Notices. Notice

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BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-52912; File No. SR-Amex-2005-120] Self-Regulatory Organizations; American Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change and Amendment No. 1 Thereto Relating to Revisions to the Series 4 Examination Program December 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 November 21, 2005, the American Stock Exchange LLC (“Amex” or “Exchange”) filed with the Securities and Exchange Commission (“SEC” or “Commission”) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by Amex.

On November 23, 2005, Amex filed Amendment No. 1 to the proposed rule change. Amex has designated the proposed rule change as constituting a stated policy, practice, or interpretation with respect to the meaning, administration, or enforcement of an existing rule of the self-regulatory organization pursuant to Section 19(b)(3)(A)(i) of the Act 3 and Rule 19b-4(f)(1) thereunder, 4 which renders the proposal effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change, as amended, from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 15 U.S.C. 78s(b)(3)(A)(i). 4 17 CFR 240.19b-4(f)(1).

I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change Amex is filing revisions to the study outline and selection specifications for the Limited Principal—Registered Options (Series 4) examination program (“Series 4 Examination”). The proposed revisions update the material to reflect changes to the laws, rules, and regulations covered by the Series 4 Examination, as well as modify the content of the Series 4 Examination to track more closely the functional workflow of a Series 4 limited principal.

The revisions that Amex is submitting with this filing supersede all prior revisions to the Series 4 Examination submitted by Amex. The revised study outline is available on the National Association of Securities Dealers, Inc.'s (“NASD”) Web site ( *http://www.nasd.com* ), at Amex, and at the Commission. However, Amex has omitted the Series 4 Examination selection specifications from this filing and has submitted the specifications under separate cover to the Commission with a request for confidential treatment pursuant to Rule 24b-2 under the Act. 5 5 17 CFR 240.24b-2.

II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, Amex included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. Amex has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose Amex Rule 920 states that a member organization shall not transact any business with the public in option contracts unless those persons engaged in the management of the member organization's business pertaining to option contracts are registered with and approved by the Exchange as Options Principals. Additionally, no individual member shall transact any business directly with the public in option contracts unless he is registered with and approved by the Exchange as an Options Principal.

The Series 4 Examination tests a candidate's knowledge of options trading generally, the Amex rules applicable to the trading of option contracts, and the rules of registered clearing agencies for options. The Series 4 Examination covers, among other things, equity options, foreign currency options, index options, and options on government and mortgage-backed securities. The Series 4 Examination is shared by Amex and the following SROs: The NASD, the Chicago Board Options Exchange, Inc., the New York Stock Exchange, Inc., the Pacific Exchange, Inc., and the Philadelphia Stock Exchange, Inc.

A committee of industry representatives, together with the staff of Amex and the SROs, recently undertook a periodic review of the Series 4 Examination. As a result of this review and as part of an ongoing effort to align the examination more closely to the supervisory duties of a Series 4 limited principal, Amex is proposing to modify the content of the Series 4 Examination to track the functional workflow of a Series 4 limited principal. More specifically, Amex is proposing to revise the main section headings and the number of questions on each section of the Series 4 Examination study outline as follows:

Options Investment Strategies, decreased from 35 to 34 questions; Supervision of Sales Activities and Trading Practices, increased from 71 to 75 questions; and Supervision of Employees, Business Conduct, and Recordkeeping and Reporting Requirements, decreased from 19 to 16 questions. Amex is further proposing revisions to the Series 4 Examination study outline to reflect the SEC short sale requirements. The revised Series 4 Examination continues to cover the areas of knowledge required to supervise options activities.

Amex is proposing these changes to the entire content of the Series 4 Examination, including the selection specifications and question bank. The number of questions on the Series 4 Examination will remain at 125, and candidates will continue to have three hours to complete the exam. Also, each question will continue to count one point, and each candidate must correctly answer 70 percent of the questions to receive a passing grade. On April 8, 2005, Amex filed with the Commission for immediate effectiveness similar revisions to the Series 4 Examination. 6 NASD originally had proposed to implement the revised Series 4 Examination by April 29, 2005. 7 However, due to administrative issues, NASD delayed the implementation date of the revisions until no later than November 30, 2005 and Amex filed with the Commission for immediate effectiveness a proposed rule change delaying the implementation date until such time. 8 In the interim, the SROs that share the Series 4 Examination recommended additional revisions to the Series 4 Examination.

These additional revisions are reflected in the examination material that Amex is submitting with this filing. As noted below, NASD has filed with the Commission similar proposed rule change reflecting the revisions to the Series 4 Examination 9 and Amex understands that the other SROs will file similar proposed rule changes. 6 *See* Securities Exchange Act Release No. 51689 (May 12, 2005), 70 FR 28965 (May 19, 2005) (SR-Amex-2005-039). 7 *See* Securities Exchange Act Release No. 51216 (February 16, 2005), 70 FR 8866 (February 23, 2005) (SR-NASD-2005-025). 8 *See* Securities Exchange Act Release No. 51690 (May 12, 2005), 70 FR 28967 (May 19, 2005) (SR-Amex-2005-045). 9 *See* Securities Exchange Act Release No. 52546 (September 30, 2005), 70 FR 59109 (October 11, 2005) (SR-NASD-2005-109). 2.

Statutory Basis Amex believes that the proposed rule change is consistent with Section 6 of the Act 10 in general and furthers the objectives of Section 6(c)(3) 11 which authorizes Amex to prescribe standards of training, experience and competence for persons associated with Amex members. 10 15 U.S.C. 78f. 11 15 U.S.C. 78f(c)(3). B. Self-Regulatory Organization's Statement on Burden on Competition The proposed rule change, as amended, 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 The proposed rule change, as amended, has become effective pursuant to Section 19(b)(3)(A)(i) of the Act 12 and Rule 19b-4(f)(1) thereunder, 13 in that the proposed rule change constitutes a stated policy, practice, or interpretation with respect to the meaning, administration, or enforcement of an existing rule of Amex.

While the Series 4 Examination is co-owned by certain SROs, the NASD administers the Series 4 Examination. Amex will announce the implementation date in a *Notice to Members* to be published no later than 60 days after SEC Notice of this filing. 12 15 U.S.C. 78s(b)(3)(A)(i). 13 17 CFR 240.19b-4(f)(1). At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. 14 14 The effective date of the original proposed rule is November 21, 2005.

The effective date of Amendment No. 1 is November 23, 2005. For purposes of calculating the 60-day period within which the Commission may summarily abrogate the proposed rule change under Section 19(b)(3)(C) of the Act, the Commission considers the period to commence on November 23, 2005, the date on which Amex submitted Amendment No. 1. See 15 U.S.C. 78s(b)(3)(C). IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change, as amended, is consistent with the Act.

Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov.* Please include File Number SR-Amex-2005-120 on the subject line. Paper Comments • Send paper comments in triplicate to Jonathan G. Katz, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-9303. All submissions should refer to File Number SR-Amex-2005-120.

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-2005-120 and should be submitted on or before January 5, 2006. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 15 15 17 CFR 200.30-3(a)(12).

Jonathan G. Katz, Secretary. [FR Doc. E5-7365 Filed 12-14-05; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-52917; File No. SR-Amex-2005-121] Self-Regulatory Organizations; American Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change and Amendment No. 1 Thereto Relating to Revisions to the Series 9/10 Examination Program December 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 November 21, 2005, the American Stock Exchange LLC (“Amex” or “Exchange”) filed with the Securities and Exchange Commission (“SEC” or “Commission”) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by Amex.

On November 23, 2005, Amex filed Amendment No. 1 to the proposed rule change. Amex has designated the proposed rule change as constituting a stated policy, practice, or interpretation with respect to the meaning, administration, or enforcement of an existing rule of the self-regulatory organization pursuant to section 19(b)(3)(A)(i) of the Act 3 and Rule 19b-4(f)(1) thereunder, 4 which renders the proposal effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change, as amended, from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 15 U.S.C. 78s(b)(3)(A)(i). 4 17 CFR 240.19b-4(f)(1).

I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change Amex is filing revisions to the study outline and selection specifications for the Limited Principal—General Securities Sale Supervisor (Series 9/10) examination program (“Series 9/10 Examination”). The proposed revisions update the material to reflect changes to the laws, rules, and regulations covered by the Series 9/10 Examination, as well as modify the content of the Series 9/10 Examination to track more closely the functional workflow of a Series 9/10 limited principal.

The revised study outline is available on Amex's Web site ( *http://www.amex.com* ), at Amex, and at the Commission. However, Amex has omitted the Series 9/10 Examination selection specifications from this filing and has submitted the specifications under separate cover to the Commission with a request for confidential treatment pursuant to Rule 24b-2 under the Act. 5 5 17 CFR 240.24b-2. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, Amex included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change.

The text of these statements may be examined at the places specified in Item IV below. Amex has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose Amex Rule 341 prohibits members from permitting a direct supervisor of a Registered Representative 6 to perform his duties in such capacity until the direct supervisor is registered with, qualified by and approved by the Exchange.

Pursuant to Commentary .06 to Amex Rule 320, a Registered Representative supervisor's responsibilities include approving new accounts and reviewing correspondence of Registered Representatives, transactions and customer accounts. The only examination that qualifies a Registered Representative supervisor is the Series 9/10 Examination. The Series 9/10 Examination tests a candidate's knowledge of securities industry rules and regulations and certain statutory provisions pertinent to the supervision of sales activities. 6 A “Registered Representative” engages in the solicitation of orders for the purchase or sale of securities or other similar instruments for the account of customers; or in the solicitation of subscriptions to investment advisory or to investment management services furnished on a fee basis.

The term Registered Representative does not apply to individuals who are engaged solely in the solicitation or handling of business in, or the sale of, commodity contracts or who are engaged solely as securities traders or securities arbitrageurs. See Amex Definition 8. The Series 9/10 Examination is shared by Amex and the following SROs: the National Association of Securities Dealers, Inc. (“NASD”), the Chicago Board Options Exchange, Inc., the New York Stock Exchange, Inc. (“NYSE”), the Municipal Securities Rule Making Board (“MSRB”), the Pacific Exchange, Inc., and the Philadelphia Stock Exchange, Inc.

A committee of industry representatives, together with the staff of Amex and the other SROs, recently undertook a periodic review of the Series 9/10 Examination. As a result of this review, Amex is proposing to update the content of the Series 9/10 Examination to cover Regulation S-P, 7 MSRB Rules G-37/G-38, SRO research analyst and anti-money laundering rules, municipal fund securities ( *e.g.* , 529 college savings plans), and exchange traded funds. Amex is further proposing revisions to the Series 9/10 Examination study outline to reflect the SEC short sale requirements.

In addition, as part of an ongoing effort to align the Series 9/10 Examination more closely to the supervisory duties of a Series 9/10 limited principal, Amex is proposing to modify the content of the Series 9/10 Examination to track the functional workflow of a Series 9/10 limited principal. Also, Amex is proposing to include questions related to parallel rules of NASD, the options exchanges, the MSRB, and the NYSE in the same section of the exam. 7 17 CFR 248.1-18; 17 CFR 248.30; and 17 CFR 248, Appendix A.

As a result of the revisions, Amex is proposing to modify the main section headings and the number of questions on each section of the Series 9/10 Examination study outline as follows: Section 1—Hiring, Qualifications, and Continuing Education, 9 questions; section 2—Supervision of Accounts and Sales Activities, 94 questions; section 3—Conduct of Associated Persons, 14 questions; section 4—Recordkeeping Requirements, 8 questions; section 5—Municipal Securities Regulation, 20 questions; section 6—Options Regulation, 55 questions.

Sections 1 through 5 constitute the Series 10 portion of the Series 9/10 Examination. Section 6 constitutes the Series 9 portion of the Series 9/10 Examination. Series 10 covers general securities and municipal securities, and Series 9 covers options. The revised Series 9/10 Examination continues to cover the areas of knowledge required for the supervision of sales activities. Amex is proposing these changes to the entire content of the Series 9/10 Examination, including the selection specifications and question bank.

The number of questions on the Series 9/10 Examination will remain at 200, and candidates will continue to have four hours to complete the Series 10 portion and one and one-half hours to complete the Series 9 portion. Also, each question will continue to count one point, and each candidate must correctly answer 70 percent of the questions on each series, 9 and 10, to receive a passing grade. As noted below, NASD has filed with the Commission a similar proposed rule change reflecting the revisions to the Series 9/10 Examination 8 and Amex understands that the other SROs also will file similar proposed rule changes. 8 *See* Securities Exchange Act Release No. 52548 (September 30, 2005), 70 FR 59111 (October 11, 2005) (SR-NASD-2005-111). 2.

Statutory Basis Amex believes that the proposed rule change is consistent with section 6 of the Act 9 in general and furthers the objectives of section 6(c)(3) 10 which authorizes Amex to prescribe standards of training, experience and competence for persons associated with Amex members. 9 15 U.S.C. 78f. 10 15 U.S.C. 78f(c)(3). B. Self-Regulatory Organization's Statement on Burden on Competition The proposed rule change, as amended, 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 The proposed rule change, as amended, has become effective pursuant to section 19(b)(3)(A)(i) of the Act 11 and Rule 19b-4(f)(1) thereunder, 12 in that the proposed rule change constitutes a stated policy, practice, or interpretation with respect to the meaning, administration, or enforcement of an existing rule of Amex.

While the Series 9/10 Examination is co-owned by certain SROs, NASD administers the Series 9/10 Examination. Amex will announce the implementation date in a *Notice to Members* to be published no later than 60 days after SEC Notice of this filing. 11 15 U.S.C. 78s(b)(3)(A)(i). 12 17 CFR 240.19b-4(f)(1). At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. 13 13 The effective date of the original proposed rule is November 21, 2005.

The effective date of Amendment No. 1 is November 23, 2005. For purposes of calculating the 60-day period within which the Commission may summarily abrogate the proposed rule change under section 19(b)(3)(C) of the Act, the Commission considers the period to commence on November 23, 2005, the date on which Amex submitted Amendment No. 1. *See* 15 U.S.C. 78s(b)(3)(C). IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change, as amended, is consistent with the Act.

Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov.* Please include File Number SR-Amex-2005-121 on the subject line. Paper Comments • Send paper comments in triplicate to Jonathan G. Katz, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-9303. All submissions should refer to File Number SR-Amex-2005-121.

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-2005-121 and should be submitted on or before January 5, 2006. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 14 Jonathan G.

Katz, Secretary. 14 17 CFR 200.30-3(a)(12). [FR Doc. E5-7366 Filed 12-14-05; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-52929; File No. SR-BSE-2005-56] Self-Regulatory Organizations; Boston Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change and Amendment No. 1 Thereto Relating to the Initial Listing and Maintenance To List Options on Certain Securities December 8, 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 November 30, 2005, the Boston Stock Exchange, Inc.

(“Exchange”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. On December 6, 2005, the Exchange filed Amendment No. 1 to the proposed rule change. 3 The Exchange filed the proposed rule change as a “non-controversial” rule change under Rule 19b-4(f)(6) under the Act, 4 which rendered the proposal effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change, as amended, from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 In Amendment No. 1, the Exchange made non-substantive changes to the text of the proposed rule change. 4 17 CFR 240.19b-4(f)(6).

I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend section 3 (Criteria for Underlying Securities) and section 4 (Withdrawal of Approval of Underlying Securities) of Chapter IV of the Rules of the Boston Options Exchange (“BOX”). Below is the text of the proposed rule change. Proposed additions are in *italics* and proposed deletions are in [brackets]. Rules of the Boston Options Exchange Facility Chapter IV.

Securities Traded On The Boston Options Exchange Facility Sec. 3 Criteria for Underlying Securities

(a)Underlying securities with respect to which put or call options contracts are approved for listing and trading on BOX must meet the following criteria: i. The security must be registered with the SEC and *be an “NMS stock” as defined in Rule 600 of Regulation NMS under the Exchange Act*

(1)Listed on a national securities exchange; or

(2)Traded through the facilities of a national securities association and reported as a “national market system” (“NMS”) security as set forth in Rule 11Aa3-1 under the Exchange Act]; and ii. The security shall be characterized by a substantial number of outstanding shares that are widely held and actively traded. Subsections

(b)through

(j)No Change. Sec. 4 Withdrawal of Approval of Underlying Securities Subsection

(a)No Change.

(b)An underlying security will not be deemed to meet BOXR's requirements for continued approval whenever any of the following occur: i. through iv. No Change. v. { *Reserved* }[The issuer has failed to make timely reports as required by applicable requirements of the Exchange Act or Rules thereunder, and such failure has not been corrected within thirty

(30)days after the date the report was due to be filed.] vi. *The underlying security ceases to be an “NMS stock” as defined in Rule 600 of Regulation NMS under the Exchange Act.* [The issue, in the case of an underlying security that is principally traded on a national securities exchange, is delisted from trading on that exchange and neither meets NMS criteria nor is traded through the facilities of a national securities association, or the issue, in the case of an underlying security that is principally traded through the facilities of a national securities association, is no longer designated as an NMS security.] vii. No Change. Subsection

(c)through

(j)No Change. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend a BOX rule pertaining to the continued approval of securities that underlie options traded on the Exchange. Specifically, the Exchange proposes to eliminate section 4(b)(v) of Chapter IV of the BOX rules. Section 4(b)(v) of Chapter IV of the BOX rules sets forth various situations under which an underlying security previously approved for options trading will in usual circumstances be deemed to no longer meet Exchange requirements for the continuance of such approval. In such circumstances, section 4(b)(v) of Chapter IV of the BOX rules provides that the Exchange will not open for trading any additional series of options in that class and may also limit any new opening transactions in those options series that have already be opened. Currently, section 4(b)(v) of Chapter IV of the BOX rules provides that an underlying security will no longer be approved for options trading on the Exchange when: “(v) The issuer has failed to make timely reports as required by applicable requirements of the Exchange Act or Rules thereunder, and such failure has not been corrected within thirty

(30)days after the date the report was due to be filed.” 5 5 Phrase “or Rules thereunder” added pursuant to telephone conference between Bill Meehan, Assistant Vice President, Exchange, and David L. Orlic, Attorney, Division of Market Regulation, Commission, on December 7, 2005. The Exchange proposes to eliminate this provision because it limits investors' ability to use options to hedge existing equity positions in such securities, and it is not necessary in the context of the rest of section 4(b) of Chapter IV of the BOX rules. First, section 4(b)(v) of Chapter IV of the BOX rules can and does impact investors' interests by preventing them from using new options series to hedge positions they may hold in the underlying security of companies that fail to make timely reports required by the Act. The Exchange states that such a restriction is inconsistent with rules and regulations in the markets for the underlying securities because no similar trading restriction is placed upon the trading of the underlying security itself. Thus, section 4(b)(v) of Chapter IV of the BOX rules only serves to limit the abilities of shareholders in such companies who may wish to hedge their positions with new options series, at a time when the ability to hedge may be particularly important. The Exchange believes that section 4(b)(v) of Chapter IV of the BOX rules has outlived any usefulness and now serves to unnecessarily burden and confuse the investing public. This provision was appropriate when it was first implemented in or around 1976, when the listing and trading of standardized options was still in its infancy and information pertaining to public companies was not readily available to the general investing public. The Exchange believes that today's listed options market, however, is a mature one with investors who have access to a significant amount of real-time market information to assist them in making informed investment decisions, including information as to whether companies have timely filed reports as required by the Act, and if not, why not. Therefore, the Exchange states that there is no reason to limit investors' ability to trade in options classes, including new series within those classes, simply because a company is not timely in filing its reports. The Exchange further advises that this restriction is further misplaced, considering that investors are not similarly restricted from buying or selling shares of the underlying security in the equity markets. Moreover, the Exchange believes that section 4(b)(v) of Chapter IV of the BOX rules limits an investors' ability to hedge his underlying stock positions at a time when he may be in most need to protect his investment. The failure of a public company to comply with its reporting requirements under the Act could cause a significant movement in the price of that company's stock. Restricting the Exchange from opening new options series may leave investors without means to hedge their positions with options contracts at strike prices that more accurately reflect the contemporaneous price trends of the underlying stock. Clearly, new options series on a security should not be permitted to be opened if the underlying security ceases to be an NMS stock. Typically, the Exchange becomes aware of issues that may impact the continued listing of a security well before that security is delisted from its primary market. Exchange staff routinely monitors daily press releases and informational releases disseminated by various entities, such as the primary listing market of a security and private news services, in an effort to monitor the activities and news items pertaining to the issuers of securities that underlie options traded on the Exchange. 6 In many cases, an issuer is given a substantial amount of time to cure this deficiency before the primary market actually delists the issuer's security. Many times, the issuer is able to comply without its security ever being delisted. During this period, BOX staff continually monitors the status of the issuer's compliance with its reporting requirements to determine whether the security may be delisted. Finally, the primary listing market typically issues a press release well in advance of delisting an issuer's security to give investors and other market participants adequate notice. 6 This is consistent with Section 4(d) of Chapter IV of the BOX rules. Given the availability of data and information relating to public issuers of securities in today's markets, and in light of the extensive amount of additional continued listing standards under section 4(b) of Chapter IV of the BOX rules, the Exchange believes that waiting until a security is actually delisted by its primary market is the appropriate point at which to restrict the issuance of new options series in an options class. Accordingly, the Exchange hereby proposes to eliminate section 4(b)(v) of Chapter IV of the BOX rules. Additionally, as a matter of “housekeeping,” the Exchange also proposes to clarify section 3(a)(i) and section (4)(b)(vi) of Chapter IV of the BOX rules, which govern the criteria for the initial and continued listing of options on a particular security, respectively. Both of these provisions include as part of their criteria a requirement that the underlying security must be a national market system security (“NMS security”). As part of the recently adopted Regulation NMS, among other things, the Commission revised the definition of an NMS security. 7 Specifically, Rule 600(b) under Regulation NMS defines an NMS security as “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.” As such, each of these Rules will be amended to reflect these new terms. 7 *See* Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496 (June 29, 2005). 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with section 6(b) of the Act 8 in general, and furthers the objectives of section 6(b)(5) of the Act 9 in particular, in that the elimination of section 4(b)(v) of Chapter IV of the BOX rules will serve to remove impediments to and perfect the mechanism of a free and open market and a national market system and is designed to promote just and equitable principles of trade and to protect investors and the public interest. 8 15 U.S.C. 78f(b). 9 15 U.S.C. 78f(b)(5). B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others The Exchange has neither solicited nor received written comments on the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the proposed rule change:

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

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

(iii)by its terms, does not become operative for 30 days after the date of filing, or such shorter time as the Commission may designate, if consistent with the protection of investors and the public interest, the proposed rule change has become effective pursuant to section 19(b)(3)(A) of the Act 10 and subparagraph (f)(6) of Rule 19b-4 thereunder. 11 10 15 U.S.C. 78s(b)(3)(A). 11 17 CFR 240.19b-4(f)(6). The Exchange has requested that the Commission waive the five-day pre-filing notice requirement and the 30-day operative delay period for “non-controversial” proposals and make the proposed rule change effective and operative upon filing. The Commission believes that waiver of the five-day pre-filing notice and the 30-day operative delay is consistent with the protection of investors and the public interest because this filing does not raise any novel issues. For this reason, the Commission designates the proposal to be effective and operative upon filing with the Commission. 12 12 For the purposes only of accelerating the operative date of this proposal, the Commission has considered the proposed rule's impact on efficiency, competition and capital formation. 15 U.S.C. 78c(f). At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in the furtherance of the purposes of the Act. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change, as amended, is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov.* Please include File Number SR-BSE-2005-56 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-BSE-2005-56. 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 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-BSE-2005-56 and should be submitted on or before January 5, 2006. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 13 13 17 CFR 200.30-3(a)(12). Jonathan G. Katz, Secretary. [FR Doc. E5-7369 Filed 12-14-05; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-52928; File No. SR-CBOE-2005-89] Self-Regulatory Organizations; Chicago Board Options Exchange, Inc.; Notice of Filing of a Proposed Rule Change and Amendment No. 1 Thereto Relating to the Adoption of a Hybrid Agency Liaison System for Automated Handling of Inbound Orders That Are Not Automatically Executed December 8, 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 October 27, 2005, the Chicago Board Options Exchange, Inc. (“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 Exchange. CBOE filed Amendment No. 1 to the proposed rule change on December 7, 2005. 3 The Commission is publishing this notice to solicit comment on the proposed rule change, as amended, from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 Amendment No. 1 replaced the original filing in its entirety. I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change CBOE proposes to amend its rules to adopt a Hybrid Agency Liaison (“HAL”) system for automated handling of inbound orders. The text of the proposed rule change is set forth below. Proposed new language is in *italics.* Chicago Board Options Exchange, Incorporated Rules Rule 6.13. CBOE Hybrid System's Automatic Execution Feature

(a)No change.

