Notices. Notice

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BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-52376; File No. SR-NASD-2005-102] Self-Regulatory Organizations; National Association of Securities Dealers, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change and Amendment No. 1 Thereto To Allow Members To Report Certain Trades in Exchange-Listed Securities Through the Execution Services of the Nasdaq Market Center September 1, 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 August 26, 2005, the National Association of Securities Dealers, Inc.

(“NASD”), through its subsidiary, The Nasdaq Stock Market, Inc. (“Nasdaq”), filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by Nasdaq. On August 31, 2005, Nasdaq filed Amendment No. 1 to the proposed rule change. 3 Nasdaq filed the proposed rule change pursuant to Section 19(b)(3)(A) of the Act 4 and Rule 19b-4(f)(5) 5 thereunder, and therefore the proposed rule change is 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 3 Amendment No. 1 clarified the scope of NASD Rule 4720 prior to adoption of the proposed rule change, corrected typographical errors, and made other clarifying changes in response to comments from the Commission staff. 4 15 U.S.C. 78s(b)(3)(A). 5 17 CFR 240.19b-4(f)(5). I. Self-Regulatory Organization's Statement of the Terms of the Substance of the Proposed Rule Change Nasdaq proposes changes to NASD Rule 4720.

The text of the proposed rule change is below. Proposed new language is in *italics;* proposed deletions are in [brackets]. 6 6 Changes are marked to the rule text that appears in the electronic NASD Manual found at *www.nasd.com* . 4720. Reporting Through the Execution Services of the Nasdaq Market Center Subject to the conditions set forth below, members may utilize the Nasdaq Market Center to report trades in Nasdaq Market Center eligible securities required or eligible to be reported to Nasdaq pursuant to the *Rule 4630* , *4640* , *4650* , [and] *6100 and 6400* Series.

(1)Members shall include the time of execution on reports submitted to the Nasdaq Market Center; and

(2)For transactions between members, the members who are parties to the trade shall agree to all trade details prior to submitting the report to the Nasdaq Market Center, and have in effect and on file with Nasdaq, an Automated Confirmation Transaction Service Service Bureau/Executing Broker Supplement to the Nasdaq Workstation II Agreement (“Attachment 2 Agreement”), and a Nasdaq National Market Execution System Give-Up Addendum to the Nasdaq Workstation II Subscriber Agreement (“SuperMontage Give-Up Agreement”). II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, Nasdaq included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. Nasdaq has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose Nasdaq is proposing to provide members the ability to use the execution services of the Nasdaq Market Center to report trades in exchange-listed securities that were matched outside of any system operated by a self-regulatory organization. Currently, Nasdaq members' ability to use the order execution service to report matched trades is limited to trades in Nasdaq National Market and SmallCap Market securities, convertible bonds listed on Nasdaq, and other reportable securities identified in the NASD Rule 6100 Series. 7 7 A detailed description of how matched trades in Nasdaq and other eligible securities are reported through the execution services of the Nasdaq Market Center is contained in Securities Exchange Act Release No. 49733 (May 19, 2004), 69 FR 29990 (May 26, 2004) (SR-NASD-2004-034). The reporting of matched trades in exchange-listed securities proposed in this rule change is intended to operate in the same manner. Under Nasdaq's proposal, matched trades in exchange-listed securities that are reported though the execution services of the Nasdaq Market Center will be transmitted to the trade reporting service and processed in the same manner as information about matched trades in Nasdaq and other eligible securities submitted to that system. For example, trade information will be disseminated on the consolidated tape, and included in the reporting service's risk management calculations and Nasdaq's audit trail. In addition, the trades will be submitted to the National Securities Clearing Corporation (“NSCC”) for clearing, if necessary. Trades in exchange-listed securities reported through the order execution service will not be included in the execution algorithm, and thus will not interact with any Quotes/Orders in the system. Under this rule change, members will not be permitted to report through the execution services of the Nasdaq Market Center trades in exchange-listed securities for which comparison is necessary. As is the case for trades in Nasdaq and other eligible securities, the order execution service will accept only:

(1)Tape only reports; 8

(2)locked-in clearing only reports; 9

(3)tape reports of locked-in trades that are to be submitted to clearing; 10 and

(4)non-tape, non-clearing reports. 11 Members will be able to report trades through the execution services of the Nasdaq Market Center during the hours that the trade reporting service is operational, which presently is 8 a.m. until 6:30 p.m. Eastern time. 8 A “tape only report” is a trade that is reported to Nasdaq for dissemination to the public, but the trade does not need to be transmitted to NSCC because one of the parties to the trade is a customer ( *i.e.* , not a broker-dealer), or the buyer and seller both are broker-dealers and they have a common clearing arrangement that will enable them to settle the trade without using NSCC's facilities. 9 A transaction is “locked-in” when the buying and selling broker-dealers have agreed to all the trade details prior to submitting the trade to Nasdaq and no further comparison is necessary. A “locked-in clearing only report” is a report that is locked-in and Nasdaq must forward the trade to NSCC for settlement. The trade does not have to be disseminated to the public because an exception to the public reporting requirement is applicable ( *e.g.* , the transaction is the offsetting leg of a riskless principal trade). 10 A “tape report of a locked-in trade that is submitted for clearing” is a locked-in report of a trade that must be disseminated to the public and settled through NSCC. 11 A “non-tape, non-clearing report” is a report of trade that is not required to be disseminated to the public, and does not need to be transmitted to NSCC for settlement, but the broker-dealer is obligated or chooses to submit this “regulatory report” to Nasdaq. See *e.g.* , NASD Rule 4632(d)(3)(B) and Notice to Members 00-79. By extending this functionality to reporting of matched trades in exchange-listed securities, members will be able to take advantage of several benefits that previously were limited to reporting matched trades in Nasdaq and other eligible securities. For example, it will be possible for members to consolidate the reporting and execution systems for a broader range of trades. In addition, members will be able to take advantage of the existing anonymity feature available in the order execution service by utilizing it for trades transmitted to the trade reporting service, and combine it with the benefits of “give up” relationships, also available to members today in both the order execution and trade reporting services of the Nasdaq Market Center. 12 As a result, members will be able to give up the true contra parties to a trade in exchange-listed securities, but still preserve full anonymity between these parties. 12 When a “give up” occurs, the member that submits the order to the order execution service (or the trade report to the trade reporting service) discloses to the contra party that the order (or report) is being entered on behalf of another member and the trade is to be settled with this other member. The member submitting the order (or trade report) has “given up” the identity of the other member who is the true party to the trade. 2. Statutory Basis Nasdaq believes that the proposed rule change, as amended, is consistent with the provisions of Section 15A of the Act, 13 in general and with Section 15A(b)(6) of the Act, 14 in particular, in that it is designed to foster coordination and cooperation with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities. The proposal is consistent with this obligation because it will provide members both the opportunity to consolidate the execution and reporting of a wider range of trades, and will extend the combined benefits of give-up relationships and anonymous trading to reporting of matched trades in exchange-listed securities. 13 13 15 U.S.C. 78 *o* -3. 14 15 U.S.C. 78 *o* -3(b)(6). B. Self-Regulatory Organization's Statement on Burden on Competition Nasdaq does not believe that the proposed rule change, as amended, will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act, as amended. 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 foregoing rule change, as amended, has become effective upon filing pursuant to Section 19(b)(3)(A)(iii) of the Act 15 and Rule 19b-4(f)(5) 16 thereunder in that it effects a change in an existing order execution system of Nasdaq that does not significantly affect the protection of investors or the public interest, does not impose any significant burden on competition, and it does not have the effect of limiting the access to or availability of the system. At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. 17 15 15 U.S.C. 78s(b)(3)(A)(iii). 16 17 CFR 240.19b-4(f)(5). 17 The effective date of the original proposed rule is August 26, 2005. The effective date of Amendment No. 1 is August 31, 2005. For purposes of calculating the 60-day period within which the Commission may summarily abrogate the proposed rule change under Section 19(b)(3)(C) of the Act, the Commission considers the period to commence on August 31, 2005, the date on which Nasdaq submitted Amendment No. 1. *See* 15 U.S.C. 78s(b)(3)(C). IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change, 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-2005-102 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-2005-102. 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 Nasdaq. 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-2005-102 and should be submitted on or before September 30, 2005. 18 17 CFR 200.30-3(a)(12). For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 18 Jonathan G. Katz, Secretary. [FR Doc. E5-4926 Filed 9-8-05; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-52377; File No. SR-NASD-2005-051] Self-Regulatory Organizations; National Association of Securities Dealers, Inc.; Order Approving Proposed Rule Change To Create an Enterprise License Fee for the TotalView Entitlement September 2, 2005. I. Introduction On April 13, 2005, the National Association of Securities Dealers, Inc. (“NASD”), through its subsidiary, The Nasdaq Stock Market, Inc. (“Nasdaq”), filed with the Securities and Exchange Commission (“Commission”) a proposed rule change pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) 1 and Rule 19b-4 thereunder, 2 to create an enterprise license fee for the TotalView entitlement. On June 3, 2005, Nasdaq amended the proposed rule change. The proposed rule change, as modified by Amendment No. 1, was published for comment in the **Federal Register** on June 28, 2005. 3 The Commission received one comment letter on the proposal. 4 On August 16, 2005, Nasdaq filed a response to the comment letter. 5 This order approves the proposed rule change, as amended. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 *See* Securities Exchange Act Release No. 51869 (June 17, 2005), 70 FR 37144. 4 *See* letter to Jonathan G. Katz, Secretary, Securities and Exchange Commission, from Christopher Gilkerson, Chair, SIA Technology & Regulation Committee, and Andrew Wels, Chair, SIA Market Data Subcommittee, dated July 19, 2005 (“SIA Letter”). 