Notices. SECURITIES AND EXCHANGE COMMISSION

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BILLING CODE 8010-01-M SECURITIES AND EXCHANGE COMMISSION [Release No. 34-50903; File No. SR-CBOE-2004-84] Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Exchange Fees December 21, 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 December 13, 2004, the Chicago Board Options Exchange, Incorporated (“CBOE” 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 CBOE.

The proposed rule change has been filed by CBOE as establishing or changing a due, fee, or other charge 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. 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 Exchange proposes to amend its Fee Schedule to

(i)make certain fee changes, and

(ii)adopt a communication review fee. The text of the proposed rule change is available at the Office of the Secretary, CBOE, and at the Commission. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, CBOE 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. CBOE 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, Proposed Rule Change 1. Purpose CBOE proposes to:

(i)Amend its Annual FOCUS Report Filing Fee, Firm FOCUS Minimum Monthly Fee, Order Routing System (“ORS”) Order Cancellation Fee and Floor Broker Workstation (“FBW”) Fees; and

(ii)adopt a Communication Review Fee. The Exchange also proposes to delete from its Fee Schedule certain fees that it represents are now outdated. The Exchange proposes to amend the following fees:

(i)*Annual FOCUS Report Filing Fee.* CBOE market-makers are required to file annual financial statements with the Exchange pursuant to Rule 17a-5(d) under the Act and CBOE Rule 15.5. Currently, the Exchange charges an annual filing fee of $100 to CBOE market-makers who make their annual filing by paper copy and $25 to CBOE market-makers who submit their annual filing electronically. 5 The Exchange proposes to increase the fee for a paper filing to $150 and increase the fee for an electronic filing to $50. The Exchange represents that these increased fees will assist it in offsetting increased costs of staff review of these filings. 5 *See* Securities Exchange Act Release No. 40566 (October 19, 1998), 63 FR 57339 (October 27, 1998).

(ii)*Firm FOCUS Minimum Monthly Fee.* CBOE charges member organizations and Designated Primary Market-Makers (“DPMs”) that are subject to Rule 15c3-1 under the Act, and for which the Exchange is the Designated Examining Authority (“DEA”), an annual fee of $.40 per $1,000 of gross revenue as reported on the member organization's FOCUS report (excluding commodity commission revenue) (“DPM & Firm DEA Fee”). The DPM & Firm DEA Fee is currently subject to a monthly minimum fee of $1,000 for clearing firms and $250 for non-clearing member firms (“Firm FOCUS Minimum Monthly Fee”). 6 The Exchange proposes to increase the Firm FOCUS Minimum Monthly Fee assessed to non-clearing member firms to $275 to help the Exchange more closely cover the costs of regulating these member firms. 6 *See* Securities Exchange Act Release No. 43144 (August 10, 2000), 65 FR 50258 (August 17, 2000). The Firm FOCUS Minimum Monthly Fee applies to those clearing member firms and non-clearing member firms whose DPM & Firm DEA Fee would not otherwise exceed the thresholds of $1,000 and $250.

(iii)*ORS Order Cancellation Fee.* CBOE currently assesses an executing clearing firm $1 per cancelled ORS order if the number of cancelled ORS orders exceeds the number of executed ORS orders in the same month (“ORS Order Cancellation Fee”). 7 The ORS Order Cancellation Fee is not charged if fewer than 500 ORS orders are cancelled in the month. The Exchange proposes to revise the methodology used to assess the ORS Order Cancellation Fee. Specifically, the Exchange proposes to assess $1 for each cancelled ORS order in excess of the number of orders that the executing clearing member executes in a month. As is presently the case, the ORS Order Cancellation Fee will not be assessed if fewer than 500 orders are cancelled in a month. 7 *See* Securities Exchange Act Release No. 44607 (July 27, 2001), 66 FR 40757 (August 3, 2001). The proposed ORS Order Cancellation Fee is similar to cancellation fees adopted by other exchanges. 8 The Exchange believes that this revised fee will result in increased order flow to CBOE. 8 *See* Securities Exchange Act Release No. 46189 (July 11, 2002), 67 FR 47587 (July 19, 2002.