(b)Automatic Execution (i)-(iii) No change.

(iv)Executions at NBBO: Eligible orders in classes that are multiply traded will not be automatically executed on CBOE at prices that are inferior to the NBBO and instead shall route to *HAL,* the PAR workstation in the trading crowd or, at the order entry firm's discretion, to BART. Eligible orders received while the CBOE market is locked (e.g., $1.00 bid—$1.00 offered) shall be eligible for automatic execution at CBOE's disseminated quote, provided that the disseminated quote is not inferior to the NBBO. (c)-(e) No change. Rule 6.14 Hybrid Agency Liaison

(HAL)*This Rule governs the operation of the HAL system. HAL is a feature within the Hybrid System that provides automated order handling in designated Hybrid option classes for qualifying electronic orders that are not automatically executed by the Hybrid System.* *(a) HAL Eligibility. The Exchange, with input from the appropriate Floor Procedure Committee, shall designate the classes in which HAL shall be activated. For such classes, HAL shall automatically process upon receipt, as set forth in subparagraph

(b)below, market and limit orders under the following circumstances:* *(i) Market orders or limit orders that are marketable against the Exchange's disseminated quotation while that quotation is not the NBBO;* *(ii) Limit orders that would improve the Exchange's disseminated quotation and that are marketable against quotations disseminated by other exchanges that are participants in the Intermarket Options Linkage; and* *(iii) Limit orders that would improve the Exchange's disseminated quotation.* *(b) HAL Order Handling. Orders that are received by HAL pursuant to subparagraph

(a)above shall immediately upon receipt be electronically exposed to all Market-Makers appointed to the relevant option class as well as all members acting as agent for orders at the top of the Exchange's book (“Qualifying Members”) in the relevant option series. The exposure shall be for a period of time determined by the Exchange on a class-by-class basis, with input from the appropriate Floor Procedure Committee, which period of time shall not exceed 1.5 seconds. If during the exposure period, a Market-Maker or Qualifying Member (on behalf of the order it is representing) commits to trade with any portion of the order, then the exposure period shall end (the Exchange will disseminate a last sale report for the quantity committed to) and an allocation period shall commence (with additional last sale reports being immediately disseminated for any additional portions of the order that are committed to during this period). At no point will HAL execute an order, or any portion of an order, if such execution would cause a trade-through. The allocation period shall be a period of time determined by the Exchange on a class-by-class basis, with input from the appropriate Floor Procedure Committee, which period of time, when combined with the designated exposure period time (as opposed to an exposure period that is terminated early), shall not exceed a total of three

(3)seconds. Allocation of the order shall be pursuant to subparagraph

(c)below. If no responses are received during the exposure period or if there remains an unexecuted portion of an order at the conclusion of the allocation period, then the order (the “Remaining Order”) shall be processed as follows:* *(i) If the Remaining Order is for the account of a public customer and is marketable against another exchange that is a participant in the Intermarket Options Linkage, then HAL shall route a P/A Order on behalf of the Remaining Order through the Linkage and any resulting execution of the P/A Order shall be allocated to the Remaining Order. If the P/A Order cannot be transmitted from the Exchange because the price of the P/A Order (or a better price) is no longer available on any market, then HAL shall, pursuant to normal order allocation processing, execute the Remaining Order against the Exchange's quote (provided such execution would not cause a trade-through) including, if appropriate, at the Exchange's BBO at the time the order was received by HAL (“Exchange Initial BBO”) against the Market-Makers that constituted the Exchange Initial BBO;* *(ii) If the Remaining Order is marketable against another exchange that is a participant in the Intermarket Options Linkage but is not for the account of a public customer, then HAL, when the system is enabled, shall route a Principal Order on behalf of the Remaining Order through the Linkage and any resulting execution of the Principal Order shall be allocated to the Remaining Order. If the Principal Order cannot be transmitted from the Exchange because the price of the Principal Order (or a better price) is no longer available on any market, then HAL shall, pursuant to normal order allocation processing, execute the Remaining Order against the Exchange's quote (provided such execution would not cause a trade-through) including, if appropriate, at the Exchange Initial BBO at the time the order was received by HAL against the Market-Makers that constituted the Exchange Initial BBO. Until the HAL system is enabled to route Principal Orders, the Remaining Order shall route to PAR;* *(iii) If the Remaining Order is not marketable (either on the Exchange or another exchange) it shall be entered into the Hybrid book for dissemination.* *(c) Allocation of Exposed Orders. Each Market-Maker or Qualifying Member that submits an order or quote to trade with an order during the exposure or allocation periods shall be entitled to receive an allocation of the order in accordance with the allocation algorithm in effect for the option class pursuant to Rule 6.45A or 6.45B. There is no participation entitlement applicable to exposed orders, and response sizes are limited to the size of the exposed order for allocation purposes.* *(d) Early Termination of Exposure Period. In addition to the receipt of a response to trade any portion of the exposed order, the exposure period will also terminate early under the following circumstances:* *(i) If during the exposure period the Hybrid System receives an unrelated order on the opposite side of the market from the exposed order that could trade against the exposed order at the prevailing NBBO price, then the orders will trade. However, the exposure period shall not terminate for any quantity that remains on the exposed order after such trade;* *(ii) If during the exposure period the Hybrid System receives an unrelated order on the same side of the market as the exposed order that is priced equal to or better than the exposed order, then the exposure period shall terminate and the exposed order shall be processed in accordance with subparagraph

(b)(i),

(ii)or (iii), as appropriate;* *(iii) If during the exposure of an order that is marketable against the Exchange Initial BBO, a Market-Maker attempts to move its quote to a price that is inferior to the Exchange Initial BBO, then the exposure period shall terminate and the exposed order shall be processed in accordance with subparagraph

(i)or (ii), as appropriate.* *(e) Early Termination of Allocation Period.* *

(i)If HAL is in the allocation stage of processing an order that has not been fully executed (i.e. all responses that have been received to that point cannot fully execute the order) and the Hybrid System receives an unrelated order on the opposite side of the market from the order that could trade against the order at the prevailing NBBO price, then the orders will trade. However, the allocation period shall not terminate with respect to any portion of the HAL order that did not execute against the unrelated order; * *(ii) If HAL is in the allocation stage of processing an order that has not been fully executed (i.e. all responses that have been received to that point cannot fully execute the order) and the Hybrid System receives an unrelated order on the same side of the market as the order, then the allocation period shall terminate for the unexecuted portion of the order and the unexecuted portion of the order shall be processed in accordance with subparagraph

(b)(i),

(ii)or (iii), as appropriate;* *(iii) If HAL is in the allocation stage of processing an order that is marketable against the Exchange Initial BBO and a Market-Maker attempts to move its quote to a price that is inferior to the Exchange Initial BBO while any portion of the order remains unexecuted (i.e. all responses that have been received to that point cannot fully execute the order), then the allocation period shall terminate and the unexecuted portion of the order shall be processed in accordance with subparagraph

(i)or (ii), as appropriate.* ** * * Interpretations and Policies:* *.01 A pattern or practice of submitting unrelated orders that cause an exposure period to conclude early will be deemed conduct inconsistent with just and equitable principles of trade and a violation of Rule 4.1 and other Exchange Rules.* *.02 Disseminating information regarding exposed orders to third parties will be deemed conduct inconsistent with just and equitable principles of trade and a violation of Rule 4.1 and other Exchange Rules.* 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 proposal and discussed any comments it received on the proposal. The text of these statements may be examined at the places specified in Item IV below. CBOE has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of the proposed rule change is to implement HAL, a new order handling system for option classes trading on CBOE's Hybrid System (“Hybrid”). Hybrid provides electronic executions for orders that are marketable against the Exchange's quote when it is priced at the National Best Bid or Offer (“NBBO”). The entire process for those orders is automated; however, many electronically-received orders that are not automatically executed upon receipt by the Hybrid System (usually because CBOE's disseminated quote is not the NBBO) are routed to a PAR terminal for manual handling. Proposed CBOE Rule 6.14 is meant to automate the process of handling most orders that would otherwise go to PAR. Currently, if the Exchange receives a marketable order when its disseminated quote is not the NBBO, the order routes to PAR where it must be selected by the PAR Official (there may be multiple orders on PAR at the same time) and then represented to the trading crowd in open-outcry. The order is represented to determine if any trading crowd members are willing to step up and match the NBBO price available on another exchange. If there is interest in the crowd to match the NBBO, then the order will be manually filled. If there is no interest in matching the NBBO price, an order will be generated and transmitted via the Intermarket Option Linkage (“Linkage”) to the NBBO market on behalf of the order on PAR. If the Linkage order is filled, that fill will be transferred to the order on PAR. While all of this is done relatively quickly, the HAL system would automate this process and reduce the timing to a matter of seconds (in no case more than three seconds). The following is an explanation of how HAL would work. HAL would only be available for classes trading on Hybrid. The Exchange, with input from the appropriate Floor Procedure Committee, would designate the Hybrid classes for which HAL would be activated. For those classes, HAL would process

(i)market orders or limit orders that are marketable against CBOE's disseminated quote while that quote is not the NBBO;

(ii)limit orders that would improve the Exchange's disseminated quote and that are marketable against quotes disseminated by other exchanges that are participants in the Plan for the Purpose of Creating and Operating an Intermarket Options Linkage (“Linkage Plan”); and

(iii)limit orders that are not marketable against the NBBO but that would improve CBOE's disseminated quote. These orders would be electronically exposed (flashed) to all Market-Makers appointed to the relevant option class as well as to all members acting as agent for orders at the top of the Exchange's book in the relevant option series (“Qualifying Members”). 4 Like with open outcry, this flash would afford crowd members an opportunity to match the away NBBO price. 4 Of course, eligible recipients of these “flash” messages may need to undertake some programming modifications in order to receive and respond to these messages. The Exchange will not require those programming changes. HAL's first step in flashing an order would be to gauge if there is any interest from any Market-Maker or Qualifying Member in matching the away NBBO price, or, in the case of a limit order that improves CBOE's quote but is not marketable, in filling the order instead of booking it. This step is called the exposure period. The exposure would be for a period of time determined by the Exchange on a class-by-class basis, with input from the appropriate Floor Procedure Committee, which period of time would not exceed 1.5 seconds. If during the exposure period, a Market-Maker or Qualifying Member (on behalf of the order it is representing) commits to trade with any portion of the order, then the exposure period would end (with a last sale report being issued for the quantity that was traded) and an allocation period would begin. The allocation period affords other participants that were attempting to trade with the exposed order a chance to participate in the execution of the order. The allocation period would be a period of time determined by the Exchange on a class-by-class basis, with input from the appropriate Floor Procedure Committee, which period of time, when combined with the designated exposure period time (as opposed to an exposure period that is terminated early), would not exceed a total of three seconds. For example, if the exposure period is set to 1.5 seconds, the allocation period cannot exceed 1.5 seconds. If the exposure period is set for one second, the allocation period cannot exceed two seconds. Of course, in that case the Exchange could determine to set the allocation period at one second or anything less than two seconds ( *i.e.* , the entire HAL process does not have to equal three seconds). Further, if an exposure period for a given order is terminated early, the “unused balance” of the exposure period is not added to the allocation period. Exposed orders would be allocated at the conclusion of the allocation period in accordance with the allocation algorithm in effect for the option class pursuant to CBOE Rule 6.45A or 6.45B. There is no participation entitlement applicable to exposed orders, and response sizes are limited to the size of the exposed order for allocation purposes. If no responses are received during the exposure period or if there remains an unexecuted portion of an order at the conclusion of the allocation period, then the order (the “Remaining Order”) would be booked if it is a limit order that is not marketable, or processed in one of the following two ways, based on whether the order is for the account of a public customer. First, if the Remaining Order is for the account of a public customer and is marketable against another exchange that is a participant in the Linkage Plan, then HAL would route a Principal Acting as Agent Linkage Order (“P/A Order”) on behalf of the Remaining Order through the Linkage and any resulting execution of the P/A Order would be allocated to the Remaining Order. Second, if the Remaining Order is marketable against another exchange that is a participant in the Linkage Plan but is not for the account of a public customer, then HAL, when the system is enabled, would route a Principal Linkage Order (“P Order”) on behalf of the Remaining Order through the Linkage, and any resulting execution of the P Order would be allocated to the Remaining Order. 5 Until the HAL system is enabled to route P Orders, the Remaining Order would route to PAR. 5 When routing Linkage orders (whether P or P/A), the Exchange may choose to route only up to the available size at the NBBO as allowable under the “trade and ship” process of the Linkage Plan. In either of these situations, if the Linkage order cannot be transmitted from the Exchange because the price of the Linkage order (or a better price) is no longer available on any market, then HAL would, pursuant to normal order allocation processing, execute the Remaining Order against the Exchange's quote (provided such execution would not cause a trade-through), including, if appropriate, at the Exchange's best bid or offer at the time the order was received by HAL (“Exchange Initial BBO”) against the Market-Makers that constituted the Exchange Initial BBO. HAL would effect executions against Market-Makers at the Exchange Initial BBO by preventing Market-Makers from moving Exchange Initial BBO quotes to inferior prices until a HAL order has been executed on CBOE or routed through Linkage. The Exchange notes that, in addition to the receipt of a response to trade any portion of the exposed order, the exposure period would terminate early under the following circumstances. First, if during the exposure period the Hybrid System received an unrelated order on the opposite side of the market from the exposed order that could trade against the exposed order at the prevailing NBBO price, then the orders would trade. However, the exposure period would not terminate if a quantity remains on the exposed order after such trade. Second, if during the exposure period the Hybrid System received an unrelated order on the same side of the market as the exposed order that was priced equal to or better than the exposed order, then the exposure period would terminate and the exposed order would be processed in the same manner as an exposed order for which no response to trade was received during the full exposure period— *i.e.* , routed through the Linkage or booked, in accordance with proposed CBOE Rule 6.14(b)(i), (ii), or (iii), as appropriate. Third, if during the exposure of an order that is marketable against the Exchange Initial BBO a Market-Maker attempted to move its quote to a price that was inferior to the Exchange Initial BBO, then the exposure period would terminate and the exposed order would be processed in the same manner as an exposed order for which no response to trade was received during the full exposure period. Meanwhile, the Exchange would not permit any Market-Maker quotes to move to an inferior price until the exposed order was routed through Linkage or, if necessary, executed against Market-Makers at the Exchange Initial BBO. Similarly, if HAL were in the allocation stage of processing an order that has not been fully executed ( *i.e.* , an order that was partially “hit” during the exposure period and for which all responses received to that point could not fully execute the order), the allocation period would terminate early under the following circumstances. First, if the Hybrid System received an unrelated order on the opposite side of the market from the HAL order that could trade against the HAL order at the prevailing NBBO price, then the orders would trade. However, the allocation period would not terminate with respect to any quantity that did not execute against the unrelated order. Second, if the Hybrid System received an unrelated order on the same side of the market as the HAL order, then the allocation period would terminate for the unexecuted portion of the order and the unexecuted portion of the order would be processed in the same manner as an exposed order for which no response to trade was received during the full exposure period— *i.e.* , routed through the Linkage or booked, in accordance with proposed CBOE Rule 6.14(b)(i), (ii), or (iii), as appropriate. Third, if HAL were in the allocation stage of an order that is marketable against the Exchange Initial BBO and a Market-Maker attempted to move its quote to a price that was inferior to the Exchange Initial BBO while any portion of the order remained unexecuted ( *i.e.* , all responses that have been received to that point cannot fully execute the order), then the allocation period would terminate and the unexecuted portion of the order would be processed in the same manner as an exposed order for which no response to trade was received during the full exposure period. Finally, the Exchange proposes that a pattern or practice of submitting unrelated orders that cause an exposure period to conclude early and disseminating information regarding exposed orders to third parties would be deemed conduct inconsistent with just and equitable principles of trade and a violation of CBOE Rule 4.1 and other Exchange Rules. 2. Statutory Basis The Exchange believes the proposed rule change is consistent with Section 6(b) of the Act 6 in general, and furthers the objectives of Section 6(b)(5) of the Act 7 in particular, in that it should promote just and equitable principles of trade, serve to remove impediments to and perfect the mechanism of a free and open market and a national market system, and protect investors and the public interest 6 15 U.S.C. 78f(b). 7 15 U.S.C. 78f(b)(5). B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that the proposed rule change would impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others 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 Exchange 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-2005-89 on the subject line. Paper Comments • Send paper comments in triplicate to Jonathan G. Katz, Secretary, Securities and Exchange Commission, Station Place, 100 F Street, NE., Washington, DC 20549-9303. All submissions should refer to File Number SR-CBOE-2005-89. 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-2005-89 and should be submitted on or before January 5, 2006. 8 17 CFR 200.30-3(a)(12). For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 8 Jonathan G. Katz, Secretary. [FR Doc. E5-7370 Filed 12-14-05; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-52899; File No. SR-NASD-2005-136] Self-Regulatory Organizations; National Association of Securities Dealers, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Allow Nasdaq To Issue Public Reprimand Letters December 6, 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 November 17, 2005, the National Association of Securities Dealers, Inc. (“NASD”), through its subsidiary, The Nasdaq Stock Market, Inc. (“Nasdaq”), filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I and II below, which Items have been prepared by Nasdaq. Nasdaq filed this proposal pursuant to section 19(b)(3)(A) of the Act 3 and Rule 19b-4(f)(6) thereunder 4 as non-controversial, and therefore the proposed rule change is effective immediately upon filing. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 15 U.S.C. 78s(b)(3)(A). 4 17 CFR 240.19b-4(f)(6). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change Nasdaq proposes to modify NASD Rules 4801, 4803, 4804 and 4811 to permit Nasdaq to issue public reprimand letters to listed companies for certain rule violations when a determination is made that delisting is not an appropriate sanction. Nasdaq would implement the proposed rule change upon notice by the Commission. The text of the proposed rule change is below. Proposed new language is in italics; proposed deletions are in brackets. 5 5 The proposed rule change is marked to show changes from the rules as they appear in the electronic NASD Manual available at *http://www.nasd.com.* 4801. Definitions (a)-(j) No change.

(k)The term “Staff Determination” shall mean *either:* *(1)* a written determination by the Listing Department to limit or prohibit the initial or continued listing of an issuer's securities pursuant to Rule 4804[.] *; or* *(2) a public reprimand letter in a case where the Listing Department has determined that the issuer has violated a Nasdaq corporate governance or notification listing standard (other than one required by Rule 10A-3 of the Securities Exchange Act of 1934) and that delisting is not an appropriate sanction. In determining whether to issue a public reprimand letter, the Listing Department shall consider whether the violation was inadvertent, whether the violation materially adversely affected shareholders' interests, whether the violation has been cured, whether the issuer reasonably relied on an independent advisor and whether the issuer has demonstrated a pattern of violations.* 4803. Staff Review of Deficiency

(a)Whenever staff of the Listing Department determines that an issuer does not meet a listing standard set forth in the Rule 4000 Series, staff shall immediately notify the issuer. The issuer shall make a public announcement through the news media disclosing the receipt of this notice, including the Rule(s) upon which it was based. Prior to the release of the public announcement, the issuer shall provide such disclosure to Nasdaq's MarketWatch Department, the Listing Department, and the Hearings Department. The public announcement shall be made as promptly as possible, but not more than four business days following receipt of the notice from the Listing Department.

(1)In the case of

(A)all quantitative deficiencies from standards that do not provide a compliance period;

(B)deficiencies from the standards of Rules 4350(c) or

(d)or 4360(c) or

(d)where the cure period of the Rule is not applicable; or

(C)deficiencies from the standards of Rules 4350(f), (h), (i), (k), or (n), 4360(f) or (i), or 4351; staff's notice shall provide the issuer with fifteen calendar days to submit a plan to regain compliance with the listing standard; provided, however, that the issuer shall not be provided with an opportunity to submit such a plan if review under the Rule 4800 Series of a prior Staff Determination *(other than a Staff Determination that serves as a public reprimand letter as described in Section 4801(k)(2))* with respect to the issuer is already pending. Subject to the restrictions of paragraph (b), staff may extend this deadline upon good cause shown. Upon receipt of the issuer's plan, staff in the Listing Department may request such additional information from the issuer as is necessary to make a determination regarding the likelihood that the plan will allow the issuer to meet the listing standard at issue. (2)-(3) No change.

(b)Unless review under the Rule 4800 Series of a prior Staff Determination *(other than a Staff Determination that serves as a public reprimand letter as described in section 4801(k)(2))* with respect to the issuer is already pending, the Listing Department may grant the issuer additional time to regain compliance with a listing standard described in paragraph (a)(1); provided, however, that the additional time provided by all such exceptions shall not exceed 105 calendar days from the date of staff's notification pursuant to paragraph (a). The Listing Department shall prepare a written record describing the basis for granting any exception, and shall provide the issuer with written notice as to the terms of the exception. If the issuer does not regain compliance within the time period provided by all applicable exceptions, the Listing Department shall immediately issue a Staff Determination pursuant to Rule 4804(a). If the Listing Department determines not to grant the issuer additional time to regain compliance, the Listing Department shall immediately issue a Staff Determination pursuant to Rule 4804(a) that includes a description of the basis for denying the exception. 4804. Written Notice of Staff Determination

(a)If the Listing Department reaches a determination to limit or prohibit the initial or continued listing of an issuer's securities *or to issue a public reprimand letter* , it shall prepare and provide to the issuer a Staff Determination that shall describe the specific grounds for the determination, identify the quantitative standard or qualitative consideration set forth in the Rule 4000 Series that the issuer has failed to satisfy, and provide notice that upon request the issuer shall be provided an opportunity for a hearing under this Rule 4800 Series.

(b)An issuer that receives a Staff Determination [to prohibit continued listing of the issuer's securities] under Rule 4804(a) shall make a public announcement through the news media disclosing the receipt of the Staff Determination, including the Rule(s) upon which the Staff Determination was based. Prior to the release of the public announcement, an issuer shall provide such disclosure to Nasdaq's MarketWatch Department, the Listing Department, and the Hearings Department. The public announcement shall be made as promptly as possible, but not more than four business days following receipt of the Staff Determination.

(c)If review under the Rule 4800 Series of a Staff Determination *described in Rule 4801(k)(1)* is pending and the Listing Department identifies the existence of one or more additional deficiencies with respect to the issuer, the Listing Department shall prepare and provide to the issuer a Staff Determination with respect to such additional deficiencies. If the new Staff Determination is issued prior to a Panel hearing with respect to the original Staff Determination, the new Staff Determination shall notify the issuer that it should present its views with respect to the additional deficiencies at the Panel hearing. If the new Staff Determination is issued after a Panel hearing with respect to the original Staff Determination, the new Staff Determination shall inform the issuer that it should present its views with respect to the additional deficiencies in writing within the period specified in the Staff Determination, to allow review of the additional deficiencies as provided under Rule 4802(d).

