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Code · REGISTER · 2005-05-25 · Nuclear Regulatory Commission · Notices

Notices. Request for comment

31,042 words·~141 min read·/register/2005/05/25/05-10453

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BILLING CODE 7590-01-P NUCLEAR REGULATORY COMMISSION Notice of Opportunity To Comment on Model Safety Evaluation on Technical Specification Improvement Regarding Revision to the Completion Time in STS 3.6.1.3, “Primary Containment Isolation Valves” for General Electric Boiling Water Reactors Using the Consolidated Line Item Improvement Process AGENCY: Nuclear Regulatory Commission. ACTION: Request for comment. SUMMARY: Notice is hereby given that the staff of the U.S. Nuclear Regulatory Commission
(NRC)has prepared a model safety evaluation
(SE)relating to changes to the completion time
(CT)in Standard Technical Specification
(STS)3.6.1.3 “Primary Containment Isolation Valves (PCIVs).” The proposed change to the Technical Specifications
(TS)would extend to 7 days the CT (or allowed outage time (AOT)) to restore an inoperable PCIV or isolate the affected penetration flow path for selected primary containment penetrations with two (or more) PCIVs and for selected primary containment penetrations with only one PCIV. This change is based on analyses provided in a generic topical report
(TR)submitted by the Boiling Water Reactors Owner's Group (BWROG). The BWROG participants in the TS Task Force
(TSTF)proposed this change to the STS in Change Traveler No. TSTF-454, Revision 0. This notice also includes a model no significant hazards consideration
(NSHC)determination relating to this matter. The purpose of these models is to permit the NRC to efficiently process amendments to incorporate this change into plant-specific TS for General Electric boiling water reactors (BWRs). Licensees of nuclear power reactors to which the models apply can request amendments conforming to the models. In such a request, a licensee should confirm the applicability of the SE and NSHC determination to its plant. The NRC staff is requesting comments on the model SE and model NSHC determination before announcing their availability for referencing in license amendment applications. DATES: The comment period expires 60 days from the date of this publication. Comments received after this date will be considered if it is practical to do so, but the Commission is able to ensure consideration only for comments received on or before this date. ADDRESSES: Comments may be submitted either electronically or via U.S. mail. Submit written comments to: Chief, Rules and Directives Branch, Division of Administrative Services, Office of Administration, Mail Stop: T-6 D59, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001. *Hand deliver comments to:* 11545 Rockville Pike, Rockville, Maryland, between 7:45 a.m. and 4:15 p.m. on Federal workdays. *Submit comments by electronic mail to: CLIIP@nrc.gov* . Copies of comments received may be examined at the NRC's Public Document Room, One White Flint North, Public File Area O1-F21, 11555 Rockville Pike (first floor), Rockville, Maryland. FOR FURTHER INFORMATION CONTACT: Bhalchandra Vaidya, Mail Stop: O-7D1, Division of Licensing Project Management, Office of Nuclear Reactor Regulation, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001, telephone
(301)415-3308. SUPPLEMENTARY INFORMATION: Background Regulatory Issue Summary 2000-06, “Consolidated Line Item Improvement Process [CLIIP] for Adopting Standard Technical Specifications Changes for Power Reactors,” was issued on March 20, 2000. The CLIIP is intended to improve the efficiency and transparency of NRC licensing processes. This is accomplished by processing proposed changes to the STS in a manner that supports subsequent license amendment applications. The CLIIP includes an opportunity for the public to comment on proposed changes to the STS following a preliminary assessment by the NRC staff and finding that the change will likely be offered for adoption by licensees. This notice is soliciting comment on a proposed change to the STS that changes the PCIV CTs for the BWR/4 and BWR/6 STS, NUREG-1433, Revision 3 and NUREG-1434, Revision 3, respectively. The CLIIP directs the NRC staff to evaluate any comments received for a proposed change to the STS and to either reconsider the change or proceed with announcing the availability of the change for proposed adoption by licensees. Those licensees opting to apply for the subject change to TSs are responsible for reviewing the staff's evaluation, referencing the applicable technical justifications, and providing any necessary plant-specific information. Each amendment application made in response to the notice of availability would be processed and noticed in accordance with applicable NRC rules and procedures. This notice involves an increase in the allowed CTs to restore an inoperable PCIV or isolate the affected penetration flow path when selected PCIVs are inoperable at BWRs. By letter dated September 5, 2003, the BWROG proposed this change for incorporation into the STS as TSTF-454, Revision 0. This change is based on the NRC staff-approved generic analyses contained in the BWROG TR NEDC-33046, “Technical Justification to Support Risk-Informed Primary Containment Isolation Valve AOT Extensions for BWR Plants,” submitted on May 3, 2002, as supplemented by letter dated July 30, 2003, and as approved by the NRC by letter and Safety Evaluation dated October 8, 2004, accessible electronically from the Agencywide Documents Access and Management System's (ADAMS) Public Electronic Reading Room on the Internet (ADAMS Accession No. ML042660055) at the NRC Web site *http://www.nrc.gov/reading-rm/adams.html* . Persons who do not have access to ADAMS or who encounter problems in accessing the documents located in ADAMS, should contact the NRC Public Document Room Reference staff by telephone at 1-800-397-4209,
(301)415-4737, or by e-mail to *pdr@nrc.gov* . Applicability This proposed change to revise the TS CTs for selected PCIVs is applicable to General Electric BWRs. To efficiently process the incoming license amendment applications, the NRC staff requests each licensee applying for the changes addressed by TSTF-454, Revision 0, using the CLIIP to address the seven plant-specific conditions and the one commitment identified in the model SE, as follows: Conditions 1. Because not all penetrations have the same impact on core damage frequency (CDF), large early release frequency (LERF), incremental conditional core damage frequency (ICCDP), or incremental conditional large early release frequency (ICLERP), a licensee's application must provide supporting information that verifies the applicability of TR NEDC-33046, including verification that the PCIV configurations for the specific plant match the licensing topical report
(LTR)and the risk parameter values used in the LTR are bounding for the specific plant. Any additional PCIV configurations or non-bounding risk parameter values not evaluated by the LTR should be included in the licensee's plant-specific analysis. [Note that PCIV configurations or non-bounding risk parameter values outside the scope of the LTR will require NRC staff review of the specific penetrations and related justifications for the proposed CTs.] 2. The licensee's application must provide supporting information that verifies that external event risk, either through quantitative or qualitative evaluation, will not have an adverse impact on the conclusions of the plant-specific analysis for extending the PCIV AOTs. 3. Because TR NEDC-33046 was based on generic plant characteristics, each licensee adopting the TR must provide supporting information that confirms plant-specific Tier 3 information in their individual submittals. The licensee's application must provide supporting information that discusses conformance to the requirements of the maintenance rule (10 CFR 50.65(a)(4)), as they relate to the proposed PCIV AOTs and the guidance contained in NUMARC 93.01, Section 11, as endorsed by Regulatory Guide
(RG)1.182, including verification that the licensee's maintenance rule program, with respect to PCIVs, includes a LERF/ICLERP assessment as part of the maintenance rule process. 4. The licensee's application must provide supporting information that verifies that a penetration remains intact during maintenance activities, including corrective maintenance activities. Regarding maintenance activities where the pressure boundary would be broken, the licensee must provide supporting information that confirms that the assumptions and results of the LTR remain valid. This includes the assumption that maintenance on a PCIV will not break the pressure boundary for more than the currently allowed AOT. 5. The licensee's application must provide supporting information that verifies the operability of the remaining PCIVs in the associated penetration flow path before entering the AOT for the inoperable PCIV. 6. Simultaneously entering the extended AOT for multiple PCIVs and the resulting impact on risk were not specifically evaluated by the BWROG. However, TR NEDC-33046 does state that multiple PCIVs can be out of service simultaneously during extended AOTs and does not preclude the practice. Therefore, since the current STS also allows separate condition entry for each penetration flow path, the licensee's application will provide supporting information that verifies that the potential for any cumulative risk impact of failed PCIVs and multiple PCIV extended AOT entries has been evaluated and is acceptable. The licensee's Tier 3 configuration risk management program (10 CFR 50.65(a)(4)) must provide supporting information that confirms that such simultaneous extended AOT entries for inoperable PCIVs in separate penetration flow paths will not exceed the RG 1.174 and RG 1.177 acceptance guidelines, as confirmed by the analysis presented in TR NEDC-33046, and that adequate defense-in-depth for safety systems is maintained. 7. The licensee shall provide supporting information that verifies that the plant-specific probabilistic risk assessment
(PRA)quality is acceptable for this application in accordance with the guidelines given in RG 1.174. To ensure the applicability of TR NEDC-33046, to a licensee's plant, additional information on PRA quality will be required from each licensee requesting an amendment in the following areas: a. Justification that the plant-specific PRA reflects the as-built, as-operated plant. b. Applicable PRA updates including individual plant examinations/individual plant examinations of external events (IPE/IPEEE) findings. c. Conclusions of the peer review including any A or B facts and observations (F and Os) applicable to the proposed PCIV extended CTs. d. The PRA quality assurance program and associated procedures. e. PRA adequacy, completeness, and applicability with respect to evaluating the proposed PCIV extended AOT plant specific impact. Commitment 1. The RG 1.177 Tier 3 program ensures that while the plant is in a limiting condition for operation
(LCO)condition with an extended AOT for an inoperable PCIV, additional activities will not be performed that could further degrade the capabilities of the plant to respond to a condition the inoperable PCIV or system was designed to mitigate and, as a result, increase plant risk beyond that assumed by the LTR analysis. A licensee's implementation of RG 1.177 Tier 3 guidelines generally implies the assessment of risk with respect to CDF. However, the proposed PCIV AOT impacts containment isolation and consequently LERF as well as CDF. Therefore, a licensee's configuration risk management program (CRMP), including those implemented under the maintenance rule of 10 CFR 50.65(a)(4), must be enhanced to include a LERF methodology/assessment and must be documented in a licensee's plant-specific submittal. The CLIIP does not prevent licensees from requesting an alternative approach or proposing the changes without providing the information described in the above 7 conditions, or making the requested commitment. Variations from the approach recommended in this notice may, however, require additional review by the NRC staff and may increase the time and resources needed for the review. Public Notices This notice requests comments from interested members of the public within 60 days of the date of this publication. Following the NRC staff's evaluation of comments received as a result of this notice, the NRC staff may reconsider the proposed change or may proceed with announcing the availability of the change in a subsequent notice (perhaps with some changes to the SE or proposed NSHC determination as a result of public comments). If the NRC staff announces the availability of the change, licensees wishing to adopt the change will submit an application in accordance with applicable rules and other regulatory requirements. The NRC staff will, in turn, issue for each application a notice of consideration of issuance of amendment to facility operating license(s), a proposed NSHC determination, and an opportunity for a hearing. A notice of issuance of an amendment to operating license(s) will also be issued to announce the revised requirements for each plant that applies for and receives the requested change. Proposed Safety Evaluation U.S. Nuclear Regulatory Commission Office of Nuclear Reactor Regulation Consolidated Line Item Improvement Technical Specification Task Force
(TSTF)Change Traveler No. TSTF-454, Revision 0, “Increase PCIV Completion Times From 4 hours, 24 hours [note that the 24-hour portion was withdrawn], and 72 hours to 7 days (NEDC-33046)” 1.0 Introduction By application dated [ ] , [Licensee] (the licensee) requested changes to the Technical Specifications
(TSs)for [facility]. The proposed changes would revise TS 3.6.1.3, “Primary Containment Isolation Valves (PCIVs),” by extending to 7 days the completion time
(CT)to restore an inoperable PCIV or isolate the affected penetration flow path for selected primary containment penetrations with two (or more) PCIVs and for selected primary containment penetrations with only one PCIV. 2.0 Regulatory Evaluation The existing Limiting Condition for Operation
(LCO)3.6.1.3, requires that each PCIV be operable. The operability of PCIVs ensures that the containment is isolated during a design-basis accident
(DBA)and is able to perform its function as a barrier to the release of radioactive material. For boiling water reactor (BWR)/4 plants, if a PCIV is inoperable in one or more penetrations, the current required action is to isolate or restore the inoperable PCIV to operable status within 4 hours for penetrations with 2 PCIVs (except for the main steam line, in which case 8 hours is allowed), and within 4 hours for penetrations with a single PCIV (except for excess flow check valves (EFCVs) and penetrations with a closed system, and for other cases if justified with a plant-specific evaluation, in which case 72 hours is allowed). Regarding the leakage rate of EFCVs, 72 hours is also currently allowed to restore EFCV leakage to within limit. For BWR/6 plants, the current required actions are the same as those for the BWR/4 plants with the exception that there are no TSs for EFCVs. The times specified for performing these actions were considered reasonable, given the time required to isolate the penetration and the relative importance of ensuring containment integrity during plant operation. In the case of a single EFCV PCIV or a single PCIV and a closed system, the specified CT takes into consideration the ability of the instrument and the small pipe diameter (associated with the EFCV) or the closed system to act as a penetration boundary. On May 3, 2002, as supplemented by letter dated July 30, 2003, the Boiling Water Reactor
(BWR)Owners Group (BWROG) submitted the generic Topical Report
(TR)NEDC-33046, which provided a risk-informed justification for extending the TS allowed outage time
(AOT)(also referred to as completion time), for a specific set of inoperable PCIVs from the current 4 hours or 72 hours to 7 days. Specifically, for BWR/4 plants, if a PCIV is inoperable in one or more penetrations, the proposed action is to isolate or restore the inoperable PCIV to operable status within 7 days for penetrations with 2 PCIVs (except for the feedwater isolation valves (FWIVs) and the residual heat removal
(RHR)shutdown cooling suction line PCIVs, in which case the 4 hours is kept, and except for the main steam line isolation valves (MSIVs), in which case the 8 hours is kept); and within 4 hours for penetrations with a single PCIV, except for EFCVs and penetrations with a closed system, in which case 7 days is allowed (and except for other cases if justified with a plant-specific evaluation, in which case the 72 hours is kept). Regarding the leakage rate of EFCVs, 7 days is also proposed to restore EFCV leakage to within the limit. For BWR/6 plants, the proposed actions are the same as those for the BWR/4 plants with the exception that for penetrations with 2 PCIVs, there is an additional exception to the 7-day AOT (for the low pressure core spray system PCIVs, in which case the 4 hours is kept); and with the exception that there are no TSs for EFCVs. The NRC staff used the guidance of Regulatory Guide
(RG)1.174, “An Approach for Using Probabilistic Risk Assessment in Risk-Informed Decisions on Plant-Specific Changes to the Current Licensing Basis, 1998,” and RG 1.177, “An Approach for Plant-Specific, Risk-Informed Decision Making: Technical Specifications, 1998,” in performing its review of this TR. RG 1.174 provides the guidelines to determine the risk level associated with the proposed change. RG 1.177 provides a three-tiered approach to evaluate the risks associated with proposed license amendments. The first tier evaluates the probabilistic risk assessment
(PRA)model and the impacts of the changes on plant operational risk. The second tier addresses the need to preclude potentially high risk configurations, should additional equipment outages occur during the AOT. The third tier evaluates the licensee's configuration risk management program
(CRMP)to ensure that the removal of equipment from service immediately prior to or during the proposed AOT will be appropriately assessed from a risk perspective. The NRC staff's safety evaluation
(SE)dated October 8, 2004, also discusses the applicable regulations and additional applicable regulatory criteria/guidelines that were considered in its review of TR NEDC-33046. 3.0 Technical Evaluation 3.1 Statement of Proposed Changes The proposed changes to TS 3.6.1.3 include: 1. For the Condition of one or more penetration flow paths with one PCIV inoperable in a penetration flow path with two [or more] PCIVs, the Completion Times for isolating the affected penetration (in Standard Technical Specification
(STS)3.6.1.3 Required Action A.1) are revised from “4 hours except for main steam line *AND* 8 hours for main steam line,” to “4 hours for feedwater isolation valves (FWIVs), residual heat removal
(RHR)shutdown cooling suction line PCIVs, and *Low Pressure Core Spray
(LPCS)System PCIVs (NUREG-1434 only)* *AND* 8 hours for main steam line isolation valves (MSIVs) *AND* 7 days except for FWIVs, RHR shutdown cooling suction line PCIVs, *LPCS System PCIVs (NUREG-1434 only),* and MSIVs.” For PCIVs not analyzed in NEDC-33046 ( *i.e.* , FWIVs and MSIVs), the current Completion Times of 4 hours and 8 hours (of STS 3.6.1.3 Required Action A.1) are maintained; 4 hours for FWIVs and 8 hours for main steam lines ( *i.e.* , MSIVs as described in the current Bases for STS 3.6.1.3 Required Action A.1). For PCIVs analyzed in NEDC-33046 that did not meet the criterion for extension ( *i.e.* , RHR shutdown cooling suction line PCIVs (for all BWRs) and LPCS System PCIVs (for BWR/5 and BWR/6 designs only), the current Completion Time (of 4 hours of STS 3.6.1.3 Required Action A.1) is maintained. The Completion Time for other PCIVs, associated with penetrations with two [or more] PCIVs, is extended to 7 days. 2. For the Condition of one or more penetration flow paths with one PCIV inoperable in a penetration flow path with only one PCIV, the Completion Times for isolating the affected penetrations (STS 3.6.1.3 Required Action C.1) are revised from “4 hours except for excess flow check valves (EFCVs) and penetrations with a closed system *AND* 72 hours for EFCVs and penetrations with a closed system,” to “4 hours except for excess flow check valves (EFCVs) and penetrations with a closed system *AND* [72 hours] [7 days] for EFCVs and penetrations with a closed system.” (For NUREG-1434, the Completion Times for STS 3.6.1.3 Required Action C.1 are revised from “4 hours except for penetrations with a closed system *AND* 72 hours for penetrations with a closed system,” to “4 hours except for penetrations with a closed system *AND* [72 hours] [7 days] for penetrations with a closed system.”) 3. For the Condition of one or more [secondary containment bypass leakage rate,] [MSIV leakage rate,] [purge valves leakage rate,] [hydrostatically tested line leakage rate,] [or] [EFCV leakage rate] not within limit, the Completion Time for restoring leakage rate to within limit, when the leakage rate exceeded is the EFCV leakage rate (in STS 3.6.1.3 Required Action D.1), is revised from “[72 hours]” to “[7 days]” by adding a new Completion Time, “[ *AND* 7 days for EFCV leakage].” (The EFCV leakage rate Completion Time change is not applicable to NUREG-1434.) 3.2 Evaluation of Proposed Changes The NRC staff's SE on TR NEDC-33046, dated October 8, 2004, found that based on the use of bounding risk parameters for General Electric (GE)-designed plants, for the proposed increase in the PCIV AOT from 4 hours (for penetrations with 2 or more PCIVs) or 72 hours (for penetrations with a single EFCV PCIV, and penetrations with a single PCIV and a closed system) or 72 hours (for EFCV leakage) to 7 days, the risk impact of the proposed 7-day AOT for the PCIVs as estimated by core damage frequency (CDF), large early release frequency (LERF), incremental conditional core damage probability (ICCDP), and incremental conditional large early release probability (ICLERP), is consistent with the acceptance guidelines specified in RG 1.174, RG 1.177, and NRC staff guidance outlined in Chapter 16.1 of NUREG-0800. The NRC staff found that the risk analysis methodology and approach used by the BWROG to estimate the risk impacts were reasonable and of sufficient quality. The NRC staff's October 8, 2004, SE also found the following. The Tier 2 evaluation did not identify any risk-significant plant equipment configurations requiring TS, procedure, or compensatory measures. TR NEDC-33046 implements a CRMP (Tier 3) using 10 CFR 50.65(a)(4) to manage plant risk when PCIVs are taken out-of-service. PCIV reliability and availability will also be monitored and assessed under the maintenance rule (10 CFR 50.65) to confirm that performance continues to be consistent with the analysis assumptions used to justify extended PCIVs AOTs. The NRC staff's October 8, 2004, SE also found that the following conditions and commitment must be addressed by licensees adopting TR NEDC-33046 in plant-specific applications that seek approval of TSTF-454, Revision 0 for their plants: Conditions 1. Because not all penetrations have the same impact on core damage frequency (CDF), large early release frequency (LERF), incremental conditional core damage frequency (ICCDP), or incremental conditional large early release frequency (ICLERP), a licensee's application must provide supporting information that verifies the applicability of TR NEDC-33046, including verification that the PCIV configurations for the specific plant match the licensing topical report
