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Code · REGISTER · 2004-12-01 · SECURITIES AND EXCHANGE COMMISSION · Notices

Notices. SECURITIES AND EXCHANGE COMMISSION

16,391 words·~75 min read·/register/2004/12/01/04-26506·

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BILLING CODE 8010-01-M SECURITIES AND EXCHANGE COMMISSION [Release No. 34-50734; File No. SR-NYSE-2004-48] Self-Regulatory Organizations; New York Stock Exchange, Inc.; Order Granting Approval to Proposed Rule Change To Create New NYSE Rule 416A (“Member and Member Organization Profile Information Updates and Quarterly Certifications Via the Electronic Filing Platform”) and To Amend NYSE Rule 476A (“Imposition of Fines for Minor Violations of Rules”), Adding New NYSE Rule 416A to the “List of Exchange Rule Violations and Fines Applicable Thereto Pursuant to Rule 476A” November 24, 2004.
On August 19, 2004, the New York Stock Exchange, Inc. (“NYSE” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) 1 and Rule 19b-4 thereunder, 2 a proposed rule change to adopt new NYSE Rule 416A (“Member and Member organization Profile Information Updates and Quarterly Certifications Via the Electronic Filing Platform”), which rule would require members and member organizations to promptly update their organizational information via the Electronic Filing Platform, and to make quarterly certifications that their organizational information is complete and accurate.
Additionally, the NYSE proposed an amendment to NYSE Rule 476A (“Imposition of Fines for Minor Violations of Rules”) to allow the Exchange to sanction members' and member organizations' minor violations of new NYSE Rule 416A pursuant to the minor fine provisions of NYSE Rule 476A. The NYSE amended the proposed rule change on October 12, 2004, which amendment completely replaced and superseded the original proposal. The proposed rule change, as amended, was published for comment in the **Federal Register** on October 25, 2004. 3 The Commission received no comments on the proposal. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 *See* Securities Exchange Act Release No. 50559 (October 19, 2004), 69 FR 62314.
The Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange 4 and, in particular, the requirements of Section 6 of the Act 5 and the rules and regulations thereunder. The Commission finds specifically that the proposed rule change is consistent with Section 6(b)(5) of the Act, 6 in that it is designed to promote just and equitable principles of trade, facilitate transactions in securities, remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest.
The Commission also finds that the proposal is consistent with Section 6(b)(6) of the Act, 7 which requires that members and persons associated with members be appropriately disciplined for violations of Exchange rules. Finally, the Commission finds the proposal is consistent with Rule 19d-1(c)(2) under the Act, 8 which governs minor rule violation plans. 4 In approving this proposed rule change, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). 5 15 U.S.C. 78f. 6 15 U.S.C. 78f(b)(5). 7 15 U.S.C. 78f(b)(6). 8 17 CFR 240.19d-1(c)(2).
It is therefore ordered, pursuant to Section 19(b)(2) of the Act, 9 that the proposed rule change (SR-NYSE-2004-48), as amended, be, and it hereby is, approved. 9 15 U.S.C. 78s(b)(2). For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 10 10 17 CFR 200.30-3(a)(12). Margaret H. McFarland, Deputy Secretary. [FR Doc. E4-3402 Filed 11-30-04; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-50727; File No. SR-Phlx-2004-66] Self-Regulatory Organizations;
Philadelphia Stock Exchange, Inc.; Notice of Filing of Proposed Rule Change Relating to Concentration Limit Listing Standards in Phlx Rule 1009A November 23, 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 7, 2004, the Philadelphia Stock Exchange, Inc. (“Phlx” 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 Phlx.
On October 25, 2004, the Exchange filed Amendment No. 1 to the proposed rule change. 3 The Commission is publishing this notice to solicit comments on the proposed rule change, as amended, from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 *See* letter from Carla Behnfeldt, Director, Legal Department New Product Development Group, Phlx to Nancy Sanow, Assistant Director, Division of Market Regulation (“Division”), Commission, dated October 22, 2004 (“Amendment No. 1”), in which the Phlx provided rationale for and requested accelerated approval of the proposed rule change.
I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend Phlx Rule 1009A, Designation of the Index, which applies to the listing of index options. Specifically, the Exchange proposes to increase certain concentration limit listing standards set forth in Phlx Rule 1009A(b) pursuant to which the Exchange may list certain narrow-based index options pursuant to Commission Rule 19b-4(e). 4 The text of the proposed rule change is set forth below.
Proposed new language is *italicized* ; proposed deletions are [in brackets]. 4 17 CFR 240.19b-4(e). Rule 1009A
(a)No Change.
(b)Notwithstanding paragraph
(a)above, the Exchange may trade options on a narrow-based index pursuant to Rule 19b-4(e) of the Exchange Act, if each of the following conditions is satisfied: (1)-(5) No Change.
(6)No single component security represents more than [25%] *30%* of the weight of the index, and the five highest weighted component securities in the index do not in the aggregate account for more than 50% ([60%] *65%* for an index consisting of fewer than 25 component securities) of the weight of the index;
(i)With respect to the Gold/Silver Index, no single component shall account for more than 35% of the weight of the Index and the three highest weighted components shall not account for more than 65% of the weight of the Index. If the Index fails to meet this requirement, the Exchange shall reduce position limits to 8000 contracts on the Monday following expiration of the farthest-out, then trading, non-LEAP series. (7)-(12) No Change. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, as amended, the Phlx 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 Phlx has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of the proposed rule change is to increase certain concentration limit listing standards in Phlx Rule 1009A. On December 6, 2000, the Commission approved a Phlx proposed rule change adopting Phlx Rule 1009A(b) 5 that provides generic listing standards for the listing and trading of narrow-based index options in accordance with the Commission's New Product Release. 6 Under Phlx Rule 1009A(b) the Exchange may trade options on a narrow-based index without filing a proposed rule change under Section 19(b)(2) of the Act if certain conditions are satisfied. 7 One of these conditions is set forth in Phlx Rule 1009A(b)(6), which prescribes certain concentration limits applicable to the most highly weighted component of the index and to the top five most highly weighted components combined. Specifically, the rule currently requires that no single component security represents more than 25% of the weight of the index, and that the five highest weighted component securities in the index do not in the aggregate account for more than 50% (60% for an index consisting of fewer than 25 component securities) of the weight of the index. The Exchange is now proposing to amend Phlx Rule 1009A(b)(6) by increasing the 25% concentration limit for the highest weighted component stock to 30%. The amendment would also increase the 60% concentration limit for the five mostly highly weighted stocks in an index consisting of fewer than 25 component securities from 60% to 65%. 5 *See* Securities Exchange Act Release No. 43683 (December 6, 2000), 65 FR 78235 (December 14, 2000). 6 *See* Securities Exchange Act Release No. 40761 (December 8, 1998), 63 FR 70952 (December 22, 1998) (“New Product Release”). 7 The Commission approved an amendment to Phlx Rule 1009A to provide that certain narrow-based index options that meet generic listing standards may be listed and traded on the Exchange without a filing pursuant to Rule 19b-4(e) under the Act. *See* Securities Exchange Act Release No. 43683 (December 6, 2000), 65 FR 78235 (December 14, 2000) (SR-Phlx-2000-67). The proposed rule change would result in increased flexibility in the Exchange's ability to list narrow-based index options. The proposal will also reduce the instances in which the addition of new series is restricted pursuant to Phlx Rule 1009A(c), the maintenance listing standards applicable to options listed under Phlx Rule 1009A(b), because changes in the market value of underlying index components has caused them to exceed the current 25% or 60% limits by a very slight amount as has occasionally occurred in the past. The Exchange believes that these changes are appropriate because they are minor in nature, such that the concentration limit listing standards will continue to serve the purpose for which they were originally intended of not permitting a single security or small number of securities to dominate the index. 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act 8 in general, and furthers the objectives of Section 6(b)(5) of the Act 9 in particular, in that it should increase the availability for listing of narrow-based index options, thus enhancing the number of investment choices for investors. 8 15 U.S.C. 78f(b). 9 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 inappropriate burden on competition. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were either solicited or received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action 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 self-regulatory organization 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-Phlx-2004-66 on the subject line. Paper Comments • Send paper comments in triplicate to Jonathan G. Katz, Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. All submissions should refer to File Number SR-Phlx-2004-66. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site *(http://www.sec.gov/rules/sro.shtml)* . Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room. Copies of the filing also will be available for inspection and copying at the principal office of the Phlx. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-Phlx-2004-66 and should be submitted on or before December 22, 2004. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 10 10 17 CFR 200.30-3(a)(12). Margaret H. McFarland, Deputy Secretary. [FR Doc. E4-3409 Filed 11-30-04; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-50722; File No. SR-Phlx-2004-72] Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change by the Philadelphia Stock Exchange, Inc. Relating to its Equity Options Payment for Order Flow Program November 23, 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 November 1, 2004, the Philadelphia Stock Exchange, Inc. (“Phlx” 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 Phlx has designated this proposal as one changing a fee imposed by the Phlx under section 19(b)(3)(A)(ii) of the Act 3 and Rule 19b-4(f)(2) thereunder, 4 which renders the proposal effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 15 U.S.C. 78s(b)(3)(A)(ii). 4 17 CFR 240.19b-4(f)(2). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Phlx proposes to revise its equity options payment for order flow program that is scheduled to be in effect beginning with trades settling on or after November 1, 2004 (“November Program”), 5 to credit Registered Options Traders (“ROTs”) for payment for order flow fees assessed for trades settling November 1, 2004, through November 12, 2004, in options ranked greater than the top 150 options. 6 The Exchange states that ROTs would not be assessed payment for order flow fees for the specified time period in those options, because the Exchange proposes to charge the fee and then credit the same amount. If a specialist unit who has elected to participate in the November Program requests reimbursement for payment for order flow funds expended in connection with any options ranked greater than the top 150 options, the Exchange itself would fund and distribute for this time period to the requesting specialist units the amount that otherwise should have been collected from ROTs. 5 *See* SR-Phlx-2004-68 (October 29, 2004). 6 The top 150 options are calculated based on the most actively traded equity options in terms of the total number of contracts that are traded nationally based on volume statistics provided by The Options Clearing Corporation (“OCC”) and that are also traded on the Exchange. For example, if two of the most actively traded equity options, based on volume statistics provided by the OCC, are not traded on the Exchange, then the next two most actively traded equity options that are traded on the Exchange will be selected. (For example, if the list of the top 150 options includes two options that are not traded on the Exchange, then the options ranked 151 and 152 will be included in the Exchange's top 150, assuming those options are traded on the Exchange.) Background Pursuant to the November Program, the Exchange will assess a payment for order flow fee of $0.40 on all equity options, except:
(1)Options on the iShares FTSE/Xinhua China 25 Index Fund (“FXI Options”), 7 an exchange-traded fund, which will not be assessed an equity options payment for order flow fee; and
(2)options on the Nasdaq-100 Index Tracking Stock SM traded under the symbol QQQ, 8 which will continue to be assessed $1.00 per contract. In addition, pursuant to the November Program, any excess payment for order flow funds billed but not requested to be used for reimbursement by the options specialist unit 9 will be rebated to the ROTs, which will appear as a credit on the same payment for order flow invoice that reflects the payment for order flow fees to be assessed for that month. 10 7 On October 19, 2004, the Exchange began listing FXI Options, a product that is an equity option, but which is assessed fees pursuant to the Exchange's Summary of Index Option and FXI Options Charges. *See* SR-Phlx-2004-67. 8 QQQ is currently the most actively-traded equity option. The Nasdaq-100 ® , Nasdaq-100 Index ® , Nasdaq ® , The Nasdaq Stock Market ® , Nasdaq-100 Shares SM , Nasdaq-100 Trust SM , Nasdaq-100 Index Tracking Stock SM , and QQQ SM are trademarks or service marks of The Nasdaq Stock Market, Inc. (“Nasdaq”) and have been licensed for use for certain purposes by the Phlx pursuant to a License Agreement with Nasdaq. The Nasdaq-100 Index ® ; (“Index”) is determined, composed, and calculated by Nasdaq without regard to the Licensee, the Nasdaq-100 Trust SM , or the beneficial owners of Nasdaq-100 Shares SM . Nasdaq has complete control and sole discretion in determining, comprising, or calculating the Index or in modifying in any way its method for determining, comprising, or calculating the Index in the future. 9 The Exchange uses the terms “specialist” and “specialist unit” interchangeably herein. 10 The payment for order flow fee is billed and collected on a monthly basis. Because the specialists are not being charged the payment for order flow fee for their own transactions, they may not request reimbursement in connection with any transactions to which they were a party. *See* SR-Phlx-2004-68 for additional information regarding the Exchange's November Program. Proposal The Exchange proposes to amend the November Program in one respect—to credit ROTs for payment for order flow fees assessed for trades settling November 1, 2004 through November 12, 2004 in options ranked greater than the top 150 options. 11 The Exchange states that this change is intended to allow ROTs additional time to close out existing positions in options ranked greater than the top 150 options in the event that a ROT no longer wishes to trade an option that becomes subject to the payment for order flow fee under the November Program. The Exchange believes that, going forward, some ROTs may wish to trade in a trading crowd where the specialist unit has elected not to participate in the Exchange's payment for order flow program. Nevertheless, a ROT may have an existing position in that option (for instance, own or be short calls or puts), and the Exchange has determined that it would be appropriate in such cases to provide additional time for ROTs to close those positions before the November Program takes full effect. 11 The Exchange will note on its fee schedule that ROTs will be billed and credited payment for order flow fees (on the same invoice) for the period November 1, 2004 through November 12, 2004 for transactions in equity options ranked greater than the top 150 options and in which the specialist unit has elected to participate in the Exchange's November Program. The Exchange will delete the reference to this “credit” from its fee schedule after the specified time period has expired pursuant to this proposed rule change. If a specialist unit who has elected to participate in the November Program 12 requests reimbursement for payment for order flow funds expended in connection with any options ranked greater than 150 respecting this time period, the Exchange would fund and distribute that requested amount to the specialist unit. 13 In effect, the Exchange would be satisfying the specialists' reimbursement request by paying from its funds the amount, or portion thereof, that should have been billed to and collected from ROTs. 12 Specialist units elect to participate or not to participate in the program in all options in which they are acting as a specialist by notifying the Exchange in writing no later than five business days prior to the start of the month. If electing not to participate in the program, the specialist unit waives its right to any reimbursement of payment for order flow funds for the month(s) during which it elected to opt out of the program. Payment for order flow charges will apply to ROTs as long as the specialist unit for that option has elected to participate in the Exchange's payment for order flow program. Once a specialist unit has either elected to participate or not to participate in the Exchange's payment for order flow program in a particular month, it is not required to notify the Exchange in a subsequent month if it does not intend to change its participation status. *See* Securities Exchange Act Release Nos. 50471 (September 29, 2004), 69 FR 59636 (October 5, 2004) (SR-Phlx-2004-60) and 50572 (October 20, 2004), 69 FR 62735 (October 27, 2004) (SR-Phlx-2004-61) and SR-Phlx-2004-68. 13 If a specialist unit elects not to participate in the program, the specialist unit waives its right to any reimbursement of payment for order flow funds for the month(s) during which it elected to opt out of the program. This proposal only applies to equity options ranked greater than the top 150 options that are subject to the November Program ( *i.e.* , only where a specialist unit has elected to participate in the November Program). Thus, payment for order flow fees would continue to be assessed, and not credited to ROTs, on options ranked 1 through 150 pursuant to the November Program. Specialists request payment for order flow reimbursements on an option-by-option basis. The collected funds are used by each specialist unit to reimburse it for monies expended to attract options orders to the Exchange by making payments to order flow providers who provide order flow to the Exchange. The Phlx states that specialists receive their respective funds only after submitting an Exchange certification form identifying the amount of the requested funds. 14 Each specialist unit establishes the amounts that would be paid to order flow providers. Although the Exchange would, in effect, be paying the amount of payment for order flow funds that should have been collected from ROTs to the requesting specialist units, the Exchange states that it does so only to preserve the balance between allowing more time for ROTs to close positions while recognizing that specialist units may have relied on receiving these funds when making their equity options payment for order flow arrangements. 14 While all determinations concerning the amount that will be paid for orders and which order flow providers shall receive these payments are made by the specialists, the specialists will provide to the Exchange on an Exchange form certain information, including what firms they paid for order flow, the amount of the payment and the price paid per contract. The purpose of the form, in part, is to assist the Exchange in determining the effectiveness of the proposed fee and to account for and track the funds transferred to specialists, consistent with normal bookkeeping and auditing practices. In addition, certain administrative duties will be provided by the Exchange to assist the specialists. The Phlx states that the issue of using Exchange fees to fund order flow payments to options order flow providers has been a topic of great concern at the Exchange. From the onset, the Exchange states that it has been, and continues to be, a vocal opponent to any payment for order flow programs. The Exchange, however, believes that, in this limited situation, paying for order flow is necessary in order to maintain its commitment to the specialist units who may have relied on its intention to implement a broader program, which was to become effective for trades settling on or after November 1, 2004. Below is the text of the proposed rule change. Proposed new language is in *italics.* SUMMARY OF EQUITY OPTION CHARGES (p. 3/3) EQUITY OPTION PAYMENT FOR ORDER FLOW FEES * Registered Option Trader (on-floor) ** + QQQ (NASDAQ-100 Index Tracking Stock SM )—$1.00 per contract Remaining Equity Options, except FXI Options—$0.40 per contract *** * Assessed on transactions resulting from customer orders, subject to a 500-contract cap, per individual cleared side of a transaction. ** Any excess payment for order flow funds billed but not reimbursed to specialists will be returned to the applicable ROTs (reflected as a credit on the monthly invoices) and distributed on a pro rata basis. **** ROTs will be billed and credited payment for order flow fees (on the same invoice) for the period November 1, 2004 through November 12, 2004 for transactions in equity options ranked greater than 150 and in which the specialist unit has elected to participate in the Exchange's November Program.* + Only incurred when the specialist elects to participate in the payment for order flow program. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Phlx included statements concerning the purpose of and basis for the proposed rule change and 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 Phlx has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Phlx states that the purpose of the proposed rule change is to maintain a more competitive equity options payment for order flow program. Payment for order flow programs are in place at each of the other options exchanges in varying amounts and covering various options. According to the Phlx, the revenue generated by the $1.00 or $0.40 payment for order flow fees, as outlined in this proposal, is intended to be used by specialist units to compete for order flow in equity options listed for trading on the Exchange. The Exchange believes that, in today's competitive environment, maintaining a payment for order flow program is necessary to continue to compete more directly with other options exchanges. 