Notices. SECURITIES AND EXCHANGE COMMISSION
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BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-51955; File No. SR-Amex-2005-057] Self-Regulatory Organizations; American Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change and Amendments No. 1 and 2 Thereto Relating to Continuation of a Quote Assist Feature in the ANTE System on a Pilot Basis June 30, 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 24, 2005, the American Stock Exchange LLC.
(“Amex” or “Exchange”) submitted to the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I and II below, which Items have been prepared by the Amex. On May 31, 2005, the Amex filed Amendment No. 1 to the proposed rule change. 3 On June 24, 2005, the Amex filed Amendment No. 2 to the proposed rule change. 4 The Exchange filed the proposed rule change pursuant to Section 19(b)(3)(A) of the Act 5 which renders it 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 Amendment No. 1 made a clarifying change to Section III of the filing. 4 Amendment No. 2 changed the proposed rule text to clarify that the specialist has an obligation to execute or display customer options limit orders immediately or in no event later than 30 seconds after receipt. 5 15 U.S.C. 78s(b)(3)(A).
I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Amex proposes to amend Rule 950-ANTE
(g)and 958A-ANTE
(e)to extend its pilot program implementing a quote-assist feature until April 30, 2006. The text of the proposed rule change is available on Amex's Web site ( *http://www.amex.com* ), at the Amex's principal office, and at the Commission's Public Reference Room. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Amex included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose Exchange Rule 958A-ANTE
(e)currently requires all option specialists to execute or display customer limit orders that improve the bid or offer by price or size immediately upon receipt, unless one of the exceptions set forth in the rule applies. “Immediately upon receipt” is defined in the rule “as soon as practicable which shall mean, under normal market conditions, no later than 30 seconds after receipt.” 6 6 *See* Securities Exchange Act Release No. 51062 (January 21, 2005), 70 FR 4163 (January 28, 2005). In order to assist the specialists in complying with Amex Rule 958A-ANTE
(e)as described above, the ANTE System 7 provides specialists with an automated quote assist feature on a pilot basis. The quote assist feature automatically displays eligible limit orders within a configurable time that can be set on a class-by-class basis by the Exchange. While all customer limit orders are expected to be displayed immediately, the quote assist feature can be set to automatically display limit orders at or close to the end of the 30-second time frame or within any other shorter time frame established by the Exchange. In the event there are instances where the specialist has not yet addressed the order within the applicable 30-second period, the quote assist feature will automatically display the eligible customer limit order in the limit order book at or close to the end of that period. The quote assist feature helps to ensure that eligible customer limit orders are displayed within the required time period then in effect. Commentary .01 to Amex Rule 950-ANTE
(g)currently requires the specialist to maintain and keep active the limit order quote assist feature. The specialist may establish the time frame within which the quote assist feature displays eligible customer limit orders, which time frame does not exceed the customer limit order display requirement set forth in Amex Rule 958A-ANTE (e). The specialist may deactivate the quote assist feature provided Floor Official approval is obtained. The specialist must obtain Floor Official approval as soon as practicable but in no event later than three minutes after deactivation. If the specialist does not receive approval within three minutes after deactivation, the Exchange will review the matter as a regulatory issue. Floor Officials will grant approval only in instances when there is an unusual influx of orders or movement of the underlying that would result in gap pricing or other unusual circumstances. The Exchange will document all instances where a Floor Official has granted approval. 7 *See* Securities Exchange Act Release No. 49747 (May 20, 2004), 69 FR 30344 (May 27, 2004). The Exchange now proposes to extend the quote assist feature on a pilot basis until April 30, 2006. The Exchange also proposes to move the text of Commentary .01 to Amex Rule 958A-ANTE (e), since the approval of the Amex's limit order display rule negates the need for the application of the specialist's due diligence obligation found in Amex Rule 156 and made applicable to options trading by Amex Rule 950-ANTE (g). The Exchange notes that the quote assist feature does not relieve the specialists of their obligation to display customer limit orders immediately. To the extent that a specialist excessively relies on the quote assist feature to display eligible limit orders without attempting to address the orders immediately, the specialist could be violating Amex Rule 958A-ANTE (e). However, brief or intermittent reliance on the quote assist feature by a specialist during an unexpected surge in trading activity in an option class would not violate Rule 958A-ANTE
(e)if used when the specialist is not physically able to address all the eligible limit orders within 30 seconds. The Exchange has issued a regulatory notice discussing the issue of excessive reliance on the quote assist feature. The Exchange will continue to conduct surveillance to ensure that specialists comply with their obligation to execute or book all eligible limit orders within the time period prescribed by Exchange rules. The Exchange commits to conduct surveillance designed to detect whether specialists, as a matter of course, rely on the quote-assist feature to display all eligible limit orders. A practice of excessive reliance upon the quote assist feature will be reviewed by Member Firm Regulation as a possible violation of Amex Rule 958A-ANTE (e). The Exchange runs its limit order display exception report at various display intervals in an attempt to detect a pattern suggestive of undue reliance on the quote assist feature. The Exchange reports to the Commission every three months the statistical data it uses to determine whether there has been impermissible reliance on the quote assist feature by specialists. 2. Statutory Basis The Exchange believes that the proposed rule change, as amended, is consistent with Section 6 of the Act, in general, 8 and furthers the objectives of Section 6(b)(5) of the Act, in particular, 9 in that it is designed to prevent fraudulent and manipulative acts and practices and to promote just and equitable principles of trade. The quote assist feature provides a mechanism to ensure that eligible customer limit orders are displayed within the appropriate time frame. 8 15 U.S.C. 78f. 9 15 U.S.C. 78f(b)(5). B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any inappropriate burden on competition. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others No written comments were either solicited or received with respect to the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The proposed rule change has been designated by the Amex as a “non-controversial” rule change pursuant to Section 19(b)(3)(A) of the Act 10 and subparagraph (f)(6) of Rule 19b-4 thereunder. 11 Consequently, because the foregoing rule change:
(1)Does not significantly affect the protection of investors or the public interest;
(2)does not impose any significant burden on competition; and
(3)does not become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest, and the Exchange provided the Commission with written notice of its intent to file the proposed rule change at least five days prior to the filing date, it has become effective pursuant to Section 19(b)(3)(A) of the Act 12 and Rule 19b-4(f)(6) thereunder. 13 10 15 U.S.C. 78s(b)(3)(A). 11 17 CFR 240.19b-4(f)(6). 12 15 U.S.C. 78s(b)(3)(A). 13 17 CFR 240.19b-4(f)(6). A proposed rule change filed under Rule 19b-4(f)(6) normally does not become operative prior to 30 days after the date of filing. However, Rule 19b-4(f)(6)(iii) permits the Commission to designate a shorter time if such action is consistent with the protection of investors and the public interest. The Amex has requested that the Commission waive the 30-day operative delay specified in Rule 19b-4(f)(6) so that the Amex may continue the quote assist pilot program on the ANTE System uninterrupted. The Exchange states that the proposed rule is substantially similar to comparable rules the Commission has approved for the Amex, 14 the Chicago Board Options Exchange (“CBOE”), 15 and the New York Stock Exchange (“NYSE”). 16 Accordingly, the Amex believes that its proposal does not raise new regulatory issues, significantly affect the protection of investors or the public interest, or impose any significant burden on competition. 14 *See* Securities Act Release No. 42952 (June 16, 2000), 65 FR 39210 (June 23, 2000). 15 *See* Securities Act Release No. 47701 (April 18, 2003), 68 FR 22426 (April 28, 2003). 16 *See* Securities Act Release No. 41386 (May 10, 1999), 64 FR 26809 (May 17, 1999). The Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest. 17 The Commission believes that the Amex's proposal raises no new issues or regulatory concerns that the Commission did not consider in approving the Amex, CBOE, and NYSE proposals. 17 For purposes only of waiving the operative delay for this proposal, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate the rule change if it appears to the Commission that the action is necessary or appropriate in the public interest, for the protection of investors, or would otherwise further the purposes of the Act. 18 18 For purposes of calculating the 60-day abrogation period, the Commission considers the proposal to have been filed on June 24, 2005, the date the Amex filed Amendment No. 2. 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-2005-057 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-Amex-2005-057. 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-2005-057 and should be submitted on or before August 1, 2005. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 19 19 17 CFR 200.30-3(a)(12). Margaret H. McFarland, Deputy Secretary. [FR Doc. E5-3622 Filed 7-8-05; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-51958; File No. SR-CME-2005-02] Self-Regulatory Organization; Chicago Mercantile Exchange; Notice of Filing and Immediate Effectiveness of Proposed Rules Governing Security Futures Adjustments June 30, 2005. Pursuant to Section 19(b)(7) of the Securities Exchange Act of 1934 (“Act”), 1 and Rule 19b-7 thereunder, 2 notice is hereby given that on May 4, 2005, the Chicago Mercantile Exchange (“CME” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change described in Items I, II, and III below, which Items have been prepared by the Exchange. 1 15 U.S.C. 78s(b)(7). 2 17 CFR 240.19b-7. CME has also certified the proposed rule change with the Commodity Futures Trading Commission (“CFTC”) under Section 5c(c) of the Commodity Exchange Act (“CEA”) 3 on May 4, 2005. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 3 7 U.S.C. 7a-(c). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change CME proposes to adopt rules governing Security Futures Product Adjustments for purposes of Section 6(h) of the Act. 4 Proposed new language is *italicized.* 4 15 U.S.C. 78f(h). CHAPTER 701: SECURITY FUTURES PRODUCTS ADJUSTMENTS 70101. SCOPE OF CHAPTER *This chapter is limited in application to Security Futures Products (“SFPs”) traded on Chicago Mercantile Exchange where the underlying interest is a single equity security or a narrow-based index. The procedures for clearing, delivery, settlement and other matters not specifically covered herein shall be governed by the Rules of the Exchange.* 70110. ADJUSTMENTS TO SECURITY FUTURES PRODUCTS 1. *Determinations as to whether and how to adjust the terms of Security Futures Products to reflect events affecting underlying interests shall be made by the Clearing House based on its judgment as to what is appropriate for the protection of investors and the public interest, taking into account such factors as fairness to the buyers and sellers of Security Futures Products on the underlying interest, the maintenance of a fair and orderly market in futures on the underlying interest, consistency of interpretation and practice, efficiency of settlement of delivery obligations arising from physically-settled Security Futures Products, and the coordination with other clearing agencies of the clearance and settlement of transactions in the underlying security. The Clearing House may, in addition to determining adjustments to Security Futures Products on a case-by-case basis, adopt interpretations having general application to specified types of events. Every determination by the Clearing House in respect of Security Futures Products pursuant to this Rule shall be within the discretion of the Clearing House and shall be conclusive and binding on all investors and not subject to review. The following paragraphs of this Rule apply to Security Futures Products based on single equity securities only.* 2. *Whenever there is a dividend, stock dividend, stock distribution, stock split, reverse stock split, rights offering, distribution, reorganization, recapitalization, reclassification or similar event in respect of any underlying security, or a merger, consolidation, dissolution or liquidation of the issuer of any underlying security, the number of Security Futures Product contracts, the unit of trading, the settlement price and the underlying security, or any of them, with respect to all outstanding Security Futures Products open for trading in the underlying security may be adjusted in accordance with this Rule. If the Clearing House does not learn, or does not learn in a timely manner, of an event for which the Clearing House would have otherwise made an adjustment, the Clearing House shall not be liable for any failure to make such adjustment or delay in making such adjustment. In making any adjustment determination, the Clearing House shall apply the factors set forth in this Rule in light of the circumstances known to it at the time such determination is made.* 3. *It shall be the general rule that there will be no adjustments to reflect ordinary cash dividends or distributions or ordinary stock dividends or distributions (collectively, “ordinary distributions”) by the issuer of the underlying security.* 4. *Subject to paragraph 3 of this Rule, it shall be the general rule that in the case of a stock dividend, stock distribution or stock split whereby one or more whole numbers of shares of the underlying security are issued with respect to each outstanding share, each SFP contract covering that underlying security shall be increased by the same number of additional SFP contracts as the number of shares issued with respect to each share of the underlying security, the last settlement price established immediately before such event shall be proportionately reduced, and the unit of trading shall remain the same.* 5. *Subject to paragraph 3 of this Rule, it shall be the general rule that in the case of a stock dividend, stock distribution or stock split whereby other than a whole number of shares of the underlying security is issued in respect of each outstanding share, the last settlement price established immediately before such event shall be proportionately reduced, and conversely, in the case of a reverse stock split or combination of shares, the last settlement price established immediately before such event shall be proportionately increased. Whenever the settlement price with respect to a stock future has been reduced or increased in accordance with this paragraph, the unit of trading shall be proportionately increased or reduced, as the case may be.* 6. *It shall be the general rule that in the case of any distribution made with respect to shares of an underlying security, other than ordinary distributions and other than distributions for which adjustments are provided in paragraphs 4 or 5 of this Rule, if the Clearing House determines that an adjustment to the terms of Security Futures Products on such underlying security is appropriate,
(a)the last settlement price established immediately before such event shall be reduced by the value per share of the distributed property, in which event the unit of trading shall not be adjusted, or alternatively,
(b)the unit of trading in effect immediately before such event shall be adjusted so as to include the amount of property distributed with respect to the number of shares of the underlying security represented by the unit of trading in effect prior to such adjustment, in which event the settlement price shall not be adjusted. The Clearing House shall, with respect to adjustments under this paragraph or any other paragraph of this Rule, have the authority to determine the value of distributed property.* 7. *In the case of any event for which adjustment is not provided in any of the foregoing paragraphs of this Rule, the Clearing House may make such adjustments, if any, with respect to the Security Futures Products affected by such event as the Clearing House determines.* 8. *Adjustments pursuant to this Rule shall as a general rule become effective in respect of outstanding Security Futures Products on the “ex-date” established by the primary market for the underlying security.* 9. * It shall be the general rule that
(a)all adjustments of the settlement price of an outstanding stock future shall be rounded to the nearest adjustment increment,
(b)when an adjustment causes a settlement price to be equidistant between two adjustment increments, the settlement price shall be rounded up to the next highest adjustment increment,
(c)all adjustments of the unit of trading shall be rounded down to eliminate any fraction, and
(d)if the unit of trading is rounded down to eliminate a fraction, the adjusted settlement price shall be further adjusted, to the nearest adjustment increment, to reflect any diminution in the value of the stock future resulting from the elimination of the fraction. * 10. *Notwithstanding the general rules set forth in paragraphs 3 through 9 of this Rule or which may be set forth as interpretations to this Rule, the Clearing House shall have the power to make exceptions in those cases or groups of cases in which, in applying the standards set forth in paragraph 1 of this Rule, the Clearing House shall determine such exceptions to be appropriate. However, the general rules shall be applied unless the Clearing House affirmatively determines to make an exception in a particular case or group of cases.* INTERPRETATION TO RULE 70110 ADJUSTMENTS TO SECURITY FUTURES PRODUCTS 1. *(a) Cash dividends or distributions by the issuer of the underlying security that the Clearing House believes to have been declared pursuant to a policy or practice of paying such dividends or distributions on a quarterly or other regular basis, will, as a general rule, be deemed to be “ordinary distributions” within the meaning of paragraph 3 of this Rule. The Clearing House will determine on a case-by-case basis whether other dividends or distributions are “ordinary distributions” or whether they are dividends or distributions for which an adjustment should be made.
(b)Stock dividends or distributions by the issuer of the underlying security that the Clearing House believes to have been declared pursuant to a policy or practice of paying such dividends or distributions on a quarterly basis will, as a general rule, be deemed to be “ordinary distributions” within the meaning of paragraph 3 of this Rule. The Clearing House will ordinarily adjust for other stock dividends and distributions.