(d)*If review under the Rule 4800 Series of a public reprimand letter is pending and the Listing Department identifies the existence of one or more additional deficiencies with respect to the issuer, the Listing Department shall review the additional deficiencies as provided in Rule 4803.* 4811. Record on Review; Contents of Decisions (a)-(d) No change. *(e) If a Panel Decision, Listing Council Decision, or decision of the NASD Board concludes that the issuer has failed to satisfy the quantitative standards or qualitative considerations set forth in the Rule 4000 Series, the decision shall either:* *(1) grant an exception to the Rule 4000 Series as permitted by Rule 4802(b);* *(2) limit or prohibit the initial or continued listing of the issuer's securities; or* *(3) serve as a public reprimand letter in a case where the Adjudicatory Body determines that the issuer has violated a Nasdaq corporate governance or notification listing standard (other than one required by Rule 10A-3 of the Securities Exchange Act of 1934) and that delisting is not an appropriate sanction. In determining whether to issue a public reprimand letter, the Adjudicatory Body shall consider whether the violation was inadvertent, whether the violation materially adversely affected shareholders' interests, whether the violation has been cured, whether the issuer reasonably relied on an independent advisor and whether the issuer has demonstrated a pattern of violations.* *(f) An issuer that receives an Adjudicatory Body decision that serves as a public reprimand letter as described in Rule 4811(e)(3) shall make a public announcement through the news media disclosing the receipt of the decision, including the Rule(s) upon which the decision was based. Prior to the release of the public announcement, an issuer shall provide such disclosure to Nasdaq's MarketWatch Department, the Listing Department, and the Hearings Department. The public announcement shall be made as promptly as possible, but not more than four business days following receipt of the decision.* II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, Nasdaq included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. Nasdaq has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose Nasdaq is proposing to allow the issuance of a public reprimand letter to a listed company upon a determination that the company has violated a Nasdaq corporate governance or notification listing standard and that delisting is not an appropriate sanction. The Commission recently approved a proposed rule change to Nasdaq's procedures associated with denying or limiting companies' initial or continued listing on Nasdaq. 6 Under these new procedures, the staff of Nasdaq's Listing Qualifications Department (“Listing Department”) provides written notice to an issuer of a deficiency when a determination has been made that a listing requirement has not been satisfied. Depending upon the nature of the deficiency, the notice takes the form of a Staff Determination, which initiates proceedings to deny or limit listing, or a deficiency letter that provides the issuer with 15 days to submit a plan to regain compliance with the listing standard. 7 If an issuer receives a Staff Determination, it may then request a hearing before a Listing Qualifications Panel (“Panel”). Upon receiving a decision from the Panel (“Panel Decision”), the issuer may appeal the decision to the Nasdaq Listing and Hearing Review Council (“Listing Council”). The final decision of the Listing Council (“Listing Council Decision”) is subject to review by the NASD Board of Directors and the Commission. 6 *See* Securities Exchange Act Release No. 52342 (August 26, 2005), 70 FR 52456 (September 2, 2005) (SR-NASD-2004-125). 7 Under NASD Rule 4803, upon the expiration of the 15 day period provided in a deficiency notice, the staff is required either to initiate delisting proceedings or grant an issuer up to 105 days to regain compliance with the listing standard. The staff's authority to grant an exception does not apply to quantitative listing standards that, by their terms, specify a cure period. Under the current rules, a Staff Determination initiates proceedings to deny or limit listing. In monitoring the compliance of listed companies with Nasdaq's corporate governance rules, Nasdaq has identified circumstances where delisting would be disproportionate to the underlying deficiency. Nasdaq believes that the availability of a lesser sanction in the form of a public reprimand letter would ensure that investors are not harmed by the premature delisting of companies in certain limited situations where violations involve a relatively minor infraction of certain Nasdaq corporate governance standards or notice requirements. 8 8 Examples of some circumstances where Nasdaq could determine to issue a public reprimand letter include those where:

(1)The staff determines that a company engaged in a pattern of failing to provide advance notice of press releases to the Nasdaq StockWatch department;

(2)the staff becomes aware that a company with a December 31 fiscal year end has not held an annual meeting for the prior year as of early January, but the company has filed a proxy to hold the meeting in the next few weeks; or

(3)the staff determines that an independent director resigned from the company and was replaced with another independent director, but the company did not provide prior notice to Nasdaq. The proposed rule change, thus, would modify NASD Rule 4801(k) to provide that, depending on the nature of the deficiency, a Staff Determination may take the form of either:

(1)A written determination to limit or prohibit the initial or continued listing of an issuer's securities or

(2)a public reprimand letter. Under the proposed rule change, the Listing Department could issue a public reprimand letter to an issuer only upon a determination that the issuer violated a Nasdaq corporate governance or notification listing standard (other than one required by Rule 10A-3 under the Act 9 ) and that delisting is not an appropriate sanction. In determining whether to issue a public reprimand letter, the Listing Department would consider whether the violation was inadvertent, whether the violation materially adversely affected shareholders' interests, whether the violation has been cured, whether the issuer reasonably relied on an independent advisor, and whether the issuer has demonstrated a pattern of violations. 9 17 CFR 240.10A-3. Because a public reprimand letter would be considered a Staff Determination, it would be subject to appeal in the same manner as a notice to deny or limit listing. The proposed rule change also would modify NASD Rule 4804(b) to clarify that once a public reprimand letter is issued, a company would be required to make a public announcement through the news media disclosing the receipt of the letter, including the basis for the staff's determination. The timetable for the public announcement would be the same as for a deficiency or delisting letter—as promptly as possible, but not later than four business days following receipt of the public reprimand letter. Nasdaq also proposes to amend NASD Rules 4803, 4804(c), and 4804(d) to clarify that if an appeal of a public reprimand letter is pending, an issuer would not be disqualified from receiving an exception with respect to any additional deficiencies under NASD Rule 4803. If a Staff Determination is under review when the staff issues an additional deficiency notice, the current rules do not permit the staff to provide additional time to the issuer to cure the violation or to submit a plan to regain compliance with the listing standards. Instead, staff must issue a new Staff Determination with respect to the additional deficiencies under NASD Rule 4804(c) and notify the issuer that it should present its views with respect to the new deficiencies at the Panel hearing or, if the Panel hearing has occurred, in writing. Because public reprimand letters generally would involve minor rule violations and are intended to be a lesser sanction than delisting, Nasdaq believes it would not be appropriate to deny issuers that appeal such a letter the benefit of the exception provided by NASD Rule 4803 in the event an additional deficiency is identified. Nasdaq also proposes to modify NASD Rule 4811 to provide that a Panel Decision, Listing Council Decision, or decision of the NASD Board could, in addition to granting an exception or limiting or prohibiting the initial or continued listing of an issuer's securities, serve as a public reprimand letter. Under the proposed rule change, like the Listing Department, the appropriate Adjudicatory Body 10 could issue a public reprimand letter to an issuer only upon a determination that the issuer violated a Nasdaq corporate governance or notification listing standard (other than one required by Rule 10A-3 under the Act 11 ) and that delisting is not an appropriate sanction. In determining whether to issue a public reprimand letter, the Adjudicatory Body would be required to consider the same criteria as the Listing Department. As in the case of a public reprimand letter issued by the staff, an issuer that receives a public reprimand letter issued by an Adjudicatory Body would be required to make a public announcement through the news media disclosing receipt of the letter. 10 NASD Rule 4801(b) defines “Adjudicatory Body” to mean a Panel, the Listing Council, or the NASD Board. 11 17 CFR 240.10A-3. Nasdaq continues to believe that delisting is the appropriate sanction for companies that fall below the quantitative listing requirements, violate Nasdaq listing standards, or raise public interest concerns. Nasdaq believes, however, that the authority to issue public reprimand letters would provide Nasdaq with the ability to impose lesser sanctions on issuers in limited circumstances, when delisting is not appropriate. 2. Statutory Basis Nasdaq believes that the proposed rule change is consistent with the provisions of section 15A of the Act, 12 in general, and with section 15A(b)(6) of the Act, 13 in particular, in that it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, remove impediments to a free and open market and a national market system, and, in general, to protect investors and the public interest. Nasdaq believes that this proposed rule change would increase the objectivity and transparency of its process of sanctioning companies for violations of listing standards and would promote public confidence in Nasdaq and the quality of Nasdaq's listed companies. 12 15 U.S.C. 78 *o* -3. 13 15 U.S.C. 78 *o* -3(b)(6). B. Self-Regulatory Organization's Statement on Burden on Competition Nasdaq does not believe that the proposed rule change would result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others Nasdaq neither solicited nor received written comments. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action This proposal has become effective pursuant to section 19(b)(3)(A) of the Act 14 and subparagraph (f)(6) of Rule 19b-4 thereunder 15 because the proposal:

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

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

(3)by its terms does not become operative for 30 days after the date of this filing, or such shorter time as the Commission may designate, if consistent with the protection of investors and the public interest. Nasdaq has requested that the Commission waive the requirement that the proposed rule change not become operative for 30 days after the date of the filing. The Commission notes that the proposed rule change is substantially similar to New York Stock Exchange Rule 303A.13, 16 which was previously approved by the Commission after notice and comment and, therefore, does not raise any new regulatory issues. 17 For this reason, the Commission designates the proposal to be effective and operative upon filing with the Commission. 18 14 15 U.S.C. 78s(b)(3)(A). 15 17 CFR 240.19b-4(f)(6). 16 *See* Securities Exchange Release No. 48745 (November 4, 2003), 68 FR 64154 (November 12, 2003) (SR-NYSE-2002-33). 17 Rule 19b-4(f)(6) also requires a self-regulatory organization to give written notice of a proposed rule change filed pursuant to this subsection at least five business days prior to filing. Nasdaq complied with this requirement. 18 For purposes only of waiving the operative delay for this proposal, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov.* Please include File Number SR-NASD-2005-136 on the subject line. Paper Comments • Send paper comments in triplicate to Jonathan G. Katz, Secretary, Securities and Exchange Commission, Station Place, 100 F Street, NE., Washington, DC 20549-9303. All submissions should refer to File Number SR-NASD-2005-136. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room. Copies of such filing also will be available for inspection and copying at the principal office of the NASD. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-NASD-2005-136 and should be submitted on or before January 5, 2006. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 19 19 17 CFR 200.30-3(a)(12). Jonathan G. Katz, Secretary. [FR Doc. E5-7384 Filed 12-14-05; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-52921; File No. SR-NYSE-2005-84] Self-Regulatory Organizations; New York Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Revisions to the Study Outline and Selection Specifications for the Limited Principal—Registered Options (Series 4) Examination Program December 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 November 30, 2005, the New York Stock Exchange, Inc. (“NYSE” or “Exchange”) filed with the Securities and Exchange Commission (“SEC” or “Commission”) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the Exchange. The Exchange has designated the proposed rule change as constituting a stated policy, practice, or interpretation with respect to the meaning, administration, or enforcement of an existing rule of the self-regulatory organization pursuant to section 19(b)(3)(A)(i) of the Act 3 and Rule 19b-4(f)(1) thereunder, 4 which renders the proposal effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 15 U.S.C. 78s(b)(3)(A)(i). 4 17 CFR 240.19b-4(f)(1). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange is filing with the Commission revisions to the study outline and selection specifications for the Limited Principal—Registered Options (Series 4) examination program. The proposed revisions update the material to reflect changes to the laws, rules, and regulations covered by the examination, as well as modify the content of the examination program to track more closely the functional workflow of a Series 4 Limited Principal. The revised study outline is available on the Exchange's Web site ( *http://www.nyse.com* ), at the NYSE, and at the Commission. However, the Exchange has omitted the Series 4 selection specifications from this filing and has submitted the specifications under separate cover to the Commission with a request for confidential treatment pursuant to Rule 24b-2 5 under the Act. 5 17 CFR 240.24b-2. The Exchange will announce the proposed rule change and the implementation date to its members and member organizations in an Information Memo to be published no later than 30 days after SEC Notice of this filing. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose Pursuant to section 6(c)(3)(B) 6 of the Act, which requires the Exchange to prescribe standards of training, experience, and competence for persons associated with Exchange members and member organizations, the Exchange has developed examinations, and administers examinations developed by other self-regulatory organizations (“SROs”), that are designed to establish that persons associated with Exchange members and member organizations have attained specified levels of competence and knowledge. The Exchange periodically reviews the content of the examinations to determine whether revisions are necessary or appropriate in view of changes pertaining to the subject matter covered by the examinations. 6 15 U.S.C. 78f(c)(3)(B). NYSE Rule 345 (“Employees—Registration, Approval, Records”) requires member firms to register with the NYSE any individuals who regularly perform duties customarily performed by a direct supervisor of a registered representative. NYSE Rule 720 (“Registration of Options Principals”) provides, in part, that no member organization may conduct a public options business unless those engaged in the management of the business pertaining to options are registered with and approved by the Exchange as Options Principals. Among other things, an Options Principal is required to successfully complete an examination prescribed by the Exchange for the purpose of demonstrating an adequate knowledge of options trading. The Series 4 examination is such an examination. The Series 4 examination, an industry-wide examination, qualifies an individual to function as a Registered Options and Security Futures Principal, but only for purposes of supervising a member firm's options activities. 7 7 A Registered Options and Security Futures Principal also must complete a firm-element continuing education program that addresses security futures and a principal's responsibilities for security futures before such person can supervise security futures activities. The Series 4 examination tests a candidate's knowledge of options trading generally, the industry rules applicable to trading of option contracts, and the rules of registered clearing agencies for options. The Series 4 examination covers, among other things, equity options, foreign currency options, index options, and options on government and mortgage-backed securities. The Series 4 examination program is shared by the Exchange and the following SROs: the National Association of Securities Dealers, Inc., the American Stock Exchange LLC, the Chicago Board Options Exchange, Inc., the Pacific Exchange, Inc., and the Philadelphia Stock Exchange, Inc. A committee of industry representatives, together with the staff of the Exchange and the other SROs, recently undertook a periodic review of the Series 4 examination program. As a result of this review and as part of an ongoing effort to align the examination more closely to the supervisory duties of a Series 4 Limited Principal, the Exchange is proposing to modify the content of the examination to track the functional workflow of a Series 4 Limited Principal. More specifically, the Exchange is proposing to revise the main section headings and the number of questions on each section of the Series 4 study outline as follows: Options Investment Strategies, decreased from 35 to 34 questions; Supervision of Sales Activities and Trading Practices, increased from 71 to 75 questions; and Supervision of Employees, Business Conduct, and Recordkeeping and Reporting Requirements, decreased from 19 to 16 questions. The Exchange is further proposing revisions to the study outline to reflect the SEC short sale requirements. The revised examination continues to cover the areas of knowledge required to supervise options activities. The Exchange is proposing these changes to the entire content of the Series 4 examination, including the selection specifications and question bank. The number of questions on the Series 4 examination will remain at 125, and candidates will continue to have three hours to complete the exam. Also, each question will continue to count one point, and each candidate must correctly answer 70 percent of the questions to receive a passing grade. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with section 6(c)(3)(B) 8 of the Act, in that it provides for the prescription by NYSE of standards of training, experience, and competence for persons associated with NYSE members and member organizations. 8 15 U.S.C. 78f(c)(3)(B). B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others Comments were neither solicited nor received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The proposed rule change has become effective pursuant to section 19(b)(3)(A)(i) 9 of the Act and Rule 19b-4(f)(1) thereunder, 10 in that the proposed rule change constitutes a stated policy, practice, or interpretation with respect to the meaning, administration, or enforcement of an existing rule of the self-regulatory organization. The Exchange will announce the implementation date to its members and member organizations in an Information Memo to be published no later than 30 days after SEC Notice of this filing. 9 15 U.S.C. 78s(b)(3)(A)(i). 10 17 CFR 240.19b-4(f)(1). At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov.* Please include File Number SR-NYSE-2005-84 on the subject line. Paper Comments • Send paper comments in triplicate to Jonathan G. Katz, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-9303. All submissions should refer to File Number SR-NYSE-2005-84. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule 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 NYSE. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-NYSE-2005-84 and should be submitted on or before January 5, 2006. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 11 11 17 CFR 200.30-3(a)(12). Jonathan G. Katz, Secretary. [FR Doc. E5-7367 Filed 12-14-05; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-52927; File No. SR-PCX-2005-128] Self-Regulatory Organizations; Pacific Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Clarifying the Hours Certain Vanguard International Equity Index Funds Are Eligible To Trade on the Archipelago Exchange December 8, 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 November 22, 2005, the Pacific Exchange, Inc. (“PCX” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. The Exchange filed the proposed rule change as a “non-controversial” rule change under Rule 19b-4(f)(6) under the Act, 3 which rendered the proposal effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 17 CFR 240.19b-4(f)(6). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange, through its wholly owned subsidiary PCX Equities, Inc. (“PCXE”), proposes to amend its rules governing the Archipelago Exchange (“ArcaEx”), the equity trading facility of PCXE. With this filing, the Exchange proposes to clarify the hours under PCXE Rule 7.34 that three exchange traded funds based on Vanguard International Equity Indices—Morgan Stanley Capital International Inc. (“MSCI”) Europe Index (ticker symbol: VGK), MSCI Pacific Index (ticker symbol: VPL), and MSCI Emerging Markets Select Index (ticker symbol: VWO) (the “Funds”)—are eligible to trade on ArcaEx pursuant to unlisted trading privileges (“UTP”). A copy of the proposed rule change is available on the PCX Web site ( *http://www.pacificex.com* ), at the PCX's Office of the Secretary, and at the Commission's Public Reference Room. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose On August 8, 2005, the Commission approved the Exchange's proposal to trade the Funds pursuant to UTP. 4 The Approval Order provided that the Funds would be eligible to trade on ArcaEx during the hours that the Intraday Indicative Value (“IIV”) is disseminated. 5 With this filing, the Exchange seeks to clarify the Funds' trading hours, proposing that the Funds should instead be eligible to trade on ArcaEx in accordance with PCXE Rule 7.34, except that the Funds will not be eligible to trade during the Opening Session (4 a.m. ET to 9:30 a.m. e.t.) unless the IIV is disseminated during that time. 4 *See* Securities Exchange Act Release No. 34-52221 (August 8, 2005), 70 FR 48222 (August 16, 2005) (SR-PCX-2005-74) (“Approval Order”). 5 *See id.* at text accompanying note 8. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with section 6(b) 6 of the Act, in general, and furthers the objectives of section 6(b)(5) of the Act, 7 in particular, in that it is designed to facilitate transactions in securities, to promote just and equitable principles of trade, to enhance competition and to protect investors and the public interest. 6 15 U.S.C. 78f(b). 7 15 U.S.C. 78f(b)(5). B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others Written comments on the proposed rule change were neither solicited nor received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The Exchange has designated the proposed rule change as one that:

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

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

(iii)by its terms, does not become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest pursuant to section 19(b)(3)(A)(iii) of the Act 8 and subparagraph (f)(6) of Rule 19b-4 thereunder. 9 8 15 U.S.C. 78s(b)(3)(A). 9 17 CFR 240.19b-4(f)(6). As required by Rule 19b-4(f)(6)(iii) under the Act, 10 the Exchange provided the Commission with written notice of its intent to file the proposed rule change, along with a brief description and text of the proposed rule change, at least five business days prior to the date of filing the proposed rule change. Pursuant to Rule 19b-4(f)(6)(iii) under the Act, 11 the proposal does not become operative for 30 days after the date of its filing, or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest. The PCX has requested that the Commission waive the 30-day operative delay so that the proposed rule change can become immediately effective upon filing. 10 17 CFR 240.19b-4(f)(6)(iii). 11 17 CFR 240.19b-4(f)(6)(iii). The Commission believes that waiving the 30-day operative date is consistent with the protection of investors and the public interest. 12 Specifically, the Funds are currently trading on ArcaEx in accordance with the Approval Order, and accelerating the operative date to allow the Funds to trade on ArcaEx, immediately upon effectiveness, in accordance with the proposed revised trading hours, would provide Equity Trading Permit Holders and the public greater liquidity and opportunities to trade, thereby helping to reduce trading costs and promote competition among marketplaces. For these reasons, the Commission designates the proposed rule change to be effective and operative upon filing with the Commission. 12 For the purpose only of accelerating the operative date of this proposal, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate the rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an email to *rule-comments@sec.gov.* Please include File No. SR-PCX-2005-128 on the subject line. Paper Comments • Send paper comments in triplicate to Jonathan G. Katz, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-9303. All submissions should refer to File No. SR-PCX-2005-128. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File No. SR-PCX-2005-128 and should be submitted on or before January 5, 2006. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. Jonathan G. Katz, Secretary. [FR Doc. E5-7371 Filed 12-14-05; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-52923; File No. SR-PCX-2005-79] Self-Regulatory Organizations; Pacific Exchange, Inc., Notice of Filing and Order Granting Accelerated Approval of Proposed Rule Change and Amendment Nos. 2 and 3 Relating to Generic Listing Standards for Options on Narrow-Based and Micro Narrow-Based Indexes December 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 June 27, 2005, the Pacific Exchange, Inc. (“PCX” or “Exchange”) filed with the Securities and Exchange Commission (“Commission” or “SEC”) the proposed rule change as described in Items I and II below, which Items have been substantially prepared by the Exchange. The PCX filed Amendment Nos. 1 3 and 2 4 on November 3, 2005. On December 6, 2005, the PCX filed Amendment No. 3. 5 The Commission is publishing this notice to solicit comments on the proposed rule change, as amended, from interested persons and is approving the proposed rule change, as amended, on an accelerated basis. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 The Exchange withdrew Amendment No. 1 on November 3, 2005. 4 Amendment No. 2 supplemented the PCX's original filing and made certain technical corrections to the purpose section and to the proposed rule text. 5 Amendment No. 3 makes certain technical corrections to the proposed rule text and purpose section, but did not materially impact the filing. I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend its index options rules in order to provide for the listing and trading of narrow-based index options pursuant to Rule 19b-4(e) under the Act. 6 The Exchange is also proposing to amend the position and exercise limits with respect to narrow-based index options, as well as a number of conforming changes in order to bring the PCX narrow-based index option rules up to date with those of other Self-Regulatory Organizations (“SROs”). 7 In addition, the Exchange proposes to adopt new generic listing standards for options on micro narrow-based indexes. The proposed rule changes are based on the rules of the International Securities Exchange, Inc. (“ISE”) 8 and the Chicago Board Options Exchange, Incorporated (“CBOE”), 9 which were approved by the Commission. The text of the proposed rule change appears below. Additions are *italicized* ; deletions are [bracketed]. 6 17 CFR 240.19b-4(e). 7 The Exchange states that, on October 28, 2003, it filed a proposed rule change to update its broad-based and narrow-based index options rules. The Exchange further states that due to the time-sensitive circumstances at that time, the Exchange amended its filing to address only the updates to the broad-based index options rules and deleted all references to modifications to the narrow-based index options rules. At this time, the Exchange is proposing to update its narrow-based index options rules in order to bring its rules in line with other SROs. *See* Securities Exchange Act Release No. 49455 (March 22, 2004), 69 FR 16316 (March 29, 2004) (Order approving SR-PCX-2003-60). The Commission notes, however, that Rule 19b-4(e), with which the Exchange now proposes to bring its listing standards into compliance, has been in effect since December 8, 1998. *See* Securities Exchange Act Release No. 40761 (December 8, 1998), 63 FR 70952 (December 22, 1998). 8 *See* Securities Exchange Act Release No. 48405 (August 25, 2003), 68 FR 52257 (September 2, 2003) (SR-ISE-2003-05) (Order approving the ISE's generic listing standards for options on narrow-based indexes). 9 *See* Securities Exchange Act Release No. 49932 (June 28, 2004), 69 FR 40994 (July 7, 2004) (SR-CBOE-2002-24) (Order approving generic listing standards for options on micro narrow-based security indexes) and Securities Exchange Act Release No. 51346 (March 9, 2005), 70 FR 12916 (March 16, 2005) (SR-CBOE-2005-08) (Order approving CBOE's proposed modified capitalization-weighted methodology as an acceptable generic listing standard for options on narrow-based index). Rule 5—Options Contracts Traded on the Exchange Definitions Rule 5.10(b)(1)-(24)—No Change. *(25) The term “Micro Narrow-Based Index” means an industry or narrow-based index that meets the specific criteria provided under Rule 5.13(d).* Designation of the Index Narrow-Based Index Options *Rule 5.13(a) The component securities of an index underlying an index option contract need not meet the requirements of Rule 5.3. Except as set forth in subsection

(b)below, the listing of a class of index options on a narrow-based index requires the filing of a proposed rule change to be approved by the SEC under Section 19(b) of the Securities Exchange Act of 1934 (“1934 Act”).* [The listing of a class of index options on a new narrow-based index will be treated by the Exchange as a proposed rule change subject to filing with and approval by the Securities and Exchange Commission (“Commission”) under Section 19(b) of the Act. A rule change proposing the listing of a class of index options on a new underlying index may be designated by the Exchange as constituting a stated policy, practice or interpretation with respect to the administration of this Rule 5.13(a) within the meaning of subparagraph (3)(A) of subsection 19(b) of the Act, thereby qualifying the rule change for effectiveness upon filing with the Commission if the Exchange prefiles with the Commission a draft copy of the rule change not less than one week before it is filed, and if the Exchange proposes to commence trading in the subject class of index options not earlier than 30 days after the date of filing, and if each of the following conditions is satisfied:] *(b) Narrow-Based Index. The Exchange may trade options on a narrow-based index pursuant to Rule 19b-4(e) of the 1934 Act, if each of the following conditions is satisfied:* (1)—No Change.