2. Basis The Exchange believes that its proposal to amend its schedule of dues, fees, and charges is consistent with section 6(b) of the Act 15 in general, and furthers the objectives of section 6(b)(4) of the Act 16 in particular, in that it is an equitable allocation of reasonable fees among Phlx members and that it is designed to enable the Exchange to compete with other markets in attracting customer order flow. The Phlx believes that the proposed payment for order flow fees would serve to maintain the competitiveness of the Phlx and its members and that this proposal therefore is consistent with and furthers the objectives of the Act, including section 6(b)(5) thereof, 17 which requires the rules of exchanges to be designed to promote just and equitable principles of trade, remove impediments to and perfect the mechanism of a free and open market and a national market system. Attracting more order flow to the Exchange, should, in turn, result in increased liquidity, tighter markets and more competition among Exchange members. 15 15 U.S.C. 78f(b). 16 15 U.S.C. 78f(b)(4). 17 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 inappropriate burden on competition. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were either solicited or received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing proposed rule change has been designated as a fee change pursuant to section 19(b)(3)(A)(ii) of the Act 18 and Rule 19b-4(f)(2) 19 thereunder, because it establishes or changes a due, fee, or other charge imposed by the Exchange. Accordingly, the proposal will take effect upon filing with the Commission. 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. 18 15 U.S.C. 78s(b)(3)(A)(ii). 19 17 CFR 240.19b-4(f)(2). IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov.* Please include File Number SR-Phlx-2004-72 on the subject line. Paper Comments • Send paper comments in triplicate to Jonathan G. Katz, Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. All submissions should refer to File Number SR-Phlx-2004-72. 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 Phlx. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-Phlx-2004-72 and should be submitted on or before December 22, 2004. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 20 20 17 CFR 200.30-3(a)(12). Margaret H. McFarland, Deputy Secretary. [FR Doc. E4-3410 Filed 11-30-04; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-50723; File No. SR-Phlx-2004-68] Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change by the Philadelphia Stock Exchange, Inc. Relating to Its Equity Options Payment for Order Flow Program November 23, 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 29, 2004, the Philadelphia Stock Exchange, Inc. (“Phlx” 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 Phlx has designated this proposal as one changing a fee imposed by the Phlx under section 19(b)(3)(A)(ii) of the Act 3 and Rule 19b-4(f)(2) thereunder, 4 which renders the proposal effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 15 U.S.C. 78s(b)(3)(A)(ii). 4 17 CFR 240.19b-4(f)(2). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Phlx proposes to revise its equity options payment for order flow program by:
(1)Imposing a payment for order flow fee of $0.40 on all equity options traded on the Phlx, other than options on the Nasdaq-100 Index Tracking Stock SM traded under the symbol QQQ (“QQQ”), currently the most actively traded equity option, and options on the iShares FTSE/Xinhua China Index Fund (“FXI Options”), an exchange-traded fund;
(2)returning to the Registered Options Traders (“ROTs”), by option, any excess equity options payment for order flow funds billed to those ROTs but not reimbursed to specialist units; 5
(3)clarifying the assessment of the payment for order flow fee when an equity option is reallocated mid-month; and
(4)making other corresponding changes to the Exchange's equity options payment for order flow program, which occur as a result of the above-referenced proposal. 5 The Exchange uses the terms “specialist” and “specialist unit” interchangeably herein. Equity Options Payment for Order Flow Program in Effect Prior to November 1, 2004 The Exchange recently amended its payment for order flow program. 6 Pursuant to the September/October Program, the Exchange assessed a payment for order flow fee as follows when ROTs trade against a customer order:
(1)$1.00 per contract for options on the QQQ, currently the most actively traded equity option; 7 and
(2)$0.40 per contract for the remaining top 150 equity options, other than the QQQs. 8 The payment for order flow fee applies, in effect, to equity option transactions between a ROT and a customer. 9 In addition, a 500 contract cap per individual cleared side of a transaction is imposed. 10 6 *See* Securities Exchange Act Release Nos. 50471 (September 29, 2004), 69 FR 59636 (October 5, 2004) (SR-Phlx-2004-60) and 50572 (October 20, 2004), 69 FR 62735 (October 27, 2004) (SR-Phlx-2004-61) (collectively, “September/October Program”). 7 The Nasdaq-100 ®, Nasdaq-100 Index ®, Nasdaq ®, The Nasdaq Stock Market ®, Nasdaq-100 Shares SM , Nasdaq-100 Trust SM , Nasdaq-100 Index Tracking Stock SM , and QQQ SM are trademarks or service marks of The Nasdaq Stock Market, Inc. (“Nasdaq”) and have been licensed for use for certain purposes by the Phlx pursuant to a License Agreement with Nasdaq. The Nasdaq-100 Index ® (“Index”) is determined, composed, and calculated by Nasdaq without regard to the Licensee, the Nasdaq-100 Trust SM , or the beneficial owners of Nasdaq-100 Shares SM . Nasdaq has complete control and sole discretion in determining, comprising, or calculating the Index or in modifying in any way its method for determining, comprising, or calculating the Index in the future. 8 The top 150 options are calculated based on the most actively traded equity options in terms of the total number of contracts that are traded nationally based on volume statistics provided by The Options Clearing Corporation (“OCC”) and that are also traded on the Exchange. For example, if two of the most actively traded equity options, based on volume statistics provided by the OCC, are not traded on the Exchange, then the next two most actively traded equity options that are traded on the Exchange will be selected. (For example, if the list of the top 150 options includes two options that are not traded on the Exchange, then the options ranked 151 and 152 will be included in the Exchange's top 150, assuming those options are traded on the Exchange). 9 Thus, the ROT payment for order flow fee is not assessed on transactions between:
(1)A specialist and a ROT;
(2)a ROT and a ROT;
(3)a ROT and a firm; and
(4)a ROT and a broker-dealer. The ROT payment for order flow fee does not apply to index options or foreign currency options. Accordingly, the ROT payment for order flow fees applies, in effect, to equity option transactions between a ROT and a customer. 10 Thus, the applicable payment for order flow fee is imposed only on the first 500 contracts, per individual cleared side of a transaction. For example, if a transaction consists of 750 contracts by one ROT, the applicable payment for order flow fee would be applied to, and capped at, 500 contracts for that transaction. Also, if a transaction consists of 600 contracts, but is equally divided among three ROTs, the 500 contract cap would not apply to any such ROT and each ROT would be assessed the applicable payment for order flow fee on 200 contracts, as the payment for order flow fee is assessed on a per ROT, per transaction basis. *See* Securities Exchange Act Release Nos. 47958 (May 30, 2003), 68 FR 34026 (June 6, 2003) (proposing SR-Phlx-2002-87); 48166 (July 11, 2003), 68 FR 42450 (July 17, 2003) (approving SR-Phlx-2002-87); and 50471 (September 29, 2004), 69 FR 59636 (October 5, 2004) (SR-Phlx-2004-60). Specialist units elect to participate or not to participate in the program in all options in which they are acting as a specialist by notifying the Exchange in writing no later than five business days prior to the start of the month. 11 If a specialist unit elects not to participate in the program, the specialist unit waives its right to any reimbursement of payment for order flow funds for the month(s) during which it elected to opt out of the program. 12 Specialists request payment for order flow reimbursements on an option-by-option basis. The collected funds are used by each specialist unit to reimburse it for monies expended to attract options orders to the Exchange by making payments to firms that provide order flow to the Exchange. Specialists receive their respective funds only after submitting an Exchange certification form identifying the amount of the requested funds. 13 Each specialist unit establishes the amounts that would be paid to order flow providers. 11 A specialist unit must notify the Exchange in writing to either elect to participate or not to participate in the program. Once a specialist unit has either elected to participate or not to participate in the Exchange's payment for order flow program in a particular month, it is not required to notify the Exchange in a subsequent month if it does not intend to change its participation status. For example, if a specialist unit elected to participate in the program and provided the Exchange with the appropriate notice, that specialist unit would not be required to notify the Exchange in the subsequent month(s) if it intends to continue to participate in the program. However, if it elects not to participate (a change from its current status), it would need to notify the Exchange in accordance with the requirements stated above. 12 For any month (or part of a month where an option is allocated mid-month) the specialist unit has elected to opt out of the program, no ROT equity options payment for order flow fee will apply. 13 While all determinations concerning the amount that will be paid for orders and which order flow providers shall receive these payments are made by the specialists, the specialists will provide to the Exchange on an Exchange form certain information, including what firms they paid for order flow, the amount of the payment and the price paid per contract. The purpose of the form, in part, is to assist the Exchange in determining the effectiveness of the proposed fee and to account for and track the funds transferred to specialists, consistent with normal bookkeeping and auditing practices. In addition, certain administrative duties will be provided by the Exchange to assist the specialists. Pursuant to the Exchange's September/October Program, any excess payment for order flow funds are carried forward to the next month by option and may not be applied retroactively to past deficits, which may be incurred when the specialist requests more than the amount collected. 14 Thus, excess funds are not rebated to ROTs except in the limited situation discussed below, nor are deficits carried forward to subsequent months. ROTs may, however, receive a rebate of excess funds in a particular option for a particular month if the specialist unit did not request reimbursement by option of at least 50% of the total amount of payment for order flow funds billed to and collected from ROTs for each option in which that specialist unit was acting as specialist, as more fully described below. 