Notices. Notice of an application under sections 6(c) and 17(b) of the Investment Company Act of 1940 (the “Act”) exempting applicants from section 17(a) of the Act and under section 12(d)(1)(J) of the Act exempting applicants from sections 12(d)(1)(A) and 12(d)(1)(B) of the Act

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BILLING CODE 7590-01-P SECURITIES AND EXCHANGE COMMISSION Proposed Collection; Comment Request Upon Written Request, Copies Available From: Securities and Exchange Commission, Office of Filings and Information Services, Washington, DC 20549. Extension: Regulation BTR; OMB Control No. 3235-0579; SEC File No. 270-521. Notice is hereby given that pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 *et seq.* ), the Securities and Exchange Commission (“Commission”) is soliciting comments on the collection of information summarized below.

The Commission plans to submit this existing collection of information to the Office of Management and Budget for extension and approval. Regulation Blackout Trade Restriction (“Regulation BTR”) clarifies the scope and application of Section 306(a) of the Sarbanes-Oxley Act of 2002 (“Act”). Section 306(a)(6) of the Act requires an issuer to provide timely notice to its directors and executive officers and to the Commission of the imposition of a blackout period that would trigger the statutory trading prohibition of Section 306(a)(1).

Approximately 1,230 issuers file Regulation BTR notices annually. We estimate that it takes 2 hours per response for an issuer to draft a notice to directors and executive officers for a total annual burden of 2,460 hours. The issuer prepares 75% of the 2,460 annual burden hours for a total reporting burden of (1,230 × 2 × .75) 1,845 hours. In addition, we estimate that an issuer distributes a notice to five directors and executive officers at an estimated 5 minutes per notice (1,230 blackout period × 5 notices × 5 minutes) for a total reporting burden of 512 hours.

The combined annual reporting burden is (1,845 hours + 512 hours) 2,357 hours. Written comments are invited on:

(a)Whether this collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility;

(b)the accuracy of the agency's estimate of the burden of the collections of information;

(c)ways to enhance the quality, utility, and clarity of the information collected; and

(a)Whether this collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility;

(b)the accuracy of the agency's estimate of the burden of the collections of information;

(c)ways to enhance the quality, utility, and clarity of the information collected; and

(1)A dividend;

(2)a stock split; or

(3)a rights or other subscription offering. Notice shall be

(1)given to the National Association of Securities Dealers, Inc.;

(2)in accordance with the procedures of the national securities exchange upon which the securities are registered; or

(3)may be waived by the Commission. The information required by Rule 10b-17 is necessary for the execution of the Commission's mandate under the Exchange Act to prevent fraudulent, manipulative, and deceptive acts and practices by broker-dealers. The consequence of not requiring the information collection pursuant to Rule 10b-17 is that sellers who have received distributions as recordholders may dispose of the cash or stock dividends or other rights received as recordholders without knowledge of possible claims of purchasers. It is estimated that, on an annual basis, there are approximately 29,430 respondents and that each response takes about 10 minutes to complete, thus imposing approximately 4,905 burden hours annually (29,430 × 10 minutes). We believe that the average hourly cost to produce and file a response under the rule is about $50. Therefore, the annual reporting cost burden for complying with this rule is about $245,250 (4,905 × $50). An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid control number. Written comments are invited on:

(a)Whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility;

(b)the accuracy of the agency's estimate of the burden of the collection of information;

(c)ways to enhance the quality, utility, and clarity of the information collected; and

(5)of Rule 17a-5(c) provides a conditional exemption from this requirement. It is estimated that approximately 375 broker-dealer respondents with approximately 109 million public customer accounts incur an average burden of 130,000 hours per year to comply with this rule. Rule 17a-5(c) does not contain record retention requirements. Compliance with the rule is mandatory. Responses are not confidential. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid control number. Written comments are invited on:

(a)Whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information shall have practical utility;

(b)the accuracy of the agency's estimate of the burden of the proposed collection of information;

(c)ways to enhance the quality, utility, and clarity of the information to be collected; and

(a)Whether this collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility;

(b)the accuracy of the agency's estimate of the burden of the collections of information;

(c)ways to enhance the quality, utility, and clarity of the information collected; and

(d)ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology. Consideration will be given to comments and suggestions submitted in writing within 60 days of this publication. Please direct your written comments to R. Corey Booth, Director/Chief Information Officer, Office of Information Technology, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549. Dated: October 7, 2005. Jill M. Peterson, Assistant Secretary. [FR Doc. E5-5729 Filed 10-17-05; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. IC-27116; 812-13116] ING Partners, Inc., et al.; Notice of Application October 12, 2005. AGENCY: Securities and Exchange Commission (“Commission”). ACTION: Notice of an application under sections 6(c) and 17(b) of the Investment Company Act of 1940 (the “Act”) exempting applicants from section 17(a) of the Act and under section 12(d)(1)(J) of the Act exempting applicants from sections 12(d)(1)(A) and 12(d)(1)(B) of the Act. *Summary of the Application:* The order would permit certain registered open-end management investment companies to acquire shares of other registered open-end management investment companies or unit investment trusts that are within or outside the same group of investment companies as well as a guaranteed rate investment contract issued by an affiliated insurance company. *Applicants:* ING Partners, Inc. (“IPI”), ING Investors Trust (“IIT”), ING Variable Insurance Trust (“IVIT”), ING Variable Products Trust (“IVPT”), ING VP Emerging Markets Fund, Inc. (“IVPEMF”), ING VP Natural Resources Trust (“IVPNRT”) (the “ING Investment Companies”), ING Life Insurance and Annuity Company (“ILIAC”), ING Investments, LLC (“IIL”) and Directed Services, Inc. (the “Advisers”). 1 1 All entities that currently intend to rely on the requested order are named as applicants and any other entity that relies on the order in the future will comply with the terms and conditions of the application. Applicants request that the relief also apply to any existing or future registered open-end management investment company that is part of the same group of investment companies as defined in section 12(d)(1)(G) of the Act as the ING Investment Companies (included in the term “ING Investment Companies”) and any existing or future insurance company controlling, controlled by or under common control with ILIAC that may issue a guaranteed rate investment contract (each an “ING Insurance Company”). Each series of an ING Investment Company is referred to as a “Fund” and collectively as “Funds.” *Filing Dates:* The application was filed on August 13, 2004 and amended on April 7, 2005, and September 28, 2005. Applicants have agreed to file an amendment during the notice period, the substance of which is reflected in this notice. *Hearing or Notification of Hearing:* An order granting the application will be issued unless the Commission orders a hearing. Interested persons may request a hearing by writing to the Commission's Secretary and serving applicants with a copy of the request, personally or by mail. Hearing requests should be received by the Commission by 5:30 p.m. on November 7, 2005, and should be accompanied by proof of service on applicants, in the form of an affidavit or, for lawyers, a certificate of service. Hearing requests should state the nature of the writer's interest, the reason for the request, and the issues contested. Persons who wish to be notified of a hearing may request notification by writing to the Commission's Secretary. ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F St., NE., Washington, DC 20549-9303. Applicants, c/o Huey P. Falgout, Jr., Chief Counsel, ING Americas U.S. Legal Services, 7337 E. Doubletree Ranch Rd., Scottsdale, Arizona 85258. FOR FURTHER INFORMATION CONTACT: Marilyn Mann, Senior Counsel, at

(202)551-6813, or Mary Kay Frech, Branch Chief, at

(202)551-6821 (Division of Investment Management, Office of Investment Company Regulation). SUPPLEMENTARY INFORMATION: The following is a summary of the application. The complete application may be obtained for a fee at the Commission's Public Reference Branch, 100 F St., NE., Washington, DC 20549-0102 (tel.

(202)551-5850). Applicants' Representations 1. IPI is a Maryland corporation and is registered under the Act as an open-end management investment company. IPI currently consists of 25 Funds, each with its own investment objective and policies. The shares of each IPI Fund are offered and sold through registered separate accounts of insurance companies that are affiliates of the Advisers (“Registered Separate Accounts”) and unregistered separate accounts of insurance companies that are affiliates of the Advisers (“Unregistered Separate Accounts” and, together with the Registered Separate Accounts, the “Separate Accounts”), which are used to fund variable annuity contracts and variable life insurance contracts, and may be offered and sold to retirement plans and certain investment advisers, pursuant to an order granted by the Commission. 2 IPI has created 5 new Funds known as the Solutions Portfolios, which will be managed by ILIAC and each of which will be a fund of funds (“Funds of Funds”). The Solutions Portfolios are the only Funds of Funds that currently intend to rely on the requested relief. 2 Aetna Variable Fund, Investment Company Act Release Nos. 23545 (Nov. 23, 1998) (notice) and 23616 (Dec. 21, 1998) (order). 2. IIT is a Massachusetts business trust and is registered under the Act as an open-end management investment company. IIT currently consists of 46 Funds, each with its own investment objective and policies. The shares of each IIT Fund currently are offered and sold through Separate Accounts which are used to fund variable annuity contracts and variable life insurance contracts, and may be offered and sold to retirement plans, pursuant to an order granted by the Commission. 3 3 *Id.* 3. IVIT is a Delaware statutory trust and is registered under the Act as an open-end management investment company. IVIT currently consists of 11 Funds, each with its own investment objective and policies. IVPT is a Massachusetts business trust and is registered under the Act as an open-end management investment company. IVPT currently consists of 10 Funds, each with its own investment objective and policies. IVPEMF is a Maryland corporate and is registered under the Act as an open-end management investment company. IVPEMF currently consists of one Fund. IVPNRT is a Massachusetts business trust and is registered under the Act as an open-end management investment company. IVPNRT currently consists of one Fund. 4. The Funds of Funds will invest in other Funds (“Affiliated Underlying Funds”) and in other registered open-end management investment companies and unit investment trusts that are not part of the same group of investment companies, as defined in section 12(d)(1)(G) of the Act, as the Funds of Funds (“Unaffiliated Underlying Funds”). The Affiliated Underlying Funds and the Unaffiliated Underlying Funds are together the “Underlying Funds.” Each Fund of Funds may also make investments in other securities and in a guaranteed rate investment contract issued by ILIAC or another ING Insurance Company (the “ING Guaranteed Contract”). ILIAC and all other ING Insurance Companies are indirect subsidiaries of ING Groep, N.V. Applicants state that each Fund of Funds will enable investors to create a comprehensive asset allocation program with just one investment and provide a simple, convenient and cost-efficient program for investors who are able to identify their investment goals and risk tolerances but may not be comfortable deciding how to invest their assets to achieve those goals. 5. Each Adviser is registered with the Commission as an investment adviser under the Investment Advisers Act of 1940, is a direct or indirect subsidiary of ING Groep, N.V., and serves as investment adviser to the Funds. Each investment adviser to a Fund of Funds that meets the definition of section 2(a)(20)(A) of the Act is referred to as a “Fund of Funds Adviser.” Any investment adviser to a Fund of Funds that meets the definition in section 2(a)(20)(B) of the Act is referred to as a “Fund of Funds Subadviser.” 6. Applicants request relief to permit the Funds of Funds to purchase shares of the Underlying Funds in excess of the limits set forth in section 12(d)(1)(A) of the Act and for the Underlying Funds, their principal underwriters and any broker or dealer to sell shares of the Underlying Funds to the Funds of Funds in excess of the limits set forth in section 12(d)(1)(B) of the Act. Applicants also seek relief from section 17(a) of the Act to permit Underlying Funds to sell shares to, and redeem shares from, the Funds of Funds. In addition, applicants seek relief from section 17(a) of the Act to permit a Fund of Funds to purchase the ING Guaranteed Contract. Applicants' Legal Analysis A. Sections 12(d)(1)(A) and

