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Code · REGISTER · 2005-06-20 · Nuclear Regulatory Commission · Notices

Notices. Notice of Issuance; correction

35,887 words·~163 min read·/register/2005/06/20/05-12091·

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

BILLING CODE 7555-01-M NUCLEAR REGULATORY COMMISSION [Docket Nos. STN 50-454, STN 50-455, STN 50-456, and STN 50-457] Exelon Generation Company, LLC; Notice of Issuance of Amendments to Facility Operating Licenses; Correction AGENCY: Nuclear Regulatory Commission. ACTION: Notice of Issuance; correction. SUMMARY: This document corrects a notice appearing in the **Federal Register** on June 7, 2005 (70 FR 33222), that incorrectly stated the date of issuance of amendments deleting the technical specification requirements related to hydrogen recombiners as May 19, 2005.
The correct date of issuance of the amendments is May 26, 2005. FOR FURTHER INFORMATION CONTACT: George F. Dick, Office of Nuclear Reactor Regulation, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001; telephone
(301)415-3019, e-mail: *GFD@nrc.gov.* SUPPLEMENTARY INFORMATION: On page 33222, in the second column, in the entry for 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, the date of issuance is corrected to read from “May 19, 2005” to “May 26, 2005”. Dated in Rockville, Maryland, this 9th day of June 2005. For the Nuclear Regulatory Commission. George F. Dick, Sr., Project Manager, Section 2, Project Directorate III, Division of Licensing Project Management, Office of Nuclear Reactor Regulation. [FR Doc. E5-3176 Filed 6-17-05; 8:45 am] BILLING CODE 7590-01-P NUCLEAR REGULATORY COMMISSION [Docket No. 70-3103] Safety Evaluation Report for the Proposed National Enrichment Facility in Lea County, NM, NUREG-1827; Notice of Availability AGENCY: United States Nuclear Regulatory Commission. ACTION: Notice of availability of Safety Evaluation Report. SUMMARY: Notice is hereby given that the Nuclear Regulatory Commission
(NRC)has issued a Safety Evaluation Report
(SER)for the Louisiana Energy Services
(LES)license application, dated December 12, 2003, docketed on January 30, 2004, and as revised by letters dated February 27, 2004, July 30, 2004, September 30, 2004, April 22, 2005, April 29, 2005, and May 25, 2005, for the possession and use of source, byproduct, and special nuclear materials at its proposed National Enrichment Facility
(NEF)in Lea County, New Mexico. The SER discusses the results of the safety review performed by NRC staff in the following areas: General information, organization and administration, Integrated Safety Analysis
(ISA)and ISA Summary, radiation protection, nuclear criticality safety, chemical process safety, fire safety, emergency management, environmental protection, decommissioning, management measures, materials control and accountability, and physical protection. The NRC is planning to conduct a public meeting in New Mexico to provide an overview of the staff's safety review and to address any comments or questions relating to the issuance of the SER. SUPPLEMENTARY INFORMATION: The SER (NUREG-1827) is available for inspection and copying for a fee at the NRC's Public Document Room, located at One White Flint North, Public File Area O1 F21, 11555 Rockville Pike (first floor), Rockville, Maryland. The Public Document Room is open from 7:45 a.m. to 4:15 p.m., Monday through Friday, except on Federal holidays. Publicly available records will be accessible electronically from the Agency-wide Documents Access and Management Systems (ADAMS) Public Electronic Reading Room, and on the Internet at the NRC Web site, *http://www.nrc.gov/NRC/ADAMS/index.html.* Persons who do not have access to ADAMS or who encounter problems in accessing the documents located in ADAMS, should contact the NRC Public Document Room Reference staff by telephone at 1-800-397-4209, 301-415-4737, or by e-mail to *pdr@nrc.gov.* FOR FURTHER INFORMATION CONTACT: Timothy C. Johnson, Mail Stop: T-8F42, Special Projects Branch, Division of Fuel Cycle Safety and Safeguards, Office of Nuclear Material Safety and Safeguards, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001, Telephone:
(301)415-7299, and e-mail: *tcj@nrc.gov.* Dated at Rockville, Maryland, this 14th day of June, 2005. For the Nuclear Regulatory Commission. James W. Clifford, Acting Branch Chief, Special Projects Branch, Division of Fuel Cycle Safety and Safeguards, Office of Nuclear Material Safety and Safeguards. [FR Doc. E5-3174 Filed 6-17-05; 8:45 am] BILLING CODE 7590-01-P NUCLEAR REGULATORY COMMISSION [Docket No. 50-331] Nuclear Management Company; Notice of Partial Denial of Amendment to Facility Operating License and Opportunity for Hearing The U.S. Nuclear Regulatory Commission (NRC or the Commission) has denied a request by Nuclear Management Company, LLC (the licensee) for an amendment to Facility Operating License No. DPR-49 issued to the licensee for operation of the Duane Arnold Energy Center, located in Linn County, Iowa. Notice of Consideration of Issuance of this amendment was published in the **Federal Register** on April 13, 2004 (69 FR 19571). The purpose of the licensee's amendment request was to revise the Technical Specifications
(TS)to reflect adoption of Technical Specifications Task Force
(TSTF)traveler numbers 264, 273, 284, and 299. The NRC staff has concluded that the portion of the licensee's request to adopt TSTF-264 and revise TS 3.3.1.1 cannot be granted. The licensee was notified of the Commission's denial of the proposed change by a letter dated June 14, 2005. By 30 days from the date of publication of this notice in the **Federal Register** , the licensee may demand a hearing with respect to the denial described above. Any person whose interest may be affected by this proceeding may file a written petition for leave to intervene pursuant to the requirements of Title 10 of the Code of Federal Regulations Section 2.309. A request for hearing or petition for leave to intervene must be filed with the Secretary of the Commission, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001 Attention: Rulemakings and Adjudications Staff, or may be delivered to the Commission's Public Document Room (PDR), located at One White Flint North, Public File Area O1 F21, 11555 Rockville Pike (first floor), Rockville, Maryland, by the above date. Because of continuing disruptions in delivery to mail to U.S. Government offices, it is requested that petitions for leave to intervene and requests for hearing be transmitted to the Secretary of the Commission either by means of facsimile transmission to 301-415-1101 or by e-mail to *hearingdocket@nrc.gov* . A copy of any petitions should also be sent to the Office of the General Counsel, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001, and because of continuing disruptions in delivery of mail to the U.S. Government offices, it is requested that copies be transmitted either by means of facsimile transmission to 301-415-3725 or by e-mail to *OGCMailCenter@nrc.gov* . A copy of any petitions should also be sent to Bradley D. Jackson, Esq., Foley and Lardner, P.O. Box 1497, Madison, WI 53701-1497, attorney for the licensee. For further details with respect to this action, see
(1)the application for amendment dated January 28, 2004, as supplemented by letter dated November 22, 2004, and
(2)the Commission's letter to the licensee dated June 14, 2005. Documents may be examined, and/or copied for a fee, at the NRC's PDR, located at One White Flint North, 11555 Rockville Pike (first floor), Rockville, Maryland, and will be accessible electronically through the Agencywide Documents Access and Management System's Public Electronic Reading Room link at the NRC Web site *http://www.nrc.gov/reading-rm/adams.html* . Persons who do not have access to ADAMS or who encounter problems in accessing documents located in ADAMS, should contact the NRC PDR Reference staff by telephone at 1-800-397-4209, 301-415-4737, or by e-mail to *pdr@nrc.gov* . Dated at Rockville, Maryland, this 14th day of June 2005. For the Nuclear Regulatory Commission. Ho K. Nieh, Acting Director, Project Directorate III-1, Division of Licensing Project Management, Office of Nuclear Reactor Regulation. [FR Doc. E5-3177 Filed 6-17-05; 8:45 am] BILLING CODE 7590-01-P NUCLEAR REGULATORY COMMISSION [Docket Nos: (Redacted), License Nos: (Redacted), EA (Redacted)] In the Matter of Certain Power Reactor Licensees and Research Reactor Licensees Who Transport Spent Nuclear Fuel; Order Modifying License (Effective Immediately) I. The licensees identified in Attachment 1 to this Order have been issued a specific license by the U.S. Nuclear Regulatory Commission (NRC or Commission) authorizing the possession of spent nuclear fuel and a general license authorizing the transportation of spent nuclear fuel [in a transportation package approved by the Commission] in accordance with the Atomic Energy Act of 1954, as amended, and 10 CFR Parts 50 and 71. This Order is being issued to all such licensees who transport spent nuclear fuel. Commission regulations for the shipment of spent nuclear fuel at 10 CFR 73.37(a) require these licensees to maintain a physical protection system that meets the requirements contained in 10 CFR 73.37(b), (c), (d), and (e). II. On September 11, 2001, terrorists simultaneously attacked targets in New York, NY, and Washington, DC, utilizing large commercial aircraft as weapons. In response to the attacks and intelligence information subsequently obtained, the Commission issued a number of Safeguards and Threat Advisories to its licensees in order to strengthen licensees' capabilities and readiness to respond to a potential attack on a nuclear facility or regulated activity. The Commission has also communicated with other Federal, State and local government agencies and industry representatives to discuss and evaluate the current threat environment in order to assess the adequacy of security measures at licensed facilities. In addition, the Commission has been conducting a comprehensive review of its safeguards and security programs and requirements. As a result of its consideration of current safeguards and security plan requirements, as well as a review of information provided by the intelligence community, the Commission has determined that certain additional security measures are required to be implemented by licensees as prudent, interim measures, to address the current threat environment in a consistent manner. Therefore, the Commission is imposing requirements, as set forth in Attachment 2 of this Order, on all licensees identified in Attachment 1 of this Order. 1 These additional security requirements, which supplement existing regulatory requirements, will provide the Commission with reasonable assurance that the common defense and security continue to be adequately protected in the current threat environment. These requirements will remain in effect until the Commission determines otherwise. 1 Attachments 1 and 2 contain SAFEGUARDS INFORMATION and will not be released to the public. The Commission recognizes that licensees may have already initiated many of the measures set forth in Attachment 2 to this Order in response to previously issued Safeguards and Threat Advisories or on their own. It is also recognized that some measures may not be possible or necessary for all shipments of spent nuclear fuel, or may need to be tailored to accommodate the licensees' specific circumstances to achieve the intended objectives and avoid any unforeseen effect on the safe transport of spent nuclear fuel. Although the additional security measures implemented by licensees in response to the Safeguards and Threat Advisories have been adequate to provide reasonable assurance of adequate protection of common defense and security, in light of the current threat environment, the Commission concludes that the security measures must be embodied in an Order consistent with the established regulatory framework. In order to provide assurance that licensees are implementing prudent measures to achieve a consistent level of protection to address the current threat environment, all licenses identified in Attachment 1 to this Order shall be modified to include the requirements identified in Attachment 2 to this Order. In addition, pursuant to 10 CFR 2.202, and in light of the common defense and security matters identified above which warrant the issuance of this Order, the Commission finds that the public health, safety, and interest require that this Order be immediately effective. III. Accordingly, pursuant to Sections 53, 103, 104, 161b, 161i, 161o, 182 and 186 of the Atomic Energy Act of 1954, as amended, and the Commission's regulations in 10 CFR 2.202 and 10 CFR Parts 50 and 71, *it is hereby ordered* , effective immediately, that all licenses identified in attachment 1 to this order are modified as follows: A. All licensees shall, notwithstanding the provisions of any Commission regulation or license to the contrary, comply with the requirements described in Attachment 2 to this Order except to the extent that a more stringent requirement is set forth in the licensee's security plan. The licensees shall immediately start implementation of the requirements in Attachment 2 to the Order and shall complete implementation by July 10, 2005, unless otherwise specified in Attachment 2, or before the first shipment after July 10, 2005, whichever is earlier. B. 1. All licensees shall, within twenty
(20)days of the date of this Order, notify the Commission,
(1)if they are unable to comply with any of the requirements described in Attachment 2,
(2)if compliance with any of the requirements is unnecessary in their specific circumstances, or
(3)if implementation of any of the requirements would cause the licensee to be in violation of the provisions of any Commission regulation or the facility license. The notification shall provide the licensee's justification for seeking relief from or variation of any specific requirement. 2. Any licensee that considers that implementation of any of the requirements described in Attachment 2 to this Order would adversely impact the safe transport of spent fuel must notify the Commission, within twenty
(20)days of this Order, of the adverse safety impact, the basis for its determination that the requirement has an adverse safety impact, and either a proposal for achieving the same objectives specified in the Attachment 2 requirement in question, or a schedule for modifying the activity to address the adverse safety condition. If neither approach is appropriate, the licensee must supplement its response to Condition B1 of this Order to identify the condition as a requirement with which it cannot comply, with attendant justifications as required in Condition B1. C. 1. All licensees shall, within twenty
(20)days of the date of this Order, submit to the Commission a schedule for achieving compliance with each requirement described in Attachment 2. 2. All licensees shall report to the Commission when they have achieved full compliance with the requirements described in Attachment 2. D. Notwithstanding any provisions of the Commission's regulations to the contrary, all measures implemented or actions taken in response to this Order shall be maintained until the Commission determines otherwise. Licensee responses to Conditions B1, B2, C1, and C2 above, shall be submitted to the NRC to the attention of the Director, Office of Nuclear Reactor Regulation under 10 CFR 50.4. In addition, licensee submittals that contain Safeguards Information shall be properly marked and handled in accordance with 10 CFR 73.21. The Director, Office of Nuclear Reactor Regulation, may, in writing, relax or rescind any of the above conditions upon demonstration by the licensee of good cause. IV. In accordance with 10 CFR 2.202, the licensee must, and any other person adversely affected by this Order may, submit an answer to this Order, and may request a hearing on this Order, within twenty
(20)days of the date of this Order. Where good cause is shown, consideration will be given to extending the time to request a hearing. A request for extension of time in which to submit an answer or request a hearing must be made in writing to the Director, Office of Nuclear Reactor Regulation, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001, and include a statement of good cause for the extension. The answer may consent to this Order. Unless the answer consents to this Order, the answer shall, in writing and under oath or affirmation, specifically set forth the matters of fact and law on which the licensee or other person adversely affected relies and the reasons as to why the Order should not have been issued. Any answer or request for a hearing shall be submitted to the Secretary, Office of the Secretary of the Commission, U.S. Nuclear Regulatory Commission, ATTN: Rulemakings and Adjudications Staff, Washington, DC 20555-0001. Copies also shall be sent to the Director, Office of Nuclear Reactor Regulation, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001, to the Assistant General Counsel for Materials Litigation and Enforcement at the same address; to the Regional Administrator for NRC Region I, II, III, or IV, as appropriate for the specific facility; and to the licensee if the answer or hearing request is by a person other than the licensee. Because of potential disruptions in delivery of mail to United States Government offices, it is requested that answers and requests for hearing be transmitted to the Secretary of the Commission either by means of facsimile transmission to
(301)415-1101 or by e-mail to *hearingdocket@nrc.gov* , and also to the Office of the General Counsel either by means of facsimile transmission to
(301)415-3725 or by e-mail to *OGCMailCenter@nrc.gov* . If a person other than the Licensee requests a hearing, that person shall set forth with particularity the manner in which his interest is adversely affected by this Order and shall address the criteria set forth in 10 CFR 2.714(d). If a hearing is requested by the licensee or a person whose interest is adversely affected, the Commission will issue an Order designating the time and place of any hearing. If a hearing is held, the issue to be considered at such hearing shall be whether this Order should be sustained. Pursuant to 10 CFR 2.202(c)(2)(i), the licensee may, in addition to demanding a hearing, at the time the answer is filed or sooner, move the presiding officer to set aside the immediate effectiveness of the Order on the ground that the Order, including the need for immediate effectiveness, is not based on adequate evidence but on mere suspicion, unfounded allegations, or error. In the absence of any request for hearing, or written approval of an extension of time in which to request a hearing, the provisions specified in Section III above shall be final twenty
(20)days from the date of this Order without further order or proceedings. If an extension of time for requesting a hearing has been approved, the provisions specified in Section III shall be final when the extension expires if a hearing request has not been received. An answer or a request for hearing shall not stay the immediate effectiveness of this order. Dated at Rockville, Maryland, this 10th day of June 2005. For the Nuclear Regulatory Commission. J.E. Dyer, Director, Office of Nuclear Reactor Regulation. [FR Doc. E5-3175 Filed 6-17-05; 8:45 am] BILLING CODE 7590-01-P SECURITIES AND EXCHANGE COMMISSION [File No. 1-05901] Issuer Delisting; Notice of Application of Fab Industries, Inc. To Withdraw Its Common Stock, $.20 Par Value, From Listing and Registration on the American Stock Exchange LLC June 13, 2005. On May 31, 2005, Fab Industries, Inc., a Delaware corporation (“Issuer”), filed an application with the Securities and Exchange Commission (“Commission”), pursuant to Section 12(d) of the Securities Exchange Act of 1934 (“Act”) 1 and Rule 12d2-2(d) thereunder, 2 to withdraw its common stock, $.20 par value (“Security”), from listing and registration on the American Stock Exchange LLC (“Amex”). 1 15 U.S.C. 78 *l* (d). 2 17 CFR 240.12d2-2(d). On May 23, 2005, the Board of Directors (“Board”) of the Issuer approved a resolution to withdraw the Security from listing and registration on Amex. On March 1, 2002, the Board adopted resolutions authorizing, subject to stockholder approval, the sale of the Issuer's business pursuant to a Plan of Liquidation and Dissolution (“Plan”). The Issuer's stockholders approved the Plan at the Issuer's annual meeting on May 30, 2002. Pursuant to the Plan, the Issuer was required to transfer its assets and liabilities to a liquidating trust on May 30, 2005. The liquidating trust will succeed to all of the Issuer's remaining assets and liabilities. Upon the transfer to the liquidating trust, the Plan required that the Issuer file a certificate of dissolution with the State of Delaware. The Issuer stated that the last day of trading in the Security on the Amex was May 27, 2005. The Issuer stated in its application that it has met the requirements of Amex Rule 18 by complying with all applicable laws in effect in the state of Delaware, in which it is incorporated, and provided written notice of withdrawal to Amex. The Issuer's application relates solely to withdrawal of the Security from listing on the Amex and from registration under Section 12(b) of the Act, 3 and shall not affect its obligation to be registered under Section 12(g) of the Act. 4 3 15 U.S.C. 78 *l* (b). 4 15 U.S.C. 78 *l* (g). Any interested person may, on or before July 6, 2005, comment on the facts bearing upon whether the application has been made in accordance with the rules of Amex, and what terms, if any, should be imposed by the Commission for the protection of investors. All comment letters may be submitted by either of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/delist.shtml* ); or • Send an e-mail to *rule-comments@sec.gov* . Please include the File Number 1-05901 or; Paper Comments • Send paper comments in triplicate to Jonathan G. Katz, Secretary, Securities and Exchange Commission, Station Place, 100 F Street, NE., Washington, DC 20549-9303. All submissions should refer to File Number 1-05901. This file number should be included on the subject line if e-mail is used. To help us 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/delist.shtml* ). Comments are also available for public inspection and copying in the Commission's Public Reference Room. All comments received will be posted without change; we do not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. The Commission, based on the information submitted to it, will issue an order granting the application after the date mentioned above, unless the Commission determines to order a hearing on the matter. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 5 5 17 CFR 200.30-3(a)(1). Jonathan G. Katz, Secretary. [FR Doc. E5-3152 Filed 6-17-05; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [File No. 1-00225] Issuer Delisting; Notice of Application of Kimberly-Clark Corporation To Withdraw Its Common Stock, $1.25 Par Value, Per Share, From Listing and Registration on the Pacific Exchange, Inc. June 14, 2005. On May 25, 2005, Kimberly-Clark Corporation, a Delaware corporation (“Issuer”), filed an application with the Securities and Exchange Commission (“Commission”), pursuant to Section 12(d) of the Securities Exchange Act of 1934 (“Act”) 1 and Rule 12d2-2(d) thereunder, 2 to withdraw its common stock, $1.25 par value (“Security”), from listing and registration on the Pacific Exchange, Inc. (“PCX”). 1 15 U.S.C. 78 *l* (d). 2 17 CFR 240.12d2-2(d). The Board of Directors (“the Board”) of the Issuer approved a resolution on April 28, 2005 to withdraw the Security from listing on PCX. The Board stated that the reason it decided to withdraw the Security from PCX is that the benefits of continued listing on PCX do not outweigh the incremental cost of the listing fees and administrative burden associated with listing on the exchange. In addition, the Board stated that it is desirable for the Issuer to remove its Security from PCX listing because of the modest volume of trading in the Security on PCX does not justify the expense and administrative time associated with remaining listed on PCX. The Issuer stated that the Security is currently traded on the New York Stock Exchange, Inc. (“NYSE”), the Issuer's principal listing exchange, and on the Chicago Stock Exchange, Inc. (“CHX”). The Issuer stated in its application that it has complied with applicable rules of PCX Rule 5.4(b) by providing PCX with the required documents governing the withdrawal of securities from listing and registration on PCX. The Issuer's application relates solely to the withdrawal of the Securities from listing on PCX and shall not affect its continued listing on CHX and NYSE or its obligation to be registered under Section 12(b) of the Act. 3 3 15 U.S.C. 781(b). Any interested person may, on or before July 11, 2005 comment on the facts bearing upon whether the application has been made in accordance with the rules of PCX, and what terms, if any, should be imposed by the Commission for the protection of investors. All comment letters may be submitted by either of the following methods: Electronic Comments • Send an e-mail to *rule-comments@sec.gov* . Please include the File Number 1-00225 or; Paper Comments • Send paper comments in triplicate to Jonathan G. Katz, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-9303. All submissions should refer to File Number 1-00225. This file number should be included on the subject line if e-mail is used. To help us 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/delist.shtml* ). Comments are also available for public inspection and copying in the Commission's Public Reference Room. All comments received will be posted without change; we do not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. The Commission, based on the information submitted to it, will issue an order granting the application after the date mentioned above, unless the Commission determines to order a hearing on the matter. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 4 4 17 CFR 200.30-3(a)(1). Jonathan G. Katz, Secretary. [FR Doc. E5-3185 Filed 6-17-05; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [File No. 1-12072] Issuer Delisting; Notice of Application of Pioneer Railcorp To Withdraw Its Class A Common Stock, $.001 Par Value, From Listing and Registration on the Chicago Stock Exchange, Inc. June 13, 2005. On May 18, 2005, Pioneer Railcorp, an Iowa corporation (“Issuer”), filed an application with the Securities and Exchange Commission (“Commission”), pursuant to Section 12(d) of the Securities Exchange Act of 1934 (“Act”) 1 and Rule 12d2-2(d) thereunder, 2 to withdraw its class A common stock, $.001 par value (“Security”), from listing and registration on the Chicago Stock Exchange, Inc. (“CHX” or “Exchange”). 1 15 U.S.C. 78 *l* (d). 2 17 CFR 240.12d2-2(d). The Board of Directors (“Board”) of the Issuer approved a resolution on September 20, 2004 to withdraw the Security from listing and registration on CHX. The Issuer stated that the reasons for the Board's decision to withdraw the Security from CHX are:
(1)The Issuer is in the process of attempting to go private and believes it will be successful in that endeavor;
(2)upon completion of the going private transaction, the Issuer will no longer file periodic and other reports under the Act as required by the Exchange; and
(3)the Security is currently quoted on the over-the-counter Pink Sheets and the Board believes the Pink Sheets will offer an adequate and efficient market for trading the Security. In addition, as a result of low trading volume, the Issuer no longer has a market maker for its Security on the Exchange and is traded in “Cabinet.” The Issuer stated in its application that it has complied with applicable rules of CHX, by providing CHX with the required documents governing the removal of securities from listing and registration on CHX. The Issuer's application relates solely to the withdrawal of the Security from listing on CHX and from registration under Section 12(b) of the Act, 3 and shall not affect its obligation to be registered under Section 12(g) of the Act. 4 3 15 U.S.C. 78 *l* (b). 4 15 U.S.C. 78 *l* (g). Any interested person may, on or before July 6, 2005, comment on the facts bearing upon whether the application has been made in accordance with the rules of CHX, and what terms, if any, should be imposed by the Commission for the protection of investors. All comment letters may be submitted by either of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/delist.shtml* ); or • Send an e-mail to *rule-comments@sec.gov* . Please include the File Number 1-12072 or; Paper Comments • Send paper comments in triplicate to Jonathan G. Katz, Secretary, Securities and Exchange Commission, Station Place, 100 F Street, NE., Washington, DC 20549-9303. All submissions should refer to File Number 1-12072. This file number should be included on the subject line if e-mail is used. To help us 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/delist.shtml* ). Comments are also available for public inspection and copying in the Commission's Public Reference Room. All comments received will be posted without change; we do not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. The Commission, based on the information submitted to it, will issue an order granting the application after the date mentioned above, unless the Commission determines to order a hearing on the matter. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 5 5 17 CFR 200.30-3(a)(1). Jonathan G. Katz, Secretary. [FR Doc. E5-3153 Filed 6-17-05; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION File No. 1-13253 Issuer Delisting; Notice of Application of Renasant Corporation To Withdraw its Common Stock, $5.00 Par Value, From Listing and Registration on the American Stock Exchange LLC June 13, 2005. On April 29, 2005, Renasant Corporation, a Mississippi corporation (“Issuer”), filed an application with the Securities and Exchange Commission (“Commission”), pursuant to Section 12(d) of the Securities Exchange Act of 1934 (“Act”) 1 and Rule 12d2-2(d) thereunder, 2 to withdraw its common stock, $5.00 par value (“Security”), from listing and registration on the American Stock Exchange LLC (“Amex”). 1 15 U.S.C. 78 *l* (d). 2 17 CFR 240.12d2-2(d). On October 19, 2004, the Board of Directors (“Board”) of the Issuer approved a resolution to withdraw the Security from listing and registration on Amex and to list the Security on the Nasdaq National Market Systems (“Nasdaq”). The Issuer stated that the Board determined to withdraw the Security from listing on Amex based on the following opinions of the Board:
(i)Nasdaq is a more efficient and better structured marketplace that may provide the Issuer with a variety of advantages over Amex, including, but not limited to,
(a)a screen-based electronic marketplace with competing market makers,
(b)increased liquidity,
(c)faster trade execution time, and
(d)better execution quality;
(ii)the Issuer will have improved visibility to investors by listing on Nasdaq; and
(iii)Nasdaq will provide the Issuer with greater exposure to institutional investors. Trading in the Security on Nasdaq commenced on May 2, 2005. The Issuer stated in its application that it has met the requirements of Amex Rule 18 by complying with all applicable laws in effect in the state of Mississippi, in which it is incorporated, and provided written notice of withdrawal to Amex. The Issuer's application relates solely to withdrawal of the Security from listing on the Amex and from registration under Section 12(b) of the Act, 3 and shall not affect its obligation to be registered under Section 12(g) of the Act. 4 3 15 U.S.C. 781(b). 4 15 U.S.C. 781(g). Any interested person may, on or before July 6, 2005, comment on the facts bearing upon whether the application has been made in accordance with the rules of Amex, and what terms, if any, should be imposed by the Commission for the protection of investors. All comment letters may be submitted by either of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/delist.shtml* ); or • Send an e-mail to *rule-comments@sec.gov* . Please include the File Number 1-13253 or; Paper Comments • Send paper comments in triplicate to Jonathan G. Katz, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-9303. All submissions should refer to File Number 1-13253. This file number should be included on the subject line if e-mail is used. To help us 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/delist.shtml* ). Comments are also available for public inspection and copying in the Commission's Public Reference Room. All comments received will be posted without change; we do not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. The Commission, based on the information submitted to it, will issue an order granting the application after the date mentioned above, unless the Commission determines to order a hearing on the matter. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 5 5 17 CFR 200.30-3(a)(1). Jonathan G. Katz, Secretary. [FR Doc. E5-3154 Filed 6-17-05; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-51834; File No. SR-Amex-2005-026] Self-Regulatory Organizations; American Stock Exchange LLC; Notice of Filing of Proposed Rule Change and Amendment Nos. 1 and 2 thereto Relating to Quotes in Nasdaq UTP Stocks To Be Disseminated by Amex Specialists Before 9:30 a.m. June 13, 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 February 24, 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, II and III below, which Items have been prepared by the Amex. On April 14, 2005, the Amex amended the proposed rule change (“Amendment No. 1”). On May 26, 2005, the Amex amended the proposed rule change (“Amendment No. 2”). 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. I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Amex seeks to amend Rule 1, Commentary .05 to allow indicative quotes in Nasdaq stocks traded pursuant to unlisted trading privileges (“UTP”) to be disseminated by Amex specialists before 9:30 a.m. The text of the proposed rule change, as amended, is set forth below. Proposed new language is in *italics.* General Rules Hours of Business Rule 1 No change Commentary .01-.04 No change. .05 The hours of business for a security traded on the Exchange pursuant to unlisted trading privileges shall be the same as the hours during which the security is traded in the primary market for such security, *provided, however, that Exchange specialists in Nasdaq securities may send quotations to the SIP between 9:25 and 9:30 a.m., and such quotations shall be for test purposes only.* Notwithstanding the foregoing, in accordance with Rules 1000 and 1000A, Portfolio Depositary Receipts and Index Fund Shares trading on the Exchange pursuant to unlisted trading privileges may trade until 4:00 p.m. or 4:15 p.m. as specified by 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 Amex included statements concerning the purpose of and basis for the proposed rule change, as amended, and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The 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 Amex Rule 1 provides that the Exchange is not open for the transaction of business before 9:30 a.m. except as otherwise determined by the Board of Governors. Exceptions to this general rule include the transmission of required pre-opening notifications to Intermarket Trading System participants and the publication of “indications” of the anticipated opening price range in a given security. The proposed rule change would codify this existing practice of the Exchange. Quotations by Amex specialists in Nasdaq UTP securities are transmitted to the Nasdaq Securities Information Processor (“SIP”) through the UTP Quotation Data Feed (“UQDF”). The SIP will not accept pre-opening indications. It will only accept standard quotations ( *i.e.* , a bid and offer composed of both price and size). These quotations are collected, consolidated and disseminated by the SIP to quotation vendors through UQDF. While the hours of operation of the UTP Plan are 8 a.m. to 6:30 p.m., the SIP opens at 7:30 a.m. to handle pre-opening quotes from UTP participants as necessary. Amex believes that its specialists should be able to send Nasdaq UTP quotations to the SIP before 9:30 a.m. in order to ensure that their quotations are being accurately received by SIP and that they are, in turn, receiving quotations from the other market centers. 3 Bids and offers in these Amex quotations sent to the SIP before 9:30 a.m. (or, in the case of a delayed opening, when a given Nasdaq security opens on the Amex) are not eligible to be hit or taken, but rather, are for test purposes only. Accordingly, Amex believes that it should amend its rules to codify its existing practice of allowing indicative quotes in Nasdaq UTP stocks to be disseminated by specialists between 9:25 and 9:30 a.m. for testing purposes and that that any such pre-opening quotations should not be available to create a binding contract. 3 The proposed amendment to Rule 1, Commentary .05 would codify this current practice of the Exchange. 2. Statutory Basis The Amex believes that the proposed rule change is consistent with Section 6(b) of the Act, 4 in general, and furthers the objectives of Section 6(b)(5), 5 in particular in that it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, and, in general, to protect investors and the public interest. 4 15 U.S.C. 78f(b). 5 15 U.S.C. 78f(b)(5). B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange believes that the proposed rule change, as amended, will impose no burden on competition not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others No written comments were solicited or received with respect to 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 self-regulatory organization 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-Amex-2005-026 on the subject line. Paper Comments • Send paper comments in triplicate to Jonathan G. Katz, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-9303. All submissions should refer to File Number SR-Amex-2005-026. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room. Copies of such filing also will be available for inspection and copying at the principal office of the 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 Number SR-Amex-2005-026 and should be submitted on or before July 11, 2005. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 6 6 17 CFR 200.30-3(a)(12). Margaret H. McFarland, Deputy Secretary. [FR Doc. E5-3178 Filed 6-17-05; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-51840; File No. SR-Amex-2005-042] Self-Regulatory Organizations; American Stock Exchange LLC; Notice of Filing and Order Granting Accelerated Approval of a Proposed Rule Change Relating to the Listing and Trading of Notes Linked to the Performance of the CBOE DJIA BuyWrite Index
(sm)June 14, 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 20, 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 Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons and is approving the proposal on an accelerated basis. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to list and trade notes, the performance of which is linked to the DJIA BuyWrite Index(sm) (the “BXD Index” or “Index”). The text of the proposed rule change is available on the Amex's Web site ( *http://www.amex.com* ), at the principal offices of the Amex, 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 III 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 Under Section 107A of the Amex Company Guide (“Company Guide”), the Exchange may approve for listing and trading securities that cannot be readily categorized under the listing criteria for common and preferred stocks, bonds, debentures, or warrants. 3 The Amex proposes to list for trading under Section 107A of the Company Guide notes linked to the performance of the BXD Index (the “Notes”). The BXD Index is determined, calculated, and maintained solely by the Chicago Board Options Exchange, Inc. (“CBOE”). 4 JPMorgan Chase & Co. (“JPMorgan”) will issue the Notes. 5 3 *See* Securities Exchange Act Release No. 27753 (Mar. 1, 1990), 55 FR 8626 (Mar. 8, 1990) (File No. SR-Amex-89-29). 4 If the BXD Index is discontinued or suspended, the calculation agent, in its sole discretion, may substitute the BXD Index with an index substantially similar to the discontinued or suspended BXD Index (the “Successor Index”). The Successor Index may be calculated and/or published by the CBOE or any other third party. If the CBOE discontinues publication of the BXD Index prior to, and such discontinuance is continuing on, the Final Valuation Date and the calculation agent determines, in its sole discretion, that no Successor Index is available at such time, then the calculation agent will determine the BXD Index closing level for such date. The BXD Index closing level will be computed by the calculation agent in accordance with the formula for and method of calculating the BXD Index last in effect prior to such discontinuance, using the closing price of the DJIA or the stocks underlying the DJIA at the discretion of the calculation agent (or, if trading in the relevant securities has been materially suspended or materially limited, its good faith estimate of the closing price that would have prevailed but for such suspension or limitation) at the close of the principal trading session on such date for the DJIA or for each security comprising the DJIA, the arithmetic average of the last bid and ask prices (or, if trading in the relevant call option has been materially suspended or materially limited, its good faith estimate of the arithmetic average of the last bid and ask prices that would have prevailed but for such suspension or limitation) of the relevant call option reported before 4:00 p.m. Eastern time and such other inputs as may reasonably be necessary. Notwithstanding these alternative arrangements, discontinuance of the publication of the BXD Index on the relevant exchange may adversely affect the value of the notes. If at any time the method of calculating the BXD Index, the DJIA, or a Successor Index, or the level thereof is changed in a material respect, or if the BXD Index, the DJIA, or a Successor Index is in any other way modified so that the BXD Index or a Successor Index does not, in the opinion of the calculation agent, fairly represent the level of the BXD Index or such Successor Index had such changes or modifications not been made, then, from and after such time, the calculation agent will, at the close of business in New York City on each date on which the BXD Index closing level is to be determined, make such calculations and adjustments as, in the good faith judgment of the calculation agent, may be necessary in order to arrive at a level of an index comparable to the BXD Index or such Successor Index, as the case may be, as if such changes or modifications had not been made, and the calculation agent will calculate the BXD Index closing level with reference to the BXD Index or such Successor Index, as adjusted. Accordingly, if the method of calculating the BXD Index, the DJIA, or a Successor Index is modified so that the level of the BXD Index or a Successor Index is a fraction of what it would have been if there had been no such modification ( *e.g.* , due to a split in the index), then the calculation agent will adjust such index in order to arrive at a level of the BXD Index or such Successor Index as if there had been no such modification ( *e.g.* , as if such split had not occurred). J.P. Morgan Securities Inc., an affiliate of JPMorgan, has been appointed to act as the calculation agent. Telephone conversation between Jeffrey P. Burns, Associate General Counsel, Amex and David Liu, Attorney, Division of Market Regulation (“Division”), Commission, on May 26, 2005. 5 The Exchange states that JPMorgan and Dow Jones & Co. (“Dow Jones”) are negotiating a non-exclusive license agreement, with up to a 165-day exclusivity period, providing for the use of the BXD Index by JPMorgan in connection with certain securities, including the Notes. Dow Jones is not responsible for and will not participate in the issuance and creation of the Notes. The Notes will conform to the initial listing guidelines under Section 107A 6 and continued listing guidelines under Sections 1001-1003 7 of the Company Guide. The Notes are a series of medium-term debt securities of JPMorgan that provide for a cash payment at maturity based on the performance of the BXD Index as adjusted by the Adjustment Amount. 8 The principal amount of each Note is expected to be $1,000. The Notes will not have a minimum principal amount that will be repaid and, accordingly, payment on the Notes at maturity may be less than the original issue price of the Notes. In fact, the value of the BXD Index must increase for the investor to receive at least the $1,000 principal amount per security at maturity. If the value of the BXD Index decreases or does not increase sufficiently, the investor will receive less, and possibly significantly less, than the $1,000 principal amount per security. In addition, holders of the Notes will not receive any interest payments from the Notes. The Notes will have a term of at least one
(1)but no more than ten
(10)years. 9 6 The initial listing standards for the Notes require:
(1)a minimum public distribution of one million units;
(2)a minimum of 400 shareholders;
(3)a market value of at least $4 million; and
(4)a term of at least one year. Because the Notes will be issued in $1,000 denominations, the minimum public distribution requirement of one million units and the minimum holder requirement of 400 holders do not apply. In addition, the listing guidelines provide that the issuer has assets in excess of $100 million, stockholder's equity of at least $10 million, and pre-tax income of at least $750,000 in the last fiscal year or in two of the three prior fiscal years. In the case of an issuer which is unable to satisfy the earning criteria stated in Section 101 of the Company Guide, the Exchange will require the issuer to have the following:
(1)assets in excess of $200 million and stockholders' equity of at least $10 million; or
(2)assets in excess of $100 million and stockholders' equity of at least $20 million. 7 The Exchange's continued listing guidelines are set forth in Sections 1001 through 1003 of Part 10 to the Exchange's Company Guide. Section 1002(b) of the Company Guide states that the Exchange will consider removing from listing any security where, in the opinion of the Exchange, it appears that the extent of public distribution or aggregate market value has become so reduced to make further dealings on the Exchange inadvisable. With respect to continued listing guidelines for distribution of the Notes, the Exchange will rely, in part, on the guidelines for bonds in Section 1003(b)(iv) of the Company Guide. Section 1003(b)(iv)(A) of the Company Guide provides that the Exchange will normally consider suspending dealings in, or removing from the list, a security if the aggregate market value or the principal amount of bonds publicly held is less than $400,000. 8 The Adjustment Amount is an annual fee that accrues daily over the term of the Notes. The Adjustment Amount is equal to 1.0% multiplied by the number of days since the pricing date of the Notes divided by 365. 9 The term of the Notes is expected to be one
(1)year and will be disclosed in the pricing supplement. The cash payment that a holder or investor of a Note will be entitled to receive at maturity (the “Payment Amount”) will depend on the relation of the level of the BXD Index at the close of the market on the Final Valuation Date 10 (the “Final Index Level”) and the closing value of the Index on the date JPMorgan prices the Notes for initial sale to the public (the “Initial Index Level”) less the Adjustment Amount. If there is a “market disruption event” 11 when determining the Final Index Level, the Final Index Level will be determined on the next available trading day during which no “market disruption event” occurs. For purposes of determining the amount payable at maturity of the Notes, the Payment Amount will be determined on the Final Valuation Date. 10 The Final Valuation Date will be the third scheduled trading day prior to the maturity date. 11 A “market disruption event” means:
(i)A suspension, absence, or material limitation of trading of stocks then constituting 20 percent or more of the level of the DJIA (or the relevant successor index) on the relevant exchanges (as defined below) for such securities for more than two hours of trading (or one hour of trading on any day that is a “roll date” for purposes of calculating the BXD Index) during, or during the one hour period preceding the close of, the principal trading session on such relevant exchange; or
(ii)a breakdown or failure in the price and trade reporting systems of any relevant exchange as a result of which the reported trading prices for stocks then constituting 20 percent or more of the level of the DJIA (or the relevant successor index)
(A)during the one hour preceding the close of the principal trading session on such relevant exchange or
(B)during any one hour period of trading on such relevant exchange on any day that is a “roll date” for purposes of calculating the BXD Index; or
(iii)a suspension, absence, or material limitation of trading of call options nominally sold in connection with the BXD Index (or the relevant successor index) on the CBOE for more than two hours of trading, or during the one hour period preceding, and including, the scheduled time at which the value of such options is calculated for purposes of calculating the BXD Index; or
(iv)a breakdown or failure in the price and trade reporting systems of the CBOE as a result of which the reported trading prices for call options nominally sold in connection with the BXD Index during the one hour period preceding, and including, the scheduled time at which the value of such options is calculated for purposes of the BXD Index are materially inaccurate; or