(2)The index is capitalization-weighted, price weighted *,* [or] or equal dollar-weighted, *or modified capitalization-weighted,* and consists of ten or more component securities; (3)-(4)—No Change.

(5)In a capitalization-weighted index *or a modified capitalization-weighted index,* the lesser of the five highest weighted component securities in the index or the highest weighted component securities in the index that in the aggregate represent at least 30% of the total number of component securities in the index each have had an average monthly trading volume of at least 2,000,000 shares over the past six months;

(6)No single component security represents more than [25] *30* % of the weight of the index, and the five highest weighted component securities in the index do not in the aggregate account for more than 50% ([60] *65* % for an index consisting of fewer than 25 component securities) of the weight of the index. (7)—No Change.

(8)[All Component securities are “reported securities” as defined in Rule 11Aa3-1 under the Exchange Act.] *Each component security must be an “NMS Stock” as defined in Rule 600 of Regulation NMS of the Securities Exchange Act of 1934.* (9)-(12)—No Change. [Maintenance Requirements Narrow-Based Index Options] [5.13(b)] *(c) Maintenance Criteria.* The following maintenance listing standards shall apply to each class of index options originally listed pursuant to *subsection* [paragraph] [(a)] *(b)* above:

(1)The *requirements* [conditions] stated in *subsections* [subparagraphs] [(a)] *(b)* (1), (3), (6), (7), (8), (9), (10),

(11)and

(12)must continue to be satisfied, provided that the *requirements* [conditions] stated in subparagraph [(a)] *(b)*

(6)must be satisfied only as of the first day of January and July in each year; (2)-(3)—No change.

(4)In a capitalization-weighted index *or a modified capitalization-weighted index,* the lesser of the five highest weighted component securities in the index or the highest weighted component securities in the index that in the aggregate represent at least 30% of the total number of stocks in the index each have had an average monthly trading volume of at least 1,000,000 shares over the past six months. In the event of a class of index options listed on the Exchange fails to satisfy the maintenance listing standards set forth herein, the Exchange shall not open for trading any additional series of options of that class unless such failure is determined by the Exchange not to be significant and the Commission concurs in that determination, or unless the continued listing of that class of index options has been approved by the Commission under Section 19(b)(2) of the Act. *(d) Notwithstanding subsection

(a)above, the Exchange may trade options on a Micro Narrow-Based security index pursuant to Rule 19b-4(e) of the 1934 Act, if each of the following condition is satisfied:* *(1) The Index is a security index:* *(i) That has 9 or fewer component securities; or* *(ii) In which a component security comprises more than 30 percent of the index's weighting; or* *(iii) In which the 5 highest weighted component securities in the aggregate comprise more than 60 percent of the index's weighting; or* *(iv) In which the lowest weighted component securities comprising, in the aggregate, 25 percent of the index's weighting have an aggregate dollar value of average daily trading volume of less than $50,000,000 (or in the case of an index with 15 or more component securities, $30,000,000) except that if there are two or more securities with equal weighting that could be included in the calculation of the lowest weighted component securities comprising, in the aggregate, 25 percent of the index's weighting, such securities shall be ranked from lowest to highest dollar value of average daily trading volume and shall be included in the calculation based on their ranking starting with the lowest ranked security;* *(2) The index is capitalization-weighted, modified capitalization-weighted, price-weighted, share weighted, equal dollar-weighted, approximate equal-dollar weighted, or modified equal-dollar weighted;* *(i) For the purposes of this Rule 5.13(d), an approximate equal-dollar weighted index is composed of one or more securities in which each component security will be weighted equally based on its market price on the index's selection date and the index must be reconstituted and rebalanced if the notional value of the largest component is at least twice the notional volume of the smallest component for fifty percent or more of the trading days in the three months prior to December 31 of each year. For purposes of this provision the “notional value” is the market price of the component times the number of shares of the underlying component in the index. Reconstitution and rebalancing are also mandatory if the number of components in the index is greater than five at the time of rebalancing. The Exchange reserves the right to rebalance quarterly at its discretion.* *(ii) For the purposes of this Rule 5.13(d), a modified equal-dollar weighted index is an index in which each underlying component represents a pre-determined weighting percentage of the entire index. Each component is assigned a weight that takes into account the relative market capitalization of the securities comprising the index. A modified equal-dollar weighted index will be balanced quarterly.* *(iii) For the purposes of this Rule 5.13(d), a share-weighted index is calculated by multiplying the price of the component security by an adjustment factor. Adjustment factors are chosen to reflect the investment objective deemed appropriate by the designer of the index and will be published by the Exchange as part of the contract specifications. The value of the index is calculated by adding the weight of each component security and dividing the total by an index divisor, calculated to yield a benchmark index level as of a particular date. A share-weighted index is not adjusted to reflect changes in the number of outstanding shares of its components. A share-weighted Micro Narrow-Based index will not be re-balanced. If a share-weighted Micro Narrow-Based Index fails to meet the maintenance listing standards under Rule 5.13(e), the Exchange will restrict trading in existing option series to closing transactions and will not issue additional series for that index.* *(iv) The Exchange may rebalance any Micro Narrow-Based index on an interim basis if warranted as a result of extraordinary changes in the relative values of the component securities. To the extent investors with open positions must rely upon the continuity of the options contract on the index, outstanding contracts are unaffected by rebalancings.* *(3) Each component security in the index has a minimum market capitalization of at least $75 million, except that each of the lowest weighted securities in the index that in the aggregate account for no more than 10% of the weight of the index may have a minimum market capitalization of only $50 million;* *(4) The average daily trading volume in each of the preceding six months for each component security in the index is at least 45,500 shares, except that each of the lowest weighted component securities in the index that in the aggregate account for no more than 10% of the weight of the index may have an average daily trading volume of only 22,750 shares for each of the last six months;* *(5) In a capitalization-weighted index, the lesser of:

(1)The five highest weighted component securities in the index each have had an average daily trading volume of at least 90,000 shares over the past six months; or

(2)the highest weighted component securities in the index that in the aggregate represent at least 30% of the total number of component securities in the index each have had an average daily trading volume of at least 90,000 shares over the past six months;* *(6) Subject to subparagraphs

(4)and

(5)above, the component securities that account for at least 90% of the total index weight and at least 80% of the total number of component securities in the index must meet the requirements of Rule 5.3 applicable to individual underlying securities;* *(7)(i) Each component security must be an “NMS Stock” as defined in Rule 600 of Regulation NMS of the Securities Exchange Act of 1934; and* *(ii) Foreign securities or ADRs that are not subject to comprehensive surveillance sharing agreements do not represent more than 20% of the weight of the index;*

(8)*The current underlying index value will be reported at least once every fifteen seconds during the time the index options are traded on the Exchange;*

(9)*An equal dollar-weighted index will be rebalanced at least once every quarter;* *(10) If the underlying index is maintained by a broker-dealer, the index is calculated by a third party who is not a broker-dealer, and the broker-dealer has in place an information barrier around its personnel who have access to information concerning changes in and adjustments to the index;* *(11) Each component security in the index is registered pursuant to Section 12 of the Exchange Act; and* *(12) Cash settled index options are designated as A.M.-settled options.* *(e) The following maintenance listing standards shall apply to each class of index options originally listed pursuant to paragraph

(d)above:* *(1) The index meets the criteria of paragraph (d)(1) of this Rule;* *(2) Subject to subparagraphs

(9)and

(10)below, the component securities that account for at least 90% of the total index weight and at least 80% of the total number of component securities in the index must meet the requirements of Rule 5.3;* *(3) Each component security in the index has a market capitalization of at least $75 million, except that each of the lowest weighted component securities that in the aggregate account for no more than 10% of the weight of the index may have a market capitalization of only $50 million;* *(4) Each component security must be an “NMS stock” as defined in Rule 600 of Regulation NMS of the Securities and Exchange Act of 1934; and* *(5) Foreign securities or ADRs thereon that are not subject to comprehensive surveillance sharing agreements do not represent more than 20% of the weight of the index;* *(6) The current underlying index value will be reported at least once every fifteen seconds during the time the index options are traded on the Exchange;* *(7) If the underlying index is maintained by a broker-dealer, the index is calculated by a third party who is not a broker-dealer, and the broker-dealer has in place an information barrier around its personnel who have access to information concerning changes in and adjustments to the index;* *

(8)The total number of component securities in the index may not increase or decrease by more than 33 1/3 % from the number of component securities in the index at the time of its initial listing; * *(9) Trading volume of each component security in the index must be at least 500,000 shares for each of the last six months, except that for each of the lowest weighted component securities in the index that in the aggregate account for no more than 10% of the weight of the index, trading volume must be at least 400,000 shares for each of the last six months;* *(10) In a capitalization-weighted index and a modified capitalization-weighted index, the lesser of the five highest weighted component securities in the index or the highest weighted component securities in the index that in the aggregate represent at least 30% of the total number of stocks in the index each have had an average monthly trading volume of at least 1,000,000 shares over the past six months;* *(11) Each component security in the index is registered pursuant to Section 12 of the Exchange Act;* *(12) In an approximate equal-dollar weighted index, the index must be reconstituted and rebalanced if the notional value of the largest component is at least twice the notional volume of the smallest component for fifty percent or more of the trading days in the three months prior to December 31 of each year. For purposes of this provision the “notional value” is the market price of the component times the number of shares of the underlying component in the index. Reconstitution and rebalancing are also mandatory if the number of components in the index is greater than five at the time of rebalancing. The Exchange reserves the right to rebalance quarterly at its discretion;* *(13) In a modified equal-dollar weighted index the Exchange will re-balance the index quarterly;* *(14) In a share-weighted index, if a share-weighted Micro Narrow-Based Index fails to meet the maintenance listing standards under Rule 5.13(e), the Exchange will not re-balance the index, will restrict trading in existing option series to closing transactions, and will not issue additional series for that index; and* *(15) In the event a class of index options listed on the Exchange fails to satisfy the maintenance listing standards set forth herein, the Exchange shall not open for trading any additional series of options of that class unless such failure is determined by the Exchange not to be significant and the Commission concurs in that determination, or unless the continued listing of that class of index options has been approved by the Commission under Section 19(b)(2) of the 1934 Act.* Position Limits for Industry (Narrow-Based ) Index Options [Narrow-Based Index Options] Rule 5.16(a). *Rule 6.8 generally shall govern position limits for industry index options, as modified by this Rule 5.16. Option contracts on an industry index shall, subject to the procedures specified in subsection

(c)of this rule, be subject to the following position limits:* [In determining compliance with Rule 6.8, narrow based (industry) index option contracts shall be subject to position limits determined as follows:] *(1) 18,000* [—9,000] contracts if the Exchange determines, at the time of a review conducted pursuant to *subsection* [paragraph]

(b)below, that any single *underlying* stock [in the group] accounted, on average, for 30% or more of the index value during the 30-day period immediately preceding the review; or *(2) 24,000* [—12,000] contracts if the Exchange determines, at the time of a review conducted pursuant to *subsection* [paragraph]

(b)below, that any single *underlying* stock [in the group] accounted, on average, for 20% or more of the index value or that any five *underlying* stocks [in the group] together accounted, on average, for more than 50% of the index value, but that no single stock in the group accounted, on average, for 30% or more of the index value, during the 30-day period immediately preceding the review; or *(3) 31,500* [—15,000] contracts if the Exchange determines that the conditions specified above, which would require the establishment of a lower limit, have not occurred.

(b)The Exchange shall *make the determinations required by subsection

(a)above with respect to options on each industry index at the commencement of trading of such options on the Exchange and thereafter review the determination semi-annually on January 1 and July 1.* [determine the appropriate position limit at the time options on an index are initially opened for trading and shall review its determination semi-annually, at the same time it reviews position and exercise limits for stock options, pursuant to Rule 6.8 and Rule 6.9. If the Exchange determines after conducting its review that a higher position limit is appropriate for an index the Exchange shall increase the limit as soon as practicable. If the Exchange determines that a lower limit is appropriate for an index, the lower limit shall take effect after the expiration of the farthest term series open for trading at the time of the Exchange's review.] *(c) If the Exchange determines, at the time of a semi-annual review, that the position limit in effect with respect to options on a particular industry index is lower than the maximum position limit permitted by the criteria set forth in subsection (a), the Exchange may effect an appropriate position limit increase immediately. If the Exchange determines, at the time of a semi-annual review, that the position limit in effect with respect to options on a particular industry index exceeds the maximum position limit permitted by the criteria set forth in subsection (a), the Exchange shall reduce the position limit applicable to such options to a level consistent with such criteria; provided, however, that such a reduction shall not become effective until after the expiration date of the most distantly expiring options series relating to the industry index that is open for trading on the date of the review; and provided further that such a reduction shall not become effective if the Exchange determines, at the next semi-annual review, that the existing position limit applicable to such options is consistent with the criteria set forth in subsection (a).* (d)—No Change. [(c)] *(e) Index* [O] *o* ption contracts [on an index] shall not be aggregated with option contracts on any stocks whose prices are the basis for the calculation of the index. *(f) Positions in reduced-value index options shall be aggregated with positions in full-value index options. For such purposes, ten

(10)reduced-reduced value options shall equal one

(1)full-value contract.* Position Limits for Options on Cash Settled Micro Narrow-Based Indexes *Rule 5.16(f) Methodology for Establishing Position Limits on Cash-Settled Options on Micro Narrow-Based Indexes as defined under Rule 5.10(b)(25). The position limit for a cash-settled option on a Micro Narrow-Based Index that meets the criteria under Rule 5.13(d) shall be calculated in accordance with the following methodology:* *(1) Determine the Market Capitalization of the S&P 500 Index.* *(2) Calculate the Notional Value of a position at the limit in the Chicago Mercantile Exchange's (“CME”) S&P 500 futures contract. The position limit for that contract is 20,000 (in all months combined) and the Index Multiplier is $250.* *Notional Value for the purposes of this rule = Index Level * Index Multiplier. Therefore, Notional Value of 20,000 S&P 500 futures contracts = 20,000 * S&P 500 Index Level * 250.* *(3) Calculate the Market Capitalization Ratio of the S&P 500 Index Market Capitalization to the Notional Value of a position limit at the limit.* *Market Capitalization Ratio = Market Capitalization of the S&P 500/Notional Value of 20,000 S&P 500 futures contract positions.* *(4) Determine the Market Capitalization of the Micro Narrow-Based Index by adding together the market capitalization of each underlying security component.* *(5) Determine the Notional Value of the Micro Narrow-Based Index Option (Index Level * Contract Multiplier).* *(6) Calculate the Position Limit of the Micro Narrow-Based Index using the following formula:* *Contract Position Limit on the Micro Narrow-Based Index = Market Capitalization of Micro Narrow-Based Index/(Notional Value of Micro Narrow-Based Index Option * Market Capitalization Ratio).* *(7) Establishing the Position Limit. After the applicable position limit has been determined pursuant to Rule 5.16(f)(1)-(6), round the calculated position limit to the nearest 1,000 contracts using standard rounding procedures. For position limits that are 400 or greater, but less than 1000 contracts, round up to 1,000 contracts.* *Rule 5.13(d) shall not apply to any Micro Narrow-Based Index in which the applicable position limit, as calculated using Rule 5.16(f)(1)-(6), for that Micro Narrow-Based Index is less than 400 contracts.* Exemptions From Position Limits Rule 5.17(a). Broad-based Index Hedge Exemptions—No Change.

(b)*Industry* (Narrow-Based) Index Hedge Exemptions. *The industry (narrow-based) index hedge exemption is in addition to the other exemptions available under Exchange Rules, interpretations and policies, and may not exceed twice the standard limit established under Rule 5.16. Industry* [Narrow-based (industry)] index option positions may be exempt from established position limits for each option contract “hedged” by an equivalent dollar amount of the underlying component securities or securities convertible into such components; provided that, in applying such hedge, each option position to be exempted is hedged by a position in at least 75% of the number of component securities underlying the index. In addition, the underlying value of the option position may not exceed the value of the underlying portfolio. The value of the *underlying* portfolio is: *(1)* [(a)] the total market value of the net stock position *; and* [, less] *(2)* [(b)] *for positions in excess of the standard limit, subtract the underlying market* value of: *(A)* [(1)] any offsetting calls and puts in the respective index option; and *(B)* [(2)] any offsetting positions in related stock index futures or options; and *(C)* [(3)] any economically equivalent positions *(assuming no other hedges for these contracts exist)* . *The following procedures and criteria must be satisfied to qualify for an industry index hedge exemption:* [Prior Exchange approval on the appropriate form designated by the Exchange is required. This exemption requires that both the option and stock positions be initiated and liquidated in an orderly manner. Specifically, a reduction of the option position must occur at or before the corresponding reduction in the stock portfolio position. The position in a narrow-based index option may not exceed the total of:

(a)the limit established under Rule 5.16, plus

(b)two times that limit (for hedged positions). The Exchange may determine, in its discretion, to grant a hedge exemption for a number of contracts that is less than the maximum number permitted under this Commentary. The Exchange may also grant other position limit exemptions under Exchange rules, and such exemptions shall be applied in addition to any exemption provided under this Commentary.] *(1) The hedge exemption account must have received prior Exchange approval for the hedge exemption specifying the maximum number of contracts that may be exempt under this Rule. The hedge exemption account must have provided all information required on Exchange-approved forms and must have kept such information current. Exchange approval may be granted on the basis of verbal representations, in which event the hedge exemption account shall within two business days, or such other time period designated by the Exchange, furnish the Exchange with appropriate forms and documentation substantiating the basis for the exemption. The hedge exemption account may apply from time to time for an increase in the maximum number of contracts exempt from the position limits.* *

(2)A hedge exemption account that is not carried by an OTP Holder or OTP Firm must be carried by a member of a self-regulatory organization participating in the Intermarket Surveillance Group. * *(3) The hedge exemption account shall:* *(A) liquidate and establish options, stock positions, or economically equivalent positions in an orderly fashion; not initiate or liquidate positions in a manner calculated to cause unreasonable price fluctuations or unwarranted price changes; and not initiate or liquidate a stock position or its equivalent with an equivalent index option position with a view toward taking advantage of any differential in price between a group of securities and an overlying stock index option;* *(B) liquidate any options prior to or contemporaneously with a decrease in the hedged value of the portfolio which options would thereby be rendered excessive.* *(C) promptly notify the Exchange of any change in the portfolio that materially affects the unhedged value of the portfolio.* *(4) If an exemption is granted, it will be effective at the time the decision is communicated. Retroactive exemptions will not be granted.* *(5) The hedge exemption account shall promptly provide to the Exchange any information requested concerning the portfolio.* *(6) Positions included in a portfolio that serve to secure an index hedge exemption may not also be used to secure any other position limit exemption granted by the Exchange or any other self regulatory organization or futures contract market.* *(7) Any OTP Holder or OTP Firm that maintains an industry index option position in such OTP Holder or OTP Firm's own account or in a customer account, and has reason to believe that such position is in excess of the applicable limit, shall promptly take the action necessary to bring the position into compliance. Failure to abide by this provision shall be deemed to be a violation of Rule 6.8 and this Rule 5.16 by the OTP Holder or OTP Firm.* *(8) Violation of any of the provisions of this Rule, absent reasonable justification or excuse, shall result in withdrawal of the index hedge exemption and may form the basis for subsequent denial of an application for an index hedge exemption hereunder.* 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 the 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 PCX has prepared summaries, set forth in sections A, B and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change Purpose 1. *Designation of Narrow-Based Index Options.* The Exchange is proposing to amend PCX's index option rules to provide for the listing and trading of narrow-based stock index options pursuant to Rule 19b-4(e) under the Act. 10 The purpose of the proposal is to allow the PCX to list and trade narrow-based index options immediately without filing a proposed rule change with the Commission under Section 19(b)(3)(A) of the Act prior to trading the product, as PCX Rule 5.13(a) currently requires. 11 Current PCX Rule 5.13(a) states that the Exchange may list and trade options on a narrow-based index 30 days after the Exchange files a formal rule filing under Section 19(b)(3)(A) describing the index option, provided that the index meets the generic listing criteria set forth in PCX Rule 5.13(a)(1)-(12). However, the 19b-4(e) Adopting Release no longer requires a Section 19(b)(3)(A) filing and subsequent waiting period so long as the exchange, relying on Rule 19b-4(e) under the Act, has generic listing criteria which have been approved by the Commission. The 19b-4(e) Adopting Release indicated that products meeting the listing criteria approved by the Commission qualified for filing under Rule 19b-4(e), so long as the exchange eliminated that requirement from its existing rules. 12 10 Rule 19b-4(e)(1) provides that “the listing and trading of a new derivative securities product by a self-regulatory organization shall not be deemed a proposed rule change, pursuant to paragraph (c)(1) of [Rule 19b-4], if the Commission has approved, pursuant to Section 19(b) of the Exchange Act, the self-regulatory organization's trading rules, procedures and listing standards for the product class that would include the new derivative securities product and the self-regulatory organization has a surveillance program for the product class.” 17 CFR 240.19b-4(e)(1). When relying on Rule 19b-4(e), the SRO must submit Form 19b-4(e) to the Commission within five business days after the exchange begins trading the new derivative securities products. *See* Securities Exchange Act Release No. 40761 (December 8, 1998), 63 FR 70952 (December 22, 1998) (File S7-13-98) (“19b-4(e) Adopting Release”). 11 The Commission notes that this procedure for listing and trading of narrow-based stock index options has been obsolete since the Commission approved the Rule 19b-4(e) Adopting Release in 1998. 12 *See id.* at note 89. Therefore, the PCX is proposing to eliminate the Section 19(b)(3)(A) rule filing requirement from PCX Rule 5.13(a) and, instead, incorporate the provisions of Rule 19b-4(e) into the new proposed PCX Rule 5.13(b). The Exchange believes that this proposal will allow the PCX to list and trade narrow-based index options that comply with the PCX Rule 5.13(b) criteria, immediately, thereby providing a more expeditious method of offering these products in the marketplace. The Exchange represents that PCX's surveillance procedures are adequate to monitor the trading in options on narrow-based indexes as defined under Rule 5.13(b). In addition, the Exchange proposes to amend its Rules to include the modified capitalization-weighted methodology as an acceptable generic listing criteria for options on a narrow-based index. 13 Current PCX Rule 5.13(a)(2) requires that the subject index be capitalization-weighted, price-weighted, or equal-dollar weighted and consist of ten or more component securities. The Exchange proposes to include the modified capitalization-weighted methodology as an acceptable generic listing criteria. The Exchange believes that such methodology is a widely established method of weighting securities indexes and is already in place at other SROs. 14 The Exchange represents that PCX's surveillance procedures are adequate to monitor the trading in options on narrow-based index options that meet the specified criteria in PCX Rule 5.13(b). 13 A modified capitalization weighted index is similar to a capitalization weighted index, where the components are weighted according to the total market value compared to the market value of the outstanding shares, except that an adjustment to the weighting of one or more of the components occurs. The general purposes for using this methodology are to:

(1)retain the economic attributes of capitalization weighting;

(2)promote portfolio weight diversification;