(c)Where the Clearing House determines to adjust for a cash or stock dividend or distribution, the adjustment shall be made in accordance with the applicable provisions of this Rule.* 2. *Adjustments will ordinarily be made for rights distributions, except as provided below in the case of certain “poison pill” rights. When an adjustment is made for a rights distribution, the unit of trading in effect immediately prior to the distribution will ordinarily be adjusted to include the number of rights distributed with respect to the number of shares or other units of the underlying security comprising the unit of trading. If, however, the Clearing House determines that the rights are due to expire before the time they could be exercised upon delivery under the futures contract, then delivery of the rights will not be required. Instead, the Clearing House will ordinarily adjust the last settlement price established before the rights expire to reflect the value, if any, of the rights as determined by the Clearing House in its sole discretion. Adjustments will not ordinarily be made to reflect the issuance of so-called “poison pill” rights that are not immediately exercisable, trade as a unit or automatically with the underlying security, and may be redeemed by the issuer. In the event such rights become exercisable, being to trade separately from the underlying security, or are redeemed, the Clearing House will determine whether an adjustment is appropriate.* 3. *Adjustments will not be made to reflect a tender offer or exchange offer to the holders of the underlying security, whether such offer is made by the issuer of the underlying security or by a third person or whether the offer is for cash, securities or other property. This policy will apply without regard to whether the price of the underlying security may be favorably or adversely affected by the offer or whether the offer may be deemed to be “coercive.” Outstanding Security Futures Products ordinarily will be adjusted to reflect a merger, consolidation or similar event that becomes effective following the completion of a tender offer or exchange offer.* 4. *Adjustments will not be made to reflect changes in the capital structure of an issuer where all of the underlying securities outstanding in the hands of the public (other than dissenters' shares) are not changed into another security, cash or other property. For example, adjustments will not be made merely to reflect the issuance (except as a distribution on an underlying security) of new or additional debt, stock, or options, warrants or other securities convertible into or exercisable for the underlying security, the refinancing of the issuer's outstanding debt, the repurchase by the issuer of less than all of the underlying securities outstanding, or the sale by the issuer of significant capital assets.* 5. *When an underlying security is converted into a right to receive a fixed amount of cash, such as in a merger, outstanding Security Futures Products will be adjusted to replace such underlying security with such fixed amount of cash as the underlying interest, and the unit of trading shall remain unchanged.* 6. *In the case of a corporate reorganization, reincorporation or similar occurrence by the issuer of an underlying security which results in an automatic share-for-share exchange of shares in the issuer for shares in the resulting company, Security Futures Products on the underlying security will ordinarily be adjusted by replacing such underlying security with a like number of units of the shares of the resulting company. Because the securities are generally exchanged only on the books of the issuer and the resulting company, and are not generally exchanged physically, deliverable shares will ordinarily include certificates that are denominated on their face as shares in the original issuer, but which, as a result of the corporate transaction, represent shares in the resulting company.* 7. *When an underlying security is converted in whole or in part into a debt security and/or a preferred stock, as in a merger, and interest or dividends on such debt security or preferred stock are payable in the form of additional units thereof, outstanding Security Futures Products that have been adjusted by replacing the original underlying security with the security into which the original underlying security has been converted shall be further adjusted, effective as of the ex-date for each payment of interest or dividends thereon, by increasing the unit of trading by the number of units of the new underlying security distributed as interest or dividends thereon.* 8. *Notwithstanding this Interpretation of Rule 70110, distributions of short-term and long-term capital gains in respect of stock fund shares by the issuer thereof shall not, as a general rule, be deemed to be “ordinary dividends or distributions” within the meaning of paragraph 3 of Rule 70110, and adjustments of the terms of Security Futures Products on such stock fund shares for such distributions shall be made in accordance with applicable provisions of Rule 70110, unless the Clearing House determines, on a case-by-case basis, not to adjust for such a distribution.* 9. *In the event that a new series of Security Futures Products is introduced with a settlement price expressed in decimals and there is an outstanding series of Security Futures Products on the same underlying security with a settlement price expressed as a fraction that could be expressed in whole cents, the Clearing House may restate the settlement price of the outstanding series as its equivalent decimal price. If the settlement price for the outstanding series is a fraction that cannot be expressed in whole cents, the settlement price may not be restated as a decimal.* 70120. UNAVAILABILITY OR INACCURACY OF FINAL SETTLEMENT PRICE 1. *If the Clearing House shall determine that the primary market(s) for the underlying security in respect of a maturing stock future did not open or remain open for trading at or before the time when the final settlement price for such futures would ordinarily be determined, or that the price or other value used to determine the final settlement price is unreported or otherwise unavailable, then, in addition to any other actions that the Clearing House may be entitled to take under the Rules, the Clearing House shall be empowered to do any or all of the following with respect to maturing futures affected by such event (“affected futures”):*
(a)*The Clearing House may suspend the time for making the final variation payment with respect to affected futures and, in the case of physically-settled Security Futures Products, may postpone the delivery date. At such time as the Clearing House determines that the required price or other value is available or the Clearing House has fixed the final settlement price pursuant to subparagraph
(a)or
(b)of this Rule, the Clearing House shall fix a new date for making the final variation payment and may fix a new delivery date for physically-settled Security Futures Products.*
(b)*The Clearing House may fix the final settlement price for affected futures, based on its judgment as to what is appropriate for the protection of investors and the public interest, taking into account such factors as fairness to buyers and sellers of affected futures, the maintenance of a fair and orderly market in such futures, and consistency of interpretation and practice. Without limiting the generality of the foregoing, the Clearing House may, if it deems such action appropriate for the protection of investors and the public interest, fix the final settlement price on the basis of the reported price of the underlying security or reported level of the underlying index at the close of regular trading hours (as determined by the Clearing House) on the last preceding trading day for which a closing stock price or index level was reported by the reporting authority.* 2. *The Clearing House may fix the final settlement price for affected futures using the opening prices of the relevant security or securities when the primary market(s) reopen. In that case, the date for making the final variation payment for the affected futures shall be postponed until the business day next following the day on which the final settlement price is fixed; and, in the case of physically-settled Security Futures Products, the delivery date shall also be postponed accordingly.* 3. *Every determination of the Clearing House pursuant to this Section shall be within the discretion of the Clearing House and shall be conclusive and binding on all investors and not subject to review. Unless the Clearing House directs otherwise, the price of an underlying security and the current index value of an underlying index as initially reported by the relevant reporting authority shall be conclusively presumed to be accurate and shall be deemed final for the purpose of determining settlement prices and the final settlement price, even if such price or value is subsequently revised or determined to have been inaccurate.* INTERPRETATION TO 70120. UNAVAILABILITY OR INACCURACY OF FINAL SETTLEMENT PRICE *The Clearing House will not adjust officially reported stock prices for final settlement purposes, even if those prices or values are subsequently found to have been erroneous, except in extraordinary circumstances. Such circumstances might be found to exist where, for example, the closing price or current index value as initially reported is clearly erroneous and inconsistent with prices or values reported earlier in the same trading day, and a corrected closing price or current index value is promptly announced by the reporting authority. In no event will a completed settlement be adjusted due to errors in officially reported stock prices or current index values.* II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects or such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposed to adopt CME Chapter 702, Security Futures Product Adjustments. The proposed CME Chapter 702 specifies the Exchange's response to corporate events and the possible unavailability or inaccuracy of spot values for use as final settlement prices. The Exchange believes that these rules are substantially identical to rules currently deployed by the Options Clearing Corporation (“OCC”) with respect to the maintenance and bookkeeping of security futures products (“SFPs”) and to the provisions of CME Chapter 8B. 5 5 CME Chapter 8B addresses procedures applied to SFPs effected on a marketplace apart from CME but cleared by CME Clearing House. Section 6(h)(3) of the Act Requirements Section 6(h)(3) of the Act 6 contains listing standards and conditions for trading SFPs. Below is a summary of each such requirement or condition, followed by a brief explanation of how CME would comply with it, whether by particular provisions in CME Listing Standards or otherwise. 6 15 U.S.C. 78f(h)(3). Clause
(A)of Section 6(h)(3) of the Act 7 requires that any security underlying a SFP be registered pursuant to Section 12 of the Act. 8 This requirement is addressed by CME Rules 70001.2, 70003.2.b, 70004.2.a, and proposed CME Rule 70002.1.a. 7 15 U.S.C. 78f(h)(3)(A). 8 15 U.S.C. 78l. Clause
(B)of Section 6(h)(3) of the Act 9 requires that a market on which a physically settled SFP is traded have arrangements in place with a registered clearing agency for the payment and delivery of the securities underlying the SFP. CME has reached an agreement with a participant of DTC, a registered clearing agency, to facilitate the delivery-versus-payment transactions which result from an agreement to make or take delivery of the underlying security by the market participant. 10 This DTC participant would provide CME with a dedicated DTC account. This account would be a sub-account of the participant's main account and would be utilized solely for CME activity with respect to the delivery of, and payment for, securities delivered against CME SFPs. CME would act as a contra party to each delivery transaction. The CME Clearing House would submit a delivery instruction for each transaction to DTC by electronic interface provided by the DTC participant. Market participants would be required to provide proof to CME outlining their operational and legal ability to make or take delivery of the underlying securities. These agreements and relevant procedures would be fully operational prior to any possible delivery event associated with such SFPs. 9 15 U.S.C. 78f(h)(3)(B). 10 The Exchange clarified its arrangement for the payment and delivery of securities underlying the SFPs. Telephone conversation between John Labuszewski, Managing Director, CME, and Florence E. Harmon, Senior Special Counsel, Division of Market Regulation (“Division”), Commission, on June 9, 2005. Clause
(C)of Section 6(h)(3) of the Act 11 provides that listing standards for SFPs must be no less restrictive than comparable listing standards for options traded on a national securities exchange or national securities association registered pursuant to Section 15A(a) of the Act. 12 For the reasons discussed herein, notwithstanding specified differences between the Sample Listing Standards and CME Listing Standards, CME believes that the latter are no less restrictive than comparable listing standards for exchange-traded options. 11 15 U.S.C. 78f(h)(3)(C). 12 15 U.S.C. 78 *o* -3(a). Clause
(D)of Section 6(h)(3) of the Act 13 requires that each SFP be based on common stock or such other equity securities as the Commission and CFTC jointly determine are appropriate. This requirement is addressed by CME Rules 70001.1, 70002.1., 70003.2., and 70004.2. 13 5 U.S.C. 78f(h)(3)(D). Clause
(E)of Section 6(h)(3) of the Act 14 requires that each SFP be cleared by a clearing agency that has in place provisions for linked and coordinated clearing with other clearing agencies that clear SFPs, which permits the SFPs to be purchased on one market and offset on another market that trades such product. CME proposes to clear SFPs traded through Exchange facilities through CME Clearing House. CME Clearing House would have in place all provisions for linked and coordinated clearing as mandated by law and statute as of the effective date of such laws and statutes. 14 15 U.S.C. 78f(h)(3)(E). Clause
(F)of Section 6(h)(3) of the Act 15 requires that only a broker or dealer subject to suitability rules comparable to those of a national securities association registered pursuant to Section 15A(a) of the Act 16 effect transactions in a SFP. CME clearing members and their correspondents are bound by the applicable sales practice rules of the National Futures Association (“NFA”), which is a national securities association. As such, the sales practice rules of NFA are, perforce, comparable to those of a national securities association registered pursuant to Section 15A(a) of the Act. 17 Moreover, the application of NFA sales practice rules is extended beyond the CME clearing membership to the extent that NFA By-Law 1101 provides that “[n]o member may carry an account, accept an order or handle a transaction in commodity futures contracts for or on behalf of any non-Member of NFA.” 15 15 U.S.C. 78f(h)(3)(F). 16 15 U.S.C. 78 *o* -3(a). 17 15 U.S.C. 78 *o* -3(a). Clause
(G)of Section 6(h)(3) of the Act 18 requires that each SFP be subject to the prohibition against dual trading in Section 4j of CEA 19 and the rules and regulations thereunder or the provisions of Section 11(a) of the Act 20 and the rules and regulations thereunder. CME Rule 123 requires Exchange members to comply with all applicable “provisions of the Commodity Exchange Act and regulations duly issued pursuant thereto by the CFTC.” 18 15 U.S.C. 78f(h)(3)(G). 19 15 U.S.C. 6j. 20 15 U.S.C. 78k(a). Further, the prohibition of dual trading in SFPs per Regulation § 41.27 21 adopted pursuant to Section 4j(a) of CEA 22 applies to a contract market operating an electronic trading system if such market provides participants with a time or place advantage or the ability to override a predetermined matching algorithm. The Exchange intends to offer SFPs on CME exclusively on its CME Globex electronic trading platform. To the extent that the conditions cited above do not exist in the context of the CME Globex system, the CME Rulebook contains no specific rule relating to dual trading in an electronic forum. 21 17 CFR 41.27. 22 7 U.S.C. 4j(a). Clause
(H)of Section 6(h)(3) of the Act 23 provides that trading in a SFP must not be readily susceptible to manipulation of the price of such SFP, nor to causing or being used in the manipulation of the price of any underlying security, option on such security, or option on a group or index including such securities. CME believes that CME Listing Standards are designed to ensure that CME SFPs and the underlying securities would not be readily susceptible to price manipulation. Under CME Rule 432, an activity “to manipulate prices or to attempt to manipulate prices” is a “major offense” punishable, per CME Rule 430, by “expulsion, suspension, and/or a fine of not more than $1,000,000 plus the monetary value of any benefit received as a result of the violative action.” 23 15 U.S.C. 78f(h)(3)(H). Clause
(I)of Section 6(h)(3) of the Act 24 requires that procedures be in place for coordinated surveillance amongst the market on which a SFP is traded, any market on which any security underlying the SFP is traded, and other markets on which any related security is traded to detect manipulation and insider trading. The Exchange has surveillance procedures in place to detect manipulation on a coordinated basis with other markets. In particular, CME is an affiliate member of the Intermarket Surveillance Group (“ISG”) and is party to an affiliate agreement and an agreement to share market surveillance and regulatory information with the other ISG members. Further, CME is party to a supplemental agreement with the other ISG members to address the concerns expressed by the Commission with respect to affiliate ISG membership. 25 Finally, CME Rule 424 permits CME to enter into agreements for the exchange of information and other forms of mutual assistance with domestic or foreign self-regulatory organizations, associations, boards of trade, and their respective regulators. 24 15 U.S.C. 78f(h)(3)(I). 25 *See* Securities Exchange Act Release No. 45956 (May 17, 2002), 67 FR 36740 (May 24, 2002) (joint CFTC and Commission rule relating to cash settlement and regulatory halt requirements for SFPs). Clause
(J)of Section 6(h)(3) of the Act 26 requires that a market on which a SFP is traded have in place audit trails necessary or appropriate to facilitate the coordinated surveillance referred to in the preceding paragraph. The Exchange states that it relies upon its Market Regulation Department and its large, highly trained staff to actively monitor market participants and their trading practices and to enforce compliance with CME rules. CME Market Regulation Department staff is organized into Compliance and Market Surveillance Groups. In performing its functions, CME Market Regulation Department routinely works closely with CME Audit Department, CME Clearing House, CME Legal Department, CME Globex Control Center, and CME Information Technology Department. 26 15 U.S.C. 78f(h)(3)(J). CME Compliance is responsible for enforcing the trading practice rules of the Exchange through detection, investigation, and prosecution of those who may attempt to violate those CME Rules. Further, CME Compliance is responsible for handling customer complaints, ensuring the integrity of the Exchange's audit trail, and administering an arbitration program for the resolution of disputes. CME Compliance employs investigators, attorneys, trading floor investigators, data analysts, and a computer programming and regulatory systems design staff. CME believes that CME Market Regulation Department has created some of the most sophisticated tools in the world to assist with the detection of possible rule violations and monitoring of the market. Among the systems it uses are the Regulatory Trade Browser (“RTB”), the Virtual Detection System (“VDS”), the Reportable Position System (“RPS”), and the RegWeb Profile System (“RegWeb”). These systems include information on all CME Globex users, all transactions, large positions, and statistical information on trading entities. CME Market Surveillance is dedicated to the detection and prevention of market manipulation and other similar forms of market disruption. As part of these responsibilities, CME Market Surveillance enforces the Exchange's position limit rules, administers the hedge approval process, and maintains the Exchange's RPS system. CME believes that the foundation of the CME Market Surveillance program is the deep knowledge of its staff about the major users, brokers, and clearing firms, along with its relationship with other regulators. Day-to-day monitoring of market positions is handled by a dedicated group of surveillance analysts assigned to specific market(s). Each analyst develops in-depth expertise of the factors that influence the market in question. The Exchange estimates that perhaps 90% of the market users at any single time are known to the Exchange. Daily surveillance staff activities include: • Monitoring positions for size based on percentage of open interest and historic user participation in each contract. • Aggregation of positions across clearing members with the use of CME trade reporting systems to account for all positions held by any single participant. CME believes that this daily review permits the surveillance analyst to promptly identify unusual market activity. • As a contract approaches maturity, large positions are scrutinized to determine whether such activity is consistent with prior experience, allowing prompt regulatory intervention if necessary. • Analysts closely monitor market news through on-line and print media. • Staff conducts on-site visits to large market participants periodically. CME Market Regulation staff investigates possible misconduct and, when appropriate, initiates disciplinary action. CME Rule 430 empowers the Exchange's disciplinary committees to discipline, limit, suspend, or terminate a member's activities for cause, amongst other sanctions. Further, per CME Rule 123, the Exchange requires its members to be responsible for “the filing of reports, maintenance of books and records, and permitting inspection and visitation” in order to facilitate such investigations by Exchange staff. CME Rule 536 requires that certain information be recorded with respect to each order, including: Time entered, terms of the order, order type, instrument and contract month, price, quantity, account type, account designation, user code, and clearing firm. This information may be recorded manually on timestamped order tickets, electronically in a clearing firms system, or by entering the orders with the required information into CME Globex immediately upon receipt. A complete CME Globex electronic audit trail is archived and maintained by CME for at least a five year period. Clearing firms must also maintain any written or electronic order records for a period of five years. Clause