(v)the suspension, absence, or material limitation of trading on any major U.S. securities market for trading in futures or options contracts related to the DJIA or the BXD Index (or the relevant successor index) for more than two hours of trading during, or during the one hour period preceding the close of, the principal trading session on such market; or a decision to permanently discontinue trading in the relevant futures or options contract, in each case as determined by the calculation agent in its sole discretion; and a determination by the calculation agent in its sole discretion that the event described above materially interfered with its ability or the ability of any of JPMorgan's affiliates to adjust or unwind all or a material portion of any hedge with respect to the notes. “Relevant exchange” means the primary U.S. organized exchange or market of trading for any security (or any combination thereof) then included in the BXD Index or any successor index. Telephone conversation between Jeffrey P. Burns, Associate General Counsel, Amex and David Liu, Attorney, Division, Commission, on May 26, 2005. The Payment Amount per Note will equal: EN20JN05.000 The Notes are cash-settled in U.S. dollars and do not give the holder any right to receive any of the component securities, dividend payments, or any other ownership right or interest in the securities comprising the BXD Index. The Notes are designed for investors who want to participate in the exposure to the DJIA that the BXD Index provides while limiting downside risk, and who are willing to forego principal protection and interest payments on the Notes during their term. The Exchange notes that the Commission has previously approved the listing on the Amex of securities with structures similar to that of the proposed Notes. 12 *Description of the Index.* The BXD Index is a benchmark index designed to measure the performance of a hypothetical “buy-write” 13 strategy on the DJIA. Developed by the CBOE in cooperation with Dow Jones, the Index was initially announced in March 2005. 14 The BXD was set to an initial value of 100.00 as of October 16, 1997. The Exchange states that the CBOE developed the BXD Index in response to several factors, including the repeated requests by options portfolio managers that the CBOE provide an objective benchmark for evaluating the performance of buy-write strategies, one of the most popular option trading strategies. Further, the CBOE developed the BXD Index to provide investors with a relatively straightforward indicator of the risk-reducing character of options that otherwise may seem complicated and inordinately risky. 12 *See* Securities Exchange Act Release Nos. 51634 (Apr. 29, 2005), 70 FR 24138 (May 6, 2005) (approving the listing and trading of notes linked to the BXM Index) (File No. SR-Amex-2005-036); 51426 (Mar. 23, 2005), 70 FR 16315 (Mar. 30, 2005) (approving the listing and trading of notes linked to the BXM Index) (File No. SR-Amex-2005-022); and 50719 (Nov. 22, 2004), 69 FR 69644 (Nov. 30, 2004) (approving the listing and trading of non-principal protected notes linked to the BXM Index) (File No. SR-Amex-2004-55). The BXM index is the CBOE S&P 500 Buy Write Index SM , while the BXD is a parallel index using the DJIA as the underlying index rather than the S&P 500. In addition, the Exchanges notes that the Commission has previously approved the listing and trading of a packaged buy-write option strategy known as “BOUNDS.” *See* Securities Exchange Act Release No. 36710 (Jan. 11, 1996), 61 FR 1791 (Jan. 23, 1996) (File Nos. SR-Amex-94-56, SR-CBOE-95-14, and SR-PSE-95-01). 13 A “buy-write” is a conservative options strategy in which an investor buys a stock or portfolio and writes call options on the stock or portfolio. This strategy is also known as a “covered call” strategy. A buy-write strategy provides option premium income to cushion decreases in the value of an equity portfolio, but will underperform stocks in a rising market. A buy-write strategy tends to lessen overall volatility in a portfolio. 14 The BXD Index consists of a long position in the component securities of the DJIA and options on the DJIA (DJX). *See www.cboe.com/bxd.* The Exchange notes that the Commission has approved the listing of numerous securities linked to the performance of the DJIA as well as options on the DJIA. *See,* *e.g.* , Securities Exchange Act Release Nos. 39011 (Sep. 3, 1997), 62 FR 47840 (Sep. 11, 1997) (approving the listing and trading of options on the DJIA) (File No. SR-CBOE-97-26); 39525 (Jan. 8, 1998), 63 FR 2438 (Jan. 15, 1998) (approving the listing and trading of DIAMONDS SM Trust Units, portfolio depositary receipts based on the DJIA) (File No. SR-Amex-97-29); 46883 (Nov. 21, 2002), 67 FR 71216 (Nov. 29, 2002) (approving the listing and trading of Market Recovery Notes on the DJIA) (File No. SR-Amex-2002-88); 49453 (Mar. 19, 2004), 69 FR 15913 (Mar. 26, 2004) (approving the listing and trading of Contingent Principal Protected Notes linked to the DJIA) (File No. SR-Amex-2004-13); and 51133 (Feb. 3, 2005), 70 FR 7129 (Feb. 10, 2005) (approving the listing and trading of Notes linked to the DJIA) (File No. SR-Amex-2004-101). The BXD Index is a passive total return index based on
(1)buying a portfolio consisting of the component stocks of the DJIA, and
(2)“writing” (or selling) near-term DJIA call options (DJX), generally on the third Friday of each month. This strategy consists of a hypothetical portfolio consisting of a “long” position indexed to the DJIA on which are deemed sold a succession of one-month, at-the-money call options on the DJIA
(DJX)listed on the CBOE. Dividends paid on the component stocks underlying the DJIA and the dollar value of option premium deemed received from the sold call options are functionally “re-invested” in the covered DJIA portfolio. The value of the BXD Index on any given date will equal
(1)the value of the BXD Index on the previous day multiplied by
(2)the daily rate of return 15 on the covered DJIA portfolio on that date. Thus, the daily change in the BXD Index reflects the daily changes in value of the covered DJIA portfolio, which consists of the DJIA (including dividends) and the component DJIA call option (DJX). The daily closing price of the BXD Index is calculated and disseminated by the CBOE on its Web site at *www.cboe.com* and via the Options Pricing and Reporting Authority (“OPRA”) at the end of each trading day. 16 The value of the DJIA is widely disseminated at least once every fifteen
(15)seconds throughout the scheduled trading day. The Exchange believes that the intraday dissemination of the DJIA, along with the ability of investors to obtain real-time, intraday DJIA call option
(DJX)pricing, provides sufficient transparency regarding the BXD Index. 17 In addition, as indicated above, the value of the BXD Index is calculated once every scheduled trading day, thereby providing investors with a daily value of such “hypothetical” buy-write options strategy on the DJIA. 15 The daily rate of return on the covered DJIA portfolio is based on
(a)the change in the closing value of the stocks in the DJIA portfolio,
(b)the value of ordinary cash dividends on the stocks underlying the DJIA, and
(c)the change in the market price of the call option. The daily rate of return will also include the value of ordinary cash dividends distributed on the stocks underlying the DJIA that are trading “ex-dividend” on that date (that is, when transactions in the stock on an organized securities exchange or trading system no longer carry the right to receive that dividend or distribution) as measured from the close in trading on the previous day. 16 The Exchange notes that the Commission, in connection with Bond Index Term Notes and the Merrill Lynch EuroFund Market Index Target Term Securities, has previously approved the listing and trading of these products where the dissemination of the value of the underlying index occurred once per trading day. *See* Securities Exchange Act Release Nos. 41334 (Apr. 27, 1999), 64 FR 23883 (May 4, 1999) (approving the listing and trading of Bond Indexed Term Notes) (File No. SR-Amex-99-03); and 40367 (Aug. 26, 1998), 63 FR 47052 (Sep. 3, 1998) (approving the listing and trading of Merrill Lynch EuroFund Market Index Target Term Securities) (File No. SR-Amex-98-24). *See also supra* note 12. 17 Call options on the DJIA
(DJX)are traded on the CBOE, and both last sale and quotation information for the call options are disseminated in real-time through OPRA. The Exchanges states that the value of the BXD can be readily approximated as a function of observable market prices throughout the trading day. In particular, such a calculation would require information on the current price of the DJIA index and specific nearest-to-expiration call and put options on that index. These components trade in highly liquid markets, and real-time prices are available continuously throughout the trading day from a number of sources, including Bloomberg and CBOE. The Exchange notes that the “Indicative Value” (as discussed below) may be a more accurate indicator of the valuation of the Notes because it reflects the fees associated with the Notes ( *e.g.* , on the initial principal amount and the Adjustment Amount); however, the “Indicative Value” is not adjusted intraday. Telephone conversation between Jeffrey P. Burns, Associate General Counsel, Amex and David Liu, Attorney, Division, Commission, on May 26, 2005. The Exchange states that the CBOE has represented that the BXD Index value will be calculated and disseminated by the CBOE once every scheduled trading day after the close. The daily change in the BXD Index reflects the daily changes in the DJIA and related options positions. The Exchange states that JPMorgan has represented that it will seek to arrange to have the BXD Index calculated and disseminated on a daily basis through a third party if the CBOE ceases to calculate and disseminate the Index. 18 If, however, JPMorgan is unable to arrange the calculation and dissemination of the BXD Index (or a Successor Index) as indicated above, the Exchange will undertake to delist the Notes. 19 18 Prior to such change in the manner in which the BXD Index is calculated, or in the event of any Index substitution, the Exchange will file a proposed rule change pursuant to Rule 19b-4, which must be approved by the Commission prior to continued listing and trading in the Notes. Telephone conversation between Jeffrey P. Burns, Associate General Counsel, Amex and David Liu, Attorney, Division, Commission, on May 26, 2005. 19 *See supra* note 4 (regarding discontinuation of the calculation and dissemination of the Notes). In order to provide an updated value of the Payment Amount for use by investors, the Exchange will disseminate over the Consolidated Tape Association's Network B, a daily indicative value (the “Indicative Value”) of the Notes. The Indicative Value will equal the performance of the BXD less the Adjustment Amount. The Indicative Value will be calculated by the Amex after the close of trading and after the CBOE calculates the BXD Index for use by investors the next scheduled trading day. It is designed to provide investors with a daily reference value of the adjusted BXD Index. The Indicative Value may not reflect the precise value of the Notes or Payment Amount. Therefore, the Indicative Value disseminated by the Amex during trading hours should not be viewed as a real time update of the BXD Index, which is calculated only once a day. While the Indicative Value that will be disseminated by the Amex is expected to be close to the current BXD Index value, the values of the Indicative Value and the BXD Index will diverge due to the application of the Adjustment Amount. From October 31, 1997 through March 31, 2005, the annualized returns for the BXD Index and the DJIA were 7.15% and 6.76%, respectively, with a total deviation of the returns during the same time period of 4.43%. As the chart attached as Exhibit 3 to the Exchange's Form 19b-4 indicates, the BXD Index will closely track the DJIA except in those cases where the market is significantly rising or decreasing. 20 In the case of a fast rising market, the BXD Index will trail the DJIA due to the limited upside potential of the Index because of the “buy-write” strategy. Due to the cushioning effect of the “buy-write” strategy, the BXD Index has in the past exhibited negative returns that are less than the DJIA during a down market. The Exchange expects the BXD Index to continue to display these characteristics. 20 The Exchange states that buy-write strategies, such as the BXD Index, generally outperformed stocks in 2000-2002 when the DJIA achieved negative returns, but tended to underperform stocks in the late 1990s when the DJIA rose by more than 15% per year. The call options
(DJX)included in the value of the BXD Index have successive terms of approximately one month. Each day that an option expires, which day is referred to as a “roll” date, that option's value at expiration is taken into account in the value of the BXD Index. At expiration, the call option
(DJX)is settled against the “Special Opening Quotation” of the DJX used as the final settlement price of the DJX call options. The Special Opening Quotation is a special calculation of the DJIA that is compiled from the opening price of component stocks underlying the DJIA. The final settlement price of the call option at expiration is equal to the difference between the Special Opening Quotation and the strike price of the expired call option, or zero, whichever is greater, and is removed from the value of the BXD Index. Subsequent to the settlement of the expired call option, a new, “short” or sold at-the-money call option is included in the value of the BXD Index. 21 The initial value of the new call option is calculated by the CBOE and is based on the volume-weighted average of all the transaction prices of the new call option during a designated time period on the day the strike price is determined. 22 21 Like the expired call option, the new call option will expire approximately one month after the date of sale. 22 For this purpose, the CBOE excludes from the calculation those call options identified as having been executed as part of a spread ( *i.e.* , a position taken in two or more options in order to profit through changes in the relative prices of those options). The market capitalization of the DJIA is approximately $3.6 trillion. The Exchange states that, as of April 18, 2005, the market capitalization of the securities included in the DJIA ranged from a high of $381.59 billion to a low of $14.8 billion. The average daily trading volume for these same securities for the last six
(6)months ranged from a high of 292 million shares to a low of 368,900 shares. The Exchange represents that it prohibits the initial and/or continued listing of any security that is not in compliance with Rule 10A-3 under the Act. 23 23 *See* 17 CFR 240.10A-3. The Exchange states that, because the Notes are issued in $1,000 denominations, the Amex's existing debt floor trading rules will apply to the trading of the Notes. First, pursuant to Amex Rule 411, the Exchange will impose a duty of due diligence on its members and member firms to learn the essential facts relating to every customer prior to trading the Notes. 24 Second, even though the Exchange's debt trading rules apply, the Notes will be subject to the equity margin rules of the Exchange. 25 Third, the Exchange will, prior to trading the Notes, distribute a circular to the membership providing guidance with regard to member firm compliance responsibilities (including suitability recommendations) when handling transactions in the Notes and highlighting the special risks and characteristics of the Notes. With respect to suitability recommendations and risks, the Exchange will require members, member organizations, and employees thereof recommending a transaction in the Notes
(1)to determine that such transaction is suitable for the customer 26 and
(2)to have a reasonable basis for believing that the customer can evaluate the special characteristics of, and is able to bear the financial risks of, such transaction. In addition, JPMorgan will deliver a prospectus in connection with its sales of the Notes. 24 Amex Rule 411 requires, among other things, that every member or member organization use due diligence to learn the essential facts, relative to every customer and to every order or account accepted. 25 *See* Amex Rule 462 and Section 107B of the Company Guide. 26 *See* Amex Rule 411. The Exchange represents that its surveillance procedures are adequate to properly monitor the trading of the Notes. Specifically, the Amex will rely on its existing surveillance procedures governing equities and options that include additional monitoring on key pricing dates, 27 which the Exchange states have been deemed adequate under the Act. In addition, the Exchange also has a general policy which prohibits the distribution of material, non-public information by its employees. 27 Telephone conversation between Jeffrey P. Burns, Associate General Counsel, Amex and David Liu, Attorney, Division, Commission, on May 26, 2005. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act 28 in general, and furthers the objectives of Section 6(b)(5) of the Act 29 in particular, in that it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in facilitating transactions in securities, and to remove impediments to and perfect the mechanism of a free and open market and a national market system. 28 15 U.S.C. 78f(b). 29 15 U.S.C. 78f(b)(5). B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others The Exchange states that no written comments were solicited or received with respect to 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 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-Amex-2005-042 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-2005-042. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File No. SR-Amex-2005-042 and should be submitted on or before July 11, 2005. IV. Commission's Findings and Order Granting Accelerated Approval of the Proposed Rule Change The Amex has asked the Commission to approve the proposal on an accelerated basis to accommodate the timetable for listing the Notes. After careful consideration, the Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange, and, in particular, with the requirements of Section 6(b)(5) of the Act. 30 The Commission finds that this proposal is similar to several approved instruments currently listed and traded on the Amex. 31 Accordingly, the Commission finds that the listing and trading of the Notes based on the BXD Index is consistent with the Act and will promote just and equitable principles of trade, and foster cooperation and coordination with persons engaged in regulating, clearing, settling, and processing information with respect to and facilitating transactions in securities consistent with Section 6(b)(5) of the Act. 321 30 30 15 U.S.C. 78f(b)(5). 31 *See* , *e.g.* , Securities Exchange Act Release Nos. 51634 (Apr. 29, 2005), 70 FR 24138 (May 6, 2005) (approving the listing and trading of notes linked to the performance of the CBOE S&P 500 BuyWrite Index(sm)) (File No. SR-Amex-2005-036); 51426 (Mar. 23, 2005), 70 FR 16315 (Mar. 30, 2005) (approving the listing and trading of notes linked to the performance of the CBOE S&P 500 BuyWrite Index(sm)) (File No. SR-Amex-2005-022); 50719 (Nov. 22, 2004), 69 FR 69644 (Nov. 30, 2004) (approving the listing and trading of notes linked to the performance of the CBOE S&P 500 BuyWrite Index(sm)) (File No. SR-Amex-2004-55). 32 15 U.S.C. 78f(b)(5). In approving the proposed rule, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). The requirements of Section 107A of the Company Guide were designed to address the concerns attendant to the trading of hybrid securities, like the Notes. For example, Section 107A of the Company Guide provides that only issuers satisfying substantial asset and equity requirements may issue securities such as the Notes. In addition, the Exchange's “Other Securities” listing standards further require that the Notes have a market value of at least $4 million. 33 In any event, financial information regarding JPMorgan, in addition to the information on the component stocks, which are reporting companies under the Act, and the Notes, which will be registered under Section 12 of the Act, will be available. 33 *See* Section 107A(c) of the Company Guide. In approving the product, the Commission recognizes that the Index is a passive total return index based on
(1)buying a portfolio consisting of the component stocks of the DJIA and
(2)“writing” (or selling) near-term DJIA call options (DJX), generally on the third Friday of each month. Given the large trading volume and capitalization of the compositions of the stocks underlying the DJIA, the Commission believes that the listing and trading of the Notes that are linked to the BXD Index should not unduly impact the market for the underlying securities compromising the DJIA or raise manipulative concerns. 34 Moreover, the issuers of the underlying securities comprising the DJIA are subject to reporting requirements under the Act, and all of the component stocks are either listed or traded on, or traded through the facilities of, U.S. securities markets. 34 The issuer, JPMorgan, disclosed in the prospectus and prospectus supplement that the hedging activities of it and its affiliates, including taking positions in the stocks underlying the Index and selling call options on the Index, which could adversely affect the market value of the Notes from time to time and the redemption amount holders of the Notes would receive on the Notes. Such hedging activity must, of course, be conducted in accordance with applicable regulatory requirements. The Commission also believes that any concerns that a broker-dealer, such as JPMorgan, or a subsidiary providing a hedge for the issuer, will incur undue position exposure are minimized by the size of the Notes issuance in relation to the net worth of JPMorgan. 35 35 *See* Securities Exchange Act Release Nos. 44913 (Oct. 9, 2001), 66 FR 52469 (Oct. 15, 2001) (order approving the listing and trading of notes whose return is based on the performance of the Nasdaq-100 Index) (File No. SR-NASD-2001-73); 44483 (June 27, 2001), 66 FR 35677 (July 6, 2001) (order approving the listing and trading of notes whose return is based on a portfolio of 20 securities selected from the Amex Institutional Index) (File No. SR-Amex-2001-40); and 37744 (Sept. 27, 1996), 61 FR 52480 (Oct. 7, 1996) (order approving the listing and trading of notes whose return is based on a weighted portfolio of healthcare/biotechnology industry securities) (File No. SR-Amex-96-27). Finally, the Commission notes that the value of the Index will be calculated and disseminated by the CBOE once every trading day after the close of trading. However, the Commission notes that the value of the DJIA will be widely disseminated at least once every fifteen seconds throughout the trading day and that investors are able to obtain real-time call option pricing on the DJIA during the trading day. Further, the Indicative Value, which will be calculated by the Amex after the close of trading and after the CBOE calculates the BXD Index for use by investors the next trading day, is designed to provide investors with a daily reference value of the adjusted Index. The Commission notes that JPMorgan has agreed to arrange to have the BXD Index calculated and disseminated on a daily basis through a third party in the event that the CBOE discontinues calculating and disseminating the Index. In such event, the Exchange agrees to obtain Commission approval, pursuant to filing the appropriate Form 19b-4, prior to the substitution of the CBOE BXD Index. Further, the Commission notes that the Exchange has agreed to undertake to delist the Notes in the event that the CBOE ceases to calculate and disseminate the Index, and JPMorgan is unable to arrange to have the BXD Index calculated and widely disseminated through a third party. The Commission finds good cause for approving the proposed rule change prior to the 30th day after the date of publication of the notice of filing thereof in the **Federal Register** . The Exchange has requested accelerated approval because this product is similar to several other instruments currently listed and traded on the Amex. 36 The Commission believes that the Notes will provide investors with an additional investment choice and that accelerated approval of the proposal will allow investors to begin trading the Notes promptly. Additionally, the Notes will be listed pursuant to Amex's existing hybrid security listing standards as described above. Therefore, the Commission finds good cause, consistent with Section 19(b)(2) of the Act, 37 to approve the proposal on an accelerated basis. 36 *See supra* notes 12 (citing previous approvals of securities with structures similar to that of the proposed Notes); and 14 (citing previous approvals of securities linked to the performance of the DJIA as well as options on the DJIA). 37 37 15 U.S.C. 78s(b)(2). V. Conclusion *It is therefore ordered* , pursuant to Section 19(b)(2) of the Act, 38 that the proposed rule change (File No. SR-Amex-2005-042) is hereby approved on an accelerated basis. 38 38 15 U.S.C. 78s(b)(2). For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 39 39 17 CFR 200.30-3(a)(12). Margaret H. McFarland, Deputy Secretary. [FR Doc. E5-3184 Filed 6-17-05; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-51830; File No. SR-CBOE-2005-26] Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Order Granting Accelerated Approval of a Proposed Rule Change and Amendment No. 1 Thereto Relating to the Terms of Index Option Contracts Listed on the Exchange June 13, 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 16, 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 Exchange. On June 9, 2005, CBOE submitted Amendment No. 1 to the proposed rule change. 3 The Commission is publishing this notice to solicit comments on the proposed rule change, as amended, from interested persons 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 June 9, 2005 (“Amendment No. 1). Amendment No. 1 replaced the original rule filing in its entirety. In Amendment No. 1, CBOE made certain clarifications to the proposed rule text by referencing Interpretation and Policy .12 to Rule 24.9 (determination of pricing sources used in the calculation of an index) and further clarified the rationale for pursuing this rule change. I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend its rules relating to the terms of index option contracts listed on the Exchange. The text of the proposed rule change is below. Proposed new language is in italics; deletions are in brackets. CHAPTER XXIV Index Options Rule 24.1—Rule 24.8 No Change Rule 24.9—Terms of Index Option Contracts Rule 24.9.
