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Code · REGISTER · 2006-04-28 · SECURITIES AND EXCHANGE COMMISSION · Notices

Notices. Notice of meeting

30,250 words·~138 min read·/register/2006/04/28/06-4020·

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BILLING CODE 3190-W6-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-53701; File No. SR-Amex-2006-30] Self-Regulatory Organizations; American Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change and Amendment No. 2 Thereto Relating to the Suspension of Transaction Charges for Specialist Orders in the Nasdaq-100 Tracking Stock®
(QQQQ)April 21, 2006. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) 1 and Rule 19b-4 thereunder, 2 notice is hereby given that on April 6, 2006, the American Stock Exchange LLC (“Amex” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I, II, and III below, which items have been prepared by Amex. The Exchange filed Amendment No. 1 on April 13, 2006, and withdrew Amendment No. 1 on April 18, 2006. On April 18, 2006, the Exchange filed Amendment No. 2 to the proposed rule change. 3 Amex has designated the proposed rule change as establishing or changing a due, fee, or other charge imposed by the Exchange pursuant to Section 19(b)(3)(A)(ii) of the Act 4 and Rule 19b-4(f)(2) thereunder, 5 which renders the proposal effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change, as amended, from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 In Amendment No. 2, the Exchange revised its statutory basis section, made a minor revision to its purpose section, and added a citation to its purpose section. 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 the Amex Exchange Traded Funds and Trust Issued Receipts Fee Schedule (the “ETF Fee Schedule”) to suspend transaction charges for specialist orders in connection with the trading of the Nasdaq-100 Index Tracking Stock® (Symbol: QQQQ) from April 6, 2006 through June 30, 2006. The text of the proposed rule change, as amended, is available on Amex's Web site ( *http://www.amex.com* ), at Amex's principal office, and from 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 Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange is proposing to suspend transaction charges for specialist orders in the QQQQ from April 6, 2006 through June 30, 2006. The previous suspension of specialist transaction charges in the QQQQ terminated on December 31, 2005. Specialist orders currently are charged $0.0034 ($0.34 per 100 shares), capped at $300 per trade (88,235 shares). Effective December 1, 2004, the Nasdaq-100 Index Tracking Stock® (formerly “QQQ”) transferred its listing from Amex to The Nasdaq Stock Market, Inc. (“Nasdaq”). It now trades on Nasdaq under the symbol QQQQ. After the transfer, Amex began trading QQQQ on an unlisted trading privileges basis. Amex previously suspended the transaction charges of specialist orders in connection with the QQQQ through December 31, 2005. 6 The Exchange did not extend these fee waivers after December 31, 2005. 6 *See* Securities Exchange Act Release No. 52736 (November 4, 2005), 70 FR 69171 (November 14, 2005). The Exchange asserts that the proposed suspension of transaction fees for specialist orders in connection with the QQQQ is consistent with Section 6(b)(4) of the Act. 7 Specifically, the Exchange believes that the proposal provides for an equitable allocation of reasonable fees among Exchange members largely based on the fact that specialists have greater obligations than other members and are also subject to other Exchange fees in addition to transaction fees. 7 Section 6(b)(4) of the Act states that the rules of a national securities exchange must provide for “the equitable allocation of reasonable dues, fees, and other charges among its members and issuers and other persons using its facilities.” 15 U.S.C. 78f(b)(4). In connection with the proposal to suspend or waive transaction fees for specialist orders in the QQQQ, the Exchange notes that specialists are subject to a variety of Exchange fees other than transaction charges. For example, the Exchange imposes floor fees solely on specialists such as a floor clerk fee, a floor facility fee, a post fee, and registration fee. 8 In addition, for those members on the floor of the Exchange, a technology fee and membership fees are also charged by the Exchange. 9 Certain market participants, such as customers, non-member broker-dealers and market-makers, and member broker-dealers are not subject to the majority of these fees. In addition, a specialist unit in order to adequately “make a market” in assigned securities must be sufficiently staffed 10 and have adequate technology resources to handle the volume of orders (especially in the QQQQ) that are sent to the Exchange. The Exchange believes that these operational costs borne by a specialist further supports the proposal to temporarily suspend QQQQ transaction fees on specialist orders. 8 The floor clerk, floor facility, post, and registration fees on an annual basis are $900, $2,400, $1,000, and $800, respectively. 9 A technology fee of $3,000 per year is assessed on all specialists and other floor participants at the Exchange. Annual membership dues of $1,500 must be paid by all members while annual membership fees are payable depending on the type of membership and circumstances. Non-members are not subject to these fees. 10 *See* Securities Exchange Act Release No. 53386 (February 28, 2006), 71 FR 11250 (March 6, 2006) (requiring specialists to employ an adequate number of clerks). Specialists have certain obligations required by Exchange rules as well as the Act that do not exist for other market participants. For example, a specialist pursuant to Amex Rule 170 is required to maintain a fair and orderly market in his or her assigned securities. Other members of the Exchange as well as non-member market participants do not have this obligation. As a result, the Exchange believes that the proposed suspension of transaction charges for specialist orders in the QQQQ is reasonable and equitable given the obligations that specialists must adhere to in making markets. The Exchange further submits that the fee suspension will provide a greater incentive to specialists to continue to provide market liquidity, rendering the Exchange an attractive venue for market participants to execute orders. 2. Statutory Basis Amex believes that the proposed rule change, as amended, is consistent with Section 6(b) of the Act 11 in general and furthers the objectives of Section 6(b)(4) of the Act 12 in particular, and is an equitable allocation of reasonable dues, fees, and other charges among its members and issuers and other persons using its facilities. 11 15 U.S.C. 78f(b). 12 15 U.S.C. 78f(b)(4). B. Self-Regulatory Organization's Statement on Burden on Competition Amex believes that the proposed rule change does 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 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 13 and subparagraph (f)(2) of Rule 19b-4 thereunder 14 because it establishes or changes a due, fee, or other charge imposed by the Exchange. At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. 15 13 15 U.S.C. 78s(b)(3)(A)(ii). 14 17 CFR 240.19b-4(f)(2). 15 The effective date of the original proposed rule change is April 6, 2006 and the effective date of Amendment No. 2 is April 18, 2006. For purposes of calculating the 60-day period within which the Commission may summarily abrogate the proposed rule change, as amended, under Section 19(b)(3)(C) of the Act, the Commission considers the period to commence on April 18, 2006, the date on which the Exchange submitted Amendment No. 2. *See* 15 U.S.C. 78s(b)(3)(C). IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change, as amended, is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to r *ule-comments@sec.gov.* Please include File Number SR-Amex-2006-30 on the subject line. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-Amex-2006-30. 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 Amex. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-Amex-2006-30 and should be submitted on or before May 19, 2006. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 16 16 17 CFR 200.30-3(a)(12). Nancy M. Morris, Secretary. [FR Doc. E6-6374 Filed 4-27-06; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-53708; File No. SR-Amex-2005-116] Self-Regulatory Organizations; American Stock Exchange LLC; Notice of Filing of a Proposed Rule Change and Amendment No. 1 Thereto Relating to Written Compliance and Supervisory Controls April 24, 2006. Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”), 1 and Rule 19b-4 thereunder, 2 notice is hereby given that on November 7, 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. Amex filed Amendment No. 1 with the Commission on April 6, 2006. 3 The Commission is publishing this notice to solicit comments on the proposed rule change, as amended, from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 *See* Amendment No. 1. I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend Amex Rule 320 to
(1)require members and member organizations with employees to establish, maintain, enforce and keep current a system of compliance and supervisory controls reasonably designed to achieve compliance with applicable securities laws and regulations and Exchange rules, and
(2)make certain other technical changes to the rule text. The text of the proposed rule change is available on the Amex's Web site at *http://www.amex.com* , at the Amex'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, Amex included statements concerning the purpose of and basis for the proposal and discussed any comments it received on the proposal. The text of these statements may be examined at the places specified in Item IV below. Amex has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose Amex Rule 320 currently requires each office, department or business activity of a member or member organization to be under the supervision and control of the member or member organization, and it also mandates that each member or member organization provide for appropriate supervisory and control procedures and designate appropriately qualified personnel to ensure that its business complies with securities laws and regulations. The purpose of this proposal is to amend Amex Rule 320 to require members and member organizations that have employees to adopt a system of compliance and supervisory controls, including written compliance and supervisory policies and procedures. Specifically, Amex proposes to add a new section
(e)to Amex Rule 320, and consequently re-designate existing section
(e)as section (f), to require that members and member organizations with employees must establish, maintain, enforce and keep current compliance and supervisory control systems appropriate to their business size, structure, customer accounts, transactions and business activities. Proposed Amex Rule 320(e) would require that the written compliance and supervisory procedures be amended, as appropriate and within a reasonable time, to reflect changes in applicable securities laws and regulations, Exchange rules, and the member's or member organization's compliance and supervisory system. Additionally, under proposed Amex Rule 320(e), the individual designated pursuant to Amex Rule 320(c) to assume authority and responsibility for the member's or member organization's compliance with securities laws, regulations and Exchange rules would be required to provide reports, at least annually, to the member's or member organization's senior management summarizing:
(1)The system of supervisory controls,
(2)the system of follow-up and review to verify that any delegated authority and responsibility is being properly exercised,
(3)any additional or amended compliance or supervisory programs that have been created and implemented during the course of the previous twelve months, and
(4)any supervisory procedures created as a result of changes in the system of follow up and review that have been revised or added in the past twelve months. The Exchange also proposes to adopt new Commentary .08 to Amex Rule 320 to provide that a member or member organization consisting of a single individual (for example, a sole proprietorship) must maintain a written compliance manual specifying
(1)the obligations to which such member or member organization is subject under applicable securities laws and regulations and Exchange rules and
(2)the processes and controls in place that are reasonably designed to achieve compliance with such obligations. Because these members and member organizations do not have employees to supervise, proposed Amex Rule 320(e) would not require that they establish or maintain either a system of supervisory controls or written supervisory policies and procedures, or that they implement annual reporting requirements to the member's or member organization's senior management concerning supervisory controls. The Exchange also proposes to amend sections
(b)and
(c)of Amex Rule 320 to include references to compliance with Exchange rules, in addition to the current references to compliance with securities laws and regulations, in order to explicitly reference a member's and member organization's obligation to comply with Exchange rules in addition to all applicable securities laws and regulations. Finally, the Exchange proposes technical conforming changes to:
(1)Replace references to “member firm” with a reference to “member organization,” and
(2)clarify references to “member organization” as applying to “member or member organization,” as appropriate, throughout Amex Rule 320. 2. Statutory Basis Amex believes that the proposed rule change 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 prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, and, in general, to protect investors and the public interest. 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 does 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 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 Within 35 days of the date of publication of this notice in the **Federal Register** or within such longer period
(i)as the Commission may designate up to 90 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or
(ii)as to which the Exchange consents, the Commission will:
(A)By order approve such proposed rule change, as amended, or
(B)Institute proceedings to determine whether the proposed rule change, as amended, should be disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change, as amended, is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov.* Please include File Number SR-Amex-2005-116 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-2005-116. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-Amex-2005-116 and should be submitted on or before May 19, 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. E6-6412 Filed 4-27-06; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-53704; File No. SR-Amex-2006-37] Self-Regulatory Organizations; American Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Floor Participant Technology Fee April 21, 2006. Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) 1 and Rule 19b-4 thereunder, 2 notice is hereby given that on April 20, 2006, the American Stock Exchange LLC (“Amex” or “Exchange”) submitted to 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. Amex filed the proposed rule change pursuant to section 19(b)(3)(A)(ii) of the Act 3 and Rule 19b-4(f)(2) thereunder, 4 which renders the proposal effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1 15 U.S.C. 78s(b)(1). 2 7 CFR 240.19b-4. 3 15 U.S.C. 78s(b)(3)(A)(ii). 4 17 CFR 240.19b-4(f)(2). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to increase the technology fee charged to the floor participants from its current rate of $3,000 per year ($250 per month) to $6,000 per year ($500 per month). The text of the proposed rule change is available on Amex's Web site at *http://www.amex.com,* at the principal office of Amex, and at the Commission's Public Reference Room. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, Amex included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. Amex has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of this proposal is to amend the Amex's Floor Fee Schedule to increase the technology fee and to remove any obsolete items. Since the technology fee has not been increased since December 2001, 5 the Exchange believes that an increase in the technology fee is appropriate at this time to cover increased costs resulting from the enhancement and development of trading technology, including new data centers, the Auction and Electronic Market Integration (“AEMI”), and improvements to the Amex New Trading Environment (“ANTE”), as well as other technology costs. The current technology fee is $3,000 per year or $250 per month. The Exchange proposes to increase the fee to $6,000 per year or $500 per month. The Exchange also proposes to remove references to fees that are no longer applicable due to their expiration so that the Floor Fee Schedule reflects the fees for current service levels. 5 *See* Securities Exchange Act Release No. 45163 (December 18, 2001), 66 FR 66958 (December 27, 2001) (SR-Amex-2001-101). The Exchange asserts that the proposal is equitable as required by section 6(b)(4) of the Act. 6 In connection with an increase to the technology fee from $3,000 per year (or $250 per month) to $6,000 per year (or $500 per month), the Exchange believes that said increase is reasonable and appropriate to cover the Exchange's rising costs associated with a number of technology initiatives benefiting floor members. 6 Section 6(b)(4) states that the rules of a national securities exchange provide for the equitable allocation of reasonable dues, fees, and other charges among its members and issuers and other persons using its facilities. 15 U.S.C. 78f(b)(4). 2. Statutory Basis Amex believes that the proposed rule change is consistent with section 6(b) of the Act, 7 in general, and furthers the objectives of section 6(b)(4) of the Act, 8 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 exchange facilities. 7 15 U.S.C. 78f(b). 8 15 U.S.C. 78f(b)(4). B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition. 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 establishes or changes a due, fee, or other charge applicable only to a member imposed by the Exchange, and, therefore, has become effective pursuant to section 19(b)(3)(A)(ii) of the Act 9 and subparagraph (f)(2) of Rule 19b-4 thereunder. 10 At any time within 60 days of the filing of such proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. 9 15 U.S.C. 78s(b)(3)(A)(ii). 10 17 CFR 240.19b-4(f)(2). IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to rule-comments@sec.gov. Please include File Number SR-Amex-2006-37 on the subject line. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-Amex-2006-37. 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 Amex. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-Amex-2006-37 and should be submitted on or before May 19, 2006. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 11 11 17 CFR 200.30-3(a)(12). Nancy M. Morris, Secretary. [FR Doc. E6-6415 Filed 4-27-06; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-53700; File No. SR-BSE-2005-46] Self-Regulatory Organizations; Boston Stock Exchange, Inc.; Order Granting Accelerated Approval of Proposed Rule Change and Amendment Nos. 1 and 2 Thereto and Notice of Filing and Order Granting Accelerated Approval to Amendment No. 3 to the Proposed Rule Change To Amend Exchange Delisting Rules To Conform to Recent Amendments to Commission Rules Regarding Removal From Listing and Withdrawal From Registration April 21, 2006. I. Introduction On October 24, 2005, the Boston Stock Exchange, Inc. (“BSE” or “Exchange”) filed with the Securities and Exchange Commission (“SEC” or “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 amend Exchange delisting rules to conform to recent amendments to Commission rules regarding removal from listing and withdrawal from registration. On March 16, 2006, BSE filed Amendment No. 1 to the proposed rule change. 3 On March 21, 2006, BSE filed Amendment No. 2 to the proposed rule change. 4 The proposed rule change, as amended, was published for comment in the **Federal Register** on March 28, 2006. 5 On April 17, 2006, BSE filed Amendment No. 3 to the proposed rule change. 6 No comments were received regarding the proposal. This order approves the proposed rule change, as amended by Amendment Nos. 1 and 2, on an accelerated basis, publishes notice of Amendment No. 3 to the proposed rule change, and grants accelerated approval to Amendment No. 3. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 In Amendment No. 1, BSE amended its rule text to clarify that an issuer that is below the continued listing policies and standards of the Exchange and seeks to voluntarily apply to withdraw a class of securities from listing must disclose that it is no longer eligible for continued listing in its statement of material facts relating to the reason for withdrawal from listing, its public press release, and its Web site notice. In addition, BSE revised its rule text to clarify which provisions in its appeal procedures were based on calendar or business days and to cross-reference its rules regarding the Exchange's basis for involuntary delisting of a class of securities by the Exchange. 4 Amendment No. 2 replaced and superseded the Exchange's original proposed rule change and Amendment No. 1. 5 *See* Securities Exchange Act Release No. 53544 (March 23, 2006), 71 FR 15499. 6 Amendment No. 3 replaced and superseded the proposed rule change and Amendment Nos. 1 and 2. While Amendment No. 3 replaced and superseded the proposed rule change in its entirety, only certain changes were made to the proposal as published. The changes made in Amendment No. 3 are as follows:
(1)Charging issuers a $3,000 fee (instead of the previously proposed $5,000 fee) when issuers appeal the Exchange's delisting determinations;
(2)modifying the appeal procedures so that the issuer is entitled to a hearing before the Stock List Committee and deleting proposed language that issuers must first request a hearing and the hearing is at the option of the Exchange;
(3)providing that the decision of the Stock List Committee shall be issued within 15 business days of the hearing or final request for documentation or information;
(4)referencing amended SEC Rule 12d2-2 in the commentary; and
(5)specifying the time period the Exchange must publicize its final determination to remove a security from listing by issuing a press release and posting on Web site as no fewer than ten days before the delisting becomes effective. II. Description of the Proposed Rule Change, As Amended Section 12 of the Act 7 and Rule 12d2-2 thereunder 8 (“SEC Rule 12d2-2”) govern the process for the delisting and deregistration of securities listed on national securities exchanges. Recent amendments to SEC Rule 12d2-2 (“amended SEC Rule 12d2-2”) and other Commission rules require the electronic filing of revised Form 25 9 on the Commission's Electronic Data Gathering, Analysis, and Retrieval (“EDGAR”) system by exchanges and issuers for all delistings, other than delistings of standardized options and securities futures, which are exempted. 10 7 15 U.S.C. 78 *l* . 8 17 CFR 240.12d2-2. 9 17 CFR 249.25. 10 *See* Securities Exchange Act Release No. 52029 (July 14, 2005), 70 FR 42456 (July 22, 2005) (“SEC Rule 12d2-2 Approval Order”). In the case of exchange-initiated delistings, amended SEC Rule 12d2-2(b) states that a national securities exchange may file an application on Form 25 to strike a class of securities from listing and/or withdraw the registration of such securities, in accordance with its rules, if the rules of such exchange, at a minimum, provide for:
(i)Notice to the issuer of the exchange's decision to delist its securities;
(ii)An opportunity for appeal to the exchange's board of directors, or to a committee designated by the board; and
(iii)Public notice of the national securities exchange's final determination to remove the security from listing and/or registration, by issuing a press release and posting notice on its Web site. Public notice must be disseminated no fewer than 10 days before the delisting becomes effective pursuant to amended SEC Rule 12d2-2(d)(1), and must remain posted on its Web site until the delisting is effective. The Exchange proposes to adopt new Section 2 of BSE Rule Chapter XXVII to set forth its rules and procedures with respect to issuer-initiated and Exchange-initiated delistings. The proposal incorporates the Exchange's current delisting practices and the requirements of amended SEC Rule 12d2-2. Proposed Section 2(b) provides the procedures for Exchange-initiated action to strike a security from listing on the Exchange. Proposed Section 2(b)(1) codifies the Exchange's current practice to provide notice to the issuer of the Exchange's decision to strike a security from listing on the Exchange when the issuer has fallen below the Exchange's continued listing policies and standards. BSE rules do not currently set forth appeal procedures for issuers to appeal the Exchange's delisting decision. Accordingly, BSE proposed new Section 2(b)(2) to provide issuers with an opportunity to appeal the Exchange's delisting decision to the Exchange's Stock List Committee. Proposed new Sections 2(b)(2)(A)-(C) outline the procedures for such appeals. Specifically, proposed Section 2(b)(2)(A) provides that an issuer shall file a request to appeal the Exchange's delisting decision no later than five business days following the issuer's receipt of the Exchange's delisting decision. Further, the issuer's request to appeal must include a $3,000 appeal fee. During the appeal process, the Exchange may suspend dealings in the security. If the issuer does not request an appeal within the relevant time period, BSE would file a Form 25 to strike the security from listing on the Exchange in accordance with the requirements of amended SEC Rule 12d2-2(b). Proposed Section 2(b)(2)(B) provides that once the Exchange received an appeal, the issuer would be entitled to present an appeal before the Exchange's Stock List Committee. The issuer must submit any written materials, if any, within 15 calendar days of the filing of the notice to appeal. The Exchange would not hold a hearing without providing five business days notice to the issuer of the time and place of the hearing. Proposed Section 2(b)(2)(C) provides that the decision of the Exchange's Stock List Committee is final and would be issued within 15 business days of the hearing or the final request for information. The Exchange would issue a written decision to the issuer. BSE also proposed new Section 2(b)(3) to incorporate the new requirements set forth in amended SEC Rule 12d2-2(b)(1)(iii). The Exchange would provide public notice of its final determination to strike a security from listing by issuing a press release and posting a notice on the Exchange's Web site, no fewer than ten days before the delisting becomes effective. The public notice would remain on the Exchange's Web site until the delisting becomes effective. Finally, in accordance with amended SEC Rule 12d2-2(b)(2), the Exchange would provide a copy of the filed Form 25 to the issuer. With respect to issuer-initiated delisting procedures, the Exchange proposes to codify its current practices and adopt new procedures to comply with the requirements of amended SEC Rule 12d2-2. Proposed Section 2(a) would require an issuer to provide the Exchange a certified copy of resolutions adopted by the issuer's Board of Directors authorizing the withdrawal from listing. After notice to the Exchange, the proposed rules state that the issuer must comply with amended SEC Rule 12d2-2(c). Proposed Section 2(a) provides that the issuer must:
(i)Comply with all applicable laws in effect in the state in which the issuer is incorporated;
(ii)Provide written notice, which describes the security involved and all material facts relating to the reasons for withdrawal, to the Exchange no fewer than 10 days before the issuer files an application on Form 25 with the Commission; and
(iii)Publish notice, contemporaneous with providing written notice to the Exchange, through a press release, and if it has a publicly accessible Web site, post such notice on that Web site, which shall remain available until the delisting become effective. Proposed Section 2(a) further provides that the Exchange, after notice from the issuer with respect to voluntary withdrawal from listing, shall post the notice of the issuer's intent on the Exchange's Web site the next business day, and such notice shall remain until the delisting is effective. In addition, the issuer must provide a copy of the Form 25 to the Exchange contemporaneously with the filing of the Form 25. The Exchange has also proposed, as commentary to Section 2, that an issuer seeking to voluntarily apply to withdraw a class of security from listing when the issuer has received notice from the Exchange that the issuer is below the Exchange's continued listing policies and standards, or that the issuer is aware that it is below such continued listing policies and standards notwithstanding that the issuer has not received a notice from the Exchange, must disclose that it is no longer eligible for continued listing (including the specific continued listing policies and standards that the issue is below) in:
(i)The statement of all material facts relating to the reasons for withdrawal from listing provided to the Exchange along with written notice of its determination to withdraw from listing as required by amended SEC Rule 12d2-2(c)(2)(ii); and
(ii)the public press release and Web site notice as required by amended SEC Rule 12d2-2(c)(2)(iii). III. Commission's Findings and Order Granting Accelerated Approval of Proposed Rule Change and Amendment Nos. 1, 2, and 3 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 11 and, in particular, the requirements of Section 6 of the Act. 12 Specifically, as discussed below, the Commission finds that the proposal, as amended, is consistent with Sections 6(b)(4), 13 6(b)(5), 14 and 6(b)(7) of the Act. 15 Section 6(b)(4) of the Act requires that the rules of an exchange provide for the equitable allocation of reasonable dues, fees, and other charges among its members and issuers and other persons using its facilities. Section 6(b)(5) of the Act requires, in part, that the rules of an exchange be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, and processing information with respect to, and facilitating transactions in securities, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. Section 6(b)(7) of the Act requires, among other things, that the rules of an exchange provide a fair procedure for the prohibition or limitation by the exchange of any person with respect to access to services offered by the exchange or a member thereof. Further, as noted in more detail below, the changes being adopted by BSE meet the requirements of amended SEC Rule 12d2-2. 11 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). 12 15 U.S.C. 78f. 13 15 U.S.C. 78f(b)(4). 14 15 U.S.C. 78f(b)(5). 15 15 U.S.C. 78f(b)(7). A. Exchange Delisting Amended SEC Rule 12d2-2(b) states that a national securities exchange may file an application on Form 25 to strike a class of securities from listing and/or withdraw the registration of such securities, in accordance with its rules, if the rules of such exchange, at a minimum, provide for notice to the issuer of the exchange's decision to delist, opportunity for appeal, and public notice of the exchange's final determination to delist. The Commission believes that BSE's proposal complies with the dictates of amended SEC Rule 12d2-2(b). The proposed rule change requires the Exchange to provide notice to issuers of the Exchange's decision to remove a security from listing and/or registration. In addition, the proposal provide issuers an opportunity to appeal the Exchange's delisting decision to a committee designated by the Board. As discussed above, the proposal sets forth the specific procedures for issuers appealing the Exchange's delisting decision to the Stock List Committee, which is a committee designated by the Board. Finally, the proposed rule change would provide for public notice of BSE's final determination to remove the security from listing and/or registration. The Commission believes that the proposed rule requiring notice to the issuer of the Exchange's decision to remove a security from listing and/or registration and establishing appeal procedures provides issuers with adequate notice and opportunity to appeal the delisting as required by amended SEC Rule 12d2-2(b). The Commission notes that the appeal procedures being adopted by the Exchange set forth an adequate structure to meet the requirements of Section 6(b)(7) of the Act 16 and for BSE to review mandatory delistings upon appeal. In addition, public notice of the Exchange's final determination should ensure that investors have adequate notice of an exchange delisting and is consistent with the protection of investors under Section 6(b)(5) of the Act. 17 16 15 U.S.C. 78f(b)(7). 17 15 U.S.C. 78f(b)(5). Finally, the Exchange proposes to charge issuers a $3,000 appeal fee in connection with a request to appeal the Exchange's delisting decision. The Commission believes that the proposed fee is consistent with Section 6(b)(4) of the Act. 18 The Commission also believes that the fee likely is not overly burdensome or excessive to the extent that an issuer would be deterred from employing its due process right to present an appeal before the Stock List Committee, and therefore, is consistent with Section 6(b)(7) of the Act. 19 Further, the Commission notes that the appeal fee is comparable to fees of other exchanges. 20 18 15 U.S.C. 78f(b)(4). 19 15 U.S.C. 78f(b)(7). 20 *See, e.g.* , NASD Rule 4805 and Amex Company Guide Section 1203(a) (charging issuers a $4,000 fee where the consideration is on the basis of written submission and $5,000 fee where the consideration is on the basis of an oral hearing). B. Issuer Voluntary Delisting The Exchange proposes to adopt rules concerning the general requirements of amended SEC Rule 12d2-2(c) regarding issuer voluntary delisting. Proposed BSE Chapter XXVII Section 2(a) states that an issuer proposing to withdraw its security from listing shall first provide to the Exchange a certified copy of its Board of Directors resolutions authorizing such action. The Commission believes that this requirement may help ensure that the decision to delist a security voluntarily has been well-considered by the issuer's board of directors. Thereafter, the issuer must comply with the requirements of amended SEC Rule 12d2-2(c), which are specifically set out in BSE's rules. The Commission believes that the proposed changes will inform issuers of the requirements for voluntary delisting of their securities under BSE rules and Federal securities laws. The proposal also sets forth a new requirement not in amended SEC Rule 12d2-2 that would require an issuer seeking to voluntarily delist its security to provide a copy of the Form 25 that was filed with the Commission, contemporaneous with such filing. The Commission believes that this requirement will allow the Exchange to be fully informed of the filing of a Form 25 and be prepared to take timely action to delist the security in accordance with the filing of the Form. In addition, BSE proposes to adopt a new commentary to require that not less than ten days before the issuer submits a Form 25, the issuer seeking to voluntarily apply to withdraw a security from listing on the Exchange when the issuer has received notice from the Exchange that the issuer is below the Exchange's continued listing policies and standards, or that the issuer is aware that it is below such continued listing policies and standards notwithstanding that it has not received such notice from the Exchange, must disclose in:
(i)Its statement of all material facts relating to the reasons for withdrawal from listing provided to the Exchange along with written notice of its determination to withdraw from listing required by amended SEC Rule 12d2-2(c)(2)(ii); and
(ii)its public press release and Web site notice required by amended SEC Rule 12d2-2(c)(2)(iii). The Commission believes that this requirement will allow shareholders to be informed and aware that the issuer has failed to meet Exchange listing standards and is voluntarily delisting with the consent of the Exchange. Issuers will therefore not be permitted to delist voluntarily without public disclosure of their noncompliance with Exchange listing standards. C. Accelerated Approval of Proposed Rule Change and Amendment Nos. 1, 2, and 3 Pursuant to Section 19(b)(2) of the Act, 21 the Commission may not approve any proposed rule change, or amendment thereto, prior to the 30th day after the date of publication of notice of the filing thereof, unless the Commission finds good cause for so doing and publishes its reasons for so finding. The Commission hereby finds good cause for approving the proposed rule change, as amended by Amendment Nos. 1 and 2, prior to the 30th day after publishing the notice in the **Federal Register** . In the SEC Rule 12d2-2 Approval Order, the Commission stated that the compliance date of the amendments is April 24, 2006. 22 In addition, no comments were received on the proposal, as originally published. 23 Accelerated approval of the proposal, as amended, would enable the Exchange's amended rules to become operative by the compliance date set forth by the Commission. 21 15 U.S.C. 78s(b)(2). 22 *See* SEC Rule 12d2-2 Approval Order, *supra* note 10. 23 *See* note 5, *supra* . The Commission further finds good cause for approving Amendment No. 3 to the proposal, prior to the 30th day after publishing notice of Amendment No. 3 in the **Federal Register** . As previously discussed, the revisions made to the proposal in Amendment No. 3 as compared to the proposal as published 24 would provide issuers with specific appeal procedures, and allow shareholders to be informed and aware that the issuer has failed to meet Exchange listing standards and is voluntarily delisting with the consent of the Exchange. The Commission believes that granting accelerated approval of Amendment No. 3 will permit the Exchange to implement this new provision as expeditiously as possible, to the benefit of investors. The Commission also believes that accelerating approval of Amendment No. 3 is appropriate because these revisions do not raise new regulatory issues. 24 *See* note 6, *supra* . Accordingly, pursuant to Section 19(b)(2) of the Act, 25 the Commission finds good cause to approve the proposed rule change, as amended by Amendment Nos. 1, 2, and 3, prior to the 30th day after notice of the proposed rule change and Amendment Nos. 1, 2, and 3 are published in the **Federal Register** . 25 15 U.S.C. 78s(b)(2). IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning Amendment No. 3, including whether Amendment No. 3 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-BSE-2005-46 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-BSE-2005-46. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-BSE-2005-46 and should be submitted on or before May 19, 2006. V. Conclusion *It is therefore ordered* , pursuant to Section 19(b)(2) of the Act, 26 that the proposed rule change (File No. SR-BSE-2005-46), as amended, is approved on an accelerated basis. 26 15 U.S.C. 78s(b)(2). 27 17 CFR 200.30-3(a)(12). For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 27 Nancy M. Morris, Secretary. [FR Doc. E6-6373 Filed 4-27-06; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-53705; File No. SR-ISE-2006-04] Self-Regulatory Organizations; International Securities Exchange, Inc.; Order Approving Proposed Rule Change and Amendments No. 1 and 2 and Notice of Filing and Order Granting Accelerated Approval to Amendment No. 3 Relating to the Proposal to Reorganize From its Current Structure Into a Holding Company Structure April 21, 2006. I. Introduction On January 12, 2006, pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) 1 and Rule 19b-4 thereunder, 2 the International Securities Exchange, Inc. (“ISE, Inc.”) filed with the Securities and Exchange Commission (“Commission”) a proposed rule change to reorganize from its current structure into a holding company structure (“Reorganization”). ISE, Inc. filed Amendment No. 1 on March 3, 2006, and withdrew Amendment No. 1 on March 3, 2006. On March 3, 2006, ISE, Inc. filed Amendment No. 2. The proposed rule change, as amended, was published for comment in the **Federal Register** on March 17, 2006. 3 The Commission received no comment letters regarding the proposal. On April 7, 2006, ISE, Inc. filed Amendment No. 3 to the proposed rule change. 4 This order approves the proposed rule change, as amended, grants accelerated approval to Amendment No. 3 to the proposed rule change, and solicits comments from interested persons on Amendment No. 3. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 *See* Securities Exchange Act Release No. 53450 (March 8, 2006), 71 FR 13875. 4 In Amendment No. 3, ISE, Inc. proposed a technical change to the filing. The complete text of Amendment No. 3 is available on the Commission's Web site ( *http://www.sec.gov/rules/sro.shtml* ), at the Commission's Public Reference Room, at the principal office of ISE, Inc., and on ISE, Inc.'s Web site ( *http://www.iseoptions.com* ). After careful review, 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. 5 In particular, the Commission finds that the proposed rule change, as amended, is consistent with section 6(b) of the Act, 6 which, among other things, requires a national securities exchange to be so organized and have the capacity to be able to carry out the purposes of the Act and to enforce compliance by its members and persons associated with its members with the provisions of the Act, the rules and regulations thereunder, and the rules of the exchange, and assure the fair representation of its members in the selection of its directors and administration of its affairs, and provide that one or more directors shall be representative of issuers and investors and not be associated with a member of the exchange, broker, or dealer. Section 6(b) of the Act 7 also requires that the rules of the exchange be 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. 