(LTR)and the risk parameter values used in the LTR are bounding for the specific plant. Any additional PCIV configurations or non-bounding risk parameter values not evaluated by the LTR should be included in the licensee's plant-specific analysis. [Note that PCIV configurations or non-bounding risk parameter values outside the scope of the LTR will require NRC staff review of the specific penetrations and related justifications for the proposed CTs.] 2. The licensee's application must provide supporting information that verifies that external event risk, either through quantitative or qualitative evaluation, will not have an adverse impact on the conclusions of the plant-specific analysis for extending the PCIV AOTs. 3. Because TR NEDC-33046 was based on generic plant characteristics, each licensee adopting the TR must provide supporting information that confirms plant-specific Tier 3 information in their individual submittals. The licensee's application must provide supporting information that discusses the conformance to the requirements of the maintenance rule (10 CFR 50.65(a)(4)), as they relate to the proposed PCIV AOTs and the guidance contained in NUMARC 93.01, Section 11, as endorsed by Regulatory Guide
(RG)1.182, including verification that the licensee's maintenance rule program, with respect to PCIVs, includes a LERF/ICLERP assessment as part of the maintenance rule process. 4. The licensee's application must provide supporting information that verifies that a penetration remains intact during maintenance activities, including corrective maintenance activities. Regarding maintenance activities where the pressure boundary would be broken, the licensee must provide supporting information that confirms that the assumptions and results of the LTR remain valid. This includes the assumption that maintenance on a PCIV will not break the pressure boundary for more than the currently allowed AOT. 5. The licensee's application must provide supporting information that verifies the operability of the remaining PCIVs in the associated penetration flow path before entering the AOT for the inoperable PCIV. 6. Simultaneously entering the extended AOT for multiple PCIVs and the resulting impact on risk were not specifically evaluated by the BWROG. However, TR NEDC-33046 does state that multiple PCIVs can be out of service simultaneously during extended AOTs and does not preclude the practice. Therefore, since the current STS also allows separate condition entry for each penetration flow path, the licensee's application will provide supporting information that verifies that the potential for any cumulative risk impact of failed PCIVs and multiple PCIV extended AOT entries has been evaluated and is acceptable. The licensee's Tier 3 configuration risk management program (10 CFR 50.65(a)(4)) must provide supporting information that confirms that such simultaneous extended AOT entries for inoperable PCIVs in separate penetration flow paths will not exceed the RG 1.174 and RG 1.177 acceptance guidelines, as confirmed by the analysis presented in TR NEDC-33046, and that adequate defense-in-depth for safety systems is maintained. 7. The licensee shall provide supporting information that verifies that the plant-specific probabilistic risk assessment
(PRA)quality is acceptable for this application in accordance with the guidelines given in RG 1.174. To ensure the applicability of TR NEDC-33046, to a licensee's plant, additional information on PRA quality will be required from each licensee requesting an amendment in the following areas: a. Justification that the plant-specific PRA reflects the as-built, as-operated plant. b. Applicable PRA updates including individual plant examinations/individual plant examinations of external events (IPE/IPEEE) findings. c. Conclusions of the peer review including any A or B facts and observations (F and Os) applicable to the proposed PCIV extended CTs. d. The PRA quality assurance program and associated procedures. e. PRA adequacy, completeness, and applicability with respect to evaluating the proposed PCIV extended AOT plant specific impact. Commitment 1. The RG 1.177 Tier 3 program ensures that while the plant is in a limiting condition for operation
(LCO)condition with an extended AOT for an inoperable PCIV, additional activities will not be performed that could further degrade the capabilities of the plant to respond to a condition the inoperable PCIV or system was designed to mitigate and, as a result, increase plant risk beyond that assumed by the LTR analysis. A licensee's implementation of RG 1.177 Tier 3 guidelines generally implies the assessment of risk with respect to CDF. However, the proposed PCIV AOT impacts containment isolation and consequently LERF as well as CDF. Therefore, a licensee's configuration risk management program (CRMP), including those implemented under the maintenance rule of 10 CFR 50.65(a)(4), must be enhanced to include a LERF methodology/assessment and must be documented in a licensee's plant-specific submittal. Staff Findings The NRC staff has reviewed the proposed TS changes and finds that they are consistent with previous staff reviews of TR NEDC-33046 as supplemented by letter dated July 30, 2003, and as approved by the NRC by letter and Safety Evaluation dated October 8, 2004, and TSTF-454, Revision 0, and are acceptable. The NRC staff has also reviewed the licensee's supporting information and the statements regarding the above conditions and commitment and finds them acceptable. Therefore, the NRC staff finds that the increase in the CTs from 4 hours (for penetrations with 2 or more PCIVs) or 72 hours (for penetrations with a single EFCV PCIV, and penetrations with a single PCIV and a closed system) or 72 hours (for EFCV leakage) to 7 days is justified. 4.0 Regulatory Commitment The licensee's letter dated [ ], contained the following regulatory commitment: [State the licensee's commitment and ensure that it satisfies the commitment in this SE, in Section 3.2 above.] The NRC staff finds that reasonable controls for the implementation and for subsequent evaluation of proposed changes pertaining to the above regulatory commitment are best provided by the licensee's administrative processes, including its commitment management program. The above regulatory commitment does not warrant the creation of a regulatory requirement (item requiring prior NRC approval of subsequent changes). 5.0 State Consultation In accordance with the Commission's regulations, the [State] State official was notified of the proposed issuance of the amendments. The State official had [choose one:
(1)No comments, or
(2)the following comments—with subsequent disposition by the staff]. 6.0 Environmental Consideration The amendment changes a requirement with respect to the installation or use of a facility component located within the restricted area as defined in 10 CFR part 20. The NRC staff has determined that the amendment involves no significant increase in the amounts and no significant change in the types of any effluents that may be released offsite, and that there is no significant increase in individual or cumulative occupational radiation exposure. The Commission has previously issued a proposed finding that the amendment involves no significant hazards consideration, and there has been no public comment on such finding (XX FR XXXXX). Accordingly, the amendment meets the eligibility criteria for categorical exclusion set forth in 10 CFR 51.22(c)(9). Pursuant to 10 CFR 51.22(b) no environmental impact statement or environmental assessment need be prepared in connection with the issuance of the amendment. 7.0 Conclusion The Commission has concluded, based on the considerations discussed above, that:
(1)There is reasonable assurance that the health and safety of the public will not be endangered by the operation in the proposed manner,
(2)such activities will be conducted in compliance with the Commission's regulations, and
(3)the issuance of the amendment will not be inimical to the common defense and security or to the health and safety of the public. Proposed No Significant Hazards Consideration Determination *Description of Amendment Request:* The proposed amendment extends the completion time
(CT)for penetration flow paths with one valve inoperable from 4 hours or 72 hours to 7 days. The change is applicable to both primary containment penetrations with two (or more) primary containment isolation valves (PCIVs) and with one PCIV. This change is not applicable to the feedwater isolation valves (FWIVs), the residual heat removal
(RHR)shutdown cooling suction line PCIVs, the low pressure core spray
(LPCS)PCIVs (boiling water reactor (BWR)/6 only), the main steam isolation valves (MSIVs), and [list of plant-specific valves]. *Basis for proposed no significant hazards consideration determination:* As required by 10 CFR 50.91(a), an analysis of the issue of no significant hazards consideration is presented below: 1. Does the proposed change involve a significant increase in the probability or consequences of an accident previously evaluated? Response: No. The proposed changes does not involve a significant increase in the probability or consequences of an accident previously evaluated. The proposed changes revise the completion times
(CTs)for restoring an inoperable primary containment isolation valve
(PCIV)(or isolating the affected penetration) within the scope of the Boiling Water Reactor
(BWR)Owners Group (BWROG) Topical Report
(TR)NEDC-33046, “Technical Justification to Support Risk-Informed Primary Containment Isolation Valve AOT [Allowed Outage Time] Extensions for BWR Plants,” submitted on May 3, 2002, as supplemented by letter dated July 30, 2003, and as approved by the NRC by letter and Safety Evaluation
(SE)dated October 8, 2004, from 4 hours or 72 hours to 7 days. PCIVs are not accident initiators in any accident previously evaluated. Consequently, the probability of an accident previously evaluated is not significantly increased. PCIVs, individually and in combination, control the extent of leakage from the primary containment following an accident. The proposed CT extensions apply to the reduction in redundancy in the primary containment isolation function by the PCIVs for a limited period of time, but do not alter the ability of the plant to meet the overall primary containment leakage requirements. In order to evaluate the proposed CT extensions, a probabilistic risk assessment
(PRA)evaluation was performed in TR NEDC-33046, submitted on May 3, 2002, as supplemented by letter dated July 30, 2003, and as approved by the NRC by letter and SE dated October 8, 2004. The PRA evaluation concluded that, based on the use of bounding risk parameters for the General Electric (GE)-designed plants, the proposed increase in the PCIV CTs from 4 hours or 72 hours to 7 days does not alter the ability of the plant to meet the overall primary containment leakage requirements. It also concluded that the proposed changes do not result in an unacceptable incremental conditional core damage probability (ICCDP) or incremental conditional large early release probability (ICLERP) according to the guidelines of Regulatory Guide
(RG)1.177. As a result, there would be no significant increase in the consequences of an accident previously evaluated. Therefore, the proposed changes do not involve a significant increase in the probability or consequences of an accident previously evaluated. 2. Does the change create the possibility of a new or different kind of accident from any accident previously evaluated? Response: No. The proposed change does not create the possibility of a new or different kind of accident from any accident previously evaluated. The proposed changes revise the CTs for restoring an inoperable PCIV (or isolating the affected penetration) within the scope of TR NEDC-33046 submitted on May 3, 2002, as supplemented by letter dated July 30, 2003, and as approved by the NRC by letter and Safety Evaluation dated October 8, 2004, from 4 hours or 72 hours to 7 days. PCIVs, individually and in combination, control the extent of leakage from the primary containment following an accident. The proposed CT extensions apply to the reduction in redundancy in the primary containment isolation function by the PCIVs for a limited period of time, but do not alter the ability of the plant to meet the overall primary containment leakage requirements. The proposed changes do not change the design, configuration, or method of operation of the plant. The proposed changes do not involve a physical alteration of the plant (no new or different type of equipment will be installed). Therefore, the proposed changes do not create the possibility of a new or different kind of accident from any previously evaluated. 3. Does the proposed change involve a significant reduction in a margin of safety? Response: No. The proposed change does not involve a significant reduction in a margin of safety. The proposed changes revise the CTs for restoring an inoperable PCIV (or isolating the affected penetration) within the scope of the TR NEDC-33046 submitted on May 3, 2002, as supplemented by letter dated July 30, 2003, and as approved by the NRC by letter and SE dated October 8, 2004, from 4 hours or 72 hours to 7 days. PCIVs, individually and in combination, control the extent of leakage from the primary containment following an accident. The proposed CT extensions apply to the reduction in redundancy in the primary containment isolation function provided by the PCIVs for a limited period of time, but do not alter the ability of the plant to meet the overall primary containment leakage requirements. In order to evaluate the proposed CT extensions, a PRA evaluation was performed in TR NEDC-33046 submitted on May 3, 2002, as supplemented by letter dated July 30, 2003, and as approved by the NRC by letter and SE dated October 8, 2004. The PRA evaluation concluded that, based on the use of bounding risk parameters for GE-designed plants, the proposed increase in the PCIV CTs from 4 hours or 72 hours to 7 days does not alter the ability of the plant to meet the overall primary containment leakage requirements. It also concluded that the proposed changes do not result in an unacceptable ICCDP or ICLERP according to the guidelines of RG 1.177. Therefore, the proposed changes do not involve a significant reduction in a margin of safety. Based on the above, the proposed change involves no significant hazards consideration under the standards set forth in 10 CFR 50.92(c), and accordingly, a finding of no significant hazards consideration is justified. Dated at Rockville, Maryland, this 19th day of May, 2005. For the Nuclear Regulatory Commission. Herbert N. Berkow, Director, Project Directorate IV, Division of Licensing Project Management, Office of Nuclear Reactor Regulation. [FR Doc. E5-2631 Filed 5-24-05; 8:45 am] BILLING CODE 7590-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-51704; File No. SR-CBOE-2005-29] Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing of a Proposed Rule Change Relating to the Composition of the Exchange's Modified Trading System Appointments Committee May 18, 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 April 19, 2005, the Chicago Board Options Exchange, Incorporated (“CBOE” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I, II and III below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange is proposing to amend CBOE Rule 8.82 relating to the composition of the Exchange's Modified Trading System Appointments Committee (“MTS Committee” or “Committee”). Below is the text of the proposed rule change. Proposed new language is in *italics;* proposed deletions are in [brackets]. Chapter VIII Market-Makers, Trading Crowds and Modified Trading Systems Section C: Designated Primary Market Makers Rule 8.82—MTS Committee [(a)] The *selection of MTS Committee members and the determination of the composition of the* MTS Committee shall *be made in accordance with Rule 2.1.* [consist of the Vice-Chairman of the Exchange, the Chairman of the Market Performance Committee, and nine persons elected by the membership of the Exchange.
(b)The nine elected MTS Committee members shall include: three members whose primary business is as a Market-Maker; three members whose primary business is as a Market-Maker or as a DPM Designee; and three members whose primary business is as a Floor Broker, at least two of whom represent public customer orders in the course of their activities as a Floor Broker. One of the nine elected positions on the MTS Committee may instead be filled by a person
(i)who directly or indirectly owns and controls a membership with respect to which the person acts as a lessor,
(ii)whose primary business is not as a Market-Maker, DPM Designee, or Floor Broker, and
(iii)whose primary residence is located within 80 miles of the Exchange's trading floor. No elected member of the MTS Committee may be affiliated (as defined under Rule 1.1(j)) with any other elected member of the MTS Committee. The nine elected MTS Committee members shall have three-year terms, three of which shall expire each year.
(c)The election procedures for the nine elected MTS Committee members shall be the same as the election procedures for elected Directors that are set forth in Article IV and Article V of the Exchange Constitution. Accordingly, the following shall occur as part of these procedures: The Nominating Committee shall select nominees to fill expiring terms and vacancies on the MTS Committee. Nominations may also be made by petition, signed by not less than 100 voting members and filed with the Secretary of the Exchange no later than 5 p.m. (Chicago time) on the Monday preceding the 1st Friday in November, or the first business day thereafter in the event that Monday occurs on a holiday. The election to fill the expiring terms and vacancies on the MTS Committee shall be held as part of the annual election. The term of office of each MTS Committee member elected at an annual election meeting shall commence at the time of the first regular Board of Directors meeting of the calendar year following that annual election meeting and shall continue until the first regular Board meeting of the third succeeding calendar year. Elected MTS Committee members shall hold office for the terms for which they are elected and until their successors are duly elected and qualified or until their earlier death, resignation, or removal.
(d)Candidates for election to the MTS Committee, whether nominated by the Nominating Committee or by petition, shall be eligible for election in any of the categories for which they qualify both at the time of their nomination and at the time of their election. The sole judge of whether a candidate satisfies the applicable qualifications for election to the MTS Committee in a designated category shall be the Nominating Committee in the case of candidates nominated by the Nominating Committee, and shall be the Executive Committee in the case of candidates nominated by petition, and the decision of the respective committee shall be final. In the event a person's status changes following election to the MTS Committee, the sole judge of whether the person continues to satisfy the applicable qualifications for service on the MTS Committee shall be the Board of Directors.
(e)In the event of the refusal, failure, neglect, or inability of any MTS Committee member to discharge that person's duties, or for any cause affecting the best interests of the Exchange, the sufficiency of which the Board of Directors shall be the sole judge, the Board shall have the power, by the affirmative vote of at least two-thirds of the Directors then in office, to remove that MTS Committee member from the Committee.
