Notices. Notice of availability and request for comments

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BILLING CODE 7555-01-M NUCLEAR REGULATORY COMMISSION Draft Report for Comment: Office of Nuclear Reactor Regulation Standard Review Plan, Section 17.5, “Quality Assurance Program Description—Design Certification, Early Site Permit and New License Applicants” AGENCY: Nuclear Regulatory Commission. ACTION: Notice of availability and request for comments. SUMMARY: The U.S. Nuclear Regulatory Commission's

(NRC)Office of Nuclear Reactor Regulation

(NRR)has issued Section 17.5, Draft Revision 0, “Quality Assurance Program Description—Design Certification, Early Site Permit and New License Applicants,” of NUREG-0800, “Standard Review Plan for the Review of Safety Analysis Reports for Nuclear Power Plants, LWR Edition” for public comment. DATES: Comments on this draft document must be submitted by April 11, 2006. To ensure efficient and complete comment resolution, comments should include references to the section, page, and line numbers of the document to which the comment applies. ADDRESSES: NUREG-0800, including Section 17.5, Draft Revision 0, is available for inspection and copying for a fee at the Commission's Public Document Room, NRC's Headquarters Building, 11555 Rockville Pike (First Floor), Rockville, Maryland. The Public Document Room is open from 7:45 a.m. to 4:15 p.m., Monday through Friday, except on Federal holidays. NUREG-0800, including Section 17.5, Draft Revision 0, is also available electronically on the NRC Web site at: *http://www.nrc.gov/reading-rm/doc-collections/nuregs/staff/sr0800/,* and from the ADAMS Electronic Reading Room on the NRC Web site at: *http://www.nrc.gov/reading-rm/adams.html* ( *ADAMS Accession No. ML060180622* ). Members of the public are invited and encouraged to submit written comments. Comments may be accompanied by additional relevant information or supporting data. A number of methods may be used to submit comments. Written comments should be mailed to Chief, Rules Review and Directives Branch, U.S. Nuclear Regulatory Commission, Mail Stop T6-D59, Washington, DC 20555-0001. Hand-deliver comments to: 11555 Rockville Pike, Rockville, MD, between 7:30 a.m. and 4:15 p.m., Federal workdays. Comments may be submitted electronically to: *nrcrep@nrc.gov.* Comments also may be submitted electronically through the comment form available on the NRC Web site at: *http://www.nrc.gov/reading-rm/doc-collections/nuregs/staff/sr0800/.* Please specify the report number NUREG-0800, Section 17.5, Draft Revision 0, in your comments, and send your comments by April 11, 2006. FOR FURTHER INFORMATION CONTACT: Stephen Tingen, Mail Stop O-6F2, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001. Telephone:

(301)415-1280; Internet: *sgt@nrc.gov.* SUPPLEMENTARY INFORMATION: This new Standard Review Plan

(SRP)section is guidance to the staff reviewers in the Office of NRR for performing safety reviews of quality assurance

(QA)programs for design certification, early site permit

(ESP)and combined license applications submitted under 10 CFR Part 52, as well as new construction permit and operating license applications submitted under 10 CFR Part 50. The principal purpose of the SRP is to ensure the quality and uniformity of staff safety reviews. It is also the intent of this plan to make information about regulatory matters widely available and to improve communication between the NRC, interested members of the public, and the nuclear power industry, thereby increasing understanding of the review process. SRP Section 17.5 is based on a combination of the following NRC endorsed guidance: ASME Standard NQA-1, “Quality Assurance Program for Nuclear Facilities” (1994 Edition); Regulatory Guide

(RG)1.8, “Qualification and Training of Personnel for Nuclear Power Plants,” Revision 3; RG 1.28, “Quality Assurance Program Requirements (Design and Construction),” Revision 3; RG 1.33, “Quality Assurance Program Requirements (Operation),” Revision 2; Review Standard 002, “Processing Applications for Early Site Permits,” Revision 0; Nuclear Information and Records Management Association, Inc. (NIRMA) Technical Guide

(TG)11-1998, “Authentication of Records and Media;” NIRMA TG 15-1998, “Management of Electronic Records;” NIRMA TG 16-1998, “Software Configuration Management and Quality Assurance;” NIRMA TG 21-1998, Electronic Records Protection and Restoration;” Electric Power Research Institute NP-5652, “Guideline for the Utilization of Commercial—Grade Items in Nuclear Safety-Related Applications (NCIG-07);” SRP Section 17.1, “Quality Assurance During the Design and Construction Phases,” Draft Revision 3; SRP Section 17.2, “Quality Assurance During the Operations Phase,” Draft Revision 3; and SRP Section 17.3, “Quality Assurance Program,” Draft Revision 1. The provisions in 10 CFR 50.69, “Risk-Informed Categorization of Structures, Systems and Components of Nuclear Power Reactors,” regarding QA controls for nonsafety-related systems, structures, and components that perform safety significant functions are included in SRP Section 17.5. The provisions in 10 CFR Part 21 and 10 CFR 50.55(e) regarding reporting of defects and noncompliance are included in SRP Section 17.5. A number of NRC approved changes to QA programs that were originally based on existing SRP Sections 17.1, 17.2, and 17.3 that are considered by the NRC to be generic in nature are also included in SRP Section 17.5. The independent review criteria in existing SRP Section 13.4, “Operational Review,” have been relocated to SRP Section 17.5. SRP Section 17.5 is to be used by the staff for guidance for the review of new QA programs. SRP Section 17.5 does not replace existing SRP Sections 13.4, 17.1, 17.2 and 17.3. These existing SRPs continue to be applicable to QA programs as previously approved by the NRC. Dated at Rockville, MD, this 1st day of February, 2006. For the Nuclear Regulatory Commission. Dale F. Thatcher, Chief, Quality & Vendor Branch A, Division of Engineering, Office of Nuclear Reactor Regulation. [FR Doc. E6-1924 Filed 2-9-06; 8:45 am] BILLING CODE 7590-01-P SECURITIES AND EXCHANGE COMMISSION Proposed Collection; Comment Request Upon Written Request, Copies Available From: Securities and Exchange Commission, Office of Filings and Information Services, Washington, DC 20549 Extension: Rule 15g-6, SEC File No. 270-349, OMB Control No. 3235-0395 Notice is hereby given that pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 *et seq.* ), the Securities and Exchange Commission (“Commission”) is soliciting comments on the collection of information summarized below. The Commission plans to submit this existing collection of information to the Office of Management and Budget for extension and approval. • (Rule 15g-6—Account statements for penny stock customers. Rule 15g-6 under the Securities Exchange Act of 1934 requires brokers and dealers that sell penny stocks to their customers to provide monthly account statements containing information with regard to the penny stocks held in customer accounts. The information is required to be provided to customers of broker-dealers that effect penny stock transactions in order to provide those customers with information that is not now publicly available. Without this information, investors would be less able to protect themselves from fraud and to make informed investment decisions. The staff estimates that there are approximately 240 broker-dealers that are subject to the rule. The staff estimates that the firms affected by the rule will, at any one time, have approximately 150 new customers with whom they have effected transactions in penny stocks, each of whom would receive a maximum of 12 account statements per year, for a total of 1,800 account statements annually for each firm (150 customers × 12 account statements/customer). The staff estimates that a broker-dealer would expend approximately three minutes in processing the information required for each account statement. Accordingly, the estimated average annual burden would equal 90 hours (1,800 account statements × 3 minutes/account statement ÷ 1 hour/60 minutes), and the estimated average total burden would equal 21,600 hours (90 hours × 240). Written comments are invited on:

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

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

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

(d)ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology. Consideration will be given to comments and suggestions submitted in writing within 60 days of this publication. Please direct your written comments to R. Corey Booth, Director/Chief Information Officer, Office of Information Technology, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549. Dated: February 1, 2006. Jill M. Peterson, Assistant Secretary. [FR Doc. E6-1831 Filed 2-9-06; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION Proposed Collection; Comment Request *Upon Written Request, Copies Available From:* Securities and Exchange Commission, Office of Filings and Information Services, Washington, DC 20549. Extension: Form N-SAR; SEC File No. 270-292; OMB Control No. 3235-0330. Notice is hereby given that pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 *et seq.* ) (“PRA”), the Securities and Exchange Commission (the “Commission”) is soliciting comments on the collections of information summarized below. The Commission plans to submit these existing collections of information to the Office of Management and Budget (“OMB”) for extension and approval. • Form N-SAR—Semi-Annual Report for Registered Investment Companies Form N-SAR is the form used by all registered investment companies with the exception of face amount certificate companies, to comply with the periodic filing and disclosure requirements imposed by Section 30 of the Investment Company Act of 1940 [15 U.S.C. 80a-1 *et seq.* ], and of rules 30a1-1 and 30b1-1 under the Act. The information required to be filed with the Commission assures the public availability of the information and permits verification of compliance with Investment Company Act requirements. Registered unit investment trusts are required to provide this information on an annual report filed with the Commission on Form N-SAR (OMB Control No. 3235-0330) pursuant to rule 30a1-1 under the Investment Company Act [17 CFR 30a1-1], and registered management investment companies must submit the required information on a semi-annual report on Form N-SAR pursuant to rule 30b1-1 under the Act [17 CFR 270.30b1-1]. 1 1 Face amount certificate companies are required to file periodic reports pursuant to Section 13 or 15(d) of the Exchange Act [15 U.S.C. 78m, 78o(d)]. The Commission estimates that the total number of respondents is 4,130 and the total annual number of responses is 7,430 ((3,300 respondents X 2 responses per year) + (830 respondents X 1 response per year)). The Commission estimates that each registrant filing a report on Form N-SAR would spend, on average, 14.43 hours in preparing and filing the Form and that the total hour burden for all Form N-SAR filings would be 107,203 hours. Estimates of the burden hours are made solely for the purposes of the PRA, and are not derived from a comprehensive or even a representative survey or study of the costs of Commission rules and forms. Written comments are invited on:

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

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

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

(d)ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology. Consideration will be given to comments and suggestions submitted in writing within 60 days of this publication. Please direct your written comments to R. Corey Booth, Director/Chief Information Officer, Office of Information Technology, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549. February 2, 2006. Nancy M. Morris, Secretary. [FR Doc. E6-1833 Filed 2-9-06; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION Proposed Collection; Comment Request *Upon written request, copies available from:* Securities and Exchange Commission, Office of Filings and Information Services, Washington, DC 20549. *Extension:* Rule 9b-1; SEC File No. 270-429; OMB Control No. 3235-0480. Notice is hereby given that pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 *et seq.* ) the Securities and Exchange Commission (“Commission”) is soliciting comments on the collection of information summarized below. The Commission plans to submit this existing collection of information to the Office of Management and Budget for extension and approval. Options Disclosure Document Rule 9b-1 under the Securities Exchange Act of 1934 (17 CFR 240.9b-1) sets forth the categories of information required to be disclosed in an options disclosure document (“ODD”) and requires the options markets to file an ODD with the Commission 60 days prior to the date it is distributed to investors. In addition, Rule 9b-1 provides that the ODD must be amended if the information in the document becomes materially inaccurate or incomplete and that amendments must be filed with the Commission 30 days prior to the distribution to customers. Finally, Rule 9b-1 requires a broker-dealer to furnish to each customer an ODD and any amendments, prior to accepting an order to purchase or sell an option on behalf of that customer. There are 6 options markets that must comply with Rule 9b-1. These 6 respondents work together to prepare a single ODD covering options traded on each market, as well as amendments to the ODD. These respondents file no more than one amendment per year, which requires approximately 8 hours per year for each respondent. Thus, the total compliance burden for options markets per year is 48 hours. The approximate cost per hour is $100, resulting in a total cost of compliance for these respondents of $4,800 per year (48 hours @ $100). In addition, approximately 2,000 broker-dealers must comply with Rule 9b-1. Each of these respondents will process an average of three new customers for options each week and, therefore, will have to furnish approximately 156 ODDs per year. The postal mailing or electronic delivery of the ODD takes respondents no more than 30 seconds to complete for an annual compliance burden for each of these respondents of 78 minutes, or 1.3 hours. Thus, the total compliance burden per year is 2,600 hours (2,000 broker-dealers × 1.3 hours). The approximate cost per hour to these respondents is $10 per hour, resulting in a total cost of compliance for these respondents of $26,000 per year (2,600 hours @ $10). The total compliance burden for all respondents under this rule (both options markets and broker-dealers) is 2648 hours per year (48 + 2,600), and total compliance costs of $30,800 ($4,800 + $26,000). Written comments are invited on:

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

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

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

(i)The Board believes that listing the Security on Nasdaq will provide visibility for the Security, improve liquidity in the Security, and provide better execution quality for investors; and

(ii)the Board believes that more of the Issuer's peer financial institutions are listed on Nasdaq than listed on Amex. The Issuer stated in its application that it has met the requirements of Amex Rule 18 by complying with all applicable laws in effect in the State of South Carolina, in which it is incorporated, and provided written notice of withdrawal to Amex. The Issuer's application relates solely to withdrawal of the Security from listing on Amex and from registration under section 12(b) of the Act, 3 and shall not affect its obligation to be registered under section 12(g) of the Act. 4 3 15 U.S.C. 78 *l* (b). 4 15 U.S.C. 78 *l* (g). Any interested person may, on or before February 28, 2006, comment on the facts bearing upon whether the application has been made in accordance with the rules of Amex, and what terms, if any, should be imposed by the Commission for the protection of investors. All comment letters may be submitted by either of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/delist.shtml* ); or • Send an e-mail to *rule-comments@sec.gov.* Please include the File Number 1-18460 or; 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 1-18460. This file number should be included on the subject line if e-mail is used. To help us 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/delist.shtml* ). Comments are also available for public inspection and copying in the Commission's Public Reference Room. All comments received will be posted without change; we do not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. The Commission, based on the information submitted to it, will issue an order granting the application after the date mentioned above, unless the Commission determines to order a hearing on the matter. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 5 5 17 CFR 200.30-3(a)(1). Nancy M. Morris, Secretary. [FR Doc. E6-1845 Filed 2-9-06; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [File No. 1-06351] Issuer Delisting; Notice of Application of Eli Lilly and Company To Withdraw Its Common Stock, No Par Value, From Listing and Registration on the Pacific Exchange, Inc. February 2, 2006. On December 23, 2005, Eli Lilly and Company, an Indiana corporation (“Issuer”), filed an application with the Securities and Exchange Commission (“Commission”), pursuant to section 12(d) of the Securities Exchange Act of 1934 (“Act”) 1 and Rule 12d2-2(d) thereunder, 2 to withdraw its common stock, no par value (“Security”), from listing and registration on the Pacific Exchange, Inc. (“PCX”). 1 15 U.S.C. 78 *l* (d). 2 17 CFR 240.12d2-2(d). On June 24, 2005, the Board of Directors (“Board”) of the Issuer adopted resolutions to withdraw the Security from listing and registration on PCX. The Issuer stated that it determined to withdraw the Security from PCX for the followings reasons:

(i)The Issuer maintains its primary listing on the New York Stock Exchange, Inc. (“NYSE”) as well as its secondary listings on the London Stock Exchange and the SWX Swiss Stock Exchange;

(ii)the Security is widely traded on several electronic exchanges;