(B)of the Act 1. Section 12(d)(1)(A) prohibits a registered investment company from acquiring shares of another registered investment company if the securities represent more than 3% of the total outstanding voting stock of the acquired company, more than 5% of the total assets of the acquiring company or, together with the securities of other investment companies, more than 10% of the total assets of the acquiring company. Section 12(d)(1)(B) prohibits a registered open-end investment company, its principal underwriter and any broker or dealer from selling shares of the company to another investment company if the sale will cause the acquiring company to own more than 3% of the acquired company's outstanding voting stock or more than 10% of the acquired company's voting stock to be owned by investment companies generally. 2. Section 12(d)(1)(J) of the Act provides that the Commission may exempt any person, security or transaction from any provision of section 12(d)(1), if the exemption is consistent with the public interest and the protection of investors. Applicants seek an exemption under section 12(d)(1)(J) to permit Funds of Funds to acquire shares of Underlying Funds and Underlying Funds to sell their shares to Funds of Funds, beyond the limits set forth in sections 12(d)(1)(A) and (B). 3. Applicants state that the proposed arrangement will be structured to mitigate the potential abuses from which sections 12(d)(1)(A) and

(B)are designed to protect investors, such as undue influence by a fund of funds over underlying funds, excessive layering of fees and overly complex fund structures. Accordingly, applicants believe that the requested exemption is consistent with the public interest and the protection of investors. 4. Applicants state that the proposed arrangement will not result in undue influence by a Fund of Funds or its affiliates over any Underlying Fund. To limit the influence that a Fund of Funds may have over an Unaffiliated Underlying Fund, applicants propose a condition prohibiting (a)(i) The Fund of Funds Adviser,

(ii)any person controlling, controlled by or under common control with the Fund of Funds Adviser and

(iii)any investment company or issuer that would be an investment company but for section 3(c)(1) or 3(c)(7) of the Act advised or sponsored by the Fund of Funds Adviser or any person controlling, controlled by or under common control with the Fund of Funds Adviser (“Group”), and (b)(i) Any Fund of Funds Subadviser,

(ii)any person controlling, controlled by or under common control with the Fund of Funds Subadviser and

(iii)any investment company or issuer that would be an investment company but for section 3(c)(1) or 3(c)(7) of the Act (or portion of such investment company or issuer) advised or sponsored by the Fund of Funds Subadviser or any person controlling, controlled by or under common control with the Fund of Funds Subadviser (“Subadviser Group”), from controlling (individually or in the aggregate) an Unaffiliated Underlying Fund within the meaning of section 2(a)(9) of the Act. 5. Applicants also propose conditions 2-7, stated below, to preclude a Fund of Funds and its affiliated entities from taking advantage of an Unaffiliated Underlying Fund with respect to transactions between the entities and to ensure the transactions will be on an arm's length basis. Condition 2 precludes a Fund of Funds and its Fund of Funds Adviser, any Fund of Funds Subadviser, promoter, principal underwriter and any person controlling, controlled by or under common control with any of these entities (each, a “Fund of Funds Affiliate”) from causing any existing or potential investment by the Fund of Funds in an Unaffiliated Underlying Fund to influence the terms of any services or transactions between the Fund of Funds or a Fund of Funds Affiliate and the Unaffiliated Underlying Fund or its investment adviser(s), sponsor, promoter, principal underwriter and any person controlling, controlled by or under common control with any of these entities (each, an “Unaffiliated Fund Affiliate”). Condition 5 precludes a Fund of Funds or Fund of Funds Affiliate (except to the extent it is acting in its capacity as an investment adviser to an Unaffiliated Underlying Fund that is an open-end management investment company (“Unaffiliated Fund”) or sponsor to an Unaffiliated Underlying Fund that is a unit investment trust (“Unaffiliated Trust”)) from causing an Unaffiliated Underlying Fund to purchase a security in an offering of securities during the existence of any underwriting or selling syndicate of which a principal underwriter is an officer, director, member of an advisory board, Fund of Funds Adviser, Fund of Funds Subadviser, sponsor or employee of the Fund of Funds, or a person of which any such officer, director, member of an advisory board, Fund of Funds Adviser, Fund of Funds Subadviser, sponsor or employee is an affiliated person (each, an “Underwriting Affiliate,” except any person whose relationship to the Unaffiliated Underlying Fund is covered by section 10(f) of the Act is not an Underwriting Affiliate). An offering of securities during the existence of any underwriting or selling syndicate of which a principal underwriter is an Underwriting Affiliate is an “Affiliated Underwriting.” 6. In addition, as an assurance that an Unaffiliated Fund understands the implications of an investment by a Fund of Funds operating in reliance on the requested relief from sections 12(d)(1)(A) and (B), prior to any investment by the Fund of Funds in the Unaffiliated Fund in excess of the limit set forth in section 12(d)(1)(A)(i), condition 10 requires the Fund of Funds and the Unaffiliated Fund to execute an agreement stating, without limitation, that their boards and their investment adviser understand the terms and conditions of the order and agree to fulfill their responsibilities under the order. Applicants note that an Unaffiliated Underlying Fund has the right to reject an investment from a Fund of Funds. 7. Applicants do not believe that the proposed arrangement will involve excessive layering of fees. With respect to investment advisory fees, applicants state that, prior to the approval of any investment advisory contract under section 15 of the Act, the board of directors or trustees (“Board”) of a Fund of Funds, including a majority of the directors or trustees who are not “interested persons,” as defined in section 2(a)(19) of the Act (“Disinterested Trustees”), will find that any investment advisory fees charged to the Fund of Funds under its investment advisory contract are based on services provided that are in addition to, rather than duplicative of, services provided under the investment advisory contract(s) of any Underlying Fund. Applicants further state that the Fund of Funds Adviser will waive or offset fees otherwise payable to it by the Fund of Funds in an amount at least equal to any compensation (including fees received pursuant to a plan adopted by an Unaffiliated Fund under rule 12b-1 under the Act) received from an Unaffiliated Underlying Fund by the Fund of Funds Adviser, or an affiliated person of the Fund of Funds Adviser, other than any advisory fees paid to the Fund of Funds Adviser or its affiliated person by an Unaffiliated Fund, in connection with the investment by the Fund of Funds in the Unaffiliated Underlying Fund. Applicants also state that any Fund of Funds Subadviser will waive fees otherwise payable to the Fund of Funds Subadviser, directly or indirectly, by the Fund of Funds in an amount at least equal to any compensation received from an Unaffiliated Underlying Fund by the Fund of Funds Subadviser, or an affiliated person of the Fund of Funds Subadviser, other than any advisory fees paid to the Fund of Funds Subadviser or its affiliated person, in connection with the investment by the Fund of Funds in the Unaffiliated Underlying Fund made at the direction of the Fund of Funds Subadviser. Applicants agree that the benefit of any such waiver by a Fund of Funds Subadviser will be passed through to the Fund of Funds. 8. Applicants represent that the aggregate sales charges and/or service fees (as defined in the Conduct Rules of the NASD (“NASD Conduct Rules”)) charged with respect to shares of any Fund of Funds will not exceed the limits applicable to funds of funds set forth in rule 2830 of the NASD Conduct Rules. Moreover, the prospectus and sales literature of a Fund of Funds will contain concise, “plain English” disclosure tailored to the particular document designed to inform investors of the unique characteristics of the fund of funds structure including, but not limited to, its expense structure and the additional expenses of investing in Underlying Funds. 9. Applicants contend that the proposed arrangement will not create an overly complex fund structure. Applicants note that Underlying Funds will be prohibited from acquiring securities of any investment company or company relying on section 3(c)(1) or 3(c)(7) of the Act in excess of the limits contained in section 12(d)(1)(A), except to the extent that an Underlying Fund

(a)receives securities of another investment company as a dividend or as a result of a plan of reorganization of a company (other than a plan devised for the purpose of evading section 12(d)(1)), or

(b)acquires (or is deemed to have acquired) securities of another investment company pursuant to exemptive relief from the Commission permitting such Underlying Fund to

(i)acquire securities of one or more affiliated investment companies for short-term cash management purposes or

(ii)engage in interfund borrowing and lending transactions. B. Section 17(a) of the Act 1. Section 17(a) generally prohibits purchases and sales of securities, on a principal basis, between a registered investment company and any affiliated person or promoter of, or principal underwriter for, the company, and affiliated persons of such persons. Section 2(a)(3) of the Act defines an “affiliated person” of another person to include, among other things, any person directly or indirectly owning, controlling or holding with power to vote 5% or more of the other's outstanding voting securities; any person 5% or more of whose outstanding voting securities are directly or indirectly owned, controlled or held with power to vote by the other person; any person directly or indirectly controlling, controlled by or under common control with the other person; and any investment adviser to an investment company. 2. Section 17(b) authorizes the Commission to grant an order permitting a transaction otherwise prohibited by section 17(a) if it finds that

(a)the terms of the proposed transaction, including the consideration to be paid and received, are fair and reasonable and do not involve overreaching on the part of any person concerned;

(b)the proposed transaction is consistent with the policies of each registered investment company concerned; and

