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Code · REGISTER · 2006-04-12 · SECURITIES AND EXCHANGE COMMISSION · Notices

Notices. Notice and request for comments

25,229 words·~115 min read·/register/2006/04/12/06-3471

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BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-53603; File No. SR-CBOE-2005-112] Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Order Granting Permanent Approval of a Pilot Program Relating to Access to the Exchange's Hybrid Automatic Execution System April 5, 2006. On December 30, 2005, the Chicago Board Options Exchange, Incorporated (“Exchange” or “CBOE”) filed with the Securities and Exchange Commission (“Commission”) a proposed rule change pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) 1 and Rule 19b-4 thereunder, 2 to make permanent the pilot program in CBOE Rule 6.13 relating to access to the Exchange's automatic execution system.
The proposed rule change was published for comment in the **Federal Register** on March 6, 2006. 3 The Commission received no comments on the proposal. This order approves the proposed rule change. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 *See* Securities Exchange Act Release No. 53377 (February 27, 2006), 71 FR 11250. The pilot program the Exchange seeks to make permanent was initiated in July 2004, was subsequently extended twice, and is currently scheduled to expire on October 12, 2006. 4 Under the pilot program, pursuant to CBOE Rule 6.13(b)(i)(C)(iii), orders from market makers and specialists on an options exchange (“options Market Makers”) and stock exchange specialists, 5 with respect to their specialty securities, are eligible for automatic execution through the Exchange's Hybrid Trading System (“Hybrid”), subject to a 15-second limitation 6 on orders on the same side of the market in an options class for an account or accounts of the same beneficial owner.
The Exchange believes that the pilot program has been successful and has helped to contribute to the maintenance of efficient markets and to attract volume to the Exchange. 4 *See* Securities Exchange Act Release Nos. 50005 (July 12, 2004), 69 FR 43032 (July 19, 2004) (approving the pilot program); 51030 (January 12, 2005), 70 FR 3404 (January 24, 2005) (extending the pilot program until October 12, 2005); and 52494 (September 22, 2005), 70 FR 56943 (September 29, 2005) (extending the pilot program until October 12, 2006). 5 By its terms, CBOE Rule 6.13(b)(i)(C)(iii) applies to orders eligible for submission pursuant to CBOE Rule 6.13(b)(i)(C)(ii), which relates to options Market Makers and certain stock exchange specialists. 6 As allowed under CBOE Rule 6.13(b)(i)(C)(iii), the Exchange's floor procedure committees determined to shorten to five seconds (from 15 seconds) the period required between entry of multiple market maker orders (including non-CBOE market maker orders) on the same side of the market in an option class for an account or accounts of the same beneficial owner using Hybrid.
This change went into effect on July 18, 2005 and was announced to the Exchange's membership via Regulatory Circular RG05-61. The Exchange clarified that such reduction in the time period to five seconds applies to all of the market participants subject to the pilot program under CBOE Rule 6.13(b)(i)(C)(iii). Telephone conversation between Jennifer M. Lamie, Managing Senior Attorney, Exchange, and Kim M. Allen, Special Counsel, Division of Market Regulation, Commission, on March 29, 2006.
After careful consideration, the Commission finds that the proposed rule change is consistent with the requirements of Section 6 of the Act 7 and the rules and regulations thereunder applicable to a national securities exchange. 8 In particular, the Commission finds that the proposed rule change is consistent with Section 6(b)(5) of the Act, 9 which requires, among other things, that the rules of an exchange be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest.
The Commission believes that prohibiting members from causing the entry into Hybrid of more than one order from options Market Makers or stock exchange specialists for the same beneficial account within a maximum 15-second period should help reduce the risk of exposure of CBOE market makers. The Commission notes that the 15-second restriction set forth in the rule provides a sufficient period to allow CBOE market makers to change their quotations following an execution, without placing an undue burden on market participants seeking to execute transactions on the Exchange. 10 The Commission further notes that market participants subject to the 15-second restriction will still be permitted to send orders to the Exchange for execution through the Intermarket Option Linkage pursuant to the terms of the Plan for the Purpose of Creating and Operating an Intermarket Option Linkage. 7 15 U.S.C. 78f. 8 In approving this proposal, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. *See* 15 U.S.C. 78c(f). 9 15 U.S.C. 78f(b)(5). 10 The Commission notes that the Exchange may not take punitive action against any non-member options market maker or stock exchange specialist who submits an order to a CBOE member for entry into Hybrid in the event that the CBOE member violates CBOE Rule 6.13(b)(i)(C)(iii).
It is therefore ordered, pursuant to Section 19(b)(2) of the Act, 11 that the proposed rule change (SR-CBOE-2005-112) is approved. 11 15 U.S.C. 78s(b)(2). 12 17 CFR 200.30-3(a)(12). For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 12 Nancy M. Morris, Secretary. [FR Doc. E6-5365 Filed 4-11-06; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-53597; File No. SR-Amex-2005-112] Self-Regulatory Organizations;
American Stock Exchange LLC; Notice of Filing of Proposed Rule Change Relating to the Prohibition of Trade Shredding by Members April 4, 2006. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934, as amended, (“Act”) 1 and Rule 19b-4 thereunder, 2 notice is hereby given that on November 1, 2005, the American Stock Exchange LLC (“Amex” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the Exchange.
On March 27, 2006, the Exchange filed Amendment No. 1 to the proposed rule change. 3 The Commission is publishing this notice to solicit comments on the proposed rule change, as amended, from interested persons. 1 15 U.S.C. 78s(b)(l). 2 17 CFR 240. 19b-4. 3 *See* Form 19b-4 dated March 27, 2006 (“Amendment No. 1”). Amendment No. 1 replaced the original filing in its entirety. I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend Amex Rule 3 (“General Prohibitions and Duty to Report”) by adding a new paragraph
(i)to prohibit a member or member organization from splitting trading interest into multiple orders for any purpose other than seeking the best execution of the entire order. The text of the proposed rule change, as amended, appears below. Additions are *in italics.* Rule 3. General Prohibitions and Duty To Report
(a)through (h)—no change. *(i) It shall be inconsistent with just and equitable principles of trade for a member or member organization to split trading interest into multiple orders for any purpose other than seeking the best execution of the entire 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, the Amex included statements concerning the purpose of, and basis for, the proposed rule change, as amended, and discussed any comments it received on the proposed rule change, as amended. The text of these statements may be examined at the places specified in Item IV below. The Amex has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change 1. Purpose “Trade shredding” is the practice of splitting large customer orders for securities into multiple smaller orders for the primary purpose of increasing the receipt of market data revenue by market centers that allow or encourage this practice. The practice is based on the fact that, as a result of the manner in which market data revenues are calculated, market centers can derive a greater share of market data revenue by increasing the number of trades they report to the consolidated tape. For example, Network B, which disseminates consolidated market information on securities listed on the Amex, allocates net income based solely on the number of trades reported by a self-regulatory organization (“SRO”), no matter how small each trade is. The Amex has expressed its serious concern in the past over the practice of trade shredding. The Exchange believes that trade shredding is incompatible with just and equitable principles of trade. Among other things, it constitutes clearly misleading trade reporting in that it presents a false impression regarding the nature and extent of bona fide trading activity. Some SROs provide incentives for trade shredding by sharing the increased market data revenue that results from the practice with the market participants, including non-members, who send in orders for execution. Such revenue sharing arrangements may create a conflict of interest between the customers and the market participants handling their orders if, for example, an order is routed to a market center based on such revenue incentives instead of the obligation to obtain best execution for the order. The Commission has requested that each SRO adopt rule changes that would prohibit its members from trade shredding. Although the Amex does not rebate revenues from tape reporting to members or non-members and provides no other incentive for its order providers to engage in trade shredding on orders sent to the Exchange, the Amex is responding to the Commission's request by adding a new paragraph
(i)to Amex Rule 3 (“General Prohibitions and Duty to Report”). This new paragraph would prohibit a member or member organization from splitting trading interest into multiple orders for any purpose other than seeking the best execution of the entire order. 2. Statutory Basis The proposed rule change, as amended, is consistent with Section 6(b) of the Act, 4 in general, and furthers the objectives of Section 6(b)(5) of the Act, 5 in particular, in that it is designed to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and is not designed to permit unfair discrimination between customers, brokers, or dealers, or to regulate by virtue of any authority matters not related to the administration of the Exchange. 4 15 U.S.C. 78f(b). 5 15 U.S.C. 78f(b)(5). B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange believes that the proposed rule change, as amended, will impose no burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others The Exchange has neither solicited nor received comments on this proposal, as amended. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 35 days of the date of publication of this notice in the **Federal Register** or within such longer period
(i)as the Commission may designate up to 90 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or
(ii)as to which the self-regulatory organization consents, the Commission will:
(A)By order approve such proposed rule change, or
(B)institute proceedings to determine whether the proposed rule change should be disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change, as amended, is consistent with the Act. Comments may be submitted by any of the following methods: Electronic comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov.* Please include File Number SR-Amex-2005-112 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-2005-112. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room. Copies of such filing also will be available for inspection and copying at the principal offices of Amex. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-Amex-2005-112 and should be submitted on or before May 3, 2006. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 6 6 17 CFR 200.30-3(a)(12). Nancy M. Morris, Secretary. [FR Doc. E6-5363 Filed 4-11-06; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-53606; File No. SR-NASD-2006-028] Self-Regulatory Organizations; National Association of Securities Dealers, Inc.; Order Approving Proposed Rule Change To Allow Nasdaq To Take Certain Actions on Behalf of Its Issuers in Connection With Nasdaq's Transition to a National Securities Exchange April 6, 2006. On February 23, 2006, the National Association of Securities Dealers, Inc. (“NASD”), through its subsidiary, The Nasdaq Stock Market, Inc. (“Nasdaq”), filed with the Securities and Exchange Commission (“Commission”), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) 1 and Rule 19b-4 thereunder, 2 a proposed rule change to adopt NASD Rule 4130 to allow Nasdaq and its subsidiary, The Nasdaq Stock Market LLC (“Nasdaq Exchange”), to file an application with the Commission or another appropriate regulator on behalf of its issuers to register their listed securities under Section 12(b) of the Act, 3 or seek a temporary exemption from Section 12 of the Act, in connection with Nasdaq Exchange's operation as a national securities exchange. The Commission published the proposed rule change for comment in the **Federal Register** on March 2, 2006. 4 The Commission received no comments on the proposal. This order approves the proposed rule change. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 15 U.S.C. 78 *1* (b). 4 Securities Exchange Act Release No. 53362 (February 24, 2006), 71 FR 10734. The Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities association. 5 The Commission believes the proposed rule change is consistent with Section 15A(b)(6) of the Act, 6 which requires, among other things, that the rules of a national securities association be designed to promote just and equitable principals of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and in general to protect investors and the public interest. The Commission approved the Nasdaq Exchange's registration as a national securities exchange on January 13, 2006. 7 As noted in the Nasdaq Exchange Order, once the Nasdaq Exchange begins operations as a national securities exchange, a security will be considered for listing on the Nasdaq Exchange only of it is registered pursuant to Section 12(b) of the Act or is subject to an exemption. Further, in the Nasdaq Exchange Order, the Commission noted that Nasdaq had notified Commission staff that it intended to request appropriate regulatory relief to facilitate the efficient registration of its issuers' securities under Section 12(b) of the Act. Nasdaq also represented that it would seek an exemption for certain issuers that are currently not required to be registered under Section 12(g) of the Act. 8 The Commission noted in the Nasdaq Exchange Order that it expected Nasdaq to provide notice to the public and its issuers of any request and provide issuers with an opportunity to opt-out of the process. Nasdaq filed this proposed rule change to give it the authority to act on behalf of its issuers and to provide notice of its plans. 5 In approving this rule proposal, the Commission notes that it has considered the proposed rule's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). 6 15 U.S.C. 78o-3(b)(6). 7 *See* Securities Exchange Act Release No. 53128 (January 13, 2006), 71 FR 3550 (January 23, 2006) (Findings, Opinion, and Order of the Commission approving the application of the Nasdaq Stock Market LLC for registration as a national securities exchange) (“Nasdaq Exchange Order”). The Nasdaq Exchange may not operate as a national securities exchange until certain conditions have been satisfied. *See id.* 8 15 U.S.C. 78 *l* (g). *It is therefore ordered,* pursuant to Section 19(b)(2) of the Act, 9 that the proposed rule change (SR-NASD-2006-028) be, and hereby is, approved. 9 15 U.S.C. 78s(b)(2). For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 10 10 17 CFR 200.30-3(a)(12). Nancy M. Morris, Secretary. [FR Doc. E6-5364 Filed 4-11-06; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-53602; File No. SR-NYSE-2005-40] Self-Regulatory Organizations; New York Stock Exchange, Inc.; Notice of Filing of a Proposed Rule Change and Amendment Nos. 1 and 2 Thereto Relating to Amendments to the Exchange's Allocation Policy and Procedures (NYSE Rules 103A, 103B, 123E and 476A) April 5, 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 June 6, 2005, New York Stock Exchange, Inc. (“NYSE” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I, II and III below, which Items have been prepared by NYSE. NYSE filed Amendment No. 1 to the proposed rule change on October 28, 2005. 3 NYSE filed Amendment No. 2 to the proposed rule change on February 9, 2006. 4 The Commission is publishing this notice to solicit comments on the proposed rule change, as amended, from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 In Amendment No. 1, the Exchange clarified certain aspects of the purpose section and rule text of the proposed rule change. Amendment No. 1 clarified that certain of the proposed amendments to NYSE Rules 103A, 103B and 123E are organizational changes that are intended to provide clarity with respect to the operation of the allocation policy and procedures. Amendment No. 1 also further explained the Exchange's decision to move from a subjective standard in the allocation process to an objective standard. Amendment No. 1 supersedes the original filing in its entirety. 4 In Amendment No. 2, the Exchange further clarified certain aspects of the purpose section and rule text of the proposed rule change. Amendment No. 2 clarified that the proposed amendments to NYSE Rule 103B includes a requirement that specialist firms describe in their blanket allocation applications any contacts they, or any individual acting on their behalf, have had with any employee of the listing company, or any individual acting on behalf of that company, with regard to its prospective listing on the Exchange. In addition, Amendment No. 2 further explained the data that will be provided to the Allocation Committee (“Committee”). Amendment No. 2 supersedes Amendment No. 1 in its entirety. I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange is proposing to amend NYSE Rules 103A, 103B, 123E and 476A with respect to the manner in which securities are allocated to specialist organizations. The text of the proposed rule change is available on the Exchange's Web site ( *http://www.nyse.com* ), at the Exchange's Office of the Secretary, and at the Commission's Public Reference Room. The text of the proposed rule change is also available on the Commission's Web site ( *http://www.sec.gov/rules/sro.shtml* ). 