(iv)*FBW Fee.* FBW terminals were initially rolled out to equity option trading crowds. CBOE currently assesses a fee of $425 per month for FBW functionality that is placed on a desktop terminal. CBOE assesses an additional $100 per month if the FBW application resides on a workstation that includes ILX and TNT functionalities. No fee is assessed for use of a mobile FBW. 9 9 *See* Securities Exchange Act Release No. 48223 (July 24, 2003), 68 FR 44978 (July 31, 2003). The Exchange represents that it plans to roll out FBW terminals to index options trading crowds. Only mobile FBWs will be used in index option trading crowds due to lack of space for desktop FBW applications. The Exchange proposes to assess a fee of $100 per month per login ID for mobile FBWs used in index option trading crowds. Additionally, the Exchange proposes to assess DPMs $100 per month per login ID for use of an FBW, whether it is the desktop application or mobile. The Exchange represents that these FBW fees will assist the Exchange in offsetting the cost of rolling out FBWs to its index options trading crowds.

(v)*Communication Review Fee.* CBOE represents that its Department of Financial and Sales Practice Compliance reviews a member firm's options-related advertisements, educational material and sales literature for compliance with applicable rules of the CBOE, Commission, and the Securities Investor Protection Corporation. 10 These public communications include, for example, print, television and radio advertisements, or electronic communications, such as Web sites. 10 Under CBOE Rule 9.21(c), CBOE members and member organizations are required to submit to the Exchange's Department of Financial and Sales Practice Compliance for approval every advertisement and all educational materials pertaining to options at least ten days prior to use. Telephone conversation between Jaime Galvan, Senior Attorney, CBOE, and Natasha Cowen, Attorney, Division of Market Regulation (“Division”), Commission, on December 15, 2004. CBOE proposes to implement a fee for this service (“Communication Review Fee”) as follows: *Regular review* —(1) for printed material reviewed, $75 per submission, plus $10 for each page reviewed in excess of 10 pages; and

(2)for video and audio media reviewed, $75 per submission, plus $10 per minute for each minute of tape reviewed in excess of 10 minutes; *Expedited review* —(1) for printed material reviewed, $500 per submission, plus $25 for each page reviewed in excess of 10 pages; and

(2)for video and audio media reviewed, $500 per submission, plus $25 per minute for each minute of tape reviewed in excess of 10 minutes. CBOE represents that expedited review will be completed within three business days, not including the date the item is received by the Department of Financial and Sales Practice Compliance, unless a shorter or longer period is agreed to by the Department of Financial and Sales Practice Compliance. The Department of Financial and Sales Practice Compliance may, in its sole discretion, refuse requests for expedited review. The proposed Communication Review Fee is similar to the communication review charge of the National Association of Securities Dealers, Inc. (NASD). 11 11 *See* NASD By-Laws, Schedule A, Section 13. The Exchange intends to implement the fee changes discussed above and the new Communication Review Fee on January 1, 2005.

