Notices. SECURITIES AND EXCHANGE COMMISSION

9,587 words·~44 min read·/register/2006/03/28/06-3037

A research copy — for the controlling text, always check the official state or federal source. Not legal advice.

BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-53532; File No. SR-ISE-2005-56] Self-Regulatory Organizations; International Securities Exchange, Inc.; Notice of Filing of Proposed Rule Change and Amendment No. 1 Thereto to Establish Fees for Enhanced Sentiment Market Data March 21, 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 1, 2005, 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 March 14, 2006, the Exchange filed Amendment No. 1 to the proposed rule change. 3 The Commission is publishing this notice to solicit comments on the proposed rule change, as amended, from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 In Amendment No. 1, the ISE added an unlimited queries subscription level, and explained in the purpose section of the proposed rule change the amount of the proposed fees, the impact of the Broker Marketing Alliance (described below) on the proposed fees, and the tier system adopted by the Exchange to facilitate the participation by all member firms for a bonus rebate.

I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange is proposing to amend its Schedule of Fees to establish fees for enhanced sentiment market data. The text of the proposed rule change is available at the Commission's Public Reference Room, at the Exchange 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 as amended 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 ISE currently creates market data that consists of options quotes and orders that are generated by its members and all trades that are executed on the Exchange.

The ISE also produces a Best Bid/Offer, or BBO, with the aggregate size from all outstanding quotes and orders at the top price level, or the “top of the book.” This data is formatted according to Options Price Reporting Authority (“OPRA”) specification and sent to OPRA for redistribution. OPRA processes the ISE's data along with the same data sets from the other five options exchanges and creates a National BBO, or “NBBO,” from all six options exchanges. The ISE also creates data that is not disseminated by OPRA.

One example of such data is the ISE Sentiment Index®, or ISEE®, a calculation that represents an overall view of market sentiment. The ISEE provides an intra-day picture of how investors view stock prices by assessing customers' option trading activity. Unlike the traditional put/call ratio, which makes no distinction between customer, market maker or firm transactions, the ISEE measures only opening long customer transactions on the ISE. The ISE updates the current ISEE value hourly during market hours and posts it for free on its Web site. 4 The ISEE is the basis for the enhanced sentiment market data, for which the Exchange is proposing to establish the fees in this proposed rule change. 4 *http://www.iseoptions.com/marketplace/statistics/sentiment_index.asp.* The ISE believes the enhanced sentiment data offering will allow subscribers to identify bullish and bearish investor sentiment for nearly any issue traded on the Exchange using the same formula that is used for the ISEE calculation.

Where the ISEE is a single value for the overall market sentiment, the enhanced sentiment data offering will provide more specific information that will allow an end user to retrieve a sentiment value for an individual symbol using a query tool, which is an intuitive Web browser interface. For example, an end user may be interested in the sentiment value for only the Nasdaq 100 Tracking Stock (symbol QQQQ). The user would just enter that symbol into the query tool interface to retrieve the sentiment value.

In addition to the enhanced sentiment data query tool, there will also be a sentiment scanning tool that will comb the market for sentiment levels that meet pre-defined parameters. For example, an end user of a pre-defined query for the scanning tool would be able to determine which three stocks are most bullish in the oil sector based on sentiment values. The enhanced sentiment data will include sentiment values for particular indices, industry sectors or individual stocks and will be calculated three times per hour versus only one time per hour for the ISEE.

The enhanced sentiment data will be available to on-line investors on a subscription basis. The Exchange proposes four subscription levels:

(i)100 queries for $11.95 per month;

(ii)200 queries for $14.95 per month;

(iii)unlimited queries for $19.95 per month; and

(iv)unlimited pre-defined queries for $11.95 per month. This enhanced sentiment data will also be offered by some broker-dealers that participate in the ISE Broker Marketing Alliance program. A Broker Marketing Alliance is an arrangement between ISE and a participating U.S. broker-dealer who markets the enhanced sentiment offering to its customers. Clients of participating brokers will be able to take advantage of a discounted price for the same four subscription levels:

(i)100 queries for $9.95 per month;

(ii)200 queries for $11.95 per month;