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 proposed rule change, as amended. 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 NYSE Rules 103A, 103B, 123E and 476A with respect to the manner in which securities are allocated to specialist organizations on the Exchange. The Exchange proposes to amend its allocation policy and procedures by placing greater emphasis on performance measures that objectively assess specialist market-making in order to provide more meaningful information for the Committee's consideration. The Exchange represents that this would be accomplished by eliminating the Specialist Performance Evaluation Questionnaire (“SPEQ”), a subjective tool that has become less meaningful as a result of the sharp reduction in the number of specialist firms, and replacing it with a series of objective measures that compare specialist performance against defined standards based on actual trading data. Unlike the SPEQ, which provided tier rankings for firms only, the objective performance measures will permit comparisons by stock, panel, and post, as well as by firm, and thus, will more clearly distinguish between strong and weak performance. In addition, the objective performance measures will evaluate individual specialist performance as well as performance of the entire firm. The SPEQ is limited to an evaluation of firm-wide performance. The use of these measures will also enable specialist firms to better manage and more easily improve performance. The objective performance measures will improve the allocation process by preventing specialist firms from proposing sub-par performers as the designated specialist for new listings and may serve to disqualify entire specialist firms from the allocation process for a period of time based on continued poor performance. In this way, the new measures will serve as a potent incentive to improved market-making and encourage superior specialist performance. The Exchange is also proposing additional changes to the allocation policy (NYSE Rule 103B) and related changes to the rules governing performance improvement actions (NYSE Rule 103A), the issuance of summary fines (NYSE Rule 476A), and specialist combination review policy (NYSE Rule 123E). 5 5 See Securities Exchange Act Release No. 53382 (February 27, 2006), 71 FR 11251 (March 6, 2006) (order approving SR-NYSE-2005-77) (“Merger Release”). The Merger Release contains conforming language changes to reflect the new entities that will exist as a result of the Exchange's merger with Archipelago Holdings, Inc. In addition, the Merger Release amended NYSE Rule 103B, with respect to the allocation of the proposed new NYSE Group stock to:
(i)Give NYSE Group the right to determine the number and identity of specialist firms that will be included in the group from which it shall choose its specialist, provided the group consists of at least four specialist firms; and
(ii)provide NYSE Group with the same material with respect to each specialist firm applicant as would have been reviewed by the Committee in allocating other securities. Telephone conversation between Deanna Logan, Principal Rule Counsel, NYSE and David Michehl, Attorney, Division of Market Regulation (“Division”), Commission on February 28, 2006. Allocation Policy and Procedures NYSE Rule 103B contains the Exchange's requirements with respect to allocation of securities to specialist member organizations (“Allocation Policy”). The Exchange represents that the intent of the Allocation Policy is:
(1)To ensure that securities are allocated in an equitable and fair manner and that all specialist units have a fair opportunity for allocations based on established criteria and procedures;
(2)to provide an incentive for ongoing enhancement of performance by specialist units;
(3)to provide the best possible match between the specialist unit and security; and
(4)to contribute to the strength of the specialist system. The Exchange represents that decisions as to the allocation of securities on the Exchange are made by the Committee. This Committee is comprised of market professionals who use their judgment to make allocation decisions based on the allocation criteria specified in the Allocation Policy. The current allocation criteria includes the SPEQ, objective performance measures, listing company input, allocations received, capital, disciplinary history, and the Committee's professional judgment. Elimination of SPEQ The Exchange states that the SPEQ is a quarterly survey on specialist performance completed by Floor Broker members of the Exchange. The SPEQ requires Floor Brokers to rate and provide written comments on the performance of specialist firms with whom they deal regularly on the Floor. Floor Broker evaluations of specialist firm performance focuses on five functional areas—dealer, service, competitiveness, communications and administrative. Floor Brokers rate specialist firms on a 0% to 100% scale, in ten-point increments, that reflect the percentage of the time that the broker feels the specialist firm engaged in the described behavior. An evaluation of 100% is defined as “always” and an evaluation of 0% is defined as “never”. The Exchange represents that the SPEQ process uses a relative scoring methodology that combines Floor Broker scores for any one specialist firm to determine each firm's overall performance and performance in each of the five functional areas. The scores are then arrayed from highest to lowest, and the specialist firms receive a ranking for the overall score and within each function. Also, a range of ranks is determined that identifies where a firm stood in relation to other units whose scores were not statistically different. From these rankings, the specialist firms are aligned into tiers, up to a maximum of four, with each tier containing those specialist firms with similar rankings. The Committee receives information on SPEQ results only as to the tier classifications. Although SPEQ has been an important mechanism for evaluation of specialist performance for both allocation and performance improvement action purposes, the Exchange represents that certain weaknesses in its use as an assessment tool have become apparent. For example, SPEQ evaluations are subjective, with ratings based on personal experiences rather than comparisons with accepted objective standards. Further, except for the written comments, which are not incorporated into the formula for SPEQ rankings, SPEQ does not focus on market-making by individual specialists. Importantly, as the number of specialist firms has decreased, SPEQ tier classifications have become tightly clustered with statistically insignificant differences among the firms. 6 Also, SPEQ participants recognize the limitations of SPEQ and have requested a more meaningful process for evaluating specialist performance. For these reasons, the Exchange proposes eliminating SPEQ and replacing it with the objective measures described below. The Exchange represents that by addressing the deficiencies of SPEQ in today's environment, these measures will enable a more meaningful comparison of specialist performance at all levels, based on truly objective criteria. 6 The Exchange states that there are currently seven firms registered as specialists in equity securities on the NYSE. As recently as 2000, there were 25 specialist firms. Expansion of the Use of Objective Measures The Exchange also proposes to add objective measures designed to evaluate market quality using pre-determined standards of performance based on actual trading data. The measures will rate the performance of stocks, individual specialists and specialist firms overall. Data will be provided to specialists on a daily basis, and monthly and quarterly to the Committee. In addition, the performance information derived from the objective measures will be made available to listing companies to aid in their decision as to the choice of a specialist firm. The Exchange proposes to add two new objective measures of specialist performance and to change an existing measure. The Exchange represents that one new measure is price continuity. Price continuity measures the absolute value of the price change, if any, from one trade to the next, in the same stock. Currently, price continuity is part of the existing near neighbor analysis, 7 which is among the information provided to specialists and the Committee. However, current continuity percentages are too tightly clustered because of tighter markets, making it difficult to derive useful data for comparison purposes. In addition, there are no trading standards specifically related to price continuity against which to measure performance. The Exchange proposes making price continuity an independent measure and has developed appropriate benchmarks and standards to enable an objective comparison of each individual specialist's market-making as it relates to price continuity. The Exchange has also developed a system to identify acceptable and unacceptable performance for this measure. 7 An explanation of the near neighbor performance measure was given in SR-NYSE-1995-05. See Securities Exchange Act Release No. 35927 (June 30, 1995), 60 FR 35764 (July 11, 1995); See also Securities Exchange Act Release No. 38158 (January 10, 1997), 62 FR 2704 (January 17, 1997) (making permanent the near neighbor pilot). Telephone conversation between Deanna Logan, Principal Rule Counsel, NYSE and David Michehl, Attorney, Division, Commission on February 28, 2006. The second new objective measure is depth. Depth refers to the price movement of a stock during a sequence of transactions totaling a particular volume. Currently, depth is measured over 3,000-share volume sequences and is also part of the near neighbor analysis. The Exchange is proposing to make depth an independent measure 8 and to add three new volume sequences—5,000, 10,000 and 25,000 shares—and has developed appropriate benchmarks and standards for this measure as well. 8 Telephone conversation between Deanna Logan, Principal Rule Counsel, NYSE and David Michehl, Attorney, Division, Commission on March 2, 2006. According to the Exchange, the benchmarks and standards developed for continuity and depth have been reviewed with two university professors from the Massachusetts Institute of Technology, with whom the Exchange consults on matters relating to allocation measures. For each measure, eligible securities 9 are grouped by price and non-block volume into categories. Eligibility requirements for securities include minimum average price, volume, and number of trades. 10 Each category has two performance benchmarks based on actual trading data. Each benchmark has upper and lower performance ranges. Each trading day, the performance of eligible securities will be compared with the upper and lower ranges for the two benchmarks used for each measure and assigned a classification of upper, middle or lower. Upper classifications are worth two points, middle classifications are worth one point and lower classifications are worth negative one point. The points earned for each of the two performance benchmarks within each measure will be combined to determine an overall score for the relevant measure. The overall scores for each measure are combined to determine the security's daily score. Scores range from four points (for upper classifications in both continuity and depth) to negative two points (for lower classifications in both continuity and depth). Daily scores will be provided to specialist firms at the end of each day, monthly scores at the end of each month and quarterly scores at the end of each quarter. 11 9 Eligible securities are all Exchange-listed domestic common stocks. 10 An eligible security will be evaluated on any day when any of the following conditions exists:
(a)The security's average trading price is between $1 and $200;
(b)the security's Exchange non-block volume (trades under 25,000 shares) is at least 100 shares; or
(c)the security had at least five depth sequences on the Exchange (for depth only) or at least five Exchange transactions (for continuity only);
(d)an individual security's overall quarterly depth and continuity score will be calculated only if it had daily scores on more than 31 days in the quarter. 11 Telephone conversation between Deanna Logan, Principal Rule Counsel, NYSE and David Michehl, Attorney, Division, Commission on March 2, 2006. The Committee will be provided with the monthly scores for each specialist firm. In addition, the Exchange will provide the Committee with average daily non-block volume and price activity and average continuity and depth scores for each of the maximum of twenty most active stocks 12 handled by the individual who is identified by his/her firm to be the designated specialist for the stock of the listing company. The information will include trading data for the current month through the week preceding the distribution of the security data sheet to the specialists plus the three preceding calendar months. 12 The Exchange represents that the average daily non-block volume is generally determined using data on the total number of shares traded during the most recent prior three months divided by the number of trading days in that period. The number of stocks is determined by creating a list of stocks traded most frequently by a specialist, ranked by average daily non-block volume. If the list contains less than twenty stocks, information on all stocks contained in the list is provided to the Committee. If the list contains more than twenty stocks, information on only the twenty most active stocks contained in the list is provided to the Committee. Telephone conversation between Deanna Logan, Principal Rule Counsel, NYSE and David Michehl, Attorney, Division, Commission on April 4, 2006. The existing measure to be changed is SuperDOT® turnaround for orders received by the specialist. Currently, this measure is based on the percentage of total post-opening market orders that are either executed or “stopped” within 60 seconds of the time they are received by the specialist. The Exchange proposes tightening this benchmark to 30 seconds to better reflect actual trading conditions and to focus performance on the individual post and panels rather than the firm overall performance. 13 13 The Exchange intends to review the continued applicability of this measure after the implementation of the NYSE HYBRID MARKET sm . *See* Securities Exchange Act Release No. 53539 (March 22, 2006), 71 FR 16353 (March 31, 2006) (order approving the NYSE HYBRID MARKET sm ). The Exchange believes that the use of these objective measures will provide for a more meaningful comparison of specialist performance and will promote better market-making as a result of the availability of more objective and detailed information and competition among the firms for allocations. Unlike the subjective criteria, which provided tier rankings for firms only, the objective performance measures will permit comparisons by stock, panel, and post, as well as by firm, and thus, will more clearly distinguish between strong and weak performance. The use of these measures will also enable specialist firms to better manage and more easily improve performance. Although the Exchange believes that the objective measures provide the more meaningful comparison, it is also acknowledged that subjective input from the Floor brokers and off-Floor customers with direct knowledge of the performance of specialist firms and individual specialists, may serve a useful purpose in the evaluation process. To this end, the proposed rule change includes a provision for providing subjective information to the Committee. The Exchange continues to develop the specific format of how the subjective information will be provided to the Committee, in consultation with constituent committees 14 that have previously provided feedback on the allocation process. 14 The Exchange represents that the constituent committees consist of the Institutional Traders Advisory Committee, the Upstairs Traders Advisory Committee, the Exchange Traders Advisory Committee, the Market Performance Committee and the proposed Hybrid Performance Committee. Telephone conversation between Deanna Logan, Principal Rule Counsel, NYSE and David Michehl, Attorney, Division, Commission on March 2, 2006. In addition, the Exchange proposes a number of other changes to NYSE Rule 103B. In summary, these changes are as follows: A. As noted above, the Committee will receive performance information regarding both the specialist firm and the individual designated by the firm to handle the security should the firm receive the allocation. Currently, the Committee only receives performance information with respect to the firm. B. In order to provide an incentive to specialist firms to ensure quality performance, provisions will be added that poor performance may result in the inability of an individual specialist or a specialist firm from applying for or receiving allocations, as follows: Specialist Firm Criteria Duration of criteria Period of ineligibility Overall depth or continuity score below 1.90 and more than one standard deviation below average score for all specialist firms Two consecutive months One month. Same as above Three consecutive months Two months. Same as above Three out of six months Two months. Overall 30-second DOT turnaround percentage below 90% One month One month. Two panels at same post with 30-second DOT turnaround percentages below 75% One month One month. Individual Specialist Criteria Duration of criteria Period of ineligibility Any of the assigned securities that the individual specialist handled most frequently during a month receive overall a depth or continuity score below 0.50 15 Three consecutive months Two months. Same as above Three out of five months Two months. Panel with 30-second DOT turnaround percentage below 75% One month One month. 