Notices. NUCLEAR REGULATORY COMMISSION

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A research copy — for the controlling text, always check the official state or federal source. Not legal advice.

BILLING CODE 7590-01-M NUCLEAR REGULATORY COMMISSION Biweekly Notice; Applications and Amendments to Facility Operating Licenses Involving No Significant Hazards Considerations Background Pursuant to section 189a.(2) of the Atomic Energy Act of 1954, as amended (the Act), the U.S. Nuclear Regulatory Commission (the Commission or NRC staff) is publishing this regular biweekly notice. The Act requires the Commission publish notice of any amendments issued, or proposed to be issued and grants the Commission the authority to issue and make immediately effective any amendment to an operating license upon a determination by the Commission that such amendment involves no significant hazards consideration, notwithstanding the pendency before the Commission of a request for a hearing from any person.

This biweekly notice includes all notices of amendments issued, or proposed to be issued from May 13, 2005 to May 25, 2005. The last biweekly notice was published on May 24, 2005 (70 FR 29785). Notice of Consideration of Issuance of Amendments to Facility Operating Licenses, Proposed No Significant Hazards Consideration Determination, and Opportunity for a Hearing The Commission has made a proposed determination that the following amendment requests involve no significant hazards consideration.

Under the Commission's regulations in 10 CFR 50.92, this means that operation of the facility in accordance with the proposed amendment would not

(1)involve a significant increase in the probability or consequences of an accident previously evaluated; or

(2)create the possibility of a new or different kind of accident from any accident previously evaluated; or

(3)involve a significant reduction in a margin of safety. The basis for this proposed determination for each amendment request is shown below. The Commission is seeking public comments on this proposed determination. Any comments received within 30 days after the date of publication of this notice will be considered in making any final determination. Within 60 days after the date of publication of this notice, the licensee may file a request for a hearing with respect to issuance of the amendment to the subject facility operating license and any person whose interest may be affected by this proceeding and who wishes to participate as a party in the proceeding must file a written request for a hearing and a petition for leave to intervene. Normally, the Commission will not issue the amendment until the expiration of 60 days after the date of publication of this notice. The Commission may issue the license amendment before expiration of the 60-day period provided that its final determination is that the amendment involves no significant hazards consideration. In addition, the Commission may issue the amendment prior to the expiration of the 30-day comment period should circumstances change during the 30-day comment period such that failure to act in a timely way would result, for example in derating or shutdown of the facility. Should the Commission take action prior to the expiration of either the comment period or the notice period, it will publish in the **Federal Register** a notice of issuance. Should the Commission make a final No Significant Hazards Consideration Determination, any hearing will take place after issuance. The Commission expects that the need to take this action will occur very infrequently. Written comments may be submitted by mail to the Chief, Rules and Directives Branch, Division of Administrative Services, Office of Administration, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001, and should cite the publication date and page number of this **Federal Register** notice. Written comments may also be delivered to Room 6D22, Two White Flint North, 11545 Rockville Pike, Rockville, Maryland, from 7:30 a.m. to 4:15 p.m. Federal workdays. Copies of written comments received may be examined at the Commission's Public Document Room (PDR), located at One White Flint North, Public File Area O1F21, 11555 Rockville Pike (first floor), Rockville, Maryland. The filing of requests for a hearing and petitions for leave to intervene is discussed below. Within 60 days after the date of publication of this notice, the licensee may file a request for a hearing with respect to issuance of the amendment to the subject facility operating license and any person whose interest may be affected by this proceeding and who wishes to participate as a party in the proceeding must file a written request for a hearing and a petition for leave to intervene. Requests for a hearing and a petition for leave to intervene shall be filed in accordance with the Commission's “Rules of Practice for Domestic Licensing Proceedings” in 10 CFR part 2. Interested persons should consult a current copy of 10 CFR 2.309, which is available at the Commission's PDR, located at One White Flint North, Public File Area 01F21, 11555 Rockville Pike (first floor), Rockville, Maryland. Publicly available records will be accessible from the Agencywide Documents Access and Management System's (ADAMS) Public Electronic Reading Room on the Internet at the NRC Web site, *http://www.nrc.gov/reading-rm/doc-collections/cfr/* . If a request for a hearing or petition for leave to intervene is filed within 60 days, the Commission or a presiding officer designated by the Commission or by the Chief Administrative Judge of the Atomic Safety and Licensing Board Panel, will rule on the request and/or petition; and the Secretary or the Chief Administrative Judge of the Atomic Safety and Licensing Board will issue a notice of a hearing or an appropriate order. As required by 10 CFR 2.309, a petition for leave to intervene shall set forth with particularity the interest of the petitioner in the proceeding, and how that interest may be affected by the results of the proceeding. The petition should specifically explain the reasons why intervention should be permitted with particular reference to the following general requirements:

(1)The name, address, and telephone number of the requestor or petitioner;

(2)the nature of the requestor's/petitioner's right under the Act to be made a party to the proceeding;

(3)the nature and extent of the requestor's/petitioner's property, financial, or other interest in the proceeding; and

(4)the possible effect of any decision or order which may be entered in the proceeding on the requestor's/petitioner's interest. The petition must also set forth the specific contentions which the petitioner/requestor seeks to have litigated at the proceeding. Each contention must consist of a specific statement of the issue of law or fact to be raised or controverted. In addition, the petitioner/requestor shall provide a brief explanation of the bases for the contention and a concise statement of the alleged facts or expert opinion which support the contention and on which the petitioner/requestor intends to rely in proving the contention at the hearing. The petitioner/requestor must also provide references to those specific sources and documents of which the petitioner is aware and on which the petitioner/requestor intends to rely to establish those facts or expert opinion. The petition must include sufficient information to show that a genuine dispute exists with the applicant on a material issue of law or fact. Contentions shall be limited to matters within the scope of the amendment under consideration. The contention must be one which, if proven, would entitle the petitioner/requestor to relief. A petitioner/requestor who fails to satisfy these requirements with respect to at least one contention will not be permitted to participate as a party. Those permitted to intervene become parties to the proceeding, subject to any limitations in the order granting leave to intervene, and have the opportunity to participate fully in the conduct of the hearing. If a hearing is requested, and the Commission has not made a final determination on the issue of no significant hazards consideration, the Commission will make a final determination on the issue of no significant hazards consideration. The final determination will serve to decide when the hearing is held. If the final determination is that the amendment request involves no significant hazards consideration, the Commission may issue the amendment and make it immediately effective, notwithstanding the request for a hearing. Any hearing held would take place after issuance of the amendment. If the final determination is that the amendment request involves a significant hazards consideration, any hearing held would take place before the issuance of any amendment. A request for a hearing or a petition for leave to intervene must be filed by:

(1)First class mail addressed to the Office of the Secretary of the Commission, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001, Attention: Rulemaking and Adjudications Staff;

(2)courier, express mail, and expedited delivery services: Office of the Secretary, Sixteenth Floor, One White Flint North, 11555 Rockville Pike, Rockville, Maryland, 20852, Attention: Rulemaking and Adjudications Staff;

(3)e-mail addressed to the Office of the Secretary, U.S. Nuclear Regulatory Commission, *HearingDocket@nrc.gov* ; or

(4)facsimile transmission addressed to the Office of the Secretary, U.S. Nuclear Regulatory Commission, Washington, DC, Attention: Rulemakings and Adjudications Staff at

(301)415-1101, verification number is

(301)415-1966. A copy of the request for hearing and petition for leave to intervene should also be sent to the Office of the General Counsel, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001, and it is requested that copies be transmitted either by means of facsimile transmission to

(800)397-4209,

(301)415-4737 or by e-mail to *pdr@nrc.gov.* Detroit Edison Company, Docket No. 50-341, Fermi 2, Monroe County, Michigan *Date of amendment request:* May 18, 2005. *Description of amendment request:* The proposed amendment would revise Fermi 2 Technical Specifications

(TSs)to add Actions to Limiting Condition for Operation

(LCO)3.8.1, “AC Sources—Operating,” for one offsite circuit inoperable, for two offsite circuits inoperable, and for one offsite circuit and one or both emergency diesel generators

(EDGs)in one Division inoperable, in accordance with Regulatory Guide 1.93, “Availability of Electric Power Sources.” The current Fermi 2 TSs contain only a single Action for one or two offsite circuits inoperable. *Basis for proposed no significant hazards consideration determination:* As required by 10 CFR 50.91(a), the licensee has provided its analysis of the issue of no significant hazards consideration, which is presented below: 1. The proposed change does not involve a significant increase in the probability or consequences of an accident previously evaluated. The proposed change to replace the existing LCO 3.8.1 Action C for one or two offsite circuits inoperable with a required Completion Time of 12 hours to be in MODE 3, and 36 hours to be in MODE 4, with new Actions C, D, and E to allow a single offsite circuit to be inoperable for up to 72 hours, two offsite circuits to be inoperable for up to 24 hours, and one offsite circuit and one or both EDGs in one Division to be inoperable for up to 12 hours, provided other Required Actions are taken is consistent with the NUREG 1433, “Standard Technical Specifications General Electric Plants, BWR/4,” criteria, and with the guidelines in Regulatory Guide 1.93. There is no change in plant design, and [Title 10 of the Code of Federal Regulations (10 CFR)] 10 CFR 50, Appendix A, General Design Criteria 17, “Electric Power Systems” will continue to be met. Increasing the Completion Times for inoperable offsite circuits will not significantly increase the potential for a loss of offsite power. This is due to the redundancy and diversity of the offsite electrical configuration at Fermi 2. Inoperability of an offsite circuit does slightly increase the potential for a loss of divisional power. The probability of losing the opposite division of offsite power in this condition is extremely small due to the physical separation of the offsite power sources that feed Fermi 2. Furthermore, the 10 CFR 50.65(a)(4) program monitors the condition of the offsite electrical system and switchyard configuration for each entry into the extended completion time to ensure that there is no significant increase in the probability or consequences of an accident. The proposed change does not alter the operation of any plant equipment assumed to function in response to an analyzed event or otherwise increase its failure probability. Therefore, this change does not involve a significant increase in the probability or the consequences of any accident previously evaluated. 2. The proposed change does not create the possibility of a new or different kind of accident from any accident previously evaluated. The proposed change does not alter the design, configuration, or method of operation of the plant. It simply provides longer Completion Times for inoperable offsite circuits. No physical or operational changes to the components of the A. C. power systems are being made by this change; therefore, no new system interactions are being created. The proposed change does not produce any parameters or conditions that could contribute to the initiation of accidents different from those already evaluated. Therefore, this change does not create the possibility of a new or different kind of accident from any accident previously evaluated. 3. The change does not involve a significant reduction in the margin of safety. The proposed change will replace the existing LCO 3.8.1 Action C for one or two offsite circuits inoperable with a required Completion Time of 12 hours to be in MODE 3, and 36 hours to be in MODE 4, with new Actions C, D, and E to allow a single offsite circuit to be inoperable for up to 72 hours, two offsite circuits to be inoperable for up to 24 hours, and one offsite circuit and one or both EDGs in one Division to be inoperable for up to 12 hours, provided other Required Actions are taken. This change is consistent with NUREG 1433, “Standard Technical Specifications General Electric Plants, BWR/4,” and with the guidelines in Regulatory Guide 1.93. The proposed change does not affect any analysis that is used to establish safety margins, nor does it alter the design, configuration, or method of operation of the plant. Therefore, the proposed change does not involve a significant reduction in a margin of safety. The NRC staff has reviewed the licensee's analysis and, based on this review, it appears that the three standards of 10 CFR 50.92(c) are satisfied. Therefore, the NRC staff proposes to determine that the amendment request involves no significant hazards consideration. *Attorney for licensee:* David G. Pettinari, Legal Department, 688 WCB, Detroit Edison Company, 2000 2nd Avenue, Detroit, Michigan 48226-1279. *NRC Section Chief:* L. Raghavan. Energy Northwest, Docket No. 50-397, Columbia Generating Station, Benton County, Washington *Date of amendment request:* April 19, 2005. *Description of amendment request:* The proposed amendment would revise technical specifications

(TS)testing frequency for the surveillance requirement

(SR)in TS 3.1.4, “Control Rod Scram Times.” Specifically, the proposed change would revise the frequency for SR 3.1.4.2, Control Rod Scram Time Testing, from “120 days cumulative operation in MODE 1” to “200 days cumulative operation in MODE 1.” The NRC staff issued a notice of availability of a model no significant hazards consideration

(NSHC)determination for referencing in licensing amendment applications in the **Federal Register** on August 23, 2004 (69 FR 51864). The licensee affirmed the applicability of the model NSHC determination in its application dated April 19, 2005. *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 change extends the frequency for testing control rod scram time testing from every 120 days of cumulative Mode 1 operation to 200 days of cumulative Mode 1 operation. The frequency of surveillance testing is not an initiator of any accident previously evaluated. The frequency of surveillance testing does not affect the ability to mitigate any accident previously evaluated, as the tested component is still required to be operable. Therefore, the proposed change does 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 extends the frequency for testing control rod scram time testing from every 120 days of cumulative Mode 1 operation to 200 days of cumulative Mode 1 operation. The proposed change does not result in any new or different modes of plant operation. Therefore, the proposed change does 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 extends the frequency for testing control rod scram time testing from every 120 days of cumulative Mode 1 operation to 200 days of cumulative Mode 1 operation. The proposed change continues to test the control rod scram time to ensure the assumptions in the safety analysis are protected. Therefore, the proposed change does not involve a significant reduction in a margin of safety. Based on the above, the proposed change presents 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. *Attorney for licensee:* Thomas C. Poindexter, Esq., Winston & Strawn, 1400 L Street, NW., Washington, DC 20005-3502. *NRC Section Chief:* Robert A. Gramm. Entergy Nuclear Operations, Docket Nos. 50-247 and 50-286, Indian Point Nuclear Generating Unit Nos. 2 and 3 (IP2 and 3), Westchester County, New York *Date of amendment request:* April 22, 2005. *Description of amendment request:* The amendments would revise the surveillance requirements

(SRs)for Technical Specification

(TS)3.3.5, “Loss of Power

(LOP)Diesel Generator

(DG)Start Instrumentation.” Specifically, a note would be added to IP2 TS SR 3.3.5.2 to indicate that the verification of the setpoint is not required for the 480 volt

(V)bus degraded voltage function when performing the trip actuating device operational test (TADOT). A similar note would be added to IP3 TS SR 3.3.5.1 for the 480V degraded voltage and undervoltage functions. *Basis for proposed no significant hazards consideration determination:* As required by 10 CFR 50.91(a), the licensee has provided its analysis of the issue of no significant hazards consideration, which 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 change adds a note to indicate that the IP2 and IP3 degraded voltage relays and the IP3 undervoltage relays do not require setpoint verification when the TADOT required by TS surveillances is performed on a monthly basis. Setpoint verification of these relays occurs as part of the channel calibration that is performed at either an 18 month or a 24 month frequency. These relays are used to sense either degraded voltage or undervoltage on the 480 volt safety related buses and to initiate the start of the EDG [emergency diesel generator] for all events where the loss of offsite power is postulated. This function has no effect on the probability of an accident previously evaluated since it is not associated with the initiation of any accident. The relay setpoint verification frequency of 18 or 24 months has no significant effect on the consequences of an accident because the relays are intended to be calibrated on this frequency. This frequency of calibration is based on operating experience, and is consistent with industry practice. Therefore, the proposed change does not involve a significant increase in the probability or consequences of an accident previously evaluated. 2. Does the proposed change create the possibility of a new or different kind of accident from any accident previously evaluated? *Response:* No. The proposed change adds a note to indicate that the IP2 and IP3 degraded voltage relays and the IP3 undervoltage relays do not require setpoint verification when the TADOT required by TS surveillances is performed on a monthly basis. This effectively changes the frequency required by the surveillance requirement from 31 days to either 18 months or 24 months. The change does not affect the function of the relays or otherwise affect the design and operation of plant systems and components and therefore no new accident scenarios would be created. The change does not affect the manner is which equipment is operated but does affect the manner in which it is maintained by extending the frequency for setpoint verification. The frequency change continues to provide adequate verification of the operability of equipment and limits the time which the relay function is inoperable or degraded while performing verification. Therefore, no new failure modes are being introduced that could lead to different accidents. 3. Does the proposed change involve a significant reduction in a margin of safety? *Response:* No. The proposed change adds a note to indicate that the IP2 and IP3 degraded voltage relays and the IP3 undervoltage relays do not require setpoint verification when the TADOT required by TS surveillances is performed on a monthly basis. Setpoint verification of these relays occurs as part of the channel calibration that is performed at either an 18 month or a 24 month frequency. The margin associated with these relays is the assurance that these relays will properly sense either degraded voltage or undervoltage on the 480 volt safety related buses and to initiate the start of the EDG for all events where the loss of offsite power is postulated. The proposed frequency of calibration is based on operating experience, and is consistent with industry practice. These indicate that setpoint verification at 18 month or 24 month [frequency] is adequate to assure performance of the function. Verification of setpoints on a monthly basis either degrades the reliability of the function or makes it inoperable. Therefore, the proposed change does not involve a significant reduction in [a] margin of safety. The NRC staff has reviewed the licensee's analysis and, based on this review, it appears that the three standards of 10 CFR 50.92(c) are satisfied. Therefore, the NRC staff proposes to determine that the amendment request involves no significant hazards consideration. *Attorney for licensee:* Mr. John Fulton, Assistant General Counsel, Entergy Nuclear Operations, Inc., 440 Hamilton Avenue, White Plains, NY 10601. *NRC Section Chief:* Richard J. Laufer. Exelon Generation Company, LLC, Docket Nos. 50-373 and 50-374, LaSalle County Station, Units 1 and 2, LaSalle County, Illinois *Date of amendment request:* April 13, 2005. *Description of amendment request:* The proposed amendments would extend the completion time

(CT)for required Action A.1, “Restore Residual Heat Removal Service Water (RHRSW) subsystem to OPERABLE status,” associated with Technical Specification

(TS)Section 3.7.1 from 7 days to 10 days. This proposed change would only be used during the upcoming Unit 1 2006 refueling outage. The establishment of a 6 day (for Division 2 core standby cooling system

(CSCS)maintenance) or 10 day (for Division 1 CSCS maintenance ) CT for TS Section 3.7.2 when one or more required diesel generator cooling water

(DGCW)subsystem(s) are inoperable. This proposed change will only be used during each of the upcoming Unit 1 2006, and Unit 2 2007, refueling outages, and during the subsequent Unit 1 2008, refueling outage. An extension of the CT for required Action C.4, “Restore required Diesel Generator

(DG)to OPERABLE status,” associated with TS Section 3.8.1 from 72 hours to 6 days. This proposed change will only be used during the upcoming Unit 2 2007 refueling outage, and during subsequent Unit 1, 2008, refueling outage. An extension of the CT for required Action F.1, “Restore one required Diesel Generator

(DG)to OPERABLE status,” associated with TS Section 3.8.1 from 2 hours to 6 days. This proposed change will only be used during the upcoming Unit 2, 2007, refueling outage, and during subsequent Unit 1, 2008, refueling outage. *Basis for proposed no significant hazards consideration determination:* As required by 10 CFR 50.91(a), the licensee has provided its analysis of the issue of no significant hazards consideration, which is presented below: 1. The proposed TS change does not involve a significant increase in the probability or consequences of an accident previously evaluated. The proposed changes have been evaluated using the risk-informed processes described in RG [Regulatory Guide] 1.174, “An Approach for Using Probabilistic Risk Assessment in Risk-Informed Decisions on Plant-Specific Changes to the Licensing Basis,” dated July 1998, and RG 1.177, “An Approach for Plant-Specific, Risk-Informed Decision Making: Technical Specifications,” dated August 1998. The risk associated with the proposed change was found to be acceptable. The previously analyzed accidents are initiated by the failure of plant structures, systems, or components. The proposed change does not have a detrimental impact on the integrity of any plant structure, system, or component that initiates an analyzed event. No active or passive failure mechanisms that could lead to an accident are affected. Non-code line stops required to isolate the Unit 1 portion of the common discharge header from the Unit 2 portion of the header during the specified CSCS maintenance will maintain the availability of the online unit's Division 2 CSCS system. The non-code line stops being used to isolate the system during the specified refueling outages are being designed to the same pressure rating and seismic requirements as the CSCS piping. Redundancy is provided by designing the CSCS system as multiple independent subsystems. Separation between subsystems assures that no single failure can affect more than one subsystem. Therefore, assuming a single failure in any subsystem including the subsystem shared between units, two subsystems in each unit will remain unaffected. These two subsystems can supply the minimum required cooling water for safe shutdown of a unit or mitigate the consequences of an accident. The proposed limited use of increased CT's of the operating unit's CSCS system maintains the design basis assumptions; therefore, the proposed change does not involve a significant increase in the consequences of an accident previously evaluated. 2. The proposed TS change does not create the possibility of a new or different kind of accident from any accident previously evaluated. The proposed change involves the temporary installation of new equipment (mechanical line stops) that will be designed and installed to the same pressure rating and seismic design as the CSCS piping. The currently installed equipment will not be operated in a new or different manner. No new or different system interactions are created and no new processes are introduced. The proposed changes will not introduce any new failure mechanisms, malfunctions, or accident initiators not already considered in the design and licensing bases. Based on this evaluation, the proposed change does not create the possibility of a new or different kind of accident from any accident previously evaluated. 3. The proposed TS change does not involve a significant reduction in a margin of safety. The proposed change does not alter any existing setpoints at which protective actions are initiated and no new setpoints or protective actions are introduced. The design and operation of the CSCS system remains unchanged. The risk assessment with the proposed increase in the CTs for TS 3.7.1, TS 3.7.2, and TS 3.8.1 were evaluated using the risk-informed processes described in RG 1.174, “An Approach for Using Probabilistic Risk Assessment in Risk-Informed Decisions on Plant-Specific Changes to the Licensing Basis,” dated July 1998, and RG 1.177, “An Approach for Plant-Specific, Risk-Informed Decision Making: Technical Specifications,” dated August 1998. The risk was shown to be acceptable. Based on this evaluation, the proposed change does not involve a significant reduction in a margin of safety. The NRC staff has reviewed the licensee's analysis and, based on this review, it appears that the three standards of 10 CFR 50.92(c) are satisfied. Therefore, the NRC staff proposes to determine that the requested amendments involve no significant hazards consideration. *Attorney for licensee:* Mr. Thomas S. O'Neill, Associate General Counsel, Exelon Generation Company, LLC, 4300 Winfield Road, Warrenville, IL 60555. *NRC Section Chief :* Gene Y. Suh. FirstEnergy Nuclear Operating Company, *et al.* , Docket No. 50-412, Beaver Valley Power Station, Unit No. 2 (BVPS-2), Beaver County, Pennsylvania *Date of amendment request:* April 11, 2005. *Description of amendment request:* The proposed amendment would revise the BVPS-2 Technical Specification

(TS)3.4.5 to change the scope of the steam generator

(SG)tubesheet examinations required in the SG tubesheet region by using the F* inspection methodology. Specifically, the proposed amendment would alter the tube inspection to exclude the portion of the SG tube within the tubesheet below the F* distance and to exclude the tube-to-tubesheet weld, by crediting the methodology described in Westinghouse Topical Report, WCAP-16385, Revision 1. The F* distance is the distance from the top of the tubesheet to the bottom of the F* length (the maximum length of tubing below the bottom of the roll transition

(BRT)which must be demonstrated to be non-degraded and which is defined as 1.97 inches on the hot leg side) plus the distance to the BRT and non-destructive examination uncertainties. The licensee's proposed amendment also would revise the TS requirements to require tubes with service-induced degradation identified in the F* distance or less than or equal to 3.0 inches below the top of the tubesheet, whichever is greater, to be repaired or removed from service upon detection. The TS Index, affected TS pages and Bases would also be revised and repaginated as necessary to reflect the proposed TS change. *Basis for proposed no significant hazards consideration determination:* As required by 10 CFR 50.91(a), the licensee has provided its analysis of the issue of no significant hazards consideration, which is presented below: 1. Does the proposed change involve a significant increase in the probability or consequences of an accident previously evaluated? No. The proposed change modifies the BVPS Unit 2 TSs to incorporate steam generator tube inspection scope based on WCAP-16385, Revision 1. Of the various accidents previously evaluated in the BVPS Unit 2 Updated Final Safety Analysis Report (UFSAR), the proposed changes only affect the steam generator tube rupture

(SGTR)event evaluation and the postulated steam line break

(SLB)accident evaluation. Loss-of-coolant accident

(LOCA)conditions cause a compressive axial load to act on the tube. Therefore, since the LOCA tends to force the tube into the tubesheet rather than pull it out, it is not a factor in this amendment request. Another faulted load consideration is a safe shutdown earthquake (SSE); however, the seismic analysis of Model 51M SGs has shown that axial loading of the tubes is negligible during an SSE. For the SGTR event, the required structural margins of the steam generator tubes will be maintained by the presence of the tubesheet. Tube rupture is precluded for cracks in the tube expansion region due to the constraint provided by the tubesheet. Therefore, Regulatory Guide