(c)the proposed transaction is consistent with the general purposes of the Act. Section 6(c) permits the Commission to exempt any person or transaction, or any class or classes of persons or transactions from any provisions of the Act, if such exemption is necessary or appropriate in the public interest and consistent with the protection of investors and the purposes fairly intended by the policy and provisions of the Act. 3. Applicants state that an Underlying Fund might be deemed to be an affiliated person of a Fund of Funds if the Fund of Funds acquires 5% or more of the Underlying Fund's outstanding voting securities. Applicants also state that since the Funds of Funds and Affiliated Underlying Funds will be advised by an Adviser, they may be deemed to be under common control and, therefore, affiliated persons of each other. Accordingly, section 17(a) could prevent an Underlying Fund from selling shares to, and redeeming shares from, a Fund of Funds. Applicants state that the consideration paid in sales and redemptions permitted under the requested order of shares of Underlying Funds will be based on the net asset values of the Underlying Funds. 4. ILIAC or another ING Insurance Company will issue an ING Guaranteed Contract to the Funds of Funds. ILIAC also may serve as investment adviser to a Fund of Funds and may also be the record owner of 5% or more of the shares of a Fund of Funds and thus may be deemed to be an affiliated person of the Fund of Funds. The purchase by a Fund of Funds of an ING Guaranteed Contract would therefore be prohibited by section 17(a). Applicants submit that the ING Guaranteed Contract will bear a fixed rate of interest which will be at least as favorable as the guaranteed rate on substantially similar guaranteed contracts offered by the ING Insurance Companies and other insurance companies. Applicants further submit that the Funds of Funds may withdraw assets from the ING Guaranteed Contract at any time if the rate becomes non-competitive (or for any other reason) without the imposition of any sales charge or market value adjustment. 5. Applicants seek an exemption under sections 6(c) and 17(b) to allow the proposed transactions. Applicants state that the transactions satisfy the standards for relief under sections 6(c) and 17(b). Applicants represent that the proposed transactions will be consistent with the policies of each Fund of Funds and Underlying Fund and with the general purposes of the Act. Applicants' Conditions Applicants agree that the order granting the requested relief shall be subject to the following conditions: 1. The members of the Group will not control (individually or in the aggregate) an Unaffiliated Underlying Fund within the meaning of section 2(a)(9) of the Act. The members of a Subadviser Group will not control (individually or in the aggregate) an Unaffiliated Underlying Fund within the meaning of section 2(a)(9) of the Act. If, as a result of a decrease in the outstanding voting securities of an Unaffiliated Underlying Fund, the Group or the Subadviser Group, each in the aggregate, becomes a holder of more than 25% of the outstanding voting securities of the Unaffiliated Underlying Fund, then the Group or the Subadviser Group (except for any member of the Group or the Subadviser Group that is a Separate Account) will vote its shares of the Unaffiliated Underlying Fund in the same proportion as the vote of all other holders of the Unaffiliated Underlying Fund's shares. A Registered Separate Account will seek voting instructions from its contract holders and will vote its shares in accordance with the instructions received and will vote those shares for which no instructions were received in the same proportion as the shares for which instructions were received. An Unregistered Separate Account will either

(i)vote its shares of the Unaffiliated Underlying Fund in the same proportion as the vote of all other holders of the Unaffiliated Underlying Fund's shares; or

(ii)seek voting instructions from its contract holders and vote its shares in accordance with the instructions received and vote those shares for which no instructions were received in the same proportion as the shares for which instructions were received. This condition shall not apply to a Subadviser Group with respect to an Unaffiliated Underlying Fund for which the Fund of Funds Subadviser or person controlling, controlled by or under common control with the Fund of Funds Subadviser acts as the investment adviser within the meaning of section 2(a)(20)(A) of the Act (in the case of an Unaffiliated Fund) or as the sponsor (in the case of an Unaffiliated Trust). 2. No Fund of Funds or Fund of Funds Affiliate will cause any existing or potential investment by the Fund of Funds in shares of an Unaffiliated Underlying Fund to influence the terms of any services or transactions between the Fund of Funds or a Fund of Funds Affiliate and the Unaffiliated Underlying Fund or an Unaffiliated Fund Affiliate. 3. The Board of each Fund of Funds, including a majority of the Disinterested Trustees, will adopt procedures reasonably designed to assure that the Fund of Funds Adviser and any Fund of Funds Subadviser are conducting the investment program of the Fund of Funds without taking into account any consideration received by the Fund of Funds or a Fund of Funds Affiliate from an Unaffiliated Underlying Fund or an Unaffiliated Fund Affiliate in connection with any services or transactions. 4. Once an investment by a Fund of Funds in the securities of an Unaffiliated Fund exceeds the limit of section 12(d)(1)(A)(i) of the Act, the Board of the Unaffiliated Fund, including a majority of the Disinterested Trustees, will determine that any consideration paid by the Unaffiliated Fund to a Fund of Funds or a Fund of Funds Affiliate in connection with any services or transactions:

(a)Is fair and reasonable in relation to the nature and quality of the services and benefits received by the Unaffiliated Fund;

(b)is within the range of consideration that the Unaffiliated Fund would be required to pay to another unaffiliated entity in connection with the same services or transactions; and

(c)does not involve overreaching on the part of any person concerned. This condition does not apply with respect to any services or transactions between an Unaffiliated Fund and its investment adviser(s), or any person controlling, controlled by or under common control with such investment adviser(s). 5. No Fund of Funds or Fund of Funds Affiliate (except to the extent it is acting in its capacity as an investment adviser to an Unaffiliated Fund or sponsor to an Unaffiliated Trust) will cause an Unaffiliated Underlying Fund to purchase a security in an Affiliated Underwriting. 6. The Board of an Unaffiliated Fund, including a majority of the Disinterested Trustees, will adopt procedures reasonably designed to monitor any purchases of securities by the Unaffiliated Fund in an Affiliated Underwriting, once an investment by a Fund of Funds in the securities of the Unaffiliated Fund exceeds the limit of section 12(d)(1)(A)(i) of the Act, including any purchases made directly from an Underwriting Affiliate. The Board of the Unaffiliated Fund will review these purchases periodically, but no less frequently than annually, to determine whether the purchases were influenced by the investment by the Fund of Funds in shares of the Unaffiliated Fund. The Board of the Unaffiliated Fund will consider, among other things,

(a)whether the purchases were consistent with the investment objectives and policies of the Unaffiliated Fund;

(b)how the performance of securities purchased in an Affiliated Underwriting compares to the performance of comparable securities purchased during a comparable period of time in underwritings other than Affiliated Underwritings or to a benchmark such as a comparable market index; and

(c)whether the amount of securities purchased by the Unaffiliated Fund in Affiliated Underwritings and the amount purchased directly from an Underwriting Affiliate have changed significantly from prior years. The Board will take any appropriate actions based on its review, including, if appropriate, the institution of procedures designed to assure that purchases of securities in Affiliated Underwritings are in the best interest of shareholders. 7. Each Unaffiliated Fund will maintain and preserve permanently in an easily accessible place a written copy of the procedures described in the preceding condition, and any modifications to such procedures, and will maintain and preserve for a period of not less than six years from the end of the fiscal year in which any purchase in an Affiliated Underwriting occurred, the first two years in an easily accessible place, a written record of each purchase made once an investment by a Fund of Funds in the securities of an Unaffiliated Fund exceeds the limit of section 12(d)(1)(A)(i) of the Act, setting forth from whom the securities were acquired, the identity of the underwriting syndicate's members, the terms of the purchase, and the information or materials upon which the determinations of the Unaffiliated Fund's Board were made. 8. A Fund of Funds will pay no sales load when purchasing an ING Guaranteed Contract, and will be permitted to remove its assets from an ING Guaranteed Contract at any time without the imposition of a sales charge or market value adjustment. 9. Prior to purchasing an ING Guaranteed Contract, and prior to any periodic adjustment to the rate of interest on an ING Guaranteed Contract held by a Fund of Funds, the Board of the Fund of Funds, including a majority of the Disinterested Trustees, will make a determination that

(i)purchasing or maintaining, as applicable, the ING Guaranteed Contract is in the best interests of the Fund of Funds and its shareholders and does not involve overreaching on the part of any person concerned, and

(ii)the guaranteed rate on the ING Guaranteed Contract is at least as favorable as the guaranteed rate on substantially similar guaranteed contracts offered by the ING Insurance Companies and other insurance companies. This determination, and the information upon which it was based, will be recorded fully in the minute books of the Fund of Funds. 10. Prior to an investment in shares of an Unaffiliated Fund in excess of the limit in section 12(d)(1)(A)(i), the Fund of Funds and the Unaffiliated Fund will execute an agreement stating, without limitation, that their boards of directors or trustees and their investment advisers understand the terms and conditions of the order and agree to fulfill their responsibilities under the order (“Participation Agreement”). At the time of its investment in shares of an Unaffiliated Fund in excess of the limit in section 12(d)(1)(A)(i), a Fund of Funds will notify the Unaffiliated Fund of the investment. At such time, the Fund of Funds also will transmit to the Unaffiliated Fund a list of the names of each Fund of Funds Affiliate and Underwriting Affiliate. The Fund of Funds will notify the Unaffiliated Fund of any changes to the list as soon as reasonably practicable after a change occurs. The Unaffiliated Fund and the Fund of Funds will maintain and preserve a copy of the order, the Participation Agreement, and the list with any updated information for the duration of the investment and for a period of not less than six years thereafter, the first two years in an easily accessible place. 11. Prior to approving any investment advisory or management contract under section 15 of the Act, the Board of each Fund of Funds, including a majority of the Disinterested Trustees, will find that the advisory or management fees charged under such contract are based on services provided that are in addition to, rather than duplicative of, the services provided under the advisory contract(s) of any Affiliated Underlying Funds or Unaffiliated Funds in which the Fund of Funds may invest. This finding, and the basis upon which the finding was made, will be recorded fully in the minute books of the Fund of Funds. 12. The Fund of Funds Adviser will waive or offset fees otherwise payable to it by the Fund of Funds in an amount at least equal to any compensation (including fees received pursuant to a plan adopted by an Unaffiliated Fund under rule 12b-1 under the Act) received by the Fund of Funds Adviser or an affiliated person of the Fund of Funds Adviser from an Unaffiliated Underlying Fund, other than any advisory fees paid to the Fund of Funds Adviser or its affiliated person by an Unaffiliated Fund, in connection with the investment by the Fund of Funds in the Unaffiliated Underlying Fund. Any Fund of Funds Subadviser will waive fees otherwise payable to the Fund of Funds Subadviser, directly or indirectly, by the Fund of Funds in an amount at least equal to any compensation received from an Unaffiliated Underlying Fund by the Fund of Funds Subadviser, or an affiliated person of the Fund of Funds Subadviser, other than any advisory fees paid to the Fund of Funds Subadviser or its affiliated person by the Unaffiliated Fund, in connection with the investment by the Fund of Funds in the Unaffiliated Underlying Fund made at the direction of the Fund of Funds Subadviser. In the event that the Fund of Funds Subadviser waives fees, the benefit of the waiver will be passed through to the Fund of Funds. 13. With respect to Registered Separate Accounts that invest in a Fund of Funds, no sales load will be charged at the Fund of Funds level or at the Underlying Fund level. Other sales charges and service fees, as defined in rule 2830 of the Conduct Rules of the NASD, if any, will only be charged at the Fund of Funds level or at the Underlying Fund level, not both. With respect to other investments in a Fund of Funds, any sales charges and/or service fees charged with respect to shares of a Fund of Funds will not exceed the limits applicable to funds of funds set forth in rule 2830 of the Conduct Rules of the NASD. 14. No Underlying Fund will acquire securities of any other investment company or company relying on section 3(c)(1) or 3(c)(7) of the Act in excess of the limits contained in section 12(d)(1)(A) of the Act, except to the extent that such Underlying Fund

(i)receives securities of another investment company as a dividend or as a result of a plan of reorganization of a company (other than a plan devised for the purpose of evading Section 12(d)(1) of the Act); or

(ii)acquires (or is deemed to have acquired) securities of another investment company pursuant to exemptive relief from the Commission permitting such Underlying Fund to

(a)acquire securities of one or more affiliated investment companies for short-term cash management purposes, or