5 *See* letter to Jonathan G. Katz, Secretary, Securities and Exchange Commission, from Edward S. Knight, Executive Vice President and General Counsel, Nasdaq, dated August 16, 2005 (“Nasdaq Response Letter”). II. Description of the Proposal Nasdaq proposes to establish a program whereby a broker-dealer distributor could obtain an enterprise license for the distribution of the TotalView market data entitlement for a fixed cost of either $25,000 per month for non-professional subscribers or of $100,000 per month for broker-dealer distributors that serve both non-professional and professional subscribers. This enterprise license pricing structure would mirror the pricing structure already established for individual professional and non-professional subscribers and is an alternative way to pay for the data. This program would only be available to broker-dealers registered under the Act, and would cover all TotalView usage fees with respect to both internal usage and re-distribution to customers with whom the firm has a brokerage relationship. 6 Non-broker-dealer vendors and application service providers would not be eligible for the enterprise license, as such firms, according to Nasdaq, typically pass through the cost of market data user fees to their customers. This would enable firms to incorporate TotalView data into the software applications they make available to their institutional and retail customers, without providing them the opportunity to re-distribute TotalView data in competition with pure vendors. 6 Distributors who utilize the enterprise license would still be liable for the applicable distributor fees. The enterprise license would cover fees for TotalView data received directly from Nasdaq as well as data received from third-party vendors ( *e.g.* , Bloomberg, Reuters). Upon signing up for the program, the relevant firm would be entitled to inform any third-party market data vendor it utilizes (through a Nasdaq-provided form) that, going forward, any TotalView data usage by the broker-dealer may be reported to Nasdaq on a non-billable basis. III. Summary of Comments The Commission received one comment letter on the proposed rule change. The commenter expressed its support for enterprise license fees and also for the fact that the product, TotalView, “does not come with data integration strings attached.” However, the commenter stated its concerns that NQDS data would be linked with the TotalView data and that the cost of Brut data integrated in the TotalView entitlement is too high. 7 In response, Nasdaq stated that the link between NQDS data and TotalView data was added to ensure compliance with the fee schedule established by the Operating Committee of the UTP Plan, which plan has been approved by the Commission. Nasdaq further noted that the cost of Brut data integrated in the TotalView entitlement has already been approved by the Commission. 8 7 *See* SIA Letter. 8 *See* Nasdaq Response Letter. IV. Discussion The Commission has carefully reviewed the proposed rule change, the SIA Letter and the Nasdaq Response Letter and finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities association, 9 the requirements of Section 15A of the Act, 10 in general, and Section 15A(b)(5) of the Act, 11 in particular, which requires that the NASD's rules provide for an equitable allocation of reasonable charges among members for the use of any facility or system which the NASD operates or controls. 9 In approving the proposed rule change, the Commission has considered its impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). 10 15 U.S.C. 78o-3. 11 15 U.S.C. 78o-3(b)(5). The Commission believes that the program whereby a broker-dealer distributor could obtain an enterprise license for the distribution of the TotalView market data entitlement for a fixed cost of either $25,000 per month for non-professional subscribers or of $100,000 per month for broker-dealer distributors that serve both non-professional and professional subscribers satisfies the statutory standards outlined above and will provide increased flexibility to market data vendors, which may result in increased access to market data. V. Conclusion *It is therefore ordered* , pursuant to Section 19(b)(2) of the Act, 12 that the proposed rule change (SR-NASD-2005-051), as amended, be, and it hereby is, approved. 12 15 U.S.C. 78s(b)(2). 13 17 CFR 200.30-3(a)(12). For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 13 Jonathan G. Katz, Secretary. [FR Doc. E5-4927 Filed 9-8-05; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-52362; File No. SR-NYSE-2005-57] Self-Regulatory Organizations; New York Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Automating the Execution of Elected Stop Orders and CAP-DI Orders and Converted CAP-DI Orders August 30, 2005. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”), 1 and Rule 19b-4 2 thereunder, notice is hereby given that on August 10, 2005, the New York Stock Exchange, Inc. (“NYSE” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the Exchange. The proposed rule change has been filed by the Exchange as effecting a change in an existing order-entry or trading system pursuant to Section 19(b)(3)(A)(iii) of the Act, 3 and Rule 19b-4(f)(5) 4 thereunder, 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)(5). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to systematize certain functions that are currently performed manually regarding the execution of elected stop orders and CAP-DI (convert and parity-destabilizing, immediate or cancel) orders and converted CAP-DI orders. The Exchange represents that the rules regarding the election and execution of CAP-DI and stop orders and conversion and execution of CAP-DI orders remain the same. 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 is filing this proposed amendment to systematize certain functions that are currently performed manually regarding the execution of elected stop orders and CAP-DI orders and converted CAP-DI orders. The rules regarding the election and execution of CAP-DI and stop orders and the conversion and execution of CAP-DI orders remain the same. The Display Book® (“Display Book” or “Book”) is the Exchange system that will handle the functions described below. The Display Book is an order management and execution facility that receives and displays orders to the specialist and provides a mechanism to execute and report transactions and publish the results to the Consolidated Tape. In addition, the Display Book is connected to a variety of other Exchange systems for the purposes of comparison, surveillance, and reporting information to customers and other market data and national market systems ( *i.e.,* the Intermarket Trading System, Consolidated Tape Association, Consolidated Quotation System, *etc.* ). Background Exchange Rules 13 and 123A.30 describe percentage orders, including CAP-DI orders, and the manner in which they are elected or converted and executed. A percentage order 5 is a limited price order placed on the Display Book to buy or sell fifty percent of the volume of specified stock within a specified limit price after the order's entry. A percentage order becomes a “live” order capable of execution in one of two ways:

(i)All or part of the percentage order is “elected” as a limit order when an Exchange trade occurs in the specified security at the percentage order's limit price or better; or

(ii)all or part of a CAP order is “converted” into a limit order by the specialist, to make a bid or offer or to participate directly in a trade. 5 For background on percentage orders and amendments to Rule 123A.30, *See* Securities Exchange Act Release Nos. 40722 (Nov. 30, 1998), 63 FR 67966 (SR-NYSE-97-09) (Dec. 9, 1998); 39009 (Sept. 3, 1997), 62 FR 47715 (September 10, 1997) (SR-NYSE-96-16); 24505 (May 22, 1987), 52 FR 20484 (June 1, 1987) (SR-NYSE-85-1); and 47614 (April 2, 2003), 68 FR 17140 (April 8, 2003) (SR-NYSE-2002-55). A “D” notation on a CAP order instructs the specialist that the order may be converted to participate in destabilizing transactions or to bid/offer in a destabilizing manner. The specialist may also convert the order to participate in stabilizing transactions or to bid/offer in a stabilizing manner. An “I” notation on a CAP order stands for “immediate execution or cancel” and instructs the specialist to cancel an elected portion of the percentage order that is not executed immediately at the price of the electing transaction or better. Any elected portion that is not immediately executed reverts to its status as a percentage order, subject to subsequent election or conversion. The CAP-DI order guides the specialist to represent the order to ensure that the elected or converted portion goes along with the market, by not initiating a significant price change or lagging behind the market. CAP-DI orders are subject to a number of restrictions intended to minimize the specialist's discretion in handling such orders. 6 Elected and converted CAP-DI orders that are not executed revert to CAP-DI status. 6 Securities Exchange Act Release No. 24505 (May 22, 1987), 52 FR 20484 (June 1, 1987) (SR-NYSE-85-1) (approving amendment to NYSE Rule 123A.30 permitting conversion of percentage orders on destabilizing ticks under certain restrictions). Exchange Rule 13 defines two types of stop orders: stop limit orders and stop orders. A stop limit order to buy becomes a limit order executable at the limit price, or at a better price if obtainable, when a transaction in the security occurs at or above the stop price after the order is represented in the Trading Crowd. A stop limit order to sell becomes a limit order executable at the limit price or at a better price, if obtainable, when a transaction in the security occurs at or below the stop price after the order is represented in the Trading Crowd. Once elected, stop limit orders remain as limit orders on the Book if not executed immediately. A stop order to buy becomes a market order when a transaction in the security occurs at or above the stop price after the order is represented in the market. A stop order to sell becomes a market order when a transaction in the security occurs at or below the stop price after the order is represented in the market. Once elected, stop market orders are executed. Executions of elected or converted CAP-DI orders do not result in further elections of CAP-DI orders on the same side of the market. Executions of elected stop orders can elect CAP-DI orders at the same or better price. Executions of elected stop orders can also elect stop orders at other prices. Automatic executions and auction market transactions systemically elect CAP-DI and stop orders. The size of the electing trade elects the same amount from each CAP-DI and stop order electable by that trade. For example, if 500 shares trade and two marketable CAP-DI orders and one marketable stop limit order are electable, 500 shares of each order are elected. However, today, once systemically elected, CAP-DI and stop orders must be manually executed and reported by the specialist. Similarly, specialists must manually execute and report converted CAP-DI orders. The specialist determines the number of shares converted on a CAP-DI order to quote or trade based on instructions from the entering broker. Moreover, Exchange Rule 123A.30 provides that the specialist can trade on parity with elected or converted CAP-DI orders as long as the specialist does not trade for its own account in an amount in excess of that which each CAP-DI order would receive. Based on the example above, the specialist would have been able to trade 500 shares for his or her own account. Exchange Rule 123A.40 provides, in part, that a specialist may be a party to the election of a stop order only:

(i)when his or her bid or offer has the effect of bettering the market, when he guarantees that the stop order will be executed at the same price as the electing sale, and with Floor Official approval if the transaction is more than 0.10 point away from the prior transaction; or