(vi)*Expired Fees.* The Exchange proposes to delete the paragraph relating to the Booth Rental Incentive Program from its Fee Schedule. The Program is due to expire on December 31, 2004, and the Exchange has determined not to extend the Program. Also, the Exchange proposes to delete the Option Trading Permit Lease Pool Bid Fee as these permits expired. 12 12 *See* Securities Exchange Act Release No. 49723 (May 18, 2004), 69 FR 29591 (May 24, 2004). The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act, 13 in general, and furthers the objectives of Section 6(b)(4) of the Act, 14 in particular, in that it is designed to provide for the equitable allocation of reasonable dues, fees, and other charges among CBOE members. B. Self-Regulatory Organization's Statement on Burden on Competition CBOE does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received from Members, Participants or Others No written comments were solicited or received with respect to the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing rule change establishes or changes a due, fee, or other charge imposed by the Exchange, it has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act 15 and subparagraph (f)(2) of Rule 19b-4 thereunder. 16 At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. 17 IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: *Electronic Comments:* • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov.* Please include File Number SR-CBOE-2004-84 on the subject line. *Paper Comments:* • Send paper comments in triplicate to Jonathan G. Katz, Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. All submissions should refer to File Number SR-CBOE-2004-84. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Section, 450 Fifth Street, NW., Washington, DC 20549. Copies of such filing also will be available for inspection and copying at the principal office of the CBOE. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-CBOE-2004-84 and should be submitted on or before January 19, 2005. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 18 18 17 CFR 200.30-3(a)(12). Margaret H. McFarland, Deputy Secretary. [FR Doc. E4-3878 Filed 12-28-04; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-50909; File No. SR-CBOE-2004-85] Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change and Amendment No. 1 Thereto by the Chicago Board Options Exchange, Incorporated Regarding Designated Primary Market-Makers' Handling of Non-Public Customer Orders December 22, 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 December 15, 2004, the Chicago Board Options Exchange, Incorporated (“CBOE” 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 CBOE. On December 21, 2004, the CBOE submitted 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 Amendment No. 1 made technical corrections to the propose rule text of the proposed rule change. I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The CBOE proposes to modify CBOE Rule 8.85(b)(iii) regarding Designated Primary Market-Makers' (“DPMs”) handling of non-public customer orders. Below is the text of the proposed rule change, as amended. Proposed deletions are in [brackets]. Rule 8.85 DPMs Obligations

(a)No change.

(b)Agency Transactions. Each DPM shall fulfill all of the obligations of a Floor Broker (to the extent that the DPM acts as a Floor Broker) and of an Order Book Official under the Rules, and shall satisfy each of the following requirements, in respect of each of the securities allocated to the DPM: (i)-(ii) No change.

(iii)accord priority to any [public] customer order which the DPM represents as agent over the DPM's principal transactions, unless the customer who placed the order has consented to not being accorded such priority; (iv)-(vii) No change. (c)-(e) No change. * * * Interpretations and Policies: .01-.04 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 Exchange included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change, as amended. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose On January 25, 2002 the Commission approved a CBOE rule change filing eliminating the obligation of DPMs to accord priority to non-public customer orders. 4 In approving the filing, the Commission expressly stated that it was making no determination as to whether a DPM's failure to accord priority to non-public customer orders, when the DPM is acting as an agent, is consistent with the federal securities laws or any other applicable law. The Commission further stated that the approval does not affect a DPM's fiduciary obligations under federal securities laws or agency law principles when it acts as agent. 4 Securities Exchange Act Release No. 45341 (January 25, 2002), 67 FR 5016 (February 1, 2002) (approving SR-CBOE-00-42). The Exchange now proposes to change the rule in question, CBOE Rule 8.85(b)(iii), to revert back to the original language so that the rule applies to both public customer and non-public customer orders. 2. Statutory Basis The Exchange believes that the proposed rule change, as amended, is consistent with Section 6(b) of the Act 5 in general, and furthers the objectives of Section 6(b)(5) 6 in particular, in that it is designed to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system and, in general, to protect investors and the public interest. 5 15 U.S.C. 78f(b). 6 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, as amended, will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received from Members, Participants, or Others No written comments were either solicited or received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 35 days of the date of publication of this notice in the **Federal Register** or within such longer period

(i)as the Commission may designate up to 90 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding, or

(ii)as to which the Exchange consents, the Commission will:

(A)By order approve such proposed rule change; or

(B)Institute proceedings to determine whether the proposed rule change should be disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov.* Please include File Number SR-CBOE-2004-85 on the subject line. Paper Comments • Send paper comments in triplicate to Jonathan G. Katz, Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. All submissions should refer to File Number SR-CBOE-2004-85. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Section, 450 Fifth Street, NW., Washington, DC 20549. Copies of such filing also will be available for inspection and copying at the principal office of the CBOE. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-CBOE-2004-85 and should be submitted on or before January 19, 2005. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 7 7 17 CFR 200.30-3(a)(12). Margaret H. McFarland, Deputy Secretary. [FR Doc. E4-3880 Filed 12-28-04; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-50888; File No. SR-FICC-2004-19] Self-Regulatory Organizations; Fixed Income Clearing Corporation; Notice of Filing of a Proposed Rule Change Relating to Changes to Eliminate or Amend Rules that are Inconsistent With Current Practice, Have Expired, Are Outdated, Are Unnecessary, or Require Technical Correction December 20, 2004. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”), 1 notice is hereby given that on October 7, 2004, the Fixed Income Clearing Corporation (“FICC”) 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 primarily by FICC. 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). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The proposed rule change would eliminate or amend FICC's Government Securities Division (“GSD”) and Mortgage-Backed Securities Division (“MBSD”) rules that are inconsistent with current practice, have expired, are outdated, are unnecessary, or require technical correction. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, FICC 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. FICC has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. 2 2 The Commission has modified the text of the summaries prepared by FICC. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Delete Provisions In GSD's Rules Regarding The Automated Customer Account Transfer Service (“ACATS”) The ACATS provisions were added to GSC's rules in 1998, when the National Securities Clearing Corporation requested that the Government Securities Clearing Corpoartion (“GSCC”), the GSD's predecessor, establish with it an interface that would enable account transfers involving netting-eligible government securities to be processed using GSCC's existing netting and settlement processes. This service was not implemented and as such its continued reference in the rules is inconsistent with current practice. 2. Delete Provisions From GSD's Rules That Designate Participation In The Repo Comparison And Netting Processes GSD's rules currently refer to FICC as designating a member to be eligible to participate in the repo comparison and repo netting processes. When these repo services commenced in 1995, GSCC required testing prior to participation and subsequently designated members as eligible to participate in the services. Participation in these services has now become commonplace and special testing and designation for participation in the repo services is no longer necessary. As such, the provisions in question are outdated. 3. Make Technical Corrections To GSD Rules FICC proposes to make the following technical corrections to GSD's rules: i. Change the definitions of “Interest Adjustment Payment” and “Interest Rate Mark Adjustment Payment” in GSD Rule 1 (Definitions) to correct an erroneous reference in both definitions to the “Federal Funds Rate” and replacing them with references to a newly defined term, “Overnight Investment Rate;” ii. change the term in Rule 1 “Multilateral Clearing Organization” to “Multilateral Clearing Agency;” iii. change the language of the definition in Rule 1 of “Member” to reflect the fact that certain members ( *i.e.,* comparison-only members) are approved for membership by senior management and not by the Membership and Risk Management Committee; iv. correct Section 1(d) of Rule 2, where GSD is erroneously referred to as its predecessors name, GSCC; v. delete subsection

