Notices. Notice of an application under section 12(d)(1)(J) of the Investment Company Act of 1940 (the “Act”) for an exemption from sections 12(d)(1)(A) and (B) of the Act, under sections 6(c) and 17(b) of the Act for an exemption from section 17(a) of the Act, and under section 17(d) of the Act and rule 17d-1 under the Act to permit certain joint transactions
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BILLING CODE 3210-01-M SECURITIES AND EXCHANGE COMMISSION [Investment Company Act Release No. 27265; 812-13199] OppenheimerFunds, Inc., et al.; Notice of Application March 22, 2006. AGENCY: Securities and Exchange Commission (“Commission”). ACTION: Notice of an application under section 12(d)(1)(J) of the Investment Company Act of 1940 (the “Act”) for an exemption from sections 12(d)(1)(A) and
(B)of the Act, under sections 6(c) and 17(b) of the Act for an exemption from section 17(a) of the Act, and under section 17(d) of the Act and rule 17d-1 under the Act to permit certain joint transactions. *Summary of Application:* Applicants request an order to permit certain registered open-end management investment companies to invest uninvested cash and cash collateral in affiliated money market funds in excess of the limits in sections 12(d)(1)(A) and
(B)of the Act. *Applicants:* OppenheimerFunds, Inc. (“OFI”), Centennial Asset Management Corp. (“CAMC,” and OFI , together, the “Adviser”), Bond Fund Series, Oppenheimer AMT-Free Municipals, Oppenheimer Fund AMT-Free New York Municipals, Oppenheimer Balanced Fund, Oppenheimer California Municipal Fund, Oppenheimer Capital Appreciation Fund, Oppenheimer Capital Income Fund, Oppenheimer Cash Reserves, Oppenheimer Champion Income Fund, Oppenheimer Developing Markets Fund, Oppenheimer Discovery Fund, Oppenheimer Dividend Growth Fund, Oppenheimer Equity Fund, Inc., Oppenheimer Emerging Growth Fund, Oppenheimer Emerging Technologies Fund, Oppenheimer Enterprise Fund, Oppenheimer Global Fund, Oppenheimer Global Opportunities Fund, Oppenheimer Gold & Special Minerals Fund, Oppenheimer Growth Fund, Oppenheimer High Yield Fund, Oppenheimer Integrity Funds, Oppenheimer International Bond Fund, Oppenheimer International Diversified Fund, Oppenheimer International Growth Fund, Oppenheimer International Large-Cap Core Trust, Oppenheimer International Growth Fund, Oppenheimer International Small Company Fund, Oppenheimer International Value Trust, Oppenheimer Limited Term California Municipal Fund, Oppenheimer Limited-Term Government Fund, Oppenheimer Main Street Funds, Inc., Oppenheimer Main Street Opportunity Fund, Oppenheimer Main Street Small Cap Fund, Oppenheimer Midcap Fund, Oppenheimer Money Market Fund, Inc., Oppenheimer Multi-State Municipal Trust, Oppenheimer Municipal Fund, Oppenheimer Portfolio Series, Oppenheimer Principal Protected Trust, Oppenheimer Principal Protected Trust II, Oppenheimer Principal Protected Trust III, Oppenheimer Quest Capital Value Fund, Inc., Oppenheimer Quest International Value Fund, Inc., Oppenheimer Quest For Value Funds, Oppenheimer Quest Value Fund, Inc., Oppenheimer Real Asset Fund, Oppenheimer Real Estate Fund, Oppenheimer Select Value Fund, Oppenheimer Series Fund, Inc., Oppenheimer Strategic Income Fund, Oppenheimer Total Return Bond Fund, Oppenheimer U.S. Government Trust, Oppenheimer Variable Account Funds, Rochester Fund Municipals, Rochester Portfolio Series, and Panorama Series Fund, Inc. (collectively, the “Oppenheimer Funds,”), Centennial California Tax Exempt Trust, Centennial Government Trust, Centennial Money Market Trust, Centennial New York Exempt Trust and Centennial Tax Exempt Trust (collectively, the “Centennial Funds,” together with the Oppenheimer Funds, the “Funds”), and any other registered open-end management investment companies or series thereof that are currently, or in the future may be advised or, provided the Adviser manages the Cash Balances (as defined herein), subadvised by the Adviser (included in the term “Funds”). *Filing Dates:* The application was filed on June 9, 2005. Applicants have agreed to file a final amendment during the notice period, the substance of which is reflected in this notice. *Hearing or Notification of Hearing:* An order granting the application will be issued unless the Commission orders a hearing. Interested persons may request a hearing by writing to the Commission's Secretary and serving applicants with a copy of the request, personally or by mail. Hearing requests should be received by the Commission by 5:30 p.m. on April 17, 2006, and should be accompanied by proof of service on applicants, in the form of an affidavit or, for lawyers, a certificate of service. Hearing requests should state the nature of the writer's interest, the reason for the request, and the issues contested. Persons may request notification of a hearing by writing to the Commission's Secretary. ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090. Applicants, R. William Hawkins, Esq., OppenheimerFunds, Inc., Two World Financial Center, 225 Liberty Street, 11th Floor, New York, NY 10281. FOR FURTHER INFORMATION CONTACT: Emerson S. Davis, Sr., Senior Counsel, at
(202)551-6868, or Nadya B. Roytblat, Assistant Director, at
(202)551-6821 (Division of Investment Management, Office of Investment Company Regulation). SUPPLEMENTARY INFORMATION: The following is a summary of the application. The complete application may be obtained for a fee at the Commission's Public Reference Desk, 100 F Street, NE., Washington, DC 20549-0102 (tel. 202-551-5850). Applicants' Representations 1. Each Fund, organized as a Massachusetts business trust or Maryland corporation, is registered under the Act as an open-end management investment company. 1 Certain Funds operate as money market funds that comply with rule 2a-7 under the Act (“Cash Management Funds”). OFI, a Colorado corporation, is registered as an investment adviser under the Investment Advisers Act of 1940 (the “Advisers Act”) and serves as investment adviser to each of the Oppenheimer Funds. CAMC, an investment adviser registered under the Advisers Act, is a wholly-owned subsidiary of OFI and serves as investment adviser to each of the Centennial Funds. 1 All Funds that currently intend to rely on the requested relief have been named as applicants and any existing or future Fund that relies on the requested relief in the future will do so only in accordance with the terms and conditions of the application. 2. Each Fund has, and may be expected to have, uninvested cash in an account at its custodian (“Uninvested Cash”). Uninvested Cash may result from a variety of sources, such as dividends or interest received on portfolio securities, unsettled securities transactions, reserves held for investment purposes, scheduled maturity of investments, proceeds from liquidation of investment securities, dividend payments, or money received from investors. Certain Funds may participate in a securities lending program under which a Fund will lend its portfolio securities to registered broker-dealers or other institutional investors (the “Securities Lending Program”). The loans will be continuously secured by collateral, which may include cash (“Cash Collateral,” and together with Uninvested Cash, “Cash Balances”). The Securities Lending Program, including the investment of any Cash Collateral, will comply with all present and future Commission or staff positions regarding securities lending arrangements. 3. Applicants request relief to permit:
(a)Certain Funds (“Investing Funds”) to use Cash Balances to purchase shares of one or more of the Cash Management Funds,
(b)the Cash Management Funds to sell their shares to, and redeem their shares from, each of the Investing Funds and
(c)the Adviser to effect the above transactions. Investment of Cash Balances in shares of the Cash Management Funds will be made only to the extent consistent with an Investing Fund's investment restrictions and policies as set forth in its prospectus and statement of additional information. Applicants believe that the proposed transactions will result in higher yields, increased investment opportunities, reduced transaction costs, increased returns, reduced administrative burdens, enhanced liquidity, and increased diversification. Applicants' Legal Analysis A. Section 12(d)(1) 1. Section 12(d)(1)(A) of the Act provides that no registered investment company may acquire securities of another investment company if such securities represent more than 3% of the acquired company's outstanding voting stock, more than 5% of the acquiring company's total assets, or if such securities, together with the securities of other acquired investment companies, represent more than 10% of the acquiring company's total assets. Section 12(d)(1)(B) of the Act provides that no registered open-end investment company may sell its securities to another investment company if the sale will cause the acquiring company to own more than 3% of the acquired company's voting stock, or if the sale will cause more than 10% of the acquired company's voting stock to be owned by investment companies. 2. Section 12(d)(1)(J) of the Act authorizes the Commission to exempt any person, security or transaction (or classes thereof) from any provision of section 12(d)(1) if, and to the extent that, the exemption is consistent with the public interest and the protection of investors. Applicants request relief under section 12(d)(1)(J) to permit the Investing Funds to use their Cash Balances to acquire shares of the Cash Management Funds in excess of the percentage limitations in section 12(d)(1)(A), provided however, that in all cases an Investing Fund's aggregate investment of Uninvested Cash in shares of the Cash Management Funds will not exceed 25% of the Investing Fund's total assets. Applicants also request relief to permit the Cash Management Funds to sell their shares to the Investing Funds in excess of the percentage limitations in section 12(d)(1)(B). 3. Applicants state that the proposed arrangement will not result in the abuses that sections 12(d)(1)(A) and
(B)were intended to prevent. Applicants state that because each Cash Management Fund will maintain a highly liquid portfolio, a Cash Management Fund would not need to maintain a special reserve or balances to meet redemptions by an Investing Fund. Applicants state that the proposed arrangement will not result in an inappropriate layering of fees because shares of the Cash Management Funds sold to the Investing Funds will not be subject to a sales load, redemption fee, distribution fee under a plan adopted in accordance with rule 12b-1 under the Act, or service fee (as defined in rule 2830(b)(9) of the Conduct Rules of the National Association of Securities Dealers, Inc. (“NASD Conduct Rules”) or, if such shares are subject to any such fees, the Adviser will waive its advisory fee for each Investing Fund in an amount that offsets the amount of such fees incurred by the Investing Fund. Applicants state that if a Cash Management Fund offers more than one class of securities, each Investing Fund will invest only in the class with the lowest expense ratio (taking into account the expected impact of the Investing Fund's investment) at the time of the investment. Before the next meeting of the board of trustees/directors (“Board”) of an Investing Fund is held for the purpose of voting on an advisory contract under section 15 of the Act, the Adviser to the Investing Fund will provide the Board with specific information regarding the approximate cost to the Adviser of, or portion of the advisory fee attributable to managing the Uninvested Cash of the Investing Fund, that can be expected to be invested in the Cash Management Funds. In connection with approving any advisory contract for an Investing Fund, the Board, including a majority of the trustees/directors who are not “interested persons,” as defined in section 2(a)(19) of the Act (“Independent Trustees/Directors”), will consider to what extent, if any, the advisory fee charged to each Investing Fund by the Adviser should be reduced to account for reduced services provided by the Adviser as a result of Uninvested Cash being invested in a Cash Management Fund. Applicants represent that no Cash Management Fund whose shares are held by an Investing Fund will acquire securities of any investment company or company relying on section 3(c)(1) or 3(c)(7) of the Act in excess of the limitations contained in section 12(d)(1)(A) of the Act. B. Section 17(a) of the Act 1. Section 17(a) of the Act makes it unlawful for any affiliated person of a registered investment company, acting as principal, to sell or purchase any security to or from the investment company. Section 2(a)(3) of the Act defines an “affiliated person” of an investment company to include the investment adviser, any person that owns 5% or more of the outstanding voting securities of that company, and any person directly or indirectly controlling, controlled by, or under common control with the investment company. Control is defined in section 2(a)(9) of the Act as “the power to exercise a controlling influence over the management or policies of a company, unless such power is solely the result of an official position with such company.” Applicants state that the Investing Funds and the Cash Management Funds may be deemed to be under common control, and therefore affiliated persons of each other, because they have a common Board, a common investment adviser or their investment advisers may be under common control. In addition, applicants submit that because an Investing Fund could acquire 5% or more of the outstanding voting shares of a Cash Management Fund, such Investing Fund might be deemed an affiliated person of the Cash Management Fund. Accordingly, applicants state that the sale of shares of the Cash Management Fund to the Investing Funds, and the redemption of such shares by the Investing Funds, may be prohibited under section 17(a). 2. Section 17(b) of the Act authorizes the Commission to exempt a proposed transaction from section 17(a) of the Act if the terms of the proposed transaction, including the consideration to be paid or received, are fair and reasonable and do not involve overreaching on the part of any person concerned, and the proposed transaction is consistent with the policies of each registered investment company involved and with the general purposes of the Act. Section 6(c) of the Act provides, in part, that the Commission may exempt any person, security or transaction, or any class or classes of persons, securities or transactions, from any provision of the Act, if and to the extent that such exemption is necessary or appropriate in the public interest and is consistent with the protection of investors and the purposes fairly intended by the policy and provisions of the Act. 3. Applicants submit that their request for relief to permit the purchase and redemption of Cash Management Fund shares by the Investing Funds satisfies the standards of sections 17(b) and 6(c) of the Act. Applicants state that the Investing Funds will purchase and redeem shares of the Cash Management Funds at net asset value, which is the same consideration paid and received for such shares by other shareholders. In addition, the Investing Funds will retain their ability to invest their Cash Balances directly into money market instruments or short-term instruments as authorized by their respective investment objectives and policies, if they believe they can obtain a higher rate of return, or for any other reason. Applicants also state that each of the Cash Management Funds reserves the right to discontinue selling shares to any of the Investing Funds if the management or Board of the Cash Management Fund determines that such sales would adversely affect its portfolio management and operations. C. Section 17(d) of the Act and Rule 17d-1 Under the Act 1. Section 17(d) of the Act and rule 17d-1 thereunder prohibit an affiliated person of a registered investment company, acting as principal, from participating in or effecting any transaction in connection with any joint enterprise or joint arrangement in which the investment company participates, unless the Commission has issued an order authorizing the arrangement. Applicants state that each Investing Fund (by purchasing shares of the Cash Management Funds), each Adviser of an Investing Fund (by managing the assets of the Investing Funds invested in the Cash Management Funds), and each Cash Management Fund (by selling shares to and redeeming them from the Investing Funds) could be deemed to be participants in a joint enterprise or other joint arrangement within the meaning of section 17(d) of the Act and rule 17d-1 thereunder. 