(iii)unlimited queries for $15.95 per month; and

(iv)unlimited pre-defined queries for $9.95 per month. Under a Broker Marketing Alliance, participating U.S. broker-dealers will participate in a revenue sharing arrangement with the Exchange for each of their referred customers that subscribes to the enhanced sentiment offering. Participating broker-dealers will receive a rebate of 35% of the subscription fee collected from subscribers. An additional bonus rebate will be paid to broker-dealers that achieve a subscription level based on the size of their firm and the number of clients that subscribe to the service. The Exchange believes that a tier system, as reflected in the Notes section of the proposed Schedule of Fees, is the most equitable method by which all member firms, regardless of their size, will be able to participate in the rebate program. Accordingly, the Exchange proposes a bonus rebate payable as follows: $500 per month for 500 subscribers at firms with 10,000-25,000 customers; $750 per month for 750 subscribers at firms with 25,001-100,000 customers; and $1,000 per month for 1,000 subscribers at firms with 100,001 or more customers. The Exchange believes that firms with a customer base of 10,000-25,000 accounts will be able to achieve 500 subscriptions with relatively the same ease as firms with a customer base of 25,001-100,000 accounts and 100,001 or more accounts, each of which are expected to achieve 750 and 1000 subscriptions, respectively, in order to qualify for the additional bonus rebate. The proposed additional bonus amounts paid to the brokers are all equal to 10.05% of the subscription revenue based on a subscription fee of $9.95 per month. For example, 500 subscribers at $9.95 is equal to $4,975 and the $500 bonus is equal to 10.05% of the $4,975; 750 subscribers at $9.95 is equal to $7,462.50 and the $750 bonus is equal to 10.05% of the $7,462.50; and 1,000 subscribers at $9.95 is equal to $9,950 and the $1,000 bonus is equal to 10.05% of the $9,950. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with Section 6(b)(4) of the Act, 5 which requires that an exchange have an equitable allocation of reasonable dues, fees and other charges among its members and other persons using its facilities. The ISE developed and conducted a comprehensive survey of a cross-section of participants in the financial services industry regarding their level of interest in a number of proprietary market data offerings and, based on the results of that survey, the Exchange developed a business plan to create and offer a number of proprietary market data products targeted to potential user groups, *e.g.* , individual investors, institutional investors, broker-dealers, etc. The Exchange also retained a consultant to validate the business plan and to provide advice on the structure and amount of fees to charge for these products. The ISE established a tiered pricing structure for enhanced sentiment data based on all of this information. The ISE believes that, under the tiered pricing structure, it is able to charge a lower fee to users who subscribe through the Broker Marketing Alliance because the Exchange will save on advertising costs associated with that user. Conversely, the Exchange believes it must charge a higher fee to users who subscribe directly on its Web site because it must incur advertising costs associated with that user. The Exchange believes the tiered levels and prices offered for the proposed market data offering provide investors with an ability to choose a plan that best suits their needs, from an annual subscription that is discounted, to a one-time subscription, regardless of whether an investor subscribes directly through the ISE's Web site or through a Broker Marketing Alliance. Further, the Exchange believes the proposed rule filing provides market participants with an opportunity to obtain enhanced sentiment market data in furtherance of their investment decisions. 5 15 U.S.C. 78(f)(b)(4). B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange believes that the proposed rule change would 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 not solicited, and does not intend to solicit, comments on this proposed rule change. The Exchange has not received any written comments from members or other interested parties. III. Date of Effectiveness of the Proposed Rule Within 35 days of the date of publication of this notice in the **Federal Register** or within such longer period

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

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

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

(a)General Application To continue to ensure investor protection and enhance market quality, NASD's Board of Governors is issuing an interpretation to NASD Rules dealing with member firms' treatment of their customer limit orders in Nasdaq and exchange-listed securities. This interpretation, which is applicable from 9:30 a.m. to 6:30 p.m. Eastern Time, will require members [acting as market makers] to handle their customer limit orders with all due care so that *members* [market makers] do not “trade ahead” of those limit orders. Thus, members [acting as market makers] that handle customer limit orders, whether received from their own customers or from another member, are prohibited from trading at prices equal or superior to that of the limit order without executing the limit order. In the interests of investor protection, NASD is eliminating the so-called disclosure “safe harbor” previously established for members that fully disclosed to their customers the practice of trading ahead of a customer limit order by a market-making firm. 1 1 15 U.S.C. 78s(b)(1). Rule 2110 states that: A member, in the conduct of his business, shall observe high standards of commercial honor and just and equitable principles of trade. Rule 2320, the Best Execution Rule, states that: In any transaction for or with a customer, a member and persons associated with a member shall use reasonable diligence to ascertain the best inter-dealer market for the subject security and buy or sell in such a market so that the resultant price to the customer is as favorable as possible to the customer under prevailing market conditions. Interpretation The following interpretation of Rule 2110 has been approved by the Board: A member firm that accepts and holds an unexecuted limit order from its customer (whether its own customer or a customer of another member) in a Nasdaq or exchange-listed security and that continues to trade the subject security for its own [market-making] account at prices that would satisfy the customer's limit order, without executing that limit order, shall be deemed to have acted in a manner inconsistent with just and equitable principles of trade, in violation of Rule 2110, provided that a member firm may negotiate specific terms and conditions applicable to the acceptance of limit orders only with respect to limit orders that are:

(a)for customer accounts that meet the definition of an “institutional account” as that term is defined in Rule 3110(c)(4); or