(RG)1.121, “Bases for Plugging Degraded PWR [pressurized-water reactor] Steam Generator Tubes,” margins against burst are maintained for both normal and postulated accident conditions. The F* length supplies the necessary resistive force to preclude pullout loads under both normal operating and accident conditions. The contact pressure results from the tube expansion process used during manufacturing and from the differential pressure between the primary and secondary side. The proposed changes do not affect other systems, structures, components or operational features. Therefore, the proposed change results in no significant increase in the probability of the occurrence of an SGTR or SLB accident. The consequences of an SGTR event are affected by the primary-to-secondary leakage flow during the event. Primary-to-secondary leakage flow through a postulated broken tube is not affected by the proposed change since the tubesheet enhances the tube integrity in the region of the expansion by precluding tube deformation beyond its initial expanded outside diameter. The resistance to both tube rupture and collapse is strengthened by the tubesheet in that region. At normal operating pressures, leakage from primary water stress corrosion cracking (PWSCC) below the F* length is limited by both the tube-to-tubesheet crevice and the limited crack opening permitted by the tubesheet constraint. Consequently, negligible normal operating leakage is expected from cracks within the tubesheet region. SLB leakage is limited by leakage flow restrictions resulting from the crack and tube-to-tubesheet contact pressures that provide a restricted leakage path above the indications and also limit the degree of crack face opening compared to free span indications. The total leakage (i.e., the combined leakage for all such tubes) meets the industry performance criterion, plus the combined leakage developed by any other alternate repair criteria, and will be maintained below the maximum allowable SLB leak rate limit, such that off-site doses are maintained less than 10 CFR [Part] 100 guideline values and the limits evaluated in the BVPS Unit 2 UFSAR. Therefore, based on the above evaluation, the proposed changes do not involve a significant increase in the probability or consequences of an accident previously evaluated. 2. Does the proposed change create the possibility of a new or different kind of accident from any accident previously evaluated? No. The proposed changes do not introduce any changes or mechanisms that create the possibility of a new or different kind of accident. Tube bundle integrity will continue to be maintained for all plant conditions upon implementation of the F* methodology. The proposed changes do not introduce any new equipment or any change to existing equipment. No new effects on existing equipment are created nor are any new malfunctions introduced. Therefore, the proposed change does 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? No. The proposed changes maintain the required structural margins of the steam generator tubes for both normal and accident conditions, including the planned uprated power level of 2910 Mwt. NRC [Nuclear Regulatory Commission] Regulatory Guide

(RG)1.121 is used as the basis in the development of the F* methodology for determining that steam generator tube integrity considerations are maintained within acceptable limits. RG 1.121 describes a method acceptable to the NRC staff for meeting General Design Criteria 14, 15, 31, and 32 by reducing the probability and consequences of an SGTR. RG 1.121 concludes that by determining the limiting safe conditions of tube wall degradation beyond which tubes with unacceptable cracking, as established by inservice inspection, should be removed from service or repaired, the probability and consequences of an SGTR are reduced. This RG uses safety factors on loads for tube burst that are consistent with the requirements of Section III of the American Society of Mechanical Engineers

(ASME)Code. For primarily axially oriented cracking located within the tubesheet, tube burst is precluded due to the presence of the tubesheet. WCAP-16385, Revision 1, defines a length, F*, of degradation-free expanded tubing that provides the necessary resistance to tube pullout due to the pressure-induced forces (with applicable safety factors applied). Application of the F* criteria will preclude unacceptable primary-to-secondary leakage during all plant conditions. The methodology for determining leakage provides for large margins between calculated and actual leakage values in the F* criteria. Plugging of the steam generator tubes reduces the reactor coolant flow margin for core cooling. Implementation of F* methodology at Beaver Valley Unit 2 will result in maintaining the margin of flow that may have otherwise been reduced by tube plugging. Based on the above, it is concluded that the proposed changes do not result in a significant reduction of margin with respect to plant safety as defined in the Final Safety Analysis Report Update or bases of the plant Technical Specifications. The NRC staff has reviewed the licensee's analysis and, based on this review, it appears that the three standards of 10 CFR 50.92(c) are satisfied. Therefore, the NRC staff proposes to determine that the amendment request involves no significant hazards consideration. *Attorney for licensee:* Mary O'Reilly, FirstEnergy Nuclear Operating Company, FirstEnergy Corporation, 76 South Main Street, Akron, OH 44308. *NRC Section Chief:* Richard J. Laufer. Florida Power and Light Company, Docket No. 50-389, St. Lucie Plant, Unit No. 2 (SL2), St. Lucie County, Florida *Date of amendment request:* March 31, 2005. *Description of amendment request:* The proposed amendment would revise Administrative Technical Specification Section 6.8.4.h, “Containment Leakage Rate Testing Program,” to allow a one-time extension of the currently approved 15-year test interval to approximately 15.5 years. *Basis for proposed no significant hazards consideration determination:* As required by 10 CFR 50.91(a), the licensee has provided its analysis of the issue of no significant hazards consideration, which is presented below:

(1)Operation of the facility in accordance with the proposed amendment would not involve a significant increase in the probability or consequences of an accident previously evaluated. The proposed change does not involve a significant increase in the probability or consequences of an accident previously evaluated. The proposed amendment of the Technical Specifications adds a one-time extension to the current surveillance interval for Type A testing (ILRT [integrated leak rate testing]). The current test interval of 15 years from the last Type A test would be extended to end prior to startup from the SL2-17 refueling. This is anticipated to be an approximately six-month addition to the 15 year interval. The proposed extension to the Type A testing interval does not significantly increase the probability of an accident previously evaluated since the containment Type A test is not a modification, nor a change in the way that plant systems, structures or components

(SSC)are operated, and is not an activity that could lead to equipment failure or accident initiation. The proposed extension of the test interval does not involve a significant increase in the consequences of an accident since research documented in NUREG-1493 has found that generically, very few potential leak paths are not identified with Type B and C tests (LLRT [local leak-rate test]). The Type B and C testing are unaffected by this proposed change. The NUREG concluded that an increase in the Type A test interval to twenty years resulted in an imperceptible increase in risk. St. Lucie Unit 2 provides a high degree of assurance through testing and inspection that the containment will not degrade in a manner only detectable by Type A testing. Inspections required by the ASME [American Society of Mechanical Engineers] Code, the containment leakage rate testing program, the plant protective coatings program, and Maintenance Rule are performed in order to identify indications of containment degradation that could affect leak tightness. Type B and C testing required by 10 CFR 50, Appendix J, are not affected by this proposed extension to the Type A test interval and will identify openings in containment penetrations that would otherwise require a Type A test.

(2)Operation of the facility in accordance with the proposed amendment would not create the possibility of a new or different kind of accident from any previously evaluated. The proposed change does not result in facility operation that would create the possibility of a new or different kind of accident from any accident previously evaluated. The proposed extension to Type A testing does not create a new or different type of accident for St. Lucie because no physical plant changes are made and no compensatory measures are being imposed that could potentially lead to a failure. There are no operational changes that could introduce a new failure mode or create a new or different kind of accident. The proposed change only adds an extension to the current interval for Type A testing and does not change implementation aspects of the test.

(3)Operation of the facility in accordance with the proposed amendment would not involve a significant reduction in a margin of safety. The proposed change would not result in operation of the facility involving a significant reduction in a margin of safety. The proposed license amendment adds a one-time extension to the current interval for Type A testing (ILRT). The current one-time test interval of 15 years from the last Type A test would be extended to end prior to startup from the SL2-17 refueling outage. This is anticipated to be an approximately six month addition to the 15 year interval. The NUREG-1493 generic study of the effects of extending the Type A test interval out to 20 years concluded that there is an imperceptible increase in plant risk. A plant specific risk calculation obtained results consistent with the generic conclusions regarding risk which show a slight but negligible increase in risk. Inspections required by the ASME code and maintenance rule are performed to ensure that the containment will not degrade in a manner that is only detectable by Type A testing (ILRT). The NRC staff has reviewed the licensee's analysis and, based on this review, it appears that the three standards of 50.92(c) are satisfied. Therefore, the NRC staff proposes to determine that the amendment request involves no significant hazards consideration. *Attorney for licensee:* M.S. Ross, Attorney, Florida Power & Light, P.O. Box 14000, Juno Beach, Florida 33408-0420. *NRC Section Chief:* Michael L. Marshall, Jr. Nebraska Public Power District, Docket No. 50-298, Cooper Nuclear Station, Nemaha County, Nebraska *Date of amendment request:* April 13, 2005. *Description of amendment request:* The proposed amendment would incorporate several Technical Specification Task Force

(TSTF)changes to the licensee's Technical Specifications (TSs). The specific TSTF changes that would be incorporated are: 1. TSTF-222-A, Revision 1, “Control Rod Scram Time Testing”—This change modifies TS Section 3.1.4, “Control Rod Scram Times,” to clarify that control rod scram time testing is required only for core cells in which work on the control rod or drive has been performed or fuel has been moved or replaced. 2. TSTF-275-A, Revision 0, “Clarify Requirement for EDG [emergency diesel generator] start signal on RPV [reactor pressure vessel] Level—Low, Low, Low during RPV cavity flood-up”—This change modifies the TS Section 3.3.5.1, “ECCS [emergency core cooling system] Instrumentation,” to clarify that the ECCS initiation instrumentation, identified as being required in modes 4 and 5, is required to be operable only when the associated ECCS subsystems are required to be operable as defined in limiting condition of operation

(LCO)3.5.2, “ECCS—Shutdown.” 3. TSTF-300-A, Revision 0, “Eliminate DG [diesel generator] LOCA [loss-of-coolant accident]—Start SRs [surveillance requirements] while in S/D [shutdown] when no ECCS is Required”—This change modifies the TS Section 3.8.2, “AC [alternating current] Sources—Shutdown,” to add an additional note to the surveillance that verifies automatic start of the emergency diesel generators and automatic load shedding from the emergency buses, is considered to be met without the ECCS initiation signals operable when ECCS initiation signals are not required to be operable per Table 3.3.5.1-1, ECCS Instrumentation. 4. TSTF-225, Revision 2, “Fuel movement with inoperable refueling equipment interlocks”—This change modifies TS Section 3.9.1, “Refueling Equipment Interlocks,” to add required actions to allow insertion of a control rod withdrawal block and verification that all control rods are fully inserted as alternate actions to suspending in-vessel fuel movement in the event that one or more required refueling equipment interlocks are inoperable. *Basis for proposed no significant hazards consideration determination:* As required by 10 CFR 50.91(a), the licensee has provided its analysis of the issue of no significant hazards consideration, which is presented below: 1. Do the proposed changes involve a significant increase in the probability or consequences of an accident previously evaluated? *Response:* No. 1. *Revision of CNS [Cooper Nuclear Station] TS SR 3.1.4.1 and SR 3.1.4.4.* The frequency at which control rod scram time is verified is not a precursor of an accident. A scram time slower than required might result in an increase in the consequences of an accident. However, revising the frequency for verifying the scram time of the control rods does not impact the scram time. Verifying that the scram time is acceptable will continue to be required prior to plant startup following fuel movement or work on the control rods or control rod drive system. Therefore, revising the frequency for verifying insertion time to clarify when it is required does not involve a significant increase in the probability of an accident or an increase in the consequences of an accident. 2. *Revision of TS Table 3.3.5.1-1.* Clarifying when certain ECCS instrumentation must be operable with the plant shut down will not increase either the probability of an accident or the consequences of the accident. The ECCS instrumentation is required to be operable only when the associated ECCS subsystems are required to be operable. This continues to ensure that the instrumentation will be operable when it is required. 3. *Revision of TS SR 3.8.2.1.* The frequency of verifying certain actions by surveillances is not a precursor to accidents. Clarifying that the actions required in response to an ECCS initiation signal are not required when the ECCS initiation signals are not required to be operable does not result in increased probability of an accident or increased consequences of an accident. Not requiring that a DG automatically start in response to the ECCS initiation signal when the ECCS subsystems that are supported by the DG are not required to be operable does not reduce the required ECCS protection. 4. *Revision of TS 3.9.1., Condition A Required Action.* The actions taken when a refueling equipment interlock is inoperable are not initiators of any accident previously evaluated. The level of protection against withdrawing a control rod during the insertion of a fuel assembly or loading a fuel assembly into the vessel with a control rod withdrawn, provided by the proposed alternate Required Actions, is equivalent to that provided by the current Required Action. The radiological consequences of an accident described in the Updated Safety Analysis Report

(USAR)while taking the proposed alternate Required Actions are not different from the consequences of an accident under the current Required Actions. Based on the above NPPD [Nebraska Public Power District] concludes that the proposed changes do not involve a significant increase in the probability or consequences of an accident previously evaluated. 2. Do the proposed changes create the possibility of a new or different kind of accident from any accident previously evaluated? *Response:* No. The proposed changes to the CNS operating license involve revisions to the requirements for when certain surveillances are to be performed (change no. 1 and no. 3), clarification of when ECCS instrumentation is required to be operable (change no. 2), and addition of alternative Required Actions if certain plant components are inoperable (change no. 4). These changes will not result in revision of plant design, physical alteration of a plant structure, system, or component (SSC), or installation of a new or different type of equipment. The changes do not involve any revision of how the plant, an SSC, or a refueling equipment interlock, are operated. Based on this, the proposed changes do not create the possibility of a new or different kind of accident. 3. Do the proposed changes involve a significant reduction in a margin of safety? *Response:* No. 1. *Revision of CNS TS SR 3.1.4.1 and SR 3.1.4.4.* Sufficiently rapid insertion of control rods following certain accidents (scram time) will prevent fuel damage, and thereby maintain a margin of safety to fuel damage. No change is being made to the required insertion rate specified in plant technical specifications. Clarifying when control rod insertion times must be verified following movement of fuel assemblies, without actually changing the requirement (verification of insertion times will continue to be required whenever work that might impact the rod insertion time is done), does not reduce the margin of safety related to fuel damage. 2. *Revision of TS Table 3.3.5.1-1.* Clarifying when certain ECCS instrumentation is required to be operable when CNS is in a shutdown mode does not change the requirement. Not requiring ECCS signals that initiate a DG to be operable when the ECCS subsystems that are supported by the DG are not required to be operable does not result in a reduction of a margin of safety for the safety related equipment that is required to be operable. 3. *Revision of TS SR 3.8.2.1.* Clarifying that automatic start of the DGs in response to the ECCS initiation signal is not required when the ECCS subsystems that are supported by the DG are not required to be operable does not result in a reduction in a margin of safety. 4. *Revision of TS 3.9.1, Condition A Required Action.* The proposed alternate Required Actions to be taken when a refueling interlock is inoperable provide a level of protection against inadvertent criticality while inserting or moving fuel in the reactor vessel that is equivalent to the level provided by the current Required Action. As a result, the proposed alternate Required Actions do not result in a significant reduction in a margin of safety related to protection against inadvertent criticality when inserting or moving fuel assemblies. Based on the above NPPD concludes that the proposed changes do not involve a significant reduction in a margin of safety. The NRC staff has reviewed the licensee's analysis and, based on this review, it appears that the three standards of 10 CFR 50.92(c) are satisfied. Therefore, the NRC staff proposes to determine that the amendment request involves no significant hazards consideration. *Attorney for licensee:* Mr. John C. McClure, Nebraska Public Power District, Post Office Box 499, Columbus, NE 68602-0499. *NRC Section Chief:* David Terao. PSEG Nuclear, LLC, Docket No. 50-354, Hope Creek Generating Station, Salem County, New Jersey *Date of amendment request:* February 25, 2005. *Description of amendment request:* The proposed amendment would revise Technical Specification

(TS)3.1.3.1, “Control Rod Operability,” such that scram discharge volume

(SDV)vent or drain lines with inoperable valves would be isolated instead of requiring that the valve be restored to Operable status or the unit be placed in Hot Shutdown within 12 hours. The NRC staff issued a Notice of Opportunity for Comment in the **Federal Register** on February 24, 2003 (68 FR 8637), on possible amendments to revise the action for one or more SDV vent or drain lines with an inoperable valve, including a model safety evaluation and model no significant hazards consideration

(NSHC)determination, using the consolidated line-item improvement process. The NRC staff subsequently issued a Notice of Availability of the models for referencing license amendment applications in the **Federal Register** on April 15, 2003 (68 FR 18294). The licensee affirmed the applicability of the model NSHC determination (modified slightly to address plant-specific TS format) in its application dated February 25, 2005. *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: Criterion 1—The proposed change does not involve a significant increase in the probability or consequences of an accident previously evaluated. A change is proposed to allow the affected SDV vent and drain line to be isolated when there are one or more SDV vent or drain lines with inoperable valves instead or requiring the valves to be restored to operable status or the unit be in hot shutdown within 12 hours. With SDV vent or drain valves inoperable in one or more lines, the isolation function would be maintained since the redundant valve in the affected line would perform its safety function of isolating the SDV. Following the completion of the required action, the isolation function is fulfilled since the associated line is isolated. The ability to vent and drain the SDV is maintained and controlled through administrative controls. This requirement assures the reactor protection system is not adversely affected by the inoperable valves. With the safety functions of the valves being maintained, the probability or consequences of an accident previously evaluated are not significantly increased. Criterion 2—The proposed change does not create the possibility of a new or different kind of accident from any accident previously evaluated. The proposed change does not involve a physical alteration of the plant (no new or different type of equipment will be installed) or a change in the methods governing normal plant operation. Thus, this change does not create the possibility of a new or different kind of accident from any previously evaluated. Criterion 3—The proposed change does not involve a significant reduction in [a] margin of safety. The proposed change ensures that the safety functions of the SDV vent and drain valves are fulfilled. The isolation function is maintained by redundant valves and by the required action to isolate the affected line. The ability to vent and drain the SDV is maintained through administrative controls. In addition, the reactor protection system will prevent filling of the SDV to the point that it has insufficient volume to accept a full scram. Maintaining the safety functions related to isolation of the SDV and insertion of control rods ensures that the proposed change does not involve a significant reduction in the margin of safety. Based on the reasoning presented above, the NRC staff proposes to determine that the amendment request involves no significant hazards consideration. *Attorney for licensee:* Jeffrie J. Keenan, Esquire, Nuclear Business Unit—N21, P.O. Box 236, Hancocks Bridge, NJ 08038. *NRC Section Chief:* Darrell J. Roberts. R.E. Ginna Nuclear Power Plant, LLC, Docket No. 50-244, R.E. Ginna Nuclear Power Plant, Wayne County, New York *Date of amendment request:* March 10, 2005. *Description of amendment request:* The amendment would revise Technical Specification Section 5.5.15, “Containment Leakage Rate Testing Program,” to allow a one-time extension of the interval between the Type A, integrated leakage rate tests (ILRTs), from 10 years to no more than 15 years. *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: Criterion 1—The Proposed Change Does Not Involve a Significant Increase in the Probability or Consequences of an Accident Previously Evaluated. The proposed change to Technical Specification 5.5.15, Containment Leakage Rate Testing Program, involves a one-time extension to the current interval for Type A containment testing. The current test interval of ten

(10)years would be extended on a one-time basis to no longer than fifteen

(15)years from the last Type A test. The proposed Technical Specification change does not involve a physical change to the plant or a change in the manner which the plant is operated or controlled. The reactor containment is designed to provide an essentially leak tight barrier against the uncontrolled release of radioactivity to the environment for postulated accidents. As such the reactor containment itself and the testing requirements invoked to periodically demonstrate the integrity of the reactor containment exist to ensure the plant's ability to mitigate the consequences of an accident, and do not involve the prevention or identification of any precursors of an accident. The proposed change involves only the extension of the interval between Type A containment leakage tests. Type B and C containment leakage tests will continue to be performed at the frequency currently required by plant Technical Specifications. Industry experience has shown, as documented in NUREG-1493, that Type B and C containment leakage tests have identified a very large percentage of containment leakage paths and that the percentage of containment leakage paths that are detected only by Type A testing is very small. The Ginna ILRT test history supports this conclusion. In NUREG-1493 Section 10, Summary of Technical Findings, it is concluded, in part, that reducing the frequency of Type A containment leak tests to once per twenty

(20)years leads to an imperceptible increase in risk. The proposed change does not result in an increase in core damage frequency since the containment system is used for mitigation purposes only. Containment Leakage Rate Testing Program local leak rate test requirements and administrative controls such as design change control, ASME [American Society of Mechanical Engineers] Section XI Inservice Inspection

(ISI)Program Containment Repair and Replacement Program and procedural requirements for system restoration ensure that containment integrity is not degraded by plant modifications or maintenance activities. The design and construction requirements of the reactor containment itself combined with the containment inspections performed in accordance with the ASME Section XI Inservice Inspection

(ISI)Program Containment Program, Boric Acid Corrosion Program, inspections in accordance with Regulatory Guide 1.163 position C.3 and the Maintenance Rule serve to provide a high degree of assurance that the containment will not degrade in a manner that is detectable only by Type A testing. Therefore, the proposed Technical Specification change does not involve a significant increase in the consequences of an accident previously evaluated. Criterion 2—The Proposed Change Does Not Create the Possibility of a New or Different Kind of Accident from any Previously Evaluated. The proposed change to Technical Specification 5.5.15 involves a one-time extension to the current interval for Type A containment testing. The reactor containment and the testing requirements invoked to periodically demonstrate the integrity of the reactor containment exist to ensure the plant's ability to mitigate the consequences of an accident and do not involve the prevention or identification of any precursors of an accident. The proposed Technical Specification change does not involve a physical change to the plant ( *i.e.* , no new or different type of equipment will be installed) or changes in the methods in which the plant is operated or controlled. Therefore, the proposed Technical Specification change does not create the possibility of a new or different kind of accident from any previously evaluated. Criterion 3—The Proposed Change Does Not Involve a Significant Reduction in a Margin of Safety. The proposed change to Technical Specifications involves a one-time extension to the current interval for Type A containment testing. The proposed Technical Specification change does not alter the manner in which safety limits, limiting safety system set points, or limiting conditions for operation are determined. The specific requirements and conditions of the Primary Containment Leakage Rate Testing Program, as defined in Technical Specifications, exist to ensure that the degree of reactor containment structural integrity and leak-tightness that is considered in the plant safety analysis is maintained. The overall containment leakage rate limit specified by Technical Specifications is maintained. The proposed change involves only the extension of the interval between Type A containment leakage tests. Type B and C containment leakage tests will continue to be performed at the frequency currently required by plant Technical Specifications. Ginna and industry experience strongly supports the conclusion that Type B and C testing detects a large percentage of containment leakage paths and that the percentage of containment leakage paths that are detected only by Type A testing is small. The containment inspections performed in accordance with the ASME Section XI Inservice Inspection

(SLB)inside containment. The changes have also been evaluated to ensure the core response for steam system piping breaks remains acceptable. The changes to the Technical Specifications

(TS)are necessary to properly accommodate the changes in plant configuration and ensure proper testing of the modified components. The proposed changes do not adversely affect accident initiators or precursors nor significantly alter the design assumptions, conditions, and configuration of the facility or the manner in which the plant is operated and maintained. The proposed changes do not adversely alter or prevent the ability of structures, systems, and components

(SLB)inside containment. The changes have also been evaluated to ensure the core response for steam system piping breaks remains acceptable. The changes to the Technical Specifications

(TS)are necessary to properly accommodate the changes in plant configuration and ensure proper testing of the modified components. The change in plant configuration significantly reduces the available water volume and therefore the mass and energy released to the containment in the event of an SLB with failure of a feedwater regulating valve. Existing feedwater flow paths or piping are not significantly altered. An existing manual valve in the flow path to each steam generator is utilized as the main feedwater isolation valve by the addition of an air actuator to provide automatic isolation capability. The changes do not involve a significant change in the methods governing normal plant operation. The TS changes modify the limiting condition for operation, required action statements, associated completion times and surveillance requirements to those that are consistent with those previously approved for Westinghouse plants in the Standard Technical Specifications found in NUREG-1431. The proposed TS changes do not create the possibility of a new or different [kind] of accident from those previously evaluated since they reflect a design change that will accomplish the same feedwater isolation function as previously performed by the main feedwater pump discharge isolation valves with no significant change to the manner in which the feedwater system operates. Therefore, the changes do not create the possibility of a new or different kind of accident from any accident previously evaluated. 3. Does the proposed change involve a significant reduction in a margin of safety? *Response:* No. The proposed changes involve a modification to the plant configuration to ensure the acceptability of containment response for Steam Line Breaks

(SLB)inside containment. The changes have also been evaluated to ensure the core response for steam system piping breaks remains acceptable. The changes to the Technical Specifications

(TS)are necessary to properly accommodate the changes in plant configuration and ensure proper testing of the modified components. The level of safety of facility operation is unaffected by the proposed changes since there is no change in the intent of the TS requirements of assuring proper main feedwater isolation in the event of a steam line break inside containment. The response of the plant systems to accidents and transients reported in the Updated Final Safety Analysis Report (UFSAR) is not adversely affected by this change. Therefore, the capability to satisfy accident analysis acceptance criteria is not adversely affected. The TS changes modify the limiting condition for operation, required action statements, associated completion times and surveillance requirements to those that are consistent with those previously approved for Westinghouse plants in the Standard Technical Specifications found in NUREG-1431. The proposed TS changes do not involve a significant reduction in [a] margin of safety since they are based upon a modification that will maintain [a] margin of safety with respect to feedwater addition for a main steam line break inside containment to the previously analyzed condition. Therefore, the changes do not involve a significant reduction in a margin of safety. The NRC staff has reviewed the licensee's analysis and, based on this review, it appears that the three standards of 10 CFR 50.92(c) are satisfied. Therefore, the NRC staff proposes to determine that the amendment request involves no significant hazards consideration. *Attorney for licensee:* Daniel F. Stenger, Ballard Spahr Andrews & Ingersoll, LLP, 601 13th Street, NW., Suite 1000 South, Washington, DC 20005. *NRC Section Chief:* Richard J. Laufer. R.E. Ginna Nuclear Power Plant, LLC, Docket No. 50-244, R.E. Ginna Nuclear Power Plant, Wayne County, New York *Date of amendment request:* April 29, 2005. *Description of amendment request:* The amendment would revise Technical Specification