(iii)in light of the strong liquidity and visibility of the trading market for the Security on NYSE and other exchanges, the additional expenses and administrative burden of maintaining a secondary listing on PCX outweigh the benefits of maintaining the listing on PCX. The Issuer stated in its application that it has complied with applicable rules of PCX by providing PCX with the required documents governing the withdrawal of securities from listing and registration on PCX. The Issuer's application relates solely to the withdrawal of the Security from listing on PCX, and shall not affect its continued listing on NYSE or its obligation to be registered under section 12(b) of the Act. 3 3 15 U.S.C. 78 *l* (b). Any interested person may, on or before February 28, 2006, comment on the facts bearing upon whether the application has been made in accordance with the rules of PCX, and what terms, if any, should be imposed by the Commission for the protection of investors. All comment letters may be submitted by either of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/delist.shtml* ); or • Send an e-mail to *rule-comments@sec.gov.* Please include the File Number 1-06351 or; 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 1-06351. This file number should be included on the subject line if e-mail is used. To help us 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/delist.shtml* ). Comments are also available for public inspection and copying in the Commission's Public Reference Room. All comments received will be posted without change; we do not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. The Commission, based on the information submitted to it, will issue an order granting the application after the date mentioned above, unless the Commission determines to order a hearing on the matter. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 4 4 17 CFR 200.30-3(a)(1). Nancy M. Morris, Secretary. [FR Doc. E6-1844 Filed 2-9-06; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-53227; File No. PCAOB-2005-01] Public Company Accounting Oversight Board; Order Approving Proposed Auditing Standard No. 4, Reporting on Whether a Previously Reported Material Weakness Continues to Exist February 6, 2006. I. Introduction On July 28, 2005, the Public Company Accounting Oversight Board (the “Board” or the “PCAOB”) filed with the Securities and Exchange Commission (“Commission”) proposed Auditing Standard No. 4, *Reporting on Whether a Previously Reported Material Weakness Continues to Exist,* pursuant to the Sarbanes-Oxley Act of 2002 (the “Act”) 1 and Section 19(b) of the Securities Exchange Act of 1934 (the “Exchange Act”). 2 Auditing Standard No. 4 establishes requirements that apply when an auditor is engaged to report on whether a previously reported material weakness in internal control over financial reporting continues to exist. 3 Also, in connection with proposed Auditing Standard No. 4, the Board adopted a proposed conforming amendment to AT sec. 101, which encompasses *agreed-upon procedures* engagements in which an auditor reports findings based on specific procedures performed on a subject matter. AT sec. 101, *Attest Engagements,* is one of the interim attestation standards adopted by the PCAOB in April 2003. 4 Notice of proposed Auditing Standard No. 4 and proposed amendment to AT sec. 101 (collectively referred to as the “Proposed Standard”) was published in the **Federal Register** on December 30, 2005, 5 and the Commission received six comment letters. For the reasons discussed below, the Commission is granting approval of the Proposed Standard. 1 15 U.S.C. 7202 *et seq.* 2 15 U.S.C. 78s(b). 3 *A previously reported material weakness,* in the context of the proposed auditing standard, means a material weakness that was described previously in an auditor's report issued pursuant to PCAOB Auditing Standard No. 2, *An Audit of Internal Control Over Financial Reporting Performed in Conjunction with an Audit of Financial Statements.* 4 The Commission approved the PCAOB's adoption of the interim standards in Release No. 34-47745, *Order Regarding Section 103(a)(3)(B) of the Sarbanes-Oxley Act of 2002* (April 25, 2003). 5 Release No. 34-52990 (December 21, 2005) [70 FR 77602]. II. Description The Act establishes the PCAOB to oversee the audits of public companies and related matters, to protect investors, and to further the public interest in the preparation of informative, accurate and independent audit reports. 6 Section 103(a) of the Act directs the PCAOB to establish auditing and related attestation standards, quality control standards, and ethics standards to be used by registered public accounting firms in the preparation and issuance of audit reports as required by the Act or the rules of the Commission. 6 Section 101(a) of the Act. The Proposed Standard is applicable to engagements tailored solely to report on whether a previously reported material weakness continues to exist. Such an engagement is voluntary in nature at the election of management, and may be performed as of any reasonable date selected by management. The auditor may report on the remediation of one or more material weaknesses as part of a single engagement, and the engagement need not be performed in conjunction with an audit or review of the company's financial statements. In order to perform such an engagement, the auditor must receive a written report from management that contains several elements, including a statement from management that the identified material weakness no longer exists as of the date specified by management. If the auditor determines that the material weakness continues to exist, the company may re-address remediation efforts and re-engage the auditor to opine on whether the material weakness continues to exist. The Proposed Standard also includes illustrative auditor's reports (Appendix A) and additional guidance (Appendix B—“Background and Basis for Conclusions”). The Proposed Standard states that, if approved by the Commission, it would be effective as of the date of Commission approval. III. Discussion The Commission's comment period on the Proposed Standard ended on January 20, 2006, and the Commission received six comment letters. The comment letters came from four registered public accounting firms and two professional associations. None of the comment letters received were from issuers or investors. In general, the respondents expressed support for the Proposed Standard. As part of their comment letters, two accounting firms and a professional organization representing the internal audit profession requested guidance on questions regarding the acceptable forms for use in filing management's report and the auditor's report. In response to these questions, the following is noted: • Since the Commission's rules do not specifically address the filing of such voluntary information, if an issuer wishes to publicly disseminate the reports of management and the auditor on whether a previously reported material weakness continues to exist, an issuer can use any Exchange Act form it believes is appropriate. • Our rules do not specify the form of disclosure that management should use when describing the circumstances surrounding the remediation of a previously reported material weakness, and our general disclosure principle and requirements would apply. However, the disclosure should not amend management's conclusion on the effectiveness of internal control over financial reporting as of the end of the fiscal year (performed pursuant to the Commission's rules implementing Section 404 of the Sarbanes Oxley Act of 2002). 7 Further, management can only conclude that internal control over financial reporting is effective if as of the time of remediation of a material weakness (or as of any other time) an assessment of effectiveness pursuant to those rules is performed as of that time. 7 Release No. 34-47986, *Management's Reports on Internal Control Over Financial Reporting and Certification of Disclosure in Exchange Act Periodic Reports* (June 5, 2003). • If the remediation was completed between the end of the fiscal year and the filing of the Form 10-K, management may include a single, combined report on the results of the annual assessment of internal control over financial reporting and the subsequent conclusion related to the remediation of a material weakness identified in the annual assessment. IV. Conclusion The Commission believes that the proposed rules provide a reasonable format for assessing whether a material weakness in a company's internal controls that has been, or is being, reported to investors continues to exist. However, to facilitate implementation of the standard, the Commission expects the PCAOB, within 90 days of the issuance of this order, to issue a clear and concise outline of the affirmative audit steps set forth in the standard. On the basis of the foregoing, the Commission finds that proposed Auditing Standard No. 4 and the proposed amendment to AT sec. 101 are consistent with the requirements of the Act and the securities laws and are necessary and appropriate in the public interest and for the protection of investors. *It is therefore ordered,* pursuant to Section 107 of the Act and Section 19(b)(2) of the Exchange Act, that proposed Auditing Standard No. 4, *Reporting on Whether a Previously Reported Material Weakness Continues to Exist* and a proposed Conforming Amendment to Interim Attestation Standard—AT sec. 101, *Attest Engagements* (File No. PCAOB-2005-01) be and hereby is approved. By the Commission. Nancy M. Morris, Secretary. [FR Doc. E6-1841 Filed 2-9-06; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-53220; File No. SR-Amex-2005-100] Self-Regulatory Organizations; American Stock Exchange LLC; Notice of Filing of Proposed Rule Change and Amendments No. 1 and 2 Thereto Relating to the Establishment of a New Class of Registered Options Trader Called a Remote Registered Options Trader (“RROT”) February 3, 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 September 30, 2005, the American Stock Exchange LLC (“Amex” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the Amex. On January 13, 2006, the Amex filed Amendment No. 1 to the proposed rule change. 3 On January 26, 2006, the Amex filed Amendment No. 2 to the proposed rule change. 4 The Commission is publishing this notice to solicit comments on the proposed rule change, as amended, from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 Amendment No. 1, which replaced and superseded the original filing in its entirety, is incorporated in this notice. 4 Amendment No. 2, which made clarifying changes to the Purpose section, as well as changes to the proposed rule text, is incorporated in this notice. I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to adopt new Rule 994—ANTE and to amend existing Rules 900—ANTE, 918—ANTE, 935—ANTE, 936—ANTE, 936C—ANTE, 950—ANTE, 951—ANTE, 958—ANTE and 958A—ANTE to authorize a new category of Registered Options Traders (“ROTs”) called a Remote Registered Options Trader (“RROT”). The text of the proposed rule change is available on the Amex's Web site at *http://www.amex.com,* at the Amex's principal office, and at the Commission's Public Reference Room. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Amex included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The 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 The Exchange proposes to create a new category of ROTs called an RROT. An RROT is a ROT which would be a member or member organization so designated by the Exchange which would be awarded remote quoting rights to enter bids and offers electronically from locations other than the trading crowd where the applicable options class is traded on the Exchange's physical trading floor. The Exchange's proposal introduces the concept of awarding remote quoting rights to specialists and ROTs based on quantitative criteria. Specialists would be awarded remote quoting rights based on Exchange floor volume executed and their percentage of the average market share of industry volume in the options in which they specialize per quarter. ROTs would be awarded remote quoting rights based solely on floor volume executed. The Exchange believes that the award of remote quoting rights will serve to foster competition and award specialists and ROTs for their performance in the option classes in which they trade. Furthermore, the proposed RROT program combines the electronic and open outcry trading models. Currently, the Exchange permits ROTs to submit quotes only from the physical trading floor. In this regard, the Exchange anticipates that offering the ability to enter offers and bids electronically away from the location where the options class is traded on the Exchange's physical trading floor will increase the liquidity available in those classes to which the RROT is assigned, as well as enhance the overall competitiveness of the Exchange. 5 5 *See* Securities Exchange Act Release No. 53161 (January 20, 2006), 71 FR 4388 (January 26, 2006) (File No. SR-Amex-2005-75), regarding the Exchange's proposed Supplemental Registered Options Trader (“SROT”) program. An SROT is defined as a ROT that is a member organization so designated by the Exchange that would be granted remote quoting rights to enter bids and offers electronically from off the Exchange's physical trading floor. The SROT program proposes similar amendments proposed to be made to the Exchange Rules herein. Assuming that the SROT proposal receives Commission approval at an earlier date, the Exchange anticipates incorporating the changes proposed in the SROT filing into this filing at that time. Exchange Rules applicable to ROTs would not apply to RROTs unless otherwise specified. The proposed rules and amendments to current rules discussed below would address the definition, approval process, quoting rights and obligations of RROTs. Remote Registered Options Traders Program i. *Application for Designation as an RROT.* Proposed Rule 994—ANTE

(a)sets forth an RROT's application and termination procedures. Under the Exchange's proposal, an RROT is defined as a ROT that is a member or member organization that would be granted remote quoting rights to enter bids and offers electronically from locations other than the trading crowd, both on and off the Exchange's trading floor, where the applicable options class is traded. A member or member organization requesting approval to be designated as an RROT is required to file a written application with the Exchange, pursuant to Exchange Rules, indicating that it is qualified as a ROT. Under the proposal, an RROT applicant that seeks to withdraw as such must notify the Exchange at least three business days prior to the desired effective date of such withdrawal. The Exchange may suspend or terminate any assignment of an RROT in one or more classes whenever, in the Exchange's judgment, the interests of a fair and orderly market are best served by such action. An RROT may seek review of the suspension or termination of its designation pursuant to Article IV, Section 1(g) of the Constitution and Rule 40. ii. *Remote Quoting Rights.* The Exchange's proposal introduces the concept of awarding remote quoting rights to ROTs and specialists. a. *Remote Quoting Rights Earned by Volume.* ROTs and specialists would earn remote quoting rights based on the percentage of Amex floor volume they execute. Volume executed via remote quoting would not count towards earning remote quoting rights. The pool of quoting rights awarded by volume would be established quarterly by a Committee designated by the Board of Governors of the Exchange that would include a representative from the Options Market Maker Association and a representative from the Options Specialist Association (the “Committee”). The Committee would announce the pool of available quoting rights available to be earned by percentage of Amex floor volume, for the subsequent trading period, not later than the first business day of each calendar quarter. The membership would be informed of the amount of quoting rights earned no later than one week prior to the commencement of the subsequent trading period. By way of example, in a given quarter, the Committee may set the total number of quoting rights to be awarded by the percentage of Amex floor volume at 1,000 quoting rights. Assuming the Exchange's total floor volume for a given quarter amounts to 20 million contracts, a member or member organization which has traded 2 million contracts that quarter has traded 10% of the total Amex floor volume. A member or member organization which has traded 10% of the total Amex floor volume would earn 10% of the available quoting rights, or 100 quoting rights. A member or member organization which has traded 1 million contracts in that same quarter has traded 5% of the Amex floor volume and would earn 5% of the available quoting rights, or 50 quoting rights. b. *Remote Quoting Rights Earned by Market Share.* Specialists may also earn remote quoting rights based on their percentage of the average market share of the industry volume in the option classes in which they specialize per quarter. The award of remote quoting rights to specialists would be based upon their market share in the top 100 option classes by industry volume, top 101-300 option classes by industry volume, and remaining option classes as follows: Options Classes Specialist percent of market share Top 100 101-300 301+ Greater than 20+ 3.00 Rights 1.50 Rights 0.75 Rights. 15-19.99 1.50 Rights 0.75 Rights 0.25 Rights. 10-14.99 0.50 Rights 0.25 Rights 0.00 Rights. Option classes with an average daily Amex volume of less than 100 contracts would be excluded from this determination. The number of remote quoting rights earned would vary quarterly based on the foregoing criteria. A specialist's quarterly market share may not be predetermined. As such, unlike the quoting rights available to be earned by the percentage of the total Amex floor volume, remote quoting rights based on market share would not be preset. The Exchange anticipates that such incentive-based quoting rights will promote competition and encourage specialists to gain an increased market share in the options classes in which they trade. Pursuant to the table above, if a particular specialist firm has earned 14% of the market share in a given option class which is in the top 100 option classes by industry volume, this firm would earn .05 quoting rights for that class. A specialist firm that has earned 25% of the market share in a given option class which is ranked 250 would earn 1.5 quoting rights for that class. A specialist firm that has earned 17% of the market share in a given option class which is ranked 350 would earn .25 quoting rights for that class. This analysis is conducted for every class traded by that specialist. Quoting Rights are totaled and rounded to the nearest whole right. The Exchange proposes that an RROT would be assigned classes pursuant to existing Commentary .05 to Rule 958—ANTE. Each remote quoting right would permit an RROT to remotely quote one option class, and no fractional remote quoting rights would be issued. Furthermore, RROTs may make adjustments to the option classes in which they will remotely quote in the form and manner set forth in Commentary .05 to Rule 958—ANTE. c. *Notification of Quoting Rights Earned.* As noted above, the pool of quoting rights earned by the percentage of Amex floor volume would be defined quarterly by the Committee. The Committee would announce the pool of quoting rights available to be earned by percentage of Amex floor volume, for the subsequent trading period, no later than the first business day of each calendar quarter. The Committee would notify eligible members and member organizations of the quoting rights they have earned, based on both volume and market share, no later than the tenth business day of each calendar quarter. Although the determinations regarding quoting rights would occur quarterly, the time frame during which the quoting rights may be used would be the subsequent three calendar months. 6 6 First quarter data regarding percentage of Amex floor volume and industry market share earned per options class would be used to determine the quoting rights awarded for May, June and July. Second quarter data would be used to determine quoting rights for August, September and October. Third quarter data would be used to determine the quoting rights for November, December and January. Four quarter data would be used to determine the quoting rights for February, March and April. The Exchange further proposes that remote quoting rights would be transferable. The transfer of remote quoting rights would be private transactions between the members and member organizations. Members and member organizations would be required to notify the Exchange of the transfer of any rights. iii. *RROT Obligations.* Under the Exchange's proposal, RROTs must have at least one active floor member acting as a ROT, subject to limitations set forth in the “Affiliation Limitations” section of proposed Rule 994—ANTE, and may remotely quote in up to five

(5)option classes per seat owned or leased without any additional seat requirements. RROTs will be required to purchase or lease one additional seat for every forty

(40)option classes remotely quoted in excess of the five option classes permitted pursuant to 994—ANTE (c)(i)(a). For example, a member firm with two

(2)seats may quote in up to ten

(10)option classes, without any additional seat requirements. Likewise, a member firm with twenty

(20)seats may quote in up to one-hundred

(100)option classes without any additional seat requirements. Quoting remotely in any additional option classes would require one additional seat for every forty

(40)option classes remotely quoted. Furthermore, Exchange memberships used to satisfy membership requirements to remotely quote as an RROT may not be used for any other purpose while being used in an RROT capacity, including being leased to another member or for trading on the trading floor. An Exchange membership would include a regular membership and an options principal membership. RROTs would also be required to provide continuous two-sided quotations in accordance with the parameters set forth in Rule 958—ANTE

(c)in at least 60% of the series of their assigned classes. RROTs may not enter quotations electronically in options classes in which they are not assigned as an RROT. The initial size of an RROT's remote quotes must be for at least ten contracts (undecremented size). An RROT may be called upon by a Floor Official to submit a single quote or maintain continuous quotes in one or more series of an option class to which the RROT is assigned whenever it is in the interest of maintaining a fair and orderly market. Finally, RROTs will be subject to the current designation of options areas that exist for ROTs. 7 In this manner, options and equity trading will be sufficiently separated so that no time or place advantage may potentially be derived from the proximity of the equity and option trading areas. As a result, in connection with the introduction of RROTs, the Exchange represents that there will be no “line of sight” between designated options trading areas and equity trading areas on the floor of the Exchange. 7 *See* Securities Exchange Act Release Nos. 39631 (February 9, 1998), 63 FR 8229 (February 18, 1998) and 46362 (August 15, 2002), 67 FR 54243 (August 21, 2002). The Exchange's proposal further states that an RROT may not be assigned to an option class where the RROT has a direct or indirect affiliate who is an RROT, ROT, or specialist in that option class. The Exchange's proposal specifically requires that no person who is either directly or indirectly affiliated with an RROT may submit quotations as an RROT, ROT, or specialist in an option class in which the affiliate RROT is assigned. Furthermore, RROTs would be required to maintain information barriers that are reasonably designed to prevent the misuse of material, non-public information with any affiliates that may conduct a brokerage business in option classes assigned to an RROT, or that may act as a market maker in any security underlying options assigned to an RROT. The proposal further requires RROTs to comply with Rule 193 regarding the misuse of material non-public information between the affiliate and the specialist member organization. The purpose of this provision is to prevent numerous affiliated parties from quoting electronically in the same option classes and receiving multiple automatic allocations for the same or affiliated beneficial account owners. iv. *900—ANTE.* Rule 900—ANTE currently sets forth the applicability, definitions and references on ANTE. The Exchange proposes to include the definition of an RROT in 900—ANTE. An RROT is defined as a ROT that is a member or member organization so designated by the Exchange that would be awarded remote quoting rights to enter bids and offers electronically from locations other than the trading crowd where the applicable options class is traded on the Exchange's physical trading floor. Furthermore, an RROT would be subject to the obligations set forth under proposed Rule 994—ANTE. Exchange rules applicable to ROTs would not apply to RROTs unless specified. The Exchange also proposes to amend the term “ANTE Participant” to include an RROT assigned to trade a specific options class on the ANTE System. v. *918—ANTE.* Rule 918—ANTE currently sets forth the automated opening, reopening and closing rotation procedures, trading halts and the supervision of such procedures. The Exchange proposes to amend Commentary .01 to Rule 918—ANTE to include paragraph (c), which provides that RROTs may not submit market orders prior to the opening. RROTs may, however, submit quotes or limit orders prior to the opening. vi. *935—ANTE.* Rule 935—ANTE currently provides for the allocation of all contracts executed through the ANTE System. The Exchange proposes to amend to Rule 935—ANTE to include RROTs. Under the Exchange's proposal, the ANTE System will allocate executed contracts to non-broker-dealer customers, broker-dealers, competing market makers, specialists, ROTs and RROTs in accordance with the provisions therein. vii. *936—ANTE and 936C—ANTE.* Rule 936—ANTE and Rule 936C—ANTE govern the cancellation and adjustment of equity options transactions and the cancellation and adjustment of index option transactions, respectively. 8 The Exchange proposes to amend Rule 936—ANTE and Rule 936C—ANTE to include RROT transactions in those that may be cancelled or adjusted. The proposal further modifies the notification requirement to allow Trading Officials and/or the Obvious Error Panel reviewing the transactions to either orally or electronically notify the members involved in the transaction of their determination. The purpose of the proposed electronic notification requirement is to provide notice to RROTs engaging in transactions off the Exchange's physical trading floor. 8 *See* Securities Exchange Act Release No. 51246 (February 24, 2005), 70 FR 10425 (March 3, 2005). viii. *950—ANTE.* Rule 950—ANTE