(K)of Section 6(h)(3) of the Act 27 requires that a market on which a SFP is traded have in place procedures to coordinate trading halts between such market and any market on which any security underlying the SFP is traded and other markets on which any related security is traded. The Exchange filed with the Commission CME Rules establishing a generalized framework for the trade of SFPs. 28 In particular, proposed CME Rule 71001.F. provides, in accordance with Regulation § 41.25(a)(2) of CEA, 29 that “[t]rading of Physically Delivered Single Security Futures shall be halted at all times that a regulatory halt, as defined per SEC Rule 6h-1(a)(3) and CFTC Regulation § 41.1(1), has been instituted for the underlying security.” 27 15 U.S.C. 78f(h)(3)(K). 28 *See* SR-CME-2005-03. 29 17 CFR 41.25(a)(2). Clause
(L)of Section 6(h)(3) of the Act 30 requires that the margin requirements for a SFP comply with the regulations prescribed pursuant to Section 7(c)(2)(B) of the Act. 31 CME has margin rules in place. 32 Thus, CME believes that its customer margin rules are consistent with the requirements of the Act. 30 15 U.S.C. 78f(h)(3)(L). 31 15 U.S.C. 78g(c)(2)(B). 32 *See* Securities Exchange Act Release No. 46637 (October 10, 2002), 67 FR 64672 (October 21, 2002) (SR-CME-2002-01). For the reasons described above, CME believes that CME Listing Standards submitted herewith satisfy the requirements set forth in Section 6(h)(3) of the Act. 33 33 15 U.S.C. 78f(h)(3). 2. Statutory Basis The Exchange believes that its proposed rule change is consistent with Section 6(b) of the Act, 34 in general, and furthers the objectives of Section 6(b)(5) of the Act, 35 in particular, in that it is designed 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. 34 15 U.S.C. 78f(b). 35 15 U.S.C. 78f(b)(5). B. Self-Regulatory Organization's Statement on Burden on Competition CME does not believe that the proposed rule change would impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others The Exchange has 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 The foregoing proposed rule change has become effective pursuant to Section 19(b)(7) of the Act. 36 Within 60 days of the date of effectiveness of the proposed rule change, the Commission, after consultation with the CFTC, may summarily abrogate the proposed rule change and require that the proposed rule change be refiled in accordance with the provisions of Section 19(b)(1) of the Act. 37 36 15 U.S.C. 78s(b)(7). 37 15 U.S.C. 78s(b)(1). 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-CME-2005-02 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-CME-2005-02. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change 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 CME. 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-CME-2005-02 and should be submitted on or before August 1, 2005. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 38 38 17 CFR 200.30-3(a)(12). Jill M. Peterson, Assistant Secretary. [FR Doc. E5-3617 Filed 7-8-05; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-51957; File No. SR-CME-2005-03] Self-Regulatory Organization; Chicago Mercantile Exchange; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change and Amendment No. 1 Thereto Relating to Rules Governing Contract Specifications for Physically Delivered Single Security Futures June 30, 2005. Pursuant to Section 19(b)(7) of the Securities Exchange Act of 1934 (“Act”), 1 and Rule 19b-7 thereunder, 2 notice is hereby given that on May 4, 2005, the Chicago Mercantile Exchange (“CME” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change described in Items I, II, and III below, which Items have been prepared by the Exchange. On May 31, 2005, CME filed Amendment No. 1 to the proposed rule change. 3 The Commission is publishing this notice, as amended, to solicit comments on the proposed rule change from interested persons. 1 15 U.S.C. 78s(b)(7). 2 17 CFR 240.19b-7. 3 *See* letter from John W. Labuszewski, Managing Director, CME, to Florence E. Harmon, Senior Special Counsel, Division of Market Regulation (“Division”), Commission, on May 31, 2005. (“Amendment No. 1”). In Amendment No. 1, the Exchange proposes to amend the size of its iShares Russell 2000 (“IWM”) futures contract to 200 instead of 100 shares. The Exchange believes that this implies that the value of the $0.01 minimum price fluctuation shall be $2.00 instead of $1.00. Also, the Exchange proposes to amend the launch date for IWM futures to June 20, 2005 from June 6, 2005. CME has also certified the proposed rule change with the Commodity Futures Trading Commission (“CFTC”) under Section 5c(c) of the Commodity Exchange Act (“CEA”) 4 on May 4, 2005. 4 7 U.S.C. 7a-2(c). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change CME proposes to adopt rules governing the trade of physically delivered single security futures products (“SFPs”). Further, the Exchange hereby certifies the listing of futures on Exchange Traded Funds (“ETFs”), specifically, the Nasdaq-100 Tracking Stock SM (“QQQQ”), Standard & Poor's Depositary Receipts ® (“SPDR”), and IWM. 5 The Exchange believes that these contract specifications are substantially similar to contract specifications currently in use with respect to physically delivered single security futures traded elsewhere. Proposed new language is *italicized.* 5 The Exchange proposes to make the proposed rule change effective on June 6, 2005 when it intends to list for trading futures based on SPDRs and QQQQs. The Exchange proposes to list futures based on IWMs on June 20, 2005. *See* Amendment No. 1, *supra* note 3. CHAPTER 710: PHYSICALLY DELIVERED SINGLE SECURITY FUTURES 71000. SCOPE OF CHAPTER *This chapter is limited in application to contract specifications applied to security futures contracts that require the physical delivery of a single security (a “Physically Delivered Single Security Futures”). Single securities that are eligible for listing per this Chapter 710 include those that meeting the initial listing standards per Exchange Rule 70001 and the maintenance listing standards per Exchange Rule 70002.* 71001. FUTURES CALL 71001.A. Trading Unit *Physically Delivered Single Security Futures contracts shall require the delivery of a particular number of shares, as specified per Rule 71004, of common stock; an exchange traded fund (“ETF Share”); a trust issued receipt (“TIR”); a registered closed-end management investment company (“Closed-End Fund Share”); or, American Depository Receipts (“ADR”).* 71001.B. Price Increments *Physically Delivered Single Security Futures contracts shall be traded in U.S. Dollars with a minimum price increment as determined by the Board of Directors as depicted in Rule 71004.* 71001.C. Trading Schedule *Physically Delivered Single Security Futures contracts may be traded during such hours, for delivery in such months as determined by the Board of Directors.* 71001.D. Termination of Trading *All trading in a particular Physically Delivered Single Security Futures contract shall terminate at the close of business on the third Friday of the contract month.* 71001.E. Position Limits * Position limits shall be applied on Physically Delivered Single Security Futures contracts such that, during the last five trading days of an expiring contract month, a person shall not own or control more than a specified number of contracts net long or net short in the expiring contract month, as depicted in Exchange Rule 71004. Position limits for each Physically Delivered Single Security Futures contract shall be determined on a case-by-case basis at levels no greater than those prescribed by CFTC Regulation § 41.25(a)(3). * 71001.F. Price Limits and Trading Halts *There is no daily price limit for Physically Delivered Single Security Futures contracts. Trading of Physically Delivered Single Security Futures shall be halted at all times that a regulatory halt, as defined per SEC Rule 6h-1(a)(3) and CFTC Regulation § 41.1(l), has been instituted for the underlying security.* 71002. SETTLEMENT PRICE 71002.A. Daily Settlement Price *Except for the last day of trading on an expiring contract, daily settlement prices shall be determined per Rule 813.* 71002.B. Final Settlement Price *On the last day of trading for an expiring contract, the Final Settlement Price is determined in accordance with Rule 71002.A. unless the Final Settlement Price is fixed in accordance with Rule 70120.* 71003. DELIVERY *Three
(3)business days after the last trading day for an expiring contract, the National Securities Clearing Corporation and Depository Trust Corporation will facilitate delivery of, and payment for, the underlying common stock, American Depository Receipts, shares of exchange-traded funds, shares of closed-end management investment companies, or trust issued receipts whereby: a seller (i.e., the holder of a net short position) delivers the securities underlying the contract to a respective buyer (i.e., the holder of a net long position); and, in exchange, that buyer pays his respective seller the aggregate dollar amount of the Expiration Day Settlement Price multiplied by the quantity of the underlying securities delivered.* 6 6 The Exchange has clarified that Depository Trust Corporation will facilitate delivery of, and payment for, the underlying common stock, American Depository Receipts, shares of exchange-traded funds, shares of closed-end management investment companies, or trust issued receipts via a participant of DTC with whom CME has a dedicated account. Telephone conversation between John Labuszewski, Managing Director, CME, and Florence E. Harmon, Senior Special Counsel, Division, Commission, on June 9, 2005. 71004. APPROVED SECURITIES *The following securities have been approved by the Board of Directors as the subject of Physically Delivered Single Security Futures Contracts:* *Approved security* *Unit of trading* *Minimum fluctuation* *Position limit in expiring contract in last 5 trading days* * Nasdaq-100 Tracking Stock SM (“QQQQ”) * *200 shares* *$0.01 or $2.00 per contract* *11,250* *Standard & Poor's Depositary Receipts ® (“SPDR”)* *100 shares* *$0.01 or $1.00 per contract* *22,500* *iShares Russell 2000 ( “IWM”)* *200 shares* *$0.01 or $2.00 per contract* 7 *11,250* 7 Trading in physically settled futures on IWMs did not qualify for the 22,500 position limit pursuant to CFTC Regulation § 41.25(a)(3)(i)(A) prior to the 2-for-1 split with an ex-date of June 9, 2005. However, after the split, futures based on IWMs do qualify for a net position limit no greater than 22,500 (100 share contract) pursuant to this CFTC Regulation. To the extent that CME amended the IWM contract size from the originally proposed 100 share contract to 200 share contract as a result of the split, the applicable position limit for futures on IWM contracts pursuant to CFTC Regulation § 41.25 would be 11,250. Telephone conversation between John Labuszewski, Managing Director, CME, and Florence E. Harmon, Senior Special Counsel, Division, Commission, on June 28, 2005. 71005. EMERGENCIES, ACTS OF GOD, ACTS OF GOVERNMENT *If delivery or acceptance or any precondition or requirement of either is prevented by a strike, fire, accident, action of government or act of God, the seller or buyer shall immediately notify the Exchange President. If the President determines that emergency action may be necessary, he shall call a special meeting of the Board of Directors and arrange for the presentation of evidence respecting the emergency condition. If the Board determines that an emergency condition exists, it shall take such action as it deems necessary under the circumstances and its decision shall be binding upon all parties to the contract.* INTERPRETATIONS & SPECIAL NOTICES RELATING TO CHAPTER 710 *Standard & Poor's, a division of The McGraw-Hill Companies, Inc. (“S&P”), does not guarantee the accuracy and/or completeness of the S&P Stock Indices or any data included therein. S&P makes no warranty, express or implied, as to the results to be obtained by any person or any entity from the use of the S&P Index ETFs or any data included therein in connection with the trading of futures contracts, options on futures contracts or any other use. S&P makes no express or implied warranties, and expressly disclaims all warranties of merchantability or fitness for a particular purpose or use with respect to the S&P Index ETFs or any data included therein. Without limiting any of the foregoing, in no event shall S&P have any liability for any special, punitive, indirect, or consequential damages (including lost profits), even if notified of the possibility of such damages.* *NEITHER FRANK RUSSELL COMPANY'S PUBLICATION OF THE RUSSELL INDEXES NOR ITS LICENSING OF ITS TRADEMARKS FOR USE IN CONNECTION WITH SECURITIES OR OTHER FINANCIAL PRODUCTS DERIVED FROM A RUSSELL INDEX IN ANY WAY SUGGESTS OR IMPLIES A REPRESENTATION OR OPINION BY FRANK RUSSELL COMPANY AS TO THE ATTRACTIVENESS OF INVESTMENT IN ANY SECURITIES OR OTHER FINANCIAL PRODUCTS BASED UPON OR DERIVED FROM ANY RUSSELL INDEX. FRANK RUSSELL COMPANY IS NOT THE ISSUER OF ANY SUCH SECURITIES OR OTHER FINANCIAL PRODUCTS AND MAKES NO EXPRESS OR IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE WITH RESPECT TO ANY RUSSELL INDEX OR ANY DATA INCLUDED OR REFLECTED THEREIN, NOR AS TO RESULTS TO BE OBTAINED BY ANY PERSON OR ANY ENTITY FROM THE USE OF THE RUSSELL INDEX OR ANY DATA INCLUDED OR REFLECTED THEREIN.* II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change, as amended. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects or 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 contract specifications governing physically delivered single security futures. Further, the Exchange proposes to list for trading, per such rules, futures on ETFs, specifically, QQQQ, SPDR, and IWM. The Exchange intends to offer physically delivered single security futures exclusively on CME's GLOBEX® electronic trading platform as opposed to trading on the floor of the Exchange. *Contract Size* —CME Rule 71001.A., Trading Unit, specifies that “Physically Delivered Single Security Futures contracts shall require the delivery of a particular number of shares, as specified per CME Rule 71004, of common stock; an exchange traded fund (‘ETF Share’); a trust issued receipt (‘TIR’); a registered closed-end management investment company (‘Closed-End Fund Share’); or, American Depository Receipts (‘ADR’).” CME Rule 71004, Approved Securities, provides that futures based on SPDRs shall be traded in units of 100 shares. SPDRs closed at $117.96 on March 31, 2005. The Exchange believes that this implies a contract valuation of $11,796. However, the Exchange proposes to trade QQQQs and IWMs based upon a 200-share unit. The Nasdaq-100 Tracking Stock closed at $36.57 on March 31, 2005, which equates to a contract value of $7,314. IWMs closed at $124.24 on March 31, 2005 but are scheduled to be split on a 2-for-1 basis on June 9, 2005 which, the Exchange believes, implies a post-split share value of $62.12 or a contract value of $12,424 based upon a 200-share contract. The Exchange believes that these values are generally somewhat smaller than the size of the E-mini S&P 500, E-mini Russell 2000, and E-mini Nasdaq-100. The Exchange further believes that they are generally, with the exception of QQQQs and IWMs, consistent with practices in the context of other SFPs and with ETF-based options traded on stock option exchanges, which are generally based upon a 100-share trading unit. *Quotation Specification* —CME Rule 71002.B., Price Increments, provides that “Physically Delivered Single Security Futures contracts shall be traded in U.S. Dollars with a minimum price increment as determined by the Board of Directors as depicted in Rule 71004.” CME Rule 71004, Approved Securities, provides that ETF futures would be quoted in minimum increments of $0.01 per share. The Exchange believes that this equates to a $1.00 tick in the context of SPDRs and a $2.00 tick in QQQQs and IWMs. The Exchange further believes that this provision is not inconsistent with provisions associated with other extant SFPs or stock options based on ETFs. Moreover, the Exchange believes that a penny tick matches practices in the underlying ETF markets. *Position Limits* —CME Rule 71001.E., Position Limits, provides that “[p]osition limits shall be applied on Physically Delivered Single Security Futures contracts such that, during the last five trading days of an expiring contract month, a person shall not own or control more than a specified number of contracts net long or net short in the expiring contract month, as depicted in CME Rule 71004. Position limits for each Physically Delivered Single Security Futures contract shall be determined on a case-by-case basis in accordance with CFTC Regulation § 41.25(a)(3).” CME Rule 71004, Approved Securities, provides that the position limit applied to futures based on QQQQs and IWMs during the last five trading days of an expiring contract month shall be 11,250 contracts and 22,500 contracts for SPDRs. The Exchange represents that these figures were determined by reference to CFTC Regulation § 41.25(a)(3), 8 which prescribes appropriate position limits by reference to the average daily volume
(ADV)in the security over the prior six
(6)months and the shares outstanding. 8 17 CFR 41.25(a)(3). IWMs qualify for the 22,500 position limit on a post-split basis because the trading volume and shares outstanding doubled due to the 2-for-1 split on June 9, 2005. Because of the split, the average daily trading volume is considered doubled for the most recent six-month period in compliance with CFTC Regulation § 41.25. Telephone conservation between John Labuszewski, Managing Director, CME, and Florence E. Harmon, Senior Special Counsel, Division, Commission, on June 28, 2005. ADV (10/04-3/05) Shares outstanding
(000)SPDRs 51,890,256 425,860 (4/22/05) IWMs (pre-split) 8,022,330 40,950 (4/22/05) IWMs (post-split) 16,044,660 81,900 (4/22/05) QQQQs 98,137,035 520,900 (4/21/05) The Exchange believes that the 11,250 contract limit adopted in the context of IWMs and QQQQs is in conformance with CFTC Regulation § 41.25(a)(3)(i)(A) 9 which specifies that “where the average daily trading volume in the underlying security exceeds 20 million shares, or exceeds 15 million shares and there are more than 40 million shares of the underlying shares of the underlying security outstanding, the designated contract market * * * may adopt a net position limit no greater than 22,500 (100-share) contracts.” However, to the extent that the Exchange proposes to adopt a 200-share contract with respect to IWMs and QQQQs, the 22,500 limit need be halved to 11,250 contracts. Finally, the Exchange believes that SPDRs likewise exceed the parameters specified per CFTC Regulation § 41.25(a)(3)(i)(A). 10 Thus, the Exchange proposes to adopt a 22,500 limit, noting the proposed 100-share contract size. 9 17 CFR 41.25(a)(3)(i)(A). 10 17 CFR 41.25(a)(3)(i)(A). *Trading Schedule* —The CME Board has determined that trading in futures on the three ETFs mentioned above shall be conducted from 8:30 a.m. to 3:15 p.m., Mondays through Fridays (Chicago time), when the underlying markets for the ETFs are open. 11 The CME Board has further determined initially to list futures for delivery in the first two quarterly delivery months in the March, June, September, and December cycle plus the first two non-quarterly or “serial” months (January, February, April, May, July, August, October, November) per CME Rule 71001.C., Trading Schedule. 11 CME confirmed that futures on the three ETFs would not be traded during holidays and other periods when the underlying markets for the ETFs are not open. Telephone conversation between Richard Co, Director of Financial Research, CME, and Florence E. Harmon, Senior Special Counsel, Division, Commission, on June 24, 2005. Summary Terms and Conditions Contract Size One-hundred
(100)ETF shares of S&P 500 (SPDR); or two-hundred
(200)shares of Nasdaq-100 Tracking Stock SM
(QQQQ)or iShares Russell 2000 (IWM). Contract Months March Quarterly Cycle plus first two serial months. Trading Hours Traded on the GLOBEX® electronic trading platform from 8:30 am to 3:15 pm Mondays through Fridays (Chicago times). Minimum Price Fluctuation $0.01 or $1.00 per contract in context of SPDRs; $2.00 per contract in context of QQQQs and IWMs. Trading Halts Trading halts are coordinated with halts in the underlying ETFs. Position Limits 11,250 contracts for QQQQs and IWMs and 22,500 contracts for SPDRs net long or short during the last five
(5)trading days of an expiring contract. Final Settlement Date Third Friday of the Contract Month. Last Trading Day Trades until the normal close of trading on the Final Settlement Date. Final Settlement Final settlement is accomplished through delivery of the requisite number of ETF shares. *Trading Halts* —CME Rule 71001.F., Price Limits and Trading Halts, provides that there would be no daily price limit for Physically Delivered Single Security Futures contracts. However, trading of Physically Delivered Single Security Futures shall be halted at all times that a regulatory halt, as defined in CFTC Regulation 41.1(1), 12 has been instituted for the underlying security. The Exchange believes that this provision is consistent with the prescriptions of CFTC Regulation § 41.25(a)(2)(i) 13 and Rule 6h-1(a)(3) of the Act. 14 12 17 CFR 41.1(1). 13 17 CFR 41.25(a)(2)(i). 14 17 CFR 240.6h-1(a)(3). *Daily Settlement* —Settlement prices on a daily basis shall be established per current Exchange practices as defined in CME Rule 813, Settlement Price. *Final Settlement* —Final settlement would be accomplished through the delivery of the underlying securities against the expiring contract per the provisions of CME Rule 71003, Delivery. Specifically, CME Rule 71003 provides that “[t]hree
