Tap any paragraph to write a margin note. Your notes collect in the Desk below the text and file under cases with @. The side-by-side margin rail opens on a larger screen.

§
Marginalia
Code · REGISTER · 2006-06-07 · Securities and Exchange Commission (“Commission”) · Notices

Notices. Notice of an application to amend a prior order under section 6(c) of the Investment Company Act of 1940 (“Act”) granting an exemption from sections 2(a)(32), 5(a)(1), and 22(d) of the Act and rule 22c-1 under the Act, and under sections 6(c) and 17(b) of the Act granting an exemption from sections 17(a)(1) and (a)(2) of the Act

29,992 words·~136 min read·/register/2006/06/07/06-5158

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

BILLING CODE 3210-01-M SECURITIES AND EXCHANGE COMMISSION [Investment Company Act Release No. 27387; 812-13285] Barclays Global Fund Advisors, et al.; Notice of Application June 1, 2006. AGENCY: Securities and Exchange Commission (“Commission”). ACTION: Notice of an application to amend a prior order under section 6(c) of the Investment Company Act of 1940 (“Act”) granting an exemption from sections 2(a)(32), 5(a)(1), and 22(d) of the Act and rule 22c-1 under the Act, and under sections 6(c) and 17(b) of the Act granting an exemption from sections 17(a)(1) and (a)(2) of the Act. *Summary of Application:* Applicants request an order to amend a prior order that permits:
(a)An open-end management investment company that includes series based on certain fixed-income securities indices to issue shares of limited redeemability;
(b)secondary market transactions in the shares of the series to occur at negotiated prices; and
(c)affiliated persons of the series to deposit securities into, and receive securities from, the series in connection with the purchase and redemption of aggregations of the series' shares (“Prior Order”). 1 Applicants seek to amend the Prior Order in order to offer two additional series based on fixed-income securities indices (each series, a “New Fund”). 1 Barclays Global Fund Advisors, *et al.* , Investment Company Act Release No. Release No. (June 25, 2002), as subsequently amended by iShares Trust, *et al.* , Investment Company Act Release No. 26006 (April 15, 2003) and Barclays Global Fund Advisors, *et al.* , Investment Company Act Release No. 26175 (September 8, 2003). *Applicants:* Barclays Global Fund Advisors (“Adviser”), iShares Trust (“Trust”) and SEI Investments Distribution Co. (“Distributor”). *Filing Dates:* The application was filed on April 20, 2006 and amended on May 24, 2006. *Hearing or Notification of Hearing:* An order granting the requested relief will be issued unless the Commission orders a hearing. Interested persons may request a hearing by writing to the Commission's Secretary and serving applicants with a copy of the request, personally or by mail. Hearing requests should be received by the Commission by 5:30 p.m. on June 22, 2006 and should be accompanied by proof of service on applicants, in the form of an affidavit or, for lawyers, a certificate of service. Hearing requests should state the nature of the writer's interest, the reason for the request, and the issues contested. Persons may request notification of a hearing by writing to the Commission's Secretary. ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090. Applicants: Ira Shapiro, Barclays Global Fund Advisors, c/o Barclays Global Investors, N.A., 45 Fremont Street, San Francisco, CA 94105; Peter Kronberg, iShares Trust, c/o Investors Bank & Trust Company, 200 Clarendon Street, Boston, MA 02116; and John Munch, SEI Investments Distribution Co., One Freedom Valley Drive, Oaks, PA 19456. FOR FURTHER INFORMATION CONTACT: Laura J. Riegel, Senior Counsel, at
(202)551-6873, or Michael W. Mundt, Senior Special Counsel, at
(202)551-6821 (Division of Investment Management). SUPPLEMENTARY INFORMATION: The following is a summary of the application. The complete application may be obtained for a fee at the Commission's Public Reference Branch, 100 F Street, NE., Washington, DC 20549-0102 (tel. 202-551-5850). Applicants' Representations 1. The Trust is an open-end management investment company registered under the Act and established in the state of Delaware. The Trust is organized as a series fund with multiple series. The Adviser, an investment adviser registered under the Investment Advisers Act of 1940, serves as investment adviser to each New Fund. The Distributor, a broker-dealer unaffiliated with the Adviser and registered under the Securities Exchange Act of 1934, serves as the principal underwriter for the Trust. 2. The Trust is currently permitted to offer several series based on fixed-income securities indices in reliance on the Prior Order. Applicants seek to amend the Prior Order to permit the Trust to offer the two New Funds, each of which, except as described in the application, would operate in a manner identical to the existing series of the Trust that are subject to the Prior Order. 2 2 If the amended order is granted, the New Funds would also be able to rely on an exemptive order granting certain relief from section 24(d) of the Act to the existing series of the Trust that are subject to the Prior Order. *See* iShares, Inc., *et al.* , Investment Company Act Release No. 25623 (June 25, 2002) (order). 3. Each New Fund will invest in a portfolio of securities generally consisting of the component securities of a specified U.S. bond index (each, an “Underlying Index”). 3 No entity that creates, compiles, sponsors, or maintains an Underlying Index is or will be an affiliated person, as defined in section 2(a)(3) of the Act, or an affiliated person of an affiliated person, of the Trust, the Adviser, the Distributor, or a promoter of a New Fund. 3 The Underlying Indices for the New Funds are Lehman Brothers 1-3 Year U.S. Credit Index (“1-3 Year Credit Index”) and Lehman Brothers U.S. MBS Fixed Rate Index (“MBS Index”). 4. Each Underlying Index contains fixed-income securities that are eligible for inclusion in the underlying index for an existing series of the Trust that is subject to the Prior Order 4 The 1-3 Year Credit Index represents that portion of the Aggregate Index consisting of U.S. investment grade bonds that have a remaining maturity of 1 to 3 years. The MBS Index represents that portion of the Aggregate Index consisting of U.S. agency mortgage pass-through securities. As with the Aggregate Bond Fund, the New Fund that would be based on the MBS Index (“MBS Fund”) intends to use “to-be-announced” (“TBA”) transactions and, in some cases, invest directly in U.S. agency mortgage pass-through securities, to track the performance of U.S. agency mortgage pass-through securities. 5 4 The Lehman Brothers U.S. Aggregate Index (“Aggregate Index”) is the underlying index of iShares U.S. Aggregate Bond Fund (“Aggregate Fund”). 5 “TBA” refers to a mechanism for the forward settlement of United States agency mortgage-pass through securities that permits the United States agency mortgage-pass through securities to be traded interchangeably pursuant to commonly observed settlement and delivery requirements. Applicants state that the use of TBA transactions permits investors to obtain exposure to U.S. agency mortgage pass-through securities, while promoting liquidity and price transparency. 5. The investment objective of each New Fund will be to provide investment results that correspond generally to the price and yield performance of its relevant Underlying Index. Each New Fund will utilize as an investment approach a representative sampling strategy where each New Fund will seek to hold a representative sample of the component securities of the Underlying Index. The New Fund that would track the 1-3 Year Credit Index will invest at least 90% of its assets in the component securities of its Underlying Index and may invest the remainder of its assets in certain futures, options, and swap contracts, cash and cash equivalents, and in bonds not included in its Underlying Index which the Adviser believes will help the New Fund track its Underlying Index. The MBS Fund will have at least 90% of its assets invested in:
(a)Component securities of its Underlying Index and
(b)investments that have economic characteristics that are substantially identical to the economic characteristics of the component securities of its Underlying Index ( *i.e.* , the TBAs, as discussed above). 6 The MBS Fund may invest the remainder of its assets in certain futures, options, and swap contracts, cash and cash equivalents, and in bonds not included in its Underlying Index which the Adviser believes will help the New Fund track its Underlying Index. Applicants expect that each New Fund will have a tracking error relative to the performance of its respective Underlying Index of no more than 5 percent. 6 As with the process used by the Aggregate Fund, the MBS Fund may accept delivery of a specified amount of “cash-in-lieu” of delivery of the designated U.S. agency mortgage pass-through securities or TBAs. This practice could result in cash-only creations and redemptions. Applicants do not believe that the acceptance of “cash-in-lieu” of U.S. agency mortgage pass-through securities or TBAs on a regular basis by the MBS Fund presents any material or unforeseen operation issues or will otherwise have a negative impact on the operation of the MBS Fund or the secondary market trading of shares of the MBS Fund. 6. Applicants state that all discussions contained in the application for the Prior Order are equally applicable to the New Funds, except as specifically noted by applicants (as summarized above). Applicants agree that the amended order will subject applicants to the same conditions as imposed by the Prior Order. Applicants believe that the requested relief continues to meet the necessary exemptive standards. For the Commission, by the Division of Investment Management, pursuant to delegated authority. J. Lynn Taylor, Assistant Secretary. [FR Doc. E6-8803 Filed 6-6-06; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-53908] Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Declaration of Effectiveness of the Fingerprint Plan of the NASDAQ Stock Market LLC May 31, 2006. On May 30, 2006, the NASDAQ Stock Market LLC (“Nasdaq”) filed with the Securities and Exchange Commission (“Commission” or “SEC”) a fingerprint plan (“Plan”) pursuant to Rule 17f-2(c) 1 under the Securities Exchange Act of 1934 (“Act”). 