(b)engage in interfund borrowing and lending transactions. 15. The Board of any Fund of Funds will satisfy the fund governance standards as defined in rule 0-1(a)(7) under the Act (“Governance Standards”) by the later of

(i)the compliance date for the rule (“Compliance Date”) or

(ii)the earlier of the date of reliance on the order or the date on which the Fund of Funds executes a Participation Agreement. The Board of any Unaffiliated Fund will satisfy the Governance Standards by the later of

(i)the Compliance Date or

(ii)the date on which the Unaffiliated Fund executes a Participation Agreement. For the Commission, by the Division of Investment Management, pursuant to delegated authority. Jill M. Peterson, Assistant Secretary. [FR Doc. E5-5735 Filed 10-17-05; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 35-28045] Filings Under the Public Utility Holding Company Act of 1935, as Amended (“Act”) October 12, 2005. Notice is hereby given that the following filing(s) has/have been made with the Commission pursuant to provisions of the Act and rules promulgated under the Act. All interested persons are referred to the application(s) and/or declaration(s) for complete statements of the proposed transaction(s) summarized below. The application(s) and/or declaration(s) and any amendment(s) is/are available for public inspection through the Commission's Branch of Public Reference. Interested persons wishing to comment or request a hearing on the application(s) and/or declaration(s) should submit their views in writing by November 7, 2005, to the Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-9303, and serve a copy on the relevant applicant(s) and/or declarant(s) at the address(es) specified below. Proof of service (by affidavit or, in the case of an attorney at law, by certificate) should be filed with the request. Any request for hearing should identify specifically the issues of facts or law that are disputed. A person who so requests will be notified of any hearing, if ordered, and will receive a copy of any notice or order issued in the matter. After November 7, 2005, the application(s) and/or declaration(s), as filed or as amended, may be granted and/or permitted to become effective. AGL Resources Inc. et al. (70-10175) AGL Resources Inc., (“AGL Resources”), a registered holding company, Ten Peachtree Place, Suite 1000, Atlanta, Georgia 30309; its public utility subsidiaries: Atlanta Gas Light Company (“AGLC”), Chattanooga Gas Company (“CGC”), Virginia Natural Gas, Inc. (“VNG”), Pivotal Utility Holdings, Inc. (“Pivotal”) and Virginia Gas Distribution Company (“VGDC”) (AGLC, CGC and VNG are collectively referred to as the “ Utility Subsidiaries”) 1 ; and the following of its nonutility companies: AGL Rome Holdings, Inc., Georgia Natural Gas Company, AGL Investments, Inc., AGL Networks, LLC, AGL Energy Corporation, AGL Propane Services, Inc., Trustees Investments, Inc., Customer Care Services, Inc., Pivotal Propane of Virginia, Inc., Southeastern LNG, Inc., AGL Services Company, AGL Capital Corporation, Global Energy Resources Insurance Corporation, AGL Capital Trust I, AGL Capital Trust II, and AGL Capital Trust III, all of Ten Peachtree Place, Suite 1000, Atlanta Georgia 30309; SouthStar Energy Services LLC, 817 West Peachtree Street, Atlanta Georgia 30308; and Sequent Energy Management, LP, Sequent, LLC, Sequent Holding, LLC, Sequent Energy Marketing, LP, Pivotal Energy Services, Inc., Jefferson Island Storage & Hub, LLC, (“JISH”), Pivotal Jefferson Island Storage & Hub LLC (“PJISH”) and Pivotal Storage, Inc. (“PSI”), all of 1200 Smith Street, Suite 900, Houston, Texas 77002 (collectively, the “Nonutility Subsidiaries”; AGL Resources, the Utility Subsidiaries and the Nonutility Subsidiaries are collectively referred to as “Applicants”) have filed a post-effective amendment (“Application”) under sections 6(a), 7, 9, 10 and 12 of the Act and rules 45, and 54 under the Act. 1 AGLC, VNG, and CGC are located at Ten Peachtree Place, Suite 1000, Atlanta, Georgia 30309. Pivotal is located at 550 Route 202-206, Box 760, Bedminster, New Jersey, and VGDC is located at 1096 Ole Berry Drive, Abingdon, Virginia 24210. Applicants request a supplemental order from the Commission for JISH, PJISH and PSI to become parties to and participate in the nonutility money pool as previously authorized for nonutility subsidiaries of AGL Resources (“Nonutility Money Pool”) under the Commission's order dated April 1, 2004 (HCAR No. 27828) (“April 2004 Order”) in order to manage JISH, PJISH and PSI's short-term capital requirements in connection with the gas storage business described below. AGL Resources directly or indirectly owns all of the issued and outstanding common stock of the Utility Subsidiaries, which are natural gas local distribution utility companies. The Utility Subsidiaries construct, manage and maintain natural gas pipelines in Georgia, Tennessee Virginia, Maryland, Florida and New Jersey and serve more than 2.3 million end-use customers. By order dated November 24, 2004 (HCAR No. 27917) (“November 2004 Order”), AGL Resources was authorized to acquire NUI Corporation and its subsidiaries, including NUI Utilities, Inc. (since renamed Pivotal Utility Holdings, Inc.) and several nonutility companies. The November 2004 Order granted financing authority to NUI Corporation and its subsidiaries, and permitted the nonutility subsidiaries of NUI Corporation to participate in the AGL Resources nonutility money pool under the same terms and conditions as AGL Resources' existing nonutility subsidiaries. Through its various nonutility subsidiaries, AGL Resources engages in asset optimization, producer services, wholesale marketing and risk management; marketing of natural gas and related services to retail customers; and providing telecommunications conduit and dark fiber. JISH owns and operates two salt dome gas storage caverns with 9.9 million Dekatherms

(Dth)of total capacity and approximately 7.3 million Dth of working gas capacity. The facility has withdrawal capacity of over 720,000 Dth per day and injection capacity of 240,000 Dth per day. Through its interconnections with eight pipelines and its access to the Henry Hub, JISH will provide additional access to natural gas supply for AGL Resources' utilities. Through its indirect wholly owned subsidiary, PJISH, AGL Resources acquired JISH on October 1, 2004 for approximately $90 million, which included approximately $9 million of working gas inventory. Applicants state that the acquisition of JISH is exempt under Rule 58. Additionally, AGL Resources has formed two new non-utility subsidiaries, PJISH and PSI, which are intermediate holding companies for JISH. PJISH is a subsidiary of PSI and PSI is a subsidiary of AGL Investments, which is a direct wholly owned subsidiary of AGL Resources. Applicants state that the creation of PJISH and PSI is exempt under the April 2004 Order. The Commission authorized the Applicants in the April 2004 Order to engage in a system of external and intrasystem financing. In particular, as it relates to this Application, AGL Resources, the Utility Subsidiaries, and certain of AGL Resources nonutility subsidiaries were authorized to continue as parties to the AGL Resources utility money pool and Nonutility Money Pool. In addition, to the extent not exempt under Rule 52(b), the nonutility subsidiaries covered by the April 2004 Order were authorized to make unsecured short-term borrowings from the Nonutility Money Pool, to contribute surplus funds to the Nonutility Money Pool, and to lend and extend credit to one another through the Nonutility Money Pool. In the April 2004 Order, the Commission also reserved jurisdiction over the participation of any newly formed or acquired company in either money pool as borrower. Applicants request authority for JISH, PHISH and PSI to become parties to and participate in the Nonutility Money Pool, subject to the same terms and conditions previously authorized by Commission for the nonutility subsidiaries in the April 2004 Order. Applicants further request that the Commission again reserve jurisdiction over the participation of any other current or future nonutility subsidiaries as a borrower under the Nonutility Money Pool. Applicants propose no other changes to the terms, condition or limitations of the April 2004 Order by this Application. For the Commission, by the Division of Investment Management, pursuant to delegated authority. Jill M. Peterson, Assistant Secretary. [FR Doc. E5-5720 Filed 10-17-05; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-52592; File No. SR-Amex-2004-76] Self-Regulatory Organizations; American Stock Exchange LLC; Order Approving Proposed Rule Change and Amendment Nos. 1 and 2 Relating to Contingency Trading Procedures October 12, 2005. I. Introduction On September 10, 2004, the American Stock Exchange LLC (“Amex” 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 adopt Amex Rule 119A regarding contingency trading procedures. On August 26, 2005, the Exchange submitted Amendment No. 1 to the proposal. 3 On August 29, 2005, the Exchange submitted Amendment No. 2 to the proposal. 4 The proposed rule change, as amended, was published for notice and comment in the **Federal Register** on September 7, 2005. 5 The Commission received no comment letters regarding the proposed rule change. This order approves the proposed rule change, as amended. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 In Amendment No. 1, the Exchange substantially revised the proposed rule text and corresponding description of the proposal in its Form 19b-4. Amendment No. 1 replaced Amex's original filing in its entirety. 4 In Amendment No. 2, the Exchange made minor corrections to the rule text. 5 *See* Securities Exchange Act Release No. 52360 (August 30, 2005), 70 FR 53260 (“Notice”). II. Description of Proposal As set forth in the Notice, the Amex proposes to adopt a new Rule 119A, setting forth the Exchange's contingency trading with respect to the use of the Exchange's “Alternative Trading Facility” (“ATF”), which is a remote facility established by the Exchange for trading securities admitted to dealings in the event that the Exchange's primary trading facility at 86 Trinity Place is wholly or partially unusable. Under proposed Amex Rule 119A(b) the provisions of the Constitution and Rules of the Exchange are applicable to trading conducted on the ATF, except to the extent that the provisions of Amex Rule 119A govern, or unless the context otherwise requires. Paragraph

(c)of proposed Amex Rule 119A provides that the Exchange's Executive Vice President for Market Operations and Trading Floor Systems or his or her designee(s) shall have authority to designate the individuals who will be allowed to conduct a securities business on the ATF from among those members, member organizations, and persons associated with those members and member organizations who are entitled to trade and support trading at the Exchange's facility at 86 Trinity Place. Not all persons who generally conduct business at the Exchange's regular facility will be able to use the ATF due to occupancy restrictions at the facility. One or more individuals from each broker and specialist unit will be allowed to conduct business on the ATF. Registered Option Traders (“ROTs”) will be allowed to conduct business on the ATF to the extent that there is space in the ATF to accommodate them based upon their volume of trading. Paragraph

(d)to proposed Amex Rule 119A provides that if a ROT is not allowed to trade on the ATF, the ROT may initiate opening trades for his or her market maker account from off the ATF without reference to in-person requirements or the requirement that off-floor orders be effected only for hedging, reducing risk, rebalancing or liquidating positions. The Exchange states that, although it has installed tethered telephones at the ATF, it has not replicated its wireless telephone system at this facility. As a result, the Amex is proposing to allow members to use personal cellular telephones to conduct business on the ATF subject to the same conditions that were applicable to the use of personal cellular telephones on the Amex following September 11, 2001. The conditions applicable to the use of personal cellular telephones on the ATF are set forth in paragraph