(b)of Rule 11B, which has expired; vi. change an incorrect reference to “Rule 7” to “Rule 6C” in Rule 17, Section 4; and vii. change a reference to the “Membership and Standards Committee” to the “Membership and Risk Management Committee” in Rule 48, Section 2. 4. Technical Corrections In The MBSD Rules FICC proposes to renumber MBSD Rule 15 (Notices) of Article X to Rule 16 as it is in fact the 16th rule in that article. FICC believes that the proposed rule change is consistent with the requirements of Section 17A of the Act 3 and the rules and regulations thereunder because it will eliminate unnecessary and/or outdated provisions and makes necessary technical changes. 3 15 U.S.C. 78q-1. B. Self-Regulatory Organization's Statement on Burden on Competition FICC does not believe that the proposed rule change will have any impact or impose any burden on competition. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received from Members, Participants, or Others. Written comments relating to the proposed rule change have not yet been solicited or received. FICC will notify the Commission of any written comments it receives. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within thirty-five 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 ninety 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 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-FICC-2004-19 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-FICC-2004-19. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Section, 450 Fifth Street, NW, Washington, DC 20549. Copies of such filing also will be available for inspection and copying at the principal office of FICC and on FICC's Web site at < *http://ficc.com/gov/gov. docs.jsp?NS-query=* >. 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-FICC-2004-19 and should be submitted on or before January 19, 2005. For the Commission by the Division of Market Regulation, pursuant to delegated authority. 4 4 17 CFR 200.30-3(a)(12). Margaret H. McFarland, Deputy Secretary. [FR Doc. E4-3866 Filed 12-28-04; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-50900; File No. SR-ISE-2004-36] Self-Regulatory Organizations; International Securities Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change and Amendment No. 1 Thereto Relating to Fee Changes December 21, 2004 Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the “Act”), 1 and Rule 19b-4 thereunder, 2 notice is hereby given that on November 30, 2004, the International Securities Exchange, Inc. (the “Exchange” or the “ISE”) filed with the Securities and Exchange Commission (the “Commission”) the proposed rule change as described in Items I, II, and III below, which items have been prepared by the ISE. On December 15, 2004, the ISE filed an amendment 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* Form 19b-4 dated December 15, 2004 (”Amendment No. 1”). In Amendment No. 1, ISE updated the attached Schedule of Fees to reflect the applicable text in effect as of the date of filing of the proposed rule change, included clarifying language explaining the Exchange's purpose in extending the QQQ cap and fee waiver, removed the reference to a proposed change to the Schedule of Fees concerning the Exchange's proposed Price Improvement Mechanism (“PIM”) that was pending Commission approval at the time of filing, and made other conforming changes to the text of the proposed rule change. The Exchange plans to resubmit the proposed change relating to the ISE Schedule of Fees dealing with the PIM in a separate, subsequent rule filing to the Commission. Amendment No. 1 to the proposed rule change replaced the original proposed rule change in its entirety. I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The ISE is proposing to amend its Schedule of Fees to:

(i)Extend, for one year, until November 30, 2005, a program that caps and waives execution and comparison fees for transactions in options on the Nasdaq 100 Tracking Stock (“QQQ”) when a member transacts a certain number of QQQ option contracts;

(ii)increase, from 700,000 to 1,000,000, the Exchange's average daily volume (“A.D.V.”) breakpoint which is used for determining the execution fee for market maker and firm proprietary transactions; and

(iii)delete references to expired fee waivers. 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 ISE 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. ISE has prepared summaries, set forth in sections A, B and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend the ISE Schedule of Fees to

(i)extend, for one year, until November 30, 2005, a program that caps and waives execution and comparison fees for transactions in QQQ options when a member transacts a certain number of QQQ option contracts,

(ii)increase, from 700,000 to 1,000,000, the Exchange's A.D.V. breakpoint which is used for determining the execution fee for market maker and firm proprietary transactions, and