(b)10,000 shares or more, unless such orders are less than $100,000 in value. In the event that a member [acting as market maker] trades ahead of an unexecuted customer limit order at a price that is better than the unexecuted limit order, such member is required to execute the limit order at the price received by the member or better. Nothing in this interpretation, however, requires members to accept limit orders from any customer. By rescinding the safe harbor position and adopting this interpretation, NASD wishes to emphasize that members may not trade ahead of their customer limit orders [in their market-making capacity] even if the member had in the past fully disclosed the practice to its customers prior to accepting limit orders. NASD believes that, pursuant to Rule 2110, members accepting and holding unexecuted customer limit orders owe certain duties to their customers and the customers of other member firms that may not be overcome or cured with disclosure of trading practices that include trading ahead of the customer's order. The terms and conditions under which institutional account or appropriately sized customer limit orders are accepted must be made clear to customers at the time the order is accepted by the firm so that trading ahead in the firm's market-making capacity does not occur. As outlined in NASD Notice to Members 97-57, the minimum amount of price improvement necessary in order for a *member* [market maker] to execute an incoming order on a proprietary basis when holding an unexecuted limit order for a Nasdaq security trading in fractions, and not be required to execute the held limit order, is as follows: • If actual spread is greater than 1/16 of a point, a firm must price improve an incoming order by at least a 1/16 . For stocks priced under $10 (which are quoted in 1/32 increments), the firm must price improve by at least 1/64 . • If actual spread is the minimum quotation increment, a firm must price improve an incoming order by one-half the minimum quotation increment. For Nasdaq securities authorized for trading in decimals pursuant to the Decimals Implementation Plan For the Equities and Options Markets, the minimum amount of price improvement necessary in order for a *member* [market maker] to execute an incoming order on a proprietary basis in a security trading in decimals when holding an unexecuted limit order in that same security, and not be required to execute the held limit order, *is* as follows:

(1)For customer limit orders priced at or inside the best inside market displayed in Nasdaq, the minimum amount of price improvement required is $0.01; and

(2)For customer limit orders priced outside the best inside market displayed in Nasdaq, the *member* [market maker] must price improve the incoming order by executing the incoming order at a price at least equal to the next superior minimum quotation increment in Nasdaq (currently $0.01). NASD also wishes to emphasize that all members accepting customer limit orders owe those customers duties of “best execution” regardless of whether the orders are executed through the member['s market-making capacity] or sent to another member for execution. As set out above, the Best Execution Rule requires members to use reasonable diligence to ascertain the best inter-dealer market for the security and buy or sell in such a market so that the price to the customer is as favorable as possible under prevailing market conditions. NASD emphasizes that order entry firms should continue to [routinely] monitor *routinely* the handling of their customers' limit orders regarding the quality of the execution received.

(b)Exclusion for Limit Orders that are Marketable at Time of Receipt *NASD* [The Association] has previously recognized the functional equivalency of marketable limit orders and market orders. Accordingly, it has adopted the following interpretation. IM-2110-2 shall not apply to a customer limit order if the limit order is marketable at the time it is received by a *member* [market maker]. These orders shall be treated as market orders for purposes of determining execution priority; however, these orders must continue to be executed at their limit price or better. The exclusion for marketable customer limit orders from the general application of IM-2110-2 is limited solely to customer limit orders that are marketable when received by a *member* [market maker]. If a customer limit order is not marketable when received by a *member* [market maker], the limit order must be accorded the full protections of IM-2110-2. In addition, if the limit order was marketable when received and then becomes non-marketable, once the limit order becomes non-marketable it must be accorded the full protections of IM-2110-2. The following scenario illustrates the application of the exclusion. The market in XYZ stock is 25 bid—25 1/16 ask, the volume of trading in XYZ stock is extremely active, and Market Maker A (“MMA”) has a queue of market orders to buy and sell. Assume the following order receipt scenario. Each sell market order in the queue is for 1,000 shares and there are no special conditions attached to the orders. MMA then receives a customer limit order to sell 1,000 shares at 25. The customer limit order is marketable at the time it is received by MMA. MMA hits another market maker's bid at 25 for 1,000 shares. Normally, IM-2110-2 would require that the customer limit order be executed before the market orders in the queue. However, because the marketable limit order and the market orders should be treated as functionally equivalent in determining execution priority, the marketable customer limit order shall not be given execution priority over the market orders that were already in the queue. When the limit order is executed, however, it must be executed at the limit price or better. In addition, if in the scenario just described the limit order does not get executed and the inside market in XYZ becomes 24 7/16 bid, the *member* [market maker] would have to protect the limit order as required by IM 2110-2 if the *member* [market maker] trades at the limit order price or better.

(c)Exemption for the Facilitation on a Riskless Principal Basis of Other Customer Orders A member shall be exempt from the obligation to execute a customer limit order in a manner consistent with this interpretation if such member engages in trading activity to facilitate the execution, on a riskless principal basis, of another order from its customer (whether its own customer or the customer of another member) (the “facilitated order”), provided that all of the following requirements are satisfied:

(1)through

(3)No change.