2 1 17 CFR 240.17f-2(c). 2 15 U.S.C. 78a *et seq.* Nasdaq believes that the Plan will facilitate compliance by Nasdaq members and Nasdaq member applicants (together, “participants”) with section 17(f)(2) of the Exchange Act and Rule 17f-2 thereunder, by providing a facility for participants to have the fingerprints of their partners, directors, officers, and employees processed by the Attorney General of the United States or his designee (“Attorney General”). The Plan will be administered for Nasdaq by NASD Regulation, Inc. (“NASDR”) and the National Association of Securities Dealers, Inc. (“NASD”), the parent corporation of NASDR, pursuant to a regulatory services agreement between NASDR and Nasdaq (the “Regulatory Contract”). The Commission notes that, notwithstanding the fact that Nasdaq has entered into the Regulatory Contract to have NASDR perform some of Nasdaq's functions, Nasdaq shall retain ultimate legal responsibility for, and control of, such functions. Under the Plan, participants submit fingerprints and identifying information, on paper or electronically, to the NASD, which then forwards the cards to the Federal Bureau of Investigation (“FBI”) (the fingerprint processing arm of the Attorney General). The FBI identifies submitted fingerprints, retrieves relevant criminal history information, and returns fingerprint reports (including the original paper fingerprint cards, if any) to authorized recipients ( *i.e.* , to a participant that submitted the fingerprints and to regulators for licensing, registration and other regulatory purposes). Under the terms of the Plan, participants will be able to view the status and results of fingerprints, including any relevant criminal history information, through the NASD's Central Registration Depository (CRD®) system after submission to the Attorney General. The Commission has reviewed the procedures detailed in the Plan and believes that the Plan is consistent with the public interest and the protection of investors. Thus, the Commission declares the Plan to be effective. The Commission notes that securities industry fingerprinting procedures are in a state of flux due to rapidly advancing technology. In the event that an industry-wide standard is adopted or becomes prevalent and in the event that this Plan substantially differs therefrom, the Commission would expect Nasdaq to revise its fingerprint plan to incorporate the industry-wide standard. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 3 3 17 CFR 200.30-3(a)(17)(iii). J. Lynn Taylor, Assistant Secretary. Exhibit A—The NASDAQ Stock Market LLC; Fingerprint Plan The NASDAQ Stock Market LLC (“Nasdaq”) submits this Fingerprint Plan (“Plan”) pursuant to Rule 17f-2(c) under the Securities Exchange Act of 1934 (“Exchange Act”). The purpose of this Plan is to facilitate compliance by Nasdaq members and Nasdaq member applicants with section 17(f)(2) of the Exchange Act and Rule 17f-2 thereunder, by providing a mechanism for Nasdaq members and Nasdaq member applicants to have the fingerprints of their partners, directors, officers, and employees processed by the Attorney General of the United States or his designee (hereinafter “Attorney General”) as required by section 17(f)(2) of the Exchange Act and Rule 17f-2 thereunder. The Plan will be administered for Nasdaq by NASD Regulation, Inc. (“NASDR”) and the National Association of Securities Dealers, Inc. (“NASD”), the parent corporation of NASDR, pursuant to a regulatory services agreement between NASDR and Nasdaq (the “Regulatory Contract”). In the event that Nasdaq enters into a contract to administer the Plan with a regulatory service provider other than NASDR or decides to administer the Plan itself, Nasdaq shall file an amendment to the Plan with the Securities and Exchange Commission (the “Commission”). Notwithstanding the fact that Nasdaq has entered into the Regulatory Contract to have NASDR perform some of Nasdaq's functions, Nasdaq shall retain ultimate legal responsibility for, and control of, such functions. NASD, pursuant to a Plan filed with and declared effective by the Commission, 4 processes fingerprint records of securities industry participants as described herein consistent with section 17(f)(2) of the Exchange Act and Rule 17f-2 thereunder. 4 Securities Exchange Act Release No. 53751 (May 2, 2006), 71 FR 27299 (May 10, 2006). NASD accepts fingerprints and identifying information from associated persons of Nasdaq members and Nasdaq member applicants required to be fingerprinted pursuant to Rule 17f-2. Nasdaq members and Nasdaq member applicants may submit fingerprints and identifying information on paper or electronically, provided such submissions are consistent with protocols and requirements established by the Attorney General. NASD transmits fingerprints and identifying information, on paper or electronically, to the Attorney General for identification and processing, consistent with protocols and requirements established by the Attorney General. NASD receives processed results from the Attorney General (on paper or electronically) and transmits those results via paper or electronic means to authorized recipients ( *i.e.* , to a Nasdaq member or Nasdaq member applicant that submitted the fingerprints and to regulators for licensing, registration and other regulatory purposes), consistent with protocols and requirements established by the Attorney General. In cases where the Attorney General's search on the fingerprints submitted fails to disclose prior arrest data, NASD transmits that result to the Nasdaq member or Nasdaq member applicant that submitted the fingerprints. In cases where the Attorney General's search yields Criminal History Record Information (CHRI), NASD transmits that information to the Nasdaq member or Nasdaq member applicant that submitted the fingerprints. With respect to Nasdaq members, NASD also reviews any CHRI returned by the Attorney General to identify persons who may be subject to statutory disqualification under the Exchange Act and notifies NASD and Nasdaq staff to take action, as appropriate, with respect to such persons. Nasdaq advises its members and member applicants of the availability of fingerprint services and any fees charged in connection with those services and the processing of fingerprints pursuant to this Plan. Nasdaq will file any such Nasdaq member fees with the Commission pursuant to section 19(b) of the Exchange Act. NASD maintains copies of fingerprint processing results received from the Attorney General with respect to fingerprints submitted by NASD pursuant to this Plan, in accordance with Nasdaq's record retention obligations under the Act. Any maintenance of fingerprint records by NASD shall be for NASD's and Nasdaq's own administrative purposes, and NASD is not undertaking to maintain fingerprint records on behalf of Nasdaq members pursuant to Rule 17f-2(d)(2). NASD records in the Central Registration Depository (CRD() the status of fingerprints submitted to the Attorney General. Through the CRD system, NASD makes available to a Nasdaq member that has submitted fingerprints the status and results of such fingerprints after submission to the Attorney General. Neither NASD nor Nasdaq shall be liable for losses or damages of any kind in connection with fingerprinting services, as a result of a failure to follow, or properly to follow, the procedures described above, or as a result of lost or delayed fingerprint cards, electronic fingerprint records, or fingerprint reports, or as a result of any action by NASD or Nasdaq or NASD's or Nasdaq's failure to take action in connection with this Plan. [FR Doc. E6-8808 Filed 6-6-06; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-53917; File No. SR-Amex-2005-116] Self-Regulatory Organizations; American Stock Exchange, Inc.; Order Granting Approval to Proposed Rule Change and Amendment No. 1 Thereto Relating to Written Compliance and Supervisory Controls June 1, 2006. I. Introduction On November 7, 2005, the American Stock Exchange, Inc. (“Amex” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) 1 and Rule 19b-4 thereunder, 2 the proposed rule change relating to written compliance and supervisory controls. Amex filed Amendment No. 1 to the proposed rule change on April 6, 2006. The proposed rule change was published for comment in the **Federal Register** on April 28, 2006. 3 The Commission received no comments on the proposal. This order approves the proposed rule change, as amended. 1 15 U.S.C. 78s(b)(l). 2 17 CFR 240.19b-4. 3 *See* Securities Exchange Act Release No. 53708 (April 24, 2006), 71 FR 25254. II. Description of the Proposal The Exchange is proposing to amend Amex Rule 320 to require members and member organizations with employees to establish, maintain, enforce, and keep current a system of compliance and supervisory controls, including written compliance and supervisory policies and procedures, that are reasonably designed to achieve compliance with applicable securities laws and regulations and Exchange rules. 4 In addition to requiring that the written compliance and supervisory policies and procedures be amended as necessary, the proposed rule would require that a member's or member organization's supervisory control employee provide reports, at least annually, to senior management summarizing certain aspects of the compliance and supervisory program. 5 4 *See* proposed Amex Rule 320(e). An Amex member or member organization consisting of a sole individual ( *i.e.* , a sole proprietorship) would be required to maintain a written compliance manual specifying the obligations to which such member or member organization is subject along with the processes and controls in place that are reasonably designed to achieve compliance with such obligations. *See* Amex Rule 320, proposed Commentary .08. 5 *See* proposed Amex Rule 320(e)(3). In addition, the Exchange proposed clarifying edits to the text of Amex Rule 320, including:
(1)Explicit references to a member's or member organization's obligation to comply with Exchange rules in addition to all applicable securities laws and regulations, and
(2)replacing references to “member firm” with references to “member organization.” III. Discussion and Commission Findings The Commission has reviewed carefully the proposed rule change and finds that it is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange, 6 particularly section 6(b)(5) of the Act, 7 which, among other things, requires that the rules of a national securities exchange be designed to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating 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. 6 In approving this proposed rule change, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. *See* 15 U.S.C. 78c(f). 7 15 U.S.C. 78f(b)(5). The Commission believes that the Exchange's proposal to require its members and member organizations to establish, maintain, enforce, and keep current a system of compliance and supervisory controls, including written compliance and supervisory policies and procedures, that are reasonably designed to achieve compliance with applicable securities laws and regulations and Exchange rules should help strengthen the Exchange's regulatory program by increasing member awareness of the laws and rules with which they must comply. It should also provide members an additional incentive to be cognizant of changing regulatory requirements. The Exchange will review the adequacy of its members' and member organizations' compliance programs. Further, the requirement that Amex members and member organizations adopt comprehensive written compliance and supervisory policies and procedures, and report to senior management on certain aspects of the compliance and supervisory program, should result in the periodic assessment by members and member organizations of the effectiveness of their compliance programs. Accordingly, the proposed rule change should help Amex strengthen its regulatory program for detecting, sanctioning, and deterring violations of Exchange rules and securities laws and regulations and, therefore, should promote just and equitable principles of trade. 8 Furthermore, the Commission believes that the Amex's proposal should enhance investor protection by facilitating the Exchange's review of its members' and member organizations' systems of compliance and supervisory controls and by enhancing the compliance programs at the member level. 8 The Commission notes that a national securities exchange must have the capacity to enforce compliance by its members with applicable securities laws, regulations and the exchange's own rules. *See* *e.g.* , section 6(b)(1) of the Act, 15 U.S.C. 78f(b)(1). IV. Conclusion *It is therefore ordered* , pursuant to section 19(b)(2) of the Act, 9 that the proposed rule change (File No. SR-Amex-2005-116), as amended, be and hereby is, approved. 9 15 U.S.C. 78s(b)(2). For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 10 10 17 CFR 200.30-3(a)(12). J. Lynn Taylor, Assistant Secretary. [FR Doc. E6-8802 Filed 6-6-06; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-53911; File No. SR-Amex-2006-40] Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change by the American Stock Exchange LLC Relating to Direct Registration System Eligibility Requirements May 31, 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 28, 2006, the American Stock Exchange LLC (“Amex”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change described in Items I, II, and III below, which items have been prepared primarily by Amex. The Commission is publishing this notice to solicit comments on the proposed rule change from interested parties. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change Amex is proposing to add new Rule 778 to its Rules and new Section 135 to its Company Guide to require certain listed securities to be eligible for a Direct Registration System operated by a securities depository. 3 3 The term “securities depository” means a securities depository registered as a clearing agency under Section 17A(b)(2) of the Act. 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 these statements. 4 4 The Commission has modified the text of the summaries prepared by the Amex.
(A)Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change
(1)Purpose In order to reduce the costs, risks, and delays associated with the physical delivery of securities certificates, Amex is proposing to require
(i)all securities (other than the securities identified below) initially listing on Amex on or after January 1, 2007, to be eligible for a DRS and
(ii)all securities (other than the securities identified below) listed on Amex on and after January 1, 2008, to be eligible for a DRS. 5 The initial listing requirement set forth in
(i)above will not apply to securities of issuers which already have securities listed on the Amex, securities of issuers which immediately prior to such initial Amex listing had securities listed on another national securities exchange, derivative products, 6 or securities (other than stocks) which are book-entry-only. The ongoing listing requirement set forth in
(ii)above will not apply to derivative products or securities (other than stocks) which are book-entry-only. 5 The New York Stock Exchange LLC (“NYSE”) and The NASDAQ Stock Market LLC (“Nasdaq”) have also filed proposed rule changes with the Commission that would require certain listed companies to become DRS eligible. Securities Exchange Act Release Nos. 53912 (May 31, 2006) [File No. SR-NYSE-2006-29] and 53913 (May 31, 2006) [File No. SR-NASDAQ-2006-08]. 6 As defined in Article 1, Section 3(d) of Amex's Constitution, the term “derivative products” includes in addition to standardized options, other securities which are issued by The Options Clearing Corporation or another limited purpose entity or trust, and which are based solely on the performance of an index or portfolio of other publicly traded securities. The term “derivative products” does not include warrants of any type or closed-end management investment companies. Securities certificates are used by issuers as a means to evidence and transfer ownership. Because securities certificates require manual processing and because trading volumes have increased, the manual clearance and settlement systems have become overburdened resulting in significant delays and expenses in processing securities transaction and in increased risks associated with lost, stolen, and forged certificates. In Section 17A of the Act, 7 Congress recognized these concerns by calling for the establishment of a national system for the prompt and accurate clearance and settlement of securities transactions, including the transfer of record ownership and the safeguarding of securities. 7 15 U.S.C. 78q-1. A DRS allows an investor to establish either through the issuer's transfer agent or through the investor's broker-dealer a book-entry securities position on the books of the issuer and to electronically transfer that securities position between the transfer agent and the broker-dealer through facilities administered by DTC. 8 Instead of receiving a securities certificate, the investor receives a DRS statement as evidence of share ownership. Investors retain the rights associated with securities certificates, including such rights as control of ownership and voting rights, without having the responsibility of holding and safeguarding securities certificates. In addition, in corporate actions such as reverse stock splits and mergers, cancellation of old shares and issuance of new shares are handled electronically with no securities certificates to be returned to or received from the transfer agent. 8 Currently, the only registered clearing agency operating a DRS is the Depository Trust Company (“DTC”). For a description of DRS and the DRS facilities administered by DTC, see Securities Exchange Act Release Nos. 37931 (November 7, 1996), 61 FR 58600 (November 15, 1996), [File No. SR-DTC-96-15] (order granting approval to establish DRS) and 41862 (September 10, 1999), 64 FR 51162 (September 21, 1999), [File No. SR-DTC-99-16] (order approving implementation of the Profile Modification System). Issuers and their transfer agents may incur initial costs when making an issue DRS-eligible and in turn satisfy the new listing standards as set forth in this proposed rule change. In order to make a security DRS-eligible, the issuer must have a transfer agent which is a DRS Limited Participants. 9 Issuers will also need to meet certain DTC criteria, such as insurance and connectivity requirements, in order to make an issue DRS-eligible. Further, an issuer's corporate by-laws must permit the issuance of book-entry shares. Amex believes that the proposed deadlines for DRS eligibility coupled with proactive and instructive communication by Amex with issuers, will allow issuers sufficient time to make the necessary changes to comply with the proposed rule change. 9 For a description of DTC's rules relating to DRS Limited Participants and a description of DRS facilities administered by DTC, see Securities Exchange Act Release Nos. 37931 (November 7, 1996), 61 FR 58600 (November 15, 1996), [File No. SR-DTC-96-15] (order granting approval to establish DRS) and 41862 (September 10, 1999), 64 FR 51162 (September 21, 1999), [File No. SR-DTC-99-16] (order approving implementation of the Profile Modification System). While the propose rule change should significantly reduce the number of transactions in securities for which settlement is effected by the physical delivery of securities certificates, the proposed rule change will not eliminate the ability of investors to obtain securities certificates after the settlement of securities transactions, provided the issuer chooses to issue or continue to issue certificates.