(f)Any vacancy occurring among the members of the MTS Committee may be filled by a qualified person appointed by the Vice Chairman of the Board with the approval of the Board of Directors. The term of any MTS Committee member so chosen shall be from the date of appointment until the first regular Board meeting of the calendar year following the next annual election meeting and until the person's successor is duly elected and qualified, or until the person's earlier death, resignation, or removal. The remaining portion of the unexpired term of an MTS Committee member, if any, shall be served by a person elected at the next annual election meeting.] 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 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 The Exchange proposes to revise the manner in which the members of the Exchange's MTS Committee 3 are chosen, as governed by existing CBOE Rule 8.82. Currently, members of the MTS Committee are elected to serve on the Committee by the Exchange's membership at the Exchange's annual election. 4 Committee candidates are nominated by the Exchange's Nominating Committee (or by petition). 5 The Committee's composition, terms of the Committee's members, procedures for filling vacancies on the Committee and other matters relating to the Committee's structure also are specifically provided for in CBOE Rule 8.82. 3 Generally, under CBOE rules, the MTS Committee is assigned the authority to make determinations concerning whether to grant or withdraw the approval to act as a designated primary market maker (“DPM” ), among other things. *See* , specifically, CBOE Rule 8.80 and, generally, CBOE Rules 8.80 through 8.94, which provide the scope of the MTS Committee's authority over DPMs. 4 *See* Articles IV and V (Conduct of Annual Election) of the Exchange's Constitution. 5 *See* CBOE Rule 8.82. The Exchange asserts that in the interest of efficiency and uniformity, the Exchange now proposes to amend CBOE Rule 8.82 to provide that the members of the MTS Committee should be appointed in a manner consistent with other Exchange committees, specifically, in accordance with CBOE Rule 2.1 (Committees of the Exchange). CBOE Rule 2.1 provides, in part, that the Vice Chairman of the Board of Directors (“Vice Chairman”), with the approval of the Board of Directors, shall appoint the chairmen and members of certain committees provided for in CBOE Rule 2.1, or any other committee established in accordance with the Exchange's Constitution, to serve for terms expiring at the first regular meeting of the Board of Directors in each calendar year. CBOE Rule 2.1 also provides that the Vice Chairman has the authority to remove any member of such committees and to fill any vacancies for the remainder of the pertinent committee term. This rule change proposes to have the appointment of MTS Committee members covered under the provisions of CBOE Rule 2.1. Additionally, other than the MTS Committee, the Nominating Committee and the Board-level committees, the Exchange's rules do not define the composition of the Exchange's committees. Consistent with that approach, CBOE Rule 8.82 would no longer mandate a particular composition for the MTS Committee and, instead, would provide that the MTS Committee's composition shall also be determined in accordance with CBOE Rule 2.1. 2. Statutory Basis The Exchange believes that this proposed rule change is consistent with Section 6(b) of the Act, 6 in general, and furthers the objectives of Section 6(b)(5) of the Act, 7 in particular, in that the proposal should promote just and equitable principles of trade, serve to remove impediments to and perfect the mechanism of a free and open market and a national market system, and protect investors and the public interest. 6 15 U.S.C. 78f(b). 7 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 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 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 findings or
(ii)as to which the Exchange consents, the Commission will:
(a)By order approve such proposed rule change; or
(b)Institute proceedings to determine whether the proposed rule change should be disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov.* Please include File Number SR-CBOE-2005-29 on the subject line. Paper Comments • Send paper comments in triplicate to Jonathan G. Katz, Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. All submissions should refer to File Number SR-CBOE-2005-29. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the 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 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-2005-29 and should be submitted on or before June 15, 2005. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 8 8 17 CFR 200.30-3(a)(12). Margaret H. McFarland, Deputy Secretary. [FR Doc. E5-2602 Filed 5-24-05; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-51705; File No. SR-CBOE-2005-35] Self-Regulatory Organizations; Chicago Board Options Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change and Amendment Nos. 1 and 2 Thereto Eliminating the Remote Market-Maker Inactivity Fee May 18, 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 April 26, 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, II and III below, which Items have been prepared by the CBOE. On May 11, 2005, the CBOE submitted Amendment No. 1 to the proposed rule change. 3 On May 17, 2005, the CBOE submitted Amendment No. 2 to the proposed rule change. 4 The CBOE has designated this proposal as one establishing or changing a due, fee, or other charge imposed by the CBOE under Section 19(b)(3)(A)(ii) of the Act, 5 and Rule 19b-4(f)(2) thereunder, 6 which renders the proposal effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested parties. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 In Amendment No. 1, the Exchange clarified the description of the purpose of the inactivity fee and amended the proposal's rule text to indicate the date of its Fees Schedule. 4 In Amendment No. 2, the Exchange made technical corrections to the proposal's rule text and further revised the date of its Fees Schedule. 5 15 U.S.C. 78s(b)(3)(A)(ii). 6 17 CFR 240.19b-4(f)(2). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to eliminate the Remote Market-Maker (“RMM”) inactivity fee. Below is the text of the proposed rule change, as amended. Proposed new language is *italicized;* proposed deletions are in [brackets]. Chicago Board Options Exchange, Inc. Fees Schedule [Aril 20, 2005] *May 13, 2005* 1. Options Transaction Fees (1)(3)(4)(7): Per Contract Equity Options (13): I.-VIII. Unchanged. IX. Remote Market-Maker [(16)]—$.26 QQQQ and SPDR Options: I.-VI. Unchanged. VII. Remote Market-Maker [(16)]—$.26 2.-4. Unchanged Notes: (1)-(15) Unchanged [(16) Effective May 1, 2005, RMMs may be assessed an inactivity fee, as described in Section 22.] 5.-21. No change 22. RMM Inactivity Fee A one-time inactivity fee will be charged to RMMs, on a per product basis, for each product for which an RMM receives an appointment through the initial RMM allocation process but does not submit quotes, as described below. An inactivity fee of $1,000 per product will be assessed upon an RMM for each product:
(a)In which the RMM receives an appointment during the initial RMM allocation process;
(b)that the RMM maintains as part of its appointment for the entire period commencing with the date of the initial RMM allocation process and ending thirty days after the termination of the rollout of the RMM program; and
(c)in which the RMM does not submit any quotations during the period described in (b). The termination of the rollout of the RMM program will not occur prior to July 15, 2005. An inactivity fee of $1,000 per product will be assessed upon an RMM for each product:
(a)In which the RMM receives an appointment during the initial RMM allocation process;
(b)in which the RMM relinquishes its appointment at any time during the period commencing with the date of the initial RMM allocation process and ending thirty days after the termination of the rollout of the RMM program; and
(c)in which the RMM does not submit any quotations during the period described in (b). The termination of the rollout of the RMM program will not occur prior to July 15, 2005. RMM organizations that relinquish appointments by virtue of the fact that they obtained an appointment in the identical product either as a DPM or e-DPM will not be required to pay the inactivity fee.] 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 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 CBOE has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange received approval of its RMM program on March 14, 2005. 7 On April 14, 2005, the Commission approved the Exchange's inactivity fee, which basically is imposed upon members that receive initial allocations of products as RMMs but then cancel those appointments prior to quoting those products. 8 The inactivity fee was also to be imposed when an RMM received an appointment of an option class, retained its appointment in the option class, but did not submit quotes in that product during any portion of the rollout of the RMM program. The purpose of the inactivity fee was to prevent members from applying for appointments in products in which they had no intention of quoting, thereby preventing other members from securing appointments in products. 7 *See* Securities Exchange Act Release No. 51366 (March 14, 2005), 70 FR 13217 (March 18, 2005). 8 *See* Securities Exchange Act Release No. 51542 (April 14, 2005), 70 FR 20952 (April 22, 2005). Now that the initial appointment allocation process is over, all RMMs have received all of their requested appointments and there are no waiting lists. In this regard, the threat of the inactivity fee served its purpose. The Exchange now proposes to eliminate it, thereby allowing free movement ( *i.e.* , allowing RMMs to freely change appointments). Because there is no waiting list in any products, the Exchange does not believe retaining the inactivity fee serves any purpose. Any RMM, currently, may request and receive an appointment in any class, so preventing some RMMs from changing appointments by virtue of the threat of the inactivity fee serves no purpose. Upon elimination of this fee, any RMM will be free to give up its appointments without owing any Exchange fees. The proposal eliminates the possible imposition of a fee upon any RMM that gives up its appointments in a product without having submitted any quotes in that product. 2. Statutory Basis For the reasons described above, the CBOE believes that the proposed rule change, as amended, 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. 9 Specifically, the Exchange believes the proposed rule change, as amended, is consistent with Section 6(b)(4) of the Act 10 in that it provides for the equitable allocation of reasonable dues, fees, and other charges among CBOE members. 9 15 U.S.C. 78f(b). 10 15 U.S.C. 78f(b)(4). B. Self-Regulatory Organization's Statement on Burden on Competition The CBOE does not believe that the proposed rule change, as amended, will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others No written comments were solicited or received with respect to the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing rule change, as amended, establishes or changes a due, fee, or other charge imposed by the Exchange, it has become effective pursuant to Section 19(b)(3)(A) of the Act 11 and subparagraph (f)(2) of Rule 19b-4 thereunder. 12 Accordingly, the proposal will take effect upon filing with the Commission. 11 15 U.S.C. 78s(b)(3)(A). 12 17 CFR 240.19b-4(f)(2). 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. 13 13 For purposes of calculating the 60-day period within which the Commission may summarily abrogate the proposed rule change under Section 19(b)(3)(C) of the Act, the Commission considers the period to commence on May 17, 2005, the date on which the Exchange submitted Amendment No. 2. *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, as amended, is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov.* Please include File Number SR-CBOE-2005-35 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-2005-35. 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 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-2005-35 and should be submitted on or before June 15, 2005. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 14 14 17 CFR 200.30-3(a)(12). Margaret H. McFarland, Deputy Secretary. [FR Doc. E5-2603 Filed 5-24-05; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-51717; File No. SR-CBOE-2004-59] Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Order Approving Proposed Rule Change and Amendment Nos. 1, 2, and 3 and Notice of Filing and Order Granting Accelerated Approval to Amendment Nos. 4 and 5 Relating to Back-Up Trading Arrangements May 19, 2005. I. Introduction On August 27, 2004, the Chicago Board Options Exchange, Incorporated (“CBOE” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”), 1 and Rule 19b-4 thereunder, 2 a proposed rule change to establish rules covering emergency procedures for CBOE members and back-up trading arrangements in the event that the Exchange's main facility is unavailable. On October 21, 2004, the Exchange amended its proposal. 3 On October 26, 2004, the Exchange further amended its proposal. 4 On March 23, 2005, the Exchange submitted a third amendment. 5 The proposed rule change, as amended, was published for notice and comment in the **Federal Register** on April 14, 2005. 6 The Commission received no comment letters regarding the proposed rule change. On May 11, 2005, CBOE submitted a clarifying amendment. 7 On May 16, 2005, CBOE submitted an additional clarifying amendment. 8 This order approves the proposed rule change, as modified by Amendment Nos. 1, 2 and 3. Simultaneously, the Commission provides notice of filing of Amendment Nos. 4 and 5 and grants accelerated approval of Amendment Nos. 4 and 5. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 *See* letter from Jaime Galvan, Attorney, CBOE, to Nancy Sanow, Assistant Director, Division of Market Regulation (“Division”), Commission, dated October 20, 2004 (“Amendment No. 1”). In Amendment No. 1, the Exchange modified the text of proposed CBOE Rule 6.16 and made certain other clarifying changes to the original submission. Amendment No. 1 replaced CBOE's original filing in its entirety. 4 *See* letter from Jaime Galvan, Attorney, CBOE, to Brian Trackman, Special Counsel, Division, Commission, dated October 25, 2004 (“Amendment No. 2”). In Amendment No. 2, the Exchange corrected typographical errors in the proposed rule text. 5 *See* Amendment No. 3, dated March 23, 2005 (“Amendment No. 3”). In Amendment No. 3, the Exchange modified portions of the proposed rule text and corresponding sections of the Form 19b-4 describing the rule proposal. Amendment No. 3 replaces CBOE's previously amended filing in its entirety. CBOE also submitted with its Amendment No. 3 a copy of the back-up trading agreement it has negotiated with the Philadelphia Stock Exchange (“Phlx”) as Exhibit 3.A to its Form 19b-4, together with a copy of a first amendment to the agreement as Exhibit 3.B. These exhibits are available for viewing on the Commission's Web site, *www.sec.gov/rules/sro.shtml,* and at the Exchange and the Commission. 6 *See* Securities Exchange Act Release No. 51510 (April 8, 2005), 70 FR 19812 (“Notice”). 7 *See* Amendment No. 4, dated May 11, 2005 (“Amendment No. 4”). In Amendment No. 4, the Exchange made one minor correction to the rule text in Section (d)(2) of proposed CBOE Rule 6.16 to state that any arbitration relating to trading of CBOE exclusively listed options on the facility of CBOE at the Back-up Exchange will be conducted in accordance with the rules of the Back-up Exchange, unless otherwise agreed by the parties. 8 *See* Amendment No. 5, dated May 16, 2005 (“Amendment No. 5”). In Amendment No. 5, the Exchange changed the number of the footnote it proposes to add to its Fee Schedule from 17 to 16. II. Description of Proposal CBOE proposes to adopt new rules that will facilitate the CBOE entering into arrangements with one or more other exchanges that would provide back-up trading facilities for CBOE listed options at another exchange if CBOE's facility becomes disabled and trading is prevented for an extended period of time, and similarly provide trading facilities at CBOE for another exchange to trade its listed options if that exchange's facility becomes disabled. The Exchange also proposes an amendment to its Fee Schedule relative to the fees that shall apply to transactions in the options of a Disabled Exchange effected on a Back-up Exchange. Additionally, the Exchange proposes to adopt a new Rule 6.17, which addresses Exchange procedures under emergency conditions and is similar to rules that have been adopted by other exchanges. Finally, the rule proposal will replace and supersede current CBOE Rule 3.22, which the Exchange adopted following the events of September 11, 2001. A. Rule 6.16—Back-Up Trading Arrangements a. Background As set forth in the Notice, the Exchange proposes to adopt new CBOE Rule 6.16, *Back-Up Trading Arrangements,* which will facilitate the CBOE entering into arrangements with one or more other exchanges (each a “Back-up Exchange”) to permit CBOE and its members to use a portion of a Back-up Exchange's facilities to conduct the trading of CBOE exclusively listed options 9 in the event of a Disabling Event, and similarly will permit the CBOE to provide trading facilities at CBOE for another exchange's exclusively listed options if that exchange (a “Disabled Exchange”) is prevented from trading due to a Disabling Event. 9 For purposes of proposed CBOE Rule 6.16, the term “exclusively listed option” means an option that is listed exclusively by an exchange (because the exchange has an exclusive license to use, or has proprietary rights in, the interest underlying the option). Proposed Rule 6.16 would also permit the CBOE to enter into arrangements with a Back-up Exchange to provide for the listing and trading of CBOE singly listed options 10 by the Back-up Exchange if CBOE's facility becomes disabled, and conversely provide for the listing and trading by CBOE of the singly listed options of a Disabled Exchange. 11 10 For purposes of proposed Rule 6.16, the term “singly listed option” means an option that is not an “exclusively listed option” but that is listed by an exchange and not by any other national securities exchange. 11 In its proposal, CBOE stated that the back-up trading arrangements contemplated by proposed Rule 6.16 represent the Exchange's immediate plan to ensure that CBOE's exclusively listed and singly listed options will have a trading venue if a catastrophe renders its primary facility inaccessible or inoperable. The Exchange noted that, in September 2003, it had entered into separate Memoranda of Understanding with the American Stock Exchange LLC (“Amex”), Pacific Exchange (“PCX”) and Philadelphia Stock Exchange (“Phlx”) to memorialize their mutual understanding to work together to develop bi-lateral back-up trading arrangements in the event that trading is prevented at one of the exchanges. Since then, the Exchange has been working with each of these exchanges to put in place written agreements outlining essential commercial terms with respect to the arrangements as well as operational plans that describe the operational and logistical aspects of the arrangements. At present, CBOE and Phlx have signed an agreement relative to back-up trading arrangements and are in the process of completing the operational plan for those arrangements. *See supra* note 5. b. If CBOE Is the Disabled Exchange Section
(a)of proposed Rule 6.16 describes the back-up trading arrangements that would apply if CBOE were the Disabled Exchange. Under proposed paragraph (a)(1)(B), the facility of the Back-up Exchange used by CBOE to trade some or all of CBOE's exclusively listed options will be deemed to be a facility of CBOE, and such option classes shall trade as listings of CBOE. Since the trading of CBOE exclusively listed options will be conducted using the systems of the Back-up Exchange, proposed paragraph (a)(1)(C) provides that the trading of CBOE exclusively listed options on CBOE's facility at the Back-up Exchange shall be conducted in accordance with the rules of the Back-up Exchange, except that
(i)such trading shall be subject to CBOE rules with respect to doing business with the public, margin requirements, net capital requirements, listing requirements and position limits,
(ii)CBOE members that are trading on CBOE's facility at the Back-up Exchange (not including members of the Back-up Exchange who become temporary members of CBOE pursuant to paragraph (a)(1)(F)) will be subject to CBOE rules governing or applying to the maintenance of a person's or a firm's status as a member of CBOE, and
(iii)CBOE Rule 8.87.01 may be utilized to establish a lower DPM participation rate applicable to trading on CBOE's facility on the Back-up Exchange than the rate that is applicable under the rules of the Back-up Exchange if agreed to by CBOE and the Back-up Exchange. In addition, CBOE and the Back-up Exchange may agree that other CBOE rules will apply to such trading. The Back-up Exchange rules that govern trading on CBOE's facility at the Back-up Exchange shall be deemed to be CBOE rules for purposes of such trading. Proposed paragraph (a)(1)(D) reflects that the Back-up Exchange has agreed to perform the related regulatory functions with respect to trading of CBOE exclusively listed options on CBOE's facility at the Back-up Exchange, in each case except as CBOE and the Back-up Exchange may specifically agree otherwise. The Back-up Exchange and CBOE will coordinate with each other regarding surveillance and enforcement respecting such trading. CBOE shall retain the ultimate legal responsibility for the performance of its self-regulatory obligations with respect to CBOE's facility at the Back-up Exchange. Under proposed paragraph (a)(1)(E), CBOE shall have the right to designate its members that will be authorized to trade CBOE exclusively listed options on CBOE's facility at the Back-up Exchange and, if applicable, its member(s) that will be a Lead Market-Maker (“LMM”) or Designated Primary Market-Maker (“DPM”) in those options. If the Back-up Exchange is unable to accommodate all CBOE members that desire to trade on CBOE's facility at the Back-up Exchange, CBOE may determine which members shall be eligible to trade at that facility by considering factors such as whether the member is a DPM or LMM in the applicable product(s), the number of contracts traded by the member in the applicable product(s), market performance, and other factors relating to a member's contribution to the market in the applicable product(s). Under proposed paragraph (a)(1)(F), members of the Back-up Exchange shall not be authorized to trade in any CBOE exclusively listed options, except that