(e)to the proposed rule. Paragraph

(f)provides that Exchange Officials may substitute for Senior Floor Officials without reference to their seniority in the event that a Floor Official's ruling is appealed to a three Senior Floor Official panel and there is an insufficient number of available Senior Floor Officials to consider the appeal. 6 6 The Exchange recently amended Amex Rule 22 to establish a three-level review process in which Floor Official decisions, as needed, may be appealed to a three Senior Floor Official Panel. *See* Securities Exchange Act Release No. 52527 (September 29, 2005), 70 FR 58246 (October 5, 2005) (SR-Amex-2005-052). III. Discussion After careful consideration, the Commission finds that the Amex's proposed rule change, as amended, is consistent with Section 6(b) of the Act 7 in general and furthers the objectives of Section 6(b)(5) 8 in particular in that it is designed to foster cooperation and coordination with persons engaged in regulating, clearing, settling and processing information with respect to, and facilitating transactions in securities. 9 7 15 U.S.C. 78f(b). 8 15 U.S.C. 78f(b)(5). 9 In approving this proposal, the Commission has considered its impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). The Commission believes that the Amex's proposed rule change, as amended, is an important element of ongoing contingency planning and reasonably designed to permit trading in the event that the Exchange's primary facilities are not available. As proposed, the Commission believes that the ATF is reasonably designed to provide a venue sufficient to accommodate a minimum threshold of Amex members and personnel to support continued operations of the Exchange on a contingency basis. The Commission further believes that the provisions of proposed Amex Rule 119A are reasonably designed to permit the fair and orderly trading of Amex-listed securities on the ATF. IV. Conclusion *It is therefore ordered* , pursuant to section 19(b)(2) of the Act, 10 that the proposed rule change (SR-Amex-2004-76), as amended, is approved. 10 10 15 U.S.C. 78s(b)(2). For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 11 11 17 CFR 200.30-3(a)(12). Jill M. Peterson, Assistant Secretary. [FR Doc. E5-5719 Filed 10-17-05; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-52593; File No. SR-Amex-2005-083] Self-Regulatory Organizations; American Stock Exchange LLC; Notice of Filing and Order Granting Accelerated Approval to Proposed Rule Change To Establish Certain Fees With Respect to Transactions Executed Through the Intermarket Trading System October 12, 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 17, 2005, the American Stock Exchange LLC (“Amex” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I and II below, which Items have been prepared by the Amex. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons, and is approving the proposal on an accelerated basis. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to enter into arrangements with other self-regulatory organizations (“SROs”) to pass certain fees they have collected from members for transactions executed on another SRO through the Intermarket Trading System (“ITS”). This proposal does not require changes to Amex rule text. 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 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 Section 31 of the Act 3 requires each national securities exchange to pay the Commission a fee based on the aggregate dollar amount of certain sales of securities (“covered sales”). Rules 31 and 31T, adopted by the Commission in June 2004, 4 established procedures for the calculation and collection of Section 31 fees on such covered sales. Rule 31 requires each national securities exchange that owes Section 31 fees to submit a completed Form R31 to the Commission each month, beginning with July 2004. Rule 31T required each exchange to submit a completed Form R31 for each of the months September 2003 to June 2004, inclusive. Each national securities exchange must report its covered sales volume based on the data from a designated clearing agency, when available. The designated clearing agency for covered sales of equity securities is the National Securities Clearing Corporation (“NSCC”). These covered sales are reported in Part I of Form R31, and each exchange is required to “provide in Part I only the data supplied to it by a designated clearing agency.” 5 The data supplied by NSCC for the period September 2003 through August 2004 did not accurately reflect the aggregate dollar value of the covered sales occurring on each exchange to permit reports to be made in accordance with new Rules 31 and 31T. In particular, the data NSCC reported to each national securities exchange included non-covered sales data for sales originating on one exchange and executed on another exchange through the ITS. 6 3 15 U.S.C. 78ee. 4 *See* Securities Exchange Act Release No. 49928 (June 28, 2004), 69 FR 41060 (July 7, 2004) (“Adopting Release”). 5 17 CFR 240.31(b)(5). 6 As a result of this and other inaccuracies in the data reported by NSCC, the national securities exchanges were unable to report accurate information on Form R31, unless they made adjustments to the NSCC data based on data other than that provided by NSCC. On October 6, 2004, the Commission's Division of Market Regulation (“Division”) issued a “no-action” letter advising exchanges for whom NSCC acts as a designated clearing agency under Rule 31, that the Division staff would not recommend that the Commission take enforcement action if a national securities exchange adjusts the data provided by NSCC to accurately reflect covered sales occurring on the national securities exchange. *See* letter from Robert L.D. Colby, Deputy Director, Division, Commission to Ellen J. Neely, Senior Vice President and General Counsel, Chicago Stock Exchange, Inc. (“CHX”), dated October 6, 2004. Section 31 requires that national securities exchanges pay a fee based on the aggregate dollar amount of sales of securities transacted on the exchange. Given the specific language of Section 31, the Commission in the Adopting Release for Rules 31 and 31T advised that the current methodology for treating sales of securities that occur through ITS 7 was no longer appropriate and that “it would be simpler and more transparent for each covered [SRO] to report all covered sales that occur on its market.” The Commission further stated: 7 In the Adopting Release, the Commission described the current methodology: “SRO A sends an ITS commitment to a member of SRO B to sell a security, and the commitment is executed on SRO B. Under existing arrangements, SRO A pays the Section 31 fee arising from this trade and passes the fee to its member that initiated the trade. ...[T]he SROs devised this system because SRO B does not have the ability to require members of SRO A to reimburse it for the cost of its Section 31 fees.” Adopting Release, 69 FR at 41067. The Commission acknowledges that a covered SRO on which a covered sale occurs as a result of an incoming ITS order may not be able to collect funds to pay the Section 31 fee from one of its own members. However, Section 31 does not address the manner or extent to which covered SROs may seek to recover the amounts that they pay pursuant to Section 31 from their members. Covered SROs may wish to devise new arrangements for passing fees between themselves so that the funds are collected from the covered SRO that originated the ITS order. 8 8 *Id.* The Commission further noted that any such arrangements devised by the SROs would have to be established pursuant to Section 19(b) of the Act and Rule 19b-4 thereunder. A subcommittee of the ITS Operating Committee 9 (“Subcommittee”) has had discussions in order to devise new arrangements for passing fees between the ITS participants that

(1)were collected from their members for the months of September 2003 through August 2004; and