(2)Statutory Basis Amex believes the proposed rule change is consistent with Section 6(b) of the Act, in general, and furthers the objectives of Section 6(b)(5) of the Act, in particular, in that it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to 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 perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. 10 10 15 U.S.C. 78f(b)(5). Amex believes that DRS eligibility listing requirements will limit market impediments arising from the physical delivery of securities certificates, thereby promoting the perfection of the national market system. Because investors will have the option of holding their securities in DRS only if the security is DRS-eligible, Amex believes that the proposed rule change is necessary to encourage listed issuers to limit the use of physical certificates. Further, the proposed rule change should serve to increase the efficiency of the clearance and settlement system and prevent forgery, theft, or other misappropriation thereby serving to better protect the public interest. Finally, because the costs, both direct and indirect, associated with securities certificates are ultimately borne by investors, Amex believes that investors in Amex listed securities covered by the proposed rule change should realize the benefits of accurate, quick, and cost-efficient transfers, rapid distribution of sale proceeds, reduced lost or stolen certificates and replacement fees, elimination of the risk associated with catastrophic events, and consistency of owning in book-entry across asset classes.
(B)Self-Regulatory Organization's Statement on Burden on Competition Amex does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act.
(C)Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were solicited or received by Amex with respect to the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within thirty-five 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 ninety days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding; or
(ii)as to which the self-regulatory organization consents, the Commission will:
(A)By order approve such proposed rule change or
(B)Institute proceedings to determine whether the proposed rule change should be disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change 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-2006-40 in 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-2006-40. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Section, 100 F Street, NE., Washington, DC 20549. Copies of such filings also will be available for inspection and copying at the principal office of Amex and on Amex's Web site, *http://www.amex.com.* 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-2006-40 and should be submitted on or before June 28, 2006. For the Commission by the Division of Market Regulation, pursuant to delegated authority. 11 11 17 CFR 200.30-3(a)(12). Jill M. Peterson, Assistant Secretary. [FR Doc. E6-8817 Filed 6-6-06; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-53909; File No. SR-CBOE-2005-65] Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing of a Proposed Rule Change and Amendment Nos. 1 and 2 Relating to the Processing of Complex Orders in the Hybrid Trading System May 31, 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 August 24, 2005, the Chicago Board Options Exchange, Incorporated (“CBOE” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the CBOE. The CBOE filed Amendment Nos. 1 and 2 to the proposal on March 13, 2006, and April 27, 2006, respectively. 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 Amendment No. 2 replaces and supersedes the original filing and Amendment No. 1 in their entirety. I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change CBOE proposes to amend its procedures applicable to trading complex orders on the Hybrid Trading System (“Hybrid System”) to provide for an automated Request for Responses (“RFR”) auction process for certain eligible complex orders (“COA” process). CBOE is also proposing to make various changes to the existing routing and execution processes applicable to the complex order book (“COB”) and various changes to its rules pertaining generally to the minimum increments applicable to complex orders. The text of the proposed rule change appears below. Additions are *italicized* ; deletions are [bracketed]. Chicago Board Options Exchange, Incorporated Rules Rule 6.9. Solicited Transactions A member or member organization representing an order respecting an option traded on the Exchange (an “original order”), including a spread, combination, or straddle order as defined in Rule 6.53, a stock-option order as defined in Rule 1.1(ii) [or] *,* a security future-option order as defined in Rule 1.1(zz), *or any other complex order as defined in Rule 6.53C,* may solicit a member or member organization or a non-member customer or broker-dealer (the “solicited person”) to transact in-person or by order (a “solicited order”) with the original order. In addition, whenever a floor broker who is aware of, but does not represent, an original order solicits one or more persons or orders in response to an original order, the persons solicited and any resulting orders are solicited persons or solicited orders subject to this Rule. Original orders and solicited orders are subject to the following conditions. (a)-(f) No change. * * * Interpretations & Policies: .01-.02 No change. .03 In respect of any solicited order that is a spread, straddle or combination order as defined in Rule 6.53, * or any other complex order as defined in Rule 6.53C, * the terms “bid” and “offer” as used in subparagraphs (a)-(d) of this Rule 6.9 mean “total net debit” and “total net credit,” respectively. .04-.07 No change. Rule 6.42. Minimum Increments for Bids and Offers (1)-(2) No change.
(3)Bids and offers on spread, straddle, or combination orders as defined in Rule 6.53 *, or any other complex order as defined in Rule 6.53C,* may be expressed in any increment *, and the legs of such an order may be executed in one cent increments,* regardless of the minimum increments otherwise appropriate to the individual legs of the order. Notwithstanding the foregoing sentence, bids and offers on spread, straddle *,* [or] combination *,* *or other complex* orders *as defined in Rule 6.53C,* in options on the S&P 500 Index *or on the S&P 100 Index,* except for box spreads, shall be expressed in decimal increments no smaller than $0.05. Spread, straddle *,* [or] combination, * or other complex* orders *as defined in Rule 6.53C* expressed in net price increments that are not multiples of the minimal increment are not entitled to the same priority under Rule 6.45 as such orders expressed in increments that are multiples of the minimum increment. * * * Interpretations & Policies: No change. Rule 6.45. Priority of Bids and Offers—Allocation of Trades (a)-(d) No change.
(e)*Complex Order Priority Exception:* A spread, straddle, combination, or ratio order (or a stock-option order or security future-option order, as defined in Rule 1.1(ii)(b) and Rule 1.1(zz)(b), respectively) *, or any other complex order as defined in Rule 6.53C,* may be executed at a net debit or credit price (in a multiple of the minimum increment) with another member without giving priority to equivalent bids (offers) in the trading crowd or in the book provided at least one leg of the order betters the corresponding bid (offer) in the book. Stock-option orders and security future-option orders, as defined in Rule 1.1(ii)(a) and Rule 1.1(zz)(a) respectively, have priority over bids (offers) of the trading crowd but not over bids (offers) of public customers in the limit order book. Rule 6.45A.—Priority and Allocation of Equity Option Trades on the CBOE Hybrid System
(a)No change.