(TS)3.5.1, “Accumulators,” and TS 3.5.4, “Refueling Water Storage Tank (RWST),” to reflect the results of revised analyses performed to accommodate a planned power uprate for the facility and revise TS 5.6.5, “Core Operating Limits Report (COLR),” to permit the use of NRC-approved methodology for large-break and small-break loss-of-coolant accidents (LOCAs). *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 include revising accumulator volume and boron concentration requirements and Refueling Water Storage Tank

(RWST)boron concentration requirements that are necessary to accommodate expected changes in the nuclear fuel ( *e.g.* , higher enrichment) that are associated with the planned power uprate. Additionally, the change would allow Ginna to utilize analysis methodologies that have been previously approved for use at Westinghouse nuclear plants. The changes to the TS are necessary to ensure the acceptability of these systems to perform their intended function in the event of an accident. The proposed changes do not adversely affect accident initiators or precursors nor significantly alter the design assumptions, conditions, and configuration of the facility or the manner in which the plant is operated and maintained. The proposed changes do not adversely alter or prevent the ability of structures, systems, and components

(SSCs)from performing their intended function to mitigate the consequences of an initiating event within the assumed acceptance limits. The proposed changes do not affect the source term, containment isolation, or radiological release assumptions used in evaluating the radiological consequences of an accident previously evaluated. Further, the proposed changes do not increase the types and amounts of radioactive effluent that may be released offsite, nor significantly increase individual or cumulative occupational/public radiation exposures. The proposed changes cannot affect the probability of an accident occurring since they reflect a necessary change in plant design consistent with current design which is not an accident initiator. The proposed changes cannot increase the consequences of postulated accidents since they reflect a change in plant design that will continue to mitigate the effects of potential accidents. Therefore, the changes do not involve a significant increase in the probability or consequences of an accident previously evaluated. 2. Does the proposed change create the possibility of a new or different kind of accident from any accident previously evaluated? *Response:* No. The proposed changes include revising accumulator volume and boron concentration requirements and RWST boron concentration requirements that are necessary to accommodate expected changes in the nuclear fuel ( *e.g.* , higher enrichment) that are associated with the planned power uprate. Additionally, the change would allow Ginna to utilize analysis methodologies that have been previously approved for use at Westinghouse nuclear plants. The changes to the TS are necessary to ensure the acceptability of these systems to perform their intended function in the event of an accident. The proposed changes involve changes to accumulator volume and boron concentration requirements and RWST boron concentration requirements to ensure the continued acceptability of LOCA and post LOCA analysis results. The changes to the Technical Specifications

(TS)are necessary to properly accommodate the changes in plant design. The changes ensure applicable acceptance criteria will continue to be met. The changes do not involve a significant change in the methods governing normal plant operation. The proposed TS changes do not create the possibility of a new or different [kind] of accident from those previously evaluated since they reflect a change that will ensure the accumulators and RWST will continue to perform their intended function in the event of an accident. Therefore, the changes do not create the possibility of a new or different kind of accident from any accident previously evaluated. 3. Does the proposed change involve a significant reduction in a margin of safety? *Response:* No. The proposed changes include revising accumulator volume and boron concentration requirements and RWST boron concentration requirements that are necessary to accommodate expected changes in the nuclear fuel ( *e.g.* , higher enrichment) that are associated with the planned power uprate. Additionally, the change would allow Ginna to utilize analysis methodologies that have been previously approved for use at Westinghouse nuclear plants. The changes to the TS are necessary to ensure the acceptability of these systems to perform their intended function in the event of an accident. The level of safety of facility operation is not significantly affected by the proposed changes since there is no change in the intent of the TS requirements of assuring proper plant response in the event of an accident. The response of the plant systems to accidents and transients reported in the Updated Final Safety Analysis Report (UFSAR) is not adversely affected by this change. Therefore, the capability to satisfy accident analysis acceptance criteria is not adversely affected. The proposed TS change cannot involve a significant reduction in [a] margin of safety since it is based upon changes that will maintain a substantial margin of safety with respect to accumulators and RWST functions. Therefore, the changes do not involve a significant reduction in a margin of safety. The NRC staff has reviewed the licensee's analysis and, based on this review, it appears that the three standards of 10 CFR 50.92(c) are satisfied. Therefore, the NRC staff proposes to determine that the amendment request involves no significant hazards consideration. *Attorney for licensee:* Daniel F. Stenger, Ballard Spahr Andrews & Ingersoll, LLP, 601 13th Street, NW., Suite 1000 South, Washington, DC 20005. *NRC Section Chief:* Richard J. Laufer. R.E. Ginna Nuclear Power Plant, LLC, Docket No. 50-244, R.E. Ginna Nuclear Power Plant, Wayne County, New York *Date of amendment request:* April 29, 2005. *Description of amendment request:* The amendment would revise Technical Specifications

(TSs)to allow the use of Relaxed Axial Offset Control

(RAOC)methodology in reducing operator action required to maintain conformance with power distribution control TS and increasing the ability to return to power after a plant trip or transient while still maintaining margin to safety limits under all operating conditions. *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 changes involve a significant increase in the probability or consequences of an accident previously evaluated? *Response:* No. The proposed changes will not involve a significant increase in the probability or consequences of an accident previously evaluated. The proposed changes do not initiate an accident. Evaluations and analyses of accidents, which are potentially affected by the parameters and assumptions, associated with the RAOC and F Q

(Z)methodologies have shown that design standards and applicable safety criteria will continue to be met. The consideration of these changes does not result in a situation where the design, material, or construction standards that were applicable prior to the change are altered. Therefore, the proposed changes will not result in any additional challenges to plant equipment that could increase the probability of any previously evaluated accident. The proposed changes associated with the RAOC and F Q

(Z)methodologies do not affect plant systems such that their function in the control of radiological consequences is adversely affected. The actual plant configurations, performance of systems, or initiating event mechanisms are not being changed as a result of the proposed changes. The design standards and applicable safety criteria limits will continue to be met; therefore, fission barrier integrity is not challenged. The proposed changes associated with the RAOC and F Q

(Z)methodologies have been shown not to adversely affect the plant response to postulated accident scenarios. The proposed changes will therefore not affect the mitigation of the radiological consequences of any accident described in the Updated Final Safety Analysis Report (UFSAR). Therefore, the proposed changes do not involve a significant increase in the consequences of an accident previously evaluated. 2. Do the proposed changes create the possibility of a new or different kind of accident from any accident previously evaluated? *Response:* No. The proposed changes will not create the possibility of a new or different kind of accident from any accident previously evaluated. No new accident scenarios, failure mechanisms, or limiting single failures are introduced as a result of the proposed change. The proposed changes do not challenge the performance or integrity of any safety-related system. The possibility for a new or different type of accident from any accident previously evaluated is not created since the proposed changes do not result in a change to the design basis of any plant structure, system or component. Evaluation of the effects of the proposed changes has shown that design standards and applicable safety criteria continue to be met. Equipment important to safety will continue to operate as designed and component integrity will not be challenged. The proposed changes do not result in any event previously deemed incredible being made credible. The proposed changes will not result in conditions that are more adverse and will not result in any increase in the challenges to safety systems. Therefore, the proposed changes do not create the possibility of a new or different kind of accident from any previously analyzed. 3. Do the proposed changes involve a significant reduction in a margin of safety? *Response:* No. The proposed changes will not involve a significant reduction in a margin of safety. The proposed changes will assure continued compliance within the acceptance limits previously reviewed and approved by the NRC for RAOC and F Q

(Z)methodologies. The appropriate acceptance criteria for the various analyses and evaluations will continue to be met. The projected impact associated with the implementation of RAOC on peak cladding temperature

(PCT)has been incorporated into the LOCA [loss-of-coolant accident] analyses for the planned extended power uprate. It has [been] determined that implementation of RAOC at the extended power uprate power level does not result in a significant reduction in a margin of safety. The analysis performed for EPU [extended power uprate] bounds operation at the current power level. Therefore, the proposed changes do not involve a significant reduction in [a] margin of safety. The NRC staff has reviewed the licensee's analysis and, based on this review, it appears that the three standards of 10 CFR 50.92(c) are satisfied. Therefore, the NRC staff proposes to determine that the amendment request involves no significant hazards consideration. *Attorney for licensee:* Daniel F. Stenger, Ballard Spahr Andrews & Ingersoll, LLP, 601 13th Street, NW., Suite 1000 South, Washington, DC 20005. *NRC Section Chief:* Richard J. Laufer. Previously Published Notices of Consideration of Issuance of Amendments to Facility Operating Licenses, Proposed No Significant Hazards Consideration Determination, and Opportunity for a Hearing The following notices were previously published as separate individual notices. The notice content was the same as above. They were published as individual notices either because time did not allow the Commission to wait for this biweekly notice or because the action involved exigent circumstances. They are repeated here because the biweekly notice lists all amendments issued or proposed to be issued involving no significant hazards consideration. For details, see the individual notice in the **Federal Register** on the day and page cited. This notice does not extend the notice period of the original notice. Nuclear Management Company, LLC, Docket No. 50-305, Kewaunee Nuclear Power Plant, Kewaunee County, Wisconsin *Date of amendment request:* May 5, 2005. *Brief description of amendment request:* The proposed amendment would change the Technical Specifications to modify the auxiliary feedwater

(AFW)pump suction protection requirements and change the design basis as described in the Updated Safety Analysis Report to revise the functionality of the discharge pressure switches to provide pump runout protection, which requires operator actions to restore the AFW pumps for specific post-accident recovery activities. *Date of publication of individual notice in* Federal Register *:* May 13, 2005 (70 FR 25619). *Expiration date of individual notice:* June 13, 2005. PPL Susquehanna, LLC, Docket Nos. 50-387 and 50-388, Susquehanna Steam Electric Station, Units 1 and 2 (SSES 1 and 2), Luzerne County, Pennsylvania *Date of amendment request:* April 27, 2005, as supplemented May 4, 2005. *Description of amendment request:* The proposed amendment would revise the SSES 1 and 2, Technical Specification 3.8.4, “DC Sources-Operating,” to address new required actions for the condition in which a 125 volt direct current

(VDC)charger is taken out of service for the purposes of a special inspection and related activities. The proposed changes would be in effect until the special inspection and related activities are completed on each of the 125 VDC Class 1E battery chargers but no later than 60 days following the issuance of the Unit 1 and 2 amendments. Specifically, required Action A.2.1 would require that surveillance requirement 3.8.6.1 be performed within 2 hours and once-per-12 hours thereafter; and, required Action A.2.2 would restrict the restoration time for the inoperable electrical power subsystem to 36 hours. *Date of publication of individual notice in* Federal Register *:* May 12, 2005 (70 FR 25122). *Expiration date of individual notice:* Comments, May 27, 2005; Hearing, July 11, 2005. Notice of Issuance of Amendments to Facility Operating Licenses During the period since publication of the last biweekly notice, the Commission has issued the following amendments. The Commission has determined for each of these amendments that the application complies with the standards and requirements of the Atomic Energy Act of 1954, as amended (the Act), and the Commission's rules and regulations. The Commission has made appropriate findings as required by the Act and the Commission's rules and regulations in 10 CFR Chapter I, which are set forth in the license amendment. Notice of Consideration of Issuance of Amendment to Facility Operating License, Proposed No Significant Hazards Consideration Determination, and Opportunity for a Hearing in connection with these actions was published in the **Federal Register** as indicated. Unless otherwise indicated, the Commission has determined that these amendments satisfy the criteria for categorical exclusion in accordance with 10 CFR 51.22. Therefore, pursuant to 10 CFR 51.22(b), no environmental impact statement or environmental assessment need be prepared for these amendments. If the Commission has prepared an environmental assessment under the special circumstances provision in 10 CFR 51.12(b) and has made a determination based on that assessment, it is so indicated. For further details with respect to the action see

(1)the applications for amendment,

(2)the amendment, and

(3)the Commission's related letter, Safety Evaluation and/or Environmental Assessment as indicated. All of these items are available for public inspection at the Commission's Public Document Room (PDR), located at One White Flint North, Public File Area 01F21, 11555 Rockville Pike (first floor), Rockville, Maryland. Publicly available records will be accessible from the Agencywide Documents Access and Management Systems (ADAMS) Public Electronic Reading Room on the internet at the NRC Web site, *http://www.nrc.gov/reading-rm/adams.html.* If you do not have access to ADAMS or if there are problems in accessing the documents located in ADAMS, contact the PDR Reference staff at 1

(800)397-4209,

(301)415-4737 or by e-mail to *pdr@nrc.gov.* AmerGen Energy Company, LLC, Docket No. 50-461, Clinton Power Station, Unit 1, DeWitt County, Illinois *Date of application for amendment:* October 21, 2004, as supplemented January 4, 2005. *Brief description of amendment:* The amendment deleted the Technical Specification

(TS)requirements to submit monthly operating reports and annual occupational radiation exposure reports. The change is consistent with Revision 1 of NRC-approved Industry/Technical Specifications Task Force

(TSTF)Standard TS Change Traveler, TSTF-369, “Removal of Monthly Operating Report and Occupational Radiation Exposure Report.” This TS improvement was announced in the **Federal Register** (69 FR 35067) on June 23, 2004, as part of the Consolidated Line Item Improvement Process (CLIIP). *Date of issuance:* May 20, 2005. *Effective date:* As of the date of issuance and shall be implemented within 60 days. *Amendment No.:* 165. *Facility Operating License No. NPF-62:* The amendment revised the Technical Specifications. *Date of initial notice in* Federal Register : April 12, 2005 (70 FR 19114). The Commission's related evaluation of the amendment is contained in a Safety Evaluation dated May 20, 2005. *No significant hazards consideration comments received:* No. Duke Energy Corporation, Docket Nos. 50-269, 50-270, and 50-287, Oconee Nuclear Station, Units 1, 2, and 3, Oconee County, South Carolina *Date of application of amendments:* February 14, 2005. *Brief description of amendments:* The amendments revised the Technical Specification Surveillance Requirement 3.3.7.1 to extend the frequency of the channel functional test for the Engineered Safeguards Protective System digital actuation logic channels from once every 31 days to once every 92 days. *Date of Issuance:* May 19, 2005. *Effective date:* As of the date of issuance and shall be implemented within 90 days. *Amendment Nos.:* 345, 347 and 346. *Renewed Facility Operating License Nos. DPR-38, DPR-47, and DPR-55:* Amendments revised the Technical Specifications. *Date of initial notice in* **Federal Register** : March 15, 2005 (70 FR 12745). The Commission's related evaluation of the amendments is contained in a Safety Evaluation dated May 19, 2005. *No significant hazards consideration comments received:* No. Entergy Operations, Inc., Docket No. 50-368, Arkansas Nuclear One, Unit No. 2, Pope County, Arkansas *Date of amendment request:* December 20, 2004, as supplemented by letter dated April 12, 2005. *Brief description of amendment:* The amendment deletes TS 6.6.1, “Occupational Radiation Exposure Report” and TS 6.6.4, “Monthly Operating Reports,” as described in the Notice of Availability published in the **Federal Register** on June 23, 2004 (69 FR 35067). *Date of issuance:* May 13, 2005. *Effective date:* As of the date of issuance and shall be implemented within 90 days from the date of issuance. *Amendment No.:* 259. *Facility Operating License No. NPF-6:* Amendment revised the Technical Specifications. *Date of initial notice in* Federal Register : January 18, 2005 (70 FR 2890). The supplement dated April 12, 2005, provided additional information that clarified the application, did not expand the scope of the application as originally noticed, and did not change the staff's original proposed no significant hazards consideration determination. The Commission's related evaluation of the amendment is contained in a Safety Evaluation dated May 13, 2005. *No significant hazards consideration comments received:* No. Entergy Operations, Inc., Docket No. 50-382, Waterford Steam Electric Station, Unit 3, St. Charles Parish, Louisiana *Date of amendment request:* December 22, 2004. *Brief description of amendment:* The requested change deletes Technical Specification

(TS)6.9.1.5, “Occupational Radiation Exposure Report,” and 6.9.1.6, “Monthly Operating Reports,” as described in the Notice of Availability published in the **Federal Register** on June 23, 2004 (69 FR 35067). *Date of issuance:* May 25, 2005. *Effective date:* As of the date of issuance and shall be implemented 90 days from the date of issuance. *Amendment No.:* 202. *Facility Operating License No. NPF-38:* The amendment revised the Technical Specifications. *Date of initial notice in* Federal Register : March 15, 2005 (70 FR 12746). The Commission's related evaluation of the amendment is contained in a Safety Evaluation dated May 25, 2005. *No significant hazards consideration comments received:* No. Entergy Operations, Inc., Docket No. 50-382, Waterford Steam Electric Station, Unit 3 (Waterford 3), St. Charles Parish, Louisiana *Date of amendment request:* April 27, 2005, as supplemented by letter dated May 12, 2005. *Brief description of amendment:* The amendment removed the license condition on instrument uncertainty that was imposed on the Waterford 3 license with the issuance of License Amendment 199 for the extended power uprate. *Date of issuance:* May 23, 2005. *Effective date:* As of the date of issuance and shall be implemented within 60 days from the date of issuance. *Amendment No.:* 201. *Facility Operating License No. NPF-38:* The amendment revised the Operating License. *Date of initial notice in* Federal Register : May 5, 2005 (70 FR 23892). The May 12, 2005, supplemental letter provided clarifying information that did not change the scope of the original **Federal Register** notice or the original no significant hazards consideration determination. The Commission's related evaluation of the amendment is contained in a Safety Evaluation dated May 23, 2005. *No significant hazards consideration comments received:* No. Exelon Generation Company, LLC, Docket Nos. STN 50-454 and STN 50-455, Byron Station, Unit Nos. 1 and 2, Ogle County, Illinois; Docket Nos. STN 50-456 and STN 50-457, Braidwood Station, Unit Nos. 1 and 2, Will County, Illinois *Date of application for amendments:* September 15, 2004. *Brief description of amendments:* The amendments deleted the Technical Specification

(TS)requirements related to hydrogen recombiners. The TS changes support implementation of the revisions to Title 10 of the Code of Federal Regulations (10 CFR) section 50.44, “Standards for Combustible Gas Control System in Light-Water-Cooled Power Reactors,” that became effective on October 16, 2003. The changes are consistent with Revision 1 of the NRC-approved Industry/Technical Specifications Task Force

(TSTF)Standard Technical Specification Change Traveler, TSTF-447, “Elimination of Hydrogen Recombiners and Change to Hydrogen and Oxygen Monitors.” *Date of issuance:* May 19, 2005. *Effective date:* As of the date of issuance and shall be implemented within 120 days. *Amendment Nos.:* 137, 137, 143, 143. *Facility Operating License Nos. NPF-37, NPF-66, NPF-72 and NPF-77:* The amendments revised the Technical Specifications. *Date of initial notice in* Federal Register: February 1, 2005 (70 FR 5243). The Commission's related evaluation of the amendments is contained in a Safety Evaluation dated May 19, 2005. *No significant hazards consideration comments received:* No. Exelon Generation Company, LLC, and PSEG Nuclear LLC, Docket Nos. 50-277 and 50-278, Peach Bottom Atomic Power Station, Units 2 and 3,York and Lancaster Counties, Pennsylvania *Date of application for amendments:* June 15, 2004, as supplemented January 12, 2005. *Brief description of amendments:* These amendments changed Surveillance Requirement

(SR)3.8.1.3, monthly diesel surveillance test; SR 3.8.1.10, diesel full load rejection test; SR 3.8.1.14.3.b, diesel 24-hour run test; and, SR 3.8.1.15, diesel hot restart test, to permit these tests to be run at a higher load up to 2800 kW. *Date of issuance:* May 20, 2005. *Effective date:* As of the date of issuance, and shall be implemented within 30 days. *Amendments Nos.:* 253 and 256. *Renewed Facility Operating License Nos. DPR-44 and DPR-56:* The amendments revised the Technical Specifications. *Date of initial notice in* Federal Register: July 20, 2004, (69 FR 43461). The January 12, 2005, supplement provided additional information that clarified the application, did not expand the scope of the application as originally noticed, and did not change the staff's original proposed no significant hazards consideration determination as published in the **Federal Register** on July 20, 2004 (69 FR 43461). The Commission's related evaluation of the amendments is contained in a Safety Evaluation dated May 20, 2005. *No significant hazards consideration comments received:* No. Omaha Public Power District, Docket No. 50-285, Fort Calhoun Station, Unit No. 1, Washington County, Nebraska *Date of amendment request:* May 21, 2004, as supplemented by letters dated September 16, and December 14, 2004. *Brief description of amendment:* The amendment revised the Technical Specification Bases Section to allow the containment spray pumps to be secured during a loss-of-coolant accident, when certain conditions are met, to minimize the potential for containment sump clogging. *Date of issuance:* May 20, 2005. *Effective date:* As of the date of issuance, and shall be implemented within 120 days of issuance. *Amendment No.:* 235. *Renewed Facility Operating License No. DPR-40:* The amendment revised the Technical Specifications Bases. *Date of initial notice in* Federal Register: June 22, 2004 (69 FR 34703). The September 16, and December 14, 2004, supplemental letters provided additional information that clarified the application, did not expand the scope of the application as originally noticed, and did not change the staff's original no significant hazards consideration determination. The Commission's related evaluation of the amendment is contained in a safety evaluation dated May 20, 2005. *No significant hazards consideration comments received:* No. South Carolina Electric & Gas Company, South Carolina Public Service Authority, Docket No. 50-395, Virgil C. Summer Nuclear Station, Unit No. 1, Fairfield County, South Carolina *Date of application for amendment:* May 21, 2004. *Brief description of amendment:* The amendment revises Technical Specifications related to the reactor coolant pump flywheel inspection program by relocating the requirements from the limiting conditions for operation to the administrative controls section and increasing the inspection interval to 20 years. *Date of issuance:* May 9, 2005. *Effective date:* As of the date of issuance and shall be implemented within 60 days. *Amendment No.:* 172. *Renewed Facility Operating License No. NPF-12:* Amendment revises the Technical Specifications. *Date of initial notice in* Federal Register : March 1, 2005 (70 FR 9995). The Commission's related evaluation of the amendment is contained in a Safety Evaluation dated May 9, 2005. *No significant hazards consideration comments received:* No. STP Nuclear Operating Company, Docket Nos. 50-498 and 50-499, South Texas Project, Units 1 and 2, Matagorda County, Texas *Date of amendment request:* October 21, 2004, as supplemented December 13 and 22, 2004, and February 23 and March 1, 2005. *Brief description of amendments:* Conforming license amendments to remove AEP Texas Central Company as an “Owner” in the facility operating licenses. *Date of issuance:* May 19, 2005. *Effective date:* As of the date of issuance and shall be implemented within 365 days of issuance. *Amendment Nos.:* Unit 1-172; Unit 2-160 *Facility Operating License Nos. NPF-76 and NPF-80:* The amendments revised the licenses. *Date of initial notice in* Federal Register : December 14, 2004 (69 FR 76019). The supplements dated December 13 and 22, 2004, and February 23 and March 1, 2005, provided additional information that clarified the application, did not expand the scope of the application as originally noticed, and did not change the staff's original proposed no significant hazards consideration determination as published in the **Federal Register** . The Commission's related evaluation of the amendments is contained in a Safety Evaluation dated May 19, 2005. *No significant hazards consideration comments received:* No. Notice of Issuance of Amendments to Facility Operating Licenses and Final Determination of No Significant Hazards Consideration and Opportunity for a Hearing (Exigent Public Announcement or Emergency Circumstances) During the period since publication of the last biweekly notice, the Commission has issued the following amendments. The Commission has determined for each of these amendments that the application for the amendment complies with the standards and requirements of the Atomic Energy Act of 1954, as amended (the Act), and the Commission's rules and regulations. The Commission has made appropriate findings as required by the Act and the Commission's rules and regulations in 10 CFR chapter I, which are set forth in the license amendment. Because of exigent or emergency circumstances associated with the date the amendment was needed, there was not time for the Commission to publish, for public comment before issuance, its usual Notice of Consideration of Issuance of Amendment, Proposed No Significant Hazards Consideration Determination, and Opportunity for a Hearing. For exigent circumstances, the Commission has either issued a **Federal Register** notice providing opportunity for public comment or has used local media to provide notice to the public in the area surrounding a licensee's facility of the licensee's application and of the Commission's proposed determination of no significant hazards consideration. The Commission has provided a reasonable opportunity for the public to comment, using its best efforts to make available to the public means of communication for the public to respond quickly, and in the case of telephone comments, the comments have been recorded or transcribed as appropriate and the licensee has been informed of the public comments. In circumstances where failure to act in a timely way would have resulted, for example, in derating or shutdown of a nuclear power plant or in prevention of either resumption of operation or of increase in power output up to the plant's licensed power level, the Commission may not have had an opportunity to provide for public comment on its no significant hazards consideration determination. In such case, the license amendment has been issued without opportunity for comment. If there has been some time for public comment but less than 30 days, the Commission may provide an opportunity for public comment. If comments have been requested, it is so stated. In either event, the State has been consulted by telephone whenever possible. Under its regulations, the Commission may issue and make an amendment immediately effective, notwithstanding the pendency before it of a request for a hearing from any person, in advance of the holding and completion of any required hearing, where it has determined that no significant hazards consideration is involved. The Commission has applied the standards of 10 CFR 50.92 and has made a final determination that the amendment involves no significant hazards consideration. The basis for this determination is contained in the documents related to this action. Accordingly, the amendments have been issued and made effective as indicated. Unless otherwise indicated, the Commission has determined that these amendments satisfy the criteria for categorical exclusion in accordance with 10 CFR 51.22. Therefore, pursuant to 10 CFR 51.22(b), no environmental impact statement or environmental assessment need be prepared for these amendments. If the Commission has prepared an environmental assessment under the special circumstances provision in 10 CFR 51.12(b) and has made a determination based on that assessment, it is so indicated. For further details with respect to the action see