(4)Members must have written policies and procedures to assure that riskless principal transactions relied upon for this exemption comply with NASD Rules 4632(d)(3)(B), 4642(d)(3)(B) and 4652(d)(3)(B). At a minimum these policies and procedures must require that the customer order was received prior to the offsetting transactions, and that the offsetting transactions are allocated to a riskless principal or customer account in a consistent manner and within 60 seconds of execution. Members must have supervisory systems in place that produce records that enable the member and NASD [Regulation] to accurately and readily reconstruct, in a time-sequenced manner, all orders *on* which a member relies in claiming this exemption. 1 No change to text of footnote 1. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, NASD 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. NASD 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 Manning Rule generally prohibits a member from trading for its own account in a Nasdaq or exchange-listed security at a price that is equal or better than an unexecuted customer limit order in that security, unless the member immediately thereafter executes the customer limit order at the price at which it traded for its own account or better. 3 The legal underpinnings for the Manning Rule are a member's basic fiduciary obligations and the requirement that it must, in the conduct of its business, “observe high standards of commercial honor and just and equitable principles of trade.” 4 3 For example, if a member bought 100 shares at $10 when holding customer limit orders in the same security to buy at $10 equaling, in aggregate, 1000 shares, the member is required to fill 100 shares of the customer limit orders. 4 *See* NASD Rule 2110. *See* also NASD Rule 2320(a) (the “Best Execution Rule”). Note: NASD has proposed changes to the Best Execution Rule in SR-NASD-2004-026, which is currently pending at the SEC. The Manning Rule is designed to ensure that customer limit orders are executed in a fair manner by prohibiting a member firm from trading ahead of customers' limit orders in its principal capacity without executing the customer limit order. Currently, IM-2110-2 generally provides that members acting as a market makers are prohibited from trading for their own accounts at prices equal or superior to an unexecuted customer's limit order in that security without executing the customer limit order. Further, if the member acting as a market maker trades ahead of a customer limit order and receives a better price than the unexecuted customer limit order, the member acting as a market maker must fill the customer limit order at the price at which it traded for its own account or better. While the text of the Manning Rule is written specifically to cover trading by market makers in their market-making capacity, NASD's longstanding position has been that the Manning Rule applies to all members (whether they are trading in a market making capacity or not) based on a member's best execution obligations. For example, in *Notices to Members* 94-58 (July 15, 1994) and 95-43 (June 5, 1995), NASD provided guidance to member firms on the application of the Manning Rule to members not acting in a market making capacity. In the context of questions about whether a non-market maker holding a customer order can trade ahead of that limit order, NASD staff stated that it would be inconsistent with a member's best execution obligation for members to trade ahead of a customer's limit order even when not acting as a market maker. In addition, the Manning Rule specifically states that all members accepting customer limit orders owe those customers duties of “best execution” regardless of whether the orders are executed through the member's market making capacity or sent to another member for execution and emphasizes that order entry firms should continue to monitor routinely the handling of their customers' limit orders regarding the quality of the execution received. Accordingly, NASD is proposing to amend the Manning Rule to codify NASD's existing position and to state explicitly that all members are prohibited from trading for their own accounts at prices that would satisfy a customer's limit order, whether acting as a market maker or not. NASD believes that the proposed amendments will provide better clarity to members as to the application of the Manning Rule to trading by non-market makers. 5 5 It is important to note that the proposed clarification does not change the application of the Manning Rule to multiple trading desks within a member firm as described in *Notice to Members* 95-43 (June 5, 1995) and *Notice to Members* 03-74 (November 26, 2003). Finally, NASD no longer refers to itself or its subsidiary, NASD Regulation, Inc., using its full corporate name, “the Association,” “the NASD” or “NASD Regulation, Inc.” Instead, NASD uses “NASD” unless otherwise appropriate for corporate or regulatory reasons. Accordingly, the proposed rule change replaces references to “Association” and “NASD Regulation” in the text of the proposed rule change with “NASD.” 2. Statutory Basis NASD believes that the proposed rule change is consistent with the provisions of Section 15A(b)(6) of the Act, which requires, among other things, that NASD rules must be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, and, in general, to protect investors and the public interest. NASD believes that the proposed rule change will improve treatment of customer limit orders and clarify the application of the Manning Rule to non-market makers. B. Self-Regulatory Organization's Statement on Burden on Competition NASD does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act, as amended. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others Written comments were neither solicited nor received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action 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 NASD consents, the Commission will:

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

(B)Institute proceedings to determine whether the proposed rule change should be disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov.* Please include File No. SR-NASD-2006-035 on the subject line. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, Station Place, 100 F Street, NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-NASD-2006-035. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room. Copies of such filing also will be available for inspection and copying at the principal office of NASD. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-NASD-2006-035 and should be submitted on or before April 12, 2006. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 6 6 17 CFR 200.30-3(a)(12). Nancy M. Morris, Secretary. [FR Doc. E6-4434 Filed 3-27-06; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-53531; File No. SR-NASD-2006-008] Self-Regulatory Organizations; National Association of Securities Dealers, Inc.; Order Approving a Proposed Rule Change to Re-establish a Fee Pilot for National Quotation Data Service March 21, 2006. On January 24, 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”), 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 reinstate its pilot program, which reduced the monthly fee that non-professional users pay to receive National Quotation Data Service (“NQDS”), retroactively to September 1, 2005. 3 The proposed rule change was published for comment in the **Federal Register** on February 15, 2006. 4 The Commission received no comments on the proposal. This order approves the proposed rule change. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 Since August 22, 2000, Nasdaq has operated a pilot to reduce from $50 to $10 the monthly fee that non-professional users pay to receive NQDS data. Nasdaq inadvertently let the pilot lapse on September 1, 2005, until January 24, 2006. This filing reinstates the pilot retroactively to September 1, 2005, thereby reflecting the fact that the pilot was in place at that time. *See* Securities Exchange Act Release Nos. 43190 (August 22, 2000), 65 FR 52460 (August 29, 2000) (notice of filing and order granting accelerated approval of NASD-00-47); 44788 (September 13, 2001), 66 FR 48303 (September 19, 2001); 46446 (August 30, 2002), 67 FR 57260 (September 9, 2002); 48386 (August 21, 2003), 68 FR 51618 (August 27, 2003); and 50318 (September 3, 2004), 69 FR 54821 (September 10, 2004). 4 *See* Securities Exchange Act Release No. 53254 (February 8, 2006), 70 FR 8027 (SR-NASD-2006-008). The Commission finds that the proposed rule change is consistent with Section 15A of the Act 5 and the rules and regulations thereunder. 6 Specifically, the Commission finds the proposal to be consistent with Section 15A(b)(5) of the Act, 7 in that it provides for the equitable allocation of reasonable dues, fees and other charges among members. The pilot lowers the monthly fee for non-professionals to receive NQDS from $50 to $10 a month. The Commission notes that the NQDS feature provides a mechanism to allow access to market data that is relevant to investors when they make financial decisions and that it does not unfairly discriminate between customers, issuers, brokers or dealers. 5 15 U.S.C. 78 *o* 3. 6 In approving this proposed rule change the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. *See* 15 U.S.C. 78c(f). 7 15 U.S.C. 78 *o* (b)(5). *It is therefore ordered,* pursuant to Section 19(b)(2) of the Act, 8 that the proposed rule change (SR-NASD-2006-008), be, and it hereby is, approved. 8 15 U.S.C. 78s(b)(2). For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 9 9 17 CFR 200.30-3(a)(12). Nancy M. Morris, Secretary. [FR Doc. E6-4436 Filed 3-27-06; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-53528; File No. SR-NSCC-2005-15] Self-Regulatory Organizations; National Securities Clearing Corporation; Order Approving Proposed Rule Change Relating To Buy-Ins in Its Continuous Net Settlement System March 21, 2006. I. Introduction On December 1, 2005, the National Securities Clearing Corporation (“NSCC”) filed with the Securities and Exchange Commission (“Commission”) proposed rule change SR-NSCC-2005-15 pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”). 1 Notice of the proposal was published in the **Federal Register** on December 27, 2005. 2 No comment letters were received. For the reasons discussed below, the Commission is approving the proposed rule change. 1 15 U.S.C. 78s(b)(1). 2 Securities Exchange Act Release No. 52976 (December 19, 2005), 70 FR 76485. II. Description The purpose of this filing is to modify NSCC's Rules with regard to CNS Buy-Ins in an effort to harmonize the buy-in rules of the industry and to assist NSCC members in reducing their exposure related to buy-ins. At the request of participants and after consultation with the Buy-In Subcommittee of the Securities Industry Association, NSCC is modifying its Rules to create a new buy-in retransmittal procedure that may be utilized by NSCC members receiving buy-in notices initiated outside of the CNS System. 3 Existing NSCC fees related to CNS Buy-Ins will remain unchanged. 3 The specific rules being amended are Rule 11, “CNS System,” and Procedures VII, “CNS Accounting Operation,” and X, “Execution of CNS Buy-Ins.” Current Process for CNS Buy-Ins Currently under NSCC's Rules (except with respect to securities subject to a voluntary corporate reorganization), a member having a long position at the end of any day (“Originator”) may submit to NSCC a Notice of Intention to Buy-In (“Buy-In Notice”) specifying the quantity of securities that it intends to buy-in (“Buy-In Position”). The Buy-In Position is given high priority for allocation from the CNS night cycle on N+1 through completion of the CNS day cycle at approximately 3 p.m. eastern standard time on N+2. 