Notices. Notice; Request for comments

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BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-53194; File No. SR-CHX-2006-01] Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Regarding Bidding and Offering in Sub-penny Increments January 30, 2006. 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 January 17, 2006, the Chicago Stock Exchange, Inc.

(“CHX” 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 CHX. The CHX has filed this proposal pursuant to Section 19(b)(3)(A) of the Act 3 and Rule 19b-4(f)(6) thereunder, 4 which renders the proposal effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 15 U.S.C. 78s(b)(3)(A). 4 17 CFR 240.19b-4(f)(6).

I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend its rules to confirm that, beginning with the compliance date for Rule 612 of Regulation NMS, 5 Exchange participants

(a)may bid or offer in sub-penny increments in the trading of Nasdaq/NM securities where those bids or offers are less than $1.00, and

(b)may bid or offer in sub-penny increments in the trading of other securities where an exemption from the provisions of Rule 612 is granted by the Commission and where the Exchange's Board of Directors agrees to allow that sub-penny quoting. The text of this proposed rule change is available on the Exchange's Web site ( *http://www.chx.com/rules/proposed_rules.htm* ), at the principal office of the Exchange, and in the Commission's Public Reference Room. 5 17 CFR 242.612. 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 CHX 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 CHX has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose Under the Exchange's existing trading rules, the Exchange's participants generally may not bid or offer in increments below $0.01. 6 Through this filing, the Exchange seeks to amend its rules to confirm that, beginning with the compliance date for Rule 612, 7 Exchange participants

(a)may bid or offer in sub-penny increments in the trading of Nasdaq/NM securities where those bids or offers are less than $1.00, and

(b)may bid or offer in sub-penny increments in the trading of other securities where an exemption from the provisions of Rule 612 is granted by the Commission and where the Exchange's Board of Directors agrees to allow that sub-penny quoting. 8 6 The Exchange does not currently have a rule that sets a minimum increment at which trades can occur. Its rule relating to minimum variations specifically refers to variations at which bids or offers may be made on the Exchange. *See* CHX Article XX, Rule 22. 7 The compliance date for Rule 612 is January 31, 2006. *See* Securities Exchange Act Release No. 52196 (Aug. 2, 2005), 70 FR 45529 (Aug. 8, 2005). 8 The Exchange has filed a separate proposal to permit its participants to execute trades in sub-penny increments. *See* Securities Exchange Act Release No. 52953 (Dec. 14, 2005) 70 FR 76088 (Dec. 22, 2005) (noticing SR-CHX-2005-36). As noted above, the proposed rule change first would confirm that an Exchange participant may submit bids or offers, for Nasdaq/NM securities, in sub-penny increments of at least $0.0001 where the bids or offers are less than $1.00. Sub-penny quoting at prices less than $1.00 is permitted, but not required, by the provisions of Rule 612, and the Exchange believes that it would be appropriate to allow its participants to engage in this practice in the trading of Nasdaq/NM securities. 9 9 The Exchange currently permits its participants to send sub-penny-priced orders, in Nasdaq/NM securities, to the Exchange. These orders are rounded to a penny increment for quoting purposes pursuant to exemptive relief from the Commission that will expire on the compliance date of Rule 612. *See* Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496, 37556-57 n. 547 (June 29, 2005) (“Regulation NMS Adopting Release”). Additionally, the proposed rule change would permit an Exchange participant to bid or offer in sub-penny increments in the trading of any securities where an exemption from the provisions of Rule 612 is granted by the Commission and where the Exchange's Board of Directors agrees to allow that sub-penny quoting. The Exchange, however, currently does not intend to more generally permit its participants to bid or offer in sub-penny increments in the trading of listed securities. The Exchange's MAX system will reject any orders in minimum variations that cannot be displayed as bids or offers on the Exchange pursuant to CHX Rule 22. 10 10 The MAX system, however, will accept inbound ITS commitments that are priced in variations smaller than the minimum variation set out in CHX Rule 22, and its specialists may execute those commitments, so long as the minimum variation is permitted by Rule 612 and so long as the specialist adheres to all other Exchange rules in executing the commitment. A specialist, among other things, should be cognizant when executing an inbound sub-penny-priced ITS commitment of its obligations under CHX Article XXX, Rule 2, Interpretation and Policy .06 with regard to “stepping ahead” of orders resting on the specialist's book. However, as of January 30, 2006, the CHX understands that no ITS participant intends to display, rank, or send commitments via ITS priced in sub-pennies. Telephone conversation between Ellen Neely, President and General Counsel, CHX, and Michael Gaw, Assistant Director, and Sara Gillis, Attorney, Division of Market Regulation, Commission, dated January 30, 2006. This proposed rule change would apply only in the Exchange's current trading model. The Exchange will re-address issues associated with sub-penny trading as part of the soon-to-be-filed package associated with its new trading model. 2. Statutory Basis The CHX believes the proposal is consistent with the requirements of the Act and the rules and regulations thereunder that are applicable to a national securities exchange, and, in particular, with the requirements of Section 6(b). 11 The Exchange believes that the proposed rule change is consistent with Section 6(b)(5) of the Act, 12 because it would promote just and equitable principles of trade, remove impediments to, and perfect the mechanism of, a free and open market and a national market system, and, in general, protect investors and the public interest by permitting Exchange participants to bid and offer in sub-penny increments in the trading of specific groups of securities. 11 15 U.S.C. 78f(b). 12 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. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were either solicited or received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the proposed rule change:

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

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

(iii)does not become operative for 30 days after the date of the 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 13 and Rule 19b-4(f)(6) thereunder. 14 The Exchange has asked the Commission to waive the 30-day operative delay and allow the proposed rule change to become operative on January 31, 2006, the compliance date for Rule 612. The Commission hereby grants that request. 15 The Commission believes that waiving the operative delay is consistent with the protection of investors and the public interest. The Commission previously has considered whether, for NMS stocks, quoting below $1.00 in sub-penny increments should be permitted. The Commission determined that it should and codified that view in Rule 612(b) of Regulation NMS. 16 The CHX's proposal to permit its participants to make bids or offers— in NMS stocks that are listed on Nasdaq—priced below $1.00 in increments as small as $0.0001 is consistent with Rule 612(b) and raises no new regulatory issues. 13 15 U.S.C. 78s(b)(3)(A). 14 17 CFR 240.19b-4(f)(6). As required by Rule 19b-4(f)(6)(iii) under the Act, the Exchange also provided with 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 the proposed rule change. 15 For purposes only of waiving the 30-day operative delay, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. *See* 15 U.S.C. 78c(f). 16 *See* Regulation NMS Adopting Release, 70 FR at 37555. 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-CHX-2006-01 on the subject line. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-CHX-2006-01. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room. Copies of such filing will also be available for inspection and copying at the principal office of the CHX. 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-CHX-2006-01 and should be submitted on or before February 28, 2006. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 17 17 17 CFR 200.30-3(a)(12). Nancy M. Morris, Secretary. [FR Doc. E6-1616 Filed 2-6-06; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-53203; File No. SR-NASD-2006-016] Self-Regulatory Organizations; National Association of Securities Dealers, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Establish a Mechanism for Handling Sub-Penny Orders in Securities Listed on the New York Stock Exchange or the American Stock Exchange January 31, 2006. 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 January 31, 2006, 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 which renders the proposed rule change effective immediately 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 Nasdaq proposes to establish a mechanism for handling sub-penny orders in securities listed on the New York Stock Exchange (“NYSE”) or the American Stock Exchange (“Amex”) due to readiness issues at those two exchanges and to make another minor adjustment in the related rule language. The text of the proposed rule change is below. Proposed new language is in *italics* ; proposed deletions are in [brackets]. 5 5 Changes are marked to the rule text that appears in the electronic NASD Manual found at *www.nasd.com* . Prior to the date when The NASDAQ Stock Market LLC (“NASDAQ LLC”) commences operations, NASDAQ LLC will file a conforming change to the rules of NASDAQ LLC approved in Securities Exchange Act Release No. 53128 (January 13, 2006), 71 FR 3550 (January 23, 2006). 6330. Obligations of CQS Market Makers

(a)through

(c)No change

(d)Minimum Price Variation

(1)No change

(2)[When a quotation properly (not in violation of paragraph

(1)above) priced in an increment of less than $0.01 is routed for execution via the ITS System to a market that does not accept quotations in increments of less than $0.01, such a quotation is rounded down (for bids) or up (for offers) to the nearest $0.01 increment.] *A quotation for a security listed on the New York Stock Exchange or the American Stock Exchange and properly (not in violation of paragraph

(1)above) priced in an increment of less than $0.01 will be adjusted by the Nasdaq Market Center down (for bids) or up (for offers) to the nearest $0.01 increment prior to display, execution or routing. A quotation so adjusted will have no price priority over equivalent quotations that did not require adjustment under this paragraph.* 4962. Minimum Quotation Increment The minimum quotation increment in the INET System for quotations of $1.00 or above in Nasdaq-listed securities and in securities listed on a national securities exchange shall be $0.01. The minimum quotation increment in the INET System for quotations below $1.00 in Nasdaq-listed securities and in securities listed on a national securities exchange shall be $0.00 *0* 1. *However, if the Securities and Exchange Commission (“SEC”) permits, with respect to any security, the display, rank or acceptance of quotations priced at or above $1.00 per share in an increment smaller than $0.01, then the minimum quotation increment for such a security shall be the minimum permitted by the SEC or $0.0001, whichever is greater.* 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 On December 22, 2005, Nasdaq filed with the Commission a rule change 6 to align Nasdaq's rules on minimum pricing increments with Rule 612 of the Commission's Regulation NMS. 7 Consistent with Rule 612, the Nasdaq Market Center (“NMC”) and Nasdaq's BRUT and INET facilities now accept quotes that are in increments ofleast $0.0001 if these quotes are priced below $1.00 or if they are in securities exempted by the Commission under Rule 612. 8 Quotes priced above $1.00 will be accepted by the NMC, BRUT, and INET in increments of at least $0.01 (unless they are in securities exempted by the Commission). These principles apply equally to Nasdaq-listed securities and to securities listed on other exchanges. 6 *See* Securities Exchange Act Release No. 53017 (December 22, 2005), 70 FR 77225 (December 29, 2005). The rule change was effective immediately upon filing, but not operational until January 31, 2006. 7 17 CFR 242.612. 8 The present proposed rule change clarifies with respect to INET that the minimum pricing increment will, in fact, be $0.0001, as opposed to $0.001. This filing also includes an additional conforming change to the INET rules, to clarify that any security that receives the Commission's permission for sub-penny quoting above $1.00 will be eligible for such quoting on INET. Under the present proposal, which is being made to accommodate the NYSE and the Amex, the NMC will adjust all proper ( *i.e.* , priced under $1.00 and in increments of not less than $0.0001) sub-penny quotes in NYSE- and Amex-listed securities as soon as it receives them. Offers will be adjusted upwards to the next whole cent, while bids will be adjusted downward to the next whole cent. Sub-penny quotes that are adjusted in this manner will be displayed, executed, or routed, as otherwise applicable, at the adjusted price and will not be accorded any price priority over the equivalent unadjusted whole-cent quotes. The NMC will adjust all sub-penny quotes that it receives for NYSE and Amex securities, regardless of whether such quotes are entered into the NMC directly or routed from another trading venue (including when the quotes are routed to the NMC from Nasdaq's BRUT or INET facilities). The ability of the NMC, BRUT, or INET to accept sub-penny quotes in Nasdaq-, NYSE-, or Amex-listed securities is not affected by this proposal. However, the “accepted” sub-penny quotes for NYSE-or Amex-listed stocks will be adjusted before being displayed in the NMC or routed via the ITS linkage from the NMC to the NYSE or the Amex. Nasdaq views the proposal described above as temporary because it will, in most cases, deprive investors of the ability, envisioned in Rule 612, to trade in sub-pennies those NYSE and Amex listed stocks that are priced below $1.00. When Nasdaq determines that this approach is no longer appropriate, it will change the rule described herein by making an immediately effective filing with the Commission. 2. Statutory Basis Nasdaq believes that the proposed rule change is consistent with the provisions of Section 15A of the Act, 9 in general, and with Section 15A(b)(6) of the Act, 10 in particular, in that it is designed to promote just and equitable principles of trade and to remove impediments to, and perfect the mechanism of, a free and open market. 9 15 U.S.C. 78 *o* -3. 10 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 will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others Written comments were neither solicited nor received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the proposed rule change:

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

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

(3)does not become operative for 30 days after the date of the filing, or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest, the proposed rule change has become effective pursuant to Section 19(b)(3)(A) of the Act 11 and Rule 19b-4(f)(6) thereunder. 12 The Commission hereby waives the 30-day operative delay. 13 The Commission has previously determined that, for NMS stocks, quoting below $1.00 in sub-penny increments should be permitted and codified that view in Rule 612(b) of Regulation NMS. 14 The proposed rule change to clarify that the minimum pricing increment for INET will be $0.0001 is consistent with Rule 612(b) and raises no new regulatory issues. With regard to the Exchange's proposal to round away all proper sub-penny quotes in NYSE- and Amex-listed securities immediately upon receipt by the NMC, the Commission believes that such rounding is non-controversial, as Rule 612 does not require that accepted sub-penny quotes priced below $1.00 be displayed, executed, or routed in sub-pennies. Therefore, the Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest. 11 15 U.S.C. 78s(b)(3)(A). 12 17 CFR 240.19b-4(f)(6). Pursuant to Rule 19b-4(f)(6)(iii) under the Act, the Exchange is required to give the Commission written notice of its intent to file the proposed rule change, along with a brief description and text of the proposed rule change, at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The Commission has determined to waive this requirement. 13 For purposes only of waiving the 30-day operative delay, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. *See* 15 U.S.C. 78c(f). 14 *See* Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496, 37555 (June 29, 2005). At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change, as amended, is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form *(http://www.sec.gov/rules/sro.shtml)* ; or • Send an e-mail to *rule-comments@sec.gov.* Please include File Number SR-NASD-2006-016 on the subject line. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, Station Place, 100 F Street, NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-NASD-2006-016. 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-2006-016 and should be submitted on or before February 28, 2006. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 15 15 17 CFR 200.30-3(a)(12). Nancy M. Morris, Secretary. [FR Doc. E6-1614 Filed 2-6-06; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-53192; File No. SR-NASD-2006-004] Self-Regulatory Organizations; National Association of Securities Dealers, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Extend Pilot Programs Relating to Multiple Market Participant Identifiers January 30, 2006. 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 January 12, 2006, 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 has filed the proposal as a “non-controversial” 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. 5 The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 15 U.S.C. 78s(b)(3)(A). 4 17 CFR 240.19b-4(f)(6). 5 Nasdaq asked the Commission to waive the five-day pre-filing notice requirement and the 30-day operative delay. *See* Rule 19b-4(f)(6)(iii). 17 CFR 240.19b-4(f)(6)(iii). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change Nasdaq proposes to continue two pilot programs that provide market participants who execute transactions in Nasdaq and exchange-listed securities through its systems the ability to display trading interest using up to 10 individual Market Participant Identifiers (“MPIDs”). The text of the proposed rule change is available at NASD, the NASD Web site, and at the Commission. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, 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 As set forth in more detail below, Nasdaq is proposing to re-establish two pilot programs that inadvertently were permitted to lapse on December 1, 2005. On March 1, 2004, Nasdaq filed SR-NASD-2004-037 6 with the Commission, establishing the ability of ECNs and market makers in Nasdaq securities to use up to 10 individual MPIDs to display attributable quotes and orders in the Nasdaq Quotation Montage. On July 29, 2004, Nasdaq filed SR-NASD-2004-097 7 with the Commission, which created this same capability for ECNs and market makers using Nasdaq systems to quote and trade exchange-listed securities. MPIDs for Nasdaq and exchange-listed securities are allocated and, when Nasdaq is reaching technological limits for displayed, attributable MPIDs, re-allocated using the same procedures. 8 Additional MPIDs are known as a “Supplemental MPID” with a market maker's or ECN's first MPID being known as the “Primary MPID.” Nasdaq subsequently filed SR-NASD-2004-134 9 with the Commission, which extended both pilots through March 1, 2005, and SR-NASD-2005-069, 10 which extended the pilots through November 30, 2005. Nasdaq is proposing to re-establish the pilot programs through November 30, 2006. 6 Securities Exchange Act Release No. 49471 (March 25, 2004), 69 FR 17006 (March 31, 2004). 7 Securities Exchange Act Release No. 50140 (August 3, 2004), 69 FR 48535 (August 10, 2004). 8 Under those procedures, rankings are based only on the volume associated with a member's Supplemental MPID—Primary MPIDs will be excluded from the calculation. The member with lowest volume using a Supplemental MPID will continue to be the first to lose the display privilege, but only with respect to the Supplemental MPID that caused it to have the lowest ranking; the member will not lose its authority to use the Supplemental MPID in that security to submit quotes and orders to SIZE or the display privileges associated with that Supplemental MPID with respect to other securities in which it is permitted to use the identifier. When reallocating the display privileges, requests for Primary MPIDs will continue to receive precedence over requests for Supplemental MPIDs. 9 Securities Exchange Act Release No. 50434 (September 23, 2004), 69 FR 58564 (September 30, 2004). 10 Securities Exchange Act Release No. 51810 (June 9, 2005), 70 FR 34803 (June 15, 2005). The purpose of providing Supplemental MPIDs is to provide quoting market participants a better ability to organize and manage diverse order flows from their customers and to route orders and quotes to Nasdaq's listed trading facilities from different units/desks. To the extent that this flexibility provides increased incentives to provide liquidity to Nasdaq systems, all market participants can be expected to benefit. 11 11 Nasdaq assesses no fees for the issuance or use of Supplemental MPIDs other than the Commission-approved transaction fees set forth in NASD Rule 7010. The restrictions on the use of any Supplemental MPID are the same as those applicable to a Primary MPID. Regardless of the number of MPIDs used, NASD members will trade exchange-listed securities using Nasdaq systems in compliance with all pre-existing NASD and Commission rules governing the trading of these securities. There are only two exceptions to this general principle. First, the continuous quote requirement and the need to obtain an excused withdrawal, or functional excused withdrawal, as described in NASD Rule 5220(e), as well as the procedures described in NASD Rule 4710(b)(2)(B) and (b)(5), do not apply to Supplemental MPIDs; second, only one MPID may be used to engage in passive market making or to enter stabilizing bids pursuant to NASD Rules 4614 and 4619. In all other respects, market makers and ECNs will have the same rights and obligations in using a Supplemental MPID to enter quotes and orders and to display quotations, as they do today. The granting of Supplemental MPIDs is secondary to the integrity of the Nasdaq system trading those issues. As such, ECNs and market makers may not use a Supplemental MPID or Supplemental MPIDs to accomplish indirectly what they would be prohibited from doing directly through a single MPID. For example, members will not be permitted to use a Supplemental MPID to avoid their Manning or best execution obligations or their obligations under the Commission's Order Handling Rules, the firm quote rule, the OATS rules, and the Commission order routing and execution quality disclosure rules. To the extent that the allocation of Supplemental MPIDs creates regulatory confusion or ambiguity, every inference will be drawn against the use of Supplemental MPIDs in a manner that would diminish the quality or rigor of the regulation of the Nasdaq market. Accordingly, if it is determined that a Supplemental exchange-listed MPID is being used improperly, Nasdaq will withdraw its grant of the Supplemental MPID for all purposes for all securities. 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. In particular, Nasdaq believes the use of multiple MPIDs in listed securities can be expected to provide greater flexibility in the processing of diverse order flows, thereby improving overall system liquidity for the benefit of all market participants. 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 will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act, as amended. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others Written comments were neither solicited nor received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing rule change:

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

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

(3)does not become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest, the proposed rule change has become effective pursuant to section 19(b)(3)(A) of the Act 14 and Rule 19b-4(f)(6) thereunder. 15 14 15 U.S.C. 78s(b)(3)(A). 15 17 CFR 240.19b-4(f)(6). At any time within 60 days of the filing of such 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. Nasdaq has asked that the Commission waive the 5-day pre-filing notice requirement and the 30-day operative delay contained in Rule 19b-4(f)(6)(iii) under the Act. 16 The Commission believes such waiver is consistent with the protection of investors and the public interest, for it will allow these lapsed pilots to be reinstated as quickly as possible. For these reasons, the Commission designates the proposal to be effective and operative upon filing with the Commission. 17 16 17 CFR 240.19b-4(f)(6)(iii). 17 For purposes only of waiving the 30-day operative delay 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 is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov.* Please include File No. SR-NASD-2006-004 on the subject line. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, Station Place, 100 F Street, NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-NASD-2006-004. 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 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-2006-004 and should be submitted on or before February 28, 2006. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 18 18 17 CFR 200.30-3(a)(12). Nancy M. Morris, Secretary. [FR Doc. E6-1617 Filed 2-6-06; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-53195; File No. SR-NSX-2006-02] Self-Regulatory Organizations; National Stock Exchange; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Exchange Rule 11.3 To Allow for Sub-Penny Quoting in Certain Securities January 30, 2006. 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 January 30, 2006, the National Stock Exchange SM (“NSX” or the “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 has filed this proposal pursuant to Section 19(b)(3)(A) of the Act 3 and Rule 19b-4(f)(6) thereunder, 4 which renders the proposal effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 15 U.S.C. 78s(b)(3)(A). 4 17 CFR 240.19b-4(f)(6). I. Self-Regulatory Organization's Statement of the Terms of the Substance of the Proposed Rule Change The Exchange is proposing to amend Exchange Rule 11.3 to allow for sub-penny quoting in securities that are listed on the Nasdaq Stock Market where such quotes are priced less than $1.00 per share, and in any other security approved by the Commission for sub-penny quoting. Exchange Rule 11.3 currently prohibits, and will continue to prohibit, sub-penny quoting in securities whose quotes are at $1.00 or more per share, except to the extent otherwise approved by the Commission. The text of the proposed rule change is below. Proposed new language is *italicized* . Proposed deletions are indicated in [brackets]. 5 5 Certain technical changes to the rule text have been made pursuant to a telephone conversation between James C. Yong, Chief Regulatory Officer, NSX and Sara Gillis, Attorney, Division of Market Regulation, Commission on January 30, 2006. RULES OF NATIONAL STOCK EXCHANGE CHAPTER XI Trading Rules Rule 11.3 Price Variations Bids, [or] offers, *orders or indications of interests* in [stocks] *securities* traded on the Exchange shall not be made [at a] *in an increment* smaller [variation] than: *(i)* $ *0* .01 [per share; and in bonds at a smaller variation than 1/8 of 1% of the principal amount.] *if those bids, offers or indications of interests are priced equal to or greater than $1.00 per share; or* *(ii) $0.0001 if those bids, offers or indications of interests are priced less than $1.00 per share and the security is listed on the Nasdaq Stock Market and is trading on the Exchange; or* *(iii) Any other increment established by the Commission for any security which has been granted an exemption from the minimum price increments requirements of SEC Rule 612(a) or 612(b).* 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 Exchange Rule 11.3 currently provides that bids or offers in stocks traded on the Exchange shall not be made at a smaller variation than $0.01 per share. Rule 612 of Regulation NMS under the Act provides, in relevant part, that no national securities exchange shall “display, rank, or accept from any person a bid or offer, an order, or an indication of interest in any NMS stock priced in an increment smaller than $0.01 if that bid or offer, order, or indication of interest is priced equal to or greater than $1.00 per share.” 6 Rule 612 also prohibits national securities exchanges from displaying, ranking or accepting bids, offers, orders, or indications of interest priced in increments smaller than $0.0001 if the bid, offer, order, or indication of interest is priced less than $1.00 per share. 7 Finally, Rule 612(c) of Regulation NMS provides that the Commission may grant exemptions from the minimum price increment requirements of Rule 612(a) and 612(b) “if the Commission determines that such exemption is necessary or appropriate in the public interest, and is consistent with the protection of investors.” 8 The compliance date for Rule 612 is January 31, 2006 (the “Compliance Date”). 9 6 17 CFR 242.612(a). 7 17 CFR 242.612(b). 8 17 CFR 242.612(c). 9 *See* Securities Exchange Act Release No. 52196 (Aug. 2, 2005), 70 FR 45529 (Aug. 8, 2005). The Exchange is now proposing to prohibit the submission of bids, offers, orders, or indications of interest priced in increments smaller than