(i)CBOE may deputize willing floor brokers of the Back-up Exchange as temporary CBOE members to permit them to execute orders as brokers in CBOE exclusively listed options traded on CBOE's facility at the Back-up Exchange, 12 and
(ii)the Back-up Exchange has agreed that it will, at the instruction of CBOE, select members of the Back-up Exchange that are willing to be deputized by CBOE as temporary CBOE members authorized to trade CBOE exclusively listed options on CBOE's facility at the Back-up Exchange for such period of time following a Disabling Event as CBOE determines to be appropriate, and CBOE may deputize such members of the Back-up Exchange as temporary CBOE members for that purpose. The second of the foregoing exceptions would permit members of the Back-up Exchange to trade CBOE exclusively listed options on the CBOE facility on the Back-up Exchange if, for example, circumstances surrounding a Disabling Event result in CBOE members being delayed in arriving at the Back-up Exchange in time for prompt resumption of trading. 12 The exchanges that acted as Back-up Exchanges in the emergency situations noted above also deputized its floor brokers in this manner. *See infra* note 16. Section (a)(2) of the proposed rule provides for the continued trading of CBOE singly listed options at a Back-up Exchange in the event of a Disabling Event at CBOE. Proposed paragraph (a)(2)(B) provides that CBOE may enter into arrangements with a Back-up Exchange under which the Back-up Exchange will agree, in the event of a Disabling Event, to list for trading option classes that are then singly listed only by CBOE. Such option classes would trade on the Back-up Exchange as listings of the Back-up Exchange and in accordance with the rules of the Back-up Exchange. Under proposed paragraph (a)(2)(C), any such options class listed by the Back-up Exchange that does not satisfy the standard listing and maintenance criteria of the Back-up Exchange will be subject, upon listing by the Back-up Exchange, to delisting (and, thus, restrictions on opening new series, and engaging in opening transactions in those series with open interest, as may be provided in the rules of the Back-up Exchange). CBOE singly listed option classes would be traded by members of the Back-up Exchange and by CBOE members selected by CBOE to the extent the Back-up Exchange can accommodate CBOE members in the capacity of temporary members of the Back-up Exchange. If the Back-up Exchange is unable to accommodate all CBOE members that desire to trade CBOE singly listed options at the Back-up Exchange, CBOE may determine which members shall be eligible to trade such options at the Back-up Exchange by considering the same factors used to determine which CBOE members are eligible to trade CBOE exclusively listed options at the CBOE facility at the Back-up Exchange. Proposed Section (a)(3) provides that CBOE may enter into arrangements with a Back-up Exchange to permit CBOE members to conduct trading on a Back-up Exchange of some or all of CBOE's multiply listed options in the event of a Disabling Event. While continued trading of multiply listed options upon the occurrence of a Disabling Event is not likely to be as great a concern as the continued trading of exclusively and singly listed options, CBOE nonetheless believes a provision for multiply listed options should be included in the rule so that the exchanges involved will have the option to permit members of the Disabled Exchange to trade multiply listed options on the Back-up Exchange. Such options shall trade as a listing of the Back-up Exchange and in accordance with the rules of the Back-up Exchange. c. If CBOE Is the Back-Up Exchange Section
(b)of proposed Rule 6.16 describes the back-up trading arrangements that would apply if CBOE were the Back-up Exchange. In general, the provisions in Section
(b)are the converse of the provisions in Section (a). With respect to the exclusively listed options of the Disabled Exchange, the facility of CBOE used by the Disabled Exchange to trade some or all of the Disabled Exchange's exclusively listed options will be deemed to be a facility of the Disabled Exchange, and such option classes shall trade as listings of the Disabled Exchange. Trading of the Disabled Exchange's exclusively listed options on the Disabled Exchange's facility at CBOE shall be conducted in accordance with CBOE rules, except that
(i)such trading shall be subject to the Disabled Exchange's rules with respect to doing business with the public, margin requirements, net capital requirements, listing requirements and position limits, and
(ii)members of the Disabled Exchange that are trading on the Disabled Exchange's facility at CBOE (not including CBOE members who become temporary members of the Disabled Exchange pursuant to paragraph (b)(1)(D)) will be subject to the rules of the Disabled Exchange governing or applying to the maintenance of a person's or a firm's status as a member of the Disabled Exchange. In addition, the Disabled Exchange and CBOE may agree that other Disabled Exchange rules will apply to such trading. CBOE will perform the related regulatory functions with respect to such trading, in each case except as the Disabled Exchange and CBOE may specifically agree otherwise. Proposed paragraph (b)(1)(C) reflects that the Disabled Exchange has agreed to retain the ultimate legal responsibility for the performance of its self-regulatory obligations with respect to the Disabled Exchange's facility at CBOE. Sections (b)(2) and (b)(3) describe the arrangements applicable to trading of the Disabled Exchange's singly and multiply listed options at CBOE, and are the converse of Sections (a)(2) and (a)(3). One difference is in paragraph (b)(2)(A), which includes a provision that would permit CBOE to allocate singly listed option classes of the Disabled Exchange to a CBOE DPM in advance of a Disabling Event, without utilizing the allocation process under CBOE Rule 8.95, to enable CBOE to quickly list such option classes upon the occurrence of a Disabling Event. d. Member Obligations Section
(c)describes the obligations of members and member organizations with respect to the trading by “temporary members” on the facilities of another exchange pursuant to Rule 6.16. Section (c)(1) sets forth the obligations applicable to members of a Back-up Exchange who act in the capacity of temporary members of the Disabled Exchange on the facility of the Disabled Exchange at the Back-up Exchange. Section (c)(1) provides that a temporary member of the Disabled Exchange shall be subject to, and obligated to comply with, the rules that govern the operation of the facility of the Disabled Exchange at the Back-up Exchange. This would include the rules of the Disabled Exchange to the extent applicable during the period of such trading, including the rules of the Disabled Exchange limiting its liability for the use of its facilities that apply to members of the Disabled Exchange. Additionally,
(i)such temporary member shall be deemed to have satisfied, and the Disabled Exchange has agreed to waive specific compliance with, rules governing or applying to the maintenance of a person's or a firm's status as a member of the Disabled Exchange, including all dues, fees and charges imposed generally upon members of the Disabled Exchange based on their status as such,
(ii)such temporary member shall have none of the rights of a member of the Disabled Exchange except the right to conduct business on the facility of the Disabled Exchange at the Back-up Exchange to the extent described in the Rule,
(iii)the member organization associated with such temporary member, if any, shall be responsible for all obligations arising out of that temporary member's activities on or relating to the Disabled Exchange, and
(iv)the Clearing Member of such temporary member shall guarantee and clear the transactions of such temporary member on the Disabled Exchange. Section (c)(2) sets forth the obligations applicable to members of a Disabled Exchange who act in the capacity of temporary members of the Back-up Exchange for the purpose of trading singly and multiply listed options of the Disabled Exchange. Such temporary members shall be subject to, and obligated to comply with, the rules of the Back-up Exchange that are applicable to the Back-up Exchange's own members, including the rules of the Back-up Exchange limiting its liability for the use of its facilities that apply to members of the Back-up Exchange. Temporary members of the Back-up Exchange have the same obligations as those set forth in Section (c)(1) that apply to temporary members of the Disabled Exchange, except that, in addition, temporary members of the Back-up Exchange shall only be permitted
(i)to act in those capacities on the Back-up Exchange that are authorized by the Back-up Exchange and that are comparable to capacities in which the temporary member has been authorized to act on the Disabled Exchange, and
(ii)to trade in those option classes in which the temporary member is authorized to trade on the Disabled Exchange. e. Member Proceedings As noted above, proposed CBOE Rule 6.16 provides that the rules of the Back-up Exchange shall apply to the trading of the singly and multiply listed options of the Disabled Exchange traded on the Back-up Exchange's facilities, and (with certain limited exceptions) the trading of exclusively listed options of the Disabled Exchange traded on the facility of the Disabled Exchange at the Back-up Exchange. The proposed rule contemplates that the Back-up Exchange has agreed to perform the related regulatory functions with respect to such trading (except as the Back-up Exchange and the Disabled Exchange may specifically agree otherwise). Section
(d)of proposed Rule 6.16 provides that if a Back-up Exchange initiates an enforcement proceeding with respect to the trading during a back-up period of singly or multiply listed options of the Disabled Exchange by a temporary member of the Back-up Exchange or exclusively listed options of the Disabled Exchange by a member of the Disabled Exchange (other than a member of the Back-up Exchange who is a temporary member of the Disabled Exchange), and such proceeding is in process upon the conclusion of the back-up period, the Back-up Exchange may transfer responsibility for such proceeding to the Disabled Exchange following the conclusion of the back-up period. This approach to the exercise of enforcement jurisdiction is also consistent with past precedent. With respect to arbitration jurisdiction, proposed Section
(d)provides that arbitration of any disputes with respect to any trading during a back-up period of singly or multiply listed options of the Disabled Exchange or of exclusively listed options of the Disabled Exchange on the Disabled Exchange's facility at the Back-up Exchange will be conducted in accordance with the rules of the Back-up Exchange, unless the parties to an arbitration agree that it shall be conducted in accordance with the rules of the Disabled Exchange. f. Member Preparations To ensure that members are prepared to implement CBOE's back-up trading arrangements, proposed Section
(e)of proposed CBOE Rule 6.16 requires CBOE members to take appropriate actions as instructed by CBOE to accommodate CBOE's back-up trading arrangements with other exchanges and CBOE's own back-up trading arrangements. g. Interpretations and Policies Proposed Interpretation and Policy .01 to CBOE Rule 6.16 clarifies that to the extent the rule text provides that another exchange will take certain action, it is reflecting what that exchange has agreed to do by contractual agreement with CBOE, but Rule 6.16 itself is not binding on the other exchange. B. Fee Schedule The Exchange proposes to add a footnote to its Fee Schedule to inform its members regarding what fees will apply to transactions in the listed options of a Disabled Exchange effected on a Back-up Exchange under CBOE Rule 6.16. The footnote provides that if CBOE is the Disabled Exchange, the Back-up Exchange has agreed to apply the per contract and per contract side fees in the CBOE fee schedule to transactions in CBOE exclusively listed options traded on the CBOE facility on the Back-up Exchange. 13 If any other CBOE listed options are traded on the Back-up Exchange (such as CBOE singly listed options that are listed by the Back-up Exchange) pursuant to CBOE Rule 6.16, the fee schedule of the Back-up Exchange shall apply to such trades. The footnote contains a second paragraph stating the converse if CBOE is the Back-up Exchange under its Rule 6.16. 13 When Phlx Dell options relocated to Annex in June 1998, Phlx fees applied to transactions in Dell options on the Amex. *See infra* note 16. C. Proposed Rule 6.17—Authority To Take Action Under Emergency Conditions The Exchange proposes to adopt a general emergency rule in proposed CBOE Rule 6.17. Although not directly related to the implementation of the back-up trading arrangements, the Exchange believes that it is appropriate to adopt such a rule in conjunction with implementing the back-up trading arrangements. Currently, there is no Exchange rule that grants specific authority in an emergency to any person or persons to take all actions necessary or appropriate for the maintenance of a fair and orderly market or the protection of investors. Authority to take actions affecting trading or the operation of CBOE systems is currently granted to the Board of Directors, floor officials and other individuals under several Exchange rules ( *e.g.,* CBOE Rules 4.16, 6.3, 6.6 and 24.7). III. Commission's Findings and Order Granting Accelerated Approval of Proposed Rule Change After careful consideration, the Commission finds that CBOE's proposed rule change is consistent with the requirements of the Exchange Act and the rules and regulations thereunder, applicable to a national securities exchange. 14 In particular, the Commission finds that the proposed rule change is consistent with Section 6(b)(5) of the Act, 15 which requires that the rules of an exchange, among other things, foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities, remove impediments to and perfect the mechanism of a free and open market and a national market system and, in general, serve to protect investors and the public interest. 14 In approving this proposal, the Commission has considered its impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). 15 15 U.S.C. 78f(b)(5). In light of the heightened security risks to the financial markets since the September 11, 2001 attacks on the World Trade Centers in New York City, the Commission has encouraged and worked with the national securities exchanges to develop contingency plans, emergency procedures, and back-up trading arrangements in order to minimize the potential disruption and market impact that a future Disabling Event could cause. The present rule change proposal is a direct response to that effort. The Commission believes that CBOE's proposed rule changes are reasonably designed to address the key elements necessary to mitigate the effects of a Disabling Event affecting the Exchange, minimize the impact of such an event on market participants, and help ensure that a liquid and orderly marketplace for securities listed and traded on CBOE will continue to exist. Specifically, the back-up trading arrangements contemplated by proposed CBOE Rule 6.16 are designed to provide a trading venue for the Exchange's exclusively listed and, to the extent feasible, its singly listed options in the event that a catastrophe required the Exchange's primary facility to be closed for an extended period. 16 The proposed rule also provides authority for CBOE to provide a back-up trading venue should another exchange be affected by a Disabling Event. 16 The Commission notes that it has approved the basic approach set forth in the proposal of deeming a portion of the Back-up Exchange's facilities to be a facility of the Disabled Exchange. *See* Securities Exchange Act Release No. 27365 (October 19, 1989), 54 FR 43511 (October 25, 1989) (approving trading of options listed on the Pacific Stock Exchange at other exchanges in wake of earthquake); Securities Exchange Act Release No. 40088 (June 12, 1998), 63 FR 33426 (June 18, 1998) (approving trading of Dell options listed on Phlx at Amex on a temporary basis). CBOE also proposes a new Rule 6.17 granting authority to take action under emergency conditions to the Chairman, President or such other person or persons as may be designated by the Board. The proposed rule text closely tracks that of other exchanges. 17 The Commission finds that proposed CBOE Rule 6.17 is consistent with the Act and should enable key actions to be taken by Exchange representatives in the event of a Disabling Event. 17 *See, e.g.,* New York Stock Exchange Rule 51. The Commission likewise finds that the proposed change to the Exchange's Fee Schedule is consistent with the Act. By affirming that CBOE and, by mutual agreement, the Back-up Exchange will apply the per contract and per contract side fees normally applicable to exclusively listed options under the Disabled Exchange's fee schedule, the Commission believes that the proposed rule change appears to be reasonably designed to minimize the disruption associated with back-up trading of such options. The proposal also clarifies that, with regard to singly listed and multiply listed options, the fees charged shall be those set forth in the Back-up Exchange fee schedule where trading occurs at a Back-up Exchange, or, where trading occurs at CBOE, the CBOE fee schedule. The Commission finds good cause, consistent with Sections 6(b)(5) and 19(b) of the Act, 18 to approve the proposal prior to the thirtieth day after the date of publication of notice of filing thereof in the **Federal Register.** Amendment No. 4 simply corrects a reference to “Back-up Exchange” in Section (d)(2) of CBOE Rule 6.16. Likewise, Amendment No. 5 changes the number of the footnote CBOE proposes to add to its Fee Schedule from 17 to 16 to avoid a gap in the numbering of the notes. Because Amendment Nos. 4 and 5 propose minor corrections to the rule text that are consistent with the clear intent of the proposal, the Commission finds that it is appropriate to approve Amendment Nos. 4 and 5 on an accelerated basis. 18 15 U.S.C. 78f(b)(5) and 78s(b). IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning Amendment Nos. 4 and 5, including whether each of these amendments is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov.* Please include File Number SR-CBOE-2004-59 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-2004-59. 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-2004-59 and should be submitted on or before June 15, 2005. V. Conclusion *It is therefore ordered,* pursuant to Section 19(b)(2) of the Act, 19 that the proposed rule change (SR-CBOE-2004-59), as amended by Amendment Nos. 1, 2 and 3, is hereby approved, and that Amendment Nos. 4 and 5 to the proposed rule change are approved on an accelerated basis. 19 15 U.S.C. 78s(b)(2). For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 20 20 17 CFR 200.30-3(a)(12). Margaret H. McFarland, Deputy Secretary. [FR Doc. E5-2634 Filed 5-24-05; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-51720; File No. SR-CBOE-2005-33] Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Increased Class Quoting Limits in AAPL, GOOG, MNX, QQQQ May 19, 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 April 21, 2005, the Chicago Board Options Exchange, Incorporated (“CBOE” or “Exchange”) filed with the Securities and Exchange Commission (“Commission” or “SEC”) the proposed rule change as described in Items I, II and III below, which Items have been prepared by the CBOE. The CBOE has designated this proposal as one constituting a stated policy, practice, or interpretation with respect to the meaning, administration, or enforcement of an existing rule under Section 19(b)(3)(A)(i) of the Act, 3 and Rule 19b-4(f)(1) thereunder, 4 which renders the proposal effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 15 U.S.C. 78s(b)(3)(A)(i). 4 17 CFR 240.19b-4(f)(1). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The CBOE proposes to increase the class quoting limits in a select number of active options classes. The text of the proposed rule change is available on the Exchange's Web site ( *http://www.cboe.com* ), 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 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 Commission approved the Exchange's Remote Market-Maker (“RMM”) program (“Program”) on March 14, 2005. 5 CBOE Rule 8.3A, Maximum Number of Market Participants Quoting Electronically per Product, establishes class quoting limits (“CQLs”) for each class traded on the Hybrid Trading System. 6 A CQL is the maximum number of quoters that may quote electronically in a given product and the current levels are established from 25-40, depending on the trading activity of the particular product. 5 *See* Securities Exchange Act Release No. 51366 (March 14, 2005), 70 FR 13217 (March 18, 2005). 6 *See* CBOE Rule 8.3A.01. CBOE Rule 8.3A.01(c) provides a procedure by which the President of the Exchange may increase the CQL for a particular product. In this regard, the President of the Exchange may increase the CQL in exceptional circumstances, which are defined in the rule as “* * * substantial trading volume, whether actual or expected.” 