(3)reduce index performance distortion by preserving the capitalization ranking of companies; and

(4)reduce market impact on the smallest underlying components from necessary weight rebalancings. For example, indexes such as the Nasdaq-100 Index, KBW Bank Index, KBW Capital Markets Index, and the Goldman Sachs Technology Indexes are calculated using the Modified Capitalization-Weighted Methodology. 14 *See supra* note 9. 2. *Position and Exercise Limits.* The Exchange is proposing to amend PCX Rule 5.16 in order to increase the position and exercise limits for narrow-based index options to the levels currently in place at the ISE, 15 the CBOE, 16 the Philadelphia Stock Exchange, Inc. (“Phlx”), 17 and the American Stock Exchange LLC (“Amex”). 18 The three-tier position and exercise limit determination will remain unchanged. Specifically, the PCX proposes to increase the position and exercise limits for narrow-based index options from 9,000, 12,000 and 15,000 contracts to 18,000, 24,000 and 31,500 contracts, respectively. 15 *See* ISE Rules 2004 and 2005. 16 *See* CBOE Rules 24.4, 24.4A, and 24.5. 17 *See* Phlx Rule 1001A and 1002A. 18 *See* Amex Rules 904C and 905C. In addition to providing regulatory equality, the PCX believes that an increase in the position and exercise limits for narrow-based index options is appropriate for a number of reasons. First, the Exchange believes that increased position and exercise limits for narrow-based index options may bring additional depth and liquidity, in terms of both volume and open interest, to these index options classes without significantly increasing concerns regarding inter-market manipulations or disruptions of the index options or the underlying component securities. Second, the Exchange notes that the proposal, while increasing the position limits for narrow-based index options, continues to reflect the unique characteristics of each index option and to maintain the structure of the current three-tiered system. Specifically, under the proposal, the lowest proposed limit, 18,000 contracts, will apply to narrow-based index options in which a single underlying stock accounted on average for 30% or more of the index value during the 30-day period immediately preceding the Exchange's semi-annual review of industry index option position limits. A position limit of 24,000 contracts will apply if:

(1)any single underlying stock accounted, on average, for 20% or more of the index value, or

(2)any five underlying stocks together accounted, on average, for more than 50% of the index value, but no single stock in the group accounted, on average, for more than 30% or more of the index value, during the 30-day period immediately preceding the Exchange's semi-annual review of industry index option position limits. The 31,500 contract limit will apply only if the Exchange determines that the above-specified conditions requiring either the 18,000 contract limit or the 24,000 contract limit have not occurred. 3. *Narrow-Based Index Hedge Exemptions.* The Exchange proposes to amend PCX Rule 5.17(b) in order to update the Exchange's exemptions from position limits for narrow-based index options and the procedures for requesting such exemptions. The Exchange represents that the proposed exemptions are substantially identical to those of other SROs. 4. *Micro Narrow-Based Index Options.* The Exchange proposes to adopt new PCX Rules 5.13(d) and 5.16(f) in order to adopt the criteria for a new classification of narrow-based indexes, classified as “micro narrow-based” indexes and adopt initial listing standards, maintenance standards, and position and exercise limits for options on micro narrow-based security indexes. 19 19 *See supra* note 9. a. *Listing and Maintenance Standards* . The Exchange proposes to use the term “micro narrow-based” to distinguish this classification of narrow-based indexes from the existing “narrow-based” security indexes. Specifically, the Exchange proposes to list and trade options on a micro narrow-based security index, pursuant to Rule 19b-4(e) under the Act, if the index is a micro narrow-based security index:

(1)That has 9 or fewer component securities; or

(2)in which a component security comprises more than 30% of the index's weighting; or

(3)in which the 5 highest weighted component securities in the aggregate comprise more than 60% of the index's weightings; or

(4)in which the lowest weighted component securities comprising, in the aggregate, 25% of the index's weighting, have an aggregate dollar value of average daily trading volume of less than $50 million (or in the case of an index with 15 or more component securities, $30 million), except that if there are 2 or more securities with equal weighting that could be included in the calculation of the lowest weighted securities comprising, in the aggregate, 25% of the index's weighting, such securities shall be ranked from lowest to highest dollar value of average daily trading volume and shall be included in the calculation based on their ranking starting with the lowest ranked security. The proposed rule change also makes other modifications that are consistent with the standards for futures on narrow-based indices, including a requirement that all component securities of a narrow-based security index be registered pursuant to Section 12 of the Act. The Exchange proposes to permit a micro narrow-based index to be a modified capitalization-weighted index 20 and proposes three additional index weighting methodologies for micro narrow-based indexes—modified equal-dollar weighted, approximate equal-dollar weighted, and share weighted. A modified equal-dollar weighted methodology is designed to be a fair measurement of the particular industry or sector represented by the index, but without assigning an excessive weight to one or more index components that have a larger market capitalization relative to other index components. Under this methodology, each component is assigned a weight that takes into account the relative market capitalization of the securities comprising the index. The index is subsequently rebalanced to maintain these pre-established weighting levels. In the case of an index with 9 components or less, the weight assigned to the largest component will not exceed 50% of the entire index weight. Like equal-dollar weighted indexes, the value of a modified equal-dollar weighted index will equal the current combined market value (based on U.S. primary market prices) of the assigned number of shares of each of the underlying components divided by the appropriate index divisor. A modified equal-dollar weighted will be balanced quarterly. 20 *See* Securities Exchange Act Release No. 49932 (June 28, 2004), 69 FR 40994 (July 7, 2004) (SR-CBOE-2002-24). The Exchange states that these listing and maintenance standards are consistent with the Commission's Staff Legal Bulletin No. 15: Listing Standards for Trading Security Futures Products (September 5, 2001). An approximate equal-dollar weighted index is composed of one or more securities in which each component security will be weighted equally based on its market price on the index's selection date. The index must be reconstituted and rebalanced if the notional value of the largest component is at least twice the notional volume of the smallest component for fifty percent or more of the trading days in the three months prior to December 31 of each year. For purposes of this provision, the Exchange defines “notional value” as the market price of the component times the number of shares of the underlying component in the index. The Exchange also states that the reconstitution and rebalancing are also mandatory if the number of components in the index changes. The Exchange also states that it will reserve the right to rebalance quarterly at its discretion. A share-weighted index is designed to mimic the value of a portfolio consisting of two or more securities. The weight of each component security is calculated by multiplying the price of the component security by an adjustment factor. Adjustment factors are chosen to reflect the investment objective deemed appropriate by the designer of the index and will be published by the Exchange as part of the contract specifications. 21 The value of the index is calculated by adding the weight of each component security and dividing the total by an index divisor. 22 If a share-weighted micro narrow-based index fails to meet the maintenance listing standards under PCX Rule 5.13(e), the index would not be rebalanced by the Exchange. Instead, the Exchange would restrict options transactions to “closing-only” transactions and would not issue any additional series for that index. 23 Upon the expiration of the last series on that index, the Exchange will no longer calculate that index and no additional series would be listed. 21 For example, an index designer might want to apply an adjustment factor in order to prevent one or a few components from dominating the weight of the index. This is similar to an adjustment factor in other types of weighting methods, such as modified capitalization weighted indexes. 22 The index “divisor” is calculated to yield a benchmark index level (50, 100, 200, etc.) as of a particular date. 23 When option series are restricted to “closing-only” status, the only opening transactions allowed in such a series are

(i)opening transactions by market-makers executed to accommodate closing transactions of other market participants and

(ii)opening transactions by an OTP Holder to facilitate the closing transactions of public customers executed as crosses pursuant to and in accordance with PCX Rule 6.47. PCX will issue a bulletin to notify OTP Holders and OTP Firms of such a situation. Regardless of the weighting methodology, the Exchange represents that it will also reserve the right to rebalance any micro narrow-based index on an interim basis if warranted as a result of extraordinary changes in the relative values of the component securities. Proposed PCX Rule 5.13(d)(2)(iv) shall provide that, to the extent investors with open positions must rely upon the continuity of the options contracts on the index, outstanding contracts are unaffected by rebalancings. The Exchange believes that these provisions are consistent with previous rule changes approved by the Commission. 24 24 *See* Securities Exchange Act Release No. 42787 (May 24, 2000), 65 FR 33598 (May 24, 2000) (Commentary .03 to Amex Rule 1000 and Commentary .02 to Amex Rule 1000A). Proposed PCX Rule 5.13(e) contains the maintenance standards that will apply to micro narrow-based security indexes. 25 The Exchange believes that the maintenance standards generally adhere to the Commission's Division of Market Regulation's Bulletin 26 and those standards applicable to futures in a narrow-based security index. The Exchange represents that PCX's surveillance procedures are adequate to monitor the trading in options on micro narrow-based indexes as defined under PCX Rule 5.10(b)(25). 25 Exhibit A summarizes how the Exchange generally expects to handle certain corporate actions upon listing Micro Narrow-Based Index Options based on approximate equal-dollar weighted or share-weighted indexes. 26 Commission Staff Legal Bulletin No. 15: Listing Standards for Trading Security Futures Products (September 5, 2001). b. *Position and Exercise Limits.* The Exchange also proposes to establish a new method for determining the applicable position limits for options on any micro narrow-based index that meets the generic listing standards under proposed PCX Rule 5.13(d). The Exchange represents that it will utilize a formulaic approach as provided in proposed PCX Rule 5.16(f), “Position Limits for Options on Cash Settled Micro Narrow-Based Indexes” as defined under PCX Rule 5.10(b)(25). This new methodology is a departure from the manner in which position limits are assigned for index options under existing PCX rules. The current position limits for narrow-based index options are assigned from pre-determined tiers based on an analysis of the respective index's underlying components. Under the proposed methodology, position limits would be determined in accordance with a formula that considers a cash settled micro narrow-based index's market capitalization and contract size in relation to the market capitalization of the S&P 500 index and the contract size and position limit of a futures contract on the S&P 500 index. In determining compliance with PCX Rule 5.18 (Exercise Limits), the applicable exercise limit for option contracts on any micro narrow-based index, as defined under proposed PCX Rule 5.10(b)(25), shall be a limit equivalent to the applicable position limits for options on that micro narrow-based index, as calculated under proposed PCX Rule 5.16(f)(1)-(7). c. *Margin and Strikes Prices.* PCX Rule 4.16 governs the determination of the applicable margin treatment for options traded on the Exchange, including options that overlie narrow-based indexes. The existing applicable margin for options on narrow-based indexes, as provided under PCX Rule 4.16, also shall apply to micro narrow-based indexes. The interval between strike prices for options on indexes that meet the criteria under PCX Rule 5.13(d) will be no less than $2.50. 5. *System Capacity.* Finally, the Exchange reasonably believes it has adequate system capacity to support the trading of options on narrow-based and micro narrow-based indexes, based on a calculation of the Exchange's current ISCA allocation and the number of new messages per second expected to be generated by options on such index. Statutory Basis The Exchange believes that the proposal is consistent with Section 6(b) of the Act, 27 in general, and furthers the objectives of Section 6(b)(5) 28 of the Act, in particular, in that it is designed to facilitate transactions in securities, to promote just and equitable principles of trade, to enhance competition, and to protect investors and the public interest. 29 27 15 U.S.C. 78f(b). 28 15 U.S.C. 78f(b)(5). 29 PCX clarified that it believes the proposal is consistent with Section 6(b)(5) of the Act as opposed to Section 6(b)(4) as stated in Exhibit 1 to the original proposed rule change and requested that the statutory language relating to Section 6(b)(5) of the Act provided on page 13 of the original rule filing be inserted in place of the language cited from Section 6(b)(4) in Exhibit 1. Telephone conversation between David Strandberg, Director, Issuer Services PCX and Johnna B. Dumler, Attorney, Division of Market Regulation, Commission, December 6, 2005. B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others Written comments on the proposed rule change were neither solicited nor received. III. 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 *rules-comments@sec.gov* . Please include Filed No. SR-PCX-2005-79 on the subject line. Paper Comments • Send paper comments in triplicate to Jonathan G. Katz, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-9303. All submissions should refer to File No. SR-PCX-2005-79. 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 will also be available for inspection and copying at the principal office of the PCX. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File No. SR-PCX-2005-79 and should be submitted on or before January 5, 2006. IV. Commission's Findings and Order Granting Accelerated Approval of Proposed Rule Change 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 PCX's proposal is consistent with Section 6(b)(5) of the Act, 30 which requires that the rules of an exchange be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to 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. 31 Specifically, the Commission notes that the proposed rule change would permit the Exchange to list and trade, pursuant to Rule 19b-4(e) under the Act, 32 options on narrow-based and micro narrow-based security indexes that meet the listing criteria set forth in PCX Rule 5.13. The Commission finds that the proposal strikes a reasonable balance between the Commission's mandates under Section 6(b)(5) 33 of the Act to remove impediments to, and perfect the mechanism of a free and open market and a national market system, while protecting investors and the public interest. 30 15 U.S.C. 78f(b)(5). 31 In approving this proposed rule change, the Commission notes that it has considered the proposed rule's impact on efficiency, competition, and capital formation. *See* 15 U.S.C. 78c(f). 32 17 CFR 240.19b-4(e). 33 15 U.S.C. 78f(b)(5). The Commission believes that the proposed initial listing and maintenance standards for options on narrow-based and micro narrow-based security indexes are consistent with the standards previously established by other SROs. 34 34 *See* CBOE Rule 24.2. *See e.g.* Securities Exchange Act Release No. 51346 (March 9, 2005), 70 FR 12916 (March 16, 2005) (SR-CBOE-2005-08) (Order approving CBOE's proposed modified capitalization-weighted methodology as an acceptable generic listing standard for options on narrow-based index); *see also* Securities Exchange Act Release No. 34157 (June 3, 1994), 59 FR 30062 (June 10, 1994) (SR-Amex-92-35) (SR-CBOE-93-59) (SR-NYSE-94-17) (SR-PSE-94-07) (SR-Phlx-94-10). The Commission findings in this approval order are prospective from the date of this order. The Commission also believes that the proposed generic listing standards for micro narrow-based index options covering, among other things, minimum capitalization, monthly trading volume, and relative weightings of component stocks are reasonably designed to ensure that the trading market for component stocks are adequately capitalized and sufficiently liquid. In addition, the Commission notes that position limits for options on any micro narrow-based index that meets the generic listing standards of proposed PCX Rule 5.13(d) would be determined in accordance with a proposed new formula that considers the index's market capitalization and contract size in relation to the market capitalization of the S&P 500 index and the contract size and position limit of a futures contract on the S&P 500 index. The Commission believes that the proposed formula for determining position limits for micro narrow-based index options is appropriate to deter manipulation of the index. In addition, the Commission finds that the weighting methodologies employed by the PCX, including the modified equal-dollar weighted, approximate equal-dollar weighted and share-weighted methodologies, are appropriate index construction standards. The Commission notes that the Exchange represents that it reasonably believes it has sufficient operational system capacity to accommodate the PCX's listing and trading of narrow-based and micro narrow-based security indexes. The Exchange is also charged with surveillance for the product classes, including options on narrow-based and micro narrow-based security indexes. The Exchange represents that it has developed and submitted surveillance procedures that it will use to monitor the general trading and settlement activity in narrow-based and micro narrow-based indexes to ensure full compliance with Exchange Rules and federal securities laws. The Exchange indicates that it will have complete access to information regarding trading activity in the underlying securities. The Exchange has developed new surveillance procedures specific to these products that the Commission finds adequate to monitor for manipulation in the narrow-based and micro narrow-based indexes. The Commission's approval of the proposed generic listing standards for options on narrow-based and micro narrow-based security indexes will allow those options that satisfy these standards to start trading under Rule 19b-4(e), without constituting a proposed rule change within the meaning of Section 19(b) of the Act 35 and Rule 19b-4, 36 for which notice and comment and Commission approval is necessary. Rule 19b-4(e) 37 states that the listing and trading of a new derivative securities product by an SRO shall not be deemed a proposed rule change, pursuant to paragraph (c)(1) of Rule19b-4, if the Commission has approved, pursuant to Section 19(b) of the Act, such 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. 35 15 U.S.C. 78s(b). 36 17 CFR 240.19b-4. 37 17 CFR 240.19b-4(e). The Exchange's ability to rely on Rule 19b-4(e) for these products potentially reduces the time frame for brining these securities to the market, promoting competition and providing investors with derivative securities products to meet their needs more quickly. As stated above, the Commission believes that the Exchange has adequate trading rules, procedures, listing standards, and a surveillance program for the narrow-based and micro narrow-based indexes, and thus, the Commission is approving the generic listing standards pursuant to 19b-4(e) for these product classes. The PCX has requested that the Commission find good cause for approving the proposed rule change, as amended, prior to the thirtieth day after the proposal is published for comment in the **Federal Register** . The Commission believes that the adoption of the proposal will enable the PCX to act expeditiously in listing options on narrow-based and micro narrow-based securities indexes in the same manner currently afforded to other options exchanges, such as the CBOE. 38 In addition, the Commission believes that the proposed rule change would remove impediments to a free and open market place by providing competition among exchanges for new products. Accordingly, the Commission finds good cause, pursuant to Section 19(b)(2) of the Act, 39 for approving the proposed rule change, as amended, prior to the thirtieth day after publication thereof in the **Federal Register** . 38 *See supra* note 9. 39 15 U.S.C. 78s(b)(2). V. Conclusion For the foregoing reasons, the Commission finds that the proposed rule change, as amended, is consistent with the Act and the rules and regulations thereunder applicable to a national securities exchange, and, in particular, Section 6(b)(5) of the Act. 40 40 15 U.S.C. 78f(b)(5). *It is therefore ordered,* pursuant to Section 19(b)(2) of the Act, 41 that the proposed rule change (SR-PCX-2005-79), as amended by Amendment Nos. 2 and 3, is approved on an accelerated basis. 41 15 U.S.C. 78s(b)(2). For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 42 42 17 CFR 200.30-3(a)(12). Jonathan G. Katz, Secretary. Exhibit A Corporate Action Summary A for Approximately Equal Dollar-Weighted Indexes Type Action Company Adjustments Close price/Action Share lot

(1)Notes Special Cash Dividend Component of Index Adj. Close = Prev. Close—Dividend Adj. Share lot = Prev. Share lot + (Prev. Share lot * Div.)/Adj. Close Companies contribution to index not affected by Special dividend. Stock Split or Dividend Component of Index Adj. Close = Prev. Close/Adjustment Factor Adj. Round Lot = Prev. Share Lot* Adjustment Factor Adjustment Factor = # of New Shares for 1 Old Share. Spin Off Component of Index

(A)Adj. Close = Close—(Ratio * Spun off Company's Price) Ratio = # of shares of spun off company received for every share of parent company owned. Spun off company will be added at a weight such that the index contribution of the two companies after the event is equal to the index contribution of the parent prior to the event. Spun Off Company

(B)ADDED Share lot = ((Share lot A* Prev. Close A)−(Share lot A * Adj. Close A))/Close B Two Components Merge in an All Stock, Cash or Combination Deal Remaining Companies

(A)Adj. Share Lot = Share Lot + ((B's Close * B's Share Lot))/# of remaining components)/A's Close All remaining companies will be adjusted using the formula to the left. Their shares will increase based on their price so as to distribute the weight of the acquired company evenly. Acquired Company

(B)DELETED A Non-Component Takes Over a Component Acquirer

(A)ADDED Share Lot = (B's Round Lot * B's Close) / A's Close The acquiring company will replace the acquired company. Its share lot will be set to contribute the same amount to the index as the acquired company contributed prior to the acquisition. Acquired Component of Index

(B)DELETED Rights Issue Component of Index Adj. Close = (Close + (Ratio * Subscription Price))/(1 + Ratio) Adj. Share Lot = (Close * Share Lot)/Adj. Close Ratio = # of rights received for 1 share of A. Extraordinary Removal

(1)Remaining Securities

(A)or

(2)Replacement Company

(A)ADDED if

(2)If (1): Adj. Share Lot

(A)= Prev. Share lot

(A)+ (B's share lot * B's Close)/(# of Remaining Components * A's Close) If (2): Share lot A = (B's Share lot * B's Close)/A's Close Company B may be removed for any of the following reasons: Bankruptcy proceedings, Financial distress, Delisting from a primary exchange (NYSE, Nasdaq, Amex), or Illiquidity (10 consecutive no trade days). The Exchange would either:

(1)Divide B's index contribution evenly between remaining components or

(2)If Replacement Company A is added, Replacement Company A would be the highest ranked (as of the most recent selection date) of the remaining securities in the industry group which qualify for inclusion. The method to be utilized will be described in the index's contract specification. Component of Index

(B)DELETED

(1)Share lots will be rounded to the nearest hundred at rebalance. Odd lots may exist between rebalances. Corporate Action Summary B for Share-Weighted Indexes Type Action Company Adjustments Component price change Adjustment factor change Notes Special Cash Dividend Component of Index New Close = Prev. Close—Dividend New Adj. Factor = (Prev. Adj. Factor * Prev. Close)/New Close Stock Split or Dividend Component of Index New Close = Prev. Close/Split Ratio New Adj. Factor = Prev. Adj. Factor * Split Ratio For example, in the case of a 2-for-1 split, the Split Ratio would be 2. In the case of a 5% stock dividend, the split ratio would be 1.05. Spin Off Component of Index

(A)New Close = Prev. Close—(Price Adjstment due to value of spun-off company) New Adj. Factor = (Prev. Adj. Factor * Prev. Close)/New Close Price Adjustment due to value of spun-off company = (Market capitalization of parent company—market capitalization of spun-off company)/number of outstanding shares of the parent company. Spun-off Company is not added. Two Components Merge in an All Stock, Cash or Combination Deal Acquiring Company New Adj. Factor = Prev. Adj. Factor + ((Acquired Company's Close * Acquired Company's Adj. Factor)/Acquiring Company's Close) The weight of the Acquired Company is added to the weight of the Acquiring Company. Acquired Company DELETED A Non-Component Takes Over a Component Non-Component Acquiring Company ADDED New Adj. Factor = ((Acquired Company's Close * Acquired Company's Adj. Factor)/Acquiring Company's Close) Non-Component Acquiring Company added to index at Acquired Company's weight. Acquired Component of Index DELETED Rights Offering Component of Index New Close = Prev. Close—Price Adjustment due to value of offering New Adj. Factor = (Prev. Adj. Factor * Prev. Close)/New Close Price Adjustment due to value of rights offering = (market capitalization of parent company—market capitalization of rights)/number of outstanding shares of the parent company. Extraordinary Removal Index Component DELETED The Adjustment Factors for each remaining component will be increased to reflect an equal distribution of the weight of a deleted component An Index Component will be removed for bankruptcy proceedings, financial distress, or delisting from a national market (NYSE, Nasdaq, Amex). [FR Doc. E5-7372 Filed 12-14-05; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-52924; File No. SR-Phlx-2005-74] Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Elimination of Commentary .01, Guideline 5 to Phlx Rule 1010 December 7, 2005. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”), 1 and Rule 19b-4 2 thereunder, notice is hereby given that on December 5, 2005, the Philadelphia Stock Exchange, Inc. (“Phlx” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I and II below, which Items have been prepared by the Phlx. The Phlx filed the proposed rule change pursuant to Section 19(b)(3)(A) of the Act 3 and Rule 19b-4(f)(6) thereunder, 4 which renders the proposal effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 15 U.S.C. 78s(b)(3)(A). 4 17 CFR 240.19b-4(f)(6). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to eliminate Commentary .01, guideline 5 to Phlx Rule 1010 (“Withdrawal of Approval of Underlying Securities”), so that an underlying security may be deemed to meet the Exchange's requirements for continued approval for options transactions where an issuer has failed to make timely reports pursuant to the Act. The Exchange also proposes as a matter of housekeeping to amend Commentary .01, guideline 6 to Phlx Rule 1010 and Phlx Rule 1009(a)(1)(ii) to substitute the term “NMS stock” for the previous description of a national market system security, for consistency with Regulation NMS. 5 The text of the proposed rule change is below. Proposed new language is *italicized* , and deleted language is in brackets. 5 *See* Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496 (June 29, 2005). Rule 1010 Withdrawal of Approval of Underlying Securities Commentary: .01 The Board of Governors has established guidelines to be considered by the Exchange in determining whether an underlying security previously approved for Exchange option transactions no longer meets its requirements for the continuance of such approval. Absent exceptional circumstances, with respect to items 1, 2, 3, or 4 listed below, an underlying security will not be deemed to meet the Exchange's requirements for continued approval whenever any of the following occur: 1. through 4.—No Change. 5. [The issuer has failed to make timely reports as required by applicable requirements of the Securities Exchange Act of 1934, and such failure has not been corrected within 30 days after the date the report was due to be filed. 6.] *The underlying security ceases to be an “NMS stock” as defined in Rule 600 of Regulation NMS under the Securities Exchange Act of 1934.* [The issue, in the case of an underlying security that is principally traded on a national securities exchange, is delisted from trading on that exchange and neither meets NMS criteria nor is traded through the facilities of a national securities association, or the issue, in the case of an underlying security that is principally traded through the facilities of a national securities association, is no longer designated as an NMS security]. [7] *6* . If an underlying security is approved for options listing and trading under the provisions of Commentary .05 of Rule 1009, the trading volume and price history of the original security (as therein defined) prior to but not after the commencement of trading in the restructure security (as therein defined), including “when issued” trading, may be taken into account in determining whether the trading volume and market price requirements of paragraph