(ii)when the specialist purchases or sells stock for his or her own account solely for the purpose of facilitating completion of a member's order at a single-price, where the depth of the current bid or offer is not sufficient to do so. When the specialist is acting in this manner, he or she shall not be required to guarantee that the stop order will be executed at the same price as the electing sale. The changes proposed below, which will systematize the execution and reporting of elected CAP-DI and stop orders and converted CAP-DI orders, will result in enhanced audit trail information, and reduce specialists' data entry workload and the associated chances for error. Existing Exchange rules governing the election and execution of CAP-DI and stop orders and the conversion and execution of converted CAP-DI orders remain unchanged, and the rules regarding execution of these orders will be incorporated into the Display Book to ensure appropriate executions. Systemic Execution of Elected CAP-DI and Stop Orders Currently, when a trade occurs, the system notifies the specialist what, if any, CAP-DI and stop orders have been elected by such trade. The specialist must then determine if there is any liquidity against which the elected orders (or portions thereof) can trade. If so, the specialist will manually execute and report a trade involving the elected CAP-DI and/or stop volume. The Exchange proposes to systematize this process, by having the Book automatically execute elected CAP-DI and stop volume to the extent possible. The Book will also automatically report such execution, including the relevant information regarding participants to the execution. Elected CAP-DI volume unable to trade will automatically revert to CAP-DI status and elected stop limit volume unable to trade will become a limit order on the Book. Elected stop market volume will be executed in the same manner as any market order. Additionally, where the specialist was a party to the election of stop orders, the elected stop orders will be systemically executed at the election price against the specialist. *Examples—CAP order is systemically elected based on the size of the last sale and then systemically executed up to the available contra size, at the last sale price:* 1. The quote is 20.05 bid, offered at 20.07, 9,000 × 9,000. A CAP-DI order arrives to buy 10,000 shares at 20.15. A limit order arrives to buy 2,500 shares at 20.07 and is executed at the offer price, 20.07. As a result of the 2,500-share execution of the limit order, 2,500 shares of the CAP-DI order are elected and systemically executed at the last sale price, 20.07. 7,500 shares remain on the CAP-DI order and the market is autoquoted 20.05 bid, offered at 20.07, 9,000 × 4,000. 2. The quote is 20.05 bid, offered at 20.07, 1,000 × 1,000. A CAP-DI order arrives to buy 10,000 shares at 20.15. A limit order arrives to sell 1,500 shares at 20.05 and is executed at the bid price, 20.05. As a result of the 1,000-share execution, 1,000 shares of the CAP-DI order are elected. However, only 500 shares of the 1,000 shares elected are able to trade, as only 500 shares of contra-side interest (the stock offered) remains. The CAP-DI order systemically buys the 500 shares and the remaining 500 shares elected revert to unelected status. 9,500 shares remain on the CAP-DI order and the market is autoquoted 20.04 bid (the next best bid on the Book), offered at 20.07, 2,000 (the size associated with the bid) × 1,000. 3. The quote is 20.05 bid, offered at 20.07, 1,000 × 1,000. A stop order arrives to buy 1,000 shares at 20.05. A limit order arrives to sell 1,500 shares at 20.05 and is executed at the bid price, 20.05. As a result of the 1,000-share execution, 1,000 shares of the stop order are elected. However, only 500 shares of the 1,000 shares elected are able to trade, as only 500 shares of contra-side interest (the stock offered) remains. The stop order systemically buys the 500 shares and the remaining 500 shares elected revert to a market order and will trade at the next best price, 20.07. The market is autoquoted 20.04 bid (the next best bid on the Book), offered at 20.07, 2,000 (the size associated with the bid) × 500 (after 500 shares of the stop order are executed as a market order at 20.07). Systemic Handling of CAP-DI Order Converted to a Bid or Offer Exchange Rule 123A.30 permits specialists to, among other things, convert a CAP-DI order on a stabilizing or destabilizing tick to make a bid or offer in accordance with the parameters set forth in the rule. After conversion to a bid or offer, the CAP-DI order is able to participate in automatic executions in accordance with and to the extent provided by Exchange Rules 1000—1005. Today, Exchange Rule 1001(a)(iii) provides, with respect to each automatic execution that includes specialist or Crowd orders, that the specialist is responsible for assigning the appropriate number of shares to each contra-side participant in accordance with Exchange Rule 72. This is because the Display Book does not have the contra-side information for these participants until it is manually entered by the specialist. This also applies to converted CAP-DI orders. The conversion is currently done manually by the specialist and the system does not incorporate any of the order information until it is entered by the specialist upon an execution. The Exchange proposes to systemically capture converted CAP-DI order information to enable the systemic reporting of automatic executions involving converted CAP-DI volume. The system will do this by creating a limit order on the Book (“a child order”) which will be systemically linked for identification purposes to the original CAP-DI order (“the parent order”). The child order will be systemically decremented as executions occur with it. 7 As noted above, none of the rules governing the specialist's ability to convert CAP-DI orders or the way in which they trade are proposed to be amended. 7 Telephone call between Kelly Riley, Assistant Director, Division of Market Regulation, SEC and Jeffrey Rosenstrock, Principal Rule Counsel, NYSE on August 29, 2005. Automation of Parity Between Specialist and Elected CAP-DI Orders As noted above, Exchange Rule 123A.30 8 provides that a Floor broker may permit a specialist to trade on parity with CAP-DI orders. The rule currently provides that if a specialist is on parity with one or more CAP-DI orders, at no time may the specialist participate for its own account in an amount in excess of what each CAP-DI order would receive, except that the specialist may participate for its own account to an extent greater than any particular CAP-DI order where the size specified on such order has been satisfied. A specialist on parity with a CAP-DI order remains subject to the limitations in Exchange Rule 104.10 as to transactions for his or her own account effected on destabilizing ticks. 8 Rule 123A.30 is proposed to be amended in the hybrid market filing to provide that when a specialist algorithmically price improves an order, any CAP-DI orders that have been entered and that are capable of trading at that price will be automatically converted and will trade along with the specialist in accordance with Exchange rules governing executions of converted CAP-DI orders. *See* Securities Exchange Act Release No. 51906 (June 22, 2005), 70 FR 37463 (June 29, 2005) (Amendment No. 5 to SR-NYSE-2004-05). For example, assume the market in XYZ stock is 20.10 bid, offered at 20.13, 50,000 × 40,000, with the offer consisting of three CAP-DI sell orders of 10,000 shares each that the specialist had converted to trade at 20.13 and added 10,000 shares of interest for his or her own account. If a buyer for 36,000 shares enters the Crowd to trade with the offer, the specialist must split executions equally among them (9,000 for each of the three CAP-DI orders and the specialist receives 9,000 shares since he or she is on parity). Now, assume the market in XYZ stock is 20.10 bid, offered at 20.13, 50,000 × 42,000, 9 with the offer consisting of three CAP-DI sell orders of 10,000 shares each that the specialist had converted to trade at 20.13 and added 12,000 shares of interest for his or her own account. If a buyer for 42,000 shares enters the Crowd to trade with the offer, the specialist must split executions equally among them (10,000 for each of the three CAP-DI orders in order to fully satisfy them), and the specialist receives 12,000 shares since he or she is on parity and there are 2,000 additional shares left over after satisfying the three CAP orders (10,000 shares each) and the specialist account for 10,000 shares. 9 Telephone call between Kelly Riley, Assistant Director, Division of Market Regulation, SEC and Jeffrey Rosenstrock, Principal Rule Counsel, NYSE on August 30, 2005. The Exchange proposes to automate the specialist's participation in these situations, so that the system assigns the proper number of shares to the specialist when trading along with elected CAP-DI orders. 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 Section 6(b)(5) of the Act, 11 in particular, in that it is designed 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 transaction in securities, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and in general, to protect investors and the public interest. The Exchange asserts that the proposed rule change also is designed to support the principles of Section 11A(a)(1) of the Act 12 in that it seeks to assure economically efficient execution of securities transactions, make it practicable for brokers to execute investors' orders in the best market, and provide an opportunity for investors' orders to be executed without the participation of a dealer. 10 15 U.S.C. 78f(b). 11 15 U.S.C. 78f(b)(5). 12 15 U.S.C. 78k-1(a)(1). B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The Exchange has neither solicited nor received written comments on the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing proposed rule change effects a change in an existing order entry or trading system that