7 The effect of an increase in the CQL is procompetitive in that it increases the number of market participants that may quote electronically in a product. The purpose of this filing is to increase the CQLs for four products trading on the Exchange: Apple Computer (AAPL), options on the Nasdaq-100 Index Tracking Stock (QQQQ), options on the mini-Nasdaq 100 index (MNX), and Google (GOOG). Specifically, the Exchange proposes to increase the CQLs in these products by the following amounts: AAPL CQL increased by 4; MNX CQL increased by 4; QQQQ CQL increased by 2; and GOOG CQL increased by 3. 7 “Any actions taken by the President of the Exchange pursuant to this paragraph will be submitted to the SEC in a rule filing pursuant to Section 19(b)(3)(A) of the Exchange Act.” CBOE Rule 8.3A.01(c). Each of these products routinely is among the most actively-traded on the Exchange for both index and equity products and, therefore, there is substantial trading volume in each of these products. Increasing the CQLs in each of these products will enable the Exchange to enhance the liquidity offered, thereby offering deeper and more liquid markets. Each of these products has a “waiting list” of market participants waiting to quote and, per CBOE Rule 8.3A's requirements, quoting spots will be offered on a time priority basis, starting with the first person on each list. The Exchange represents that it will comply with all of the requirements of CBOE Rule 8.3A in increasing the CQLs in these products and, if it determines subsequently to reduce such CQLs, in reducing the CQLs in these products. 8 Changes to the CQLs will be announced to the membership via Information Circular. 8 The Exchange has represented that it will follow the procedures outlined in CBOE Rule 8.3A.01(a) for assigning new CQLs, based on revised trading volume statistics, at the end of the calendar quarter and that if the new CQLs are lower than the increased CQLs assigned as a result of this proposed rule change, the procedures outlined in CBOE Rule 8.3A.01(a) will be followed. Telephone conversation of May 18, 2005, between Patrick Sexton, Assistant General Counsel, CBOE and David Michehl, Attorney, Division of Market Regulation, Commission. 2. Statutory Basis The CBOE believes that 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. 9 Specifically, the Exchange believes the proposed rule change is consistent with the Section 6(b)(5) 10 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. 9 15 U.S.C. 78f(b). 10 15 U.S.C. 78f(b)(5). B. Self-Regulatory Organization's Statement on Burden on Competition The CBOE 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 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 The foregoing proposed rule change will take effect upon filing with the Commission pursuant to Section 19(b)(3)(A)(i) of the Act 11 and Rule 19b-4(f)(1) thereunder, 12 because it constitutes a stated policy, practice, or interpretation with respect to the meaning, administration, or enforcement of an existing rule. 11 15 U.S.C. 78s(b)(3)(A)(i). 12 17 CFR 240.19b-4(f)(1). 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. 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-2005-33 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-2005-33. 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 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-2005-33 and should be submitted on or before June 15, 2005. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 13 13 17 CFR 200.30-3(a)(12). Margaret H. McFarland, Deputy Secretary. [FR Doc. E5-2636 Filed 5-24-05; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-51703; File No. SR-NASD-2004-033] Self-Regulatory Organizations; National Association of Securities Dealers, Inc.; Order Approving a Proposed Rule Change and Amendment Nos. 1, 2, and 3 Thereto Seeking to Modify the Nasdaq Market Center Execution Service To Add an Optional Routing Feature May 18, 2005. I. Introduction On February 25, 2004, the National Association of Securities Dealers, Inc. (“NASD”), through its subsidiary, The Nasdaq Stock Market, Inc. (“Nasdaq”), filed with the Securities and Exchange Commission (“Commission”), 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 seeking to modify the Nasdaq Market Center execution service to add an optional routing feature. On July 15, 2004, Nasdaq submitted Amendment No. 1 to the proposed rule change. 3 On February 23, 2005, Nasdaq submitted Amendment No. 2 to the proposed rule change. 4 On April 7, 2005, Nasdaq submitted Amendment No. 3 to the proposed rule change. 5 The proposed rule change, as amended, was published for comment in the **Federal Register** on April 13, 2005. 6 The Commission received no comments on the proposal. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 Amendment No. 1 replaced and superseded the originally filed proposed rule change. 4 Amendment No. 2 replaced and superseded the originally filed proposed rule change, as amended. 5 Amendment No. 3 replaced and superseded the originally filed proposed rule change, as amended. 6 *See* Securities Exchange Act Release No. 51504 (April 7, 2005), 70 FR 19538 (April 13, 2005) (SR-NASD-2004-033). II. Description Nasdaq has proposed to modify the Nasdaq Market Center execution service to create an optional outbound order routing feature that will route orders in Nasdaq-listed securities to other markets when those markets are displaying quotes at prices superior to those displayed on Nasdaq and that are accessible through the router. 7 Under the proposal, Nasdaq Market Center Participants will be able to choose on an order-by-order basis whether they want an order routed outside the Nasdaq Market Center. Such routed orders will be executed pursuant to the rules and regulations of the destination market. If more than one market is at a price level that is superior to Nasdaq's displayed price, the computer algorithm of the Nasdaq Market Center router will determine the market, or markets, to which the order will be sent, based on several factors including the number of shares being displayed, response time, likelihood of undisplayed trading interest, and the cost of accessing the market. If an order (or a portion of the order) remains unfilled after being routed, it will be returned to Nasdaq where, if the order is marketable, it will be returned to the Non-Directed Order processing queue, where it can be executed in Nasdaq, or routed again, if Nasdaq is not at the best price when the order is next in line in the processing queue. Once a routed limit order is no longer marketable, whether it becomes non-marketable upon return to Nasdaq or while in the execution queue, it will be placed on the Nasdaq Market Center book, if consistent with the order's time in force condition. Once on the book, however, an order will not be routed out of the Nasdaq Market Center, even if it becomes marketable against the quotes of another market. 7 Under the proposal, Nasdaq will access the quotes of exchanges through its broker-dealer subsidiary, Brut. *See* Securities Exchange Act Release No. 51326 (March 7, 2005), 70 FR 12521 (March 14, 2005). III. Discussion and Commission Findings After careful review, the Commission finds that the proposed rule change, as amended, is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a self-regulatory organization. 8 In particular, the Commission believes that the proposed rule change, as amended, is consistent with Section 15A(b)(6) of the Act, 9 which requires, among other things, that NASD's rules be designed to protect investors and the public interest. 8 The Commission has considered the proposed rule's impact on efficiency, competition and capital formation. 15 U.S.C. 78c(f). 9 15 U.S.C. 78 *o* -3(b)(6). The Commission notes that the proposed routing functionality is an optional feature and that Nasdaq Market Center Participants will be able choose whether or not to participate in routing on an order-by-order basis. The Commission also notes that orders flagged for routing will only in fact route when a superior price is available in another market that is accessible through the router. Therefore, the Commission believes that the proposed outbound order routing feature should help investors to reach better prices available outside the Nasdaq Market Center and thereby enhance the national market system. IV. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act, 10 that the proposed rule change (File No. SR-NASD-2004-033), as amended, be, and hereby is, approved. 10 15 U.S.C. 78s(b)(2). For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 11 11 17 CFR 200.30-3(a)(12). Margaret H. McFarland, Deputy Secretary. [FR Doc. E5-2605 Filed 5-24-05; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-51706; File No. SR-NYSE-2005-27] Self-Regulatory Organizations; New York Stock Exchange, Inc.; Notice of Filing and Order Granting Accelerated Approval of Proposed Rule Change and Amendment No. 2 Thereto Relating to the Listing of PIES SM Issued by Sierra Pacific Resources Under Section 703.19 May 18, 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 April 19, 2005, 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 and II below, which Items have been prepared by the Exchange. On May 16, 2005, the Exchange filed Amendment No. 1 to the proposed rule change. On May 18, 2005, the Exchange withdrew Amendment No. 1 and filed Amendment No. 2. 3 The Commission is publishing this notice to solicit comments on the proposed rule change, as amended, from interested persons and is approving the proposal on an accelerated basis. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 In Amendment No. 2, the Exchange requested that the proposal, which had initially been submitted under section 19(b)(3)(A) of the Act, 15 U.S.C. 78s(b)(3)(A), and Rule 19b-4(f)(6) thereunder, 17 CFR 240.19b-4(f)(6), be approved pursuant to section 19(b)(2) of the Act, 15 U.S.C. 78s(b)(2) and Rule 19b-4(a) thereunder, 17 CFR 240.19b-4(a). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to list and trade Premium Income Equity Securities (PIES sm ) (the “New PIES”), each of which consists of a purchase contract issued by Sierra Pacific Resources (“SPR”) that requires the holder to purchase a variable amount of SPR common stock and a 5% undivided beneficial ownership interest in a senior note of SPR with a principal amount of $1,000 due November 15, 2007 (unless its maturity is extended as described below). II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, NYSE included statements concerning the purpose of and basis for the proposed rule change. The text of these statements may be examined at the places specified in Item III 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 Under Section 703.19 of the NYSE Listed Company Manual (the “Manual”), the Exchange may approve for listing and trading securities not otherwise covered by the criteria of sections 1 and 7 of the Manual, provided the issue is suited for auction market trading. 4 The Exchange proposes to list and trade, under section 703.19 of the Manual, the New PIES, each of which consists of
(1)a purchase contract (“Purchase Contract”) issued by SPR and
(2)a 5% undivided beneficial ownership interest in a senior note of SPR with a principal amount of $1,000 (the “Note”, and collectively, the “Notes”) due November 15, 2007. 5 4 Securities Exchange Act Release No. 28217 (July 18, 1990), 55 FR 30056 (July 24, 1990). 5 SPR filed a Form S-4 relating to the New PIES (the “Registration Statement”) on April 15, 2005. The information provided in this Rule 19b-4 filing relating to the New PIES is based entirely on information included in the Registration Statement. The New PIES are being offered pursuant to an exchange offer, the full terms of which are set out in the Registration Statement. 6 Specifically, SPR offers to exchange the New PIES and a cash payment of $0.125 for each validly tendered and accepted currently existing Corporate PIES of SPR (collectively referred to as the “Old PIES”), subject to, among other things, the condition that the Old PIES remain listed on the Exchange. 6 In particular, the Registration Statement provides a detailed discussion and comparison of the Old PIES and the New PIES so that holders can evaluate whether it is in their best interests to participate in the exchange offer. Each Purchase Contract obligates the holder of a New PIES to purchase from SPR, no later than November 15, 2005 (the “Purchase Contract Settlement Date”), for a price of $50, the following number of shares of SPR common stock, $1.00 par value:
(a)If the average of the closing prices of SPR's common stock over the 20-trading day period ending on the third trading day prior to the Purchase Contract Settlement Date (the “Applicable Market Value”) is equal to or greater than $16.62, 3.0084 shares;
(b)if the Applicable Market Value is less than $16.62 but greater than $13.85, a number of shares determined by dividing the stated amount of $50 by the Applicable Market Value; and
(c)if the Applicable Market Value over the same period is less than or equal to $13.85, 3.6101 shares. SPR will also pay New PIES holders a quarterly fixed amount in cash, called a contract adjustment payment, at a rate of 1.07% per year of the stated amount of $50 per New PIES, or $0.535 per year. The Notes will constitute senior obligations of SPR. Prior to the Purchase Contract Settlement Date, the ownership interest in the Notes will be pledged to secure the New PIES holders' obligation to purchase SPR's common stock under the purchase contract. SPR will appoint one or more remarketing agents to remarket, the Notes to third party investors at any time during the period for early remarketing, which is the period beginning the day following the consummation of the exchange offer on May 18, 2005 and ending on the ninth business day prior to the Purchase Contract Settlement Date in one or more three-day remarketing periods that consist of three sequential possible remarketing dates selected by SPR, or during a final remarketing period, which is the period beginning on the fifth business day, and ending on and including the third business day, preceding the Purchase Contract Settlement Date. New PIES holders may choose to opt out of the remarketing of the Notes to third party investors to satisfy their payment obligations on the Contract Settlement Date. A New PIES holder who opts out of the remarketing of the Notes would be required to settle each Purchase Contract for $50.00 in cash. Prior to a successful remarketing of the Notes, SPR will pay New PIES holders interest at a rate of 7.93% per year on the principal amount of the Note, payable quarterly. In connection with a successful remarketing of the Notes, certain terms of the Notes, including the interest rate (which may be reset to a rate greater or less than 7.93% per year), the maturity date (which may be extended to a maximum term of 11 years from the remarketing settlement date), the redemption provisions, the interest payment dates and the addition of covenants applicable to the Notes, may be modified to allow a remarketing of the Notes. The material differences between the Old PIES and New PIES are illustrated in the table below. Old PIES New PIES Remarketing Date The senior notes beneficially owned by each holder of Old PIES will be remarketed on August 10, 2005, unless the remarketing agent delays the remarketing to a later date The Notes associated with the New PIES may be remarketed • at any time during the period for early remarketing, which is the period beginning the day following the consummation of the exchange offer and ending on the ninth business day prior to the Purchase Contract Settlement Date in one or more three-day remarketing periods that consist of three sequential possible remarketing dates selected by SPR, or • during the final remarketing period, which is the period beginning on the fifth business day, and ending on and including the third business day, immediately preceding the Purchase Contract Settlement Date. Terms of the Notes Upon Remarketing In connection with the remarketing of the senior notes, the interest rate on all senior notes, whether or not a part of Old PIES, will be reset to an interest rate sufficient to allow a remarketing of the senior notes. The senior notes mature November 15, 2007 In connection with the remarketing of the Notes, the interest rate on all Notes will be reset and certain terms of the Notes may be modified, including the interest rate, the maturity date (which may be extended to a maximum term of 11 years from the remarketing settlement date), the redemption provisions, the interest payment dates and the addition of covenants applicable to Notes. However, terms set forth in the indenture under which the Notes were issued, such as ranking and events of default, may not be modified in connection with the remarketing, except pursuant to the terms of the indenture. The New PIES represent both an equity and fixed income investment in SPR. The equity investment is in the form of the Purchase Contract, which, unless earlier terminated, requires a New PIES holder to purchase a variable number of shares of SPR common stock on the Purchase Contract Settlement Date. The fixed income investment is in the form of the Notes, which are senior indebtedness of SPR. The New PIES will conform to the issuer listing criteria under section 703.19 of the Manual and be subject to the relevant continuing listing criteria under section 801 and 802 of the Manual. 7 The Exchange will impose the issuer listing requirements of section 703.19 on SPR. Under section 703.19, among other things, if the issuer is an NYSE-listed company, it must be a company in good standing. SPR is an NYSE-listed company in good standing. The New PIES will also meet the equity listing standards found in section 703.19(2) of the Manual, except that the New PIES will not have the minimum life of one year required for equity listings. However, the Exchange does not believe that the New PIES will raise any significant new regulatory issues. Because the New PIES will meet or exceed the other equity listing requirements under section 703.19, the Exchange believes that the New PIES will have sufficient liquidity and depth of market, even if listed for a period shorter than one year. The Exchange also notes that the underlying SPR common stock from which the value of the New PIES is in part derived will remain outstanding and listed on the Exchange following maturity of the New PIES on the Purchase Contract Settlement Date. 7 Section 801.00 provides, in relevant part, that when an issuer that has fallen below any of the continued listing criteria has more than one class of securities listed, the Exchange will give consideration to delisting all such classes. Section 802.01D states, in relevant part, that delisting of specialized securities will be considered when the number of publicly-held shares is less than 100,000; the number of holders is less than 100; and aggregate market value of shares outstanding is less than $1 million. The Exchange also notes that it may, at any time, suspend a security if it believes that continued dealings in the security on the Exchange are not advisable. The Exchange's existing equity trading rules will apply to trading of the New PIES. The Exchange will also have in place certain other requirements to provide additional investor protection. First, pursuant to Exchange Rule 405, the Exchange will impose a duty of due diligence on its members and member firms to learn the essential facts relating to every customer prior to trading the New PIES. 8 Second, the New PIES will be subject to the equity margin rules of the Exchange. 9 Third, the Exchange will, prior to trading the New PIES, distribute a circular to the membership providing guidance with regard to member firm compliance responsibilities (including suitability recommendations) when handling transactions in the New PIES and highlighting the special risks and characteristics of the New PIES. With respect to suitability recommendations and risks, the Exchange will require members, member organizations, and employees thereof recommending a transaction in the New PIES:
(1)To determine that such transaction is suitable for the customer, and