(1)The application for amendment,

(2)the amendment to Facility Operating License, and

(3)the Commission's related letter, Safety Evaluation and/or Environmental Assessment, as indicated. All of these items are available for public inspection at the Commission's Public Document Room (PDR), located at One White Flint North, Public File Area 01F21, 11555 Rockville Pike (first floor), Rockville, Maryland. Publicly available records will be accessible from the Agencywide Documents Access and Management System's (ADAMS) Public Electronic Reading Room on the Internet at the NRC Web site, *http://www.nrc.gov/reading-rm/adams.html.* If you do not have access to ADAMS or if there are problems in accessing the documents located in ADAMS, contact the PDR Reference staff at 1

(800)397-4209,

(301)415-4737 or by e-mail to *pdr@nrc.gov.* The Commission is also offering an opportunity for a hearing with respect to the issuance of the amendment. Within 60 days after the date of publication of this notice, the licensee may file a request for a hearing with respect to issuance of the amendment to the subject facility operating license and any person whose interest may be affected by this proceeding and who wishes to participate as a party in the proceeding must file a written request for a hearing and a petition for leave to intervene. Requests for a hearing and a petition for leave to intervene shall be filed in accordance with the Commission's “Rules of Practice for Domestic Licensing Proceedings” in 10 CFR part 2. Interested persons should consult a current copy of 10 CFR 2.309, which is available at the Commission's PDR, located at One White Flint North, Public File Area 01F21, 11555 Rockville Pike (first floor), Rockville, Maryland, and electronically on the Internet at the NRC Web site, *http://www.nrc.gov/reading-rm/doc-collections/cfr/.* If there are problems in accessing the document, contact the PDR Reference staff at 1

(800)397-4209,

(301)415-4737, or by e-mail to *pdr@nrc.gov.* If a request for a hearing or petition for leave to intervene is filed by the above date, the Commission or a presiding officer designated by the Commission or by the Chief Administrative Judge of the Atomic Safety and Licensing Board Panel, will rule on the request and/or petition; and the Secretary or the Chief Administrative Judge of the Atomic Safety and Licensing Board will issue a notice of a hearing or an appropriate order. As required by 10 CFR 2.309, a petition for leave to intervene shall set forth with particularity the interest of the petitioner in the proceeding, and how that interest may be affected by the results of the proceeding. The petition should specifically explain the reasons why intervention should be permitted with particular reference to the following general requirements:

(1)The name, address, and telephone number of the requestor or petitioner;

(2)the nature of the requestor's/petitioner's right under the Act to be made a party to the proceeding;

(3)the nature and extent of the requestor's/petitioner's property, financial, or other interest in the proceeding; and

(4)the possible effect of any decision or order which may be entered in the proceeding on the requestor's/petitioner's interest. The petition must also identify the specific contentions which the petitioner/requestor seeks to have litigated at the proceeding. Each contention must consist of a specific statement of the issue of law or fact to be raised or controverted. In addition, the petitioner/requestor shall provide a brief explanation of the bases for the contention and a concise statement of the alleged facts or expert opinion which support the contention and on which the petitioner intends to rely in proving the contention at the hearing. The petitioner must also provide references to those specific sources and documents of which the petitioner is aware and on which the petitioner intends to rely to establish those facts or expert opinion. The petition must include sufficient information to show that a genuine dispute exists with the applicant on a material issue of law or fact. 1 Contentions shall be limited to matters within the scope of the amendment under consideration. The contention must be one which, if proven, would entitle the petitioner to relief. A petitioner/requestor who fails to satisfy these requirements with respect to at least one contention will not be permitted to participate as a party. 1 To the extent that the applications contain attachments and supporting documents that are not publicly available because they are asserted to contain safeguards or proprietary information, petitioners desiring access to this information should contact the applicant or applicant's counsel and discuss the need for a protective order. Each contention shall be given a separate numeric or alpha designation within one of the following groups: 1. Technical—primarily concerns/issues relating to technical and/or health and safety matters discussed or referenced in the applications. 2. Environmental—primarily concerns/issues relating to matters discussed or referenced in the environmental analysis for the applications. 3. Miscellaneous—does not fall into one of the categories outlined above. As specified in 10 CFR 2.309, if two or more petitioners/requestors seek to co-sponsor a contention, the petitioners/requestors shall jointly designate a representative who shall have the authority to act for the petitioners/requestors with respect to that contention. If a petitioner/requestor seeks to adopt the contention of another sponsoring petitioner/requestor, the petitioner/requestor who seeks to adopt the contention must either agree that the sponsoring petitioner/requestor shall act as the representative with respect to that contention, or jointly designate with the sponsoring petitioner/requestor a representative who shall have the authority to act for the petitioners/requestors with respect to that contention. Those permitted to intervene become parties to the proceeding, subject to any limitations in the order granting leave to intervene, and have the opportunity to participate fully in the conduct of the hearing. Since the Commission has made a final determination that the amendment involves no significant hazards consideration, if a hearing is requested, it will not stay the effectiveness of the amendment. Any hearing held would take place while the amendment is in effect. A request for a hearing or a petition for leave to intervene must be filed by:

(1)First class mail addressed to the Office of the Secretary of the Commission, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001, Attention: Rulemaking and Adjudications Staff;

(3)e-mail addressed to the Office of the Secretary, U.S. Nuclear Regulatory Commission, *HearingDocket@nrc.gov* ; or

(4)facsimile transmission addressed to the Office of the Secretary, U.S. Nuclear Regulatory Commission, Washington, DC, Attention: Rulemakings and Adjudications Staff at

(301)415-1101, verification number is

(301)415-3725 or by e-mail to *OGCMailCenter@nrc.gov.* A copy of the request for hearing and petition for leave to intervene should also be sent to the attorney for the licensee. Nontimely requests and/or petitions and contentions will not be entertained absent a determination by the Commission or the presiding officer or the Atomic Safety and Licensing Board that the petition, request and/or the contentions should be granted based on a balancing of the factors specified in 10 CFR 2.309(a)(1)(i)-(viii). Tennessee Valley Authority, Docket No. 50-260, Browns Ferry Nuclear Plant, Unit 2, Limestone County, Alabama *Date of amendment request:* April 26, 2005, as supplemented on April 29 and on May 3, 2005. *Description of amendment request:* Revises the Completion Time for the Action associated with an inoperable low pressure Emergency Core Cooling System injection/spray system to 14 days on a one-time basis. *Date of issuance:* May 9, 2005. *Effective date:* As of date of issuance and shall be implemented within 7 days. *Amendment No.:* 294. *Facility Operating License No. DPR-52:* Amendment revises the Technical Specifications. *Public comments requested as to proposed no significant hazards consideration (NSHC):* No. The Commission's related evaluation of the amendment, finding of emergency circumstances, and final determination of NSHC determination are contained in a Safety Evaluation dated May 9, 2005. *Attorney for licensee:* General Counsel, Tennessee Valley Authority, 400 West Summit Hill Drive, ET 11A, Knoxville, Tennessee 37902. *NRC Section Chief:* Michael L. Marshall, Jr. Dated in Rockville, Maryland, this 27th day of May 2005. For the Nuclear Regulatory Commission. Ledyard B. Marsh, Director, Division of Licensing Project Management, Office of Nuclear Reactor Regulation. [FR Doc. E5-2848 Filed 6-6-05; 8:45 am] BILLING CODE 7590-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 35-27978] Notice of Proposal To Amend Articles of Incorporation; Order Authorizing the Solicitation of Proxies June 1, 2005. Notice is hereby given that the following filing has been made with the Commission pursuant to provisions of the Act and rules promulgated under the Act. All interested persons are referred to the declaration for complete statements of the proposed transactions summarized below. The declaration and any amendments are available for public inspection through the Commission's Branch of Public Reference. Interested persons wishing to comment or request a hearing on the declaration should submit their views in writing by June 24, 2005 to the Secretary, Securities and Exchange Commission, Washington DC 20549-0609 and serve a copy on the declarant at the address specified below. Proof of service (by affidavit or, in case of an attorney at law, by certificate) should be filed with the request. Any request for hearing should specifically identify the issues of facts or law that are disputed. A person who so desires will be notified of any hearing, if ordered, and will receive a copy of any notice or order issued in this matter. After June 24, 2005, the declaration, as filed or amended, may be granted or permitted to become effective. Exelon Corporation (70-10291) Exelon Corporation (“Exelon”), 10 South Dearborn Street, 37th Floor, Chicago, Illinois, 60603, a registered holding company, has filed a declaration, as amended (“Declaration”) under sections 6(a), 7 and 12(e) of the Public Utility Holding Company Act of 1935 as amended (“Act”), and rules 54 and 62 under the Act. Exelon seeks authority to amend its Amended and Restated Articles of Incorporation to increase the amount of the Exelon's authorized capital stock and authority to solicit the proxies of the holders of common stock of Exelon. On December 20, 2004, Exelon and Public Service Enterprise Group Incorporated (“PSEG”), an electric and gas utility holding company that claims exemption from registration pursuant to rule 2 under section 3(a)(1) of the Act, entered into an Agreement and Plan of Merger (“Merger Agreement”). 1 Under the terms of the Merger Agreement, PSEG would merge into Exelon (“Merger”), thereby ending the separate corporate existence of PSEG. Each PSEG shareholder will be entitled to receive 1.225 shares of Exelon common stock for each PSEG share held and cash in lieu of any fraction of an Exelon share that a PSEG shareholder would have otherwise been entitled to receive. Exelon common stock will be unaffected by the Merger, with each issued and outstanding share remaining outstanding following the Merger as a share in the surviving company. Upon completion of the Merger, Exelon will change its name to Exelon Electric & Gas Corporation (“Exelon”). 1 The Merger is subject to a number of conditions, including the approval of the Commission under the Act and other regulatory approvals. On March 15, 2005 Exelon filed an application with this Commission seeking approval of the Merger and related transactions. SEC File No. 70-10294. As the surviving company in the Merger, Exelon will remain the ultimate corporate parent of Commonwealth Edison Company (“ComEd”), PECO Energy Company (“PECO”), Exelon Generation Company, LLC (“Exelon Generation”) and the other Exelon subsidiaries, and become the ultimate corporate parent of Public Service Electric and Gas Company (“PSE&G”), a public utility company under the Act, and the other PSEG subsidiaries. Exelon will continue to be a registered public utility holding company under the Act, and ComEd, PECO and PSE&G will continue to be operating franchised public utility companies. Exelon will remain headquartered in Chicago, but will also have energy trading and nuclear headquarters in southeastern Pennsylvania and generation headquarters in Newark, New Jersey. PSE&G will remain headquartered in Newark. PECO will remain headquartered in Philadelphia and ComEd will remain headquartered in Chicago. Under the terms of the Merger Agreement, Exelon and PSEG have agreed to convene meetings of their respective shareholders for the purpose of obtaining required stockholder approvals relating to the Merger. Exelon will seek to obtain the affirmative vote of a majority of votes cast by holders of the outstanding shares of the common stock of Exelon (“Exelon Shares”) represented at the Exelon shareholders meeting (“Exelon Shareholders Meeting”) (provided that at least a majority of the Exelon Shares are represented in person or by proxy at such meeting). Exelon is seeking authority to solicit proxies with respect to proposals for Exelon shareholders to approve the issuance of shares of Exelon common stock as contemplated by the Merger Agreement, and an amendment to Exelon's Amended and Restated Articles of Incorporation to increase the number of authorized shares of Exelon common stock from 1,200,000,000 to 2,000,000,000. In addition, Exelon's shareholders will be asked to vote on the election of five directors to Exelon's Board of Directors, the ratification of the Company's independent accountants for 2005, and the approval of the Exelon 2006 Long-Term Incentive Plan and the Exelon Employee Stock Purchase Plan for Unincorporated Subsidiaries. Exelon further asks the Commission to issue an order authorizing Exelon to amend its Amended and Restated Articles of Incorporation to increase the number of authorized shares of Exelon common stock from 1,200,000,000 to 2,000,000,000. Fees and expenses in the estimated amount of $2,140,750.00 are expected by Exelon to be incurred in connection with the proposed transactions (including costs associated with the solicitation of proxies). Exelon states that no state or federal commission, other than this Commission, has jurisdiction over the transactions proposed in the Application. Exelon has filed its proxy solicitation materials and requests that its proposal to solicit proxies be permitted to become effective immediately, as provided in rule 62(d) under the Act. It appears to the Commission that the Declaration, with respect to the proposed solicitation of proxies, should be permitted to become effective immediately under rule 62(d). *It is ordered* , under rule 62 under the Act, that the Declaration regarding the proposed solicitation of proxies be, and it hereby is, permitted to become effective immediately, subject to the terms and conditions contained in rule 24 under the Act. For the Commission, by the Division of Investment Management, pursuant to delegated authority. Margaret H. McFarland, Deputy Secretary. 4 [FR Doc. E5-2898 Filed 6-6-05; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-51770; File No. SR-Amex-2005-040] Self-Regulatory Organizations; American Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change and Amendment Nos. 1 and 2 to Extend Until June 5, 2006, a Pilot Program for Listing Options on Selected Stocks Trading Below $20 at One-Point Intervals May 31, 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 14, 2005, the American Stock Exchange LLC (“Amex” 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 Amex. The Amex filed Amendment Nos. 1 and 2 to the proposal on May 10, 2005, and May 18, 2005, respectively. 3 The Amex filed the proposal, as amended, pursuant to Section 19(b)(3)(A) of the Act, 4 and Rule 19b-4(f)(6) thereunder, 5 which renders the proposal effective upon the filing with the Commission of Amendment No. 2 to the proposal. 6 The Commission is publishing this notice to solicit comments on the proposed rule change, as amended, from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 Amendment No. 2 replaced and superseded the original filing and Amendment No. 1 in their entirety. Amendment No. 2 revises the proposal to change it from a filing made pursuant to Section 19(b)(2) of the Act to a filing made pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-4(f)(6) thereunder. In addition, Amendment No. 2 requests a one-year extension of the $1 strikes pilot program, through June 5, 2006, rather than permanent approval of the pilot. 4 15 U.S.C. 78s(b)(3)(A). 5 17 CFR 240.19b-4(f)(6). 6 As noted above, Amendment No. 2 changed the proposal from a filing made pursuant to Section 19(b)(2) of the Act to a filing made pursuant to Section 19(b)(3)(A) of the Act. The Amex has asked the Commission to waive the five-day pre-filing notice requirement and the 30-day operative delay. *See* Rule 19b-4(f)(6)(iii), 17 CFR 240.19b-4(f)(6)(iii). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Amex proposes to amend Commentary .05 to Amex Rule 903, “Series of Options Open for Trading,” to extend until June 5, 2006, its pilot program for listing options series on selected stocks trading below $20 at one-point intervals (“Pilot Program”). The text of the proposed rule change is available on the Amex's Web site ( *http://www.amex.com* ), at the Amex's principal office, and at the Commission's Public Reference Room. 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 Amex 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 Amex 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 Pilot Program was established in June 2003, 7 with a one-year extension through June 5, 2005, granted by the Commission in June 2004. 8 The Amex believes that the Pilot Program has operated as designed, providing investors with greater flexibility in achieving their investment strategies in connection with stocks trading below $20. Accordingly, the Amex believes that a one-year extension, through June 5, 2006, is reasonable and consistent with the intent of the Pilot Program. 7 *See* Securities Exchange Act Release No. 48024 (June 12, 2003), 68 FR 36617 (June 18, 2003) (order approving File No. SR-Amex-2003-36) (“Pilot Approval Order”). 8 *See* Securities Exchange Act Release No. 49813 (June 4, 2004), 69 FR 33088 (June 14, 2004) (notice of filing and immediate effectiveness of File No. SR-Amex-2004-45) (“Pilot Program Extension Notice”). The Pilot Program permits the Exchange to select a total of five individual stocks on which options series may be listed at $1 strike price intervals. To be eligible for the Pilot Program, an underlying stock must close below $20 on its primary market on the previous trading day. If selected, the Exchange may list $1 strike prices at $1 intervals from $3 to $20, consistent with the terms of the Pilot Program. Under the Pilot Program, a $1 strike price may not be listed that is greater than $5 from the underlying stock's closing price on its primary market on the previous day. The Exchange may also list $1 strikes on any other options class designated by another options exchange that employs a similar pilot program approved by the Commission. The Pilot Program prohibits the Exchange from listing $1 strikes on any series of individual equity options classes that have greater than nine months until expiration. In addition, the Exchange is restricted from listing any series that would result in strike prices being $0.50 apart. To date, the Exchange believes that the Pilot Program has been beneficial to investors and the options market by providing investors with greater flexibility in the trading of equity options that overlie stocks trading below $20. In this manner, options investors are able to better tailor their strategies through the availability of $1 strikes. The Pilot Program Report, attached as Exhibit 3, provides data regarding the Pilot Program as required in the Pilot Program Extension Notice. 9 The Amex notes that, as the data indicates, the $1 strikes exhibited higher volume and open interest than the “standard” strike price intervals. Specifically, the five options classes selected by the Amex for $1 strikes had a trading volume of 595,836 contracts, while the “standard” strikes for the same options classes had a trading volume of 342,553 contracts. Of even greater significance is the difference in open interest between the $1 strikes and “standard” strikes. As of March 8, 2005, $1 strikes open interest totaled 883,471 contracts versus 677,553 contracts for “standard” strikes. Given the limited nature of the Pilot Program, the Exchange submits that the impact on systems has been minimal. Accordingly, the Amex believes that an extension of the Pilot Program for one year through June 5, 2006, is warranted. 9 *See* note 8, *supra.* 2. Statutory Basis The Amex believes that the proposed rule change is consistent with the Section 6(b) of the Act, 10 in general, and furthers the objective of Section 6(b)(5) of the Act, 11 in particular, in that it is designed to promote just and equitable principles of trade and to remove impediments to and perfect the mechanism of a free and open market. 10 15 U.S.C. 78f(b). 11 15 U.S.C. 78f(b)(5). B. Self-Regulatory Organization's Statement on Burden on Competition The Amex believes that the proposed rule change will impose no burden on competition that is not necessary or appropriate in the 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 The Amex has filed the proposed rule change pursuant to Section 19(b)(3)(A) of the Act 12 and subparagraph (f)(6) of Rule 19b-4 thereunder. 13 Because the foregoing proposed rule change:

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

(2)does not impose any significant burden on competition; and

(3)by its terms does not become operative for 30 days after the date of this filing, or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest, the proposed rule change has become effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-4(f)(6) thereunder. 12 15 U.S.C. 78s(b)(3)(A). 13 17 CFR 240.19b-4(f)(6). A proposed rule change filed under Rule 19b-4(f)(6) normally does not become operative for 30 days after the date of filing. However, Rule 19b-4(f)(6)(iii) permits the Commission to designate a shorter time if such action is consistent with the protection of investors and the public interest. In addition, Rule 19b-4(f)(6)(iii) requires a self-regulatory organization to provide the Commission with written notice of its intent to file the proposed rule change, along with a brief description and text of the proposed rule change, at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The Amex has asked the Commission to waive the five-day pre-filling notice requirement and the 30-day operative delay so that the proposal will be effective on June 5, 2005. The Commission waives the five-day pre-filing notice requirement. In addition, the Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest because it will allow the Pilot Program to continue without interruption through June 5, 2006. 14 For this reason, the Commission designates that the proposal become operative on June 5, 2005. 15 14 For purposes only of waiving the 30-day operative delay, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). 15 As set forth in the Commission's initial approval of the Pilot Program, if the Amex proposes to:

(1)extend the Pilot Program;

(2)expand the number of options eligible for inclusion in the Pilot Program; or

(3)seek permanent approval of the Pilot Program, it must submit a Pilot Program report to the Commission along with the filing of its proposal to extend, expand, or seek permanent approval of the Pilot Program. The Amex must file any such proposal and the Pilot Program report with the Commission at least 60 days prior to the expiration of the Pilot Program. The Pilot Program report must cover the entire time the Pilot Program was in effect and must include:

(1)Data and written analysis on the open interest and trading volume for options (at all strike price intervals) selected for the Pilot Program;

(2)delisted options series (for all strike price intervals) for all options selected for the Pilot Program;

(3)an assessment of the appropriateness of $1 strike price intervals for the options the Amex selected for the Pilot Program;

(4)an assessment of the impact of the Pilot Program on the capacity of the Amex's, the Options Price Reporting Authority's, and vendors' automated systems;

(5)any capacity problems or other problems that arose during the operation of the Pilot Program and how the Amex addressed them;

(6)any complaints that the Amex received during the operation of the Pilot Program and how the Amex addressed them; and

(7)any additional information that would help to assess the operation of the Pilot Program. *See* Pilot Approval Order, *supra* note 7. 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 No. SR-Amex-2005-040 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 No. SR-Amex-2005-040. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room, 450 Fifth Street, NW., Washington, DC 20549. Copies of such filing will also be available for inspection and copying at the principal office of the Amex. 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 No. SR-Amex-2005-040 and should be submitted on or before June 28, 2005. 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. E5-2897 Filed 6-6-05; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-51771; File No. SR-CBOE-2005-37] Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change to Extend until June 5, 2006, a Pilot Program for Listing Options on Selected Stocks Trading Below $20 at One-Point Intervals May 31, 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 May 9, 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 and II below, which Items have been prepared by the CBOE. The CBOE filed the proposal pursuant to Section 19(b)(3)(A) of the Act, 3 and Rule 19b-4(f)(6) thereunder, 4 which renders the proposal effective upon filing with the Commission. 5 The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 15 U.S.C. 78s(b)(3)(A). 4 17 CFR 240.19b-4(f)(6). 5 The CBOE has asked the Commission to waive the 30-day operative delay. *See* Rule 19b-4(f)(6)(iii), 17 CFR 240.19b-4(f)(6)(iii). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The CBOE proposes to amend Commentary .01 to CBOE Rule 5.5, “Series of Option Contracts Open for Trading,” to extend until June 5, 2006, its pilot program for listing options series on selected stocks trading below $20 at one-point intervals (“Pilot Program”). The text of the proposed rule change is available on the CBOE's Web site ( *http://www.cboe.com* ), at the CBOE's principal office, and at the Commission's Public Reference Room. 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 purpose of the proposed rule change is to extend the Pilot Program for an additional year. 6 The Pilot Program allows the CBOE to select a total of five individual stocks on which option series may be listed at $1 strike price intervals. To be eligible for inclusion in the Pilot Program, the underlying stock must close below $20 on its primary market on the previous trading day. If selected for the Pilot Program, the Exchange may list strike prices at $1 intervals from $3 to $20, but no $1 strike price may be listed that is greater than $5 away from the underlying stock's closing price on its primary market on the previous day. The Exchange also may list $1 strikes on any other options class designated by another options exchange that employs a similar pilot program under its rules. Under the terms of the Pilot Program, the Exchange may not list long-term option series (“LEAPS” ® at $1 strike price intervals for any class selected for the Pilot Program. The Exchange also is restricted from listing any series that would result in strike prices being $0.50 apart. 6 The Commission approved the Pilot Program on June 5, 2003. See Securities Exchange Act Release No. 47991 (June 5, 2003), 68 FR 35243 (June 12, 2003) (order approving File No. SR-CBOE-2001-60) (“Pilot Approval Order”). The Pilot Program was extended for an additional year on June 3, 2004. *See* Securities Exchange Act Release No. 49799 (June 3, 2004), 69 FR 32642 (June 10, 2004) (notice of filing and immediate effectiveness of File No. SR-CBOE-2004-34) (“Pilot Extension Notice”). Under Interpretation and Policy .01(a) to CBOE Rule 5.5, the Pilot Program is scheduled to expire on June 5, 2005. As stated in its previous filings establishing and extending the Pilot Program, 7 the CBOE believes that $1 strike price intervals provide investors with greater flexibility in the trading of equity options that overlie lower-priced stocks 8 by allowing investors to establish equity options positions that are better tailored to meet their investment objectives. 9 As reflected in the Pilot Extension Notice, the trading volume in a wide majority of the classes selected for the Pilot Program increased significantly within the first year after being selected for the Pilot Program. 10 In ten of the 22 classes originally selected, average daily trading volume (“ADV”) increased over 100%, and in some classes ADV more than tripled. 11 Now, almost two years since the inception of the Pilot Program, the CBOE notes that ADV in several options classes remains significantly higher than immediately prior to their selection for the Pilot Program. 12 It should be noted that, as reflected in the Pilot Program Report, ADV also has dropped in several options classes since their selection for the Pilot Program, although it is difficult to identify the specific market factors that may contribute to the increase or decrease in options trading volume from one particular class to another, especially considering the time removed since the inception of the Pilot Program. However, the Exchange still believes that the practice of offering customers strike prices for lower-priced stocks at $1 intervals contributes to the overall volume of the participating options classes. 7 *See* Pilot Approval Order and Pilot Extension Notice, *supra* note 6. 8 To be eligible for inclusion in the Pilot Program, the underlying stock must close below $20 per share on its primary market on the previous trading day. 9 See Pilot Approval Order and Pilot Extension Notice, *supra* note 6. 10 *See* Pilot Extension Notice, *supra* note 6. 11 *See* Pilot Extension Notice, *supra* note 6. 12 Pursuant to the Pilot Extension Notice, the CBOE is submitting a report (the “Pilot Program Report”), as Exhibit 3 to the proposal. Among other things, the Pilot Program Report contains analyses of the ADV and open interest (“OI”) for the options classes that have been selected for the Pilot Program since its inception. With regard to the impact on system capacity, the CBOE's analysis of the Pilot Program also suggests that the impact on the CBOE's, the Options Price Reporting Authority's (“OPRA”), and market data vendors’ respective automated systems has been minimal. Specifically, the CBOE notes that in February 2005, the 21 classes participating in the Pilot Program accounted for 8,482,369 quotes per day or 2.26% of the industry's 374,547,949 average quotes per day. These 21 classes averaged 285,509 contracts per day or 5.11% of the industry's 5,589,841 average contracts per day. The classes involved totaled 881 series or 2.47% of all series listed. 13 It should be noted that these quoting statistics may overstate the contribution of $1 strike prices because these figures also include quotes for series listed in intervals higher than $1 ( *i.e.* , $2.50 strikes) in the same options classes. Even with the non-$1 strike series quoting being included in these figures, the CBOE believes that the overall impact on capacity is still minimal. 13 *See* Pilot Program Report, *infra* Exhibit 3. 2. Statutory Basis The Exchange believe that an extension of the Pilot Program is warranted because the data indicates that there is strong investor demand for $1 strikes and because the Pilot Program has not adversely impacted systems capacity. For these reasons, the Exchange believe 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. 14 Specifically, the Exchange believes the proposed rule change is consistent with the requirements of Section 6(b)(5) 15 that the rules of a national securities 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. 14 15 U.S.C. 78f(b). 15 15 U.S.C. 78f(b)(5). B. Self-Regulatory Organization's Statement on Burden on Competition The CBOE does not believes that the proposed rule change will impose any burden on competition that is not necessary or appropriate in the 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. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The CBOE has filed the proposed rule change pursuant to Section 19(b)(3)(A) of the Act 16 and subparagraph (f)(6) of Rule 19b-4 thereunder. 17 Because the foregoing proposed rule change:

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

(2)does not impose any significant burden on competition; and

(3)by its terms does not become operative for 30 days after the date of this filing, or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest, the proposed rule change has become effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-4(f)(6) thereunder. As required under Rule 19b-4(f)(6)(iii), the CBOE provided the Commission with written notice of its intention to file the proposed rule change at least five business days prior to filing the proposal with the Commission or such shorter period as designated by the Commission. 16 15 U.S.C. 78s(b)(3)(A). 17 17 CFR 240.19b-4(f)(6). A proposed rule change filed under Rule 19b-4(f)(6) normally does not become operative for 30 days after the date of filing. However, Rule 19b-4(f)(6)(iii) permits the Commission to designate a shorter time if such action is consistent with the protection of investors and the public interest. The CBOE has asked the Commission to waive the 30-day operative delay to permit the Pilot Program extension to become effective at the time the Commission waives the 30-day operative delay. The Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest because it will allow the Pilot Program to continue without interruption through June 5, 2006. 18 For this reason, the Commission designates that the proposal become operative on June 5, 2005. 19 18 For purposes only of waiving the 30-day operative delay, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). 19 As set forth in the Commission's initial approval of the Pilot Program, if the CBOE proposes to:

(1)Extend the Pilot Program;

(2)expand the number of options eligible for inclusion in the Pilot Program; or

(3)seek permanent approval of the Pilot Program, it must submit a Pilot Program report to the Commission along with the filing of its proposal to extend, expand, or seek permanent approval of the Pilot Program. The CBOE must file any such proposal and the Pilot Program report with the Commission at least 60 days prior to the expiration of the Pilot Program. The Pilot Program report must cover the entire time the Pilot Program was in effect and must include:

(1)Data and written analysis on the open interest and trading volume for options (at all strike price intervals) selected for the Pilot Program;

(2)delisted options series (for all strike price intervals) for all options selected for the Pilot Program;

(3)an assessment of the appropriateness of $1 strike price intervals for the options the CBOE selected for the Pilot Program;

(4)an assessment of the impact of the Pilot Program on the capacity of the CBOE's, OPRA's, and vendors' automated systems;

(5)any capacity problems or other problems that arose during the operation of the Pilot Program and how the CBOE addressed them;

(6)any complaints that the CBOE received during the operation of the Pilot Program and how the CBOE addressed them; and

(7)any additional information that would help to assess the operation of the Pilot Program. *See* Pilot Approval Order, *supra* note 6. At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov* . Please include File No. SR-CBOE-2005-37 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 No. SR-CBOE-2005-37. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room, 450 Fifth Street, NW., Washington, DC 20549. Copies of such filing will also 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 No. SR-CBOE- 2005-37 and should be submitted on or before June 28, 2005. 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. E5-2891 Filed 6-6-05; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-51766; File No. SR-CBOE-2004-54] Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Order Approving a Proposed Rule Change and Partial Amendment No. 1 To Amend Rules Relating to Margin Treatment on Stock Transactions Effected by an Options Market Maker to Hedge Options Positions May 31, 2005. I. Introduction On July 30, 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 2 thereunder, a proposed rule change seeking to amend rules relating to margin treatment on stock transactions effected by an options market maker to hedge options positions. On February 22, 2005, the CBOE filed a partial amendment to its proposed rule change. 3 The proposed rule change, as amended, was published for comment in the **Federal Register** on April 13, 2005. 4 The Commission received no comments on the proposal. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 SR-CBOE-2004-54: Amendment No. 1. Under the partial amendment, the options market maker must be able to demonstrate that it effected its permitted offset transactions for market-making purposes. 4 *See* Securities Exchange Act Release No. 51497 (April 6, 2005), 70 FR 19536 (April 13, 2005). II. Description The Exchange has proposed to eliminate a rule that essentially disallows favorable margin treatment on stock transactions initiated by options market makers to hedge an option position if the exercise price of the option is more than two standard exercise price intervals above the price of the stock in the case of a call option, or below in the case of a put option. When options market makers hedge their option positions by taking a long or short position in the underlying security, the underlying security is allowed “good faith” margin treatment, provided the underlying security meets the definition of a “permitted offset.” To qualify as a permitted offset, CBOE Rule 12.3(f)(3) requires, among other things, that the transaction price of the underlying security be not more than two standard exercise price intervals below the exercise price of the option being hedged in the case of a call option, or above in the case of a put option. The term “in-or-at-the-money” is used in CBOE Rule 12.3(f)(3) to refer to the two standard strike price interval requirement. Stated another way, “in-or-at-the-money” means the option being hedged cannot be “out-of-the-money” by more than two standard exercise price intervals. The Exchange has stated that the intent of this requirement was to confine good faith margining of transactions in the underlying security to those that constituted meaningful hedges of an option position. The Exchange has proposed to remove the “in-or-at-the-money” requirement. 5 5 The New York Stock Exchange (“NYSE”) also has filed a proposed rule change to remove the “in-or-at-the-money” language from its rules on permitted offsets. Although the language of the NYSE's proposed rule change differs from the language of the CBOE's proposed rule change, the proposed changes from the two exchanges are substantively identical. The Commission is publishing a notice to solicit comments on the NYSE's proposed rule change. The Exchange noted that the “in-or-at-the-money” requirement is not consistent with current options market-maker hedging technique. Options market-makers will take a less than 100 share position in the underlying security per option being hedged so that any gain/loss on that position in dollar terms closely tracks that of the dollar gain/loss on the option position. When options market-makers hedge in this manner, known as “delta neutral hedging,” they cannot benefit from any gain on a position in the underlying security because it is equally offset by a loss in the option being hedged. The Exchange further noted that the “in-or-at-the-money” requirement is unnecessary because, when a clearing firm extends good faith margin on a security underlying an option, it must reduce its net capital by any amount by which the deduction required by Rule 15c3-1 under the Securities Exchange Act of 1934 (the “haircut”) exceeds the amount of equity in the options market maker's account. 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 national securities exchange. 6 In particular, the Commission believes that the proposed rule change is consistent with Section 6(b)(5) of the Act 7 , which requires that the rules of the exchange be designed, among other things, to remove impediments to and perfect the mechanisms of a free and open market, and, in general, to protect investors and the public interest. The Commission finds that amending the rules relating to margin treatment on stock transactions effected by an options market maker to hedge options positions, by eliminating the “in-or-at-the-money” requirement, is consistent with the requirements of Section 6(b)(5), in that the “in-or-at-the-money” requirement impedes options market makers from hedging, on a good faith margin basis, “out-of-the-money” options having standard exercise price intervals of less than five points. 6 In approving this proposed rule change, the Commission notes that it has considered the proposed rule's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). 7 15 U.S.C. 78f(b)(5). IV. Conclusion. *It is therefore ordered,* pursuant to Section 19(b)(2) of the Act, 8 that the proposed rule change (File No. SR-CBOE-2004-54), as amended, be, and it hereby is, approved. 8 15 U.S.C. 78s(b)(2). For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 9 9 17 CFR 200.30-3(a)(12). Margaret H. McFarland, Deputy Secretary. [FR Doc. E5-2889 Filed 6-6-05; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-51763; File No. SR-CHX-2005-15] Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change and Amendment No. 1 Thereto Relating to Participant Fees and Credits May 31, 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 May 2, 2005, the Chicago Stock Exchange, Inc. (“CHX” 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. On May 23, 2005, the Exchange filed Amendment No. 1 to the proposed rule change. 3 The Commission is publishing this notice to solicit comments on the proposed rule change, as amended, from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 In Amendment No. 1, the Exchange made technical corrections to the rule text of the proposed rule change. The effective date of the original proposed rule change is May 2, 2005, and the effective date of the amendment is May 23, 2005. For purposes of calculating the 60-day period within which the Commission may summarily abrogate the proposed rule change, as amended, under Section 19(b)(3)(C) of the Act, the Commission considers the period to commence on May 23, 2005, the date on which the Exchange submitted Amendment No. 1. *See* 15 U.S.C. 78s(b)(3)(C). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The CHX proposes to amend its Participant Fee Schedule (the “Fee Schedule”) to

(1)eliminate the assignment fee for listed securities that are not assigned in competition; and

(2)modify the Exchange's fixed fee for specialists trading Nasdaq/NM securities. The text of the proposed rule change is available on the CHX's Web site ( *www.chx.com* ), at the CHX's Office of the Secretary, and at the Commission's Public Reference Room. 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 CHX 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 CHX has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to modify its Fee Schedule in two ways. Specifically, the Exchange proposes to

(1)eliminate the assignment fee for listed securities that are not assigned in competition; and

(2)modify the Exchange's fixed fee for specialists trading Nasdaq/NM securities. *Eliminating certain assignment fees.* Under the current Fee Schedule, the Exchange charges a fee to a specialist that receives the assignment of a listed security when other firms are not competing for the assignment. To encourage firms to trade additional listed securities by reducing their costs of doing so, the Exchange proposes to eliminate this assignment fee. 4 The Exchange previously had waived this fee on a temporary basis, through the end of 2004; the current proposal would eliminate the fee altogether. 5 4 The Exchange would continue to charge specialist assignment fees with respect to securities that are assigned to a specialist firm in competition with other firms, reflecting the increased administrative costs associated with allocating stocks in competition. 5 *See* Securities Exchange Act Release No. 50657 (November 12, 2004), 69 FR 67615 (November 18, 2004) (SR-CHX-2004-34). *Modifying the fixed fee.* The Exchange currently charges specialists trading Nasdaq/NM securities a base fixed fee that is the greater of

(a)$20,000 or

(b)the firm's pro rata share of $60,000. The Exchange now believes that it is appropriate to modify the calculation to impose a flat base fee of $20,000. This modified calculation allows the Exchange to recoup many of the fixed costs of running its OTC specialist program, while not imposing unnecessary fees on specialist firms. 6 6 At a basic level, many of the Exchange's costs of supporting the OTC specialist program do not vary based on the number of OTC specialist firms or the number of issues traded. These costs, however, can increase with substantial increases in trading volume or can decrease with substantial decreases in trading volume or in the number of firms that trade Nasdaq/NM securities. The Exchange's proposed changes to the fixed fee are consistent with these principles. The Exchange believes that these changes to the Fee Schedule represent a fair allocation of the costs associated with the Exchange's specialist programs. As noted above, the changes are also intended to provide specialists with an appropriate incentive to increase the number of issues that they trade (consistent with the specialist's duties as a specialist), which could allow the Exchange's participants to offer their customers access to a wider array of specialist-traded securities. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act, 7 in general, and furthers the objectives of Section 6(b)(4) of the Act, 8 in particular, in that it provides for the equitable allocation of reasonable dues, fees, and other charges among its members. 7 15 U.S.C. 78f(b). 8 15 U.S.C. 78f(b)(4). B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any inappropriate burden on competition. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were either solicited or received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The proposed rule change has become effective upon filing pursuant to Section 19(b)(3)(A)(ii) of the Act 9 and subparagraph (f)(2) of Rule 19b-4 thereunder, 10 because it establishes or changes a due, fee, or other charge imposed by the CHX. 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. 11 9 15 U.S.C. 78s(b)(3)(A)(ii). 10 17 CFR 240.19b-4(f)(2). 11 *See supra* note 3. 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-CHX-2005-15 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-CHX-2005-15. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room. Copies of the filing also will be available for inspection and copying at the principal offices of the CHX. 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-CHX-2005-15 and should be submitted on or before June 28, 2005. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 12 12 17 CFR 200.30-3(a)(12). Margaret H. McFarland, Deputy Secretary. [FR Doc. E5-2888 Filed 6-6-05; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-51769; File No. SR-ISE-2005-22] Self-Regulatory Organizations; International Securities Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Extend Until June 5, 2006, a Pilot Program for Listing Options on Selected Stocks Trading Below $20 at One-Point Intervals May 31, 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 May 10, 2005, the International Securities Exchange, Inc. (“ISE” 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 ISE. The ISE filed the proposal pursuant to Section 19(b)(3)(A) of the Act, 3 and Rule 19b-4(f)(6) thereunder, 4 which renders the proposal effective upon filing with the Commission. 5 The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 15 U.S.C. 78s(b)(3)(A). 4 17 CFR 240.19b-4(f)(6). 5 The ISE has asked the Commission to waive the five-day pre-filing notice requirement and the 30-day operative delay. *See* Rule 19b-4(f)(6)(iii), 17 CFR 240.19b-4(f)(6)(iii). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The ISE proposes to amend Supplementary Material .01 to ISE Rule 504, “Series of Options Contracts Open for Tracing,” to extend until June 5, 2006, its pilot program for listing options series on selected stocks trading below $20 at one-point intervals (“Pilot Program”). The text of the proposed rule change is available on the ISE's Web site *(http://www.iseoptions.com),* at the ISE's principal office, and at the Commission's Public Reference Room. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the ISE included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The ISE has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose On June 16, 2003, the Commission approved the ISE's Pilot Program, which allows the ISE to list series with $1 strike price intervals on equity option classes that overlie up to five individual stocks, provided that the strike prices are $20 or less, but not less than $3, subject to the terms of the Pilot Program. 6 Although the ISE may select only up to five individual stocks to be included in the Pilot Program, the ISE is also permitted to list options on other individual stocks at $1 strike price intervals if other options exchanges listed those series pursuant to their respective rules. The ISE selected the following five options classes to participate in the Pilot Program: AMR Corp. [AMR], Clapine Corp. [CPN], EMC Corp. [EMC], El Paso Corp. [EP], and Sun Microsystems Inc. [SUNW]. The Pilot Program, after being extended on two prior occasions, 7 is set to expire on June 5, 2005. 8 The ISE believes the Pilot Program has been successful. Thus, the ISE proposes to extend the Pilot Program until June 5, 2006. In support of this proposed rule change, and as required by the Pilot Program Approval Order and the Pilot Extension Notices, the Exchange is submitting to the Commission a report (the “Pilot Program Report”), attached as Exhibit 3 to the proposal, that details the Exchange's experience with the Pilot Program. Specifically, the Pilot Program Report contains data and written analysis regarding the five options classes included in the Pilot Program for the period between May 1, 2004, and February 28, 2005. 6 *See* Securities Exchange Act Release No. 48033 (June 13, 2003), 68 FR 37036 June 20, 2003) (order approving File No. SR-ISE-2003-17) (“Pilot Program Approval Order”). 7 *See* Securities Exchange Act Release Nos. 49827 (June 8, 2004), 69 FR 33966 (June 17, 2004) (notice of filing and immediate effectiveness of File No. SR-ISE-2004-21) (extending the $1 Strike Pilot Program until August 5, 2004); and 50060 (July 22, 2004), 69 FR 45864 (July 30, 2004) (notice of filing and immediate effectiveness of File No. SR-ISE-2004-26) (extending the $1 Strike Pilot Program until June 5, 2005) (collectively, the “Pilot Extension Notices”). 8 *See* Securities Exchange Act Release No. 50060, *supra* note 7. The Exchange believes there is sufficient investor interest and demand to extend the Pilot Program for another year. The Exchange continues to believe that the Pilot Program has provided investors with greater trading opportunities and flexibility and the ability to more closely tailor their investment strategies and decisions to the movement of the underlying security. Furthermore, the Exchange has not detected any material proliferation of illiquid options series resulting from the narrower strike price intervals. 2. Statutory Basis The ISE believes the proposed rule change is consistent with the Act and the rules and regulations thereunder and, in particular, the requirements of Section 6(b) of the Act. 9 Specifically, the ISE believes the proposed rule change is consistent with the requirements under Section 6(b)(5) of the Act that the rules of a national securities exchange be designed to promote just and equitable principles of trade, to prevent fraudulent and manipulative acts, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. The ISE believes that extension of the Pilot Program until June 5, 2006, will result in a continuing benefit to investors by allowing them to more closely tailor their investment decisions, and will allow the ISE to further study investor interest in $1 strike price intervals. 9 15 U.S.C. 78f(b). B. Self-Regulatory Organization's Statement on Burden on Competition The ISE believes that the proposed rule change does not impose any burden on competition that is not necessary or appropriate in the 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 ISE has not solicited, and does not intend to solicit, comments on this proposed rule change. The ISE has not received any unsolicited written comments from members or other interested persons. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The ISE has filed the proposed rule change pursuant to Section 19(b)(3)(A) of the Act 10 and subparagraph (f)(6) of Rule 19b-4 thereunder. 11 Because the foregoing proposed rule change:

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

(2)does not impose any significant burden on competition; and

(3)by its terms does not become operative for 30 days after the date of this filing, or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest, the proposed rule change has become effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-4(f)(6) thereunder. 10 15 U.S.C. 78s(b)(3)(A). 11 17 CFR 240.19b-4(f)(6). A proposed rule change filed under Rule 19b-4(f)(6) normally does not become operative for 30 days after the date of filing. However, Rule 19b-4(f)(6)(iii) permits the Commission to designate a shorter time if such action is consistent with the protection of investors and the public interest. In addition, Rule 19b-4(f)(6)(iii) requires a self-regulatory organization to provide the Commission with written notice of its intent to file the proposed rule change, along with a brief description and text of the proposed rule change, at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The ISE has asked the Commission to waive the five-day pre-filing notice requirement and the 30-day operative delay to prevent a lapse in the operation of the Pilot Program. The Commission waives the five-day pre-filing notice requirement. In addition, the Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest because it will allow the Pilot Program to continue without interruption through June 5, 2006. 12 For this reason, the Commission designates that the proposal become operative on June 5, 2005. 13 12 For purposes only of waiving the 30-day operative delay, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). 13 As set forth in the Commission's initial approval of the Pilot Program, if the ISE proposes to:

(1)extend the Pilot Program;

(2)expand the number of options eligible for inclusion in the Pilot Program; or

(3)seek permanent approval of the Pilot Program, it must submit a Pilot Program report to the Commission along with the filing of its proposal to extend, expand, or seek permanent approval of the Pilot Program. The ISE must file any such proposal and the Pilot Program report with the Commission at least 60 days prior to the expiration of the Pilot Program. The Pilot Program report must cover the entire time the Pilot Program was in effect and must include:

(1)data and written analysis on the open interest and trading volume for options (at all strike price intervals) selected for the Pilot Program;

(2)delisted options series (for all strike price intervals) for all options selected for the Pilot Program;

(3)an assessment of the appropriateness of $1 strike price intervals for the options the ISE selected for the Pilot Program;

(4)an assessment of the impact of the Pilot Program on the capacity of the ISE's, the Options Price Reporting Authority's, and vendors' automated systems;

(5)any capacity problems or other problems that arose during the operation of the Pilot Program and how the ISE addressed them;

(6)any complaints that the ISE received during the operation of the Pilot Program and how the ISE addressed them; and

(7)any additional information that would help to assess the operation of the Pilot Program. *See* Pilot Program Approval Order, *supra* note 6. At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov* . Please include File No. SR-ISE-2005-22 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 No. SR-ISE-2005-22. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room, 450 Fifth Street, NW., Washington, DC 20549. Copies of such filing will also be available for inspection and copying at the principal office of the ISE. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File No. SR-ISE-2005-22 and should be submitted on or before June 28, 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. E5-2899 Filed 6-6-05; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-51757; File No. SR-NASD-2005-037] Self-Regulatory Organizations; National Association of Securities Dealers, Inc.; Notice of Filing and Order Granting Accelerated Approval of Proposed Rule Change and Amendment No. 1 Thereto To Modify Certain Fees for Connecting to the Nasdaq Market Center and Nasdaq's Brut Facility for Non-Members May 27, 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 March 24, 2005, the National Association of Securities Dealers, Inc. (“NASD”), through its subsidiary, The Nasdaq Stock Market, Inc. (“Nasdaq”), filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I and II below, which Items have been prepared by Nasdaq. On May 10, 2005, Nasdaq submitted Amendment No. 1 to the proposed rule change. 3 The Commission is publishing this notice to solicit comments on the proposed rule change, as amended, from interested persons and to grant accelerated approval to the proposed rule change, as amended. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 *See* Form 19b-4, dated May 10, 2005 (“Amendment No. 1”). Amendment No. 1 replaced the original rule filing in its entirety. I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change Nasdaq proposes to amend NASD Rule 7010 to modify certain fees for connecting to the Nasdaq Market Center (“NMC”) and Nasdaq's Brut Facility (“Brut”). The text of the proposed change to NASD Rule 7010 is below. Additions are in italics and deletions are in brackets. 7000. Charges for Services and Equipment 7010. System Services (a)—(e) No change

(f)Access Services. The following charges are assessed by Nasdaq for connectivity to the Nasdaq Market Center *(NMC) and, where indicated, to Nasdaq's Brut Facility (Brut).*

(1)and

(2)No change.

(3)Computer to computer interface

(CTCI)and Financial Information Exchange

(FIX)Options Price Option 1: Dual 56kb lines (one for redundancy), single hub and router, and optional single FIX port $1275/month. Option 2: Dual 56kb lines (one for redundancy), dual hubs (one for redundancy), dual routers (one for redundancy), and optional single FIX port $1600/month. Option 3: Dual T1 lines (one for redundancy), dual hubs (one for redundancy), dual routers (one for redundancy), and optional single FIX port. Includes base bandwidth of 128kb $8000/month (CTCI or CTCI/FIX lines) $4000/month (FIX-only lines). FIX *Trading* Port *(NMC and Brut)* [Charge] $[300] *400* /port/month. *FIX Port for Services Other than Trading* *$500/port/month.* Dedicated FIX server $1,000/ *server* /month. *Dedicated FIX server (Brut)* *3,000/server/month; initial term of not less than 12 months is required.* Option 1, 2, or 3 with Message Queue software enhancement Bandwidth 20% Fee for Option 1, 2, or 3 (including any Enhancement Fee) plus. Disaster Recovery Option: Single 56kb line with single hub and router and optional single FIX port. (For remote disaster recovery sites only.) $975/month. Bandwidth Enhancement Fee (for T1 subscribers only) $600/month per 64kb increase above 128kb T1 base. Installation Fee $2000 per site for dual hubs and routers. $1000 per site for single hub and router. Relocation Fee (for the movement of TCP/IP-capable lines within a single location) $1700 per relocation. FIX connectivity through Options 1, 2, or 3 or the Disaster Recovery Option will not be available to new subscribers that are

(i)NASD members after January 1, 2004, or

(ii)not NASD members after the effective date of SR-NASD-2003-196.