(b)Allocation of Orders Represented in Open Outcry: The allocation of orders that are represented in open outcry by floor brokers or PAR Officials shall be as described below in subparagraphs (b)(i) and (b)(ii). With respect to subparagraph (b)(ii), the floor broker or PAR Official representing the order shall determine the sequence in which bids (offers) are made. (i)-(ii) No change.
(iii)Exception: Complex Order Priority: A spread, straddle, combination, or ratio order (or a stock-option order or security future-option order, as defined in Rule 1.1(ii)(b) and Rule 1.1(zz)(b), respectively) *, or any other complex order as defined in Rule 6.53C,* may be executed at a net debit or credit price (in a multiple of the minimum increment) with another member without giving priority to equivalent bids (offers) in the trading crowd or in the book provided at least one leg of the order betters the corresponding bid (offer) in the book. Stock-option orders and security future-option orders, as defined in Rule 1.1(ii)(a) and Rule 1.1(zz)(a) respectively, have priority over bids (offers) of the trading crowd but not over bids (offers) of public customers in the limit order book.
(iv)No change. (c)-(e) No change. * * * Interpretations and Policies: No change. Rule 6.45B—Priority and Allocation of Trades in Index Options and Options on ETFs on the CBOE Hybrid System
(a)No change.
(b)Allocation of Orders Represented in Open Outcry: The allocation of orders that are represented in the trading crowd by floor brokers or PAR Officials shall be as described below in subparagraphs (b)(i) and (b)(ii). With respect to subparagraph (b)(ii), the floor broker or PAR Official representing the order shall determine the sequence in which bids (offers) are made. (i)-(ii) No change.
(iii)Exception: Complex Order Priority: A member holding a spread, straddle, or combination order (or a stock-option order or security future-option order as defined in Rule 1.1(ii)(b) and Rule 1.1(zz)(b), respectively) *,* * or any other complex order as defined in Rule 6.53C,* and bidding (offering) on a net debit or credit basis (in a multiple of the minimum increment) may execute the order with another member without giving priority to equivalent bids (offers) in the trading crowd or in the electronic book provided at least one leg of the order betters the corresponding bid (offer) in the book. Stock-option orders and security future-option orders, as defined in Rule 1.1(ii)(a) and Rule 1.1(zz)(a), respectively, have priority over bids (offers) of the trading crowd but not over bids (offers) of public customers in the limit order book. (c)-(d) No change. * * * Interpretations and Policies: No change. Rule 6.53C. Complex Orders on the Hybrid System RULE 6.53C. (a)-(b) No change.
(c)Complex Order Book
(i)No change. [(ii) Priority of Complex Orders in the COB: Orders from public customers have priority over orders from non-public customers. Multiple public customer complex orders at the same price are accorded priority based on time.] [(iii)] *(ii)* Execution of Complex Orders in the COB: *Notwithstanding the provisions of Rule 6.42, the appropriate Exchange committee will determine on a class-by-class basis whether complex orders that are routed to or resting in the COB may be expressed on a net price basis in a multiple of the minimum increment (i.e., $0.05 or $0.10, as applicable) or in a one cent increment. All pronouncements regarding COB increments will be announced to the membership via Regulatory Circular.* Complex orders resting in the COB may be executed without consideration to prices of the same complex orders that might be available on other exchanges *, and the legs of a complex order may be executed in one cent increments, regardless of the minimum quoting increments otherwise appropriate to the individual legs of the order.* Complex orders resting in the COB may trade in the following way:
(1)Orders *and Quotes* in the [Electronic Book (“]EBook[”)]: A complex order in the COB will automatically execute against individual orders or quotes residing in EBook provided the complex order can be executed in full (or in a permissible ratio) by the orders *and quotes* in EBook.
(2)Orders in COB: Complex orders in the COB that are marketable against each other will automatically execute. *The allocation of a complex order within the COB shall be pursuant to the rules of trading priority otherwise applicable to incoming electronic orders in the individual component legs.*
(3)Market participants, as defined in [CBOE] Rule 6.45A *or 6.45B, as applicable* , may submit orders *or quotes* to trade against orders in the COB. The allocation of complex orders among market participants shall be done pursuant to CBOE Rule 6.45A(c) *or 6.45B(c), as applicable.* [(iv)] *(iii)* Complex orders in the COB may be designated as day orders or good-til-cancelled orders. Only those complex orders with no more than four legs and having a ratio of one-to-three or lower, as determined by the appropriate Exchange committee, are eligible for placement into the COB.
(d)*Process for Complex Order RFR Auction: Prior to routing to the COB or once on PAR, eligible complex orders may be subject to an automated request for responses (“RFR”) auction process.* *(i) For purposes of paragraph (d):* *(1) “COA” is the automated complex order RFR auction process.* *(2) A “COA-eligible order” means a complex order that, as determined by the appropriate Exchange committee on a class-by-class basis, is eligible for a COA considering the order's marketability (defined as a number of ticks away from the current market), size and complex order type, as defined in paragraph
(a)above. All pronouncements regarding COA eligibility will be announced to the membership via Regulatory Circular. Complex orders processed through a COA may be executed without consideration to prices of the same complex orders that might be available on other exchanges.*
(3)*The “Response Time Interval” means the period of time during which responses to the RFR may be entered.* *(ii) Initiation of a COA: On receipt of a COA-eligible order and request from the member representing the order that it be COA'd, the Exchange will send an RFR message to all members who have elected to receive RFR messages. The RFR message will identify the component series, the size of the COA-eligible order and any contingencies, if applicable, but will not identify the side of the market.* *(iii) Bidding and Offering in Response to RFRs: Each Market-Maker with an appointment in the relevant option class, and each member acting as agent for orders resting at the top of the COB in the relevant options series, may submit responses to the RFR message (“RFR Responses”) during the Response Time Interval.* *(1) RFR Response sizes will be limited to the size of the COA-eligible order for allocation purposes and may be expressed on a net price basis in a multiple of the minimum increment (i.e., $0.05 or $0.10, as applicable) or in a one cent increment as determined by the appropriate Exchange committee on a class-by-class basis. RFR Responses will not be visible (other than by the COA system).* *(2) The appropriate Exchange committee will determine the length of the Response Time Interval on a class-by-class basis; provided, however, that the duration shall not exceed three
(3)seconds.* *All pronouncements regarding COA increments and the Response Time Interval will be announced to the membership via Regulatory Circular.* *(iv) Processing of COA-Eligible Orders: At the expiration of the Response Time Interval, COA-eligible orders will be allocated in accordance with subparagraph
(v)below or routed in accordance with subparagraph
(vi)below.*
(v)*Execution of COA-Eligible Orders: COA-eligible orders may be executed without consideration to prices of the same complex orders that might be available on other exchanges, and the legs of a COA-eligible order may be executed in one cent increments, regardless of the minimum quoting increments otherwise appropriate to the individual legs of the order. COA-eligible orders will trade first based on the best net price(s) and, at the same net price, will be allocated in the following way:* *(1) The individual orders and quotes residing in the EBook shall have first priority to trade against a COA-eligible order provided the COA-eligible order can be executed in full (or in a permissible ratio) by the orders and quotes in the EBook. The allocation of a COA-eligible order against the EBook shall be consistent with the UMA allocation described in Rule 6.45A or 6.45B, as applicable.* *(2) Public customer complex orders resting in the COB before, or that are received during, the Response Time Interval and public customer RFR Responses shall, collectively have second priority to trade against a COA-eligible order. The allocation of a COA-eligible order against the public customer complex orders resting in the COB shall be according to time priority.* ( *3) Non-public customer orders resting in the COB before the Response Time Interval shall have third priority to trade against a COA-eligible order. The allocation of a COA-eligible order against non-public customer orders resting in the COB shall be pursuant to the UMA allocation described in Rule 6.45A or 6.45B, as applicable.* *(4) Non-public customer orders resting in the COB that are received during the Response Time Interval and non-public customer RFR responses shall, collectively, have fourth priority. The allocation of a COA-eligible order against these opposing orders shall be consistent with the CUMA allocation described in Rule 6.45A or 6.45B, as applicable.