(3)business days after the last trading day for an expiring contract, the National Securities Clearing Corporation (“NSCC”) and Depository Trust Corporation (“DTC”) will facilitate delivery of, and payment for, the underlying * * * [security] * * * whereby: A seller * * * delivers the securities * * * and, in exchange, that buyer pays his respective seller the aggregate dollar amount of the Expiration Day Settlement Price multiplied by the quantity of the underlying securities delivered.” 15 The invoice amount would be established per CME Rule 71002.B., Final Settlement Price, as the closing price of the futures contract established per normal settlement procedures. 16 Deliveries shall be facilitated through the CME Clearing House and its designated facilitating agents. 15 As described below, CME has reached an agreement with a participant of DTC, a registered clearing agency, to facilitate the delivery-versus-payment transactions that result from an agreement to make or take delivery of the ETFs. 16 *See* Amendment No. 1, *supra* note 3. *Compliance With Listing Standards* —Single securities eligible for listing per these proposed rules would be governed by Chapter 700 of the Exchange's Rulebook (“Rulebook”), which specifies initial and maintenance listing standards for physically delivered single security futures and for security futures based on an Index of two or more securities. 17 The Exchange believes that Chapter 710 of the Rulebook governing physically delivered single security futures is based closely upon the specifications under which single security futures are traded elsewhere. 17 Chapter 700 of the CME Rulebook has been developed for purposes of compliance with Section 6(h) of the Act. CME believes that CME Listing Standards are generally identical to the sample listing standards published in the Commission's, Division of Market Regulation Staff Legal Bulletin No. 15, as supplemented by the Joint Order of the Commission and CFTC identifying listing standards for shares of ETFs, TIRs, and Closed-End Fund. *See* Commission, Division: Staff Legal Bulletin No. 15: Listing Standards for Trading Security Futures Products (September 5, 2001). *See also* Securities Exchange Act Release No. 46090 (June 19, 2002), 67 FR 42760 (June 25, 2002). In order to attain initial eligibility for listing, a security must comply with certain requirements with respect to activity and issue size as discussed below. As illustrated in the accompanying table, all three of the subject securities meet the qualifications for initial listing as specified above. • Per CME Rule 70001.1., “[t]here must be at least seven million shares or receipts evidencing the underlying security outstanding.” • Per CME Rule 70001.7, “it must have had a total trading volume * * * of at least 2,400,000 shares or receipts evidencing the underlying security in the preceding 12 months.” • Per CME Rule 70001.8, “the market price per share of the underlying security has been at least $3.00 for the previous five consecutive business days preceding the date on which the Exchange commences to list and trade the Security Futures Product on said underlying security.” 18 18 The joint order by the CFTC and the Commission modifying the requirement specified in Section 6(h)(3)(D) of the Act and the criterion specified in Section 2(a)(1)(D)(i)(III) of the CEA to permit an ETF share, TIR or Closed-End Fund share to underlie a security future also provides that the market price of the underlying share be $7.50 for the majority of business days during the three calendar months preceding listing of the SFP and that the issuer of the ETF, TIR, or Closed-End Fund be in compliance with all of the applicable requirements of the Act. *See* Securities Exchange Act Release No. 46090 (June 19, 2002), 67 FR 42760 (June 25, 2002). CME intends to comply with this joint order. Telephone conversation between John Labuszewski, Managing Director, CME, and Florence E. Harmon, Senior Special Counsel, Division of Market Regulation (“Division”), Commission, on June 28, 2005. Shares outstanding
(000)Total volume (4/04-3/05) Price (3/31/05) SPDRs 425,860 (4/22/05) 11,841,058,200 $117.96 IWMs 40,950 (4/22/05) 1,849,663,900 112.15 QQQQs 520,900 (4/21/05) 24,973,601,523 36.57 Section 6(h)(3) of the Act Requirements Section 6(h)(3) of the Act 19 contains listing standards and conditions for trading SFPs. Below is a summary of each such requirement or condition, followed by a brief explanation of how CME would comply with it, whether by particular provisions in CME Listing Standards or otherwise. 19 15 U.S.C. 78f(h)(3). Clause
(A)of Section 6(h)(3) of the Act 20 requires that any security underlying a SFP be registered pursuant to Section 12 of the Act. 21 This requirement is addressed by CME Rules 70001.2, 70003.2.b, 70004.2.a, and proposed CME Rule 70002.1.a. 20 15 U.S.C. 78f(h)(3)(A). 21 15 U.S.C. 78l. Clause
(B)of Section 6(h)(3) of the Act 22 requires that a market on which a physically settled SFP is traded have arrangements in place with a registered clearing agency for the payment and delivery of the securities underlying the SFP. CME has reached an agreement with a participant of DTC, a registered clearing agency, to facilitate the delivery-versus-payment transactions which result from an agreement to make or take delivery of the underlying security by the market participant. 23 This DTC participant would provide CME with a dedicated DTC account. This account would be a sub-account of the participant's main account and would be utilized solely for CME activity with respect to the delivery of, and payment for, securities delivered against CME SFPs. CME would act as a contra party to each delivery transaction. The CME Clearing House would submit a delivery instruction for each transaction to DTC by electronic interface provided by the DTC participant. Market participants would be required to provide proof to CME outlining their operational and legal ability to make or take delivery of the underlying securities. These agreements and relevant procedures would be fully operational prior to any possible delivery event associated with such SFPs. 22 15 U.S.C. 78f(h)(3)(B). 23 The Exchange clarified its arrangement for the payment and delivery of securities underlying the SFPs. Telephone conversation between John Labuszewski, Managing Director, CME, and Florence E. Harmon, Senior Special Counsel, Division, Commission, on June 9, 2005. Clause
(C)of Section 6(h)(3) of the Act 24 provides that listing standards for SFPs must be no less restrictive than comparable listing standards for options traded on a national securities exchange or national securities association registered pursuant to Section 15A(a) of the Act. 25 For the reasons discussed herein, notwithstanding specified differences between the Sample Listing Standards and CME Listing Standards, CME believes that the latter are no less restrictive than comparable listing standards for exchange-traded options. 24 15 U.S.C. 78f(h)(3)(C). 25 15 U.S.C. 78 *o* -3(a). Clause
(D)of Section 6(h)(3) of the Act 26 requires that each SFP be based on common stock or such other equity securities as the Commission and CFTC jointly determine are appropriate. This requirement is addressed by CME Rules 70001.1, 70002.1., 70003.2., and 70004.2. 26 15 U.S.C. 78f(h)(3)(D). Clause
(E)of Section 6(h)(3) of the Act 27 requires that each SFP be cleared by a clearing agency that has in place provisions for linked and coordinated clearing with other clearing agencies that clear SFPs, which permits the SFPs to be purchased on one market and offset on another market that trades such product. CME proposes to clear SFPs traded through Exchange facilities through CME Clearing House. CME Clearing House would have in place all provisions for linked and coordinated clearing as mandated by law and statute as of the effective date of such laws and statutes. 27 15 U.S.C. 78f(h)(3)(E). Clause
(F)of Section 6(h)(3) of the Act 28 requires that only a broker or dealer subject to suitability rules comparable to those of a national securities association registered pursuant to Section 15A(a) of the Act 29 effect transactions in a SFP. CME clearing members and their correspondents are bound by the applicable sales practice rules of the National Futures Association (“NFA”), which is a national securities association. As such, the sales practice rules of NFA are, perforce, comparable to those of a national securities association registered pursuant to Section 15A(a) of the Act. 30 Moreover, the application of NFA sales practice rules is extended beyond the CME clearing membership to the extent that NFA By-Law 1101 provides that “[n]o member may carry an account, accept an order or handle a transaction in commodity futures contracts for or on behalf of any non-Member of NFA.” 28 15 U.S.C. 78f(h)(3)(F). 29 15 U.S.C. 78 *o* -3(a). 30 15 U.S.C. 78 *o* -3(a). Clause
(G)of Section 6(h)(3) of the Act 31 requires that each SFP be subject to the prohibition against dual trading in Section 4j of CEA 32 and the rules and regulations thereunder or the provisions of Section 11(a) of the Act 33 and the rules and regulations thereunder. CME Rule 123 requires Exchange members to comply with all applicable “provisions of the Commodity Exchange Act and regulations duly issued pursuant thereto by the CFTC.” 31 15 U.S.C. 78f(h)(3)(G). 32 15 U.S.C. 4j. 33 15 U.S.C. 78k(a). Further, the prohibition of dual trading in SFPs per Regulation § 41.27 34 adopted pursuant to Section 4j(a) of CEA 35 applies to a contract market operating an electronic trading system if such market provides participants with a time or place advantage or the ability to override a predetermined matching algorithm. The Exchange intends to offer SFPs on CME exclusively on its CME Globex electronic trading platform. To the extent that the conditions cited above do not exist in the context of the CME Globex system, the CME Rulebook contains no specific rule relating to dual trading in an electronic forum. Clause
(H)of Section 6(h)(3) of the Act 36 provides that trading in a SFP must not be readily susceptible to manipulation of the price of such SFP, nor to causing or being used in the manipulation of the price of any underlying security, option on such security, or option on a group or index including such securities. CME believes that CME Listing Standards are designed to ensure that CME SFPs and the underlying securities would not be readily susceptible to price manipulation. Under CME Rule 432, an activity “to manipulate prices or to attempt to manipulate prices” is a “major offense” punishable, per CME Rule 430, by “expulsion, suspension, and/or a fine of not more than $1,000,000 plus the monetary value of any benefit received as a result of the violative action.” 34 17 CFR 41.27. 35 7 U.S.C. 6j(a). 36 15 U.S.C. 78f(h)(3)(H). Clause
(I)of Section 6(h)(3) of the Act 37 requires that procedures be in place for coordinated surveillance amongst the market on which a SFP is traded, any market on which any security underlying the SFP is traded, and other markets on which any related security is traded to detect manipulation and insider trading. The Exchange has surveillance procedures in place to detect manipulation on a coordinated basis with other markets. In particular, CME is an affiliate member of the Intermarket Surveillance Group (“ISG”) and is party to an affiliate agreement and an agreement to share market surveillance and regulatory information with the other ISG members. Further, CME is party to a supplemental agreement with the other ISG members to address the concerns expressed by the Commission with respect to affiliate ISG membership. 38 Finally, CME Rule 424 permits CME to enter into agreements for the exchange of information and other forms of mutual assistance with domestic or foreign self-regulatory organizations, associations, boards of trade, and their respective regulators. Clause
(J)of Section 6(h)(3) of the Act 39 requires that a market on which a SFP is traded have in place audit trails necessary or appropriate to facilitate the coordinated surveillance referred to in the preceding paragraph. The Exchange states that it relies upon its Market Regulation Department and its large, highly trained staff to actively monitor market participants and their trading practices and to enforce compliance with CME rules. CME Market Regulation Department staff is organized into Compliance and Market Surveillance Groups. In performing its functions, CME Market Regulation Department routinely works closely with CME Audit Department, CME Clearing House, CME Legal Department, CME Globex Control Center, and CME Information Technology Department. 37 15 U.S.C. 78f(h)(3)(I). 38 *See* Securities Exchange Act Release No. 45956 (May 17, 2002), 67 FR 36740 (May 24, 2002) (joint CFTC and Commission rule relating to cash settlement and regulatory halt requirements for SFPs). 39 15 U.S.C. 78f(h)(3)(J). CME Compliance is responsible for enforcing the trading practice rules of the Exchange through detection, investigation, and prosecution of those who may attempt to violate those CME Rules. Further, CME Compliance is responsible for handling customer complaints, ensuring the integrity of the Exchange's audit trail, and administering an arbitration program for the resolution of disputes. CME Compliance employs investigators, attorneys, trading floor investigators, data analysts, and a computer programming and regulatory systems design staff. CME believes that CME Market Regulation Department has created some of the most sophisticated tools in the world to assist with the detection of possible rule violations and monitoring of the market. Among the systems it uses are the Regulatory Trade Browser (“RTB”), the Virtual Detection System (“VDS”), the Reportable Position System (“RPS”), and the RegWeb Profile System (“RegWeb”). These systems include information on all CME Globex users, all transactions, large positions, and statistical information on trading entities. CME Market Surveillance is dedicated to the detection and prevention of market manipulation and other similar forms of market disruption. As part of these responsibilities, CME Market Surveillance enforces the Exchange's position limit rules, administers the hedge approval process, and maintains the Exchange's RPS system. CME believes that the foundation of the CME Market Surveillance program is the deep knowledge of its staff about the major users, brokers, and clearing firms, along with its relationship with other regulators. Day-to-day monitoring of market positions is handled by a dedicated group of surveillance analysts assigned to specific market(s). Each analyst develops in-depth expertise of the factors that influence the market in question. The Exchange estimates that perhaps 90% of the market users at any single time are known to the Exchange. Daily surveillance staff activities include: • Monitoring positions for size based on percentage of open interest and historic user participation in each contract. • Aggregation of positions across clearing members with the use of CME trade reporting systems to account for all positions held by any single participant. CME believes that this daily review permits the surveillance analyst to promptly identify unusual market activity. • As a contract approaches maturity, large positions are scrutinized to determine whether such activity is consistent with prior experience, allowing prompt regulatory intervention if necessary. • Analysts closely monitor market news through on-line and print media. • Staff conducts on-site visits to large market participants periodically. CME Market Regulation staff investigates possible misconduct and, when appropriate, initiates disciplinary action. CME Rule 430 empowers the Exchange's disciplinary committees to discipline, limit, suspend, or terminate a member's activities for cause, amongst other sanctions. Further, per CME Rule 123, the Exchange requires its members to be responsible for “the filing of reports, maintenance of books and records, and permitting inspection and visitation” in order to facilitate such investigations by Exchange staff. CME Rule 536 requires that certain information be recorded with respect to each order, including: Time entered, terms of the order, order type, instrument and contract month, price, quantity, account type, account designation, user code, and clearing firm. This information may be recorded manually on timestamped order tickets, electronically in a clearing firms system, or by entering the orders with the required information into CME Globex immediately upon receipt. A complete CME Globex electronic audit trail is archived and maintained by CME for at least a five-year period. Clearing firms must also maintain any written or electronic order records for a period of five years. Clause
(K)of Section 6(h)(3) of the Act 40 requires that a market on which a SFP is traded have in place procedures to coordinate trading halts between such market and any market on which any security underlying the SFP is traded and other markets on which any related security is traded. The Exchange filed with the Commission CME Rules establishing a generalized framework for the trade of SFPs. 41 In particular, proposed CME Rule 71001.F. provides, in accordance with Regulation § 41.25(a)(2) of CEA, 42 that “[t]rading of Physically Delivered Single Security Futures shall be halted at all times that a regulatory halt, as defined per SEC Rule 6h-1(a)(3) and CFTC Regulation § 41.1(l), has been instituted for the underlying security.” 40 U.S.C. 78f(h)(3)(K). 41 *See* SR-CME-2005-03. 42 17 CFR 41.25(a)(2). Clause
(L)of Section 6(h)(3) of the Act 43 requires that the margin requirements for a SFP comply with the regulations prescribed pursuant to Section 7(c)(2)(B) of the Act. 44 CME has margin rules in place. 45 Thus, CME believes that its customer margin rules are consistent with the requirements of the Act. 43 15 U.S.C. 78f(h)(3)(L). 44 15 U.S.C. 78g(c)(2)(B). 45 *See* Securities Exchange Act Release No. 46637 (October 10, 2002), 67 FR 64672 (October 21, 2002) (SR-CME-2002-01). For the reasons described above, CME believes that CME Listing Standards submitted herewith satisfy the requirements set forth in Section 6(h)(3) of the Act. 46 46 15 U.S.C. 78f(h)(3). 2. Statutory Basis The Exchange believes that its proposed rule change, as amended, is consistent with Section 6(b) of the Act, 47 in general, and furthers the objectives of Section 6(b)(5) of the Act, 48 in particular, in that it is designed 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. 47 15 U.S.C. 78f(b). 48 15 U.S.C. 78f(b)(5). B. Self-Regulatory Organization's Statement on Burden on Competition CME does not believe that the proposed rule change, as amended, would impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others The Exchange has 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 The foregoing proposed rule change, as amended, has become effective pursuant to Section 19(b)(7) of the Act. 49 Within 60 days of the date of effectiveness of the proposed rule change, as amended, the Commission, after consultation with the CFTC, may summarily abrogate the proposed rule change and require that the proposed rule change be refiled in accordance with the provisions of Section 19(b)(1) of the Act. 50 49 15 U.S.C. 78s(b)(7). 50 15 U.S.C. 78s(b)(1). 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-CME-2005-03 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-CME-2005-03. 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 CME. 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-CME-2005-03 and should be submitted on or before August 1, 2005. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 51 51 17 CFR 200.30-3(a)(12). Jill M. Peterson, Assistant Secretary. [FR Doc. E5-3618 Filed 7-8-05; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-51959; File No. SR-CME-2005-01] Self-Regulatory Organization; Chicago Mercantile Exchange; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to Listing Standards for Security Futures Products June 30, 2005. Pursuant to Section 19(b)(7) of the Securities Exchange Act of 1934 (“Act”), 1 and Rule 19b-7 thereunder, 2 notice is hereby given that on May 4, 2005, the Chicago Mercantile Exchange (“CME” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change described in Items I, II, and III below, which Items have been prepared by CME. 1 15 U.S.C. 78s(b)(7). 2 17 CFR 240.19b-7. CME has also certified the proposed rule change with the Commodity Futures Trading Commission (“CFTC”) under Section 5c(c) of the Commodity Exchange Act (“CEA”) 3 on May 4, 2005. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 3 7 U.S.C. 7a-2(c). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change CME proposes to amend its Security Futures Product Listing Standards (“Listing Standards”) for purposes of Section 6(h) of the Act. 4 These amendments are intended to conform CME Listing Standards for physically settled security futures products, including exchange traded funds (“ETFs”), trust issued receipts (“TIRs”), closed-end funds and narrow-based indices (“NRIs”), to current industry practices. The text of the proposed rule change is below. Proposed new language is *italicized* ; and proposed deletions are in [brackets]. 4 15 U.S.C. 78f(h). CHAPTER 700: SECURITY FUTURES PRODUCT LISTING STANDARDS 70000. SCOPE OF CHAPTER No change. 70001. SINGLE SECURITY FUTURES—INITIAL LISTING STANDARDS For a Security Futures Product, that is physically settled, to be eligible for initial listing, the security underlying the futures contract must meet each of the following requirements: 1.-5. No change. 6. In the case of an underlying security other than an ETF Share, TIR or Closed-End Fund Share, it must have had [an average daily trading volume (in all markets in which the underlying security has traded) of at least 109,000 shares or receipts evidencing the underlying security in each of the preceding 12 months.] *total trading volume (in all markets in which the underlying security is traded) of at least 2,400,000 shares or receipts evidencing the underlying security in the preceding 12 months.* Interpretation of Requirement 6 as Applied to Restructure Securities No change. 7. No change. 8. [It must have had a market price per security of at least $7.50, as measured by the lowest closing price reported in any market in which it has traded, for the majority of business days during the three calendar months preceding the date of selection.] *If the underlying security is a “covered security as defined under Section 18(b)(1)(A) of the Securities Act of 1933, the market price per share of the underlying security has been at least $3.00 for the previous five consecutive business days preceding the date on which the Exchange commences to list and trade the Security Futures Product on said underlying security. For purposes of this provision, the market price of such underlying security is measured by the closing price reported in the primary market in which the underlying security is traded.* Interpretation of Requirement 8 as Applied to Restructure Securities Look-Back Test: In determining whether a Restructure Security that is issued or distributed to the shareholders of an Original Equity Security (but not a Restructure Security that is issued pursuant to a public offering or rights distribution) satisfies this requirement, the Exchange may “look back” to the market price history of the Original Equity Security prior to the ex-date of the Restructuring Transaction if the following Look-Back Test is satisfied: a. The Restructure Security has an aggregate market value of at least $500 million; b. The aggregate market value of the Restructure Security equals or exceeds the Relevant Percentage (defined below) of the aggregate market value of the Original Equity Security; c. The aggregate book value of the assets attributed to the business represented by the Restructure Security equals or exceeds both $50 million and the Relevant Percentage of the aggregate book value of the assets attributed to the business represented by the Original Equity Security; or d. The revenues attributed to the business represented by the Restructure Security equals or exceeds both $50 million and the Relevant Percentage of the revenues attributed to the business represented by the Original Equity Security. For purposes of determining whether the Look-Back Test is satisfied, the term “Relevant Percentage” means:
(i)25%, when the applicable measure determined with respect to the Original Equity Security or the business it represents includes the business represented by the Restructure Security; and
(ii)33 1/3 %, when the applicable measure determined with respect to the Original Equity Security or the business it represents excludes the business represented by the Restructure Security. In calculating comparative aggregate market values, the Exchange will use the Restructure Security's closing price on its primary market on the last business day prior to the Selection Date, or the Restructure Security's opening price on its primary market on the Selection Date, and will use the corresponding closing or opening price of the related Original Equity Security. Furthermore, in calculating comparative asset values and revenues, the Exchange will use the issuer's
(i)latest annual financial statements or
(ii)most recently available interim financial statements (so long as such interim financial statements cover a period of not less than three months), whichever are more recent. Those financial statements may be audited or unaudited and may be pro forma. Restructure Securities Issued in Public Offering or Rights Distribution: In determining whether a Restructure Security that is distributed pursuant to a public offering or a rights distribution satisfies requirement [(viii)] *8,* the Exchange may look back to the market price history of the Original Equity Security if:
(i)The foregoing Look-Back Test is satisfied;
(ii)the Restructure Security trades “regular way” on an exchange or automatic quotation system for at least five trading days immediately preceding the Selection Date; and
(iii)at the close of trading on each trading day on which the Restructure Security trades “regular way” prior to the Selection Date, as well as at the opening of trading on Selection Date, the market price of the Restructure Security was at least [$7.50]; *$3.00* . Limitation on Use of Look-Back Test: Except in the case of a Restructure Security that is distributed pursuant to a public offering or rights distribution, the Exchange will not rely upon the market price history of an Original Equity Security for any trading day unless it also relies upon the trading volume history for that trading day. In addition, once the Exchange commences to rely upon a Restructure Security's trading volume and market price history for any trading day, the Exchange will not rely upon the trading volume and market price history of the related Original Equity Security for any trading day thereafter. *9. If the underlying security is not a “covered security as defined under Section 18(b)(1)(A) of the Securities Act of 1933, the market price per share of the underlying security has been at least $7.50 for the previous five consecutive business days preceding the date on which the Exchange commences to list and trade the Security Futures Product on said underlying security. For purposes of this provision, the market price of such underlying security is measured by the closing price reported in the primary market in which the underlying security is traded.* Interpretation of Requirement 9 as Applied to Restructure Securities *Look-Back Test: In determining whether a Restructure Security that is issued or distributed to the shareholders of an Original Equity Security (but not a Restructure Security that is issued pursuant to a public offering or rights distribution) satisfies this requirement, the Exchange may “look back” to the market price history of the Original Equity Security prior to the ex-date of the Restructuring Transaction if the following Look-Back Test is satisfied:* *a. The Restructure Security has an aggregate market value of at least $500 million;* *b. The aggregate market value of the Restructure Security equals or exceeds the Relevant Percentage (defined below) of the aggregate market value of the Original Equity Security;* *c. The aggregate book value of the assets attributed to the business represented by the Restructure Security equals or exceeds both $50 million and the Relevant Percentage of the aggregate book value of the assets attributed to the business represented by the Original Equity Security; or* *d. The revenues attributed to the business represented by the Restructure Security equals or exceeds both $50 million and the Relevant Percentage of the revenues attributed to the business represented by the Original Equity Security.* * For purposes of determining whether the Look-Back Test is satisfied, the term “Relevant Percentage” means:
(i)25%, when the applicable measure determined with respect to the Original Equity Security or the business it represents includes the business represented by the Restructure Security; and
(ii)33 1/3 %, when the applicable measure determined with respect to the Original Equity Security or the business it represents excludes the business represented by the Restructure Security. * *In calculating comparative aggregate market values, the Exchange will use the Restructure Security's closing price on its primary market on the last business day prior to the Selection Date, or the Restructure Security's opening price on its primary market on the Selection Date, and will use the corresponding closing or opening price of the related Original Equity Security.* *Furthermore, in calculating comparative asset values and revenues, the Exchange will use the issuer's
(i)latest annual financial statements or
(ii)most recently available interim financial statements (so long as such interim financial statements cover a period of not less than three months), whichever are more recent. Those financial statements may be audited or unaudited and may be pro forma.* *Restructure Securities Issued in Public Offering or Rights Distribution: In determining whether a Restructure Security that is distributed pursuant to a public offering or a rights distribution satisfies requirement [(viii)] 8, the Exchange may look back to the market price history of the Original Equity Security if:
(i)The foregoing Look-Back Test is satisfied;
(ii)the Restructure Security trades “regular way” on an exchange or automatic quotation system for at least five trading days immediately preceding the Selection Date; and
(iii)at the close of trading on each trading day on which the Restructure Security trades “regular way” prior to the Selection Date, as well as at the opening of trading on Selection Date, the market price of the Restructure Security was at least $7.50.* *Limitation on Use of Look-Back Test: Except in the case of a Restructure Security that is distributed pursuant to a public offering or rights distribution, the Exchange will not rely upon the market price history of an Original Equity Security for any trading day unless it also relies upon the trading volume history for that trading day. In addition, once the Exchange commences to rely upon a Restructure Security's trading volume and market price history for any trading day, the Exchange will not rely upon the trading volume and market price history of the related Original Equity Security for any trading day thereafter.* [9.] *10.* If the underlying security is an ADR: a. The Exchange must have an effective surveillance sharing agreement with the primary exchange in the home country where the stock underlying the ADR is traded; b. The combined trading volume of the ADR and other related ADRs and securities in the U.S. ADR market, or in markets with which the Exchange has in place an effective surveillance sharing agreement, represents (on a share equivalent basis) at least 50% of the combined worldwide trading volume in the ADR, the security underlying the ADR, other classes of common stock related to the underlying security, and ADRs overlying such other stock over the three-month period preceding the dates of selection of the ADR for futures trading (“Selection Date”); c.
(1)The combined trading volume of the ADR and other related ADRs and securities in the U.S. ADR market, and in markets where the Exchange has in place an effective surveillance sharing agreement, represents (on a share equivalent basis) at least 20% of the combined worldwide trading volume in the ADR and in other related ADRs and securities over the three-month period preceding the Selection Date;
(2)The average daily trading volume for the ADR in the U.S. markets over the three-month period preceding the Selection Date is at least 100,000 receipts; and
(3)The daily trading volume for the ADR is at least 60,000 receipts in the U.S. markets on a majority of the trading days for the three-month period preceding the Selection Date. Or d. The Securities and Exchange Commission and Commodity Futures Trading Commission have otherwise authorized the listing. [10.] *11.* The Exchange will not list for trading any SFP where the underlying security is a Restructure Security that is not yet issued and outstanding, regardless of whether the Restructure Security is trading on a “when issued” basis or on another basis that is contingent upon the issuance or distribution of securities. 70002. SINGLE SECURITY FUTURES—MAINTENANCE LISTING STANDARDS 1. [Absent exceptional circumstances, the] *The* Exchange will not open for trading any SFP, that is physically settled, with a new delivery month, and may prohibit any opening purchase transactions in the SFP already trading, to the extent it deems such action necessary or appropriate, unless the underlying security meets each of the following maintenance requirements; provided that, if the underlying security is an ETF Share, TIR or Closed-End Fund Share, the applicable requirements for initial listing of the related SFP (as described in Rule 70001 above) shall apply in lieu of the following maintenance requirements: *a. It must be registered under Section 12 of the Exchange Act.* [a.] *b.* There must be at least 6,300,000 shares or receipts evidencing the underlying security outstanding that are owned by persons other than those who are required to report their security holdings pursuant to Section 16(a) of the Exchange Act. [b.] *c.* There must be at least 1,600 securityholders. [c.] *d.* It must have had an average daily trading volume (across all markets in which the underlying security is traded) of least 82,000 shares or receipts evidencing the underlying security in each of the preceding 12 months. Interpretation of Requirement [1.c.] *1.d.* as Applied to Restructure Securities If a Restructure Security is approved for a SFP trading under the initial listing standards in [Section I] *Rule 70001* , the average daily trading volume history of the Original Equity Security (as defined in [Section I] *Rule 70001* ) prior to the commencement of trading in the Restructure Security (as defined in [Section I] Rule 70001), including “when-issued” trading, may be taken into account in determining whether this requirement is satisfied. [d.] The security underlying the Security Futures Product must have had a market price of at least $5.00, as measured by the highest closing price reported in any market in which it has traded, for a majority of business days during the preceding six calendar months; provided, however, that the Exchange may waive this requirement and open for trading a SFP with a new delivery month, if:
(1)The aggregate market value of the underlying security equals or exceeds $50 million;
(2)Customer open interest (reflected on a two-sided basis) equals or exceeds 4,000 contracts for all delivery months;
(3)Its average daily trading volume (in all markets in which the underlying security is traded) has been at least 109,000 shares or receipts evidencing the underlying security in each of the preceding 12 months; and
(4)The market price per share or receipt of the underlying security closed at $3.00 or above on a majority of the business days during the preceding six calendar months, as measured by the highest closing price for the underlying security reported in any market in which the underlying security traded, and the market price per share or receipt of the underlying security is at least $3.00 at the time such additional series are authorized for trading. During the next consecutive six calendar month period, to satisfy this paragraph, the market price per share or receipt of the underlying security must be at least $4.00.] * e. The market price per share or receipt of the underlying security has not closed below $3.00 on the previous trading day to the Expiration Day of the nearest expiring Contract on the underlying security. The market price per share of the underlying security will be measured by the closing price reported in the primary market in which the underlying security traded. * Interpretation of Requirement [d] 1.e. as Applied to Restructure Securities If a Restructure Security is approved for SFP trading under the initial listing standards per Rule 70001[.8], the market price history of the Original Equity Security prior to the commencement of trading in the Restructure Security, including “when-issued” trading, may be taken into account in determining whether this requirement is satisfied. [e.] *f.* If the underlying security is an ADR and was initially deemed appropriate for SFP trading per Rule 70001.10.b or Rule 70001. *10.c.[.8.b. or 70001.8.c.* ], the Exchange will not open for trading SFPs having additional delivery months on the ADR unless:
(1)The percentage of worldwide trading volume in the ADR and other related securities that takes place in the U.S. and in markets with which the Exchange has in place effective surveillance sharing agreements for any consecutive three-month period is:
(1)At least 30%, without regard to the average daily trading volume in the ADR; or
(2)at least 15% when the average U.S. daily trading volume in the ADR for the previous three months is at least 70,000 receipts;
(2)The Exchange has in place an effective surveillance sharing agreement with the primary exchange in the home country where the security underlying the ADR is traded; or
(3)The Securities and Exchange Commission and Commodity Futures Trading Commission have otherwise authorized the listing. 2.-4. No change. 70003. SFPs BASED ON INDEX COMPOSED OF TWO OR MORE SECURITIES—INITIAL LISTING STANDARDS No change. 70004. SFPs BASED ON INDEX COMPOSED OF TWO OR MORE SECURITIES—MAINTENANCE LISTING STANDARDS The Exchange will not open for trading SFPs, that are physically settled, based on an index composed of two or more securities with a new delivery month unless the underlying index: 1. No change. 2. Meets the following requirements: a.-i. No change. Interpretation of Requirement 2.i. Regarding Procedures for Rebalancing [The date of determination for the mandatory annual rebalancing of an approximately equal dollar-weighted index underlying a physically settled security futures product as described in the first sentence of
(i)will initially be the last trading day of the year, except that, if the Exchange has rebalanced such index on an interim basis as described in the second sentence of (i), any following annual rebalancing of such index will occur on the anniversary date of the interim rebalancing. New contracts issued on or after a date on which the corresponding index is rebalanced in accordance with
(i)will be based on an index consisting of the original component securities, weighted applying the methodology described under
(i)above on the basis of security prices on the rebalancing date. Outstanding contracts will not be affected by any rebalancing.] *In the case of a physically settled SFP based on an approximately equal dollar-weighted index composed of one or more securities, each component security will be weighted equally based on its market price on the Selection Date, subject to rounding up or down the number of shares or receipts evidencing such security to the nearest multiple of 100 shares or receipts.* j.-l. 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, the Exchange included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects or such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange has Listing Standards applicable to physically settled security futures products (“SFPs”) for NBIs and for single security products, including ETFs, TIRs, and shares of registered closed-end management investment companies (“Closed-End Fund”). 5 The Exchange proposes to amend its Listing Standards to conform to current industry practices. In particular, the Exchange proposes to amend the current requirement that a security underlying a SFP, other than an ETF, TIR, or Closed-End Fund share, must have had an average daily trading volume of at least 109,000 shares or receipts evidencing the underlying security in each of the preceding 12 months to adopt a requirement, in conformance with current industry practice (and the standards for an ETFs, TIRs, and Closed-End Fund share), that such security must evidence total trading volume of at least 2,400,000 shares or receipts evidencing the underlying security in the preceding 12 months. Finally, the Exchange also proposes to adopt other minor or technical amendments to its Listing Standards to conform with industry practices, such as adjusting the market price per share of a security underlying a SFP to distinguish between a covered security as defined under Section 18(b)(1)(A) of the Securities Act of 1933 and a security that is “not covered.” 6 5 *See* Securities Exchange Act Release No. 46975 (December 9, 2002), 67 FR 77297 (December 17, 2002) (SR-CME-2002-02). 6 The joint order by the CFTC and the Commission modifying the requirement specified in Section 6(h)(3)(D) of the Act and the criterion specified in Section 2(a)(1)(D)(i)(III) of the CEA to permit an ETF share, TIR or Closed-End Fund share to underlie a security future also provides that the market price of the underlying share be $7.50 for the majority of business days during the three calendar months preceding listing of the SFP and that the issuer of the ETF, TIR, or Closed-End Fund be in compliance with all of the applicable requirements of the Act. See Securities Exchange Act Release No. 46090 (June 19, 2002), 67 FR 42760 (June 25, 2002). CME intends to comply with this joint order. Telephone conversation between John Labuszewski, Managing Director, CME, and Florence E. Harmon, Senior Special Counsel, Division of Market Regulation (“Division”), Commission, on June 28, 2005. *Section 6(h)(3) of the Act Requirements* Section 6(h)(3) of the Act 7 contains listing standards and conditions for trading SFPs. Below is a summary of each such requirement or condition, followed by a brief explanation of how CME would comply with it, whether by particular provisions in CME Listing Standards or otherwise. 7 15 U.S.C. 78f(h)(3). Clause
(A)of Section 6(h)(3) of the Act 8 requires that any security underlying a SFP be registered pursuant to Section 12 of the Act. 9 This requirement is addressed by CME Rules 70001.2, 70003.2.b, 70004.2.a, and proposed CME Rule 70002.1.a. 8 15 U.S.C. 78f(h)(3)(A). 9 15 U.S.C. 78l. Clause
(B)of Section 6(h)(3) of the Act 10 requires that a market on which a physically settled SFP is traded have arrangements in place with a registered clearing agency for the payment and delivery of the securities underlying the SFP. CME has reached an agreement with a participant of DTC, a registered clearing agency, to facilitate the delivery-versus-payment transactions which result from an agreement to make or take delivery of the underlying security by the market participant. 11 This DTC participant would provide CME with a dedicated DTC account. This account would be a sub-account of the participant's main account and would be utilized solely for CME activity with respect to the delivery of, and payment for, securities delivered against CME SFPs. CME would act as a contra party to each delivery transaction. The CME Clearing House would submit a delivery instruction for each transaction to DTC by electronic interface provided by the DTC participant. Market participants would be required to provide proof to CME outlining their operational and legal ability to make or take delivery of the underlying securities. These agreements and relevant procedures would be fully operational prior to any possible delivery event associated with such SFPs. 10 15 U.S.C. 78f(h)(3)(B). 11 The Exchange clarified its arrangement for the payment and delivery of securities underlying the SFPs. Telephone conversation between John Labuszewski, Managing Director, CME, and Florence E. Harmon, Senior Special Counsel, Division, Commission, on June 9, 2005. Clause
(C)of Section 6(h)(3) of the Act 12 provides that listing standards for SFPs must be no less restrictive than comparable listing standards for options traded on a national securities exchange or national securities association registered pursuant to Section 15A(a) of the Act. 13 For the reasons discussed herein, notwithstanding specified differences between the Sample Listing Standards and CME Listing Standards, CME believes that the latter are no less restrictive than comparable listing standards for exchange-traded options. 12 15 U.S.C. 78f(h)(3)(C). 13 15 U.S.C. 78 *o* -3(a). Clause