(2)to have a reasonable basis for believing that the customer can evaluate the special characteristics of, and is able to bear the financial risks of, such transaction. 8 NYSE Rule 405 requires that every member, member firm or member corporation use due diligence to learn the essential facts relative to every customer and to every order or account accepted. 9 *See* NYSE Rule 431. The Exchange represents that its surveillance procedures are adequate to properly monitor the trading of the New PIES. Specifically, the Exchange will rely on its existing surveillance procedures governing equity, which have been deemed adequate under the Exchange Act. 2. Statutory Basis The Exchange states that the basis for the proposed rule change is the requirement under section 6(b)(5) 10 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. 10 15 U.S.C. 78f(b)(5). B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is 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 has neither solicited nor received written comments on the proposed rule change. III. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change, as amended, is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov.* Please include File Number SR-NYSE-2005-27 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-2005-27. 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 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-2005-27 and should be submitted on or before June 15, 2005. IV. Commission Findings and Order Granting Accelerated Approval of Proposed Rule Change After careful consideration, the Commission finds that the proposed rule change, as amended, is consistent with the requirements of the Act and the rules and regulations thereunder, applicable to a national securities exchange, and, in particular, with the requirements of Section 6(b)(5) of the Act. 11 The Commission notes that the proposal is substantially similar to approved instruments currently listed and traded on the NYSE. 12 Accordingly, the Commission finds that the listing and trading of the Units is consistent with the Act and will promote just and equitable principles of trade, foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities, and, in general, protect investors and the public interest consistent with section 6(b)(5) of the Act. 13 11 15 U.S.C. 78f(b)(5). 12 *See* , *e.g.* , Securities Exchange Act Release No. 49112 (January 21, 2004), 69 FR 4196 (January 28, 2004) (SR-NYSE-2003-40) (approving the listing and trading of Premium Equity Participating Security Units issued by PPL Corporation). 13 15 U.S.C. 78f(b)(5). 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). As described more fully above, the Exchange proposes to list and trade the New PIES, which represent both an equity and fixed income investment in SPR. The equity investment is in the form of the Purchase Contract, which, unless earlier terminated, requires a New PIES holder to purchase a variable number of shares of SPR common stock on the Purchase Contract Settlement Date. The fixed income investment is in the form of the Notes, which are senior indebtedness of SPR. As set forth above, the New PIES are being offered pursuant to an exchange offer, the full terms of which are explained in the Registration Statement. 14 The Registration Statement contains a comparison of Old PIES and New PIES so that holders can evaluate whether it is in their best interests to participate in the exchange offer. 14 *See supra* note 6. The Commission notes that the Exchange's rules and procedures address the special concerns attendant to the trading of certain types of hybrid securities. In particular, by requiring the New PIES to comply with the initial listing standards under section 703.19 of the Manual and the continued listing standards under section 801 and 802 of the Manual, as well as the equity trading rules, suitability standards, and disclosure requirements described above, the Commission believes the Exchange has addressed adequately the potential problems that could arise from the hybrid nature of the PIES. The Commission also notes that the Exchange will distribute a circular to its members regarding member firm compliance responsibilities when handling transactions in the New PIES and highlighting the special risks and characteristics of the New PIES. The Exchange's ”Other Securities” listing standards in section 703.19 of the Manual provide that issuers satisfying earnings and net tangible assets requirements may issue securities such as the New PIES, provided that the issue is suited for auction market trading. The Exchange has represented that the New PIES will meet all of the relevant listing standards found in section 703.19 of the Manual except that they will not have the minimum life of one year. 15 Because the New PIES are being offered in connection with an exchange offer, the Commission believes that the New PIES will have sufficient liquidity and depth of market, even if listed for a period of shorter than one year. Further, because the issuer of the New PIES is SPR (the Purchase Contract issued by SPR and the Note issued by SPR and guaranteed by SPR), the Commission does not object to the Exchange's reliance on SPR to meet the issuer listing requirements of section 703.19 of the Manual. 15 Specifically, the Exchange has represented the following in accordance with the listing standards of section 703.19 of the Manual:
(1)SPR is an NYSE-listed company in good standing;
(2)there will be at least 1 million securities outstanding;
(3)there will be at least 400 holders; and
(4)at least $4 million from which the value of the New PIES is in part derived will remain outstanding and listed on the Exchange following maturity of the New PIES. The Commission also notes that the Exchange's existing equity trading rules and equity margin rules will apply to trading of the New PIES, and, as discussed more fully above, the Exchange will also have in place certain other requirements to provide additional investor protection. The Commission notes that the Exchange will rely on its existing surveillance procedures governing equity, which the Exchange represents have been deemed adequate under the Act. The Commission finds good cause, consistent with sections 6(b)(5) and 19(b)(2) of the Act, 16 to approve the proposal prior to the thirtieth day after the date of publication of notice of filing thereof in the **Federal Register.** Accelerating approval of the proposal will enable the Exchange to accommodate the listing of the New PIES on or shortly after May 18, 2005, the expiration date of the exchange offer pursuant to which the New PIES are being offered. The Commission notes that it has previously approved a substantially similar proposal involving another listed company. 17 The Commission believes that permitting the expeditious listing of New PIES will serve the interests of investors and the public interest. Accordingly, the Commission finds that it is appropriate to approve the proposed rule change on an accelerated basis. 16 15 U.S.C. 78f(b)(5) and 78s(b)(2). 17 See Securities Exchange Act Release No. 49112 (January 21, 2004), 69 FR 4196 (January 28, 2004) (SR-NYSE-2003-40). V. Conclusion It is therefore ordered, pursuant to section 19(b)(2) of the Act, that the proposed rule change (SR-NYSE-2005-27) is approved on an accelerated basis. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 18 18 17 CFR 200.30-3(a)(12). Margaret H. McFarland, Deputy Secretary. [FR Doc. E5-2604 Filed 5-24-05; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-51715; File No. SR-Phlx-2004-83] Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; Order Granting Approval to Proposed Rule Change and Amendment No. 1 Thereto and Notice of Filing and Order Granting Accelerated Approval to Amendment No. 2 Thereto Relating to the Matching of Certain Incoming Orders With Certain Phlx Existing Orders Through the PACE System May 19, 2005. I. Introduction On November 26, 2004, the Philadelphia Stock Exchange, Inc. (“Phlx” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) 1 and Rule 19b-4 thereunder, 2 a proposed rule change to modify Phlx Rule 229 to permit the PACE System 3 to match certain incoming orders with certain Phlx existing orders (the “Matching Rule”). On March 10, 2005, the Phlx filed Amendment No. 1 to the proposed rule change. 4 The proposed rule change, as amended, was published for comment in the **Federal Register** on March 24, 2005. 5 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 PACE is the Exchange's automated order routing, delivery, execution and reporting system for equities. *See* Phlx Rule 229. 4 In Amendment No. 1, which replaced the original proposal in its entirety, Phlx modified two concepts contained in the original proposed rule change (those of the Midpoint Price and the Modified PACE Quote), clarified the operation of the proposed rule change, reorganized the rule text of proposed new Supplementary Material .04A to Phlx Rule 229 into subsections, and made corresponding changes to other portions of the Supplementary Material to Phlx Rule 229 to reflect the applicability of the proposed rule change. 5 *See* Securities Exchange Act Release No. 51394 (Mar. 18, 2005), 70 FR 15141 (Mar. 24, 2005) (“Notice”). The Commission received no comments on the proposal. On May 6, 2005, the Phlx filed Amendment No. 2 to the proposed rule change. 6 This order approves the proposed rule change as amended. Simultaneously, the Commission provides notice of filing of Amendment No. 2, grants accelerated approval to Amendment No. 2, and solicits comments from interested persons on Amendment No. 2. 6 In Amendment No. 2, which supplemented the proposal as noticed, the Phlx modified Supplementary Material .02 to Phlx Rule 229 to clarify that if specialists offer access to PACE for orders without participating in the PACE execution guarantees for agency orders, where the entering member organization has generally elected not to receive automatic execution or primary market print protection for electronically delivered limit orders, those orders will be eligible for enhanced matching under Supplementary Material .04A to Phlx Rule 229. II. Description of the Proposal Under the proposal, the Phlx PACE System will check incoming orders against existing orders, and if possible, automatically execute those incoming orders against the existing orders prior to submitting them for execution by the specialist. The Phlx has represented that the purpose of the proposal is to help preserve the priority of orders and reduce incidents of inadvertent trading ahead of customer orders, and believes the proposal, among other things, will protect investors by increasing the number of orders that are matched without the participation of a dealer. To this end, under the proposed rule change, as amended, round-lot market and limit orders and the round-lot portion of non-all-or-none PRL 7 market and limit orders entered after the opening will generally execute against existing round-lot market and limit orders and the round-lot portion of existing non-all-or-none PRL market and limit orders that have not been marked for layoff, if executable within the Modified PACE Quote. 8 Incoming round lot all-or-none orders will be eligible for matching only if the size of the incoming all-or-none order is equal to or smaller than the first existing order it would match against. Conversely, if the incoming all-or-none order is larger than the first existing order it could match against, the incoming order will not automatically match, but will be handled by the specialist. 9 7 “PRL” refers to a combined round-lot and odd-lot order. *See* Phlx Rule 229. 8 The “PACE Quote” means the best bid/ask quote among the American, Boston, National, Chicago, New York, or Philadelphia Stock Exchanges, the Pacific Exchange, or the Intermarket Trading System/Computer Assisted Execution System (“ITS/CAES”) quote, as appropriate. *See* Phlx Rule 229. The “Modified PACE Quote” is defined in the proposed rule change to mean the PACE Quote, unless the PACE Quote is comprised of another market's quote of 100 shares or less, in which case the Modified PACE Quote will be one cent away from such 100 share away quote. 9 Orders that have been marked for lay-off ( *i.e.* , orders that are being sent to other marketplaces for execution and appropriately marked by the specialist within PACE) would not be eligible under the proposal to be matched against an incoming order. Further, no order for which the entering member organization has elected primary market high-low protection (as provided in Phlx Rule 229, Supplementary Material .07(a)(ii)) would be matched if the execution price of such execution would be outside the primary market high-low range for the day. In addition, notwithstanding Phlx Rule 229, Supplementary Material .01 regarding priority, existing Phlx orders would be executed in price/time priority with the highest bid/lowest offer executed first, with existing market orders, for purposes of enhanced matching priority, being treated as limit orders priced at the Midpoint Price (defined below). *See* Notice for examples and further details. Under the Matching Rule, the price of the execution will be dependent on the Midpoint Price, meaning the midpoint of the Modified PACE Quote as rounded (if applicable), 10 and the type of orders that are being matched. 11 Existing Phlx orders generally will be executed in price/time priority with the highest bid/lowest offer executed first, with existing market orders, for purposes of enhanced matching priority, being treated as limit orders priced at the Midpoint Price. As part of the proposed rule change, the Phlx is also modifying language in other sections of Phlx Rule 229 to reflect and account for the operation of the new Matching Rule. 10 Rounding of the Modified PACE Quote will be applicable if the midpoint of the Modified PACE Quote is not a penny increment, in which case the Midpoint Price shall be rounded down
(up)to the nearest penny if the existing Phlx order is an order to buy (sell). 11 When one or more of the orders to be matched are limit orders, the execution price would be the price closest to the Midpoint Price that will allow the limit order(s) to execute. *See* Notice for examples and further details. III. Discussion and Commission Findings The Commission finds that the proposed rule change, as amended, is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange. 12 In particular, the Commission believes that the proposal is consistent with Section 6(b)(5) of the Act, 13 which requires that the rules of an exchange be designed 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. 12 In approving this proposed rule change, the Commission notes that it has considered the proposed rule's impact on efficiency, competition, and capital formation. *See* 15 U.S.C. 78c(f). 13 15 U.S.C. 78f(b)(5). Under the proposal, the PACE System will seek to execute eligible incoming customer orders against existing customer orders automatically, prior to submitting them for execution by the specialist. The Matching Rule will apply generally to non-all-or-none round-lot market and limit orders and the round-lot portions of non-all-or-none PRL orders entered after the opening, as well as to round-lot all-or-none orders and the round-lot portion of PRL all-or-none orders to the extent that such orders are smaller in size than an available contra-side order. Moreover, it will apply to non-agency orders in PACE securities, even in the event that the PACE specialist does not agree to provide PACE execution guarantees for such non-agency orders. The Commission believes that, by thus increasing the automated handling of customer orders and matching incoming orders with existing orders without the participation of the specialist, the proposed rule change should better facilitate a wide range of transactions, help preserve the priority of existing orders, and reduce incidents of inadvertent trading ahead of customer orders as contemplated by the Exchange. The Commission believes that the midpoint of the Modified PACE Quote, the best bid/ask quote among the equities exchanges except in the case where the best bid/ask quote is comprised of an away market quote of 100 shares or less, is a reasonable price upon which to base the price at which customer orders are executed pursuant to the Matching Rule, subject to the rounding principles and provisions designed to accommodate the matching of limit orders, as described above. 14 Moreover, the proposed rule change sets forth in detail for investors the procedures by which orders will be matched in the PACE System and the basis upon which the execution prices for such transactions will be determined. 14 *See supra* notes 10 and 11. The Commission finds good cause for approving Amendment No. 2 to the proposed rule change prior to the thirtieth day after the date of the publication of notice thereof in the **Federal Register** . The Commission notes that Amendment No. 2 does not modify the proposed Matching Rule itself, but merely extends the improvements it offers to non-agency orders entered into the PACE System. The Commission therefore believes that it is appropriate to accelerate approval of Amendment No. 2 so that the proposed rule change, as amended, may be implemented without delay. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether Amendment No. 2 to the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov* . Please include File Number SR-Phlx-2004-83 on the subject line. Paper Comments • Send paper comments in triplicate to Jonathan G. Katz, Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. All submissions should refer to File Number SR-Phlx-2004-83. 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 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-Phlx-2004-83 and should be submitted on or before June 15, 2005. V. Conclusion For the foregoing reasons, the Commission finds that the proposed rule change, as amended, is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange. *It is therefore ordered* , pursuant to Section 19(b)(2) of the Act, 15 that the proposed rule change (SR-Phlx-2004-83), as amended, be, and it hereby is, approved, with Amendment No. 2 being approved on an accelerated basis. 15 15 U.S.C. 78s(b)(2). For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 16 16 17 CFR 200.30-3(a)(12). Margaret H. McFarland, Deputy Secretary. [FR Doc. E5-2635 Filed 5-24-05; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-51718; File No. SR-Phlx-2004-65] Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; Notice of Filing of Proposed Rule Change and Amendment Nos. 1, 2 and 3 Thereto Relating to Backup Trading Arrangements May 19, 2005. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) 1 , and Rule 19b-4 2 thereunder, notice is hereby given that on October 18, 2004, the Philadelphia Stock Exchange, Inc. (“Phlx” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I, II, and III, below, which Items have been prepared by the Phlx. On April 29, 2005, the Exchange submitted Amendment No. 1 to the proposal. 3 On May 12, 2005, the Exchange submitted Amendment No. 2 to the proposal. 4 On May 16, 2005, the Exchange submitted Amendment No. 3 to the proposal. 5 The Commission is publishing this notice to solicit comments on the proposed rule change, as amended, from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 In Amendment No. 1, the Exchange substantially revised the proposed rule text and added a new paragraph (d), Member Proceedings, to establish disciplinary jurisdiction as between the Disabled Exchange and the Back-up Exchange in situations where there is an ongoing disciplinary action involving a member of the Disabled Exchange at the time of termination of the back-up period. The Exchange also proposed amendments to its fee schedules, which incorporate Rule 99. 4 In Amendment No. 2, the Exchange made minor revisions to the proposed rule text and corresponding description of the proposal. Phlx also refiled corrected versions of the exhibits submitted with the proposal. Amendment No. 2 replaces and supersedes Phlx's earlier submissions in their entirety. 5 In Amendment No. 3, the Exchange submitted a revised Exhibit 5 to its amended Form 19b-4 to correctly identify the new rule text in the proposal, including Exchange Rule 99 and changes to the Phlx Fee Schedule. I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Phlx proposes to adopt a rule that will permit Phlx to enter into arrangements with one or more other exchanges that would provide trading facilities for Phlx listed options at another exchange in the event that the functions of Phlx are severely and adversely affected by an emergency or extraordinary circumstances (a “Disabling Event”), and similarly provide trading facilities at Phlx for another exchange to trade its listed options if that exchange's facility experiences a Disabling Event. Additionally, the Exchange has submitted a corresponding back-up trading agreement between itself and the Chicago Board Options Exchange, Incorporated (“CBOE”) as Exhibit B to its Form 19b-4 filing. This back-up trading agreement is available for viewing on the Commission's Web site, *http://www.sec.gov/rules/sro.shtml* , and at the Exchange and the Commission. 6 6 *See infra* note 10. The Commission notes that the text of the back-up trading agreement that appears on the Commission's Web site was filed as part of Amendment No. 2. The Exchange also proposes an amendment to its Fee Schedule relative to the fees that shall apply to transactions in the options of a Disabled Exchange effected on a Back-up Exchange. The text of the proposed rule change is set forth below. Proposed new language is in *italics.* Backup Trading Arrangements Rule 99 *(a) Phlx is Disabled Exchange.* *(i) Exchange (“Phlx”) Exclusively Listed Options.* *(A) For purposes of this Rule 99, the term “exclusively listed option” means an option that is listed exclusively by an exchange (because such exchange has an exclusive license to use, or has proprietary rights in, the interest underlying the option).* *(B) The Phlx may enter into arrangements with one or more other exchanges (each a “Backup Exchange”) to permit the Phlx and its members and associated persons and other personnel to use a portion of the Backup Exchange's facilities to conduct the trading of some or all of the Phlx's exclusively listed options in the event that the functions of the Phlx are, or are threatened to be, severely and adversely affected by an emergency or extraordinary circumstances (a “Disabling Event”). Such options shall trade as listings of Phlx. The facility of the Backup Exchange used by the Phlx for this purpose will be deemed to be a facility of the Phlx.* *(C) Trading of Phlx exclusively listed options shall be conducted in accordance with the rules of the Backup Exchange, except that such trading shall be subject to Phlx rules with respect to doing business with the public, margin requirements, net capital requirements, listing requirements, and position limits. In addition, the Phlx and the Backup Exchange may agree that other rules of the Phlx will apply to such trading. The Phlx and the Back-up Exchange have agreed to communicate to their respective members which rules apply in advance of trading. The Backup Exchange rules that govern trading on Phlx's facility at the Back-up Exchange shall be deemed to be Phlx rules for purposes of such trading.* *(D) The Back-up Exchange has agreed to perform the related regulatory functions with respect to trading of Phlx exclusively listed options on Phlx's facility at the Back-up Exchange, in each case except as Phlx and the Back-up Exchange may specifically agree otherwise. The Back-up Exchange and Phlx have agreed to coordinate with each other regarding surveillance and enforcement respecting trading of Phlx exclusively listed options on Phlx's facility at the Back-up Exchange. Phlx shall retain the ultimate legal responsibility for the performance of its self-regulatory obligations with respect to Phlx's facility at the Back-up Exchange.* *(E) If the Backup Exchange is unable to accommodate all Phlx members that desire to trade on Phlx's facility at the Backup Exchange pursuant to paragraph (a)(i)(A), the Phlx may determine which members shall be eligible to trade at that facility. Factors to be considered in making such determinations may include, but are not limited to, any one or more of the following: Whether the member is a specialist in the applicable product(s), the number of contracts traded by the member or member organization in the applicable product(s), market performance, and other factors relating to a member's contribution to the market in the applicable product(s) during a specific period.* *(F) Members of the Backup Exchange shall not be authorized to trade in any Phlx exclusively listed options, except that