5 In approving the proposed rule change, the Commission has considered its impact on efficiency, competition, and capital formation. *See* 15 U.S.C. 78c(f). 6 15 U.S.C. 78f(b). 7 *Id.* A. Accelerated Approval of Amendment No. 3 The Commission also finds good cause for approving Amendment No. 3 to the proposed rule change prior to the thirtieth day after publishing notice of Amendment No. 3 in the ** Federal Register ** pursuant to section 19(b)(2) of the Act. 8 8 15 U.S.C. 78s(b)(2). Pursuant to section 19(b)(2) of the Act, the Commission may not approve any proposed rule change, or amendment thereto, prior to the thirtieth day after the date of publication of the notice thereof, unless the Commission finds good cause for so doing. In Amendment No. 3, ISE, Inc. proposes to amend ISE Rule 303, Supplementary Material .02, to replace a reference to the “Certificate of Incorporation” of ISE, Inc. with a reference to the “LLC Agreement” of International Securities Exchange, LLC (“ISE, LLC”) to reflect that, upon consummation of the Reorganization, ISE, Inc. would merge with, and thereafter operate as, a limited liability company. The Commission believes that Amendment No. 3 is non-substantive in nature, raises no novel issues, and is consistent with the Act. Therefore, the Commission finds that good cause exists to accelerate approval of the proposed rule change in Amendment No. 3, pursuant to section 19(b)(2) of the Act. 9 9 15 U.S.C. 78s(b)(2). B. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning Amendment No. 3, including whether Amendment No. 3 is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov.* Please include File Number SR-ISE-2006-04 on the subject line. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-ISE-2006-04. 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 ISE, Inc. 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 Amendment No. 3 of File Number SR-ISE-2006-04 and should be submitted on or before May 19, 2006. II. Description and Discussion ISE, Inc., a Delaware corporation and publicly-traded company, 10 proposes to reorganize into a holding company structure. ISE, Inc. has formed International Securities Exchange Holdings, Inc., a Delaware corporation (“ISE Holdings”), and its wholly owned subsidiary, ISE, LLC, a Delaware limited liability company, in contemplation of the Reorganization. After satisfaction of certain conditions, including approval of the Reorganization by the Commission, ISE, Inc. will merge into ISE, LLC, with ISE, LLC as the surviving entity of the merger (“Merger”). 10 *See* Securities Exchange Act Release No. 51029 (January 12, 2005), 70 FR 3233 (January 21, 2005) (SR-ISE-2004-29) (discussing ISE, Inc.'s current capital stock and governance structure). As a result of the Merger, ISE Holdings will effectively become the sole equity owner of ISE, LLC, and the shares of ISE Holdings common stock (“ISE Holdings Common Stock”) will in turn be publicly held. The holders of shares of ISE, Inc. Class A Common Stock (“Class A Common Stock”) will become holders of ISE Holdings Common Stock, and holders of ISE, Inc. Class B Common Stock, Series B-1 (“Series B-1 Common Stock”), ISE, Inc. Class B Common Stock, Series B-2 (“Series B-2 Common Stock”), and ISE, Inc. Class B Common Stock, Series B-3 (“Series B-3 Common Stock”) 11 will become holders of PMM Rights, CMM Rights, and EAM Rights, respectively. 12 Upon consummation of the Merger, the percentage of the outstanding shares of ISE Holdings Common Stock held after the Merger by each holder of Class A Common Stock will be identical to the percentage of Class A Common Stock that such holder held prior to the Merger. The percentage of Exchange Rights held after the Merger by each holder of Class B Common Stock also will be identical to the percentage of Class B Common Stock that such holder held prior to the Merger. 11 The Series B-1 Common Stock, Series B-2 Common Stock, and Series B-3 Common Stock are herein collectively referred to as the “Class B Common Stock.” 12 *See* proposed Limited Liability Company Agreement of ISE, LLC (“LLC Agreement”), Section 6.2, for the definition of “PMM Rights,” “CMM Rights,” and “EAM Rights.” PMM Rights, CMM Rights, and EAM Rights are herein collectively referred to as the “Exchange Rights.” As is currently the case with respect to ISE, Inc. and its shares of Class B Common Stock, 13 ISE, LLC will require ownership of an Exchange Right as a predicate to obtaining the trading rights and privileges associated with such Exchange Right. 14 Where still relevant and practical, ISE, Inc. has preserved certain rights of the holders of Class B Common Stock following the Reorganization. As a result, holders of PMM and CMM Rights will be entitled to vote on any change in, amendment, or modification of the same Core Rights to which the holders of Series B-1 Common Stock and Series B-2 Common Stock are entitled with respect to ISE, Inc. 15 In addition, holders of Exchange Rights will continue to be entitled to vote with respect to any amendments to the LLC Agreement or the proposed Constitution of ISE, LLC (“LLC Constitution”) that would alter or change the powers, preferences, or special rights of one or more series of Exchange Rights so as to affect them adversely. 16 Further, as discussed below, holders of Exchange Rights will continue to be entitled to elect six Exchange Directors of the board of directors of ISE, LLC (“LLC Board”). 17 13 Amended and Restated Certificate of Incorporation of ISE, Inc. (“ISE, Inc. Amended Certificate”), Article Fourth, Subdivision II(b)(ii). 14 LLC Agreement, Section 6.2. 15 *See* LLC Agreement, section 2.2, for the definition of “Core Rights.” Core Rights means any increase in the number of authorized PMM Rights or CMM Rights. 16 LLC Agreement, section 8.1, and LLC Constitution, section 10.1. The sole LLC member (ISE Holdings) will have a similar right to approve amendments to the LLC Constitution or LLC Agreement if such amendments would alter or change the powers, preferences, or special rights of the sole LLC member so as to affect it adversely. *Id.* 17 Because ISE, LLC will have limited liability members instead of stockholders, ISE Holdings (as the sole LLC member) and the holders of Exchange Rights will not have voting, dividend, or liquidation rights typically associated with common stock under state law. The proposed rule change includes:
(a)The elimination of the ISE, Inc. Amended Certificate and the Amended and Restated Constitution of ISE, Inc. (“ISE, Inc. Amended Constitution”);
(b)the Certificate of Incorporation of ISE Holdings (“Holdings Certificate”) and the bylaws of ISE Holdings (“Holdings Bylaws”);
(c)the LLC Agreement and the LLC Constitution; and
(d)certain amendments to the Rules of ISE, Inc. (“ISE Rules”) to reflect the Reorganization. 18 18 ISE, Inc. is proposing to amend the ISE Rules to, among other things, change references to “Class B common stock,” “Class B stockholders,” “shares,” and similar or derivative words to “Exchange Rights,” “Exchange Rights holders,” and “Rights” and the like. A. ISE Holdings 1. ISE Holdings as Sole Member ISE, LLC will be a wholly owned subsidiary of ISE Holdings. ISE Holdings will have sole voting control over ISE, LLC, except for certain matters relating to Exchange Rights. 19 Section 19(b) of the Act 20 and Rule 19b-4 thereunder 21 require a self-regulatory organization (“SRO”) to file proposed rule changes with the Commission. Although ISE Holdings is not an SRO, certain provisions of the Holdings Certificate and Holdings Bylaws are rules of an exchange 22 if they are stated policies, practice, or interpretations, as defined in Rule 19b-4 of the Act, 23 of the exchange, and must be filed with the Commission pursuant to section 19(b) of the Act 24 and Rule 19b-4 thereunder. 25 Accordingly, ISE, Inc. has filed the Holdings Certificate and Holdings Bylaws with the Commission. 26 19 ISE Holdings will not have any voting rights with respect to the Core Rights, the election of PMM Directors, CMM Directors, or EAM Directors, or any other matters relating to the Exchange Rights, such as the eligibility and approval of persons to own, transfer or lease Exchange Rights, rulemaking, supervision of entities holding Exchange Rights, and the like. *See* LLC Agreement, section 2.2. *See also* LLC Constitution, section 3.2(b), for the definitions of “PMM Director,” “CMM Director,” and “EAM Director.” The PMM Directors, CMM Directors, and EAM Directors are herein collectively referred to as the “Exchange Directors.” 20 20 15 U.S.C. 78s(b). 21 17 CFR 240.19b-4. 22 *See* section 3(a)(27) of the Act, 15 U.S.C. 78c(a)(27). 23 17 CFR 240.19b-4. 24 15 U.S.C. 78s(b). 25 17 CFR 240.19b-4. 26 If ISE Holdings decides to amend the Holdings Certificate or the Holdings Bylaws, the Board of Directors of ISE Holdings (“Holdings Board”) must submit such amendment to the LLC Board, and if the LLC Board determines that such amendment is required to be filed with, or filed with and approved by, the Commission before the same may be effective pursuant to section 19 of the Act and the rules thereunder, such amendment shall not be effective until filed with, or filed with and approved by, the Commission, as the case may be. *See* Holdings Certificate, Article Sixteenth, and Holdings Bylaws, Section 10.1. 2. Ownership and Voting Limitations; Changes in Control of ISE, LLC The Holdings Certificate and Holdings Bylaws will include substantially the same ownership and voting limitations that are contained in the ISE, Inc. Amended Certificate and ISE, Inc. Amended Constitution. 27 Specifically, the Holdings Certificate provides that no Person, 28 either alone or together with its Related Persons, 29 may own, directly or indirectly, shares of the capital stock of ISE Holdings constituting more than 40 percent of the outstanding shares of any class or series of capital stock of ISE Holdings. 30 Further, the Holdings Certificate provides that no Member, 31 either alone or together with its Related Persons, may own, directly or indirectly, shares of the capital stock of ISE Holdings constituting more than 20 percent of the outstanding shares of any class or series of capital stock of ISE Holdings. 32 The Holdings Certificate also provides that no Person, either alone or together with its Related Persons, may, directly or indirectly, vote or cause the voting of shares of the capital stock of ISE Holdings representing more than 20 percent of the voting power of any class or series of the then issued and outstanding capital stock of ISE Holdings. 33 If a Person, either alone or with its Related Persons, beneficially owns shares of stock of ISE Holdings in violation of the relevant ownership limitation, ISE Holdings will apply substantially the same corrective procedures that were previously approved by the Commission. 34 Also, as is currently the case with respect to ISE, Inc., if any stockholder purports to vote or cause the voting of shares of the capital stock of ISE Holdings that would violate the relevant voting limitation, then the ISE, Holdings will not honor such vote to the extent that such provision would be violated. 35 27 ISE, Inc. represents that currently, no Person, either alone or together with its Related Persons, owns more than 40 percent of the outstanding shares of any class or series of capital stock of ISE, Inc., and no member, either alone or together with its Related Persons, owns more than 20 percent of the outstanding shares of any class or series of capital stock of ISE, Inc. ISE, Inc. therefore represents that there is no reason to believe that the Reorganization will result in any large concentrations of ownership or voting power by ISE, Inc.'s current stockholders or members. 28 *See* Holdings Certificate, Article Fourth, Subdivision III, for the definition of “Person.” 29 *See* ISE, Inc. Amended Certificate, Article Fourth, Subdivision III, for the current definition of “Related Person” and Holdings Certificate, Article Fourth, Subdivision III, for the proposed modification to the definition of “Related Persons” in connection with the Reorganization. Currently, “Related Person” means
(1)with respect to any Person, all “affiliates” and “associates” of such Person (as such terms are defined in Rule 12b-2 under the Act);
(2)with respect to any Person constituting an exchange member (as defined in the ISE, Inc. Amended Constitution), any broker or dealer with which such Exchange Member is associated; and
(3)any two or more Persons that have any agreement, arrangement, or understanding (whether or not in writing) to act together for the purpose of acquiring, voting, holding, or disposing of shares of the capital stock of ISE, Inc. ISE, Inc. proposes to modify the definition of “Related Persons” in connection with the Reorganization to also include, with respect to any Person, any executive officer (as defined under Rule 3b-7 under the Act), director, general partner, manager, or managing member, as applicable, and, with respect to any Person that is an executive officer (as defined under Rule 3b-7 under the Act), director, general partner, manager, or managing member of a company, corporation, or similar entity, such company, corporation, or entity, as applicable. 30 Holdings Certificate, Article Fourth, Subdivision III(a). 31 The term “Member,” as proposed to be defined in ISE Rule 100, means an organization that has been approved to exercise trading rights associated with Exchange Rights. 32 Holdings Certificate, Article Fourth, Subdivision III(a). 33 Holdings Certificate, Article Fourth, Subdivision III(b). 34 ISE, Inc. Amended Certificate, Article Fourth, Subdivision III(c). 35 Holdings Certificate, Article Fourth, Subdivision III(d). ISE, LLC also will continue to have a 20 percent limit with respect to Exchange Rights. 36 Specifically, no holder or lessee of Exchange Rights, together with any affiliate, may own (or exercise any of the non-trading rights associated with) more than 20 percent of the PMM Rights, the CMM Rights, or the EAM Rights. 37 36 LLC Agreement, section 6.5(a). 37 *Id.* Members that trade on an exchange traditionally have ownership interests in such exchange. As the Commission has noted in the past, however, a member's interest in an exchange could become so large as to cast doubt on whether the exchange can fairly and objectively exercise its self-regulatory responsibilities with respect to that member. 38 A member that is a controlling shareholder of an exchange might be tempted to exercise that controlling influence by directing the exchange to refrain from, or the exchange may hesitate to, diligently monitor and surveil the member's conduct or diligently enforce its rules and the federal securities laws with respect to conduct by the member that violates such provisions. 38 *See* Securities Exchange Act Release Nos. 53128 (January 13, 2006), 71 FR 3550 (January 23, 2006) (File No. 10-131); 51149 (February 8, 2005), 70 FR 7531 (February 14, 2005) (SR-CHX-2004-26); 49718 (May 17, 2004), 69 FR 29611 (May 24, 2004) (SR-PCX-2004-08); 49098 (January 16, 2004), 69 FR 3974 (January 27, 2004) (SR-Phlx-2003-73); and 49067 (January 13, 2004), 69 FR 2761 (January 20, 2004) (SR-BSE-2003-19). In addition, as proposed, ISE, LLC will be a wholly owned subsidiary of ISE Holdings. The LLC Agreement identifies this ownership structure. 39 Any changes to the LLC Agreement, including any changes to the provision that identifies ISE Holdings as the sole LLC member, must be filed with and approved by the Commission pursuant to Section 19 of the Act. 40 Further, any assignment of its interest in ISE, LLC by ISE Holdings will be subject to prior Commission approval pursuant to section 19 of the Act. 41 39 The LLC Agreement only permits ISE, LLC to have one LLC member at any given time, and identifies ISE Holdings as the sole LLC member. *See* preamble to the LLC Agreement and sections 2.1 and 3.1. 40 15 U.S.C. 78s. 41 LLC Agreement, section 7.1. The Commission finds that the ownership and voting limitations in the Holding Certificate and the change in control provisions and limit on Exchange Rights in the LLC Agreement are consistent with the Act. These requirements should minimize the potential that a person could improperly interfere with or restrict the ability of the Commission or ISE, LLC to effectively carry out their regulatory oversight responsibilities under the Act. B. Exchange Operations and Independence of Self-Regulatory Function of ISE, LLC Upon consummation of the Merger, ISE, LLC will be the successor to the registration of ISE, Inc. as a national securities exchange. ISE, LLC thus will operate as the registered national securities exchange under section 6 of the Act 42 and be responsible for enforcing its member compliance with the Federal securities laws and ISE Rules. 43 Further, all decisions with respect to the listing and delisting of options and related products will continue to be made in accordance with ISE Rules. ISE, Inc. also represents that provisions of the LLC Agreement and LLC Constitution dealing with exchange operations are substantively the same as the current ISE, Inc. Amended Certificate and ISE, Inc. Amended Constitution, respectively. 42 15 U.S.C. 78f. 43 Under the Act, the holders or lessees of Exchange Rights are “members” of ISE, LLC. *See* section 3(a)(3) of the Act, 15 U.S.C. 78c(a)(3). However, the holders of Exchange Rights are not “members” for purposes of the Delaware Limited Liability Company Act or the LLC Agreement. LLC Agreement, section 6.1. As an SRO, ISE, LLC will have ultimate responsibility for the administration and enforcement of the rules governing its options business operations. ISE, Inc. represents that the regulatory relationship that it currently maintains with the National Association of Securities Dealers (“NASD”) will not be affected by the Reorganization and that ISE, LLC, as the successor-in-interest to ISE, Inc., will continue to have the same relationship with the NASD. 44 ISE, LLC's disciplinary process will be the same as the process for ISE, Inc. and will be carried out by the Business Conduct Committee which is composed of members. 45 Likewise, ISE, Inc. represents that ISE, LLC will participate in various national market system plans, including the Options Price Reporting Authority and the Options Intermarket Linkage Plan, in which ISE, Inc. is currently a participant. 44 *See* Securities Exchange Act Release No. 4781 (May 14, 2003), 68 FR 27869 (May 21, 2003) (approving a plan pursuant to Rule 17d-2 of the Act between NASD and ISE, Inc.). 45 Currently, the Chief Executive Officer (“CEO”) of ISE, Inc. authorizes the institution of disciplinary actions, and ISE, Inc., with the assistance of the NASD staff, if appropriate, conducts disciplinary proceedings before the Business Conduct Committee. Decisions of the Business Conduct Committee may be appealed to the Committee for Review of ISE, Inc., which is composed of directors of ISE, Inc. Certain provisions in the LLC Agreement, LLC Constitution, and ISE Rules are designed to facilitate the ability of ISE, LLC to fulfill its regulatory obligations under the Act and to help ensure the independence of its regulatory function from its market operations and other commercial interests. Specifically, the LLC Constitution provides that all meetings of the LLC Board pertaining to the self-regulatory function of ISE, LLC or to the structure of the market that ISE, LLC regulates will be closed to all persons other than the LLC Board and officers, staff, counsel, or other advisors of ISE, LLC whose participation is necessary or appropriate to the proper discharge of ISE, LLC's regulatory functions and any representative of the Commission. No members of the Holdings Board who are not also LLC Board members, and no officers, staff, counsel, or advisors of ISE Holdings who are not also officers, staff, counsel, or advisors of ISE, LLC, will be allowed to participate in such meetings. 46 46 LLC Constitution, section 3.2(d). In addition, the LLC Agreement provides that, in discharging his or her responsibilities as a member of the LLC Board, each director shall take into consideration the effect that his or her actions would have on the ability of ISE, LLC to carry out its responsibilities under the Act. 47 Further, in discharging his or her responsibilities as a member of the LLC Board or as an officer or employee of ISE, LLC, each director, officer, or employee shall comply with the federal securities laws and rules and regulations thereunder and cooperate with the Commission. 