(i)$0.0001 if the bid, offer, order, or indication of interest is priced less than $1.00 per share on securities that are listed in the Nasdaq Stock Market and traded on the Exchange, or

(ii)the minimum price increment established by the Commission for any security that has been granted an exemption from the minimum price increment requirement of Rule 612(a) or 612(b) of Regulation NMS. Exchange Rule 11.3 currently prohibits, and will continue to prohibit, sub-penny orders and quotes priced at $1.00 or more per share, except to the extent otherwise approved by the Commission, and will maintain a minimum increment of $0.01 for any security traded on the Exchange and listed by the New York Stock Exchange or American Stock Exchange. In connection with these revisions to Exchange Rule 11.3, the Exchange is also removing the language in Exchange Rule 11.3 relating to minimum price variations in bonds. The Exchange does not trade bonds and has not traded bonds for several years. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with the provisions of Section 6(b) of the Act, 10 in general, and Section 6(b)(5) of the Act, 11 in particular, in that it is designed to promote just and equitable principles of trade and to remove impediments to, and perfect the mechanism of, a free and open market and a national market system and, generally, in that it protects investors and the public interest. The Exchange also believes that the proposal is consistent with the quoting restrictions of Rule 612 of Regulation NMS. 10 15 U.S.C. 78f(b). 11 15 U.S.C. 78f(b)(5). B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any inappropriate burden on competition. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others 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)does not become operative for 30 days after the date of the 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 12 and Rule 19b-4(f)(6) thereunder. 13 The Exchange has asked the Commission to waive the 30-day operative delay and allow the proposed rule change to become operative on January 31, 2006, the compliance date for Rule 612. The Commission hereby grants that request. 14 The Commission believes that waiving the operative delay is consistent with the protection of investors and the public interest. The Commission previously has considered whether, for NMS stocks, quoting below $1.00 in sub-penny increments should be permitted. The Commission determined that it should and codified that view in Rule 612(b) of Regulation NMS. 15 The Exchange's proposal to permit its members to make bids or offers—in NMS stocks that are listed on Nasdaq—priced below $1.00 in increments as small as $0.0001 is consistent with Rule 612(b) and raises no new regulatory issues. 12 15 U.S.C. 78s(b)(3)(A). 13 17 CFR 240.19b-4(f)(6). Pursuant to Rule 19b-4(f)(6)(iii) under the Act, the Exchange is required to give the Commission written notice of its intent to file the proposed rule change, along with a brief description and text of the proposed rule change, at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The Commission has determined to waive this requirement. 14 For purposes only of waiving the 30-day operative delay, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. *See* 15 U.S.C. 78c(f). 15 *See* Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496, 37555 (June 29, 2005). 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-NSX-2006-02 on the subject line. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-NSX-2006-02. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site *(http://www.sec.gov/rules/sro.shtml)* . Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room. Copies of such filing will also 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-NSX-2006-02 and should be submitted on or before February 28, 2006. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 16 16 17 CFR 200.30-3(a)(12). Nancy M. Morris, Secretary. [FR Doc. E6-1615 Filed 2-6-06; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-53197; File No. SR-Phlx-2006-08] Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Exchange Rule 715 January 31, 2006. 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 January 26, 2006, the Philadelphia Stock Exchange, Inc. (“Phlx” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I, II and III below, which Items have been prepared by the Phlx. The Phlx filed the proposed rule change pursuant to Section 19(b)(3)(A) of the Act 3 and Rule 19b-4(f)(1) thereunder, 4 and consequently the proposal was 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)(1). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Phlx proposes to amend Exchange Rule 715, Monthly Payment and Reporting, to clarify that equity floor members are no longer required to submit a monthly report of net commissions on transactions effected on the floor of the Exchange. Exchange Rule 715 is set forth below, with new text *italicized* : Rule 715 Monthly Payment and Reporting

(a)Each member and member organization shall submit to the Exchange's Controller, in such form as the Exchange may prescribe, a monthly report of net commissions on transactions *, other than equity transactions,* effected on the Floor of the Exchange during the preceding month together with a check payable to the Exchange for the appropriate fee. Said reports and fees must be received by the Exchange on or before the 28th calendar day following the month covered by the report, unless the Exchange is not open for business on such day, in which event the report is to be filed and the fees are to be paid on the next business day.