(b)currently provides rules for priority and parity at the opening. Paragraph (b)(i) specifically provides that after the opening, an options specialist acting as principal may only retain priority over, or be on parity with, orders for the accounts of broker-dealers, but may not retain priority over, or be on parity with, off-floor orders for the accounts of public customers. The Exchange proposes to amend 950—ANTE (b)(i) to identify RROTs as broker-dealers. Commentary .01 of paragraph

(c)currently provides that after the opening, an options specialist acting as principal, may only retain priority over or be on parity with orders for the accounts of broker-dealers but may not retain priority over or be on parity with off-floor orders for the accounts of public customers. Commentary .02 of paragraph

(c)provides that options orders for the accounts of broker-dealers may only retain priority over or be on parity with orders for the accounts of broker-dealers but may not retain priority over or be on parity with off-floor orders for the accounts of public customers. The proposed amendments to Commentaries .01 and .02 of paragraph

(c)also categorize an RROT as a broker-dealer. Finally, the proposed amendment to Commentary .02 of paragraph

(l)will require RROTs to compete with one another to improve the quoted markets in all series of option classes in which they trade. ix. *951—ANTE.* Rule 951—ANTE currently governs the bids and offers of options contracts. Commentary .01 to Rule 951—ANTE provides that if the bid or offer of a specialist or ROT, locks or crosses the ABBO, the ANTE System will revise the bid by one or more minimum price variations lower than the bid submitted, or revise the offer by one or more minimum price variations higher than the offer submitted, so that the bid or offer submitted does not lock or cross the ABBO provided. 9 The Exchange proposes to amend Commentary .01 to Rule 951—ANTE to apply to RROTs. 9 The ANTE System collects all of the quotes being calculated by the specialist and each ROT, and determines the best bid and best offer for dissemination pursuant to the firm quote rule, as the Amex Best Bid and Offer (“ABBO”). The ANTE System never allows a locked or crossed market to occur in the ABBO. If a quote is submitted that would lock or cross the ABBO, the ANTE System will revise the bid or the offer by the minimum price variant(s) so that the ABBO is not locked or crossed. x. *958—ANTE.* Rule 958—ANTE governs ANTE options transactions of registered options traders. Pursuant to 958—ANTE (a), ROTs are assigned classes of options in accordance with the existing procedures set forth in Commentary .05. Rule 958—ANTE

(a)also provides that any option transactions initiated by a ROT on the Floor and through the facilities of the Exchange for any account in which the ROT has an interest would be in such assigned classes. Paragraph

(b)of Rule 958—ANTE provides that transactions of a ROT must be reasonably calculated to contribute to the maintenance of a fair and orderly market, and no ROT should enter into transactions or make bids or offers that are inconsistent with such a course of dealings. Paragraph

(c)of Rule 958—ANTE provides that whenever ROTs participate in the trading of options in other than a floor brokerage capacity, or are called upon by a floor official or floor broker acting in an agency capacity, they would be required to make competitive bids and offers necessary, in a market making capacity, to contribute to the maintenance of a fair and orderly market. The Exchange proposes to apply paragraphs (a),

(b)and

(c)of 958—ANTE to RROTs as they currently apply to ROTs. Paragraph

(h)currently provides that ROTs may choose to use an Exchange provided or proprietary automated quote system to calculate and disseminate quotes, or join the specialist's disseminated quotation in some or all of his assigned classes or series. Paragraph

(h)further provides that ROTs must be physically present at the specialist's post on the floor of the Exchange where that options class is traded. Under the Exchange's proposal, RROTs would also use an authorized or proprietary automated quote system to calculate and disseminate quotes. RROTs may not use the “join quote” feature in ANTE. The Exchange believes that requiring RROTs to submit their own quotes in options that an RROT is assigned will serve to further foster active quote competition. Finally, the Exchange proposes that RROTs, as well as ROTs and specialists, must compete with each other to improve the quoted markets in all series of option classes which they trade. The Exchange further proposes to remove the in-person requirement for RROTs as provided in paragraph

(h)because the RROT may not be physically present. xi. *958A—ANTE.* Rule 958A—ANTE, the Exchange's Firm Quote Rule, currently provides that ROTs, when inputting their own quotes through an Exchange provided or proprietary automated quote calculation system, would each be considered a responsible broker or dealer for their bids or offers to the extent of their quotation size. The Exchange proposes to amend Rule 958A—ANTE (a)(ii)(C) to include RROTs as responsible broker-dealers to the extent of their quotation size for the purposes of this rule. 2. Statutory Basis The Exchange believes that the proposed rule change, as amended, is consistent with Section 6(b) of the Act, 10 in general, and furthers the objectives of Section 6(b)(5) of the Act, 11 in particular, in that it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principals of trade, and, in general, to protect investors and the public interest. 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 believes that the proposed rule change will impose no 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 by the Exchange on this proposal. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 35 days of the date of publication of this notice in the **Federal Register** or within such longer period

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

(ii)as to which the Exchange consents, the Commission will:

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

(B)Institute proceedings to determine whether the proposed rule change, as amended, should be disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change, as amended, is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to rule-comments@sec.gov. Please include File Number SR-Amex-2005-100 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-Amex-2005-100. 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, Station Place, 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 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-2005-100 and should be submitted on or before March 3, 2006. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 12 12 17 CFR 200.30-3(a)(12). Nancy M. Morris, Secretary. [FR Doc. E6-1832 Filed 2-9-06; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-53232; File No. SR-Amex-2006-008] Self-Regulatory Organizations; American Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to the Specialist Transaction Fee February 6, 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 February 1, 2006, the American Stock Exchange LLC (“Amex” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the Amex. The Exchange has designated this proposal as one establishing or changing a due, fee or other charge imposed by the Exchange under section 19(b)(3)(A), 3 and Rule 19b-4(f)(2) thereunder, 4 which renders the proposal effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 15 U.S.C. 78s(b)(3)(A). 4 17 CFR 240.19b-4(f)(2). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to revise its Specialist Transaction Fee. The text of the proposed rule change is available on the Amex's Web site at *http://www.amex.com* , the Office of the Secretary, the Amex, 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, Amex 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. 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 Effective with transactions beginning October 3, 2005, the Exchange increased the Specialist Transaction Fee from $.00005 to $.00007 of the total value of a specialist's transactions in equities. 5 After further consideration, analysis of the impact of the fee increase and discussions with its members, the Exchange proposes to rollback the increase in the Specialist Transaction Fee to $.00005. The increase in the Specialist Transaction Fee implemented in October 2005 was part of a number of changes to the Equity Fee Schedule, the purpose of which was to generate additional revenue for the Exchange and to create additional incentives for market participants to send order flow to the Amex. For market participants other than the specialists, the changes in the aggregate contributed to the increase in revenue for the Exchange. The changes to fees imposed on the specialists, which also generated an increase in revenue, included an increase in the Specialist Transaction Fee and the elimination of a rarely used exemption from the Transaction Fee for trades in paired securities. 5 *See* Securities Exchange Act Release No. 52701 (October 28, 2005), 70 FR 67504 (November 7, 2005) (notice of filing and immediate effectiveness of SR-Amex 2005-101). According to the Exchange, the Specialist Transaction Fee is based on the dollar value of equity shares executed by the specialist. As a result, specialists trading high-priced and/or high volume securities account for a disproportionate amount of the revenue generated by the fee. The recent increase in the fee exacerbated this result. Rolling back the increase will alleviate, in part, this disproportionate impact on certain specialists. The rollback of the increase in the Specialist Transaction Fee will result in a decrease in the additional revenues expected to be generated by the recent changes to the Equity Fee Schedule. The Exchange represents that this decrease will not result in an increase or other revisions to fees charged to other market participants. Notwithstanding the proposed reduction in the Specialist Transaction Fee, 6 the Exchange believes that the recent changes to the Equity Fee Schedule continue to be an equitable allocation of reasonable fees among its members, issuers and other users of its facilities. 6 Amex clarified that although it refers in this sentence to the proposed rollback of the Specialist Transaction Fee from $.00007 to $.00005 as a “rebate,” it is more accurately characterized here as a “reduction” in the Specialist Transaction Fee. Telephone conversation between Claire McGrath, Senior Vice President and General Counsel, Amex, and Johnna B. Dumler, Attorney, Division of Market Regulation, Commission, on February 6, 2006. In a separate filing, submitted pursuant to section 19(b)(2) of the Act, 7 the Exchange is also requesting approval to rebate the amount of increase in the Specialist Transaction Fee collected since October 3, 2005. 8 7 15 U.S.C. 78s(b). 8 *See* SR-Amex-2005-130. 2. Statutory Basis The Amex 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)(4) of the Act, 10 in particular, in that it is designed to assure the equitable allocation of reasonable dues, fees and other charges among its members and issuers and other persons using its facilities. Specifically, the Exchange is proposing to eliminate a recent fee increase that it believes disproportionately impacts some members. 9 15 U.S.C. 78f(b). 10 15 U.S.C. 78f(b)(4). B. Self-Regulatory Organization's Statement on Burden on Competition The Amex does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others No written comments were solicited or received with respect to the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective pursuant to section 19(b)(3)(A) of the Act 11 and subparagraph (f)(2) of Rule 19b-4 thereunder, 12 since it establishes or changes a due, fee or other charge imposed by the Exchange. 11 15 U.S.C. 78s(b)(3)(A). 12 17 CFR 240.19b-4(f)(2). 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 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 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-2006-008 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-Amex-2006-008. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Section. Copies of such filing also will be available for inspection and copying at the principal office of the 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 No. SR-Amex-2006-008 and should be submitted on or before March 3, 2006. 13 17 CFR 200.30-3(a)(12). For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 13 Jill M. Peterson, Assistant Secretary. [FR Doc. E6-1843 Filed 2-9-06; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-53222; File No. SR-CBOE-2005-60] Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Order Granting Approval of Proposed Rule Change and Amendment No. 1 Thereto and Notice of Filing and Order Granting Accelerated Approval to Amendment No. 2 to the Proposed Rule Change Relating to an Automated Improvement Mechanism February 3, 2006. I. Introduction On August 5, 2005, the Chicago Board Options Exchange, Incorporated (“CBOE” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”), pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) 1 and Rule 19b-4 thereunder, 2 a proposed rule change to adopt an electronic price improvement mechanism. On September 2, 2005, the Exchange filed Amendment No. 1 to the proposed rule change. 3 The proposed rule change, as amended, was published for comment in the **Federal Register** on October 18, 2005. 4 On October 12, 2005, the Exchange filed Amendment No. 2 to the proposed rule change. 5 The Commission received two comment letters with respect to the amended proposal, 6 and on December 2, 2005, the Exchange filed its response to the comment letters. 7 This order approves the proposed rule change as amended by Amendment No. 1, notices and solicits comments on Amendment No. 2, and grants accelerated approval to Amendment No. 2. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 Amendment No. 1 superseded and replaced the proposed rule filing in its entirety. 4 *See* Securities Exchange Act Release No. 52577 (October 7, 2005), 70 FR 60586. 5 In Amendment No. 2, the CBOE proposes to amend proposed CBOE Rule 6.74A(b)(1)(E) so that members, not floor brokers, may submit RFR responses on behalf of customer orders resting at the top of the Exchange book. Amendment No. 2 also would amend proposed CBOE Rule 6.74A.06 with respect to information that the Exchange may provide to the Commission regarding a pilot program that would end on July 18, 2006. 6 *See* letters to Jonathan G. Katz, Secretary, Commission, from Matthew B. Hinerfeld, Managing Director & Deputy General Counsel, Citadel Investment Group, LLC on behalf of Citadel Derivatives Group LLC (“Citadel”), dated November 8, 2005 (“Citadel Letter”) and from Annah Y. Kim, Chief Regulatory Officer, Boston Options Exchange Regulation (“BOX”), dated November 10, 2005 (“BOX Letter”). Citadel also commented on the American Stock Exchange LLC's (“Amex”) proposal to implement the Amex New Trading Environment Price Improvement Auction (“PIA”) (File No. SR-Amex-2004-107). This Order and Notice does not address the Amex proposal. A discussion of the comment letters is provided in section III below. 7 *See* letter from Angelo Evangelou, Managing Senior Attorney, Legal Division, CBOE, to Jonathan G. Katz, Secretary, Commission, dated December 2, 2005 (“Response Letter”). II. Description of the Proposal The Exchange proposes to establish an electronic auction system (Automated Improvement Mechanism or “AIM”), which would expose certain orders electronically in an auction to provide such orders with the opportunity to receive an execution at an improved price. The AIM auction is available only for orders that an Exchange member represents as an agent (“Agency Order”). To initiate the electronic auction, the Exchange member (“Initiating Member”) who represents an Agency Order would submit the Agency Order and a second order for the same size as the Agency Order (on the opposite side of the Agency Order) into the auction. If the Agency Order is for less than 50 contracts, the Initiating Member must stop the entire Agency Order as principal or with a solicited order at the better of

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

(B)the Agency Order's limit price (if the Agency Order is a limit order). If the Agency Order is for 50 contracts or more, the Initiating Member must stop the entire Agency Order as principal or with a solicited order at the better of the NBBO or the Agency Order's limit price (if the Agency Order is a limit order). Thereafter, other Exchange participants would compete with the Initiating Member's second order to execute against the Agency Order. The second order submitted by the Initiating Member could be an order for the principal account of the Initiating Member (“principal order”) or an order solicited by the Initiating Member to trade with another member or a non-member customer or broker-dealer (“solicited order”). 8 Under the proposal, the Initiating Member may enter the second order in one of two formats:

(1)At a specified single price or

(2)with a non-price specific commitment to match as principal the price and size of all auction responses (“Auto-Match”). If the Initiating Member enters the second order with Auto-Match, then the Initiating Member would not have control over the prices at which it receives an allocation at the conclusion of the auction. After the commencement of an auction, the Initiating Member would not be able to cancel the auction. 8 *See* CBOE Rule 6.9 for a definition of solicited order. Upon receipt of an Agency Order and the second order, the Exchange would commence the auction by issuing a request for responses (“RFR”) detailing the side and size of the Agency Order. 9 The auction would last for a random time period, from 3 seconds to 5 seconds, determined by the Exchange's system. During such time period, any Exchange market maker with an appointment in the options class may submit RFR responses (including multiple responses). In addition, any Exchange member acting as an agent for customer orders resting at the top of the Exchange's book opposite the Agency Order, may submit RFR responses on behalf of such customer orders (such RFR responses may not exceed the size of the customer orders). 10 The RFR responses must specify price and size, and may not cross the Exchange's quote on the opposite side of the market as the Agency Order. All RFR responses would be “blind,” *i.e.* , the RFR responses would not be visible to any other participants in the auction. Under the proposal, market makers may modify or cancel RFR responses prior to the conclusion of the auction. The Exchange may set the RFR response minimum price increment at no less than one cent. 9 The Exchange would send each RFR to all members electing to receive RFRs ( *i.e.* , those members who have established the necessary systems connectivity to receive RFRs). Thus, an Exchange member's election to receive RFRs would not be on an auction-by-auction basis. 10 *See* Amendment No. 2, *supra* note 5. Normally, the auction would end at the conclusion of the random 3 seconds to 5 seconds time period. However, under the proposal, the following events could prematurely end the auction:

(1)If the Exchange Hybrid System receives an unrelated order in the same series as the Agency Order and such unrelated order is marketable against the Exchange's disseminated quote (when the quote is the NBBO) or the RFR responses;