(D)of Section 6(h)(3) of the Act 14 requires that each SFP be based on common stock or such other equity securities as the Commission and CFTC jointly determine are appropriate. This requirement is addressed by CME Rules 70001.1, 70002.1., 70003.2., and 70004.2. 14 15 U.S.C. 78f(h)(3)(D). Clause
(E)of Section 6(h)(3) of the Act 15 requires that each SFP be cleared by a clearing agency that has in place provisions for linked and coordinated clearing with other clearing agencies that clear SFPs, which permits the SFPs to be purchased on one market and offset on another market that trades such product. CME proposes to clear SFPs traded through Exchange facilities through CME Clearing House. CME Clearing House would have in place all provisions for linked and coordinated clearing as mandated by law and statute as of the effective date of such laws and statutes. 15 15 U.S.C. 78f(h)(3)(E). Clause
(F)of Section 6(h)(3) of the Act 16 requires that only a broker or dealer subject to suitability rules comparable to those of a national securities association registered pursuant to Section 15A(a) of the Act 17 effect transactions in a SFP. CME clearing members and their correspondents are bound by the applicable sales practice rules of the National Futures Association (“NFA”), which is a national securities association. As such, the sales practice rules of NFA are, perforce, comparable to those of a national securities association registered pursuant to Section 15A(a) of the Act. 18 Moreover, the application of NFA sales practice rules is extended beyond the CME clearing membership to the extent that NFA By-Law 1101 provides that “[n]o member may carry an account, accept an order or handle a transaction in commodity futures contracts for or on behalf of any non-Member of NFA.” 16 15 U.S.C. 78f(h)(3)(F). 17 15 U.S.C. 78 *o* -3(a). 18 15 U.S.C. 78 *o* -3(a). Clause
(G)of Section 6(h)(3) of the Act 19 requires that each SFP be subject to the prohibition against dual trading in Section 4j of CEA 20 and the rules and regulations thereunder or the provisions of Section 11(a) of the Act 21 and the rules and regulations thereunder. CME Rule 123 requires Exchange members to comply with all applicable “provisions of the Commodity Exchange Act and regulations duly issued pursuant thereto by the CFTC.” 19 15 U.S.C. 78f(h)(3)(G). 20 15 U.S.C. 4j. 21 15 U.S.C. 78k(a). Further, the prohibition of dual trading in SFPs per Regulation § 41.272 22 adopted pursuant to Section 4j(a) of CEA 23 applies to a contract market operating an electronic trading system if such market provides participants with a time or place advantage or the ability to override a predetermined matching algorithm. The Exchange intends to offer SFPs on CME exclusively on its CME Globex electronic trading platform. To the extent that the conditions cited above do not exist in the context of the CME Globex system, the CME Rulebook contains no specific rule relating to dual trading in an electronic forum. 22 17 CFR 41.27. 23 7 U.S.C. 6j(a). Clause
(H)of Section 6(h)(3) of the Act 24 provides that trading in a SFP must not be readily susceptible to manipulation of the price of such SFP, nor to causing or being used in the manipulation of the price of any underlying security, option on such security, or option on a group or index including such securities. CME believes that CME Listing Standards are designed to ensure that CME SFPs and the underlying securities would not be readily susceptible to price manipulation. Under CME Rule 432, an activity “to manipulate prices or to attempt to manipulate prices” is a “major offense” punishable, per CME Rule 430, by “expulsion, suspension, and/or a fine of not more than $1,000,000 plus the monetary value of any benefit received as a result of the violative action.” 24 15 U.S.C. 78f(h)(3)(H). Clause
(I)of Section 6(h)(3) of the Act 25 requires that procedures be in place for coordinated surveillance amongst the market on which a SFP is traded, any market on which any security underlying the SFP is traded, and other markets on which any related security is traded to detect manipulation and insider trading. The Exchange has surveillance procedures in place to detect manipulation on a coordinated basis with other markets. In particular, CME is an affiliate member of the Intermarket Surveillance Group (“ISG”) and is party to an affiliate agreement and an agreement to share market surveillance and regulatory information with the other ISG members. Further, CME is party to a supplemental agreement with the other ISG members to address the concerns expressed by the Commission with respect to affiliate ISG membership. 26 Finally, CME Rule 424 permits CME to enter into agreements for the exchange of information and other forms of mutual assistance with domestic or foreign self-regulatory organizations, associations, boards of trade, and their respective regulators. 25 15 U.S.C. 78f(h)(3)(I). 26 *See* Securities Exchange Act Release No. 45956 (May 17, 2002), 67 FR 36740 (May 24, 2002) (joint CFTC and Commission rule relating to cash settlement and regulatory halt requirements for SFPs). Clause
(J)of Section 6(h)(3) of the Act 27 requires that a market on which a SFP is traded have in place audit trails necessary or appropriate to facilitate the coordinated surveillance referred to in the preceding paragraph. The Exchange states that it relies upon its Market Regulation Department and its large, highly trained staff to actively monitor market participants and their trading practices and to enforce compliance with CME rules. CME Market Regulation Department staff is organized into Compliance and Market Surveillance Groups. In performing its functions, CME Market Regulation Department routinely works closely with CME Audit Department, CME Clearing House, CME Legal Department, CME Globex Control Center, and CME Information Technology Department. 27 15 U.S.C. 78f(h)(3)(J). CME Compliance is responsible for enforcing the trading practice rules of the Exchange through detection, investigation, and prosecution of those who may attempt to violate those CME Rules. Further, CME Compliance is responsible for handling customer complaints, ensuring the integrity of the Exchange's audit trail, and administering an arbitration program for the resolution of disputes. CME Compliance employs investigators, attorneys, trading floor investigators, data analysts, and a computer programming and regulatory systems design staff. CME believes that CME Market Regulation Department has created some of the most sophisticated tools in the world to assist with the detection of possible rule violations and monitoring of the market. Among the systems it uses are the Regulatory Trade Browser (“RTB”), the Virtual Detection System (“VDS”), the Reportable Position System (“RPS”), and the RegWeb Profile System (“RegWeb”). These systems include information on all CME Globex users, all transactions, large positions, and statistical information on trading entities. CME Market Surveillance is dedicated to the detection and prevention of market manipulation and other similar forms of market disruption. As part of these responsibilities, CME Market Surveillance enforces the Exchange's position limit rules, administers the hedge approval process, and maintains the Exchange's RPS system. CME believes that the foundation of the CME Market Surveillance program is the deep knowledge of its staff about the major users, brokers, and clearing firms, along with its relationship with other regulators. Day-to-day monitoring of market positions is handled by a dedicated group of surveillance analysts assigned to specific market(s). Each analyst develops in-depth expertise of the factors that influence the market in question. The Exchange estimates that perhaps 90% of the market users at any single time are known to the Exchange. Daily surveillance staff activities include: • Monitoring positions for size based on percentage of open interest and historic user participation in each contract. • Aggregation of positions across clearing members with the use of CME trade reporting systems to account for all positions held by any single participant. CME believes that this daily review permits the surveillance analyst to promptly identify unusual market activity. • As a contract approaches maturity, large positions are scrutinized to determine whether such activity is consistent with prior experience, allowing prompt regulatory intervention if necessary. • Analysts closely monitor market news through on-line and print media. • Staff conducts on-site visits to large market participants periodically. CME Market Regulation staff investigates possible misconduct and, when appropriate, initiates disciplinary action. CME Rule 430 empowers the Exchange's disciplinary committees to discipline, limit, suspend, or terminate a member's activities for cause, amongst other sanctions. Further, per CME Rule 123, the Exchange requires its members to be responsible for “the filing of reports, maintenance of books and records, and permitting inspection and visitation” in order to facilitate such investigations by Exchange staff. CME Rule 536 requires that certain information be recorded with respect to each order, including: Time entered, terms of the order, order type, instrument and contract month, price, quantity, account type, account designation, user code, and clearing firm. This information may be recorded manually on timestamped order tickets, electronically in a clearing firms system, or by entering the orders with the required information into CME Globex immediately upon receipt. A complete CME Globex electronic audit trail is archived and maintained by CME for at least a five year period. Clearing firms must also maintain any written or electronic order records for a period of five years. Clause
(K)of Section 6(h)(3) of the Act 28 requires that a market on which a SFP is traded have in place procedures to coordinate trading halts between such market and any market on which any security underlying the SFP is traded and other markets on which any related security is traded. The Exchange filed with the Commission CME Rules establishing a generalized framework for the trade of SFPs. 29 In particular, proposed CME Rule 71001.F. provides, in accordance with Regulation § 41.25(a)(2) of CEA, 30 that “[t]rading of Physically Delivered Single Security Futures shall be halted at all times that a regulatory halt, as defined per SEC Rule 6h-1(a)(3) and CFTC Regulation § 41.1(1), has been instituted for the underlying security.” 28 15 U.S.C. 78f(h)(3)(K). 29 *See* SR-CME-2005-03. 30 17 CFR 41.25(a)(2). Clause
(L)of Section 6(h)(3) of the Act 31 requires that the margin requirements for a SFP comply with the regulations prescribed pursuant to Section 7(c)(2)(B) of the Act. 32 CME has margin rules in place. 33 Thus, CME believes that its customer margin rules are consistent with the requirements of the Act. 31 15 U.S.C. 78f(h)(3)(L). 32 15 U.S.C. 78g(c)(2)(B). 33 *See* Securities Exchange Act Release No. 46637 (October 10, 2002), 67 FR 64672 (October 21, 2002) (SR-CME-2002-01). For the reasons described above, CME believes that CME Listing Standards submitted herewith satisfy the requirements set forth in Section 6(h)(3) of the Act. 34 34 15 U.S.C. 78f(h)(3). 2. Statutory Basis The Exchange believes that its proposed rule change is consistent with Section 6(b) of the Act, 35 in general, and furthers the objectives of Section 6(b)(5) of the Act, 36 in particular, in that it is designed 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. 35 15 U.S.C. 78f(b). 36 15 U.S.C. 78f(b)(5). B. Self-Regulatory Organization's Statement on Burden on Competition CME does not believe that the proposed rule change would impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others The Exchange has 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 The foregoing proposed rule change has become effective pursuant to Section 19(b)(7) of the Act. 37 Within 60 days of the date of effectiveness of the proposed rule change, the Commission, after consultation with the CFTC, may summarily abrogate the proposed rule change and require that the proposed rule change be refiled in accordance with the provisions of Section 19(b)(1) of the Act. 38 37 15 U.S.C. 78s(b)(7). 38 15 U.S.C. 78s(b)(1). 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-CME-2005-01 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-CME-2005-01. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Section. Copies of such filing also will be available for inspection and copying at the principal office of CME. 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-CME-2005-01 and should be submitted on or before August 1, 2005. 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. E5-3620 Filed 7-8-05; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-51948; File No. SR-ISE-2005-28] Self-Regulatory Organizations; International Securities Exchange, Inc.; Notice of Filing of Proposed Rule Change and Amendment No. 1 Thereto Relating to Fee Changes for Transactions in Options on the Standard & Poor's Depository Receipts ® on a Retroactive Basis June 30, 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, 2005, the International Securities Exchange, Inc. (“Exchange” or “ISE”) 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 June 15, 2005, the Exchange filed Amendment No. 1 to the proposed rule change. 3 The Commission is publishing this notice to solicit comments on the proposed rule change, as amended, from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 In Amendment No. 1, the Exchange made non-substantive changes to clarify the purpose for the fee change. I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The ISE proposes to amend its Schedule of Fees to adopt a $.10 per contract surcharge for certain transactions in options based on the Standard & Poor's Depository Receipts(®), or SPDRs(®) (“SPDRs”) to become effective retroactively as of January 10, 2005. 4 The text of the proposed rule change, as amended, is available on the Exchange's Internet Web site ( *http://www.iseoptions.com* ), at the Exchange's Office of the Secretary, and at the Commission's Public Reference Room. 4 The Exchange filed with the Commission an identical proposed revision to its Schedule of Fees on May 20, 2005 (SR-ISE-2005-06), which was immediately effective as of that date under Section 19(b)(3)(A) of the Act and Rule 19b-4(f)(2) thereunder. The Exchange filed Amendment No. 1 thereto on June 15, 2005. That proposal was published in Exchange Act Release No. 51901 (June 22, 2005), 70 FR 37455 (June 29, 2005). Because the Exchange seeks to apply the surcharge to its Schedule of Fees on a retroactive basis as of January 10, 2005, the Exchange is submitting this proposal to the Commission under Section 19(b)(2) of the Act, to be published for notice and comment. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend its Schedule of Fees to retroactively establish, as of January 10, 2005, a $.10 per contract surcharge fee for certain transactions in options on SPDRs 5 that became effective on May 20, 2005 pursuant to a previous proposed rule change submitted by the Exchange. 6 5 The Exchange represents that these fees will be charged only to Exchange members. 6 *See supra* note 4. The Exchange's Schedule of Fees currently has in place a surcharge fee item that calls for a $.10 per contract fee for transactions in certain licensed products. The Exchange entered into a license agreement with Standard and Poor's, a unit of McGraw-Hill Companies, Inc., authorizing the Exchange to list SPDR options. The Exchange is adopting this fee for transactions in SPDR options to defray the licensing costs. The Exchange believes that charging the participants that trade these instruments is the most equitable means of recovering the costs of the license. However, because competitive pressures in the industry have resulted in the waiver of transaction fees for Public Customers, 7 the Exchange proposes to exclude Public Customer Orders 8 from this surcharge fee. Accordingly, this surcharge fee will only be charged to Exchange members with respect to non-Public Customer Orders ( *e.g.* , Market Maker and Firm Proprietary orders) and shall apply to Linkage Orders under a pilot program that is set to expire on July 31, 2005. 9 7 Public Customer is defined in ISE Rule 100(a)(32) as a person that is not a broker or dealer in securities. 8 Public Customer Order is defined in ISE Rule 100(a)(33) as an order for the account of a Public Customer. 9 *See* ISE Rule 1900(10) (defining Linkage Orders). The surcharge fee will apply to the following Linkage Orders: Principal Acting as Agent Orders and Principal Orders. Additionally, if it is concluded by the courts, after all avenues of appeal, that no license from Standard and Poor's was required by the Exchange to list SPDR options, then upon any refund by Standard and Poor's, the Exchange shall submit a rule filing to the Commission providing for a reimbursement of the surcharge fees paid by members to the Exchange as a result of this surcharge fee. The Exchange now proposes to extend this surcharge fee retroactively to all applicable transactions occurring since January 10, 2005. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act 10 in general, and furthers the objectives of 6(b)(4) of the Act 11 in particular, in that it provides for the equitable allocation of reasonable dues, fees and other charges among its members and other persons using its facilities. 10 15 U.S.C. 78f(b). 11 15 U.S.C. 78f(b)(4). B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others The Exchange has 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 with respect to this proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 35 days of the date of publication of this notice in the **Federal Register** or within such longer period
(i)as the Commission may designate up to 90 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or
(ii)as to which the Exchange consents, the Commission will:
(A)By order approve such proposed rule change, as amended, or
(B)institute proceedings to determine whether the proposed rule change, as amended, should be disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change, as amended, is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov.* Please include File Number SR-ISE-2005-28 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-2005-28. 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 ISE. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-ISE-2005-28 and should be submitted on or before August 1, 2005. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 12 12 17 CFR 200.30-3(a)(12). Margaret H. McFarland, Deputy Secretary. [FR Doc. E5-3623 Filed 7-8-05; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-51951; File No. SR-MSRB-2005-09] Self-Regulatory Organizations; Municipal Securities Rulemaking Board; Notice of Filing of Proposed Rule Change Relating to Month-End Performance Data for Municipal Fund Securities Under MSRB Rule G-21 June 30, 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 2, 2005, the Municipal Securities Rulemaking Board (“MSRB” or “Board”) 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 the MSRB. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The MSRB has filed with the SEC a proposed rule change amending Rule G-21, on advertising, to establish requirements relating to the availability of performance data current to the most recent month-end in connection with advertisements by brokers, dealers and municipal securities dealers (“dealers”) containing performance data for municipal fund securities. The MSRB proposes that dealers be required to comply with the proposed rule change for advertisements of municipal fund securities submitted or caused to be submitted for publication on or after December 1, 2005. The text of the proposed rule change is available on the MSRB's Web site ( *http://www.msrb.org* ), at the MSRB's principal office, and at the Commission's Public Reference Room. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the MSRB 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 MSRB 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 MSRB has recently amended Rule G-21 to, among other things, establish requirements relating to the inclusion of performance data in advertisements used or produced by dealers relating to municipal fund securities (the “recent amendments”). 3 These requirements are, in most respects, consistent with the requirements applicable under Rule 482 adopted by the SEC under the Securities Act of 1933, as amended 4 (the “Securities Act”), for mutual fund advertisements that contain performance data. However, one provision of Securities Act Rule 482 that was not included in the recent amendments requires that mutual fund advertisements showing performance data that is not current as of the most recent month-end also include a phone number or Web site address at which performance data may be obtained that is current to the most recent month-end, available no later than seven business days after the end of the month. 3 *See* Exchange Act Release No. 51736 (May 24, 2005), 70 FR 31551 (June 1, 2005). 4 15 U.S.C. 77a *et seq.* The proposed rule change would further amend Rule G-21 to require dealers to include in advertisements that contain performance data for municipal fund securities a phone number or Web address where investors may obtain performance data current to the most recent month-end, unless the data included in the advertisement is itself current to the most recent month-end. Specifically, the proposed rule change would amend clause
(C)of Rule G-21(e)(ii) to provide that performance data in advertisements must be calculated as of the most recent practicable date considering the type of municipal fund securities and the media used, except that any advertisement containing total return quotations would be in compliance with this requirement if: (1)(a) Total return quotations are current to the most recent calendar quarter ended prior to the submission of the advertisement for publication for which such return, or all information required for the calculation of such return, is available to the dealer, and
(b)total return quotations (current to the most recent month ended seven business days prior to the date of any use 5 for which such return, or all information required for the calculation of such return, is available to the dealer) are provided at a toll-free or collect telephone number or Web site identified in the advertisement and the month to which such information is current is identified; or 5 The term “use” is used with the same meaning as in Securities Act Rule 482.