* *(vi) Routing of COA-Eligible Orders: If a COA-eligible order cannot be filled in whole or in a permissible ratio, the order (or any remaining balance) will route to the COB or back to PAR, as applicable.* *(vii) Firm Quote Requirement for COA-Eligible Orders: RFR Responses represent non-firm interest that can be modified or withdrawn at any time prior to the end of the Response Time Interval. At the end of the Response Time Interval, RFR Responses shall be firm only with respect to the COA-eligible order for which it is submitted, provided that RFR Responses that exceed the size of a COA-eligible order are also eligible to trade with other incoming COA-eligible orders that are received during the Response Time Interval. Any RFR Responses not accepted in whole or in a permissible ratio will expire at the end of the Response Time Interval.* *(viii) Handling of Unrelated Complex Orders: Incoming complex orders that are received prior to the expiration of the Response Time Interval for a COA-eligible order (the “original COA”) will impact the original COA as follows:* *(1) Incoming complex orders that are received prior to the expiration of the Response Time Interval for the original COA that are on the opposite side of the market and are marketable against the starting price of the original COA-eligible order will cause the original COA to end. The processing of the original COA pursuant to subparagraphs (d)(iv) through (d)(vi) remains the same. For purposes of this Rule, the “starting price,” shall mean the better of the original COA-eligible order's limit price or the best price, on a net debit or credit basis, that existed in the EBook or COB at the beginning of the Response Time Interval.* *(2) Incoming COA-eligible orders that are received prior to the expiration of the Response Time Interval for the original COA that are on the same side of the market, at the same price or worse than the original COA-eligible order and better than or equal to the starting price will join the original COA. The processing of the original COA pursuant to subparagraphs (d)(iv) through (d)(vi) remains the same with the addition that the priority of the original COA-eligible order and incoming COA-eligible order(s) shall be according to time priority.* *
(3)Incoming COA-eligible orders that are received prior to the expiration of the Response Time Interval for the original COA that are on the same side of the market and at a better price than the original COA-eligible order will join the original COA, cause the original COA to end, and a new COA to begin for any remaining balance on the incoming COA-eligible order. The processing of the original COA pursuant to subparagraphs (d)(iv) through (d)(vi) remains the same with the addition that the priority of the original COA-eligible order and incoming COA-eligible order shall be a according to time priority. * * * * Interpretations and Policies: .01-.02 No change. *.03 With respect to the initiation of a COA (as described in Rule 6.53C(d)(ii)), members routing complex orders directly to the COB may request that the complex orders be COA'd on a class-by-class basis and members with resting complex orders on PAR may request that complex orders be COA'd on an order-by-order basis.* *.04 A pattern or practice of submitting orders that cause a COA to conclude early will be deemed conduct inconsistent with just and equitable principles of trade and a violation of Rule 4.1.* *.05 Disseminating information regarding COA-eligible orders to third parties will be deemed conduct inconsistent with just and equitable principles of trade and a violation of Rule 4.1 and other Exchange Rules.* Rule 6.74. Crossing Orders (a)-(f) No change. * * * Interpretations & Policies: .01-.02 No change. .03 Spread, straddle, stock-option (as defined in Rule 1.1(ii)), inter-regulatory spread as defined in Rule 1.1(ll) (including security future-option orders as defined in Rule 1.1(zz) [or] *,* combination orders, *or any other complex orders as defined in Rule 6.53C* on opposite sides of the market may be crossed, provided that the Floor Broker holding such orders proceeds in the manner described in paragraphs
(a)or
(b)above as appropriate. Members may not prevent a spread, straddle, stock-option, inter-regulatory spread (including a security future-option order), [or] combination, *or any other complex order* cross from being completed by giving a competing bid or offer for one component of such order. .04-.08 No change. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the CBOE included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The CBOE has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Commission recently approved Exchange Rule 6.53C, “Complex Orders on the Hybrid System,” which sets forth the procedures for trading complex orders on CBOE's Hybrid System. 4 As an enhancement to the current COB system, CBOE intends to develop a COA process, which the Exchange believes will, in turn, facilitate more automated handling of complex orders. The purpose of this proposed rule change is to adopt corresponding revisions to Exchange Rule 6.53C. In addition, CBOE is proposing to make certain changes to the existing COB provisions contained in Exchange Rule 6.53C to better describe the allocation methodology for executing orders in the COB. Lastly, CBOE is proposing to make certain modifications and clarifications to its rules generally pertaining to complex order minimum increments. a. Automated RFR Auction Process for Complex Orders Exchange Rule 6.53C sets forth the process for trading complex orders in the Hybrid System, including whether complex orders will be routed to a PAR workstation (for manual handling) or the complex order book (for automated handling) and, once in the COB, the manner in which complex orders execute against the electronic book (“the EBook”), orders resting in the COB, and market participants’ orders submitted to trade against the COB. The proposed COA-related amendments will introduce new functionality that will give certain eligible complex orders an opportunity for price improvement before being booked in the COB or once on PAR. 5 Proposed paragraph
(d)of Exchange Rule 6.53C will describe the COA process. The proposed rule change will give the appropriate Exchange committee the authority to determine on a class-by-class basis what incoming complex orders are eligible for a COA based on marketability (defined as a number of ticks away from the current market), size and the complex order type (“COA-eligible orders”). 6 4 *See* Securities Exchange Act Release No. 51271 (February 28, 2005), 70 FR 10712 (March 4, 2005) (order approving File No. SR-CBOE-2004-45). 5 Currently, stock-option orders, security futures-option orders, and conversions and reversals are not eligible for routing to COB and, similarly, will not be eligible for routing to COA. 6 For example, the appropriate Exchange committee could determine that spread orders are eligible for a COA to the extent they are less than two ticks away from the “top of the book,” which would be the best price considering the net prices available in the complex order book and the individual component legs quoted in the CBOE market. All pronouncements, including changes thereto, regarding COA eligibility and Response Time Intervals will be announced to the membership via Regulatory Circular. Upon receiving a COA-eligible order and a request by the member representing the order that it be COA'd, 7 the Exchange will send an RFR message to CBOE members with an interface connection to CBOE that have elected to receive such RFR messages. This RFR message will identify the component series, the size of the COA-eligible order and any contingencies, if applicable. However, the RFR message will *not* identify the side of the market ( *i.e.* , whether the COA-eligible order is to buy or to sell). 7 Systemically, members will be able to make this request for incoming orders routing directly to COB on a class-by-class basis and for resting PAR orders on an order-by-order basis. If an incoming order is not COA-eligible or not designated for a COA, it will be routed to either PAR or the COB in accordance with Exchange Rule 6.53C(c)(i). Market-Makers with an appointment in the relevant options class, and members acting as agent for orders resting at the top of the COB in the relevant options series, may electronically submit responses (“RFR Responses”), and modify or withdraw them, at any time during the request response time interval (the “Response Time Interval”). RFR Responses must be in a permissible ratio, and may be expressed on a net price basis in a multiple of the minimum increment ( *i.e.* , $0.05 or $0.10, as applicable) or in a one-cent increment as determined by the appropriate Exchange committee on a class-by-class basis. In addition, RFR Response sizes will be limited to the size of the COA-eligible order for allocation purposes. RFR Responses will not be visible (other than by the COA system). The applicable Response Time Interval will be determined by the appropriate Exchange committee on a class-by-class basis and, in any event, will not exceed three seconds. 8 8 For example, the appropriate Exchange committee could determine to set the timer for a particular class to a random time interval determined by the Exchange system between two and three seconds. When the Response Time Interval expires, the COA-eligible order will be executed and allocated to the extent it is marketable, or routed to the COB or back to PAR to the extent it is not marketable. 9 If executed, the rules of trading priority will provide that the COA-eligible order be executed based first on net price and, at the same net price:
(i)The individual component orders and quotes in the EBook shall have first priority to trade against the COA-eligible order;
(ii)public customer complex orders resting in the COB before, or that are received during, the Response Time Interval and public customer RFR Responses shall, collectively, have second priority;
(iii)non-public customer complex orders resting in the COB before the Response Time Interval shall have third priority; and
(iv)non-public customer complex orders resting in the COB that are received during the Response Time Interval and non-public customer RFR Responses shall, collectively, have fourth priority. 10 Allocations within the first category above (orders residing in the EBook) shall be based upon the Hybrid System ultimate matching algorithm (“UMA”) pertaining to equity options or index/exchange-traded fund options in Exchange Rules 6.45A and 6.45B, respectively, as applicable. 11 Allocations within the second category above (public customer complex orders resting in the COB and public customer RFR Responses) shall be based on time when multiple public customer complex orders or RFR Responses exist at the same price. Allocations within the third category above (non-public customer orders resting in the COB before the Response Time Interval) shall be based on the applicable UMA algorithm. Allocations within the fourth category above (non-public customer orders received during the Response Time Interval in the COB and non-public customer RFR Responses) shall be based on the Hybrid System ultimate matching algorithm in Exchange Rule 6.45A or 6.45B, as applicable, which caps the maximum quote size to be no greater than the underlying order for allocation purposes (“CUMA”). 9 For example, if no RFR Responses are received in the Response Time Interval and the COA-eligible order is not marketable against the individual orders and quotes in the EBook, the COA-eligible order would be routed to the COB or, as applicable, back to PAR at the expiration of the Response Time Interval. If routed to COB, the order would then be subject to execution in accordance with the provisions of Exchange Rule 6.53C(c)(iii) (proposed to be renumbered as Exchange Rule 6.53C(c)(ii)). If routed back to PAR, the member holding the order would have the ability to represent the order in open outcry, trade the order against the COB in accordance with Exchange Rule 6.53C(c)(iii)(3) (proposed to be renumbered as Exchange Rule 6.53C(c)(ii)(3)), or route the order to COB in accordance with Exchange Rule 6.53C(c)(i). 10 RFR Responses that exceed the size of the COA-eligible order are also eligible to trade with other marketable COA-eligible orders that may be received during the Response Time Interval. *See* proposed Exchange Rule 6.53C(d)(vii) and (viii). 11 Exchange Rule 6.45A pertains to the priority and allocation of trades in equity options on the Hybrid System. Exchange Rule 6.45B pertains to the priority and allocation of trades in index options and options on exchange-traded funds on the Hybrid System. The following is an example of a COA: assume the CBOE's derived spread market, considering the individual series prices in the EBook, is offered at $1.15 for 20 contracts. In addition, assume a public customer order resting in the COB is offered at $1.15 for five contracts and two non-public customer orders resting in the COB are offered at $1.15 for five contracts each (for a total of 10 contracts). A COA-eligible order is then received to buy 100 spreads at $1.15. COA will auction the order. An RFR message is sent to members indicating the complex order series and 100 contracts (but not the side of the market). The Response Time Interval for submitting RFR Responses will be for no more than three seconds. Before the conclusion of the Response Time Interval, the following RFR Responses on the offer side are received: Public customer RFR Responses to sell five at a price of $1.14 and five at a price of $1.15; and non-public customer RFR Responses to sell 15 at a price of $1.13, 35 at a price of $1.14, and 100 at a price of $1.15. The execution of the COA-eligible order will proceed as follows: • 15 contracts get filled at $1.13 (against non-public customer RFR Responses); • 40 contracts get filled at $1.14 (five contracts against public customer RFR Responses, then 35 contracts against non-public customer RFR Responses); and • 45 contracts get filled at $1.15 (20 contracts against the individual series legs in the EBook allocated by UMA, then 10 contracts against the public customer orders in COB and public customer RFR Responses allocated by time priority, then 10 contracts against the non-public customer orders resting in the COB before the COA began allocated by UMA, then five contracts against the non-public customer RFR Responses allocated via CUMA). The proposed rule change also describes the handling of unrelated incoming complex orders that may be received prior to the expiration of a COA. 12 Specifically, the proposed rule change provides the following: 12 * See* proposed Exchange Rule 6.53C(d)(viii). The COA system cannot be used to trade a COA-eligible order against a facilitated or solicited order. Instead, facilitations and solicitations of complex orders are subject to Interpretations and Policies .01 and .02 of Exchange Rule 6.45A (with respect to equity options) and Interpretations and Policies .01 and .02 of Exchange Rule 6.45B (with respect to index options and options on exchange-traded funds). These rules also apply to complex orders that are COA'd. Interpretation and Policy .01 of both Exchange Rules 6.45A and 6.45B pertains to principal transactions and prohibit an order entry firm from executing as principal against an order it represents as agent unless:
(1)The agency order is first exposed on the Hybrid System for at least three seconds;
(2)the order entry firm has been bidding or offering for at least three seconds prior to receiving an agency order that is executable against such bid or offer; or
(3)the order entry firm proceeds in accordance with the crossing rules in Exchange Rule 6.74. Interpretation and Policy .02 of both Exchange Rules 6.45A and 6.45B pertains to solicitation orders and requires an order entry firm to expose for at least three seconds an order it represents as agent before the order may be executed electronically via the electronic execution mechanism of the Hybrid System, in whole or in part, against orders solicited from members and non-member broker-dealers to transact with the order. • An incoming complex order received prior to the expiration of the Response Time Interval for a pending COA (the “original COA”) that is on the opposite side of the original COA-eligible order and is marketable against the starting price 13 of the original COA-eligible order will cause the original COA to end. The processing of the original COA pursuant to proposed subparagraphs (d)(iv) through (d)(vi) of Exchange Rule 6.53C is the same. Specifically, the COA-eligible order will be allocated in accordance with proposed subparagraph (d)(v) of Exchange Rule 6.53C or, if the COA-eligible order cannot be filled in whole or in a permissible ratio, the order (or any remaining balance) will route to the COB or back to PAR, as applicable, in accordance with proposed subparagraph (d)(vi) of Exchange Rule 6.53C. 14 13 The “starting price,” which is not visible (other than by the COA system), is the better of the original COA-eligible order's limit price or the best price, on a net debit or credit basis, that existed in the EBook or COB at the beginning of the Response Time Interval. *See* proposed Exchange Rule 6.53C(d)(viii)(1). 14 For example, assume that a COA-eligible order to buy with a net price of $1.20 is received when the starting price is a net price of $1.10. A COA will be initiated at a net price of $1.10. An incoming order to sell at a price less than or equal to $1.10 will cause the COA to end. To the extent possible, the original COA-eligible order will be filled and any remaining balance would route to COB or back to PAR. • Incoming COA-eligible orders that are received prior to the expiration of the Response Time Interval for the original COA that are on the same side of the market, at the same price or worse than the original COA-eligible order and that are better than or equal to the starting price, will join the original COA. The processing of the original COA pursuant to proposed subparagraphs (d)(iv) through (d)(vi) of Exchange Rule 6.53C is the same (as described above) with the addition that the priority of the original COA-eligible order and incoming COA-eligible order(s) shall be according to time priority. 15 15 For example, assume that a COA-eligible order to buy with a net price of $1.20 is received when the starting price is a net price of $1.10. A COA will be initiated at a net price of $1.10. Incoming orders to buy at net prices ranging from $1.10 to $1.20 will join the COA. To the extent possible, the original COA-eligible order will be filled and then the incoming COA-eligible order will be filled. Any remaining balance on either the original COA-eligible order or the incoming COA-eligible order will route to COB or back to PAR. • An incoming COA-eligible order that is received prior to the expiration of the Response Time Interval for the original COA that is on the same side of the market and at a better price than the original COA-eligible order will join the COA, cause the original COA to end, and a new COA to begin for any remaining balance on the incoming COA-eligible order. The processing of the original COA pursuant to proposed subparagraphs (d)(iv) through (d)(vi) of Exchange Rule 6.53C is the same (as described above), with the addition that the priority of the original COA-eligible order and incoming COA-eligible order shall be according to time priority. 