(4)No change. (g)—(v) No change. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, Nasdaq included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item III below. Nasdaq has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change 1. Purpose The proposed rule change would apply to non-members certain rule changes that were immediately effective with respect to NASD members. 4 According to Nasdaq, an important objective of this proposal is to ensure uniform treatment under the rules of members and non-members alike. As further described below, these changes modify certain fees and establish new options for connecting to the NMC and Brut. 4 *See* SR-NASD-2005-036. Today, Nasdaq offers participants Financial Information Exchange (“FIX”) protocol connectivity for entering orders to buy and sell securities into the NMC and Brut. Effective April 1, 2005, the port charge for such a connection will be set at $400 per month for both the NMC and Brut. For NMC users, this represents a $100 per month increase from the current $300 monthly charge; for Brut users, this is a new charge, 5 which is being instituted in order to harmonize NMC and Brut charges for similar services. 5 To assure service quality, a Brut FIX port has been provisioned as a port pair, in which a redundant second port is included for use as backup. Nasdaq does not intend to change this practice at this time. Therefore, a Brut user will receive both ports in the pair for a single payment of $400/month. This charge better reflects the market conditions and the costs associated with providing the service. The $100/month increase in the charge for an NMC FIX port is necessary in light of the higher-than-expected infrastructure costs that Nasdaq is currently incurring in providing this service. In estimating its costs, Nasdaq considers the cost of necessary hardware, software, maintenance and staff. In response to subscriber demand, Nasdaq also intends to make FIX connectivity available for services other than trading ( *i.e.* , other than the entry of orders). As such, on April 1, 2005, Nasdaq expects to enable FIX connectivity to the NMC for the purpose of accepting trade reports from those participants that are eligible to submit such reports to the NMC. In the future, it may become possible to use such non-trading FIX connection for additional Nasdaq services. The proposed port charge for this connection is slightly higher than the charge for a trading port, which is a reflection of current market conditions and costs. It is based on the expected level of demand for this type of service and the expected infrastructure costs (including hardware, software and staff costs). Initially, this port will be used for the purpose of accepting trade reports from those participants that are eligible to submit such reports to the NMC. In the future, it may become possible to use this connection for other existing or to-be-established services. Of course, Nasdaq will submit rule change filings with respect to any new services whenever required to do so pursuant to Section 19(b)(1) of the Act 6 and Rule 19b-4 thereunder. 7 6 15 U.S.C. 78s(b)(1). 7 17 CFR 240.19b-4. Nasdaq is currently offering a dedicated-to-a-specific-firm FIX server that can be used to connect to the NMC. A dedicated server is not necessary for a proper FIX connection to the NMC, but some participants may choose it as an option. 8 In response to participant interest, Nasdaq is also making available a dedicated FIX server for Brut. The charge for a dedicated Brut FIX server will reflect the costs of providing it. In order to further ensure that all initial costs of activating a dedicated server are allocated properly, Nasdaq intends to require a one-year minimum term for a dedicated Brut FIX server. Users will be responsible for the full first year's charges even if they wish to terminate their contract early. 8 *See* Securities Exchange Act Release No. 51170 (Feb. 9, 2005), 70 FR 7988 (Feb. 16, 2005) (SR-NASD-2005-002) (explains that Nasdaq will carefully monitor message traffic on all dedicated and non-dedicated servers to ensure that dedicated servers will not provide firms that receive them with any transmission speed advantage). The monthly charge for a dedicated FIX server at Brut is higher than the charge for a dedicated FIX server at the NMC. This difference in charges is in large part a reflection of the differences in the cost of necessary hardware, maintenance fees, software licensing fees, and staff support costs. A Brut dedicated FIX server also entails higher initial costs, and the requirement of a 12-month minimum term is designed to reduce Nasdaq's financial exposure in the event that a user decides to terminate the arrangement after less than a year (although Nasdaq's expectation is that users that choose the dedicated server option continue with this option for longer than a year). The initial and operating costs of an NMC dedicated FIX server are lower, and in the event of an early termination of this option by a user, the equipment used to provide such service can be more readily (than the Brut equipment) converted to other uses. Nasdaq carefully monitors incoming and outgoing message traffic on all servers used for Brut access in order to ensure that connectivity to and from Brut is not degraded because of insufficient capacity on such servers. This process will not change with the implementation of dedicated servers. Nasdaq regularly reviews the performance statistics for each user connected to Nasdaq's and Brut's servers. If it appears that a server is reaching its capacity limits (for example, if a particular user is experiencing greater volumes than in the past), Nasdaq would reassign servers and users to ensure that there is no degradation in the speed of transmission. As a result, the choice a user makes between a shared and a dedicated server has no impact on transmission speed. Nasdaq will install additional non-dedicated servers whenever necessary to provide a high level of support across all FIX servers. A dedicated FIX server at Brut would also be capable of being converted to provide access to the NMC if at any time Nasdaq decided to make the appropriate system modifications. The use of such a server for connectivity to and from the NMC would not confer any transmission speed advantage or disadvantage upon this server's users. 2. Statutory Basis Nasdaq believes that the proposed rule change is consistent with Section 15A of the Act, 9 in general, and Section 15A(b)(5) 10 of the Act, in particular, in that it provides for the equitable allocation of reasonable dues, fees and other charges among members and issuers and other persons using any facility or system which the NASD operates or controls. 9 15 U.S.C. 78 *o* -3. 10 15 U.S.C. 78 *o* -3(b)(5). B. Self-Regulatory Organization's Statement on Burden on Competition Nasdaq 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 Nasdaq has neither solicited nor received 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-NASD-2005-037 on the subject line. Paper Comments • Send paper comments in triplicate to Jonathan G. Katz, Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. • All submissions should refer to File Number SR-NASD-2005-037. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site *(http://www.sec.gov/rules/sro.shtml).* Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room. Copies of the filing also will be available for inspection and copying at the principal offices of the NASD. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-NASD-2005-037 and should be submitted on or before June 28, 2005. IV. Commission Findings and Order Granting Accelerated Approval of Proposed Rule Change 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. 11 In particular, the Commission believes that the proposed rule change is consistent with the requirements of Section 15A(b)(5) of the Act, 12 which requires that the rules of the self-regulatory organization provide for the equitable allocation of reasonable dues, fees, and other charges among members and issuers and other persons using any facility or system which it operates or controls. Specifically, the Commission notes that this proposal would permit the schedule for non-NASD members to mirror the schedule applicable to NASD members that was effective pursuant to SR-NASD-2005-036. 11 The Commission has considered the proposed rule's impact on efficiency, competition and capital formation. 15 U.S.C. 78c(f). 12 15 U.S.C. 78o-3(b)(5). The Commission finds good cause for accelerating approval of the proposed rule change, as amended, prior to the thirtieth day after publication in the **Federal Register** . The Commission notes that the proposed fees for non-NASD members are identical to those in SR-NASD-2005-036, which implemented these fees for NASD members and which became effective pursuant to Section 19(b)(3)(A) of the Act. 13 The Commission notes that this change will promote consistency in Nasdaq's fee schedule by applying the same pricing schedule with the same date of effectiveness for both NASD members and non-NASD members. Accordingly, the Commission finds good cause, consistent with Section 19(b)(2) of the Act, 14 to approve the proposed rule change, as amended, on an accelerated basis. 13 15 U.S.C. 78s(b)(3)(A). 14 15 U.S.C. 78s(b)(2). V. Conclusion *It is therefore ordered,* pursuant to Section 19(b)(2) of the Act, 15 that the proposed rule change (SR-NASD-2005-037), as amended, is approved. 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. E5-2890 Filed 6-6-05; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-51756; File No. SR-NASD-2005-036] Self-Regulatory Organizations; National Association of Securities Dealers, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change and Amendment No. 1 Thereto To Modify Certain Fees for Connecting to the Nasdaq Market Center and Nasdaq's Brut Facility May 27, 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 March 24, 2005, the National Association of Securities Dealers, Inc. (“NASD”), through its subsidiary, The Nasdaq Stock Market, Inc. (“Nasdaq”), filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I, II and III below, which Items have been prepared by Nasdaq. On May 10, 2005, Nasdaq submitted Amendment No. 1 to the proposed rule change. 3 Nasdaq has designated this proposal as establishing or changing a due, fee, or other charge imposed by a self-regulatory organization pursuant to Section 19(b)(3)(A) of the Act, 4 and Rule 19b-4(f)(2) thereunder, 5 which renders the proposal effective upon filing with the Commission. 6 The Commission is publishing this notice to solicit comments on the proposed rule change, as amended, from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 *See* Form 19b-4, dated May 10, 2005 (“Amendment No. 1”). Amendment No. 1 clarified the substance of and basis for the proposal. 4 15 U.S.C. 78s(b)(3)(A). 5 17 CFR 240.19b-4(f)(2). 6 Nasdaq is simultaneously filing, and requesting accelerated approval for, another rule change proposal, which would make the changes described herein also applicable to non-members. I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change Nasdaq proposes to amend NASD Rule 7010 to modify certain fees for connecting to the Nasdaq Market Center (“NMC”) and Nasdaq's Brut Facility (“Brut”). The text of the proposed change to NASD Rule 7010 is below. Additions are in italics and deletions are in brackets. 7000. Charges for Services and Equipment 7010. System Services (a)—(e) No change

(f)Access Services. The following charges are assessed by Nasdaq for connectivity to the Nasdaq Market Center *(NMC) and, where indicated, to Nasdaq's Brut Facility (Brut)* .

(1)and

(2)No change.

(3)Computer to computer interface

(CTCI)and Financial Information Exchange

(FIX)Options Price Option 1: Dual 56kb lines (one for redundancy), single hub and router, and optional single FIX port $1275/month. Option 2: Dual 56kb lines (one for redundancy), dual hubs (one for redundancy), dual routers (one for redundancy), and optional single FIX port $1600/month. Option 3: Dual T1 lines (one for redundancy), dual hubs (one for redundancy), dual routers (one for redundancy), and optional single FIX port. Includes base bandwidth of 128kb $8000/month (CTCI or CTCI/FIX lines) $4000/month (FIX-only lines). FIX *Trading* Port ( *NMC and Brut* ) [Charge] $[300] *400* /port/month. *FIX Port for Services Other than Trading* *$500/port/month* . *Dedicated FIX server* $1,000/ *server* /month. *Dedicated FIX server (Brut)* *3,000/server/month; initial term of not less than 12 months is required* . Option 1, 2, or 3 with Message Queue software enhancement Fee for Option 1, 2, or 3 (including any Bandwidth Enhancement Fee) plus 20%. Disaster Recovery Option: Single 56kb line with single hub and router and optional single FIX port. (For remote disaster recovery sites only.) $975/month. Bandwidth Enhancement Fee (for T1 subscribers only) $600/month per 64kb increase above 128kb T1 base. Installation Fee $2000 per site for dual hubs and routers. $1000 per site for single hub and router. Relocation Fee (for the movement of TCP/IP-capable lines within a single location) $1700 per relocation. FIX connectivity through Options 1, 2, or 3 or the Disaster Recovery Option will not be available to new subscribers that are

(i)NASD members after January 1, 2004, or

(ii)not NASD members after the effective date of SR-NASD-2003-196.

(4)No change. (g)-(v) No change. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, Nasdaq included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. Nasdaq has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose Today, Nasdaq offers participants Financial Information Exchange (“FIX”) protocol connectivity for entering orders to buy and sell securities into the NMC and Brut. Effective April 1, 2005, the port charge for such a connection will be set at $400 per month for both the NMC and Brut. For NMC users, this represents a $100 per month increase from the current $300 monthly charge; for Brut users, this is a new charge, 7 which is being instituted in order to harmonize NMC and Brut charges for similar services. 7 To assure service quality, a Brut FIX port has been provisioned as a port pair, in which a redundant second port is included for use as backup. Nasdaq does not intend to change this practice at this time. Therefore, a Brut user will receive both ports in the pair for a single payment of $400/month. This charge better reflects the market conditions and the costs associated with providing the service. The $100/month increase in the charge for an NMC FIX port is necessary in light of the higher-than-expected infrastructure costs that Nasdaq is currently incurring in providing this service. In estimating its costs, Nasdaq considers the cost of necessary hardware, software, maintenance and staff. In response to subscriber demand, Nasdaq also intends to make FIX connectivity available for services other than trading ( *i.e.* , other than the entry of orders). As such, on April 1, 2005, Nasdaq expects to enable FIX connectivity to the NMC for the purpose of accepting trade reports from those participants that are eligible to submit such reports to the NMC. In the future, it may become possible to use such non-trading FIX connection for additional Nasdaq services. The proposed port charge for this connection is slightly higher than the charge for a trading port, which is a reflection of current market conditions and costs. It is based on the expected level of demand for this type of service and the expected infrastructure costs (including hardware, software and staff costs). Initially, this port will be used for the purpose of accepting trade reports from those participants that are eligible to submit such reports to the NMC. In the future, it may become possible to use this connection for other existing or to-be-established services. Of course, Nasdaq will submit rule change filings with respect to any new services whenever required to do so pursuant to Section 19(b)(1) of the Act 8 and Rule 19b-4 thereunder. 9 8 15 U.S.C. 78s(b)(1). 9 17 CFR 240.19b-4. Nasdaq is currently offering a dedicated-to-a-specific-firm FIX server that can be used to connect to the NMC. A dedicated server is not necessary for a proper FIX connection to the NMC, but some participants may choose it as an option. 10 In response to participant interest, Nasdaq is also making available a dedicated FIX server for Brut. The charge for a dedicated Brut FIX server will reflect the costs of providing it. In order to further ensure that all initial costs of activating a dedicated server are allocated properly, Nasdaq intends to require a one-year minimum term for a dedicated Brut FIX server. Users will be responsible for the full first year's charges even if they wish to terminate their contract early. 10 *See* Securities Exchange Act Release No. 51170 (Feb. 9, 2005), 70 FR 7988 (Feb. 16, 2005) (SR-NASD-2005-002) (explains that Nasdaq will carefully monitor message traffic on all dedicated and non-dedicated servers to ensure that dedicated servers will not provide firms that receive them with any transmission speed advantage). The monthly charge for a dedicated FIX server at Brut is higher than the charge for a dedicated FIX server at the NMC. This difference in charges is in large part a reflection of the differences in the cost of necessary hardware, maintenance fees, software licensing fees, and staff support costs. A Brut dedicated FIX server also entails higher initial costs, and the requirement of a 12-month minimum term is designed to reduce Nasdaq's financial exposure in the event that a user decides to terminate the arrangement after less than a year (although Nasdaq's expectation is that users that choose the dedicated server option continue with this option for longer than a year). The initial and operating costs of an NMC dedicated FIX server are lower, and in the event of an early termination of this option by a user, the equipment used to provide such service can be more readily (than the Brut equipment) converted to other uses. Nasdaq carefully monitors incoming and outgoing message traffic on all servers used for Brut access in order to ensure that connectivity to and from Brut is not degraded because of insufficient capacity on such servers. This process will not change with the implementation of dedicated servers. Nasdaq regularly reviews the performance statistics for each user connected to Nasdaq's and Brut's servers. If it appears that a server is reaching its capacity limits (for example, if a particular user is experiencing greater volumes than in the past), Nasdaq would reassign servers and users to ensure that there is no degradation in the speed of transmission. As a result, the choice a user makes between a shared and a dedicated server has no impact on transmission speed. Nasdaq will install additional non-dedicated servers whenever necessary to provide a high level of support across all FIX servers. A dedicated FIX server at Brut would also be capable of being converted to provide access to the NMC if at any time Nasdaq decided to make the appropriate system modifications. The use of such a server for connectivity to and from the NMC would not confer any transmission speed advantage or disadvantage upon this server's users. 2. Statutory Basis Nasdaq believes that the proposed rule change is consistent with Section 15A of the Act, 11 in general, and Section 15A(b)(5) 12 of the Act, in particular, in that it provides for the equitable allocation of reasonable dues, fees and other charges among members and issuers and other persons using any facility or system which the NASD operates or controls. 11 15 U.S.C. 78 *o* -3. 12 15 U.S.C. 78 *o* -3(b)(5). B. Self-Regulatory Organization's Statement on Burden on Competition Nasdaq 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 Nasdaq has neither solicited nor received comments on the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective pursuant to Section 19(b)(3)(A) of the Act 13 and subparagraph (f)(2) of Rule 19b-4 thereunder. 14 At any time within 60 days of the filing of such proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. 15 13 15 U.S.C. 78s(b)(3)(a). 14 17 CFR 240.19b-4(f)(2). 15 15 *See* 15 U.S.C. 78s(b)(3)(C). For purposes of calculating the 60-day abrogation period, the Commission considers the period to commence on May 10, 2005, the date Nasdaq filed Amendment No. 1. The effective date of the original proposed rule change is March 24, 2005, and the effective date of the amendment is May 10, 2005. 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-NASD-2005-036 on the subject line. Paper Comments • Send paper comments in triplicate to Jonathan G. Katz, Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. All submissions should refer to File Number SR-NASD-2005-036. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room. Copies of the filing also will be available for inspection and copying at the principal offices of the NASD. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-NASD-2005-036 and should be submitted on or before June 28, 2005. 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. E5-2895 Filed 6-6-05; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-51765; File No. SR-NSX-2005-02] Self-Regulatory Organizations; National Stock Exchange; Notice of Filing of Proposed Rule Change, and Amendments No. 1 and 2 Thereto, Relating to the Composition of NSX's Board of Directors and Committees May 31, 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 March 31, 2005, the National Stock Exchange SM (the “Exchange” or “NSX” SM ) 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 NSX. On March 31, 2005, the Exchange filed Amendment No. 1 to the proposed rule change. 3 On May 19, 2005, the Exchange filed Amendment No. 2 to the proposed rule change. 4 The Commission is publishing this notice to solicit comments on the proposed rule change, as amended, from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 In Amendment No. 1, the Exchange corrected page numbering errors in the initial filing. Amendment No. 1 replaced the original filing in its entirety. 4 In Amendment No. 2, the Exchange revised the proposed definition of “Independent Director.” I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend its By-Laws to make modifications to the composition of its Board of Directors (“Board”) and committees. These changes are being made in connection with a termination of rights agreement entered into between NSX and the Chicago Board Options Exchange (“CBOE”) and in order to comport with industry trends and anticipated changes in regulatory requirements. Below is the amended text of the proposed rule change. Proposed new language is in italics; proposed deletions are in [brackets]. CODE OF REGULATIONS (BY-LAWS) OF NATIONAL STOCK EXCHANGE ARTICLE I. Definitions Section 1. When used in this Code of Regulations (By-Laws), unless the context otherwise requires— (a)-(e). No change. *(f) The term “CBOE” shall mean the Chicago Board Options Exchange, Incorporated.* *(g) The term “CBOE member(s)” shall mean an individual CBOE member or a CBOE member organization that is a regular member of CBOE as described in Article II, Section 2.1(b) of the CBOE Constitution or that is a special member of CBOE as described in Article II Section 2.1(d) of the CBOE Constitution as such CBOE members may exist from time to time.* [(f)] *(h)* The term “Commission” means the United States Securities and Exchange Commission. [(g)] *(i)* The term “Exchange” means National Stock Exchange. [(h)] *(j)* The term “Exchange Rules” means those rules adopted by the Exchange pursuant to the provisions of Article X of these By-Laws. *(k) The term “Independent Director” means a member of the Board that the Board has determined to have no material relationship with the Exchange or any affiliate of the Exchange, any member of the Exchange or any affiliate of any such member, other than as a member of the Board.* [(i)] *(l)* The term “person” means a natural person, company, government, or political subdivision, agency or instrumentality of a government. [(j)] *(m)* The terms “person associated with a member” or “associated person of a member” mean any partner, officer, director, or branch manager of a member (or any person occupying a similar status or performing similar functions), any person directly or indirectly controlling, controlled by, or under common control with the member, of any employee of such member, except that any person associated with a member whose functions are solely clerical or ministerial shall not be included in the meaning of such terms. [(k)] *(n)* The term “Proprietary Member” means a person who was a “Regular Member” prior to the effective date of these By-Laws or a person who, pursuant to the provisions of Article II of these By-Laws, has applied for, and been admitted to, membership as a proprietary member subsequent to the effective date of these By-Laws. [(l)] *(o)* The term “statutory disqualification” shall mean any statutory disqualification as defined in the Act. [(m) The term “CBOE” shall mean the Chicago Board Options Exchange, Incorporated.] [(n) The term “CBOE member(s)” shall mean an individual CBOE member or a CBOE member organization that is a regular member of CBOE as described in Article II, Section 2.1(b) of the CBOE Constitution or that is a special member of CBOE as described in Article II Section 2.1(d) of the CBOE Constitution as such CBOE members may exist from time to time, except that in the case of a transferable regular CBOE membership which is subject to a lease agreement, the lessee and not the lessor shall be deemed to be the CBOE member]. ARTICLE V. Exchange Organization and Administration Section 1. Board of Directors [1.1. General] *(a) General Composition.* The management and administration of the affairs of the Exchange shall be vested in a Board of Directors, which shall be composed of thirteen *(subject to Section 1(b))* voting Directors *(a majority of whom will be independent pursuant to Section 1(b)),* as follows: [(a)] *(i)* the *Chief Executive Officer of the* Exchange [President]; [(b) two] *(ii) three* Proprietary Members, or executive officers of Proprietary Member organizations[, who are Designated Dealers in the National Securities Trading System (“Designated Dealer Directors”);

(c)one Proprietary Member or an executive officer of a Proprietary Member organization, who conducts a nonmember public customer business on the Exchange (“At-Large] *(* “ *Member* Director *s* ”); *(iii) six Independent Directors (subject to increase under Section 1(b) below); and* [(d) the Chairman of CBOE (“CBOE Director”);

(e)the President of CBOE (“CBOE Director”);

(f)four] *(iv) three executive officers of CBOE,* CBOE members or executive officers of CBOE member organizations (“CBOE Directors”)[; and

(g)three representatives of issuers and investors who shall not be associated with any member of the Exchange or with any registered broker or dealer or with another self-regulatory organization, other than as a public trustee or director (“Public Director”)]. Excepting affiliations with national securities exchanges, no two or more Directors may be partners, officers of directors of the same person or be affiliated with the same person.

(b)*Changes in Composition on the Occurrence of Certain Events. Notwithstanding the provisions of Section 1(a) of this Article V:* *(i) The current terms of the Directors currently serving as of the effective date of this provision of these By-laws (the “Effective Date”) shall be unchanged.* *(ii) Following the Effective Date, the three new Independent Directors who are authorized by Section 1(a)(iii) (“New Independent Directors”) shall be either (as determined by the Board)

(y)selected in accordance with Sections 2.1(c) and 2.2(b) of this Article V, except that each candidate for New Independent Director shall be submitted by the Nominating Committee to the Board for approval or disapproval as soon as practical, or

(z)appointed in accordance with Sections 2.1(c) and 3 of this Article V.* *(iii) On the date of the first Subsequent Closing (as defined below) to occur after January 18, 2005, the number of positions on the Board to be filled by CBOE Directors shall be reduced from three to two and the number of positions to be filled by Independent Directors shall be increased from six to seven. Following the first Subsequent Closing, a new Independent Director shall be either (as determined by the Board)

(y)selected in accordance with Sections 2.1(c) and 2.2(b) of this Article V, except that the candidate for Independent Director shall be submitted by the Nominating Committee to the Board for approval or disapproval as soon as practical, or

(z)appointed in accordance with Sections 2.1(c) and 3 of this Article V.* *

(iv)If no Subsequent Closing has occurred prior to February 15, 2006, then in order to achieve a majority of Independent Directors serving on the Board, the Board may, in its discretion, add up to two new Independent Directors and thereby increase the number of Directors serving on the Board from thirteen to not more than fifteen. In such event the two new Independent Directors authorized hereby shall be either (as determined by the Board)

(y)selected in accordance with Sections 2.1(c) and 2.2(b) of this Article V, except that each candidate for Independent Director shall be submitted by the Nominating Committee to the Board for approval or disapproval as soon as practical, or

(z)appointed in accordance with Sections 2.1(c) and 3 of this Article V. * *(v) On the date of the second Subsequent Closing to occur after January 18, 2005, the number of positions on the Board to be filled by CBOE Directors shall be reduced from two to one, and the Board may, in its discretion, increase by one the number of positions to be filled by either Independent Directors or Member Directors. Following the second Subsequent Closing, a new Director may be either (as determined by the Board)

(y)elected or appointed in accordance with Sections 2.1 and 2.2 of this Article V, except that the requisite action may be taken as soon as practical, or

(z)appointed in accordance with Sections 2.1 and 3 of this Article V.* *(vi) On the earliest to occur of

(A)the date on which CBOE owns less than five percent (5%) of the outstanding certificates of proprietary membership of the Exchange or

(y)elected or appointed in accordance with Sections 2.1 and 2.2 of this Article V, except that the requisite action may be taken as soon as practical, or

(z)appointed in accordance with Sections 2.1 and 3 of this Article V.* *(vii) “Subsequent Closing” has the meaning given to it in the Termination of Rights Agreement between CBOE and the Exchange dated as of September 27, 2004.* [1.2. Term Notwithstanding Paragraphs 1.1 and 2.1 and 2.2 below, from the effective date of this provision of these By-Laws to the first Board of Directors meeting after the annual election meeting in 1988, 1989 or 1990, as appropriate, the initial terms of the Exchange Directors shall be as follows: Public Director—1990 Public Director—1989 Public Director—1988 President of the Exchange—1988 Designated Dealer Director—1990 Designated Dealer Director—1989 At-Large Director—1988 Chairman of CBOE—1988 President of CBOE—1988 CBOE Director—1988 CBOE Director—1988 CBOE Director—1988 CBOE Director—1988] Section 2. Election of Directors 2.1. Terms of Office

(a)The *board* term of *the Chief Executive Officer shall expire when such individual ceases to be Chief Executive Officer of the Exchange.* [(a)] *(b) The* [a Designated Dealer] *Member* Director *s* [, At-Large Director or Public Director] shall be *divided into* three *classes, each initially composed of no more than one Member Director. Each Member Director shall be elected for a term expiring at the third successive annual meeting of the membership, or when such Director's successor is thereafter elected and qualified, and shall be identified as being of the same class as the Director such Director succeeds. Notwithstanding the foregoing, in the case of any new Member Director subject to initial election or appointment pursuant to Section 1(b) of this Article V, such Director shall be added to a class, as determined by the Board at the time of such Director's initial election or appointment, and shall have an initial term expiring at the same time as the term of the class to which such Director has been added. In no case will any Member Director be added to a class that is already composed of two Member Directors* [years or until a successor is elected and qualified]. *(c) The Independent Directors shall be divided into three classes, each initially composed of no more than two Independent Directors. Each Independent Director shall be selected for a term expiring at the third successive annual meeting of the membership or when such Director's successor is thereafter elected and qualified, and shall be identified as being of the same class as the Director such Director succeeds. Notwithstanding the foregoing, in the case of any new Independent Director subject to initial selection or appointment pursuant to Section 1(b) of this Article V, such Director shall be added to a class, as determined by the Board at the time of such Director's initial selection or appointment, and shall have an initial term expiring at the same time as the term of the class to which such Director has been added.* [(b)] *(d)* The term of a CBOE Director shall be one year or until a successor is elected and qualified. 2.2. Candidate Selection