(2)Total return quotations are current to the most recent month ended seven business days prior to the date of any use of the advertisement for which such return, or all information required for the calculation of such return, is available to the dealer and the month to which such information is current is identified. In addition, the proposed rule change would amend clause (C)(1) of Rule G-21(e)(i) to require that any municipal fund securities advertisement that displays performance information must identify either a toll-free (or collect) telephone number or a Web site where an investor may obtain total return quotations current to the most recent month-end for which such return is available. 2. Statutory Basis The MSRB believes that the proposed rule change is consistent with Section 15B(b)(2)(C) of the Act, 6 which provides that the MSRB's rules shall: 6 15 U.S.C. 78o-4(b)(2)(C). Be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in municipal securities, to remove impediments to and perfect the mechanism of a free and open market in municipal securities, and, in general, to protect investors and the public interest. The MSRB believes that the proposed rule change is consistent with the Act because it will further investor protection by making information provided in advertisements of municipal fund securities more up-to-date and more comparable among different municipal fund securities investments and between municipal fund securities and registered mutual funds. B. Self-Regulatory Organization's Statement on Burden on Competition The MSRB does not believe that the proposed rule change will result in any burden on competition not necessary or appropriate in furtherance of the purposes of the Act since it would apply equally to all dealers. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others On December 16, 2004, the MSRB published for comment a draft amendment to Rule G-21 with respect to advertisements of municipal fund securities. 7 The MSRB received four comment letters. 8 ICI, CSF and Vanguard fully support the draft amendments, while CSPN is generally supportive of the draft amendments subject to certain concerns regarding the deadlines imposed under the proposal. The comments received are discussed below. After reviewing these comments, the MSRB approved the draft amendments, with certain modifications described below, for filing with the SEC. 7 *See* MSRB Notice 2004-43 (December 16, 2004). 8 Letter from David J. Pearlman, Chairman, College Savings Foundation (“CSF”), to Ernesto A. Lanza, dated January 14, 2005; letter from Tamara K. Salmon, Senior Associate Counsel, Investment Company Institute (“ICI”), to Ernesto A. Lanza, dated January 19, 2005; letter from Heidi Stam, Principal, Securities Regulation, Vanguard Group, Inc. (“Vanguard”), to Ernesto A. Lanza, dated January 19, 2005; and letter from Tim Berry, Chair, College Savings Plan Network (“CSPN”), and Indiana State Treasurer, to Ernesto A. Lanza, dated January 27, 2005. Impact on State 529 Plan Community *Comments Received.* CSPN states that it has conducted an informal poll of its issuer members regarding the impact of the draft amendments on their activities. CSPN notes that all but one issuer prepare monthly performance data but that less than half currently target having such data available for all of their investment options within seven business days of month-end as provided for in the draft amendments. CSPN states that most (but not all) issuers that do not meet the seven business day timeframe indicate that 10 business days would be an appropriate outside posting date. CSPN also notes that some issuers express concern that “implementation of the proposed Rule without modification might unfairly disadvantage programs, or investment options within programs, which are not invested entirely (or at all) in mutual funds of one mutual fund family, thereby negatively affecting depositor choice.” CSPN observes that “application of the proposed standard to qualified tuition programs * * * [is] more complex than is the case with mutual funds. Many issuers' programs include investment options that are invested in assets other than mutual funds. Many issuers rely upon contractual arrangements with financial institutions to obtain performance data with respect to some or all of their program's investment options.” CSPN states: Many issuers also rely upon contractual arrangements with financial institutions with respect to the marketing of their programs, including in some instances the marketing of investment options managed for investment purposes by other financial institutions, by the issuer or by another public entity. An inability to include the most recent available total return data in advertisements may disadvantage an issuer's program as compared with other programs. In addition, an inability to include an investment option in advertisements because total return data is not then available with respect to such investment option may disadvantage such investment option as compared with other investment options within the same program. Other concerns that issuers express to CSPN include initial and ongoing costs of implementing appropriate procedures to assure compliance and the speed at which such procedures can be put in place. CSPN argues that the draft amendments “effectively impose the compliance burden of the proposed requirement upon unregulated issuers, as it is issuers who will be financially and, in some instances, operationally responsible for the provision of the referenced total return data through a toll-free (or collect) telephone number or Web site.” With respect to specific elements of the draft amendments, CSPN seeks clarification that the language would never require that performance data be current as of a date other than the end of a month ( *i.e.* , that it would never require mid-month calculations). In addition, CSPN requests that the month-end data that is required to be made available by telephone or the Internet not be made subject to the posting deadline of seven business days after the end of the month. In the alternative, if the MSRB retains a posting deadline, CSPN suggests that such deadline be extended to 15 business days. In addition, CSPN states that this posting deadline be based on when the performance data (or information needed to calculate performance data) becomes available to the issuer, rather than available to the dealer. *MSRB Response* . The MSRB does not view the rule language to require that performance data be calculated other than on an end-of-month basis unless the advertisement in which such data appears otherwise states or reasonably implies. Therefore, no change to the rule is required for this purpose. The MSRB believes that it is important that the rule retain the seven business day from end of month deadline, both to ensure consistency with mutual fund rules and to avoid large-scale mismatches between the timeframes for performance data available to investors for one municipal fund security versus another. This deadline provides that performance data must be current to the most recent month ended seven business days prior to the date of any use for which such return, or all information required for the calculation of such return, is available to the dealer. In general, so long as either the actual performance data, or all the information necessary to calculate performance, for the most recently ended calendar month is available to the dealer within seven business days after the end of such month, such performance must be used for compliance with the rule. However, if neither the performance data nor the information required to calculate performance is available to the dealer within that seven business day period, the dealer may continue to use the performance data from the preceding month until the most recent month's data is available or can be calculated. Where the issuer has undertaken to prepare performance data for use by dealers in their advertisements, the performance data will be presumed to be first made available to the dealer for purposes of this requirement when such performance data is made available by the issuer to the dealer, regardless of whether some or all of the information needed to calculate performance has previously become available to the dealer. 9 The MSRB has added a requirement that dealers disclose the month to which month-end performance data is current to ensure that investors understand the information they are provided and are in a better position to make meaningful comparisons between different investment options. 9 This presumption may be lost if the dealer itself causes a material delay in the issuer's calculation of performance or if the issuer fails to fulfill its undertaking on a consistent basis. Finally, where an issuer offers various different investment options, the rule's currentness standard should be read to apply to each investment option separately. Thus, so long as dealers display performance data for each investment option in a manner that complies with the preceding paragraph, it is possible that, at any given time, performance data for one investment option of an issuer may be current to a different month-end than with respect to the performance data for another investment option of the same issuer. Fee and Expense Disclosure *Comments Received* . Vanguard recommends that the MSRB require additional disclosures in advertisements that include performance data. Vanguard states: We urge the MSRB to consider enhancing fee disclosure in the context of municipal fund securities performance advertising. Accordingly, we ask the MSRB to consider requiring brokers and dealers, in any advertisement containing municipal fund securities performance data, to clearly and prominently disclose all fees and expenses applicable to an investment in those securities in close proximity to such performance data. Vanguard observes that information about fees and expenses is critical in evaluating investments and making informed investment decisions, and such information is “essential in order to achieve and maintain the proper balance” with performance data. Vanguard notes that NASD has filed with the SEC a proposed amendment to its mutual fund advertising rule that would require mutual fund advertisements that include performance data to disclose, in a prominent text box, sales charges and annual expense ratio. 10 Vanguard states, however, that it does not support NASD's formatting requirements with respect to such disclosure. 10 *See* Exchange Act Release No. 50226 (August 20, 2004), 69 FR 52738 (August 27, 2004) (SR-NASD-2004-043). *MSRB Response.* The MSRB agrees that disclosure of fees and expenses would be appropriate and that it is crucial for informed investment decisions that such information be available in conjunction with performance data. The MSRB believes that any such requirement in connection with municipal fund securities be made consistent with requirements that may become applicable to mutual fund advertisements. The MSRB is taking this suggestion under advisement pending final action by the SEC on the NASD rulemaking proposal. Effective Date *Comments Received* . CSF requests that the draft amendments have an effective date of 180 days after SEC approval. CSPN also requests a delayed effectiveness of 180 days if the MSRB maintains specific deadlines for making month-end information available. The ICI recommends coordination of the effective date for the draft amendments with the recent amendments, which were then pending with a proposed effective date of three months after approval. However, in a separate comment letter to the SEC on the recent amendments, the ICI requested that such amendments become effective 210 days after approval. The ICI noted that the SEC had provided a 210-day transition period when it had adopted extensive changes to its mutual fund advertising rule in 1988. *MSRB Response.* The MSRB agrees that the proposed rule change should have the same effective date as the performance data provisions of the recent amendments since the proposed rule change also relates to performance data and therefore is best implemented in tandem with the related provisions of the recent amendments. The MSRB observes that, under the recent amendments, the SEC provided that all advertisements for municipal fund securities submitted or caused to be submitted for publication on or after December 1, 2005 must come into compliance with Rule G-21(e)(ii) and certain other provisions relating to performance data. 11 As a result, dealers also would be required to comply with the amendments to Rule G-21(e)(ii) effected by the proposed rule change for advertisements of municipal fund securities submitted or caused to be submitted for publication on or after December 1, 2005. 11 *See* Exchange Act Release No. 51736 (May 24, 2005), 70 FR 31551 (June 1, 2005). III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The MSRB proposes that dealers be required to comply with the proposed rule change for advertisements of municipal fund securities submitted or caused to be submitted for publication on or after December 1, 2005. Within 35 days of the date of publication of this notice in the **Federal Register** or within such longer period
(i)as the Commission may designate up to 90 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or
(ii)as to which the self-regulatory organization consents, the Commission will: A. By order approve such proposed rule change, or B. Institute proceedings to determine whether the proposed rule change should be disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov.* Please include File Number SR-MSRB-2005-09 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-MSRB-2005-09. 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 MSRB's offices. 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-MSRB-2005-09 and should be submitted on or before August 1, 2005. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 12 12 17 CFR 200.30-3(a)(12). Jill M. Peterson, Assistant Secretary. [FR Doc. E5-3615 Filed 7-8-05; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-51952; File No. SR-MSRB-2005-10] Self-Regulatory Organizations; Municipal Securities Rulemaking Board; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Regarding Technical Amendment to Rule G-37, on Political Contributions and Prohibitions on Municipal Securities Business June 30, 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 2, 2005, the Municipal Securities Rulemaking Board (“MSRB” or “Board”), filed with the Securities and Exchange Commission (“Commission” or “SEC”) the proposed rule change as described in Items I, II and III below, which Items have been prepared by the MSRB. The MSRB has filed the proposal as a “non-controversial” rule change pursuant to Section 19(b)(3)(A)(iii) of the Act, 3 and Rule 19b-4(f)(6) thereunder, 4 which renders the proposal effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 15 U.S.C. 78s(b)(3)(A)(iii). 4 17 CFR 240.19b-4(f)(6). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The MSRB is filing with the Commission a proposed rule change consisting of a technical amendment to Rule G-37, on political contributions and prohibitions on municipal securities business. The MSRB has set an effective date for the proposed rule change of July 5, 2005. The text of the proposed rule change is available on the MSRB's Web site ( *http://www.msrb.org* ), at the MSRB's principal office, and at the Commission's Public Reference Room. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the MSRB 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 MSRB 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 Rule G-37, on political contributions and prohibitions on municipal securities business, provides that contributions to officials of an issuer by a municipal finance professional (“MFP”) of a dealer can result in the dealer being banned from municipal securities business with such issuer for a period of two years. When a person first becomes an MFP, the rule imposes a “look back” in which certain contributions made by such person prior to becoming an MFP (in addition to contributions made after becoming an MFP) can result in the imposition of the ban. The nature of such look back varies depending on the type of MFP. In the case of persons who become MFPs solely as a result of their supervisory activities or firm leadership positions within the meaning of clause (C),
(D)or
(E)of Rule G-37(g)(iv) (“supervisor MFPs”), the look back period established in Rule G-37(b)(iii) is limited to the six month period prior to becoming an MFP. The MSRB has learned that some people may read the language in Rule G-37(b)(iii) literally to provide that the *only* contributions of supervisor MFPs that can result in a ban on business are those made during the six month look back period, and that contributions made after becoming such an MFP are excluded. This interpretation clearly was not the intent of this provision. The proposed rule change would clarify this language to ensure that those contributions made after becoming an MFP are also subject to the potential ban. 2. Statutory Basis The MSRB believes that the proposed rule change is consistent with Section 15B(b)(2)(C) of the Act, 5 which provides that MSRB rules shall: 5 15 U.S.C. 78o-4(b)(2)(C). Be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in municipal securities, to remove impediments to and perfect the mechanism of a free and open market in municipal securities, and, in general, to protect investors and the public interest * * * The MSRB believes that the proposed rule change clarifies the rule's intent of ensuring that the high standards and integrity of the municipal securities industry are maintained. B. Self-Regulatory Organization's Statement on Burden on Competition The MSRB does not believe that the proposed rule change will result in 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 Written comments were neither solicited nor received on the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the proposed rule change:(i) Does not significantly affect the protection of investors or the public interest;
(ii)does not impose any significant burden on competition; and
(iii)does not become operative for 30 days from June 2, 2005, the date on which it was filed, and the MSRB provided the Commission with written notice of its intent to file the proposed rule change at least five business days prior to the filing date, the proposed rule change has become effective pursuant to Section 19(b)(3)(A) of the Act 6 and Rule 19b-4(f)(6) thereunder. 7 6 15 U.S.C. 78s(b)(3)(A). 7 17 CFR 240.19b-4(f)(6). At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. 8 8 *See* Section 19(b)(3)(C) of the Act, 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-MSRB-2005-10 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-MSRB-2005-10. 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 MSRB. 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-MSRB-2005-10 and should be submitted on or before August 1, 2005. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 9 Jill M. Peterson, Assistant Secretary. 9 17 CFR 200.30-3(a)(12). [FR Doc. E5-3616 Filed 7-8-05; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-51956; File No. SR-NASD-2005-081] Self-Regulatory Organizations; National Association of Securities Dealers, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Expand Maximum Single Order Share Size Limits in Nasdaq's Brut Facility June 30, 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 22, 2005, the National Association of Securities Dealers, Inc. (“NASD”), through its subsidiary, The Nasdaq Stock Market, Inc. (“Nasdaq”), submitted to 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 NASD. NASD filed the proposed rule change pursuant to Section 19(b)(3)(A) of the Act 3 which renders it effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 15 U.S.C. 78s(b)(3)(A). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change Nasdaq proposes to expand the single order total dollar price limit in Nasdaq's Brut Facility. The text of the proposed rule change is below. Proposed new language is in italics; proposed deletions are in brackets. 4903. Order Entry Parameters (a)-(e) No Change.
(f)Order Size—Any order in whole shares up to 1,000,099 shares may be entered into the System, subject to a dollar volume limitation of $[2] *7* 5,000,000. 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 NASD included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The 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 Nasdaq proposes to expand the maximum single-order total dollar value parameter in Nasdaq's Brut Facility. Currently, the dollar value of a single order entered into the Brut system may not exceed $25,000,000. Nasdaq proposes to expand that amount to $75,000,000. Nasdaq believes that expansion of the single-order total dollar value amount will provide additional flexibility for Brut system users trading more liquid, higher-priced securities, as well as facilitating trading in larger dollar amounts on days of increased market activity, such as index rebalance and options expiration days. 2. Statutory Basis NASD believes that the proposed rule change is consistent with Section 15A of the Act, 4 in general, and with Section 15A(b)(6) of the Act, 5 in particular, in that it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to remove impediments to a free and open market and a national market system, and, in general, to protect investors and the public interest. 4 15 U.S.C. 78o-3. 5 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 Act. C.Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others Written comments were neither solicited nor received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The proposed rule change has been filed by NASD as a “non-controversial” rule change pursuant to Section 19(b)(3)(A) of the Act 6 and subparagraph (f)(6) of Rule 19b-4 thereunder. 7 Consequently, because the foregoing rule change does not: 6 15 U.S.C. 78s(b)(3)(A). 7 17 CFR 240.19b-4(f)(6).
