Notices. Notice and request for comments

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BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-51006; File No. SR-CBOE-2005-04] Self-Regulatory Organizations; Chicago Board Options Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to the Systematizing of Orders in the Standard and Poor's Depositary Receipts (“SPDR”) Option Class January 10, 2005. 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 January 10, 2005, the Chicago Board Options Exchange, Inc.

(“CBOE” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I and II below, which Items have been prepared by the CBOE. The Exchange has filed the proposal as a “non-controversial” rule change pursuant to Section 19(b)(3)(A) of the Act, 3 and Rule 19b-4(f)(6) thereunder, 4 which renders the proposal effective upon filing with the Commission. 5 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). 4 17 CFR 240.19b-4(f)(6). 5 The CBOE asked the Commission to waive the 30-day operative delay. *See* Rule 19b-4(f)(6)(iii). 17 CFR 240.19b-4(f)(6)(iii).

I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change CBOE proposes to amend its rules relating to the systematizing of orders in the Standard and Poor's Depositary Receipts (“SPDR”) option class. The text of the proposed rule change is below. Proposed new language is in *italics* . CHAPTER VI Section B: Member Activities on the Floor Required Order Information Rule 6.24 (a)(1)-(2) No change. (a)(3) Orders in Certain Index Option Classes *and the Standard and Poor's Depositary Receipts (“SPDR”) Option Class.* The requirement to systematize orders as set forth in this Rule shall commence on March 28, 2005, in the following option classes: the S&P 500 index option class (SPX), *the SPDR option class* , the S&P 100 index option class (OEX), and the European-style S&P 100 index option class (XEO).

(a)(4) No change. (b)-(c) No change. * * * Interpretations and Policies: .01—.07 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, 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.

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 In connection with the development of a Consolidated Options Audit Trail System (“COATS”), CBOE recently amended CBOE Rule 6.24 to require that each order, cancellation of, or change to an order transmitted to CBOE must be “systematized”, in a format approved by the Exchange, either before it is sent to the Exchange or upon receipt on the floor of the Exchange. 6 An order is systematized if:

(i)The order is sent electronically to the Exchange; or

(ii)the order that is sent to the Exchange non-electronically ( *e.g.* , telephone orders) is input electronically into the Exchange's systems contemporaneously upon receipt on the Exchange, and prior to representation of the order. 6 *See* Securities Exchange Act Release No. 50996 (January 7, 2005) (SR-CBOE-2004-77). The requirements of CBOE Rule 6.24 to systematize orders commenced on January 10, 2005 in all option classes traded on CBOE, except for the S&P 500 index option class (SPX), the S&P 100 index option class (OEX), and the European-style S&P 100 index option class (XEO). In these option classes, the requirement to systematize orders will commence on March 28, 2005. In its rule change amending CBOE Rule 6.24, CBOE noted that the extension until March 28, 2005, for these option classes is reasonable and appropriate because the manner in which these option classes trade is significantly different than equity option classes and because of the trading environment that exists in these option classes. 7 7 Moreover, CBOE noted in its rule filing that it initially developed its floor broker workstation (“FBW”) to assist its members in complying with their obligations to systematize orders for COATS. However, the FBW was designed specifically for COATS compliance in equity option classes, and not for use in index option classes. Upon being advised in late December 2003 that the requirement to systematize orders also applied to non-equity option classes, the Exchange actively pursued developing an alternative technology to utilize in index option classes. The purpose of this rule filing is to amend CBOE Rule 6.24 to state that the requirement to systematize orders in the S&P Depositary Receipts Trust (“SPDR”) option class will commence on March 28, 2005, as it will for SPX, OEX and XEO options. Options on SPDRs, which is an exchange-traded fund based on the S&P 500 index, began trading on CBOE on January 10, 2005. CBOE anticipates that options on SPDRs will traded in a manner similar to SPX options (an index option based on the S&P 500 index), and therefore believes it is reasonable and appropriate to extend the requirement to systematize orders in options on SPDRs until March 28, 2005. 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. Specifically, the Exchange believes the proposed rule change is consistent with the Section 6(b)(5) 10 because it will enhance CBOE's audit trail for orders by incorporating non-electronic orders into COATS, and will permit CBOE to reconstruct markets in a more efficient and effective manner. 8 15 U.S.C. 78f(b). 9 15 U.S.C. 78f(b)(5). 10 15 U.S.C. 78(f)(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 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 neither solicited nor received comments on the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action 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, the proposed rule change has become effective pursuant to Section 19(b)(3)(A) of the Act 11 and Rule 19b-4(f)(6) thereunder. 12 11 15 U.S.C. 78s(b)(3)(A) 12 17 CFR 240.19b-4(f)(6). A proposed rule change filed under Rule 19b-4(f)(6) 13 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 satisfied the five-day pre-filing requirement. The Exchange further requested that the Commission waive the 30-day operative delay, as specified in Rule 19b-4(f)(6)(iii), and designate the proposed rule change immediately operative. The Commission notes that by waiving the operative period, the Exchange has stated that it will be able to implement trading in options on SPDRs expeditiously, which the Exchange states should serve to enhance the depth and liquidity of the SPDR market as well as the products for which SPDRs or the S&P 500 Index is the underlying benchmark. For these reasons, the Commission, consistent with the protection of investors and the public interest, has waived the 30-day operative date requirement for this proposed rule change, and has determined to designate the proposed rule change as operative on January 10, 2005, the date it was submitted to the Commission. 13 17 CFR 240.19b-4(f)(6). 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-CBOE-2005-04 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-2005-04. 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 offices 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-2005-04 and should be submitted on or before February 4, 2005. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 14 14 17 CFR 200.30-3(a)(12). Jill M. Peterson, Assistant Secretary. [FR Doc. E5-133 Filed 1-13-05; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-51003; File No. SR-CBOE-2005-01] Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change by the Chicago Board Options Exchange, Incorporated, Relating to Allowing Market Participants To Submit Orders for Automatic Execution January 10, 2005. 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 31, 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 and II below, which Items have been prepared by the Exchange. The Exchange filed the proposal as a “non-controversial” proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act 3 and Rule 19b-4(f)(6) thereunder. 4 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)(iii). 4 17 CFR 240.19b-4(f)(6). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The CBOE proposes to allow market participants to submit orders for automatic execution. 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, the Exchange included statements concerning the purpose of, and statutory basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of those 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 the Statutory Basis for, the Proposed Rule Change 1. Purpose When CBOE market participants 5 interact with orders in the electronic book (“the book” or “E-book”), CBOE Rule 6.45A(c) governs the allocation of such orders. 6 Generally, if only one market participant (“MP”) interacts with the order in the book, he/she will be entitled to receive the entire order. If, however, more than one MP attempts to interact with the same order in the book, a “quote trigger” process initiates. Under the quote trigger process, the first MP to interact with the book order starts a counting period lasting N-seconds whereby each MP that submits an order within that “N-second period” becomes part of the “N-second group” and is entitled to share in the allocation of that order via the formula contained in the rule. The Exchange proposes to provide an alternative method by which MPs may interact with orders in the book. 5 Per CBOE Rule 6.45A, the term market participants includes an in-crowd Market-Maker, a Market-Maker complying with the in-person requirements of CBOE Rule 8.7.03(B)(1) who submits quotes from off of the floor of the Exchange through the facilities of the Exchange, an in-crowd DPM, an e-DPM, and a floor broker representing orders in the trading crowd. 6 Market participants currently interact with orders in the book in one of two ways: by submitting a quote or by submitting an order. Such orders are referred to as “I-orders.” As proposed, MPs will have the ability to submit orders that will be eligible to execute automatically against resting orders in the book. As such, execution will be based on time priority such that the first order, whether from a MP, a customer, or broker-dealer, will have priority for up to the size of his/her order. Subsequent orders will be entitled to allocations only to the extent the first order did not exhaust the size of the order in the book. CBOE Rule 6.13 governs orders submitted for automatic execution and orders submitted by MPs would be subject to these requirements. Orders submitted by MPs that are CBOE Market-Makers (“MMs”) will be treated as orders from “Options Exchange Market-Makers,” as defined in CBOE Rule 6.13(b)(i)(C)(ii)(A), and therefore will be subject to the same restrictions imposed by CBOE Rule 6.13(b)(i)(C)(iii), which generally limits *all* options exchange MMs (whether CBOE or away MMs) to one execution (on the same side of the market) per 15-seconds. 7 7 CBOE Rule 6.13(b)(i)(C)(iii) provides: “With respect to orders eligible for submission pursuant to paragraph (b)(i)(C)(ii), members shall neither enter nor permit the entry of multiple orders on the same side of the market in an option class within any 15-second period for an account or accounts of the same beneficial owner. The appropriate FPC may shorten the duration of this 15-second period by providing notice to the membership via a Regulatory Circular that is issued at least one day prior to implementation. The effectiveness of this rule shall terminate on January 12, 2005.” The Exchange has proposed to extend the effectiveness of this Rule until October, 2005. The Exchange represents that it has the ability to surveil for violations of this rule by CBOE MPs. Upon implementation of this new rule, CBOE MMs will have two alternative methods by which they can access orders in the book. 8 One will be through the use of I-orders (with allocation via the “N-second group” as described above) and the other will be through the use of an order submitted for automatic execution (with allocation based on time priority). CBOE MMs may choose which method they want to utilize to send in orders. Functionally, the vast majority of MMs will have one handheld device through which they submit either an I-order or an order for automatic execution. 9 Upon approval of this rule, MMs could choose to submit two orders simultaneously. 10 For example, a MM may submit an order for automatic execution immediately followed by an I-order. In this respect, if the MM's auto-ex order is first, he/she will receive an execution. If, however, the MM is not first and instead was “beaten” to the order by another CBOE MM, the first MM may still participate in the order by virtue of sending in the I-order. 8 Floor brokers already have this dual ability with respect to orders they represent as agent. They may choose to submit the order for automatic execution (in accordance with CBOE Rule 6.13) or they may determine to join the “N-second group.” Away MMs, too, have the ability to submit orders for automatic execution (in accordance with CBOE Rule 6.13) or they may have a floor broker represent their orders as part of the “N-second group.” 9 The routing of the order the MM submits is dictated by the way the MM marks the order. An order designated with an “I” origin code routes directly to the book and participates in the “N-second group.” An order submitted for automatic execution by a MM will be marked with an “M” origin code and will route through ORS where it executes in accordance with Rule 6.13. 10 CBOE has confirmed that the limit on sending more than one order within 15 seconds in CBOE Rule 6.13(b)(i)(C)(iii), as described in fn. 7 *supra* , only applies to auto-ex orders. Hence, a MP could send two orders simultaneously as long as one of them is sent as an I-order. Telephone conversation between Deborah L. Flynn, Assistant Director, Division of Market Regulation, Commission and Steve Youhn, Assistant Secretary, CBOE on January 5, 2005. With respect to priority between the two types of orders, the first order received by the Exchange has priority over the other. For example, assume two MMs in the trading crowd both attempt to execute against an order in the book by sending in different types of orders. MM A sends an I-order while MM B sends an order for automatic execution. The first order received by the Exchange has priority. If it is the I-order, then the order submitted by the MM B for automatic execution will only execute to the extent there is a balance remaining after the I-order executes. 11 If the auto-ex order is received first, then the I-order submitted by MM A will only execute to the extent there is a balance remaining after the auto-ex order executes. 12 An order submitted by a MM for automatic execution will not participate in the “N-second group.” 11 When the I-order executes against the order in the book, it starts the N-second process. 12 If there is a balance remaining against which the I-order executes, the N-second process starts again when the I-order executes. 2. Statutory Basis The Exchange represents that allowing MMs to submit orders for automatic execution in accordance with CBOE Rule 6.13 will enhance their ability to provide liquidity and manage risk. Accordingly, CBOE 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 Act. 13 Specifically, the Exchange believes the proposed rule change is consistent with the Section 6(b)(5) 14 requirement that the rules of an exchange be designed to prevent fraudulent and manipulative acts, to promote just and equitable principles of trade, to perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. 13 15 U.S.C. 78f(b). 14 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 Act. Rather, CBOE believes that the proposed rule change will have a positive effect on competition, which is appropriate and in furtherance of the purposes of the Act. Specifically, the proposal would allow CBOE MMs to have the ability to be first with respect to executing against a booked order, which entitles them to receive all of that order (up to the size of the order the MM submits). Currently, the only way a MM can take 100% of a booked order is if no other market participant submits an order during the “N-second” period. The Exchange believes that the ability to receive a larger allocation will serve as an incentive to a MM to make more vigorous markets. The Exchange believes that the proposal also puts CBOE MMs on equal footing with their away-market counterparts, who have the ability to submit orders to CBOE for automatic execution. For these reasons, CBOE believes that the proposal will have a significantly positive effect on competition. 