48 The LLC Agreement also provides that all confidential information pertaining to the self-regulatory function of ISE, LLC contained in books and records of ISE, LLC shall not be made available to any persons other than to those officers, directors, employees, and agents of ISE, LLC that have a reasonable need to know the contents thereof, be retained in confidence by such parties, and not be used for any commercial purposes. 49 47 LLC Agreement, section 5.1(b). 48 *Id* . 49 LLC Agreement, section 4.1(b). The Commission believes that any non-regulatory use of such information would be for a commercial purpose. The Commission further notes that ISE has taken steps to safeguard the use of regulatory monies. In particular, ISE, LLC will interpret ISE Rules to require that any revenue it receives from regulatory fees or penalties will be segregated and applied to fund the legal, regulatory, and surveillance operations of ISE, LLC and will not be used to pay distributions to the sole LLC member (ISE Holdings) or holders of Exchange Rights, except in the event of liquidation of ISE, LLC, in which case the sole LLC member will be entitled to the distribution of ISE, LLC's remaining assets. 50 50 *See* Securities Exchange Act Release No. 45803 (April 23, 2002), 67 FR 21306 (April 30, 2002). Finally, proposed ISE Rule 312 provides that, without prior Commission approval, ISE, LLC or any entity with which it is affiliated shall not, directly or indirectly through one or more intermediaries, acquire or maintain an ownership interest in a Member or non-member owner. In addition, pursuant to ISE Rule 312, a Member or non-member owner shall not be or become an affiliate of ISE, LLC or an affiliate of any affiliate of ISE, LLC. 51 Moreover, the LLC Constitution prohibits officers or employees of ISE, LLC from being holders of Exchange Rights or being affiliated with a Member. 52 The Commission believes that these provisions mitigate its concerns about the potential for unfair competition and conflicts of interest between an exchange's self-regulatory obligations and its commercial interest. The Commission also believes that ISE Rule 312 minimizes the potential for unfair competitive advantage that the affiliated member could have by virtue of informational or operational advantages, or the ability to receive preferential treatment. 53 51 ISE Rule 312 also provides that it does not prohibit a Member or non-member owner from acquiring or holding any equity interest in ISE Holdings that is permitted by the Holdings Certificate. Further, ISE Rule 312 does not prohibit any Member from being or becoming an affiliate of ISE, LLC or an affiliate of any affiliate of ISE, LLC solely by reason of any officer, director, or partner of such Member being or becoming an Exchange Director pursuant to the LLC Constitution. 52 LLC Constitution, section 4.5. 53 *See* Securities Exchange Act Release No. 53382 (February 27, 2006), 71 FR 11251 (March 6, 2006) (order approving the business combination of New York Stock Exchange, Inc. and Archipelago Holdings, Inc.). The Commission finds that the proposed organization of ISE, LLC is consistent with the Act, particularly with section 6(b)(1), 54 which requires that an exchange be so organized and have the capacity to carry out the purposes of the Act. 54 15 U.S.C. 78f(b)(1). C. Relationship of ISE Holdings to ISE, LLC; Jurisdiction Over ISE Holdings Following the Reorganization, ISE Rules, LLC Agreement, and LLC Constitution will reflect ISE, LLC's status as a wholly owned subsidiary of ISE Holdings, under management of the ISE, LLC Board and its designated officers and with self-regulatory obligations pursuant to ISE, LLC's registration as a national securities exchange. As the sole owner of ISE, LLC, ISE Holdings' activities must be consistent with, and not interfere with, ISE, LLC's obligations under the Act. Certain provisions in the Holdings Certificate and Holdings Bylaws are designed to enable ISE, LLC to operate in a manner that complies with federal securities laws, including the objectives of sections 6(b) and 19(g) of the Act, 55 and facilitate the ability of ISE, LLC and the Commission to fulfill their regulatory and oversight obligations under the Act. 55 15 U.S.C. 78f(b) and 78s(g). For example, the Holdings Certificate provides that ISE, Holdings, each director of the Holdings Board, and each officer or employee of ISE Holdings shall comply with the Federal securities laws and rules and regulations thereunder and shall cooperate with ISE, LLC and the Commission. 56 In addition, in discharging his or her responsibilities as a member of the Holdings Board, each director of the Holdings Board shall take into consideration the effect that ISE Holdings' actions would have on the ability of ISE, LLC to carry out its responsibilities under the Act. 57 ISE Holdings and its officers, directors, and employees also shall give due regard to the preservation of the independence of the self-regulatory function of ISE, LLC and to ISE, LLC's obligations under the Act and the rules thereunder and shall not take any actions which he or she knows or reasonably should have known would interfere with the effectuation of any decisions by the LLC Board relating to ISE, LLC's regulatory functions or which would adversely affect the ability of ISE, LLC to carry out ISE, LLC's responsibilities under the Act. 58 Further, all confidential information pertaining to the self-regulatory function of ISE, LLC contained in books and records of ISE, LLC that shall come into the possession of ISE Holdings shall not be made available to any Persons other than to officers, directors, employees, and agents of ISE Holdings that have a reasonable need to know, be retained in confidence by such parties, and not be used for any commercial purposes. 59 56 Holdings Certificate, Article Twelfth and Article Fifteenth. ISE Holdings also shall take reasonable steps necessary to cause its agents to cooperate with ISE, LLC and the Commission with respect to such agents' activities related to ISE, LLC. Holdings Certificate, Article Fifteenth. 57 Holdings Certificate, Article Twelfth. 58 Holdings Bylaws, section 1.5. ISE Holdings also will take reasonable steps necessary to cause its officers, directors, and employees, prior to accepting a position as such, to consent in writing to the applicability to them of Article Twelfth, Article Thirteenth, and Article Fourteenth of Holdings Certificate and sections 1.4 and 1.5 of Holdings Bylaws, as applicable, with respect to their activities related to ISE, LLC. Holdings Bylaws, section 1.6. 59 Holdings Certificate, Article Thirteenth. The Commission believes that any non-regulatory use of such information would be for a commercial purpose. In addition, ISE Holdings' books and records will be subject at all times to inspection and copying by the Commission and are deemed to be the books and records of ISE, LLC for purposes of and subject to oversight pursuant to the Act, in each case to the extent they relate to the exchange business of ISE, LLC. 60 ISE Holdings and its officers, directors, employees, and agents will also submit to the jurisdiction of the U.S. Federal courts, the Commission, and ISE, LLC with respect to activities relating to ISE, LLC. 61 60 Holdings Certificate, Article Fourteenth. 61 Holdings Bylaws, section 1.4. ISE Holdings and its officers, directors, employees, and agents will also maintain an agent for service of process in the U.S. *Id.* The Holdings Certificate and Holdings Bylaws also provide that any amendment to the Holdings Certificate or Holdings Bylaws must be submitted by the Holdings Board to the LLC Board. If the LLC Board determines that such amendment is required, under section 19 of the Act 62 and the rules promulgated thereunder, to be filed with, or filed with and approved by, the Commission, then such amendment will not become effective until filed with, or filed and approved by, the Commission. 63 The Commission finds that these provisions are consistent with the Act, and that they will support ISE, LLC's ability to fulfill its self-regulatory obligations and administer and comply with the requirements of the Act. 62 15 U.S.C. 78s. 63 Holdings Certificate, Article Sixteenth, and Holdings Bylaws, section 10.1. Under section 20(a) of the Act, 64 any person with a controlling interest in ISE, LLC would be jointly and severally liable with, and to the same extent that, ISE, LLC is liable under any provision of the Act, unless the controlling person acted in good faith and did not directly or indirectly induce the act or acts constituting the violation or cause of action. In addition, section 20(e) of the Act 65 creates aiding and abetting liability for any person who knowingly provides substantial assistance to another person in violation of any provision of the Act or rule thereunder. Further, section 21C of the Act 66 authorizes the Commission to enter a cease-and-desist order against any person who has been a “cause of” a violation of any provision of the Act through an act or omission that the person knew or should have known would contribute to the violation. These provisions are applicable to ISE Holdings' dealings with ISE, LLC. 64 15 U.S.C. 78t(a). 65 15 U.S.C. 78t(e). 66 15 U.S.C. 78 *u* -3. D. Governance of ISE, LLC The corporate governance provisions of the LLC Agreement and LLC Constitution are substantively the same as the current the ISE, Inc. Amended Certificate and ISE, Inc. Amended Constitution, respectively. Although ISE Holdings will have sole voting control over ISE, LLC (except for certain matters relating to Exchange Rights), 67 the management and administration of ISE, LLC will be carried out by the LLC Board and by the executive officers of ISE, LLC. 68 Among other officers, ISE, LLC will have a President and CEO and a Chief Regulatory Officer that will manage the business and affairs of ISE, LLC, subject to the oversight of the ISE, LLC Board. 69 67 *See supra* note 19. 68 *See* LLC Constitution, Section 5.1(a). *See also* LLC Agreement, Section 5.1. 69 In some cases this management will be subject to the approval of ISE Holdings as the sole LLC member. ISE, Inc. represents that, under Delaware law, certain events such as the sale of all or substantially all of the assets, merger, or liquidation of ISE, LLC may require the approval of ISE Holdings. The initial officers of ISE, LLC will be the individuals currently serving as the officers of ISE, Inc. Further, ISE, LLC will have a Finance & Audit Committee, a Corporate Governance Committee, and a Compensation Committee, all of which will be governed by charters. LLC Constitution, sections 5.4, 5.5, and 5.6. As is the case currently with respect to the board of directors of ISE, Inc. (“ISE, Inc. Board”), the LLC Board will be composed of 15 members, 70 eight of whom will be Non-Industry Directors, 71 six of whom will be Exchange Directors, and the CEO of ISE, LLC. 72 Each year, the Nominating Committee 73 will nominate the Exchange Directors and the Corporate Governance Committee will nominate the Non-Industry Directors. 74 At the first annual meeting of the sole LLC member (ISE Holdings) and holders of Exchange Rights, and at each subsequent annual meeting, ISE Holdings will elect the eight Non-Industry Directors (rather than the holders of the Class A Common Stock, as is currently the case), and holders of Exchange Rights will elect the six Exchange Directors, to serve until the next annual meeting or until their successors are elected and qualified. 75 The Chairman of the LLC Board will be a Non-Industry Director who is elected by the LLC Board. 70 ISE, Inc. proposes that the number of members of the LLC Board may only be changed by the LLC Board with the approval of the affirmative vote of the holders of two-thirds of the then outstanding Exchange Rights. LLC Constitution, section 3.2. 71 *See* LLC Constitution, section 3.2(b), for the definition of “Non-Industry Director” and section 13.1(w), for the definition of “non-industry representative.” These definitions are the same as the current definitions. *See* ISE, Inc. Amended Constitution, sections 3.2(b) and 14.1(q), respectively. Further, as is currently the case, at least 2 Non-Industry Directors will be required to be public representatives. *See* LLC Constitution, Section 3.2(b)(iv). 72 LLC Agreement, section 5.2, and LLC Constitution, section 3.2(b). ISE, Inc. represents that the initial members of the LLC Board were the individuals serving as directors of ISE, Inc. on the date of formation of ISE, LLC. 73 The proposed Nominating Committee will be composed of one representative of PMM Rights, one representative of CMM Rights, and one representative of EAM Rights. *See* LLC Constitution, section 5.3(a). This composition is essentially the same as the current Nominating Committee of ISE, Inc. *See* ISE, Inc. Amended Constitution, section 5.3(a). 74 The proposed Corporate Governance Committee will be composed of three, and no more than eight, Non-Industry Directors. *See* LLC Constitution, section 5.4. This is the same as the current Corporate Governance Committee. *See* ISE, Inc. Amended Constitution, section 5.4. 75 LLC Constitution, section 3.2(c). As is currently the case, each director of ISE, LLC will hold office for a two-year term, except the CEO of ISE, LLC will hold office for a one-year term or such earlier time as such person no longer serves as the CEO. The directors, other than the CEO, will be divided into two classes. 76 If there is a vacancy on the LLC Board, the vacancy will be filled by the LLC Board, and the person chosen to fill the vacancy will serve until the expiration of the term of office of the class to which such person was elected. No Exchange Director may serve more than three consecutive terms, and, after a two-year hiatus, may again be eligible to serve as an Exchange Director. 77 76 At each annual meeting, the successors of the class of directors whose term expires at that meeting will be elected to hold office for a term expiring at the annual meeting held in the second year following the year of their election and until their successors are elected and qualified. 77 LLC Constitution, section 3.2(e). ISE, Inc. did not impose term limits on Non-Industry Directors, and ISE, LLC does not propose to do so, though the ISE, LLC Corporate Governance Committee may determine whether and how to provide for such term limits at a later time. Holders of Exchange Rights also may continue to nominate Exchange Directors by petition. ISE, Inc. represents that the petition process following the Reorganization will be substantially similar to the petition process currently in place for ISE, Inc. However, for purposes of determining whether a person has been nominated for election by petition by the requisite percentage set forth in the LLC Constitution, no Member, alone or together with its affiliates, may account for more than 50 percent of the signatures of the holders of outstanding Exchange Rights of the series entitled to elect such person. 78 78 LLC Constitution, section 3.10. Petitions submitted for nominees for Exchange Directors of ISE, LLC also will not be required to contain all the information that is required to be disclosed pursuant to Regulation 14A under the Act, because ISE, LLC will not be subject to the proxy requirements under the Act. The proposed governance structure of ISE, LLC following the Reorganization will be substantially the same as the governance structure currently in place for ISE, Inc. The Commission therefore finds that proposed governance structure, including the composition of the LLC Board and the selection of directors, continue to satisfy the requirements of the Act, including sections 6(b)(1) and 6(b)(3) of the Act. 79 79 15 U.S.C. 78f(b)(1) and 78f(b)(3). The Commission notes that it is in the process of reviewing a range of governance issues relating to SROs, including possible steps to strengthen the framework for, and ways to improve the transparency of, the governance procedures of all SROs and has proposed rules in furtherance of this goal. Depending upon the results of the proposed rules, ISE, LLC may be required to make changes to further strengthen its governance structure. The Commission also believes that the LLC Board should continue to monitor and evaluate ISE, LLC's governance structure and processes on an ongoing basis, and propose further changes as appropriate. *See* Securities Exchange Act Release No. 50699 (November 18, 2004), 69 FR 71126 (December 8, 2004). III. Conclusion For the foregoing reasons, the Commission finds that the proposed rule change, as amended, is consistent with the Act and rules and regulations thereunder applicable to the national securities exchange. *It is therefore ordered,* pursuant to section 19(b)(2) of the Act 80 that the proposed rule change (SR-ISE-2006-04), as amended, is approved, and Amendment No. 3 is approved on an accelerated basis. 80 15 U.S.C. 78s(b)(2). 81 17 CFR 200.30-3(a)(12). For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 81 Nancy M. Morris, Secretary. [FR Doc. E6-6411 Filed 4-27-06; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-53697; File No. SR-NASDAQ-2006-006] Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing of Proposed Rule Change and Amendment No. 1 Thereto Regarding Restrictions on Affiliation Between Nasdaq and Its Members April 21, 2006. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) 1 and Rule 19b-4 thereunder, 2 notice is hereby given that on April 5, 2006, The NASDAQ Stock Market LLC (“Nasdaq”), filed with the Securities and Exchange Commission (“Commission” or “SEC”) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by Nasdaq. On April 12, 2006, Nasdaq filed Amendment No. 1 to the proposed rule change. 3 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 In Amendment No. 1, Nasdaq proposed additional revisions to Nasdaq Rule 9270 regarding settlement procedures. I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change Nasdaq proposes to establish a rule to govern affiliations between Nasdaq and its members and to make conforming changes to its disciplinary proceedings. Nasdaq will implement the proposed rule change immediately upon approval by the Commission. The text of the proposed rule change is below. Proposed new language is in *italics;* proposed deletions are in brackets. 2140. Restrictions on Affiliation *(a) Except as provided in paragraph (b):* *(1) Nasdaq or any entity with which it is affiliated shall not, directly or indirectly, acquire or maintain an ownership interest in, or engage in a business venture with, a Nasdaq member or an affiliate of a Nasdaq member in the absence of an effective filing under Section 19(b) of the Act; and* *(2) A Nasdaq member shall not be or become an affiliate of Nasdaq, or an affiliate of an entity affiliated with Nasdaq, in the absence of an effective filing under Section 19(b) of the Act.* *The term “affiliate” shall have the meaning specified in Rule 12b-2 under the Act; provided, however, that for purposes of this Rule, one entity shall not be deemed to be an affiliate of another entity solely by reason of having a common director. The term “business venture” means an arrangement under which
(A)Nasdaq or an entity with which it is affiliated, and
(B)a Nasdaq member or an affiliate of a Nasdaq member, engage in joint activities with an expectation of shared profit and a risk of shared loss from common entrepreneurial efforts.* *(b) Nothing in this rule shall prohibit, or require a filing under Section 19(b) of the Act, for:* *(1) A Nasdaq member or an affiliate of a Nasdaq member acquiring or holding an equity interest in The Nasdaq Stock Market, Inc. that is permitted by the ownership limitations contained in Nasdaq Rule 2130, or* *(2) Nasdaq or an entity affiliated with Nasdaq acquiring or maintaining an ownership interest in, or engaging in a business venture with, an affiliate of a Nasdaq member if:* *(A) there are information barriers between the member and Nasdaq and its facilities, such that the member* *(i) Will not be provided an informational advantage concerning the operation of Nasdaq and its facilities, and will not be provided changes or improvements to the trading system that are not available to the industry generally or other Nasdaq members;* *(ii) Will not have any knowledge in advance of other Nasdaq members of proposed changes, modifications, or improvements to the operations or trading systems of Nasdaq and its facilities, including advance knowledge of Nasdaq filings pursuant to Section 19(b) of the Act;* *(iii) Will be notified of any proposed changes, modifications, or improvements to the operations or trading systems of Nasdaq and its facilities in the same manner as other Nasdaq members are notified; and* *(iv) Will not share employees, office space, or databases with Nasdaq or its facilities, The Nasdaq Stock Market, Inc., or any entity that is controlled by The Nasdaq Stock Market, Inc.; and* *(B) Nasdaq's Regulatory Oversight Committee certifies, on an annual basis, to the Director of the Division of Market Regulation that Nasdaq has taken all reasonable steps to implement the requirements of this rule and is in compliance therewith.* 9268. Decision of Hearing Panel or Extended Hearing Panel (a)-(d) No change.