(3)and

(4)of this Commentary .01 are satisfied provided, however, that in the case of a Restructure Security approved for options listing and trading under paragraph

(d)of Commentary .05 under Rule 1009, such trading volume requirements must be satisfied based on the trading volume history of the Restructure Security. Commentaries .02 to .10—No Change. Rule 1009 Criteria for Underlying Securities

(a)Underlying securities in respect of which put or call option contracts are approved for listing and trading on the Exchange must meet the following criteria:

(1)The security must be duly registered and *be an “NMS stock” as defined in Rule 600 of Regulation NMS* [(i) listed on the national securities exchange; or

(ii)traded through the facilities of a national securities association and is a reported national market system (“NMS”) security as defined in Rule 11Aa3-1] under the Securities Exchange Act of 1934;

(2)No Change. Remainder of Rule 1009—No Change. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Phlx included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Phlx has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to eliminate Phlx Commentary .01, guideline 5 to Phlx Rule 1010. Phlx Commentary .01 sets forth the guidelines to be considered by the Exchange in determining whether an underlying security previously approved for options trading continues to be appropriate. Specifically, Phlx Rule 1010 and related Phlx Commentary .01 provide that if an underlying security previously approved by the Exchange does not meet the then current requirements for continuance, the Exchange will not open for trading additional series of such options class and may also limit any new opening transactions in those options series that have previously been opened for trading. Phlx Commentary .01, guideline 5 in particular provides that an underlying security will not be deemed to meet the Exchange's requirements for continued approval whenever: 5. The issuer has failed to make timely reports as required by applicable requirements of the Securities Exchange Act of 1934, and such failure has not been corrected within 30 days after the date the report was due to be filed. The Exchange proposes to eliminate this provision based on its experience in recent years applying this requirement. The Exchange believes that this provision limits the ability of investors to use options to hedge existing equity positions and is not necessary given the entire application of Phlx Commentary .01. In addition, the Exchange notes that the underlying security will continue to trade on national securities exchanges, regardless of the late filings or reports required by the Act. The Exchange submits that Phlx Commentary .01, guideline 5 potentially harms investors and the marketplace by preventing the use of new options series to hedge positions in the underlying securities of companies that fail to make timely reports required by the Act. The Exchange states that this restriction is inconsistent with the underlying equity markets, whereby failure to properly file reports under the Act does not result in a similar trading restriction. Accordingly, the Exchange maintains that Phlx Commentary .01, guideline 5 limits the ability of investors who may wish to hedge their underlying stock positions with new options series, at a time when the ability to hedge may be particularly important. The Exchange believes that Phlx Commentary .01, guideline 5 has substantially outlived any usefulness and now serves to unnecessarily burden and confuse the investing public. Phlx Commentary .01, guideline 5 to Phlx Rule 1010 has been a part of the Exchange's continued listing criteria since about late 1976, shortly after the listing and trading of standardized options commenced on the Exchange. In contrast to 1976, the Exchange states that the standardized options market today is a mature market largely consisting of sophisticated investors with significant access to information, such as information on the failure of a company to make timely reports under the Act. Therefore, the Exchange contends that there is no reason to limit the opportunity for investors to execute transactions in options classes (including new series within those classes) simply because a company is not timely in filing its reports under the Act, when investors are not similarly restricted from purchasing or selling shares in the underlying security. Moreover, the limitation on new options series imposed pursuant to Phlx Commentary .01, guideline 5 causes considerable confusion and frustration in the options marketplace because it only restricts the trading of new series in a given option class. The Exchange has found that Phlx Commentary .01, guideline 5 tends to confuse both public customers and market professionals, who find themselves restricted from trading any new options series in a given class at the same time that trading occurs in pre-existing options series or the underlying stock itself. Still further confusion can arise in this process because the Exchange maintains that the Phlx, as well as the other options exchanges, have no independent means to verify whether any of the listed securities underlying options traded at the Exchange have failed to meet their reporting requirements under the Act. Accordingly, the options exchanges, including the Phlx, must rely on other self-regulatory organizations or third parties for such notification, which is always difficult to monitor, particularly since such third-party reports are sometimes delayed or inaccurate. 6 6 The Exchange notes that it has procedures in place to monitor when an underlying security previously approved for option transactions ceases to trade on or is delisted from its primary listed market. Exchange staff monitors:

(1)The daily list services issued by the primary listing markets (such as the New York Stock Exchange, Inc., American Stock Exchange LLC, and The Nasdaq Stock Market, Inc.);

(2)press releases issued by the primary listing markets and the news wires; and

(3)information circulars issued by the primary listing markets. In the event of a delisting of the underlying security from its primary listed market, Phlx will cease opening new series of options in such security and allow the existing series of options to expire. Additionally, if the underlying security has been halted or suspended in the primary market, the Exchange may halt trading in the option class pursuant to Phlx Rule 1047 or halt trading pursuant to Phlx Rule 133. The Exchange further submits that Phlx Commentary .01, guideline 5 is unnecessary for the protection of investors and the marketplace. For example, underlying securities that are delisted or fail to be NMS securities are no longer approved for options trading under existing rules. Specifically, existing Phlx Commentary .01, guideline 6 to Phlx Rule 1010 provides that an underlying security will no longer be approved for options transactions when: 6. The issue, in the case of an underlying security that is principally traded on a national securities exchange, is delisted from trading on that exchange and neither meets NMS criteria nor is traded through the facilities of a national securities association, or the issue, in the case of an underlying security that is principally traded through the facilities of a national securities association, is no longer designated as an NMS security. The Phlx believes a better approach is to limit or suspend options trading when the underlying security itself has been delisted and not subject the process to the inherent uncertainty of a failure of the underlying company to timely file its reports under the Act. The Exchange accordingly submits that current Phlx Commentary .01, guideline 5 should be eliminated. 7 7 The reference to guideline 6 in the prior paragraph, and the word current in the final sentence of this paragraph, were added pursuant to a telephone conference between Jurij Trypupenko, Director, Exchange, and David L. Orlic, Attorney, Division of Market Regulation, Commission, on December 7, 2005. Finally, as a matter of “housekeeping,” the Exchange is amending Phlx Commentary .01, guideline 6 to Phlx Rule 1010 and Phlx Rule 1009(a)(1)(ii) to substitute “NMS stock” for the term “national market system security,” for consistency with Regulation NMS. Both of these provisions include a requirement that the underlying security must be a national market system security (“NMS security”). As part of the recently adopted Regulation NMS, among other things, the Commission revised the definition of an “NMS security.” 8 Specifically, Rule 600(b)(46) under Regulation NMS defines an NMS security as “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.” Rule 600(b)(47) under Regulation NMS also defines an “NMS stock” as any NMS security other than an option. As such, Phlx Commentary .01, guideline 6 to Phlx Rule 1010 and Phlx Rule 1009(a)(1)(ii) will be amended to reflect these new terms. 8 *See* supra note 5. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act, 9 in general, and furthers the objectives of Section 6(b)(5) of the Act, 10 in particular, in that it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in facilitating transactions in securities, and to remove impediments to and perfect the mechanism of a free and open market and a national market system. 9 15 U.S.C. 78f(b). 10 15 U.S.C. 78f(b)(5). B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others Written comments on the proposed rule change were neither solicited nor received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The Phlx has designated the proposed rule change as one that:

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

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

(iii)does not become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate. Therefore, the foregoing rule change has become effective pursuant to Section 19(b)(3)(A) of the Act 11 and Rule 19b-4(f)(6) thereunder. 12 11 15 U.S.C. 78s(b)(3)(A). 12 17 CFR 240.19b-4(f)(6). At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate such rule change, if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. Pursuant to Rule 19b-4(f)(6)(iii) under the Act, 13 the proposal may not become operative for 30 days after the date of its filing, or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest, and the self-regulatory organization must file notice of its intent to file the proposed rule change at least five business days beforehand. The Exchange requests that the Commission waive the five-day pre-filing notice requirement and the 30-day operative delay so the proposed rule change can be implemented immediately. The Commission believes that waiving the five-day pre-filing provision and the 30-day operative delay is consistent with the protection of investors and the public interest. 14 13 17 CFR 240.19b-4(f)(6)(iii). 14 For purposes only of accelerating the operative date of this proposal, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change, as amended, is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov.* Please include File Number SR-Phlx-2005-74 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-Phlx-2005-74. 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 offices of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-Phlx-2005-74 and should be submitted on or before January 5, 2006. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 15 15 17 CFR 200.30-3(a)(12). Jonathan G. Katz, Secretary. [FR Doc. E5-7364 Filed 12-14-05; 8:45 am] BILLING CODE 8010-01-P SMALL BUSINESS ADMINISTRATION Mandatory Declassification Review Requests AGENCY: U.S. Small Business Administration. ACTION: Notice. SUMMARY: This notice identifies the office in the U.S. Small Business Administration to which mandatory declassification review requests shall be addressed in accordance with applicable laws. This notice benefits the public in advising them where to send such requests for declassification review. ADDRESSES: Requests must be addressed to: Director, Office of Security Operations, Office of Inspector General, U.S. Small Business Administration, 409 3rd Street, SW., Washington, DC 20416. FOR FURTHER INFORMATION CONTACT: Linda M. Roberts, Director, Office of Security Operations, Office of Inspector General, at

(202)205-6223. SUPPLEMENTARY INFORMATION: Pursuant to Classified National Security Information Directive No. 1 (32 CFR, Parts 2001 and 2004), issued by the Information Security Oversight Office, the U.S. Small Business Administration is required to advise the public of the address that Mandatory Declassification Review requests pertaining to the U.S. Small Business Administration may be sent. This notice fulfills that requirement. Authority: 32 CFR 2001.33. Dated: December 8, 2005. Peter McClintock, Deputy Inspector General. [FR Doc. E5-7346 Filed 12-14-05; 8:45 am] BILLING CODE 8025-01-P DEPARTMENT OF STATE [Public Notice 5244] Bureau of Educational and Cultural Affairs

(ECA)Request for Grant Proposals: Middle East Partnership Initiative Study of the United States Institute for Undergraduate Student Leaders *Announcement Type:* New Cooperative Agreement. *Funding Opportunity Number:* ECA/A/E/USS-06-MEPI-4. *Catalog of Federal Domestic Assistance Number:* 00.000. *Key Dates:* *Application Deadline:* January 31, 2006. *Executive Summary:* The U.S. Department of State (DoS), through the Bureau of Educational and Cultural Affairs

(ECA)and the Office of the Middle East Partnership Initiative

(MEPI)invites proposal submissions for the design and implementation of a six-week Study of the United States (U.S.) Institute for undergraduate students from the Middle East and North Africa entitled: Middle East Partnership Initiative Study of the United States Institute for Undergraduate Student Leaders. The Bureau anticipates awarding two separate assistance awards to support two institutes for undergraduate student leaders. Prospective host institutions are limited to submitting only one proposal to conduct one of the two institutes. I. Funding Opportunity Description Authority Overall grant making authority for this program is contained in the Mutual Educational and Cultural Exchange Act of 1961, Public Law 87-256, as amended, also known as the Fulbright-Hays Act. The purpose of the Act is “to enable the Government of the United States to increase mutual understanding between the people of the United States and the people of other countries * * *; to strengthen the ties which unite us with other nations by demonstrating the educational and cultural interests, developments, and achievements of the people of the United States and other nations * * * and thus to assist in the development of friendly, sympathetic and peaceful relations between the United States and the other countries of the world.” The funding authority for the program above is provided through legislation. Funding for these institutes is being provided by the Department of State's Middle East Partnership Initiative (MEPI). MEPI is the U.S. Government's primary policy and programmatic tool to implement democratic reform in the Middle East and North Africa. This project addresses the MEPI goals of fostering political reform, educational reform and women's empowerment in MEPI partner countries. Based on a group of 20-22 participants, the total DoS-funded budget (program and administrative) for each of the MEPI Study of the United States Institutes for Undergraduate Student Leaders will not exceed $418,000. Potential host institutions should attempt to maximize cost-sharing in all facets of the program, and try to engage the U.S. private sector, including foundations and corporations, for support. Applicants must submit a comprehensive budget for the entire program. The Bureau reserves the right to reduce, revise, or increase proposal budgets in accordance with the needs of the program and availability of U.S. Government funding. Purpose The two MEPI Study of the United States Institutes for Undergraduate Student Leaders should each provide a multinational group of 20 first and second year undergraduate student leaders from selected countries in the Middle East and North Africa with a uniquely designed program that focuses on leadership development. Both institutes will take place over the course of six weeks during the summer of 2006, and will consist of a challenging academic program, as well as educational travel to other regions of the United States to illustrate the various topics explored in class. With leadership training as its main objective, the Institute will provide the students with opportunities to examine the concept, history and manifestation of leadership in American society through classroom activities, site visits and regular community service projects. Under the direction of the MEPI Office, the students will also be invited to take part in an alumni conference and follow-on activities in their home countries after the conclusion of the program in the United States. Participants in the program will be nominated by U.S. embassies and consulates in Algeria, Bahrain, Egypt, Iraq, Israel, Jordan, Kuwait, Lebanon, Libya (if possible, depending on the feasibility of recruitment and travel), Morocco, Oman, Qatar, Saudi Arabia, Syria, Tunisia, the United Arab Emirates, the West Bank and Gaza, and Yemen. (Israeli participants will be Arab-Israeli only.) Participants will be selected by the ECA Study of the United States Branch in consultation with the Office of the Middle East Partnership Initiative. The Bureau is seeking detailed proposals for each of the two institutes from U.S. liberal arts colleges, universities, consortia of colleges and universities, and other not-for-profit academic organizations. Each MEPI Study of the United States Institute for Undergraduate Student Leaders should be designed as an intensive academic program with an educational travel component that is organized through a carefully integrated series of panel presentations, seminar discussions, debates, individual and group activities, lectures and reading assignments, as well as local site visits, regional educational travel, and participation in community activities. The Institute must not simply replicate existing or previous lectures, workshops, or group activities designed for American students. Rather, it should be a specially designed and well-integrated seminar that imaginatively combines lectures, discussions, readings, debates, local site visits and regional travel into a coherent whole. Within the framework of “leadership,” the academic program and educational travel component for the institutes should focus on the role and influence of democratic values in U.S. society, including the rule of law, individual rights, freedom of expression, equality, diversity and tolerance. Current political, social and economic issues and debates should be examined. Civic responsibility, volunteerism, team building, effective communication and problem-solving skills should also be addressed, and hands-on activities directly related to these ideas should be included in the institute agenda. Each Institute will begin with a two-day orientation in Washington, DC. Following the orientation, participants in the MEPI Study of the United States Institutes will spend approximately five weeks at the host institution in the academic residency program, approximately ten days on the educational travel component, and two to three days in Washington, DC at the conclusion of the Institute. The educational travel component should directly complement the academic residency program. Each Institute should provide the participants with continuous opportunities to meet and have substantial interaction with American citizens from a variety of ethnic, cultural and religious backgrounds, particularly with those in their peer group. In addition, the institute participants should be afforded opportunities to speak to appropriate student and civic groups about the societies and cultures of their home countries. Applicants for the MEPI Study of the United States Institutes for Undergraduate Students Leaders should take into consideration that an alumni workshop for the institute participants will take place at a site in the Middle East or North Africa region within six-twelve months of the U.S.-based Institute. DoS will assume principal responsibility for organizing and hosting the alumni workshop in consultation with overseas embassies and the U.S. host institutions. While host institutions should not provide a detailed strategy for a follow-on workshop, they should be prepared to assist in the planning and implementation of the workshop. Applicants are encouraged to design thematically coherent programs in ways that draw upon the particular strengths, faculty and resources of their institutions, as well as upon the nationally recognized expertise of scholars and other experts throughout the United States. All Study of the United States Institutes, regardless of their particular thematic focus, seek to give participants a multi-dimensional view of U.S. society and institutions through a program that reflects a broad and balanced range of perspectives. In addition to interaction with scholars and practitioners in a variety of fields, participants should have opportunities for discussions with ordinary Americans (particularly those within their own age group) through activities such as weekend homestays or dinners with local families, community service, and civic organization meetings. Each Institute should designate an academic director who will be present throughout the program to ensure the continuity, coherence and integration of all aspects of the academic program, including the study tour. In addition to the academic director(s), an administrative director or coordinator should be assigned to oversee all student support services, including supervision of the program participants, budgetary, logistical, and other administrative arrangements. It is also important that the grantee institution retain highly qualified mentors and escorts who exhibit cultural sensitivity, an understanding of the program's objectives, and a willingness to engage with the participants throughout the program. This includes accompanying students to classroom sessions, residing with them in dormitories or other accommodations, escorting them during the educational travel component, etc. To fulfill the goals of this program, it is important that grantee institutions retain highly qualified mentors and escorts for the students. These mentors and escorts should exhibit cultural sensitivity, an understanding of the program's objectives, and a willingness to engage with the participants for the duration of the Institute. This includes accompanying the students to classroom sessions, residing with them in dormitories or other accommodations, escorting them during the educational travel component, etc. Participants As specified in the Project Objectives, Goals and Implementation

(POGI)guidelines in the solicitation package, participants in the MEPI Study of the United States Institutes should be highly motivated and exemplary first and second year undergraduate students selected from colleges, universities and teacher training institutions in Algeria, Bahrain, Egypt, Iraq, Israel, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Qatar, Saudi Arabia, Syria, Tunisia, the United Arab Emirates, the West Bank and Gaza, and Yemen who demonstrate leadership through academic work, community involvement, and extracurricular activities. Participants will be identified and nominated by U.S. embassies and consulates in the candidates' home countries, with final selection made by the Study of the United States Branch at ECA in consultation with representatives of the MEPI office. Every effort will be made to select a balanced mix of male and female participants, as well as students who represent a mix of religious and cultural backgrounds. **Please note:** The level of English among the students may vary. The host institutions will be required to prepare lectures and discussions that meet the highest academic standards while using language appropriate for students for whom English is their second or third language. U.S. embassies and consulates overseas will make a particular effort to recruit participants who have had little or no prior experience in the United States or elsewhere outside their home countries. They will also seek candidates who are from non-elite or underprivileged backgrounds and from both rural and urban areas. Nominees should be willing and able to fully participate in an intensive academic program that includes educational travel, and in community service activities. All participants will be selected largely on the basis of their demonstrated leadership capacity, and must return home at the conclusion of the Institute to continue their university studies in the fall of 2006. **Please note:** Special sensitivity will be required on the part of the host institution to the cultural traditions and religious practices of the institute participants who will represent a variety of Muslim and other religious traditions. Special requirements and restrictions regarding diet, daily worship, housing and medical care should be considered. The Bureau will provide guidance and assistance to the host institution, as needed. Program Dates Each Institute should be a maximum of 47 days in length (including participant arrival and departure days). It is anticipated that the institutes for undergraduate student leaders will begin in early July 2006. Program Guidelines It is essential that proposals provide a full, detailed and comprehensive narrative describing the objectives of the Institute; the title, scope and content of each session; planned site visits; and how each session relates to the overall institute theme. A syllabus must be included that explains the subject matter for each panel discussion, group presentation, lecture or other activity. The syllabus should also confirm or provisionally identify proposed speakers and session leaders, and clearly show how assigned readings will advance the goals of each section. A calendar of all program activities must be included in the proposal, as well as a description of plans for public and media outreach in connection with the Institute. **Please note:** The Branch for the Study of the United States will assume the following responsibilities for the institutes: participation in the selection of participants; conducting a pre-program orientation; oversight of the institutes through one or more site visits; debriefing participants in Washington, DC, at the conclusion of the Institute; engaging in follow-on communication with the participants after they return to their home countries. The Branch may require changes in the content or scope of activities of the Institute, either before or after the grant is awarded. The recipient will be required to obtain approval of significant agenda/syllabus changes in advance of their implementation. II. Award Information *Type of Award:* Cooperative Agreement. ECA's level of involvement in this program is listed under number I above. *Fiscal Year Funds:* FY-2006. *Approximate Total Funding:* $836,000. *Approximate Number of Awards:* 2. *Approximate Average Award:* $399,000. *Floor of Award Range:* $380,000. *Ceiling of Award Range:* $418,000. *Anticipated Award Date:* Pending availability of funds, March 31, 2006. *Anticipated Project Completion Date:* September 30, 2007. *Additional Information:* Pending successful implementation of this program and the availability of funds in subsequent fiscal years, it is ECA's intent to renew this grant for two additional fiscal years, before openly competing it again. III. Eligibility Information: III.1. *Eligible applicants:* Applications may be submitted by public and private non-profit organizations meeting the provisions described in Internal Revenue Code section 26 U.S.C. 501(c)(3). III.2. *Cost Sharing or Matching Funds:* There is no minimum or maximum percentage required for this competition. However, the Bureau encourages applicants to provide maximum levels of cost sharing and funding in support of its programs. When cost sharing is offered, it is understood and agreed that the applicant must provide the amount of cost sharing as stipulated in its proposal and later included in an approved grant agreement. Cost sharing may be in the form of allowable direct or indirect costs. For accountability, you must maintain written records to support all costs that are claimed as your contribution, as well as costs to be paid by the Federal Government. Such records are subject to audit. The basis for determining the value of cash and in-kind contributions must be in accordance with OMB Circular A-110, (Revised), Subpart C.23—Cost Sharing and Matching. In the event you do not provide the minimum amount of cost sharing as stipulated in the approved budget, ECA's contribution will be reduced in like proportion. III.3. *Other Eligibility Requirements:* Grants awarded to eligible organizations with less than four years of experience in conducting international exchange programs will be limited to $60,000. IV. *Application and Submission Information:* Note: Please read the complete **Federal Register** announcement before sending inquiries or submitting proposals. Once the RFGP deadline has passed, Bureau staff may not discuss this competition with applicants until the proposal review process has been completed. IV.1. *Contact Information to Request an Application Package:* Please contact the Branch for the Study of the United States, ECA/A/E/USS, Room 314, U.S. Department of State, SA-44, 301 4th Street, SW., Washington, DC 20547; tel.