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 Exchange has designated the proposed rule change as a “non-controversial” rule change pursuant to Section 19(b)(3)(A)(iii) of the Act 15 and subparagraph (f)(6) of Rule 19b-4 thereunder. 16 The Exchange represents that 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)by its terms, does not become operative for 30 days after the date of this filing, or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest. The Exchange has requested that the Commission waive the five-day pre-filing notice requirement and the 30-day operative delay period for “non-controversial” proposals and make the proposed rule change effective and operative upon filing. 15 15 U.S.C. 78s(b)(3)(A)(iii). 16 17 CFR 240.19b-4(f)(6). The Commission has determined to waive the five-day pre-filing notice requirement and the 30-day operative delay period. 17 The Commission notes that the proposal would only give CBOE market makers the option of sending their proprietary orders for automatic execution, an option that other CBOE market participants already enjoy. For this reason, the Commission sees no reason to delay the operation of the proposed change. Therefore, the foregoing rule change has become immediately effective and operative upon filing pursuant to Section 19(b)(3)(A)(iii) of the Act 18 and Rule 19b-4(f)(6) thereunder. 19 17 For purposes only of accelerating the operative date of this proposal, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). 18 15 U.S.C. 78s(b)(3)(A)(iii). 19 17 CFR 240.19b-4(f)(6). 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. 20 20 *See* 15 U.S.C. 78s(b)(3)(C). 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-2005-01 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-2005-01. 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, 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 Exchange. 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-2005-01 and should be submitted on or before February 4, 2005. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 21 21 17 CFR 200.30-3(a)(12). Jill M. Peterson, Assistant Secretary. [FR Doc. E5-135 Filed 1-13-05; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-51000, File No. SR-MSRB-2004-08] Self-Regulatory Organizations; Municipal Securities Rulemaking Board; Order Approving Proposed Rule Change Relating to Amendments to MSRB Rule G-34, on CUSIP Numbers and New Issue Requirements, To Facilitate Real-Time Transaction Reporting of Trades in New Issue Municipal Securities January 7, 2005. On November 18, 2004, the Municipal Securities Rulemaking Board (“MSRB” or “Board”), filed with the Securities and Exchange Commission (“SEC” or “Commission”), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”), 1 and Rule 19b-4 thereunder, 2 a proposed rule change to amend its Rule G-34, on CUSIP numbers and new issue requirements, to facilitate real-time transaction reporting of trades in new issue municipal securities. The proposed rule change was published for comment in the **Federal Register** on December 7, 2004. 3 The Commission received no comment letters regarding the proposal. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 *See* Securities Exchange Act Release No. 50773 (December 1, 2004), 69 FR 70731 (December 7, 2004). The Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to the MSRB 4 and, in particular, the requirements of Section 15B(b)(2)(C) of the Act and the rules and regulations thereunder. 5 Section 15B(b)(2)(C) of the Act requires, among other things, that the MSRB's rules be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in municipal securities, to remove impediments to and perfect the mechanism of a free and open market in municipal securities, and, in general, to protect investors and the public interest. 6 In particular, the Commission finds that the proposed rule change will facilitate the processing of transactions in new issue municipal securities so that such transactions can be reported to the MSRB in real-time and prices of such transactions can be disseminated on a contemporaneous basis. 4 In approving this rule the Commission notes that it has considered the proposed rule's impact on efficiency, competition and capital formation. 15 U.S.C. 78c(f). 5 15 U.S.C. 78o-4(b)(2)(C). 6 *Id* . *It is therefore ordered* , pursuant to Section 19(b)(2) of the Act, 7 that the proposed rule change (SR-MSRB-2004-08) be, and hereby is, approved. 7 15 U.S.C. 78s(b)(2). 8 17 CFR 200.30-3(a)(12). For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 8 Jill M. Peterson, Assistant Secretary. [FR Doc. E5-156 Filed 1-13-05; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-50971; File No. SR-NASD-2004-180] Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change by the National Association of Securities Dealers, Inc., Regarding Waiver of California Arbitrator Disclosure Standards January 6, 2005. Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (“Exchange Act”), 1 and Rule 19b-4 thereunder, 2 notice is hereby given that on December 9, 2004, the National Association of Securities Dealers, Inc., (“NASD”) filed with the Securities and Exchange Commission (“Commission” or “SEC”) the proposed rule change as described in Items I, II, and III, below, which NASD has prepared. 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 NASD is proposing to extend the pilot rule in IM-10100(f) of the NASD Code of Arbitration Procedure (“Code”), relating to the California waiver program, until September 30, 2005. NASD is not proposing any textual changes to the By-Laws or Rules of NASD. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, NASD 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. NASD 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 Effective July 1, 2002, the California Judicial Council adopted a set of rules, “Ethics Standards for Neutral Arbitrators in Contractual Arbitration” (“California Standards”), 3 which contain extensive disclosure requirements for arbitrators. According to NASD, the rules were designed to address conflicts of interest in private arbitration forums that are not part of a Federal Regulatory System overseen on a uniform, national basis by the SEC. NASD states that the California Standards impose disclosure requirements on arbitrators that conflict with the disclosure rules of NASD and the New York Stock Exchange (“NYSE”). Because NASD could not both administer its arbitration program in accordance with its own rules and comply with the new California Standards at the same time, NASD initially suspended the appointment of arbitrators in cases in California, but offered parties several options for pursuing their cases. 4 3 California Rules of Court, Division VI of the Appendix. 4 These measures included providing venue changes for arbitration cases, using non-California arbitrators when appropriate, and waiving administrative fees for NASD-sponsored mediations. In July 2002, NASD and the NYSE filed a lawsuit in Federal district court seeking a declaratory judgment that the California Standards are inapplicable to arbitration forums sponsored by self-regulatory organizations (“SROs”). 5 On November 12, 2002, the United States District Court for the Northern District of California dismissed the case on Eleventh Amendment grounds. In December 2002, NASD and the NYSE filed a Notice of Appeal to the United States Court of Appeals for the Ninth Circuit. This appeal is currently stayed pending a decision in *Credit Suisse First Boston Corp.* v. *Grunwald* , 6 which is discussed below. 5 *See* Motion for Declaratory Judgment, *NASD Dispute Resolution, Inc. and NYSE, Inc.* v. *Judicial Council of California* , filed in the United States District Court for the Northern District of California, No. C 02 3486 SBA (July 22, 2002), available on the NASD Web site at: *http://www.nasd.com/stellent/groups/med_arb/documents/mediation_arbitration/nasdw_009557.pdf* . 6 No. C 02-2051 SBA (N.D. Cal. March 31, 2003). In another case before the United States District Court for the Northern District of California regarding the applicability of the California Standards to NASD arbitrations, Judge Jeremy Fogel denied the plaintiff's motion to vacate an order compelling arbitration. 7 In his April 2003 decision, Judge Fogel concluded that the application of the California Standards to the NYSE and other SROs, such as NASD, is preempted by the Exchange Act and by the Federal Arbitration Act (“FAA”). The *Mayo* decision was not appealed. 7 *Mayo* v. *Dean Witter Reynolds, Inc.* , 258 F. Supp. 2d 1097 (N.D. Cal. 2003). The applicability of the California Standards to SRO arbitrations was again addressed by the United States District Court for the Northern District of California in *Grunwald* . The court found that the California Standards could not apply to SRO-appointed arbitrators because such arbitrators did not fall within the definition of “neutral arbitrators” that is set forth in the California Code of Civil Procedure. Consequently, the court concluded that the Judicial Council had exceeded its authority in drafting the California Standards and thus declared them void. The *Grunwald* decision has been appealed to the United States Court of Appeals for the Ninth Circuit. Although the appeal has been briefed and argued, the Ninth Circuit has not yet issued a decision. In *Jevne* v. *The Superior Court of Los Angeles County* , 8 the California Court of Appeal, Second District found that the Judicial Council had not exceeded its authority in drafting the California Standards and that the standards are not preempted by the FAA. The court did find, however, that the California Standards are preempted by the Exchange Act. On March 17, 2004, the California Supreme Court granted review in *Jevne* . Although the case has been fully briefed, oral arguments have not yet been scheduled. 8 6 Cal. Rptr. 3d 542, 113 Cal. App. 4th 486 (2d Dist. 2003). To allow arbitrations to proceed in California while the litigation regarding the applicability of the California Standards to SRO arbitrations is pending, NASD implemented a pilot rule to require all industry parties (member firms and associated persons) to waive application of the California Standards to the case, if all the parties in the case who are customers, associated persons with claims against industry parties, member firms with claims against other member firms, or member firms with claims against associated persons that relate exclusively to promissory notes, have done so. 9 In such cases, the arbitration proceeds under the NASD Code of Arbitration Procedure, which already contains extensive disclosure requirements and provisions for challenging arbitrators with potential conflicts of interest. 10 9 Originally, the pilot rule applied only to claims by customers, or by associated persons asserting a statutory employment discrimination claim against a member, and required a written waiver by the industry respondents. In July 2003, NASD expanded the scope of the pilot rule to include all claims by associated persons against another associated person or a member. At the same time, the rule was amended to provide that when a customer, or an associated person with a claim against a member or another associated person, agrees to waive the application of the California Standards, all respondents that are members or associated persons will be deemed to have waived the application of the standards as well. The July 2003 amendment also clarified that the pilot rule applies to terminated members and associated persons. *See* Securities Exchange Act Release No. 48187 (July 16, 2003), 68 FR 43553 (July 23, 2003) (SR-NASD-2003-106). In October 2003, NASD again expanded the scope of the pilot rule to include claims filed by members against other members and to claims filed by members against associated persons that relate exclusively to promissory notes. *See* Securities Exchange Act Release No. 48711 (October 29, 2003), 68 FR 62490 (November 4, 2003) (SR-NASD-2003-153). 10 NASD states that the NYSE has a similar rule, NYSE Rule 600(g). The pilot rule, which was originally approved for six months on September 26, 2002, 11 has been extended and is now due to expire on March 31, 2005. 12 Because NASD believes all the pending litigation regarding the California Standards is unlikely to be resolved by March 31, 2005, NASD requests that the effectiveness of the pilot rule be extended through September 30, 2005, in order to prevent NASD from having to suspend administration of cases covered by the pilot rule. 11 *See* Securities Exchange Act Release No. 46562 (September 26, 2002), 67 FR 62085 (October 3, 2002) (SR-NASD-2002-126). 12 *See* Securities Exchange Act Release No. 50447 (September 24, 2004), 69 FR 58567 (September 30, 2004) (SR-NASD-2004-126). 2. Statutory Basis NASD believes that the proposed rule change is consistent with the provisions of section 15A(b)(6) of the Act, 13 which requires, among other things, that the NASD's rules must be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, and, in general, to protect investors and the public interest. NASD believes that expediting the appointment of arbitrators under the proposed waiver, at the request of customers, associated persons with claims against industry parties, member firms with claims against other member firms, or member firms with claims against associated persons that relate exclusively to promissory notes, will allow those parties to exercise their contractual rights to proceed in arbitration in California, notwithstanding the conflict between the disputed California Standards and the NASD rules. 13 15 U.S.C. 78 *o* -3(b)(6). B. Self-Regulatory Organization's Statement on Burden on Competition NASD does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance 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