(a)General. (1)-(3) No Change.
(4)A.M.-Settled Index Options. The last day of trading for A.M.-settled index options shall be the business day preceding the last day of trading in the underlying securities prior to expiration. The current index value at the expiration of an A.M.-settled index option shall be determined, for all purposes under these rules and the rules of the Clearing Corporation, on the last day of trading in the underlying securities prior to expiration, by reference to the reported level of such index as derived from [first reported sale] *the opening* [(opening)] prices of the underlying securities on such day, *as determined by the market for such security selected by the Reporting Authority pursuant to Interpretation and Policy .12 to Rule 24.9* , except that in the event that the primary market for an underlying security does not open for trading, halts trading prematurely, or otherwise experiences a disruption of normal trading on that day, or in the event that the primary market for an underlying security is open for trading on that day, but that particular security does not open for trading, halts trading prematurely, or otherwise experiences a disruption of normal trading on that day, the price of that security shall be determined, for the purposes of calculating the current index value at expiration, as set forth in Rule 24.7(e). The following A.M.-settled index options are approved for trading on the Exchange: (i)-(lxxiv) No Change.
(5)Other Methods of Determining Exercise Settlement Value. Exercise settlement values for the following index options are determined as specified in this paragraph:
(i)No Change.
(ii)[Nasdaq 100 Stock Index. The current index value at expiration shall be determined, for all purposes under these Rules and the Rules of the Clearing Corporation, on the last day of trading in the underlying securities prior to expiration. The current index value for such purposes shall be calculated by the Nasdaq Stock Market, Inc. (“Nasdaq”) and reported to the CBOE using the volume weighted prices (“VWPs”) of the securities underlying the Nasdaq-100 Index, which VWPs shall be calculated according to the then current volume-weighted averaging methodology developed by Nasdaq.
(iii)]CBOE Volatility Indexes and CBOE Increased-Value Volatility Indexes. The current index value at expiration shall be determined, for all purposes under these Rules and the Rules of the Clearing Corporation, on the last day of trading in the underlying securities prior to expiration. The current index value for such purposes shall be calculated by the Chicago Board Options Exchange as a Special Opening Quotation
(SOQ)of each respective Volatility or Increased-Value Volatility Index using the sequence of opening prices of the options that comprise each Index. The opening price for any series in which there is no trade shall be the average of that option's bid price and ask price as determined at the opening of trading. (b)-(c) No Change. * * * *Interpretations and Policies:* .01-.12 No Change. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, CBOE included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item III 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 clarify CBOE rules relating to the determination of opening prices for securities that underlie certain A.M.-settled index options traded on the Exchange and to clarify CBOE rules relating to the determination of the exercise settlement value for certain option contracts that are based on the Nasdaq 100 Index. Currently, CBOE Rule 24.9(a)(4) provides that the current index value at expiration of an A.M.-settled index option is determined on the last day of trading in the underlying securities prior to expiration, by reference to the reported level of such index as derived “from first reported sale (opening) prices of the underlying securities on such day.” The Exchange believes it important to clarify in CBOE Rules that, although the settlement values of an A.M.-settled index are generally determined from the first reported sale of the securities that underlie the index, the specific methodology for ascertaining the opening prices is largely determined by factors outside of the CBOE's control. Specifically, these factors include the fact that
(1)the Reporting Authority 4 for a particular index may not always be using the primary market for a particular index component security 5 and/or
(2)the opening price for any particular component security used to calculate the index may not always be the first reported sale of that security, regardless of whether the Reporting Authority is using the underlying security's primary market as the pricing source. 6 4 CBOE Rule 24.1(h) defines a Reporting Authority as “ * * * in respect of a particular index means the institution or reporting service designated by the Exchange as the official source for calculating the level of the index from the reported prices of the underlying securities that are the bases of the index and reporting such level.” 5 Interpretation and Policy .12 to CBOE Rule 24.9 provides that, “[w]ith respect to any securities index on which options are traded on the Exchange, the source of the prices of component securities used to calculate the current index level at expiration is determined by the Reporting Authority for that index.” 6 Although the Reporting Authority has discretion in selecting the source (i.e., primary market or other securities exchange) of pricing for securities that underlie the index, the opening price must be determined in accordance with the rules of the securities exchange (or Nasdaq) that the Reporting Authority selects as the source of pricing to be used in the calculation of the index. Additionally, and as is consistent with CBOE Rule 24.9(a)(4), the Reporting Authority will be required to use the opening price in the calculation of the index value, not the closing price from the previous trading day. To emphasize factor
(1)above, the Exchange proposes to reference existing Interpretation and Policy .12 to Rule 24.9 7 in paragraph
(4)to CBOE Rule 24.9(a). Regarding factor
(2)above, there may be circumstances in which the opening price for a particular component(s) underlying an index may not be the first reported sale for that component. To illustrate, Nasdaq has recently received approval to utilize a single opening pricing methodology (“Nasdaq Official Opening Price”) for securities traded through Nasdaq. 8 Through this new methodology, the Nasdaq Official Opening Price reported by Nasdaq for a security may not always be the first reported sale. As such, referring to opening prices as the “first reported sale,” as is currently described in CBOE Rule 24.9(a)(4), is simply not accurate. 7 *See supra* at Note 4 and *see also* Securities Exchange Act Release No. 50269 (August 26, 2004); 69 FR 53755 (September 2, 2004) (Notice of Filing and Immediate Effectiveness of proposed rule change adding Interpretation and Policy .12 to Rule 24.9). Telephone conversation between Terri Evans, Special Counsel, Division of Market Regulation, Commission, and James Flynn, Attorney, CBOE, on June 10, 2005. 8 *See* Securities Exchange Act Release No. 50405 (September 16, 2004); 69 FR 57118 (September 23, 2004). Therefore, the Exchange proposes to amend CBOE Rule 24.9(a)(4), in part,
(1)to eliminate reference to the term “first reported sale” and
(2)to reflect that the opening prices of the underlying securities at expiration of an A.M.-settled index option will be determined by the market (securities exchange or Nasdaq) for such security selected by the Reporting Authority, as consistent with Interpretation and Policy .12 to Rule 24.9. Additionally, this rule filing proposes to revise Rule 24.9(a)(5)(ii), which describes the manner in which Nasdaq determines the exercise settlement value for the Nasdaq 100 Index. Until recently, as described in Rule 24.9(a)(5)(ii), Nasdaq calculated the exercise settlement value for the Nasdaq 100 Index using the volume weighted prices (“VWP”) of the securities underlying the Nasdaq 100 Index. Nasdaq now uses a new methodology that, essentially, relies on a single price of each security that underlies the Nasdaq 100 Index. 9 As Nasdaq will no longer be using a special VWP methodology for calculating the exercise settlement value for the Nasdaq 100 Index and, relying instead on the general provision in CBOE Rule 24.9(a)(4), 10 CBOE proposes to merely eliminate the VWP description entirely from CBOE Rule 24.9(a)(5). 9 *Id* . 10 Telephone conversation between Terri Evans, Special Counsel, Division of Market Regulation, Commission, and James Flynn, Attorney, CBOE, on June 10, 2005 (changing reference from Interpretation and Policy .12 to Rule 24.9(a)(4). 2. Statutory Basis Because these proposed amendments serve to clarify existing rules relating to the determination of the opening prices for the securities that underlie indexes on which the Exchange lists options and also clarifies the method for determining the exercise settlement value for certain option contracts that are based on the Nasdaq 100 Index, the Exchange believes that the proposed rule change is consistent with and furthers the objectives of Section 6(b)(5) of the Act, 11 in that it is designed 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. 11 15 U.S.C. 78f(b)(5). B. Self-Regulatory Organization's Statement on Burden on Competition This proposed rule change does not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others The CBOE neither solicited nor received comments with respect to 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-CBOE-2005-26 on the subject line. Paper Comments • Send paper comments in triplicate to Jonathan G. Katz, Secretary, Securities and Exchange Commission, Station Place, 100 F Street, NE., Washington, DC 20549-9303. All submissions should refer to File Number SR-CBOE-2005-26. 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. Copies of such filing also will be available for inspection and copying at the principal office of the CBOE. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-CBOE-2005-26 and should be submitted on or before July 11, 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 national securities exchange. 12 In particular, the Commission finds that the proposed rule change, as amended, is consistent with Section 6(b)(5) of the Act, 13 which requires, in part, that the rules of an exchange be designed 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 Commission believes that the proposed rule change reflects the change in methodology for calculating the index settlement value of the Nasdaq 100 Index and clarifies that the settlement values of A.M. settled index options may be determined using an opening price other than the first reported sale. 12 In approving this proposal, the Commission has considered its impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). 13 15 U.S.C. 78f(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 accelerating approval of the proposed rule change will allow the Exchange to timely reflect in its rules the manner in which Nasdaq proposes to calculate the current index value at expiration for the Nasdaq 100 Index starting with the June 2005 expiration. 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. 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, as amended (File No. SR-CBOE-2005-26), be approved on an accelerated basis. 15 *Id.* 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. E5-3150 Filed 6-17-05; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-51828; File No. SR-CBOE-2005-42] Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of Proposed Rule Change and Amendment No. 1 Thereto Relating to a Fee Cap for Options Merger Spread Transactions June 13, 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 Chicago Board Options Exchange, Incorporated (“CBOE” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by CBOE. On May 31, 2005, the Exchange filed Amendment No. 1 to the proposed rule change. 3 The Exchange designated the proposed rule change, as amended, as establishing or changing a due, fee, or other charge imposed by the Exchange under Section 19(b)(3)(A)(ii) of the Act, 4 and Rule 19b-4(f)(2) thereunder, 5 which renders the proposal effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change, as amended, from interested parties. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 In Amendment No. 1, the Exchange replaced the first paragraph under Item 3 of the Form 19b-4 to correct a formatting error that appeared in the original filing. 4 15 U.S.C. 78s(b)(3)(A)(ii). 5 17 CFR 240.19b-4(f)(2). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend its Fee Schedule to adopt a fee cap on merger spread transactions. The text of the proposed rule change is available on the Exchange's Web site ( *http://www.cboe.com* ), at the Office of the Secretary, CBOE, and at the Commission. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, CBOE included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. CBOE has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, Proposed Rule Change 1. Purpose The Exchange currently caps market-maker, firm, and broker-dealer transaction fees associated with “dividend spread” transactions at $2,000 for all dividend spread transactions executed on the same trading day in the same options class. 6 According to the Exchange, a dividend spread is defined as any trade done to achieve a dividend arbitrage between any two deep-in-the-money options. 6 *See* Securities Exchange Act Release No. 51468 (April 1, 2005), 70 FR 17742 (April 7, 2005) (SR-CBOE-2005-18). The dividend spread fee cap program is in effect as a pilot program that will expire on September 1, 2005. The Exchange proposes to amend its Fee Schedule to adopt a similar fee cap for “merger spread” transactions. 7 Specifically, the Exchange proposes to cap market-maker, firm, and broker-dealer transaction fees at $2,000 for all merger spread transactions executed on the same trading day in the same options class. Because the Exchange believes that merger spread transactions have similar economic risks and are executed in similar ways as dividend spread transactions, the Exchange believes adopting this fee cap would attract additional liquidity and should permit the Exchange to remain competitive. 7 According to the Exchange, a merger spread transaction is defined as a transaction executed pursuant to a strategy involving the simultaneous purchase and sale of options of the same class and expiration date, but with different strike prices, followed by the exercise of the resulting long options position, each executed prior to the date on which shareholders of record are required to elect their respective form of consideration, *i.e.* , cash or stock. Similar to the dividend spread fee cap program, the merger spread fee cap would be in effect as a pilot program that would expire on September 1, 2005. The Exchange represents that the proposed fee cap is similar to merger spread fee caps adopted by other exchanges. 8 8 *See* Securities Exchange Act Release Nos. 51596 (April 21, 2005), 70 FR 22381 (April 29, 2005) (SR-PHLX-2005-19) and 51787 (June 6, 2005), 70 FR 34174 (June 13, 2005) (SR-PCX-2005-65). As is done under the current dividend spread fee cap program, the Exchange would rebate transaction fees for qualifying merger spread transactions. To qualify transactions for the cap, a rebate request form, along with supporting documentation ( *e.g.* , clearing firm transaction data), must be submitted to the Exchange within 30 days of the transactions. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act, 9 in general, and Section 6(b)(4) of the Act, 10 in particular, in that it provides for the equitable allocation of reasonable dues, fees, and other charges among CBOE members and other persons using its facilities. 9 15 U.S.C. 78f(b). 10 15 U.S.C. 78f(b)(4). B. Self-Regulatory Organization's Statement on Burden on Competition CBOE does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were solicited or received with respect to the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective pursuant to Section 19(b)(3)(A) of the Act 11 and subparagraph (f)(2) of Rule 19b-4 thereunder 12 because it establishes or changes a due, fee, or other charge imposed by the Exchange. At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. 13 11 15 U.S.C. 78s(b)(3)(A). 12 17 CFR 240.19b-4(f)(2). 13 The effective date of the original proposed rule change is May 23, 2005, the date of the original filing, and the effective date of the amendment is May 31, 2005, the date of filing of Amendment No. 1. 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 31, 2005, the date on which the Exchange submitted Amendment No. 1. *See* 15 U.S.C. 78s(b)(3)(C). IV. Solicitation of Comments Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov.* Please include File Number SR-CBOE-2005-42 on the subject line. Paper Comments • Send paper comments in triplicate to Jonathan G. Katz, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-9303. All submissions should refer to File Number SR-CBOE-2005-42. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room. Copies of such filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-CBOE-2005-42 and should be submitted on or before July 11, 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. E5-3158 Filed 6-17-05; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-51824; File No. SR-CBOE-2005-45] Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Modify the Designated Primary Market-Maker Participation Entitlement for Orders Specifying a Preferred DPM June 10, 2005. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) 1 and Rule 19b-4 thereunder, 2 notice is hereby given that on June 6, 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 Exchange provided the Commission with written notice of its intention to file the proposed rule change on June 3, 2005. The Exchange has requested that the Commission waive the 30-day operative delay. 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 modify the Designated Primary Market-Maker (“DPM”) participation entitlement for orders specifying a Preferred DPM. Proposed new language is in *italics* ; proposed deletions are in [brackets]. Rule 8.87 Participation Entitlements of DPMs and e-DPMs
(a)Subject to the review of the Board of Directors, the MTS Committee may establish from time to time a participation entitlement formula that is applicable to all DPMs.
(b)The participation entitlement for DPMs and e-DPMs (as defined in Rule 8.92) shall operate as follows:
(1)Generally.
(i)To be entitled to a participation entitlement, the DPM/e-DPM must be quoting at the best bid/offer on the Exchange.
(ii)A DPM/e-DPM may not be allocated a total quantity greater than the quantity that the DPM/e-DPM is quoting at the best bid/offer on the Exchange.
(iii)The participation entitlement is based on the number of contracts remaining after all public customer orders in the book at the best bid/offer on the Exchange have been satisfied.
(2)Participation Rates applicable to DPM Complex. The collective DPM/e-DPM participation entitlement shall be: 50% when there is one Market-Maker also quoting at the best bid/offer on the Exchange; 40% when there are two Market-Makers also quoting at the best bid/offer on the Exchange; and, 30% when there are three or more Market-Makers also quoting at the best bid/offer on the Exchange.
(3)Allocation of Participation Entitlement Between DPMs and e-DPMs. The participation entitlement shall be as follows: If the DPM and one or more e-DPMs are quoting at the best bid/offer on the Exchange, the e-DPM participation entitlement shall be one-half (50%) of the total DPM/e-DPM entitlement and shall be divided equally by the number of e-DPMs quoting at the best bid/offer on the Exchange. The remaining half shall be allocated to the DPM. If the DPM is not quoting at the best bid/offer on the Exchange and one or more e-DPMs are quoting at the best bid/offer on the Exchange, then the e-DPMs shall be allocated the entire participation entitlement (divided equally between them). If no e-DPMs are quoting at the best bid/offer on the Exchange and the DPM is quoting at the best bid/offer on the Exchange, then the DPM shall be allocated the entire participation entitlement. If only the DPM and/or e-DPMs are quoting at the best bid/offer on the Exchange (with no Market-Makers at that price), the participation entitlement shall not be applicable and the allocation procedures under Rule 6.45A shall apply.