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

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

(4)pursuant to a pilot program that would expire on July 18, 2006, any time there is a market maker to market maker quote lock on the Exchange in accordance with CBOE Rule 6.45A(d). 11 11 In connection with this pilot program, pursuant to proposed CBOE Rule 6.74A.06, the Exchange would provide the Commission data (on a confidential basis) regarding the frequency of early terminations of the auction, and also the frequency of early terminations pursuant to this provision that result in favorable pricing for the Agency Order. *See* Amendment No. 2, *supra* note 5. At the conclusion of the auction, the Agency Order would be allocated in accordance with applicable matching algorithm rules in effect for such option class subject to the following provisions. First, no participation entitlement would apply with respect to an AIM execution. Second, public customer orders in the Exchange book would have priority. Third, if the Exchange received an unrelated market order or marketable limit order on the opposite side of the Agency Order which prematurely ended the auction, such unrelated order would trade against the Agency Order at the midpoint of the best RFR response and the NBBO on the other side of the market (rounded towards the disseminated quote when necessary). 12 Fourth, if the Exchange received an unrelated non-marketable limit order on the opposite side of the Agency Order which prematurely ended the auction, such unrelated limit order would trade against the Agency Order at the midpoint of the best RFR response and the unrelated order's limit price (rounded towards the unrelated order's limit price when necessary). 13 Fifth, if the best price equals the Initiating Member's single-price submission, the Initiating Member's single-price submission would be allocated the greater of one contract or 40% of the order. However, if only one market maker matches the Initiating Member's single price submission, then the Initiating Member would be allocated 50% of the order. Sixth, if the Initiating Member selected Auto-Match for the second order, then the Initiating Member would be allocated its full size at each price point until a price point is reached where the balance of the order can be fully executed. At such price point, the Initiating Member would be allocated the greater of one contract or 40% of the remainder of the order. Seventh, if the auction does not result in price improvement over the Exchange's disseminated price at the commencement of the auction, resting unchanged quotes or orders that were disseminated at the best price before the auction started would have priority, after any public customer order priority and the Initiating Member's priority (40%) have been satisfied. Any unexecuted balance on the Agency Order would be allocated to RFR responses pursuant to the matching algorithm except that the RFR responses would be capped to the size of the unexecuted balance and the Initiating Member may not participate on any such balance unless the Agency Order would otherwise go unfilled. Finally, if the final auction price locks a customer order on the book on the same side as the Agency Order, then unless there is sufficient size in the RFR responses to execute both the Agency Order and the booked customer order (in which case they would both execute at the final auction price), the Agency Order would execute against the RFR responses at one minimum RFR response increment worse than the final Auction price against the auction participants that submitted the final auction price, and any balance would trade against the customer order in the book at such order's limit price. 12 For example, if an auction is underway for an Agency Order to buy and the CBOE quote (as well as the NBBO) is 1-1.15, with the RFRs at 1.12 and an unrelated market order to sell is received by the Exchange, the unrelated order would execute against the Agency Order at 1.06 (the midpoint of the best RFRs and the NBBO on the other side of the market, *i.e.* , the best bid). 13 For example, using the same scenario as above except the unrelated order is a non-marketable limit order to sell at 1.10, the unrelated order would execute against the Agency Order at 1.11 (the midpoint of the best RFRs (1.12) and the unrelated order's limit price (1.10)). If an unexecuted balance remains on the RFR responses after the Agency Order has been executed and such balance could trade against any unrelated order(s) that caused the auction to conclude, then the RFR response balance would trade against the unrelated order(s). The CBOE proposes several interpretations and policies to proposed CBOE Rule 6.74A. First, an Initiating Member would be permitted to use the auction only when there is a genuine intention to execute a bona fide transaction. Second, a pattern or practice of submitting unrelated orders that cause an auction to prematurely conclude would be deemed conduct inconsistent with just and equitable principles of trade and a violation of CBOE Rule 4.1 and other Exchange Rules. Third, initially, and during a Pilot Period, which would end on July 18, 2006, there would be no minimum size requirement for orders to be eligible for the auction. During this Pilot Period, the Exchange would submit on a confidential basis certain data, periodically as required by the Commission, to provide supporting evidence that, among other things, there is meaningful competition for all size orders and that there is an active and liquid market functioning on the Exchange outside of the auction mechanism. Fourth, any solicited orders submitted by the Initiating Member to trade against the Agency Order would not be permitted to be for the account of a market maker assigned to the option class. Fifth, the Exchange would communicate any Exchange determinations pursuant to the proposed rule such as eligible classes, order size parameters, and the minimum price increment for RFR responses, in a Regulatory Circular. Finally, proposed CBOE Rule 6.74A(b)(2)(E), which would end the auction due to a lock on the CBOE market, would operate as a pilot program until July 18, 2006. III. Discussion and Commission Findings After careful review of the amended proposal and consideration of the comment letters and the Response Letter, the Commission finds that the proposed rule change, as amended, to establish rules for the implementation of the AIM auction, is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange 14 and, in particular, the requirements of section 6 of the Act. 15 Specifically, as discussed in detail below, the Commission finds that the proposal is consistent with section 6(b)(5) of the Act, 16 which requires, in part, that the rules of an exchange be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, and processing information with respect to, and facilitating transactions in securities, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. Section 6(b)(5) of the Act 17 also requires that the rules of an exchange not be designed to permit unfair discrimination among customers, issuers, brokers, or dealers. 14 In approving this proposal, the Commission has considered the proposed rule change's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). 15 15 U.S.C. 78f. 16 15 U.S.C. 78f(b)(5). 17 *Id.* The Commission believes that approving the Exchange's proposal to establish the AIM should confer benefits to the public by increasing competition between and among the options exchanges, resulting in better prices and executions for investors. The Commission also believes that access to the AIM auction for those who may wish to compete for an Agency Order should be sufficient to provide opportunities for a meaningful, competitive auction. The Commission therefore finds that for the reasons discussed below, the Exchange's proposal is consistent with the Act. A. Internalization In its comment letter, Citadel asks the Commission to reject the proposal because the AIM auction and other similar auctions encourage internalization, which Citadel believes would hinder price discovery and harm investors with worse prices. 18 Citadel states that these auctions harm the options markets and investors by hindering price discovery, discouraging aggressive quoting, eliminating substantial price improvement by diminishing the ability of customers to interact with one another; and undercutting customer limit orders. 19 Therefore, Citadel urges the Commission to reevaluate the auctions currently in operation 20 and determine whether such auctions should operate. 21 18 *See* Citadel Letter, *supra* note 6, at p.1. 19 *Id.* at pp. 3-4. 20 *Id.* at p. 6. The Boston Options Exchange (“BOX”), a trading facility of the Boston Stock Exchange, Incorporated (“BSE”), operates an auction known as the PIP, *see* Securities Exchange Act Release No. 49068 (January 13, 2004), 69 FR 2775 (January 20, 2004) (Order approving SR-BSE-2002-15 to establish trading rules for the BOX facility (“BOX Order”)), and the International Securities Exchange, Inc. (“ISE”) operates an auction known as the PIM, *see* Securities Exchange Act Release No. 50819 (December 8, 2004), 69 FR 75093 (December 15, 2004) (Order approving SR-ISE-2003-06 to adopt rules for the PIM). 21 *See* Citadel Letter, *supra* note 6, at p.1. In the Response Letter, the Exchange states that it should be allowed to adopt the AIM auction for competitive reasons, since other options exchanges have similar auctions, and if the Commission were to take any actions with respect to these auctions, such actions should affect the options exchanges equally at the same time. 22 22 *See* Response Letter, *supra* note 7, at pp. 1-2. After considering the Citadel Letter and the Response Letter, the Commission believes that the Citadel Letter does not raise any novel regulatory concerns that would preclude the approval of the proposed rule change. The Commission believes that the proposed CBOE AIM auction provides limitations on internalization comparable to the other exchanges' rules that guarantee members the right to internalize their customers' orders. Specifically, like the auction rules previously approved by the Commission, the proposed AIM rules require the Initiating Member to expose the Agency Order in the auction before the Initiating Member may trade with the Agency Order. B. Solicitation Process Proposed CBOE Rule 6.74A permits a member that represents an Agency Order to execute that Agency Order in the AIM auction against principal interest or against a solicited order. BOX argues that the proposal should define how the Initiating Member solicits the other side of the Agency Order. BOX contends that the proposed rules need to clarify the parameters for a market maker and the Initiating Member's ability to access customer information that may be derived from solicited orders and agency orders. BOX notes that the Commission required BOX to codify procedural protections on BOX's Directed Order process (which it termed its version of a solicitation process), and BOX believes that it would be placed at a competitive advantage if the Commission does not require CBOE to adopt similar procedural protections. Finally, BOX notes that brokers in the options industry generally limit solicitation of large customer orders ( *e.g.* , greater than 300 contracts). BOX believes that the Exchange should clarify why the proposal would permit solicitation of orders of all sizes, particularly for orders of less than 50 contracts. 23 23 *See* BOX Letter, *supra* note 6, at pp. 4-5. In the Response Letter, the Exchange notes that solicited orders are processed on the floor of all floor-based options exchanges. The Exchange contends that ISE's PIM is identical to the proposed rule change in that the PIM auction rules allow the initiating member to pair the agency order with a facilitation order or a solicitation order. Further, CBOE notes that ISE's rules do not contain elaborate procedures regarding the solicitation process. The Exchange further notes that unlike the BOX Directed Order process, the AIM proposal provides that solicited orders submitted by the Initiating Member may not be for the account of a market maker assigned to the option class. Thus, the CBOE contends that any comparison between the AIM auction and BOX's Directed Order process is not relevant. Finally, with respect to the size of a solicited order, the Exchange believes that unless other options exchanges adopt size limits, it would be inappropriate for the Commission to require that the CBOE impose such size limitations on solicited orders for the AIM auction. 24 24 *See* Response Letter, *supra* note 7, at pp. 4-5. The Commission believes that the proposal regarding solicitation process is sufficiently clear. The Commission notes that CBOE Rule 6.9 limits solicitation from members or non-member customers or broker-dealers. 25 In addition, CBOE Rule 4.1 prohibits members from engaging in acts or practices inconsistent with just and equitable principles of trade. 26 The Commission further notes that CBOE has proposed an additional limitation in CBOE Rule 6.74A.04 that would require that any solicited orders submitted by the Initiating Member to trade against the Agency Order not be for the account of a Market-Maker assigned to the option class. The Commission believes that these provisions should permit members to solicit, in advance, the other side of an order, while providing for adequate disclosure of such orders to limit manipulation and abuse. 25 CBOE Rule 6.9. 26 CBOE Rule 4.1. C. Competition in the AIM Proposed CBOE Rule 6.74A(a)(4) would require that there be at least three Market Makers quoting in a relevant series at the time an Initiating Member submits its Agency Order into the AIM. 27 The Commission believes that this requirement should improve the opportunity for an Agency Order to be exposed to a competitive auction. 28 27 *See also* ISE Rule 723(b)(1) and BOX Rules Chapter V, Sec. 18(e). 28 *See* BOX Order, *supra* note 20. BOX questions how public customers may participate in the RFR. 29 The Exchange proposes to clarify in Amendment No. 2 that members acting as agent for orders resting at the top of the Exchange's book opposite the Agency Order may submit responses to the RFR on behalf of such orders. 30 In its Response Letter, the Exchange further explains that at the time customer orders are submitted to the member representing such orders, the member and the customer would discuss price improvement parameters, and the CBOE member representing customer orders would actually represent those customer orders during an AIM auction. 31 Based on the Exchange's representations, the Commission believes that public customer access to the AIM auction should be comparable to customers' access to open outcry auctions on the current floor-based exchanges. 29 *See* BOX Letter, *supra* note 6, at p. 5. 30 *See* Amendment No. 2, *supra* note 5. 31 *See* Response Letter, *supra* note 7, at p. 5. D. Duration of the AIM The CBOE proposes that the duration of each RFR period be for a random time period determined by the system that would not be less than 3 seconds and would not exceed 5 seconds. 32 The Commission believes that a RFR period between 3 and 5 seconds randomly determined by the Exchange's system should afford electronic crowds sufficient time to respond to, and compete for, Agency Orders submitted by an Initiating Member. The Commission expects that electronic systems should be readily available to CBOE members to allow them to respond to the RFR broadcasts. 32 The AIM would end prior to the expiration of the RFR period under certain circumstances. *See* proposed CBOE Rule 6.74A(b)(2) and discussion in text accompanying notes 33-35. E. Termination of Auction by Unrelated Orders As proposed, the AIM would end prematurely under certain circumstances: 33

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

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

(4)pursuant to a pilot program that would expire on July 18, 2006, any time there is a market maker to market maker quote lock on the Exchange in accordance with CBOE Rule 6.45A(d). 33 With respect to the same series, no AIM auction will run simultaneously with another AIM auction, nor will AIM auctions be permitted to queue or overlap in any manner. *See* proposed CBOE Rule 6.74A(b). BOX argues that the termination of the auction by an unrelated non-marketable limit order in the same series as the Agency Order and on the opposite side of the market could expose the AIM auction to manipulation. BOX believes the proposal is unclear as to why such orders should terminate the auction, unless they are for the full size of the Agency Order; BOX notes that other similar auction systems, such as the systems of BOX and ISE, treat such orders as price improvement orders and argues that categorizing such orders as price improvement orders would increase the number of RFR responses and maximize price improvement potential in the AIM auction. 34 34 *See* BOX Letter, *supra* note 6, at p. 3. In the Response Letter, the Exchange asserts that both the unrelated non-marketable limit order and the Agency Order should be provided with price improvement (rather than the Agency Order only as provided in the BOX PIP and ISE PIM). The Exchange agreed with BOX that early termination of the auction for the purpose of manipulating the market would be inappropriate, and noted that according to proposed CBOE Rule 6.74.02, a pattern of submitting unrelated orders to end the auction prematurely would be a violation of Exchange rules and would be deemed conduct inconsistent with just and equitable principles of trade. 35 35 *See* Response Letter, *supra* note 7, pp. 3-4. The Commission believes that the treatment of unrelated non-marketable orders on the opposite side of the Agency Order is consistent with the requirements of the Act. The Exchange's proposal provides that the unrelated order and the Agency Order would receive price improvement, and the Commission believes that allowing both orders to be eligible for price improvement should benefit investors and customers. In addition, the Exchange's proposed interpretation would prohibit Exchange members from deliberately submitting orders to end the AIM auction prematurely. The Commission, however, expects the Exchange to analyze the impact of unrelated orders on the AIM auction to ensure that Agency Orders are not being deprived of a full opportunity for price improvement by the premature conclusion of an AIM auction. F. Allocation at the Conclusion of the Auction 1. Order Matching Allocation Algorithms At the conclusion of the auction, the Agency Order would be allocated in accordance with applicable matching algorithm rules in effect for such class subject to certain conditions. 36 BOX notes that proposed CBOE Rule 6.74A(b)(3) does not specify the matching algorithm as to how orders will be allocated, 37 and in its Response Letter, the Exchange has clarified that the matching algorithms are defined in CBOE Rule 6.45A for equity options and CBOE Rule 6.45B for index options. 38 The Commission believes that the matching algorithm set forth in these rules is sufficiently clear regarding how orders are to be allocated in the AIM auction. 36 *See* proposed CBOE Rule 6.74A(b)(3). The Commission notes that to be consistent with the requirements of section 11(a) of the Exchange Act, 15 U.S.C. 78k(a), and Rule 11a1-1(T) under the Act, 17 CFR 240.11a1-1(T), Exchange Members must yield priority in the AIM auction to all non-Member orders, unless another exception to Section 11(a) applies. 37 *See* BOX Letter, *supra* note 6, at p. 4. 38 *See* Response Letter, *supra* note 7, at pp. 3-4. 2. Auto-Match To initiate the electronic auction, the Initiating Member who represents an Agency Order would submit the Agency Order and also either specify a single-price submission to cross the Agency Order or indicate that it is willing to automatically match as principal the price and size of all auction responses (“Auto-Match”). If the Initiating Member uses the Auto-Match feature, the Initiating Member would not have control over the prices at which it receives an allocation of the Agency Order at the conclusion of the auction. BOX, in its comment letter, argues that the Auto-Match feature of the AIM auction provides unfair competitive advantages to the Initiating Member. BOX contends that since the Exchange system governs the Auto-Match feature, it is likely to confer upon the Initiating Member a technological advantage in the sense that the Initiating Member would have the fastest response time to any competing RFR responses. BOX further contends that the proposal appears to provide the Initiating Member with an automatic “last look” at the best priced RFR response, thereby guaranteeing the Initiating Member an allocation in any auction. BOX also notes that RFR responses would not be visible to other AIM auction participants and believes that as a result, Exchange members would not have sufficient information to make a fully informed decision to compete for the Agency Order. Finally, BOX believes the ability of the Initiating Member to use Auto-Match would provide the Initiating Member an unfair advantage over customer orders and thus raise customer priority concerns. 39 39 *See* BOX Letter, *supra* note 6, at pp. 2, 5. In its Response Letter, the Exchange states that a blind auction is a key component to AIM and that a blind auction would encourage participants to quote their best prices. The Exchange believes that in a blind auction, there is greater incentive for participants to submit their best prices at the outset, whereas in a non-blind auction, participants would need to submit only the minimal amount of improvement. Because AIM is a blind auction, the Exchange adds, it sought to propose a means by which the Initiating Member could still receive a guaranteed participation, *i.e.* , Auto-Match, similar to other mini-auctions, like BOX's PIP. CBOE notes that since PIP is not a blind auction, the initiating member could always configure its system to match the best response. Further, CBOE points out that under the terms of its proposal, when the Initiating Member selects Auto-Match prior to the start of the auction, the available liquidity would be doubled and pricing would be completely out of the Initiating Member's control. Finally, the Exchange states that BOX's argument that Auto-Match would provide the Initiating Member with some sort of technological advantage (in the form of faster response time) over other participants is misleading. The CBOE notes that once Auto-Match is selected (before the auction), the Initiating Member does not respond at all, but instead must honor the prices set forth in the responses received from other participants. 40 40 *See* Response Letter, *supra* note 7, at pp. 2-3. The Commission believes that the Auto-Match feature of the AIM auction would not unfairly discriminate against other AIM participants. The Commission disagrees that a blind auction would necessarily deprive auction participants with information necessary to submit RFR responses. When the AIM system receives an Agency Order, the Exchange would submit a RFR to all participating members detailing the side and size of the Agency Order. RFR responses would not be visible to any of the auction participants, including the Initiating Member. Finally, the Commission believes that an Initiating Member's use of Auto-Match would not have customer priority issues, since the proposal provides that public customer orders in the book must have priority. 41 At the same time, because the Auto-Match feature is offered only to the Initiating Member and would provide the Initiating Member with a guaranteed participation, the Commission believes it is essential that the Exchange provide data on the frequency of use of Auto-Match and its effect on price improvement to permit the Commission to monitor the impact of the proposed rule change on the competitive process. 42 41 *See* proposed CBOE rule 6.74A(b)(3)(B). 42 *See* Section II.G. G. Price Improvement versus Facilitation As discussed above, an Initiating Member who submits an Agency Order into the AIM auction must “stop” the Agency Order as follows:

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

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

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

(2)if the Agency Order is for 50 contracts or more, the Initiating Member must stop the entire Agency Order as principal or with a solicited order at the better of the NBBO or the Agency Order's limit price (if the Agency Order is a limit order). 43 43 *See* proposed CBOE Rule 6.74A(a)(2) and (3). BOX argues that the AIM rules should provide a minimum price improvement over the NBBO for orders of 50 contracts or greater. BOX noted that other auction systems such as ISE's PIM and BOX's PIP initiate auctions for such orders with a required price improvement of at least one cent better than the NBBO. 44 In response, the Exchange, however, points out that all of the options exchanges, other than BOX, allow guaranteed facilitation participation at the NBBO for orders of 50 contracts or greater. 45 44 *See* BOX Letter, *supra* note 3. 45 *See* Response Letter, *supra* note 7, at p. 4. The Commission believes that stopping an Agency Order of 50 contracts or greater at the better of the NBBO or the Agency Order's limit price is consistent with the requirements of the Act. The Commission notes that it has approved rules of other options exchanges that permit facilitation at the NBBO for orders of 50 contracts or greater. 46 The Commission further notes that unlike the facilitation mechanisms of some exchanges, once the Initiating Member has submitted an Agency Order and designated a single-price submission or auto-match into the AIM auction, it may not modified or cancelled. Therefore, the Agency Order submitted to the AIM auction is guaranteed an execution price of at least the NBBO and, moreover, is given the opportunity for price improvement beyond the NBBO. 46 *See e.g.,* Rule 6.47(b)(4) of the Pacific Exchange, Inc., ISE Rule 716(d). H. No Minimum Size Requirement for AIM Like the BOX's PIP auction and the ISE's PIM auction, the AIM auction would be available for orders of fewer than 50 contracts. Under the Exchange's proposal, there would be no minimum size requirement for orders entered into the AIM, for a pilot period expiring on July 18, 2006. 47 47 The July 18, 2006 pilot expiration date corresponds to the expiration of a similar pilot program for the BOX's PIP, and ISE's PIM. *See* BOX Rules, Chapter V, Sec. 18, Supplementary Material .01, and ISE Rule 723, Supplementary Material .03. The Commission believes that the Exchange's proposal should provide small customer orders with the opportunity for price improvement, and is consistent with the Act. In particular, any Agency Order for less than 50 contracts that is entered into the AIM is guaranteed an execution at the end of the auction at a price at least a penny better than the NBBO. The Commission will evaluate the AIM auction during the Pilot Period to determine whether it would be beneficial to customers and to the options market as a whole to approve any proposal requesting permanent approval to permit orders of fewer than 50 contracts to be submitted to the AIM auction. In addition, the Commission will examine the data submitted by the Exchange with respect to situations in which the AIM auction is terminated prematurely by an unrelated order. To aid the Commission in its evaluation, the CBOE represents that it will provide the following information each month:

(1)The number of orders of fewer than 50 contracts entered into the AIM auction;

(2)The percentage of all orders of fewer than 50 contracts sent to CBOE that are entered into CBOE's AIM auction;

(3)The percentage of all CBOE trades represented by orders of fewer than 50 contracts;

(4)The percentage of all CBOE trades effected through the AIM auction represented by orders of fewer than 50 contracts;

(5)The percentage of all contracts traded on CBOE represented by orders of fewer than 50 contracts;

(6)The percentage of all contracts effected through the AIM auction represented by orders of fewer than 50 contracts;

(7)The spread in the option, at the time an order of fewer than 50 contracts is submitted to the AIM auction;

(8)The number of orders of 50 contracts or greater entered into the AIM auction;

(9)The percentage of all orders of 50 contracts or greater sent to CBOE that are entered into CBOE's AIM auction;

(10)The spread in the option, at the time an order of 50 contracts or greater is submitted to the AIM auction;

(11)Of AIM trades for orders of fewer than 50 contracts, the percentage done at the NBBO plus $.01, plus $.02, plus $.03, etc.;

(12)Of AIM trades for orders of 50 contracts or greater, the percentage done at the NBBO plus $.01, plus $.02, plus $.03, etc.;

(13)The number of orders submitted by Exchange members when the spread was $.05, $.10, $.15, etc. For each spread, specify the percentage of contracts in orders of fewer than 50 contracts submitted to CBOE's AIM that were traded by:

(a)the Exchange member that submitted the order to the AIM;

(b)CBOE Market Makers assigned to the class;

(c)other CBOE members;

(d)Public Customer Orders; and

(e)unrelated orders (orders in standard increments entered during the AIM auction). For each spread, also specify the percentage of contracts in orders of 50 contracts or greater submitted to CBOE's AIM that were traded by:

(a)the Exchange member that submitted the order to the AIM;

(b)CBOE Market Makers assigned to the class;

(c)other CBOE members;

(d)Public Customer Orders; and

(e)unrelated orders (orders in standard increments entered during the AIM auction);

(14)The number of times that a market or marketable limit order in the same series on the same side of the market as the Agency Order prematurely ended the AIM auction, and the number of times such orders were entered by the same (or affiliated) firm that initiated the AIM auction that was terminated;

(15)The percentage of AIM early terminations due to the receipt of a market or marketable limit order in the same series on the same side of the market that occurred within a 1/2 second of the start of the AIM auction; the percentage that occurred within one second of the start of the AIM auction; the percentage that occurred within 1 1/2 second of the start of the AIM auction; the percentage that occurred within 2 seconds of the start of the AIM auction; the percentage that occurred within 2 1/2 seconds of the AIM auction; and the average amount of price improvement provided to the Agency Order where the AIM auction is terminated early at each of these time periods;

(16)The number of times that a market or marketable limit order in the same series on the opposite side of the market as the Agency Order prematurely ended the AIM auction and at what time the unrelated order ended the AIM auction, and the number of times such orders were entered by the same (or affiliated) firm that initiated the AIM auction that was terminated;

(17)The percentage of AIM auction early terminations due to the receipt of a market or marketable limit order in the same series on the opposite side of the market that occurred within a 1/2 second of the start of the AIM auction; the percentage that occurred within one second of the start of the AIM auction; the percentage that occurred within 1 1/2 second of the start of the AIM auction; the percentage that occurred within 2 seconds of the start of the AIM auction; the percentage that occurred within 2 1/2 seconds of the AIM auction; and the average amount of price improvement provided to the Agency Order where the AIM auction is terminated early at each of these time periods;

(18)The number of times that an RFR response matching the Exchange's disseminated quote on the opposite side of the market from the RFR responses prematurely ended the AIM auction and at what time the RFR response ended the AIM auction, and the number of times such orders were entered by the same (or affiliated) firm that initiated the AIM auction that was terminated;

(19)The percentage of AIM auction early terminations due to the receipt of an RFR response matching the Exchange's disseminated quote on the opposite side of the market from the RFR responses that occurred within a 1/2 second of the start of the AIM auction; the percentage that occurred within one second of the start of the AIM auction; the percentage that occurred within 1 1/2 second of the start of the AIM auction; the percentage that occurred within 2 seconds of the start of the AIM auction; the percentage that occurred within 2 1/2 seconds of the AIM auction; and the average amount of price improvement provided to the Agency Order where the AIM auction is terminated early at each of these time periods;

(20)The number of times that a quote lock on the Exchange pursuant to CBOE Rule 6.45A(d) prematurely ended the AIM auction and at what time the quote lock ended the AIM auction, and the number of times such orders were entered by the same (or affiliated) firm that initiated the AIM that was terminated;

(21)With respect to a quote lock on the Exchange pursuant to CBOE Rule 6.45A(d) that has occurred with an Agency Order to buy, the number of times that the quote was locked at the existing best bid and the number of times that the quote was locked at the existing best offer, and the firm that caused the quote lock;

(22)With respect to a quote lock on the Exchange pursuant to CBOE Rule 6.45A(d) that has occurred with an Agency Order to sell, the number of times that the quote was locked at the existing best bid and the number of times that the quote was locked at the existing best offer, and the firm that caused the quote lock;

(23)The frequency with which early termination due to a quote lock on the Exchange pursuant to CBOE Rule 6.45A(d) results in price improvement for the Agency Order; and the average amount of price improvement provided to the Agency Order;

(24)The average amount of price improvement provided to the Agency Order when the AIM auction is not terminated early ( *i.e.* , runs the full three seconds); and

(25)The percentage of all CBOE trades effected through the AIM auction in which the Initiating Member has chosen the Auto-Match feature, and the average amount of price improvement provided to the Agency Order when the Initiating Member has chosen the Auto-Match feature vs. the average amount of price improvement provided to the Agency Order when the Initiating Member has chosen a single-price submission. IV. Solicitation of Comments on Amendment No. 2 Interested persons are invited to submit written data, views and arguments concerning Amendment No. 2, including whether Amendment No. 2 is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov.* Please include File Number SR-CBOE-2005-60 on the subject line. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-CBOE-2005-60. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room. Copies of such filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-CBOE-2005-60 and should be submitted on or before March 3, 2006. V. Accelerated Approval of Amendment No. 2 The Commission finds good cause to approve Amendment No. 2 to the proposed rule change prior to the thirtieth day after the amendment is published for comment in the **Federal Register** pursuant to section 19(b)(2) of the Act. 48 The revisions made to the proposed rule change, as amended, in Amendment No. 2 clarified that Exchange members, when acting as agent for orders resting at the top of the Exchange's book on the other side of the Agency Order, may submit RFR responses on behalf of such orders. In addition, Amendment No. 2 clarified that the Exchange would submit certain data, as required by the Commission, during the Pilot Period and information submitted by the Exchange to the Commission would be on a confidential basis. 48 15 U.S.C. 78s(b)(2). The Commission believes that the proposed changes in Amendment No. 2 are necessary to the proper functioning and implementation of AIM. The Commission believes that the proposed changes in Amendment No. 2 provide a clearer understanding of the operation of AIM and the Pilot Period and raise no new issues of regulatory concern. For these reasons, the Commission believes that accelerated approval of Amendment No. 2 is appropriate. Accordingly, pursuant to section 19(b)(2) of the Act, 49 the Commission finds good cause exists to approve Amendment No. 2 prior to the 30th day after notice of the Amendment is published in the **Federal Register** . 49 15 U.S.C. 78s(b)(2). VI. 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, with section 6(b)(5) of the Act. 50 50 15 U.S.C. 78f(b)(5). In connection with the issuance of this approval order, neither the Commission nor its staff is granting any exemptive or no-action relief from the requirements of Rule 10b-10 under the Act. 17 CFR 240.10b-10. Accordingly, a broker-dealer executing a customer order through the AIM auction will need to comply with all applicable requirements of that Rule. *It is therefore ordered,* pursuant to section 19(b)(2) of the Act, 51 that the proposed rule change (SR-CBOE-2005-60) and Amendment No. 1 thereto, are approved, and that Amendment No. 2 thereto is approved on an accelerated basis, except that

(1)paragraph (b)(2)(E) of CBOE Rule 6.74A is approved on a pilot basis until July 18, 2006; and

(2)there shall be no minimum size requirement for orders entered into the AIM, for a pilot period expiring on July 18, 2006. 51 15 U.S.C. 78s(b)(2). For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 52 52 17 CFR 200.30-3(a)(12). Jill M. Peterson, Assistant Secretary. [FR Doc. E6-1836 Filed 2-9-06; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-53229; File No. SR-CBOE-2006-12] Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Bid/Ask Differentials in CBOE Rule 8.7 February 6, 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 Chicago Board Options Exchange, Incorporated (“CBOE” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. The CBOE has filed this proposal pursuant to Section 19(b)(3)(A)(iii) of the Act 3 and Rule 19b-4(f)(6) thereunder, 4 which renders the proposal effective upon filing with the Commission. 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)(iii). 4 17 CFR 240.19b-4(f)(6). 5 The CBOE has asked the Commission to waive the five-day pre-filing requirement and the 30-day operative delay provided in 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 The CBOE proposes to amend CBOE Rule 8.7, “Obligations of Market Makers,” to modify the bid/ask differential rules for options trading in open outcry and on the CBOE's Hybrid System (“Hybrid”) and Hybrid 2.0 Platform (“Hybrid 2.0”). 6 The text of the proposed rule change appears below. Proposed new language is *italicized;* proposed deletions are bracketed. 6 Hybrid is the CBOE's trading platform that allows individual Market Makers to submit electronic quotes in their appointed classes. Hybrid 2.0 is an enhanced trading platform that allows remote quoting by authorized categories of members. *See* CBOE Rule 1.1(aaa). Rule 8.7—Obligations of Market-Makers Rule 8.7.

(a)No change

(b)Appointment. With respect to each class of option contracts for which he holds an Appointment under Rule 8.3, a Market-Maker has a continuous obligation to engage, to a reasonable degree under the existing circumstances, in dealings for his own account when there exists, or it is reasonably anticipated that there will exist, a lack of price continuity, a temporary disparity between the supply of and demand for a particular option contract, or a temporary distortion of the price relationships between option contracts of the same class. Without limiting the foregoing, a Market-Maker is expected to perform the following activities in the course of maintaining a fair and orderly market: (i)-(iii) No change

(iv)To price options contracts fairly by, among other things, bidding and/or offering *in the following manner:* *(A) Bidding and Offering in Open Outcry. With respect to all option classes traded on the Exchange, bids and offers made in open outcry shall be priced* so as to create differences of no more than $0.25 between the bid and offer for each option contract for which the bid is less than $2, no more than $0.40 where the bid is at least $2 but does not exceed $5, no more than $0.50 where the bid is more than $5 but does not exceed $10, no more than $0.80 where the bid is more than $10 but does not exceed $20, and no more than $1 where the bid is more than $20, provided that the [appropriate Market Performance Committee] *Exchange* may establish differences other than the above for one or more options series. The bid/ask differentials stated above shall not apply to in-the-money series where the *quote width

(i)on the primary market of the* underlying security[ies market] *, or

(ii)calculated by the Exchange or its agent for various indices pursuant to Interpretation .08 of Rule 8.7, as applicable* , is wider than the differentials set forth above. For these series, the bid/ask differential may be as wide as the quotation on the primary market of the underlying security *or calculated by the Exchange or its agent for various indices, as applicable.* *(B) Opening Rotations. The provisions of Rule 8.7(b)(iv)(A) shall apply during the applicable opening rotation employed in Hybrid classes, Hybrid 2.0 classes, and Non-Hybrid and Non-Hybrid 2.0 classes.* ([A] *C* ) *Option Classes Trading on the Hybrid Trading System and Hybrid 2.0 Platform. Except as provided in subparagraphs

(i)and

(ii)below,* [O] *o* ption[s] [on] classes trading on the Hybrid *Trading* [s] *S* ystem *and the Hybrid 2.0 Platform* may be quoted electronically with a difference not to exceed $5 between the bid and offer regardless of the price of the bid. [The $5 quote widths shall only apply to classes trading on the Hybrid system and only following the opening rotation in each security ( *i.e.* , the widths specified in paragraph (b)(iv) above shall apply during opening rotation).] *The provisions of Rule 8.7(b)(iv)(A) shall apply to any* [Q] *q* uotes given in open outcry in Hybrid classes *and Hybrid 2.0 classes* [may not be quoted with $5 widths and instead must comply with the legal width requirements ( *e.g.* , no more than $0.25 between the bid and offer for each option contract for which the bid is less than $2) described in paragraph

(iv)and not subparagraph (iv)(A)]. *i. The $5 bid/ask differential stated in subparagraph

(C)above shall not apply to in-the-money series where the quote width on the primary market of the underlying security, or the quote width calculated by the Exchange or its agent for various indices pursuant to Interpretation .08, is wider than $5. For these series, the bid/ask differential may be as wide as the quote width on the primary market of the underlying security or calculated by the Exchange or its agent, as applicable; and* *ii. The Exchange may establish quote width differences other than as provided in subparagraph

(C)for one or more option series.* (c)-(e) No change. . . . Interpretations and Policies: .01-.13 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 CBOE proposes to make a number of changes to its rules relating to bid/ask differentials as described below, including reorganizing CBOE Rule 8.7(b)(iv) to set forth in separate paragraphs the applicable bid/ask differentials in open outcry, during the opening rotation, and for option classes trading on Hybrid or Hybrid 2.0. CBOE Rule 8.7(b)(iv) establishes maximum bid/ask differentials (also referred to as quote spread requirements) for Market Makers that vary depending upon the price of the option class and the trading platform on which the option class trades ( *e.g.* , Hybrid, Non-Hybrid). For bids and offers in open outcry, the allowable bid/ask differentials are currently no more than $0.25 when the bid is less than $2, no more than $0.40 when the bid is at least $2 but does not exceed $5, no more than $0.50 where the bid is more than $5 but does not exceed $10, no more than $0.80 when the bid is more than $10 but does not exceed $20, and no more than $1 where the bid is more than $20. CBOE Rule 8.7(b)(iv) provides that the Exchange may establish differences other than the above for one or more option series. 7 Additionally, CBOE Rule 8.7(b)(4) provides that the differentials stated above do not apply to in-the-money-series where the underlying securities market is wider than the above; for those series, the differential may be as wide as the quotation on the primary market of the underlying security. With respect to option classes trading on Hybrid or Hybrid 2.0, bids and offers may be quoted electronically with a difference not to exceed $5 following the opening rotation regardless of the price of the bid. 7 The CBOE proposes to amend CBOE Rule 8.7(b)(iv) to substitute the Exchange for the appropriate Market Performance Committee. With respect to the bid/ask differentials in open outcry, the CBOE is proposing to amend CBOE Rule 8.7(b)(iv) to modify the existing allowable bid/ask differentials as follows. The proposed rule change maintains in amended paragraph

(A)of CBOE Rule 8.7(b)(iv) the existing provisions of CBOE Rule 8.7(b)(iv) which allow the bid/ask differentials for in-the-money series to be quoted in open outcry as wide as the quotation in the underlying securities market. Additionally, the Exchange proposes to cross reference in amended CBOE Rule 8.7(b)(iv)(A) the provisions of CBOE Rule 8.7, Interpretation and Policy .08, pertaining to bid/ask differentials for index options as to which the Exchange or its authorized agent calculates bids and asks. 8 Thus, under CBOE Rule 8.7(b)(iv)(A), as amended, the bid/ask differentials for in-the-money series of index options may be as wide as the bid/ask differential calculated by the CBOE or its authorized agent pursuant to CBOE Rule 8.7, Interpretation and Policy .08. 8 CBOE Rule 8.7, Interpretation and Policy .08, provides that the Exchange or its authorized agent may calculate bid/ask values for various indexes for the sole purpose of determining permissible bid/ask differentials on options on those indexes. The proposed rule change also establishes a new paragraph

(B)under CBOE Rule 8.7(b)(iv), which provides that the provisions of CBOE Rule 8.7(b)(iv)(A), as amended, shall apply during the opening rotation in Hybrid classes, Hybrid 2.0 classes, and non-Hybrid and non-Hybrid 2.0 classes. As noted above, CBOE Rule 8.7(b)(iv)(A), as amended, sets forth the permissible bid/ask differentials for trading in open outcry. The CBOE states that new paragraph

(B)of CBOE Rule 8.7(b)(iv) is consistent with the CBOE's existing rules pertaining to the permissible bid/ask differentials that apply during the opening rotation. 9 Thus, according the CBOE, this proposed modification does not make any substantive changes to the CBOE's existing rules relating to the permissible bid/ask differentials during the opening rotation. 9 For example, CBOE Rule 6.2B, “Hybrid Opening System,” provides that in calculating an Expected Opening Price during the opening, the quote of the Designated Primary Market Maker or at least one Market Maker or Lead Market Maker with an appointment in an options class must be present and comply with the legal width quote requirements of current CBOE Rule 8.7(b)(iv). In addition, CBOE Rule 8.7(b)(iv)(A) currently provides that for classes trading on Hybrid, the quote widths in CBOE Rule 8.7(b)(iv) apply during the opening rotation in each security. New paragraph