(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-NASD-2004-180 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-NASD-2004-180. 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 NASD. 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-NASD-2004-180 and should be submitted on or before February 4, 2005. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 14 14 17 CFR 200.30-3(a)(12). Jill M. Peterson, Assistant Secretary. [FR Doc. E5-134 Filed 1-13-05; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-50982; File No. SR-NYSE-2004-49] Self-Regulatory Organizations; Notice of Filing of Amendment No. 3 to Proposed Rule Change by the New York Stock Exchange, Inc., Relating to Procedures for Companies That Fail To File Annual Reports in a Timely Manner January 6, 2005. 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 21, 2004, the New York Stock Exchange, Inc. (“NYSE” or “Exchange”) filed with the Securities and Exchange Commission (“SEC” or “Commission”) Amendment No. 3 to the proposed rule change as described in Items I, II, III below, which Items have been prepared by the Exchange. 3 The proposed rule change was published for public comment in the **Federal Register** on October 1, 2004. 4 The Commission is publishing this notice to solicit comments on Amendment No. 3 to the proposed rule change from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240-19b-4. 3 The Exchange filed Amendment No. 1 on October 29, 2004, which stated that the proposed rule change would apply to companies that are already late in filing their annual reports as of the date that the Commission approves the proposed rule change. On November 29, 2004, the Exchange filed Amendment No. 2, which replaced and superseded Amendment No. 1. On December 21, 2004, the Exchange withdrew Amendment No. 2. 4 Securities Exchange Act Release No. 50452 (September 27, 2004), 69 FR 58987. I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The proposed rule change reflects amendments to the Listed Company Manual to include procedures applicable to companies that fail to file their Exchange Act annual report in a timely manner. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the NYSE included statements concerning the purpose of and basis for Amendment No. 3 to 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 and is set forth in Sections A, B, and C below. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange is proposing to codify existing procedures followed in situations where companies fail to satisfy the Commission's filing requirements for annual reports on Forms 10-K, 10-KSB, 20-F, 40-F, or N-CSR in a timely manner. The purpose of Amendment No. 3 is to provide notice that, since the proposed rule codifies existing NYSE procedures, it would apply with full effect to companies that are already late in filing their annual report on Form 10-K, 20-F, 40-F, or N-CSR with the SEC as of the date that the Commission approves this rule filing. Set forth below is a description of the proposed rule change as originally proposed: The Exchange closely monitors whether listed companies have filed their annual reports with the Commission as part of its continued listing program. At any given point over the past four years, no more than approximately two dozen NYSE-listed companies failed to file their annual reports with the Commission by the later of the date the filing was required to be made or, if the company filed a Form 12b-25 in a timely manner, by the extended due date. Most of these companies subsequently filed the required annual report within three to four months of the filing due date, and the vast majority of the remaining companies complied within six months of the filing due date. Cumulatively, approximately 13 companies took more than six months to make their filings over the past four years. In all cases where a company failed to file its annual report by the filing due date, Exchange staff held regular discussions and meetings with each company's management, directors, regulators and advisors to monitor the status of the annual report filing and to determine whether to allow the company to continue to trade despite the continued failure to file an annual report with the Commission. In several of these situations, the Exchange ultimately moved to suspend the company's trading and delist its securities due to the length of time that passed without the company providing audited financial statements to the marketplace. In order to formalize the process that the Exchange currently follows when a company has failed to file its annual report on a timely basis, the Exchange proposes to amend Section 802.01 of the Listed Company Manual as described below. Proposed Section 802.01E A company that fails to file its annual report (Forms 10-K, 10-KSB, 20-F, 40-F or N-CSR) with the Commission in a timely manner will be subject to the following procedures: Once the Exchange identifies that a company has failed to file a timely periodic annual report with the Commission by the later of