14 Specialists may not receive more than the payment for order flow amount billed and collected in a given month; however, the amount specialists receive may include excesses, if any, for that option, carried forward from prior months, up to the payment for order flow amount billed and collected in such month. Specialists units may opt out entirely from the program as long as they notify the Exchange in writing by the 15th of the month, or the next business day if the 15th of the month is not a business day. If a specialist unit opts out of the program by the 15th of the month, no payment for order flow charges would be incurred for either the specialist unit or ROTs for transactions in the affected options for that month. In addition to opting out entirely from the program, specialists may opt out of the program on an option-by-option basis if they notify the Exchange in writing no later than three business days after the end of the month (which is before the payment for order flow fee is billed). If a specialist unit opts out of an option at the end of the month, no payment for order flow fees are assessed on the applicable ROT(s) for that option. If a specialist unit opts out of the program in a particular option more than two times in a six-month period, it would be precluded from entering into the payment for order flow program for that option for the next three months. If a specialist unit opts into the program (and does not opt out of the program entirely by the 15th day of the month or by option by the third business day after the end of the month) and does not request reimbursement by option of at least 50% of the total amount of payment for order flow funds billed to and collected from ROTs for each option in which that specialist unit is acting as the specialist, then any excess payment for order flow funds remaining after the specialist has been reimbursed would be rebated, on a pro rata basis, to the affected ROTs for those particular options in which the 50% threshold was not met. 15 15 For example, if a specialist unit requests $10,000 in reimbursement for one option and the total amount billed and collected from the ROTs was $30,000, then the specialist unit did not satisfy the 50% threshold, given the fact that it did not request reimbursement of at least $15,000. Therefore, the remaining amount of $20,000 will be rebated to the ROTs on a pro rata basis. If ROT A was assessed $15,000 in payment for order flow fees, it would receive a rebate of $10,000 ($15,000/$30,000 = 50%, and 50% of $20,000 is $10,000). If ROT B was assessed $8,000 in payment for order flow fees, it would receive $5,333.33, which represents 26.67% ($8,000/$30,000) of $20,000. If ROT C was assessed $7,000 in payment for order flow fees, it would receive $4,666.67, which represents 23.33% ($7,000/$30,000) of $20,000. The payment for order flow fee is billed and collected on a monthly basis. Because the specialists are not being charged the equity options payment for order flow fee for their own transactions, they may not request reimbursement for order flow funds in connection with any transactions to which they were a party. 16 16 The amount a specialist may receive in reimbursement is limited to the percentage of ROT monthly volume to total specialist and ROT monthly volume in the equity options payment for order flow program. For example, if a specialist unit has a payment for order flow arrangement with an order flow provider to pay that order flow provider $0.70 per contract for order flow routed to the Exchange and that order flow provider sends 90,000 customer contracts to the Exchange in one month for one option, then the specialist would be required, pursuant to its agreement with the order flow provider, to pay the order flow provider $63,000 for that month. Assuming that the 90,000 represents 30,000 specialist transactions, 20,000 ROT transactions and 40,000 transactions from firms, broker-dealers and other customers, the specialist may request reimbursement of up to 40% (20,000/50,000) of the amount paid ($63,000 × 40% = $25,200). However, because the ROTs will have paid $8,000 into the payment for order flow fund for that month, the specialist may collect only $8,000 (20,000 contracts × $0.40 per contract) of its $25,200 reimbursement request plus, if applicable, any excess funds for that particular option carried over from a prior month up to the specialist's $25,200 reimbursement request. The Exchange may audit a specialist's payments to payment-accepting firms to verify the use and accuracy of the payment for order flow funds remitted to the specialists based on their certification. 17 17 *See* Supplemental Material .01 of Exchange Rule 760. The Exchange continues to implement a quality of execution program. 18 18 *See e.g.* Securities Exchange Act Release No. 43436 (October 11, 2000), 65 FR 63281 (October 23, 2000) (SR-Phlx-00-83). Proposed Equity Options Payment for Order Flow Program Commencing November 1, 2004 The Exchange proposes to charge a payment for order flow fee of $0.40 on all equity options traded on the Phlx, other than options on the QQQs, which would continue to be assessed $1.00, and FXI Options. The Exchange is not proposing to assess a payment for order flow fee on FXI Options because the Exchange is not currently seeking to garner order flow in this product from other exchanges, because FXI Options do not currently trade on other exchanges. Attracting order flow from other exchanges is the principal goal of the payment for order flow program. Specialists would continue to request payment for order flow reimbursements on an option-by-option basis. According to the Exchange, the collected funds would be used by each specialist unit to reimburse it for monies expended to attract options orders to the Exchange by making payments to order flow providers who provide order flow to the Exchange. The Phlx states that specialists would receive their respective funds only after submitting an Exchange certification form identifying the amount of the requested funds. 19 19 *See supra* note 13. Specialist units are given instructions as to when the certification forms are required to be submitted. Specialist units would continue to elect to participate or not to participate in the program in all options in which they are acting as a specialist by notifying the Exchange in writing no later than five business days prior to the start of the month. 20 If electing not to participate in the program, the specialist unit waives its right to any reimbursement of payment for order flow funds for the month(s) during which it elected to opt out of the program. Payment for order flow charges would apply to ROTs as long as the specialist unit for that option has elected to participate in the Exchange's payment for order flow program. A payment for order flow fee would be assessed, even beginning mid-month, if an option is allocated (or reallocated) from a non-participating specialist unit to a specialist unit that participates in the Exchange's payment for order flow program. 20 *See supra* note 11. The Exchange also proposes to return to ROTs, by option, any excess payment for order flow funds billed but not reimbursed to specialists. 21 According to the Phlx, excess funds would be returned to the ROTs (reflected as a credit on the monthly invoices) and distributed on a pro rata basis to the applicable ROTs. 22 Thus, excess funds would no longer be carried forward. 21 In the September/October Program, any excess payment for order flow funds are carried forward to the next month by option and may not be applied retroactively to past deficits, which may be incurred when the specialist requests more than the amount collected. Thus, excess funds generally are not rebated to ROTs. However, under the September/October Program, excess funds may be rebated in the limited situation where a specialist unit opts into the program (and does not opt out of the program entirely by the 15th day of the month or by option by the third business day after the end of the month) and does not request reimbursement by option of at least 50% of the total amount of payment for order flow funds billed to and collected from ROTs for each option in which that specialist unit is acting as the specialist, then any excess payment for order flow funds remaining after the specialist has been reimbursed is rebated, on a pro rata basis, to the affected ROTs for those particular options in which the 50% threshold was not met. This separate rebate requirement would no longer be necessary because, pursuant to this proposal, any excess payment for order flow funds that have been billed, but not requested by specialist, will be returned to the applicable ROTs on a pro rata basis. For example, if a ROT is assessed a payment for order flow fee of $10,000 for the month of November and $2,000 was to be returned to the ROT because it represented the amount of funds not requested by specialists, that amount would appear on the same November invoice. Thus, the ROT would submit $8,000 in payment for order flow fees for the month of November. 22 For example, if a specialist unit requests $10,000 in reimbursement for one option and the total amount billed and collected from the ROTs was $30,000, the remaining $20,000 will be rebated to the ROTs on a pro rata basis. If ROT A was assessed $15,000 in payment for order flow fees, he would receive a rebate of $10,000 ($15,000/$30,000 = 50% and 50% of $20,000 is $10,000). If ROT B was assessed $8,000 in payment for order flow fees, it would receive $5,333.33, which represents 26.67% ($8,000/$30,000) of $20,000. If ROT C was assessed $7,000 in payment for order flow fees, it would receive $4,666.67, which represents 23.33% ($7,000/$30,000) of $20,000. The Exchange does not know at this time whether there will be any excess payment for order flow funds from the September/October Program because billing and collecting for the September/October Program will not be completed until after November 2004 and because of the different reimbursement procedures applicable to the Exchange's equity options payment for order flow program in effect prior to this proposal. Telephone conversation between Cynthia K. Hoekstra, Counsel, Phlx, and David Liu, Attorney, Division of Market Regulation, Commission, on November 23, 2004. Therefore, the Exchange intends to file a separate proposed rule change, if necessary, to address the handling of any excess payment for order flow funds generated from the September/October Program. The Phlx states that no other changes to the Exchange's payment for order flow program are being proposed at this time. 23 23 Accordingly, the calculation of the top 150 options as described in note 8, *supra* , would no longer be necessary because the new program extends beyond the top 150 options. The payment for order flow fees as set forth in this proposal would be in effect for trades settling on or after November 1, 2004. Below is the text of the proposed rule change. Proposed new language is in *italics* ; deletions are in [brackets]. SUMMARY OF EQUITY OPTION CHARGES (p. 3/3) EQUITY OPTION PAYMENT FOR ORDER FLOW FEES* Registered Option Trader (on-floor)** + QQQ (NASDAQ-100 Index Tracking Stock SM )—$1.00 per contract Remaining [Top 150] Equity Options *, except FXI Options* —$0.40 per contract * Assessed on transactions resulting from customer orders, subject to a 500-contract cap, per individual cleared side of a transaction ** [Any excess payment for order flow funds will be carried forward to the next month by option and will not be rebated to ROTs. ROTs may, however, receive a rebate of any excess funds in a particular option for a particular month if the specialist unit does not request reimbursement by option of at least 50% of the total amount of payment for order flow funds billed and collected from ROTs for each option in which that specialist unit is acting as specialist.] *Any excess payment for order flow funds billed but not reimbursed to specialists will be returned to the applicable ROTs (reflected as a credit on the monthly invoices) and distributed on a pro rata basis.