Notices. M SECURITIES AND EXCHANGE COMMISSION

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BILLING CODE 8010—01—M SECURITIES AND EXCHANGE COMMISSION [Release No. 34-50904; File No. SR-BSE-2004-57] Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change by the Boston Stock Exchange, Inc. Relating to the Execution Guarantee Rules 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 7, 2004, the Boston Stock Exchange, Inc.

(“BSE” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend its rules regarding execution guarantees.

The text of the proposed rule change appears below. 3 Additions are in italics; deletions are in brackets. 3 The Commission notes that a technical change was made to the proposed rule text of Sec. 33(a) submitted by the BSE to correct a typographical error. Specifically, in the rule text proposed to be added to this Section, the word “a” was changed to “at”. Telephone conversation between John Boese, Vice President and Chief Regulatory Officer, BSE, and Jennifer Colihan, Special Counsel, Division of Market Regulation, Commission, on December 20, 2004.

RULES OF THE BOSTON STOCK EXCHANGE Chapter II Dealings on the Exchange Sec. 33 Execution Guarantee

(a)The Execution Guarantee shall be available to each member firm in all issues traded through the Intermarket Trading System

(ITS)and registered to a specialist on the Exchange. Specialists must accept and guarantee execution on all agency market and marketable limit orders [from 100 up to and including 1,299 shares] *on the basis of the NBBO bid on a sell order or the NBBO offer on a buy order at the time an order is received. Sell orders will be satisfied up to the size of the lesser of the NBBO bid or 1299 shares; buy orders up to the lesser of the NBBO offer or 1299 shares. No portion of an order larger than 1299 shares is subject to this public agency guarantee.*

(b)Subject to the requirements of the short sale rule, all agency market orders must be filled on the basis of the Consolidated Quotation System best bid or better on a sell order, or the Consolidated Quotation System best offer or better on a buy order.

(c)All agency limit orders will be filled if one of the following conditions occur:

(1)the bid or offering at the limit price has been exhausted in the primary market as defined in the CTA Plan;

(2)there has been a price penetration of the limit in the primary market; or

(3)the issue is trading on the primary market at the limit price unless it can be demonstrated that such order would not have been executed if it had been transmitted to the primary market, or the broker and specialist agree to a specific volume-related or other criteria requiring a fill. * * * Interpretations and Policies: .01—Pre-opening orders must be accepted and filled at the primary market opening[, provided however that on such orders the specialist shall be obligated to accept orders up to 1299 shares on both the buy side and the sell side]. .02—In trading halt situations occurring on the primary market, orders will be executed based on the reopening price. .03—Simultaneous orders must be executed pursuant to the provisions of the Rule up to an accumulated size equal to the prevailing NBBO displayed size on receipt of the order. .04—For purposes of limit order execution, size will be governed by that displayed on the Consolidated Quotation System (“CQS”). .05—If the displayed quotations of the Consolidated Quotation System can be demonstrated to be in error or a market center is experiencing system problems which result in an invalid quotation in CQS, an adjustment in execution price may be allowed as prescribed in .06. .06—In unusual trading situations or in the event of an equipment failure, a specialist or floor broker may seek relief from the requirements of this rule from two out of three Floor Officials (floor members of the Market Performance Committee or Board of Governors). Chapter XXXIII BEACON Section 5 Automatic Execution Parameters [a) All market and marketable limit orders in ITS issues up to and including 1,299 shares will be eligible for automatic execution. All automatic execution parameters will be updated on a regular basis and published in BEACON. Specialists may provide larger automatic execution parameters than the 1299 minimum requirement. Parameters in excess of these minimum requirements will be pursuant to specific authorization by a Specialist with a member organization, and will not be published in BEACON.

(b)A 599 automatic execution parameter may be requested for a particular stock for good cause shown by submitting a statement to the Market Performance Committee setting forth the specific conditions and/or reasons that render participation at the 1299 parameter injurious.

(c)The BEACON reference price for automatic execution is the consolidated best bid or offer (“BBO”) price. All market and marketable limit orders will be filled in their entirety (up to the current automatic execution parameter) at the reference price, regardless of the displayed size of the BBO.