(202)453-8536; fax

(202)453-8533; e-mail: *caseysd@state.gov* to request a Solicitation Package. Please refer to the Funding Opportunity Number ECA/A/E/USS-06-MEPI-4. The Solicitation Package contains the Proposal Submission Instruction

(PSI)document, which consists of required application forms and standard guidelines for proposal preparation. It also contains the Project Objectives, Goals and Implementation

(POGI)document, which provides specific information, award criteria and budget instructions tailored to this competition. Please specify Sheila Casey and refer to the Funding Opportunity Number ECA/A/E/USS-06-MEPI-4 on all other inquiries and correspondence. IV.2. *To Download a Solicitation Package Via Internet: The entire Solicitation Package may be downloaded from the Bureau's Web site at: http://exchanges.state.gov/education/rfgps/menu.htm.* Please read all information before downloading. IV.3. *Content and Form of Submission:* Applicants must follow all instructions in the Solicitation Package. The original and ten

(10)copies of the application should be sent per the instructions under IV.3f. “Submission Dates and Times section” below. IV.3a. *You are required to have a Dun and Bradstreet Data Universal Numbering System

(DUNS)number to apply for a grant or cooperative agreement from the U.S. Government.* This number is a nine-digit identification number, which uniquely identifies business entities. Obtaining a DUNS number is easy and there is no charge. To obtain a DUNS number, access *http://www.dunandbradstreet.com* or call 1-866-705-5711. Please ensure that your DUNS number is included in the appropriate box of the SF-424 which is part of the formal application package. IV.3b. *All proposals must contain an executive summary, proposal narrative and budget.* Please Refer to the Solicitation Package. It contains the mandatory PSI document, as well as the POGI document for additional formatting and technical requirements. IV.3c. *You must have nonprofit status with the IRS at the time of application.* If your organization is a private nonprofit which has not received a grant or cooperative agreement from ECA in the past three years, or if your organization received nonprofit status from the IRS within the past four years, you must submit the necessary documentation to verify nonprofit status as directed in the PSI document. Failure to do so will cause your proposal to be declared technically ineligible. IV.3d. *Please take into consideration the following information when preparing your proposal narrative:* IV.3d.1. *Adherence To All Regulations Governing the J Visa:* The Bureau of Educational and Cultural Affairs is placing renewed emphasis on the secure and proper administration of Exchange Visitor (J visa) Programs and adherence by grantees and sponsors to all regulations governing the J visa. Therefore, proposals should demonstrate the applicant's capacity to meet all requirements governing the administration of the Exchange Visitor Programs as set forth in 22 CFR part 62, including the oversight of Responsible Officers and Alternate Responsible Officers, screening and selection of program participants, provision of pre-arrival information and orientation to participants, monitoring of participants, proper maintenance and security of forms, record-keeping, reporting and other requirements. The Bureau will be responsible for issuing DS-2019 forms to participants in this program. A copy of the complete regulations governing the administration of Exchange Visitor

(J)programs is available at *http://exchanges.state.gov* or from: United States Department of State, Office of Exchange Coordination and Designation, ECA/EC/ECD-SA-44, Room 734, 301 4th Street, SW., Washington, DC 20547. *Telephone:*

(202)203-5029. *FAX:*

(202)453-8640. Please refer to Solicitation Package for further information. IV.3d.2. *Diversity, Freedom and Democracy Guidelines:* Pursuant to the Bureau's authorizing legislation, programs must maintain a non-political character and should be balanced and representative of the diversity of American political, social, and cultural life. “Diversity” should be interpreted in the broadest sense and encompass differences including, but not limited to ethnicity, race, gender, religion, geographic location, socio-economic status, and physical challenges. Applicants are strongly encouraged to adhere to the advancement of this principle both in program administration and in program content. Please refer to the review criteria under the 'Support for Diversity' section for specific suggestions on incorporating diversity into your proposal. Public Law 104-319 provides that “in carrying out programs of educational and cultural exchange in countries whose people do not fully enjoy freedom and democracy,” the Bureau “shall take appropriate steps to provide opportunities for participation in such programs to human rights and democracy leaders of such countries.” Public Law 106-113 requires that the governments of the countries described above do not have inappropriate influence in the selection process. Proposals should reflect advancement of these goals in their program contents, to the full extent deemed feasible. IV.3d.3. *Program Monitoring and Evaluation:* Proposals must include a plan to monitor and evaluate the project's success, both as the activities unfold and at the end of the program. The Bureau recommends that your proposal include a draft survey questionnaire or other technique plus a description of a methodology to use to link outcomes to original project objectives. The Bureau expects that the grantee will track participants or partners and be able to respond to key evaluation questions, including satisfaction with the program, learning as a result of the program, changes in behavior as a result of the program, and effects of the program on institutions (institutions in which participants work or partner institutions). The evaluation plan should include indicators that measure gains in mutual understanding as well as substantive knowledge. Successful monitoring and evaluation depend heavily on setting clear goals and outcomes at the outset of a program. Your evaluation plan should include a description of your project's objectives, your anticipated project outcomes, and how and when you intend to measure these outcomes (performance indicators). The more that outcomes are “smart” (specific, measurable, attainable, results-oriented, and placed in a reasonable time frame), the easier it will be to conduct the evaluation. You should also show how your project objectives link to the goals of the program described in this RFGP. Your monitoring and evaluation plan should clearly distinguish between program *outputs* and *outcomes. Outputs* are products and services delivered, often stated as an amount. Output information is important to show the scope or size of project activities, but it cannot substitute for information about progress towards outcomes or the results achieved. Examples of outputs include the number of people trained or the number of seminars conducted. *Outcomes* , in contrast, represent specific results a project is intended to achieve and is usually measured as an extent of change. Findings on outputs and outcomes should both be reported, but the focus should be on outcomes. We encourage you to assess the following four levels of outcomes, as they relate to the program goals set out in the RFGP (listed here in increasing order of importance): 1. Participant satisfaction with the program and exchange experience. 2. Participant learning, such as increased knowledge, aptitude, skills, and changed understanding and attitude. Learning includes both substantive (subject-specific) learning and mutual understanding. 3. Participant behavior, concrete actions to apply knowledge in work or community; greater participation and responsibility in civic organizations; interpretation and explanation of experiences and new knowledge gained; continued contacts between participants, community members, and others. 4. Institutional changes, such as increased collaboration and partnerships, policy reforms, new programming, and organizational improvements. **Please note:** Consideration should be given to the appropriate timing of data collection for each level of outcome. For example, satisfaction is usually captured as a short-term outcome, whereas behavior and institutional changes are normally considered longer-term outcomes. Overall, the quality of your monitoring and evaluation plan will be judged on how well it

(1)Specifies intended outcomes;

(2)gives clear descriptions of how each outcome will be measured;

(3)(identifies when particular outcomes will be measured; and

(1)Institute staff salary and benefits.

(2)Participant housing and meals.

(3)Participant travel.

(4)Textbooks and educational materials.

(5)Speaker honoraria. Please refer to the Solicitation Package for complete budget guidelines and formatting instructions. IV.3f. *Submission Dates and Times:* *Application Deadline Date:* January 31, 2006. *Explanation of Deadlines:* Due to heightened security measures, proposal submissions must be sent via a nationally recognized overnight delivery service (i.e., DHL, Federal Express, UPS, Airborne Express, or U.S. Postal Service Express Overnight Mail, etc.) and be shipped no later than the above deadline. The delivery services used by applicants must have in-place, centralized shipping identification and tracking systems that may be accessed via the Internet and delivery people who are identifiable by commonly recognized uniforms and delivery vehicles. Proposals shipped on or before the above deadline but received at ECA more than seven days after the deadline will be ineligible for further consideration under this competition. Proposals shipped after the established deadlines are ineligible for consideration under this competition. It is each applicant's responsibility to ensure that each package is marked with a legible tracking number and to monitor/confirm delivery to ECA via the Internet. ECA will *not* notify you upon receipt of application. Delivery of proposal packages *may not* be made via local courier service or in person for this competition. Faxed documents will not be accepted at any time. Only proposals submitted as stated above will be considered. Applications may not be submitted electronically at this time. Applicants must follow all instructions in the Solicitation Package. **Important note:** When preparing your submission please make sure to include one extra copy of the completed SF-424 form and place it in an envelope addressed to “ECA/EX/PM”. The original and ten

(10)copies of the application should be sent to: U.S. Department of State, SA-44, Bureau of Educational and Cultural Affairs, Ref.: ECA/A/E/USS-06-MEPI-4, Program Management, ECA/EX/PM, Room 534, 301 4th Street, SW., Washington, DC 20547. Along with the Project Title, all applicants must enter the above Reference Number in Box 11 on the SF-424 contained in the mandatory Proposal Submission Instructions

(PSI)of the solicitation document. IV.3g. *Intergovernmental Review of Applications:* Executive Order 12372 does not apply to this program. Applicants must also submit the “Executive Summary” and “Proposal Narrative” sections of the proposal in text (.txt) format on a PC-formatted disk. The Bureau will provide these files electronically to the appropriate Public Affairs Section(s) at the U.S. embassy(ies) for its (their) review. Applicant institutions or organizations may submit only one

(1)proposal to conduct one

(1)MEPI Study of the United States Institute for Undergraduate Student Leaders. V. Application Review Information V.1. Review Process The Bureau will review all proposals for technical eligibility. Proposals will be deemed ineligible if they do not fully adhere to the guidelines stated herein and in the Solicitation Package. All eligible proposals will be reviewed by the program office, as well as the Public Diplomacy section overseas, where appropriate. Eligible proposals will be subject to compliance with Federal and Bureau regulations and guidelines and forwarded to Bureau grant panels for advisory review. Proposals may also be reviewed by the Office of the Legal Adviser or by other Department elements. Final funding decisions are at the discretion of the Department of State's Assistant Secretary for Educational and Cultural Affairs. Final technical authority for cooperative agreements resides with the Bureau's Grants Officer. Review Criteria Technically eligible applications will be competitively reviewed according to the criteria stated below. These criteria are not rank ordered and all carry equal weight in the proposal evaluation: 1. *Quality of Program Idea/Plan:* Proposals should exhibit originality, substance, precision, and relevance to the Bureau's mission. Detailed agenda and relevant work plan should demonstrate substantive undertakings and logistical capacity. 2. *Ability to Achieve Overall Program Objectives:* Objectives should be reasonable, feasible, and flexible. Proposals should clearly demonstrate how the institution will meet the program's objectives and plan. 3. *Support for Diversity:* Proposals should demonstrate substantive support of the Bureau's policy on diversity. Achievable and relevant features should be cited in both program administration (selection of participants, program venue and program evaluation) and program content (orientation and wrap-up sessions, program meetings and resource materials). 4. *Evaluation and Follow-Up:* Proposals should include a plan to evaluate the activity's success, both as the activities unfold and at the end of the program. A draft survey questionnaire or other technique plus description of a methodology to use to link outcomes to original project objectives is recommended. 5. *Cost-effectiveness/Cost-sharing:* The overhead and administrative components of the proposal, including salaries and honoraria, should be kept as low as possible. All other items should be necessary and appropriate. Proposals should maximize cost-sharing through other private sector support as well as institutional direct funding contributions. 6. *Institutional Track Record/Ability:* Proposals should demonstrate an institutional record of successful exchange programs, including responsible fiscal management and full compliance with all reporting requirements for past Bureau grants as determined by Bureau Grants Staff. The Bureau will consider the past performance of prior recipients and the demonstrated potential of new applicants. VI. Award Administration Information VI.1a. Award Notices Final awards cannot be made until funds have been appropriated by Congress, allocated and committed through internal Bureau procedures. Successful applicants will receive an Assistance Award Document

(1)copy of the final program and financial report no more than 90 days after the expiration of the award. Grantees will be required to provide reports analyzing their evaluation findings to the Bureau in their regular program reports. (Please refer to IV. Application and Submission Instructions (IV.3.d.3) above for Program Monitoring and Evaluation information. All data collected, including survey responses and contact information, must be maintained for a minimum of three years and provided to the Bureau upon request. All reports must be sent to the ECA Grants Officer and ECA Program Officer listed in the final assistance award document. VI.4. *Program Data Requirements:* Organizations awarded grants will be required to maintain specific data on program participants and activities in an electronically accessible database format that can be shared with the Bureau as required. As a minimum, the data must include the following:

(1)Name, address, contact information and academic major of all participants.

(2)Itineraries of international and domestic travel for all participants, providing dates of travel and cities in which any exchange experiences take place. Final itineraries must be received by the ECA Program Officer at least three work days prior to the participants' arrival in the United States. VII. Agency Contacts For questions about this announcement, contact: Sheila Casey, Branch for the Study of the United States, ECA/A/E/USS, Room 314, ECA/A/E/USS-06-MEPI-4, U.S. Department of State, SA-44, 301 4th Street, SW., Washington, DC 20547; tel.

(202)453-8536; fax

(202)453-8533, e-mail: *caseysd@state.gov.* All correspondence with the Bureau concerning this RFGP should reference the above title and number ECA/A/E/USS-06-MEPI-4. Please read the complete **Federal Register** announcement before sending inquiries or submitting proposals. Once the RFGP deadline has passed, Bureau staff may not discuss this competition with applicants until the proposal review process has been completed. VIII. Other Information Notice The terms and conditions published in this RFGP are binding and may not be modified by any Bureau representative. Explanatory information provided by the Bureau that contradicts published language will not be binding. Issuance of the RFGP does not constitute an award commitment on the part of the Government. The Bureau reserves the right to reduce, revise, or increase proposal budgets in accordance with the needs of the program and the availability of funds. Awards made will be subject to periodic reporting and evaluation requirements per section VI.3 above. Dated: December 7, 2005. Dina Habib Powell, Assistant Secretary for Educational and Cultural Affairs, Department of State. [FR Doc. E5-7390 Filed 12-14-05; 8:45 am] BILLING CODE 4710-05-P DEPARTMENT OF STATE [Public Notice 5245] Bureau of Educational and Cultural Affairs

(ECA)Request for Grant Proposals: Religion and Society: A Dialogue *Announcement Type:* New Grant. *Funding Opportunity Number:* ECA/PE/C/NEA-AF-06-26. *Catalog of Federal Domestic Assistance Number:* 00.000. *Application Deadline:* February 16, 2006. Executive Summary The Office of Citizen Exchanges of the Bureau of Educational and Cultural Affairs, U.S. Department of State, announces a special competition for two to three grants to support international exchange projects under the rubric “Religion and Society: A Dialogue.” Public and private non-profit organizations meeting the provisions described in Internal Revenue Code section 26 U.S.C. 501(c)(3) may submit proposals to develop and implement a multi-phased exchange to engage influential clerics, religious scholars and community leaders from countries with significant Muslim populations in dialogue designed to educate participants about the scholarship and practice of Islam in the United States and the world and the compatibility of religious practice and democratic social and political values and structures. Authority Overall grant-making authority for this program is contained in the Mutual Educational and Cultural Exchange Act of 1961, Public Law 87-256, as amended, also known as the Fulbright-Hays Act. The purpose of the Act is “to enable the Government of the United States to increase mutual understanding between the people of the United States and the people of other countries * * *; to strengthen the ties which unite us with other nations by demonstrating the educational and cultural interests, developments, and achievements of the people of the United States and other nations * * * and thus to assist in the development of friendly, sympathetic and peaceful relations between the United States and the other countries of the world.” The funding authority for the program above is provided through legislation. Overview The Office of Citizen Exchanges consults with and supports American public and private nonprofit organizations in developing and implementing multi-phased, often multi-year, exchanges of professionals, community leaders, scholars and academics, public policy advocates, non-governmental organization activists, etc. These exchanges address issues of vital importance to the United States and to other countries; they promote focused, substantive, and cooperative interaction among counterparts; and they entail both theoretical and experiential learning for all participants. A primary goal is the development of sustained, international, institutional and individual linkages. In addition to providing a context for professional development and collaborative problem-solving, these projects are intended to introduce foreign participants and their American counterparts to one another's political, social, and economic structures, facilitating improved communication and enhancing mutual understanding. Desirable components of an exchange may be local citizen involvement and activities that orient foreign participants to American society and culture. The initiative “Religion and Society: A Dialogue” will support two to three grants facilitating the international exchange of American and non-American clerics, religious scholars, and community leaders—influential opinion leaders recognized for their ability to communicate in scholarly writing, through sermons, or by virtue of a position of community leadership. The objectives of the exchange are

(1)to enhance the non-American participants' understanding of the place of religion and serious religious study, particularly Islam, in American life;

(2)to provide a forum for examination and discussion of the compatibility of religious practice and democratic social and political values and structures, the benefits produced by coexistence among religious communities, and the practice of Islam in a multi-cultural, multi-religious context; and

(3)to broaden the understanding of American scholars, clerics, and laypersons of the place of Islam in non-American societies. Competitive program models would outline activities for a two-year exchange, including: Consultations and participant selection in participating countries by American professionals (selection coordinated with U.S. Embassies); study trips of up to 28 non-American scholars, clerics, and community leaders to the United States for several weeks (approximately 14 participants in two separate tours, one each year); and final consultations and workshops in the countries of origin of non-American participants by up to 14 American scholars, etc., Muslim and non-Muslim (approximately 7 American participants in each of two separate tours). Study tours in the United States would include: Meetings at Islamic centers, discussions with American Muslim and non-Muslim counterparts, familiarization with major religious libraries and archives, particularly those holding significant Islamic collections, discussions with leaders and members of religious and secular institutions that represent America's guarantee of human dignity and freedom of worship, and participation in scholarly (and possibly public) workshops and seminars. Abroad, Americans would participate in workshops and seminars, consult with local clerics, scholars, and community leaders, etc. Participants may be drawn from any relevant country, worldwide. Proposals should provide a persuasive rationale for the country or countries included in the exchange. The Office of Citizen Exchanges encourages applicants to be creative in planning project implementation. Activities may include both theoretical orientation and experiential, community-based initiatives designed to achieve objectives. Applicants should, in their proposals, identify any partner organizations and/or individuals inside or outside the U.S. with which/whom they are proposing to collaborate and justify the collaboration on the basis of experience, accomplishments, etc. Selection of Participants Applications should include a description of a merit-based, focused participant selection process. Applicants should anticipate consulting with the Public Affairs Sections of U.S. Embassies in selecting participants, with the Embassy retaining the right to nominate participants, to advise the grantee regarding participants recommended by other entities, and to have final approval of the list of participants identified. Public Affairs Section Involvement The Public Affairs Sections

(PAS)of the U.S. Embassies often play an important role in project implementation. PAS will initially evaluate project proposals and may, in consultation with the grantee organization, coordinate planning with the grantee organization and in-country partners, facilitate in-country activities, nominate participants and vet grantee nominations, observe in-country activities, and debrief participants. PAS will also evaluate project impact. Though project administration and implementation are the responsibility of the grantee, the grantee is expected to inform the PAS in participating countries of its operations and procedures and to coordinate with PAS officers in the development of project activities. The PAS should be consulted regarding country priorities, political and cultural sensitivities, security issues, and logistic and programmatic issues. II. Award Information *Type of Award:* Grant Agreement. *Fiscal Year Funds:* 2006. *Approximate Total Funding:* $1,000,000, to be allocated among two to three grant awards. *Approximate Number of Awards:* Two to three. *Anticipated Award Date:* Pending availability of funds, August 31, 2006. *Anticipated Project Completion Date:* July 31, 2008 to May 31, 2009. Projects under this competition may range in length from two to three years, depending on the number of project components, the country/region targeted, and the extent of the evaluation plan proposed by the applicant. The Office of Citizen Exchanges strongly encourages applicant organizations to plan enough time after project activities to measure project outcomes. Please refer to the Program Monitoring and Evaluation section, item IV.3d.3 below, for further guidance on evaluation. III. Eligibility Information III.1. *Eligible applicants:* Applications may be submitted by public and private non-profit organizations meeting the provisions described in Internal Revenue Code section 26 U.S.C. 501(c)(3). III.2. *Required Cost Sharing or Matching Funds:* There is no minimum or maximum percentage required for this competition. However, the Bureau encourages applicants to provide maximum levels of cost sharing and funding in support of its programs. Cost sharing is an important element of the ECA-grantee institution relationship, and it demonstrates the implementing organization's commitment to the program. Cost sharing is included as one criterion for grant proposal evaluation. Applicants are strongly encouraged to cost share a portion of overhead and administrative expenses. Cost-sharing, including contributions from the applicant, proposed in-country partner(s), and other sources should be included in the budget request. Proposal budgets that do not reflect cost sharing will be deemed not competitive under the Cost Effectiveness and Cost Sharing criterion (item V.1, below). When cost sharing is offered, it is understood and agreed that the applicant must provide the amount of cost sharing stipulated in its proposal and later included in an approved grant agreement. Cost sharing may be in the form of allowable direct or indirect costs. For accountability, you must maintain written records to support all costs that are claimed as your contribution as well as costs to be paid by the Federal government. Such records are subject to audit. The basis for determining the value of cash and in-kind contributions must be in accordance with OMB Circular A-110, (Revised), subpart C.23—Cost Sharing and Matching. In the event you do not provide the minimum amount of cost sharing stipulated in the approved budget, ECA's contribution will be reduced in like proportion. III.3. *Other Eligibility Requirements:* (a.) Bureau grant guidelines require that organizations with less than four years experience in conducting international exchanges be limited to $60,000 in Bureau funding. ECA anticipates awarding two to three grants, in an amount up to $500,000 to support program and administrative costs required to implement this exchange program. Therefore, organizations with less than four years experience in conducting international exchanges are ineligible to apply under this competition. (b.) Technical Eligibility: Proposals must comply with the requirements outlined in this Request for Grant Proposals and accompanying Proposal Submission Instructions in order to be considered technically eligible for consideration in the review process. IV. Application and Submission Information Note: Please read the complete **Federal Register** announcement before sending inquiries or submitting proposals. Once the RFGP deadline has passed, Bureau staff may not discuss this competition with applicants until the proposal review process has been completed. *IV.1 Contact Information to Request an Application Package:* The Application Package comprises the Proposal Submission Instruction

(PSI)document, consisting of required application forms and standard guidelines for proposal preparation. The Solicitation Package may be downloaded from: *http://exchanges.state.gov/education/rfgps/menu.htm.* Please read all information before downloading. IV.2 To receive a hard copy of the Application Package via U.S. Postal Service, contact Thomas Johnston, Office of Citizen Exchanges, ECA/PE/C/NEA-AF, Room 216, U.S. Department of State, SA-44, 301 4th Street, SW., Washington, DC 20547, Telephone

(202)453-8162; Fax

(202)453-8168; E-mail *JohnstonTJ@state.gov* . Please refer to Funding Opportunity Number ECA/PE/C/NEA-AF-06-26 on all inquiries and correspondence. IV.3. *Content and Form of Submission:* Applicants must follow all instructions in the Solicitation Package. The original and ten copies of the application should be sent per the instructions under IV.3f. “Submission Dates and Times section,” below. IV.3a. Applicants are required to have a Dun and Bradstreet Data Universal Numbering System

(DUNS)number to apply for a grant or cooperative agreement from the U.S. Government. This number is a nine-digit identification number, which uniquely identifies business entities. Obtaining a DUNS number is easy and there is no charge. To obtain a DUNS number, access *http://www.dunandbradstreet.com* or call 1-866-705-5711. Please ensure that the DUNS number is included in the appropriate box of the SF—424 which is part of the formal application package. IV.3b. All proposals must contain an executive summary, proposal narrative and budget. Please refer to the Application Package, containing the mandatory Proposal Submission Instructions

(PSI)document, for additional formatting and technical requirements. IV.3c. Applicants must have nonprofit status with the IRS at the time of application. If your organization is a private nonprofit which has not received a grant or cooperative agreement from ECA in the past three years, or if your organization received nonprofit status from the IRS within the past four years, you must submit the necessary documentation to verify nonprofit status as directed in the PSI document. Failure to do so will cause your proposal to be declared technically ineligible. IV.3d. Please take into consideration the following information when preparing your proposal narrative: IV.3d.1 *Adherence To All Regulations Governing The J Visa.* The Office of Citizen Exchanges of the Bureau of Educational and Cultural Affairs is the official program sponsor of the exchange program covered by this RFGP, and an employee of the Bureau will be the “Responsible Officer” for the program under the terms of 22 CFR 62, which covers the administration of the Exchange Visitor Program (J visa program). Under the terms of 22 CFR 62, organizations receiving grants under this RFGP will be third parties “cooperating with or assisting the sponsor in the conduct of the sponsor's program.” The actions of grantee program organizations shall be “imputed to the sponsor in evaluating the sponsor's compliance with” 22 CFR 62. Therefore, the Bureau expects that any organization receiving a grant under this competition will render all assistance necessary to enable the Bureau to fully comply with 22 CFR 62 et seq. The Bureau of Educational and Cultural Affairs places great emphasis on the secure and proper administration of Exchange Visitor (J visa) Programs and adherence by grantee program organizations and program participants to all regulations governing the J visa program status. Therefore, proposals should *explicitly state in writing* that the applicant is prepared to assist the Bureau in meeting all requirements governing the administration of Exchange Visitor Programs as set forth in 22 CFR 62. If your organization has experience as a designated Exchange Visitor Program Sponsor, the applicant should discuss its record of compliance with 22 CFR 62 et. seq., including the oversight of its Responsible Officers and Alternate Responsible Officers, screening and selection of program participants, provision of pre-arrival information and orientation to participants, monitoring of participants, proper maintenance and security of forms, record-keeping, reporting and other requirements. The Office of Citizen Exchanges of ECA will be responsible for issuing DS-2019 forms to participants in this program. A copy of the complete regulations governing the administration of Exchange Visitor