* Only incurred when the specialist elects to participate in the payment for order flow program II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Phlx included statements concerning the purpose of, and basis for, the proposed rule change and 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 Phlx has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Phlx states that the purpose of the proposed rule change is to adopt a more competitive equity options payment for order flow program. Equity options payment for order flow programs are in place at each of the other options exchanges in varying amounts and covering various options. The Phlx states that the revenue generated by the $1.00 or $0.40 payment for order flow fees, as outlined in this proposal, is intended to be used by specialist units to compete for order flow in equity options listed for trading on the Exchange. The Exchange believes that, in today's competitive environment, changing its payment for order flow program to compete more directly with other options exchanges is important and appropriate. Accordingly, the Exchange proposes to expand its program beyond the top 150 options. The Exchange also proposes to modify the program to return excess ROT fees rather than carry those excesses forward. The Phlx believes that returning any excess payment for order flow funds to ROTs on a pro rata basis should help to minimize the financial impact to them in connection with the collection of the Exchange payment for order flow fee. 2. Basis The Exchange believes that its proposal to amend its schedule of dues, fees, and charges is consistent with section 6(b) of the Act 24 in general, and furthers the objectives of section 6(b)(4) of the Act 25 in particular, in that it is an equitable allocation of reasonable fees among Phlx members and that it is designed to enable the Exchange to compete with other markets in attracting customer order flow. Because the payment for order flow fees are collected only from member organizations respecting customer transactions, the Phlx believes that there is a direct and fair correlation between those members who fund the equity options payment for order flow fee program and those who receive the benefits of the program. The Exchange states that ROTs also potentially benefit from additional customer order flow. In addition, the Phlx believes that the proposed payment for order flow fees would serve to enhance the competitiveness of the Phlx and its members and that this proposal therefore is consistent with and furthers the objectives of the Act, including section 6(b)(5) thereof, 26 which requires the rules of exchanges to be designed to promote just and equitable principles of trade, and to remove impediments to and perfect the mechanism of a free and open market and a national market system. The Phlx believes that attracting more order flow to the Exchange should, in turn, result in increased liquidity, tighter markets and more competition among exchange members. 24 15 U.S.C. 78f(b). 25 15 U.S.C. 78f(b)(4). 26 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 inappropriate burden on competition. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were either solicited or received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing proposed rule change has been designated as a fee change pursuant to section 19(b)(3)(A)(ii) of the Act 27 and Rule 19b-4(f)(2) 28 thereunder, because it establishes or changes a due, fee, or other charge imposed by the Exchange. Accordingly, the proposal will take effect upon filing with the Commission. 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. 27 15 U.S.C. 78s(b)(3)(A)(ii). 28 17 CFR 240.19b-4(f)(2). IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov* . Please include File Number SR-Phlx-2004-68 on the subject line. Paper Comments • Send paper comments in triplicate to Jonathan G. Katz, Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. All submissions should refer to File Number SR-Phlx-2004-68. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the 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 Phlx. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-Phlx-2004-68 and should be submitted on or before December 22, 2004. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 29 29 17 CFR 200.30-3(a)(12). Margaret H. McFarland, Deputy Secretary. [FR Doc. E4-3411 Filed 11-30-04; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-50728; File No. SR-Phlx-2004-74] Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change and Amendment No. 1 by the Philadelphia Stock Exchange, Inc. Relating to $5 Bid/Ask Differentials in Options Traded on the Exchange's Electronic Trading Platform, Phlx XL November 23, 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 November 3, 2004, the Philadelphia Stock Exchange, Inc. (“Phlx” or “Exchange”) submitted to the Securities and Exchange Commission (“SEC” or “Commission”) the proposed rule change as described in items I and II below, which items have been prepared by the Exchange. On November 10, 2004, the Phlx filed Amendment No. 1 to the proposed rule change, which changed the proposal from a filing made pursuant to section 19(b)(2) of the Act to a filing made pursuant to section 19(b)(3)(A) of the Act, 3 and Rule 19b-4(f)(6) thereunder. 4 Accordingly, the proposed rule change became effective upon filing of Amendment No. 1. 5 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. 5 The 60-day period within which the Commission may summarily abrogate the proposed rule change under section 19(b)(3)(C) of the Act commenced on November 10, 2004, the date the Phlx filed Amendment No. 1 to the proposal. I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Phlx proposes to adopt new Phlx Rule 1014(c)(i)(A)(2), which would relax the quotation spread requirements for Streaming Quote Options traded on the Exchange's new electronic trading platform, Phlx XL. 6 Specifically, the proposal would allow Streaming Quote Options trading on Phlx XL to be quoted electronically with a difference not to exceed $5 between the bid and offer, regardless of the price of the bid. The text of the proposed rule change appears below. Proposed additions are in *italics.* 6 *See* Securities Exchange Act Release No. 50100 (July 27, 2004), 69 FR 46612 (August 3, 2004) (order approving File No. SR-Phlx-2003-59). Rule 1014 Obligations and Restrictions Applicable to Specialists and Registered Options Traders (a)-(b) No change.
(c)In Classes of Option Contracts to Which Assigned—Affirmative Obligations. With respect to classes of option contracts to which his assignment extends, a Specialist and an ROT, whenever the ROT enters the trading crowd in other than a floor brokerage capacity or is called upon by a Floor Official or a Floor Broker, to make a market, are expected to engage, to a reasonable degree under the existing circumstances, in dealing for his own account when there exists, or it is reasonably anticipated that there will exist, a lack of price continuity, a temporary disparity between the supply of and demand for a particular option contract, or a temporary distortion of the price relationships between option contracts of the same class. Without limiting the foregoing, a Specialist and an ROT is expected to perform the following activities in the course of maintaining a fair and orderly market:
(i)Options on Equities (including Exchange-Traded Fund Shares). (A)( *1* ) Quote Spread Parameters (Bid/Ask Differentials)—Bidding and/or offering so as to create differences of no more than $.25 between the bid and the offer for each option contract for which the prevailing bid is less than $2; no more than of $.40 where the prevailing bid is $2 or more but less than $5; no more than $.50 where the prevailing bid is $5 or more but less than $10; no more than $.80 where the prevailing bid is $10 or more but less than $20; and no more than $1 where the prevailing bid is $20 or more, provided that the bid/ask differentials stated above shall not apply to in-the-money series where the market for the underlying security is wider than the differentials set forth above. For such series, the bid/ask differentials may be as wide as the quotation for the underlying security on the primary market, or its decimal equivalent rounded up to the nearest minimum increment. The Exchange may establish differences other than the above for one or more series or classes of options. *(2) Streaming Quote Options trading on Phlx XL may be quoted electronically with a difference not to exceed $5 between the bid and offer regardless of the price of the bid. The $5 bid/ask differentials only apply to Streaming Quote Options trading on Phlx XL and only following the opening rotation in each security (i.e., the bid/ask differentials specified in sub-paragraph (c)(i)(A)(1) above shall apply during opening rotation). Quotations provided in open outcry in Streaming Quote Options may not be made with $5 bid/ask differentials and instead must comply with the bid/ask differential requirements described in sub-paragraph (c)(i)(A)(1) above and not in this sub-paragraph (c)(i)(A)(2).*