(2)are being collected from their members beginning in September 2004 and continuing. This proposed rule change is being submitted by the Amex with the understanding that the other exchanges participating in the proposed arrangement devised by the subcommittee will be submitting substantially similar rule change proposals. 10 9 The ITS participants are Amex, Boston Stock Exchange (“BSE”), Chicago Board Options Exchange (“CBOE”), CHX, National Association of Securities Dealers (“NASD”), National Stock Exchange (“NSX”), New York Stock Exchange (“NYSE”), Pacific Exchange (“PCX”), and Philadelphia Stock Exchange (“Phlx”). 10 NASD has determined not to participate in the arrangement for passing fees between exchanges although they participated in many of the conference calls regarding the proposed arrangement. Pursuant to the new arrangement being proposed, each ITS participant determines whether it has received and executed more in dollar value of covered sales than it has originated and sent to each other ITS participant. For example, for the historical period, September 2003 through August 2004, SRO A sent ITS commitments for covered sales whose dollar value was $150 million to SRO B for execution. SRO A collected fees from its members to fund its Section 31 obligation for those covered sales executed on SRO B. Under the new procedures established by the Commission for the calculation and collection of Section 31 fees on such covered sales, SRO B, as the executing market center, is obligated to pay the Section 31 fee to the SEC. During the same period, SRO B sent ITS commitments for covered sales whose dollar value was $210 million to SRO A. SRO B collected fees from its members for those covered sales executed on SRO A. SRO A, as the executing market center, is obligated to pay the Section 31 fee to the SEC. Since SRO A executed a greater dollar value of covered sales from SRO B than it sent to SRO B, the proposed arrangement requires SRO A to determine the amount of the fees collected by SRO B from its members based on the aggregate dollar value of covered sales from SRO B and executed on SRO A through ITS commitments. When invoicing SRO B, SRO A will deduct the amount of the fee it owes to SRO B ( *i.e.* , the fee amount based on SRO A's $210 million in aggregate covered sales less the fee amount based on SRO B's $150 million in aggregate covered sales) and will invoice only for the difference of $60 million. Once the fees have been invoiced and paid for the historical period, the ITS participants plan to use the same arrangement for the period beginning September 2004 and continuing. It is anticipated that the invoicing process will occur twice yearly to coincide with the March 15 and September 30 payment schedule for Section 31 fees set forth in the Act. To implement this proposed arrangement, an ITS participant will require access to the aggregate dollar value of buy and sell transactions occurring through ITS. Under the proposed arrangement for fees collected for the months of September 2003 through August 2004, an ITS participant may choose to use data obtained from the Inter-market Surveillance Information System (“ISIS”) or data that provides comparable information that includes aggregate dollar value of ITS transactions. 11 The ISIS data is sorted by originating market center ( *i.e.* , the sender of an ITS commitment) and receiving market center ( *i.e.* , the market center that executes the ITS commitment). Using this data, each ITS participant can determine on a monthly basis the dollar value of all executed commitments sent to and received from another ITS participant. 11 The NYSE has made available to the ITS participants spreadsheets for each month in the period using the ISIS data. At its meeting on February 23, 2005, the Subcommittee asked the Securities Industry Automation Corporation (“SIAC”) to determine the time and expense involved for SIAC to use the ITS database that it maintains to provide reports of the aggregate dollar value of buy and sell transactions occurring through ITS to the ITS participants. On March 15, 2005, representatives of the Subcommittee authorized SIAC to develop new reports. SIAC is in the process of developing these reports and expects to complete testing by August 31, 2005. Once SIAC can provide this data, it will no longer be necessary for ISIS data to be used. The new reports provided by SIAC will be used by ITS participants in connection with determining which ITS participant will pay the fee for transactions occurring through ITS and which ITS participant has collected the fee from its members. The Amex believes that the proposed arrangement is a fair and efficient means for passing fees collected at one ITS participant based upon executions of covered sales occurring at another ITS participant. The Amex acknowledges that the legal duty to report and pay the Section 31 fee remains with the ITS participant on which the sale was in fact transacted. 2. Statutory Basis This proposal would establish a process for SROs to enter into arrangements to pass fees they have collected from members for transactions executed on another SRO through ITS. For these reasons, the Exchange believes that the proposed rule change is consistent with the Act and the rules and regulations thereunder that are applicable to a national securities exchange and, in particular, the requirements of Section 6(b) of the Act. 12 Specifically, the Exchange believes the proposed rule change is consistent with the requirements of Section 6(b)(5) of the Act, 13 in that it is designed to promote just and equitable principles of trade, to prevent fraudulent and manipulative acts and practices, and, in general, to protect investors and the public interest. In addition, the Exchange believes that the proposed rule change is consistent with the provisions of Section 6(b)(4) of the Act, 14 which requires that the rules of an exchange provide for the equitable allocation of reasonable dues, fees, and other charges among its members and issuers and other persons using its facilities. 12 15 U.S.C. 78f(b). 13 15 U.S.C. 78f(b)(5). 14 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 No written comments were solicited or received with respect to the proposed rule change. III. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov* . Please include File Number SR-Amex-2005-083 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-2005-083. 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-2005-083 and should be submitted on or before November 8, 2005. IV. Commission's Findings and Order Granting Accelerated Approval of a Proposed Rule Change After careful consideration, the Commission finds that the proposed rule change is consistent with the Act and the rules and regulations thereunder applicable to a national securities exchange. 15 In particular, the Commission believes that the proposal is consistent with Section 6(b)(4) of the Act, 16 which requires that the rules of an exchange provide for the equitable allocation of reasonable dues, fees, and other charges among its members and issuers and other persons using its facilities. National securities exchanges obtain funds to pay their Section 31 fees to the Commission by charging fees to persons who generate the covered sales on which Section 31 fees are based. An exchange can obtain most of these funds by imposing a fee on one of its members whenever the member is on the sell side of a transaction. However, when the exchange accepts an ITS commitment to buy, the ultimate seller is a party on another market. The exchange lacks the ability to pass a fee to that seller directly, because the seller may not be a member of the exchange. Under the proposed arrangement, which the Commission understands will be adopted by each of the ITS participant exchanges, 17 the exchange that routed the ITS commitment away will continue to collect a fee from the broker-dealer that placed the sell order. Then, with respect to each ITS participant exchange, the exchange will determine whether it is a net sender or net receiver of ITS trades and send fees to or accept fees from each other exchange accordingly. The Commission believes this is an equitable manner for the exchanges to obtain funds to pay their Section 31 fees on covered sales resulting from ITS trades. 15 In approving this proposal, the Commission has considered its impact on efficiency, competition, and capital formation. *See* 15 U.S.C. 78c(f). 16 15 U.S.C. 78f(b)(4). 17 *See* letter from George W. Mann, Jr., Executive Vice President and General Counsel, BSE, and Chairman, Subcommittee, to Michael Gaw, Assistant Director, Division, Commission, dated September 29, 2005. Under Section 19(b)(2) of the Act, 18 the Commission may not approve any proposed rule change prior to the thirtieth day after the date of publication of the notice of filing thereof, unless the Commission finds good cause for so doing. The Commission hereby finds good cause for approving the proposed rule change prior to the thirtieth day after publishing notice of filing thereof in the **Federal Register** . In this case, the Commission does not believe a comment period is necessary because all of the parties affected by the proposed fee—the other ITS participant exchanges—have already consented to and will adopt the same fee arrangement. 19 18 15 U.S.C. 78s(b)(2). 19 *See supra* note 17. For the reasons set forth above, the Commission finds good cause to accelerate approval of the proposed rule change pursuant to Section 19(b)(2) of the Act. 20 20 *Id.* V. Conclusion *It is therefore ordered* , pursuant to Section 19(b)(2) of the Act, 21 that the proposed rule change (SR-Amex-2005-083) is hereby approved on an accelerated basis. 21 *Id.* For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 22 22 17 CFR 200.30-3(a)(12). Jill M. Peterson, Assistant Secretary. [FR Doc. E5-5721 Filed 10-17-05; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-52577; File No. SR-CBOE-2005-60] Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing of a Proposed Rule Change and Amendment No. 1 Thereto Relating to an Automated Improvement Mechanism October 7, 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 5, 2005, the Chicago Board Options Exchange, Incorporated (“CBOE” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I, II, and III below, which Items have been substantially prepared by the CBOE. On September 2, 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 240.19-4. 3 Amendment No. 1 superseded and replaced the proposed rule filing in its entirety. I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend its rules to adopt an electronic price improvement mechanism. Below is the text of the proposed rule change. Proposed new language is *italicized* . Chicago Board Options Exchange, Incorporated Rules Rule 6.74A Automated Improvement Mechanism (“AIM”) *Notwithstanding the provisions of Rule 6.74, a member that represents agency orders may electronically execute an order it represents as agent (“Agency Order”) against principal interest or against a solicited order provided it submits the Agency Order for electronic execution into the AIM auction (“Auction”) pursuant to this Rule.* *(a) Auction Eligibility Requirements. A member (the “Initiating Member”) may initiate an Auction provided all of the following are met:* *(1) the Agency Order is in a class designated as eligible for AIM Auctions as determined by the appropriate Floor Procedure Committee and within the designated Auction order eligibility size parameters as such size parameters are determined by the appropriate Floor Procedure Committee;* *(2) if the Agency Order is for 50 contracts or more, the Initiating member must stop the entire Agency Order as principal or with a solicited order at the better of the NBBO or the Agency Order's limit price (if the order is a limit order);* *(3) if the Agency Order is for less than 50 contracts, the Initiating member must stop the entire Agency Order as principal or with a solicited order at the better of

(A)the NBBO price improved by one minimum price improvement increment, which increment shall be determined by the Exchange but may not be smaller than one cent; or

(B)the Agency Order's limit price (if the order is a limit order); and* *(4) at least three

(3)Market-Makers are quoting in the relevant series.* *(b) Auction Process. Only one Auction may be ongoing at any given time in a series and Auctions in the same series may not queue or overlap in any manner. The Auction may not be cancelled and shall proceed as follows:* *(1) Auction Period and Request for Responses (RFRs).* *(A) To initiate the Auction, the Initiating Member must mark the Agency Order for Auction processing, and specify

(i)a single price at which it seeks to cross the Agency Order (with principal interest or a solicited order) (a “single-price submission”), or

(ii)that it is willing to automatically match as principal the price and size of all Auction responses (“auto-match”) in which case the Agency Order will be stopped at the NBBO (if 50 contracts or greater) or one cent/one minimum increment better than the NBBO (if less than 50 contracts). Once the Initiating Member has submitted an Agency Order for processing pursuant to this subparagraph, such submission may not be modified or cancelled.* *(B) When the Exchange receives a properly designated Agency Order for Auction processing, a Request for Responses (“RFR”) detailing the side and size of the order will be sent to all members that have elected to receive RFRs.* *(C) The RFR will last for a random time period determined by the system that shall not be less than 3 seconds and shall not exceed 5 seconds.* *(D) Each Market-Maker with an appointment in the relevant option class may submit responses to the RFR (specifying prices and sizes). Such responses cannot cross the disseminated Exchange quote on the opposite side of the market.* *(E) Floor Brokers may submit responses to the RFR (specifying prices and sizes) only on behalf of orders resting at the top of the Exchange's book (resting at the BBO) opposite the Agency Order. Such responses cannot cross the disseminated Exchange quote on the opposite side of the market, and may not exceed the size of the booked order being represented.* *(F) RFR responses shall not be visible to other Auction participants, and shall not be disseminated to OPRA.* *(G) The minimum price increment for RFR responses and for an Initiating Member's single price submission shall not be smaller than the minimum price improvement increment established pursuant to subparagraph (a)(3)(A) above.* *(H) An RFR response size at any given price point may not exceed the size of the Agency Order.* *(I) RFR responses may be modified or cancelled.* *(2) Conclusion of Auction. The Auction shall conclude at the sooner of

(A)through

(E)below with the Agency Order executing pursuant to paragraph

(3)below.* *(A) The end of the RFR period;* *(B) Upon receipt by the Hybrid System of an unrelated order (in the same series as the Agency Order) that is marketable against either the Exchange's disseminated quote (when such quote is the NBBO) or the RFR responses;* *(C) Upon receipt by the Hybrid System of an unrelated limit order (in the same series as the Agency Order and on the opposite side of the market as the Agency Order) that improves any RFR response;* *(D) Any time an RFR response matches the Exchange's disseminated quote on the opposite side of the market from the RFR responses; or* *(E) Any time there is a quote lock on the Exchange pursuant to Rule 6.45A(d).* *(3) Order Allocation. At the conclusion of the Auction, the Agency Order will be allocated at the best price(s) pursuant to the matching algorithm in effect for the class subject to the following:* *(A) Such best prices may include non-Auction quotes and orders.* *(B) Public customer orders in the book shall have priority.* *(C) No participation entitlement shall apply to orders executed pursuant to this Rule.* *(D) If an unrelated market or marketable limit order on the opposite side of the market as the Agency Order was received during the Auction and ended the Auction, such unrelated order shall trade against the Agency Order at the midpoint of the best RFR response and the NBBO on the other side of the market from the RFR responses (rounded towards the disseminated quote when necessary).* *(E) If an unrelated non-marketable limit order on the opposite side of the market as the Agency Order was received during the Auction and ended the Auction, such unrelated order shall trade against the Agency Order at the midpoint of the best RFR response and the unrelated order's limit price (rounded towards the unrelated order's limit price when necessary).* *(F) If the best price equals the Initiating Member's single-price submission, the Initiating Member's single-price submission shall be allocated the greater of one contract or 40% of the order. However, if only one Market-Maker matches the Initiating Member's single price submission then the Initiating Member shall be allocated 50% of the order.* *(G) If the Initiating Member selected the auto-match option of the Auction, the Initiating Member shall be allocated its full size at each price point until a price point is reached where the balance of the order can be fully executed. At such price point, the Initiating Member shall be allocated the greater of one contract or 40% of the remainder of the order.* *(H) If the Auction does not result in price improvement over the Exchange's disseminated price at the time the Auction began, resting unchanged quotes or orders that were disseminated at the best price before the Auction began shall have priority after any public customer order priority and the Initiating Member's priority (40%) have been satisfied. Any unexecuted balance on the Agency Order shall be allocated to RFR responses provided that those RFR responses will be capped to the size of the unexecuted balance and that the Initiating Member may not participate on any such balance unless the Agency Order would otherwise go unfilled.* *

(I)If the final Auction price locks a customer order in the book on the same side of the market as the Agency Order, then, unless there is sufficient size in the Auction responses to execute both the Agency Order and the booked customer order (in which case they will both execute at the final Auction price), the Agency Order will execute against the RFR responses at one minimum RFR response increment worse than the final Auction price against the Auction participants that submitted the final Auction price and any balance shall trade against the customer order in the book at such order's limit price. * *If an unexecuted balance remains on the Auction responses after the Agency Order has been executed and such balance could trade against any unrelated order(s) that caused the Auction to conclude, then the RFR balance will trade against the unrelated order(s).* ** * * Interpretations and Policies:* *.01 The Auction may be used only where there is a genuine intention to execute a bona fide transaction.* *.02 A pattern or practice of submitting unrelated orders that cause an Auction to conclude before the end of the RFR period will be deemed conduct inconsistent with just and equitable principles of trade and a violation of Rule 4.1. It will also be deemed conduct inconsistent with just and equitable principles of trade and a violation of Rule 4.1 to engage in a pattern of conduct where the Initiating Member breaks-up an Agency Order into separate orders for two