(4)Allocation of Participation Entitlement Between DPMs and e-DPMs for Orders Specifying a Preferred DPM. Notwithstanding the provisions of subparagraph (b)(3) above, the Exchange may allow, on a class-by-class basis, for the receipt of marketable orders, through the Exchange's Order Routing System when the Exchange's disseminated quote is the NBBO, that carry a designation from the member transmitting the order that specifies a DPM or e-DPM in that class as the “Preferred DPM” for that order. In such cases and after the provisions of subparagraph (b)(1)(i) and
(iii)above have been met, then the *Preferred DPM participation entitlement shall be 50% when there is one Market-Maker also quoting at the best bid/offer on the Exchange; 40% when there are two Market-Makers also quoting at the best bid/offer on the Exchange; and, 30% when there are three or more Market-Makers also quoting at the best bid/offer on the Exchange,* [participation entitlement applicable to the DPM Complex (as set forth in subparagraph (b)(2) above) shall be allocated to the Preferred DPM] subject to the following: [(i) if the Preferred DPM is an e-DPM and the DPM is also quoting at the best bid/offer on the Exchange, then 2/3 of the participation entitlement shall be allocated to the Preferred DPM and the balance of the participation entitlement shall be allocated to the DPM;
(ii)if the Preferred DPM is an e-DPM and the DPM is not quoting at the best bid/offer on the Exchange but one or more e-DPMs are also quoting at the best bid/offer on the Exchange, then 2/3 of the participation entitlement shall be allocated to the Preferred DPM and the balance of the participation entitlement shall be divided equally between the remaining e-DPMs also quoting at the best bid/offer on the Exchange;
(iii)if the Preferred DPM is the DPM and one or more e-DPMs are also quoting at the best bid/offer on the Exchange, then 2/3 of the participation entitlement shall be allocated to the Preferred DPM and the balance of the participation entitlement shall be divided equally between the e-DPMs quoting at the best bid/offer on the Exchange;] [(iv)] *(i) if the Preferred DPM is not quoting at the best bid/offer on the Exchange then the participation entitlement set forth in subparagraph (b)(3) above shall apply; and* [(v) if only members of the DPM Complex are quoting at the best bid/offer on the Exchange then the participation entitlement applicable to the Preferred DPM shall be: 50% when there is one other member of the DPM Complex also quoting at the best bid/offer on the Exchange; 40% when there are two other members of the DPM Complex quoting at the best bid/offer on the Exchange; and, 30% when there are three or more members of the DPM Complex also quoting at the best bid/offer on the Exchange. The other members of the DPM Complex shall not receive a participation entitlement and the allocation procedures under Rule 6.45A shall apply; and] [(vi)] *(ii)* in no case shall the Preferred DPM [a DPM/e-DPM] be allocated, pursuant to this participation right, a total quantity greater than the quantity that the Preferred DPM [DPM/e-DPM] is quoting at the best bid/offer on the Exchange. The Preferred DPM participation entitlement set forth in subparagraph (b)(4) of this Rule shall be in effect until June 2, 2006 on a pilot basis. * * * Interpretations and Policies .01 Notwithstanding subparagraph (b)(2) above, the Exchange may establish a lower DPM Complex Participation Rate on a product-by-product basis for newly-listed products or products that are being allocated to a DPM trading crowd for the first time. Notification of such lower participation rate shall be provided to members through a Regulatory Circular. 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 CBOE Rule 8.87 governs the participation entitlement of DPMs and e-DPMs (the “DPM Complex”). CBOE Rule 8.87(b)(2) states the actual participation entitlement percentages applicable to the DPM Complex, which are tiered to take into account the number of non-DPM Market-Makers also quoting at the best price. The participation entitlement percentages are as follows: 50% when there is one Market-Maker also quoting at the best bid/offer on the Exchange; 40% when there are two Market-Makers also quoting at the best bid/offer on the Exchange; and, 30% when there are three or more Market-Makers also quoting at the best bid/ offer on the Exchange. The CBOE recently obtained approval of a filing adopting a Preferred DPM Program. 6 Under that program, order providers can send an order to the Exchange designating a “Preferred DPM” from among the DPM Complex. If the Preferred DPM is quoting at the National Best Bid or Offer (“NBBO”) at the time the order is received on the CBOE, the Preferred DPM is entitled to 2/3 of the participation entitlement described above. The Philadelphia Stock Exchange (“Phlx”) recently obtained approval of a directed order program that allows the directed order recipient to receive a 40% participation entitlement on designated orders received while that entity is quoting at the NBBO. 7 The purpose of this filing is to remain competitive with the Phlx directed order program. 6 *See* Securities Exchange Act Release No. 51779 (June 2, 2005) (order approving SR-CBOE-2004-71). 7 *See* Securities Exchange Act Release No. 51759 (May 27, 2005), 70 FR 32860 (June 6, 2005) (order approving SR-Phlx-2004-91). This proposal increases the participation entitlement applicable to Preferred DPMs from 2/3 of the “regular” participation entitlement to the entire participation entitlement. Thus, the Preferred DPM participation entitlement shall be 50% when there is one Market-Maker also quoting at the best bid/offer on the Exchange; 40% when there are two Market-Makers also quoting at the best bid/offer on the Exchange; and, 30% when there are three or more Market-Makers also quoting at the best bid/offer on the Exchange. The proposal does not in any way modify the percentage of an order that is available to non-DPM quoters while allowing the Exchange's program to be more competitive with the Phlx directed order program. The CBOE notes that other exchanges have rules that provide specialist entitlements as high as 40% (with three or more market-makers also quoting at the same price), 8 and that the Preferred DPM Program is operating as a one-year pilot program. 8 *See* Phlx Rule 1014(g)(viii), Pacific Exchange Rule 6.82(d)(2), and American Stock Exchange Rule 935-ANTE(a)(4). 2. Statutory Basis The Exchange believes the proposed rule change is consistent with Section 6(b) of the Act, 9 in general, and furthers the objectives of Section 6(b)(5), 10 in particular, in that it is designed to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. 9 15 U.S.C. 78f(b). 10 15 U.S.C. 78f(b)(5). B. *Self-Regulatory Organization's Statement on Burden on Competition* The CBOE does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in 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 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 11 and Rule 19b-4(f)(6) thereunder. 12 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 15 U.S.C. 78s(b)(3)(A). 12 17 CFR 240.19b-4(f)(6). The CBOE has requested that the Commission waive the 30-day operative delay. The Commission believes it is consistent with the protection of investors and the public interest for the CBOE to implement the proposed rule change without delay. For this reason, the Commission designates the proposal to be effective and operative upon filing with the Commission. 13 13 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. See 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 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-2005-45 on the subject line. Paper Comments • Send paper comments in triplicate to Jonathan G. Katz, Secretary, Securities and Exchange Commission, Station Place, 100 F Street, NE., Washington, DC 20549-9303. All submissions should refer to File No. SR-CBOE-2005-45. 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, 100 F Street, NE., 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-2005-45 and should be submitted on or before July 11, 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. E5-3163 Filed 6-17-05; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-51835; File No. SR-ISE-2004-16] Self-Regulatory Organizations; International Securities Exchange, Inc.; Notice of Filing of Proposed Rule Change and Amendment No. 1 Thereto Establishing a Directed Order Process June 13, 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 20, 2004, 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, II, and III below, which Items have been prepared by the ISE. On April 26, 2005, the ISE 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 Amendment No. 1 replaced and superseded the original filing in its entirety. Amendment No. 1 to the proposed rule change:
(i)added a provision to the proposed rule change related to the processing of Directed Orders when the market maker to which it is directed is the primary market maker in the option and the ISE's bid/offer is inferior to the national best bid/offer;
(ii)revised the purpose section of the filing and maked certain non-substantive changes to the text of the proposed rule change; and
(iii)removed a proposed amendment to ISE Rule 810 related to information barriers to allow market maker to handle directed order because the Exchange has received approval of a separate proposed rule change to ISE Rule 810 in this respect ( *see* Securities Exchange Act Release No. 50433 (September 23, 2004), 69 FR 58563 (September 30, 2004) (SR-ISE-2004-18)). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The ISE proposes to adopt new ISE Rule 811 to allow Exchange market makers to receive Public Customer Orders directed to them from Electronic Access Members (“EAMs”) through the Exchange's system (“Directed Orders”). Proposed new language is in *italics.* Rule 811. Directed Orders *(a) Definitions.* *(1) A “Directed Order” is a Public Customer Order routed from an Electronic Access Member to an Exchange market maker through the Exchange's System.* *(2) A “Directed Market Maker” is a market maker that receives a Directed Order.* *(3) The “NBBO” is defined in Rule 1900.* *(b) Exchange market makers may only receive and handle orders on an agency basis if they are Directed Orders and only in the manner prescribed in this Rule 811. A market maker can elect whether or not to accept Directed Orders on a daily basis. If a market maker elects to be a Directed Market Maker, it must accept Directed Orders from all Electronic Access Members. A Directed Market Maker cannot reject a Directed Order.* *(c) Obligations of Directed Market Makers.* *(1) Directed Market Makers must hold the interests of orders entrusted to them above their own interests and fulfill in a professional manner all other duties of an agent, including, but not limited to, ensuring that each such order, regardless of its size or source, receives proper representation and timely, best possible execution in accordance with the terms of the order and the rules and policies of the Exchange.* *(2) Directed Market Makers must ensure that their acceptance and execution of Directed Orders as agent are in compliance with applicable Federal and Exchange rules and policies.* *(3) Within three
(3)seconds of receipt of a Directed Order, Directed Market Makers must either enter the Directed Order into the PIM pursuant to Rule 723 or release the Directed Order to the Exchange's limit order book pursuant to paragraph
(e)of this Rule.* *(i) If the Directed Market Maker is quoting at the NBBO on the opposite side of the Directed Order, the Directed Market Maker is prohibited from adjusting the price of its quote to a price that is less favorable than the price available at the NBBO or reducing the size of its quote prior to submitting the Directed Order to the PIM, unless such quote change is the result of an automated quotation system that operates independently from the existence or non-existence of a pending Directed Order. Otherwise changing a quote on the opposite side of the Directed Order except as specifically permitted herein will be a violation of Rule 400 (Just and Equitable Principles of Trade).* *(ii) If a Directed Market Maker fails to either enter a Directed Order into the PIM or release the order within three
(3)seconds of its receipt, the Directed Order will be automatically released by the System and processed according to paragraph
(e)of this Rule.* *(d) Directed Market Maker Guarantee. If the Directed Market Maker is quoting at the NBBO on the opposite side of the market from a Directed Order at the time the Directed Order is received by the Directed Market Maker, and the Directed Order is marketable, the System will automatically guarantee execution of the Directed Order against the Directed Market Maker at the price and the size of its quote (the “Guarantee”). The Directed Market Maker cannot alter the Guarantee.* *(e) Except as provided in this paragraph (e), when a Directed Order is released, the System processes the order in the same manner as any other order received by the Exchange. Directed Orders will not be automatically executed at a price that is inferior to the NBBO and, except as provided in subparagraph (e)(3), will be handled pursuant to Rule 803(c)(2) when the ISE best bid or offer is inferior to the NBBO.* *(1) A marketable Directed Order will be matched against orders and quotes according to Rule 713 except that, at any given price level, the Directed Market Maker will be last in priority.* *(i) If, after all other interest at the NBBO is executed in full, there is any remaining unexecuted quantity of the Directed Order and the Directed Market Maker is quoting at the NBBO or a Guarantee exists, a broadcast message will be sent to all Members. After three
(3)seconds, any additional interest at the same or better price will be executed according to Rule 713.* *(ii) If there continues to be any remaining unexecuted quantity of the Directed Order, it will be executed against any interest at the same price from the Directed Market Maker. If a Guarantee exists at that price, an execution will occur for at least the size of the Guarantee.* *
(iii)If there continues to be any remaining unexecuted quantity of the Directed Order and the Directed Order is marketable at the next price level without trading through the NBBO, the Directed Order will be allocated according to Rule 713 except that the Directed Market Maker will be last in priority. If an execution at any given price level would cause the Directed Order to be executed at a price inferior to the NBBO, the order will be presented to the PMM for handling according to Rule 803(c)(2). * *(iv) Subparagraph (e)(1)(iii) will be repeated until the Directed Order is
(A)fully executed,
(B)presented to the Primary Market Maker for handling according to Rule 803(c)(2), or
(C)no longer marketable, in which case it will be placed on the limit order book.* *(2) If a Directed Order is not marketable at the time it is released:* *(i) If a Guarantee exists, a broadcast message will be sent to all Members. After three
(3)seconds, the Directed Order will be executed against any contra interest at the Guarantee price or better according to Rule 713. Thereafter, the Directed Order will be executed against the Directed Market Maker for at least the size of the Guarantee. If there is any remaining unexecuted quantity of the Directed Order, it will be placed on the Exchange's limit order book.* *(ii) If no Guarantee exists, the Directed Order will be placed on the Exchange's limit order book. In this case, the Directed Market Maker may not enter a proprietary order to execute against the Directed Order during the three
(3)seconds following the release of the Directed Order.* *(3) If, at the time a Directed Order is released by the Directed Market Maker, the Directed Order is marketable but the ISE best bid or offer is inferior to the NBBO, and the Directed Market Maker is the Primary Market Maker in the option class for the Directed Order, then a broadcast message shall be sent to all Members displaying the Directed Order. After three
(3)seconds, the Directed Order will be executed against any contra interest at the NBBO price or better according to Rule 713, except that the Directed Market Maker will be last in priority. Thereafter, if there is any remaining unexecuted quantity of the Directed Order, it will be presented to the Primary Market Maker for handling according to Rule 803(c)(2).* II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it had 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 The Exchange proposes to adopt new ISE Rule 811 to allow Exchange market makers to receive Directed Orders. A Directed Order is defined as a Public Customer Order routed from an EAM to an Exchange market maker through the Exchange's system. 4 A “Directed Market Maker” is an Exchange market maker that receives a Directed Order. Market makers may elect whether to receive Directed Orders on a daily basis. Directed Market Makers must accept Directed Orders from all EAMs and may not reject any Directed Orders. Directed Market Makers must either enter Directed Orders into the Price Improvement Mechanism (“PIM”) pursuant to ISE Rule 723 or release the Directed Orders to the Exchange's limit order book. The ISE would give a Directed Market Maker three seconds to take one of these actions, after which the Exchange system would automatically release the Directed Order. Directed Orders are anonymous, so that Directed Market Makers would not know which EAM routed a Directed Order. 4 The proposal is similar to Chapter VI, Section 5(b) and (c), and Section 10, of the rules of the Boston Stock Exchange. When a Directed Order is not entered into the PIM, and thus is released to the Exchange's limit order book, the Exchange would process the order like any other incoming order, other than as follows: i. When an order is directed to a market maker that is quoting at the national best bid or offer (“NBBO”), the system automatically guarantees the price and size of the market maker's quote (the “Guarantee”). This assures that if the price or size of the Directed Market Maker's quote changes between the time the Directed Order was received and the time that it is released (because, for example, there is a change in the market for the underlying security), the Directed Order is not disadvantaged. ii. At any given price level, a Directed Order is executed according the Exchange's standard allocation process provided in ISE Rule 713, except that the Directed Market Maker is put last in priority and the Directed Order is exposed to all Members for three seconds prior to executing any portion of the Directed Order against the Directed Market Maker. This assures that the Directed Market Maker does not benefit from the fact that it had knowledge of the Directed Order prior to its entry into the Exchange's system. Applying these principles, a marketable Directed Order released into the Exchange's system would trade as follows: • When the Directed Order is released, the system would execute the Directed Order pursuant to ISE Rule 713, initially excluding the Directed Market Maker. • If there is any remaining unexecuted quantity of the Directed Order, and the Directed Market Maker is quoting at the same price or there is a Guarantee at the same price, the system would generate a broadcast message to all Members, who would have three seconds to respond with additional interest at the same or a better price. • After this three second exposure, the system would again execute the Directed Order pursuant to the ISE Rule 713 algorithm against all interest except for the Directed Market Maker. If there continues to be any remaining unexecuted quantity of the Directed Order, the system would automatically execute the Directed Order against the Directed Market Maker's quote and/or Guarantee (if the Directed Market Maker has a quote at the same price as the Guarantee for a greater size, the order would receive the greater size). • Following any execution against the Directed Market Maker, and if there continues to be any unexecuted quantity: If the order is not marketable, the system would place the order on the limit order book; or, if the order is marketable at that price without trading through the NBBO, execute the order at the next price level. At each such price level, the Directed Order is executed pursuant to the ISE Rule 713 algorithm except that the Directed Market Maker is put last in priority. • At each price level, the Exchange's system would assure that the Directed Order is not automatically executed at a price that is inferior to the NBBO. When the ISE best bid or offer is inferior to the NBBO, marketable orders would be presented to the Primary Market Maker (“PMM”) for handling pursuant to ISE Rule 803(c)(2), unless the PMM is the Directed Market Maker that released the Directed Order, in which case the Directed Order would first be exposed to all Members, as described below. When a non-marketable Directed Order is released and a Guarantee exists, the Exchange's system would broadcast a message to all Members for three seconds before executing the Directed Order against the Guarantee. This would happen where the Directed Market Maker was quoting at the NBBO at the time that a marketable Directed Order was received, but the NBBO moved prior to the release of the Directed Order so that the Directed Order was no longer marketable. If, at the time a Directed Order is released by the Directed Market Maker, the Directed Order is marketable but the ISE best bid or offer is inferior to the NBBO, and the Directed Market Maker is the PMM in the option class for the Directed Order, then a broadcast message would be sent to all Members displaying the Directed Order. After three
(3)seconds, the Directed Order would be executed against any contra interest at the NBBO price or better according to ISE Rule 713, except that the PMM would be last in priority. Thereafter, if there is any remaining unexecuted quantity of the Directed Order, it would be presented to the PMM for handling according to ISE Rule 803(c)(2). This assures that the PMM does not benefit from the fact that it had knowledge of the Directed Order prior to its entry into the Exchange's system by allowing other market participants an opportunity to execute against the Directed Order before the PMM. In addition to the procedures described above, the proposed rule contains two restrictions regarding Directed Market Makers. First, if the Directed Market Maker is quoting at the NBBO on the opposite side of the Directed Order, the Directed Market Maker is prohibited from adjusting the price of its quote to a price that is less favorable than the price available at the NBBO or reducing the size of its quote prior to submitting the Directed Order to the PIM, unless such quote change is the result of an automated quotation system that operates independently from the existence or non-existence of a pending Directed Order. Otherwise changing a quote on the opposite side of the Directed Order except as specifically permitted herein would be a violation of ISE Rule 400 (Just and Equitable Principles of Trade). The Exchange would conduct routine surveillance of such quote changes to identify potential violations of ISE Rule 400. The purpose of this limitation is to prohibit a Directed Market Maker from manipulating the market by moving the NBBO to an inferior price prior to submitting an order into the PIM. The occasion where this type of manipulation might be possible is remote, as a Directed Market Maker would have to be the only market maker quoting at the NBBO in the national market system. Nevertheless, we believe the restriction is carefully tailored so that price discovery through the use of automated quotation systems would not be unnecessarily disrupted, while assuring that Directed Market Makers are not permitted to disadvantage orders they represent as agent. The second restriction applies when a Directed Market Maker releases a non-marketable Directed Order without a Guarantee (that is, where the Directed Market Maker is not quoting at the NBBO). In that situation, the Directed Market Maker must wait at least three seconds before entering a contra order to execute against the Directed Order as principal. The purpose of this restriction is to allow other market participants an opportunity to execute against the Directed Order before the Directed Market Maker who had knowledge of the Directed Order before it was released. 2. Statutory Basis The ISE believes the basis under the Exchange Act for this proposed rule change is the requirement under Section 6(b)(5) that an exchange have rules that are designed to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transaction in securities, to remove impediments to and perfect the mechanism for a free and open market and a national market system, and, in general, to protect investors and the public interest. In particular, this proposed rule change would allow the Exchange to better compete with other options exchanges, while assuring the fair handling of Directed Orders. B. Self-Regulatory Organization's Statement on Burden on Competition The ISE does not believe that the proposed rule change, as amended, would impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The Exchange has not solicited, and does not intend to solicit, comments on this proposed rule change. The Exchange has not received any unsolicited written comments from members or other interested parties. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action 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 ISE consents, the Commission will:
(A)By order approve such proposed rule change; or
(B)Institute proceedings to determine whether the proposed rule change should be disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change, as amended, is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov.* Please include File Number SR-ISE-2004-16 on the subject line. Paper Comments • Send paper comments in triplicate to Jonathan G. Katz, Secretary, Securities and Exchange Commission, Station Place, 100 F Street, NE., Washington, DC 20549-9303. All submissions should refer to File Number SR-ISE-2004-16. 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, 100 F Street, NE., Washington, DC 20549. Copies of such filing also will be available for inspection and copying at the principal office of the ISE. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make publicly available. All submissions should refer to File Number SR-ISE-2004-16 and should be submitted on or before July 11, 2005. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 5 5 17 CFR 200.30-3(a)(12). Margaret H. McFarland, Deputy Secretary. [FR Doc. E5-3179 Filed 6-17-05; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-51825; File No. SR-NASD-2005-070] 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 Relating to Rescinding the Pilot Rule in IM-10100(f) of the NASD Code of Arbitration Procedure Relating to the Waiver of the California Ethics Standards for Neutral Arbitrators in Contractual Arbitration June 13, 2005. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Exchange Act”) 1 and Rule 19b-4 thereunder, 2 notice is hereby given that on May 31, 2005 and on June 8, 2005 (Amendment No. 1), the National Association of Securities Dealers, Inc. (“NASD” or “Association”) filed with the Securities and Exchange Commission (“SEC” or “Commission”) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by NASD. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons and is approving the proposal on an accelerated basis. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change NASD is proposing to rescind the pilot rule in IM-10100(f) of the NASD Code of Arbitration Procedure relating to the waiver of the California Ethics Standards for Neutral Arbitrators in Contractual Arbitration. Below is the text of the proposed rule change. 3 Proposed new language is italicized; proposed deletions are in brackets. 3 Corresponding changes reflecting the proposed rule change will be made to the NASD Code of Arbitration Procedure for Customer Disputes filed on October 15, 2003, and amended on January 3, 2005, January 19, 2005, and April 8, 2005 (SR-NASD-2003-158); and the NASD Code of Arbitration Procedure for Industry Disputes filed on January 16, 2004, and amended on February 26, 2004, January 3, 2005, and April 8, 2005 (SR-NASD-2004-011). IM-10100. Failure To Act Under Provisions of Code of Arbitration Procedure It may be deemed conduct inconsistent with just and equitable principles of trade and a violation of Rule 2110 for a member or a person associated with a member to:
(a)Through
(c)No change
(d)Fail to honor an award, or comply with a written and executed settlement agreement, obtained in connection with an arbitration submitted for disposition pursuant to the procedures specified by the National Association of Securities Dealers, Inc., the New York, American, Boston, Cincinnati, Chicago, or Philadelphia Stock Exchanges, the Pacific Exchange, Inc., the Chicago Board Options Exchange, the Municipal Securities Rulemaking Board, or pursuant to the rules applicable to the arbitration of disputes before the American Arbitration Association or other dispute resolution forum selected by the parties where timely motion has not been made to vacate or modify such award pursuant to applicable law; *or*
(e)Fail to comply with a written and executed settlement agreement, obtained in connection with a mediation submitted for disposition pursuant to the procedures specified by the National Association of Securities Dealers, Inc.[; or] [(f) Fail to waive the California Rules of Court, Division VI of the Appendix, entitled, “Ethics Standards for Neutral Arbitrators in Contractual Arbitration” (the “California Standards”), if application of the California Standards has been waived by all parties to the dispute who are:
(1)Customers with a claim against a member or an associated person;
(2)Associated persons with a claim against a member or an associated person;
(3)Members with a claim against another member; or
(4)Members with a claim against an associated person that relates exclusively to a promissory note. Written waiver by such parties shall constitute and operate as a waiver for all member firms or associated persons against whom the claim has been filed. This rule applies to claims brought in California against all member firms and associated persons, including terminated or otherwise inactive member firms or associated persons.] Remainder unchanged II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, NASD included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item III below. NASD has prepared summaries, set forth in Sections (A), (B), and
(C)below, of the most significant aspects of such statements.