15 Telephone conversation between Deanna Logan, Principal Rule Counsel, NYSE and David Michehl, Attorney, Division, Commission on April 4, 2006. C. The composition of the nine-member Committee will be changed, as illustrated in the chart below, in order to equalize representation on the Allocation Panel and the Committee and to give non-Floor constituents a greater role in the allocation process. Committee member type Current rule Proposed Floor Broker 3 Governors (1 may be Independent) 4 At least 1 Floor Governor, Executive Floor Official or Senior Floor Official. 3 Others (1 must be Independent) Allied Member 2 4 At least 1 Allied Member and at least 1 Institutional Representative. Institutional 1 Chairperson Floor Broker 1 Floor Broker or Allied Member/Institutional Representative. In alternating terms, an additional Floor Broker or Allied Member/Institutional Representative will be chosen for the Committee. The Committee members will select a chairperson from the dominant group on the Committee that term. No reappointments as chairperson until all members of Allocation Panel in same category have served a term as chairperson. D. Each standing Committee will be selected one month before its term commences and will elect its chairperson at that time. Currently, the rule provides that the chairperson is elected two months before his/her term starts. E. The requirement that the Committee chairperson be approved by the Quality of Markets Committee (“QOM”) of the Exchange Board of Directors will be eliminated. As a result of corporate governance changes in December 2003, the Exchange's Board of Directors no longer has an active QOM. F. In order to encourage more participation from various constituent representatives on the Committee, the term of service for Committee members will be modified as follows: Current terms of service Proposed terms of service 4-month term 2-month term. Terms staggered so that every 2 months, 4-5 members rotate off No staggered terms. Reappointment possible, provided a minimum of 2 months have passed since expiration of term No reappointment until all members of Allocation Panel in same category have served a term. G. Provide standing Committee with quarterly information identifying the individuals designated in each allocation application and the number of allocations they received, to provide informational continuity among Committees. H. As a mechanism to facilitate greater efficiency in the allocation process, the Committee quorum requirement is modified as follows: Committee member type Current rule Proposed Floor Broker 6, at least 2 Governors Any 7 members of the standing Committee. Allied Member 1 Institutional None required I. Increase the number of Allocation Panel members from 69+ to 75+ to encompass the need for added allied member and institutional representation on the Committee. J. Modify the composition of the Allocation Panel: Panel member type Current rule Proposed Floor Broker 28 20 Floor Broker Governors 10 10 Sr./Exec. Floor Officials 5 (minimum) 5 (minimum). Allied Members 15 including those on MPC 16 20 including those on MPC. Institutional 11 including those on MPC 20 including those on MPC. 16 MPC stands for Market Performance Committee. K. In order to make the process more efficient, the number of specialist firms selected for the interview pool under Option 2 of the Allocation Policy will be modified to four firms, including one firm designated as instrumental by the listing company. Currently, the rule provides that the pool may be composed of three, four or five firms. L. Redefine the “quiet period” for specialist contact with a listing company so that it commences solely with the date that allocation applications are solicited for that issuer. M. Extend the requirement that the specialist firm's designated specialist remain the primary specialist in an allocated security from six months to one year unless the listed company agrees to a change, in which case the specialist must provide written notice of the change and the listed company's agreement to the Committee and Market Surveillance. N. Extend the “Allocation Sunset Policy” for initial public offerings (“IPOs”) from three months to six months and for Exchange traded funds (“ETFs”) from three months to one year. Updated information on objective performance measures and disciplinary data will be provided to companies after three months
(IPOs)and six months (ETFs). O. Provide the Committee with more disciplinary history: Current rule Proposed Provided as to firms only Provided for designated specialist and firm. Informal discipline (Summary Fines and Admonition and Education letters) is reported as follows: market maintenance—12 months from time of issuance; non-market maintenance—6 months from time of issuance All informal discipline for 12 months from time of issuance. Significant pending Enforcement matters once action is authorized Same. Hearing Panel decisions, for 12 months after they become final Final Hearing Panel decisions, for three years after they become final. P. Eliminate the provision that NYSE Rule 103A performance improvement action criteria (timeliness of openings, SuperDOTreg; turnaround, *etc.* ) be reported to the Committee. Currently, the rule requires this information to be reported as a “pass” or “fail”. The revised system will provide the Committee with more detailed information. Q. In order to expedite the process, specialist firms will be required to designate an individual specialist for each listing, regardless of whether they apply for the allocation. Included in this requirement is the specialist firm's obligation to describe any contacts they, or any individual acting on their behalf, have had with any employee of the listing company, or any individual acting on behalf of that company, with regard to its prospective listing on the Exchange. This will enable staff to produce individual performance data in a timely manner for firms that may be selected for interview pools on a “without prejudice” basis. R. Provide the listing company with the same objective performance measure information the Committee considered, with respect to the members of its interview pool. In addition, as noted in “N” and “T” herein, provide the listing company with disciplinary history for the firms in the interview pool and their designated specialists. S. Preclude specialists, and anyone acting in their behalf, from offering to pay for or subsidize the cost of services or other incentives provided to a listing company in whole or in part by third parties in order to avoid even the semblance of impropriety. T. Provide that interview pools for the allocation of closed-end funds by the same issuer will remain operative for a nine-month period following the selection of a specialist. Any further closed-end fund listings from the same issuer in the nine-month period will be able to select any specialist from this group or ask for the matter to be referred to the Committee, in which case the group dissolves. The fund will be given updated objective performance and disciplinary information before making its decision. If a specialist firm/individual is ineligible for an allocation, that firm will be dropped from the group. If an individual specialist is no longer with a firm at the time of a new allocation of a closed-end fund, the firm will be dropped from the group. U. Delete references to QOM from NYSE Rule 103B. V. Substitute the term “admonition letter” for “cautionary letter.” W. Eliminate the requirement that the Committee chair receive orientation from the QOM. X. In order to provide an incentive for ongoing enhancement of performance by specialist firms, add the following to the list of factors considered by a special committee consisting of certain members of the Committee, which determines the allocation of ETFs under this policy: The extent to which a specialist organization has supported in the past, and will continue to support, the Exchange's efforts to strengthen and expand its ETF market. Y. Allow the issuer of a structured product to participate in the specialist interview via a senior official of its subsidiary participating in the issuance of the structured product. Additionally, the following amendments are proposed to NYSE Rule 103A: A. Delete references to SPEQ. B. Provide new criteria for performance improvement actions, as follows: i. SuperDOT® market order turnaround: In any case where a firm:
(a)Does not turn around 90% of its DOT orders in 30 seconds or less (previously 60 seconds) during any quarter (previously two quarters) in a rolling four-quarter period; or
(b)Has two panels at the same post with 30-second turnaround percentages below 75% for any one quarter. ii. Market Depth: In any case where a firm has:
(a)An overall quarterly Depth score below 1.90 and more than one standard deviation below the average quarterly Depth score for all specialist firms for two consecutive quarters, or
(b)An overall quarterly Depth score below 1.90 and more than one standard deviation below the average quarterly Depth score for all specialist firms for two out of four consecutive quarters, or
(c)More than ten percent of its eligible stocks with overall quarterly Depth scores below 0.50 and the percent is more than one standard deviation above the Floor average for two consecutive quarters. iii. Price Continuity In any case where a firm has:
(a)An overall quarterly Continuity score that is below 1.90 and more than one standard deviation below the average quarterly Continuity score for all specialist firms for two consecutive quarters, or
(b)An overall quarterly Continuity score that is below 1.90 and more than one standard deviation below the average quarterly Continuity score for all specialist firms for two out of four consecutive quarters, or
(c)More than ten percent of its eligible stocks with overall quarterly Continuity scores below 0.50 and the percent is more than one standard deviation above the Floor average for two consecutive quarters. Further, the Exchange proposes to eliminate references to SPEQ and add references to the proposed objective measures in NYSE Rule 123E (Specialist Combination Review Policy). Finally, the Exchange proposes to add NYSE Rule 103B to the list of rules for which summary fines are available, specifically NYSE Rule 476A (Imposition of Fines for Minor Violation(s) of Rules) to allow the Exchange to sanction members' and member organizations' less serious violations of NYSE Rule 103B pursuant to the minor fine provisions of NYSE Rule 476A. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with the provisions of Section 6(b)(5) of the Act 17 because it is designed to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system and, in general, to protect investors and the public interest. The Exchange believes that the proposed rule change is consistent with these objectives in that it enables the Exchange to further enhance the process by which securities are allocated. 17 15 U.S.C. 78f(b)(5). B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange believes that the proposed rule change will not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others The Exchange has not solicited, and does not intend to solicit, comments regarding the proposed rule change. The Exchange has not received any unsolicited written comments from members or other interested parties. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 35 days of the date of publication of this notice in the **Federal Register** or within such longer period
(i)as the Commission may designate up to 90 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or
(ii)as to which the self-regulatory organization consents, the Commission will: A. By order approve such proposed rule change, as amended; or B. Institute proceedings to determine whether the proposed rule change, as amended, should be disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change, as amended, is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov.* Please include File Number SR-NYSE-2005-40 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-NYSE-2005-40. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room. Copies of such filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-NYSE-2005-40 and should be submitted on or before May 3, 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. E6-5368 Filed 4-11-06; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-53600; File No. SR-NYSEArca-2006-07] Self-Regulatory Organizations; NYSE Acra, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change, and Amendment No. 1 Thereto, Relating to Exchange Fees and Charges April 4, 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 21, 2006, NYSE Arca, Inc. (“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 31, 2006, the Exchange filed Amendment No. 1 to the proposed rule change. 3 The Exchange has designated this proposal as one establishing or changing a due, fee, or other charge imposed by the Exchange under Section 19(b)(3)(A)(ii), 4 and Rule 19b-4(f)(2) thereunder, 5 which renders the proposal effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change, as amended, from interested persons. 1 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 Amendment No. 1 made clarifying changes to the rule text and purpose section of the proposed rule change. 4 15 U.S.C. 78s(b)(3)(A)(ii). 5 17 CFR 240.19b-4(f)(2). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend its Schedule of Fees and Charges for Exchange Services (“Schedule”) in order to assess a royalty fee on options contracts traded on certain Exchange Traded Funds (“ETFs”). The text of the proposed rule change, as amended, is available on the Exchange's Web site at *http://www.nysearca.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, 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 The Exchange proposes to amend its Schedule in order to assess a $0.10 royalty fee on options contracts traded on the following ETFs: the Russell 1000 Index Fund (IWB), The Russell 1000 Value Index Fund (IWD), the Russell 2000 Index Fund (IWM), the Russell 2000 Value Index Fund (IWN), the Russell 2000 Growth Fund (IWO), and the Russell Midcap Index Fund (IWR). The Exchange proposes to charge $0.10 per contract side on all market maker, firm and broker dealer transactions. According to the Exchange, consistent with the present Schedule, customers will not be assessed the royalty fee. The Exchange also proposes to add additional language to footnote 6 of the Trade-Related Charges section of the Schedule. According to the Exchange, this language is being added to cross reference an existing section in the Schedule that contains information on how royalty fees associated with Options Strategy Executions are assessed. These fees are explained under the “Limit of Fees on Options Strategy Executions” section of the Schedule. The Exchange notes that the additional language to this footnote simply serves as a reference to the existing explanation. 2. Statutory Basis The Exchange believes that the proposed rule change, as amended, is consistent with Section 6(b) of the Act, 6 in general, and furthers the objectives of Section 6(b)(4) of the Act, 7 in particular, in that it is designed to provide for the equitable allocation of reasonable dues, fees, and other charges among its members and issuers and other persons using its facilities. 6 15 U.S.C. 78f(b). 7 15 U.S.C. 78f(b)(4). B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that the proposed rule change, 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 No written comments were solicited or received with respect to the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change, as amended, has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act 8 and subparagraph (f)(2) of Rule 19b-4 thereunder, 9 since it establishes or changes a due, fee or other charge imposed by the Exchange. 8 15 U.S.C. 78s(b)(3)(A)(ii). 9 17 CFR 240.19b-4(f)(2). At any time within 60 days of the filing of such proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in the furtherance of the purposes of the Act. 10 10 The effective date of the original proposed rule change is March 21, 2006, and the effective date of Amendment No. 1 is March 31, 2006. For purposes of calculating the 60-day period within which the Commission may summarily abrogate the proposed rule change under Section 19(b)(3)(C) of the Act, the Commission considers the period to commence on March 31, 2006, the date on which the Exchange filed Amendment No. 1. See 15 U.S.C. 78s(b)(3)(C). IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change, as amended, is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov.* Please include File Number SR-NYSEArca-2006-07 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-NYSEArca-2006-07. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Section. Copies of such filing also will be available for inspection and copying at the principal office of the 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-NYSEArca-2006-07 and should be submitted on or before May 3, 2006. 11 17 CFR 200.30-3(a)(12). For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 11 Nancy M. Morris, Secretary. [FR Doc. E6-5366 Filed 4-11-06; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-53612; File No. SR-Phlx-2006-15] Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; Notice of Filing and Order Granting Accelerated Approval of Proposed Rule Change and Amendment Nos. 1 and 2 Thereto Relating to Registration Filing Requirements and Reporting Requirements April 6, 2006. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”), 1 and Rule 19b-4 thereunder, 2 notice is hereby given that on March 17, 2006, the Philadelphia Stock Exchange, Inc. (“Phlx” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I and II below, which Items have been prepared by the Phlx. On April 3, 2006, the Phlx filed Amendment No. 1 to the proposed rule change. 3 On April 5, 2006, the Phlx filed Amendment No. 2 to the proposed rule change. 4 The Commission is publishing this notice to solicit comments on the proposed rule change, as amended, from interested persons and is approving the proposal on an accelerated basis. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 In Amendment No. 1, the Phlx made clarifying and technical changes to the proposal. 4 In Amendment No. 2, the Phlx made further clarifying and technical changes to the proposal. I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Phlx proposes to:
(1)Amend Exchange Rules 600, 604, 620, 623 and 1024, Options Floor Procedure Advice (“OFPA”) F-25 and Equity Floor Procedure Advice (“EFPA”) F-25 to require all member and participant organizations, that do not already participate in Web CRD as a member of a participating exchange or the National Association of Securities Dealers (“NASD”) to submit Form U4, and Form U5, and amendments thereto to the Web Central Registration Depository (“Web CRD”) 5 as well as to submit fingerprint cards directly to the NASD;
(2)amend Exchange Rule 1024 to require persons to be Registered Representatives 6 of a member or participant organization in order to solicit or accept customer orders for foreign currency options or in the alternative to require persons who have not successfully completed the Series 7 General Securities Representative Examination to submit an application for waiver of the Series 7 for approval;
(3)amend Exchange Rules 600, 604, 620 and 1024 to add language specifying a timeframe in which to amend Form U4, Form U5 and Form BD;
(4)amend its minor rule violation enforcement and reporting plan (“MRP”) by adopting two new floor procedure advices, EFPA F-34 and OFPA F-34, respectively, pursuant to Exchange Rule 970, for failures to timely submit amendments to Form U4, Form U5 and Form BD; 7 and
(5)make other minor clarifying changes to certain of these rules. The text of the proposed rule change is available on the Phlx's Web site ( *http://www.phlx.com* ), at the Phlx's Office of the Secretary, and at the Commission's Public Reference Room. 5 Web CRD is a web-based system that provides broker-dealers and their associated persons “one-stop filing” with the Commission, NASD, and other self-regulatory organizations and regulators. Web CRD is operated by NASD and is utilized by participating securities regulators in connection with registering and licensing broker-dealers and their associated persons. 6 Registered Representative categories include registered options principals, general securities representatives, general securities sales supervisors and United Kingdom limited general securities registered representatives. *See* Phlx Fee Schedule Appendix A at footnote 25. 7 Rule 19d-1(c)(1) under the Act, 17 CFR 240.19d-1(c)(1), requires any self-regulatory organization for which the Commission is the appropriate regulatory agency that takes any final disciplinary action with respect to any person to promptly file a notice thereof with the Commission. However, rule violations resulting in a fine not exceeding $2,500 are not deemed final and therefore not subject to the same reporting requirements. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Phlx included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item III below. The Phlx has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of the proposed rule change is to create a more efficient, centralized registration process by migrating from a manual paper-based Exchange procedure to Web CRD for registration and NASD processing of fingerprints, with more defined deadlines and a more streamlined disciplinary process. The proposal also seeks to eliminate the Series 15 as a prerequisite for trading foreign currency options, which is rarely used. The proposal also makes other minor technical changes. Web CRD The Web CRD process would assist in maintaining all historical information related to associated persons of member and participant organizations in one central repository, as well as create efficient disclosure utilizing an online database, which can be accessed by other exchanges and regulators. Additionally, the Web CRD process would track and capture information related to registration and continuing education. Finally, the Web CRD system would capture information related to fingerprinting and statutory disqualification, which would enable regulators and broker-dealers to make informed decisions concerning employment and membership. Members, member and participant organizations would be required to submit Forms U4 and U5 (and amendments thereto) electronically through the Web CRD system. Currently, member and participant organizations submit Forms U4 and U5 in paper form to the Exchange. Although Form BD is required to be submitted to Web CRD, the proposed rule change codifies this requirement into Phlx Rule 600(c), and applies to amendments as well. 8 8 17 CFR 240.15b-1. Currently, members, member and participant organizations submit manual rolled fingerprint cards 9 to the Exchange, which then forwards the cards to the FBI, the fingerprint processing arm of the Office of the Attorney General of the United States. The FBI identifies submitted fingerprints, retrieves relevant criminal history information, and returns fingerprint reports (including the original fingerprint cards) to the Exchange. Upon receipt of the approved fingerprint cards, the Exchange sends this information to the member or participant organization, as applicable, and keeps a copy for its records. This proposed rule change would require the members, member and participant organizations to send the fingerprint cards to the NASD for processing. All trading floor personnel, including clerks, interns, stock execution clerks and other associated persons of member or participant organizations, who are not registered and only submit fingerprint cards to the NASD, will be classified as Non-Registered Fingerprint (“NRF”) filers. 9 The NASD will accept Federal Bureau of Investigation (“FBI”) fingerprint results in lieu of fingerprint cards. The Exchange anticipates that the proposed migration to Web CRD will take place on April 10, 2006, at which time Web CRD will be available to process Phlx member and participant organization submissions electronically. On May 12, 2006, the use of Web CRD, pursuant to this proposed rule change becomes mandatory. 10 The Exchange will provide notification in writing to the membership of the effective date of the rule change. 10 The period from April 10-May 11, 2006 is intended as a phase-in and to permit manual filing in case there is a problem filing via Web CRD. Other than filing via Web CRD, the rule change takes effect April 10, 2006. Elimination of Series 15 Examination The removal of the Series 15 Foreign Currency Options Examination and the requirement to be a Registered Representative to solicit or accept customer orders for foreign currency options would eliminate the need to allocate staff resources to maintaining the examination in the future. 11 The Series 7 General Securities Representative Examination covers many other financial instruments as well as the material covered by the Series 15 examination, such as questions regarding the sale and trading of listed foreign currency options. 11 Since 1999, the Series 15 examination has only been administered about 20 times. From June 1986, the Series 7 examination has included questions regarding the trading of listed foreign currency options. For that reason, Registered Representatives who passed the Series 7 examination after June 1986 have been eligible to sell foreign currency options on the Phlx without taking the Series 15. In addition, in 1993, 12 the Exchange amended Rule 1024(a)(ii) to establish a procedure to waive the Series 15 examination which allows Registered Representatives who passed the Series 7 examination prior to June 1986 to sell Phlx foreign currency options based on the length and depth of their industry experience, in lieu of having to pass a separate Series 15 examination that relates solely to foreign currency options. 12 *See* Securities Exchange Act Release No. 32990 (September 30, 1993), 58 FR 52339 (October 7, 1993)(SR-Phlx-92-10). In this proposal, in addition to eliminating the Series 15 examination altogether, the Exchange proposes to establish the same criteria for waiver of the Series 7 examination, which requires a description of the applicant's options experience and certification of that experience by a current or former supervisor with knowledge of the registered representative's options experience. 13 The Director of Examinations will determine whether the applicant demonstrates sufficient knowledge of options to allow the applicant to sell foreign currency options without taking the Series 7 examination. 13 The supervisor must certify that the applicant understands options and has applied his or her knowledge in the course of trading and monitoring options positions over a period of no less than six months. Additionally, other minor changes are being made to Exchange Rule 1024 for purposes of clarification. The Exchange is amending the language in Exchange Rule 1024(a)(i) to clarify the registration obligations of Options Principals. Failures To Submit Timely Amendments to Form U4, Form U5 and Form BD The Exchange is adding language to Exchange Rules 600, 604, 620 and 1024 as well as adding Floor Procedure Advices pursuant to the Exchange's minor rule plan and Exchange Rule 970 to clarify the timeframe within which member and participant organizations must amend Forms U4, U5 and BD to allow for prompt disclosure. The Exchange proposes a timeframe of 30 days from the time the filer knew or should have known of the facts which gave rise to the amendment to submit amended Forms U4, U5 and BD. By including this language in both the Exchange Rules and Advices, Exchange staff would retain the discretion to initiate formal disciplinary proceedings. The Exchange believes that the proposed Advices should encourage member organizations and participant organizations to timely submit Forms U4, U5 and BD and thereby timely disclose the information contained in those forms. The disclosure of this information should enable the Exchange and the public to receive current information on registered persons and entities. Specifically, the Advices will authorize the Exchange to impose a fine on any member or participant organization without formal disciplinary action. Exchange staff will review the number and seriousness of the violation, as well as previous disciplinary history of the violator, to determine if a matter is appropriate for disposition under the minor rule plan. Once a member or participant organization is fined under the minor rule plan, the Exchange may issue progressively higher fines for all subsequent violations within a rolling 12 month period or initiate more formal disciplinary proceedings. The addition of these Advices to the Exchange's minor rule plan should allow Exchange staff the ability to impose more meaningful sanctions for violations that merely warrant a cautionary letter, for example, but do not necessarily rise to the level of a formal disciplinary proceeding pursuant to Exchange Rule 960. Additionally, the Advices would allow for disposition of minor or technical violations of Exchange rules by means of a less costly and less time consuming process as compared to a formal disciplinary process. Expediting resolutions for technical violations, while retaining the discretion to bring formal disciplinary action, should allow for efficient dispositions of rule violations. Other The language in Exchange Rule 604(e)(ii), related to off-floor traders currently engaged in off-floor trading activities, is being deleted because the language is no longer applicable. The term participant organization is being added for clarification in the various rules. 2. Statutory Basis The Exchange believes that its proposal is consistent with Sections 6(b) and 6(c) of the Act 14 in general, and furthers the objectives of Section 6(b)(5) of the Act 15 in particular, in that it is designed to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest, by providing information to a central repository. 14 15 U.S.C. 78f(b) and 78f(c). 15 15 U.S.C. 78f(b)(5). The Exchange believes that its proposal is consistent with Section 6(c)(3)(B) of the Act 16 in that it is the Exchange's responsibility to prescribe standards of training, experience and competence for persons associated with the Exchange's members, and member and participant organizations. In addition, under Section 6(c)(3)(B) of the Act, 17 the Exchange may bar a natural person from becoming a member or person associated with a member, if the person does not meet the standards of training, experience and competence as are prescribed in the rules of the Exchange. 16 15 U.S.C. 78f(c)(3)(B). 17 *Id.* Further, the Exchange believes that its proposal is consistent with Sections 6(b)(1), 18 6(b)(6), 19 6(b)(7) 20 and 6(d)(1) 21 of the Act, which require that the rules of an exchange enforce compliance with, and provide appropriate discipline for, violations of Commission and Exchange rules. In addition, because existing Exchange Rule 970 provides procedural rights to a person fined under the MRP to contest the fine and permits a hearing on the matter, the Exchange believes the minor rule plan, as amended by this proposal, should provide a fair procedure for the disciplining of members and persons associated with members. Finally, the Exchange believes that the proposal is consistent with the public interest, the protection of investors, or otherwise in furtherance of the purposes of the Act, as required by Rule 19d-1(c)(2) under the Act 22 which governs minor rule violation plans. The Exchange believes that the proposed change to the MRP should strengthen the Exchange's ability to carry out its oversight and enforcement responsibilities as a self-regulatory organization in cases where formal disciplinary proceedings are unsuitable in view of the minor nature of the particular violation. In addition, the Exchange believes that its proposal furthers the objectives of Section 6(b)(6) of the Act, 23 in that it provides that its members be appropriately disciplined for violations of exchange rules, the Act, and rules and regulations thereunder, by expulsion, suspension, limitation of activities, functions, and operations, fine, censure, being suspended or barred from being associated with a member, or any other fitting sanction. 18 15 U.S.C. 78f(b)(1). 19 15 U.SC. 78f(b)(6). 20 15 U.S.C. 78f(b)(7). 21 15 U.S.C. 78f(d)(1). 22 17 CFR 240.19d-1(c)(2). 23 15 U.S.C. 78f(b)(6). B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were either solicited or received. III. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change, as amended, is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov.* Please include File Number SR-Phlx-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 Number SR-Phlx-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 such filing also will be available for inspection and copying at the principal office of the Phlx. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-Phlx-2006-15 and should be submitted on or before May 3, 2006. IV. Commission's Findings and Order Granting Accelerated Approval of the Proposed Rule Change After careful consideration, the Commission finds that the proposed rule change, as amended, is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange. 24 In particular, the Commission finds that the proposed rule change, as amended, is consistent with Section 6(b)(5) of the Act, 25 which requires, among other things, that the Exchange's rules be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities, and, in general, to protect investors and the public interest. The Commission believes that the proposed rule change clarifies the Phlx registration process and promotes uniformity of registration in the industry. In addition, the proposed rule change should enhance the ability of regulators to monitor broker-dealers and their associated persons. Requiring firms that are only members of the Phlx to register through Web CRD will put them on a par with other Phlx member firms that are members of another SRO and, as such, are already registering through Web CRD. 24 In approving this proposal, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. *See* 15 U.S.C. 78c(f). 25 15 U.S.C. 78f(b)(5). The Commission also finds that the proposed rule change is consistent with Section 6(c)(3)(B) of the Act, 26 which states that an Exchange may prescribe standards of training, experience and competence for persons associated with Exchange members. Further, the Commission believes that the procedures for obtaining a waiver of the Series 7 examination should help to ensure that only persons with adequate experience in options trading and knowledge of foreign currency options and the underlying markets will be granted a waiver of the Series 7 examination requirement. 26 15 U.S.C. 78f(c)(3)(B). The Commission also believes that the proposed rule change is consistent with Section 6(b)(6) of the Act 27 in that it provides for the appropriate discipline for violation of Phlx rules. Moreover, the Commission believes that the proposed rule change is consistent with Section 6(b)(7) of the Act 28 in that it provides a fair procedure for the disciplining of Phlx members. Finally, the Commission finds that the proposed rule change is consistent with Rule 19d-1(c)(2) under the Act, 29 which governs minor rule violation plans. The Commission believes it is reasonable for Phlx to be able to sanction late filings of amendments to Form U4, Form U5 and Form BD pursuant to its MRP. 27 15 U.S.C. 78f(b)(6). 28 15 U.S.C. 78f(b)(7). 