(a)*The* [three] candidates for election to the Board [either] as [Designated Dealer Directors or as At-Large] *Member* Director *s* shall be selected by the Nominating Committee. The Committee shall select at least one candidate for the position to be voted upon. An additional candidate or candidates may be nominated by a petition signed by ten percent or more of the Proprietary Members and delivered to the Secretary of the Exchange, provided that such candidate or candidates conforms to the requirements for the open position(s). There shall be an annual election [on the second Monday of January of each year (if such day is a legal holiday, then on the next business day)] *during the annual meeting of the membership,* at which only Proprietary Members can vote. *(b) The Independent Directors shall be selected by means of the following process. The Nominating Committee shall select, after receipt of input from interested parties, the candidate(s) to be submitted to the Board for approval or disapproval at the first Board meeting following the annual membership meeting.* [(b)] *(c)* The [four] CBOE *Directors* [members or executive officers of CBOE member organizations] shall be elected to the Board by the CBOE Board of Directors at their January meeting or as soon thereafter as possible. [(c) The three Public Directors shall be selected by means of the following process. The Exchange's Chairman shall submit a name or names of a candidate(s) to the Nominating Committee. The Nominating Committee shall approve the candidate(s) to be submitted to the Board for approval or disapproval at the first Board meeting following the annual membership meeting.] ARTICLE VI. Committees Section 1. Establishment of Committees 1.4. Selection of Members The membership of such committees shall be chosen in such a way as to assure fair representation of *the public and, as appropriate,* all classes of members in the administration of the Exchange. Each committee shall be comprised of at least three *persons* [members, at least one of whom shall be a member of the Board, except that all members of the Executive Committee, if any, shall be members of the Board]. Section 3. Special Provisions Relating to Certain Committees 3.1. Securities Committee [(a) The Securities Committee shall have as members at least one Proprietary Member with a certificate and at least one representative of issuers and investors who is not associated with a member or a broker or dealer. Notwithstanding anything in these By-Laws to the contrary, from the effective date of this provision of these By-Laws to the first Board meeting in 1989, the members of the Securities Committee shall be those members appointed to the Committee as of the effective date of this provision of the By-Laws. (b)] The Securities Committee shall have the authority to adopt operating procedures necessary and appropriate for the Exchange's automated interface with the Intermarket Trading System (ITS). The Securities Committee also may delegate its authority in Rule 11.9 to approve Designated Dealers and Designated Issues to an officer of the Exchange. 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 proposal and discussed any comments it received on the proposed rule change, as amended. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose On November 14, 1986, NSX and CBOE entered into an agreement of affiliation pursuant to which CBOE held 162 certificates of proprietary membership in NSX, and CBOE and its members had certain rights associated with NSX. 5 NSX and CBOE have recently taken steps to terminate or amend certain aspects of their affiliation and, in connection therewith, CBOE has agreed to transfer certain of its certificates to NSX and to relinquish certain rights associated with NSX, in exchange for certain cash payments and other undertakings by NSX, subject to the terms and conditions set forth in a termination of rights agreement entered into between NSX and CBOE on September 27, 2004 (the “Termination Agreement”). 5 *See* Securities Exchange Act Release No. 24090 (February 12, 1987), 52 FR 5225 (February 19, 1987)(order approving proposed rule change by the Cincinnati Stock Exchange relating to an affiliation with CBOE). One of the conditions to the initial closing of the Termination Agreement called for amendments to the NSX By-Laws to eliminate the right of CBOE members to become NSX members without purchasing membership certificates, and thus the elimination of the “CBOE Exerciser Member” membership class, 6 the elimination of the Exchange's Special Nominating Committee, and the removal of certain special limitations on changes to certain By-Laws and Rules. These changes were approved by the Commission on January 13, 2005. 7 6 As part of the 1986 affiliation agreement between the Exchange and CBOE, the Exchange's By-Laws had been amended to provide that CBOE members were eligible to become Proprietary Members of NSX without having to purchase and own a certificate of proprietary membership, provided that each such CBOE member met all other eligibility requirements for NSX membership. This class of NSX membership was known as “Proprietary Members without certificates” and these NSX members were commonly referred to as “CBOE Exerciser Members.” 7 In eliminating the “CBOE Exerciser Member” class of membership, a ninety day transition period was provided for whereby any CBOE Exerciser Members existing on the effective date, January 13, 2005 (the “Effective Date”), will have ninety days from the Effective Date (which is April 13, 2005) to purchase a certificate of proprietary membership. During the ninety day period, a CBOE Exerciser Member who has not purchased a certificate shall have the rights and obligations of a Proprietary Member without certificate as those rights and obligations existed prior to the Effective Date. At the conclusion of the ninety day period, any CBOE Exerciser Member who does not own a certificate shall automatically cease to qualify for membership on the Exchange and may not again become a member of the Exchange without first complying with all the procedures and requirements set forth in the NSX By-Laws and Rules. On January 18, 2005, the initial closing under the Termination Agreement took place. As part of that closing, NSX paid CBOE cash consideration in exchange for the relinquishment of three of CBOE's six NSX Board positions and other rights, as well as the transfer of a number certificates of proprietary membership to the Exchange. The Termination Agreement also anticipates subsequent closings or events whereby NSX shall pay CBOE cash and/or other consideration in exchange for the relinquishment of the remainder of CBOE's three NSX Board positions and other rights, as well as the transfer of additional certificates of proprietary membership to the Exchange. As a result of the relinquishment of the three NSX Board positions by CBOE and in anticipation of future relinquishments of NSX Board positions pursuant to the terms of the Termination Agreement, revisions to the NSX By-Laws are necessary to describe changes to the composition of the Board respecting those positions. The Exchange is also proposing additional revisions to its Board composition requirements to include a new category of directors known as “Independent Directors.” This category will replace the current “Public Directors” category. The Exchange is also proposing to provide a transition schedule for making a majority of its thirteen member Board be Independent Directors. These independence-related revisions are being proposed to comport with industry trends and in anticipation of governance requirements that the Commission may be imposing upon self-regulatory organizations. 8 Various other related changes to the composition of the Board and its committees, which are described below, are also being proposed. The specific changes being proposed are described below. 8 To the extent that the proposed rule change, as amended, runs counter to the Commission's recent governance and transparency proposals, Securities Exchange Act Release No. 50699 (November 18, 2004), 69 CFR 71125 (December 8, 2004), NSX represents that upon adoption of final rulemaking it will conform its By-laws accordingly. Telephone conversation among Jennifer M. Lamie, Assistant General Counsel & Secretary, NSX and Geraldine Idrizi, Attorney, Division of Market Regulation, Commission, on May 23, 2005. a. Board Composition, Terms and Candidate Selection Immediately preceding the initial closing date under the Termination Agreement, the Board consisted of thirteen Directors:

(A)The NSX President;

(B)two Designated Dealer Directors;

(C)an At-Large Member Director;

(D)the CBOE Chairman, the CBOE President and four CBOE Member Directors (collectively referred to as the six “CBOE Directors”); and

(E)three Public Directors. 9 The composition of the Board is proposed to be revised to consist of the following Directors: the NSX Chief Executive Officer; three Member Directors; six Independent Directors; and three CBOE Directors. 9 The current members of the Board are David Colker (NSX President); Peter B. Madoff and Cameron Smith (Designated Dealer Directors); Antoine C. Kemper, Jr. (At-Large Member Director); James M. Anderson, J. Carter Beese and Donald L. Calvin (Public Directors); and William J. Brodsky, Mark F. Duffy and Gary P. Lahey (CBOE Directors). As discussed elsewhere, there are also three vacant CBOE Director positions. In sum, the Exchange is proposing to:

(A)Change the position reserved for the President of the Exchange in favor of the NSX's Chief Executive Officer; 10

(B)combine the two Designated Dealer and one At-Large Member positions into a single “Member Director” category, which would be defined in proposed Article V, Section 1(a)(ii) of the NSX By-Laws as “Proprietary Members or executive officers of Proprietary Member organizations;”

(C)eliminate the existing Public Director 11 category in favor of an “Independent Director” category, which would be defined in proposed Article I, Section 1(k) of the NSX By-Laws as “a member of the Board that the Board has determined to have no material relationship with the Exchange or any affiliate of the Exchange, any member of the Exchange or any affiliate of any such member, other than as a member of the Board” and increased from three to six positions; and

(D)combine the CBOE Chairman, CBOE President and CBOE Member Director categories into a single “CBOE Director” category, which would be defined in proposed Article V, Section 1(a)(iv) of the NSX By-Laws as “executive officers of CBOE, CBOE members or executive officers of CBOE member organizations” and decreased from six to three positions. Corresponding references throughout the NSX By-Laws are proposed to be amended accordingly. 10 The President and Chief Executive Officer are currently the same person. 11 “Public Directors” are defined as “representatives of issuers and investors who shall not be associated with any member of the Exchange or with any registered broker or dealer or with another self-regulatory organization, other than as a public trustee or director[.]” Article V, Section 1.1(g) of the NSX By-Laws. The ten Directors now serving on the Board shall remain and their current terms shall continue unchanged. 12 As determined by the Board, the three new Independent Directors (who will be replacing the three CBOE Director positions that were vacated as part of the initial closing) will be either

(i)selected in accordance with the applicable candidate selection processes set out in proposed Sections 2.1 and 2.2 of Article V of the NSX By-Laws (described below), except that each candidate will be submitted by the Nominating Committee to the Board for approval or disapproval as soon as practical rather than following the annual membership meeting; or

(ii)appointed in accordance with proposed Section 2.1 of the NSX By-Laws and the procedures for filling intraterm vacancies set out in Section 3 of Article V of the NSX By-Laws (collectively referred to hereinafter as the “New Director Selection Procedures”). The initial terms of the three new Independent Directors shall be staggered to expire at the same times as the current terms of the three existing Independent Directors in accordance with proposed Article V, Section 2.1(c) of the NSX By-Laws. 12 The members of the Board immediately following approved of the proposed revisions will be David Colker (NSX Chief Executive Officer); Antoine J. Kemper, Jr., Peter B. Madoff and Cameron Smith (Member Directors); James M. Anderson, J. Carter Beese and Donald L. Calvin (Independent Directors); and William J. Brodsky, Mark F. Duffy and Gary P. Lahey (CBOE Directors). There will also be three new Independent Directors selected in accordance with Article V, Section 2.2 of the NSX By-Laws. The terms of office for the four categories of Director described in Article V, Section 2.1 of the NSX By-Laws will remain for the most part unchanged. The Chief Executive Officer's board term shall expire when such individual ceases to be Chief Executive Officer, each Member Director and Independent Director will be appointed for a three-year term or until a successor is thereafter elected and qualified, and each CBOE Director will be appointed for a one-year term or until a successor is elected and qualified. Modifications to provisions regarding Directors' terms of office are, however, being proposed to add procedures to account for when new Member Directors' and new Independent Directors' initial terms would begin. The candidate selection process described in Article V, Section 2.2 of the NSX By-Laws will be modified as follows. The procedures for the election of Member Director candidates are proposed to be modified to clarify the language and existing Exchange practice that the annual election, at which Proprietary Members vote for the candidate(s), occurs during the annual meeting of the membership, which occurs in January in accordance with Article II, Section 10.1 of the NSX By-Laws. Reference to the procedures for the selection of Public Directors will be deleted and the proposed procedures for the selection of Independent Directors will be added to provide that the Nominating Committee shall select, after receipt of input from interested parties, the candidate(s) to be submitted to the Board for approval or disapproval at the first Board meeting following the annual membership meeting. The CBOE Directors shall continue to be elected to the NSX Board by the CBOE's board of directors at their January meeting or as soon thereafter as possible. b. Subsequent Changes in Board Composition The Termination Agreement anticipates subsequent closings or events whereby NSX shall pay CBOE cash and/or other consideration in exchange for the relinquishment of the reminder of CBOE's three NSX Board positions and other rights, as well as the transfer of additional certificates of proprietary membership to the Exchange. The Exchange is therefore proposing to adopt additional provisions to accommodate the resultant changes in composition to the Board that would occur upon such closing(s) and in order to achieve a majority of Independent Directors serving on the Board should there be no subsequent closings. These provisions will be reflected in proposed Article V, Section 1(b) of the NSX By-Laws and would provide: • On the date of the first “Subsequent Closing” 13 to occur after January 18, 2005, the number of positions on the Board to be filled by CBOE Directors shall be reduced from three to two and the number of positions to be filled by Independent Directors shall be increased from six to seven. Following the first Subsequent Closing, a new Independent Director shall be selected, as determined by the Board, pursuant to the New Director Section Procedures. 13 “Subsequent Closing” would be defined in proposed Article V, Section 1(b)(vii) of the NSX By-Laws to have meaning given to it in the Termination Agreement. • If no Subsequent Closing has occurred prior to February 15, 2006, then in order to achieve a majority of Independent Directors serving on the Board, the Board may, in its discretion, add up to two new Independent Directors and thereby increase the number of Directors serving on the Board from thirteen to not more than fifteen. In such event, the two new Independent Directors shall be selected, as determined by the Board, pursuant to the New Director Selection Procedures. • On the date of the second Subsequent Closing to occur after January 18, 2005, the number of positions on the Board to be filled by CBOE Directors will be reduced from two to one, and the Board may, in its discretion, increase by one the number of positions to be filled by either Independent Directors or Member Directors. Following the second Subsequent Closing, a new Director may be selected, as determined by the Board, pursuant to the New Director Selection Procedures. • On the earliest to occur of

(A)the date on which CBOE owns less than five percent (5%) of the outstanding certificates of proprietary membership of the Exchange or

(B)the third anniversary of the fourth Subsequent Closing (the earliest of these to occur being the “CBOE Withdrawal Date”), the number of positions on the Board to be filled by CBOE Directors shall be reduced from one to zero, and the Board may, in its discretion, increase by one the number of positions to be filled by either Independent Directors or Member Directors. The remaining CBOE Director shall be deemed to have resigned from the Board as of the CBOE Withdrawal Date. Following the CBOE Withdrawal Date, a new Director may be selected, as determined by the Board, pursuant to the New Director Selection Procedures. c. Changes in Committee Composition In order to comport with industry practice and anticipated changes in regulatory requirements, the Exchange is proposing to revise the general composition requirements for committees contained in Article VI, Section 1.4 of the NSX By-Laws to provide that membership of such committees shall be chosen in such a way to assure fair representation of the public and, as appropriate, all classes of members. The Exchange is also proposing to delete references in:

(i)Article VI, Section 1.4 of the NSX By-Laws to the requirements that at least one member of each committee be a member of the Board and that all members of the Executive Committee be members of the Board, and

(ii)Article VI, Section 3.1 of the NSX By-Laws to the requirements that the Securities Committee have at least one Proprietary Member and at least one representative of issuers and investors who is not associated with a member or a broker or dealer, and composition requirements that were no longer applicable after 1989. d. Definition Changes As indicated above, the Exchange is proposing to adopt a definition for “Independent Director.” The Exchange is also proposing to modify the definition of “CBOE member(s)” to delete reference to the requirement, in the case of a transferable regular CBOE membership that is subject to a lease agreement, that the lessee and not the lessor be deemed to the CBOE member. Finally, the Exchange is proposing to reorganize the list of definitions in alphabetical order and renumber the provisions accordingly. 2. Statutory Basis The Exchange believes the proposed rule change, as amended, is consistent with Section 6(b) of the Act 14 in general, and furthers the objectives of Section 6(b)(5) 15 in particular, in that it is designed to promote just and equitable principles of trade and to remove impediments to and perfect the mechanism of a free and open market and a national market system and, generally, in that it protects investors and the public interest. The Exchange believes that the proposed rule change, as amended, also furthers the objectives of Section 6(b)(1), 16 in that it helps to assure that the Exchange is so organized and has the capacity to be able to carry out the purposes of the Act and to comply, and to enforce compliance by its members, with the Act. 14 15 U.S.C. 78f(b). 15 15 U.S.C. 78f(b)(5). 16 15 U.S.C. 78f(b)(1). B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that the proposed rule change, as amended, will impose any 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 solicited or received in connection with the proposed rule change, as amended. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 35 days of the date of publication of this notice in the **Federal Register** or within such longer period

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

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

(a)By order approve such proposed rule change, as amended; or

(b)institute proceedings to determine whether the proposed rule change, as amended, 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-NSX-2005-02 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-NSX-2005-02. 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, as amended, that are filed with the Commission, and all written communications relating to the proposed rule change, as amended, 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 NSX. 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-NSX-2005-02 and should be submitted on or before June 28, 2005. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 17 17 17 CFR 200.30-3(a)(12). Margaret H. McFarland, Deputy Secretary. [FR Doc. E5-2892 Filed 6-6-05; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-51767; File No. SR-PCX-2005-69] Self-Regulatory Organizations; Pacific Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Extend Until June 5, 2006, a Pilot Program for Listing Options on Selected Stocks Trading Below $20 at One-Point Intervals May 31, 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 May 23, 2005, the Pacific Exchange, Inc. (“PCX” 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 PCX. The PCX filed the proposal pursuant to Section 19(b)(3)(A) of the Act, 3 and Rule 19b-4(f)(6) thereunder, 4 which renders the proposal effective upon filing with the Commission. 5 The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 15 U.S.C. 78s(b)(3)(A). 4 17 CFR 240.19b-4(f)(6). 5 The PCX has asked the Commission to waive the five-day pre-filing notice requirement and the 30-day operative delay. *See* Rule 19b-4(f)(6)(iii), 17 CFR 240.19b-4(f)(6)(iii). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The PCX proposes to amend Commentary .04 to PCX Rule 6.4, “Series of Options Open for Trading,” to extend until June 5, 2006, its pilot program for listing options series on selected stocks trading below $20 at one-point intervals (“Pilot Program”). The text of the proposed rule change is available on the PCX's Web site ( *http://www.pacificex.com* ), at the PCX's principal office, and at the Commission's Public Reference Room. 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 PCX 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 PCX has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of this proposal is to extend for one year the PCX's Pilot Program. The current Pilot Program expires on June 5, 2005. The PCX notes that Member Firms have expressed a continued interest in listing additional strike prices on low-priced stocks so that they can provide their customers with greater flexibility in their investment choices. For this reason, the Exchange proposes to extend the Pilot Program. The Exchange notes that all of the issues eligible to be included in the Pilot Program, the procedures for adding $1 strike prices, the procedures for phasing out $2.50 strike prices, the prohibition against listing long-term options (also known as “LEAPS”) in equity option classes at $1 strike intervals, the procedures for adding expiration months, and the procedures for deleting $1 strike prices will remain the same. In support of the Exchange's proposal to extend the Pilot Program until June 5, 2006, the Exchange is submitting to the Commission a report (the “Pilot Program Report”), attached as Exhibit 3 to the proposal, that offers detailed data from, and analysis of, the Pilot Program. 2. Statutory Basis The PCX believes that the continuation of $1 strike prices will stimulate customer interest in options overlying lower-priced stocks by creating greater trading opportunities and flexibility. The Exchange further believes that continuation of $1 strike prices will provide customers with the ability to more closely tailor investment strategies to the precise movement of the underlying security. For these reasons, the Exchange believes the proposed rule change is consistent with the Act and the rules and regulations thereunder and, in particular, the requirements of Section 6(b) of the Act. 6 Specifically, the PCX believes the proposed rule change is consistent with the requirements under Section 6(b)(5) of the Act that the rules of a national securities exchange be designed to promote just and equitable principles of trade, to prevent fraudulent and manipulative acts, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. 6 15 U.S.C. 78f(b). B. Self-Regulatory Organization's Statement on Burden on Competition The PCX does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in the furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others Written comments on the proposed rule change were neither solicited nor received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The PCX has filed the proposed rule change pursuant to Section 19(b)(3)(A) of the Act 7 and subparagraph (f)(6) of Rule 19b-4 thereunder. 8 Because the foregoing proposed rule change:

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

(2)does not impose any significant burden on competition; and

(3)by its terms does not become operative for 30 days after the date of this filing, or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest, the proposed rule change has become effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-4(f)(6) thereunder. 7 15 U.S.C. 78s(b)(3)(A). 8 17 CFR 240.19b-4(f)(6). A proposed rule change filed under Rule 19b-4(f)(6) normally does not become operative for 30 days after the date of filing. However, Rule 19b-4(f)(6)(iii) permits the Commission to designate a shorter time if such action is consistent with the protection of investors and the public interest. In addition, Rule 19b-4(f)(6)(iii) requires a self-regulatory organization to provide the Commission with written notice of its intent to file the proposed rule change, along with a brief description and text of the proposed rule change, at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The PCX has asked the Commission to waive the five-day pre-filling notice requirement and the 30-day operative delay to allow the PCX to continue to list the same options series listed on other options exchanges and to provide the public with the benefits of price competition and added liquidity in these series. The Commission waives the five-day pre-filing notice requirement. In addition, the Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest because it will allow the Pilot Program to continue without interruption through June 5, 2006. 9 For this reason, the Commission designates that the proposal become operative on June 5, 2005. 10 9 For purposes only of waiving the 30-day operative delay, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). 10 As set forth in the Commission's initial approval of the Pilot Program and in its order extending the operation of the Pilot Program through June 5, 2005, if the PCX proposes to:

(1)Extend the Pilot Program;

(2)expand the number of options eligible for inclusion in the Pilot Program; or

(3)seek permanent approval of the Pilot Program, it must submit a Pilot Program report to the Commission along with the filing of its proposal to extend, expand, or seek permanent approval of the Pilot Program. The PCX must file any such proposal and the Pilot Program report with the Commission at least 60 days prior to the expiration of the Pilot Program. The Pilot Program report must cover the entire time the Pilot Program was in effect and must include:

(1)Data and written analysis on the open interest and trading volume for options (at all strike price intervals) selected for the Pilot Program;

(2)delisted options series (for all strike price intervals) for all options selected for the Pilot Program;

(3)an assessment of the appropriateness of $1 strike price intervals for the options the PCX selected for the Pilot Program;

(4)an assessment of the impact of the Pilot Program on the capacity of the PCX's, the Options Price Reporting Authority's, and vendors' automated systems;

(5)any capacity problems or other problems that arose during the operation of the Pilot Program and how the PCX addressed them;

(6)any complaints that the PCX received during the operation of the Pilot Program and how the PCX addressed them; and

(7)any additional information that would help to assess the operation of the Pilot Program. *See* Securities Exchange Act Release Nos. 48945 (June 17, 2003), 68 FR 37594 (June 24, 2003) (File No. SR-PCX-2003-28) (order approving the Pilot Program through June 5, 2004); and 50152 (August 5, 2004), 69 FR 49931 (August 12, 2004) (File No. SR-PCX-2004-61) (order approving the extension of the Pilot Program through June 5, 2005). 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 No. SR-PCX-2005-69 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 No. SR-PCX-2005-69. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room, 450 Fifth Street, NW., Washington, DC 20549. Copies of such filing will also be available for inspection and copying at the principal office of the PCX. 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 No. SR-PCX-2005-69 and should be submitted on or before June 28, 2005. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 11 11 17 CFR 200.30-3(a)(12). Margaret H. McFarland, Deputy Secretary. [FR Doc. E5-2893 Filed 6-6-05; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-51752; File No. SR-PCX-2005-34] Self-Regulatory Organizations; Pacific Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change and Amendment No. 1 thereto Relating to ETP Holders Borrowing from or Lending to Their Customers May 27, 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 15, 2005, the Pacific Exchange, Inc. (“PCX” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I and II, which Items have been prepared by PCX. The proposed rule change has been filed by the PCX as a “non-controversial” rule change pursuant to Rule 19b-4(f)(6) under the Act. 3 On May 25, 2005, the PCX filed Amendment No. 1 to the proposed rule change (“Amendment No. 1”). 4 The Commission is publishing this notice to solicit comments on the proposed rule change, as amended, from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 17 CFR 240.19b-4(f)(6). 4 Amendment No. 1 revised and clarified the statutory basis for the proposed rule change. *See* Letter Dated May 23, 2005, from Melanie Grace, Office of the Corporate Secretary, PCX, to Nancy Sanow, Assistant Director, Division of Market Regulation. I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change PCX, through its wholly-owned subsidiary PCX Equities, Inc. (“PCXE”), proposes to adopt a new rule restricting registered persons of ETP Holders from borrowing from or lending to their customers, except pursuant to the conditions specified in the rule. The text of the proposed rule change is set forth below. Proposed new language is in *italics.* Rule 9.29. Borrowing From or Lending to Customers *(a) No person associated with an ETP Holder in any registered capacity may borrow money from or lend money to any customer of such person unless:* *

(1)The ETP Holder has written procedures allowing the borrowing and lending of money between such registered persons and customers of the ETP Holder; and * *(2) The lending or borrowing arrangement meets one of the following conditions:* *(A) the customer is a member of such person's immediate family;* *(B) the customer is a financial institution regularly engaged in the business of providing credit, financing, or loans, or other entity or person that regularly arranges or extends credit in the ordinary course of business;* *(C) the customer and the registered person are both registered persons of the same ETP Holder;* *(D) the lending arrangement is based on a personal relationship with the customer, such that the loan would not have been solicited, offered, or given had the customer and the associated person not maintained a relationship outside of the broker/customer relationship; or* *(E) the lending arrangement is based on a business relationship outside of the broker/customer relationship;* *(b) Procedures.* *(1) ETP Holders must pre-approve in writing the lending or borrowing arrangements described in subparagraphs (a)(2)(C), (D), and

(E)above.* *(2) With respect to the lending or borrowing arrangements described in subparagraph (a)(2)(A) above, an ETP Holder's written procedures may indicate that registered persons are not required to notify the ETP Holder, or receive ETP Holder approval either prior to or subsequent to entering into such lending or borrowing arrangements.* *(3) With respect to the lending or borrowing arrangements described in subparagraph (a)(2)(B) above, an ETP Holder's written procedures may indicate that registered persons are not required to notify the ETP Holder or receive their approval either prior to or subsequent to entering into such lending or borrowing arrangements, provided that the loan has been made on commercial terms that the customer generally makes available to members of the public similarly situated as to need, purpose, and creditworthiness. For purposes of this subparagraph, the ETP Holder may rely on the registered person's representation that the terms of the loan meet the above-described standards.* *(c) The term immediate family shall include parents, grandparents, mother-in-law or father-in-law, husband or wife, brother or sister, brother-in-law or sister-in-law, son-in-law or daughter-in-law, children, grandchildren, cousin, aunt or uncle, or niece or nephew, and shall also include any other person whom the registered person supports, directly or indirectly, to a material extent.* II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, PCX 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. PCX has prepared summaries, set forth in Sections A, B and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of the proposed rule change is to adopt a rule that prohibits registered persons of an ETP Holder from borrowing money from or lending money to a customer unless each of the following applies:

(1)The ETP Holder has written procedures allowing such borrowing or lending arrangements; and

(2)the borrowing or lending arrangement falls within one of five permissible types of lending arrangements. 5 In certain cases, the ETP Holder must also pre-approve the loan in writing. The five types of permissible lending arrangements are: 5 The proposed rule is substantially similar to NASD Rule 2370. *See* Securities Exchange Act Release No. 48242 (August 29, 2003), 68 FR 52806 (September 5, 2003). NASD Rule 2370 was amended in Securities Exchange Act Release No. 49269 (February 18, 2004), 69 FR 8718 (February 25, 2004). *See also* Securities Exchange Act Release No. 50874 (December 16, 2004), 69 FR 76803 (December 22, 2004) (SR-CBOE-2004-66).