(B)No change. (d)-(h) No change. Commentary: No change. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Phlx included statements concerning the purpose of and basis for the proposed rule change and 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 Phlx has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of the proposed rule change is to reduce the market making risk, especially in volatile markets, by relaxing the quotation spread requirements for Streaming Quote Options traded on the Exchange's new electronic trading platform, Phlx XL. According to the Phlx, the primary purpose of the current quote spread requirements set forth in Phlx Rule 1014(c)(i)(A) is to help to maintain narrow spreads in options. The Phlx believes that these requirements can have the unintended consequence of requiring those making markets to quote at prices that are unnecessarily narrow, thereby exposing them to great risk if markets move quickly. The proposed $5 bid/ask differential would apply only to electronic quotations submitted in Streaming Quote Options traded on Phlx XL. The current bid/ask differential requirements contained in Phlx Rule 1014(c)(i)(A)(1) would continue to apply to quotations in Streaming Quote Options made in open outcry, and to quotations in non-Streaming Quote Options. The Exchange believes that given the competitive market making structure of Phlx XL and the existence of vigorous inter-market competition, the mandatory quote spread requirements may not be necessary to ensure narrow and competitive spreads in options. In this regard, the Phlx believes that the Phlx XL market structure creates strong incentives for specialists, Registered Options Traders (“ROTs”) and other market participants to disseminate competitive prices. The Exchange notes that in Phlx XL, each specialist and Streaming Quote Trader quotes independently, and customers, off-floor broker-dealers, and ROTs can enter limit orders at prices that improve the Exchange's disseminated bid or offer. 7 The Exchange automatically collects this trading interest information, calculates the Phlx best bid and offer, and disseminates that value to the Options Price Reporting Authority. Accordingly, the Phlx believes that its Phlx XL market is competitive, accessible and transparent. 7 The Phlx clarified this sentence in a telephone conversation. Telephone conversation between Richard Rudolph, Director and Counsel, Phlx, and Yvonne Fraticelli, Special Counsel, Division of Market Regulation, Commission, on November 23, 2004. In addition, the Phlx believes that market participants in Phlx XL have strong incentives to quote competitively. The Exchange currently allocates incoming orders based on the price and size of orders and quotes resting in the book. Under the Exchange's trade allocation rules applicable to options trading on Phlx XL, the larger the size of a market maker's quote at the best price, the greater the size of the allocation he or she receives. 8 Conversely, if a market participant does not quote at the best price, the market participant will not participate in any electronic trade allocations. The Phlx believes, moreover, that given NBBO protections in place at each exchange, as well as under Plan for the Purpose of Creating an Options Intermarket Linkage (the “Linkage Plan”), market participants have even stronger incentives to quote at the best price, lest incoming orders be filed away. Thus, the Phlx believes that both inter-market and intra-market competitive forces provide strong incentives for market participants to quote competitively and to enter quotes and orders that improve the price and depth of the market. 8 *See* Phlx Rule 1014(g)(vii). For these reasons, Phlx proposes to expand the allowable spread in Streaming Quote Options traded on Phlx XL to $5 for options quoted electronically. The proposed quote spread requirements will apply after the opening trading rotation. During the opening trading rotation, market makers will be required to quote in accordance with the traditional bid/ask width requirements. The $5 quotation requirements would become operative immediately following the opening rotation. 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) of the Act, 10 in particular, in that it is designed to promote just and equitable principles of trade, to prevent fraudulent and manipulative acts and, in general, to protect investors and the public interest. 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 inappropriate burden on competition. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others No written comments were either solicited or received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The Exchange has designated the proposed rule change as a “non-controversial” rule change 11 pursuant to section 19(b)(3)(A) of the Act 12 and subparagraph (f)(6) of Rule 19b-4 thereunder. 13 Consequently, because the foregoing rule change:
(1)Does not significantly affect the protection of investors or the public interest;
(2)does not impose any significant burden on competition; and
(3)does not 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, and the Phlx provided the Commission with written notice of its intent to file the proposed rule change at lease five days prior to the filing date, it has become effective pursuant to section 19(b)(3)(A) of the Act 14 and Rule 19b-4(f)(6) thereunder. 15 11 *See* Amendment No. 1. 12 15 U.S.C. 78s(b)(3)(A). 13 17 CFR 240.19b-4(f)(6). 14 15 U.S.C. 78s(b)(3)(A). 15 17 CFR 240.19b-4(f)(6). A proposed rule change filed under Rule 19b-4(f)(6) normally does not become operative prior to 30 days after the date of filing. However, Rule 19b-4(f)(6)(iii) permits the Commission to designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has requested that the Commission waive the 30-day operative delay specified in Rule 19b-4(f)(6) in order to remain competitive with other exchanges with similar rules in effect. In this regard, the Phlx notes that its proposal is based on Chicago Board Options Exchange, Inc. (“CBOE”) Rule 8.7(b)(iv)(A); 16 International Securities Exchange, Inc. (“ISE”) Rule 803(b)(4); 17 and Pacific Exchange, Inc. (“PCX”) Rule 6.37(b)(1)(G). 18 16 *See* Securities Exchange Act Release No. 50079 (July 26, 2004), 69 FR 45858 (July 30, 2004) (order approving File No. SR-CBOE-2004-44). 17 *See* Securities Exchange Act Release No. 50015 (July 14, 2004), 69 FR 43872 (July 22, 2004) (order approving File No. SR-ISE-2003-22). 18 *See* Securities Exchange Act Release No. 50538 (October 14, 2004), 69 FR 62105 (October 22, 2004) (notice of filing and immediate effectiveness of SR-PCX-2004-89). The Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest. 19 Specifically, the Commission believes that allowing the Phlx to implement $5 quotation spread parameters will help the Phlx to compete with other options exchanges that have adopted similar rules. The Commission believes that the Phlx's proposal raises no new issues or regulatory concerns that the Commission did not consider in approving the ISE and CBOE proposals. For these reasons, the Commission designates that the proposal become operative immediately. 19 For purposes only of waiving the operative delay for this proposal, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate the rule change if it appears to the Commission that the action is necessary or appropriate in the public interest, for the protection of investors, or would otherwise further the purposes of the Act. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov.* Please include File Number SR-Phlx-2004-74 on the subject line. Paper Comments • Send paper comments in triplicate to Jonathan G. Katz, Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. All submissions should refer to File Number SR-Phlx-2004-74. 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 this filing also will be available for inspection and copying at the principal office of the Phlx. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-Phlx-2004-74 and should be submitted on or before December 22, 2004. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 20 20 17 CFR 200.30-3(a)(12). Margaret H. McFarland, Deputy Secretary. [FR Doc. E4-3412 Filed 11-30-04; 8:45 am] BILLING CODE 8010-01-P DEPARTMENT OF STATE [Public Notice 4895] Request for Proposals: Program for Research and Training on Eastern Europe and the Independent States of the Former Soviet Union (Title VIII) *Summary:* The Department of State invites organizations with substantial and wide-reaching experience in administering research and training programs to serve as intermediaries conducting nationwide competitive programs for scholars, students and institutions pertaining to advanced research and language training on the countries of Southeast Europe and Eurasia. U.S.-based public and private nonprofit organizations and educational institutions may submit proposals to carry out Title VIII-funded programs that
(1)support and sustain American expertise on the countries of Eurasia and Southeast Europe,
(2)bring American expertise to the service of the U.S. Government, and
(3)further U.S. foreign assistance goals. The grants will be awarded through an open, merit-based competition. The purpose of this request for proposals is to inform potential applicant organizations of programmatic, procedural and funding information for the fiscal year 2005 Title VIII grants competition. We request that applicants read the entire **Federal Register** announcement before addressing inquiries to the Title VIII Program Office or submitting a proposal. This notice contains three parts. Part I addresses Shipment and Deadline for Proposals. Part II consists of a Statement of Purpose and Program Priorities. Part III provides Funding Information for the program. *Authority:* Grantmaking authority for the Program for Research and Training on Eastern Europe and the Independent States of the Former Soviet Union (Title VIII) is contained in the Soviet-Eastern European Research and Training Act of 1983 (22 U.S.C. 4501-4508, as amended) and is funded through the FREEDOM Support Act
(FSA)of 1992 and Support for East European Democracy
(SEED)Act of 1992. Part I *Shipping and Deadline for Proposals:* Due to security procedures proposals must be sent via a nationally recognized overnight delivery service ( *i.e.* , DHL, Federal Express, UPS, Airborne Express, or USPS Express Mail, etc.) or hand-delivered. Proposals may not be sent by regular U.S. Mail. Proposals sent by USPS Express Mail or overnight delivery service must have a postmark or invoice dated by Friday, January 28, 2005 and must be received within seven
(7)days after the deadline. Hand-delivered proposals must be submitted no later than 4 p.m. on January 28, 2005. Faxed proposals will not be accepted at any time. Late applications will not be considered. It is the applicant's responsibility to ensure that proposals are delivered on time. Address proposals to: Maria Seda-Gaztambide, Title VIII Program Assistant, U.S. Department of State, INR/RES, Room 2251, 2201 C Street, NW., Washington, DC 20520-6510. *Applications Delivered by Hand:* Hand-delivered proposals will be accepted between 9 a.m. and 4 p.m. EST daily, except Saturdays, Sundays and Federal holidays. Proposals must be brought to the State Department's 21st Street entrance, just north of the intersection with C Street, NW. Contact Maria Seda-Gaztambide at
(202)736-4572 to arrange delivery time. Part II *Program Information:* In the Soviet-Eastern European Research and Training Act of 1983 (Title VIII), the Congress declared that independently verified factual knowledge about the countries of that area is “of utmost importance for the national security of the United States, for the furtherance of our national interests in the conduct of foreign relations, and for the prudent management of our domestic affairs.” Congress also declared that the development and maintenance of such knowledge and expertise “depends upon the national capability for advanced research by highly trained and experienced specialists, available for service in and out of Government.” The Title VIII Program provides financial support for advanced research, graduate and language training and other related functions on the countries of the region. The program operates on a “pass-through” basis in that grantee organizations serve as intermediaries and conduct nationwide competitive programs to distribute grant funds to individual scholars, language students or universities. The program's goal is to support and sustain a cadre of U.S. experts by providing a full spectrum of financial assistance spanning the careers of scholars and students who have made, or are likely to make, a career commitment to the study of Southeast Europe and Eurasia. The Department of State's Title VIII Program Office brings this research and expertise to the service of the U.S. Government. The Title VIII Program also contributes to the overall objectives of the FREEDOM Support and SEED Acts through the Title VIII scholars' and students' participation in interactive educational and professional activities, volunteering, consulting, and other endeavors that further economic prosperity and mutual understanding in the region. The full purpose of the Title VIII Program and the eligibility requirements are set forth in Pub. L. 98-164, 97 Stat. 1047-50, as amended. The following countries are eligible for funding under this request for proposals: Albania, Armenia, Azerbaijan, Belarus, Bosnia and Herzegovina, Bulgaria, Croatia, Republic of Macedonia, Georgia, Kazakhstan, Kyrgyzstan, Moldova, Romania, Russia, Serbia and Montenegro, Tajikistan, Turkmenistan, Ukraine and Uzbekistan. Travel to certain countries may be subject to restrictions due to unforeseen world events, Congressional restrictions, U.S. embassy requirements, or general security concerns. The Act established an Advisory Committee to recommend grant policies and recipients. The Deputy Secretary of State, after consultation with the Advisory Committee, approves policies and makes the final determination on awards. Once the proposal submission deadline has passed, Title VIII Program staff and the Title VIII Advisory Committee may not discuss any aspect of this competition with applicants until after the proposal review and approval process has been completed. *Eligibility:* U.S.