(C)of CBOE Rule 8.7(b)(iv) contains the permissible quote width differentials that apply to option classes trading on Hybrid and Hybrid 2.0. These quote width differentials were previously contained in CBOE Rule 8.7(b)(iv)(A). New paragraph

(C)makes clear that the quote width differentials that apply to options classes trading on Hybrid are equally applicable to option classes trading on Hybrid 2.0. In addition, proposed new CBOE Rule 8.7(b)(iv)(C)(i) provides that the quote widths for in-the-money series of options classes trading on Hybrid and Hybrid 2.0 may be as wide as the quote width of the underlying security or index reported by the Exchange or its agent, as applicable, when that quote width is greater than $5. The CBOE states that these provisions are identical to International Securities Exchange (“ISE”) Rule 803(b)(4). Additionally, proposed new paragraph

(C)would permit the Exchange to establish permissible quote width differentials other than as provided in CBOE Rule 8.7(b)(iv)(C). For example, the Exchange may determine to grant bid/ask relief in the event of unusual circumstances, such as a pending merger or acquisition of an underlying security, a distribution of a special cash dividend, or other unusual circumstances. The CBOE believes that granting the Exchange the ability to establish quote width differentials greater than $5 in unusual circumstances will have no deleterious effects on average quote widths and will contribute to the maintenance of efficient markets. The CBOE notes that this provision is consistent with ISE Rule 803(b)(4), which grants the ISE the authority to establish quote width differences other than as provided in ISE Rule 803(b)(4). 2. Statutory Basis The CBOE believes that the proposed rule change is consistent with the Act 10 and the rules and regulations under the Act applicable to a national securities exchange and, in particular, the requirements of Section 6(b) of the Act. 11 Specifically, the CBOE believes that the proposed rule change is consistent with the requirements under Section 6(b)(5) 12 of the Act that the rules of an exchange be designed to promote just and equitable principles of trade, to prevent fraudulent and manipulative acts and, in general, to protect investors and the public interest. 10 15 U.S.C. 78a *et seq.* 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 CBOE 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 CBOE neither solicited nor received comments on the proposal. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The CBOE 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 of filing, or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest. Therefore, the foregoing 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 CBOE has asked the Commission to waive the requirement in Rule 19b-4(f)(6)(iii) 15 that the CBOE provide the Commission with written notice of its intention to file the proposed rule change, along with a brief description and the text of the proposed rule change, at least five business days prior to filing the proposal with the Commission. 13 15 U.S.C. 78s(b)(3)(A). 14 17 CFR 240.19b-4(f)(6). 15 17 CFR 240.19b-4(f)(6)(iii). Pursuant to Rule 19b-4(f)(6)(iii) under the Act, a 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 CBOE has asked the Commission to waive the 30-day operative delay and to allow the proposal to become operative upon filing. In this regard, the CBOE states that the proposal raises no unique issues and that it reorganizes CBOE Rule 8.7 to make clear the bid/ask differential provisions that apply in open outcry, during the opening rotation, and to classes trading on Hybrid and Hybrid 2.0. In addition, the CBOE states that new subparagraphs

(i)and

(ii)of CBOE Rule 8.7(b)(iv)(C) are consistent with ISE Rule 803(b)(4). The Commission waives the five-day pre-filing requirement. In addition, the Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest because the proposed changes to CBOE Rule 8.7 are consistent with existing CBOE or ISE rules. 16 In this regard, current CBOE Rule 8.7(b)(iv), which applies to trading in open outcry and which will be renumbered as CBOE Rule 8.7(b)(iv)(A), provides that the bid/ask differential for in-the-money option series may be as wide as the bid/ask differential in the primary market for the underlying security. CBOE Rule 8.7(b)(iv)(A), as amended, extends this principal to in-the-money index option series by allowing the bids/ask differentials for these series to be as wide as the bid/ask differential calculated by the CBOE or its agent. Similarly, current CBOE Rule 8.7(b)(iv)(A), which will be renumbered as CBOE Rule 8.7(b)(iv)(C), provides that the quote widths specified in current CBOE Rule 8.7(b)(iv) apply to Hybrid classes during the opening rotation. New CBOE Rule 8.7(b)(iv)(B) applies these quote widths to the opening rotation in Hybrid classes, Hybrid 2.0 classes, and Non-Hybrid and Non-Hybrid 2.0 classes. The CBOE represents that this modification makes no substantive changes to the CBOE's existing rules relating to permissible bid/ask differentials during the opening rotation. 17 New CBOE Rule 8.7(b)(4)(C)(i), which allows the bid/ask differential for in-the-money series trading on Hybrid and Hybrid 2.0 to be as wide as the quote width on the primary market or, for index options, as wide as the quote width calculated by the CBOE or its agent, is consistent with renumbered CBOE Rule 8.7(b)(iv)(A), as discussed above, and with current ISE Rule 803(b)(4)(i). 18 New CBOE Rule 8.7(b)(4)(C)(ii), allowing the CBOE to establish quote width differentials other than the $5 width provided in CBOE Rule 8.7(b)(4)(C) for Hybrid and Hybrid 2.0 classes, is consistent with current CBOE Rule 8.7(b)(iv) and with ISE Rule 803(b)(4). 19 In addition, new CBOE Rule 8.7(b)(4)(C) makes clear that the $5 bid/ask differential provided in that rule applies to both Hybrid and Hybrid 2.0 option classes. For these reasons, the Commission designates that the proposed rule change become operative as of the date of the filing of the proposal. 16 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. 15 U.S.C. 78c(f). 17 *See also* note 9, *supra.* 18 ISE Rule 803(b)(4)(i) provides that the bid/ask differential for in-the-money series may be as wide as the quotation on the primary market of the underlying security. 19 Current CBOE Rule 8.7(b)(iv), which applies to trading in open outcry, allows the CBOE to establish bid/ask differentials other than those provided in CBOE Rule 8.7(b)(iv) for one or more options series. Similarly, ISE Rule 803(b)(4) allows the ISE to establish bid/ask differentials other than those specified in ISE Rule 803(b)(4) for one or more options series. 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 e-mail to *rule-comments@sec.gov.* Please include File Number SR-CBOE-2006-12 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 No. SR-CBOE-2006-12. 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-CBOE-2006-12 and should be submitted on or before March 3, 2006. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 20 20 17 CFR 200.30-3(a)(12). Jill M. Peterson, Assistant Secretary. [FR Doc. E6-1837 Filed 2-9-06; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-53223; File No. SR-ISE-2006-06] Self-Regulatory Organizations; International Securities Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change and Amendment No. 1 Thereto Relating to Competitive Market Maker Inactivity Fees February 3, 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 23, 2006, the International Securities Exchange, Inc. (“ISE” 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 ISE. On January 31, 2006, the Exchange filed Amendment No. 1 to the proposed rule change. 3 The ISE has designated this proposal as one establishing or changing a due, fee, or other charge imposed by a self-regulatory organization pursuant to Section 19(b)(3)(A)(ii) of the Act 4 and Rule 19b-4(f)(2) thereunder, 5 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 In Amendment No. 1, the ISE corrected an error in Exhibit 5 of the original rule filing by eliminating certain inadvertent underlining. For purposes of calculating the 60-day period within which the Commission may summarily abrogate the proposed rule change the Commission considers the period to commence on January 31, 2006, the date on which the ISE filed Amendment No. 1. *See* 15 U.S.C. 78s(b)(3)(C). 4 15 U.S.C. 78s(b)(3)(A)(ii). 5 17 CFR 240.19b-4(f)(2). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The ISE is proposing to amend its Schedule of Fees to change its Competitive Market Maker (“CMM”) Inactivity Fee. The text of the proposed rule change is available at the Exchange, at the Commission's Public Reference Room and at the Exchange's Web site: *http://www.iseoptions.com/legal/proposed_rule_changes.asp).* 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 ISE 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 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 Currently, the ISE charges the owner 6 of a CMM membership an Inactivity Fee of $25,000 a month if the owner does not:

(i)Itself operate the CMM membership,

(ii)lease the CMM membership to another member which operates the CMM membership, or

(iii)avail itself to one of the exemptions specifically authorized in the Notes to the CMM Inactivity Fee on the Schedule of Fees. The CMM Inactivity Fee was adopted by the Exchange 7 at a time when there was significant demand for CMM memberships and some owners were holding onto inactive memberships. The purpose of the CMM Inactivity Fee was to encourage the timely operation of the memberships to promote greater trading activity on the Exchange. 6 The Note to the CMM Inactivity Fee on the Schedule of Fees provides that the fee applies to the owner of the CMM membership, unless the inactive CMM membership is subject to a lease that was approved by the Exchange prior to the effective date of the fee, in which case the fee would apply to the lessee. 7 *See* Securities Exchange Act Release No. 46272 (July 26, 2002), 67 FR 50497 (August 2, 2002) (SR-ISE-2002-11). The Exchange believes the circumstances that lead to the enactment of the CMM Inactivity Fee no longer exist to the same degree that they did in 2002. For one thing, the ISE has created additional CMM memberships to ease demand. 8 The Exchange has also changed its minimum quoting requirements, allowing CMMs to quote wide markets. 9 Thus, a new owner of a CMM membership can avoid the CMM Inactivity Fee by continuing to “operate” it by quoting $5-wide markets, enabling it to “ramp up” its quoting at a reasonable pace. Nevertheless, ISE believes that a CMM Inactivity Fee continues to serve a purpose by encouraging the operation of CMM memberships generally, and prefers to retain the fee. At the same time, the Exchange believes that the amount of the fee—$25,000 a month per membership—is now too high in light of the changed circumstances, imposing an unreasonable burden on firms that hold multiple memberships. Therefore, the Exchange proposes to reduce the amount of the fee to $5,000 a month per membership, with a cap of $25,000 on a per-firm basis, *i.e.* , a firm that owns five or more inactive CMMs would pay a maximum CMM Inactivity Fee of $25,000 per month. 8 *See* Securities Exchange Act Release Nos. 47289 (January 30, 2003), 68 FR 5947 (February 3, 2003) (SR-ISE-2002-28) (approving a proposed rule change to increase CMM memberships from 100 to 130); 49195 (February 5, 2004), 69 FR 7061 (February 12, 2004) (SR-ISE-2003-38) (approving a proposed rule change to increase CMM memberships from 130 to 160). 9 *See* Securities Exchange Act Release No. 50015 (July 14, 2004), 69 FR 43872 (July 22, 2004) (SR-ISE-2003-22). Also, as a matter of “housekeeping,” the Exchange proposes to delete certain language in the Notes to the CMM Inactivity Fee relating to assessing the fee to the lessee if the CMM membership was subject to a lease that was approved prior to the effective date of the fee. All such leases have terminated, so there is no longer a need to retain that exception. 2. Statutory Basis The Exchange states that the basis under the Act for this proposed rule change is the requirement under Section 6(b)(4) 10 that an exchange have an equitable allocation of reasonable dues, fees and other charges among its members and other persons using its facilities. 10 15 U.S.C. 78f(b)(4). B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange 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. 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 comments on the proposed rule change. The ISE has not received any unsolicited written comments from members or other interested parties. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing proposed rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act, 11 and paragraph (f)(2) of Rule 19b-4 thereunder 12 because it establishes or changes a due, fee, or other charge. 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. 11 15 U.S.C. 78s(b)(3)(A)(ii). 12 17 CFR 240.19b-4(f)(2). IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change, as amended, is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov.* Please include File Number SR-ISE-2006-06 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-ISE-2006-06. 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 ISE. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-ISE-2006-06 and should be submitted on or before March 3, 2006. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 13 13 17 CFR 200.30-3(a)(12). Nancy M. Morris, Secretary. [FR Doc. E6-1838 Filed 2-9-06; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-53233; File No. SR-NASD-2006-019] Self-Regulatory Organizations; National Association of Securities Dealers, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Establish Uniform Order Warning and Rejection Parameters for the Nasdaq Market Center February 6, 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 February 3, 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 substantially prepared by Nasdaq. Nasdaq 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 Nasdaq proposes to establish uniform order warning and rejection parameters for the Nasdaq Market Center. Nasdaq would like to implement the proposed rule change on February 6, 2006. The text of the proposed rule change is available on the NASD's Web site, *http://www.nasd.com,* at the NASD'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, 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 the establishment of uniform warning and rejection parameters for orders that, at the time of entry, cross the best bid/offer in the Nasdaq Market Center. Under the proposal, the Nasdaq Market Center would provide a warning message 4 to market participants that enter an order that is 10% or more away from the Nasdaq inside, while orders that at the time of entry are 20% or more away from the inside would be rejected by the system. For orders priced less than $1.00, Nasdaq is proposing to implement specific penny-based warning and rejection parameters of $0.10 and $0.20 respectively. Market orders would not be subject to any price validation, and these warning and rejection parameters would apply regardless of the method used by the participant to enter the quote/order into the Nasdaq Market Center ( *e.g.* , FIX, QIX, CTCI or the New Nasdaq Workstation). These warning/rejection parameters are summarized below: 4 This warning message may be overridden by the entering party, in which case the order will be allowed entry into the system and processed in the normal course. Price Warning (percentage/amount) Reject (percentage/amount) Less than $1 $.10 $.20 $1-$999,999 10% 20% The warning and rejection parameters proposed here will be in effect from 8 a.m. through 4 p.m. eastern time and key off the best bid/offer prices within the Nasdaq Market Center at the time of order-entry. Orders entered for participation in Nasdaq's opening and closing cross processes will not be subject to the proposed warning and rejection parameters. Nasdaq is establishing these parameters in an attempt to mitigate the negative market-wide impacts resulting from the entry of mis-priced orders, especially in cases of large system malfunctions resulting in the submission of numerous mis-priced orders into the public market in a very short time span. Nasdaq believes that its proposal continues to allow vigorous price discovery near the inside market while protecting the integrity of the market from distortions created by the submission of abnormally priced orders. 2. Statutory Basis Nasdaq believes that the proposed rule change is consistent with Section 15A of the Act, 5 in general, and Section 15A(b)(6) 6 of the Act, in particular, in that it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. 5 15 U.S.C. 78 *o* -3. 6 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 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 Nasdaq 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 7 and subparagraph (f)(6) of Rule 19b-4 thereunder. 8 7 15 U.S.C. 78s(b)(3)(A). 8 17 CFR 240.19b-4(f)(6). Nasdaq has requested that the Commission waive 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 30-day operative delay is consistent with the protection of investors and the public interest, because the proposed rule change is intended to protect the integrity of the Nasdaq market by reducing the incidence of the submission of grossly mis-priced orders into the market. For this reason, the Commission designates the proposal to be effective and operative upon filing with the Commission. 9 9 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 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-2006-019 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-NASD-2006-019. 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-2006-019 and should be submitted on or before March 3, 2006. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 10 Nancy M. Morris, Secretary. 10 17 CFR 200.30-3(a)(12). [FR Doc. E6-1830 Filed 2-9-06; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-53224; File No. SR-NASD-2005-112] Self-Regulatory Organizations; National Association of Securities Dealers, Inc.; Order Approving Proposed Rule Change Relating to Amendments to Rule 3360 To Expand Short Interest Reporting to OTC Equity Securities February 3, 2006. I. Introduction On September 20, 2005, the National Association of Securities Dealers, Inc. (“NASD”) filed with the Securities and Exchange Commission (“Commission” or “SEC”), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) 1 and Rule 19b-4 thereunder, 2 a proposed rule change to amend NASD Rule 3360 to expand short interest reporting requirements to over-the-counter (“OTC”) equity securities. 3 The proposed rule change was published for comment in the **Federal Register** on November 3, 2005. 4 The Commission received seven comment letters on the proposal. 5 The NASD filed a response to the comment letters on January 20, 2006. 6 This order approves the proposed rule change. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 The term “OTC equity securities” means any equity securities that are neither included in the Nasdaq Stock Market nor traded on a national securities exchange. 4 *See* Securities Exchange Act Release No. 52679 (Oct. 26, 2005), 70 FR 66875 (Nov. 3, 2005) (the “Proposing Release”). 5 *See* e-mail from Greg Hogberg to *enforcement@sec.gov* , dated December 30, 2005 (attaching letter from Dr. Jim DeCosta to Jonathan G. Katz, Secretary, SEC, dated November 24, 2005); e-mail from Donald L. Smith to *rule-comments@sec.gov* , dated December 16, 2005; letter from Dr. Jim DeCosta to Jonathan G. Katz, Secretary, SEC, dated November 24, 2005 (“DeCosta”); e-mail from Paul Vuksich to *rule-comments@sec.gov* , dated November 22, 2005 (“Vuksich”); e-mail from David Patch to *rule-comments@sec.gov* , dated November 17, 2005 (“Patch”); e-mail from Daniel Opdyke to *rule-comments@sec.gov* , dated November 10, 2005; e-mail from Chris Meredith to *rule-comments@sec.gov* , dated November 1, 2005 (“Meredith”). 6 *See* letter from Andrea D. Orr, Assistant General Counsel, NASD, to Nancy M. Morris, Secretary, SEC, dated January 20, 2006. II. Description of the Proposal The proposal would amend Rule 3360, Short-Interest Reporting, to require that members maintain and report on a monthly basis total short positions in OTC equity securities in all customer and proprietary firm accounts. 7 Currently, Rule 3360(a) requires members to maintain a record of total short positions 8 in all customer and proprietary firm accounts in Nasdaq securities (and listed securities if not reported to another self-regulatory organization (“SRO”)) and requires members to report such information to the NASD on a monthly basis. The NASD believes that expanding the monthly short interest reporting requirements to OTC equity securities will increase the information available to public investors and other interested parties related to trading in OTC equity securities. Accordingly, the NASD proposes to amend Rule 3360(a) to require that members maintain and report to the NASD short sale positions for OTC equity securities. For purposes of the proposed rule change, OTC equity securities would be defined as any equity security that is not listed on The Nasdaq Stock Market or a national securities exchange. 7 Non-self-clearing broker-dealers generally are considered to have satisfied their reporting requirement by making appropriate arrangements with their respective clearing organizations. *See* NASD *Notice to Members* 03-08 (Jan. 2003). 8 Rule 3360(b) provides that short positions required to be reported under the rule are those resulting from short sales as the term is defined in Rule 200 of Regulation SHO under the Act (“Regulation SHO”), with limited exceptions. Rule 200 of Regulation SHO provides, in part, the following: “The term ‘short sale' shall mean any sale of a security which the seller does not own or any sale which is consummated by the delivery of a security borrowed by, or for the account of, the seller.” 17 CFR 242.200(a). The NASD will announce the effective date of the proposed rule change in a *Notice to Members* to be published no later than 60 days following Commission approval. In the proposed rule change, the NASD stated that in recognition of the technological and systems changes the proposed rule change may require, the effective date for the proposed rule change will be 90 days following publication of the NASD's *Notice to Members* announcing Commission approval. 9 9 *See* 70 FR at 66876. In the Proposing Release, 10 the Commission specifically requested comment regarding whether the implementation period for the proposed rule change could be shorter. 11 The Commission did not receive any comments regarding this specific request for comment. Thus, the Commission has determined not to request that the NASD shorten the implementation period. 10 *See* supra note 4. 11 70 FR at 66876. III. Summary of Comments The Commission received seven comment letters on the proposal. 12 The commenters generally supported the proposal. Some commenters, however, recommended additional changes to the proposed rule and to other rules relating to short selling. The following is a summary of the major concerns the commenters raised. 12 *See* supra note 5. Two commenters questioned the exceptions to the short interest reporting requirements contained in current Rule 3360 and in the proposed rule change. 13 Both current Rule 3360 and the proposed rule change provide that NASD members must report short interest positions that result from “short sales,” as that term is defined in Rule 200 of Regulation SHO, 14 with the exception of positions that meet the requirements of subsections (e)(1), (6), (7),