(A)Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of the proposed rule change is to rescind the pilot rule in IM-10100(f) of the NASD Code of Arbitration Procedure (“Code”) relating to the waiver of the California Ethics Standards for Neutral Arbitrators in Contractual Arbitration (“Pilot Rule”). Effective July 1, 2002, the California Judicial Council (“Judicial Council”) adopted a set of rules, “Ethics Standards for Neutral Arbitrators in Contractual Arbitration” (“California Standards”), 4 which contain extensive disclosure and disqualification requirements for arbitrators. The California Standards imposed disclosure and disqualification requirements on arbitrators that conflict with the disclosure and disqualification rules of NASD and the New York Stock Exchange (“NYSE”). Because NASD could not both administer its arbitration program in accordance with its own rules and comply with the new California Standards at the same time, NASD initially suspended the appointment of arbitrators in cases in California, but offered parties several options for pursuing their cases. 5 4 California Rules of Court, Division VI of the Appendix. 5 These measures included providing venue changes for arbitration cases, using non-California arbitrators when appropriate, and waiving administrative fees for NASD-sponsored mediations. In September 2002, NASD implemented a pilot rule providing that if parties to an arbitration who are customers (or, in certain circumstances, associated persons) waived application of the California Standards to their arbitration proceeding, then the firm would be required to waive the application of the California Standards. 6 Under such a waiver, the arbitration proceeds under the existing NASD Code, which already contains extensive disclosure requirements and provisions for challenging arbitrators with potential conflicts of interest. In those cases where a waiver of the California Standards is not received, the appointment of arbitrators is temporarily postponed unless the parties agree to proceed in a non-California venue. 6 This rule has been expanded on several occasions. Originally, the pilot rule only applied to claims by customers, or by associated persons asserting a statutory employment discrimination claim against a member, and required a written waiver by the industry respondents. In July 2003, NASD expanded the scope of the pilot rule to include all claims by associated persons against another associated person or a member. At the same time, the rule was amended to provide that when a customer, or an associated person with a claim against a member or another associated person, agrees to waive the application of the California Standards, all respondents that are members or associated persons will be deemed to have waived the application of the standards as well. The July 2003 amendment also clarified that the pilot rule applies to terminated members and associated persons. Exchange Act Release No. 48187 (July 16, 2003), 68 FR 43553 (July 23, 2003). In October 2003, the rule was further amended to include claims by members against other members, and claims by members against associated persons that relate exclusively to promissory notes. Exchange Act Release No. 48711 (October 29, 2003), 68 FR 62490 (November 4, 2003). NASD also commenced litigation or became involved in a number of suits challenging the California Standards. On March 1, 2005, the United States Court of Appeals for the Ninth Circuit issued its decision in *Credit Suisse First Boston Corp.* v. *Grunwald.* 7 The Ninth Circuit held that the Exchange Act preempts application of the California Standards to NASD arbitrations. On May 23, 2005, the Supreme Court of California also held that the Exchange Act preempts application of the California Standards to NASD-administered arbitrations. 8 7 400 F.3d 1119 (9th Cir. 2005). 8 *Jevne* v. *The Superior Court of Los Angeles County* , S121532 (CA Sup. Ct. May 23, 2005). The Pilot Rule was originally approved for six months in September 2002. 9 It was subsequently extended on several occasions and is now due to expire on September 30, 2005. 10 NASD has determined that the Pilot Rule should be rescinded prior to September 30, 2005, as it is no longer necessary. Specifically, with the recent decisions in *Grunwald* and *Jevne,* both the Ninth Circuit Court of Appeals and the California Supreme Court have found that the Exchange Act preempts the application of the California Standards to arbitrators in the NASD forum. Consequently, NASD believes that it can once again appoint arbitrators in California cases without requiring a waiver of the California Standards. 9 See Exchange Act Release No. 46562 (September 26, 2002), 67 FR 62085 (October 3, 2002). 10 See Exchange Act Release No. 51213 (February 16, 2005), 70 FR 8862 (February 23, 2005). 2. Statutory Basis NASD believes that the proposed rule change is consistent with the provisions of Section 15A(b)(6) of the Exchange Act, 11 which requires, among other things, that NASD's rules must be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, and, in general, to protect investors and the public interest. Specifically, rescinding the Pilot Rule will benefit all users of the forum as it will allow NASD to process those arbitration cases that have not been paneled because the necessary waivers of the California Standards have not been received. 11 15 U.S.C. 78o-3(b)(6).
(B)Self-Regulatory Organization's Statement on Burden on Competition NASD does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Exchange Act, as amended.
(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. 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 Exchange Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov.* Please include File Number SR-NASD-2005-070 on the subject line. Paper Comments • Send paper comments in triplicate to Jonathan G. Katz, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-9303. All submissions should refer to File Number SR-NASD-2005-070. 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, 100 F Street, NE., Washington, DC 20549. Copies of such filings 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 the File Number SR-NASD-2005-070 and should be submitted on or before July 11, 2005. IV. Commission's Findings and Order Granting Accelerated Approval of Proposed Rule Change The Commission finds that the proposed rule change is consistent with the requirements of the Exchange Act and the rules and regulations thereunder, applicable to a self-regulatory organization. 12 In particular, the Commission finds that the proposed rule change is consistent with Section 15A(b)(6) of the Exchange Act, 13 which requires, among other things, that NASD's rules must be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, and, in general, to protect investors and the public interest. The Commission notes that rescinding the Pilot Rule will benefit all users of the forum as it will allow NASD to process those arbitration cases that have not proceeded because the necessary waivers of the California Standards have not been received. 12 In approving this proposal, the Commission has considered its impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). 13 15 U.S.C. 78o-3(b)(6). After careful consideration, the Commission finds good cause, pursuant to Section 19(b)(2) of the Exchange Act, 14 for approving the proposed rule change prior to the thirtieth day after the date of publication of notice in the **Federal Register** . In recent decisions in *Grunwald* and *Jevne* , both the Ninth Circuit Court of Appeals and the California Supreme Court have found that the Exchange Act preempts the application of the California Standards to arbitrations in the NASD forum. Consequently, the Commission believes that the NASD can once again appoint arbitrators in California cases without requiring a waiver of the California Standards. Accordingly, the Commission believes that there is good cause, consistent with Section 15A(b)(6) of the Exchange Act, 15 to approve the proposal on an accelerated basis. 14 15 U.S.C. 78s(b)(2). 15 15 U.S.C. 78o-3(b)(6). V. Conclusion *It is therefore ordered* , pursuant to Section 19(b)(2) of the Exchange Act, 16 that the proposed rule change (SR-NASD-2005-070) is hereby approved on an accelerated basis. 16 15 U.S.C. 78s(b)(2). 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. E5-3151 Filed 6-17-05; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-51813, File No. SR-NYSE-2004-20] Self-Regulatory Organizations; New York Stock Exchange, Inc.; Order Approving Proposed Rule Change and Amendment Nos. 1, 2, 4, 5, 6, and 7 Thereto and Notice of Filing and Order Granting Accelerated Approval to Amendment No. 8 Thereto to Amend Its Original and Continued Quantitative Listing Standards June 9, 2005. I. Introduction On April 13, 2004, the New York Stock Exchange, Inc. (“NYSE” or “Exchange”) filed with the Securities and Exchange Commission (“Commission” or “SEC”), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) 1 and Rule 19b-4 thereunder, 2 a proposed rule change to amend Sections 102.01C, 103.01B, 802.01A, 802.01B, 802.01C, 802.02, and 802.03 of the NYSE's Listed Company Manual (“Listed Company Manual”) regarding the minimum numerical original and continued listing standards. On May 20, 2004, NYSE submitted Amendment No. 1 to the proposed rule change. 3 The proposed rule change, as amended by Amendment No. 1, was published for comment in the **Federal Register** on July 2, 2004. 4 The Commission received three comment letters on the proposed rule change, as amended by Amendment No. 1. 5 On August 31, 2004, NYSE submitted Amendment No. 2 to the proposed rule change. 6 On November 29, 2004, NYSE submitted Amendment No. 3 to the proposed rule change. 7 On December 17, 2004, NYSE withdrew Amendment No. 3. On December 17, 2004, NYSE submitted Amendment No. 4 to the proposed rule change. 8 On January 25, 2005, NYSE submitted Amendment No. 5 to the proposed rule change. 9 On February 17, 2005, NYSE submitted Amendment No. 6 to the proposed rule change. 10 On March 4, 2005, NYSE submitted Amendment No. 7 to the proposed rule change. 11 The proposed rule change, as amended, was re-published for comment in the **Federal Register** on March 25, 2005. 12 The Commission received one comment on the proposed rule change, as amended by Amendment Nos. 1, 2, 4, 5, 6, and 7. 13 On May 27, 2005, NYSE submitted Amendment No. 8 to the proposed rule change. 14 This order approves the proposed rule change, as amended by Amendment Nos. 1 through 7. Simultaneously, the Commission provides notice of filing of Amendment No. 8 and grants accelerated approval of Amendment No. 8. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 Amendment No. 1 replaced and superseded the original filing in its entirety. 4 *See* Securities Exchange Act Release No. 49917 (June 25, 2004), 69 FR 40439. 5 *See* letters to Jonathan G. Katz, Secretary, Commission, from Richard F. Latour, President and CEO, MicroFinancial Inc., dated July 15, 2004 (“MicroFinancial Letter”); Kenneth A. Hoogstra, von Briesen & Roper, s.c., dated July 20, 2004 (“von Briesen Letter”); and John L. Patenaude, Vice President Finance and Chief Financial Officer, Nashua Corporation, dated July 22, 2004 (“Nashua Letter”). 6 Amendment No. 2 replaced and superseded the original filing in its entirety. In addition, NYSE also responded to the three comment letters in Amendment No. 2. 7 Amendment No. 3 replaced and superseded the original filing in its entirety. 8 Amendment No. 4 replaced and superseded the original filing in its entirety. 9 Amendment No. 5 replaced and superseded the original filing in its entirety. 10 In Amendment No. 6, NYSE partially amended Sections 802.01B, 802.02, and 802.03 of the proposed rule text. 11 In Amendment No. 7, NYSE partially amended Sections 802.03 of the proposed rule text. 12 *See* Securities Exchange Act Release No. 51332 (March 8, 2005), 70 FR 15392. 13 *See* Letter to Jonathan G. Katz, Secretary, Commission, from Dorothy M. Donohue, Associate Counsel, Investment Company Institute, dated April 6, 2005 (“ICI Letter”). 14 In Amendment No. 8, NYSE, in response to a comment letter, partially amended Section 802.01(B) of the proposed rule text to eliminate its proposed increase to the market capitalization continued listing requirement for closed-end funds, and to maintain the current market capitalization continued listing requirement for closed-end funds of $15 million with an early notification threshold of $25 million. In addition, the Exchange proposed to clarify that the proposed overall $25 million average market capitalization over 30 consecutive trading days continued listing standard set out in second paragraph of Section 802.01B of the Listed Company Manual applies only to companies that are listed under Sections 102.01C or 103.01B. II. Description The Exchange seeks permanent approval of changes to certain of its minimum numerical standards for the original listing and continued listing of equity securities on NYSE originally approved by the Commission on January 29, 2004, on a pilot program basis (the “Pilot Program”). 15 Subsequently, to address concerns of a number of listed companies that did not comply with the Pilot Program's automatic application of new continued listing standards, the Exchange suspended the portions of the Pilot Program relating to the continued listing standards of Section 802.01B of the NYSE's Listed Company Manual. 16 In this filing, File No. SR-NYSE-2004-20, the Exchange seeks permanent approval for the Pilot Program currently in effect with respect to the Exchange's original minimum listing standards and approval of the continued minimum listing standards as initially proposed in File No. SR-NYSE-2003-43 (but subsequently suspended) with modifications that are responsive to public comments submitted to the Commission. 15 *See* Securities Exchange Act Release No. 49154 (January 29, 2004), 69 FR 5633 (February 5, 2004) (approving File No. SR-NYSE-2003-43). 16 *See* Securities Exchange Act Release Nos. 49443 (March 18, 2004), 69 FR 13929 (March 24, 2004) (File No. SR-NYSE-2004-15), and 51628 (April 28, 2005), 70 FR 23288 (May 4, 2005) (File No. SR-NYSE-2005-28). Prior to the Pilot Program, Section 102.01C of the Listed Company Manual provided that a company must meet one of four specified financial standards in order to qualify to have its equity securities listed. The Exchange proposes permanent approval of amendments to three of these four standards that have been in effect under the Pilot Program. 17 The Exchange also proposes permanent approval of amendments to Section 103.01B(III), which provides a corresponding numerical standard applicable to international companies and have also been in effect under the Pilot Program. 17 The “Earnings Test,” the “Valuation/Revenue Test” (incorporating in one section the pre-Pilot Program Valuation/Revenue with Cash Flow Test and in another section the Pure Valuation/Revenue Test), or the “Affiliated Company Test.” *See supra* note 15 (approving File No. SR-NYSE-2003-43). Prior to the Pilot Program, Section 102.01C(I) of the Listed Company Manual required that a company demonstrate pre-tax earnings of $6.5 million in aggregate for the last three fiscal years, with either a minimum of:
(a)$2.5 million in earnings in the most recent fiscal year and $2 million in each of the preceding two years; or
(b)$4.5 million in earnings in the most recent fiscal year, with positive earnings in each of the preceding two years. Pursuant to the Pilot Program, the “Earnings Test” requires that companies demonstrate pre-tax earnings of $10 million in aggregate for the last three fiscal years. It also requires that the company demonstrate positive results in all three of the years tested with a minimum of $2.0 million in earnings in each of the preceding two years. The Exchange believes that these changes strengthen the Earnings Test standard and also simplify it by eliminating the current two-tiered structure. Prior to the Pilot Program, Section 102.01C(II) of the Listed Company Manual required that a company demonstrate market capitalization of at least $500 million and revenues of at least $100 million over the most recent 12-month period. Provided that these thresholds were met, a company with operating cash flows of at least $25 million in aggregate for the last three fiscal years and positive amounts in each of the three fiscal years would have qualified for listing. Section 102.01C(III) required that an issuer demonstrate
(a)market capitalization of at least $1 billion and
(b)revenues of at least $100 million in the most recent fiscal year. Because both of these tests are valuation and revenue-based, the Exchange now seeks permanent approval to consolidate them into one test with two alternative subsections. One of the sections of the current Pilot Program, the “Valuation/Revenue Test,” incorporates the pre-Pilot Program requirements of Section 102.01C(II) as the “Valuation/Revenue with Cash Flow Test” with no change to the previous thresholds. The other section incorporates the pre-Pilot Program requirements of Section 102.01C(III) as the “Pure Valuation/Revenue Test.” In addition, the Exchange proposes to permanently approve the Pilot Program amendments that will lower the thresholds of Section 102.01C(III) that require that companies demonstrate
(a)market capitalization of at least $750 million and
(b)revenues of at least $75 million during the most recent fiscal year. As noted above, the Exchange represents that its staff has monitored the modest number of companies over the last two years that have met the Pilot Program's lower thresholds to the “Pure Valuation/Revenue Test” and found that those companies performed to a standard that is appropriate for inclusion on the NYSE list. 18 18 *See* Amendment No. 2, *supra* note 6. The Exchange is also proposing permanent approval of corresponding restructuring changes to Section 103.01B of the Listed Company Manual, which sets out minimum numerical standards for non-U.S. issuers. The Exchange is also proposing permanent approval of changes to the numeric thresholds of Section 103.01B(III) in accordance with changes to Section 102.01C(III). In addition, the Exchange seeks permanent approval of its suspended Pilot Program that restructures and amends the numerical continued listing standards. Section 802.01B of the Listed Company Manual currently applies to companies that fall below any of the following criteria:
(i)Average global market capitalization over a consecutive 30 trading-day period is less than $50 million and total stockholders' equity is less than $50 million; or
(ii)average global market capitalization over a consecutive 30 trading-day period is less than $15 million; or
(iii)for companies that qualified for original listing under the “global market capitalization” standard,
(a)average global market capitalization over a consecutive 30 trading-day period is less than $500 million and total revenues are less than $20 million over the last 12 months (unless the resultant entity qualifies as an original listing under one of the other original listing standards), or
(b)average global market capitalization over a consecutive 30 trading-day period is less than $100 million. The Exchange proposes to amend these thresholds and to specifically relate the continued listing standards of Section 802.01B of the Listed Company Manual to the original listing standards of Sections 102.01C or 103.01B used to qualify a company for listing. In addition, the Exchange proposes to add a minimum continued listing standard applicable to all companies regardless of the original listing standard under which it listed. This standard would require that all companies listed under Sections 102.01C or 103.01B maintain average global market capitalization over a consecutive 30 trading-day period of at least $25 million or undergo the prompt initiation of suspension and delisting procedures by the Exchange (the “Minimum Continued Listing Standard”). 19 19 Issuers that fall below this minimum threshold would not be afforded the opportunity to submit a plan and “cure” their noncompliance over a plan period. In addition, issuers that list under the Affiliated Company Test would be subject to the proposed $25,000,000 threshold, regardless of the status of their parent company. Companies that list under the Pilot Program Earnings Test or its predecessor test will be considered to be below compliance if average global market capitalization over a consecutive 30 trading-day period is less than $75 million and, at the same time, total stockholders' equity is less than $75 million. This level has been increased in the proposal to reflect marketplace expectations of those companies deemed suitable for continued listing. The current alternate threshold for the Earnings Test that resulted in a company being below compliance if average global market capitalization over a consecutive 30 trading-day period is less than $15 million is proposed to be eliminated as a result of the proposed $25 million Minimum Continued Listing Standard. Issuers that list under the Pilot Program's “Valuation/Revenue with Cash Flow Test” or its predecessor test would be considered to be below compliance standards if:
(a)average global market capitalization over a consecutive 30 trading-day period is less than $250 million and, at the same time, total revenues are less than $20 million over the last 12 months (unless the company qualifies as an original listing under one of the other original listing standards); or
(b)average global market capitalization over a consecutive 30 trading-day period is less than $75 million. 20 20 These levels are lower than the existing “global market capitalization” standard. Issuers that list under the Pilot Program's “Pure Valuation/Revenue Test” or its predecessor test would be considered to be below compliance standards if:
(a)average global market capitalization over a consecutive 30 trading-day period is less than $375 million and, at the same time, total revenues are less than $15 million over the last 12 months (unless the company qualifies as an original listing under one of the other original listing standards); or