-based public and private non-profit organizations and educational institutions with substantial and wide-reaching expertise in administering advanced research and training programs and conducting nationwide competitive programs for scholars, students and institutions pertaining to advanced research and language training on the countries of Southeast Europe and Eurasia and related fields may apply. To demonstrate eligibility, applicant organizations should describe their experience and expertise in each of the following: —Conducting national, open, merit-based competitions for the purpose of distributing grant funds for advanced research and language training at the graduate level and above; —Peer review mechanisms; and —Recruiting individuals who are likely to make a career commitment to the study of Eastern Europe and/or Eurasia; —Bringing American expertise to the service of the U.S. Government. *NB:* Individual scholars and students seeking Title VIII support should refer to the Title VIII Program website for funding opportunities: *http://www.state.gov/s/inr/grants* . Proposals from institutions or organizations to fund their own projects, *i.e.* , projects that are not national in scope and/or do not involve open, merit-based recruitment of participants will not be considered. *Scope:* The Title VIII legislation states that the program should develop a stable, long-term, national program of unclassified, advanced research and training on the countries of Eastern Europe and/or Eurasia. Applicants' proposals should outline programs that:
(1)Support and sustain American expertise on the countries of Eurasia and Southeast Europe,
(2)bring American expertise to the service of the U.S. Government, and
(3)further U.S. foreign assistance goals. *Guidelines:* Programs should be national in scope and may:
(1)Award contracts or grants to U.S. institutions of higher education or nonprofit organizations in support of post-doctoral or equivalent-level research projects, to be cost-shared with partner institutions;
(2)Offer graduate, post-doctoral and teaching fellowships for advanced training on the countries of Southeast Europe and Eurasia, and in related studies, including training in the languages of the region, to be cost-shared with partner institutions;
(3)Provide fellowships and other support for American specialists enabling them to conduct advanced research on the countries of Southeast Europe and Eurasia, and in related studies;
(4)Facilitate research collaboration among U.S. scholars, the U.S. Government, and private specialists on Southeast Europe and Eurasia studies;
(5)Provide field-strengthening activities that stimulate interaction and sustained relationships among junior and senior scholars;
(6)Provide advanced training and research in the countries of Southeast Europe and Eurasia by facilitating access for American specialists to research facilities and resources in those countries;
(7)Facilitate the dissemination of research findings, methods and data among U.S. Government agencies and the public;
(8)Strengthen the national capability for advanced research or training on the countries of Southeast Europe and Eurasia; and
(9)Bring Title VIII scholarship to the service of the U.S. Government in ways not specified above. In addition to the above guidelines, support for specific activities will be guided by the following policies and priorities: • *Support for Transitions and U.S. Assistance Goals:* Program activities are strongly encouraged that build expertise among U.S. specialists on the region, and also:
(1)Promote fundamental goals of U.S. foreign assistance programs such as establishing functioning market economies and promoting democratic governance and civil societies, and
(2)provide knowledge to both U.S. and foreign audiences related to current U.S. policy interests in the region, broadly defined. This includes, but is not limited to, such topics as resolution of ethnic, religious, and other conflict; terrorism; transition economics; access to information; women's issues; human rights; and citizen participation in politics and civil society. For overseas research, applicants are asked to propose creative means through which individual grant recipients' work may complement assistance activities in the region. Applicants are strongly encouraged to propose programs where grants for overseas work include a service component such as lecturing at a university or participating in workshops with host government and parliamentary officials, nongovernmental organizations, and other relevant audiences on issues related to economic and political transitions. • *Research Topics:* The Title VIII Program supports research topics that strengthen the fields of Eurasian and East European Studies, and that address U.S. policy interests in the region, broadly defined. Historical or cultural research that promotes understanding of current events in the region is acceptable if an explicit connection is made to policy relevant issues, broadly defined. Technical research in fields such as mathematics is not appropriate for funding under Title VIII. • *Regional Focus:* Priority will be given to programs that focus on gaps in knowledge on Central Asia, the Caucasus, and the Balkans, especially the former Yugoslavia. The greater Central Asia region is critical in the global war on terrorism, therefore also eligible are proposals that incorporate a focus on “Cross-Regional Issues” and include specifically the countries of Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and/or Uzbekistan, relative to their shared historical, ethnic, linguistic, political, economic, and cultural ties with such countries as Iraq, Iran, Afghanistan, Pakistan, Korea, China and Turkey. • *Balanced National Program:* In making its recommendations, the Advisory Committee will seek to encourage a coherent, long-term and stable effort directed toward developing and maintaining a national capability on the countries of Southeast Europe and Eurasia. Program proposals can be for the conduct of any of the functions enumerated, but in making its recommendations, the Committee will concern itself particularly with the development of a balanced national effort that will ensure attention to all eligible countries. • *Promoting Federal Service for Title VIII Grant Recipients:* Although the Title VIII Program does not require a federal service commitment for individuals receiving funding, the Advisory Committee urges grantees to encourage individuals receiving Title VIII funding to pursue U.S. Government career opportunities, internships, or short-term sabbaticals after completing their awards. Grant recipient organizations are encouraged to:
(1)Identify individuals for funding who have an interest in pursuing careers in the U.S. Government, and
(2)provide opportunities for individuals in disciplines with Eurasian and/or Southeast European studies concentrations to serve on a temporary basis as a policy or other expert in U.S. Embassies, U.S. Government agencies and/or with NGOs in the region. Applications proposing more productive interaction among U.S. Government agencies, universities and non-government organizations
(NGOs)in the U.S. and overseas are strongly encouraged. • *Publications:* Funds awarded in this competition should not be used to subsidize journals, newsletters and other periodical publications. • *Conferences:* Proposals to fund conferences will be considered for funding only if the conference is an interactive, field-strengthening activity and if it is a component of a larger program with greater duration and scope. Conference panelists must be selected through an open, merit-based selection process. In addition, conference proposals will be assessed according to their relative contribution to the advancement of knowledge and to the professional development of cadres in the fields, and will be competed and evaluated against research, fellowship or other proposals for achieving the objectives of this grant competition. • *Language Support:* The Advisory Committee encourages a focus on the non-Russian languages of Eurasia and the less-commonly-taught languages of Southeast Europe. For Russian-language instruction/study, support may be provided only at the advanced level. Institutions seeking funding in order to offer language instruction are encouraged to apply to one or more of the national programs with appropriate peer review and selection mechanisms. • *Support for Non-Americans:* The purpose of the program is to build and sustain U.S. expertise on the countries of Southeast Europe and Eurasia. Therefore, the Advisory Committee has determined that highest priority for support always should go to American specialists ( *i.e.* , U.S. citizens or permanent residents). Support for such activities as long-term research fellowships ( *i.e.* , nine months or longer), should be restricted solely to American scholars. Support for short-term activities also should be restricted to Americans, except in special instances where the participation of a non-American scholar has clear and demonstrable benefits to the U.S. scholarly community and/or the U.S. Government. In such special instances, the applicant will be required to justify the expenditure and notify the Title VIII Program office prior to the activity. Despite this restriction on support for non-Americans, collaborative projects are encouraged—where the non-American component is funded from other sources—and priority is given to institutions whose programs contain such an international component. • *Cost-sharing:*
(1)Title VIII legislation requires cost-sharing for projects involving post-doctoral or equivalent-level research projects; and graduate, post-doctoral and teaching fellowships for advanced training or language studies for institutions or individuals. Cost sharing is strongly encouraged in all programs.
(2)Research solely on, and/or travel to, the countries of “greater Central Asia” or Central and East Europe outside of Southeast Europe as outlined in this request for proposals, is not eligible for FSA or SEED funding. Proposals may include a plan to support research projects on, and travel to, countries eligible and ineligible for FSA or SEED funding, to address cross-border issues, regional or comparative studies, etc., in which case travel to ineligible countries would be cost-shared with funding from other sources.