29 17 CFR 240.19d-1(c)(2). The Exchange has requested accelerated approval of the proposed rule change. The Commission finds good cause for approving the proposed rule change, as amended, prior to the thirtieth day after the date of publication of the notice of filing in the **Federal Register** . Accelerated approval of the proposed rule change should allow the Exchange to migrate to Web CRD, as scheduled, on April 10, 2006 and make regulatory information with respect to members and their associated persons more readily available to regulators. In addition, the Commission has approved similar rule changes implementing electronic registration for the Pacific Exchange, Inc. and the Chicago Board Options Exchange, Incorporated. 30 The Commission has also approved a similar rule change for NASD to include failures to timely submit amendments to Form U5 in its Minor Rule Violation Plan. 31 Finally, the Commission does not believe that the Exchange's proposal raises any novel regulatory issues. Therefore, the Commission finds good cause, consistent with Section 19(b)(2) of the Act, 32 to approve the proposed rule change, as amended, on an accelerated basis. 30 *See* Securities Exchange Act Release Nos. 51398 (March 18, 2005), 70 FR 15672 (March 28, 2005) (SR-PCX-2005-10) and 46308 (August 2, 2002), 67 FR 51905 (August 9, 2002) (SR-CBOE-2001-66). 31 *See* Securities Exchange Act Release No. 50446 (September 24, 2004), 69 FR 58568 (September 30, 2004) (SR-NASD-2004-121). 32 15 U.S.C. 78s(b)(2). V. Conclusion *It is therefore ordered,* pursuant to Section 19(b)(2) of the Act, 33 that the proposed rule change (SR-Phlx-2006-15), as amended, is hereby approved on an accelerated basis. 33 *Id.* For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 34 34 17 CFR 200.30-3(a)(12). Nancy M. Morris, Secretary. [FR Doc. E6-5362 Filed 4-11-06; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-53604; File No. SR-Phlx-2006-19] Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Orders Marked Sell Short Entered Before the Opening April 5, 2006. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) 1 , and Rule 19b-4 2 thereunder, notice is hereby given that on March 22, 2006, the Philadelphia Stock Exchange, Inc. (“Phlx” or “Exchange”) filed with the Securities and Exchange Commission (“SEC” or “Commission”) the proposed rule change as described in Items I, II, and III, below, which Items have been prepared by the Phlx. The Phlx 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 series under paragraph (f)(1) of Rule 19b-4 under the Act, 3 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 17 CFR 240.19b-4(f)(1). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Phlx, pursuant to Section 19(b)(1) of the Act 4 and Rule 19b-4 thereunder, 5 proposes to interpret its rules to make certain market and limit orders in Short Sale Exempt Securities 6 received prior the opening pursuant to Phlx Rule 229, Supplementary Material .06 and .10(a)(iv), eligible for automatic execution, even though such orders are marked sell short. 4 15 U.S.C. 78s(b)(1). 5 17 CFR 240.19b-4. 6 The Commission's Division of Market Regulation (the “Division”) issued two no-action letters (the “Two No-Action Letters”) regarding broker-dealer marking requirements under Rule 200(g) of Regulation SHO. *See* Letter from James A. Brigagliano, Assistant Director, Securities and Exchange Commission, to Ira Hammerman, Senior Vice President and General Counsel, Securities Industry Association, dated January 3, 2005 and letter from James A. Brigagliano, Assistant Director, Commission, to Ira Hammerman, Senior Vice President and General Counsel, Securities Industry Association, dated April 15, 2005. As used in this proposed rule change, Short Sale Exempt Securities means those securities traded on the Phlx and described in one of the Two No-Action Letters. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Phlx included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Phlx has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of the proposed rule change is to treat orders received over PACE 7 prior to the opening in a manner consistent with the treatment expected by the member organizations entering the orders. Pursuant to Phlx Rule 229, Supplementary Material .06 and .10(a)(iv), certain market and limit orders received prior to the opening are eligible for automatic execution at the opening price of the New York market, unless, among other things, those orders are marked sell short. 8 According to the Phlx, the reason for not automatically executing orders marked sell short is to prevent a possible violation of the tick test in Rule 10a-1 under the Act 9 if an order marked sell short were executed on an impermissible tick. However, in 2005, the Division issued Two No-Action Letters, which allowed broker-dealers, such as Phlx member organizations, to mark sell short orders in Short Sale Exempt Securities that are not subject to any other exemption as “sell short” instead of “sell short exempt” if those orders were sent to exchanges which, among other things, “have instituted procedures to ‘mask' the short sale character of the transaction so they are executed as short exempt.” 10 The Phlx has implemented such procedures to mask the short sale character of transactions in Short Sale Exempt Transactions so they are executed as short exempt. The Phlx notes that, therefore, in reliance on the Two No-Actions Letters, Phlx member organizations can mark such orders “sell short”. 7 PACE is the Exchange's automated order routing, delivery, execution and reporting system for equities. *See* Phlx Rule 229. 8 *See* Securities Exchange Act Release No. 52495 (September 22, 2005), 70 FR 56961 (September 29, 2005) (SR-Phlx-2005-14). 9 17 CFR 240.10a-1. 10 *See* the Two No-Action Letters. Accordingly, in accordance with the Division's Two No-Action Letters, eligible sell short orders received prior to the opening in Short Sale Exempt Securities could now, by law, be automatically executed on the Phlx without applying the tick test. However, pursuant to Phlx's own rules, Phlx Rule 229, Supplementary Material .06 and .10(a)(iv), orders marked “sell short exempt” are eligible for automatic execution and orders marked “sell short” are not. The Phlx now proposes to interpret Phlx Rule 229, Supplementary Material .06 and .10(a)(iv) to consider orders in Short Sale Exempt Securities that are marked sell short as if they were marked sell short exempt. The Phlx, therefore, notes that such orders in Short Sale Exempt Securities that are marked sell short, if otherwise eligible, would execute automatically, pursuant to Phlx Rule 229, Supplementary Material .06 and .10(a)(iv). The Phlx believes that this interpretation conforms to the intention of member organizations entering orders marked sell short in Short Sale Exempt Securities, because, relying on the Two No-Action Letters, such member organization would expect such order to be treated as if it were, in fact, marked sell short exempt. 2. Statutory Basis The Exchange believes that its proposal 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, 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, by treating orders entered by member organizations in a manner consistent with their expectations. 11 15 U.S.C. 78f(b). 12 15 U.S.C. 78f(b)(5). B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were either solicited or received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective pursuant to Section 19(b)(3)(A) of the Act and paragraph (f)(1) of Rule 19b-4 thereunder. 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-Phlx-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-Phlx-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 the filing also will be available for inspection and copying at the principal office of the Phlx. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-Phlx-2006-19 and should be submitted on or before May 3, 2006. 13 17 CFR 200.30-3(a)(12). For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 13 Nancy M. Morris, Secretary. [FR Doc. E6-5367 Filed 4-11-06; 8:45 am] BILLING CODE 8010-01-P DEPARTMENT OF STATE [Public Notice 5326] Shipping Coordinating Committee; Notice of Meeting The Shipping Coordinating Committee will conduct an open meeting at 9:30 a.m. on Monday, May 1, 2006 in Room 2415, at U.S. Coast Guard Headquarters, 2100 2nd Street, SW., Washington, DC 20593-0001. The purpose of this meeting will be to finalize preparations for the 81st Session of the Maritime Safety Committee, and associated bodies of the International Maritime Organization (IMO), which is scheduled for May 10-19, 2006 at IMO Headquarters in London. At this meeting, papers received and the draft U.S. positions for the Maritime Safety Committee will be discussed. Among other things, the items of particular interest are: —Adoption of amendments to SOLAS for long range identification and tracking of ships, amendments to the IMDG Code, amendments to the International Convention on standards of Training, Certification and Watchkeeping for Seafarers, amendments to the FSS Code, and amendments to the LSA Code; —Passenger ship safety; —Measures to enhance maritime security; —Goal-based new ship construction standards; —Formal safety assessment; —Reports of nine subcommittees—Stability, load lines and fishing vessel safety, Dangerous goods, solid cargoes and containers, Training and watchkeeping, Fire protection, Radiocommunications and search and rescue, Ship design and equipment, Flag State implementation, Bulk liquids and gases, and Safety of navigation. Members of the public may attend this meeting up to the seating capacity of the room. Interested persons may seek information by writing to Mr. Howard Hime, Commandant (G-PS), U.S. Coast Guard Headquarters, 2100 2nd Street, SW., Room 1218, Washington, DC 20593-0001 or by calling
(202)267-2970. Dated: April 5, 2006. Clay Diamond, Executive Secretary, Shipping Coordinating Committee, Department of State. [FR Doc. E6-5401 Filed 4-11-06; 8:45 am] BILLING CODE 4710-09-P DEPARTMENT OF TRANSPORTATION Federal Motor Carrier Safety Administration [Docket No. FMCSA-2006-23781] Agency Information Collection Activities; Request for Comment; Approval of a New Information Collection: Letter of Confirmation and Carrier Contact Information Sheets AGENCY: Federal Motor Carrier Safety Administration (FMCSA), DOT. ACTION: Notice and request for comments. SUMMARY: FMCSA invites public comment on its plan to request the Office of Management and Budget's
(OMB)approval to collect information on new forms entitled “Carrier Contact Information Sheets.” The information will be collected from United States and Canada-based motor carriers through the use forms, and used by FMCSA Safety Auditors and Safety Investigators to prepare in advance for Compliance Reviews
(CRs)and New Entrant Program Safety Audits (NEPSAs); Pre-authority Safety Audits (PASAs) and CRs of certain Mexico-domiciled motor carriers; and NEPSAs and CRs of Non-North American motor carriers. FMCSA conducts CRs to determine motor carrier compliance with the Federal Motor Carrier Safety Regulations (FMCSRs) and other regulations overseen by FMCSA. In accordance with section 350 of the 2002 DOT Appropriations Act and the Agency's regulations, all Mexico-domiciled long-haul carriers must successfully complete a PASA before receiving authority to operate in the United States and must receive a CR within their first 18 months of operations in the United States. All other motor carriers receive CRs to determine their safety fitness. FMCSA conducts NEPSAs in accordance with section 210 of the Motor Carrier Safety Improvement Act of 1999, which requires safety reviews of all new entrants during their first 18 months of operations. The information collected from motor carriers will be used to assist safety investigators to become familiar with the motor carrier's operation prior to visiting the carrier's place of business. The information collected will include, but is not limited to, company information and contact persons, business type, insurance, type of cargo transported, vehicle and driver information and controlled substance testing information. Additional information will be collected from carriers who transport hazardous materials, household goods, and passengers or are domiciled in Mexico. This notice is required by the Paperwork Reduction Act of 1995. DATES: Comments must be submitted on or before June 12, 2006. ADDRESSES: All comments should reference Docket No. FMCSA-2006-23781. You may mail or hand deliver comments to the U.S. Department of Transportation, Dockets Management Facility, Room PL-401, 400 Seventh Street, SW., Washington, DC 20590; telefax comments to
(202)493-2251; or submit electronically at *http://dms.dot.gov* . You may examine and copy all comments received at the above address between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. If you desire your comment to be acknowledged, you must include a self-addressed stamped envelope or postcard or, if you submit your comments electronically, you may print the acknowledgment. FOR FURTHER INFORMATION CONTACT: Mr. Arturo H. Ramirez, Division Chief,
(202)366-3181, Enforcement and Compliance Division, Federal Motor Carrier Safety Administration, 400 7th Street SW., Suite 8214, Washington, DC 20590. Office hours are from 7:00 a.m. to 4:30 p.m., e.t., Monday through Friday, except Federal Holidays. SUPPLEMENTARY INFORMATION: Title: Carrier Contact Information Sheets. *OMB Control No:* 2126-XXXX. Background: In 1999, the Motor Carrier Safety Improvement Act of 1999 (MCSIA) [Public Law 106-159,113 Stat. 1748 (December 9, 1999)] strengthened the motor carrier safety program by mandating more vehicle and driver inspections, and carrier compliance reviews. MCSIA also required safety reviews of all new entrants during the first 18 months of operations. Section 350 of the DOT Appropriations Act for Fiscal Year 2002 [Public Law 107-87, 115 Stat. 864 (December 18, 2001)] further strengthened the safety program for motor carriers by requiring safety audits of long-haul Mexico-domiciled carriers before they receive operating authority in the United States. FMCSA conducts compliance reviews to ensure that motor carriers comply with the FMCSRs. To facilitate the timely completion of the compliance reviews in the future, FMCSA safety investigators will use the following two forms to collect information from motor carriers prior to conducting compliance reviews. A “Letter of Confirmation,” will be used by the safety investigator to confirm an appointment with a carrier once a compliance review has been scheduled. The letter further informs the carrier the investigator will need access to all carrier records including, but not limited to, the following: • A list of drivers used in the past 365 days, including date of hire, date of termination, Commercial Driver's License
(CDL)State and license number, and date of birth; • Driver qualification files and controlled substance testing records results and summaries for the past 365 days; • Driver payroll records; • Driver records of duty status (logs, time records, etc.) for the past 6 months; • Driver trip reports, expense records, scale tickets, fuel receipts, toll receipts, bills of lading or any other pickup or delivery document for the past 6 months; • Motor vehicle accident reports and accident register for the past 12 months; • A list of motor vehicle equipment (company unit number, license number, State, year, make and gross vehicle weight rating (GVWR)); • Lease agreements, if applicable; • Vehicle maintenance records for all vehicles owned or leased; • Driver vehicle inspection reports for the last 90 days; • All roadside inspections for the past 365 days; • Company gross revenue for the last calendar or fiscal year, as applicable; • Total fleet mileage for the last year; • A copy of the motor carrier's MCS-90 or MCS-90B endorsement for its current policy; and insurance claim information for the past 365 days (Loss Run Report). • Carriers of household goods must also provide all documents related to the movement of household goods, including estimates, orders for service, bills of lading, inventories, invoices and weight tickets. • Carriers of hazardous materials must also provide, if applicable: a copy of the company's security plan; a list of any hazardous materials (HM or hazmat) incident(s) that may have occurred in the past 12 months (including spills, injuries or any type of release); HM shipping papers for the past 12 months; records related to the training of all hazmat employees and all documentation regarding the testing of any applicable specification cargo tanks. Form MCSA-5540, “Carrier Information,” will be used for the collection of information from all motor carriers subject to the Federal Motor Carrier Safety Regulations. The information will be used by the safety investigator to assist him/her in conducting a compliance review of the motor carrier's operation. The information to be collected from the carrier includes, but is not limited to: • The legal name and contact information (including telephone and facsimile numbers and e-mail addresses); • Information regarding the motor carrier's type of business—for example, whether the business is a sole proprietorship, partnership, LLC (Limited Liability Company) or corporation; • The motor carrier's gross revenue for the last complete fiscal year; • The fleet mileage for the preceding 12 months; • The motor carrier's employee identification number, social security number or Registro Federal de Causantes number (Mexican Federal Tax Identification number)