2. In determining whether to approve a joint transaction under rule 17d-1 under the Act, the Commission will consider whether the participation by the investment company in the joint transaction or arrangement is consistent with the provisions, policies, and purposes of the Act, and the extent to which the participation is on a basis different from or less advantageous than that of other participants. Applicants submit that the investment by the Investing Funds in shares of the Cash Management Funds will be on the same basis and will be indistinguishable from any other shareholder account maintained by the same class of the Cash Management Funds, and the proposed transactions satisfy the standards of rule 17d-1 under the Act. Applicants' Conditions Applicants agree that the order granting the requested relief shall be subject to the following conditions: 1. Shares of the Cash Management Funds sold to and redeemed by the Investing Funds will not be subject to a sales load, redemption fee, distribution fee under a plan adopted in accordance with rule 12b-1 under the Act, or service fee (as defined in rule 2830(b)(9) of the NASD Conduct Rules), or if such shares are subject to any such fee, the Adviser will waive its advisory fee for each Investing Fund in an amount that offsets the amount of such fees incurred by the Investing Fund. 2. Before the next meeting of the Board of an Investing Funds held for purposes of voting on an advisory contract under Section 15 the Act, the Adviser to the Investing Fund will provide the Board with specific information regarding the approximate cost to the Adviser of, or portion of the advisory fee under the existing advisory contract attributable to, managing the Uninvested Cash of the Investing Fund that can be expected to be invested in the Cash Management Funds. Before approving any advisory contract for an Investing Fund, the Board of the Investing Fund, including a majority of the Independent Trustees/Directors, shall consider to what extent, if any, the advisory fees charged to the Investing Fund by the Adviser should be reduced to account for reduced or duplicative services provided to the Investing Fund by the Adviser as a result of Uninvested Cash being invested in the Cash Management Funds. The minutes of the meeting of the Investing Fund will record fully the Board's considerations in approving the advisory contract, including the considerations relating to fees referred to above. 3. Each of the Investing Funds will invest Uninvested Cash in, and hold shares of, the Cash Management Funds only to the extent that the Investing Fund's aggregate investment of Uninvested Cash in the Cash Management Funds does not exceed 25% of the Investing Fund's total assets. 4. Investment of Cash Balances in shares of the Cash Management Funds will be in accordance with each Investing Fund's respective investment restrictions, if any, and will be consistent with each Investing Fund's policies as set forth in its prospectus and statement of additional information. 5. No Cash Management Fund shall acquire securities of any investment company or company relying on section 3(c)(1) or 3(c)(7) of the Act in excess of the limits contained in section 12(d)(1)(A) of the Act. 6. Each Investing Fund and Cash Management Fund that may rely on the requested order shall be advised by the Adviser. 7. Before an Investing Fund may participate in a Securities Lending Program, a majority of the Fund's Board, including a majority of the Independent Trustees/Directors, will approve the Fund's participation in the Securities Lending Program. The Board will evaluate the Securities Lending Program and its results no less frequently than annually and determine that any investment of Cash Collateral in the Cash Management Funds is in the best interests of the shareholders of the Investing Fund. 8. The Board of any Investing Fund will satisfy the fund governance standards as defined in rule 0-1(a)(7) under the Act by the compliance date for the rule. For the Commission, by the Division of Investment Management, under delegated authority. Nancy M. Morris, Secretary, [FR Doc. E6-4518 Filed 3-28-06; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-53540; File No. SR-Amex-2006-14] Self-Regulatory Organizations; American Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change and Amendment Nos. 1 and 2 Thereto Relating to Specialists' Transactions With Public Customers March 22, 2006. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the “Act”), 1 and Rule 19b-4 thereunder, 2 notice is hereby given that on February 7, 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 and II below, which Items have been prepared by Amex. On March 16, 2006, the Exchange filed Amendment No. 1 to the proposed rule change. 3 On March 17, 2006, the Exchange filed Amendment No. 2 to the proposed rule change. 4 The Exchange filed the proposal as a “non-controversial” proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act 5 and Rule 19b-4(f)(6) thereunder. 6 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 revised proposed Amex Rule 190, Commentary .07 (iv), to require that a specialist represent to the Amex that neither the specialist nor his affiliates are making a market in any of the underlying component securities, currencies, or commodities of any ETF issued by the sponsor with which the specialist has entered into a business transaction. 4 In Amendment No. 2, the Exchange made further changes to proposed Amex Rule 190, Commentary .07 (iv), to apply the requirement therein to transactions entered into by either specialist or his member organization or any member, officer, employee or approved person therein. 5 15 U.S.C. 78s(b)(3)(A)(iii). 6 17 CFR 240.19b-4(f)(6). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend Amex Rule 190 and Section 910 of the Amex Company Guide to permit business transactions between a specialist or his member organization, or any member, officer, employee or approved person therein and the sponsor of any exchange traded fund (“ETF”) in which the specialist is registered. The text of the proposed rule change, as amended, is attached hereto as Exhibit A and is also available on the Amex Web site *http://www.amex.com* , at the principal office of 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, the Exchange included statements concerning the purpose of, and basis for, the proposed rule change, as amended, 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 the Statutory Basis for, the Proposed Rule Change 1. Purpose Amex Rule 190 (Specialist's Transactions with Public Customers) and Section 910 (Relationship with Specialists) of the Amex Company Guide generally restrict business transactions between a specialist or his member organization, or any member, officer, employee or approved person therein (collectively, “affiliates”) and any company or any officer, director, or 10% stockholder of a company in whose stock the specialist is registered. The restriction is intended to ensure that a specialist or his affiliates do not enter into a material business relationship with a company in whose security the specialist is registered, such that the specialist's or his affiliates' status creates conflicts of interest with respect to the specialist's affirmative and negative obligations to maintain a fair and orderly market in the security. Currently, Amex Rule 193 provides exemptions from Amex Rule 190(a) and
(b)to an approved person or member organization that is affiliated with a specialist member organization with respect to business transactions with issuers. This is due to the fact that the functional separation required by Amex Rule 193 eliminates conflict of interest concerns. The Exchange proposes to add an exemption to Amex Rule 190 and Section 910 of the Amex Company Guide that would apply to business transactions between a specialist or his affiliates and the sponsor of any ETF in which the specialist is registered. The Commission previously approved a similar rule filing by the New York Stock Exchange, Inc. (“NYSE”). 7 7 *See* Securities Exchange Act Release No. 52838 (November 28, 2005); 70 FR 72320 (December 2, 2005) (SR-NYSE-2005-66). For the purposes of the proposed rule change, ETFs are Portfolio Depositary Receipts (as defined in Rule 1000), Index Fund Shares (as defined in Rule 1000A), Trust Issued Receipts (as defined in Rule 1200) and derivative instruments based on one or more securities, currencies or commodities. The Exchange believes that potential conflicts of interest will be reduced due to the nature of how ETFs are traded. Since the trading price of an ETF is generally based on the price(s) of one or more security, commodity, currency or related futures contract (collectively, “underlying assets”), the Exchange believes that the potential for conflicts of interest that might have an undue influence or impact on the trading price of an ETF will be minimal. The Exchange also believes that conflict of interest or undue influence concerns will be further minimized by the fact that the underlying assets of an ETF are typically traded on a different exchange or market than Amex or in a different location within Amex. The Exchange also believes that the potential for conflicts of interest that might arise between a specialist or his affiliates and a sponsor of an ETF will be negligible because the responsibilities of a sponsor of an ETF are limited to establishing the trust that issues ETF shares, registering the ETF shares with the SEC, and filing required periodic reports. Thus, while the ETF sponsor generally oversees the performance of the trustee of the ETF and the trust's principal service providers, the trustee is responsible for the day-to-day administration of the trust. The proposed rule change would provide that in order to take advantage of the exemption the following conditions must be met:
(i)The business transaction may only be entered into with the sponsor of the ETF and the sponsor may not be involved in the day-to-day administration of the ETF;
(ii)any fee or other compensation paid in connection with the business transaction to a specialist or his affiliates must not have any relationship to the trading price or daily trading volume of the ETF;
(iii)the specialist or his affiliate must notify and provide a full description to the Exchange of any business transaction or relationship it may have with any sponsor of an ETF in which the specialist or any of its affiliates is registered; and
(iv)the specialist or his affiliate must make a representation to the Exchange indicating that the neither the specialist nor his affiliates are making a market in any of the underlying component securities, currencies or commodities of any ETF issued by the sponsor with which such specialist or affiliate has entered into a business transaction. The Exchange believes that the above-listed conditions will serve as an additional layer of protection against conflicts of interest by diminishing any potential ability for a specialist or his affiliates to unduly influence trading for their own benefit and any incentive for such specialist to compromise his specialist obligations in maintaining fair and orderly markets. The Exchange also believes that such conditions will help to ensure that the ETF sponsor does not unduly influence its specialist or his affiliates. 2. Statutory Basis The Exchange believes that the proposed rule change, as amended, is consistent with Section 6(b) of the Act, 8 in general, and furthers the objectives of Section 6(b)(5) of the Act, 9 in particular, in that it is designed to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, 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. 8 15 U.S.C. 78f(b). 9 15 U.S.C. 78f(b)(5). B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that the proposed rule change, as amended, will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others The Exchange did not solicit or receive any written comments with respect to the proposed rule change, as amended. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change, as amended, has become effective pursuant to Section 19(b)(3)(A) of the Act 10 and Rule 19b-4(f)(6) thereunder 11 in that 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 the filing, or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest. 10 15 U.S.C. 78s(b)(3)(A). 11 17 CFR 240.19b-4(f)(6). The Exchange has requested that the Commission waive the five-day pre-filing notice requirement and the 30-day operative delay period for “non-controversial” proposals and make the proposed rule change, as amended, effective and operative upon filing. The Commission has determined to waive the five-day pre-filing notice requirement and the 30-day operative delay period. 12 The Commission notes that the proposed rule change imposes conditions for specialist transactions with sponsors of ETFs that are substantially identical to those contained in NYSE Rule 460, Commentary .25 and NYSE Rule 103B.VIII. 12 For purposes only of accelerating the operative date of this proposal, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). Therefore, the foregoing rule change, as amended, has become immediately effective and operative upon filing pursuant to Section 19(b)(3)(A)(iii) of the Act 13 and Rule 19b-4(f)(6) thereunder. 14 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. 15 13 15 U.S.C. 78s(b)(3)(A)(iii). 14 17 CFR 240.19b-4(f)(6). 15 The effective date of the original proposed rule change is February 7, 2006, the date of the original filing, and the effective dates of Amendment Nos. 1 and 2 are, respectively, March 16, 2006 and March 17, 2006, the filing dates of the amendments. For purposes of calculating the 60-day abrogation period within which the Commission may summarily abrogate the proposed rule change, as amended, under Section 19(b)(3)(C) of the Act, the Commission considers the period to commence on March 17, 2006, the date on which the Exchange submitted Amendment No. 2. *See* 15 U.S.C. 78s(b)(3)(C). IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change, as amended, is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov* . Please include File Number SR-Amex-2006-14 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-2006-14. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Section, 100 F Street, NE., Washington, DC 20549. Copies of such filing also will be available for inspection and copying at the principal office of 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-2006-14 and should be submitted on or before April 19, 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. Exhibit A—American Stock Exchange LLC Proposed Rule Change Italicized text indicates material to be added. [Bracketed] text indicates material to be deleted. Specialist's Transactions With Public Customers Rule 190.
(a)through
(e)No change. * * * Commentary .01 through .06 No change. *.07 The restrictions in paragraph
(a)above relating to business transactions between a specialist or his member organization or any member, officer, employee or approved person therein and a company in which stock the specialist is registered shall not apply to Portfolio Depositary Receipts (as defined in Rule 1000), Index Fund Shares (as defined in Rule 1000A), Trust Issued Receipts (as defined in Rule 1200) and derivative instruments based on one or more securities, currencies or commodities (all of the foregoing collectively referred to in this Commentary .07 as “ETFs”), if the following conditions are met:* *(i) the specialist or his member organization or any member, officer, employee or approved person therein only enters into the business transaction with the sponsor of the ETF and the sponsor is not involved in the day-to-day administration of the ETF; and* *(ii) any fee or other compensation in connection with the business transaction paid to the specialist or his member organization or any member, officer, employee or approved person therein must not be dependent on the trading price or daily trading volume of the ETF;* *(iii) the specialist or his member organization or any member, officer, employee or approved person therein must notify and provide a full description to the Exchange of any business transaction or relationship it may have with any sponsor of an ETF that he or it is registered as specialist in; and* *
(iv)the specialist or his member organization or any member, officer, employee or approved person therein represents to the Exchange that the specialist, member organization or any member, officer, employee or approved person therein are not making a market in any of the underlying component securities, currencies or commodities of any ETF issued by the sponsor with which such specialist, member organization or any member, officer, employee or approved person therein has entered into a business transaction. * AMEX Company Guide Relationship With Specialist Procedures, Rules and Regulations Sec. 910. Introduction and
(a)through
(c)No change.
(d)*Exchange Rules Governing Specialist's Activities* —In addition to certain provisions of the Securities Exchange Act of 1934, a number of Exchange regulations place clearly defined limits on a specialist's activities. An awareness of both the intent and spirit of Exchange rules, and the responsibilities the Exchange places on the specialist, will help ensure that contacts between company officials and the specialist are conducted within the framework provided for above. With respect to any security in which a specialist is registered, Exchange rules prohibit specialists (and, with respect to paragraphs iii through ix, the member firm or member corporation of which the specialist is a member) from:
(i)through
(v)No change.