(d)Market orders that would be executed outside the primary market price range for the day should be “stopped” and will be executed at the BEACON reference price, or better as subsequent trades occur on the Consolidated Tape.] *Automatic execution size parameters will be set in BEACON according to specialist specifications, by issue. All market or marketable limit orders of a size equal to or less than the automatic execution parameters will be automatically executed in their entirety, at the price of the NBBO.* *Orders that are larger than the size of the automatic execution parameters, will be automatically executed up to the size of the automatic execution parameter, at the price of the NBBO. The remainder of any order which is not automatically executed, i.e. that portion of the order which is greater than the size of the automatic execution parameter, will be guaranteed professional handling by the specialist according to the specialist's fiduciary duties of best execution.* 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 BSE included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The proposed rule change would amend two sections of the Rules of the Board of Governors of the Boston Stock Exchange (“BSE Rules”) relating to the guaranteed execution of agency market and marketable limit orders (“Execution Guarantee”). In Chapter II, the Exchange sets forth rules related to the Execution Guarantee (“Execution Guarantee Rules”). Currently, the Execution Guarantee is that Exchange specialists must accept and guarantee execution of all agency market and marketable limit orders from 100 up to and including 1,299 shares, at the price of the National Best Bid or Offer (“NBBO”). The Exchange is proposing to amend its Execution Guarantee Rules so that specialists would be obligated to fill agency market and marketable limit orders at the price of the NBBO, but at a size of the lesser of the displayed size of the NBBO or 1,299 shares. The Exchange represents that the proposed rule change would be consistent with the rules of other exchanges in this area, specifically the Chicago Stock Exchange (Article XX, Rule 37) and the National Stock Exchange (Rule 11.9 (n)). Although the BSE's proposal is to limit the size of the Execution Guarantee, specialists would still be obligated, under the general principles of best execution, to seek the best execution of their customer orders. This would include the execution of a market order at the size available in the NBBO quotation. For example, if a specialist received a 5,000 share market order and the size reflected in the NBBO was 5,000 shares or greater, the specialist would be obligated to pursue an execution of that order in its entirety, regardless of the BSE's Execution Guarantee Rules. 4 4 If the quote of the BSE specialist is the NBBO, the BSE specialist is obligated by Rule 11Ac1-1(c)(2) under the Act (“Quote Rule”) to execute any order up to the size of his quote. 17 CFR 240.11Ac1-1(c)(2). The Exchange also notes that the average trade size executed on the primary listed markets has drastically reduced in recent years, due to a variety of factors. With the reduction of executed trade size, the size of the NBBO has also greatly reduced, thereby often making it difficult for BSE specialists to find a contra market for trades which they, under current rules, must execute at the NBBO price, for a size up to 1,299 shares, regardless of the size of the posted NBBO. In an era in which average quotation spreads are reducing to the lowest possible difference, the current BSE Execution Guarantee Rules in Chapter II often mean that BSE specialists are forced to absorb a position for which a market no longer exists. Accordingly, the Exchange is seeking to change its Execution Guarantee Rules so that its specialists are not disadvantaged by the requirements of this Rule. The Exchange is also seeking to change its rules in Chapter XXXIII, BEACON, Section 5, *Automatic Execution Parameters,* regarding Automatic Execution Parameters (“Automatic Execution Rules”), so that the Automatic Execution Rules do not conflict with the proposed changes to the Execution Guarantee Rules. Currently, the Automatic Execution Rules discuss automatic execution parameters in relation to the 1,299 share requirement, and state that all market and marketable limit orders up to and including 1,299 shares will be eligible for automatic execution. The Automatic Execution Rules also discuss the updating and publishing of automatic execution parameters, and permit a specialist to provide automatic execution parameters in excess of the 1,299 share minimum guarantee. Further, they discuss the concept of reference price, defined as the NBBO price, and state that all market and marketable limit orders will be filled in their entirety up to the size of the automatic execution parameter at the reference price, regardless of the size of the NBBO. To be consistent with the changes proposed to the Execution Guarantee Rules, the Exchange is proposing to replace the current language in Chapter XXXIII, Section 5, in its entirety. The current language of this Section is closely related to the current Execution Guarantee Rules, such as the references to 1,299 share as being the minimum size of the automatic execution parameter. Also, the Exchange believes that the discussion of “reference price,” in particular the fact that it is essentially an undefined term within the BSE Rules, could lead to confusion with the proposed changes to the Execution Guarantee Rules discussed above. Therefore, the Exchange is proposing replacing the current language of