(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 have the effect of limiting access to or availability of the system, it has become effective pursuant to Section 19(b)(3)(A)(iii) of the Act, 13 and Rule 19b-4(f)(5) 14 thereunder. 13 15 U.S.C. 78s(b)(3)(A)(iii). 14 17 CFR 240.19b-4(f)(5). 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. 15 15 *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-NYSE-2005-57 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-NYSE-2005-57. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Section. Copies of such filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-NYSE-2005-57 and should be submitted on or before September 30, 2005. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 16 16 17 CFR 200.30-3(a)(12). Jonathan G. Katz, Secretary. [FR Doc. E5-4920 Filed 9-8-05; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-52361; File No. SR-PCX-2005-58] Self-Regulatory Organizations; Pacific Exchange, Inc.; Order Approving Proposed Rule Change and Amendments Nos. 1 and 2 Thereto Relating to Market Order Auction August 30, 2005. On April 22, 2005, the Pacific Exchange, Inc. (“PCX”), through its wholly owned subsidiary PCX Equities, Inc. (“PCXE”) filed with the Securities and Exchange Commission (“Commission”), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) 1 and Rule 19b-4 thereunder, 2 a proposed rule change to amend its rules governing the Market Order Auction of the Archipelago Exchange (“ArcaEx”), the equities trading facility of PCXE. On June 27, 2005, the Exchange amended the proposed rule change and on July 8, 2005, the Exchange further amended the proposed rule change. The proposed rule change, as amended, was published for notice and comment in the **Federal Register** on July 29, 2005. 3 The Commission received no comment letters on the proposal. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 *See* Securities Exchange Act Release No. 52103 (July 21, 2005), 70 FR 43924. The proposed rule change would clarify the Indicative Match Price definition as defined in PCXE Rule 1.1(r) which determines the price at which orders eligible for execution in the ArcaEx auctions are executed. The proposed rule change would also modify the Market Order Auction rules as described in PCXE Rule 7.35 and implement price collars based on a similar standard currently in place for ArcaEx's Closing Auction. The Commission finds that the proposed rule change, as amended, is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange. 4 In particular, the Commission finds that the proposed rule change is consistent with Section 6(b)(5) of the Act, 5 which requires, among other things, that the rules of an exchange 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 facilitating transactions in securities, to remove impediments to and perfect the mechanism of a free and open market and a national market system and, in general, to protect investors and the public interest. The Commission believes that clarifying and improving the Market Order Auction pricing mechanism on ArcaEx should provide investors with a clearer understanding of how orders will be priced at the open and may provide greater assurance that orders will be priced at prices that are substantially close to where the stock is trading. 4 In approving this proposed rule change, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). 5 15 U.S.C. 78f(b)(5). *It is therefore ordered,* pursuant to Section 19(b)(2) of the Act, 6 that the proposed rule change (SR-PCX-2005-58), as amended, be hereby approved. 6 15 U.S.C. 78s(b)(2). For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 7 7 17 CFR 200.30-3(a)(12). Jonathan G. Katz, Secretary. [FR Doc. E5-4919 Filed 9-8-05; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-52366; File No. SR-PCX-2005-101] Self-Regulatory Organizations; Pacific Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to the Extension of the Pilot Program Applicable to Option Strategy Executions until March 1, 2006 August 31, 2005. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) 1 and Rule 19b-4 thereunder, 2 notice is hereby given that on August 25, 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, II, and III below, which Items have been prepared by PCX. The Exchange designated the proposed rule change as establishing or changing a due, fee, or other charge imposed by the Exchange under Section 19(b)(3)(A)(ii) of the Act 3 and Rule 19b-4(f)(2) 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)(ii) 4 17 CFR 240.19b-4(f)(2). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change PCX proposes to amend its Schedule of Fees and Charges in order to extend the pilot program (“Pilot Program”) that applies to Option Strategy Executions until March 1, 2006. The text of the proposed rule change is available on the Exchange's Web site ( *http://www.pacificex.com* ), at the Office of the Secretary, PCX, and at the Commission. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, PCX included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. PCX has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of this proposed rule change is to extend the Pilot Program that applies to Option Strategy Executions until March 1, 2006. 5 The transactions included as part of the Pilot Program include reversals and conversions, 6 dividend spreads, 7 box spreads, 8 short stock interest spreads, 9 and merger spreads. 10 Because the referenced Options Strategy Transactions are generally executed by professionals whose profit margins are generally narrow, the Pilot Program caps the transaction fees associated with such executions at $1,000 per strategy executed on the same trading day in the same option class. In addition, there is also a monthly cap of $50,000 per initiating firm for all strategy executions. The Exchange believes that by keeping fees low, the Exchange will be able to attract liquidity by accommodating these transactions. Extending the Pilot Program until March 1, 2006 will allow the Exchange to keep these fees low and thus continue to attract liquidity. 5 *See* Securities Exchange Act Release Nos. 51645 (May 2, 2005), 70 FR 24458 (May 9, 2005) (SR-PCX-2005-47) (establishing pilot program for reversals and conversions, dividend spreads, and box spreads until September 1, 2005) and 51787 (June 6, 2005), 70 FR 34174 (June 13, 2005) (SR-PCX-2005-65) (establishing pilot program for short stock interest spreads and merger spreads until September 1, 2005). 6 Reversals and conversions are transactions that employ calls, puts and the underlying stock to lock in a nearly risk free profit. Reversals are established by combining a short stock position with a short put and a long call position that shares the same strike and expiration. Conversions employ long positions in the underlying stock that accompany long puts and short calls sharing the same strike and expiration. 