(RFC)(if a Mexico-domiciled carrier); • The motor carrier's insurance information, including name of insurance company, agent or contact information, insurance company's telephone number, coverage or policy number and whether the carrier has an additional umbrella policy. The form also requests that for-hire carriers and carriers of hazardous materials have available for the safety investigator's review a copy of Form MCS-90 or MCS-90B, as appropriate; • Any reports of accidents in the proceeding 365 days; • A description of the type of cargo transported and whether the carrier is a for-hire property carrier, a for-hire passenger carrier, private property carrier or private passenger carrier; • The number of vehicles in the motor carrier's fleet including, if applicable, the number of straight trucks, truck tractors, trailers, hazardous material cargo tank trucks, hazardous material cargo tank trailers, school buses, motor coaches, and number of 9-15 passenger vehicles; • The number of vehicles in its fleet that are owned, leased or trip leased; • The number of interstate or intrastate drivers that operate commercial motor vehicles within a 100 air-mile radius or beyond a 100 air-mile radius; • The number of non-CDL drivers operating commercial motor vehicles within a 150 air-mile radius; • If applicable, the total number of trip leased and CDL drivers it employs per month; • A description of the motor carrier's controlled substances and alcohol testing program for CDL drivers, including the name of any consortium in which it participates and relevant contact persons, addresses, and telephone numbers; • A list of all drivers enrolled in the company's random alcohol and controlled substance testing program and a semi-annual aggregate statistical summary of the motor carrier's alcohol and controlled substance testing results; • The name of the person(s) who hires drivers, oversees driver qualifications, monitors drivers hours-of-service, maintains trip related expense receipts, completes payroll, dispatches, oversees controlled substances testing, is responsible for the motor carrier's vehicle maintenance program, is responsible for maintenance records and is responsible for the motor carrier's accident records. Additional forms set forth below will apply to carriers who transport household goods, hazardous materials and passengers, or are domiciled in Mexico. The forms are listed as Appendices, Forms A-E, respectively. Appendix A (Household Goods Carriers) Requests that carriers who transport household goods provide: • General information including, but not limited to, the location of the motor carrier's sales office(s), the location where it maintains equipment or warehousing facilities and the name and phone number of these locations; • If applicable, the name of prime agents that are not company owned, addresses and telephone number(s) and copies of any written agreements the carrier may have with them; • If the carrier uses brokers, copies of any written agreements with the brokers; • If applicable, information pertaining to the use of public or self-storage facilities the carrier may use to hold shipments that are in transit and the name, address and telephone number of each facility used in the past 12 months; • Information pertaining to the motor carrier's arbitration program, the provider of the program (company name), contact person, date participation in the program began, address of provider, date the program was put into effect, estimating process and its complaint and inquiry processes; • Information regarding tariffs, including name and identifying number of the tariff, the effective date of the tariff, whether the carrier participates in a tariff published by another party, if so, the date participation began and a copy of the motor carrier's tariff and all revisions in effect during the past 12 months; • Information regarding production and distribution to their customers of the publication entitled “Your Rights and Responsibilities When You Move” prior to signing an order for service; and Appendix B (Hazardous Materials Carriers) Requests that a carrier of hazardous materials provide: • A motor carrier's hazardous materials registration number, the class/division of the hazardous material the carrier transports and whether it transports placardable amounts; • If applicable, the specification(s) of the cargo tanks the carrier uses to transport the hazardous material, the name of the facility it uses to inspect the cargo tanks and registration number
(CT)number; • Information pertaining to hazardous materials requiring a Hazardous Material Safety Permit and the permit number; • Information about the motor carrier's security plan, whether the plan includes a written risk assessment and the name of the person in the company responsible for security; • The name of the person(s) providing employees hazardous material training; • Whether the motor carrier's employees have received general awareness training, security awareness training, function specific training or in-depth security training; • A list of all employees that handle hazardous materials, including, but not limited to drivers, loaders, handlers, persons that prepare shipping papers; and • The name of anyone responsible for hazardous materials safety. Appendix C (Passenger Carriers) Requires passenger carriers to identify whether they operate vehicles designed to transport:
(1)Eight
(8)passengers or less (including driver),
(2)nine
(9)to 15 passengers (including the driver[ar3]), or
(3)16 or more passengers (including the driver). The passenger carrier is also asked whether it operates in interstate commerce. Appendix D (Mexico-domiciled Carriers) Requests a Mexico-domiciled carrier to provide: • Information regarding the transportation of interstate cargo during the preceding 12 months and the number of miles traveled in the United States only; • The number of vehicles the carrier operates in commerce in the United States that have a Gross Vehicle Weight or Gross Combination Weight rating under 10,000 pounds, in excess of 10,000 pounds or in excess of 26,000 pounds; • Whether the vehicles are housed in Mexico or the United States and the address of the location they are housed; • Copies of its MX authority and a MCS-90 properly endorsed with required or adequate levels of insurance; • The number of drivers operating in the United States-Mexico border commercial zone and beyond the commercial zone; • Information regarding its process agent(s), including, but not limited to, the contact person, address of process agent, telephone, facsimile or cellular phone numbers and e-mail addresses, if applicable; • For carriers with subsidiaries based in the United States, information regarding these subsidiaries, including, but not limited to, company name, contact person, address of company, telephone, facsimile and cellular numbers; and e-mail addresses. Appendix E (Non-North American Carriers) Requests a Non-North American carrier to[ar4] provide: • Information concerning the transportation of interstate cargo during the preceding 12 months and the number of miles traveled in the United States only; • The number of vehicles the carrier operates in commerce in the United States that have a Gross Vehicle Weight or Gross Combination Weight rating under 10,000 pounds, in excess of 10,000 pounds or in excess of 26,000 pounds; • Whether the vehicles are housed in Mexico or the United States and the address of the location they are housed; • Copies of all operating authorities (MX or other) and a MCS-90 properly endorsed with required or adequate levels of insurance; • Information regarding its process agent(s), including, but not limited to, the contact person, address of process agent, telephone, facsimile or cellular numbers and e-mail address in applicable; and For carriers with subsidiaries based in the United States, information regarding these subsidiaries, including, but not limited to, the contact person, address of process agent, telephone, facsimile or cellular numbers and e-mail address. *Respondents:* United States, Canada-based and Mexico-domiciled motor carriers and Non-North American motor carriers. *Frequency:* On occasion. *Estimated Average Burden per Response:* The burden for the Letter of Confirmation is included in the burden for the Form MCSA-5540, “Carrier Information”. The estimated time to read the Letter of Confirmation and complete the Form MCSA-5540 is 40 minutes, and Appendices A—E: is 20 minutes. *Estimated Total Annual Burden Hours:* 23,384 hours [23,384 respondents x 40 minutes/60 minutes to complete the Letter of Confirmation and Form MCSA-5540 + 23,384 respondents x 20 minutes to/60 minutes complete Appendices A-E = 23,384 hours]. *Public Comments Invited:* You are asked to comment on any aspect of this information collection, including:
(1)Whether the proposed collection is necessary for the FMCSA's performance;
(2)the accuracy of the estimated burden;
(3)ways for the FMCSA to enhance the quality, usefulness, and clarity of the collected information; and
(4)ways that the burden could be minimized without reducing the quality of the collected information. The agency will summarize and/or include your comments in the request for OMB's clearance of this information collection. Issued on: April 6, 2006. Warren E. Hoemann, Deputy Administrator. [FR Doc. E6-5434 Filed 4-11-06; 8:45 am] BILLING CODE 4910-EX-P DEPARTMENT OF THE TREASURY Internal Revenue Service Proposed Collection; Comment Request for Revenue Procedure 2006-1 and Revenue Procedure 2006-3 AGENCY: Internal Revenue Service (IRS), Treasury. ACTION: Notice and request for comments. SUMMARY: The Department of the Treasury, as part of its continuing effort to reduce paperwork and respondent burden, invites the general public and other Federal agencies to take this opportunity to comment on proposed and/or continuing information collections, as required by the Paperwork Reduction Act of 1995, Public Law 104-13 (44 U.S.C. 3506(c)(2)(A)). Currently, the IRS is soliciting comments concerning Revenue Procedure 2006-1, and Revenue Procedure 2006-3, 26 CFR 601.201—Rulings and Determination Letters. DATES: Written comments should be received on or before June 12, 2006 to be assured of consideration. ADDRESSES: Direct all written comments to Glenn P. Kirkland, Internal Revenue Service, room 6411, 1111 Constitution Avenue, NW., Washington, DC 20224. FOR FURTHER INFORMATION CONTACT: Requests for additional information or copies of revenue procedures should be directed to Larnice Mack at Internal Revenue Service, room 6512, 1111 Constitution Avenue, NW., Washington, DC 20224, or at
(202)622-3179, or through the Internet at ( *Larnice.Mack@irs.gov* ). SUPPLEMENTARY INFORMATION: *Title:* 26 CFR 601.201—Rulings and Determination Letters. *OMB Number:* 1545-1522. *Revenue Procedure Number:* Revenue Procedures 2006-1, and 2006-3. *Abstract:* The information requested in these revenue procedures are required to enable the Internal Revenue Service to give advice on filing letter rulings and determination letter requests and to process such requests. *Current Actions:* There are no changes being made to the revenue procedures at this time. *Type of Review:* Extension of a currently approved collection. *Affected Public:* Business or other for-profit organizations, individuals, farms, and Federal, state, local, or tribal governments. *Estimated Number of Respondents:* 3,800. *Estimated Time Per Respondent:* 80 hours, 19 minutes. *Estimated Total Annual Burden Hours:* 305,230. The following paragraph applies to all of the collections of information covered by this notice: An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid OMB control number. Books or records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. Generally, tax returns and tax return information are confidential, as required by 26 U.S.C. 6103. Request for Comments Comments submitted in response to this notice will be summarized and/or included in the request for OMB approval. All comments will become a matter of public record. Comments are invited on:
(a)Whether the collection of information is necessary for the proper performance of the functions of the agency, including whether the information shall have practical utility;
(b)the accuracy of the agency's estimate of the burden of the collection of information;
(c)ways to enhance the quality, utility, and clarity of the information to be collected;
(d)ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology; and
(e)estimates of capital or start-up costs and costs of operation, maintenance, and purchase of services to provide information. Approved: April 5, 2006. Glenn P. Kirkland, IRS Reports Clearance Officer. [FR Doc. E6-5344 Filed 4-11-06; 8:45 am] BILLING CODE 4830-01-P DEPARTMENT OF THE TREASURY Internal Revenue Service Proposed Collection; Comment Request for Form 8594 AGENCY: Internal Revenue Service (IRS), Treasury. ACTION: Notice and request for comments. SUMMARY: The Department of the Treasury, as part of its continuing effort to reduce paperwork and respondent burden, invites the general public and other Federal agencies to take this opportunity to comment on proposed and/or continuing information collections, as required by the Paperwork Reduction Act of 1995, Public Law 104-13 (44 U.S.C. 3506(c)(2)(A)). Currently, the IRS is soliciting comments concerning Form 8594, Asset Acquisition Statement. DATES: Written comments should be received on or before June 12, 2006 to be assured of consideration. ADDRESSES: Direct all written comments to Glenn Kirkland, Internal Revenue Service, room 6516, 1111 Constitution Avenue, NW., Washington, DC 20224. FOR FURTHER INFORMATION CONTACT: Requests for additional information or copies of the form and instructions should be directed to Allan Hopkins, at
(202)622-6665, or at Internal Revenue Service, room 6516, 1111 Constitution Avenue, NW., Washington, DC 20224, or through the Internet, at *Allan.M.Hopkins@irs.gov.* SUPPLEMENTARY INFORMATION: *Title:* Asset Acquisition Statement. *OMB Number:* 1545-1021. *Form Number:* 8594. *Abstract:* Internal Revenue Code section 1060 requires reporting to the IRS by the buyer and seller of the total consideration paid for assets in an applicable asset acquisition. The information required to be reported includes the amount allocated to goodwill or going concern value. Form 8594 is used to report this information. *Current Actions:* There are no changes being made to Form 8594 at this time. *Type of Review:* Extension of a currently approved collection. *Affected Public:* Business or other for-profit organizations and individuals. *Estimated Number of Respondents:* 13,200. *Estimated Time Per Respondent:* 16 hrs., 28 minutes. *Estimated Total Annual Burden Hours:* 217,272 The following paragraph applies to all of the collections of information covered by this notice: An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid OMB control number. Books or records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. Generally, tax returns and tax return information are confidential, as required by 26 U.S.C. 6103. *Request for Comments:* Comments submitted in response to this notice will be summarized and/or included in the request for OMB approval. All comments will become a matter of public record. Comments are invited on:
(a)Whether the collection of information is necessary for the proper performance of the functions of the agency, including whether the information shall have practical utility;
(b)the accuracy of the agency's estimate of the burden of the collection of information;
(c)ways to enhance the quality, utility, and clarity of the information to be collected;
(d)ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology; and
(e)estimates of capital or start-up costs and costs of operation, maintenance, and purchase of services to provide information. Approved: April 6, 2006. Allan Hopkins, IRS Reports Clearance Officer. [FR Doc. E6-5345 Filed 4-11-06; 8:45 am] BILLING CODE 4830-01-P DEPARTMENT OF THE TREASURY Internal Revenue Service Open Meeting of the Small Business/Self Employed—Taxpayer Burden Reduction Committee of the Taxpayer Advocacy Panel AGENCY: Internal Revenue Service
(IRS)Treasury. ACTION: Notice. SUMMARY: An open meeting of the Small Business/Self Employed—Taxpayer Burden Reduction Committee of the Taxpayer Advocacy Panel will be conducted (via teleconference). The TAP will be discussing issues pertaining to increasing compliance and lessening the burden for Small Business/Self Employed individuals. DATES: The meeting will be held Tuesday, May 2, 2006. FOR FURTHER INFORMATION CONTACT: Marisa Knispel at 1-888-912-1227 or 718-488-3557. SUPPLEMENTARY INFORMATION: Notice is hereby given pursuant to Section 10(a)(2) of the Federal Advisory Committee Act, 5 U.S.C. App.
(1988)that an open meeting of the Small Business/Self Employed—Taxpayer Burden Reduction Committee of the Taxpayer Advocacy Panel will be held Tuesday, May 2, 2006 from 3:30 p.m. ET to 4:30 p.m. ET via a telephone conference call. If you would like to have the TAP consider a written statement, please call 1-888-912-1227 or 718-488-3557, or write to Marisa Knispel, TAP Office, 10 Metro Tech Center, 625 Fulton Street, Brooklyn, NY 11201. Due to limited conference lines, notification of intent to participate in the telephone conference call meeting must be made with Marisa Knispel. Ms. Knispel can be reached at 1-888-912-1227 or 718-488-3557, or post comments to the Web site: *http://www.improveirs.org* . The agenda will include the following: Various IRS issues. Dated: April 5, 2006. Bernard E. Coston, Director, Taxpayer Advocacy Panel. [FR Doc. E6-5346 Filed 4-11-06; 8:45 am] BILLING CODE 4830-01-P DEPARTMENT OF THE TREASURY Internal Revenue Service Open Meeting of the Taxpayer Assistance Center Committee of the Taxpayer Advocacy Panel AGENCY: Internal Revenue Service
(IRS)Treasury. ACTION: Notice. SUMMARY: An open meeting of the Taxpayer Assistance Center Committee of the Taxpayer Advocacy Panel will be conducted in Denver, Colorado. The Taxpayer Advocacy Panel
(TAP)is soliciting public comments, ideas, and suggestions on improving customer service at the Internal Revenue Service. DATES: The meeting will be held Thursday, May 4, 2006, Friday, May 5, 2006 and Saturday, May 6, 2006. FOR FURTHER INFORMATION CONTACT: Dave Coffman at 1-888-912-1227, or 206-220-6096. SUPPLEMENTARY INFORMATION: Notice is hereby given pursuant to Section 10(a)(2) of the Federal Advisory Committee Act, 5 U.S.C. App.