Chapter XXXIII, Section 5 with language that more accurately reflects the automatic execution of orders on the BSE, in congruence with the proposed changes to the Exchange's Execution Guarantee Rules. The proposed new language of the Automatic Execution Rules explains that automatic execution parameters are set according to specialist specifications. All market or marketable limit orders of a size equal to or less than the automatic execution parameters will be automatically executed in their entirety at the price of the NBBO. For orders that are larger than the size of the automatic execution parameters, that portion of the order which is in excess of the execution parameter will be guaranteed handling by the specialist in accordance with the specialist's fiduciary duties of best execution, although not necessarily automatic execution, while that portion of the order which would fall within the size of the automatic execution parameter will be automatically executed in BEACON. 2. Statutory Basis The Exchange believes that the proposal is consistent with the requirements of Section 6(b) of the Act 5 in general, and Section 6(b)(5)of the Act, 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 is not designed to permit unfair discrimination between customers, brokers, or dealers, or to regulate by virtue of any authority matters not related to the administration of the Exchange. 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 will impose any burden on competition. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received from Members, Participants, or Others The Exchange has neither solicited nor received comments on the proposed rule change. 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 pursuant to Section 19(b)(3)(A) of the Act 7 and Rule 19b-4(f)(6) 8 thereunder. Consequently, because the proposed 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 of filing, 9 or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest, it has become effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-4 thereunder. 7 15 U.S.C. 78s(b)(3)(a). 8 17 CFR 240.19b-4(f)(6). 9 The Commission has waived the requirement that the Exchange provide written notice of its intent to file the proposed rule change at least five days prior to the filing date in connection with this filing. 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. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: *Electronic Comments:* • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov.* Please include File Number SR-BSE-2004-57 on the subject line. *Paper Comments:* • Send paper comments in triplicate to Jonathan G. Katz, Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. All submissions should refer to File Number SR-BSE-2004-57. 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 offices of the BSE. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-BSE-2004-57 and should be submitted on or before January 19, 2005. 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. E4-3877 Filed 12-28-04; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-50920; File No. SR-CBOE-2004-81] Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change by the Chicago Board of Options Exchange, Incorporated Relating to Amending Rule 30.20 To Conform to the Requirements of Regulation SHO December 22, 2004. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Exchange Act”), 1 notice is hereby given that on December 8, 2004, the Chicago Board Options Exchange, Incorporated (“CBOE” or “Exchange”) filed with the Securities Exchange Commission (“Commission”) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the CBOE. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1 15 U.S.C. 78(b)(1). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change CBOE proposes to amend CBOE Rule 30.20 to conform to the requirements of Regulation SHO. 2 The text of the proposed rule change is available at the Office of the Secretary, CBOE and at the Commission. 3 2 *See* Securities Exchange Act Release No. 50103 (July 28, 2004), 69 FR 48008 (August 6, 2004) (“Adopting Release”). 3 Exhibit A is available at *http://www.sec.gov/rules/sro.shtml.* II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change The Commission on July 23, 2004 adopted Regulation SHO (“Reg SHO”) to address short sales of securities and to create uniform rules relating to the short selling of securities. 4 The purpose of this rule is to amend existing Exchange rules relating to short sales to bring them into conformity with the requirements of Reg SHO. 4 *Id.* The Exchange proposes to amend Rule 30.20, as described below. *Rule 30.20(a):* The Exchange amends this paragraph to require that all orders to sell a security be market either long, short, or short exempt. *Rule 30.20(b):* The Exchange amends this paragraph to incorporate a reference to Exchange Act Rule 242.202T. 5 5 Rule 202T provides a procedure for the Commission to suspend, on a pilot basis, the trading restrictions of the Commission's short sale price test, as well as any short sale price test of any exchange or national securities association, for short sales in such securities as the Commission designates by order as necessary or appropriate in the public interest and consistent with the protection of investors, after giving due consideration to the security's liquidity, volatility, market depth and trading market. Rule 202T makes explicit that no SRO “shall have a rule that is not in conformity with or conflicts with” the suspension of a price test for the securities selected for the pilot. *Rule 30.20(c):* The Exchange eliminates the entire text of paragraph