(vi)effecting, directly or indirectly, any business transaction with the issuer of any such security or any officer, director or 10% stockholder of any such issuer *, except as provided in Commentary .07 to Rule 190 with respect to business transactions, under certain conditions, between a specialist or his member organization or any member, officer, employee or approved person therein and the sponsor of an ETF (as defined therein) that he or it is registered as specialist in* ;
(vii)through
(ix)No change. With respect to any security in which a specialist is registered, Exchange rules require the specialist to report to the Exchange:
(i)through
(iii)No change.
(iv)any unusual transaction in which the specialist participates as a broker or dealer; [and]
(v)each purchase and sale for the specialists' own account[.]; and *(vi) a full description of any business transaction or relationship that a specialist or his member organization or any member, officer, employee or approved person therein may have, under certain conditions as provided in Commentary .07 to Rule 190, with any sponsor of an ETF (as defined therein) that he or it is registered as specialist in.*
(e)No change. [FR Doc. E6-4537 Filed 3-28-06; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-53537; File No. SR-CBOE-2006-15] Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of Proposed Rule Change and Amendment No. 1 Thereto To Reflect Committee Revisions 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 6, 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, II and III below, which Items have been prepared by the Exchange. On March 13, 2006, the CBOE filed Amendment No. 1 to the proposed rule change. 3 The CBOE has designated the proposed rule change as concerned solely with the administration of the Exchange under Section 19(b)(3)(A)(iii) of the Act, 4 and Rule 19b-4(f)(3) thereunder, 5 which renders the proposal effective upon filing with the Commission. 6 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 replaces the original filing in its entirety. In Amendment No. 1, the Exchange:
(i)revised the rule text to reflect revisions that had become effective through separate, unrelated rule change filings and to correct typographical errors; and
(ii)made certain clarifications in the text of CBOE Rule 4.11, Interpretation and Policy .05(b) regarding the Exchange's procedures in the event that a Market-Maker's position limit exemption request is denied and in the event that the Exchange subsequently reviews a position limit exemption request that it had granted. 4 15 U.S.C. 78s(b)(3)(A)(iii). 5 17 CFR 240.19b-4(f)(3). 6 For purposes of calculating the 60-day period within which the Commission may summarily abrogate the proposed rule change, as amended, under Section 19(b)(3)(C) of the Act, the Commission considers the period to commence on March 13, 2006, the date on which the Exchange submitted Amendment No. 1. *See* 15 U.S.C. 78s(b)(3)(C). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend its rules to delete or modify specific references to certain committees that have been eliminated and to modify specific references to other committees whose titles or authorities have changed. All references that currently relate to committees that are being eliminated will be replaced with terms such as the “appropriate Exchange committee” or the “Exchange.” All references to committees that have changed titles or authorities will be amended accordingly. The text of the proposed rule change is available on the Exchange's Web site ( *http://www.cboe.com* ), at the Exchange's Office of the Secretary, and at the Commission's Public Reference Room. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of the proposed rule change, as amended, is to delete from the CBOE Rules any specific references to the Clearing Procedures Committee, Exemption Committee, Modified Trading System Appointments (“MTS”) Committee, appropriate Screen-Based Trading (“SBT”) Trading Committee, appropriate SBT DPM Appointments Committee, and Special Product Assignment Committee. The Exchange is proposing to make these changes at this time because it recently determined to eliminate these committees and reassign their respective authorities to other committees and/or to Exchange staff. 7 The Exchange is also deleting all references to the Allocation Committee in the CBOE Rules in order to simplify the rule text and avoid confusion over the division of authorities among that committee and other appropriate Exchange committees that are assuming the authorities of the former Special Product Assignment Committee. In addition, a reference to the Securities Committee in CBOE Rule 6.41 is being deleted to avoid confusion, because this committee is a committee of the Options Clearing Corporation and not of the Exchange. References to the “appropriate Floor Procedure Committee,” the “appropriate FPC” and the like are also being amended to say the “appropriate Procedure Committee” to reflect a change in the names of those committees. 8 7 For example, the authorities of the former MTS Committee have been reassigned to the Allocation Committee and the appropriate Market Performance Committees. There were also other committees that the Exchange eliminated for which there are no specific references in the CBOE rules that need to be updated. For example, the Market Fee Oversight Committee was eliminated and its specific authorities have been reassigned to the appropriate Market Performance Committees. 8 Specifically, the Exchange has changed the titles of its Floor Procedure Committees to simply “Procedure Committees” ( *e.g.* , the Equity Floor Procedure Committee is now the Equity Option Procedure Committee and the Index Floor Procedure Committee is now the Index Option Procedure Committee). The Exchange also proposes to make certain clarifications in the text of CBOE Rule 4.11, Interpretation and Policy .05(b) regarding the procedures following denial of a Market-Maker's position limit exemption request and subsequent Exchange review of a granted position limit exemption request. 9 9 With respect to an initial request, ordinarily a first exemption request application will be considered without the presence of the Market-Maker. If a Market-Maker's first application request for an exemption is denied and he wishes to reapply, he may make a brief personal appearance before the Exchange. The proposed rule change deletes language that had limited a Market-Maker's appearance to presenting only those issues not previously considered as part of the first application. Under the proposed rule change, no such restriction will apply. With respect to review of a granted request, which may be revoked or modified by the Exchange, the proposed rule change clarifies that such reviews may be considered by the Exchange without the presence of the Market-Maker that originally received the exemption. The proposed rule change also clarifies that, if a granted exemption that is reviewed by the Exchange without the presence of a Market-Maker is revoked or modified and the Market-Maker wishes to reapply for the exemption or a modified exemption, the Market-Maker may make a brief scheduled personal appearance before the Exchange. The Exchange notes that CBOE Rule 4.11, Interpretation and Policy .05 applies only to Market-Makers seeking an exemption to the standard position limits in all options traded on the Exchange for the purpose of assuring that there is sufficient depth and liquidity in the marketplace, and not to confer a right upon the Market-Maker applying for an exemption. As such and in light of the procedural safeguards described herein, as well as other procedural safeguards set out in Rule 4.11, Interpretation and Policy .05, the purpose of the exemption process, and the prohibition against the granting of retroactive exemptions, decisions granting or denying exemptions are not subject to review under Chapter XIX of the Exchange Rules regarding Hearings and Review. Finally, various miscellaneous changes to the rule text to accommodate the above-described changes are also being made. In trying to accommodate the reassignments, the Exchange believes a better approach than making a specific reference to a committee is to make reference to the “appropriate Exchange committee” in the instances where the reassignment is to another committee and to the “Exchange” in instances where the reassignment is to Exchange staff and/or a committee. In this way, the Exchange will have the flexibility to delegate the authorities under the rules to the appropriate committee (or appropriate Exchange staff) and will not have to make a rule change merely, for instance, to accommodate a future change in the title of a committee or to accommodate the reassignment of an authority to another committee. As the authority exercised by committees (and by Exchange staff) is delegated pursuant to Exchange rules, the Exchange believes that the title of the committees exercising their authority should not be relevant. 2. Statutory Basis The Exchange believes the proposed rule change is consistent with the requirements of Section 6(b)(5) of the Act 10 which requires, among other things, that the rules of the Exchange be designed to promote just and equitable principles of trade, foster cooperation among persons engaged in facilitating securities transactions, and protect investors and the public interest. The CBOE believes that this proposal complies with the Act because the CBOE is amending its rules to update and/or generalize certain committee references to facilitate compliance. 10 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 Exchange neither solicited nor received comments on the proposal. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The Exchange has designated this proposal as concerned solely with the administration of the Exchange under Section 19(b)(3)(A)(iii) of the Act, 11 and Rule 19b-4(f)(3) thereunder, 12 which renders the proposal effective upon filing with the Commission. 11 15 U.S.C. 78s(b)(3)(A)(iii). 12 17 CFR 240.19b-4(f)(3). 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. 13 13 *See supra* note 6. IV. Solicitation of Comments Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change, as amended, is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov* . Please include File Number SR-CBOE-2006-15 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-2006-15. 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-2006-15 and should be submitted on or before April 19, 2006. 14 17 CFR 200.30-3(a)(12). For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 14 Nancy M. Morris, Secretary. [FR Doc. E6-4517 Filed 3-28-06; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-53543; File No. SR-CBOE-2006-21] Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Revise Provisions of the Exchange's Crossing Rule March 23, 2006. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the “Act”), 1 and Rule 19b-4 thereunder, 2 notice is hereby given that on February 28, 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 CBOE. The Exchange filed the proposal as a “non-controversial” rule change pursuant to Section 19(b)(3)(A) of the Act 3 and Rule 19b-4(f)(6) thereunder, 4 which renders the proposed rule change effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 15 U.S.C. 78s(b)(3)(A). 4 17 CFR 240.19b-4(f)(6). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change CBOE proposes certain changes to provisions of its rule that governs the participation rights of firms crossing orders in open outcry. The text of the proposed rule change is available on the Exchange's Web site ( *http://www.cboe.com* ), at the Exchange'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, CBOE included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. CBOE has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose Paragraphs
(d)and
(e)of CBOE Rule 6.74 currently provide guaranteed participation rights to floor brokers in trades that are crossed in open outcry in certain circumstances. Generally, these provisions provide that if the trade takes place at the market provided by the crowd then, after all public customer orders in the book and represented in the trading crowd at the time the market was established are satisfied, the floor broker representing the order will be entitled to cross a certain percentage of the contracts remaining in the original order. The percentage could be 40% or 20%, depending upon the particular type of option. For example, transactions in equity options are generally subject to a 40% participation guarantee under paragraph
(d)and broad-based index options (where the option class is not traded at an equity option trading post) are generally subject to a 20% participation guarantee under paragraph (e). In order to clarify and simplify the crossing provisions related to the 40% and 20% participation entitlements, the Exchange is deleting the current crossing entitlement provisions in paragraphs
(d)and
(e)of CBOE Rule 6.74 and creating a new crossing entitlement provision (proposed new paragraph
(d)of CBOE Rule 6.74), which combines aspects of current paragraphs
(d)and
(e)of the current rule. The new paragraph
(d)would provide a crossing entitlement for all option classes traded on the Exchange, 5 and set forth applicable parameters that would be set by the appropriate Exchange Procedure Committee on a class-by-class basis. 6 In addition, proposed CBOE Rule 6.74(d)(viii) would provide that the appropriate Procedure Committee would have the authority to exempt an option class from the section of the rule that provides for the crossing guarantee. 7 For each class that is subject to the crossing entitlement provisions, the appropriate Procedure Committee would determine the following:
(i)Whether the crossing guarantee applies to facilitations and/or solicitations; 8
(ii)a crossing guarantee percentage of either 20% or 40% (after public customer orders are satisfied); 9 and
(iii)the eligible size for an order that may be subject to the guaranteed crossing entitlement, although the eligible order size may not be less than 50 contracts. 10 The Exchange is also revising CBOE Rule 6.9.04 to make that provision consistent with the first paragraph of proposed CBOE Rule 6.74(d). 5 Currently, the crossing entitlements of CBOE Rule 6.74(d) and
(e)apply only to trading in equity and broad-based index options. *See* Telephone conversation between David Doherty, Attorney, CBOE, and Jan Woo, Attorney, Division of Market Regulation, Commission, March 15, 2006 (“Telephone conversation of March 15, 2006”). 6 The particular open outcry trading procedures applicable to the crossing guarantee will continue to apply unchanged. Generally, a floor broker representing an order eligible for crossing must request bids and offers and make all persons in the trading crowd aware of the request. When the cross involves a facilitation of a public customer order, the floor broker must make certain disclosures on the order ticket for the public customer and must disclose all securities that are components of the public customer order before requesting bids and offers for the execution of all components of the order. Once the trading crowd has provided a quote, the floor broker is entitled to cross a certain percentage of the order after all public customer orders that were on the limit order book and represented in the trading crowd at the time the market was established have been satisfied. The current provisions describing the Designated Primary Market-Maker's (“DPM”) guaranteed participation level (the guaranteed participation level will be a percentage that when combined with the percentage the originating firm crossed, does not exceed 40% of the order that remains after satisfying those public customer orders which trade ahead of the cross transaction) and priority of members of the trading crowd who established the market also apply unchanged under the proposed rule change. As is also provided in the existing procedures, nothing prohibits a floor broker or DPM from trading more than their applicable participation entitlements if the other members of the trading crowd do not choose to trade the remaining portion of the order. The proposed rule change also includes references to Lead Market-Makers, since that category of Exchange market participant may be entitled to a participation entitlement pursuant to CBOE Rule 8.15B. 7 This exemptive provision is identical to what is currently provided in subparagraph (e)(viii) of CBOE Rule 6.74 with respect to broad-based index options. Telephone conversation of March 15, 2006. 8 Currently, CBOE Rule 6.74(d) and Commentary .08 to CBOE Rule 6.74 provide for a crossing guarantee for both facilitation and solicitation orders in the case of equity options, and CBOE Rule 6.74(e) provides a crossing guarantee for facilitation orders only in the case of broad-based index options. Telephone conversation of March 15, 2006. 9 As described above, the current rules provide a 20% crossing guarantee in the case of broad-based index options and a 40% crossing guarantee in the case of equity options. Telephone conversation of March 15, 2006. 10 The proposed rule change also would establish that, in determining whether an order satisfies the eligible order size requirement, any multi-part or complex order (including a spread, straddle, combination, or ratio order (or a stock-option order or security future-option order, as defined in CBOE Rules 1.1(ii)(b) and 1.1(zz)(b), respectively) or any other complex order defined in CBOE Rule 6.53C) must contain one leg alone which is for the eligible order size or greater. Telephone conversation of March 15, 2006. 2. Statutory Basis The Exchange believes the proposed rule change is consistent with Section 6(b) of the Act 11 in general and furthers the objectives of Section 6(b)(5) of the Act 12 in particular in that it is designed to promote just and equitable principles of trade, serve to remove impediments to and perfect the mechanism of a free and open market and a national market system, and protect investors and the public interest. 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 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 Exchange neither solicited nor received comments on the proposal. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing proposed rule change:
(1)Does not significantly affect the protection of investors or the public interest;
(2)does not impose any significant burden on competition; and