(a)the date that the annual report was required to be filed with the Commission by the applicable form or

(b)if a Form 12b-25 was timely filed with the Commission, the extended filing due date for the annual report, the Exchange would notify the company in writing of its status. The later of these two dates would be referred to as the “Filing Due Date.” Within five days of receipt of this notification, the company would be required to

(a)contact the Exchange to discuss the status of the annual report filing, and

(b)if it has not already done so, issue a press release disclosing the status of the filing. If the company fails to issue this press release in a timely manner, the Exchange would itself issue a press release stating that the company has failed to timely file its annual report with the Commission. During the nine-month period from the Filing Due Date, the Exchange would monitor the company and the status of the filing, including through contact with the company, until the annual report is filed. If the company fails to file the annual report within nine months from the Filing Due Date, the Exchange would be permitted, in its sole discretion, to allow the company's securities to be traded for up to an additional three-month trading period depending on the company's specific circumstances. If the Exchange determines that an additional trading period of up to three months is not appropriate, suspension and delisting procedures would commence in accordance with the procedures set out in Para. 804.00 of the Listed Company Manual. A company would not be eligible to follow the procedures outlined in Paras. 802.02 and 802.03 with respect to this criteria. In determining whether an additional up to three-month trading period is appropriate, the Exchange would consider the likelihood that the filing could be made during the additional period, as well as the company's general financial status, based on information provided by a variety of sources, including the company, its audit committee, its outside auditors, the staff of the Commission and any other regulatory body. The Exchange strongly encourages companies to provide ongoing disclosure on the status of the annual report filing to the market through press releases, and would also take the frequency and detail of such information into account in determining whether an additional three-month trading period is appropriate. If the Exchange determined that an additional up to three-month trading period was appropriate and the company failed to file its periodic annual report by the end of the additional period, suspension and delisting procedures would commence in accordance with the procedures set out in Para. 804.00. Note that if, at any time, the Exchange deemed it necessary or appropriate in the public interest or for the protection of investors, trading in any security could be suspended immediately, and, in accordance with the procedures set out in Para. 804.00, application made to the Commission to delist the security. 2. Statutory Basis The Exchange believes that the basis for this proposed rule change, as amended, is the requirement under Section 6(b)(5) 5 of the Act that an exchange have rules that are designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to remove impediments to, and perfect the mechanism of a free and open market and, in general, to protect investors and the public interest; and are not designed to permit unfair discrimination between customers, issuers, brokers, or dealers. 5 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 The Exchange has neither solicited nor received written comments on the proposed rule change, as amended. 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 the 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 amendment is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov* . Please include File Number SR-NYSE-2004-49 on the subject line. Paper Comments • Send paper comments in triplicate to Jonathan G. Katz, Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. All submissions should refer to File Number SR-NYSE-2004-49. 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 offices of the NYSE. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-NYSE-2004-49 and should be submitted on or before February 4, 2005. 6 17 CFR 200.30-3(a)(12). For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 6 Jill M. Peterson, Assistant Secretary. [FR Doc. E5-136 Filed 1-13-05; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-51015; File No. SR-NYSE-2004-54] Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change by the New York Stock Exchange, Inc. Relating to Amendments to the NYSE Constitution and the Adoption of an Independence Policy of the NYSE Board of Directors January 11, 2005. 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 September 17, 2004 the New York Stock Exchange, Inc. (“NYSE” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the self-regulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange is proposing amendments to the various provisions of the NYSE Constitution. These amendments further implement the new governance architecture adopted by the Exchange in December 2003. The text of the proposed rule change is attached hereto as Exhibits A-1 and A-2. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the NYSE included statements concerning the purpose of, and basis for, its proposal and discussed any comments it received on the proposal. The text of these statements may be examined at the places specified in Item IV below. The NYSE has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose Changes to the NYSE Constitution The proposed amendments to the NYSE Constitution follow the basic constructs of the Exchange's new governance architecture. The proposed amendments to the various provisions of the NYSE Constitution and the proposed Independence Policy of the Exchange Board of Directors, containing standards which NYSE directors must meet in order to be considered independent, are attached, respectively, as Exhibits A-1 and A-2 hereto. The proposed amendments to the NYSE Constitution mostly clarify the positions of the separate Chief Executive Officer and the members of the Exchange's Board of Executives under that architecture. One proposed change allows the Board to set the annual membership meeting earlier in the year than the June date set under the current scheme. Under Article XIV, Section 1 of the Constitution, amendment to many Constitutional provisions requires adoption by the members. However, amendment to certain Constitutional provisions (generally, provisions dealing with the internal Exchange matters not directly involving the membership or other Exchange constituent groups) may be made by the Board without the vote of members, except that no such amendment by the Board alone can take effect without two weeks' notice being given to the members. Following are descriptions of the proposed amendments to the NYSE Constitution. The last five amendments, amendments (6)-(10), did not require a membership vote. 1. An amendment to Article III, Section 1 of the Constitution will enable the Board to move up the Annual Meeting of members closer to the end of the fiscal (calendar) year. The amendment also provides the Board a degree of time flexibility in reporting nominations to the membership, but without reducing the current time period for members to propose nominations by petition. 2. An amendment to Article IV, Section 14(b) of the Constitution will recuse the Chief Executive Officer from participation in the review by the Board of Directors of decisions by Exchange staff, officers and committees. The Exchange believes that this is appropriate because decisions appealed to the Board include decisions in the regulatory area, and decisions by the Chief Executive Officer and those reporting to the Chief Executive Officer. Such recusal of the Chief Executive Officer is consistent with the oversight of Exchange management by the independent Directors. 3. An amendment to Article IX, Section 3 will prohibit Board of Executives members from serving on the Hearing Board in light of the participation of certain Board of Executives members on the Regulation, Enforcement & Listing Standards Committee. 4. An amendment to Article IX, Section 6 will prohibit the Chief Executive Officer from requiring reviews of disciplinary decisions and will recuse the Chief Executive Officer from participating in reviews by the Board of disciplinary decisions. The Exchange believes that this is consistent with the Chief Executive Officer's separation from the regulatory function. 5. An amendment to Article XV, Section 9 will correct an incomplete cross-reference in that section from “Nominating Committee” to “Nominating & Governance Committee.” As discussed above, the following amendments did not require a member vote. 6. An amendment to Article IV, Section 12(a)(1)(vii) will eliminate the Chairman as a mandated subject of succession planning by the Nominating & Governance Committee. Under the Exchange's new governance architecture, the Board determines from time to time whether to continue to separate the offices of the Chairman of the Board and the Chief Executive Officer. The Exchange believes that succession planning with respect to the Chief Executive Officer is the norm in corporate governance practice. 7. An amendment to Article IV, Section 14(a) will correct an erroneous cross-reference from “Article VII, Section 1” (which pertains to Exchange Contracts), to “Article VIII, Section 1” (which pertains to regulation). 8. Amendments to Article V, Sections 2(b) and 6(a), and to Article VI, Section 2 will permit either the Chairman of the Board, or the Chief Executive Officer, as the Chairman determines from time to time, to preside over meetings of the Board of Executives, to call meetings of the Board of Executives and to determine when circumstances require shorter notice of meetings of the Board of Executives than otherwise provided for that group—all in the event the Chairman is not also the Chief Executive Officer. The Exchange believes that these changes are consistent with the function of the Board of Executives to advise the Chief Executive Officer in the management of the operations of the Exchange. 9. An additional amendment to Article V, Section 2(b) will clarify that the Board may appoint as a non-specialist floor member of the Board of Executives any non-specialist who spends a substantial part of his or her time on the Floor of the Exchange. (The current description of the non-specialist floor members of the Board of Executives was carried over from a category of “industry director” which applied under the prior Exchange governance structure and appears to not include the entire non-specialist constituency as it exists today.) 10. An amendment to Article V, Section 11 will replace the requirement for Plenary Sessions of the Board and the Board of Executives with a more specific requirement for each director to be present for at least three meetings of the Board of Executives each year. A related change in Article VI, Section 2 provides for the Chairman to make the Annual Report on the Exchange's activities to the Board of Executives, rather than to a “Plenary Session” of the Board and the Board of Executives. Independence Policy of the NYSE Board of Directors The NYSE Board of Directors also has adopted an Independence Policy of the Exchange Board of Directors (the “Independence Policy”) in accordance with the Constitution to ensure the independence of its elected Directors and its non-executive Chairman. Under the Independence Policy, an elected Director will not be considered independent unless he or she meets the independence standards required of a director of an NYSE listed company. Additional requirements address independence from Exchange constituents. Under Article IV, Section 2 of the Exchange Constitution, the Independence Policy must be filed with and approved by the Commission. The Board is following this policy pending Commission action. 3 3 The Commission notes that it recently published for comment a proposed rulemaking that, among other things, would establish governance requirements for national securities exchanges and registered securities associations and would include a definition of the term “independent director.” *See* Securities Exchange Act Release No. 50699 (November 18, 2004), 69 FR 71126 (December 8, 2004). 2. Statutory Basis The Exchange represents that the basis under the Act for this proposed rule change is the requirement under Section 6(b)(5) 4 that an exchange have rules that are designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. 4 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 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 neither solicited nor received written comments on the proposed rule change. 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