(2)or fewer contracts for the purpose of gaining a higher allocation percentage than the Initiating Member would have otherwise received in accordance with the allocation procedures contained in subparagraph (b)(3) above.* *.03 Initially, and for at least a Pilot Period expiring on July 18, 2006, there will be no minimum size requirement for orders to be eligible for the Auction. During this Pilot Period, the Exchange will submit certain data, periodically as required by the Commission, to provide supporting evidence that, among other things, there is meaningful competition for all size orders and that there is an active and liquid market functioning on the Exchange outside of the Auction mechanism. Any data which is submitted to the Commission will be provided on a confidential basis.* *.04 Any solicited orders submitted by the Initiating Member to trade against the Agency Order may not be for the account of a Market-Maker assigned to the option class.* *.05 Any determinations made by the Exchange pursuant to this Rule such as eligible classes, order size parameters and the minimum price increment for RFR responses shall be communicated in a Regulatory Circular.* *.06 Subparagraph (b)(2)(E) of this rule will be effective for a Pilot Period until July 18, 2006. During the Pilot Period, the Exchange will submit certain data relating to the frequency with which early termination of the Auction occurs pursuant to this provision as well as any other provision, and also the frequency with which early termination pursuant to this provision results in favorable pricing for the Agency Order.* II. Self-Regulatory Organization's Statement of the Purpose of and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, CBOE included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The CBOE has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to establish an Automated Improvement Mechanism (“AIM”) that would electronically auction certain orders for price improvement. Under the AIM process, a member (“Initiating Member”) that represents agency orders may submit an order it represents as agent (“Agency Order”) along with a second order (a principal order or a solicited order for the same amount as the Agency Order) into the AIM auction where other participants could compete with the Initiating Member's second order to execute against the Agency Order. When submitting an Agency Order into the AIM auction, the Initiating Member must also submit a contra-side second order for the same size as the Agency Order. This second order guarantees that the Agency Order will receive an execution ( *i.e.* , it acts as a stop). 4 Once an AIM auction has commenced, it cannot be cancelled by the Initiating Member. The Initiating Member may enter the second order in one of two formats:

(1)a specified single price, or

(2)a non-price specific commitment to match as principal the price and size of all auction responses that are received during the auction. In this case, the Initiating Member would have no control over the match price. 4 In connection with the stop of the Agency Order, the following shall apply: if

(1)the Agency Order is for less than 50 contracts, the Initiating Member must stop the entire Agency Order as principal or with a solicited order at the better of

(A)the national best bid or offer (“NBBO”) price improved by one minimum price improvement increment, which increment shall be determined by the Exchange but may not be smaller than one cent; or

(B)the Agency Order's limit price (if the order is a limit order); and

(2)if the Agency Order is for 50 contracts or more, the Initiating Member must stop the entire Agency Order as principal or with a solicited order at the better of the NBBO or the Agency Order's limit price (if the order is a limit order). Upon receipt of an Agency Order (and second order), the Exchange would commence the AIM auction by issuing a request for responses (“RFR”) detailing the side and size of the Agency Order. 5 The RFR response period ( *i.e.* , the auction) would last for a random time period (calculated by the Exchange system) that shall not be less than 3 seconds and shall not exceed 5 seconds. During that period any Market-Maker with an appointment in the class as well as any Floor Broker on behalf of orders resting at the top of the Exchange's book opposite the Agency Order may submit RFR responses (including multiple responses). These responses must specify price and size and may not cross the Exchange's quote on the opposite side of the market. All RFR responses are “blind,” that is, they are not visible to any other participants. CBOE believes this aspect of the auction will encourage more aggressive quoting and superior price improvement. RFR responses may be modified or cancelled so long as they are modified or cancelled before the conclusion of the random RFR response period. Lastly, the RFR response minimum price increment may be set by the Exchange at no less than one cent. 5 Each RFR would be sent to all members electing to receive RFRs ( *i.e.* , those members who have established the necessary systems connectivity to receive RFRs). Thus, such election to receive RFRs would not be on a case-by-case basis. Only members specified in proposed CBOE Rule 6.74A(b)(1)(D) and

(E)may submit responses. Normally, the auction ends at the conclusion of the random RFR response timer (3 to 5 seconds), 6 however, the proposal provides that certain other events would end the auction prior to the conclusion of the RFR timer. These events are:

(1)receipt by the Hybrid System of an unrelated order, in the same series as the Agency Order, that is marketable against the Exchange's disseminated quote (when such quote is the NBBO) or the RFR responses,

(2)receipt by the Hybrid System of an unrelated non-marketable limit order, in the same series as the Agency Order and on the opposite side of the market as the Agency Order, that improves any RFR response,

(3)any time an RFR response matches the Exchange's disseminated quote on the opposite side of the market, and

(4)pursuant to a pilot program that will expire on July 18, 2006, any time there is a Market-Maker to Market-Maker quote lock on the Exchange (in accordance with CBOE Rule 6.45A(d)). 7 6 CBOE represents that this random time period would be determined solely by the Exchange system. 7 In connection with this pilot program, the Exchange would provide the Commission data (on a confidential basis) regarding the frequency with which early termination of the Auction occurs pursuant to this provision as well as any other provision, and also the frequency with which early termination pursuant to this provision results in favorable pricing for the Agency Order. Proposed Interpretation .06 to Proposed CBOE Rule 6.74A. At the conclusion of the auction, the Agency Order would be allocated in accordance with applicable matching algorithm rules in effect for such class subject to the following provisions. First, no participation entitlement would apply with respect to an AIM execution. Second, public customer orders in the book would have priority. Third, if an unrelated market order or marketable limit order on the opposite side of the market as the Agency Order was received during the auction and ended the auction, such unrelated order would trade against the Agency Order at the midpoint of the best RFR response and the NBBO on the other side of the market (rounded towards the disseminated quote when necessary). 8 Fourth, if an unrelated non-marketable limit order on the opposite side of the market as the Agency Order was received during the auction and ended the auction, such unrelated limit order would trade against the Agency Order at the midpoint of the best RFR response and the unrelated order's limit price (rounded towards the unrelated order's limit price when necessary). 9 Fifth, if the best price equals the Initiating Member's single-price submission, the Initiating Member's single-price submission would be allocated the greater of one contract or 40% of the order. However, if only one Market-Maker matches the Initiating Member's single price submission then the Initiating Member would be allocated 50% of the order. Sixth, if the Initiating Member selected the auto-match option of the auction, the Initiating Member would be allocated its full size at each price point until a price point is reached where the balance of the order can be fully executed. At such price point, the Initiating Member would be allocated the greater of one contract or 40% of the remainder of the order. Seventh, if the auction does not result in price improvement over the Exchange's disseminated price at the time the auction began, resting unchanged quotes or orders that were disseminated at the best price before the auction began would have priority after any public customer order priority and the Initiating Member's priority (40%) have been satisfied. Any unexecuted balance on the Agency Order would be allocated to RFR responses pursuant to the matching algorithm except that the responses would be capped to the size of the unexecuted balance and the Initiating Member may not participate on any such balance unless the Agency Order would otherwise go unfilled. Eight, if the final auction price locks a customer order in the book on the same side of the market as the Agency Order, then, unless there is sufficient size in the auction responses to execute both the Agency Order and the booked customer order (in which case they will both execute at the final auction price), the Agency Order would execute against the RFR responses at one minimum RFR response increment worse than the final Auction price against the auction participants that submitted the final auction price and any balance would trade against the customer order in the book at such order's limit price. 8 For example, if an AIM auction is underway for an Agency Order to buy and the CBOE quote (as well as the NBBO) is 1-1.15 with the RFR responses at 1.12 and an unrelated market order to sell is received by the Exchange, the unrelated order would execute against the Agency Order at 1.06 (the midpoint of the best RFR responses and the NBBO). 9 For example, using the same scenario as above except the unrelated order is a non-marketable limit order to sell at 1.10, the unrelated order would execute against the Agency Order at 1.11 (the midpoint of the best RFR responses and the unrelated order's limit price). If an unexecuted balance remains on the auction responses after the Agency Order has been executed and such balance could trade against any unrelated order(s) that caused the Auction to conclude, then the RFR balance would trade against the unrelated order(s). CBOE believes this is a benefit to the market in that excess auction liquidity would be available to orders other than the Agency Order. Lastly, the Exchange proposes certain interpretations and policies. First, the auction may be used only where there is a genuine intention to execute a bona fide transaction. Second, a pattern or practice of submitting unrelated orders that cause an auction to conclude before the end of the RFR period would be deemed conduct inconsistent with just and equitable principles of trade and a violation of CBOE Rule 4.1 and other Exchange Rules. Third, initially, and for at least a Pilot Period expiring on July 18, 2006, there would be no minimum size requirement for orders to be eligible for the auction. During this Pilot Period, the Exchange would submit certain data, periodically as required by the Commission, to provide supporting evidence that, among other things, there is meaningful competition for all size orders and that there is an active and liquid market functioning on the Exchange outside of the Auction mechanism. Any data which is submitted to the Commission would be provided on a confidential basis. Fourth, any solicited orders submitted by the Initiating Member to trade against the Agency Order may not be for the account of a Market-Maker assigned to the option class. Fifth, any determinations made by the Exchange pursuant to the proposed rule such as eligible classes, order size parameters and the minimum price increment for RFR responses would be communicated in a Regulatory Circular. Finally, proposed CBOE Rule 6.74A(b)(2)(E), which would end the auction because of a lock on the CBOE market, would operate as a pilot program until July 18, 2006. 2. Statutory Basis The Exchange believes the proposed rule change is consistent with Section 6(b) of the Act 10 in general and furthers the objectives of Section 6(b)(5) of the Act 11 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. In particular, the Exchange believes that the proposal would provide an opportunity for customers to receive price improvement on their orders. 10 15 U.S.C. 78f(b). 11 15 U.S.C. 78f(b)(5). B. Self-Regulatory Organization's Statement on Burden on Competition This proposed rule change does not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others No written comments were solicited or received with respect to the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 35 days of the date of publication of this notice in the **Federal Register** or within such longer period

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

(ii)as to which the self-regulatory organization consents, the Commission will:

(A)By order approve such proposed rule change, or

(B)Institute proceedings to determine whether the proposed rule change should be disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change, as amended, is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov* . Please include File Number SR-CBOE-2005-60 on the subject line. Paper Comments • Send paper comments in triplicate to Jonathan G. Katz, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-9303. All submissions should refer to File Number SR-CBOE-2005-60. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room. Copies of such filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-CBOE-2005-60 and should be submitted on or before November 8, 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. E5-5728 Filed 10-17-05; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-52578; File No. SR-ISE-2005-27] Self-Regulatory Organizations; International Securities Exchange, Inc.; Order Approving Proposed Rule Change and Amendment No. 1 and Notice of Filing and Order Granting Accelerated Approval to Amendment No. 4 to the Proposed Rule Change Relating to Listing Standards for Broad-Based Index Options October 7, 2005. I. Introduction On May 19, 2005, the International Securities Exchange, Inc. (“ISE” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) 1 and Rule 19b-4 thereunder, 2 a proposed rule change to establish listing and maintenance standards and position limits for options on broad-based indexes. The ISE filed Amendment No. 1 to the proposed rule change on July 13, 2005. 3 The proposed rule change, as amended by Amendment No. 1, was published for comment in the **Federal Register** on July 27, 2005. 4 The Commission received no comments regarding the proposal, as amended. The ISE filed Amendment No. 2 to the proposed rule change on September 26, 2005, and withdrew Amendment No. 2 on September 28, 2005. The ISE filed Amendment No. 3 to the proposed rule change on September 28, 2005, and withdrew Amendment No. 3 on October 6, 2005. The ISE filed Amendment No. 4 to the proposal on October 6, 2005. 5 This order approves the proposed rule change, as amended. In addition, the Commission is publishing notice to solicit comments on, and is simultaneously approving, on an accelerated basis, Amendment No. 4 to the proposal. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 Amendment No. 1 makes technical corrections to the proposal, including revisions that clarify the applicability of the market capitalization and options eligibility requirements in ISE Rule 2002(d). 4 *See* Securities Exchange Act Release No. 52084 (July 20, 2005), 70 FR 43481. 5 Amendment No. 4 revises the proposal to:

(1)Provide that an index's component securities must be “NMS stocks” rather than “reported securities;”

(2)identify the entities or services that will disseminate index values;

(3)state that the ISE has an adequate surveillance program for broad-based index options; and

(4)clarify that the position limits for broad-based index options apply to option contracts on the same side of the market. II. Description of the Proposed Rule Change The ISE proposes to adopt ISE Rule 2002(d) to establish initial listing standards for broad-based index options. The proposal will allow the ISE to list, pursuant to Rule 19b-4(e) under the Act, 6 broad-based index options that meet the listing standards in ISE Rule 2002(d). The listing standards require, among other things, that the underlying index be broad-based, as defined in ISE Rule 2001(j); that options on the index be a.m.-settled; that the index be capitalization-weighted, modified capitalization-weighted, price-weighted, or equal dollar-weighted; and that the index be comprised of at least 50 securities, all of which must be “NMS stocks,” as defined in Rule 600 of Regulation NMS. 7 In addition, ISE Rule 2002(d) requires that the index's component securities meet certain minimum market capitalization and average daily trading volume requirements; that no single component account for more than 10% of the weight of the index and that the five highest weighed components represent no more than 33% of the weight of the index; that the index value be widely disseminated at least every 15 seconds; and that the ISE have written surveillance procedures in place with respect to the index options. 6 17 CFR 240.19b-4(e). 7 *See* Amendment No. 4, *supra* note 5. Rule 600 of Regulation NMS defines an “NMS stock” to mean “any NMS security other than an option.” An “NMS security” is “any security or class of securities for which transaction reports are collected, processed, and made available pursuant to an effective transaction reporting plan, or an effective national market system plan for reporting transactions in listed options.” *See* 17 CFR 242.600. The ISE also proposes to adopt ISE Rule 2002(e), which establishes maintenance standards for broad-based index options listed pursuant to ISE Rule 2002(d). In addition, the ISE proposes to amend ISE Rule 2004(a) to establish a position limit of 25,000 contracts on the same side of the market for broad-based index options listed pursuant to ISE Rule 2002(d). 8 8 *See* Amendment No. 4, *supra* note 5. III. Discussion After careful review, the Commission finds that the proposed rule change, as amended, is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange. In particular, the Commission finds that the proposed rule change, as amended, is consistent with Section 6(b)(5) of the Act, 9 which requires, among other things, that the rules of a national securities exchange be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system and, in general, to protect investors and the public interest. 9 15 U.S.C. 78f(b)(5). To list options on a particular broad-based index, the ISE currently must file a proposed rule change with the Commission pursuant to Section 19(b)(1) of the Act and Rule 19b-4 thereunder. However, Rule 19b-4(e) provides that the listing and trading of a new derivative securities product by a self-regulatory organization (“SRO”) will not be deemed a proposed rule change pursuant to Rule 19b-4(c)(1) if the Commission has approved, pursuant to Section 19(b) of the Act, the SRO's trading rules, procedures, and listing standards for the product class that would include the new derivative securities product, and the SRO has a surveillance program for the product class. As described more fully above, the ISE proposes to establish listing standards for broad-based index options. The Commission's approval of the ISE's listing standards for broad-based index options will allow options that satisfy the listing standards to begin trading pursuant to Rule 19b-4(e), without constituting a proposed rule change within the meaning of Section 19(b) of the Act and Rule 19b-4, for which notice and comment and Commission approval is necessary. 10 The ISE's ability to rely on Rule 19b-4(e) to list broad-based index options that meet the requirements of ISE Rule 2002(d) potentially reduces the time frame for bringing these securities to the market, thereby promoting competition and making new broad-based index options available to investors more quickly. The Commission notes that the ISE has represented that it has adequate trading rules, procedures, listing standards, and surveillance program for broad-based index options. ISE's existing index option trading rules and procedures will apply to broad-based index options listed pursuant to ISE Rule 2002(d). Other existing ISE rules, including provisions addressing sales practices and margin requirements, also will apply to these options. In addition, the ISE proposes to establish position and exercise limits of 25,000 contracts on the same side of the market for broad-based index options listed pursuant to ISE Rule 2002(d). 11 The Commission believes that the proposed position and exercise limits should serve to minimize potential manipulation concerns. 10 When relying on Rule 19b-4(e), the SRO must submit Form 19b-4(e) to the Commission within five business days after the SRO begins trading the new derivative securities product. *See* Securities Exchange Act Release No. 40761 (December 8, 1998), 63 FR 70952 (December 22, 1998) (File No. S7-13-98). 11 *See* Amendment No. 4, *supra* note 5. Under ISE Rule 2007, the exercise limits for index options are equivalent to the position limits prescribed for option contracts with the nearest expiration in ISE Rule 2004 or ISE Rule 2005. The ISE represents that it has adequate surveillance procedures for broad-based index options and that it intends to apply its existing surveillance procedures for index options to monitor trading in broad-based index options listed pursuant to ISE Rule 2002(d). 12 In addition, because ISE Rule 2002(d) requires that each component of an index be an “NMS stock,” as defined in Rule 600 of Regulation NMS under the Act, each index component must trade on a registered national securities exchange or through Nasdaq. Accordingly, the ISE will have access to information concerning trading activity in the component securities of an underlying index through the Intermarket Surveillance Group (“ISG”). 13 ISE Rule 2002(d) also provides that non-U.S. index components that are not subject to a comprehensive surveillance sharing agreement between the ISE and the primary market(s) trading the index components may comprise no more than 20% of the weight of the index. 14 The Commission believes that these requirements will help to ensure that the ISE has the ability to monitor trading in broad-based index options listed pursuant to ISE Rule 2002(d) and in the component securities of the underlying indexes. 12 *See* Amendment No. 4, *supra* note 5. 13 The ISG was formed on July 14, 1983, to, among other things, coordinate more effectively surveillance and investigative information sharing arrangements in the stock and options markets. All of the registered national securities exchanges and the National Association of Securities Dealers, Inc., are members of the ISG. In addition, futures exchanges and non-U.S. exchanges and associations are affiliate members of the ISG. 14 However, such non-U.S. index components, as “NMS stocks,” would be registered under Section 12 of the Act and listed and traded on a national securities exchange or Nasdaq, where there is last sale reporting. The Commission believes that the requirements in ISE Rule 2002(d) regarding, among other things, the minimum market capitalization, trading volume, and relative weightings of an underlying index's component stocks are designed to ensure that the markets for the index's component stocks are adequately capitalized and sufficiently liquid, and that no one stock dominates the index. In addition, ISE Rule 2002(d) requires that the underlying index be “broad-based,” as defined in ISE Rule 2001(j). 15 The Commission believes that these requirements minimize the potential for manipulating the underlying index. 15 ISE Rule 2001(j) defines “broad-based index” to mean “an index designed to be representative of a stock market as a whole or of a range of companies in unrelated industries.” The Commission believes that the requirement in ISE Rule 2002(d) that the current index value be widely disseminated at least once every 15 seconds by the Options Price Reporting Authority, the Consolidated Tape Association, the Nasdaq Index Dissemination Service or by one or more major market data vendors during the time an index option trades on the ISE should provide transparency with respect to current index values and contribute to the transparency of the market for broad-based index options. 16 In addition, the Commission believes, as it has noted in other contexts, that the requirement in ISE Rule 2002(d) that an index option be settled based on the opening prices of the index's component securities, rather than on closing prices, could help to reduce the potential impact of expiring index options on the market for the index's component securities. 17 16 *See* Amendment No. 4, *supra* note 5. The Commission notes, however, that if the ISE designated a data vendor, on an exclusive basis, to disseminate index values on behalf of the ISE, such vendor would be an “exclusive processor” under Section 3(a)(22)(B) of the Act and, absent an exemption, would be required to register as a securities information processor under Section 11A(b)(1) of the Act. 17 *See, e.g.* , Securities Exchange Act Release No. 30944 (July 21, 1992), 57 FR 33376 (July 28, 1992) (order approving a Chicago Board Options Exchange, Incorporated proposal to establish opening price settlement for S&P 500 Index options). Accelerated Approval of Amendment No. 4 The Commission finds good cause for approving Amendment No. 4 to the proposed rule change prior to the thirtieth day after the date of publication of notice of filing thereof in the **Federal Register** . Amendment No. 4 strengthens and clarifies the proposal by revising the proposal to:

(1)Provide that an index's component securities must be “NMS stocks” rather than “reported securities;”

(2)identify the entities or services that will disseminate index values;

(3)state that the ISE has an adequate surveillance program for broad-based index options; and

(4)clarify that the position limits for broad-based index options apply to option contracts on the same side of the market. Accordingly, the Commission finds that it is consistent with Sections 6(b)(5) and 19(b) of the Act to approve Amendment No. 4 on an accelerated basis. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning Amendment No. 4, including whether Amendment No. 4 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-2005-27 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-ISE-2005-27. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Section, 100 F Street, NE., Washington, DC 20549. Copies of such filing also will be available for inspection and copying at the principal office of the ISE. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-ISE-2005-27 and should be submitted on or before November 8, 2005. V. Conclusion *It is therefore ordered* , pursuant to Section 19(b)(2) of the Act, 18 that the proposed rule change (SR-ISE-2005-27), as amended, is approved. 18 15 U.S.C. 78s(b)(2). For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 19 Jill M. Peterson, Assistant Secretary. 19 17 CFR 200.30-3(a)(12). [FR Doc. 05-20775 Filed 10-17-05; 8:45 am]

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17 CFR 240.10
17 CFR 240.17
17 CFR 240.19
17 CFR 240.19-4

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Notices

Notice of an application under sections 6(c) and 17(b) of the Investment Company Act of 1940 (the “Act”) exempting applicants from section 17(a) of the Act and under section 12(d)(1)(J) of the Act exempting applicants from sections 12(d)(1)(A) and 12(d)(1)(B) of the Act

Cite17 CFR 240.10

Cite17 CFR 240.17

Cite17 CFR 240.19

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