4 4 The day the Buy-In Notice is submitted to NSCC is referred to as N with N+1 and N+2 referring to the succeeding days. Each CNS day begins in the evening and includes an evening allocation of securities and a daytime allocation of securities. If the Buy-In Position (or a portion thereof) remains unfilled after the evening allocation on N+1, NSCC issues CNS Retransmittal Notices on the following morning allocation (N+1) to a sufficient number of members with short positions. NSCC issues CNS Retransmittal Notices in an aggregate quantity at least equal to the Buy-In Position. In no case will the Buy-In liability of a member exceed the Buy-In Position or the total short position of the member. If several members have short positions with the same age, all such members are issued CNS Retransmittal Notices even if the total of their short position exceeds the Buy-In Position. If the Buy-In Position is not satisfied by 3 p.m. on N+2, the buy-in may be executed. This current process will remain in effect. Buy-In Notices transmitted by a member which is the original submitter will be referred to as “Original Buy-In Notices.” Procedure for CNS Buy-In Retransmittals At times, an NSCC member will be in receipt of a buy-in notice initiated outside of the CNS system while at the same time be failing to receive shares from CNS in the same security. Recognizing that such externally initiated buy-ins may expire before the time the expiration period that NSCC's Rules currently provide as the expiration for CNS buy-ins ( *i.e.* , the current N+2 expiration), NSCC will utilize a new procedure to permit retransmittals of such buy-ins with an appropriately shortened execution time frame. Accordingly, the new procedure provides that an NSCC member which has a long position in CNS at the end of any day ( *i.e.* , a fail to receive) and which is in receipt of a buy-in notice for securities of the same CUSIP that was initiated outside of the CNS System may submit a “Buy-In Retransmittal Notice” to NSCC. If the Buy-In Position (or a portion thereof) that is the subject of the Buy-In Retransmittal Notice is not satisfied by 3 p.m. on N+1, the buy-in can be executed. The Buy-In Retransmittal Notice will identify the entity that initiated the buy-in against the member. The differences between a Buy-In Retransmittal Notice and an Original Buy-In Notice are as follows: • An Original Buy-In Notice refers to a Buy-In Notice transmitted by a member for which the member is the original submitter. A Buy-In Retransmittal Notice refers to a Buy-In Notice submitted by a member where the member has received a buy-in notice outside of the CNS system with respect to securities of the same CUSIP. • The member submitting a Buy-In Retransmittal Notice receives an elevated priority for CNS allocations upon NSCC's receipt of the notice. The member submitting an Original Buy-In Notice continues to receive elevated priority on the morning of N+1. • The member submitting a Buy-In Retransmittal Notice is provided with five additional fields to be used to identify the entity or entities that initiated the buy-in against the member. At least one such entity other than the member must be identified or NSCC will reject the Buy-In Retransmittal Notice. • For Buy-In Retransmittal Notices, NSCC transmits CNS Retransmittal Notices to CNS short members upon receipt of the Buy-In Retransmittal Notice on N. The CNS Retransmittal Notice identifies both the submitting member and the entity or entities that initiated the buy-in against the member. For Original Buy-In Notices, NSCC continues to transmit CNS Retransmittal Notices to short members on the morning of N+1. • A buy-in based on a Buy-In Retransmittal Notice may be executed on N+1 if the Buy-In Position (or a portion thereof) is not satisfied by 3 p.m. on N+1. The execution of a buy-in based on an Original Buy-In Notice continues to be at 3 p.m. on N+2. Technical Correction In addition to modifying NSCC's Rules and Procedures to reflect the above changes, NSCC is also making technical correction to Procedure X, “Execution of Buy-Ins—CNS System.” The procedure states that members that receive CNS Retransmittal Notices and do not satisfy them assume liability for the loss, if any, which occurs as a result of the buy-in and that those members with the oldest short positions after the evening cycle on N+2 will first be held liable for an executed buy-in. Procedure X will now reflect that it is the oldest short positions after the day cycle on N+2 that will first be held liable for an executed buy-in. Implementation NSCC plans to implement these changes on a pilot basis open to all members as soon as possible following the Commission's approval of the proposed rule filing. The pilot will be limited to buy-ins of CNS eligible NYSE listed securities. NSCC anticipates that the pilot phase will be completed within thirty calendar days of implementation at which time buy-ins of all other CNS eligible securities will be permitted under these proposed changes. At that time the pilot will cease. NSCC will notify its members by an Important Notice of the specific date on which the pilot will expire and the proposed buy-in procedures are available for use with all CNS eligible securities. III. Discussion Section 17A(b)(3)(F) of the Act requires that the rules of a clearing agency be designed to promote the prompt and accurate clearance and settlement of securities transactions. 5 The Commission finds that NSCC's proposed rule change is consistent with this requirement because the buy-in retransmittal procedures are designed to harmonize NSCC's buy-in rules with the buy-in rules of other self-regulatory organizations. Harmonization of buy-in rules among self-regulatory organizations should increase the efficiency of the buy-in execution process and should help to promote the prompt and accurate settlement of securities transactions. 5 15 U.S.C. 78q-1(b)(3)(F). IV. Conclusion On the basis of the foregoing, the Commission finds that the proposed rule change is consistent with the requirements of the Act and in particular Section 17A of the Act and the rules and regulations thereunder. *It is therefore ordered* , pursuant to Section 19(b)(2) of the Act, 6 that the proposed rule change (File No. SR-NSCC-2005-15) be and hereby is approved. 6 15 U.S.C. 78s(b)(2). For the Commission by the Division of Market Regulation, pursuant to delegated authority. 7 7 17 CFR 200.30-3(a)(12). Nancy M. Morris, Secretary. [FR Doc. E6-4433 Filed 3-27-06; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-53529; File No. SR-Phlx-2006-16] Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to its Dividend Spread and Merger Spread Program March 21, 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 24, 2006, the Philadelphia Stock Exchange, Inc. (“Phlx” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I, II and III below, which items have been prepared by Phlx. Phlx has designated the proposed rule change as one establishing or changing a due, fee, or other charge, pursuant to Section 19(b)(3)(A)(ii) of the Act 3 and Rule 19b-4(f)(2) thereunder, 4 which renders the proposal effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 15 U.S.C. 78s(b)(3)(A)(ii). 4 17 CFR 240.19b-4(f)(2). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change Phlx proposes to:

(1)Amend its dividend spread strategy program to assess a $0.05 per contract side license fee on additional equity option products in connection with dividend spread strategies to recapture license fees associated with the trading of these products; and

(2)extend for a period of six months its fee caps on equity option transaction and comparison charges on dividend spread transactions 5 and merger spread transactions, 6 and its $0.05 per contract side license fee imposed for dividend spread transactions. The current fee caps and $0.05 per contract side license fee are in effect as a pilot program that expired on March 1, 2006. The Exchange proposes to extend the pilot program for a six-month period until September 1, 2006. The Exchange also proposes to make a minor technical change to delete unnecessary text from its fee schedule and to correct a typographical error. 5 For purposes of this proposal, a “dividend spread” transaction is any trade done within a defined time frame pursuant to a strategy in which a dividend arbitrage can be achieved between any two deep-in-the-money options. 6 For purposes of this proposal, the Exchange defines a “merger spread” transaction as a transaction executed pursuant to a merger spread strategy involving the simultaneous purchase and sale of options of the same class and expiration date, but different strike prices, followed by the exercise of the resulting long options position, each executed prior to the date on which shareholders of record are required to elect their respective form of consideration, *i.e.* , cash or stock. The text of the proposed rule change is available on Phlx's Web site at *http://www.phlx.com,* at the Office of the Secretary at Phlx, and at the Commission's Public Reference Room. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the 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 Exchange imposes a fee cap on equity option transaction and comparison charges on merger spread strategy and dividend spread strategy transactions executed on the same trading day in the same options class. Specifically, Registered Options Traders'

(ROTs)and specialists’ equity option transaction and comparison charges are capped at $1,750 for transactions effected pursuant to a merger spread strategy or pursuant to a dividend spread strategy when the dividend is $0.25 or greater. However, for dividend spread transactions for a security with a declared dividend or distribution of less than $0.25, the ROTs' and specialists' equity option transaction and comparison charges are capped at $1,000 for transactions effected pursuant to a dividend spread strategy executed on the same trading day in the same options class. The fee caps are implemented after any applicable rebates are applied to ROT and specialist equity option transaction and comparison charges. 7 7 Currently, the Exchange provides a rebate for certain contracts executed in connection with transactions occurring as part of a dividend spread or merger spread strategy. Specifically, for those options contracts executed pursuant to a dividend spread or merger spread strategy, the Exchange rebates $0.08 per contract side for ROT executions and $0.07 per contract side for specialist executions on the business day before the underlying stock's ex-date. (The “ex-date” is the date on or after which a security is traded without a previously declared dividend or distribution. After the ex-date a stock is said to trade ex-dividend.) *See* Securities Exchange Act Release No. 51596 (April 21, 2005), 70 FR 22381 (April 29, 2005) (SR-Phlx-2005-19). In addition, the Exchange assesses a license fee of $0.05 per contract side for dividend spread strategy transactions in options in connection with certain products that carry license fees. 8 The license fee of $0.05 per contract side:

(i)Is not subject to the $1,750 or $1,000 caps described above;

(ii)is assessed in addition to any other transaction and comparison charges associated with dividend spread strategy transactions; and

(iii)does not count towards reaching the $1,750 or $1,000 caps. The Exchange proposes to extend the pilot program for the current fee caps and $0.05 per contract side license fee for a six-month period until September 1, 2006. 9 8 These products are listed on the Exchange's fee schedule under the section entitled “$60,000 “Firm Related” Equity Option and Index Option Cap.” 9 Telephone conversation between Leah Mesfin, Special Counsel, Commission, and Cynthia Hoekstra, Director, Phlx, on March 21, 2006. The Exchange also proposes to recoup the license fees owed in connection with the trading of additional products. Specifically, in addition to the products already being charged a license fee under the Exchange's strategy fee pilot program, the Exchange proposes to assess the license fee of $0.05 per contract side for dividend spread strategy transactions in options on:

(1)State Street Global Advisors', a division of State Street Bank and Trust Company (“SSGA”), streetTracks based on the Dow Jones & Co., Inc. (“Dow Jones”) Global Titans 50 IndexSM, (DGT);

(2)SSGA's streetTracks based on the Dow Jones Wilshire 5000 IndexSM, (TMW);

(3)BGI's iShares Dow Jones Select Dividend IndexSM, (DVY);

(4)iShares Dow Jones U.S. Total Market IndexSM, (IYY);

(5)iShares Dow Jones U.S. Basic Materials IndexSM, (IYM);

(6)iShares Dow Jones U.S. Consumer Services Sector IndexSM, (IYC);

(7)iShares Dow Jones U.S. Financial Sector IndexSM, (IYF);

(8)iShares Dow Jones U.S. Financial Services Sector IndexSM, (IYG);

(9)iShares Dow Jones U.S. Healthcare Sector IndexSM, (IYH);

(10)iShares Dow Jones U.S. Industrial Sector IndexSM, (IYJ);

(11)iShares Dow Jones U.S. Consumer Goods Sector IndexSM, (IYK);