(a)all directors to be elected by members to serve for a term of one year;

(b)two Trustees of the Gratuity Fund who shall be regular members (and not lessor members), to serve for a term of three years; and

(c)qualified persons to fill any vacancies among the trustees of the Gratuity Fund. The Board shall distribute its annual nominating report, which lists the nominees to serve in the elective positions, to each member [not less than 60 days in advance of the annual meeting] *a sufficient number of days in advance of the annual meeting to take into account the number of days for the filing of petitions by members for the proposal of nominations for elective positions, the determination by the Board of eligibility of persons nominated by petition and the notice to members of said annual meeting, all as provided in this Article III.* Article IV. Board of Directors Sec. 12. Standing Committees. The Standing Committees and their respective Chairmen shall be appointed by the Board at its annual organizational meeting. The Board shall adopt for each Standing Committee a charter consistent with the duties prescribed in the subsections below, and including such additional duties as may be considered appropriate and not inconsistent with this Constitution. Each Standing Committee shall have the authority to engage independent legal counsel and other advisors as it determines necessary to carry out its duties, but may not use counsel or other advisors who advise Exchange officers or employees.

(a)*Committees Consisting Solely of Directors.* The Standing Committees described in Section 12(a)(1)-(4) shall consist solely of directors, other than the Chief Executive Officer, and shall report to the Board. Such Standing Committees may be combined with any other such Standing Committee, be subdivided into one or more such Standing Committees, or the Board may constitute itself as a committee of the whole in respect of such a Standing Committee. The Chief Executive Officer shall be recused from deliberations of the Board, whether it is acting as the Board or as a committee of the whole, with respect to the activities of the Nominating & Governance Committee, the Human Resources & Compensation Committee, the Audit Committee or the Regulatory Oversight & Regulatory Budget Committee.

(1)*Nominating & Governance Committee.* The Nominating & Governance Committee shall be responsible for

(i)recommending to the Board candidates for Board membership in accordance with Article IV, Section 2 and candidates for Trustees of the Gratuity Fund,

(ii)recommending to the Board candidates for Board of Executives membership,

(iii)conducting the Board's annual governance review,

(iv)reviewing and recommending the Exchange's corporate governance guidelines,

(v)establishing an appropriate process for, and overseeing implementation of, the Board's self-assessments (including Board self-assessment, committee self-assessments and director assessments) and the Board of Executives' self-assessments,

(vi)recommending director compensation, and

(vii)succession planning for the [Chairman and] Chief Executive Officer of the Exchange. In discharging its responsibilities under clause

(i)of the immediately preceding sentence, the Nominating & Governance Committee shall propose persons as candidates for the Board who, in the opinion of the Committee,

(a)are committed to serving the interests of the public and strengthening the Exchange as a public securities market; and

(b)include among their number individuals at least one of whom is intended to allow the Exchange to meet the requirements of section 6(b)(3) of the Act concerning issuers and at least one of whom is intended to allow the Exchange to meet the requirements of section 6(b)(3) of the Act concerning investors. In addition, the Nominating & Governance Committee shall establish procedures to solicit the input of investors in equity securities and members regarding Board candidates. The Nominating & Governance Committee shall also solicit input from the various Exchange communities regarding candidates for appointment by the Board to the Board of Executives. Consensus recommendations for candidates to represent the groups referenced in clauses (ii),

(iii)and

(iv)of Article V, Section 2(b) put forward by the respective representatives of those groups shall be forwarded to the Board as the recommendations of the Nominating & Governance Committee unless and to the extent such Committee determines that a candidate does not qualify for the position. Article IV. Board of Directors Sec. 14. Delegation.

(a)*Delegation Authority.* The Board may delegate such of its powers as it may from time to time determine, subject to the provisions of the Constitution and applicable law, to the Board of Executives, to such officers and employees of the Exchange, and to such committees, composed either of directors or otherwise, as the Board may from time to time authorize; provided, however, that, except as this Constitution otherwise provides, the Board may not delegate, and no committee may re-delegate, to the Board of Executives, to officers and employees of the Exchange or to any committee other than a committee consisting solely of directors (other than the Chief Executive Officer) authority either to adopt rules under Article VIII, Section 1 or Article IX, Section 1, or to act on any subject matter described in Article IV, Section 12(a) or (b)(1), except by effecting a rule change within the meaning of Section 19(b)(1) of the Act. Notwithstanding the foregoing, the Board may authorize an officer or officers of the Exchange to adopt rules as aforesaid, so long as the Board is informed of any such action at its next meeting, and the prior approval of the Chief Regulatory Officer is obtained for any regulatory matter. Any committee of directors to which authority is delegated to adopt rules under Article [VII] *VIII,* Section 1 or Article IX, Section 1 shall include thereon at least one director nominated by the Industry Members of the Board of Executives, as provided in Article IV, Section 2. The Board shall diligently oversee the activities of the Board of Executives, the officers and employees of the Exchange, and any committees to which the Board has delegated authority pursuant hereto.