(1988)that an open meeting of the Taxpayer Assistance Center Committee of the Taxpayer Advocacy Panel will be held Thursday, May 4, 2006 from 1 p.m. Mountain Time to 4:30 p.m. Mountain Time; Friday, May 5, 2006 from 8:30 a.m. Mountain Time to 4:30 p.m. Mountain Time; and Saturday, May 6, 2006 from 8:30 a.m. Mountain Time to 11:30 a.m. Mountain Time at 1672 Lawrence Street, Denver, Colorado. If you would like to have the TAP consider a written statement, please call 1-888-912-1227 or 206-220-6096, or write to Dave Coffman, TAP Office, 915 2nd Avenue, MS W-406, Seattle, WA 98174 or you can contact us at *http://www.improveirs.org.* Due to limited space, notification of intent to participate in the meeting must be made with Dave Coffman. Mr. Coffman can be reached at 1-888-912-1227 or 206-220-6096. The agenda will include the following: Various IRS issues. Dated: April 5, 2006. Bernard Coston, Director, Taxpayer Advocacy Panel. [FR Doc. E6-5347 Filed 4-11-06; 8:45 am] BILLING CODE 4830-01-P DEPARTMENT OF THE TREASURY Office of Thrift Supervision [No. 2006-17] Community Reinvestment Act; Questions and Answers Regarding Community Reinvestment; Notice AGENCY: Office of Thrift Supervision (OTS). ACTION: Notice and request for comment. SUMMARY: This proposal would revise OTS guidance relating to the Community Reinvestment Act (CRA). Accompanying this proposal and published in the Rules and Regulations portion of today's **Federal Register** , is a Final Rule revising the definition of “community development” in OTS's CRA rule. This proposal addresses topics related to that Final Rule among others. Public comment is invited on the proposed guidance, as well as any other community reinvestment issues. DATE: Comments on the proposed questions and answers are requested by June 12, 2006. ADDRESSES: You may submit comments, identified by No. 2006-17, by any of the following methods: • Federal eRulemaking Portal: *http://www.regulations.gov.* Follow the instructions for submitting comments. • E-mail address: *regs.comments@ots.treas.gov.* Please include No. 2006-17 in the subject line of the message and include your name and telephone number in the message. • Fax:
(202)906-6518. • Mail: Regulation Comments, Chief Counsel's Office, Office of Thrift Supervision, 1700 G Street, NW., Washington, DC 20552, Attention: No. 2006-17. • Hand Delivery/Courier: Guard's Desk, East Lobby Entrance, 1700 G Street, NW., from 9 a.m. to 4 p.m. on business days, Attention: Regulation Comments, Chief Counsel's Office, Attention: No. 2006-17. *Instructions:* All submissions received must include the agency name and docket number for this rulemaking. All comments received will be posted without change to the OTS Internet Site at *http://www.ots.treas.gov/pagehtml.cfm?catNumber=67&an=1,* including any personal information provided. *Docket:* For access to the docket to read background documents or comments received, go to *http://www.ots.treas.gov/pagehtml.cfm?catNumber=67&an=1.* In addition, you may inspect comments at the Public Reading Room, 1700 G Street, NW., by appointment. To make an appointment for access, call
(202)906-5922, send an e-mail to *public.info@ots.treas.gov,* or send a facsimile transmission to
(202)906-7755. (Prior notice identifying the materials you will be requesting will assist us in serving you.) We schedule appointments on business days between 10 a.m. and 4 p.m. In most cases, appointments will be available the next business day following the date we receive a request. FOR FURTHER INFORMATION CONTACT: Celeste Anderson, Senior Program Manager, Operation Risk,
(202)906-7990; Richard Bennett, Counsel, Regulations and Legislation Division,
(202)906-7409, Office of Thrift Supervision, 1700 G Street, NW., Washington, DC 20552. SUPPLEMENTARY INFORMATION: I. Background Elsewhere in today's **Federal Register** , OTS is publishing a final rule revising its CRA rule effective immediately. That final rule revises the definition of “community development” to include activities to revitalize and stabilize distressed or underserved, nonmetropolitan middle-income areas and designated disaster areas. It also makes a technical change to the lettering of the definitions in the CRA rule to conform to that used in the CRA rules of the other Federal banking agencies. To help savings associations meet their responsibilities under the CRA and to increase public understanding of the CRA regulations, OTS, the Office of the Comptroller of the Currency (OCC), the Board of Governors of the Federal Reserve (Board), and the Federal Deposit Insurance Corporation
(FDIC)have previously published guidance in the form of questions and answers about the CRA regulations. That guidance is intended to provide the informal views of agency staff for use by examiners and other agency personnel, financial institutions, and the public, and is supplemented periodically. *See* Interagency Questions and Answers Regarding Community Reinvestment, 66 FR 36620 (July 12, 2001) (2001 Interagency Q&As). Today, OTS is issuing proposed questions and answers to provide additional guidance for savings associations. All of this additional proposed guidance is substantively identical to final guidance jointly issued by the OCC, Board, and FDIC on March 10, 2006 (71 FR 12424). However, OTS's proposal only includes questions and answers that pertain to its revised definition of “community development” and certain other provisions of the CRA rule that are common to all four agencies. It does not include questions and answers that pertain to additional revisions the OCC, Board, and FDIC made to their CRA rules in their August 2, 2005 rulemaking (70 FR 44256), since OTS has not adopted those revisions to date. Just as in the 2001 Interagency Q&As, the proposed questions and answers are grouped by the provision of the CRA regulations that they discuss and are presented in the same order as the regulatory provisions. As a result of technical changes made to the four federal banking agencies' CRA rules (70 FR 15570 (March 28, 2005)) and the recent revisions, some of the numbering in the 2001 Interagency Q&As no longer corresponds to the appropriate sections of the revised regulation. However, in the proposed questions and answers, if a reference is made to an existing question and answer, the number of the existing question and answer, as published in the 2001 Interagency Q&As, is given, even if the old reference does not accurately describe the current provision in the regulations. When the proposed questions and answers are adopted as final and the rest of the questions and answers are updated, the references in the questions and answers will be updated. II. Proposed New Questions and Answers OTS believes new questions and answers addressing its CRA regulation would be helpful. Therefore, it is publishing for comment ten new questions and answers. A. New Questions and Answers on Revised “Community Development” Definition Of the ten proposed new questions and answers, eight address the revised definition of “community development,” which includes activities that revitalize or stabilize a distressed or underserved, nonmetropolitan middle-income geography or a designated disaster area. Each of these questions and answers is discussed in the order that it appears in the text of OTS's proposed revisions. 1. *Is the same definition of community development applicable to all savings associations? (§ 563e.12(g)(4)-1)* The proposed guidance clarifies that the same definition of “community development,” which OTS is revising today, applies to all savings associations. OTS's proposed guidance is worded somewhat differently from that used by the other federal banking agencies. The question that the other federal banking agencies used is, “Is the revised definition of community development, effective September 1, 2005, applicable to all banks or only to intermediate small banks?” OTS's revised definition becomes effective today, not September 1, 2005. Also, OTS has not, to date, adopted the intermediate small bank test and thus does not use that term. Further, OTS is concerned that using the term “revised” when referring to the definition of community development will cause confusion in future years once the revisions are no longer new. Instead, OTS focuses the question and answer on whether the same definition of community development applies to all savings associations. 2. *Will activities that provide housing for middle-income and upper-income persons qualify for favorable consideration as community development activities when they help to revitalize or stabilize a distressed or underserved, nonmetropolitan middle-income geography or designated disaster areas? (§ 563e.12(g)(4)-2)* The proposed guidance clarifies that an activity that provides housing for middle-or upper-income individuals qualifies as an activity that revitalizes or stabilizes a distressed nonmetropolitan middle-income geography or a designated disaster area if the housing directly helps to revitalize or stabilize the community by attracting new, or retaining existing, businesses or residents and, in the case of a designated disaster area, is related to disaster recovery. OTS generally will consider all activities that revitalize or stabilize a distressed nonmetropolitan middle-income geography or designated disaster area, but will give greater weight to those activities that are most responsive to community needs, including needs of low-or moderate-income individuals or neighborhoods. For example, a loan solely for middle-or upper-income housing in a community in need of financing for low- and moderate-income housing would be given very little weight if there is only a short-term benefit to low- and moderate-income individuals in the community through the creation of temporary construction jobs. OTS will presume that an activity revitalizes or stabilizes such a geography or area if the activity is consistent with a bona fide government revitalization or stabilization plan or disaster recovery plan. 3. *What is a “designated disaster area” and how long does the designation last? (§ 563e.12(g)(4)(ii)-1)* The proposed guidance explains that the term “designated disaster area” refers to federally designated disaster areas. State disasters or emergencies are usually declared as a prerequisite for Federal disaster assistance. Thus, restricting the term to federally designated disaster areas would not appear to meaningfully limit the scope of that term. Some Federal disaster area designations are solely for the purpose of providing short-term public assistance to address debris removal or emergency protective measures immediately following an incident—specifically, Federal Emergency Management Agency
(FEMA)Public Assistance Emergency Work Category A (Debris Removal) and Category B (Emergency Protective Measures). OTS believes that designations for these purposes may not exhibit the type of conditions that would require sustained disaster recovery-related revitalization or stabilization activities. Therefore, the proposed guidance states that a “designated disaster area” is a major disaster area designated by the Federal government. Such disaster designations include, in particular, Major Disaster Declarations administered by FEMA, but exclude counties designated to receive only FEMA Public Assistance Emergency Work Category A (Debris Removal) and/or Category B (Emergency Protective Measures). Although FEMA makes a public announcement of a disaster designation, FEMA generally does not announce an expiration of the disaster designation. Nor do its regulations provide for the designation's expiration. FEMA's regulations and practices entail different stages relevant to a disaster designation period, such as the incident period, the application period, the work completion deadlines, and the period that a joint field office is open, but these periods may vary from incident to incident, and may not be relevant to all designated disasters. FEMA's regulations establish a requirement that permanent public assistance work relating to a major disaster must be completed within 18 months of the disaster designation (44 CFR 206.204(c)) unless FEMA grants an extension. Accordingly, the proposed guidance states that OTS will consider disaster recovery-related activities that help to revitalize or stabilize a designated disaster area for 36 months following the date of designation by the Federal government. OTS proposes providing a uniform 36-month period following disaster designation to provide an adequate time period to address the variety of community revitalization or stabilization needs that may arise depending on the nature, extent, and severity of the particular disaster. Where there is a demonstrable community need to extend the period for recognizing revitalization or stabilization activities in a particular disaster area to assist in long-term recovery efforts, this time period could be extended. Finally, OTS would plan to extend substantially the time periods for recovery-related activities in the Gulf Coast areas designated as disaster areas because of Hurricanes Katrina and Rita. The extension beyond 36 months from the dates of the disaster designations would be because of the demonstrated community need for long-term involvement by financial institutions in helping to address the widespread devastation caused by these hurricanes. 4. *What activities are considered to “revitalize or stabilize” a designated disaster area, and how are those activities considered? (§ 563e.12(g)(4)(ii)-2)* The proposed guidance states that OTS generally will consider an activity to revitalize or stabilize a designated disaster area if it helps to attract new, or retain existing, businesses or residents and is related to disaster recovery. An activity will be presumed to revitalize or stabilize the area if the activity is consistent with a *bona fide* government revitalization and stabilization plan or disaster recovery plan. OTS generally will consider all activities related to disaster recovery that revitalize or stabilize a designated disaster area, but will give greater weight to those activities that are most responsive to community needs, including needs of low-or moderate-income individuals or neighborhoods. The proposed guidance provides several examples of activities that will be considered to revitalize or stabilize a designated disaster area. Qualifying activities may include, for example, providing financing to help retain businesses in the area that employ local residents, including low- and moderate-income individuals; providing financing to attract a major new employer that will create long-term job opportunities, including for low- and moderate-income individuals; activities that provide financing or other assistance for essential community-wide infrastructure, community services, and rebuilding needs; and activities that provide housing, financial assistance, and services to individuals in designated disaster areas and to individuals who have been displaced from those areas, including low- and moderate-income individuals. 5. *What criteria are used to identify distressed or underserved, nonmetropolitan middle-income geographies? (§ 563e.12(g)(4)(iii)-1)* The proposed guidance explains the criteria OTS will use to designate nonmetropolitan middle-income geographies that are distressed or underserved. Data source information along with the list of designated census tracts is published on the Federal Financial Institutions Examination Council (FFIEC) Web site ( *http://www.ffiec.gov* ). 6. *How often will the list of designated distressed or underserved, nonmetropolitan middle-income geographies be updated? (§ 563e.12(g)(4)(iii)-2* ) The proposed guidance states that the list of designated distressed or underserved nonmetropolitan middle-income geographies will be updated annually and will be published on the FFIEC Web site ( *http://www.ffiec.gov* ). It also proposes a twelve-month lag period immediately after a census tract is reclassified as no longer distressed or underserved. During the lag period, revitalization and stabilization activities will receive consideration as community development if the activities would have been considered to have a primary purpose of community development if the census tract in which they were located were still designated as distressed or underserved. The list will be updated annually based on annual changes in source data and published continuously on the FFIEC Web site. The list will indicate which designated census tracts are in their lag periods. OTS's proposed guidance contains an editorial, nonsubstantive difference from the final guidance of the other federal banking agencies. Whereas the other agencies use the terms “twelve-month” and “one year” interchangeably when referring to the duration of the lag period, OTS uses the term “twelve-month” throughout for consistency. 7. *What activities are considered to “revitalize or stabilize” a distressed nonmetropolitan middle-income geography, and how are those activities evaluated? (§ 563e.12(g)(4)(iii)-3* ) The proposed guidance explains how revitalization and stabilization activities in designated distressed nonmetropolitan middle-income geographies will be evaluated. It is consistent with the similar proposed guidance applicable to savings associations' revitalization and stabilization activities in designated disaster areas. *See* proposed Q&A § 563e.12(g)(4)(ii)-2. The proposed guidance specifically states that examiners will give greater weight to those activities that are most responsive to community needs, including the needs of low-or moderate-income individuals or neighborhoods. 8. *What activities are considered to “revitalize or stabilize” an underserved nonmetropolitan middle-income geography, and how are those activities evaluated? (§ 563e.12(g)(4)(iii)-4)* The proposed guidance includes a restatement of the standard that appears in the regulations, that is, that activities revitalize or stabilize an underserved nonmetropolitan middle-income geography if they help to meet essential community needs, including the needs of low-or moderate-income individuals. Activities such as financing for the construction, expansion, improvement, maintenance, or operation of essential infrastructure or facilities for health services, education, public safety, public services, industrial parks, or affordable housing, will be evaluated under these criteria to determine if they qualify for revitalization or stabilization consideration. B. Other New Questions and Answers Two new questions and answers address consideration of prior-period qualified investments and treatment of small savings associations' affiliates' activities. Each of these questions and answers is discussed in the order that it appears in the text of OTS's proposed revisions. 1. *When evaluating a qualified investment, what consideration will be given for prior-period investments? (§ 563e.12(t)-1)* The proposed guidance would explain that examiners consider qualified investments that were made during the prior evaluation period but that are still outstanding during the current evaluation period. This guidance would apply to savings associations of all sizes. Qualitative factors affect the weight given to both current period and outstanding prior-period qualified investments. Although prior-period investments may receive consideration in a savings association's current evaluation, examiners typically distinguish between current-period and prior-period investments when listing the amounts of a savings association's investments in the institution's performance evaluation. Further, examiners use qualitative factors to determine how much consideration a savings association receives for any given qualified investment. Greater weight is given to investments that are responsive to community needs, innovative, or complex. 2. *When evaluating a small savings association's performance, will examiners consider, at the institution's request, retail and community development loans originated or purchased by affiliates, qualified investments made by affiliates, or community development services provided by affiliates? (§ 563e.26-1)* The proposed guidance would clarify that any small savings association may request that activities of an affiliate in the small savings association's assessment area(s) be considered in its performance evaluation. Those activities will be considered in the small savings association's performance evaluation subject to the same constraints that apply to large institutions' affiliate activities, including that the activities have not also been considered in the CRA evaluation of another institution. OTS's proposed question is worded differently from the comparable question in the other federal banking agencies' final guidance. Their question refers to a “small or intermediate small bank's performance.” Since OTS has not, to date, adopted the intermediate small bank test, OTS's proposed question does not use that term. III. Revisions to Existing Guidance Proposed revisions to two existing questions and answers would address community development services and qualified investments. Each of these questions and answers is discussed in the order that it appears in the text of OTS's proposed revisions. A. *What are examples of community development services? (§ 563e.12(i)-3)* The proposed guidance would revise the existing guidance from the 2001 Interagency Q&As (§ 563e.12(i)-3), which lists examples of community development services, to add two new examples. The first new example would state that providing financial services to low-or moderate-income individuals through branches and other facilities in low-or moderate-income areas is a community development service (unless the provision of such services has been considered in the evaluation of a savings association's retail banking services under § __.24(d)). The second new example of a community development service would be providing international remittance services that increase access to financial services by low- and moderate-income persons (for example, by offering reasonably priced international remittance services in connection with a low-cost account). This example is consistent with guidance the four federal banking agencies previously provided in a letter responding to a question from a member of Congress. B. *What are examples of qualified investments? (§ 563e.12(t)-4)* The proposed revision would change a bullet to the existing guidance from the 2001 Interagency Q&As that provides examples of qualified investments (§ 563e.12(r)-4). The revised bullet would indicate that an example of a qualified investment includes savings associations' investments in Rural Business Investment Companies (RBICs). The Rural Business Investment Program (RBIP), which is a joint initiative between the U.S. Small Business Administration and the U.S. Department of Agriculture, is intended to promote economic development by financing small businesses located primarily in rural areas. OTS reminds savings associations that they may establish and invest in RBICs or entities established to invest solely in RBICs so long as those investments do not exceed five percent of the capital and surplus of the association. 