(b)average global market capitalization over a consecutive 30 trading-day period is less than $100 million. The Exchange also proposes to clarify that, in circumstances where a listed company's parent or affiliated company no longer controls the listed company or such listed company's parent or affiliated company falls below the continued listing standards applicable to the parent or affiliated company, the continued listing standards applicable to the Pilot Program's Earnings Test would apply to companies that originally listed under the Affiliated Company Standard. Amendments are also proposed to make clear that companies that list under the Affiliated Company Standard are subject to the Minimum Continued Listing Standard, regardless of the status of the listed company's parent. In addition, the Exchange proposes to increase the continued listing criteria for REITs and limited partnerships from $15 million to $25 million with a corresponding increase to the notification threshold from $25 million to $35 million. Companies that fall below the foregoing minimum standards could be permitted a period of time to return to compliance, in accordance with the procedures specified in Sections 802.02 and 802.03 of the Listed Company Manual. As a general matter, companies must reestablish the level of market capitalization (and, if applicable, shareholder's equity) specified in the continued listing standard below which the company fell. However, with respect to the current requirements of Section 802.01B(I) that a company reestablish both its market capitalization and its stockholders' equity to the $50 million level, footnote
(C)to Section 802.01B provides several alternatives. Currently, the footnote specifies that, to return to conformity, a company must do one of the following:
(a)reestablish both its market capitalization and its stockholders' equity to the $50 million level;
(b)achieve average global market capitalization over a consecutive 30-trading-day period of at least $100 million; or
(c)achieve average global market capitalization over a consecutive 30 trading-day period of $60 million, with either
(x)stockholders' equity of at least $40 million, or
(y)an increase in stockholders' equity of at least $40 million, since the company was notified by the Exchange that it was below continued listing standards. Likewise, with respect to the current requirements of Section 802.01B(iii) relating to companies that listed under the current global market capitalization standard, footnote
(D)states that companies must reestablish both market capitalization and revenues in conformity with continued listing standards. The Exchange proposes, however, to eliminate footnotes
(C)and
(D)to Section 802.01B of the Listed Company Manual, and, instead amend Sections 802.02 and 802.03 to provide that a listed company's plan to regain compliance need only demonstrate how the company will cease to trigger the applicable Section 802.01B continued listing standard at the end of the allowable recovery period. For example, a company that listed under the proposed Earnings Test would be required to submit a plan that demonstrates how the company will exceed either the $75,000,000 market capitalization or shareholders' equity threshold, rather than be required to exceed both thresholds to regain compliance. It has been the Exchange's experience over the last five years that the sustained restoration of one component of the continued listing standard thresholds is evidence of a company's recovery. Due to the fact that a company would not be deemed below compliance unless it fell below both thresholds at the same time, the Exchange believes that the proposed amendment provides companies with a more rational basis for returning to compliance. This proposed change eliminates the potential for certain anomalies in situations where, for example, a company's stockholders' equity may never have been above the minimum and a decrease in market capitalization below the required threshold triggers non-compliance. Since, in this example, it is the fact that market capitalization also dropped below the required threshold that results in a deficiency (despite no change to stockholders' equity), under amended Sections 802.02 and 802.03, the company in this situation would only be required to recover market capitalization in order to regain compliance. The Exchange represents that it has considered how to transition the above-described changes to the continued listing standards and intends to provide a period of 30 trading days from the date of any Commission approval of the proposed amendments until such amendments would become effective. Sections 802.02 and 802.03 of the Listed Company Manual provide that, with respect to a company that is determined to be below continued listing standards a second time within 12 months of successful recovery from previous non-compliance, the Exchange will examine the relationship between the two incidents of falling below continued listing standards and re-evaluate the company's method of financial recovery from the first incident. The Exchange may then take appropriate action, which, depending upon the circumstances, may include truncating the normal procedures for reestablishing conformity with the continued listing standards or immediately initiating suspension and delisting procedures. For those companies that are within such a 12-month period and that would be deemed to be below continued listing standards as a direct result of the approval of the amendments proposed in this filing, the Exchange would not intend to truncate or immediately initiate suspension and delisting solely on the basis of the proposed increase to the current continued listing standards. The Exchange would take into consideration all of the facts and circumstances relating to the company in determining whether to allow such company an opportunity to submit a second plan. With respect to an issuer currently below the continued listing standards now in force, the Exchange intends to allow it to complete its applicable follow-up procedures and plan for return to compliance as provided in Sections 802.02 and 802.03 of the Listed Company Manual. If, at the end thereof, the issuer is compliant with the continued listing standards about which it was originally notified, but below the increased requirements set forth above, the Exchange would grant it an opportunity to present an additional business plan advising the Exchange of definitive action the issuer has taken, or is taking, that would bring it into conformity with the increased requirements within a further 12 months. In addition, if an issuer was to complete its currently applicable follow-up procedures and plan and was not compliant at that time with the continued listing standards about which it was originally notified, but is above the increased requirements set forth above, the Exchange would consider that issuer to be in conformity with the continued listing standards. According to NYSE, for an issuer that is in compliance with the continued listing standards now in force but that might be below the continued listing standards proposed herein, the proposed 30 trading-day measurement period prior to effectiveness would allow the Exchange sufficient time to provide early warnings to any issuer that would potentially be below compliance at the end of that period. If, at the end of the 30 trading-day measurement period, an issuer is below the increased requirements set forth above, the Exchange would formally notify the issuer of such non-compliance and provide it with an opportunity to present a business plan within 45 days of that notification advising the Exchange of definitive action the issuer would take to bring it into conformity with the increased requirements within an 18-month period. Finally, the Exchange proposes minor technical and conforming changes to Sections 102.02C, 103.01B, 802.01A, 802.01B, and 802.01C of the Listed Company Manual. III. Summary of Comments The Commission received three comment letters generally opposing the proposed rule change, as amended by Amendment No. 1 and published for comment in the **Federal Register** on July 2, 2004. 21 The commenters opposed the proposed increase to $75 million from $50 million to the Earnings Test continued listing standard thresholds for market capitalization and stockholders' equity million. Commenters believed that NYSE failed to provide a sufficient rationale for the proposal supported by data and market conditions. 22 One commenter noted that the proposed changes would affect only a small percentage of NYSE's listed companies. 23 The commenters argued that the proposed changes to the Earnings Test would be disruptive and particularly burdensome for the affected companies, leading to uncertainty among both affected issuers and their investors concerning the listing. 24 The commenters argued that the proposal would push affected companies to sacrifice long-term plans in favor of short-term growth, 25 or that smaller companies, currently in compliance, would be required to find alternatives in a short period of time. 26 One commenter noted that a company currently below existing continued listing standards may, in some instances, be treated more favorably than those currently in compliance. 27 All three commenters argued for either a grace period or grandfather provision for affected companies, 28 and one commenter requested that the effective date of the proposal be clarified. 29 21 21 *See* Securities Exchange Act Release No. 49917 (June 25, 2004), 69 FR 40439. 22 *See* MicroFinancial Letter, *supra* note 5, at 3, and von Briesen Letter, *supra* note 5, at 2. 23 *See* MicroFinancial Letter, *supra* note 5, at 2. 24 *See* Nashua Letter, *supra* note 5, at 1; MicroFinancial Letter, *supra* note 5, at 2; and von Briesen Letter, *supra* note 5, at 2. 25 *See* von Briesen Letter, *supra* note 5, at 2. 26 *See* Nashua Letter, *supra* note 5, at 1. 27 *See* von Briesen Letter, *supra* note 5, at 3. 28 *See* MicroFinancial Letter, *supra* note 5, at 3-4; Nashua Letter, *supra* note 5, at 2; and von Briesen Letter, *supra* note 5, at 3-4. 29 *See* von Briesen Letter, *supra* note 5, at 3. In response to these comments, NYSE noted in Amendment No. 2 that it undertook a further review of the listed companies that are currently either below the proposed continued financial listing standard thresholds or within 10% of those thresholds and found that there were only 21 such companies representing 0.08% of all NYSE-listed companies. According to NYSE, these companies qualified under the original Earnings Test or the original Closed-end Fund, REIT, or Limited Partnership Test. NYSE represented that only ten of the 21 companies would have been below compliance under the proposed thresholds. NYSE represented that, of those ten, two companies were below compliance under the existing thresholds and one additional REIT was operating under a liquidation process expected to be completed in August 2004. NYSE noted that it believed that the proposed increases to the current continued listing standards were appropriate. As a result of these comments, NYSE filed Amendment No. 2 and proposed to amend Sections 802.02 and 802.03 of the Listed Company Manual to modify the thresholds that companies must exceed in order to regain compliance with the continued listing standards. 30 30 Specifically and as described in greater detail above, the Exchange proposed to eliminate footnotes
(C)and
(D)to Section 802.01B of the Listed Company Manual, and, instead proposed to amend Sections 802.02 and 802.03 to provide that a listed company's plan to regain compliance need only demonstrate how the company will cease to trigger the applicable Section 802.01B continued listing standard at the end of the allowable recovery period. Amendment No. 2 also proposed to provide the Exchange with flexibility to extend a company's Plan period by an additional 12 months in certain circumstances. This aspect of the proposal was later removed. The Commission received one comment letter from ICI partially opposing the proposed rule change, as amended by Amendment Nos. 1, 2, 4, 5, 6, and 7 and published for comment in the **Federal Register** on March 25, 2005. 31 ICI opposed the part of the proposal dealing with continued listing standards for closed-end funds. 32 Specifically, ICI objected to the proposed change that would subject closed-end funds that fall below an average market capitalization of $25 million over 30 consecutive trading days to immediate suspension and delisting instead of the $15 million requirement that is currently in effect. ISI stressed that the proposal does not take into account that NYSE maintains distinct initial listing standards for closed-end funds in a fund family verses stand-alone closed-end funds (noting that that funds in a fund family must have a public market value of $30 million versus stand-alone funds that must have a public market value of $60 million). 33 As a result, ISI believes that treating all closed-end funds, stand-alone funds and those listed as part of a fund family, the same by implementing a uniform $25 million market capitalization requirement with respect to the Exchange's continued listing standards is inappropriate. 34 ISI instead recommended that NYSE maintain its current $15 million continued listing standard for closed-end funds that list as part of a fund family. ISI believes that its approach would make the NYSE's continued listing standard for closed-end funds more consistent with the continued listing standards for other issuers and also make it easier for fund families to list all of their funds on one exchange. 35 31 *See* Securities Exchange Act Release No. 51332 (March 8, 2005), 70 FR 15392. 32 *See* ICI Letter, *supra* note 13. 33 *See* ICI Letter, *supra* note 13, at 1-2. ISI asserts that NYSE initially created this distinction to accommodate the wishes of fund families that generally prefer to list all of their funds on the same market. 34 *See* ICI Letter, *supra* note 13, at 2. ISI notes that stand-alone funds would be subject to delisting if they there is more than a 58 percent decline in market capitalization versus closed-end funds that would be subject to delisting if there is more than a 16 percent decrease. 35 *See* ICI Letter, *supra* note 13, at 2. In response to ISI's comment, NYSE acknowledged in Amendment No. 8 that closed-end funds listing in a fund family are subject to distinct alternative listing criteria that permit the listing of all of the funds in a family, if, among other things, no one fund has a market value of publicly held shares of less than $30 million (rather than the $60 million required for the listing of individual closed-end funds). NYSE also acknowledged that a fund that lists under the fund family initial listing standard with a market value of publicly held shares of $30 million would be subject to immediate early warning for delisting based on the originally proposed $35 million early notification threshold. In order to avoid this peculiar result, NYSE modified its proposal in Amendment No. 8 to maintain the existing market capitalization continued listing criteria for closed-end funds at its current level of $15 million with an early notification threshold of $25 million. IV. Discussion and Commission Findings After careful review of the proposal and consideration of the comment letters, 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. 36 In particular, the Commission finds that the proposed rule change is consistent with Section 6(b)(5) of the Act, 37 which requires that the rules of an exchange be designed to promote just and equitable principles of trade, remove impediments to and perfect the mechanism of a free and open market and a national securities system, and protect investors and the public interest. 36 In approving this proposal, the Commission has considered its impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). 37 15 U.S.C. 78f(b)(5). The proposed changes to Section 102.01C(I) of the Listed Company Manual amending the Earnings Test would require that companies demonstrate pre-tax earnings of $10 million in aggregate for the last three fiscal years. The proposed Earnings Test would also require that the company demonstrate positive results in all three of the years tested with a minimum of $2 million in earnings in each of the preceding two years. The Commission believes that these amendments are consistent with the Act. The amendments to the current thresholds of Section 102.01C(III) of the Listed Company Manual would require, in order to qualify for listing under the “Pure Valuation/Revenue Test,” that companies demonstrate
(a)market capitalization of at least $750 million; and
(b)revenues of at least $75 million during the most recent fiscal year. The Commission believes that it is appropriate for the Exchange, based upon its experience, to determine that the companies that meet this proposed standard would be appropriate for inclusion on the NYSE list. In addition, the Commission believes that the amendments to the numerical continued listing standards in Section 802.01B of the Listed Company Manual should simplify and clarify the continued listing standards, by relating the continued listing standards to the original listing standards set forth in Sections 102.01C and 103.01B. The Commission believes that it is consistent with the Act for the Exchange, based upon its experience, to determine that the proposed categories of listing standards reflect marketplace expectations of those companies deemed suitable for continued listing. The Commission also believes that it is consistent with the Act for the Exchange to allow a company to regain compliance by ceasing to trigger the applicable continued listing standard it violated by the end of the recovery period. In addition, the Commission notes that, in general, the continued listing standards reflect the proportional adjustments in the initial listing standards. Three commenters, in responding to the proposed rule change as amended by Amendment No. 1, opposed the proposed increase to $75 million from $50 million to the Earnings Test continued listing standard thresholds for market capitalization and stockholders' equity million. These commenters believed that NYSE failed to provide a sufficient rationale for the proposal supported by data and market conditions. 38 38 *See* MicroFinancial Letter, *supra* note 5, at 3, and von Briesen Letter, *supra* note 5, at 2. After carefully considering these comment letters, the Commission, however, believes that the proposed continued listing standards are reasonable and consistent with the Act. The Commission believes that the commenter's concerns are addressed by Amendment No. 2, in which NYSE proposed to amend Sections 802.02 and 802.03 of the Listed Company Manual to modify the thresholds that companies must exceed in order to regain compliance with the continued listing standards. 39 NYSE also noted that it undertook a further review of the listed companies that are currently either below the proposed continued financial listing standard thresholds or within 10% of those thresholds and found that there were only 21 such companies representing 0.08% of all NYSE-listed companies. NYSE represented that only ten of the 21 companies would have been below compliance under the proposed thresholds. NYSE represented that, of those ten, two companies were below compliance under the existing thresholds and one additional REIT was operating under a liquidation process expected to be completed in August 2004. 39 Specifically and as described in greater detail above, the Exchange proposed to eliminate footnotes
(C)and
(D)to Section 802.01B of the Listed Company Manual, and, instead proposed to amend Sections 802.02 and 802.03 to provide that a listed company's plan to regain compliance need only demonstrate how the company will cease to trigger the applicable Section 802.01B continued listing standard at the end of the allowable recovery period. Amendment No. 2 also proposed to provide the Exchange with flexibility to extend a company's Plan period by an additional 12 months in certain circumstances. This aspect of the proposal was later removed. The commenters also argued for either a grace period or grandfather provision for affected companies, 40 and one commenter requested that the effective date of the proposal be clarified. 41 The commenters argued that the proposed changes to the Earnings Test would be disruptive and particularly burdensome for the affected companies, leading to uncertainty among both affected issuers and their investors concerning the listing. 42 40 *See* MicroFinancial Letter, *supra* note 5, at 3-4; Nashua Letter, *supra* note 5, at 2; and von Briesen Letter, *supra* note 5, at 3-4. 41 *See* von Briesen Letter, *supra* note 5, at 3. 42 *See* Nashua Letter, *supra* note 5, at 1; MicroFinancial Letter, *supra* note 5, at 2; and von Briesen Letter, *supra* note 5, at 2. The Commission finds that the Exchange has provided an implementation schedule for the amended continued listing standards that includes a sufficient transition period for affected companies. Specifically, the Exchange will provide a period of 30 trading-days from the date of Commission approval of the proposed amendments until such amendments will become effective. In addition, for those companies that are currently within a 12-month period following their recovery from previous non-compliance (pursuant to a Plan) and would fall below continued listing standards as a direct result of the approval of the proposal, the Exchange does not intend to truncate the normal procedures or immediately initiate suspension and delisting procedures, solely on the basis of the proposed increase to the current continued listing standards. The Exchange intends to take into consideration all of the facts and circumstances relating to the company, including the relationship between the two incidents of falling below the continued listing standards and the method of recovery from the first incident, in determining whether to allow such a company to submit a second Plan. The Exchange intends to allow companies that are currently below the continued listing standards to complete their applicable follow-up procedures and Plan for return to compliance, as provided in Sections 802.02 and 802.03 of the Listed Company Manual. If, at the end thereof, such companies are compliant with the continued listing standards for which they were originally notified, but below the increased requirements proposed herein, the Exchange would grant them an opportunity to present an additional business plan advising the Exchange of definitive action the company has taken, or is taking, that would bring the company into conformity with the increased requirements within a further 12 months. In addition, if a company completes its currently applicable follow-up procedures and Plan and is not compliant at that time with the continued listing standards for which it was originally notified, but is above the increased requirements set forth above, the Exchange would consider that company to be in conformity with the continued listing standards. The Commission believes that the Exchange's transition policies are clearly delineated and consistent with the Act. The Commission notes that the notice and comment periods provided for this filing and the additional period of 30 trading-days from the date of Commission approval of the proposed amendments until such amendments would become effective should provide sufficient notice to issuers that may be below compliance with the proposed continued listing standards. The Commission, however, expects that the Exchange will follow closely the progress of companies that are currently in their Plan period or subsequent 12-month period, to ensure that these companies will satisfy the new continued listing standards. The Commission notes that, pursuant to Section 802.02 of the Listed Company Manual, the Exchange has the discretion to suspend trading in any security and apply to the Commission for delisting, when the Exchange deems it necessary for the protection of investors. In addition, the Commission received one comment letter from ICI in response to the proposed rule change, as amended by Amendment Nos. 1 through 7. ICI objected to the proposed change that would subject closed-end funds that fall below an average market capitalization of $25 million over 30 consecutive trading days to immediate suspension and delisting instead of the $15 million requirement that is currently in effect. The Commission believes that the ISI's concerns are answered by Amendment No. 8, which maintains the existing market capitalization continued listing criteria for closed-end funds at its current level of $15 million with an early notification threshold of $25 million. The Commission finds good cause for approving proposed Amendment No. 8 before the thirtieth day after the date of publication of notice of filing thereof in the **Federal Register** . NYSE filed Amendment No. 8 in response to a comment it received after the publication of notice of filing of the proposed rule change to address the commenter's concerns. 