(b)*Limitation of Delegation Authority.* A member, member organization, allied member or approved person affected by a decision of any officer, employee or committee acting under powers delegated by the Board may require a review by the Board of such decision, by filing with the Secretary of the Exchange a written demand therefor[e] within 10 days after the decision has been rendered, except as otherwise provided in Article IX, Section 6. Any and all powers delegated by the Board may continue to be exercised by the Board notwithstanding such delegation, and the Board may exercise such review and oversight over the exercise of (or omission to exercise) any delegated authority as it shall at any time determine. *Notwithstanding any other provisions of this paragraph (b), the Chief Executive Officer shall be recused from deliberations and actions of the Board with respect to matters to be reviewed by the Board pursuant to this paragraph (b).* Article V. Board of Executives. Sec. 2. *Composition of Board of Executives.*

(b)The Board of Executives shall consist of the Chairman of the Board [(who shall be the Chairman of the Board of Executives)] *(if such individual is not also the Chief Executive Officer),* the Chief Executive Officer [(if such individual is not also the Chairman)], and at least 20 but no more than 25 members (“Board of Executives members”). *Either the Chairman of the Board or the Chief Executive Officer, as the Chairman of the Board determines from time to time, shall serve as Chairman of the Board of Executives.* The Board of Executives members (other than the Chairman and Chief Executive Officer) shall be appointed by the Board at its annual organizational meeting and shall consist of

(i)at least six individuals who are either the chief executive or a principal executive officer of a member organization that engages in a business involving substantial direct contact with securities customers,

(ii)at least two individuals, each of whom is registered as a specialist and spends a *substantial part* of his or her time on the Floor of the Exchange,

(iii)at least two individuals, each of whom spends a [majority] substantial part of his or her time on the Floor of the Exchange [, and has a substantial part of his or her business the execution of transactions on the Floor of the Exchange for other than his or her own account or the account of his or her member organization], but who shall not be registered as a specialist,

(iv)at least two individuals who are lessor members who are not affiliated with a broker or dealer in securities,

(v)at least four individuals who are either the chief executive or a principal executive officer of an institution that is a significant investor in equity securities, at[s] least one of whom shall be a fiduciary of a public pension fund;

(vi)at least one individual intended to represent individuals who invest in equity securities and are retail clients of member organizations, and

(vii)at least four individuals who are either the chief executive or a principal executive officer of a listed company (the members of the Board of Executives referenced in subsections (i), (ii), and

(iii)herein collectively shall be called “Industry Members of the Board of Executives”). If the Board increases the size of the Board of Executives it shall strive to maintain approximately the same balance between Industry Members of the Board of Executives and other members of the Board of Executives as is represented above. If the Board increases the size of the Board of Executives, it shall also be free to add members to the Board of Executives who represent other elements of the Exchange community. Each person who is not a member of the Exchange and is appointed to the Board of Executives shall, by the acceptance of such position, be deemed to have agreed to uphold this Constitution. Sec. 6. *Meetings.*

(a)*Frequency of Meetings.* The Board of Executives shall have not less than six meetings each year. Special meetings of the Board of Executives may be called by the Chairman of the Board *or by the Chief Executive Officer,* or pursuant to the written request of not less than one third of the Board of Executives members then in office, in accordance with the provision of notice of meetings, except that when in the judgment of the Chairman of the Board *or the Chief Executive Officer,* emergency requires shorter notice. Sec. 11. *[Plenary Sessions of the] Board Member Attendance at Meetings of [and] the Board of Executives.* [The Board and the Board of Executives shall meet jointly (a “Plenary Session”)] *Each member of the Board shall attend a meeting of the Board of Executives* at least [twice] *three times* each year. [The Chairman of the Board shall chair all Plenary Sessions.] Article VI. Officers. Sec. 2. *The Chairman.* The Chairman shall preside at all meetings of the Board [and of the Board of Executives] and shall decide all questions of order, subject, however, to an appeal to the Board; provided, however, that if the Chairman is also the Chief Executive Officer, he or she shall not participate in executive sessions of the Board. If the Chairman is not the Chief Executive Officer, he or she shall act as liaison officer between the Board and the Chief Executive Officer. In addition to his or her usual duties, the Chairman shall make an Annual Report on the Exchange's activities to [a Plenary Session] *the Board of Executives.* Article IX. Disciplinary Proceedings. Sec. 3. *Hearing Board.* The Chairman of the Board, subject to the approval of the Board, shall from time to time appoint a hearing board to be composed of such number of members and allied members of the Exchange who are not members of the Board *or of the Board of Executives,* and registered employees and non-registered employees of members and member organizations, as the Chairman of the Board shall deem necessary. The members of the hearing board shall be appointed annually and serve at the pleasure of the Board. The Chairman of the Board, subject to the approval of the Board, shall also designate from among the officers and employees of the Exchange a chief hearing officer and one or more other hearing officers who shall have no Exchange duties or functions relating to the investigation or preparation of disciplinary matters and who shall be appointed annually and shall serve as hearing officers at the pleasure of the Board. Sec. 6. *Review.* In a disciplinary proceeding not involving a written consent to the imposition of a specified penalty, any member, member organization, allied member, approved person, or registered or non-registered employee of a member or member organization, adjudged guilty of any charge, or the division or department of the Exchange which brought the charges, or any member of the Board or the Board of Executives, may, in accordance with procedures set forth in the rules of the Exchange, require a review by the Board, of any determination or penalty, or both, imposed by the hearing panel. Upon review, the Board, by the affirmative vote of a majority of the entire Board, may sustain any determination or penalty imposed, may modify or reverse any such determination, and may increase, decrease or eliminate any such penalty, or impose any penalty permitted under this Article as it deems appropriate. In a disciplinary proceeding involving a written consent to the imposition of a specified penalty, any member of the Board or the Board of Executives may require a review by the Board of any determination or penalty, or both, imposed by the hearing panel. In any such proceeding, the division or department which entered into the written consent, may require a review by the Board of any penalty, including any determination related thereto, imposed by the hearing panel, which is less severe than the stipulated penalty. The respondent or the division or department which entered into the written consent may require a review by the Board of any rejection of the written consent by the hearing panel. Any review provided in this paragraph shall be conducted in accordance with procedures set forth in the rules of the Exchange. Upon review, the Board, by the affirmative vote of a majority of the entire Board, may fix and impose the penalty agreed to in such written consent or any penalty which is less severe than the stipulated penalty, or remand the case for further proceedings. *Notwithstanding any other provisions of this Section, the Chief Executive Officer