(iii)delete references to expired fee waivers. Specifically, the Exchange proposes to extend, until November 30, 2005, its program that caps and waives execution and comparison fees for transactions in QQQ options when a member transacts a certain number of QQQ option contracts on the Exchange. Under that program, when a member's A.D.V. in QQQ options reaches 8,000 contracts, the member's execution fee for the next 2,000 QQQ option contracts is reduced by $.10 per contract. Further, when a member's monthly A.D.V. in QQQ options reaches 10,000 contracts, the Exchange waives the entire execution fee and the comparison fee for each QQQ option contract traded thereafter. The Exchange instituted this program in November 2003 for a six month period, expiring in May 2004. 4 The Exchange extended this program in May 2004 for an additional six month period, expiring in November 2004. 5 The Exchange now proposes extending this program for a one year period, expiring on November 30, 2005. The Exchange seeks to extend this program for competitive reasons. This program was initiated and extended in an attempt to increase the Exchange's market share in the QQQ option product. 4 *See* Securities Exchange Act Release No. 49147 (Jan. 29, 2004), 69 FR 5629 (Feb. 5, 2004) (File No. SR-ISE-2003-32). 5 *See* Securities Exchange Act Release No. 49853 (June 14, 2004), 69 FR 35087 (June 23, 2004) (File No. SR-ISE-2004-15). The Exchange also proposes to increase, from 700,000 to 1,000,000, the Exchange's A.D.V breakpoint which is used for determining the execution fee for market maker and firm proprietary transactions. The breakpoints were established when the Exchange commenced trading in May 2000, and have not been revised since that time. As a result of the increase in the overall industry A.D.V. and Exchange A.D.V., the Exchange is proposing to revise the breakpoint so that it is more reflective of the current overall industry A.D.V., as well as current Exchange A.D.V. Accordingly, the Exchange is proposing to revise the calculation so that a $.14 per contract charge is applied when Exchange A.D.V. is from 500,001 to 1,000,000 contracts, and a $.12 per contract charge is applied when Exchange A.D.V. is over 1,000,000 contracts. 6 6 The Commission notes that the effect of the increased breakpoint contained in the proposed rule change will be to increase by $0.02 the per contract charge when Exchange A.D.V. is from 700,001 to 1,000,000 contracts. Furthermore, the Exchange proposes to delete the following references to expired fee waivers for certain transactions in S&P MidCap 400 Index options: the market maker and firm proprietary execution fee waiver that expired on November 25, 2004; and the non-Public Customer Order surcharge execution fee waiver that expired on November 25, 2004. 2. Basis The Exchange believes that the proposed rule change is consistent with the requirement under Section 6(b)(4) of the Act 7 that an exchange have an equitable allocation of reasonable dues, fees and other charges among its members and other persons using its facilities. In particular, the Exchange believes that the proposed rule change would enable the Exchange to continue offering competitively priced products. 7 15 U.S.C. 78f(b)(4). B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others The Exchange has not solicited, and does not intend to solicit, comments on this proposed rule change. The Exchange has not received any unsolicited written comments from members or other interested parties. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change, as amended, has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act 8 and Rule 19b-4(f)(2) 9 thereunder, in that it establishes or changes a due, fee, or other charge imposed by the Exchange. Accordingly, the proposal will take effect upon filing the amended proposal with the Commission. At any time within 60 days after the filing of Amendment No. 1 to the proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. 10 8 15 U.S.C. 78s(b)(3)(A)(ii). 9 17 CFR 19b-4(f)(2). 10 For purposes of calculating the 60-day abrogation period, the Commission considers the abrogation period to have begun on December 15, 2004, the date on which the Commission received Amendment No. 1. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: *Electronic comments:* • Use the Commission's Internet comment form *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov* . Please include File No. SR-ISE-2004-36 on the subject line. *Paper comments:* • Send paper comments in triplicate to Jonathan G. Katz, Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. All submissions should refer to File Number SR-ISE-2004-36. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commissions Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room. Copies of such filing also will be available for inspection and copying at the principal office of the ISE. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-ISE-2004-36 and should be submitted by January 19, 2005. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 11 11 17 CFR 200.30-3(a)(12). Margaret H. McFarland, Deputy Secretary. [FR Doc. E4-3864 Filed 12-28-04; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-50897; File No. SR-NASD-2004-169] Self-Regulatory Organizations; National Association of Securities Dealers, Inc.; Notice of Filing of Proposed Rule Change To Adopt Additional Listing Standards Applicable to the Securities of the Nasdaq Stock Market, Inc. or an Affiliate December 21, 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 2, 2004, the National Association of Securities Dealers, Inc. (“NASD”), through its subsidiary, The Nasdaq Stock Market, Inc. (“Nasdaq”), 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 Nasdaq. On December 14, 2004, and December 15, 2004, Nasdaq filed Amendments No. 1 and No. 2, respectively. 3 On December 15, 2004, Nasdaq filed Amendment No. 3 to the proposal. 4 The Commission is publishing this notice to solicit comments on the proposed rule change, as amended, from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 Amendment No. 1 and Amendment No. 2 were deficient for technical reasons and were withdrawn on December 14 and December 15, 2004, respectively. 4 Amendment No. 3 slightly modifies the text of the proposed rule to make clear that the exclusion in the definition of an Affiliate Security would encompass other exchange traded funds listed on The Nasdaq Stock Market. The amendment also further clarifies and explains the proposed rule change. Amendment No. 3 is incorporated into this notice. I. Self-Regulatory Organization's Statement of the Terms of the Substance of the Proposed Rule Change Nasdaq proposes to adopt additional listing standards that would apply to a security listed on Nasdaq by Nasdaq or its affiliate (collectively defined in the proposed rule as “Nasdaq Affiliates”). The text of the proposed rule change is below. Proposed new language is in italics; proposed deletions are in brackets. 5 5 Changes are marked to the rule text that appears in the electronic NASD manual found at *http://www.nasd.com* . Rule 4370. Additional Requirements for Nasdaq-Listed Securities Issued by Nasdaq or Its Affiliates *(a) For purposes of this Rule 4370, the terms below are defined as follows:* *(1) “Nasdaq Affiliate” means Nasdaq and any entity that directly or indirectly, through one or more intermediates, controls, is controlled by, or is under common control with Nasdaq, where “control” means that the one entity possesses, directly or indirectly, voting control of the other entity either through ownership of capital stock or other equity securities or through majority representation on the board of directors or other management body of such entity.* *(2) “Affiliate Security” means any security issued by a Nasdaq Affiliate, with the exception of Portfolio Depository Receipts, as defined in Rule 4420(i)(1)(A), and Index Fund Shares as defined in Rule 4420(j)(1)(A).* *(b) Upon initial and throughout continued inclusion of the Affiliate Security in The Nasdaq Stock Market, Nasdaq shall:* *(1) file a report each month with the Commission detailing Nasdaq's monitoring of:* *(A) the Nasdaq Affiliate's compliance with the provisions of the Rule 4200, 4300 and 4400 Series; and* *(B) the trading of the Affiliate Security, which shall include summaries of all related surveillance alerts, complaints, regulatory referrals, trades cancelled or adjusted pursuant to Rule 11890, investigations, examinations, formal and informal disciplinary actions, exception reports and trading data of such security.* *(2) engage on independent accounting firm once a year to review and prepare a report on the Affiliate Security to ensure that the Nasdaq Affiliate is in compliance with the Rule 4200, 4300 and 4400 Series and promptly forward to the Commission a copy of the report prepared by the independent accounting firm.* *(c) In the event that Nasdaq determines that the Nasdaq Affiliate is not in compliance with any of the Rule 4200, 4300 and 4400 Series, Nasdaq shall file a report with the Commission at the same time that Nasdaq notifies the Nasdaq Affiliate of its non-compliance. The report shall identify the date of non-compliance, type of non-compliance and any other material information conveyed to the Nasdaq Affiliate in the notice of non-compliance. Within five