(3)by its terms does not become operative for 30 days after the date of this filing, or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest, the proposed rule change has become effective pursuant to Section 19(b)(3)(A) 13 of the Act and Rule 19b-4(f)(6) thereunder. 14 13 15 U.S.C. 78s(b)(3)(A). 14 17 CFR 240.19b-4(f)(6). The Exchange provided the Commission with written notice of its intention to file the proposed rule change on February 13, 2006. The Commission received the Exchange's submission, and asked the Exchange to file the instant proposed rule change, pursuant to Rule 19b-4(f)(6) under the Act. CBOE requests that the Commission waive the 30-day operative delay, as specified in Rule 19b-4(f)(6)(iii), 15 and designate the proposed rule change to become operative immediately. The Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest because the proposed rule change establishes a uniform set of rules with respect to facilitation and solicitation orders for all options based on principles already approved by the Commission, while setting forth parameters by which the appropriate Exchange Procedure Committee may apply these rules flexibly on a class-by-class basis. 16 Waiving the 30-day pre-operative period will allow the Exchange to implement these changes without delay. 15 17 CFR 240.19b-4(f)(6)(iii). 16 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. *See* 15 U.S.C. 78c(f). At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov* . Please include File No. SR-CBOE-2006-21 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-CBOE-2006-21. 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 CBOE. 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-2006-21 and should be submitted on or before April 19, 2006. 17 17 CFR 200.30-3(a)(12). For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 17 Nancy M. Morris, Secretary. [FR Doc. E6-4539 Filed 3-28-06; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-53534; File No. SR-FICC-2005-18] Self-Regulatory Organizations; Fixed Income Clearing Corporation; Order Approving Proposed Rule Change To Enhance the Repo Collateral Substitution Process of FICC's Government Securities Division March 21, 2006. I. Introduction On September 30, 2005, the Fixed Income Clearing Corporation (“FICC”) filed with the Securities and Exchange Commission (“Commission”) and on December 20, 2005, amended proposed rule change SR-FICC-2005-18 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 January 5, 2006. 2 No comment letters were received. On March 20, 2006, FICC filed an amendment to the proposed rule change. 3 For the reasons discussed below, the Commission is approving the proposed rule change as amended. 1 15 U.S.C. 78s(b)(1). 2 Securities Exchange Act Release No. 53036 (December 29, 2005), 71 FR 629. 3 The amendment, as noted below, is not substantive and did not require republication of the notice. II. Description In general, FICC is enhancing the repo collateral substitution process of its Government Securities Division (“GSD”). The rule change:
(i)Permits the repo dealer or repo broker, as appropriate, to submit a substitution notification to FICC without information about the replacement collateral,
(ii)revises the repo collateral substitution process deadline and fee schedule, and
(iii)implements certain risk management measures and technical changes. A. Initial Substitution Notification Without Replacement Collateral Information The GSD's repo collateral substitution process provides a mechanism for a repo dealer to process its right to substitute the original collateral it provided as part of a repo transaction with replacement collateral. With respect to a brokered transaction, typically the repo dealer notifies the broker that it wishes to substitute the repo collateral before it specifically identifies the replacement collateral. 4 The repo broker then contacts the reverse repo dealer and informs it that a repo collateral substitution process is being initiated. The reverse repo dealer then sends the original repo collateral to FICC. However, since under FICC's current system the repo dealer's substitution notification that it must send to FICC must contain information about the replacement collateral, often the substitution notification is not delivered to FICC by the time FICC receives the returned original repo collateral from the reverse repo dealer. When the repo dealer does determine what securities will constitute the replacement collateral, it often delivers the replacement collateral to FICC before sending the repo collateral substitution notification. Thus the original and replacement collateral frequently are delivered to FICC before FICC is able to forward the collateral to the appropriate party. This leaves FICC in an overdraft position at the clearing bank, which can cause expense and risk to FICC and to its members and can cause settlement processing delays. 4 With respect to a non-brokered repo transaction, the repo dealer would contact the reverse repo dealer directly about the repo collateral substitution. The rule change permits the repo dealer or repo broker, as appropriate, to submit a substitution notification to FICC without information about the replacement collateral. FICC will deliver the original collateral to the repo party's account at its clearing bank upon receipt of the substitution notification so the original collateral will no longer linger in FICC's account. 5 5 The changes necessary to reflect this part of the rule change are contained in GSD Rule 18, sections 3(a), (b), (c), and
(d)and in the Schedule of Required and Accepted Data Submission Items for a Right of Substitution. A new schedule, titled Schedule of Required and Accepted Data Submission Items for New Securities Collateral, is being added to the rules to reflect that information on the replacement collateral will be contained in a separate submission to FICC. B. Revised Repo Collateral Substitution Process Deadline and Fee Schedule The rule change in repo processing requires a revision to GSD's schedule of time frames. Currently, there is a two-tiered deadline for a repo party to submit a substitution notification and associated late-fee. 6 The rule change establishes:
(i)An 11 a.m. Eastern Time deadline 7 for a repo party to submit a substitution notification and
(ii)a late-fee of $100 for each substitution notification that is received after the deadline. The rule change also establishes a two-tiered deadline for a repo party to submit replacement collateral information and an associated late-fee schedule. The deadlines for submission of replacement collateral information are:
(i)12 p.m. Eastern Time and
(ii)12:30 p.m. Eastern Time. The late-fee assessments are:
(i)$100 for each submission of replacement collateral information that is received after the first deadline but before the second deadline and
(ii)$250 for each submission of replacement collateral information that is received after the second deadline. 8 6 The current deadlines are 12 p.m. Eastern Time and 12:30 p.m. Eastern Time. The deadlines are extended by one hour on days that:
(i)FICC determines are high-volume days or
(ii)The Bond Market Association announces in advance will be high-volume days. FICC assesses a late-fee of:
(i)$100 for each substitution notification that is received after the first deadline but before the second deadline and
(ii)$250 for each substitution notification that is received after the second deadline. 7 The proposed 11 a.m. Eastern Time deadline will not be extended on high-volume days. 8 The allocation of collateral deadlines will be extended by one hour on days that:
(i)FICC determines are high-volume days or
(ii)The Bond Market Association announces in advance will be high-volume days. The rule changes necessary to affect this part of the proposed rule are contained in the Schedule of Timeframes and in the Fee Structure under “Late Fees.” In order to accommodate members' preparations to comply with the time frames contained herein, the proposed changes to the schedule of time frames and applicable late-fees will be implemented at a later date than the other rule changes contained in this filing. FICC will announce the implementation of the proposed schedule of time frames by Important Notice at least thirty calendar days prior to implementation. Until such implementation, currently existing time frames and late-fees applied to repo collateral substitutions shall remain in effect. C. Risk Management Measures and Technical Changes Generally, FICC is implementing certain measures to address the risk presented to it by the failure of a party to submit in a timely manner information regarding the replacement collateral to FICC. Specifically, FICC is:
(i)Increasing the clearing fund calculation of the repo dealer and allowing margining with respect to replacement collateral based on applicable generic CUSIP numbers only 9 and
(ii)imposing mark-to-market consequences on both the repo dealer and the reverse dealer with respect to unknown replacement collateral. 9 Generic CUSIP numbers represent the range of permissible securities that can constitute the replacement collateral. For example, there is a generic CUSIP number which represents Treasury securities with remaining maturity of fewer than thirty years. 1. Clearing Fund Calculation and Permissible Margin Offsets With respect to the calculation of the repo dealer's clearing fund requirement, FICC is assigning a value of 150 percent of the contract value of the original securities collateral to a repo transaction where FICC has not received information regarding the replacement collateral. 10 FICC also is applying the highest applicable margin factor in its rules in connection with the repo transaction. In GSD's rules, the highest margin factor is the factor for securities with a remaining maturity of 15 years and 16 days or greater. Therefore, if the generic CUSIP number that is assigned to the unknown replacement collateral is the generic CUSIP number for Treasury securities with a remaining maturity of 15 years and 16 days or greater, FICC will use the existing margin factor of 1.450 (applicable to category 1 members with positions in non-zeros). 11 10 New subsection 3(f) is being added to Rule 18 in order to effect this change. It should be noted that the application of the 150 percent for clearing fund purposes applies to both the receive/deliver and repo volatility components of the clearing fund calculation. 11 The GSD's margin factor schedules apply different margin factors to category 1 and category 2 dealers. In this example, if the member were a category 2 member electing to receive credit forward mark adjustment payments, the applicable margin factor under the proposed rule change would be 2.0. The proposed risk management measures applicable to non-timely allocation of replacement collateral will further affect the clearing fund calculation of the repo dealer by limiting permissible offsets. A regular part of the GSD's margining system is to permit offsets between resulting margin amounts of long and short net settlement positions. The GSD's rules contain disallowance factor tables that set forth specific limits on these permissible offsets. For example, where a short net settlement position in Treasury Offset Class A is to be offset against a long net settlement position in Treasury Offset Class B, the applicable disallowance factor table provides that 30 percent of this offset will be disallowed. 12 For offset purposes under the proposed rule change, FICC is defining two new offset classes to capture the generic CUSIP numbers that can be assigned to unknown replacement collateral. These new offset classes are identified as “H” for Treasury securities and “h” for non-mortgage-backed Agency securities. Under the proposed rule change, as a further risk management measure, FICC will not permit offsets between Offset Classes H and h or between Offset Classes H or h and any other existing GSD Offset Class. 12 As originally filed, FICC mistakenly stated that 20 percent of the offset would be disallowed. In its March 20, 2006, amendment, FICC changed this to 30 percent to accurately reflect the disallowance factor for such securities. 2. Modified Mark-to-Market Calculation FICC also is calculating a modified mark-to-market obligation with respect to the replacement collateral and imposing this on both the repo dealer and the reverse repo dealer in the case where a generic CUSIP number is used for underlying collateral. In a typical scenario where the replacement collateral is identified, FICC reverses any previous mark-to-market calculation for the old collateral and recalculates, collects, and passes through a mark-to-market associated with the actual replacement collateral. This computation is defined as the Forward Mark Adjustment Payment. 13 In the scenario where the replacement collateral has not been identified, FICC will calculate a modified Forward Mark Adjustment Payment to protect FICC against market risk. Specifically, the definition of Forward Mark Adjustment Payment is amended by noting that with respect to a repo transaction for which a substitution request has been made but for which replacement collateral information has not been provided to FICC, a new Forward Unallocated Sub Mark will be applied. This new mark will take into account repo interest that has accrued with respect to the repo transaction to date, as well as changes in the repo rate (to reflect the difference between the contract rate and the market rate for the remaining term of the repo transaction). 14 13 The Forward Mark Adjustment Payment is the sum of two components: the Collateral Mark and the Financing Mark. The Collateral Mark is the absolute value of the difference between the trade's contract value and market value. The Financing Mark reflects the financing cost that would be incurred by FICC if it replaced the reverse side of the repo by buying securities and putting them out on repo. 14 The following new definitions effect this change: Accrued Repo Interest-to-Date, Repo Interest Rate Differential, and Forward Unallocated Sub Mark. 3. Technical Changes Additionally, FICC is making certain technical changes to its GSD rules relating to repo collateral substitutions and repo transactions generally. a. *Section 3(a) of Rule 18:* Delete the requirement that details regarding the rights of substitution match between counterparties. Details regarding rights of substitution are not a required trade reporting item and thus will not be a required match item in GSD's system. References in this respect are deleted to reflect actual operating practice. b. *Sections 3(e) and 3(f) of Rule 18:* Delete the requirement that upon receipt of either the original or the replacement collateral, FICC will promptly redeliver the securities to the appropriate party. As stated in the narrative above, FICC may receive securities that are the subject of a repo collateral substitution request but may not yet have the requisite information for delivery of those securities. These provisions are deleted to reflect actual operating practice and also to make the rule consistent with the proposed changes. c. *Section 3(h) of Rule 18:* Delete the provision regarding implications of repo collateral substitutions on margin and mark-to-market requirements. This provision is redundant because the effects of repo substitutions on such requirements are covered in the rules governing these items and the rules to be modified by the proposed rule change. d. *Section 4 of Rule 18:* Make optional a requirement that for general collateral, forward-starting repos, the specific CUSIP and par value be submitted prior to the repo start date. FICC typically does not receive such allocations from its members prior to the repo start date and thus the proposed change aligns the rule with industry practice. The proposed change further reflects operating practice as well as industry expectations that a general collateral, forward-starting repo will be removed from the GSD's books if FICC does not receive the specific CUSIP by the time noted in the rule. Members typically submit new transactions with the specific CUSIPs and expect that the general collateral transaction will be removed from the GSD's books. e. *Section 5 of Rule 18:* Amend the provision that addresses repo transactions with maturing collateral. The proposed rule change provides that the repo party in such a repo transaction must make the required substitution of collateral by the time noted in the rule or FICC will remove the transaction from its books. This is because the underlying contract terminates if the collateral is not replaced in time, and therefore, the proposed rule change reflects industry practice. The proposed rule change further reflects industry practice by deleting the requirement that the replacement collateral meet certain specific criteria and by replacing that requirement with a requirement that the replacement collateral be “in accordance with the terms of the transaction.” This change also reflects industry practice. III. Discussion Section 19(b) of the Act directs the Commission to approve a proposed rule change of a self-regulatory organization if it finds that such proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to such organization. 15 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 and to assure the safeguarding of securities and funds which are in the custody or control of the clearing agency or for which it is responsible. 16 The Commission finds that FICC's rule change is consistent with these requirements. By revising its repo substitution rules to more accurately reflect industry practice, FICC's proposed rule change should result in repo substitution transactions being completed in a more timely manner. FICC's proposed rule change also includes revised risk management measures ( *e.g.* , revised clearing fund calculation and margin offsets) to address potential risk resulting from the revised repo substitution rules. As such, FICC's proposed rule change also should result in FICC being able to safeguard securities and funds which are in its possession and control or for which it is responsible. 15 15 U.S.C. 78s(b). 16 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, 17 that the proposed rule change (File No. SR-FICC-2005-18) be and hereby is approved. 17 15 U.S.C. 78s(b)(2). For the Commission by the Division of Market Regulation, pursuant to delegated authority. 18 18 17 CFR 200.30-3(a)(12). Nancy M. Morris, Secretary. [FR Doc. E6-4527 Filed 3-28-06; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-53536; File No. SR-NASD-2006-026] Self-Regulatory Organizations; National Association of Securities Dealers, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change and Amendment No. 1 Thereto Establishing CTCI Station-Based Pricing for Members 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 22, 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, II, and III below, which Items have been prepared by Nasdaq. Nasdaq filed Amendment No. 1 to the proposed rule change on March 10, 2006. 3 Nasdaq has designated this proposal as establishing or changing a due, fee, or other charge of 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 proposed rule change 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 For purposes of calculating the 60-day abrogation period, the Commission considers the period to have commenced on March 10, 2006, the date Nasdaq filed Amendment No. 1. 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 the Substance of the Proposed Rule Change Nasdaq proposes to modify fees for Nasdaq access through the Computer to Computer Interface (“CTCI”) protocol. 6 The text of the proposed rule change is below. Proposed new language is in italics; proposed deletions are in brackets. 7 6 The instant proposed rule change establishes fees for NASD members. The identical fees for non-memebers were established in SR-NASD-2006-027. *See* Securities Exchange Act Release No. 53535 (March 21, 2006). 7 Changes are marked to the rule text that appears in the electronic NASD Manual found at *http://www.nasd.com.* Prior to the date when The NASDAQ Stock Market LLC (“NASDAQ LLC”) commences operations, NASDAQ LLC will file a confirming change to the rules of NASDAQ LLC approved in Securites Exchange Act Release No. 53128 (January 13, 2006), 71 FR 3550 (January 23, 2006) (File No. 10-131). Rule 7010. System Services (a)-(e) No Change (f)(1)-(2) No Change