(202)203-5029. FAX:

(202)453-8640. IV.3d.2 *Diversity, Freedom and Democracy Guidelines.* Pursuant to the Bureau's authorizing legislation, programs must maintain a non-political character and should be balanced and representative of the diversity of American political, social, and cultural life. “Diversity” should be interpreted in the broadest sense and encompass differences including, but not limited to ethnicity, race, gender, religion, geographic location, socio-economic status, and disabilities. Applicants are strongly encouraged to adhere to the advancement of this principle both in program administration and in program content. Please refer to the review criteria under the 'Support for Diversity' section for specific suggestions on incorporating diversity into your proposal. Public Law 104-319 provides that “in carrying out programs of educational and cultural exchange in countries whose people do not fully enjoy freedom and democracy,” the Bureau “shall take appropriate steps to provide opportunities for participation in such programs to human rights and democracy leaders of such countries.” Public Law 106—113 requires that the governments of the countries described above do not have inappropriate influence in the selection process. Proposals should reflect advancement of these goals in their program contents, to the fullest extent feasible. IV.3d.3. *Program Monitoring and Evaluation.* Proposals must include a plan to monitor and evaluate the project's success, both as the activities unfold and at the end of the program. The Bureau recommends that your proposal include a draft survey questionnaire or other technique plus a description of a methodology to use to link outcomes to original project objectives. The Bureau expects that the grantee will track participants or partners and be able to respond to key evaluation questions, including satisfaction with the program, learning as a result of the program, changes in behavior as a result of the program, and effects of the program on institutions (institutions in which participants work or partner institutions). The evaluation plan should include indicators that measure gains in mutual understanding as well as substantive knowledge. Successful monitoring and evaluation depend heavily on setting clear goals and outcomes at the outset of a program. Your evaluation plan should include a description of your project's objectives, your anticipated project outcomes, and how and when you intend to measure these outcomes (performance indicators). The more that outcomes are “smart” (specific, measurable, attainable, results-oriented, and placed in a reasonable time frame), the easier it will be to conduct the evaluation. You should also show how your project objectives link to the goals of the program described in this RFGP. Your monitoring and evaluation plan should clearly distinguish between program outputs and outcomes. Outputs are products and services delivered, often stated as an amount. Output information is important to show the scope or size of project activities, but it cannot substitute for information about progress towards outcomes or the results achieved. Examples of outputs include the number of people trained or the number of seminars conducted. Outcomes represent specific results a project is intended to achieve and are usually measured as an extent of change. Findings on outputs and outcomes should both be reported, but the focus should be on outcomes. We encourage you to assess the following four levels of outcomes, as they relate to the program goals set out in the RFGP (listed here in increasing order of importance): 1. Participant satisfaction with the program and exchange experience. 2. Participant learning, such as increased knowledge, aptitude, skills, and changed understanding and attitude. Learning includes both substantive (subject-specific) learning and mutual understanding. 3. Participant behavior, concrete actions to apply knowledge in work or community; greater participation and responsibility in civic organizations; interpretation and explanation of experiences and new knowledge gained; continued contacts between participants, community members, and others. 4. Institutional changes, such as increased collaboration and partnerships, policy reforms, new programming, and organizational improvements. Please note: Consideration should be given to the appropriate timing of data collection for each level of outcome. For example, satisfaction is usually captured as a short-term outcome, whereas behavior and institutional changes are normally considered longer-term outcomes. Overall, the quality of your monitoring and evaluation plan will be judged on how well it

(1)Specifies intended outcomes;

(2)gives clear descriptions of how each outcome will be measured;

(3)identifies when particular outcomes will be measured; and

(4)provides a clear description of the data collection strategies for each outcome (i.e., surveys, interviews, or focus groups). (Please note that evaluation plans that deal only with the first level of outcomes [satisfaction] will be deemed less competitive under the present evaluation criterion.) Grantees will be required to provide reports analyzing their evaluation findings to the Bureau in their regular program reports. All data collected, including survey responses and contact information, must be maintained for a minimum of three years and provided to the Bureau upon request. IV.3e. Please take the following information into consideration when preparing your budget: IV.3e.1. Applicants must submit a comprehensive budget for the entire project. There must be a summary budget as well as breakdowns reflecting both administrative and program budgets. Applicants may provide separate sub-budgets for each program component, phase, location, or activity to provide clarification. Budgets that limit administrative costs to approximately 25% of the funding sought from ECA will be given priority consideration. IV.3e.2. Allowable costs for the program include the following: 1. *Travel.* International and domestic airfare; visas; transit costs; ground transportation costs. Please note that all air travel must be in compliance with the Fly America Act. There is no charge for J-1 visas for participants in Bureau sponsored programs. 2. *Per Diem.* For U.S.-based programming, organizations should use the published Federal per diem rates for individual U.S. cities. Domestic per diem rates may be accessed at: *http://policyworks.gov/org/main/mt/homepage/mtt/perdiem/perd03d.html.* ECA requests applicants to budget realistic costs that reflect the local economy and do not exceed Federal per diem rates. Foreign per diem rates can be accessed at: *http://www.state.gov/m/a/als/prdm/html.* 3. *Interpreters.* For U.S.-based activities, ECA strongly encourages applicants to hire their own locally based interpreters. However, applicants may ask ECA to assign State Department interpreters. One interpreter is typically needed for every four participants who require interpretation. When an applicant proposes to use State Department interpreters, the following expenses should be included in the budget: Published Federal per diem rates (both “lodging” and “M&IE”) and “home-program-home” transportation in the amount of $400 per interpreter. Salary expenses for State Department interpreters will be covered by the Bureau and should not be part of an applicant's proposed budget. Bureau funds cannot support interpreters who accompany delegations from their home country or travel internationally. 4. *Book and Cultural Allowances.* Foreign participants are entitled to a one-time cultural allowance of $150 per person, plus a book allowance of $50. Interpreters should be reimbursed up to $150 for expenses when they escort participants to cultural events. U.S. program staff, trainers or participants are not eligible to receive these benefits. 5. *Consultants.* Consultants may be used to provide specialized expertise or to make presentations. Honoraria rates should not exceed $250 per day. Organizations are encouraged to cost-share rates that would exceed that figure. Subcontracting organizations may also be employed, in which case the written agreement between the prospective grantee and sub-grantee should be included in the proposal. Such sub-grants should detail the division of responsibilities and proposed costs, and subcontracts should be itemized in the budget. 6. *Room rental.* The rental of meeting space should not exceed $250 per day. Any rates that exceed this amount should be cost shared. 7. *Materials.* Proposals may contain costs to purchase, develop and translate materials for participants. Costs for high quality translation of materials should be anticipated and included in the budget. Grantee organizations should expect to submit a copy of all program materials to ECA, and ECA support should be acknowledged on all materials developed with its funding. 8. *Equipment.* Applicants may propose to use grant funds to purchase equipment, such as computers and printers; these costs should be justified in the budget narrative. Costs for furniture are not allowed. 9. *Working meal.* Normally, no more than one working meal may be provided during the program. Per capita costs may not exceed $15-$25 for lunch and $20-$35 for dinner, excluding room rental. The number of invited guests may not exceed participants by more than a factor of two-to-one. When setting up a budget, interpreters should be considered “participants.” 10. *Return travel allowance.* A return travel allowance of $70 for each foreign participant may be included in the budget. This allowance would cover incidental expenses incurred during international travel. 11. *Health insurance.* Foreign participants will be covered during their participation in the program by the ECA-sponsored Accident and Sickness Program for Exchanges (ASPE), for which the grantee must enroll them. Details of that policy can be provided by the contact officers identified in this solicitation. The premium is paid by ECA and should not be included in the grant proposal budget. However, applicants are permitted to include costs for travel insurance for U.S. participants in the budget. 12. *Wire transfer fees.* When necessary, applicants may include costs to transfer funds to partner organizations overseas. Grantees are urged to research applicable taxes that may be imposed on these transfers by host governments. 13. *In-country travel costs for visa processing purposes* . Given the requirements associated with obtaining J-1 visas for ECA-supported participants, applicants should include costs for any travel associated with visa interviews or DS-2019 pick-up. 14. *Administrative costs* . Costs necessary for the effective administration of the program may include salaries for grantee organization employees, benefits, and other direct and indirect costs per detailed instructions in the Application Package. While there is no rigid ratio of administrative to program costs, proposals in which the administrative costs do not exceed 25% of the total requested ECA grant funds will be more competitive under the cost effectiveness and cost sharing criterion, per item V.1 below. Proposals should show strong administrative cost sharing contributions from the applicant, the in-country partner and other sources. Please refer to the Solicitation Package for complete budget guidelines and formatting instructions. IV.3f. Submission Dates and Times: *Application Deadline Date:* Thursday, February 16, 2006. *Explanation of Deadlines:* Due to heightened security measures, proposal submissions must be sent via a nationally recognized overnight delivery service (i.e., DHL, Federal Express, UPS, Airborne Express, or U.S. Postal Service Express Overnight Mail, etc.) and be shipped no later than the above deadline. The delivery services used by applicants must have, in-place, centralized shipping identification and tracking systems that may be accessed via the Internet and delivery people who are identifiable by commonly recognized uniforms and delivery vehicles. Proposals shipped on or before the above deadline but received at ECA more than seven days after the deadline will be ineligible for further consideration under this competition. Proposals shipped after the established deadlines are ineligible for consideration under this competition. It is each applicant's responsibility to ensure that each package is marked with a legible tracking number and to monitor/confirm delivery to ECA via the Internet. ECA will *not* notify you upon receipt of application. Delivery of proposal packages *may not* be made via local courier service or in person for this competition. Faxed documents will not be accepted at any time. Only proposals submitted as stated above will be considered. Applications may not be submitted electronically at this time. Applicants must follow all instructions in the Solicitation Package. Important note: When preparing your submission please make sure to include one extra copy of the completed SF-424 form and place it in an envelope addressed to “ECA/EX/PM”. The original and ten copies of the application should be sent to: U.S. Department of State, SA-44, Bureau of Educational and Cultural Affairs, Ref.: ECA/PE/C/NEA-AF-06-26, Program Management, ECA/EX/PM, Room 534, 301 4th Street, SW., Washington, DC 20547. Along with the Project Title, all applicants must enter the above Reference Number in Box 11 on the SF-424 contained in the mandatory Proposal Submission Instructions

(PSI)of the solicitation document. IV.3g. Intergovernmental Review of Applications: Executive Order 12372 does not apply to this program. IV.3h. Applicants must also submit the “Executive Summary” and “Proposal Narrative” sections of the proposal in text (.txt) format on a PC-formatted disk. The Bureau will provide these files electronically to the appropriate Public Affairs Section(s) at the U.S. embassy(ies) for its(their) review. V. Application Review Information V.1. *Review Process:* The Bureau will review all proposals for technical eligibility. Proposals will be deemed ineligible if they do not fully adhere to the guidelines stated herein and in the Solicitation Package. All eligible proposals will be reviewed by the program office, as well as the Public Diplomacy section overseas, where appropriate. Eligible proposals will be subject to compliance with Federal and Bureau regulations and guidelines and forwarded to Bureau grant panels for advisory review. Proposals may also be reviewed by the Office of the Legal Adviser or by other Department elements. Final funding decisions are at the discretion of the Department of State's Assistant Secretary for Educational and Cultural Affairs. Final technical authority for grant awards resides with the Bureau's Grants Officer. Review Criteria Technically eligible applications will be competitively reviewed according to the criteria stated below. All criteria carry equal weight in the proposal evaluation: 1. *Quality of the Program Idea:* Proposals should be substantive, well thought out, focused on issues of demonstrable relevance to all proposed participants, and responsive to the exchange suggestions and guidelines provided above. 2. *Implementation Plan and Ability to Achieve Objectives:* A detailed project implementation plan should establish a clear and logical connection between the interest, the expertise, and the logistic capacity of the applicant and the objectives to be achieved. The plan should discuss in concrete terms how the institution proposes to achieve the objectives. Institutional resources—including personnel—assigned to the project should be adequate and appropriate to achieve project objectives. The substance of workshops and site visits should be included as an attachment, and the responsibilities of U.S. participants and in-country partners should be clearly delineated. 3. *Institutional Capacity:* Proposals should include an institutional record of successful exchange programs, with reference to responsible fiscal management and full compliance with reporting requirements. The Bureau will consider the demonstrated potential of new applicants and will evaluate the performance record of prior recipients of Bureau grants as reported by the Bureau grant staff. 4. *Post-Grant Activities:* Applicants should provide a plan for sustained follow-on activity (building on the linkages developed under the grant and the activities initially funded by the grant) after grant funds have been expended. This will ensure that Bureau-supported projects are not isolated events. Funds for all post-grant activities must be in the form of contributions from the applicant or sources outside the Bureau. Costs for these activities must not appear in the proposal budget but should be outlined in the narrative. 5. *Project Evaluation/Monitoring:* Proposals should include a detailed plan to monitor and evaluate the project. Competitive evaluation plans will describe how the applicant organization will measure results, defined in both qualitative and quantitative terms and will include draft data collection instruments (surveys, questionnaires, etc.) in Tab E. See the “Program Management/Evaluation” section, item IV.3d.3 above for more information on the components of a competitive evaluation plan. Successful applicants (grantee institutions) will be expected to submit a report after each program component concludes or on a quarterly basis, whichever is less frequent. The Bureau also requires that grantee institutions submit a final narrative and financial report no more than 90 days after the expiration of a grant. Please refer to the “Program Management/Evaluation” section, item IV.3d.3 above for more guidance. 6. *Cost Effectiveness and Cost Sharing:* Overhead and administrative costs in the proposal budget, including salaries, honoraria and subcontracts for services, should be kept to a minimum. *Proposals whose administrative costs are less than twenty-five

(25)per cent of the total funds requested from the Bureau will be deemed more competitive under this criterion.* Applicants are strongly encouraged to cost share a portion of overhead and administrative expenses. Cost-sharing, including contributions from the applicant, proposed in-country partner(s), and other sources should be included in the budget request. Proposal budgets that do not reflect cost sharing will be deemed not competitive in this category. 7. *Support of Diversity:* Proposals should demonstrate support for the Bureau's policy on diversity. Features relevant to this policy should be cited in program implementation (selection of participants, program venue, and program evaluation), program content, (orientation and wrap-up session, program meetings, resource materials and follow-up activities), and program administration. Applicants should refer to the Bureau's Diversity, Freedom and Democracy Guidelines in the Proposal Submission Instructions

(PSI)and the Diversity, Freedom and Democracy Guidelines section, Item IV.3d.2, above for additional guidance. VI. Award Administration Information VI.1a. *Award Notices:* Final awards cannot be made until funds have been appropriated by Congress, allocated, and committed through internal Bureau procedures. Successful applicants will receive an Assistance Award Document

(AAD)from the Bureau's Grants Office. The AAD and the original grant proposal with subsequent modifications (if applicable) shall be the only binding authorizing document between the recipient and the U.S. Government. The AAD will be signed by an authorized Grants Officer and mailed to the recipient's responsible officer, identified in the application. Unsuccessful applicants will receive notification of the results of the application review from the ECA program office coordinating this competition. VI.2. *Administrative and National Policy Requirements:* Terms and Conditions for the Administration of ECA agreements include the following: Office of Management and Budget Circular A-122, “Cost Principles for Nonprofit Organizations.” Office of Management and Budget Circular A-21, “Cost Principles for Educational Institutions.” OMB Circular A-87, “Cost Principles for State, Local and Indian Governments.” OMB Circular No. A-110 (Revised), Uniform Administrative Requirements for Grants and Agreements with Institutions of Higher Education, Hospitals, and other Nonprofit Organizations. OMB Circular No. A-102, Uniform Administrative Requirements for Grants-in-Aid to State and Local Governments. OMB Circular No. A-133, Audits of States, Local Government, and Non-profit Organizations. Please reference the following Web sites for additional information: *http://www.whitehouse.gov/omb/grants.* *http://exchanges.state.gov/education/grantsdiv/terms.htm#articleI.* VI.3. *Reporting Requirements:* You must provide ECA with a hard copy original plus two copies of the following reports: 1. Semi-annual program and financial reports, which include a description of program activities implemented in the course of the six-month period and an accounting of expenditures. 2. A final program and financial report no more than 90 days after the expiration date of the award. 3. Grantees will be required to provide reports analyzing their evaluation findings to the Bureau in their regular program reports. (Please refer to IV. Application and Submission Instructions (IV.3d.3) above for Program Monitoring and Evaluation information.) All data collected, including survey responses and contact information, must be maintained for a minimum of three years and provided to the Bureau upon request. All reports must be sent to the ECA Grants Officer and ECA Program Officer listed in the final assistance award document. Organizations awarded grants will be required to maintain specific data on program participants and activities in an electronically accessible database format that can be shared with the Bureau as required. As a minimum, the data must include the following:

(1)Name, address, contact information and biographic sketch of all persons who travel internationally on funds provided by the grant.

(2)Itineraries of international and domestic travel, providing dates of travel and cities in which any exchange experiences take place. Final schedules for in-country and U.S. activities must be received by the ECA Program Officer at least three work days prior to the official opening of the activity. VII. Agency Contacts For questions about this announcement, contact: Thomas Johnston, Office of Citizen Exchanges, ECA/PE/C/NEA-AF, Room 216, ECA/PE/C/NEA-AF-06-26, U.S. Department of State, SA-44, 301 4th Street, SW., Washington, DC 20547, Telephone:

(202)453-8162; Fax: (202)453-8168; E-mail: *JohnstonTJ@state.gov* . Correspondence with the Bureau concerning this RFGP should reference the above title and number ECA/PE/C/NEA-AF-06-26. Please read the complete **Federal Register** announcement before sending inquiries or submitting proposals. Once the RFGP deadline has passed, Bureau staff may not discuss this competition with applicants until the proposal review process has been completed. VIII. Other Information *Notice:* The terms and conditions published in this RFGP are binding and may not be modified by any Bureau representative. Explanatory information provided by the Bureau that contradicts published language will not be binding. Issuance of the RFGP does not constitute an award commitment on the part of the Government. The Bureau reserves the right to reduce, revise, or increase proposal budgets in accordance with the needs of the program and the availability of funds. Awards made will be subject to periodic reporting and evaluation requirements per section VI.3 above. Dated: December 7, 2005. Dina Habib Powell, Assistant Secretary for Educational and Cultural Affairs, Department of State. [FR Doc. E5-7391 Filed 12-14-05; 8:45 am] BILLING CODE 4710-05-P DEPARTMENT OF TRANSPORTATION Federal Transit Administration [Docket Number FTA-2005-23227] Notice of Revision of Title VI Circular and EEO Circular AGENCY: Federal Transit Administration, DOT. ACTION: Notice and request for comment. SUMMARY: The Federal Transit Administration

(FTA)is revising and updating its Circulars 4702.1, “Title VI Program Guidelines for Urban Mass Transit Administration Recipients” and 4704.1 “Equal Employment Opportunity Program Guidelines for Grant Recipients.” FTA is seeking input from interested parties on this document, including examples of problems with compliance, best practices for compliance, and proposals for changes to these circulars. Upon consideration of the comments, FTA will issue revised circulars and will seek additional comments on the revised documents. DATES: Comments must be received by January 17, 2006. Late filed comments will be considered to the extent practicable. FTA will publish a second notice in the **Federal Register** summarizing all comments received regarding this notice. ADDRESSES: You may submit comments [identified by DOT DMS Docket Number FTA-2005-23227] by any of the following methods: *Web site: http://dms.dot.gov* . Follow the instructions for submitting comments on the DOT electronic docket site. *Fax:* 202-493-2251. *Mail:* Docket Management Facility; U.S. Department of Transportation, 400 Seventh Street, SW., Nassif Building, PL-401, Washington, DC 20590-0001. Hand Delivery: Room PL-401 on the plaza level of the Nassif Building, 400 Seventh Street, SW., Washington, DC, between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. *Instructions:* You must include the agency name (Federal Transit Administration) and the docket number (FTA-2005-23227). You should submit two copies of your comments if you submit them by mail. If you wish to receive confirmation that FTA received your comments, you must include a self-addressed stamped postcard. Note that all comments received will be posted without change to the Department's Docket Management System

(DMS)Web site located at *http://dms.dot.gov.* This means that if your comment includes any personal identifying information, such information will be made available to users of DMS. FOR FURTHER INFORMATION CONTACT: For the Title VI Circular, David Schneider, Office of Civil Rights, 400 Seventh Street, SW., Washington, DC 20590,

(202)366-4018 or at *David.Schneider@fta.dot.gov* ;. For the EEO Circular, Sandra McCrea, Office of Civil Rights, 400 7th Street, SW., Washington, DC 20590,

(202)366-4018 or at *sandra.mccrea@fta.dot.gov* . For legal questions, Linda Lasley, Assistant Chief Counsel, Federal Transit Administration, 400 Seventh Street, SW., Room 9316, Washington, DC 20590,

(202)366-4011 or *Linda.Lasley@dot.gov* . SUPPLEMENTARY INFORMATION: 1. Background Title VI of the Civil Rights Act of 1964 prohibits discrimination on the basis of race, color, or national origin in programs and activities receiving Federal financial assistance. Specifically, Title VI provides that “no person in the United States shall, on the ground of race, color, or national origin, be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any program or activity receiving Federal financial assistance.” (42 U.S.C. 200d). Section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 790) states: “No qualified handicapped person shall, solely by reason of his handicap, be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any program or activity that receives or benefits from Federal financial assistance.” Additionally, the Age Discrimination Act of 1975 (42 U.S.C. 6101) states that “no person in the United States shall, on the basis of age, be excluded from participation in, be denied the benefits of, or be subjected to discrimination under, any program or activity receiving Federal financial assistance.” 23 U.S.C. 324 provides a similar prohibition on the basis of sex: “No person shall on the ground of sex be excluded from participating in, be denied the benefits of, or be subjected to discrimination under, any program or activity receiving Federal financial assistance under this title or carried on under this title.” FTA Circulars 4702.1, “Title VI Program Requirements for Urban Mass Transit Administration Recipients” and 4704.1 “Equal Employment Opportunity Program Guidelines for Grant Recipients” provide information on how FTA will enforce Title VI and EEO requirements. Both circulars include information, guidance, and instructions on the objectives of the FTA Title VI and EEO programs; information on specific grant programs covered by the FTA Title VI and EEO programs; a description of the FTA data collection and reporting requirements; a summary of the FTA compliance review for Title VI and EEO certification procedures; a description of the FTA process for implementing remedial and enforcement actions; information on the DOT complaint process; and public information requirements. Circulars 4702.1 and 4704.1 were last updated in May and July 1988, respectively. FTA is establishing a docket to receive public comment on these circulars. FTA intends to revise these circulars to incorporate existing practices, lessons learned, and reflect current Department policies and guidance relating to Title VI and EEO. Comments received will be summarized in another **Federal Register** notice. In addition, FTA will solicit additional public comment on revisions to these circulars made as a result of public comment. Issued in Washington, DC this 9th day of December 2005. Michael Winter, Director, FTA Office of Civil Rights. [FR Doc. 05-24066 Filed 12-14-05; 8:45 am]

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