(a)may not require a review by the Board under this Section and

(b)shall be recused from deliberations and actions of the Board with respect to matters to be reviewed by the Board under this Section.* Article XV. The Gratuity Fund. Sec. 9. *Management of Gratuity Fund.* The management and distribution of the Gratuity Fund shall be under the charge of a board of trustees, acting as agent for the Exchange, to be known as the “trustees of the Gratuity Fund,” and shall consist of six regular members of the Exchange who are not lessor members and are elected by the membership. In case of a vacancy among the trustees, the Board, at its next regular meeting thereafter, shall proceed to fill the same until the next annual election of the Exchange. Prior to filling such vacancy, the Board shall request the Nominating *& Governance* Committee to submit to the Board the name of the person recommended by the Nominating *& Governance* Committee to fill such vacancy. Exhibit A-2—Text of the Proposed Rule Change (New language is *italicized.* ) INDEPENDENCE POLICY OF THE EXCHANGE BOARD OF DIRECTORS Purpose *The purpose of this Policy is to set forth the independence requirements that shall apply to the members of the Board of Directors (the “Board”) of the Exchange in accordance with Article IV, Section 2 of the New York Stock Exchange Constitution.* Independence Requirements 1. *Each Director elected by the members and the Chairman of the Board if not also the Chief Executive Officer shall be independent within the meaning of this Policy. A list of the Directors shall be maintained on the Exchange's web site.* 2. * A Director shall be independent only if the Board determines that the Director does not have any material relationships with the Exchange. When assessing a Director's relationships and interests, the Board shall consider the issue not merely from the standpoint of the Director, but also from the standpoint of persons or organizations with which the Director is affiliated 6 or associated. * 6 *An “affiliate” of, or a person “affiliated” with, a specific person is a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the person specified.* 3. *In making independence determinations, the Board shall consider the special responsibilities of a Director in light of the status of the Exchange as a New York not-for-profit corporation, and as a self-regulatory organization and national securities exchange subject to the supervision of the Securities and Exchange Commission.* 4. * The Board shall make an independence determination with respect to each Director elected by the members upon the Director's nomination or appointment to the Board and thereafter at such times as the Board considers advisable in light of the Director's circumstances and any changes to this Policy, but in any event not less frequently than annually. Upon adoption of this Policy, the Board shall make an affirmative determination with respect to the independence of each Director then serving on the Board. * 5. *It shall be the responsibility of each Director to inform the Chairman of the Board and the Chairman of the Nominating & Governance Committee promptly and otherwise as requested of the existence of such relationships and interests which might reasonably be considered to bear on the Director's independence.* 6. *Any Director elected by the members who is no longer independent due to the existence of a relationship described in Article IV, Section 2(a)-(d) of the Constitution or whom the Board otherwise determines not to be independent from the Exchange under this Policy shall, pursuant to Article IV, Section 9, be deemed to have tendered his or her resignation for consideration by the Board, and such resignation shall not be effective unless and until accepted by the Board.* Independence Qualifications 1. *In making an independence determination with respect to any Director or Director candidate, the Board shall consider the standards below with respect to relationships or interests of the Director or Director candidate with or in

(a)the Exchange or its subsidiaries,

(b)members, allied members, and lessor members,

(c)member organizations of the Exchange (“Member Organizations”) or non-member broker-dealers that engage in business involving substantial direct contact with securities customers (“Non-Member Broker-Dealers”), and

(d)companies other than Member Organizations whose securities are listed on the Exchange (“Listed Companies”). The standards below relating to category

(a)are the same as those that the Exchange applies to its own listed companies. The standards below relating to categories (b),

(c)and

(d)stem from the differing regulatory responsibilities and roles that the Exchange exercises in overseeing the organizations and companies included in those categories.* 2. *The term “approved person” used herein has the meaning set forth in the NYSE Constitution.* 3. *The term “immediate family member” with respect to any Director has the meaning set forth in the NYSE Listed Company Manual.* 4. *The following independence criteria shall apply:* Independence From the Exchange *A Director is not independent if the Director or an immediate family member of the Director has or had a relationship or interest with or in the Exchange which, if such relationship or interest existed with respect to a Listed Company, would preclude a Director of the Listed Company from being considered an independent Director of the Listed Company pursuant to Section 303A.02(a) or

(b)of the Listed Company Manual.* 7 7 *The relevant sections of the Listed Company Manual and commentary are available on the website at www.nyse.com/pdfs/finalcorpgovrules.pdf* Members, Allied Members and Lessor Members *A Director is not independent if he or she is, or within the last three years was, or has an immediate family member who is, or within the last three years was, a member, allied member, lessor member or approved person.* Member Organizations *A Director is not independent if the Director

(a)is, or within the last three years was, employed by a Member Organization,

(b)has an immediate family member who is, or within the last three years was, an executive officer of a Member Organization,

(c)has within the last three years received from any Member Organization more than $100,000 per year in direct compensation, or received from Member Organizations in the aggregate an amount of direct compensation which in any one year is more than 10 percent of the Director's annual gross income for such year, excluding in each case Director and committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service), or

(d)is affiliated, directly or indirectly, with a Member Organization.* Non-Member Broker-Dealers *A Director is not independent if the Director is employed by or affiliated, directly or indirectly, with a Non-Member Broker-Dealer.* Listed Companies *A Director is not independent if the Director is an executive officer of an issuer of securities listed on the Exchange.* 5. *The Exchange shall make disclosure of any charitable relationship that a listed company would be required to disclose pursuant to Listed Company Manual Section 303A.02(b)(v) and commentary. Gifts by the Exchange or by the NYSE Foundation shall not favor charities on which any Director serves as an executive officer or member of the board of trustees or directors or comparable governing body.* [FR Doc. E5-144 Filed 1-13-05; 8:45 am] BILLING CODE 8010-01-P SMALL BUSINESS ADMINISTRATION Data Collection Available for Public Comments and Recommendations ACTION: Notice and request for comments. SUMMARY: In accordance with the Paperwork Reduction Act of 1995, this notice announces the Small Business Administration's intentions to request approval on a new and/or currently approved information collection. DATES: Submit comments on or before March 15, 2005. ADDRESSES: Send all comments regarding whether this information collection is necessary for the proper performance of the function of the agency, whether the burden estimates are accurate, and if there are ways to minimize the estimated burden and enhance the quality of the collection, to Charles Ou, Senior Economist, Office of Advocacy, Small Business Administration, 409 3rd Street, SW., Suite 7800, Washington, DC 20416. FOR FURTHER INFORMATION CONTACT: Charles Ou, Senior Economist,

(202)205-6966 or Curtis B. Rich, Management Analyst,

(202)205-7030. SUPPLEMENTARY INFORMATION: *Title:* “Impact of Credit Scoring on Lending to Small Firms.” *Description of Respondents:* Senior executives in banks and thrifts who are knowledgeable about credit risk and lending practices for small businesses. *Form No:* N/A. *Annual Responses:* 1,200. *Annual Burden:* 300. Jacqueline White, Chief, Administrative Information Branch. [FR Doc. 05-856 Filed 1-13-05; 8:45 am]

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