(3)[Computer to computer interface
(CTCI)and] Financial Information Exchange
(FIX)Options Price [Option 1: Dual 56kb lines (one for redundancy) single hub and router, and optional single FIX port.] [$1275/month]. [Option 2: Dual 56kb lines (one for redundancy), dual hubs (one for redundancy), and dual routers (one for redundancy), and optional single FIX port.] [$1600/month]. [Option 3: Dual T1 lines (one for redundancy), dual hubs (one for redundancy), dual routers (one for redundancy), and optional single FIX port. Includes base bandwidth of 128kb.] [$8000/month (CTCI or CTCI/FIX lines) $4000/month (FIX-only lines)]. FIX Trading Port (NMC and Brut) $400/port/month. FIX Port for Services Other than Trading $500/port/month. Dedicated FIX server $1,000/server/month. Dedicated FIX server
(Brut)$3,000/server/month; initial term of not less than 12 months is required. [Option 1, 2, or 3 with Message Queue software enhancement] [Fee for Option 1, 2, or 3 (including any Bandwidth Enhancement Fee) plus 20%]. [Disaster Recovery Option: Single 56kb line with single hub and router and optional single FIX port. (For remote disaster recovery sites only.)] [$975/month]. [Bandwidth Enhancement Fee (for T1 subscribers only)] [$600/month per 64kb increase above 128kb T1 base]. [Installation Fee] [$2000 per site for dual hubs and routers $1000 per site for single hub and router]. [Relocation Fee (for the movement of TCP/IP-capable lines within a single location)] [$1700 per relocation]. [FIX connectivity through Options 1, 2, or 3 or the Disaster Recovery Option will not be available to new subscribers that are
(i)NASD members after January 1, 2004, or
(ii)not NASD members after the effective date of SR-NASD-2003-196.] *(4) Computer to Computer Interface (CTCI)* . *The fees in the table below are applicable to NASD members that have transitioned off of Nasdaq-supported circuits, and as of July 1, 2006, also apply to NASD members that have not transitioned.* *Stations* *Fee component* *Fee* *1st Station* *$200/Station/month* *Each Additional Station* *$600/Station/month* *The bandwidth-based fees in the table below apply to NASD members that have not transitioned off of Nasdaq-supported circuits, and, pending approval of SR-NASD-2006-027, to non-members as indicated.* *Bandwidth* *Fee component* *Fee* Single 56kb line with single hub and router (for remote disaster recovery sites only) *$900/month for members* *$975/month for non-members* Option 1 Dual 56kb lines (one for redundancy) and single hub and router *$1,000/month for members* *$1,275/month for non-members* Option 2 Dual 56kb lines (one for redundancy), dual hubs (one for redundancy), and dual router (one for redundancy) *$1,200/month for members* *$1,600/month for non-members* Option 3 Dual T1 lines (one for redundancy), dual hubs (one for redundancy), and dual routers (one for redundancy). *Includes base bandwidth of 128kb* *$2,500/month for members* *$8,000/month for non-members* Bandwidth Enhancement Fee (for T1 subscribers only) Per 64kb increase above 128kb T1 base *$200/month for members* *$600/month for non-members* Option 1, 2, or 3 with Message Queue software enhancement *Fee for Option 1, 2, or 3 (including any Bandwidth* *Enhancement Fee) plus 20%* Installation Fee *$2,000 per site for dual hubs and routers* *$1,000 per site for single hub and router* Relocation Fee (for the movement of TCP/IP-capable lines within a single location) *$1,700 per relocation* [(4)] *(5)* New Nasdaq Workstation. (g)-(w) 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, 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 modifying fees for member access to Nasdaq through the CTCI protocol. Through the implementation of FIX and QIX and the sunset of the SDP/API, Nasdaq has continued towards its goal of allowing firms and service bureaus to choose their own circuit connectivity provider for access to Nasdaq's products and services. CTCI is the only remaining Nasdaq protocol that requires the firm to choose a Nasdaq-provided circuit for connectivity. In order for Nasdaq to complete its strategy, Nasdaq seeks to modify the CTCI pricing structure in order to transition from circuit-based fee components based on bandwidth to “Station” fee components that are more synonymous with logical access ports. CTCI Stations are logical channels used to manage the flow of data to and from the firm user. Stations are synonymous with the logical access ports used for FIX and QIX as they have the same characteristics, including a one-to-one relationship between the firm and Station and throughput limits. For this reason, Nasdaq chose a Station-based fee component for its new pricing. In order to facilitate the transition, Nasdaq seeks to modify the current bandwidth based fees to Nasdaq's circuit cost imposed by its carrier plus an administration cost. Firms that decide not to transition off of Nasdaq supported circuits will pay the new bandwidth-based fees in addition to Station fees. Nasdaq expects almost all firms to transition to new circuit connections but that the transition date will be different for each firm. As a result, Nasdaq intends to implement the new pricing structure once a firm has transitioned to a different circuit connection. However, the new pricing will be applied to all firms on July 1, 2006 regardless of the firm's transition plan. Thus, a firm that transitions will pay only the station fee. A firm that does not transition will pay only the bandwidth fee prior to July 1, but will pay both the station and the bandwidth fee between July 1 and the date when it does transition. 2. Statutory Basis Nasdaq believes the proposed rule change is consistent with the provisions of section 15A of the Act, 8 in general, and sections 15A(b)(5) 9 of the Act, in particular, in that it provides for the equitable allocation of reasonable dues, fees, and other charges among members and issuers and other persons using any facility or system which the NASD operates or controls. The proposed rule change will modify the current CTCI pricing structure in order to transition from circuit-based fee components based on bandwidth to “Station” fee components that are more synonymous with logical access ports. 8 15 U.S.C. 78 *o* -3. 9 15 U.S.C. 78 *o* -3(b)(5). B. Self-Regulatory Organization's Statement on Burden on Competition Nasdaq does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act, as amended. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others Written comments were neither solicited nor received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The proposed rule change has become effective pursuant to section 19(b)(3)(A)(ii) of the Act 10 and subparagraph (f)(2) of Rule 19b-4 thereunder, 11 because it establishes or changes a due, fee, or other charge imposed by NASD. At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. 10 15 U.S.C. 78s(b)(3)(A)(ii). 11 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-NASD-2006-026 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 NASD-2006-026. 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 offices 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 NASD-2006-026 and should be submitted on or before April 19, 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. E6-4515 Filed 3-28-06; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-53538; File No. SR-NASD-2006-037] Self-Regulatory Organizations; National Association of Securities Dealers, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Extending the Effective Date of the Uniform Branch Office Definition and Related Interpretive Material and Extending the Transition Deadline for Compliance With Form BR and Form U4 Filing Requirements March 22, 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 March 14, 2006, the National Association of Securities Dealers, Inc. (“NASD”) filed with the Securities and Exchange Commission (“SEC” or “Commission”) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by NASD. NASD has designated the proposed rule change as constituting a stated policy, practice, or interpretation with respect to the meaning, administration, or enforcement of an existing rule under section 19(b)(3)(A)(i) of the Act 3 and Rule 19b-4(f)(1) thereunder, 4 which renders the proposal effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 15 U.S.C. 78s(b)(3)(A)(i). 4 17 CFR 240.19b-4(f)(1). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change NASD is filing with the Commission an extension of the effective date of amendments to NASD Rule 3010(g)(2)(A) which defines the term “branch office,” and related IM-3010-1 which provides guidance on factors to be considered by members when conducting internal inspections of offices (“Uniform Branch Office Definition”), from May 1, 2006 to July 3, 2006. 5 Further, NASD is extending from May 1, 2006 to July 3, 2006 the transition deadline for compliance with Form BR (Uniform Branch Office Registration Form) and Form U4 (Uniform Application for Securities Industry Registration or Transfer) filing requirements for firms with branch offices in existence before the close of business on October 14, 2005. 6 NASD is not proposing any textual changes to NASD's rules. 5 *See* Securities Exchange Act Release No. 52403 (September 9, 2005), 70 FR 54782 (September 16, 2005) (SR-NASD-2003-104) (“Uniform Branch Office Definition Approval Order”). 6 *See* Securities Exchange Act Release No. 52544 (September 30, 2005), 70 FR 58764 (October 7, 2005) (SR-NASD-2005-030) (“Form BR Approval Order”). II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, NASD 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. 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 On September 9, 2005, the SEC approved:
(1)amendments to NASD Rule 3010(g)(2) which defines the term “branch office” and
(2)the adoption of IM-3010-1 to provide interpretive guidance on factors to be considered by members in conducting internal inspections of offices. 7 In the rule filing, NASD stated that the effective date of the Uniform Branch Office Definition would follow deployment of the new branch office registration system on the Central Registration Depository (CRD®), and that members would have sufficient time to transition to the new Form BR (Uniform Branch Office Registration Form) and associated filing protocols. 8 Following SEC approval of the Uniform Branch Office Definition, NASD announced in a *Notice to Members* that the effective date of the amendments would be May 1, 2006. 9 7 *See* Uniform Branch Office Definition Approval Order. 8 *See* Form BR Approval Order. *See also* NASD *Notice to Members* 05-66 (October 2005). 9 *See* NASD *Notice to Members* 05-67 (October 2005). In addition, on September 30, 2005, the SEC approved the Form BR and conforming and technical changes to Form U4 (Uniform Application for Securities Industry Registration or Transfer) and Form U5 (Uniform Termination Notice for Securities Industry Registration). 10 In the rule filing and subsequent *Notice to Members* , NASD announced May 1, 2006 as the transition deadline for compliance with Form BR and Form U4 filing requirements for firms with branch offices in existence before the close of business on October 14, 2005. Such firms currently have until May 1, 2006 to:
(1)Complete and file the “conversion” Form BR for each such branch and
(2)with respect to the registered persons employed by such branches, amend all applicable Forms U4 to assign these registered persons to the branch office(s) (or other locations) from which they work. 11 10 *See* Form BR Approval Order. *See also* NASD *Notice to Members* 05-66 (October 2005). 11 *See* NASD *Notice to Members* 05-66 (October 2005). Numerous members have requested an extension of the May 1, 2006 deadlines, as the process for transitioning existing and new branch offices into the new centralized branch office registration system on CRD has been more time consuming than originally anticipated. In particular, members with the largest number of associated persons have stated that the process of completing a Form BR for each branch office location, which requires more detailed information on each branch location (both existing and new locations) than previously required under Schedule E to Form BD, has been resource and labor intensive. Such members have expressed concern that, despite the allocation of significant resources to meet the May 1, 2006 deadlines, they do not believe they will be able to complete the necessary Forms BR and Forms U4 linking each associated person to a registered office location by such deadline. As a result, NASD believes this one-time extension of the deadlines to July 3, 2006 of:
(1)the effective date of the Uniform Branch Office Definition and
(2)the transition deadline for compliance with Form BR and Form U4 filing requirements for firms with branch offices in existence before the close of business on October 14, 2005 will allow for a more orderly transition by members to the new Uniform Branch Office Definition and the new centralized branch office registration system on CRD. NASD is filing the proposed rule change for immediate effectiveness. The proposed rule change will become effective upon the date of this filing, thereby extending to July 3, 2006:
(1)the effective date of the Uniform Branch Office Definition and
(2)the transition deadline for compliance with Form BR and Form U4 filing requirements for firms with branch offices in existence before the close of business on October 14, 2005. 2. Statutory Basis NASD believes that the proposed rule change is consistent with the provisions of section 15A(b)(6) of the Act, 12 which requires, among other things, that NASD rules 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 extension to July 3, 2006 will allow for a more orderly transition by members to the Uniform Branch Office Definition and the new centralized branch office registration system on CRD. The extension will allow members to comply with the Uniform Branch Office Definition and the new Form BR without unduly burdening members. 12 15 U.S.C. 78 *o* -3(b)(6). 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. 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 The foregoing rule change has become effective pursuant to section 19(b)(3)(A) 13 of the Act and paragraph
(f)of Rule 19b-4 thereunder, 14 in that the proposed rule change constitutes a stated policy, practice, or interpretation with respect to the meaning, administration, or enforcement of an existing rule of NASD. At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. 13 15 U.S.C. 78s(b)(3)(A). 14 17 CFR 240.19b-4(f). IV. Solicitation of Comments Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov.* Please include File Number SR-NASD-2006-037 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-2006-037. 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-2006-037 and should be submitted on or before April 19, 2006. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 15 15 17 CFR 200.30-3(a)(12). Nancy M. Morris, Secretary. [FR Doc. E6-4528 Filed 3-28-06; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-53535; File No. SR-NASD-2006-027] Self-Regulatory Organizations; National Association of Securities Dealers, Inc.; Notice of Filing and Order Granting Accelerated Approval of Proposed Rule Change and Amendment Nos. 1 and 2 Thereto Establishing CTCI Station-Based Pricing for Non-Members 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 22, 2006, the National Association of Securities Dealers, Inc. (“NASD”), through its subsidiary, The Nasdaq Stock Market, Inc. (“Nasdaq”), filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I and II below, which Items have been prepared by Nasdaq. Nasdaq filed Amendment No. 1 on March 10, 2006, and Amendment No. 2 on March 14, 2006. The Commission is publishing this notice to solicit comments on the proposed rule change, as modified by Amendment Nos. 1 and 2, from interested persons, and simultaneously granting accelerated approval of the proposed rule change, as amended. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change Nasdaq proposes to modify fees for Nasdaq access through the Computer to Computer Interface (“CTCI”) protocol for non-members. The text of the proposed rule change is below. Proposed new language is in italics; proposed deletions are in brackets. 3 3 Changes are marked to the rule text that appears in the electronic NASD Manual found at *http://www.nasd.com,* as amended on an immediately effective basis by SR-NASD-2006-026. *See* footnote 3 *supra.* Prior to the date when The NASDAQ Stock Market LLC (“NASDAQ LLC”) commences operations, NASDAQ LLC will file a conforming change to the rules of NASDAQ LLC approved in Securities Exchange Act Release No. 53128 (January 13, 2006), 71 FR 3550 (January 23, 2006) (File No. 10-131). Rule 7010. System Services (a)-(e) No Change (f)(1)-(3) No Change
(4)Computer to Computer Interface
(CTCI)The fees in the table below are applicable to *CTCI subscribers* [NASD members] that have transitioned off of Nasdaq-supported circuits, and as of the July 1, 2006, also apply to *CTCI subscribers* [NASD members] that have not transitioned. Stations Fee component Fee Station/month 1st Station $200 Each Additional Station 600 The bandwidth fees in the table below apply to [NASD members] *CTCI subscribers* that have not transitioned off of Nasdaq-supported circuits[, and, pending approval of SR-NASD-2006-027, to non-members as indicated]. Bandwidth Fee component Fee Single 56kb line with single hub and router (for remote disaster recovery sites only) $900/month [for members $975/month for non-members]. *Option 1* Dual 56kb lines (one for redundancy) and single hub and router $1,000/month [for members $1,275/month for non-members]. *Option 2* Dual 56kb lines (one for redundancy), dual hubs (one for redundancy), and dual router (one for redundancy) $1,200/month [for members $1,600/month for non-members]. *Option 3* Dual T1 lines (one for redundancy), dual hubs (one for redundancy), and dual routers (one for redundancy). Includes base bandwidth of 128kb $2,500/month [for members $8,000/month for non-members]. Bandwidth Enhancement Fee (for T1 subscribers only) Per 64kb increase above 128kb T1 base $200/month [for members $600/month for non-members] Option 1, 2, or 3 with Message Queue software enhancement Fee for Option 1, 2, or 3 (including any Bandwidth Enhancement Fee) plus 20% Installation Fee $2,000 per site for dual hubs and routers. $1,000 per site for single hub and router. Relocation Fee (for the movement of TCP/IP—capable lines within a single location) $1,700 per relocation.