43 Because Amendment No. 8 proposes simply to maintain the current market capitalization continued listing requirement in effect for closed-end funds, 44 the Commission finds good cause for accelerating approval of the proposed rule change, as amended by Amendment No. 8. 43 *See* Summary of Comments, *supra* Section III. 44 *See* note 14, *supra* . V. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the Amendment No. 8, including whether the proposed rule change, as amended by Amendment No. 8, is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov* . Please include File Number SR-NYSE-2004-20 on the subject line. Paper Comments • Send paper comments in triplicate to Jonathan G. Katz, Secretary, Securities and Exchange Commission, Station Place, 100 F Street, NE., Washington, DC 20549-9303. All submissions should refer to File Number SR-NYSE-2004-20. 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, Washington, DC 20549-9303. Copies of such filing also will be available for inspection and copying at the principal office of NYSE. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-NYSE-2004-20 and should be submitted on or before July 11, 2005. VI. Conclusion *It is therefore ordered* , pursuant to Section 19(b)(2) of the Act, 45 that the proposed rule change (SR-NYSE-2004-20), as amended by Amendment Nos. 1, 2, 4, 5, 6, and 7, is hereby approved, and that Amendment No. 8 to the proposed rule change be, and hereby is, approved on an accelerated basis. 45 15 U.S.C. 78s(b)(2). For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 46 46 17 CFR 200.30-3(a)(12). Margaret H. McFarland, Deputy Secretary. [FR Doc. E5-3156 Filed 6-17-05; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-51838; File No. SR-Phlx-2005-30] Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change and Amendment Nos. 1 and 2 Thereto To Impose a New Licensing Fee in Connection With the Firm-Related Equity Option and Index Option Fee Cap June 14, 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 28, 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, II, and III below, which Items have been prepared by the Exchange. On April 29, 2005, the Exchange filed Amendment No. 1 to the proposed rule change. 3 On June 6, 2005, the Exchange filed Amendment No. 2 to the proposed rule change. 4 Phlx has designated this proposal as one 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, 5 and Rule 19b-4(f)(2) thereunder, 6 which renders the proposal effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change, 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 non-substantive changes to the text of the proposed rule change. 4 In Amendment No. 2, the Exchange modified the text of the proposed rule change and clarified the basis of the proposal. 5 15 U.S.C. 78s(b)(3)(A). 6 17 CFR 240.19b-4(f)(2). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Phlx proposes to amend its schedule of fees to adopt a license fee of $0.10 for options traded on the following products:
(1)iShares Lehman 1-3 Year Treasury Bond Fund, traded under the symbol SHY (“SHY);
(2)iShares Lehman 7-10 Year Treasury Bond Fund, traded under the symbol IEF (“IEF”);
(3)iShares Lehman 20+ Treasury Bond Fund, traded under the symbol TLT (“TLT”);
(4)iShares Lehman Aggregate Bond Fund, traded under the symbol AGG (“AGG”);
(5)iShares Lehman TIPS Bond Fund, traded under the symbol TIP (“TIP”) (collectively “iShares Lehman products”);
(6)KBW Capital Markets Index, traded under the symbol KSX (“KSX”); 7
(7)KBW Insurance Index, traded under the symbol KIX (“KIX”); and
(8)Phlx/KBW Bank Index, traded under the symbol (“BKX”) (collectively “KBW products”) to be assessed per contract side for equity option and index option “firm” transactions (comprised of equity option firm/proprietary comparison transactions, equity option firm/proprietary transactions, equity option firm/proprietary facilitation transactions, index option firm/proprietary comparison transactions, index option firm/proprietary transactions and index option firm/proprietary facilitation transactions). This license fee will be imposed only after the Exchange's $60,000 “firm-related” equity option and index option comparison and transaction charge cap, described more fully below, is reached. 7 “KBW,” “Keefe, Bruyette & Woods Capital Markets Index,” and “KBW Capital Markets Index” are trademarks of Keefe, Bruyette & Woods, Inc. and have been licensed for use by the Philadelphia Stock Exchange, Inc. Keefe, Bruyette & Woods, Inc. makes no recommendations concerning the advisability of investing in options based on the KBW Capital Markets Index. Currently, the Exchange imposes a cap of $60,000 per member organization 8 on all “firm-related” equity option and index option comparison and transaction charges combined. 9 Specifically, “firm-related” charges include equity option firm/proprietary comparison charges, equity option firm/proprietary transaction charges, equity option firm/proprietary facilitation transaction charges, index option firm/proprietary comparison charges, index option firm/proprietary transaction charges, and index option firm/proprietary facilitation transaction charges (collectively “firm-related charges”). Thus, such firm-related charges in the aggregate for one billing month may not exceed $60,000 per month per member organization. 8 The firm/proprietary comparison or transaction charge applies to member organizations for orders for the proprietary account of any member or non-member broker-dealer that derives more than 35% of its annual, gross revenues from commissions and principal transactions with customers. Member organizations are required to verify this amount to the Exchange by certifying that they have reached this threshold by submitting a copy of their annual report, which was prepared in accordance with Generally Accepted Accounting Principles (“GAAP”). In the event that a member organization has not been in business for one year, the most recent quarterly reports, prepared in accordance with GAAP, are accepted. *See* Securities Exchange Act Release No. 43558 (November 14, 2000), 65 FR 69984 (November 21, 2000) (SR-Phlx-2000-85). 9 *See* Securities Exchange Act Release No. 51024 (January 11, 2005), 70 FR 3088 (January 19, 2005) (SR-Phlx-2004-94). The Exchange also imposes a license fee of $0.10 per contract side for equity option “firm” transactions on options on Nasdaq-100 Index Tracking Stock SM 10 traded under the symbol QQQQ (“QQQ”) and certain other licensed products (collectively “licensed products”) 11 after the $60,000 cap, as described above, is reached. Therefore, when a member organization exceeds the $60,000 cap (comprised of combined firm-related charges), the member organization is charged $60,000, plus license fees of $0.10 per contract side for any contracts in licensed products (if any) over those that were included in reaching the $60,000 cap. In other words, if the cap is reached, the $0.10 license fee is imposed on all subsequent equity option and index option firm transactions; these license fees are charged in addition to the $60,000 cap. 10 The Nasdaq-100®, Nasdaq-100 Index®, Nasdaq®, The Nasdaq Stock Market®, Nasdaq-100 Shares SM , Nasdaq-100 Trust SM , Nasdaq-100 Index Tracking Stock SM , and QQQ SM are trademarks or service marks of The Nasdaq Stock Market, Inc. (“Nasdaq”) and have been licensed for use for certain purposes by the Phlx pursuant to a License Agreement with Nasdaq. The Nasdaq-100 Index® (the “Index”) is determined, composed, and calculated by Nasdaq without regard to the Licensee, the Nasdaq-100 Trust SM , or the beneficial owners of Nasdaq-100 Shares SM . Nasdaq has complete control and sole discretion in determining, comprising, or calculating the Index or in modifying in any way its method for determining, comprising, or calculating the Index in the future. 11 In addition to the QQQs, the following products are assessed a $0.10 license fee per contract side after the $60,000 cap is reached: Russell 1000 Growth iShares (“IWF”); Russell 2000 iShares (“IWM”); Russell 2000 Value iShares (“IWN”); Russell 2000 Growth iShares (“IWO”); Russell Midcap Growth iShares (“IWP”); Russell Midcap Value iShares (“IWS”); NYSE Composite Index (“NYC”); NYSE U.S. 100 Index (“NY”); and Standard & Poor's Depositary Receipts®, Trust Series 1 (“SPY”). The Exchange proposes to adopt a $0.10 license fee per contract side for the iShares Lehman products and the KBW products for equity option and index option firm transactions, which will be imposed after the $60,000 cap is reached in the same way as the current licensed product fees are assessed. Thus, when a member organization exceeds the $60,000 cap, the member organization will be charged $60,000 plus any applicable license fees for trades of licensed products, including the iShares Lehman products and KBW products, over those trades that were counted in reaching the $60,000 cap. 12 12 Consistent with current practice, when calculating the $60,000 cap, the Exchange first calculates all equity option and index option transaction and comparison charges for products without license fees and then equity option and index option transaction and comparison charges for products with license fees ( *i.e.* , QQQ license fees) that are assessed by the Exchange after the $60,000 cap is reached. *See* Securities Exchange Act Release No. 50836 (December 10, 2004), 69 FR 75584 (December 17, 2004) (SR-Phlx-2004-70). The fees set forth in this proposal are scheduled to become effective for transactions settling on or after May 1, 2005. The text of the proposed rule change is available on the Phlx's Web site, *http://www.phlx.com,* at the Phlx's Office of the Secretary, and at the Commission's Public Reference Section. 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 proposal. 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 the Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of assessing the iShares Lehman products and the KBW products license fee of $0.10 per contract side after reaching the $60,000 cap as described in this proposal is to help defray licensing costs associated with the trading of these products, while still capping member organizations' fees enough to attract volume from other exchanges. The cap operates this way in order to offer an incentive for additional volume without leaving the Exchange with significant out-of-pocket costs. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act 13 in general, and furthers the objectives of Section 6(b)(4) of the Act 14 in particular, in that it is an equitable allocation of reasonable dues, fees, and other charges among Exchange members. 13 15 U.S.C. 78f(b). 14 15 U.S.C. 78f(b)(4). B. Self-Regulatory Organization's Statement on Burden on Competition The Phlx believes that the proposed rule change would impose no burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others The Exchange did not solicit or receive any written comments with respect to the proposal. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing proposed rule change has been designated as a fee change pursuant to Section 19(b)(3)(A)(ii) of the Act 15 and Rule 19b-4(f)(2) 16 thereunder. Accordingly, the proposal is effective upon filing with the Commission. At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. 17 15 15 U.S.C. 78s(b)(3)(A)(ii). 16 17 CFR 240.19b-4(f)(2). 17 *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 June 6, 2005, the date the Phlx filed Amendment No. 2. The effective date of the original proposed rule change is April 28, 2005, the effective date of Amendment No. 1 is April 29, 2005, and the effective date of Amendment No. 2 is June 6, 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-Phlx-2005-30 on the subject line. Paper Comments • Send paper comments in triplicate to Jonathan G. Katz, Secretary, Securities and Exchange Commission, Station Place, 100 F Street NE., Washington, DC 20549-9303. All submissions should refer to File Number SR-Phlx-2005-30. 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. Copies of such filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-Phlx-2005-30 and should be submitted on or before July 11, 2005. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 18 18 17 CFR 200.30-3(a)(12). Margaret H. McFarland, Deputy Secretary. [FR Doc. E5-3155 Filed 6-17-05; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-51827; File No. SR-Phlx-2005-20] Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; Order Granting Approval to Proposed Rule Change, and Amendment No. 1 Thereto, Relating to the Elimination of the Prohibition Against the Entry of Multiple Orders in an Option Within Any 15-Second Period for an Account or Accounts of the Same Beneficial Owner June 13, 2005. On March 24, 2005, the Philadelphia Stock Exchange, Inc. (“Phlx” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”), 1 and Rule 19b-4 thereunder, 2 a proposed rule change to amend Exchange Rule 1080, Philadelphia Stock Exchange Automated Options Market (“AUTOM”) System, 3 to eliminate the restriction against Order Entry Firms 4 entering or permitting the entry of multiple orders in an option within any 15-second period for an account or accounts of the same beneficial owner and to eliminate a similar provision in Commentary .05 to Exchange Rule 1080 relating to proprietary orders submitted by off-floor broker-dealers. 5 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 AUTOM is the Exchange's electronic order delivery, routing, execution and reporting system, which provides for the automatic entry and routing of equity option and index option orders to the Exchange trading floor. Orders delivered through AUTOM may be executed manually, or certain orders are eligible for AUTOM's automatic execution features, Book Sweep and Book Match. Equity option and index option specialists are required by the Exchange to participate in AUTOM and its features and enhancements. *See* Exchange Rule 1080. 4 The Exchange defines an “Order Entry Firm” as a member organization of the Exchange that is able to route orders to AUTOM. *See* Exchange Rule 1080(c)(ii)(A)(1). 5 The term “off-floor broker-dealer” means a broker-dealer that delivers orders from off the floor of the Exchange for the proprietary account(s) of such broker-dealer, including a market maker located on an exchange or trading floor other than the Exchange's trading floor who elects to deliver orders via AUTOM for the proprietary account(s) of such market maker. *See* Exchange Rule 1080(b)(i)(C). On April 11, 2005, the Exchange filed Amendment No. 1 to the proposed rule change. 6 The proposed rule change, as amended, was published for comment in the **Federal Register** on May 6, 2005. 7 The Commission received no comments on the proposal. 6 In Amendment No. 1, the Exchange revised the status of the proposed rule change from one that would take effect upon filing with the Commission under Section 19(b)(3)(A) of the Act, 15 U.S.C. 78s(b)(3)(A), to one that is filed under Section 19(b)(2) of the Act. 7 *See* Securities Exchange Act Release No. 51640 (April 29, 2005), 70 FR 24156. 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 8 and, in particular, the requirements of Section 6(b) of the Act 9 and the rules and regulations thereunder. The Commission finds specifically that the proposed rule change, as amended, is consistent with Section 6(b)(5) of the Act, 10 in that it is designed to promote just and equitable principles of trade, 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. In the Commission's view, removal of the limitation on the entry into AUTOM of multiple orders by an Order Entry Firm for the same beneficial account owner within any 15-second period should help facilitate more efficient and immediate executions on the Exchange. 8 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). 9 15 U.S.C. 78f(b). 10 15 U.S.C. 78f(b)(5). *It is therefore ordered* , pursuant to Section 19(b)(2) of the Act, 11 that the proposed rule change (SR-Phlx-2005-20), as amended, be, and hereby is, approved. 11 15 U.S.C. 78s(b)(2). 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. E5-3157 Filed 6-17-05; 8:45 am] BILLING CODE 8010-01-P DEPARTMENT OF STATE [Public Notice 5114] Bureau of Political-Military Affairs; Notice of Information Collection Under Emergency Review: Form DS-4076; Request for Commodity Jurisdiction (CJ)/U.S. Munitions List
(USML)Determination; OMB Control Number 1405-XXXX AGENCY: Department of State. ACTION: Notice. SUMMARY: The Department of State has submitted the following information collection request to the Office of Management and Budget
(OMB)for review and approval in accordance with the emergency review procedures of the Paperwork Reduction Act of 1995. • *Type of Request:* Emergency Review. • *Originating Office:* Bureau of Political-Military Affairs, Directorate of Defense Trade Controls, (PM/DDTC). • *Title of Information Collection:* Request for Commodity Jurisdiction (CJ)/U.S. Munitions List
(USML)Determination. • *OMB Control Number:* None. • *Frequency:* Once per year per respondent. • *Form Number:* DS-4076. • *Respondents:* Business organizations. • *Estimated Number of Respondents:* 300. • *Estimated Number of Responses:* 300. • *Average Hours Per Response:* 2 hours. • *Total Estimated Burden:* 600 hours. • *Obligation to Respond:* Voluntary. The proposed information collection is published to obtain comments from the public and affected agencies. Emergency review and approval of this collection has been requested from OMB by July 29, 2005. If granted, the emergency approval is only valid for 180 days. Comments should be directed to the State Department Desk Officer, Office of Information and Regulatory Affairs, Office of Management and Budget (OMB), Washington, DC 20530, who may be reached on 202-395-7316. You may submit comments by any of the following methods: • E-mail: *Katherine_T._Astrich@omb. eop.gov* . You must include the form number (DS-4076) and information collection title in the subject line of your message. • Hand Delivery or Courier: OIRA State Department Desk Officer, Office of Management and Budget, 725 17th Street, NW., Washington, DC 20503. • Fax: 202-395-6974. SUPPLEMENTARY INFORMATION: During the first 60 days of this same period a regular review of this information collection is also being undertaken. Comments are encouraged and will be accepted until 60 days from the date that this notice is published in the **Federal Register** . The agency requests written comments and suggestions from the public and affected agencies concerning the proposed collection of information. Your comments are being solicited to permit the agency to: • Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility. • Evaluate the accuracy of the agency's estimate of the burden of the proposed collection, including the validity of the methodology and assumptions used. • Enhance the quality, utility, and clarity of the information to be collected. • Minimize the reporting burden on those who are to respond, including through the use of automated collection techniques or other forms of technology. *Abstract of proposed collection:* The information will be used to evaluate whether or not a particular article is covered by the U.S. Munitions List; to change the U.S. Munitions List category designation; to confirm the U.S. Munitions List Category designation; to remove a defense article from the U.S. Munitions List; or to reconsider a previous commodity jurisdiction determination. For Additional Information: Public comments, or requests for additional information, regarding the collection listed in this notice should be directed to Angelo Chang, Acting Director, Office of Defense Trade Controls Management, Directorate of Defense Trade Controls, Bureau of Political-Military Affairs, SA-1, Room H1200, 2401 E. Street, NW., Washington, DC 20522-0112,
(202)663-2700. E-mail: *ChangAA@state.gov* . Dated: May 5, 2005. Gregory M. Suchan, Deputy Assistant Secretary for Defense Trade Controls, Bureau of Political-Military Affairs, Department of State. [FR Doc. 05-12091 Filed 6-17-05; 8:45 am]
Connectionstraces to 11
6 references not yet in our index
  • 10 CFR 2.714(d)
  • 15 USC 78
  • 17 CFR 240.12
  • 17 CFR 240.19
  • 17 CFR 240.10
  • 400 F.3d 1119
Citation graph
cites case law
Notices
Notice of Issuance; correction
C.F.R.§ 73.37
C.F.R.§ 2.202
C.F.R.§ 50.4
C.F.R.§ 73.21
C.F.R.§ 200.30-3
U.S.C.§ 781
U.S.C.§ 78s
U.S.C.§ 78f
U.S.C.§ 552
F. App'x400 F.3d 1119
Cite10 CFR 2.714(d)
Cite15 USC 78
Cites 17 · showing 12Cited by 0 across 0 sources
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