7 U.S.C. 2009cc-9. IV. General Comments Public comment is invited on the proposed new and revised questions and answers. Public comment is also invited on a continuing basis on any issues raised by the CRA and the Interagency Q&As. If, after reading this proposed guidance and the existing Interagency Q&As, financial institutions, examiners, community organizations, or other interested parties have unanswered questions or comments about OTS's community reinvestment regulations, they should submit them to OTS. OTS will consider addressing such questions in future guidance. Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA) Section 212 of SBREFA, 5 U.S.C. 601 note, requires for each rule for which an agency prepares a final regulatory flexibility analysis, that the agency publish one or more compliance guides to help small entities understand how to comply with the rule. Pursuant to section 605(b) of the Regulatory Flexibility Act, OTS certified that its proposed CRA rule would not have a significant economic impact on a substantial number of small entities. 69 FR 68257, 68265 (November 24, 2004). Likewise, OTS certified that its final rule published in today's **Federal Register** would not have a significant impact on a substantial number of small entities. Nonetheless, as part of OTS's continuing efforts to provide clear, understandable regulations, the four Federal banking agencies have compiled the Interagency Q&As and OTS has compiled these proposed revisions. These materials serve the same purpose as the compliance guide described in the SBREFA by providing guidance on a variety of issues of particular concern to small institutions. The text of OTS's proposed revisions to the Interagency Questions and Answers Regarding Community Reinvestment follows: Section 563e.12(g)(4) Activities That Revitalize or Stabilize Section 563e.12(g)(4)—1: Is the same definition of community development applicable to all savings associations? Yes, one definition of community development is applicable to all savings associations. Section 563e.12(g)(4)—2: Will activities that provide housing for middle-income and upper-income persons qualify for favorable consideration as community development activities when they help to revitalize or stabilize a distressed or underserved, nonmetropolitan middle-income geography or designated disaster areas? An activity that provides housing for middle-or upper-income individuals qualifies as an activity that revitalizes or stabilizes a distressed nonmetropolitan middle-income geography or a designated disaster area if the housing directly helps to revitalize or stabilize the community by attracting new, or retaining existing, businesses or residents and, in the case of a designated disaster area, is related to disaster recovery. OTS generally will consider all activities that revitalize or stabilize a distressed nonmetropolitan middle-income geography or designated disaster area, but will give greater weight to those activities that are most responsive to community needs, including needs of low-or moderate-income individuals or neighborhoods. For example, a loan solely to develop middle-or upper-income housing in a community in need of low- and moderate-income housing would be given very little weight if there is only a short-term benefit to low- and moderate-income individuals in the community through the creation of temporary construction jobs. (A housing-related loan is not evaluated as a “community development loan” if it has been reported or collected by the institution or its affiliate as a home mortgage loan, unless it is a multifamily dwelling loan. *See* 12 CFR 563e.12(h)(2)(i) and Q&A §§ __.12(i) & 563e.12(h)—2.) OTS will presume that an activity revitalizes or stabilizes such a geography or area if the activity is consistent with a bona fide government revitalization or stabilization plan or disaster recovery plan. *See* Q&As §§ __.12(h)(4) & 563e.12(g)(4)—1 and §§ __.12(i) & 563e.12(h)'4. In *underserved* nonmetropolitan middle-income geographies, activities that provide housing for middle- and upper-income individuals may qualify as activities that revitalize or stabilize such underserved areas if the activities also provide housing for low-or moderate-income individuals. For example, a loan to build a mixed-income housing development that provides housing for middle- and upper-income individuals in an underserved nonmetropolitan middle-income geography would receive positive consideration if it also provides housing for low-or moderate-income individuals. Section 563e.12(g)(4)(ii) Activities That Revitalize or Stabilize Designated Disaster Areas Section 563e.12(g)(4)(ii)—1: What is a “designated disaster area” and how long does the designation last? A “designated disaster area” is a major disaster area designated by the Federal Government. Such disaster designations include, in particular, Major Disaster Declarations administered by the Federal Emergency Management Agency
(FEMA)( *http://www.fema.gov* ), but exclude counties designated to receive only FEMA Public Assistance Emergency Work Category A (Debris Removal) and/or Category B (Emergency Protective Measures). Examiners will consider savings association activities related to disaster recovery that revitalize or stabilize a designated disaster area for 36 months following the date of designation. Where there is a demonstrable community need to extend the period for recognizing revitalization or stabilization activities in a particular disaster area to assist in long-term recovery efforts, this period may be extended. Section 563e.12(g)(4)(ii)—2: What activities are considered to “revitalize or stabilize” a designated disaster area, and how are those activities considered? OTS generally will consider an activity to revitalize or stabilize a designated disaster area if it helps to attract new, or retain existing, businesses or residents and is related to disaster recovery. An activity will be presumed to revitalize or stabilize the area if the activity is consistent with a *bona fide* government revitalization or stabilization plan or disaster recovery plan. OTS generally will consider all activities relating to disaster recovery that revitalize or stabilize a designated disaster area, but will give greater weight to those activities that are most responsive to community needs, including the needs of low-or moderate-income individuals or neighborhoods. Qualifying activities may include, for example, providing financing to help retain businesses in the area that employs local residents, including low- and moderate-income individuals; providing financing to attract a major new employer that will create long-term job opportunities, including for low- and moderate-income individuals; providing financing or other assistance for essential community-wide infrastructure, community services, and rebuilding needs; and activities that provide housing, financial assistance, and services to individuals in designated disaster areas and to individuals who have been displaced from those areas, including low- and moderate-income individuals (see, e.g., Q&As §§ __.12(j) & 563e.12(i)” 3; §§ __.12(s) & 563e.12(r)'4; § __.22(b)(2) &(3)—4; § __.22(b)(2) &(3)—5; and § __.24(d)(3)—1). Section 563e.12(g)(4)(iii) Activities That Revitalize or Stabilize Distressed or Underserved, Nonmetropolitan Middle-income Geographies Section 563e.12(g)(4)(iii)—1: What criteria are used to identify distressed or underserved, nonmetropolitan middle-income geographies? Eligible nonmetropolitan middle-income geographies are those designated by OTS as being in distress or that could have difficulty meeting essential community needs (underserved). A particular geography could be designated as both distressed and underserved. As defined in § 563e.12(k), a geography is a census tract delineated by the United States Bureau of the Census. A nonmetropolitan middle-income geography will be designated as distressed if it is in a county that meets one or more of the following triggers:
(1)An unemployment rate of at least 1.5 times the national average,
(2)a poverty rate of 20 percent or more, or
(3)a population loss of ten percent or more between the previous and most recent decennial census or a net migration loss of five percent or more over the five-year period preceding the most recent census. A nonmetropolitan middle-income geography will be designated as underserved if it meets criteria for population size, density, and dispersion that indicate the area's population is sufficiently small, thin, and distant from a population center that the tract is likely to have difficulty financing the fixed costs of meeting essential community needs. OTS will use as the basis for these designations the “urban influence codes,” numbered “7,” “10,” “11,” and “12,” maintained by the Economic Research Service of the United States Department of Agriculture. Data source information along with the list of eligible nonmetropolitan census tracts will be published on the Federal Financial Institutions Examination Council Web site ( *http://www.ffiec.gov* ). Section 563e.12(g)(4)(iii)—2: How often will the list of designated distressed or underserved, nonmetropolitan middle-income geographies be updated? The list will be reviewed and updated annually, as needed. The list will be published on the Federal Financial Institutions Examination Council Web site ( *http://www.ffiec.gov* ). To the extent that changes to the designated census tracts occur, OTS has determined to adopt a twelve-month lag period. This lag period will be in effect for the twelve months immediately following the date when a census tract that was designated as distressed or underserved is removed from the designated list. Revitalization or stabilization activities undertaken during the lag period will receive consideration as community development activities if they would have been considered to have a primary purpose of community development if the census tract in which they were located were still designated as distressed or underserved. Section 563e.12(g)(4)(iii)—3: What activities are considered to “revitalize or stabilize” a distressed nonmetropolitan middle-income geography, and how are those activities evaluated? An activity revitalizes or stabilizes a distressed nonmetropolitan middle-income geography if it helps to attract new, or retain existing, businesses or residents. An activity will be presumed to revitalize or stabilize the area if the activity is consistent with a *bona fide* government revitalization or stabilization plan. OTS generally will consider all activities that revitalize or stabilize a distressed nonmetropolitan middle-income geography, but will give greater weight to those activities that are most responsive to community needs, including needs of low-or moderate-income individuals or neighborhoods. Qualifying activities may include, for example, providing financing to attract a major new employer that will create long-term job opportunities, including for low- and moderate-income individuals, and activities that provide financing or other assistance for essential infrastructure or facilities necessary to attract or retain businesses or residents. *See* Q&As §§ __.12(h)(4) & 563e.12(g)(4)—1 and §§ __.12(i) & 563e.12(h)—4. Section 563e.12(g)(4)(iii)—4: What activities are considered to “revitalize or stabilize” an underserved nonmetropolitan middle-income geography, and how are those activities evaluated? The regulation provides that activities revitalize or stabilize an underserved nonmetropolitan middle-income geography if they help to meet essential community needs, including needs of low-or moderate-income individuals. Activities such as financing for the construction, expansion, improvement, maintenance, or operation of essential infrastructure or facilities for health services, education, public safety, public services, industrial parks, or affordable housing, will be evaluated under these criteria to determine if they qualify for revitalization or stabilization consideration. Examples of the types of projects that qualify as meeting essential community needs, including needs of low-or moderate-income individuals, would be a new or expanded hospital that serves the entire county, including low- and moderate-income residents; an industrial park for businesses whose employees include low-or moderate-income individuals; a new or rehabilitated sewer line that serves community residents, including low-or moderate-income residents; a mixed-income housing development that includes affordable housing for low- and moderate-income families; or a renovated elementary school that serves children from the community, including children from low- and moderate-income families. Other activities in the area, such as financing a project to build a sewer line spur that connects services to a middle-or upper-income housing development while bypassing a low-or moderate-income development that also needs the sewer services, generally would not qualify for revitalization or stabilization consideration in geographies designated as underserved. However, if an underserved geography is also designated as distressed or a disaster area, additional activities may be considered to revitalize or stabilize the geography, as explained in Q&As §§ 563e.12(g)(4)(ii)—2 and 563e.12(g)(4)(iii)—3. Section 563e.12(i) Community Development Service § 563e.12(i)—3: What are examples of community development services? [ *proposed revision to existing answer]:* Examples of community development services include, but are not limited to, the following: • Providing financial services to low- and moderate-income individuals through branches and other facilities located in low- and moderate-income areas, unless the provision of such services has been considered in the evaluation of a saving association's retail banking services under § 563e.24(d); • Providing technical assistance on financial matters to nonprofit, tribal or government organizations serving low- and moderate-income housing or economic revitalization and development needs; • Providing technical assistance on financial matters to small businesses or community development organizations, including organizations and individuals who apply for loans or grants under the Federal Home Loan Banks' Affordable Housing Program; • Lending employees to provide financial services for organizations facilitating affordable housing construction and rehabilitation or development of affordable housing; • Providing credit counseling, home-buyer and home-maintenance counseling, financial planning or other financial services education to promote community development and affordable housing; • Establishing school savings programs and developing or teaching financial education curricula for low-or moderate-income individuals; • Providing electronic benefits transfer and point of sale terminal systems to improve access to financial services, such as by decreasing costs, for low-or moderate-income individuals; • Providing international remittance services that increase access to financial services by low- and moderate-income persons (for example, by offering reasonably priced international remittance services in connection with a low-cost account); and • Providing other financial services with the primary purpose of community development, such as low-cost bank accounts, including “Electronic Transfer Accounts” provided pursuant to the Debt Collection Improvement Act of 1996, or free government check cashing that increases access to financial services for low-or moderate-income individuals. Examples of technical assistance activities that might be provided to community development organizations include: • Serving on a loan review committee; • Developing loan application and underwriting standards; • Developing loan processing systems; • Developing secondary market vehicles or programs; • Assisting in marketing financial services, including development of advertising and promotions, publications, workshops and conferences; • Furnishing financial services training for staff and management; • Contributing accounting/bookkeeping services; and • Assisting in fund raising, including soliciting or arranging investments. Section 563e.12(t) Qualified Investment Section 563e.12(t)—1: When evaluating a qualified investment, what consideration will be given for prior-period investments? When evaluating a savings association's qualified investment record, examiners will consider investments that were made prior to the current examination, but that are still outstanding. Qualitative factors will affect the weighting given to both current period and outstanding prior-period qualified investments. For example, a prior-period outstanding investment with a multi-year impact that addresses assessment area community development needs may receive more consideration than a current period investment of a comparable amount that is less responsive to area community development needs. Section 563e.12(t)—4: What are examples of qualified investments? *[proposed revision to existing answer]:* Examples of qualified investments include, but are not limited to, investments, grants, deposits, or shares in or to: • Financial intermediaries (including, Community Development Financial Institutions (CDFIs), Community Development Corporations (CDCs), minority- and women-owned financial institutions, community loan funds, and low-income or community development credit unions) that primarily lend or facilitate lending in low-or moderate-income areas or to low- and moderate-income individuals in order to promote community development, such as a CDFI that promotes economic development on an Indian reservation; • Organizations engaged in affordable housing rehabilitation and construction, including multifamily rental housing; • Organizations, including for example, Small Business Investment Companies (SBICs), specialized SBICs, and Rural Business Investment Companies (RBICs), that promote economic development by financing small businesses or small farms; • Facilities that promote community development in low- and moderate-income areas for low- and moderate-income individuals, such as youth programs, homeless centers, soup kitchens, health care facilities, battered women's centers, and alcohol and drug recovery centers; • Projects eligible for low-income housing tax credits; • State and municipal obligations, such as revenue bonds, that specifically support affordable housing or other community development; • Not-for-profit organizations serving low- and moderate-income housing or other community development needs, such as counseling for credit, home-ownership, home maintenance, and other financial services education; and • Organizations supporting activities essential to the capacity of low- and moderate-income individuals or geographies to utilize credit or to sustain economic development, such as, for example, day care operations and job training programs that enable people to work. Section 563e.26 Small Savings Association Performance Standards Section 563e.26—1: When evaluating a small savings association's performance, will examiners consider, at the institution's request, retail and community development loans originated or purchased by affiliates, qualified investments of affiliates, or community development services of affiliates? Yes. However, a small institution that elects to have examiners consider affiliate activities must maintain sufficient information that the examiners may evaluate these activities under the appropriate performance criteria and ensure that the activities are not claimed by another institution. The constraints applicable to affiliate activities claimed by large institutions also apply to small institutions. *See* Q&A § __.22(c)(2) and related guidance provided to large institutions regarding affiliate activities. Examiners will not include affiliate lending in calculating the percentage of loans and, as appropriate, other lending-related activities located in a savings association's assessment area. This concludes the text of OTS's proposed revisions to the Interagency Questions and Answers Regarding Community Reinvestment. Dated: March 31, 2006. By the Office of Thrift Supervision. John M. Reich, Director. [FR Doc. 06-3471 Filed 4-11-06; 8:45 am]
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