(5)New Nasdaq Workstation No Change (g)-(w) 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, Nasdaq 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 III below. Nasdaq has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose On February 22, 2006, Nasdaq filed SR-NASD-2006-026, to modify fees for members to establish access to Nasdaq through the CTCI protocol (effective February 22, 2006). The instant proposed rule change will apply to non-members a pricing schedule identical to that schedule Nasdaq instituted for members in SR-NASD-2006-026. 4 4 *See* Securities Exchange Act Release No. 53536 (March 21, 2006). Through the implementation of FIX and QIX and the sunset of the SDP/API, Nasdaq has continued towards its goal of allowing firms and service bureaus to choose their own circuit connectivity provider for access to Nasdaq's products and services. CTCI is the only remaining Nasdaq protocol that requires the firm to choose a Nasdaq-provided circuit for connectivity. In order for Nasdaq to complete its strategy, Nasdaq seeks to modify the CTCI pricing structure in order to transition from circuit-based fee components based on bandwidth to “Station” fee components that are more synonymous with logical access ports. CTCI Stations are logical channels used to manage the flow of data to and from the firm user. Stations are synonymous with the logical access ports used for FIX and QIX as they have the same characteristics, including a one to one relationship between the firm and Station and throughput limits. For this reason, Nasdaq chose a Station-based fee component for its new pricing. In order to facilitate the transition, Nasdaq seeks to modify the current bandwidth based fees to Nasdaq's circuit cost imposed by its carrier plus an administration cost. Firms that decide not to transition off of Nasdaq supported circuits will pay the new bandwidth-based fees in addition to Station fees. Nasdaq expects almost all firms to transition to new circuit connections but that the transition date will be different for each firm. As a result, Nasdaq intends to implement the new pricing structure once a firm has transitioned to a different circuit connection. However, the new pricing will be applied to all firms on July 1, 2006 regardless of the firm's transition plan. Thus, a firm that transitions will pay only the station fee. A firm that does not transition will pay only the bandwidth fee prior to July 1, but will pay both the station and the bandwidth fee between July 1 and the date when it does transition. 2. Statutory Basis Nasdaq believes that the proposed rule change is consistent with the provisions of Section 15A of the Act, 5 in general, and with Section 15A(b)(5) of the Act, 6 in particular, in that the proposal provides for the equitable allocation of reasonable dues, fees, and other charges among members and issuers and other persons using any facility or system which NASD operates or controls. The proposed rule change applies to non-members and will modify the current CTCI pricing structure in order to transition from circuit-based fee components based on bandwidth to “Station” fee components that are more synonymous with logical access ports. 5 15 U.S.C. 78 *o* -3. 6 15 U.S.C. 78 *o* -3(b)(5). B. Self-Regulatory Organization's Statement on Burden on Competition Nasdaq does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act, as amended. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others Written comments were neither solicited nor received. III. 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-2006-027 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 NASD-2006-027. 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 offices 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 NASD-2006-027 and should be submitted on or before April 19, 2006. IV. Commission's Findings and Order Granting Accelerated Approval of Proposed Rule Change 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 self-regulatory organization. 7 Specifically, the Commission believes that the proposed rule change, as amended, is consistent with Section 15A(b)(5) of the Act, 8 which requires that the rules of the self-regulatory organization provide for the equitable allocation of reasonable dues, fees, and other charges among members and issuers and other persons using any facilities or system which it operates or controls. 7 In approving the 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). 8 15 U.S.C. 78 *o* -3(b)(5). The Commission notes that this proposal would permit the schedule for non-NASD members to mirror the schedule applicable to NASD members that became effective on February 22, 2006, pursuant to SR-NASD-2006-026. The Commission finds good cause for approving the proposed rule change, as amended, prior to the 30th day of the date of publication of the notice thereof in the **Federal Register** . The proposed fees for non-NASD members are identical to those in SR-NASD-2006-026, which implemented those fees for NASD members and which became effective as of February 22, 2006. The Commission notes that the instant proposed rule change will promote consistency in Nasdaq's fee schedule by applying simultaneously the same pricing schedule for NASD members and non-NASD members alike. Therefore, the Commission finds that there is good cause, consistent with Section 19(b)(2) of the Act, to approve the proposed rule change, as modified by Amendment Nos. 1 and 2, on an accelerated basis. V. Conclusion *It is therefore ordered* , pursuant to Section 19(b)(2) of the Act, that the proposed rule change, as amended (SR-NASD-2006-027), is approved on an accelerated basis. 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. E6-4538 Filed 3-28-06; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-53542; File No. SR-NASD-2006-029] Self-Regulatory Organizations; National Association of Securities Dealers, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Amendments to Rule 6530 To Clarify the Removal Process for Securities of OTCBB Issuers That Fail To Remain Current With OTCBB Reporting Requirements March 23, 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 27, 2006, the National Association of Securities Dealers, Inc. (“NASD”) 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 NASD. NASD has designated the proposed rule change as “constituting a stated policy, practice, or interpretation with respect to the meaning, administration, or enforcement of an existing rule” under Section 19(b)(3)(A)(i) of the Act 3 and Rule 19b-4(f)(1) thereunder, 4 which renders the proposal effective upon receipt of this filing by the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 15 U.S.C. 78s(b)(3)(A)(i). 4 17 CFR 240.19b-4(f)(1). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change NASD is proposing to amend NASD Rule 6530 to clarify the removal process for the securities of issuers quoted on the Over-the-Counter Bulletin Board (“OTCBB”) that fail to remain current with reporting their financial information to the Commission or other appropriate regulator. The text of the proposed rule change is available on NASD's Web site ( *http://www.nasd.com* ), at the principal office of NASD, 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, NASD 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. 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 In January 1999, the Commission approved amendments to NASD Rules 6530 and 6540 that limit quotations on the OTCBB to securities of issuers that are current in their periodic filings with the Commission or other applicable regulator. 5 In November 2005, the Commission approved amendments to NASD Rule 6530 that limit the eligibility for quotation on the OTCBB of the securities of issuers that are repeatedly late or otherwise delinquent in filing periodic reports. 6 Specifically, NASD Rule 6530(e) provides that OTCBB issuers that fail to file a complete periodic report with the Commission or other respective regulator, even if they file within the grace period allowed by NASD Rule 6530, three times in a two-year period and those issuers that have been removed from the OTCBB for failure to file two times in a two-year period, are ineligible for quotation on the OTCBB by an NASD member. 7 Following removal pursuant to NASD Rule 6530(e), the securities of an issuer would only become eligible for quotation on the OTCBB again if the issuer has timely filed complete required periodic reports for a one-year period. 5 *See* Securities Exchange Act Release No. 40878 (January 4, 1999), 64 FR 1255 (January 8, 1999) (SR-NASD-98-51). 6 *See* Securities Exchange Act Release No. 52786 (November 16, 2005), 70 FR 70907 (November 23, 2005) (SR-NASD-2005-011). 7 NASD Rule 6530(e) applies to filings for reporting periods ending on and after October 1, 2005. NASD is filing the proposed rule change to clarify the removal process and grace periods for securities of OTCBB issuers that fail to remain current in their reporting requirements. Specifically, when an issuer does not comply with the reporting requirements in NASD Rule 6530, either because a filing was not made 8 or because a filing was incomplete, 9 a fifth character “E” is appended to the trading symbol of that issuer's security. 10 Notice of the pending symbol change to append the “E” modifier is publicly reported on the OTCBB Daily List. 11 This identifier notifies investors and other market participants that the issuer is not current, or that the NASD staff does not have sufficient information to determine if the issuer is current, in its reporting obligations. 12 8 When NASD does not receive notice that an issuer which files with a regulator other than the Commission has timely filed, the “E” modifier is appended to the trading symbol of the issuer's security. If the issuer did in fact timely file with its respective regulator, the issuer would not be considered delinquent for purposes of NASD Rule 6530(e). 9 In order for a filing to be complete, it must, for example, contain all required certifications, attestations, and financial statements, including an auditor's review pursuant to SAS-100 (for quarterly reports) or an unqualified auditor's opinion (for annual reports). *See* Rule 13a-14 under the Act, 17 CFR 240.13a-14, and Rules 10-01(d) and 2-02(c) of Regulation S-X, 17 CFR 210.10-01(d) and 2-02(c). In addition, the auditor must be registered with the Public Company Accounting Oversight Board. *See* Section 102(a) of the Sarbanes-Oxley Act of 2002, 15 U.S.C. 7212(a). 10 A filing would not be considered delinquent if made within any applicable extension permitted by Rule 12b-25 under the Act, provided that the issuer files the applicable materials specified in Rule 12b-25. *See* 17 CFR 240.12b-25 (under Rule 12b-25, an issuer would need to file, among other things, a Form 12b-25 notice with the Commission no later than one business day after the due date for the applicable report). If the issuer does not file the required report by the expiration of the applicable Rule 12b-25 grace period, notice of a pending change to the issuer's symbol will be publicly reported on the OTCBB Daily List and the “E” modifier will be appended to the trading symbol of that issuer's securities. The applicable grace period under NASD Rule 6530 will be calculated from the date of publication on the OTCBB Daily List. 11 Notice of a pending symbol change is publicly reported on the OTCBB Daily List within seven business days of the due date of the report. The “E” modifier is then appended to the issuer's security symbol within two business days thereafter. The OTCBB Daily List is available at *http://www.otcbb.com* . 12 A list of delinquent issuers is available on *http://www.otcbb.com.* NASD Rule 6530 generally permits the continued quoting of securities of delinquent issuers for a specified grace period. 13 Questions have been raised as to from what date the grace period, if applicable, commences. NASD is clarifying that the grace period, if applicable, is calculated from the date notification of the pending symbol change to append the “E” modifier is published on the OTCBB Daily List. If the issuer does not comply within any applicable grace period provided by NASD Rule 6530 and no request for review by a hearing panel has been received, 14 then the securities of the issuer are removed from quotation on the OTCBB following a subsequent publication on the OTCBB Daily List of the removal. In this case, notice of removal will appear on the Daily List within one business day after the expiration of the grace period. 15 Alternatively, if the delinquent issuer becomes current in its filings with the Commission or its respective regulator during any applicable grace period provided for in NASD Rule 6530, the “E” modifier will be removed from the trading symbol of that issuer's security following subsequent publication thereof on the OTCBB Daily List. 16 In this case, notice of the symbol change will appear on the OTCBB Daily List within one business day after the filing of the complete periodic report. 17 13 The grace period set forth in NASD Rule 6530 varies depending on the type of issuer. OTCBB issuers that file with the Commission are subject to a 30 calendar day grace period, whereas, OTCBB issuers that do not file with the Commission, but are required to file with other regulators ( *i.e.* , banks, savings associations, and insurance companies) are afforded a 60 calendar day grace period. Pursuant to NASD Rule 6530(e), however, the third time an OTCBB issuer is delinquent in the prior two-year period, that issuer's securities will be removed from quotation on the OTCBB without the benefit of any grace period for the third delinquency, although seven calendar days will be provided to request a review of the staff determination by a hearing panel. *See* Securities Exchange Act Release No. 52786 (November 16, 2005), 70 FR 70907 (November 23, 2005) (SR-NASD-2005-011). 14 A party aggrieved by a determination relating to the OTCBB may request a review of such determination by a hearing panel pursuant to the NASD Rule 9700 Series. The hearing panel determines whether the securities of an issuer are eligible for continued quotation because the issuer has, in fact, filed a complete periodic report. The hearing panel does not have the discretion to allow the securities of delinquent companies to continue to trade on the OTCBB. A request for review by a hearing panel will stay the security's removal until the panel makes its determination. An issuer that is not removed because it files a late report after requesting a hearing but before a decision by the hearing panel has been issued in the matter would not be considered to have failed to file for purposes of NASD Rule 6530(e)(2), however, that issuer would be considered to have filed late for purposes of NASD Rule 6530(e)(1). In a separate filing with the Commission, NASD is proposing to clarify the availability of this review process and to adopt fees for such review. *See* SR-NASD-2005-067 (available at *http://www.nasd.com* ). *See also* Securities Exchange Act Release No. 52786 (November 16, 2005), 70 FR 70907 (November 23, 2005) (SR-NASD-2005-011). 