(i)Phlx may deputize willing floor brokers of the Back-up Exchange as temporary Phlx members to permit them to execute orders as brokers in Phlx exclusively options traded on Phlx's facility at the Back-up Exchange; and
(ii)the Back-up Exchange has agreed that it will, at the instruction of Phlx, select members of the Back-up Exchange that are willing to be deputized by Phlx as temporary Phlx members authorized to trade Phlx exclusively listed options on Phlx's facility at the Back-up Exchange for such period of time following a Disabling Event as Phlx determines to be appropriate, and Phlx may deputize such members of the Back-up Exchange as temporary Phlx members for that purpose.* *(ii) Phlx Singly Listed Options.* *(A) For purposes of this Rule 99, the term “singly listed option” means an option that is not an “exclusively listed option” but that is listed by an exchange and not by any other national securities exchange.* *(B) The Exchange may enter into arrangements with a Backup Exchange under which the Backup Exchange will agree, in the event of a Disabling Event, to list for trading singly listed options that are then singly listed only by the Phlx and not by the Backup Exchange. Any such options listed by the Backup Exchange shall trade on the Backup Exchange and in accordance with the rules of the Backup Exchange. Such options shall be traded by members of the Backup Exchange and by Phlx members selected by the Phlx to the extent the Backup Exchange can accommodate Phlx members in the capacity of temporary members of the Back-up Exchange. If the Back-up Exchange is unable to accommodate all Phlx members that desire to trade at the Back-up Exchange pursuant to paragraph (a)(i)(A), Phlx may determine which members shall be eligible to trade at the Back-up Exchange. Factors to be considered in making such determinations may include, but are not limited to, any one or more of the following: Whether the member is a specialist in the applicable product(s), the number of contracts traded by the member or specialist unit in the applicable product(s), market performance, and other factors relating to a member's contribution to the market in the applicable product(s).* *Any Phlx member who is granted temporary access to the Backup Exchange pursuant to this paragraph shall only be permitted
(i)to act in those Backup Exchange capacities that are authorized by the Backup Exchange and that are comparable to capacities in which the temporary member has been authorized to act on the Phlx and
(ii)to trade in those options in which the temporary member is authorized to trade on the Phlx.* *(C) Any options listed by the Backup Exchange pursuant to paragraph (a)(ii)(B) that does not satisfy the standard listing and maintenance criteria of the Backup Exchange will be subject, upon listing by the Backup Exchange, to delisting (and, thus, restrictions on opening new series, and engaging in opening transactions in those series with open interest, as may be provided in the rules of the Backup Exchange).* *(b) Phlx is Backup Exchange.* *(i) Disabled Exchange Exclusively Listed Options.* *(A) The Exchange may enter into arrangements with one or more other exchanges (each a “Disabled Exchange”) to permit the Disabled Exchange and its members to use a portion of the Phlx's facilities to conduct the trading of some or all of the Disabled Exchange's Exclusively Listed Securities in the event of a Disabling Event. The facility of the Phlx used by the Disabled Exchange for this purpose will be deemed to be a facility of the Disabled Exchange.* *(B) Trading of the Disabled Exchange's exclusively listed options on the Disabled Exchange's facility at Phlx shall be conducted in accordance with Phlx rules, except that
(1)such trading shall be subject to the Disabled Exchange's rules with respect to doing business with the public, margin requirements, net capital requirements, listing requirements, and position limits, and
(2)members of the Disabled Exchange that are trading on the Disabled Exchange's facility at Phlx (not including Phlx members who become temporary members of the Disabled Exchange pursuant to paragraph (b)(i)(D)) will be subject to the rules of the Disabled Exchange governing or applying to the maintenance of a person's or a firm's status as a member of the Disabled Exchange. In addition, the Disabled Exchange and Phlx may agree that other Disabled Exchange rules will apply to such trading. The Disabled Exchange and Phlx have agreed to communicate to their respective members which rules apply in advance of trading.* *(C) Phlx will perform the related regulatory functions with respect to trading of the Disabled Exchange's exclusively listed options on the Disabled Exchange's facility at Phlx, in each case except as the Disabled Exchange and Phlx may specifically agree otherwise. Phlx and the Disabled Exchange have agreed to coordinate with each other regarding surveillance and enforcement respecting trading of the Disabled Exchange's exclusively listed options on the Disabled Exchange's facility at Phlx. The Disabled Exchange has agreed that it shall retain the ultimate legal responsibility for the performance of its self-regulatory obligations with respect to the Disabled Exchange's facility at Phlx.* *(D) Phlx members shall not be authorized to trade in any exclusively listed options of the Disabled Exchange, except that:
(1)the Disabled Exchange may deputize willing Phlx floor brokers as temporary members of the Disabled Exchange to permit them to execute orders as brokers in exclusively listed options of the Disabled Exchange traded on the facility of the Disabled Exchange at Phlx; and
(2)at the instruction of the Disabled Exchange, the Phlx shall select Phlx members that are willing to be deputized by the Disabled Exchange as temporary members of the Disabled Exchange authorized to trade the Disabled Exchange's exclusively listed options on the facility of the Disabled Exchange at the Phlx for such period of time following a Disabling Event as the Disabled Exchange determines to be appropriate, and the Disabled Exchange may deputize such Phlx members as temporary members of the Disabled Exchange for that purpose.* *(ii) Disabled Exchange Singly Listed Options.* *(A) The Phlx may enter into arrangements with a Disabled Exchange under which the Phlx will agree, in the event of a Disabling Event, to list for trading options that are then singly listed only by the Disabled Exchange and not by the Phlx. Any such options listed by the Phlx shall trade on the Phlx and in accordance with Phlx rules. Such options shall be traded by Phlx members and by members of the Disabled Exchange selected by the Disabled Exchange to the extent the Phlx can accommodate members of the Disabled Exchange in the capacity of temporary members of Phlx. Any member of a Disabled Exchange granted temporary access to conduct business on the Phlx under this paragraph shall only be permitted
(i)to act in those Phlx capacities that are authorized by the Phlx and that are comparable to capacities in which the temporary member has been authorized to act on the Disabled Exchange and
(ii)to trade in those options in which the temporary member is authorized to trade on the Disabled Exchange. The Phlx may allocate such options to a Phlx specialist in advance of a Disabling Event, without utilizing the allocation process under Phlx Rule 506, to enable the Phlx to quickly list such options upon the occurrence of a Disabling Event.* *(B) Any class of options listed by the Phlx pursuant to paragraph (b)(ii)(A) that does not satisfy the listing and maintenance criteria under Phlx Rules 1009 and 1010 will be subject, upon listing by the Phlx, to delisting (and, thus, restrictions on opening new series, and engaging in opening transactions in those series with open interest, as may be provided in Phlx rules).* *(c) Member Obligations.* *(i) Temporary Members of a Disabled Exchange* *(A) A Phlx member acting as a temporary member of the Disabled Exchange pursuant to paragraph (b)(i)(D) shall be subject to, and obligated to comply with, the rules that govern the operation of the facility of the Disabled Exchange at Phlx to the extent applicable during the period of such trading. Additionally,
(1)such Phlx member shall be deemed to have satisfied, and the Disabled Exchange has agreed to waive specific compliance with, rules governing or applying to the maintenance of a person's or a firm's status as a member of the Disabled Exchange, including all dues, fees and charges imposed generally upon members of the Disabled Exchange based on their status as such;
(2)such Phlx member shall have none of the rights of a member of the Disabled Exchange except the right to conduct business on the facility of the Disabled Exchange at Phlx to the extent described in this Rule;
(3)the member organization associated with such Phlx member, if any, shall be responsible for all obligations arising out of that Phlx member's activities on or relating to the Disabled Exchange; and
(4)the clearing member of such Phlx member shall guarantee and clear the transactions of such Phlx member on the Disabled Exchange.* *
(B)A member of a Back-up Exchange acting in the capacity of a temporary member of Phlx pursuant to paragraph (a)(i)(F) shall be subject to, and obligated to comply with, the rules that govern the operation of the facility of Phlx at the Back-up Exchange, including Phlx rules to the extent applicable during the period of such trading. Additionally,
(1)such temporary member shall be deemed to have satisfied, and Phlx will waive specific compliance with, rules governing or applying to the maintenance of a person's or a firm's status as a member of Phlx, including all dues, fees and charges imposed generally upon Phlx members based on their status as such;
(2)such temporary member shall have none of the rights of a Phlx member except the right to conduct business on the facility of Phlx at the Back-up Exchange to the extent described in this Rule;
(3)the member organization associated with such temporary member, if any, shall be responsible for all obligations arising out of that temporary member's activities on or relating to Phlx; and
(4)the clearing member of such temporary member shall guarantee and clear the transactions on Phlx of such temporary member. * *(ii) Temporary Members of the Backup Exchange* *(A) A Phlx member acting in the capacity of a temporary member of the Back-up Exchange pursuant to paragraph (a)(ii)(B) shall be subject to, and obligated to comply with, the rules of the Back-up Exchange that are applicable to the Back-up Exchange's own members. Additionally,
(1)such Phlx member shall be deemed to have satisfied, and the Back-up Exchange has agreed to waive specific compliance with, rules governing or applying to the maintenance of a person's or a firm's status as a member of the Back-up Exchange, including all dues, fees and charges imposed generally upon members of the Back-up Exchange based on their status as such,
(2)such Phlx member shall have none of the rights of a member of the Back-up Exchange except the right to conduct business on the Back-up Exchange to the extent described in this Rule;
(3)the member organization associated with such Phlx member, if any, shall be responsible for all obligations arising out of that Phlx member's activities on or relating to the Back-up Exchange;
(4)the clearing member of such Phlx member shall guarantee and clear the transactions of such Phlx member on the Back-up Exchange; and
(5)such Phlx member shall only be permitted
(x)to act in those capacities on the Back-up Exchange that are authorized by the Back-up Exchange and that are comparable to capacities in which the Phlx member has been authorized to act on Phlx, and
(y)to trade in those options in which the Phlx member is authorized to trade on Phlx.* *(B) A member of a Disabled Exchange acting in the capacity of a temporary member of Phlx pursuant to paragraph (b)(ii)(A) shall be subject to, and obligated to comply with, Phlx rules that are applicable to Phlx's own members. Additionally,
(1)such temporary member shall be deemed to have satisfied, and Phlx will waive specific compliance with, rules governing or applying to the maintenance of a person's or a firm's status as a member of Phlx, including all dues, fees and charges imposed generally upon Phlx members based on their status as such;
(2)such temporary member shall have none of the rights of a Phlx member except the right to conduct business on Phlx to the extent described in this Rule;
(3)the member organization associated with such temporary member, if any, shall be responsible for all obligations arising out of that temporary member's activities on or relating to Phlx;
(4)the clearing member of such temporary member shall guarantee and clear the transactions of such temporary member on the Phlx; and
(5)such temporary member shall only be permitted
(x)to act in those Phlx capacities that are authorized by Phlx and that are comparable to capacities in which the temporary member has been authorized to act on the Disabled Exchange, and
(y)to trade in those option classes in which the temporary member is authorized to trade on the Disabled Exchange.* *(d) Member Proceedings.* *(i) If the Phlx initiates an enforcement proceeding with respect to the trading during a back-up period of the singly or multiply listed options of the Disabled Exchange by a temporary member of the Phlx or the exclusively listed options of the Disabled Exchange by a member of the Disabled Exchange (other than a Phlx member who is a temporary member of the Disabled Exchange), and such proceeding is in process upon the conclusion of the backup period, the Phlx may transfer responsibility for such proceeding to the Disabled Exchange following the conclusion of the backup period. Arbitration of any disputes with respect to any trading during a backup period of singly or multiply listed options of the Disabled Exchange or of exclusively listed options of the Disabled Exchange on the Disabled Exchange's facility at the Phlx will be conducted in accordance with Phlx rules, unless the parties to an arbitration agree that it shall be conducted in accordance with Phlx rules.* *(ii) If the Backup Exchange initiates an enforcement proceeding with respect to the trading during a backup period of Phlx singly or multiply listed options by a temporary member of the Backup Exchange or Phlx exclusively listed options by a Phlx member (other than a member of the Backup Exchange who is a temporary member of the Phlx), and such proceeding is in process upon the conclusion of the backup period, the Backup Exchange may transfer responsibility for such proceeding to the Phlx following the conclusion of the backup period. Arbitration of any disputes with respect to any trading during a backup period of Phlx singly or multiply listed options on the Backup Exchange or of Phlx exclusively listed options on the facility of the Phlx at the Backup Exchange will be conducted in accordance with the rules of the Backup Exchange, unless the parties to an arbitration agree that it shall be conducted in accordance with Phlx rules.*
(e)Member Preparations. Phlx members are required to take appropriate actions as instructed by the Exchange to accommodate Phlx's backup trading arrangements. SUMMARY OF EQUITY OPTION CHARGES (p. 1/6) OPTION COMPARISON CHARGE (Applicable to All Trades—Except Specialist Trades) Ψ Remainder unchanged. OPTION TRANSACTION CHARGE Ψ Remainder unchanged. SUMMARY OF EQUITY OPTION CHARGES (p. 3/6) REAL-TIME RISK MANAGEMENT FEE Ψ Remainder unchanged. EQUITY OPTION PAYMENT FOR ORDER FLOW FEES* Ψ Remainder unchanged. See Appendix A for additional fees. *Assessed on transactions resulting from customer orders, subject to a 500-contract cap, per individual cleared side of transaction Ψ *If Phlx exclusively listed options are traded at Phlx's facility on a Back-up Exchange pursuant to Phlx Rule 99, the Back-up Exchange has agreed to apply the per contract fees in this fee schedule to such transactions. If any other Phlx listed options are traded on the Back-up Exchange (such as Phlx singly listed options) pursuant to Phlx Rule 99, the fee schedule of the Back-up Exchange shall apply to such trades.* *If the exclusively listed options of a Disabled Exchange are traded on the Disabled Exchange's facility at Phlx pursuant to Phlx Rule 99, Phlx will apply the per contract fees in the fee schedule of the Disabled Exchange to such transactions. If any other options classes of the Disabled Exchange are traded on Phlx (such as singly listed options of the Disabled Exchange) pursuant to Phlx Rule 99, the fees set forth in the Phlx fee schedule shall apply to such trades.* Remainder of Summary of Equity Options Charges: Unchanged SUMMARY OF INDEX OPTION AND FXI OPTIONS CHARGES (p. 1/1) OPTION COMPARISON CHARGE (Applicable to All Trades—Except Specialist Trades) Ψ Remainder unchanged. OPTION TRANSACTION CHARGE Ψ Remainder unchanged. OPTION FLOOR BROKERAGE ASSESSMENT Remainder unchanged. REAL-TIME RISK MANAGEMENT FEE Ψ Remainder unchanged. See Appendix A for additional fees. Ψ *If Phlx exclusively listed options are traded at Phlx's facility on a Back-up Exchange pursuant to Phlx Rule 99, the Back-up Exchange has agreed to apply the per contract fees in this fee schedule to such transactions. If any other Phlx listed options are traded on the Back-up Exchange (such as Phlx singly listed options) pursuant to Phlx Rule 99, the fee schedule of the Back-up Exchange shall apply to such trades.* *If the exclusively listed options of a Disabled Exchange are traded on the Disabled Exchange's facility at Phlx pursuant to Phlx Rule 99, Phlx will apply the per contract fees in the fee schedule of the Disabled Exchange to such transactions. If any other options classes of the Disabled Exchange are traded on Phlx (such as singly listed options of the Disabled Exchange) pursuant to Phlx Rule 99, the fees set forth in the Phlx fee schedule shall apply to such trades.* Remainder of Fee Schedule: Unchanged II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Phlx included statements concerning the purpose of and basis for the proposed rule change, as amended, and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Phlx has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. B. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose a. Introduction The Exchange proposes to adopt new Rule 99, *Backup Trading Arrangements,* which would govern the arrangements with one or more other exchanges (each a “Back-up Exchange”) to permit Phlx and its members to use a portion of a Back-up Exchange's facilities to conduct the trading of Phlx exclusively listed options 7 in the event of a Disabling Event, and similarly will permit Phlx to provide trading facilities at Phlx for another exchange's exclusively listed options if that exchange (a “Disabled Exchange”) is prevented from trading due to a Disabling Event. Proposed Rule 99 would also permit Phlx to enter into arrangements with a Back-up Exchange to provide for the listing and trading of Phlx singly listed options 8 by the Back-up Exchange if Phlx's facility becomes disabled, and conversely provide for the listing and trading by Phlx of the singly listed options of a Disabled Exchange. 7 Paragraph (a)(i)(A) of proposed Rule 99 would define the term “exclusively listed option” as an option that is listed exclusively by an exchange (because the exchange has an exclusive license to use, or has proprietary rights in, the interest underlying the option). 8 For purposes of proposed Phlx Rule 99, the term “singly listed option” means an option that is not an “exclusively listed option” but that is listed by an exchange and not by any other national securities exchange. To accord with the provisions of its new Rule 99 and negotiated back-up trading arrangements, Phlx also proposes changes to its fee schedule relative to the fees that shall apply to transactions in the options of a Disabled Exchange executed on a Back-up Exchange. b. Background The back-up trading arrangements contemplated by proposed Rule 99 represent Phlx's immediate plan to ensure that Phlx's exclusively listed and singly listed options will have a trading venue if a catastrophe renders its primary facility inaccessible or inoperable. The Commission has suggested measures that Phlx should undertake to expedite reopening of Phlx's exclusively listed securities if a catastrophic event prevents trading at Phlx for an extended period of time. 9 Proposed Rule 99 would permit Phlx to enter into back-up trading arrangements with other exchanges that would address the measures suggested by the Commission. 9 *See* letter from Annette L. Nazareth, Director, Division of Market Regulation, Commission, to Meyer S. Frucher, Chairman and Chief Executive Officer, Phlx, dated April 17, 2003. Comparable letters were also sent to other exchanges. In September 2003, Phlx entered into separate Memoranda of Understanding with the American Stock Exchange LLC (“Amex”) and CBOE to memorialize their mutual understanding to work together to develop bilateral back-up trading arrangements in the event that trading is prevented at one of the exchanges due to a Disabling Event. Since then, Phlx has been working with each of these exchanges to put in place written agreements outlining essential commercial terms with respect to the arrangements as well as operational plans that describe the operational and logistical aspects of the arrangements. Phlx and CBOE have signed an agreement relative to back-up trading arrangements and are in the process of completing the operational plan and systems testing for those arrangements. The Exchange submitted a copy of this agreement as Exhibit 3.A to its Form 19b-4 for the rule change proposal, together with a copy of a first amendment to the agreement as Exhibit 3.B. 10 10 These exhibits are available for viewing on the Commission's Web site, *www.sec.gov/rules/sro.shtml,* and at the Exchange and the Commission. c. Proposed Rule 99 The Exchange proposes to adopt Rule 99 to make effective its back-up trading arrangements with other exchanges. If Phlx Is the Disabled Exchange Section