(8)and

(10)of Rule 10a-1 under the Act. 15 13 *See* Patch at 1; Meredith at 1. 14 *See* 17 CFR 242.200(a). 15 *See* NASD Rule 3360(b); supra note 4. Rule 10a-1 provides that, subject to certain exceptions, a short sale in an exchange-registered security may be effected only pursuant to the price test restrictions contained in Rule 10a-1. Subsection

(e)of Rule 10a-1 contains exceptions to the price test restrictions. The exceptions in Rule 10a-1(e) were designed to permit certain types of trading activities that were intended to benefit the markets or that were believed to carry little risk of the kind of manipulative or destabilizing trading that the rule was designed to address. *See* Securities Exchange Act Release No. 48709 (Oct. 28, 2003), 68 FR 62972 (Nov. 6, 2003). Subsection (e)(1) of Rule 10a-1 permits short sales to be effected without regard to the price test restrictions in the rule if the seller owns the security sold and intends to deliver such security as soon as possible without undue inconvenience or expense. *See* 17 CFR 240.10a-1(e)(1). Subsection (e)(6) of Rule 10a-1 contains an exception for certain sales of a security effected with the approval of an exchange which are necessary to equalize the price of such security with the current price of such security on another national securities exchange, which is the principal exchange market. *See* 17 CFR 240.10a-1(e)(6). Subsection (e)(7) of Rule 10a-1 contains an exception for certain bona fide domestic arbitrage transactions. *See* 17 CFR 240.10a-1(e)(7). Subsection (e)(8) of Rule 10a-1 contains an exception for certain international domestic arbitrage transactions. *See* 17 CFR 240.10a-1(e)(8). Subsection (e)(10) of Rule 10a-1 generally excepts sales of securities by underwriters or syndicate members participating in a distribution in connection with an over-allotment, and any lay-off sales by such a person in connection with a distribution of securities through rights or a standby underwriting commitment. *See* 17 CFR 240.10a-1(e)(10). The commenters recommended that the exceptions be eliminated from the proposed rule change and all short interest positions be reported and publicly disseminated. 16 One commenter argued that all short interest positions should be disclosed to the investing public so that investors have an understanding of exactly how much supply is actually in the system because the short interest position affects the overall valuation of a security. 17 16 *See* Patch at 1; Meredith at 1. 17 *See* Patch at 1. One commenter proposed amendments to Rule 3360 that would require issuers to cause their transfer agents to report long and short interest positions to the NASD at the close of each trading day. 18 This commenter's recommendation would also require transfer agents on behalf of issuers to report certain share information to the NASD at the close of each trading day, such as authorized shares, total shares outstanding, and shares held in street name. 19 18 *See* Vuksich at 1. 19 *See id.* Some commenters asserted that further action in the short selling area is necessary, in particular to address naked short selling abuses and what they believe to be certain loopholes in Regulation SHO. 20 Other commenters raised concerns regarding hedge fund regulation, the National Securities Clearing Corporation's Continuous Net Settlement System and the Depository Trust & Clearing Corporation's stock loan program. 21 20 *See e.g.* , DeCosta. 21 *See e.g.* , Meredith at 1; DeCosta at 2-8. IV. NASD's Response In its response letter, 22 the NASD stated that it believed that all the comments were outside the scope of its rule filing because the proposed rule change is limited to expanding the current short interest reporting requirements to OTC equity securities. 23 The NASD stated in its letter that because the changes recommended by the commenters were not germane to the proposal, were beyond the purview of the NASD, or related to amendments to another SRO's rules or SEC rules, the NASD was not responding to those recommendations specifically in its response letter. 24 In addition, the NASD stated that it would review and analyze these recommendations in the same manner in which it would consider any requests for rulemaking, and, based on such review and analysis, would determine whether further action on these recommendations is appropriate. 25 22 *See* supra note 6. 23 *Id.* at 3. 24 *Id.* 25 *Id.* With respect to comments regarding the exceptions to short interest reporting contained in current NASD Rule 3360 and the proposed rule change, the Commission urges the NASD to conduct an in-depth review of the exceptions to short interest reporting to determine whether future rulemaking regarding the exceptions is appropriate. V. Discussion and Commission Findings The Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange and, in particular, the requirements of Section 15A of the Act 26 and the rules and regulations thereunder. Specifically, the Commission finds that the proposed rule change is consistent with the provisions of Section 15A(b)(6) of the Act, 27 which requires, among other things, that the NASD's rules be 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. 28 26 15 U.S.C. 78 *o* -3. 27 15 U.S.C. 78 *o* -3(b)(6). 28 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). The Commission believes that expanding short interest reporting to OTC equity securities will protect investors and the public interest by requiring NASD members to increase the information available to investors and other interested parties related to trading in OTC equity securities. VI. Conclusion *It is therefore ordered,* pursuant to Section 19(b)(2) of the Act, 29 that the proposed rule change (SR-NASD-2005-112) be, and it hereby is, approved. 29 15 U.S.C. 78s(b)(2). 30 17 CFR 200.30-3(a)(12). For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 30 Nancy M. Morris, Secretary. [FR Doc. E6-1842 Filed 2-9-06; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-53213; File No. SR-NYSE-2005-80] Self-Regulatory Organizations; New York Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change and Amendment No. 1 Thereto Relating to NYSE Rule 36, RCMMs' Ability to Use Exchange Authorized and Issued Portable Phones on the NYSE Floor February 2, 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 November 22, 2005, the New York Stock Exchange, Inc. (“NYSE” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. On January 18, 2006, NYSE filed Amendment No. 1 to the proposed rule change. 3 NYSE filed this proposal pursuant to Section 19(b)(3)(A) of the Act 4 and Rule 19b-4(f)(6) thereunder 5 as non-controversial, and therefore the proposed rule change is effective immediately upon filing. The Commission is publishing this notice, as amended, to solicit comments on the proposed rule change from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 In Amendment No. 1, the Exchange clarified proposed NYSE Rule 36.22 and added in the purpose section a new footnote relating to surveillance and examination procedures to monitor the activities of RCMMs. 4 15 U.S.C. 78s(b)(3)(A). 5 17 CFR 240.19b-4(f)(6). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change This filing amends NYSE Rule 36 to permit Registered Competitive Market Makers (“RCMMs”), as defined in NYSE Rule 107A, to use Exchange authorized and provided portable phones and consists of proposed member education bulletins which describe the conditions under which Floor brokers and RCMMs may use such phones pursuant to the Exchange's portable phone pilot (“Pilot”). The conditions under which a Floor broker and a RCMM may use a portable phone pursuant to the Pilot are proposed as NYSE Rules 36.21 and 36.22. 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. 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 Background The Commission approved implementation of the Exchange's amendment to NYSE Rule 36 allowing Floor brokers to use Exchange authorized and provided portable phones on the Exchange Floor as a six-month pilot 6 beginning no later than June 23, 2003. 7 Since the inception of the Pilot, the Exchange has extended the Pilot five times, with the current Pilot expiring on January 31, 2006. 8 In addition, the Exchange filed for permanent approval of this rule. 9 The Exchange represents that no administrative or technical problems, other than routine telephone maintenance issues, have resulted from the Pilot over the past few months. 10 6 *See* Securities Exchange Act Release No. 47671 (April 11, 2003), 68 FR 19048 (April 17, 2003) (SR-NYSE-2002-11) (“Original Order”). 7 *See* Securities Exchange Act Release No. 47992 (June 5, 2003), 68 FR 35047 (June 11, 2003) (SR-NYSE-2003-19) (delaying the implementation date for portable phones from on or about May 1, 2003 to no later than June 23, 2003). 8 *See* Securities Exchange Act Release Nos. 48919 (December 12, 2003), 68 FR 70853 (December 19, 2003) (SR-NYSE-2003-38) (extending the Pilot for an additional six months ending on June 16, 2004); 49954 (July 1, 2004), 69 FR 41323 (July 8, 2004) (SR-NYSE-2004-30) (extending the Pilot for an additional five months ending on November 30, 2004); 50777 (December 1, 2004), 69 FR 71090 (December 8, 2004) (SR-NYSE-2004-67) (extending the Pilot for an additional four months ending March 31, 2005); 51464 (March 31, 2005), 70 FR 17746 (April 7, 2005) (SR-NYSE-2005-20) (extending the Pilot for additional four months ending July 31, 2005); and 52188 (August 1, 2005), 70 FR 46252 (August 9, 2005) (SR-NYSE-2005-53) (extending the Pilot for an additional six months ending January 31, 2006). 9 *See* SR-NYSE-2004-52, pending with the Commission. 10 The Exchange notes that it began receiving records of incoming telephone calls in June 2005 and will continue to receive monthly updates. With respect to regulatory actions concerning the Pilot, there is an open investigation into possible insider trading in an NYSE listed security in which the trading activity of two RCMMs has been identified and is under review. With respect to one of these RCMMs, the use by the RCMM of an Exchange authorized and provided portable phone in or about January 2005 is under review as part of the investigation. Telephone conversation between Jeff Rosenstrock, Senior Special Counsel, NYSE, and Molly M. Kim, Attorney, Division of Market Regulation, Commission, on January 27, 2006. NYSE Rule 36 NYSE Rule 36 (Communications Between Exchange and Members' Offices) governs the establishment of telephone or electronic communications between the Exchange Floor and any other location. Today, NYSE Rule 36.20 permits a Floor broker to use an Exchange authorized and provided portable telephone on the Exchange Floor. NYSE Rule 36.20 does not apply to specialists who are prohibited under this rule from communicating with off-Floor locations from the Exchange Floor. 11 11 NYSE Rule 36.30 provides that, with the approval of the Exchange, a specialist unit may maintain a telephone line at its stock trading post location to the off-Floor offices of the specialist unit or the unit's clearing firm. Such telephone connection shall not be used for the purpose of transmitting to the Floor orders for the purchase or sale of securities but may be used to enter options or futures hedging orders through the unit's off-Floor office or the unit's clearing firm or through a member (on the floor) of an options or futures exchange. Currently, under the Pilot, with the approval of the Exchange, a Floor broker is permitted to engage in direct voice communication from the point of sale to an off-Floor location, such as a member firm's trading desk or the office of one of the Floor broker's customers. 12 Such communication permit Floor brokers to accept orders consistent with Exchange rules and provide status and oral execution reports for orders previously received, as well as “market look” observations as historically have been routinely transmitted from a Floor broker's booth location. The use of a portable telephone on the Exchange Floor other than one authorized and provided by the Exchange is prohibited. 12 Floor brokers receiving orders from the public over portable phones must be properly qualified to engage in such direct access business under NYSE Rules 342 and 345, among others. For more information regarding Exchange requirements for conducting a public business on the Exchange Floor, *see* Information Memos 05-37 (May 27, 2005) and 01-18 (July 11, 2001) (both available on *http://www.nyse.com* ) and 91-25 (July 8, 1991). RCMMs The Commission approved the Exchange's proposed rule to permit members to register as RCMMs on May 1, 1978. 13 Under NYSE Rule 107A, RCMMs may trade for their own account or the account of their member organization and may also serve as Floor brokers executing customer orders. 14 Currently, there are eleven

(11)registered RCMMs. RCMMs are also subject to being called by a Floor Official or a Floor broker holding an unexecuted customer order to improve the market in any listed stock by either bidding/offering to narrow the spread by at least the minimum trading variation or improving the depth of the market by at least one unit of trading (normally 100 shares). 15 Further, a member may not act as a RCMM and a broker representing an agency order in the same security on the same day. 16 13 *See* Securities Exchange Act Release No. 14718 (May 1, 1978), 45 FR 19738 (May 8, 1978) (SR-NYSE-78-24). 14 The Exchange has developed surveillance and examination procedures to monitor the activities of RCMMs, including their use of Exchange authorized and provided portable phones. 15 These RCMM trades are referred to as “affirmative obligation” trades or “call-in notifications.” 16 *See* NYSE Rule 107A.B(1). Proposed Changes to NYSE Rule 36 Prior approval orders by the Commission concerning the Pilot and the current NYSE Rule 36.20 only apply to a Floor broker's ability to use an Exchange authorized and provided portable phone. RCMMs are non-specialist members of the Exchange and do not have the same type of information ( *i.e.* , access to the Display Book®) that a specialist has. As such, the Exchange believes it is appropriate for RCMMs to participate in the Pilot so that they could communicate with their offices in order to, among other things, enter off-Floor orders and better monitor their positions. Therefore, in order to clarify that NYSE Rule 36.20 would apply to RCMMs and Floor brokers, the Exchange proposes to delete the current reference in NYSE Rule 36.20 to “members and member organizations other than a specialist or specialist member organization” and replacing it with the terms “Floor brokers and RCMMs.” The Exchange believes that providing portable phones to RCMMs would increase the efficiency of their trading in accordance with NYSE Rule 107A, especially given the changes in the speed of trading. 17 However, given their ability to trade for their own account or the account of their member organizations without the restrictions that apply to other non-specialist members and member organizations, the Exchange also believes it appropriate to limit RCMMs' use of portable phones in accordance with the Pilot, as follows: 17 The Exchange believes that, currently, allowing Floor brokers to use portable phones enables the Exchange to continue to provide more direct, efficient access to its trading crowds and customers, increase the speed of transmittal of orders and the execution of trades, and provide an enhanced level of service to customers in an increasingly competitive environment. *See* Securities Exchange Act Release No. 52188 (August 1, 2005), 70 FR 46252 (August 9, 2005) (SR-NYSE-2005-53). • Limit their use of the portable phone solely to communications with their upstairs office's land line and the land line of their clearing member organization's upstairs office to enter off-Floor orders and discuss matters related to the clearance and settlement of transactions; • RCMMs, their off-Floor offices, and their member organization's off-Floor offices would not be allowed to use portable phones to transmit to the Floor orders for the purchase or sale of securities by public customers or any other agency business; • RCMMs' use of the portable phone pursuant to proposed NYSE Rules 36.20 and 36.22 must comply with all other rules, policies, and procedures of both the federal securities laws and the Exchange, including the record retention requirements, as set forth in NYSE Rule 440 and Rules 17a-3 and 17a-4 under the Act; 18 18 17 CFR 240.17a-3 and 240.17a-4. • Require that RCMMs implement procedures designed to deter their upstairs office or their clearing member organization's upstairs office calling their portable phone number from using caller ID block or other means to conceal the phone number from which a call is being made; and • Call-forwarding or conference calling are prohibited by RCMMs, their upstairs office personnel, and their clearing member organization's upstairs office. 19 19 All Exchange authorized and provided portable phones do not have call-forwarding or conference calling capabilities and would continue to not have such capabilities. In addition, no other electronic communication devices may be used unless approved by the Exchange. 20 Finally, RCMMs must execute a written acknowledgement authorizing the portable phone service provider to provide New York Stock Exchange Regulation (“NYSE Regulation”) with data and records relating to incoming and outgoing calls. 21 20 Currently, only Exchange authorized and provided portable phones are approved. 21 This provision is being proposed as a precautionary measure to address the privacy concerns by the portable phone service provider. A member education bulletin describing the above conditions for the use of a portable phone by RCMMs, the acknowledgement procedure, and the proposed rule text would be sent to all RCMMs. The Exchange also proposes that this filing (including proposed conforming changes to NYSE Rule 36) become incorporated into the Pilot. RCMM Acting as a Floor Broker As noted above, RCMMs are permitted to serve as Floor brokers, executing customer orders, provided they do not execute RCMM and customer orders in the same security on the same day. However, the Pilot permits broader portable phone usage for Floor brokers than RCMMs. Accordingly, RCMMs would not be allowed to use a portable phone to conduct any agency business until issues involving the use of portable phones by a RCMM acting in a capacity of an agent have been fully reviewed and resolved by NYSE Regulation. 22 22 In the future, the Exchange would consider allowing RCMMs to notify NYSE Regulation in writing of their intent to conduct such agency business, and NYSE Regulation would make a determination whether to require that a RCMM amend his or her Form BD with the Commission and/or file an amended membership application with NYSE Regulation. However, allowing RCMMs acting as Floor brokers to use portable phones would involve further discussions with the Commission and would be the subject of a separate filing with the Commission. Use of Portable Phones by Floor Brokers As noted above, the Exchange is providing in proposed NYSE Rule 36.21 the conditions under which Floor brokers can use portable phones during the Pilot. In addition, the Exchange has developed an acknowledgement for Floor brokers participating in the Pilot to sign. Floor brokers must acknowledge the following: • They authorize the portable phone service provider to provide NYSE Regulation with data and records relating to incoming and outgoing calls; • Their use of the portable phone pursuant to NYSE Rule 36.20 complies with all other rules, policies, and procedures of both the federal securities laws and the Exchange, including the record retention requirements, as set forth in NYSE Rule 440 and Rules 17a-3 and 17a-4 under the Act; 23 23 17 CFR 240.17a-3 and 240.17a-4. • They are required to implement procedures designed to deter anyone calling their portable phone number from using caller ID block or other means to conceal the phone number from which a call is being made; members and member organizations are required to make and retain records demonstrating compliance with such procedures; and • No other electronic communication devices may be used unless approved by the Exchange. 24 24 Currently, only Exchange authorized and provided portable phones are approved. A member education bulletin describing the proposed rule text and the acknowledgement procedure would be sent to all Floor brokers participating in the Pilot. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act 25 in general, and further the objectives of Section 6(b)(5) of the Act 26 in particular, in that it is designed to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. The Exchange believes that the amendment to NYSE Rule 36 would support the mechanism of free and open markets by providing for increased means by which communications to and from the Floor of the Exchange could take place. 25 15 U.S.C. 78f(b). 26 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, as amended, would impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others The Exchange has neither solicited nor received written comments on the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing proposed rule change, as amended, does not:

(i)Significantly affect the protection of investors or the public interest;

(ii)impose any significant burden on competition; and

(iii)become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest, it has become effective pursuant to Section 19(b)(3)(A) of the Act 27 and Rule 19b-4(f)(6) thereunder. 28 At any time within 60 days of the filing of the proposed rule change, as amended, 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. 29 27 15 U.S.C. 78s(b)(3)(A). 28 17 CFR 240.19b-4(f)(6). 29 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 January 18, 2006, the date NYSE filed Amendment No. 1 to the proposed rule change. *See* 15 U.S.C. 78s(b)(3)(C). The Exchange has requested that the Commission waive the 30-day operative period under Rule 19b-4(f)(6)(iii) of the Act. 30 The Commission believes that it is consistent with the protection of investors and the public interest to waive the 30-day operative delay and make this proposed rule change, as amended, immediately effective upon filing on November 21, 2005. The Commission believes that the waiver of the 30-day operative delay may increase the efficiency of the Exchange by providing immediate use of Exchange authorized portable phones to RCMMs. For this reason, the Commission designates the proposal to be effective and operative upon filing with the Commission. 31 30 17 CFR 240.19b-4(f)(6)(iii). 31 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). The Commission notes that proper surveillance is an essential component of any telephone access policy to an Exchange Floor. Surveillance procedures should help to ensure that Floor brokers and RCMMs use portable phones as authorized by NYSE Rule 36 and that orders are being handled in compliance with NYSE rules. The Commission expects the Exchange to actively review these procedures and address any potential concerns that have arisen during the Pilot. In this regard, the Commission notes that the Exchange should address whether telephone records are adequate for surveillance purposes. The Commission also requests that the Exchange report any problems, surveillance, or enforcement matters associated with use of an Exchange authorized and provided portable telephone by Floor brokers and RCMMs on the Exchange Floor. As stated in the Original Order, NYSE should also address whether additional surveillance would be needed because of the derivative nature of the ETFs. Furthermore, in any future additional filings on the Pilot, the Commission would expect that NYSE submit information documenting the usage of the phones, any problems that have occurred, including, among other things, any regulatory actions or concerns, and any advantages or disadvantages that have resulted. 32 32 The Commission expects the information to distinguish between Floor brokers' and RCMMs' usage of the phones . 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-NYSE-2005-80 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-NYSE-2005-80. 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 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-2005-80 and should be submitted on or before March 3, 2006. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 33 33 17 CFR 200.30-3(a)(12). Nancy M. Morris, Secretary. [FR Doc. E6-1839 Filed 2-9-06; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-53228; File No. SR-Phlx-2005-91] Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change and Amendment No. 1 Thereto To Amend the Equity Option Specialist Deficit (Shortfall) Fee February 6, 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 December 29, 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, II, and III below, which Items have been prepared by the Phlx. On February 1, 2006, the Phlx filed Amendment No. 1 to the proposed rule change. 3 The Phlx filed the proposal pursuant to Section 19(b)(3)(A)(ii) of the Act 4 and Rule 19b-4(f)(2) thereunder, 5 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 In Amendment No. 1, the Exchange made additional changes to the proposed rule text to clarify the assessment of the shortfall fee and the application of the shortfall credit. 4 15 U.S.C. 78s(b)(3)(A)(ii). 5 17 CFR 240.19b-4(f)(2). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Phlx proposes to amend its Specialist Deficit (Shortfall) Fee (“shortfall fee”) in two ways:

(1)Eliminate the DROT Exemption (as defined herein), so that a specialist 6 will be assessed a shortfall fee, subject to the maximum caps currently in effect, 7 even when one or more Streaming Quote Traders (“SQTs”) 8 or Remote Streaming Quote Traders (“RSQTs”) 9 trading on the Exchange's electronic options trading platform, Phlx XL, 10 have been designated to receive Directed Orders 11 from Order Flow Providers 12 for the same top 120 equity option 13 in which that specialist unit is acting as the specialist; and

(2)establish a shortfall credit of $0.35 per contract in any top 120 equity option for each specialist unit whose trading volume for such equity option effected on the Exchange in one month exceeds 15% of the total national monthly contract volume for such equity option in that same month, up to the total amount of the shortfall fee, if any, that is incurred in connection with the trading of other top 120 equity options that has not met the volume threshold, which is currently set at 12% of the total national monthly contract volume. 6 The Exchange uses the terms “specialist” and “specialist unit” interchangeably herein. 7 Certain shortfall fee caps apply to transactions in any of the top 120 equity options pursuant to the following:

(1)If Phlx volume in any top 120 equity option, except options on Nasdaq-100 Index Tracking Stock SM (traded under the symbol “QQQQ”), is less than or equal to 50 percent of the current threshold volume (presently 6 percent), a cap of $10,000 will apply;

(2)If Phlx volume in any top 120 equity option, except options on QQQQ, is greater than 50 percent of the current threshold volume (presently 6 percent) and less than 12 percent of the total national monthly contract volume, a cap of $5,000 will apply;

(3)If Phlx volume in options on QQQQ is less than or equal to 50 percent of the current threshold volume (presently 6 percent), a cap of $20,000 will apply; and

(4)If Phlx volume in options on QQQQ is greater than 50 percent of the current threshold volume (presently 6 percent) and less than 12 percent of the total national monthly contract volume, a cap of $10,000 will apply. The Nasdaq-100®, Nasdaq-100 Index®, Nasdaq®, The Nasdaq Stock Market®, Nasdaq-100 Shares SM , Nasdaq-100 Trust SM , Nasdaq-100 Index Tracking Stock SM , and QQQ SM are trademarks or service marks of The Nasdaq Stock Market, Inc. (“Nasdaq”) and have been licensed for use for certain purposes by the Phlx pursuant to a License Agreement with Nasdaq. The Nasdaq-100 Index® (the “Index”) is determined, composed, and calculated by Nasdaq without regard to the Licensee, the Nasdaq-100 Trust SM , or the beneficial owners of Nasdaq-100 Shares SM . Nasdaq has complete control and sole discretion in determining, comprising, or calculating the Index or in modifying in any way its method for determining, comprising, or calculating the Index in the future. 8 An SQT is an Exchange Registered Options Trader (“ROT”) who has received permission from the Exchange to generate and submit option quotations electronically through an electronic interface with AUTOM via an Exchange approved proprietary electronic quoting device in eligible options to which such SQT is assigned. *See* Phlx Rule 1014(b)(ii)(A). AUTOM is the Exchange's electronic order delivery, routing, execution and reporting system, which provides for the automatic entry and routing of equity option and index option orders to the Exchange trading floor. *See* Phlx Rule 1080(a). 9 An RSQT is a ROT that is a member or member organization of the Exchange with no physical trading floor presence who has received permission from the Exchange to generate and submit option quotations electronically through AUTOM in eligible options to which such RSQT has been assigned. An RSQT may only submit such quotations electronically from off the floor of the Exchange. An RSQT may only trade in a market making capacity in classes of options in which he is assigned. *See* Phlx Rule 1014(b)(ii)(B). *See generally* Securities Exchange Act Release Nos. 51126 (February 2, 2005), 70 FR 6915 (February 9, 2005) (SR-Phlx-2004-90) and 51428 (March 24, 2005), 70 FR 16325 (March 30, 2005) (SR-Phlx-2005-12). 10 In July 2004, the Exchange began trading equity options on Phlx XL, followed by index options in December 2004. *See* Securities Exchange Act Release No. 50100 (July 27, 2004), 69 FR 46612 (August 3, 2004) (SR-Phlx-2003-59). 11 The term “Directed Order” means any customer order to buy or sell which has been directed to a particular specialist, RSQT, or SQT by an Order Flow Provider (as defined herein). *See* Phlx Rule 1080(l)(i)(A). The provisions of Phlx Rule 1080(l) are in effect for a one-year pilot period to expire on May 27, 2006. *See* Securities Exchange Act Release No. 51759 (May 27, 2005), 70 FR 32860 (June 6, 2005) (SR-Phlx-2004-91). 12 The term “Order Flow Provider” means any member or member organization that submits, as agent, customer orders to the Exchange. *See* Phlx Rule 1080(l)(i)(B). 13 The Exchange defines a top 120 equity option as one of the 120 most actively traded equity options in terms of the total number of contracts in that option that were traded nationally for a specified month, based on volume reflected by The Options Clearing Corporation. The Exchange also proposes to make a minor, technical change to the shortfall fee section in its Summary of Equity Option Charges by inserting the word “equity” in the phrase “top 120 options” to clarify the type of options to which the Exchange is referring in the shortfall fee section. In addition, the Exchange proposes to clarify that the reference to “transition period” in the first paragraph of the shortfall fee section refers to the transition period set forth for any top 120 equity option listed after February 1, 2004 and for any top 120 equity option acquired by a new specialist unit within the first 60 days of operations and which is described at the end of the shortfall fee section. The Exchange considers these changes to be minor, technical changes because they are consistent with current Exchange practice and should help to clarify the assessment of the shortfall fee. The proposed rule change is scheduled to become effective for transactions settling on or after January 2, 2006. The text of the proposed rule change is available on the Phlx's Internet Web site ( *http://www.phlx.com* ), at the Phlx'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 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 currently charges specialist units a shortfall fee of $0.35 per contract, to be paid monthly in connection with transactions in any top 120 equity option, in most cases, if at least 12% of the total national monthly contract volume in that equity option is not effected by that specialist unit on the Exchange in that month. 14 Effective for trades settling on or after June 6, 2005, the Exchange amended its shortfall fee to no longer charge the shortfall fee when one or more SQTs or RSQTs trading on Phlx XL have been designated to receive Directed Orders from Order Flow Providers (“Directed Order Flow Program”) for the same option in which that specialist unit is acting as the specialist (collectively, the “DROT Exemption”). 15 At that time, the Exchange believed that it would not be reasonable to impose a shortfall fee on specialists when SQTs and RSQTs would be competing for market share with respect to the same equity options on a relatively equal basis, as the shortfall fee was designed, in part, to create an incentive for specialists to promote the equity options they have been allocated. Thus, given that the Directed Order Flow Program was a new program, the Exchange believed it was important to see how such program would affect the specialists' market share, as well as how the Directed Order Flow Program might influence order routing decisions by Order Flow Providers. 14 An exception to the 12% volume threshold amount relates to a transition period for newly listed top 120 equity options or for any top 120 equity option (including those equity options listed on the Exchange before February 1, 2004) acquired by a new specialist unit. These transition periods are not affected by the current proposal. *See* Securities Exchange Act Release No. 49324 (February 26, 2004), 69 FR 10089 (March 3, 2004) (SR-Phlx-2004-08). 15 *See* Securities Exchange Act Release No. 51947 (June 30, 2005), 70 FR 39542 (July 8, 2005) (SR-Phlx-2005-39). However, the specialists' market share in certain top 120 equity options currently remains well below the targeted shortfall fee volume threshold of 12% of the total national monthly contract volume effected on the Exchange. Although the Exchange recognizes that the specialists are competing for market share with the SQTs and RSQTs, it believes that obtaining 12% market share, which would include SQT and RSQT volume, is not unreasonable and wants to encourage specialists to compete in garnering greater market share. Thus, the purpose of this proposal is to encourage equity option specialist units to increase their respective market shares and create an incentive, by way of a credit, for such specialists to trade on the Exchange in any top 120 equity option in excess of 15% of the total national monthly contract volume for such top 120 equity option in one month. Under the proposal, when a specialist unit's trading volume in any top 120 equity option effected on the Exchange in one month exceeds 15% of the total national contract volume for such top 120 equity option in that same month, a shortfall credit of $0.35 per contract would be applied to such specialist unit's invoice, the dollar amount of which would

(i)directly correspond to the number of contracts of such top 120 equity option in excess of 15% of the total national contract volume for such top 120 equity option, and

(ii)offset any shortfall fee charged to such specialist unit with respect to any other top 120 equity option traded in that same month. However, the amount of any shortfall credit may not

(a)exceed the total amount of any shortfall fee charged to such specialist unit with respect to any other top 120 equity option traded in that same month, and

(b)be applied against any other Exchange charges on the invoice(s) of such specialist unit or subsidiary of such specialist unit. Finally, any excess shortfall credit would not be carried over to subsequent months. Should the total amount of the shortfall credit exceed the total amount of the shortfall fee due, no shortfall fee would be due to the Exchange. 16 16 For example, if the total national monthly contract volume was 8,000,000 contracts for one equity option, and the Exchange's market share in that option was 18% or 1,440,000 contracts, the specialist unit would receive a credit based on the number of contracts in excess of the 15% threshold, up to the total amount of the shortfall fee that was incurred in connection with the trading of other top 120 equity options that did not meet the current 12% volume threshold. In this example, the amount of 1,200,000 contracts represents 15% of the total national monthly contract volume of 8,000,000. Thus, a shortfall credit of $84,000 (derived from the product of the difference between 1,200,000 contracts and 1,440,000 contracts and $0.35) would be applied against any other shortfall fees incurred by that specialist unit in that month. If the amount of the shortfall fees totaled less than the amount of the shortfall credit ( *e.g.* , the shortfall fees totaled $25,000 and the shortfall credit was $84,000), no shortfall fee would be due the Exchange that month. The excess credit of $59,000 would not carry over to subsequent months. According to the Exchange, the purpose of making the minor, technical changes to the proposed text of the shortfall fee, including the addition of the caption “Transition Period,” is to more clearly describe current Exchange practice, which should, in turn, help to avoid confusion regarding the implementation of the shortfall fee. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with the requirements of Section 6(b) of the Act, 17 in general, and furthers the objectives of Section 6(b)(4) of the Act, 18 in particular, because it is designed to provide for the equitable allocation of reasonable dues, fees, and other charges among members of the Exchange. All specialist units competing in the top 120 equity options would be assessed the same shortfall fee and would be given the same shortfall fee credit. 17 15 U.S.C. 78f(b). 18 15 U.S.C. 78f(b)(4). B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The Phlx 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 The foregoing proposed rule change has been designated as a fee change pursuant to Section 19(b)(3)(A)(ii) of the Act 19 and Rule 19b-4(f)(2) 20 thereunder. Accordingly, the proposed rule change is effective upon filing with the Commission. 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. 21 19 15 U.S.C. 78s(b)(3)(A)(ii). 20 17 CFR 19b-4(f)(2). 21 The effective date of the original proposed rule change is December 29, 2005, and the effective date of Amendment No. 1 is February 1, 2006. 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 such period to commence on February 1, 2006, the date on which the Exchange filed 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 No. SR-Phlx-2005-91 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 No. SR-Phlx-2005-91. 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 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 No. SR-Phlx-2005-91 and should be submitted on or before March 3, 2006. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 22 Jill M. Peterson, Assistant Secretary. 22 17 CFR 200.30-3(a)(12). [FR Doc. E6-1835 Filed 2-9-06; 8:45 am] BILLING CODE 8010-01-P DEPARTMENT OF STATE [Public Notice 5301] Culturally Significant Objects Imported for Exhibition Determinations: “Action Half Life” SUMMARY: Notice is hereby given of the following determinations: Pursuant to the authority vested in me by the Act of October 19, 1965 (79 Stat. 985; 22 U.S.C. 2459), Executive Order 12047 of March 27, 1978, the Foreign Affairs Reform and Restructuring Act of 1998 (112 Stat. 2681, *et seq.* ; 22 U.S.C. 6501 note, *et seq.* ), Delegation of Authority No. 234 of October 1, 1999, Delegation of Authority No. 236 of October 19, 1999, as amended, and Delegation of Authority No. 257 of April 15, 2003 [68 FR 19875], I hereby determine that the objects to be included in the exhibition “Action Half Life,” imported from abroad for temporary exhibition within the United States, are of cultural significance. The objects are imported pursuant to loan agreements with the foreign owners or custodians. I also determine that the exhibition or display of the exhibit objects at Fotofest Gallery, from on or about March 10, 2006, until on or about April 23, 2006, and at possible additional venues yet to be determined, is in the national interest. Public Notice of these Determinations is ordered to be published in the **Federal Register** . FOR FURTHER INFORMATION CONTACT: For further information, including a list of the exhibit objects, contact Richard Lahne, Attorney-Adviser, Office of the Legal Adviser, U.S. Department of State (telephone: 202/453-8058). The address is U.S. Department of State, SA-44, 301 4th Street, SW. Room 700, Washington, DC 20547-0001. Dated: February 6, 2006. C. Miller Crouch, Principal Deputy Assistant Secretary for Educational and Cultural Affairs, Department of State. [FR Doc. 06-1244 Filed 2-9-06; 8:45 am]

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