15 After publication on the Daily List, the issuer's securities will be removed from quotation on the following business day. Telephone conversation among Andrea Orr, Assistant General Counsel, NASD, Nancy Sanow, Assistant Director, Division of Market Regulation, Commission, Tim Fox, Special Counsel, Division of Market Regulation, Commission, and Richard Holley III, Special Counsel, Division of Market Regulation, Commission, on March 20, 2006. 16 A delinquent issuer may not prevent its security from being removed from the OTCBB by filing the required complete periodic report after the grace period expires but before notice of removal is published on the OTCBB Daily List and the security is removed from the system ( *e.g.* , if the issuer files the report on the 31st day following publication, where the grace period expired on the 30th day), and OTCBB market makers are not permitted to initiate quotations in delinquent issuers in such instances after the grace period has expired. After the expiration of any applicable grace period where the issuer has not filed the complete periodic report, NASD will continue to process the removal, and an NASD member would only be permitted to quote the issuer's security to the extent permitted by NASD Rule 6530 and other applicable rules. Telephone conversation among Andrea Orr, Assistant General Counsel, NASD, Nancy Sanow, Assistant Director, Division of Market Regulation, Commission, Tim Fox, Special Counsel, Division of Market Regulation, Commission, and Richard Holley III, Special Counsel, Division of Market Regulation, Commission, on March 20, 2006. 17 *See* e-mail from Andrea Orr, Assistant General Counsel, NASD to Tim Fox, Special Counsel, Division of Market Regulation, Commission, dated March 22, 2006. 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 clarify and provide greater transparency to the process for removing the securities of issuers from quotation on the OTCBB that fail to comply with the reporting requirements in NASD Rule 6530. 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 by NASD. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The proposed rule change has become effective pursuant to Section 19(b)(3)(A)(i) of the Act 18 and Rule 19b-4(f)(1) thereunder, 19 in that the proposed rule change constitutes a stated policy, practice, or interpretation with respect to the meaning, administration, or enforcement of an existing rule of NASD. 18 15 U.S.C. 78s(b)(3)(A)(i). 19 17 CFR 240.19b-4(f)(1). At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. IV. Solicitation of Comments Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov.* Please include File Number SR-NASD-2006-029 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-2006-029. 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 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 the File Number SR-NASD-2006-029 and should be submitted on or before April 19, 2006. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 20 20 17 CFR 200.30-3(a)(12). Nancy M. Morris, Secretary. [FR Doc. E6-4540 Filed 3-28-06; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-53541; File No. SR-NASD-2006-033] Self-Regulatory Organizations; National Association of Securities Dealers, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change and Amendments No. 1 and 2 Thereto To Amend NASD Rule 11890 March 22, 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 March 1, 2006, the National Association of Securities Dealers, Inc. (“NASD”), through its subsidiary, The Nasdaq Stock Market, Inc. (“Nasdaq”), filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I and II below, which Items have been prepared by Nasdaq. On March 13, 2006 and March 22, 2006, Nasdaq submitted Amendments No. 1 3 and 2, 4 respectively, to the proposed rule change. Nasdaq has designated the proposed rule change as constituting a non-controversial rule change under Rule 19b-4(f)(6) under the Act, 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 *See* Form 19b-4 dated March 13, 2006 (“Amendment No. 1”). In Amendment No. 1, Nasdaq amended its filing to indicate that Nasdaq proposes to implement the proposed rule change on March 13, 2006, rather than immediately, in the event the Commission waives the 30-day operative waiting period. 4 *See* Form 19b-4 dated March 21, 2006 (“Amendment No. 2”). In Amendment No. 2, Nasdaq amended its proposed definition of “Nasdaq security” and “non-Nasdaq security.” 5 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 clarify the scope of NASD Rule 11890. Nasdaq proposes to implement the proposed rule change on March 13, 2006. 6 The text of the proposed rule change is below. 7 Proposed new language is italicized; proposed deletions are in brackets. 6 *See* Amendment No. 1, *supra* note 3. 7 The proposed rule change is marked to show changes from the rule as it appears in the electronic NASD Manual available at *http://www.nasd.com* . Prior to the date when The NASDAQ Stock Market LLC (“NASDAQ LLC”) commences operations, NASDAQ LLC will file a conforming change to the rules of NASDAQ LLC approved in Securities Exchange Act Release No. 53128 (January 13, 2006), 71 FR 3550 (January 23, 2006). 11890. Clearly Erroneous Transactions
(a)Authority To Review Transactions Pursuant to Complaint of Market Participant
(1)No change.
(2)Procedures for Reviewing Transactions (A)—(B) No change.
(C)Following the expiration of the period for submission of supporting material, a Nasdaq officer shall determine whether the complaint is eligible for review. A complaint shall not be eligible for review under paragraph
(a)unless:
(i)The complainant has provided all of the supporting information required under paragraph (a)(2)(B), and
(ii)For trades *in Nasdaq securities* executed between 9:30 a.m. and 4 p.m. Eastern Time, or *trades in non-Nasdaq securities executed between the time when the primary market for the security first posts an executable two-sided quote for its regular market trading session and 4 p.m. Eastern Time* , the price of transaction to buy
(sell)that is the subject of the complaint is greater than (less than) the best offer (best bid) by an amount that equals or exceeds the minimum threshold set forth below: Inside Price Minimum Threshold $0-$0.99—$0.02 + (0.10 × Inside Price) $1.00-$4.99—$0.12 + (0.07 × (Inside Price—$1.00)) $5.00-$14.99—$0.40 + (0.06 × (Inside Price—$5.00)) $15 or more $1.00 For a transaction to buy
(sell)a Nasdaq [listed] security, the inside price shall be the best offer (best bid) in Nasdaq at the time that the first share of the order that resulted in the disputed transaction was executed, and for a transaction to buy
(sell)a[n exchange-listed] *non-Nasdaq* security, the inside price shall be the national best offer (best bid) at the time that the first share of the order that resulted in the disputed transaction was executed. *A “Nasdaq security” means a security for which transaction reports are disseminated under the Nasdaq UTP Plan, and a “non-Nasdaq security” means a security for which transaction reports are disseminated under the Consolidated Tape Association Plan. The “primary market” for a non-Nasdaq Security is the market designated as the primary market under the Consolidated Tape Association Plan.* (D)-(G) No change. (b)-(d) 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, 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 NASD Rule 11890(a) allows designated officers of Nasdaq to declare transactions that arise out of the use or operation of Nasdaq execution or communications systems to be clearly erroneous and to nullify or modify the terms of such transactions. In SR-NASD-2004-009, 8 Nasdaq established a minimum price deviation threshold to provide a “bright line” rule standard for determining when transactions are considered eligible for review. A transaction price that meets these thresholds does not automatically trigger a clearly erroneous determination, but if the transaction price does not meet these thresholds the transaction will not be considered for clearly erroneous review. Thus, there is now a conclusive presumption that a transaction to buy
(sell)is not clearly erroneous unless its price is greater than (less than) the best offer (best bid) by an amount that equals or exceeds the minimum threshold set forth below: 8 *See* Securities Exchange Act Release No. 52141 (July 27, 2005), 70 FR 44709 (August 3, 2005) (SR-NASD-2004-009). Inside price Minimum threshold $0-$0.99 $0.02 + (0.10 × Inside Price). $1.00-$4.99 $0.12 + (0.07 × (Inside Price—$1.00)). $5.00-$14.99 $0.40 + (0.06 × (Inside Price—$5.00)). $15 or more $1.00 In SR-NASD-2005-115, 9 Nasdaq amended this rule to clarify that the minimum price deviation thresholds are applicable only to transactions executed during regular market hours, *i.e.* , between 9:30 a.m. and 4 p.m. This amendment reflected the fact that the analysis conducted by Nasdaq to determine the appropriate levels for the thresholds was based on pricing during normal market hours, and that therefore application of the thresholds during other trading sessions was not consistent with the intent underlying the rule. During pre-market and post-market trading sessions, the inside price of many stocks may not fully reflect trading interest in the stock, since the range of market participants in these trading sessions is far more limited than during regular market hours. As a result, a trade that occurs at a price that deviates significantly from a stock's trading range during the most recent regular market session may nevertheless be sufficiently close to the pre-market or post-market inside price that it would not meet the minimum deviation threshold for the stock. Because the thresholds established by Nasdaq were based on analysis of trading patterns during regular market hours, Nasdaq concluded that the rule should be clarified by limiting the thresholds' application to such hours. The change has resulted in a larger number of transactions being eligible for review under NASD Rule 11890, since transactions occurring during pre-market and post-market sessions are always be eligible for adjudication under the rule unless the market participant seeking an adjudication failed to provide the information required under NASD Rule 11890(a)(2)(B) ( *i.e.* , the approximate time of transaction(s), security symbol, number of shares, price(s), contra broker(s) if the transactions are not anonymous, Nasdaq system used to execute the transactions, and the reason the review is being sought). 9 *See* Securities Exchange Act Release No. 52549 (October 3, 2005), 70 FR 58762 (October 7, 2005) (SR-NASD-2005-115). Nasdaq has now concluded that further clarification of the rule, in accordance with the foregoing discussion, is needed with respect to non-Nasdaq stocks ( *i.e.* , stocks for which transaction reports are disseminated through the Consolidated Tape Association Plan). 10 Because the primary market 11 for such stocks may not post an executable two-sided quotation precisely at 9:30 a.m., the pre-market trading session for such stocks may, in effect, run beyond that time. As a result, Nasdaq has found that trades in these stocks occurring after 9:30 but before the time when the primary market quote is available are frequently not subject to adjudication even though the price of the trades may deviate significantly from a stock's trading range during the most recent regular market session. The proposed rule change will address this concern by clarifying that for non-Nasdaq securities, the thresholds do not apply before the time when the primary market for the security first posts an executable two-sided quote for its regular market trading session. 10 *See* Amendment No. 2, *supra* note 4. 11 The rule defines “primary market” with reference to the Consolidated Tape Association Plan (“CTA Plan”), which references the market in which the greatest number of transactions in the security reported on the consolidated tape during the preceding six month period (or such shorter period as the security has been reported on the consolidated tape if it has not been so reported for a full six month period) has taken place. *See* CTA Plan (second restatement), Section XI, Operational Matters. 2. Statutory Basis Nasdaq believes that the proposed rule change, as amended, is consistent with the provisions of Section 15A of the Act, 12 in general and with Section 15A(b)(6) of the Act, 13 in particular, in that the proposal is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, 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. The proposed rule change will ensure that NASD Rule 11890's minimum price deviation thresholds do not bar adjudication of clearly erroneous petitions in circumstances where the wider spreads prevailing before the primary market for a non-Nasdaq stock posts a quotation may make the application of such thresholds excessively restrictive. 12 15 U.S.C. 78 *o* -3. 13 15 U.S.C. 78 *o* -3(b)(6). B. Self-Regulatory Organization's Statement on Burden on Competition Nasdaq does not believe that the proposed rule change, as amended, will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others Nasdaq neither solicited nor received any written comments. 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 after the date of the filing or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest, it has become effective pursuant to Section 19(b)(3)(A) of the Act 14 and Rule 19b-4(f)(6) thereunder. 15 14 15 U.S.C. 78s(b)(3)(A). 15 17 CFR 240.19b-4(f)(6). Nasdaq has requested that the Commission waive the 30-day operative delay to permit Nasdaq to implement the rule proposal on March 13, 2006. The Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest because such waiver will ensure that NASD Rule 11890's minimum price deviation thresholds do not bar adjudication of clearly erroneous petitions for transactions occurring prior to the time that the primary market for a non-Nasdaq security disseminates a two-sided quote for the security, which is a period when wider spreads can prevail. Accordingly, the Commission has determined to waive the operative delay, and the proposed rule change has become effective upon filing with the Commission and operative as of March 13, 2006. 16 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. 17 16 For purposes only of waiving the operative date of this proposal, the Commission has considered the proposed rule's impact on efficiency, competition and capital formation. *See* 15 U.S.C. 78c(f). 17 For purposes of calculating the 60-day period within which the Commission may summarily abrogate the proposed rule change, as amended, under Section 19(b)(3)(C) of the Act, the Commission considers the period to commence on March 22, 2006, the date on which Nasdaq submitted Amendment No. 2. *See* 15 U.S.C. 78s(b)(3)(C). IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change, as amended, is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an *e-mail to rule-comments@sec.gov.* Please include File Number SR-NASD-2006-033 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-2006-033. 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, as amended, that are filed with the Commission, and all written communications relating to the proposed rule change, as amended, 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. 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-2006-033 and should be submitted on or before April 19, 2006. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 18 18 17 CFR 200.30-3(a)(12). Nancy M. Morris, Secretary. [FR Doc. E6-4541 Filed 3-28-06; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-53526; File No. SR-PCX-2006-19] Self-Regulatory Organizations; Pacific Exchange, Inc. (Now Known As NYSE Arca, Inc.); Notice of Filing and Immediate Effectiveness of Proposed Rule Change and Amendment No. 2 Thereto Relating to Rebates and Credits a Market Maker is Eligible To Receive for Executions That Result From Principal Acting as Agent Orders Sent to and Executed at Away Market Centers 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 March 3, 2006, the Pacific Exchange, Inc. (“PCX”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I, II and III below, which Items were prepared by the PCX. On March 15, 2006, NYSE Arca, Inc. (“NYSE Arca” or “Exchange”) 3 filed Amendment No. 1 to the proposed rule change. On March 16, 2006, the Exchange withdrew Amendment No. 1 and filed Amendment No. 2 to the proposed rule change. 4 The Exchange 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 5 and Rule 19b-4(f)(2) thereunder, 6 which renders the proposal effective upon filing with the Commission. 7 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 On March 6, 2006, the PCX filed a proposed rule change (SR-PCX-2006-24) to amend its rules to reflect the following name changes:
(i)From PCX to NYSE Arca;
(ii)from PCX Equities, Inc. to NYSE Arca Equities, Inc.;
(iii)from PCX Holdings, Inc., to NYSE Arca Holdings, Inc.; and
(iv)from the Archipelago Exchange, L.L.C. to NYSE Arca, L.L.C. That proposed rule change became effective upon filing. Amendment No. 2 to the instant proposed rule change reflects these name changes. The Exchange states that it plans to subsequently file a proposed rule change to update such names in its Schedule of Rates and Charges (“Schedule”). 4 In Amendment No. 2, the Exchange made clarifying and technical changes to the original filing and added a provision in the Schedule that requires Market Makers to reimburse the Exchange for any excessive credits received by such Market Makers. 5 15 U.S.C. 78s(b)(3)(A)(ii). 6 17 CFR 240.19b-4(f)(2). 7 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 March 16, 2006, the date on which the Exchange filed Amendment No. 2. See 15 U.S.C. 78s(b)(3)(C). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend its Schedule to create a credit associated with the fees that a Market Maker is charged for executions that result from principal acting as agent orders sent to and executed at away market centers. The Exchange also proposes to make a minor housekeeping correction to footnote 2 under the Trade Related Charges section of the Schedule. The text of the proposed rule change is available at the Commission's Public Reference Room, at the Exchange's Web site ( *http://www.archipelago.com/regulation/filings.asp* ) and at the Exchange's Office of the Secretary. 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 The Exchange proposes to amend the Schedule in order to create a credit associated with the fees a Market Maker is charged for executions that result from principal acting as agent orders sent to and executed at away market centers. Presently, the Exchange charges Market Makers a $0.26 per contract fee for all transactions. On transactions that result when principal acting as agent orders are sent to and executed at away market centers, the Exchange presently rebates to the Market Maker the transaction fee of $0.26. The Exchange believes that this rebate is warranted due to the fact a Market Maker acting in this capacity is doing so on behalf of public customer orders and receives no beneficial gain from the transaction. The rebate of the Exchange transaction fee of $0.26 covers the fees assessed by the Exchange on these trades; it does not cover additional costs a Market Maker incurs in connection with executing the trade. In addition to the Exchange transaction fee, a Market Maker must pay a transaction fee at the away exchange and clearing costs associated with the trade. To help offset the additional costs associated with principal acting as agent orders that are sent to and executed at away market centers, the Exchange proposes to credit Exchange Market Makers $0.26 per contract on these transactions. This credit will be in addition to the $0.26 rebate the Exchange rebates market Makers for these trades. The new $0.26 credit is designed to offset additional costs associated with sending orders away and might not cover all costs associated with these types of trades. In the event that the total amount the Exchange credits a Market Maker for sending orders away is in excess of the total actual expenses incurred in sending the orders away, the Exchange would be entitled to a reimbursement of the excess credits. 8 Market Maker expenses associated with sending orders away to other market centers will be based on the total aggregate expenses incurred during a calendar month. 8 The Commission notes that the transaction fees charged by away market centers for principal acting as agent orders executed on away markets are pursuant to pilot programs scheduled to expire on July 31, 2006. In a previous filing (SR-PCX-2006-15), 9 the PCX eliminated the On Line Comparison fee associated with Market Maker transactions. A reference to that comparison fee was left inadvertently in the footnote attached to the Market Maker transaction fee. The Exchange now proposes to remove this reference to reconcile the footnote with the previously effective filing. Removing the reference to the comparison fee at this time will make no substantive change to the Schedule. 9 That proposed rule change was filed with the Commission on February 23, 2006 and became effective upon filing. *See* Securities Exchange Act Release No. 53485 (March 14, 2006). 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with section 6(b) of the Act 10 in general, and section 6(b)(4) of the Act 11 in particular, in that it provides for the equitable allocation of dues, fees and other charges among its OTP Firms, OTP Holders and other persons using its facilities for trading option contracts. 10 15 U.S.C. 78f(b). 11 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 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 become effective pursuant to section 19(b)(3)(A)(ii) of the Act, 12 and paragraph (f)(2) of Rule 19b-4 thereunder 13 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 12 15 U.S.C. 78s(b)(3)(A)(ii). 13 17 CFR 240.19b-4(f)(2). 14 *See supra* note 7. 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-PCX-2006-19 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-PCX-2006-19. 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 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-PCX-2006-19 and should be submitted on or before April 19, 2006. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 15 15 17 CFR 200.30-3(a)(12). Nancy M. Morris, Secretary. [FR Doc. E6-4516 Filed 3-28-06; 8:45 am] BILLING CODE 8010-01-P UNITED STATES SENTENCING COMMISSION Sentencing Guidelines for United States Courts AGENCY: United States Sentencing Commission. ACTION: Notice of temporary, emergency amendment to sentencing guidelines, policy statements, and commentary. SUMMARY: Pursuant to the Anabolic Steroid Control Act of 2004, Pub. L. 108-358 (the “ASC Act”) and the United States Parole Commission Extension and Sentencing Commission Authority Act of 2005, Pub. L. 109-76, the Commission hereby gives notice of a temporary, emergency amendment to the sentencing guidelines, policy statements, and commentary. This notice sets forth the temporary, emergency amendment and the reason for the amendment. DATES: The Commission has specified an effective date of March 27, 2006, for the emergency amendment set forth in this notice. FOR FURTHER INFORMATION CONTACT: Michael Courlander, Public Affairs Officer, Telephone:
(202)502-4590. SUPPLEMENTARY INFORMATION: The United States Parole Commission Extension and Sentencing Commission Authority Act of 2005 requires the Commission, under emergency amendment authority, to implement section 3 of the ASC Act no later than 180 days after the date of enactment of the United States Parole Commission Extension and Sentencing Commission Authority Act of 2005. Accordingly, the Commission is required to promulgate a temporary, emergency amendment by March 27, 2006. The temporary, emergency amendment set forth in this notice also may be accessed through the Commission's Web site at *http://www.ussc.gov* . Authority: 28 U.S.C. 994(a), (o), (p), (x); section 105 of Pub. L. 109-9; and Pub. L. 109-76. Ricardo H. Hinojosa, Chair. 1. *Amendment:* Section 2D1.1 is amended by redesignating subsections (b)(6) and (b)(7) as subsections (b)(8) and (b)(9), respectively; and by inserting the following after subsection (b)(5): “(6) If the offense involved the distribution of an anabolic steroid and a masking agent, increase by 2 levels.
(7)If the defendant distributed an anabolic steroid to an athlete, increase by 2 levels.”. Section 2D1.1(c) is amended in the “*Notes to Drug Quantity Table” in subdivision
(F)by striking “(except anabolic steroids)”; and by adding at the end the following: “For an anabolic steroid that is not in a pill, capsule, tablet, or liquid form ( *e.g.* , patch, topical cream, aerosol), the court shall determine the base offense level using a reasonable estimate of the quantity of anabolic steroid involved in the offense. In making a reasonable estimate, the court shall consider that each 25 mg of an anabolic steroid is one ‘unit'.”. Section 2D1.1(c) is amended in the “*Notes to the Drug Quantity Table” by striking subdivision (G); and by redesignating subdivisions
(H)through
(J)as subdivisions
(G)through (I), respectively. The Commentary to § 2D1.1 captioned “Application Notes” is amended in the first paragraph of Note 8 by inserting “Interaction with § 3B1.3.—” before “A defendant who”; by striking “enhancement” and inserting “adjustment”; and by adding at the end the following: “Additionally, an enhancement under § 3B1.3 ordinarily would apply in a case in which the defendant used his or her position as a coach to influence an athlete to use an anabolic steroid.”. The Commentary to § 2D1.1 captioned “Application Notes” is amended in Notes 19 and 20 by striking “(b)(6)” each place it appears and inserting “(b)(8)”; and in Note 21 by striking “(b)(7)” each place it appears and inserting “(b)(9)”. The Commentary to § 2D1.1 captioned “Application Notes” is amended by adding at the end the following: “24. Application of Subsection (b)(6).—For purposes of subsection (b)(6), ‘masking agent’ means a substance that, when taken before, after, or in conjunction with an anabolic steroid, prevents the detection of the anabolic steroid in an individual's body. 25. Application of Subsection (b)(7).—For purposes of subsection (b)(7), ‘athlete’ means an individual who participates in an athletic activity conducted by
(i)an intercollegiate athletic association or interscholastic athletic association;
(ii)a professional athletic association; or
(iii)an amateur athletic organization.”. The Commentary to § 2D1.1 captioned “Background” is amended in the ninth paragraph by striking “(b)(6)(A)” and inserting “(b)(8)(A)”; and in the last paragraph by striking “(b)(6)(B) and (C)” and inserting “(b)(8)(B) and (C)”. *Reason for Amendment:* This amendment implements the directive in the United States Parole Commission Extension and Sentencing Commission Authority Act of 2005, Pub. L. 109-76, which required the Commission, under emergency amendment authority, to implement section 3 of the Anabolic Steroid Control Act of 2004, Pub. L. 108-358 (the “ASC Act”). The ASC Act directed the Commission to “review the Federal sentencing guidelines with respect to offenses involving anabolic steroids” and “consider amending the * * * guidelines to provide for increased penalties with respect to offenses involving anabolic steroids in a manner that reflects the seriousness of such offenses and the need to deter anabolic steroid trafficking and use * * *.” The amendment implements the directives by increasing the penalties for offenses involving anabolic steroids. It does so by changing the manner in which anabolic steroids are treated under § 2D1.1 (Unlawful Manufacturing, Importing, Exporting, or Trafficking (Including Possession with Intent to Commit These Offenses); Attempt or Conspiracy). The amendment eliminates the sentencing distinction between anabolic steroids and other Schedule III substances when the steroid is in a pill, capsule, tablet, or liquid form. For anabolic steroids in other forms ( *e.g.* , patch, topical cream, aerosol), the amendment instructs the court that it shall make a reasonable estimate of the quantity of anabolic steroid involved in the offense, and in making such estimate, the court shall consider that each 25 mg of anabolic steroid is one “unit”. In addition, the amendment addresses two harms often associated with anabolic steroid offenses by providing new enhancements in § 2D1.1(b)(6) and (b)(7). Subsection (b)(6) provides a two-level enhancement if the offense involved the distribution of an anabolic steroid and a masking agent. Subsection (b)(7) provides a two-level enhancement if the defendant distributed an anabolic steroid to an athlete. Both enhancements address congressional concern with distribution of anabolic steroids to athletes, particularly the impact that steroids distribution and steroids use has on the integrity of sport, either because of the unfair advantage gained by the use of steroids or because of the concealment of such use. The amendment also amends Application Note 8 of § 2D1.1 to provide that an adjustment under § 3B1.3 (Abuse of Position of Trust or Use of Special Skill) ordinarily would apply in the case of a defendant who used his or her position as a coach to influence an athlete to use an anabolic steroid. [FR Doc. 06-3023 Filed 3-28-06; 8:45 am]
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U.S. Code
- Registration, responsibilities, and oversight of self-regulatory organizations§ 78s
- National securities exchanges§ 78f
- Definitions and application§ 78c
- Public information; agency rules, opinions, orders, records, and proceedings§ 552
- National system for clearance and settlement of securities transactions§ 78q–1
- Registration with the Board§ 7212
- Duties of the Commission§ 994
7 references not yet in our index
- 17 CFR 240.19
- 15 USC 78
- 17 CFR 240.13
- 17 CFR 240.12
- Pub. L. 108-358
- Pub. L. 109-76
- Pub. L. 109-9
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cites case law
Notices
Notice of an application under section 12(d)(1)(J) of the Investment Company Act of 1940 (the “Act”) for an exemption from sections 12(d)(1)(A) and (B) of the Act, under sections 6(c) and 17(b) of the Act for an exemption from section 17(a) of the Act, and under section 17(d) of the Act and rule 17d-1 under the Act to permit certain joint transactions
Cite17 CFR 240.19
Cite15 USC 78
Cite17 CFR 240.13
Cites 16 · showing 12Cited by 0 across 0 sources