(i)Significantly affect the protection of investors or the public interest;
(ii)impose any significant burden on competition; and
(iii)become operative for 30 days from the date of filing, or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest, it has become effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-4(f)(6) thereunder. 8 8 Rule 19b-4(f)(6) under the Act also requires a self-regulatory organization to give the Commission written notice of its intent to file the proposed rule change, along with a brief description and text of the proposed rule change, at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The NASD complied with this requirement. A proposed rule change filed under Rule 19b-4(f)(6) normally does not become operative prior to 30 days after the date of filing. However, Rule 19b-4(f)(6)(iii) permits the Commission to designate a shorter time if such action is consistent with the protection of investors and the public interest. NASD has requested that the Commission waive the 30-day pre-operative period, which would make the proposed rule operative immediately. The Commission believes that it is consistent with the protection of investors and the public interest to waive the 30-day pre-operative period in this case. 9 Allowing the rule change to become operative immediately should allow Brut system users to take advantage of additional trading flexibility without delay. Consequently, the proposed rule change has become effective pursuant to Section 19(b)(3)(A) of the Act 10 and Rule 19b-4(f)(6) thereunder. 11 9 For purposes only of waiving the operative delay for this proposal, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). 10 15 U.S.C. 78s(b)(3)(A). 11 17 CFR 240.19b-4(f)(6). At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change, as amended, is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov* . Please include File Number SR-NASD-2005-081 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-NASD-2005-081. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room. Copies of such filing also will be available for inspection and copying at the principal office of the NASD. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-NASD-2005-081 and should be submitted on or before August 1, 2005. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 12 12 17 CFR 200.30-3(a)(12). Margaret H. McFarland, Deputy Secretary. [FR Doc. E5-3621 Filed 7-8-05; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-51953; File No. SR-NASD-2005-085] Self-Regulatory Organizations; National Association of Securities Dealers, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Extending the Pilot Relating to Manning Price-Improvement Standards for Decimals June 30, 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 29, 2005, the National Association of Securities Dealers, Inc. (“NASD”) 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 NASD. NASD has filed this 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. 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). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change NASD is proposing to extend through December 31, 2005, the current pilot price-improvement standards for decimalized securities contained in NASD Interpretive Material 2110-2—Trading Ahead of Customer Limit Order (“Manning Interpretation” or “Manning”). There are no proposed changes to the rule text of the Manning Interpretation. 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 NASD's Manning Interpretation requires an NASD member firm to provide a minimum level of price improvement to an incoming order in a Nasdaq National Market or SmallCap security if the firm chooses to trade as principal with an incoming order at a price superior to that of the customer limit order that it currently holds. If the firm fails to provide the minimum level of price improvement to the incoming order, the firm must execute the held customer limit order. Generally, if a firm fails to provide the requisite amount of price improvement and also fails to execute the held customer limit order, it is in violation of the Manning Interpretation. The Commission originally approved, on a pilot basis, price-improvement standards for decimalized securities contained in the Manning Interpretation on April 6, 2001. 5 At that time, NASD added the following language to IM-2110-2: 5 *See* Securities Exchange Act Release No. 44165 (April 6, 2001), 66 FR 19268 (April 13, 2001). For Nasdaq securities authorized for trading in decimals pursuant to the Decimals Implementation Plan For the Equities and Options Markets, the minimum amount of price improvement necessary in order for a market maker to execute an incoming order on a proprietary basis in a security trading in decimals when holding an unexecuted limit order in that same security, and not be required to execute the held limit order, is as follows:
(1)For customer limit orders priced at or inside the best inside market displayed in Nasdaq, the minimum amount of price improvement required is $0.01; and
(2)For customer limit orders priced outside the best inside market displayed in Nasdaq, the market maker must price improve the incoming order by executing the incoming order at a price at least equal to the next superior minimum quotation increment in Nasdaq (currently $0.01). 6 6 Pursuant to the terms of the Decimals Implementation Plan for the Equities and Options Markets, the minimum quotation increment for Nasdaq securities (both National Market and SmallCap) at the outset of decimal pricing is $0.01. As such, Nasdaq displays priced quotations to two places beyond the decimal point (to the penny). Quotations submitted to Nasdaq that do not meet this standard are rounded to the nearest minimum quotation increment (namely, $0.01), specifically, rounded down for buy orders and rounded up for sell orders. *See* Securities Exchange Act Release No. 43876 (January 23, 2001), 66 FR 8251 (January 30, 2001) (SR-NASD-01-07). Since approval, these standards continue to operate on a pilot basis which terminates on June 30, 2005. 7 NASD has determined to seek an extension of its current pilot until December 31, 2005. NASD believes that such an extension provides for an appropriate continuation of the current Manning price-improvement standard while the Commission continues to analyze the issues related to customer limit order protection in a decimalized environment. NASD is not proposing any other changes to the pilot at this time. 7 *See* Securities Act Release No. 50893 (December 20, 2004), 69 FR 78078 (December 29, 2004). 2. Statutory Basis NASD believes that the proposed rule change is consistent with the provisions of Section 15A of the Act, 8 in general, and with Section 15A(b)(6) of the Act, 9 in particular, which require, among other things, that NASD rules must be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, and, in general, to protect investors and the public interest. NASD believes that the proposed rule change will improve treatment of customer limit orders and enhance the integrity of the market. 8 15 U.S.C. 78o-3. 9 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 Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others Written comments were neither solicited nor received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action NASD asserts that the foregoing rule change has become effective pursuant to Section 19(b)(3)(A) of the Act 10 and Rule 19b-4(f)(6) thereunder 11 because the rule change does not: 10 15 U.S.C. 78s(b)(3)(A). 11 17 CFR 240.19b-4(f)(6).
(i)Significantly affect the protection of investors or the public interest;
(ii)impose any significant burden on competition; nor
(iii)become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest. 12 NASD has requested that the Commission waive the 30-day operative delay and designate the proposed rule change effective immediately so that the pilot can continue uninterrupted. 12 In addition, Rule 19b-4(f)(6)(iii) states that NASD must provide the Commission with written notice of its intent to file the proposed rule change at least five days prior to the date of filing of the proposed rule change. NASD satisfied this requirement. The Commission hereby grants the request. 13 The Commission believes that such waiver is consistent with the protection of investors and the public interest because it will allow the protection of customer limit orders provided by the pilot to continue without interruption and designates the proposed rule change to be operative upon filing with the Commission. 13 For purposes only of accelerating the operative date of the proposal, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. *See* 15 U.S.C. 78c(f). At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments: • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov.* Please include File Number SR-NASD-2005-085 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-2005-085. 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 at the principal office of NASD and at the Commission's Public Reference Room. 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-2005-085 and should be submitted on or before August 1, 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. E5-3624 Filed 7-8-05; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-51954; File No. SR-NSCC-2005-07] Self-Regulatory Organizations; National Securities Clearing Corporation; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Charges for Communications Fees To Continue Operating Legacy Communication Networks June 30, 2005. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”), 1 notice is hereby given that on June 17, 2005, the National Securities Clearing Corporation (“NSCC”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change described in Items I, II, and III below, which items have been prepared primarily by NSCC. The Commission is publishing this notice to solicit comments on the proposed rule change from interested parties. 1 15 U.S.C. 78s(b)(1). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The proposed rule change would revise the fees charged to members that fail to migrate their communications systems from legacy networks to The Depository Trust & Clearing Corporation's (“DTCC's”) Securely Managed and Reliable Technology (“SMART”) system 2 or to the Securities Industry Automation Corporation's (“SIAC's”) Secure Financial Transaction Infrastructure (“SFTI”) networks. 2 SMART is DTCC's centralized, end-to-end managed communications infrastructure that provides connectivity support for all post-trade clearance and settlement processing. Most of the services offered by DTCC's subsidiaries, The Depository Trust Company, the Fixed Income Clearing Corporation, and NSCC are accessible through SMART. SMART is interoperable with SFTI. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, NSCC 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. NSCC has prepared summaries, set forth in sections (A), (B), and
(C)below, of the most significant aspects of these statements. 3 3 The Commission has modified the text of the summaries prepared by NSCC.
(A)Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change Beginning in 2003, NSCC has periodically informed members of the need to migrate their telecommunications connectivity from SIAC's legacy based Broker and Access networks to DTCC's SMART system or SIAC's SFTI. 4 While several advantages exist in having all members successfully migrate, NSCC's main objective in insourcing these services into its own data processing operations is to provide consistent business continuity planning capabilities across all NSCC services. In the event of a large-scale regional disruption, any member accessing NSCC through a legacy network will not have the benefits provided by the other communications vehicles which could create exposure to these members and their counterparties. 5 4 DTCC Important Notices Z#0008, Z#0009, and Z#0010. 5 SMART is designed to withstand catastrophic disaster scenarios and is set up to operate in DTCC's multiple remote sites to ensure its operability in the event of disruption. Legacy network connections are not automatically configured to “fail over” to DTCC's remote processing sites and therefore do not provide members using these networks with the resilience that would be needed in the event of a large-scale regional disruption. While most NSCC members have complied with stated migration requirements, several members continue to access NSCC through legacy networks, which is imposing significant unnecessary costs on NSCC for continued support of these systems. NSCC rules provide that members will be charged for communications charges at cost. Therefore, in order to encourage these members to migrate and in order to equitably allocate costs among its members, NSCC intends to allocate its costs for continued support of legacy networks among the members using such systems on a pro rata basis. NSCC plans to soon issue an important notice to members specifying the date such fees will become effective. 6 6 NSCC expects that the migration deadline will be set for the end of 2005. In order to avoid bearing these costs, members currently using legacy systems are required to take the following actions:
(i)As soon as possible, ensure adequate communications connectivity through SMART and/or SFTI,
(ii)successfully complete testing through the newly-established pathways,
(iii)complete full conversion of all input/output for applicable NSCC applications directly to/from NSCC through SMART and/or SFTI, and
(iv)cancel the legacy network connections. The proposed change is consistent with Section 17A of the Act 7 and the rules and regulations thereunder applicable to NSCC because it will enable NSCC to equitably allocate costs among its members. 7 15 U.S.C. 78q-1.
(B)Self-Regulatory Organization's Statement on Burden on Competition NSCC does not believe that the proposed rule change will have any impact or impose any burden on competition.
(C)Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others Written comments were not and are not intended to be solicited with respect to the proposed rule change and none have been received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective upon filing pursuant to Section 19(b)(3)(A)(ii) of the Act 8 and Rule 19b-4(f)(2) 9 thereunder because the proposed rule establishes or changes a due, fee, or other charge. At any time within sixty 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. 8 15 U.S.C. 78s(b)(3)(A)(ii). 9 17 CFR 240.19b-4(f)(2). 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-NSCC-2005-07 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-NSCC-2005-07. 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 NSCC and on NSCC's Web site at *http://www.nscc.com* . 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-NSCC-2005-07 and should be submitted on or before August 1, 2005. 10 17 CFR 200.30-3(a)(12). For the Commission by the Division of Market Regulation, pursuant to delegated authority. 10 Margaret H. McFarland, Deputy Secretary. [FR Doc. E5-3619 Filed 7-8-05; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-51972; File No. SR-PCX-2005-84] Self-Regulatory Organizations; Pacific Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Trading Securities in Subpenny Increments July 5, 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 30, 2005, the Pacific Exchange, Inc. (“PCX” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I and II below, which Items have substantially been prepared by the Exchange. The Exchange has filed this 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. 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). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange, through its wholly owned subsidiary PCX Equities, Inc. (“PCXE”), is proposing to amend the interpretation to PCXE Rule 7.6(a) to reflect the anticipated extension of a Commission exemption that permits securities transactions to be entered, executed, and reported in subpenny increments, although such quotations are disseminated in rounded, penny increments without a rounding identifier. The text of the proposed rule change is available on the PCX Web site ( *http://www.pacificex.com* ), at the Exchange's principal office, and at the Commission's Public Reference Room. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item III below. The self-regulatory organization has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Commission previously granted PCX an exemption from Rules 11Ac1-1, 11Ac1-2, and 11Ac1-4 under the Act 5 with respect to securities priced less than $1.00 per share that permits Archipelago Exchange, a facility of PCX (“ArcaEx”), electronic trading permit (“ETP”) holders of ArcaEx, and vendors that distribute ArcaEx quotation information to enter, execute, and report quotations in exchange-listed, Nasdaq National Market, and SmallCap securities in increments less than $0.01 per share, although such quotations are disseminated in rounded, penny increments without a rounding identifier. 6 In conjunction with the initial grant of this exemption, the Exchange modified Interpretation .05 to PCXE Rule 7.6(a) on a pilot basis to reflect a subpenny minimum price variation for securities priced less than $1.00. That pilot rule is operative until September 30, 2005. 7 Subsequently, the Exchange requested the Commission to extend the exemption to permit the Exchange to accept and execute orders and quotations of all exchange-listed, National Market, and SmallCap securities in increments less than $0.01 per share, although such quotations are disseminated in rounded, penny increments without a rounding identifier. 8 That exemption expires on June 30, 2005. 9 PCX has requested the Commission, in a separate letter, to extend this exemption until the effective date of Rule 612 of Regulation NMS. 10 With this filing, the Exchange is amending Interpretation .05 to PCXE Rule 7.6(a) to reflect the anticipated extension of this Commission exemption. 11 5 17 CFR 240.11Ac1-1, 240.11Ac1-2, and 11Ac1-4. 6 *See* Letter from David S. Shillman, Associate Director, Division of Market Regulation, Commission, to Mai S. Shiver, Director of Regulatory Policy, PCX, dated September 24, 2004. 7 *See* Securities Exchange Act Release No. 50441 (September 24, 2004), 69 FR 58570 (September 30, 2004). 8 *See* Letter from David S. Shillman, Associate Director, Division, Commission, to Mai S. Shiver, Director of Regulatory Policy, PCX, dated February 10, 2005. 9 *See id* . 10 *See* Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496 (June 29, 2005) (Regulation NMS adopting release). Rule 612, which governs sub-penny quotations, will become effective on August 29, 2005. 11 The Commission notes that it has granted the Exchange the extension it requested. *See* Letter to Alden Adkins, Chief Regulatory Officer, PCX, from Annette L. Nazareth, Director, Division, Commission, dated July 1, 2005. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act, 12 in general, and furthers the objectives of Section 6(b)(5), 13 in particular, in that it is designed to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in facilitating transactions in securities, to remove impediments and perfect the mechanisms of a free and open market, and to protect investors and the public interest. 12 15 U.S.C. 78f(b). 13 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 Written comments on the proposed rule change were neither solicited nor received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The Exchange asserts that the foregoing rule change has become effective pursuant to Section 19(b)(3)(A) of the Act 14 and Rule 19b-4(f)(6) thereunder 15 because the rule change does not: 14 15 U.S.C. 78s(b)(3)(A). 15 17 CFR 240.19b-4(f)(6).
(i)Significantly affect the protection of investors or the public interest;
(ii)Impose any significant burden on competition; and
(iii)Become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, if consistent with the protection of investors and the public interest. 16 The Exchange has requested that the Commission waive the 30-day operative delay and designate the proposed rule change effective immediately. 16 In addition, Rule 19b-4(f)(6)(iii) states that the Exchange must provide the Commission with written notice of its intent to file the proposed rule change at least five days prior to the date of filing of the proposed rule change. The Commission has determined to waive the requirement in this case. The Commission hereby grants the request. 17 The Commission believes that such waiver is consistent with the protection of investors and the public interest because the sole purpose of the rule change to accurately reflect the new expiration date of a Commission exemption. 17 For purposes only of accelerating the operative date of the proposal, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. *See* 15 U.S.C. 78c(f). At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov* . Please include File No. SR-PCX-2005-84 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 No. SR-PCX-2005-84. 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 changes 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 will also be available for inspection and copying at the principal office of PCX. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File No. SR-PCX-2005-84 and should be submitted on or before August 1, 2005. 18 17 CFR 200.30-3(a)(12). For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 18 Jill M. Peterson, Assistant Secretary. [FR Doc. 05-13546 Filed 7-8-05; 8:45 am]
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U.S. Code
- Registration, responsibilities, and oversight of self-regulatory organizations§ 78s
- National securities exchanges§ 78f
- Definitions and application§ 78c
- Public information; agency rules, opinions, orders, records, and proceedings§ 552
- Repealed. Pub. L. 111–203, title VII, § 734(a), July 21, 2010, 124 Stat. 1718§ 7a
- Registration requirements for securities§ 78l
- Trading by members of exchanges, brokers, and dealers§ 78k
- Margin requirements§ 78g
- Common provisions applicable to registered entities§ 7a–2
- Restrictions on dual trading in security futures products on designated contract markets and registered derivatives transaction execution facilities§ 6j
- Short title§ 77a
- Municipal securities§ 78o–4
- Registered securities associations§ 78o–3
- National system for clearance and settlement of securities transactions§ 78q–1
9 references not yet in our index
- 17 CFR 240.19
- 15 USC 78
- 5 USC 78f(h)(3)(D)
- 15 USC 6j
- 7 USC 4j(a)
- 17 CFR 240.6
- 15 USC 4j
- 40 USC 78f(h)(3)(K)
- 17 CFR 240.11
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SECURITIES AND EXCHANGE COMMISSION
Cite17 CFR 240.19
Cite15 USC 78
Cite5 USC 78f(h)(3)(D)
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