(i)The customer is a member of the registered person's immediate family (as defined in the proposed rule);

(ii)The customer is a financial institution regularly engaged in the business of providing credit, financing, or loans, or other entity or person that regularly arranges or extends credit in the ordinary course of business;

(iii)The customer and the registered person are both registered persons of the same ETP Holder;

(iv)The lending arrangement is based on a personal relationship outside of the broker-customer relationship; or

(v)The lending arrangement is based on a business relationship outside of the broker-customer relationship. The proposed rule change establishes a regulatory framework that would give ETP Holders greater control over, and more specific supervisory responsibilities for, lending arrangements between registered persons and their customers. ETP Holders could choose to permit their registered persons to borrow from or lend to specified customers consistent with the requirements of the rule. If ETP Holders choose to permit their registered persons to engage in lending arrangements with those customers, the proposed rule change would require ETP Holders to have written procedures allowing the borrowing and lending of money between registered persons and customers or ETP Holders. As stated above, ETP Holders would be permitted to approve loans only if the loan falls within one of the five types of permissible lending arrangements set forth in the rule. The proposed rule would require ETP Holders to pre-approve in writing three out of the five types of lending arrangements permitted by the rule. It would exempt from the rule's notice and approval requirements lending arrangements involving a registered person and his/her customer that is

(1)a member of his/her immediate family (as defined in the proposed rule); or

(2)a financial institution regularly engaged in the business of providing credit, financing, or loans (or other entity or persons that regularly arranges or extends credit in the ordinary course of business), provided the loan has been made on commercial terms that the customer generally makes available to members of the general public similarly situated as to need, purpose, and creditworthiness. PCX believes the requirement in the proposed rule that certain types of lending and borrowing arrangements must be pre-approved by the ETP Holder would enhance the ETP Holder's ability to supervise such lending and borrowing activities of registered personnel. PCX also believes that the proposed rule change would enhance PCX's ability to monitor loans between registered persons and their customers. Currently, under controlling Commission decisions, to bring a disciplinary action against a registered person who has entered into an unethical lending arrangement with a customer, PCX generally must prove that the arrangement is inconsistent with just and equitable principles of trade because the registered person has acted in bad faith or unethically. This can be difficult to prove in cases in which the customer is unable or unavailable to testify, or refuses to testify because he or she is relying on the registered person for financial advice. The proposed rule change would better enable PCX to monitor and bring disciplinary actions in cases involving such loans. PCX notes that the safeguards provided under the proposed rule, including bringing disciplinary actions for violations of the rule, are in addition to the general powers that PCX has to bring disciplinary actions against a registered person who has entered into an unethical lending arrangement with a customer. It is also important to note that this proposal does not change the applications of Regulation T to lending activities by associated persons. Specifically, the definition of “creditor” under Regulation T extends to associated persons of broker-dealers and therefore, certain loans to customers by associated persons may require compliance with the provisions of Regulation T. 2. Statutory Basis For the above reasons, PCX believes that the proposed rule change would enhance competition. PCX believes that the proposed rule change is consistent with Section 6(b) 6 of the Act, in general, and furthers the objectives of Section 6(b)(5), 7 in particular, in that it is designed to prevent fraudulent and manipulative acts and practices, promote just and equitable principles of trade, to foster competition and to protect investors and the public interest. PCX believes that the proposed rule change is designed to accomplish these ends by establishing a regulatory framework that will give ETP Holders greater control over lending arrangements by permitting ETP Holders to permit such arrangements only if they fall within the five types of permissible arrangements, or, as was the case before the proposal of this new rule, prohibit such arrangements altogether. ETP Holders that permit such arrangements would be required to keep written procedures. These procedures would enable both ETP Holders and PCX to proscribe certain customer-broker loans and monitor those that have been approved. 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 PCX 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 Written comments on the proposed rule change were neither solicited nor received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action PCX has stated that the foregoing proposed rule change has become effective pursuant to Section 19(b)(3)(A)(iii) of the Act 8 and Rule 19b-4(f)(6) 9 thereunder because the proposed rule change:

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

(ii)does not impose any significant burden on competition; and

(E)above.* *(2) With respect to the lending or borrowing arrangements described in subparagraph (a)(2)(A) above, an OTP Holder's or OTP Firm's written procedures may indicate that registered persons are not required to notify the OTP Holder or OTP Firm, or receive OTP Holder or OTP Firm approval either prior to or subsequent to entering into such lending or borrowing arrangements.* *(3) With respect to the lending or borrowing arrangements described in subparagraph (a)(2)(B) above, an OTP Holder's or OTP Firm's written procedures may indicate that registered persons are not required to notify the OTP Holder or OTP Firm or receive their approval either prior to or subsequent to entering into such lending or borrowing arrangements, provided that the loan has been made on commercial terms that the customer generally makes available to members of the public similarly situated as to need, purpose, and creditworthiness. For purposes of this subparagraph, the OTP Holder or OTP Firm may rely on the registered person's representation that the terms of the loan meet the above-described standards.* *(c) The term immediate family shall include parents, grandparents, mother-in-law or father-in-law, husband or wife, brother or sister, brother-in-law or sister-in-law, son-in-law or daughter-in-law, children, grandchildren, cousin, aunt or uncle, or niece or nephew, and shall also include any other person whom the registered person supports, directly or indirectly, to a material extent.* II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, PCX 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. PCX has prepared summaries, set forth in Sections A, B and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of the proposed rule change is to adopt a rule that prohibits registered persons of an OTP Holder or OTP Firm from borrowing money from or lending money to a customer unless each of the following applies:

(1)The OTP Holder or OTP Firm has written procedures allowing such borrowing or lending arrangements; and

(2)the borrowing or lending arrangement falls within one of five permissible types of lending arrangements. 5 In certain cases, the OTP Holder or OTP Firm must also pre-approve the loan in writing. The five types of permissible lending arrangements are: 5 The proposed rule is substantially similar to NASD Rule 2370. *See* Securities Exchange Act Release No. 48242 (August 29, 2003), 68 FR 52806 (September 5, 2003). NASD Rule 2370 was amended in Securities Exchange Act Release No. 49269 (February 18, 2004), 69 FR 8718 (February 25, 2004). *See also* Securities Exchange Act Release No. 50874 (December 16, 2004), 69 FR 76803 (December 22, 2004) (SR-CBOE-2004-66).

(i)The customer is a member of the registered person's immediate family (as defined in the proposed rule);

(ii)the customer is a financial institution regularly engaged in the business of providing credit, financing, or loans, or other entity or person that regularly arranges or extends credit in the ordinary course of business;

(iii)the customer and the registered person are both registered persons of the same OTP Holder or OTP Firm;

(iv)the lending arrangement is based on a personal relationship outside of the broker-customer relationship; or

(v)the lending arrangement is based on a business relationship outside of the broker-customer relationship. The proposed rule change establishes a regulatory framework that would give OTP Holders and OTP Firms greater control over, and more specific supervisory responsibilities for, lending arrangements between registered persons and their customers. OTP Holders and OTP Firms could choose to permit their registered persons to borrow from or lend to specified customers consistent with the requirements of the rule. If OTP Holders or OTP Firms choose to permit their registered persons to engage in lending arrangements with those customers, the proposed rule change would require OTP Holders and OTP Firms to have written procedures allowing the borrowing and lending of money between registered persons and customers or OTP Holders or OTP Firms. As stated above, OTP Holders and OTP Firms would be permitted to approve loans only if the loan falls within one of the five types of permissible lending arrangements set forth in the rule. The proposed rule would require OTP Holders and OTP Firms to pre-approve in writing three out of the five types of lending arrangements permitted by the rule. It would exempt from the rule's notice and approval requirements lending arrangements involving a registered person and his/her customer that is

(1)a member of his/her immediate family (as defined in the proposed rule); or

(2)a financial institution regularly engaged in the business of providing credit, financing, or loans (or other entity or persons that regularly arranges or extends credit in the ordinary course of business), provided the loan has been made on commercial terms that the customer generally makes available to members of the general public similarly situated as to need, purpose, and creditworthiness. PCX believes the requirement in the proposed rule that certain types of lending and borrowing arrangements must be pre-approved by the OTP Holder or OTP Firm would enhance the OTP Holder's and OTP Firm's ability to supervise such lending and borrowing activities of registered personnel. PCX also believes that the proposed rule change would enhance PCX's ability to monitor loans between registered persons and their customers. Currently, under controlling Commission decisions, to bring a disciplinary action against a registered person who has entered into an unethical lending arrangement with a customer, PCX generally must prove that the arrangement is inconsistent with just and equitable principles of trade because the registered person has acted in bad faith or unethically. This can be difficult to prove in cases in which the customer is unable or unavailable to testify, or refuses to testify because he or she is relying on the registered person for financial advice. The proposed rule change would better enable PCX to monitor and bring disciplinary actions in cases involving such loans. PCX notes that the safeguards provided under the proposed rule, including bringing disciplinary actions for violations of the rule, are in addition to the general powers that PCX has to bring disciplinary actions against a registered person who has entered into an unethical lending arrangement with a customer. It is also important to note that this proposal does not change the applications of Regulation T to lending activities by associated persons. Specifically, the definition of “creditor” under Regulation T extends to associated persons of broker-dealers and therefore, certain loans to customers by associated persons may require compliance with the provisions of Regulation T. 2. Statutory Basis For the above reasons, PCX believes that the proposed rule change would enhance competition. PCX believes that the proposed rule change is consistent with Section 6(b) 6 of the Act, in general, and furthers the objectives of Section 6(b)(5), 7 in particular, in that it is designed to prevent fraudulent and manipulative acts and practices, promote just and equitable principles of trade, to foster competition and to protect investors and the public interest. PCX believes that the proposed rule change is designed to accomplish these ends by establishing a regulatory framework that will give OTP Holders and OTP Firms greater control over lending arrangements by permitting OTP Holders and OTP Firms to permit such arrangements only if they fall within the five types of permissible arrangements, or, as was the case before the proposal of this new rule, prohibit such arrangements altogether. OTP Holders and OTP Firms that permit such arrangements would be required to keep written procedures. These procedures would enable both OTP Holders and OTP Firms and PCX to proscribe certain customer-broker loans and monitor those that have been approved. 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 PCX 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 Written comments on the proposed rule change were neither solicited nor received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action PCX has stated that the foregoing proposed rule change has become effective pursuant to Section 19(b)(3)(A)(iii) of the Act 8 and Rule 19b-4(f)(6) 9 thereunder because the proposed rule change:

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

(ii)does not impose any significant burden on competition; and

(iii)does not become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest. At any time within 60 days of the filing of such proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. 10 The PCX provided the Commission with written notice of its intent to file this proposed rule change at least five business days prior to the date of filing the proposed rule change. 8 15 U.S.C. 78s(b)(3)(A). 9 17 CFR 240.19b-4(f)(6)(iii). 10 For purposes only of calculating the 60-day abrogation period, the Commission considers the proposed rule change to have been filed on May 23, 2005, when Amendment No. 1 was filed. Pursuant to Rule 19b-4(f)(6)(iii) under the Act, 11 the proposal does not become operative for 30 days after the date of its filing, or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest. The PCX has requested that the Commission waive the 30-day operative delay so that the proposed rule change will become immediately effective upon filing. 11 Id. The Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest. 12 Accelerating the operative date will allow for an immediately effective mechanism for proscribing certain customer-broker loans and monitoring those that have been approved. For these reasons, the Commission designates that the proposed rule change has become effective and operative immediately. 12 For purposes of accelerating the operative date of this proposal, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). 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-PCX-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-PCX-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 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 PCX. 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-PCX-2005-33 and should be submitted on or before June 28, 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. E5-2896 Filed 6-6-05; 8:45 am] BILLING CODE 8010-01-P SECURITITES AND EXCHANGE COMMISSION [Release No. 34-51768; File No. SR-Phlx-2005-35] Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Extend Until June 5, 2006, a Pilot Program for Listing Options on Selected Stocks Trading Below $20 at One-Point Intervals May 31, 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 May 16, 2005, 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 and II below, which Items have been prepared by the Phlx. The Phlx filed the proposal pursuant to Section 19(b)(3)(A) of the Act, 3 and Rule 19b-4(f)(6) thereunder, 4 which renders the proposal effective upon filing with the Commission. 5 The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 15 U.S.C. 78s(b)(3)(A). 4 17 CFR 240.19b-4(f)(6). 5 The Phlx has asked the Commission to waive the five-day pre-filing notice requirement and the 30-day operative delay. *See* Rule 19b-4(f)(6)(iii), 17 CFR 240.19b-4(f)(6)(iii). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Phlx proposes to amend Commentary .05 to Phlx Rule 1012, “Series of Options Open for Trading,” to extend until June 5, 2006, its pilot program for listing options series on selected stocks trading below $20 at one-point intervals (“Pilot Program”). As set forth in Phlx Rule 1012, Commentary .05, the Pilot Program allows the Phlx to list options classes overlying five individual stocks with strike price intervals of $1.00 where, among other things, the underlying stock closes below $20 on its primary market on the day before the Phlx selects the stock for the Pilot Program. The Phlx also may list $1 strike prices on any options classes selected by other options exchanges that have adopted similar pilot programs. 6 The text of the proposed rule change is available on the Phlx's Web site ( *http://www.phlx.com* ), at the Phlx's principal office, and at the Commission's Public Reference Room. 6 The Commission approved the Phlx's Pilot Program on June 11, 2003, and extended it through June 5, 2005. *See* Securities Exchange Act Release Nos. 48013 (June 11, 2003), 68 FR 35933 (June 17, 2003) (order approving File No. SR-Phlx-2002-55) (approving the Pilot Program through June 5, 2004) (“Phlx Approval Order”); and 49801 (June 3, 2004), 69 FR 32652 (June 10, 2004) (notice of filing and immediate effectiveness of File No. SR-PHLX-2004-38) (extending the Pilot Program through June 5, 2005) (“Phlx Pilot Extension”). The other options exchanges have similar pilot programs that likewise were extended through June 5, 2005. *See, e.g.* , Securities Exchange Act Release Nos. 49813 (June 4, 2004), 69 FR 33088 (June 14, 2004) (notice of filing and immediate effectiveness of File No. SR-Amex-2004-45) (extending the $1 strike price pilot program of the American Stock Exchange LLC, through June 5, 2005); 49799 (June 3, 2004), 69 FR 32542 (June 10, 2004) (notice of filing and immediate effectiveness of File No. SR-CBOE-2004-34) (extending the $1 strike price pilot program of the Chicago Board Options Exchange, Incorporated, through June 5, 2005); 50060 (July 22, 2004), 69 FR 45864 (July 30, 2004) (notice of filing and immediate effectiveness of File No. SR-ISE-2004-26) (extending the $1 strike price pilot program of the International Securities Exchange, Inc., through June 5, 2005); and 50152 (August 5, 2004), 69 FR 49931 (August 12, 2004) (order approving File No. SR-PCX-2004-61) (extending the $1 strike price pilot program of the Pacific Exchange, Inc., through June 5, 2005). II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Phlx included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Phlx has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of the proposed rule change is to extend the Pilot Program for one year so that the Exchange may continue to list options at $1 strike price intervals within the parameters specified in Phlx Rule 1012, Commentary .05. Because of the large number of stocks that have precipitously declined in price over the last four years and the increasing number of options overlying this lowest tier of stocks, the Commission approved the Pilot Program and extended it through June 5, 2005. 7 The Exchange proposes to extend the Pilot Program for a period of one year, through June 5, 2006. The Pilot Program will remain unchanged so that, under the terms of the Pilot Program, the Phlx may establish $1 strike price intervals on options classes overlying no more than five individual stocks designated by the Exchange where the underlying stock closes below $20 on its primary market on the trading day before the Exchange selects the stock for the Pilot Program. Under the terms of the Pilot Program, the strike prices listed pursuant to the Pilot Program must be between $3 and $20 and may be no more than $5 above or below the closing price of the underlying stock on the preceding day. In addition, strike prices listed pursuant to the Pilot Program may not be listed within $.50 of an existing $2.50 strike price, and $1 strike prices are not applied to long term options series (“LEAPS”). Pursuant to the Pilot Program, the Exchange may list $1 strike prices on options classes selected by other options exchanges for inclusion in their $1 strike price pilot programs. 7 *See* Phlx Approval Order and Phlx Pilot Extension, *supra* note 6. In July 2003, the Phlx chose and listed five options classes with $1 strike price intervals, and thereafter listed $1 strike prices in options classes selected by other options exchanges for inclusion in their $1 strike price pilot programs. The Phlx currently lists 22 options classes with $1 strike prices. 8 According to the Phlx, the Exchange's ability to list options at $1 strike price intervals pursuant to the Pilot Program has given investors the opportunity to more closely and effectively tailor their options investments to the price of the underlying stock, has allowed the Exchange to take advantage of competitive opportunities to list options at $1 strike prices, and has stimulated price competition among the options exchanges in these options. 8 The Phlx continues to list the $1 strike prices in the options classes that it initially chose for the Pilot Program: TYCO International, LTD (TYC), Micron Tech. (MU), Oracle Co. (ORQ), Brocade Comm. (UBF), and Juniper Networks (JUP). In its notice extending the Pilot Program through June 5, 2005, the Commission indicated that if the Phlx sought to extend, expand, or request permanent approval of the Pilot Program, it would be required to include a Pilot Program report with its filing. 9 The Phlx's Pilot Program Report (“Pilot Program Report”), included as Exhibit 3 to the proposal, reviews the Exchange's experience with the Pilot Program. According to the Phlx, the Pilot Program Report clearly supports the Exchange's belief that extension of the Pilot Program is proper. Among other things, the Phlx believes that the Pilot Program Report shows the strength and efficacy of the Pilot Program on the Exchange, as reflected by the increase in the percentage of $1 strikes in comparison to total options volume traded on the Phlx (from 37.23% in the 2004 report to 51.59% in 2005 Pilot Program Report) and the continuing robust open interest of options traded on the Phlx at $1 strike price intervals. The Phlx believes that the Pilot Program Report establishes that the Pilot Program has not created and in the future should not create capacity problems for the systems of the Exchange or the Options Price Reporting Authority (“OPRA”). In addition, the Pilot Program Report explains that most delistings of $1 strike price options series occurred to ensure that the chosen $1 strike price issues remained within the parameters of the Pilot Program. 9 *See* Phlx Pilot Extension, *supra* note 6. 2. Statutory Basis The Exchange believes the proposed rule change is consistent with Section 6(b) of the Act, 10 in general, and furthers the objectives of Section 6(b)(5), 11 in particular, in that it is designed to perfect the mechanism of a free and open market and a national market system, to protect investors and the public interest, and to promote just an equitable principles of trade. The Phlx believes the proposal would achieve this by allowing the continued listing of options at $1 strike price intervals within certain parameters, thereby stimulating customer interest in options overlying the lowest tier of stocks and creating greater trading opportunities and flexibility and providing customers with the ability to more closely tailor investment strategies to the precise movement of the underlying stocks. 10 15 U.S.C. 78f(b). 11 15 U.S.C. 78f(b)(5). B. Self-Regulatory Organization's Statement on Burden on Competition The Phlx does not believe that the proposed rule change will impose any inappropriate burden on competition. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were either solicited or received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The Phlx has filed the proposed rule change pursuant to Section 19(b)(3)(A) of the Act 12 and subparagraph (f)(6) of Rule 19b-4 thereunder. 13 Because the foregoing proposed rule change:

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

(2)does not impose any significant burden on competition; and

(3)by its terms does not become operative for 30 days after the date of this filing, or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest, the proposed rule change has become effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-4(f)(6) thereunder. 12 15 U.S.C. 78s(b)(3)(A). 13 17 CFR 240.19b-4(f)(6). A proposed rule change filed under Rule 19b-4(f)(6) normally does not become operative for 30 days after the date of filing. However, Rule 19b-4(f)(6)(iii) permits the Commission to designate a shorter time if such action is consistent with the protection of investors and the public interest. In addition, Rule 19b-4(f)(6)(iii) requires a self-regulatory organization to provide the Commission with written notice of its intent to file the proposed rule change, along with a brief description and text of the proposed rule change, at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The Phlx has asked the Commission to waive the five-day pre-filing notice requirement and the 30-day operative delay to allow the Exchange to continue listing $1 strike prices without a lapse in the operation of the Pilot Program. The Commission waives the five-day pre-filing notice requirement. In addition, the Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest because it will permit the Pilot Program to continue without interruption through June 5, 2006. 14 For this reason, the Commission designates that the proposal become operative on June 5, 2005. 15 14 For purposes only of waiving the 30-day operative delay, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). 15 As set forth in the Commission's initial approval of the Pilot Program, if the Phlx proposes to:

(1)Extend the Pilot Program;

(2)expand the number of options eligible for inclusion in the Pilot Program; or

(3)seek permanent approval of the Pilot Program, it must submit a Pilot Program report to the Commission along with the filing of its proposal to extend, expand, or seek permanent approval of the Pilot Program. The Phlx must file any such proposal and the Pilot Program report with the Commission at least 60 days prior to the expiration of the Pilot Program. The Pilot Program report must cover the entire time the Pilot Program was in effect and must include:

(1)data and written analysis on the open interest and trading volume for options (at all strike price intervals) selected for the Pilot Program;

(2)delisted options series (for all strike price intervals) for all options selected for the Pilot Program;

(3)an assessment of the appropriateness of $1 strike price intervals for the options the Phlx selected for the Pilot Program;

(4)an assessment of the impact of the Pilot Program on the capacity of the Phlx's, OPRA's, and vendors' automated systems;

(5)any capacity problems or other problems that arose during the operation of the Pilot Program and how the Phlx addressed them;

(6)any complaints that the Phlx received during the operation of the Pilot Program and how the Phlx addressed them; and

(7)any additional information that would help to assess the operation of the Pilot Program. *See* Phlx Approval Order, *supra* note 6. At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov.* Please include File No. SR-Phlx-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 No. SR-Phlx-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, 450 Fifth Street, NW., Washington, DC 20549. Copies of such filing will also 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 No. SR-Phlx-2005-35 and should be submitted on or before June 28, 2005. 16 17 CFR 200.30-3(a)(12). For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 16 Margaret H. McFarland, Deputy Secretary. [FR Doc. E5-2900 Filed 6-6-05; 8:45 am] BILLING CODE 8010-01-P SMALL BUSINESS ADMINISTRATION Wisconsin District Advisory Council; Public Meeting The U.S. Small Business Administration, Wisconsin District Advisory Council will be hosting its first meeting to discuss such matters that may be presented by members, and staff of the U.S. Small Business Administration, or others present. The meeting will be held on Thursday, June 16, 2005, starting at 1:30 p.m. The meeting will take place at the U.S. Small Business Administration, Wisconsin District—Milwaukee, 310 West Wisconsin Avenue, Suite 400, Milwaukee, Wisconsin. Anyone wishing to attend must contact Cindy Merrigan in writing or by fax. Cindy Merrigan, Small Business Administration, 740 Regent Street, Suite 100, Madison, Wisconsin 53715, phone

(608)441-5560, fax

(202)481-0815, e-mail: *cindy.merrigan@sba.gov.* Matthew K. Becker, Committee Management Officer. [FR Doc. 05-11296 Filed 6-6-05; 8:45 am]

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