(e)Appeal or Review. *(1)* If not timely appealed pursuant to Rule 9311 or timely called for review pursuant to Rule 9312, the majority decision shall constitute final disciplinary action of Nasdaq for purposes of SEC Rule 19d-1(c)(1). *(2) The majority decision with respect to a Nasdaq member that is an affiliate of Nasdaq within the meaning of Rule 2140 shall constitute final disciplinary action of Nasdaq for purposes of SEC Rule 19d-1(c)(1) and may not be appealed pursuant to Rule 9311 or called for review pursuant to Rule 9312.* 9269. Default Decisions (a)-(c) No change.
(d)Final Disciplinary Action of Nasdaq; Effectiveness of Sanctions. *(1)* If a default decision is not appealed pursuant to Rule 9311 or called for review pursuant to Rule 9312 within 25 days after the date the Office of Hearing Officers serves it on the Parties, the default decision shall become the final disciplinary action of Nasdaq for purposes of SEC Rule 19d-1(c)(1). Unless otherwise provided in the default decision, the sanctions shall become effective on a date to be determined by Nasdaq Regulation staff, except that a bar or expulsion shall become effective immediately upon the default decision becoming the final disciplinary action of Nasdaq. The decision shall be served on a Respondent by courier, facsimile or other means reasonably likely to obtain prompt service when the sanction is a bar or an expulsion. *(2) A default decision with respect to a Nasdaq member that is an affiliate of Nasdaq within the meaning of Rule 2140 shall constitute final disciplinary action of Nasdaq for purposes of SEC Rule 19d-1(c)(1) and may not be appealed pursuant to Rule 9311 or called for review pursuant to Rule 9312.* 9270. Settlement Procedure (a)-(d) No change.
(e)If a Respondent makes an offer of settlement and the Department of Enforcement or the Department of Market Regulation does not oppose it, the offer of settlement is uncontested. If an offer of settlement is determined to be uncontested by the Department of Enforcement or the Department of Market Regulation before a hearing on the merits has begun, the Department of Enforcement or the Department of Market Regulation shall transmit the uncontested offer of settlement and a proposed order of acceptance to the Nasdaq Review Council ( *or to the Office of Disciplinary Affairs, in the case of a Respondent that is an affiliate of Nasdaq within the meaning of Rule 2140* ) with its recommendation. If an offer of settlement is determined to be uncontested by the Department of Enforcement or the Department of Market Regulation after a hearing on the merits has begun, the Department of Enforcement or the Department of Market Regulation shall transmit the offer of settlement and a proposed order of acceptance to the Hearing Panel or, if applicable, the Extended Hearing Panel for acceptance or rejection. If accepted by the Hearing Panel or, if applicable, Extended Hearing Panel, the offer of settlement and the order of acceptance shall be forwarded to the Nasdaq Review Council ( *or to the Office of Disciplinary Affairs, in the case of a Respondent that is an affiliate of Nasdaq within the meaning of Rule 2140* ) to accept or reject.
(1)No change.
(2)Before an offer of settlement and an order of acceptance shall become effective, they shall be submitted to and accepted by the Nasdaq Review Council *or the Office of Disciplinary Affairs.* The Review Subcommittee [or the Office of Disciplinary Affairs] may accept *or reject* such offer of settlement and order of acceptance or refer them to the Nasdaq Review Council for acceptance or rejection by the Nasdaq Review Council. [The Review Subcommittee may reject such offer of settlement and order of acceptance or refer them to the Nasdaq Review Council for acceptance or rejection by the Nasdaq Review Council.] *In the case of a Respondent that is an affiliate of Nasdaq within the meaning of Rule 2140, the offer of settlement and order of acceptance shall be accepted or rejected by the Office of Disciplinary Affairs and shall not be referred to the Nasdaq Review Council.*
(3)No change.
(f)Contested Offers of Settlement. If a Respondent makes an offer of settlement and the Department of Enforcement or the Department of Market Regulation opposes it, the offer of settlement is contested. When the Department of Enforcement or the Department of Market Regulation opposes an offer of settlement, the Respondent's written offer and the Department of Enforcement's or the Department of Market Regulation's written opposition shall be submitted to a Hearing Panel or, if applicable, an Extended Hearing Panel. The Hearing Panel or, if applicable, the Extended Hearing Panel, may order the Department of Enforcement or the Department of Market Regulation and the Respondent to attend a settlement conference.
(1)If a contested offer of settlement is approved by the Hearing Panel or, if applicable, Extended Hearing Panel, the Hearing Officer shall draft an order of acceptance of the offer of settlement. The order of acceptance shall make findings of fact, including a statement of the rule, regulation, or statutory provision violated, and impose sanctions consistent with the terms of the offer of settlement. The offer of settlement, any written opposition thereto, and the order of acceptance shall be forwarded to the Nasdaq Review Council ( *or to the Office of Disciplinary Affairs, in the case of a Respondent that is an affiliate of Nasdaq within the meaning of Rule 2140* ) to accept or reject.
(2)Before an offer of settlement and order of acceptance shall become effective, they shall be submitted to, and accepted by, the Nasdaq Review Council *or the Office of Disciplinary Affairs.* The Review Subcommittee may accept or reject such offer of settlement and order of acceptance or refer them to the Nasdaq Review Council for acceptance or rejection by the Nasdaq Review Council. *In the case of a Respondent that is an affiliate of Nasdaq within the meaning of Rule 2140, the offer of settlement and order of acceptance shall be accepted or rejected by the Office of Disciplinary Affairs and shall not be referred to the Nasdaq Review Council.*
(3)If the offer of settlement and order of acceptance are accepted by the *Office of Disciplinary Affairs, the* Nasdaq Review Council or the Review Subcommittee, the Chief Regulatory Officer shall issue the order and notify the Office of Hearing Officers.
(g)No change.
(h)Rejection of Offer of Settlement. If an uncontested offer of settlement or an order of acceptance is rejected by the Hearing Panel or, if applicable, the Extended Hearing Panel, the Review Subcommittee, *the Office of Disciplinary Affairs* , or the Nasdaq Review Council, the Respondent shall be notified in writing and the offer of settlement and proposed order of acceptance shall be deemed withdrawn. If a contested offer of settlement or an order of acceptance is rejected by the Hearing Panel or, if applicable, the Extended Hearing Panel, the Review Subcommittee, *the Office of Disciplinary Affairs* , or the Nasdaq Review Council, the Respondent shall be notified in writing and the offer of settlement and proposed order of acceptance shall be deemed withdrawn. The rejected offer and proposed order of acceptance shall not constitute a part of the record in any proceeding against the Respondent making the offer.
(i)No change.
(j)No Prejudice from Rejected Offer of Settlement. If an offer of settlement is rejected by a Hearing Panel or, if applicable, an Extended Hearing Panel, the Review Subcommittee, *the Office of Disciplinary Affairs* , or the Nasdaq Review Council, the Respondent shall not be prejudiced by the offer, which may not be introduced into evidence in connection with the determination of the issues involved in the pending complaint or in any other proceeding. 9311. Appeal by Any Party; Cross-Appeal
(a)Time to File Notice of Appeal. A Respondent or the Department of Enforcement or the Department of Market Regulation may file a written notice of appeal within 25 days after service of a decision issued pursuant to Rule 9268 or Rule 9269; *provided, however, that a decision with respect to a Respondent that is an affiliate of Nasdaq within the meaning of Rule 2140 may not be appealed to the Nasdaq Review Council.* (b)-(f) No change. 9312. Review Proceeding Initiated by Nasdaq Review Council
(a)Call for Review.
(1)Rule 9268 Decision. A decision issued pursuant to Rule 9268 may be subject to a call for review by any member of the Nasdaq Review Council or, pursuant to authority delegated from the Nasdaq Review Council, by any member of the Review Subcommittee. A decision issued pursuant to Rule 9268 shall be subject to a call for review within 45 days after the date of service of the decision. If called for review, such decision shall be reviewed by the Nasdaq Review Council.
(2)Rule 9269 Decision. A default decision issued pursuant to Rule 9269 shall be subject to a call for review by the Chief Regulatory Officer, on his or her own motion within 25 days after the date of service of the decision. If called for review, such decision shall be reviewed by the Nasdaq Review Council. *(3) Decision Regarding Affiliate of Nasdaq* . *Notwithstanding anything herein to the contrary, a decision with respect to a member that is an affiliate of Nasdaq within the meaning of Rule 2140 may not be called for review by the Nasdaq Review Council.* (b)-(d) No change. 9351. Discretionary Review by Nasdaq Board
(a)Call for Review by Director. A Director may call a disciplinary proceeding for review by the Nasdaq Board if the call for review is made within the period prescribed in paragraph
(b)*; provided, however, that a decision with respect to a member that is an affiliate of Nasdaq within the meaning of Rule 2140 may not be called for review.* (b)-(e) No change. 9360. Effectiveness of Sanctions Unless otherwise provided in the decision issued under Rule 9349 or Rule 9351, a sanction (other than a bar, an expulsion, or a permanent cease and desist order) specified in a decision constituting final disciplinary action of Nasdaq for purposes of SEC Rule 19d-1(c)(1) shall become effective on a date to be determined by Nasdaq staff *(or the Hearing Panel, Extended Hearing Panel, or Office of Disciplinary Affairs in the case of a decision with respect to an affiliate of Nasdaq within the meaning of Rule 2140)* . A bar, an expulsion, or a permanent cease and desist order shall become effective upon service of the decision constituting final disciplinary action of Nasdaq, unless otherwise specified therein. Nasdaq shall serve the decision on a Respondent by courier, facsimile or other means reasonably likely to obtain prompt service when the sanction is a bar, an expulsion, or a permanent cease and desist order. 9523. Acceptance of Member Regulation Recommendations and Supervisory Plans by Consent Pursuant to SEC Rule 19h-1 (a)-(b) No change.
(c)If the disqualified member, sponsoring member, and/or disqualified person execute the letter consenting to the supervisory plan, it shall be submitted to Nasdaq Regulation by the Department of Member Regulation with a proposed Notice under SEC Rule 19h-1, where required. Nasdaq Regulation shall forward the supervisory plan and proposed Notice under SEC Rule 19h-1, if any, to the Chairman of the Statutory Disqualification Committee, acting on behalf of the Nasdaq Review Council *(or to the Office of Disciplinary Affairs in the case of a supervisory plan with respect an affiliate of Nasdaq within the meaning of Rule 2140)* . The Chairman of the Statutory Disqualification Committee may accept or reject the recommendation of the Department of Member Regulation and the supervisory plan or refer them to the Nasdaq Review Council for acceptance or rejection by the Nasdaq Review Council *, and the Office of Disciplinary Affairs may accept or reject the recommendation of the Department of Member Regulation and the supervisory plan.*
(d)If the recommendation and supervisory plan is accepted by the Nasdaq Review Council, [or] the Chairman of the Statutory Disqualification Committee *, or the Office of Disciplinary Affairs* , it shall be deemed final and, where required, the proposed Notice under SEC Rule 19h-1 will be filed by Nasdaq. If the recommendation and supervisory plan are rejected by the Chairman of the Statutory Disqualification Committee, [or] the Nasdaq Review Council *, or the Office of Disciplinary Affairs* , Nasdaq Regulation may take any other appropriate action with respect to the disqualified member, sponsoring member, and/or disqualified person. If the recommendation and supervisory plan are rejected, the disqualified member, sponsoring member, and/or disqualified person shall not be prejudiced by the execution of the letter consenting to the supervisory plan under subparagraph
(a)and the letter may not be introduced into evidence in any proceeding. 9524. Nasdaq Review Council Consideration
(a)Hearing Panel Consideration.
(1)Appointment of Hearing Panel. When the disqualified member, sponsoring firm, or applicant requests a hearing, the Nasdaq Review Council or the Review Subcommittee shall appoint a Hearing Panel composed of two or more members, who shall be current or former members of the Nasdaq Review Council or the Statutory Disqualification Committee or former Directors *(provided, however, that current members of the Nasdaq Review Council shall not serve on a Hearing Panel with respect to an affiliate of Nasdaq within the meaning of Rule 2140)* . The Hearing Panel shall conduct a hearing and recommend a decision on the request for relief. (2)-(9) No change.
(10)Recommendation. On the basis of the record, the Hearing Panel shall present a recommended decision in writing on the request for relief to the Statutory Disqualification Committee. After considering the record and recommendation of the Hearing Panel, the Statutory Disqualification Committee shall present its recommended decision in writing to the Nasdaq Review Council. *Notwithstanding the foregoing, with respect to a Nasdaq member that is an affiliate of Nasdaq within the meaning of Rule 2140, the Hearing Panel shall prepare a final decision meeting the requirements of Rule 9524(b)(2), which shall not be reviewed by the Statutory Disqualification Committee or the Nasdaq Review Council, and may not be called for review by the Nasdaq Board pursuant to Rule 9525* .
(b)Decision. (1)-(2) No change.
(3)Issuance of Decision After Expiration of Call for Review Period. The Nasdaq Review Council shall provide its proposed written decision to the Nasdaq Board. The Nasdaq Board may call the eligibility proceeding for review pursuant to Rule 9525. If the Nasdaq Board does not call the eligibility proceeding for review, the proposed written decision of the Nasdaq Review Council shall become final, and the Nasdaq Review Council shall serve its written decision on the disqualified member, sponsoring member, and/or disqualified person, as the case may be, and the Department of Member Regulation pursuant to Rules 9132 and 9134. *In the case of a decision with respect to a Nasdaq member that is an affiliate of Nasdaq within the meaning of Rule 2140, the decision of the Hearing Panel shall become final without being provided to the Nasdaq Board, and the Hearing Panel shall serve its written decision.* The decision shall constitute final action of Nasdaq, unless the Nasdaq Review Council remands the eligibility proceeding. A decision to deny re-entry or continued association shall be effective immediately. A decision to approve shall be effective after the Commission issues an acknowledgment letter or, in cases involving Commission ordered sanctions, an order. 9559. Hearing Procedures for Expedited Proceedings Under the Rule 9550 Series (a)-(p) No change.
(q)Call for Review by the Nasdaq Review Council.