(b)A member or member organization may, in writing, request that the Controller grant an extension of not more than five business days to file such reports or pay such fees. The Controller has the discretion to grant or deny such extension requests. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Phlx included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposal. The text of these statements may be examined at the places specified in Item IV below. The 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 purpose of amending Exchange Rule 715 is to update this rule to reflect that monthly reports of net commissions are no longer required to be submitted in connection with equity transactions. This clarification should help avoid any member confusion as it relates to the floor brokerage assessment. No fee changes are being made pursuant to this proposal. Previously, the Exchange adopted a monthly fee of $250 for each member who derives his/her primary income from floor brokerage business conducted on the equity floor of the Exchange and eliminated the equity floor brokerage assessment fee of five percent of net floor brokerage income. 5 The Exchange waived the equity floor brokerage assessment and implemented the flat monthly fee of $250 to encourage floor brokers to send additional order flow to the Exchange and to simplify Phlx accounting procedures and billing. Thus, because the equity floor brokerage assessment is no longer based on net commissions, equity floor members do not need to submit monthly reports of net commissions, as required by Exchange Rule 715. Equity option and index option members and foreign currency participants, however, are still required to submit monthly reports because their floor brokerage assessment continues to be imposed based on monthly net floor brokerage income. 5 *See* Securities Exchange Act Release No. 49057 (January 12, 2004), 69 FR 2808 (January 20, 2004) (SR-Phlx-2003-83). 2. Statutory Basis The Exchange believes that its proposal 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 help to foster cooperation and coordination with persons engaged in the regulating, clearing, settling, processing information with respect to and facilitating transactions in securities by clarifying that a floor brokerage assessment form is not required to be completed in connection with the assessment of the flat monthly fee of $250. 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 Phlx believes that the proposed rule change will not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act, as amended. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The Phlx has neither solicited nor received comments on the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective upon filing pursuant to Section 19(b)(3)(A) of the Act 8 and Rule 19b-4(f)(1) thereunder 9 because it constitutes a stated policy, practice or interpretation with respect to the meaning, administration, or enforcement of an existing rule. 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. 10 8 15 U.S.C. 78s(b)(3)(A). 9 17 CFR 240.19b-4(f)(1). 10 *See* Section 19(b)(3)(C), 15 U.S.C. 78s(b)(3)(C). IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov* . Please include File Number SR-Phlx-2006-08 on the subject line. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-Phlx-2006-08. 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 Phlx. 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-2006-08 and should be submitted on or before February 28, 2006. 11 17 CFR 200.30-3(a)(12). For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 11 Nancy M. Morris, Secretary. [FR Doc. E6-1613 Filed 2-6-06; 8:45 am] BILLING CODE 8010-01-P DEPARTMENT OF TRANSPORTATION Federal Aviation Administration [Docket No.: FAA-2005-20109] Proposed Grant of Exemption; Ameriflight, Inc. AGENCY: Federal Aviation Administration, DOT. ACTION: Notice; Request for comments. SUMMARY: This notice contains the text of a proposed grant of exemption from specified requirements of 14 CFR. The purpose of this notice is to improve the public's awareness of, and participation in, this aspect of the FAA's regulatory activities. Neither publication or this notice nor the inclusion or omission of information in the text of the proposed exemption is intended to affect the legal status of the petition or its final disposition. DATES: Comments must be received on or before March 9, 2006. ADDRESSES: You may send comments [identified by Docket Number FAA-2005-20109] using any of the following methods: • DOT Docket Web site: Go to *http://dms.dot.gov* and follow the instructions for sending your comments electronically. • Governmentwide rulemaking Web site: Go to *http://www.regulations.gov* and follow the instructions for sending your comments electronically. • Mail: Docket Management Facility; U.S. Department of Transportation, 400 Seventh Street, SW., Nassif Building, Room PL-401, Washington, DC 20590. • Fax: 1-202-493-2251. • 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. FOR FURTHER INFORMATION CONTACT: Katherine Perfetti, Air Transportation Division, Flight Standards Service, Room 831, 800 Independence Avenue, SW., Washington, DC 20591, telephone:

(202)267-3760, e-mail: *Katherine.perfetti@faa.gov.* SUPPLEMENTARY INFORMATION Comments Invited The FAA invites interested persons to submit written comments, data, and views on the agency's analysis contained in the proposed grant of exemption contained below. The most helpful comments reference a specific portion of the analysis, explain the reason for any recommended change, and include supporting data. We ask that you send us two copies of written comments. We will file in the docket all comments we receive, as well as a report summarizing each substantive public contact with FAA personnel concerning this proposed grant of exemption. The docket is available for public inspection before and after the comment closing date. If you wish to review the docket in person, go to the address in the ADDRESSES section of this notice between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. You may also review the docket using the Internet at the Web address in the ADDRESSES section. Privacy Act: Using the search function of our docket Web site, anyone can find and read the comments received into any of our dockets, including the name of the individual sending the comment (or signing the comment on behalf of an association, business, labor union, etc.). You may review DOT's complete Privacy Act Statement in the **Federal Register** published on April 11, 2000 (65 FR 19477-78) or you may visit *http://dms.dot.gov.* Before acting on this proposal, we will consider all comments we receive on or before the closing date for comments. We will consider comments filed late if it is possible to do so without incurring expense or delay. We may change this proposal in light of the comments we receive. If you want the FAA to acknowledge receipt of your comments on this proposal, include with your comments a pre-addressed, stamped postcard on which the docket number appears. We will stamp the date on the postcard and mail it to you. The Proposal On January 13, 2005, Mr. John W. Hazlet, Jr., Vice President of Flight, Ameriflight, Inc. (Ameriflight) petitioned the FAA for relief from § 119.3 of Title 14, Code of Federal Regulations (14 CFR) to allow Ameriflight to operate certain EMBRAER Brasilia EMB-120 (EMB-120) airplanes with a maximum payload capacity greater than 7,500 pounds in all-cargo service under part 135 rather than part 121. This petition was denied on February 4, 2005, because Ameriflight sought to comply with certain sections of part 121 instead of complying with all the applicable sections of 121. In addition, Ameriflight did not show how its situation was different from the general class of regulated entities. On March 22, and April 5, 2005, Ameriflight petitioned the FAA for a reconsideration of Denial of Exemption No. 8480. The FAA has reconsidered its position and is considering granting Ameriflight's petition. The FAA is publishing the text of this proposed grant for comment because the increase in the payload capacity for all-cargo operations is a change to the basic applicability standards contained in part 119 and could potentially have broader applicability to other all-cargo operations. Further, the part 125/135 Aviation Rulemaking Committee

(ARC)has submitted a recommendation on this subject. That recommendation has broader applicability and higher payload capacity limits than proposed by Ameriflight. The ARC recommendation is currently under consideration by the FAA for general rulemaking action. Although elements of the ARC's recommendation were considered in the FAA's analysis of this petition, the FAA's decision to grant this exemption is based solely on the merits of Ameriflight's petition. The entire content of the proposed grant of exemption, including the FAA's analysis and conditions and limitations of the grant follows: The Petitioner Requests Relief From the Following Regulation Section 119.3 prescribes, in pertinent part, that an on-demand operation means any operation for compensation or hire that is an all-cargo operation conducted with airplanes having a payload capacity of 7,500 pounds or less. The Petitioner Supports Its Request With the Following Information The petitioner presents additional information to serve as the basis for a Grant of Exemption. The petitioner incorporates the recommendation of February 24, 2005, Part 125/135 Aviation Rulemaking Committee's

(ARC)Steering Committee, “Applicability 32” with one dissenting vote from the Air Line Pilots Association (ALPA). (Hereafter, Recommendation Document.) Ameriflight states that the Recommendation Document proposes to increase the maximum payload for part 135 cargo-only operations from the current 7,500-pound limit to 18,000 pounds, subject to certain requirements intended to provide an equivalent level of safety. The Ameriflight petition includes equipment, maintenance, and training requirements, which Ameriflight states provide a compelling argument in favor of a Grant of Exemption. This includes a requirement for a § 135.411(a)(2), Continuous Airworthiness Maintenance Program, which Ameriflight states essentially parallels requirements for part 121 supplemental operations. The petitioner presents the following information. First, Ameriflight states that it is requesting a payload increase only to allow the difference between basic operating weight, plus the crew, and the aircraft's certificated maximum-zero fuel weight. Ameriflight states the greatest weight difference this exemption would permit is only 633 pounds above the current 7,500-pound payload standard. Ameriflight states that it has accumulated more than 18,000 hours in the EMB-120 in all-weather operations. This has been accomplished with perfect safety, while operating seven EMB-120 airplanes with a reduced payload capacity under part 135. Ameriflight states that it is also important to note that it is permitted to, and in some cases does, carry the additional weight increment for which Ameriflight is petitioning as fuel, rather than payload. Ameriflight states that there is clearly no safety issue, because this total aircraft weight is within the airplanes' certificated maximum weight limits. A summary of the petition was published in the **Federal Register** on May 16, 2005 (70 FR 25874). One comment was received. The Air Line Pilots Association, International

(ALPA)is opposed to granting the Petition for Reconsideration. ALPA also opposes taking part 121 turbo-propeller aircraft out of part 121 by increasing the weight from 7,500 pounds and allowing them to operate in part 135. ALPA supports the FAA's original denial in which the FAA stated that picking and choosing isolated sections from each part to comply with would not provide an equivalent level of safety. Additionally, ALPA disagrees with Ameriflight's claim that a major, significant change has taken place since the filing and denial of the original Petition for Exemption. ALPA asserts that nothing has changed except an opinion vote on a recommendation document in the 135 ARC. Furthermore, there have been no studies or analyses completed concerning the proposed changes. The FAA's Proposed Analysis Is as Follows In reviewing the Reconsideration of Denial of Exemption No. 8480, the FAA has fully evaluated all of Ameriflight's supportive information and the opposing comments submitted by ALPA. The FAA finds for the reasons presented below, the proposed exemption would be in the public interest. First, this exemption meets the equivalent level of safety standard. This exemption is limited to Ameriflight's all-cargo operations in EMB-120 airplanes. This exemption is limited to an increase of 633 pounds payload capacity above the part 135 standard of 7,500 pounds and it does not increase the maximum certificated takeoff weight of the airplane. These airplanes must be equipped with an operable cockpit voice recorder (CVR), flight data recorder (FDR), traffic alert and collision avoidance system (TCAS), ground proximity warning system