(12)iShares Dow Jones U.S. Real Estate Sector IndexSM, (IYR);

(13)iShares Dow Jones U.S. Technology Sector IndexSM, (IYW);

(14)iShares Dow Jones U.S. Telecommunications Sector IndexSM, (IYZ);

(15)iShares Dow Jones U.S. Utilities Sector IndexSM, (IDU); and

(16)First Trust's ETF based on the Dow Jones Select Microcap IndexSM, (FDM). 10 10 The products listed in this proposal were recently the subject of a proposed rule change filed with the Commission to include them on the list of products that are assessed a license fee of $0.10 per contract side in connection with the Exchange's $60,000 “Firm Related” Equity Option and Index Option Cap. This same list of products is also used to designate the products that are assessed a license fee of $0.05 per contract side for dividend spread strategies in connection with transactions other than firm-related transactions. *See* Securities Exchange Act Release No. 53287 (February 14, 2006), 71 FR 9186 (February 22, 2006) (SR-Phlx-2006-10). Even with the assessment of the $0.05 license fee per contract side, the Exchange believes that the fee caps and rebates should continue to encourage specialists and ROTs to provide liquidity for dividend spread strategy transactions. In addition, the purpose of extending the pilot program is to continue to attract additional liquidity to the Exchange and to remain competitive. The reference to the $1,000 and $1,750 caps that are subject to a pilot program that expired on March 1, 2006 inadvertently appears twice on the fee schedule in the same paragraph. Therefore, the purpose of removing this sentence is to clarify and simplify the text relating to the caps and the pilot program as it appears on the Exchange's fee schedule. In addition, the purpose of changing one reference to the symbol “IWM” to “IYM” is to correct a typographical error. The symbol “IYM” is the symbol for iShares Dow Jones U.S. Basic Material Index SM . 11 11 “Dow Jones” and “SSGA's streetTracks based on the Dow Jones Global Titans 50 Index SM ”, “SSGA's streetTracks based on the Dow Jones Wilshire 5000 Index SM ”, “BGI's iShares Dow Jones Select Dividend Index SM ”, “iShares Dow Jones U.S. Total Market Index SM ”, “iShares Dow Jones U.S. Basic Materials Index SM ”, “iShares Dow Jones U.S. Consumer Services Sector Index SM ”, “iShares Dow Jones U.S. Financial Sector Index SM ”, “iShares Dow Jones U.S. Financial Services Sector Index SM ”, “iShares Dow Jones U.S. Healthcare Sector Index SM ”, “iShares Dow Jones U.S. Industrial Sector Index SM ”, “iShares Dow Jones U.S. Consumer Goods Sector Index SM ”, “iShares Dow Jones U.S. Real Estate Sector Index SM ”, “iShares Dow Jones U.S. Technology Sector Index SM ”, “iShares Dow Jones U.S. Telecommunications Sector Index SM ”, “iShares Dow Jones U.S. Utilities Sector Index SM ”, and “First Trust's ETF based on the Dow Jones Select Microcap Index SM ”, are service marks of Dow Jones & Company, Inc. and have been licensed for use for certain purposes by the Philadelphia Stock Exchange, Inc. The Dow Jones products are not sponsored, endorsed, sold or promoted by Dow Jones, and Dow Jones makes no representation regarding the advisability of investing in such product(s). 2. Statutory Basis The Exchange believes that the proposal is consistent with Section 6(b) of the Act, 12 in general, and Section 6(b)(4), 13 in particular, in that it is an equitable allocation of reasonable fees and other charges among its members. 12 15 U.S.C. 78f(b). 13 15 U.S.C. 78f(b)(4). B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that 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 either solicited or received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act 14 and subparagraph (f)(2) of Rule 19b-4 thereunder 15 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. 14 15 U.S.C. 78s(b)(3)(A)(ii). 15 17 CFR 240.19b-4(f)(2). IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov.* Please include File Number SR-Phlx-2006-16 on the subject line. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-Phlx-2006-16. 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 Phlx. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-Phlx-2006-16 and should be submitted on or before April 18, 2006. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 16 16 17 CFR 200.30-3(a)(12). Nancy M. Morris, Secretary. [FR Doc. E6-4429 Filed 3-27-06; 8:45 am] BILLING CODE 8010-01-P SMALL BUSINESS ADMINISTRATION Revocation of License of Small Business Investment Company Pursuant to the authority granted to the United States Small Business Administration by the Final Order of the United States District Court for the Southern District of Florida, Miami, Division, dated August 30, 2005, the United States Small Business Administration hereby revokes the license of Capital International SBIC, L.P., a Delaware limited partnership, to function as a small business investment company under the Small Business Investment Company License No. 04/04-0275 issued to Capital International SBIC, L.P. on December 4, 1998 and said license is hereby declared null and void as of November 30, 2003. Dated: March 7, 2006. United States Small Business Administration. Jaime Guzman-Fournier, Associate Administrator for Investment. [FR Doc. 06-3037 Filed 3-27-06; 8:45 am]

Connectionstraces to 6

Traces to 6 documents

U.S. Code

CFR