(1)The Nasdaq Review Council's Review Subcommittee may call for review a decision issued under the Rule 9550 Series within 21 days after receipt of the decision from the Office of Hearing Officers *; provided, however, that a decision under the Rule 9550 Series with respect to a Nasdaq member that is an affiliate of Nasdaq within the meaning of Rule 2140 shall constitute final disciplinary action of Nasdaq for purposes of SEC Rule 19d-1(c)(1) and may not be called for review pursuant to Rule 9559* . Rule 9313(a) is incorporated by reference. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, Nasdaq included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it had received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. Nasdaq has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose In connection with its registration as a national securities exchange, 4 Nasdaq has agreed to propose a rule to regulate affiliation between Nasdaq and its members, and to limit in certain respects Nasdaq's regulatory authority with respect to members with which it may become affiliated. The purpose of the rule is to guard against any possibility that Nasdaq may exercise, or forebear to exercise, regulatory authority with respect to an affiliated member in a manner that is influenced by commercial considerations, to provide an opportunity for Commission review of certain proposed affiliations, and to ensure that certain affiliated members do not receive advantaged access to information in comparison with unaffiliated members. Nasdaq believes that the proposed rule will provide added assurance of regulatory integrity without subjecting Nasdaq and its affiliates to unwarranted restrictions on their commercial activities. 4 Securities Exchange Act Release No. 53128 (January 13, 2006), 71 FR 3550 (January 23, 2006) (File No. 10-131). In general, the proposed rule provides that Nasdaq must file a proposed rule change with the SEC before Nasdaq or an entity with which it is affiliated acquires or maintains an ownership interest in, or engages in a business venture with, a Nasdaq member or an affiliate of a Nasdaq member. 5 The rule defines “affiliate” with reference to Rule 12b-2 under the Act, 6 which provides that if one person controls, is controlled by, or is under common control another person, the persons are affiliates. The proposed rule would help to implement what Nasdaq perceives to be emerging Commission policy with regard to appropriate activities for member broker-dealers that are affiliated with self-regulatory organizations (“SROs”). For example, although the Commission's order to establish the Archipelago Exchange (“ArcaEx”) as a facility of the Pacific Exchange (“PCX”) allowed ArcaEx to affiliate itself with various broker-dealers for the purpose of introducing orders to ArcaEx and routing them to other trading venues, 7 the Commission's order with respect to the acquisition of PCX by Archipelago Holdings (“Arca Holdings”) mandated that Arca Holdings divest its ownership of PCX members engaged in activities other than outbound routing. 8 5 As used in the rule, the term “affiliate” includes natural persons, but the term “entity,” when used to describe an affiliate, excludes natural persons. 6 17 CFR 240.12b-2. 7 Securities Exchange Act Release No. 44983 (October 25, 2001), 66 FR 55225 (November 1, 2001) (SR-PCX-00-25). 8 Securities Exchange Act Release No. 52497 (September 22, 2005), 70 FR 56949 (September 29, 2005) (SR-PCX-2005-90). Nasdaq's proposed rule would make it clear that in a case where Nasdaq proposes an acquisition of, or a merger or business venture with a Nasdaq member, an SEC filing will be required. In order to make it clear that the obligation to avoid affiliations that have not been filed is imposed by the rule both on Nasdaq and its members, moreover, the rule provides that a Nasdaq member shall not be or become an affiliate of Nasdaq, or an affiliate of any entity affiliated with Nasdaq, without an SEC filing. The term “business venture,” as used in the rule, is defined as an arrangement under which Nasdaq or an entity with which it is affiliated, on the one hand, and a Nasdaq member or affiliate thereof, on the other hand, engage in joint activities with an expectation of shared profit and a risk of shared loss from common entrepreneurial efforts. Thus, the term does not include, and the proposed rule does not regulate, contracts with members or their affiliates to provide goods, products, or services for consideration, including, but not limited to, asset or stock purchase agreements that do not result in ongoing ties with a member or its affiliates, 9 credit or debt facilities, licenses of intellectual property, contracts for investment banking, financial advisory, or consulting services, 10 or the provision of transaction services or data to a broker-dealer member or products or services to a listed company that is or that owns a member broker-dealer. 9 For example, if Nasdaq acquired a non-member subsidiary of a member in a transaction that did not result in an ongoing affiliation with the member, the transaction would not be regulated by the rule. 10 In some cases, such contracts may involve sharing of confidential information with a member in circumstances where a member acts as a fiduciary for Nasdaq or one of its affiliates. The member would be required take measures to prevent such information from being misused, and a failure to do so would constitute a violation of Nasdaq rules, including, depending on the circumstances, Rule 2110 (Standards of Commercial Honor and Principles of Trade); Rule 2120 (Use of Manipulative, Deceptive, or Other Fraudulent Devices); and Rule 3010 (Supervision). *See also* NASD Notice to Members 91-45: NASD/NYSE Joint Memo on Chinese Wall Policies and Procedures (June 21, 1991) (describing NASD policies with regard to preventing misuse of confidential information by NASD member firms). The rule limits possible expansive interpretations of the term “affiliate” by stipulating that one entity is not deemed to be an affiliate of another entity solely by virtue of having a common director. For example, if one of the member representative directors of Nasdaq elected by the Nasdaq membership is also a director of a Nasdaq member, that member would not be deemed to be an affiliate of Nasdaq solely because of the common director. In addition, the rule should not be construed to regulate in any manner the selection of directors or standing committee members of Nasdaq, The Nasdaq Stock Market, Inc. (“Nasdaq Holdco”), or their affiliates, provided such selections are conducted in accordance with applicable provisions of governing corporate documents ( *e.g.* , Nasdaq's limited liability company agreement and by-laws or Nasdaq Holdco's certificate of incorporation and bylaws). In circumstances where an SEC filing is required, the rule may, in appropriate cases, permit a filing to be submitted on an immediately effective basis under Section 19(b)(3)(A) of the Act 11 and Rule 19b-4(f) thereunder. 12 For example, in cases where a proposed affiliation or business venture would not result in the establishment of a “facility” of Nasdaq within the meaning of Section 3 of the Act, 13 a filing to establish rules to govern the operation of the affiliate or business venture would not be required or appropriate. Rather, in such circumstances, Nasdaq would expect to engage in informal consultation with the Division of Market Regulation and/or members of the Commission, and would then submit a filing to amend Rule 2140 itself, to establish that the affiliation or business venture could exist as an exception to the rule. Depending on the circumstances, such a filing might be submitted on an immediately effective basis. 11 15 U.S.C. 78s(b)(3)(A). 12 17 CFR 240.19b-4(f). 13 15 U.S.C. 78c. There are also several important exceptions to the general filing requirement of the rule. First, the rule would not require a filing for transactions that result in a Nasdaq member acquiring or holding an interest in Nasdaq Holdco that is consistent with Nasdaq Rule 2130. Rule 2130 provides that “[n]o member or person associated with a member shall be the beneficial owner of greater than twenty percent (20%) of the then-outstanding voting securities of The Nasdaq Stock Market, Inc.” “Beneficial ownership” is defined with reference to Nasdaq Holdco's certificate of incorporation, which in turn provides that a person shall be deemed the “beneficial owner” of, shall be deemed to have “beneficial ownership” of and shall be deemed to “beneficially own” any securities:
(i)Which such person or any of such person's affiliates is deemed to beneficially own, directly or indirectly, within the meaning of Rule 13d-3 under the Act * * *; 14
(ii)subject to certain narrow exceptions described in the certificate of incorporation, which such person or any of such person's affiliates has the right to acquire or to vote pursuant to any agreement, arrangement, or understanding; or
(iii)subject to certain narrow exceptions described in the certificate of incorporation, which are beneficially owned, directly or indirectly, by any other person and with respect to which such person or any of such person's affiliates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of such securities. Thus, although a person may be construed to have an ownership interest in the Nasdaq Holdco under a range of circumstances, a member's ownership interest would be permissible under Rule 2130 and would not require an SEC filing pursuant to Rule 2140 as long as the total ownership interest of the member constituted 20% or less of the then outstanding voting securities of Nasdaq. For example, one of Nasdaq's current investors, Silver Lake Partners, is affiliated with Instinet, LLC (“Instinet”), a registered broker-dealer. If Instinet becomes a Nasdaq member, the rule would not be construed to restrict its activities in any respect as long as
(i)the ownership interest of Nasdaq Holdco imputed to it remains under 20%, and
(ii)its affiliation with Nasdaq arises from its ownership interest. Nasdaq would, however, be required to submit a filing if Nasdaq itself acquired an ownership interest in Instinet or entered into a business venture with it (unless another exception to Rule 2140 applied). Similarly, the rule would not require a filing with respect to an acquisition of a Nasdaq member by a Nasdaq Holdco stockholder, as long as the Nasdaq member's resulting beneficial ownership interest in Nasdaq Holdco was under 20%. 14 SEC Rule 13d-3, 17 CFR 240.13d-3, in turn provides that a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares voting power or investment power. Finally, the rule provides that no filing is required for Nasdaq or an entity affiliated with Nasdaq acquiring or maintaining an ownership interest in, or engaging in a business venture with, an affiliate of a Nasdaq member if there are information barriers between the member and Nasdaq and its facilities, such that the member
(i)will not be provided an informational advantage concerning the operation of Nasdaq and its facilities, and will not be provided changes or improvements to the trading system that are not available to the industry generally or other Nasdaq members;
(ii)will not have knowledge in advance of other members of proposed changes, modifications, or improvements to the operations or trading systems of Nasdaq and its facilities, including advance knowledge of Nasdaq filings pursuant to Section 19(b) of the Act;
(iii)will be notified of any proposed changes, modifications, or improvements to the operations or trading systems of Nasdaq and its facilities in the same manner as other Nasdaq members are notified; and
(iv)will not share employees, office space, or databases with Nasdaq or its facilities, Nasdaq Holdco, or any entity that is controlled by Nasdaq Holdco. 15 Nasdaq's Regulatory Oversight Committee must certify, on an annual basis, to the Director of the Division of Market Regulation that Nasdaq has taken all reasonable steps to implement the foregoing requirements with respect to any affiliate to which they apply and is in compliance therewith. 15 Nasdaq will not construe these limitations to bar an employee of an affiliated member from serving on a Nasdaq advisory committee, such as the Quality of Markets Committee, since
(i)such committee members are required to sign confidentiality agreements with regard to information received through committee service, and
(ii)the committee member employed by the affiliate would receive information provided through committee service at the same time as other committee members. This exception is aimed at circumstances in which Nasdaq or an affiliated entity acquires, or enters into a business venture with, an affiliate of a Nasdaq member, and Nasdaq erects information barriers between the member and Nasdaq and its facilities. Thus, Nasdaq ensures that the member does not receive any advantage as a result of its affiliation. The proposed rule change also modifies Nasdaq's rules regarding disciplinary proceedings to provide that Nasdaq disciplinary actions with regard to a member that is an affiliate of Nasdaq (including litigated and default decisions, contested and uncontested settlements, statutory disqualification proceedings, and expedited proceedings) may not be appealed to the Nasdaq Review Council or called for review by the Nasdaq Review Council or the Nasdaq Board of Directors. Rather, after an initial decision with regard to such members is reached by the NASD under the terms of Nasdaq's regulatory services agreement with NASD, the member could appeal directly to the Commission. These changes to the disciplinary process would apply to all affiliated members, including members whose affiliations did not require a filing pursuant to Rule 2140. 2. Statutory Basis Nasdaq believes that the proposed rule change, as amended, is consistent with the provisions of Section 6 of the Act, 16 in general, and with Section 6(b)(5) of the Act, 17 in particular, in that it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. 16 15 U.S.C. 78f. 17 15 U.S.C. 78f(b)(5). B. Self-Regulatory Organization's Statement on Burden on Competition Nasdaq does not believe that the proposed rule change, as amended, will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act, as amended. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others Written comments were neither solicited nor received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 35 days of the date of publication of this notice in the **Federal Register** or within such longer period
(i)as the Commission may designate up to 90 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding, or
(ii)as to which Nasdaq 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-NASDAQ-2006-006 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-NASDAQ-2006-006. 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 Nasdaq. 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 publicly available. All submissions should refer to File Number SR-NASDAQ-2006-006 and should be submitted on or before May 19, 2006. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 18 18 17 CFR 200.30-3(a)(12). Nancy M. Morris, Secretary. [FR Doc. E6-6376 Filed 4-27-06; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-53699; File No. SR-NASD-2006-050] Self-Regulatory Organizations; National Association of Securities Dealers, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Extend Operation of NASD's Alternative Display Facility as a Temporary Pilot April 21, 2006. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) 1 and Rule 19b-4 thereunder, 2 notice is hereby given that on April 18, 2006, the National Association of Securities Dealers, Inc. (“NASD”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I and II below, which Items have been prepared by NASD. NASD has filed the proposed rule change as a “non-controversial” rule change pursuant to Section 19(b)(3)(A) of the Act 3 and Rule 19b-4(f)(6) thereunder, 4 which renders it effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 15 U.S.C. 78s(b)(3)(A). 4 17 CFR 240.19b-4(f)(6). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change NASD is proposing to extend for nine months, to January 26, 2007, the operation of NASD's Alternative Display Facility (“ADF”) on a pilot basis. The ADF pilot program, as approved by the Commission on July 24, 2002, and extended on April 7, 2003, January 26, 2004, October 21, 2004, and July 20, 2005, will expire on April 26, 2006. The pilot permits members to quote and trade only Nasdaq-listed securities on or through the ADF. Below is the text of the proposed rule change. Proposed new language is in *italics* ; proposed deletions are in [brackets]. 4000A. NASD Alternative Display Facility 4100A. General NASD Alternative Display Facility (“ADF”) is the facility to be operated by NASD on a nine-month pilot basis for members that choose to quote or effect trades in Nasdaq securities (“ADF-eligible securities”) otherwise than on Nasdaq or on an exchange. The ADF will collect and disseminate quotations, compare trades, and collect and disseminate trade reports. Those NASD members that utilize ADF systems for quotation or trading activities must comply with the Rule 4000A, Rule 5400 and Rule 6000A Series, as well as all other applicable NASD Rules. The ADF pilot will expire on [April 26, 2006] *January 26, 2007* . II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, NASD included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. NASD has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose On July 24, 2002, the Commission approved SR-NASD-2002-97, 5 which authorizes NASD to operate the ADF on a pilot basis for nine months. NASD subsequently filed for immediate effectiveness proposed rule changes SR-NASD-2003-067 to extend the pilot until January 26, 2004; 6 SR-NASD-2004-012 to extend the pilot until October 26, 2004; 7 SR-NASD-2004-160 to extend the pilot until July 26, 2005; 8 and SR-NASD-2005-092 to extend the pilot until April 26, 2006. 9 As described in detail in SR-NASD-2001-90, the ADF is a quotation collection, trade comparison, and trade reporting facility developed by NASD in accordance with the Commission's SuperMontage Approval Order 10 and in conjunction with Nasdaq's anticipated registration as a national securities exchange. 11 In addition, since the Commission gave its initial approval to the ADF pilot, NASD has filed several other ADF-related rule change proposals that have been incorporated into the operation and administration of the pilot. 12 5 Securities Exchange Act Release No. 46249 (July 24, 2002), 67 FR 49822 (July 31, 2002). 6 Securities Exchange Act Release No. 47633 (April 10, 2003), 68 FR 19043 (April 17, 2003). 7 Securities Exchange Act Release No. 49131 (January 27, 2004), 69 FR 5229 (February 3, 2004). 8 Securities Exchange Act Release No. 50601 (October 28, 2004), 69 FR 64611 (November 5, 2004). 9 Securities Exchange Act Release No. 52122 (July 25, 2005), 70 FR 44133 (August 1, 2005). 10 Securities Exchange Act Release No. 43863 (January 19, 2001), 66 FR 8020 (January 26, 2001). 11 Securities Exchange Act Release No. 44396 (June 7, 2001), 66 FR 31952 (June 13, 2001). 12 On January 30, 2003, NASD filed proposed rule change SR-NASD-2003-009 to revise the transaction and quotation-related fees applicable to ADF activity during the pilot program. The rule change proposal became effective upon filing, with an implementation date of February 17, 2003. On January 6, 2004, the Commission granted accelerated approval to SR-NASD-2003-145, a proposal to amend the ADF pilot rules to give jurisdiction to a three-member subcommittee of NASD's Market Regulation Committee to review system outage determinations under NASD Rule 4300A(f) and excused withdrawal denials under NASD Rule 4619A. The rule change proposal became effective contemporaneous with the Commission's approval. On December 4, 2003, NASD filed for immediate effectiveness a proposed rule change to amend Rule 4613A(c) to clarify that NASD may suspend quotations in the ADF displayed by any market participant, including an ECN, that are no longer reasonably related to the prevailing market. Additionally, NASD filed with the Commission three other rule change proposals. On March 12, 2004, the Commission approved SR-NASD-2003-175, a proposal to repeal Rule 4613A(e)(1), which required members that display priced quotations for a Nasdaq security in two or more market centers to display the same priced quotations for that security in each market center. On August 18, 2004, the Commission approved SR-NASD-2004-002, a proposed rule change to amend NASD Rule 4300A to require an ADF Market Participant to provide advance written notice to NASD's ADF Market Operations before denying electronic access to its ADF quote to any NASD member in the limited circumstances where a broker-dealer fails to pay contractually obligated costs for access to the Market Participant's quotations. On March 10, 2005, the Commission approved SR-NASD-2004-159, a proposed rule change to establish Rule 4400A, which gives NASD authority to receive and review complaints against ADF Market Participants that allege denial of direct or indirect access pursuant to NASD Rule 4300A. The ADF ultimately should provide market participants the ability to quote and trade Nasdaq and exchange-listed securities. The current ADF pilot program, however, permits operation of the ADF with respect to Nasdaq securities only. This is because several regulatory issues relating to the trading of exchange-listed securities on the ADF have not been resolved. The ADF has been operating successfully during the pilot period. In the SuperMontage approval order, the Commission stated that the ADF met the conditions set forth in that order to provide an alternative quotation collection, trade comparison, and trade reporting facility. NASD believes that ADF has since continued to honor those conditions. Meanwhile, certain issues related to trading exchange-listed securities—and by extension, approval of the operation of ADF on a permanent basis—remain unresolved. Accordingly, NASD believes it is appropriate to extend the pilot period for ADF trading in Nasdaq securities for the shorter of nine months or until approval of the ADF on a permanent basis. The proposed rule change will become effective upon filing, will be implemented at the close of business on April 26, 2006, and will expire on January 26, 2007. 2. Statutory Basis NASD believes that the proposed rule change is consistent with the provisions of Section 15A(b)(6) of the Act, 13 which requires, among other things, that NASD rules must be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination among persons engaged in regulating, clearing, settling, processing information and facilitating transactions in securities, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. In addition, NASD believes that the proposed rule change is consistent with Section 15A(b)(6) of the Act because it does not permit unfair discrimination between customers, issuers, brokers, or dealers, fix minimum profits, impose any schedule or fix rates of commissions, allowances, discounts, or other fees to be charged by members, or regulate matters not related to the purposes of the Act or the administration of NASD. 13 15 U.S.C. 78 *o* -3(b)(6). B. Self-Regulatory Organization's Statement on Burden on Competition NASD does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others Written comments were neither solicited nor received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the forgoing rule change does not:
(1)Significantly affect the protection of investors or the public interest;
(2)impose any significant burden on competition; and
(3)become operative for 30 days after the date of this filing, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A) of the Act 14 and Rule 19b-4(f)(6) thereunder. 15 14 15 U.S.C. 78s(b)(3)(A). 15 17 CFR 240.19b-4(f)(6). A proposed rule change filed under 19b-4(f)(6) normally may not become operative prior to 30 days after the date of filing. 16 However, Rule 19b-4(f)(6)(iii) 17 permits the Commission to designate a shorter time if such action is consistent with the protection of investors and the public interest. 18 NASD has requested that the Commission waive the 30-day pre-operative delay, and the Commission hereby grants that request. 19 The Commission believes that waiving the 30-day pre-operative delay is consistent with the protection of investors and in the public interest. This action will prevent the benefits provided by the current ADF pilot program from lapsing. 16 17 CFR 240.19b-4(f)(6)(iii). 17 *Id* . 18 In addition, Rule 19b-4(f)(6)(iii) requires that a self-regulatory organization submit to the Commission written notice of its intent to file the proposed rule change, along with a brief description and text of the proposed rule change, at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The Commission has decided to waive the five-day pre-filing notice requirement. 19 For the purposes only of waiving the 30-day pre-operative delay, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. *See* 15 U.S.C. 78c(f). At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the Act. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov* . Please include File No. SR-NASD-2006-050 on the subject line. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, Station Place, 100 F Street, NE., Washington, DC 20549-1090. All submissions should refer to File No. SR-NASD-2006-050. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room. Copies of such filing will also be available for inspection and copying at the principal office of NASD. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File No. SR-NASD-2006-050 and should be submitted on or before May 19, 2006. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 20 20 17 CFR 200.30-3(a)(12). Nancy M. Morris, Secretary. [FR Doc. E6-6375 Filed 4-27-06; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-53696; File No. SR-NASD-2006-047] Self-Regulatory Organizations; National Association of Securities Dealers, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Modify the NASD Rule 4500 Series To Describe an Application of Nasdaq's Authority To Waive Fees and To Make Certain Technical Changes April 21, 2006. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) 1 and Rule 19b-4 thereunder, 2 notice is hereby given that on April 4, 2006, the National Association of Securities Dealers, Inc. (“NASD”), through its subsidiary, The Nasdaq Stock Market, Inc. (“Nasdaq”), filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by Nasdaq. Nasdaq has designated the proposed rule change as “constituting a stated policy, practice, or interpretation with respect to the meaning, administration, or enforcement of an existing rule” under Section 19(b)(3)(A)(i) of the Act 3 and Rule 19b-4(f)(1) thereunder, 4 which renders the proposal effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 15 U.S.C. 78s(b)(3)(A)(i). 4 17 CFR 240.19b-4(f)(1). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change Nasdaq proposes to modify the NASD Rule 4500 series to describe an application of Nasdaq's authority to waive fees and to make certain technical corrections. Nasdaq will implement the proposed rule change immediately. The text of the proposed rule change is available at NASD, at the Commission, and at NASD's Web site ( *http://www.nasdaq.com/about/RuleFilingsListings/ Filings_Listing.stm* ). II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, Nasdaq included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. Nasdaq has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose In January 2005, the Commission approved a proposed rule change by Nasdaq to eliminate the entry and application fees under NASD Rules 4510(a) and 4520(a) for companies listed on a national securities exchange (an “exchange”) that transfer their listing to the Nasdaq National Market or the Nasdaq Capital Market. 5 This filing was based on Nasdaq's belief that assessing initial listing fees against issuers that have already paid fees to list on another market imposes a burden on the competition between exchange markets and markets other than exchange markets, a competition that is one of the central goals of the national market system. 6 In approving that proposed rule change, the Commission stated its belief that such a program “may ultimately benefit issuers and investors because competition among listing markets has the potential to enhance the quality of services that listing markets provide. 7 5 Securities Exchange Act Release No. 51004 (January 10, 2005), 70 FR 2917 (January 18, 2005) (SR-NASD-2004-140). 6 15 U.S.C. 78k-1. 7 See footnote 5, *supra* . Based on recent experience with companies considering switching from other markets, Nasdaq has determined that companies are also reluctant to switch markets during the beginning and middle of the year, because they will have already paid a non-refundable annual listing fee to another market. As a result, Nasdaq proposes to allow issuers a credit in the pro-rated amount of any annual listing fees paid to the other exchange, for the period of time after the transfer. This credit will be used to offset the annual fee otherwise payable to Nasdaq for that period under NASD Rule 4510(c), 4510(d), or 4520(c), and cannot exceed that fee. In light of a switching issuer's prior payment to another market, Nasdaq believes that providing such a credit to switching issuers is entirely consistent with an equitable allocation of listing fees. Further, Nasdaq notes that it does not expect the financial impact of this proposed rule change to be material to Nasdaq, as issuers will only receive a one year credit and, even with the proposed rule change in place, a change in listing venue is a major step for an issuer, and therefore Nasdaq does not expect that the number of switching issuers in a given time frame will be sufficient to have a material effect on Nasdaq's financial resources or commitment to its regulatory oversight of the listing process or its regulatory programs. Further, Nasdaq anticipates that it will make up any short-term costs through the long-term receipt of applicable listing fees. In addition, Nasdaq proposes to codify that a credit is available to an issuer that previously paid a dual listing annual fee and determines to cease its dual listing and remain listed on Nasdaq. As in the case of a company transferring between the Nasdaq National Market and the Nasdaq Capital Market, 8 such an issuer will be allowed a credit against the annual fee otherwise due in the year of the transfer for the portion of the dual list annual fee attributable to the period of time following the transfer. 8 NASD Rules 4510(c)(3), 4510(d)(6), and 4520(c)(5). While NASD Rules 4e510(c)(2), 4510(d)(3), and 4520(c)(3) provide Nasdaq with the discretion to waive all or part of the annual listing fees, Nasdaq has determined to codify the existence of these credits given their applicability to any issuer switching from an exchange or terminating a dual listing. Nasdaq also proposes to modify the text of NASD Rules 4510(c)(5) and 4520(c)(8) to clarify that the annual fee for an ADR or closed-end fund that is dually listed on the Nasdaq National Market, and a closed-end fund that is dually listed on the Nasdaq Capital Market, is $15,000, the same as for any other dually listed security. Finally, Nasdaq proposes to make technical corrections to more clearly describe the termination of a dual listing, correct an error in the numbering of the subparagraphs of NASD Rule 4520(a), correct a reference in NASD Rule 4520(c)(8), and to delete IM-4500-2 and IM-4500-3, which no longer have any applicability. 2. Statutory Basis Nasdaq believes that the proposed rule change is consistent with the provisions of Section 15A of the Act, 9 in general, and with Sections 15A(b)(5) and
(6)of the Act, 10 in particular, in that it is designed to provide an equitable allocation of reasonable dues, fees, and charges among members and issuers and other persons using any facility or system which NASD operates or controls, and to remove impediments to and perfect the mechanism of a free and open market and a national market system. The proposed rule change will assure that an issuer is not required to pay duplicative fees to multiple markets, thereby removing an impediment to issuers transferring from another market to Nasdaq. 9 15 U.S.C. 78 *o* -3. 10 15 U.S.C. 78 *o* -3(b)(5) and (6). B. Self-Regulatory Organization's Statement on Burden on Competition Nasdaq does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act, as amended. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others Written comments were neither solicited nor received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The proposed rule change has become effective pursuant to Section 19(b)(3)(A)(i) of the Act 11 and Rule 19b-4(f)(1) thereunder, 12 in that the proposed rule change constitutes a stated policy, practice, or interpretation with respect to the meaning, administration, or enforcement of an existing rule of NASD. At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. 11 15 U.S.C. 78s(b)(3)(A)(i). 12 17 CFR 240.19b-4(f)(1). IV. Solicitation of Comments Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov* . Please include File Number SR-NASD-2006-047 on the subject line. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-NASD-2006-047. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room. Copies of such filing also will be available for inspection and copying at the principal office of NASD. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-NASD-2006-047 and should be submitted on or before May 19, 2006. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 13 13 17 CFR 200.30-3(a)(12). Nancy M. Morris, Secretary. [FR Doc. E6-6410 Filed 4-27-06; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-53703; File No. SR-NYSEArca-2006-09] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to NYSE Arca Equities Inc. Rule 5.1(c) April 21, 2006. Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) 1 and Rule 19b-4 thereunder, 2 notice is hereby given that on April 13, 2006, NYSE Arca, Inc. (“NYSE Arca” 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. The Exchange filed the proposal pursuant to section 19(b)(3)(A) of the Act 3 and Rule 19b-4(f)(6) thereunder, 4 which renders the proposal effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 15 U.S.C. 78s(b)(3)(A). 4 17 CFR 240.19b-4(f)(6). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change NYSE Arca, through its wholly owned subsidiary NYSE Arca Equities, Inc. (“NYSE Arca Equities”), is proposing, for the reasons and time period set forth in this proposal, that an independent accounting firm not prepare a report—for submission to the Commission—on Archipelago Holdings, Inc.'s (“Archipelago Holdings”) compliance with the applicable NYSE Arca Equities’ listing standards, as required by NYSE Arca Equities Rule 5.1(c). II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The NYSE Arca 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 NYSE Arca Equities Rule 5.1(c) requires, among other things, that if a security of an affiliate of NYSE Arca Equities or any entity that operates and/or owns a trading system or facility of NYSE Arca is listed pursuant to the rules of NYSE Arca Equities, then, once a year, an independent accounting firm shall review the listing standards for the subject security to ensure that the issuer is in compliance with NYSE Arca's Equities' listing requirements, and a copy of the report shall be forwarded promptly to the Commission (“Annual Report”). 5 In August 2004, Archipelago Holdings” common stock was listed on NYSE Arca pursuant to the rules of NYSE Arca Equities. Because Archipelago Holdings owns and operates NYSE Arca Marketplace (formerly known as the Archipelago Exchange), a facility of NYSE Arca (formerly known as the Pacific Exchange), it was subject to the requirements of Rule 5.1(c), including the Annual Report. 6 5 NYSE Arca Equities Rule 5.1(c) also requires that NYSE Arca Equities submit a monthly report to the Commission that describes its monitoring, among other things, of
(i)trading in listed securities subject to this rule, and
(ii)compliance by such listings with applicable listing standards. NYSE Arca Equities submitted such reports related to the listing of Archipelago Holdings on a timely basis for each month that Archipelago Holdings was listed and subject to this rule, including the report for March 2006, which was submitted on April 10, 2006. 6 *See* Securities Exchange Act Release No. 50171 (August 9, 2004), 69 FR 50427 (August 16, 2004) (order approving NYSEArca Equities Rule 5.1(c)) (“Approval Order”). On March 7, 2006, as a result of the merger between Archipelago Holdings and the New York Stock Exchange Inc., which was completed that day, Archipelago Holdings' common stock was delisted from NYSE Arca. Accordingly, for the following reasons, NYSE Arca, by this filing, is proposing that the Annual Report related to Archipelago Holdings' listing on NYSE Arca for the period August 2004 through March 2006 not be completed: 1. The Annual Report would relate to an entity (Archipelago Holdings) that is no longer publicly traded or listed on NYSE Arca, and as such, policy considerations that underlie the requirement in NYSE Arca Equities Rule 5.1(c) for an Annual Report as set forth in the Commission's Approval Order—that it would provide additional assurance that all listed securities comply with listing standards and help serve to minimize or eliminate potential conflicts of interest that may exist as a result of the listing on NYSE Arca of the security of an affiliate of NYSE Arca Equities or an entity that operates and/or owns a trading system or facility of the Exchange 7 —are no longer applicable; 8 7 A discussion of these conflicts is contained in the Approval Order. 8 Telephone conversation between A. David Strandberg III, Director, NYSE Arca Equities, and Heather A. Seidel, Senior Special Counsel, Commission, Division of Market Regulation (“Division”), on April 21, 2006. 2. NYSE Arca Equities otherwise fully complied with its Rule 5.1(c) during this time period, including the preparation and submission to the Commission of the monthly reports also required by Rule 5.1(c); and 3. The costs and burden related to preparation of the Annual Report would be substantial in relation to any benefits. Notwithstanding this filing, NYSE Arca Equities Rule 5.1(c) remains in full force and effect, and is not revised in any way by this filing. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with section 6(b) of the Act 9 in general and furthers the objectives of section 6(b)(5) 10 in particular, in that the policy and practical considerations underlying NYSE Arca Equities Rule 5.1(c) are no longer applicable, that NYSE Arca Equities otherwise complied with Rule 5.1(c), and the costs and burden related to compliance would be substantial in relation to any benefits. 11 9 15 U.S.C. 78f(b). 10 15 U.S.C. 78f(b)(5). 11 At the request of the Exchange, the Commission staff amended the statutory basis section to make it consistent with the Form 19b-4 as filed by the Exchange. Telephone conversation between A. David Strandberg III, Director, NYSE Arca Equities, and Natasha Cowen, Attorney, Commission, Division, on April 19, 2006 (“April 19 Telephone Conversation”). B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that the proposal 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 Written comments on the proposed rule change were neither solicited nor received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing proposed rule change does not:
(i)Significantly affect the protection of investors or the public interest;
(ii)Impose any significant burden on competition; and