7 Dividend spreads are trades involving deep in the money options that exploit pricing differences arising around the time a stock goes ex-dividend. 8 Box spreads is a strategy that synthesizes long and short stock positions to create a profit. Specifically, a long call and short put at one strike is combined with a short call and long put at a different strike to create synthetic long and synthetic short stock positions, respectively. 9 A short stock interest spread is a spread that uses two deep in the money put options of the same class followed by the exercise of the resulting long position in order to establish a short stock interest arbitrage position. 10 A merger spread is a transaction executed pursuant to a strategy involving the simultaneous purchase and sale of options of the same class and expiration date, but with different strike prices followed by the exercise of the resulting long option position. OTP Holders and OTP Firms who wish to benefit from the fee cap will be required to submit to the Exchange forms with supporting documentation ( *e.g.* , clearing firm transaction data) to qualify for the cap. 2. Statutory Basis The proposal is consistent with Section 6(b) of the Act, 11 in general, and Section 6(b)(4) of the Act, 12 in particular, in that it provides for the equitable allocation of dues, fees, and other charges among its members. 11 15 U.S.C. 78f(b). 12 15 U.S.C. 78f(b)(4). B. Self-Regulatory Organization's Statement on Burden on Competition The proposed rule change will not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others 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 foregoing rule change has become effective pursuant to Section 19(b)(3)(A) of the Act 13 and paragraph (f)(2) of Rule 19b-4 thereunder 14 because it is establishing or changing a due, fee, or other charge applicable only to the Exchange's members. At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. 13 15 U.S.C. 78s(b)(3)(A). 14 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-PCX-2005-101 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-PCX-2005-101. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room. Copies of such filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-PCX-2005-101 and should be submitted on or before September 30, 2005. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 15 15 CFR 200.30-3(a)(12). Jonathan G. Katz, Secretary. [FR Doc. E5-4921 Filed 9-8-05; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-52371; File No. SR-PCX-2005-68] Self-Regulatory Organizations; Pacific Exchange, Inc.; Order Approving Proposed Rule Change and Amendment No. 1 Thereto To Modify Rate Schedule Retroactively To January 1, 2002 To Cap the Fees on Multiple Options Issues Transfers August 31, 2005. On May 13, 2005, the Pacific Exchange, Inc. (“PCX” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) 1 and Rule 19b-4 thereunder, 2 a proposed rule change to modify its rate schedule retroactively to January 1, 2002 to cap the fees on multiple options issues transfers. The Exchange amended the proposal on July 1, 2005. 3 The proposed rule change, as amended, was published for notice and comment in the **Federal Register** on July 27, 2005. 4 The Commission did not receive comments on the proposal. This order approves the proposed rule change, as amended. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 Amendment No. 1 replaced and superseded the original proposal. 4 *See* Securities Exchange Act Release No. 52090 (July 20, 2005), 70 FR 43492. PCX proposes to cap the fees on multiple options issues transfers. Currently, PCX charges a Lead Market Maker (“LMM”) that has been allocated an options issue $1,000 per issue if the LMM transfers the options issue to another LMM. 5 PCX originally adopted the fee to help offset its administrative and technological costs related to transferring an options issue. While PCX believes it is still accurate to charge $1,000 for the transfer of one issue, when multiple issues are transferred as part of a single transaction, the overall costs of PCX associated with the transfer may be reduced. When multiple issues are transferred as part of a single transaction, PCX believes that charging the full $1,000 on every transferred issue with no limit to the total charges is not the original intent of the transfer fee. 5 According to PCX, options issue transfers are conducted in accordance with PCX Transfer of Issues Guidelines. *See* PCX Regulatory Information Bulletin RBO-03-09 (August 11, 2003). PCX proposes to continue charging $1,000 per issue transferred, but cap the fee at $15,000 for the first one hundred issues transferred, and $5,000 for every one hundred (or any part of) additional issues transferred. To qualify for the rate cap, all transfers must be deemed to be part of a single transaction and meet the PCX Transfer of Issues Guidelines. The new fee cap would allow PCX to more accurately assess an LMM the technological and administrative costs associated with the transfer of allocated issues. PCX proposes to make this fee effective retroactive to January 1, 2002, the date the transfer fee was first effective, so that it would have the ability to make any adjustments it deems necessary to allow previous charges to properly reflect the true intent of the transfer fee. Further, PCX represented that it would review all past transfers to determine if any adjustments are warranted pursuant to the proposed rate schedule. After careful review of the proposed rule change, as amended, the Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange. 6 Specifically, the Commission believes that the proposed rule change is consistent with Section 6(b)(4) of the Act, 7 in that it provides for the equitable allocation of reasonable dues, fees, and other charges among the Exchange's members. The Commission believes that the proposal should allow the Exchange to more accurately charge LMMs the Exchange's true costs when multiple options issues are transferred. Further, the Commission believes that by making the proposal retroactive to January 1, 2002, the Exchange could make adjustments to past transfers in accordance with the original intent of the fee. 6 In approving the proposed rule change, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. *See* 15 U.S.C. 78c(f). 7 15 U.S.C. 78f(b)(4). *It is therefore ordered* , pursuant to Section 19(b)(2) of the Act, 8 that the proposed rule change (SR-PCX-2005-68) and Amendment No. 1 are approved. 8 15 U.S.C. 78s(b)(2). For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 9 9 17 CFR 200.30-3(a)(12). Jonathan G. Katz, Secretary. [FR Doc. E5-4928 Filed 9-8-05; 8:45 am] BILLING CODE 8010-01-P DEPARTMENT OF TRANSPORTATION Federal Aviation Administration State Court Decision Affecting Recordation of Artisan Liens AGENCY: Federal Aviation Administration, DOT. ACTION: Notice. SUMMARY: Consistent with Agency policy, the Federal Aviation Administration