(a)of proposed Rule 99 describes the back-up trading arrangements that would apply if Phlx were the Disabled Exchange. Under proposed paragraph (a)(i)(B), the facility of the Back-up Exchange used by Phlx to trade some or all of Phlx's exclusively listed options will be deemed to be a facility of Phlx, and such option classes shall trade as listings of Phlx. This approach of deeming a portion of the Back-up Exchange's facilities to be a facility of the Disabled Exchange is an approach approved by the Commission in previous emergency situations. 11 11 The Commission approved a similar approach when options listed on the Pacific Stock Exchange were physically moved to other exchanges in October 1989 due to an earthquake ( *See* Exchange Act Release No. 27365 (October 19, 1989), 54 FR 43511 (October 25, 1989) (SR-Amex-89-26; SR-CBOE-89-21; SR-PSE-89-28; SR-Phlx-89-52)), and when Dell options were relocated from Phlx to Amex on a temporary basis in June 1998 ( *See* Exchange Act Release No. 40088 (June 12, 1998), 63 FR 33426 (June 18, 1998) (SR-Phlx-98-25)). Since the trading of Phlx exclusively listed options will be conducted using the systems of the Back-up Exchange, proposed paragraph (a)(i)(C) provides that the trading of Phlx exclusively listed options on Phlx's facility at the Back-up Exchange would be conducted in accordance with the rules of the Back-up Exchange, except that
(i)such trading would be subject to Phlx rules with respect to doing business with the public, margin requirements, net capital requirements, listing requirements and position limits. In addition, Phlx and the Back-up Exchange may agree that other Phlx rules will apply to such trading. 12 The Back-up Exchange rules that govern trading on Phlx's facility at the Back-up Exchange would be deemed to be Phlx rules for purposes of such trading. 12 As stated above, Phlx's back-up trading arrangements with CBOE contemplate that the operation of the Disabled Exchange's facility at the Back-up Exchange will be conducted in accordance with the rules of the Back-up Exchange except that
(i)the rules of the Disabled Exchange will apply with respect to doing business with the public, margin requirements, net capital requirements and listing requirements, and
(ii)the members of the Disabled Exchange that are trading on the facility of the Disabled Exchange at the Back-up Exchange (not including members of the Back-up Exchange who become temporary members of the Disabled Exchange) will be subject to the rules of the Disabled Exchange governing or applying to the maintenance of a person's or a firm's status as a member of the Disabled Exchange. Proposed paragraph (a)(i)(D) reflects that the Back-up Exchange has agreed to perform the related regulatory functions with respect to trading of Phlx exclusively listed options on Phlx's facility at the Back-up Exchange, in each case except as Phlx and the Back-up Exchange may specifically agree otherwise. The Back-up Exchange and Phlx will coordinate with each other regarding surveillance and enforcement respecting such trading. Phlx would retain the ultimate legal responsibility for the performance of its self-regulatory obligations with respect to Phlx's facility at the Back-up Exchange. Under proposed paragraph (a)(i)(E), if the Back-up Exchange is unable to accommodate all Phlx members that desire to trade on Phlx's facility at the Back-up Exchange, Phlx would have the right to determine which members would be eligible to trade at that facility by considering factors such as whether the member is the specialist in the applicable product(s), the number of contracts traded by the member in the applicable product(s), market performance, and other factors relating to a member's contribution to the market in the applicable product(s). Under proposed paragraph (a)(1)(F), members of the Back-up Exchange would not be authorized to trade in any Phlx exclusively listed options, except that
(i)Phlx may deputize willing floor brokers of the Back-up Exchange as temporary Phlx members to permit them to execute orders as brokers in Phlx exclusively listed options traded on Phlx's facility at the Back-up Exchange, 13 and
(ii)the Back-up Exchange has agreed that it will, at the instruction of Phlx, select members of the Back-up Exchange that are willing to be deputized by Phlx as temporary Phlx members authorized to trade Phlx exclusively listed options on Phlx's facility at the Back-up Exchange for such period of time following a Disabling Event as Phlx determines to be appropriate, and Phlx may deputize such members of the Back-up Exchange as temporary Phlx members for that purpose. The second of the foregoing exceptions would permit members of the Back-up Exchange to trade Phlx exclusively listed options on the Phlx facility on the Back-up Exchange if, for example, circumstances surrounding a Disabling Event result in Phlx members being delayed in arriving at the Back-up Exchange in time for prompt resumption of trading. 13 The exchanges that acted as Back-up Exchanges in the emergency situations noted above also deputized floor brokers in this manner. *See supra* note 11. Section (a)(ii) of the proposed rule provides for the continued trading of Phlx singly listed options at a Back-up Exchange in the event of a Disabling Event at Phlx. Proposed paragraph (a)(ii)(B) provides that Phlx may enter into arrangements with a Back-up Exchange under which the Back-up Exchange will agree, in the event of a Disabling Event, to list for trading options that are then singly listed only by Phlx. Such options would trade on the Back-up Exchange as listings of the Back-up Exchange and in accordance with the rules of the Back-up Exchange. Phlx singly listed options would be traded by members of the Back-up Exchange and by Phlx members selected by Phlx to the extent the Back-up Exchange can accommodate Phlx members in the capacity of temporary members of the Back-up Exchange. If the Back-up Exchange is unable to accommodate all Phlx members that desire to trade Phlx singly listed options at the Back-up Exchange, Phlx may determine which members woud be eligible to trade such options at the Back-up Exchange by considering the same factors used to determine which Phlx members are eligible to trade Phlx exclusively listed options at the Phlx facility at the Back-up Exchange. Under proposed paragraph (a)(ii)(C), any such option listed by the Back-up Exchange that does not satisfy the standard listing and maintenance criteria of the Back-up Exchange would be subject, upon listing by the Back-up Exchange, to delisting (and, thus, restrictions on opening new series, and engaging in opening transactions in those series with open interest, as may be provided in the rules of the Back-up Exchange). If Phlx Is the Back-up Exchange Section
(b)of proposed Rule 99 describes the back-up trading arrangements that would apply if Phlx were the Back-up Exchange. In general, the provisions in Section
(b)are the converse of the provisions in Section (a). With respect to the exclusively listed options of the Disabled Exchange, the facility of Phlx used by the Disabled Exchange to trade some or all of the Disabled Exchange's exclusively listed options would be deemed to be a facility of the Disabled Exchange, and such options would trade as listings of the Disabled Exchange. Trading of the Disabled Exchange's exclusively listed options on the Disabled Exchange's facility at Phlx would be conducted in accordance with Phlx rules, except that
(i)such trading would be subject to the Disabled Exchange's rules with respect to doing business with the public, margin requirements, net capital requirements, listing requirements, and position limits, and
(ii)members of the Disabled Exchange that are trading on the Disabled Exchange's facility at Phlx (not including Phlx members who become temporary members of the Disabled Exchange pursuant to paragraph (b)(i)(D)) would be subject to the rules of the Disabled Exchange governing or applying to the maintenance of a person's or a firm's status as a member of the Disabled Exchange. In addition, the Disabled Exchange and Phlx may agree that other Disabled Exchange rules will apply to such trading. Section (b)(ii) describes the arrangements applicable to trading of the Disabled Exchange's singly listed options at Phlx, and is the converse of Section (a)(ii). One difference is the last sentence in paragraph (b)(ii)(A), which provides that Phlx may allocate singly listed option classes of the Disabled Exchange to a Phlx Specialist in advance of a Disabling Event, without utilizing the allocation process under Phlx Rule 506, to enable Phlx to quickly list such option classes upon the occurrence of a Disabling Event. Member Obligations Section
(c)describes the obligations of members and member organizations with respect to the trading by “temporary members” on the facilities of another exchange pursuant to Rule 99. Section (c)(i) sets forth the obligations applicable to Phlx members who act in the capacity of temporary members of the Disabled Exchange on the facility of the Disabled Exchange at the Back-up Exchange. Section (c)(i) provides that a Phlx member acting as a temporary member of the Disabled Exchange would be subject to, and obligated to comply with, the rules that govern the operation of the facility of the Disabled Exchange at Phlx. This would include the rules of the Disabled Exchange to the extent applicable during the period of such trading, including the rules of the Disabled Exchange limiting its liability for the use of its facilities that apply to members of the Disabled Exchange. Additionally,
(1)such Phlx member acting as a temporary member of the Disabled Exchange would be deemed to have satisfied, and the Disabled Exchange has agreed to waive specific compliance with, rules governing or applying to the maintenance of a person's or a firm's status as a member of the Disabled Exchange, including all dues, fees and charges imposed generally upon members of the Disabled Exchange based on their status as such;
(2)such Phlx member acting as a temporary member of the Disabled Exchange would have none of the rights of a member of the Disabled Exchange except the right to conduct business on the facility of the Disabled Exchange at the Back-up Exchange to the extent described in the Rule;
(3)the member organization associated with such Phlx member acting as a temporary member of the Disabled Exchange, if any, would be responsible for all obligations arising out of that Phlx member's activities on or relating to the Disabled Exchange, and
(4)the clearing member of such Phlx member would guarantee and clear the transactions of such temporary member on the Disabled Exchange. Section (c)(ii) sets forth the obligations applicable to Phlx members who act in the capacity of temporary members of the Back-up Exchange for the purpose of trading singly and multiply listed options of the Disabled Exchange. Such Phlx members would be subject to, and obligated to comply with, the rules of the Back-up Exchange that are applicable to the Back-up Exchange's own members, including the rules of the Back-up Exchange limiting its liability for the use of its facilities that apply to members of the Back-up Exchange. Phlx members who act in the capacity of temporary members of the Back-up Exchange have the same obligations as those set forth in Section (c)(i) that apply to temporary members of the Disabled Exchange, except that, in addition, Phlx members who act in the capacity of temporary members of the Back-up Exchange would only be permitted
(1)to act in those capacities on the Back-up Exchange that are authorized by the Back-up Exchange and that are comparable to capacities in which the temporary member has been authorized to act on the Disabled Exchange, and
(2)to trade in those options in which the temporary member is authorized to trade on the Disabled Exchange. Member Proceedings As noted above, proposed Rule 99 provides that the rules of the Back-up Exchange shall apply to the trading of the singly and multiply listed options of the Disabled Exchange traded on the Back-up Exchange's facilities, and (with certain limited exceptions) the trading of exclusively listed options of the Disabled Exchange traded on the facility of the Disabled Exchange at the Back-up Exchange. The Back-up Exchange will perform the related regulatory functions with respect to such trading (except as the Back-up Exchange and the Disabled Exchange may specifically agree otherwise). Section
(d)of proposed Rule 99 provides that if a Backup Exchange initiates an enforcement proceeding with respect to the trading during a backup period of singly or multiply listed securities of the Disabled Exchange by a temporary member of the Backup Exchange or exclusively listed securities of the Disabled Exchange by a member of the Disabled Exchange (other than a member of the Backup Exchange who is a temporary member of the Disabled Exchange), and such proceeding is in process upon the conclusion of the backup period, the Backup Exchange may transfer responsibility for such proceeding to the Disabled Exchange following the conclusion of the backup period. This approach to the exercise of enforcement jurisdiction is also consistent with past precedent. 14 14 *See supra* note 11. With respect to arbitration jurisdiction, proposed Section
(d)provides that arbitration of any disputes with respect to any trading during a backup period of singly or multiply listed securities of the Disabled Exchange or of exclusively listed securities of the Disabled Exchange on the Disabled Exchange's facility at the Backup Exchange will be conducted in accordance with the rules of the Backup Exchange, unless the parties to an arbitration agree that it shall be conducted in accordance with the rules of the Disabled Exchange. The purpose of these provisions is to permit a Backup Exchange to confer its temporary enforcement jurisdiction over a member or member organization of the Disabled Exchange back to the Disabled Exchange once the backup period has expired. Member Preparations To ensure that members are prepared to implement Phlx's back-up trading arrangements, proposed Section
(e)of Proposed Rule 99 requires Phlx members to take appropriate actions as instructed by Phlx to accommodate Phlx's back-up trading arrangements. d. Fee Schedule The Exchange proposes to add a footnote to its Fee Schedule to inform its members regarding what fees will apply to transactions in the listed options of a Disabled Exchange effected on a Backup Exchange under Rule 99. The footnote provides that if Phlx is the Disabled Exchange, the Backup Exchange will apply the per contract and per contract side fees in the Phlx fee schedule to transactions in Phlx exclusively listed options traded on the Phlx facility on the Backup Exchange. 15 If any other Phlx listed options are traded on the Backup Exchange (such as Phlx singly listed options) pursuant to Phlx Rule 99, the fee schedule of the Backup Exchange shall apply to such trades. The footnote contains a second paragraph stating the converse if Phlx is the Backup Exchange under Rule 99. 15 When Phlx Dell options relocated to Amex in June 1998, Phlx fees applied to transactions in Dell options on the Amex. *See supra* note 11. 2. Statutory Basis The Exchange states that the proposed rule change is intended to ensure that Phlx's exclusively listed and singly listed products will have a trading venue in the event that trading at Phlx is prevented due to a Disabling Event, thus minimizing potential disruptions for the markets and investors under those circumstances. The Exchange thus believes that the proposed rule change is consistent with Section 6(b) of the Act 16 in general, and furthers the objectives of Section 6(b)(5) of the Act 17 in particular, in that it is designed to perfect the mechanisms of a free and open market and to protect investors and the public interest. 16 15 U.S.C. 78f(b). 17 15 U.S.C. 78f(b)(5). B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any inappropriate burden on competition. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were either solicited or received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 35 days of the date of publication of this notice in the **Federal Register** or within such longer period
(i)as the Commission may designate up to 90 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or
(ii)as to which the self-regulatory organization consents, the Commission will: A. By order approve such proposed rule change, or B. Institute proceedings to determine whether the proposed rule change should be disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change, as amended, is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov.* Please include File Number SR-Phlx-2004-65 on the subject line. Paper Comments • Send paper comments in triplicate to Jonathan G. Katz, Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. All submissions should refer to File Number SR-Phlx-2004-65. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room. Copies of the filing also will be available for inspection and copying at the principal office of the Phlx. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-Phlx-2004-65 and should be submitted on or before June 15, 2005. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 18 18 17 CFR 200.30-3(a)(12). Margaret H. McFarland, Deputy Secretary. [FR Doc. E5-2637 Filed 5-24-05; 8:45 am] BILLING CODE 8010-01-P DEPARTMENT OF STATE [Public Notice 5087] 30-Day Notice of Proposed Information Collection: DS-3091, Thomas R. Pickering Foreign Affairs Fellowship Program, OMB Control No. 1405-0143 ACTION: Notice of request for public comment and submission to OMB of proposed collection of information. SUMMARY: The Department of State has submitted the following information collection request to the Office of Management and Budget
(OMB)for approval in accordance with the Paperwork Reduction Act of 1995. *Title of Information Collection:* Thomas R. Pickering Foreign Affairs Fellowship Program. *OMB Control Number:* 1405-0143. *Type of Request:* Extension of a Currently Approved Collection. *Originating Office:* HR/REE/REC. *Form Number:* DS-3091. *Respondents:* College Students. *Estimated Number of Respondents:* 500. *Estimated Number of Responses:* 500. *Average Hours Per Response:* 10. *Total Estimated Burden:* 5,000 hours. *Frequency:* On Occasion. *Obligation to Respond:* Required to Obtain or Retain a Benefit. A pilot program is gathering costs and reviewing security requirement necessary to stand up an electronic option. DATES: Submit comments to the Office of Management and Budget
(OMB)for up to 30 days from May 25, 2005. ADDRESSES: Direct comments and questions to Katherine Astrich, the Department of State Desk Officer in the Office of Information and Regulatory Affairs at the Office of Management and Budget (OMB), who may be reached at 202-395-4718. You may submit comments by any of the following methods: • E-mail: *Katherine_T._Astrich@omb.eop.gov* . You must include the DS form number, information collection title, and OMB control number in the subject line of your message. • Mail (paper, disk, or CD-ROM submissions): Office of Foreign Missions, U.S. Department of State, 2201 C Street, NW., Washington, DC 20520 • Fax: 202-395-6974. FOR FURTHER INFORMATION CONTACT: You may obtain copies of the proposed information collection and supporting documents from Norris Bethea, Department of State, 2401 E. Street, NW., Washington, DC 20522, who may be reached at: 202-261-8896 or *betheand@state.gov.* SUPPLEMENTARY INFORMATION: We are soliciting public comments to permit the Department to: • Evaluate whether the proposed collection of information is necessary for the proper performance of the functions. • Evaluate the accuracy of our estimate of the burden of the proposed collection, including the validity of the methodology and assumptions used. • Enhance the quality, utility, and clarity of the information to be collected. • Minimize the reporting burden on those who are to respond, including through the use of automated collection techniques or other forms of technology. *Abstract of Proposed Collection:* This collection is necessary for the process of identifying highly motivated students with an interest in international affairs. Our goal is to identify and select these students from a nation-wide pool of very talented applicants. Through our application process, the Thomas R. Pickering Foreign Affairs Fellowship has managed to attract many students from diverse backgrounds to consider a career in the Foreign Service. *Methodology:* This information collection is posted on both the Department of State and Woodrow Wilson National Fellowship Foundation Web sites, where an applicant can download and print an application. Because the complete application requires extensive supporting documentation, it is now paper-based. However, the Department is currently piloting an upgrade in the Department's Student Programs that may enable future applicants to apply for the Pickering Fellowship online. *Additional Information:* None. Dated: May 9, 2005. Raphael A. Mirabal, Deputy Director, Bureau of Human Resources, Department of State. [FR Doc. 05-10453 Filed 5-24-05; 8:45 am]
Connectionstraces to 9
3 references not yet in our index
  • 10 CFR 20
  • 17 CFR 240.19
  • 15 USC 78
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Notices
Request for comment
C.F.R.§ 50.65
C.F.R.§ 51.22
C.F.R.§ 50.91
C.F.R.§ 50.92
U.S.C.§ 78s
U.S.C.§ 78f
U.S.C.§ 552
C.F.R.§ 200.30-3
U.S.C.§ 78c
Cite10 CFR 20
Cite17 CFR 240.19
Cite15 USC 78
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