(GPWS)and autopilot navigation. This equipment provides an equivalency to part 121 supplemental operations and exceeds part 135 requirements for passenger or all-cargo operations. The FAA notes that Ameriflight, in its original petition of January 13, 2005, proposed to conduct operations in which Ameriflight would utilize the services of a chief inspector and a director of quality control. Ameriflight proposed that the chief inspector report to a director of quality control. Ameriflight offered to use a voluntary required inspection item process. Ameriflight states that it would accept these practices as a condition upon which a grant of the proposed exemption would be predicated. The FAA finds that Ameriflight must meet the requirements of § 135.411(a)(2) as a condition and limitation of this grant. Ameriflight does not address part 121 flight following in its petition. The FAA finds that the flight locating requirements of 135 do not provide an equivalent standard to part 121. Ameriflight must institute a flight following program equivalent to that as specified in § 121.125 as a condition to this grant. This will ensure adequate monitoring of each flight. The FAA points out that the Ameriflight petition discussed transition and initial cadre considerations. Ameriflight stated that if this exemption is granted, its employees will need additional training. It proposed that flight crewmembers, flight instructors, check airmen, flight following personnel, mechanics, and inspectors qualified under Ameriflight's previous authorizations in the same type of aircraft will have to satisfactorily complete a training program acceptable to the Administrator addressing any differences associated with the increased weight or additional equipment installed on the aircraft. Although not noted by Ameriflight, these seven airplanes could be operated in a passenger configuration in on-demand service under part 135 if they were properly converted. The removal of passenger seats and furnishings increases the payload capacity to above 7,500 pounds. It should be noted, however, that the FAA does not intend to increase the 7,500-pound payload capacity applicability standard for on-demand passenger service under part 135; nor does it intend to change the 10 or more passenger seat part 121 applicability standard for scheduled passenger service. Second, this exemption serves the public interest by more efficiently meeting market demands with a high degree of safety. Ameriflight has presented a convincing case that there is an ever-increasing demand for cargo operations of this size and classification of aircraft. Ameriflight would satisfy that market need with fewer flights than would be necessary under the weight limits of part 135. Fewer operations provide an environmental incentive through the saving of fuel, reducing air traffic, and reducing exposure to risk. Ameriflight holds an air carrier certificate under part 119 to operate all-cargo operations under part 135. It is currently operating seven EMB-120 airplanes under part 135 complying with the 7,500 pounds payload capacity limit. Ameriflight has accumulated over 18,000 hours of all-cargo operations in these airplanes. The FAA finds that an equivalent level of safety can be maintained because of Ameriflight's safe operation of this aircraft in all-cargo operations, use of a two pilot crew, use of a part 25 certificated airplane, newer technology and the conditions and limitations specified in this grant. Third, in response to ALPA's comment that this exemption will result in airplanes moving from part 121 to part 135, the FAA finds that Ameriflight is somewhat unique in its circumstances. Although it is possible for some aircraft to move from 121 to 135 operations, this transition is limited by the total number of available EMB-120 aircraft and the number of EMB-120 aircraft configured for all-cargo operations. There are only two operators operating a total of three EMB-120 airplanes in all-cargo operations under part 121. Additionally, there are three operators, including Ameriflight, operating a total of 11 EMB-120 airplanes in an all-cargo operation under part 135. There is a limited population of airplanes that are, or could potentially be, retired from scheduled passenger service that could be reconfigured for use in an all-cargo operation. The FAA recognizes that other companies in similar situations could petition for an exemption; however, the FAA would consider each petition on its own merits. Fourth, the FAA finds that if Ameriflight is “picking and choosing” the regulations it wishes to follow, it has done so judiciously. The maintenance, equipment, training and flight locality required by conditions and limitations in this grant of exemption will ensure the equivalency to part 121, supplemental operations. Ameriflight has conducted all-cargo operations for more than 36 years. It currently has a fleet comprised of 180 aircraft and has accumulated over 350,000 flight-hours under part 135. It currently has seven EMB-120 aircraft and has accumulated over 18,000 hours and 15,000 landings in those airplanes. This experience adds considerable merit to this grant of exemption. Ameriflight cited as part of its petition the Recommendation Document submitted by the Part 135/125 Review ARC. While that documentation has been formally sent to the FAA and is currently being reviewed, this grant of exemption stands on its own merit as presented by Ameriflight, not on the basis of the justification or recommendation for general rulemaking by the ARC. Proposed Conditions and Limitations 1. Prior to conducting operations under this exemption, Ameriflight must obtain amended operations specifications that include this exemption. 2. Operations under this exemption are limited to EMB-120ER airplanes modified into dedicated freighters under STC00598WI, or Embraer's own factory-dedicated freighter conversion. 3. A copy of this exemption must be carried on board each EMB-120ER airplane operated under this exemption. 4. EMB-120ER airplanes operated under this exemption must be maintained in accordance with the maintenance requirements set forth in § 135.411(a)(2). 5. Ameriflight must institute a flight following program in accordance with § 121.125. 6. The increase in payload capacity, in excess of 7,500 pounds, is limited to 633 pounds. Ameriflight must compute the increase in weight, in excess of 7,500 pounds by determining the difference between the certificated Maximum Zero-Fuel Weight and the actual Empty Operating Weight plus crew weight. 7. All operations conducted under this exemption must be conducted with EMB-120ER airplanes that are equipped with an operable CVR, FDR, TCAS, GPWS, and autopilot. 8. Prior to conducting any operations under this exemption, Ameriflight must amend its approved training program, in a manner acceptable to its principal operations inspector, to include training with the additional equipment listed in Condition and Limitation No. 7 and any other differences. Issued in Washington, DC on February 1, 2006. Thomas K. Toula, Manager, Air Transportation Division. [FR Doc. 06-1087 Filed 2-6-06; 8:45 am]

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