(3)All proposed cost sharing should be included in the budget request in a separate column, and explained in the budget notes. The basis for determining the value of cash and in-kind contributions must be in accordance with OMB Circular A-110, (Revised), Subpart C.23—Cost Sharing and Matching. • *Program Data Requirements:* Organizations awarded grants will be required to provide data on program participants and activities in an electronically accessible format for the Title VIII Alumni Database. Requested information would include the following: Name; Institution; Address; Contact Information; Field(s) of Expertise; Type/Title of Award; Location(s) of Research, Fellowship, or other Activity; Research Products/Titles; Service to the U.S. Government; Contribution to U.S. Assistance Goals; etc. • *Reporting and Funding Acknowledgement:* Successful applicants will be required to submit quarterly financial and program reports, and will be expected to acknowledge the Department of State and the Title VIII Program in all Title VIII-supported research products, advertising, recruitment tools, announcements, and other related electronic or written communications. Applications *Application Format:* Applicants must submit 10 copies of the proposal (a clearly marked original and 9 copies) in Times New Roman, 12-point font. The “Executive Summary,” “Proposal Narrative,” “Budget Presentation” and “Resumes” must be submitted on a PC-formatted disk or CD. Proposals should include the following elements: TAB 1: SF424 “Application for Federal Assistance” and Cover Letter with primary point of contact for questions if different than “Authorized Representative.” SF424 is online: ( *http://www.whitehouse.gov/omb/grants/sf424.pdf* ); TAB 2: Executive Summary (one page, single-spaced—see below); TAB 3: Proposal Narrative (not to exceed 20 double-spaced pages), and calendar or timeline of major program activities; TAB 4: Budget Presentation (Detailed Budget, Budget Notes, and Budget Summary—see below for explanation); TAB 5: Resumes (one page, key professional staff); TAB 6: Letters of Support and/or Partnership; and TAB 7: Certifications of Compliance with Federal Regulations (see below). Applicants may append other information they consider essential, although bulky submissions are discouraged and run the risk of not being reviewed fully. *Executive Summary:* A one page, single-spaced summary to include: two separate dollar figures indicating the amount of funding requested for Eurasia and Southeast Europe, respectively; a list of each proposed program component in priority order; and any additional information the applicant wishes to provide. *Budget:* Because funds will be appropriated separately for Southeast Europe
(SEED)and Eurasia
(FSA)programs, proposals and budgets must delineate how the requested funds will be distributed by region, country (to the extent possible), and activity. Successful grant recipients will be required to report expenditures by region, country and activity. Applicants must provide the following Budget Presentation* (*budget templates are available by request from the Title VIII Program Office):
(1)Summary Budget, with one column each for the following:
(1)DOS/Title VIII Costs;
(2)Applicant Cost Sharing;
(3)Third Party Cost Sharing, if applicable; and
(4)Total Costs, with the following headings: Southeast Europe
(SEED)Program Costs Administrative Costs TOTAL Southeast Europe Eurasia
(FSA)Program Costs Administrative Costs TOTAL Eurasia SEED + FSA Totals TOTAL Program Costs (SEED + FSA) TOTAL Administrative Costs (SEED + FSA) (Percentage Of Total Admin Costs To Total Requested Funding:%) TOTAL COSTS (SEED + FSA)
(2)Detailed Line-Item Budget with one column each for the following:
(1)DOS/Title VIII Costs;
(2)Applicant Cost Sharing;
(3)Third Party Cost Sharing, if applicable; and
(4)Total Costs. The budget must include the headings “Program Costs” and “Administrative Costs,” and both administrative and program costs must be listed separately according to region (Eurasia or Southeast Europe). Sub-budgets for each separate program component, phase, location or activity should be included to provide clarification. Administrative Costs include the following: “Staff Requirements” (each position should be listed as a separate line item with annual salary x percentage of time x number of months devoted to program), “Benefits,” “Direct Costs,” and “Indirect Costs.” Indirect costs are limited to 10 percent of total direct program costs. The “Total Amount Requested” should be the sum of the amount requested for Eurasia activities plus the amount requested for Southeast Europe activities.
(3)Budget Notes should clarify each line item, as necessary. Explain cost sharing with appropriate details and cross-references to the budget request.
(4)For applicants requesting funds to supplement a program having other sources of funding, submit a current budget for the total program and an estimated future budget for it, showing how specific lines in the budget would be affected by the allocation of requested grant funds. Other funding sources and amounts should be identified.
(5)Append the most recent audit report (the most recent U.S. Government audit report, if available) and the name, address, and point of contact of the audit agency.
(6)Include a prioritized list of proposed programs if funding is being requested for more than one program or activity. All payments will be made to grant recipients through the U.S. Government's Payment Management System (PMS). Applicants should familiarize themselves with Department of State grant regulations contained in 22 CFR 145, “Grants and Cooperative Agreements with Institutions of Higher Education, Hospitals, and Other Non-Profit Organizations”; 22 CFR 137; OMB Circular A-110, “Uniform Administrative Requirements for Grants and Agreements with Institutions of Higher Education, Hospitals, and Other Non-Profit Organizations”; and OMB Circular A-133, “Audits of Institutions of Higher Learning and Other Non-Profit Institutions.” Organizations can receive a DUNS number at no cost: call the toll-free DUNS Number request line at
(866)705-5711 or apply online at *http://www.dnb.com/us/duns_update/.* *Proposal Narrative:* The Applicant must describe the proposed programs, in no more than 20 double-spaced pages, including the benefits of these programs for the Southeast European and Eurasian fields, estimates of the types and amounts of anticipated awards, peer review procedures, recruitment plan for open, merit-based selection of participants with detailed information about advertising of program opportunities to eligible individuals and/or institutions, and anticipated selection committee participants. The narrative should address the applicant's plan to encourage policy relevant research, methods for dissemination of research products, and plans for bringing Title VIII to the service of the U.S. Government, where applicable. Applicants who have received previous grants from the Title VIII Program should provide the following detailed information: names/affiliations of individual and institutional award recipients and amounts and types of awards from the past year; and a summary of the applicant's past grants under the Title VIII Program specifying both past and anticipated applicant to award ratios. Proposals from national organizations involving language instruction programs should provide information on programs supported in the past year, including: indications of progress achieved by Title VIII-funded students; criteria for evaluation, including levels of instruction, degrees of intensiveness, facilities, and methods for measuring language proficiency (including pre- and post-testing); instructors' qualifications; and budget information showing estimated costs per student. *Certifications:* Applicants must include three Certifications of Compliance with Federal Regulations. These forms are available online at: *http://www.state.gov/m/a/dir/c6606.htm.*
(a)DS-2012 *Certification Regarding Drug-Free Workplace Requirements for Grantees Other Than Individuals;*
(b)DS-2015 *Certification Regarding Debarment, Suspension and Other Responsibility Matters for Lower Tier and Primary Covered Transactions;* and
(c)DS-2018 *New Restrictions on Lobbying.* *Review Process:* the program office, a grant review panel and the Title VIII Advisory Committee will review all eligible proposals. Proposals also may be reviewed by the Office of the Legal Advisor or by other Department elements. Final funding decisions are at the discretion of the Department of State's Deputy Secretary. Final technical authority for grants resides with the Department of State's Grants Officers. *Review Criteria:* Technically eligible proposals will be competitively reviewed according to the following criteria:
(1)Quality of the Program Idea: Proposals should be responsive to the guidelines provided in this request for proposals, and should exhibit originality, substance, precision, and relevance to the State Department's mission, the legislation supporting the Title VIII Program, and the FREEDOM Support and SEED Acts.
(2)Program Plan: Program objectives should be stated clearly. Objectives should respond to priorities and address gaps in knowledge for particular fields and/or regions. A calendar or timeline of major program activities should be included. Responsibilities of partner organizations, if any, should be described clearly.
(3)*Institutional Capacity:* Proposed personnel and selection committees should be adequate and appropriate to achieve the program's goals. The proposal should reflect the applicant's expertise and knowledge in conducting national competitive award programs of the type the applicant proposes on the countries of Southeast Europe and/or Eurasia. Past performance of prior recipients and the demonstrated potential of new applicants will be considered.
(4)*Cost-Effectiveness and Cost Sharing:* Administrative costs in the proposal budget should be kept to a minimum. All other items should be necessary and appropriate. Proposals should maximize cost sharing, including in-kind assistance, through contributions from the applicant, partner organizations, as well as other private sector support. “Applicant Cost-Sharing” and “Third Party Cost Sharing” should be included as separate columns in the budget request. Proposal budgets that do not provide cost sharing will be deemed less competitive in this category.
(5)Evaluation, Monitoring, Database, Reporting: Proposals should include a plan to evaluate and monitor program successes and challenges. Methods for linking outcomes to program objectives are recommended. The proposal should address the applicant's willingness and ability to contribute to the alumni database. Part III *Available Funds:* Funding for this program is subject to final Congressional action and the appropriation of FY 2005 funds. Funding may be available at a level of approximately $5.0 million. In Fiscal Year 2004, the program was funded at $5.0 million from the FREEDOM Support and SEED Acts, which funded grants to nine national organizations. The number of awards may vary each year, depending on the level of funding and the quality of the applications submitted. The Department legally cannot commit funds that may be appropriated in subsequent fiscal years. Thus multi-year projects cannot receive assured funding unless such funding is supplied out of a single year's appropriation. Grant agreements may permit the expenditure from a particular year's grant to be made up to three years after the grant's effective date. The terms and conditions published in this Request for Proposals are binding and may not be modified by any Department representative. Issuance of the Request for Proposals does not constitute an award commitment on the part of the U.S. Government. The Department reserves the right to reduce, revise, or increase proposal budgets in accordance with the needs of the program and the availability of funds. *Further Information:* For further information or to arrange a consultation, contact Maria Seda-Gaztambide, Title VIII Program Assistant, by e-mail: *Seda-GaztambideMM@state.gov.* Kenneth E. Roberts, Executive Director, Advisory Committee for Studies of Eastern Europe and the Independent States of the Former Soviet Union, Department of State. [FR Doc. 04-26506 Filed 11-30-04; 8:45 am]
Connectionstraces to 5
6 references not yet in our index
  • 17 CFR 240.19
  • 22 USC 4501-4508
  • Pub. L. 98-164
  • 97 Stat. 1047
  • 22 CFR 145
  • 22 CFR 137
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Notices
SECURITIES AND EXCHANGE COMMISSION
U.S.C.§ 78s
U.S.C.§ 78c
U.S.C.§ 78f
C.F.R.§ 200.30-3
U.S.C.§ 552
Cite17 CFR 240.19
Cite22 USC 4501-4508
Pub. L.Pub. L. 98-164
Stat.97 Stat. 1047
Cite22 CFR 145
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