(c)in favor of language referencing the Commission's “Locate and Delivery Requirements for Short Sales.” As amended, new paragraph

(c)provides that no member or member organization shall accept, represent or execute for his or its own account or the account of any other person an order to sell a security subject to the rules in this Chapter unless such member or member organization complies with Exchange Act Rule 242.203. *Rule 30.20.02:* The Exchange amends this Interpretation to provide that the terms long, short, and short exempt will have the same meaning as in Exchange Act Rule 242.200. *Rule 30.20.03:* The Exchange proposes to delete existing Interpretation .03, which is specific to a product (SuperShares) that the Exchange never traded. *Rule 30.20.04:* The Exchange proposes to revise current Interpretation .04 to include new text referencing the Exchange Act Rules governing the requirements for long sales (Exchange Act Rule 242.203(a)) and short sales (Exchange Act Rule 242.203(b)). The Exchange also proposes to clarify that the requirements members currently must satisfy in order to make an affirmative determination for short sales shall continue to be required for documenting compliance with Exchange Act Rule 242.203(b)(1). In this respect, the requirements remain the same. *Rule 30.20.05:* The Exchange proposes to delete this Interpretation, which is specific to an expired product (S&P 500 Index Bear market Warrants), and replace it with language from Exchange Act Rule 242.203(b)(3) relating to threshold securities. *Rule 30.20.06:* The Exchange proposes to adopt this new Interpretation to remind members that even if a security is expected from any short sale price test under any Pilot program (or any order issued pursuant to Exchange Act Rule 242.202T), members or member organizations must still comply with the marking and locate requirements in Exchange Act Rule 242.200 and 203. The Exchange believes the proposed rule change is consistent with the Act and the rules and regulations under the Act applicable to a national securities exchange and, in particular, the requirements of section 6(b) of the Exchange Act. Specifically, the Exchange believes the proposed rule change is consistent with the Section 6(b)(5) 6 requirements that the rules of an exchange be 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. 6 15 U.S.C. 78(f)(b)(5). 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 not necessary or appropriate in furtherance of the purposes of the Exchange Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others The Exchange neither solicited nor received comments on the proposal. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective pursuant to section 19(b)(3) of the Exchange Act 7 and subparagraph (f)(6) of Exchange Act Rule 19b-4. 8 CBOE has designated the proposed rule change as one that:

(i)Does not significantly affect the protection of investors or the public interest;

(ii)does not significantly burden on competition; and

(iii)does not become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate. CBOE requests that the Commission waive the 30-day pre-operative delay requirement contained in Rule 19b-4(f)(6)(iii). CBOE believes that good cause exists to grant such waiver because of the importance of short sale regulation to the protection of investors and compliance with Reg SHO. 9 7 15 U.S.C. 78s(b)(3)(A). 8 17 CFR 240.19b-4(f)(6). 9 The compliance date for Reg SHO is January 3, 2005. *See* Adopting Release, *supra* note 2. The operative date of the proposed filing is January 3, 2005. *See* CBOE Regulatory Circular RG04-127, December 21, 2004, available at *http://www.cboe.org/Legal/* . The Commission believes that waiving the 30-day pre-operative delay is consistent with the protection of investors and the public interest. The Commission believes that accelerating the operative date does not raise any new regulatory issues, significantly affect the protection of investors or the public interest, or impose any significant burden on competition. For these reasons, the Commission designates the proposed rule change effective and operative immediately. 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 Exchange 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 Exchange 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-2004-81 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-2004-81. 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-2004-81 and should be submitted on or before January 19, 2005. 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. 04-28476 Filed 12-28-04; 8:45 am]

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