(5)business days of receipt of a plan of compliance from the Nasdaq Affiliate, Nasdaq shall notify the Commission of such receipt, whether the plan of compliance was accepted by Nasdaq or what other action was taken with respect to the plan and the time period provided to regain compliance with the Rule 4200, 4300 and 4400 Series, if any.* II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, Nasdaq 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. Nasdaq 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 Nasdaq is proposing a rule change to adopt a new Rule 4370 that would impose additional reporting requirements on Nasdaq should Nasdaq or an affiliate of Nasdaq list a security on The Nasdaq Stock Market (collectively, the “Nasdaq Affiliates”). 6 In the event that a Nasdaq Affiliate lists a security on Nasdaq (the “Affiliate Security”), the proposed rule change would require Nasdaq to file a report with the Commission on a monthly basis detailing Nasdaq's monitoring of

(1)the Nasdaq Affiliate's compliance with the provisions of Rule 4200, 4300 and 4400 Series (which include bid price requirements, and quantitative and qualitative maintenance requirements) and

(2)the trading of the Affiliate Security, including summaries of all related surveillance alerts, complaints, regulatory referrals, trades cancelled or adjusted pursuant to NASD Rule 11890, investigations, examinations, formal and informal disciplinary actions, exception reports and trading data. 6 The NASD currently would be considered a Nasdaq Affiliate for purposes of the proposed rule change. Nasdaq also would be required to commission an annual review and report by an independent accounting firm of the compliance of the Affiliate Security with Rule 4200, 4300 and 4400 Series. Nasdaq would be required to furnish promptly a copy of the report to the Commission. Nasdaq also would be required to notify the Commission at the same time it notifies the Nasdaq Affiliate if Nasdaq determines that the Nasdaq Affiliate was not in compliance with any of its listing standards. The proposed rule change also would require Nasdaq to notify the Commission within five business days of its receipt of a plan of compliance from the Nasdaq Affiliate. Nasdaq's notification also would advise the Commission on whether the plan of compliance was accepted by Nasdaq or what other action was taken with respect to the plan and the time period provided to regain compliance with the Rule 4200, 4300 and 4400 Series, if any. Nasdaq believes that the additional requirements contained in the proposed rule change would provide additional assurance that any Affiliate Securities listed on Nasdaq by a Nasdaq Affiliate comply with Nasdaq's listing standards on an on-going basis. Nasdaq believes that the proposed rule change would eliminate any perception of a potential conflict of interest if a Nasdaq Affiliate seeks to list a security on The Nasdaq Stock Market. Nasdaq is proposing to exclude from the definition of Rule 4370—solely for purposes of this rule—securities that meet the definition of “Portfolio Depository Receipts” under NASD Rule 4420(i)(1)(A) and “Index Fund Shares” under NASD Rule 4420(j)(1)(A). These securities, commonly referred to as “exchange traded funds” or “ETFs,” are issued by open-end management investment companies based on a portfolio of securities. Often this portfolio mirrors a foreign or domestic stock index. An ETF is designed to provide investment results that correspond generally to the price and yield performance of the underlying portfolio of securities. Nasdaq believes that such securities do not present the same concerns as other securities, even if issued by a Nasdaq Affiliate. ETFs, which do not represent investments in an individual company, are already exempt from a number of listing standards including corporate governance rules standards, such as the requirement to have a board of directors comprised of a majority of independent directors and to have a code of conduct applicable to all employees and directors. 7 Nasdaq does not believe that the additional reporting requirements in the proposed rule change would provide any value in this context because ETFs would not constitute an investment in a Nasdaq Affiliate. Further, these issuers are already subject to a comprehensive scheme of regulation pursuant to the Investment Company Act of 1940. 7 NASD Rule 4350(a)(2). 2. Statutory Basis Nasdaq believes that the proposed rule change, as amended, is consistent with the provisions of Section 15A of the Act, 8 in general, and with Section 15A(b)(6) of the Act, 9 in particular, in that it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, remove impediments to a free and open market and a national market system, and, in general, to protect investors and the public interest, and does not permit unfair discrimination among issuers. Specifically, the rule change would provide additional reporting safeguards for certain listed securities where conflicts of interest might arise. 8 15 U.S.C. 78o-3. 9 15 U.S.C. 78o-3(b)(6). B. Self-Regulatory Organization's Statement on Burden on Competition Nasdaq does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others Written comments were neither solicited nor 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

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