(iii)Become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest, it has become effective pursuant to section 19(b)(3)(A) of the Act 12 and Rule 19b-4(f)(6) thereunder. 13 As required under Rule 19b-4(f)(6)(iii) under the Act, 14 the Exchange provided the Commission with written notice of its intent to file the proposed rule change, along with a brief description and text of the proposed rule change, at least five business days prior to the date of the filing of the proposed rule change. 12 15 U.S.C. 78s(b)(3)(A). 13 17 CFR 240.19b-4(f)(6). April 19 Telephone Conversation. 14 17 CFR 240.19b-4(f)(6)(iii). 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-NYSEArca-2006-09 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-NYSEArca-2006-09. 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 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-NYSEArca-2006-09 and should be submitted on or before May 19, 2006. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 15 15 17 CFR 200.30-3(a)(12). Nancy M. Morris, Secretary. [FR Doc. E6-6414 Filed 4-27-06; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-53690; File No. SR-PCX-2005-122] Self-Regulatory Organizations; Pacific Exchange, Inc. (n/k/a NYSE Arca, Inc.); Order Granting Accelerated Approval of Proposed Rule Change and Amendment No. 1 Thereto and Notice of Filing and Order Granting Accelerated Approval to Amendment No. 2 to the Proposed Rule Change Relating to Amending Exchange Delisting Rules to Conform to Recent Amendments to Commission Rules Regarding Removal From Listing and Withdrawal From Registration April 20, 2006. I. Introduction On October 24, 2005, the Pacific Exchange, Inc. (n/k/a NYSE Arca, Inc.) (“Exchange”) filed with the Securities and Exchange Commission (“SEC” or “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 amend Exchange delisting rules to conform to recent amendments to Commission rules regarding removal from listing and withdrawal from registration. 3 On January 6, 2006, the Exchange filed Amendment No. 1 to the proposed rule change. 4 The proposed rule change, as amended by Amendment No. 1, was published for comment in the **Federal Register** on March 23, 2006. 5 On March 21, 2006, the Exchange filed Amendment No. 2 to the proposed rule change. 6 No comments were received regarding the proposal. This order approves the proposed rule change, as amended, on an accelerated basis, publishes notice of Amendment No. 2 to the proposed rule change, and grants accelerated approval to Amendment No. 2. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 On March 6, 2006, the Exchange filed with the Commission a proposed rule change, which was effective upon filing, to change the name of the Exchange, as well as several other related entities, to reflect the recent acquisition of the Pacific Exchange, Inc. by Archipelago Holdings, Inc. (“Archipelago”) and the merger of NYSE with Archipelago. *See* Securities Exchange Act Release No. 53615 (April 7, 2006), 71 FR 19226 (April 13, 2006) (File No. SR-PCX-2006-24). All references herein have been changed to reflect the aforementioned rule change. 4 In Amendment No. 1, the Exchange made changes to its rule text to clarify that the delisting procedures set forth therein apply to instances where the Exchange is considering delisting for reasons other than those set forth in amended Rule 12d2-2(a) under the Act. 5 *See* Securities Exchange Act Release No. 53497 (March 16, 2006), 71 FR 14763. 6 In Amendment No. 2, the Exchange amended its rule text to clarify that an issuer that is below the continued listing policies and standards of the Exchange and seeks to voluntarily apply to withdraw a class of securities from listing must disclose that it is no longer eligible for continued listing in its statement of material facts relating to the reason for withdrawal from listing, its public press release, and its Web site notice. In addition, the Exchange revised its rule text to clarify that applications to voluntarily withdraw a class of securities from listing must be filed on Form 25 and that the previous rule text would be operative until April 23, 2006. II. Description of the Proposed Rule Change Section 12 of the Act 7 and Rule 12d2-2 thereunder 8 (“SEC Rule 12d2-2”) govern the process for the delisting and deregistration of securities listed on national securities exchanges. Recent amendments to SEC Rule 12d2-2 (“amended SEC Rule 12d2-2”) and other Commission rules require the electronic filing of revised Form 25 9 on the Commission's Electronic Data Gathering, Analysis, and Retrieval (“EDGAR”) system by exchanges and issuers for all delistings, other than delistings of standardized options and securities futures, which are exempted. 10 7 15 U.S.C. 78 *l* . 8 17 CFR 240.12d2-2. 9 17 CFR 249.25. 10 *See* Securities Exchange Act Release No. 52029 (July 14, 2005), 70 FR 42456 (July 22, 2005) (“SEC Rule 12d2-2 Approval Order”). In the case of exchange-initiated delistings, amended SEC Rule 12d2-2(b) states that a national securities exchange may file an application on Form 25 to strike a class of securities from listing and/or withdraw the registration of such securities, in accordance with its rules, if the rules of such exchange, at a minimum, provide for:
(i)Notice to the issuer of the exchange's decision to delist its securities;
(ii)An opportunity for appeal to the exchange's board of directors, or to a committee designated by the board; and
(iii)Public notice of the national securities exchange's final determination to remove the security from listing and/or registration, by issuing a press release and posting notice on its Web site. Public notice must be disseminated no fewer than 10 days before the delisting becomes effective pursuant to amended SEC Rule 12d2-2(d)(1), and must remain posted on its Web site until the delisting is effective. NYSE Arca Equities Rule 5.5(m) provides the applicable procedures when the Exchange considers removing securities from listing. The Exchange proposes to amend NYSE Arca Equities Rule 5.5(m) to comply with new requirements set forth in amended SEC Rule 12d2-2(b). The provisions set forth in current NYSE Arca Equities Rule 5.5(m), which provide for notification to the issuer in the event that the Exchange determines to delist the issuer's securities and the right to appeal the Exchange's determination, satisfy the minimum provisions set forth in amended SEC Rule 12d2-2(b)(1)(i)-(ii). The Exchange's rules do not currently provide for the mandated public notice, and accordingly, proposed NYSE Arca Equities Rule 5.5(m)(3) would require the Exchange to provide public notice, pursuant to amended SEC Rule 12d2-2(b)(iii). Specifically, the Exchange proposes to state that, in the event the Exchange makes a final decision to remove the security of an issuer from listing, the Exchange will take the following actions, no fewer than ten
(10)days before the delisting becomes effective:
(i)An application on Form 25 will be submitted by the Exchange to the Commission to strike the security from listing and registration in accordance with Rule 12d2-2;
(ii)a copy of such application will be provided to the issuer in accordance with Rule 12d2-2; and
(iii)public notice of the Exchange's final determination to delist the security will be made via a press release and posting on the Exchange's website until the delisting is effective. In connection with this proposed change, the Exchange also proposes to make reference to the above public notice procedures in the appeal procedures discussion in new NYSE Arca Equities Rule 5.5(m)(2)(f). In addition, the Exchange proposes to state in NYSE Arca Equities Rule 5.5(m)(1)(b) that the Exchange, after making its initial determination to delist a security, will notify the issuer in writing, if possible, rather than by telephone. NYSE Arca Equities Rule 5.4(b) sets forth the Exchange procedures that apply when an issuer proposes to withdraw a security from listing on the Exchange. The Exchange proposes to amend NYSE Arca Equities Rule 5.4(b) to provide that the Exchange, upon receiving notification by an issuer of its intent to withdraw its securities from listing and registration, will post notice of such intent on the Exchange's Web site by the next business day and will continue to post the notice until the delisting becomes effective. These proposed changes reflect the requirements set forth in amended SEC Rule 12d2-2(c). The Exchange also proposes a new requirement that an issuer submit to the Exchange a copy of the Form 25 that it has filed with the Commission no later than the date of such filing. In addition, the Exchange proposes to amend NYSE Arca Equities Rule 5.4(b) to clarify that the issuer, when proposing to withdraw its securities from listing and registration, must submit to the Exchange a “letter from an authorized officer of the issuer providing the specific reasons cited by the board of directors of the issuer for the proposed withdrawal,” rather than a “statement setting forth in detail the reasons for the proposed withdrawal and the facts in support thereof.” The Exchange also proposes to amend NYSE Arca Equities Rule 5.4(b) to state that an issuer seeking to voluntarily apply to withdraw a class of securities from listing on NYSE Arca that has received notice from NYSE Arca, pursuant to Rule 5.3, Rule 5.5 or otherwise, that it is below NYSE Arca's continued listing policies and standards, or that is aware that it is below such continued listing policies and standards notwithstanding that it has not received such notice from NYSE Arca, must disclose that it is no longer eligible for continued listing (identifying the specific continued listing policies and standards with which it does not comply) in:
(i)Its statement of all material facts relating to the reasons for withdrawal from listing provided to NYSE Arca along with written notice of its determination to withdraw from listing required by amended SEC Rule 12d2-2(c)(2)(ii); and
(ii)its public press release and Web site notice required by amended SEC Rule 12d2-2(c)(2)(iii). 11 11 *See* Amendment No. 2, *supra* note 6. Finally, the Exchange has made changes in its rules to clarify that the Form 25 serves as the application to remove a security from listing and/or registration and to specify that the proposed changes will be effective as of April 24, 2006 as required by amended SEC Rule 12d2-2. III. Commission's Findings and Order Granting Accelerated Approval of Proposed Rule Change and Amendment Nos. 1 and 2 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 12 and, in particular, the requirements of section 6 of the Act. 13 Specifically, as discussed below, the Commission finds that the proposal, as amended, is consistent with section 6(b)(5) of the Act, 14 which requires, in part, that the rules of an exchange be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, and processing information with respect to, and facilitating transactions in securities, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. Further, as noted in more detail below, the changes being adopted by the Exchange meet the requirements of amended SEC Rule 12d2-2. 12 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). 13 15 U.S.C. 78f. 14 15 U.S.C. 78f(b)(5). A. Exchange Delisting Amended SEC Rule 12d2-2(b) states that a national securities exchange may file an application on Form 25 to strike a class of securities from listing and/or withdraw the registration of such securities, in accordance with its rules, if the rules of such exchange, at a minimum, provide for notice to the issuer of the exchange's decision to delist, opportunity for appeal, and public notice of the exchange's final determination to delist. The Commission believes that the Exchange's current rules and proposal comply with the dictates of amended SEC Rule 12d2-2(b). The Exchange's rules currently provide the requisite issuer notice as well as an opportunity for appeal to the Board Appeals Committee, a committee appointed by the Board of Directors. 15 In addition, the proposed rule change will provide for public notice of the Exchange's final determination to remove the security from listing and/or registration. The Exchange also proposes to state in NYSE Arca Equities Rule 5.5(m)(1)(b) that the Exchange, after making its initial determination that a security should be delisted, will notify the issuer in writing, if possible, of the decision rather than by telephone. The Commission notes that this provision is a clarification of the Exchange's current practices. Overall, the proposed Exchange amendments should ensure that investors have adequate notice of an exchange delisting and is consistent with the protection of investors under section 6(b)(5) of the Act. 16 15 *See* NYSE Arca Equities Rule 5.5(m)(2)(c). 16 15 U.S.C. 78f(b). B. Issuer Voluntary Delisting The Exchange proposes to set forth in its Exchange rules the general requirements of amended SEC Rule 12d2-2(c) regarding issuer voluntary delisting. Accordingly, the Exchange proposes to amend NYSE Arca Equities Rule 5.4(b) to provide that the Exchange, upon receiving notification by an issuer of its intent to withdraw its securities from listing and registration, will post notice of such intent on the Exchange's Web site by the next business day and will continue to post the notice until the delisting becomes effective. The Commission believes that the proposal will better inform issuers of the requirements for voluntary delisting of their securities under the Exchange's rules and Federal securities laws. The proposal also sets forth a new requirement not in amended SEC Rule 12d2-2 that would require the issuer to submit to the Exchange a copy of the Form 25 that the issuer has filed with the Commission no later than the date of such filing. The Commission believes that this requirement will allow the Exchange to be fully informed of the filing of a Form 25 and be prepared to take timely action to delist the security in accordance with the filing of the Form. In addition, the Exchange proposes to revise NYSE Arca Equities Rule 5.4(b) to require an issuer proposing to withdraw a security from listing to submit to the Exchange a letter from an authorized officer of the issuer providing the specific reasons cited by the board of directors of the issuer for the proposed withdrawal. The Commission believes that this requirement may help ensure that the decision to delist a security voluntarily has been well-considered by the issuer's board. The Exchange also proposes to amend NYSE Arca Equities Rule 5.4(b) to state that an issuer seeking to voluntarily apply to withdraw a class of securities from listing on the Exchange that has received notice from the Exchange, pursuant to Rule 5.3, Rule 5.5 or otherwise, that it is below the Exchange's continued listing policies and standards, or that is aware that it is below such continued listing policies and standards notwithstanding that it has not received such notice from the Exchange, must disclose that it is no longer eligible for continued listing (identifying the specific continued listing policies and standards with which it does not comply) in:
(i)Its statement of all material facts relating to the reasons for withdrawal from listing provided to the Exchange along with written notice of its determination to withdraw from listing required by amended SEC Rule 12d2-2(c)(2)(ii); and
(ii)its public press release and Web site notice required by amended SEC Rule 12d2-2(c)(2)(iii). 17 The Commission believes that this requirement will allow shareholders to be informed and aware that the issuer has failed to meet Exchange listing standards and is voluntarily delisting with the consent of the Exchange. Issuers will therefore not be permitted to delist voluntarily without public disclosure of their noncompliance with Exchange listing standards. 17 *See* Amendment No. 2, *supra* note 6. C. Accelerated Approval of Proposed Rule Change and Amendment Nos. 1 and 2 Pursuant to section 19(b)(2) of the Act, 18 the Commission may not approve any proposed rule change, or amendment thereto, prior to the 30th day after the date of publication of notice of the filing thereof, unless the Commission finds good cause for so doing and publishes its reasons for so finding. The Commission hereby finds good cause for approving the proposed rule change, as amended, prior to the 30th day after publishing notice of the proposed rule change and Amendment Nos. 1 and 2 in the **Federal Register** . In the SEC Rule 12d2-2 Approval Order, the Commission stated that the compliance date of the amendments is April 24, 2006. 19 In addition, no comments were received on the proposal, as originally published. 20 Accelerated approval of the proposal, as amended, would enable the Exchange's amended rules to become operative by the compliance date set forth by the Commission. 18 15 U.S.C. 78s(b)(2). 19 *See* SEC Rule 12d2-2 Approval Order, *supra* note 10. 20 *See* note 5, *supra* . The Commission further finds good cause for approving Amendment No. 2 to the proposal, prior to the 30th day after publishing notice in the **Federal Register** . In Amendment No. 2, the Exchange amended its rule text to clarify that an issuer seeking to voluntarily delist that has received notice from the Exchange that it is below continued listing policies and standards, or that is aware that it is below such continued listing policies and standards notwithstanding that it has not received such notice from the Exchange, must disclose its status. As previously discussed, the revisions made to the proposal in Amendment No. 2 will allow shareholders to be informed and aware that the issuer has failed to meet Exchange listing standards and is voluntarily delisting with the consent of the Exchange. The Commission believes that granting accelerated approval of Amendment No. 2 will permit the Exchange to implement this new provision as expeditiously as possible, to the benefit of investors. In addition, the Commission believes that these revisions do not raise new regulatory issues. Accordingly, pursuant to section 19(b)(2) of the Act, 21 the Commission finds good cause to approve the proposed rule change, as amended, prior to the thirtieth day after notice of the proposed rule change and Amendment Nos. 1 and 2 are published in the **Federal Register** . 21 *Id* . IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning Amendment No. 2, including whether Amendment No. 2 is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov.* Please include File Number SR-PCX-2005-122 on the subject line. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-PCX-2005-122. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-PCX-2005-122 and should be submitted on or before May 19, 2006. V. Conclusion *It is therefore ordered,* pursuant to section 19(b)(2) of the Act, 22 that the proposed rule change (File No. SR-PCX-2005-122), as amended by Amendment Nos. 1 and 2, is approved on an accelerated basis. 22 15 U.S.C. 78s(b)(2). 23 17 CFR 200.30-3(a)(12). For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 23 Nancy M. Morris, Secretary. [FR Doc. E6-6413 Filed 4-27-06; 8:45 am] BILLING CODE 8010-01-P TENNESSEE VALLEY AUTHORITY Meeting of the Regional Resource Stewardship Council AGENCY: Tennessee Valley Authority (TVA). ACTION: Notice of meeting. SUMMARY: TVA will convene a meeting of the Regional Resource Stewardship Council (Regional Council) to obtain views and advice on the topic of TVA's stewardship program infrastructure and emergency preparedness and coordination programs. Under the TV Act, TVA is charged with the proper use and conservation of natural resources for the purpose of fostering the orderly and proper physical, economic and social development of the Tennessee Valley region. The Regional Council was established to advise TVA on its natural resource stewardship activities. Notice of this meeting is given under the Federal Advisory Committee Act, 5 U.S.C. App. 2, (FACA). The meeting agenda includes the following:
(1)Update on TVA Board governance.
(2)TVA Stewardship infrastructure. 30 TVA emergency preparedness and external coordination.
(3)Current issues, including Bear Creek Dam.
(4)Public comments.
(5)Council discussion and advice. The Regional Council will hear opinions and views of citizens by providing a public comment session. The public comment session will be held from 9:30 a.m. to 10:30 a.m. EDT on Thursday, May 11, 2006. Citizens who wish to express views and opinions on the topic of TVA's recreation strategy may do so during the Public Comment portion of the agenda. Public Comments participation is available on a Comment portion of the agenda. Public Comments participation is available on a first-come, first-served basis. Speakers addressing the Regional Council are requested to limit their remarks to no more than 5 minutes. Persons wishing to speak are requested to register at the door and are then called on by the Regional Council Chair during the public comment period. Handout materials should be limited to one printed page. Written comments are also invited and may be mailed to the Regional Resource Stewardship Council, Tennessee Valley Authority, 400 West Summit Hill Drive, WT 11A, Knoxville, Tennessee 37902. DATES: The meeting will be held on Wednesday, May 10, 2006, from 8 a.m. to 4 p.m. and on Thursday, May 11, 2006, from 8 a.m. to 12:15 p.m. Eastern daylight Time. ADDRESSES: The meeting will be held in the auditorium at the Tennessee Valley Authority headquarters, 400 West Summit Hill Drive, Knoxville, Tennessee 37902, and will be open to the public. Anyone needing special access or accommodations should let the contact below know at least a week in advance. FOR FURTHER INFORMATION CONTACT: Sandra L. Hill, 400 West Summit Hill Drive, WT 11A, Knoxville, Tennessee 37902,
(865)632-2333. Dated: April 17, 2006. Kathryn J. Jackson, Executive Vice President, River System Operations & Environment, Tennessee Valley Authority. [FR Doc. 06-4020 Filed 4-27-06; 8:45 am]
Connectionstraces to 8
5 references not yet in our index
  • 17 CFR 240.19
  • 7 CFR 240.19
  • 15 USC 78
  • 17 CFR 240.12
  • 17 CFR 240.13
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Notices
Notice of meeting
U.S.C.§ 78s
U.S.C.§ 78f
U.S.C.§ 552
C.F.R.§ 200.30-3
C.F.R.§ 249.25
U.S.C.§ 78c
U.S.C.§ 78t
U.S.C.§ 78k–1
Cite17 CFR 240.19
Cite7 CFR 240.19
Cite15 USC 78
Cite17 CFR 240.12
Cites 13 · showing 12Cited by 0 across 0 sources
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