(FAA)gives notice of the holding in *Creation Aviation, Inc.,* vs. *Textron Financial Corporation,* Florida District Court of Appeal, Fourth District, No. 4D04-2178, decided on April 27, 2005. The Court in *Creston* held that Federal law pertaining to recording with the FAA Aircraft Registry did not preempt a Florida statute requiring that an artisan lien for work on an aircraft first be filed in the county where the work was performed in order to enforce the lien under Florida law. Accordingly, the FAA is advising the public that recording an artisan lien with the FAA Aircraft Registry only, may be insufficient to enforce an artisan lien under Florida law. FOR FURTHER INFORMATION CONTACT: Joseph R. Standell, Aeronautical Center Counsel, Monroney Aeronautical Center (AMC-7), Federal Aviation Administration, 6500 S. MacArthur, Oklahoma City, OK 73169; Telephone

(405)954-3296. SUPPLEMENTARY INFORMATION: Background Under 49 U.S.C. 44107, the FAA maintains an aircraft registry that records “conveyances that affect an interest in civil aircraft of the United States.” The FAA published notice in the **Federal Register** that the FAA Aircraft Registry would record artisan liens on aircraft that met the minimum requirements of state statute. The notice stated that, for aircraft, “there is Federal preemption of place of filing: The FAA Aircraft Registry at Oklahoma City.” 46 FR 61528, December 17, 1981. The sole purpose of that notice was to set out the criteria for recording artisan liens with the FAA Aircraft Registry. Florida Statues, F.S.A. 329.01, requires all liens of affecting civil aircraft to be filed with the Federal Aviation Administration. F.S.A. 329.51 provides that aircraft liens are enforceable provided the lienor records a verified lien notice with the clerk of the circuit court in the county where the aircraft was located when services were furnished. In *Creston,* a fixed base operator attempted to foreclose a mechanic's lien that had been filed and recorded with the FAA consistent with 49 U.S.C. 44107 and F.S.A. 329.01. However, the Florida Court of Appeal held that the fixed base operator's failure to file a notice of lien in the county where the work was performed rendered the lien unenforceable under state law. The Florida Court of Appeal did not accept the fixed base operator's argument that state or local filing requirements contained in F.S.A. 329.51 were preempted by Federal law. The Court in *Creston* cited *Holiday Airlines Corporation* v. *Pacific Propeller, Inc.,* 620 F.2d 731 (1980), which had similar facts. The Court in *Holiday* held that a lien filed with the FAA was enforceable, notwithstanding a lienor's failure to file in the State of Washington. The Court held that the “federal recording statute, and rules implementing it, clearly preempt the filing requirements of Washington law.” On the other hand, the Court in *Holiday* held that “matters touching on the validity of liens are determined by underlying State law.” The Florida Court of Appeal accepted the argument that until a lien on a civil aircraft is recorded with the FAA Aircraft Registry, it is valid only against those persons with actual notice and their heirs and devises and that after the lien is filed with the FAA, it is valid against all persons. However, the Court determined that the State of Florida is not precluded from imposing requirements, including local filing requirements that affect the enforceability of aircraft liens in Florida. Interested parties may wish to research state lien statutes to determine if local requirements affect enforceability of artisan liens recorded with the FAA. Issued in Oklahoma City on September 1, 2005. Joseph R. Standell, Aeronautical Center Counsel. [FR Doc. 05-17835 Filed 9-8-05; 8:45 am]

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