16 A pattern or practice of submitting unrelated orders that cause a COA to conclude early will be deemed conduct inconsistent with just and equitable principles of trade and a violation of Exchange Rule 4.1, “Just and Equitable Principles of Trade.” Dissemination of information related to COA-eligible orders to third parties will also be deemed conduct inconsistent with just and equitable principles of trade and a violation of Exchange Rule 4.1 and other Exchange rules. In addition, the CBOE notes that COA-eligible orders may be executed without consideration of prices of the same complex orders that might be available on other exchanges. 17 16 For example, assume that a COA-eligible order to buy with a net price of $1.20 is received when the starting price is a net price of $1.10. A COA will be initiated at a net price of $1.10. An incoming order to buy at a net price higher than $1.20 will join the COA, cause the COA to end, and a new COA to begin for any remaining balance of the incoming order. To the extent possible, the original COA-eligible order will be filled, and then the incoming COA-eligible order will be filled. Any remaining balance on the original COA-eligible order will route to COB or back to PAR. Any remaining balance on the incoming COA-eligible order will be subject to a new COA. 17 This principle also applies currently to complex orders that are executed through the COB. *See* Exchange Rule 6.53C(c)(iii). Finally, CBOE is proposing that RFR Responses be firm only to the extent they may exist at the end of the Response Time Interval and only with respect to COA-eligible orders. As such, RFR Responses that collectively exceed the size of a COA-eligible order would be eligible to trade with other incoming COA-eligible orders that are received prior to the expiration of the Response Time Interval. Any RFR Response not accepted to trade against COA-eligible orders either in whole or in a permissible ratio would expire at the end of the Response Time Interval and would not be eligible to trade with the EBook or the COB. b. Revisions to the Complex Order Book CBOE is also proposing to make certain revisions to the existing complex order execution procedures to better describe the allocation algorithm applicable to the trading of complex orders that are entered into the COB. With respect to complex orders that trade against the EBook, the filing will clarify in renumbered paragraph (c)(ii)(1) of Exchange Rule 6.53C that the “EBook” consists of electronic orders and quotes residing in the Hybrid System, which would include public and non-public orders and market participants' quotes. With respect to complex orders that trade with other orders in the COB, renumbered paragraph (c)(ii)(2) of Exchange Rule 6.53C will provide that such trades will be allocated based on the rules of trading priority otherwise applicable to the individual component leg series in the EBook. With respect to the allocation of complex orders among market participants' orders submitted to trade against the COB, renumbered paragraph (c)(ii)(3) of Exchange Rule 6.53C will provide that market participants may enter both orders and quotes and that resulting trades will be allocated based on the rules of trading otherwise applicable to the interaction of quotes and/or orders with orders in the EBook in the individual component leg series contained in Exchange Rules 6.45A(c) or 6.45B(c), as applicable. Currently the rule text makes specific reference to only Exchange Rule 6.45A(c). The Exchange believes that these revisions will help to clarify and simplify the COB rules such that similar priority and allocation algorithms apply whether trading an individual series or a complex order. The Exchange is also proposing to make some clarifications with respect to the minimum increments applicable to the pricing and trading of complex orders in the COB. Exchange Rule 6.42(3), “Minimum Increments for Bids and Offers,” currently provides that complex orders may be entered in any increment. This provision also applies to orders entered into the COB. However, CBOE is proposing to include a clarification in Exchange Rule 6.53C to provide that complex orders that are routed to, or resting in, the COB may be expressed on a net price basis only in a multiple of the minimum increment ( *i.e.* , $0.05 or $0.10, as applicable) or in a one-cent increment as determined by the appropriate Exchange committee. As discussed further below, the Exchange is also proposing to clarify that the individual legs of a complex order entered into COB may be executed in one-cent increments. c. Revisions Related to Complex Order Minimum Increments The Exchange is proposing to revise and clarify the minimum increments that are permissible for bids and offers on complex orders. CBOE believes these changes will facilitate the orderly execution of complex orders in open outcry and via the COB and COA systems. With respect to minimum increments, Exchange Rule 6.42(3) currently provides that complex orders may generally be expressed in any increment, regardless of the minimum increment otherwise appropriate to the individual legs of the order. Thus, for example, a complex order could be entered at a net debit or credit price of $1.03 even though the standard minimum increment for the individual series is generally $0.05 or $0.10. As an exception to this provision, Exchange Rule 6.42(3) also provides that complex orders in options on the S&P 500 Index (“SPX”) that are not box spreads 18 are to be expressed in decimal increments no smaller than $0.05. The Exchange is proposing to amend this provision of Exchange Rule 6.42(3) to provide that complex orders in options on the S&P 100 Index (“OEX”) that are not box spreads must be expressed in decimal increments no smaller than $0.05. Thus, the minimum increment applicable to OEX options will be the same as that which is currently applicable to SPX options. The Exchange believes that this change is appropriate given the complexity of these orders and the size of the underlying S&P 100 Index. As discussed above, the Exchange is also proposing to clarify in Exchange Rule 6.53C that complex orders entered into and resting in the COB may be expressed on a net price basis in a multiple of the minimum increment ( *i.e.* , $0.05 or $0.10, as applicable) or in a one-cent increment as determined by the appropriate Exchange committee on a class-by-class basis. 18 A “box spread” (also referred to as a “box/roll spread”) means “an aggregation of positions in a long call option and short put option with the same exercise price (‘buy side’) coupled with a long put option and short call option with the same exercise price (‘sell side’ all of which have the same aggregate current underlying value, and are structured as either:
(A)a ‘long box spread’ in which the sell side exercise price exceeds the buy side exercise price or
(B)a ‘short box spread’ in which the buy side exercise price exceeds the sell side exercise price.” *See* Exchange Rule 6.42, Interpretation and Policy .05, and Exchange Rule 6.53C(a)(7). The Exchange is also proposing to make some clarifications with respect to the execution of the individual legs of a complex order. By way of background, after a complex order has been executed at the total net debit or credit price, the contract quantity and price for each individual component leg of the trade are reported as executions. However, the Exchange's rules are silent as to the minimum increment in which these resulting legs may be reported for execution. In the past, when a complex order was expressed in increments smaller than $0.05 or $0.10 in open outcry, each of the component legs of a resulting trade typically would be reported in “split” prices in order to reach the quoted debit or credit price. However, with the introduction of the COB, that system may report the legs of a resulting trade in one-cent increments. Because the Exchange rules do not specifically address the minimum increment in which the legs of a resulting complex order transaction are to be reported, CBOE is proposing to include language in Exchange Rules 6.42 and 6.53C to clarify that the legs of a complex order may be executed in open outcry, via COB or via a COA in one-cent increments, regardless of the minimum quoting increments otherwise appropriate to the individual legs of the order. This change applies a consistent standard for reporting the legs of a complex order transaction whether the transaction takes place in open outcry or via electronic trading, and the Exchange believes that it will enable members to more efficiently execute transactions with less component parts in the transaction. Lastly, the Exchange is proposing to update the provisions of its rules that refer to the trading of various types of complex orders such as spreads, straddles and combinations. These provisions will now include a cross reference to the various other types of complex orders defined in Exchange Rule 6.53C. 2. Statutory Basis The Exchange believes the proposed rule change is consistent with Section 6(b) of the Act, 19 in general, and furthers the objectives of Section 6(b)(5) of the Act, 20 in particular, in that it is designed to promote just and equitable principles of trade, to remove impediments to, and perfect the mechanism of, a free and open market and a national market system, and to protect investors and the public interest. 19 15 U.S.C. 78f(b). 20 15 U.S.C. 78f(b)(5). B. Self-Regulatory Organization's Statement on Burden on Competition CBOE does not believe that the proposed rule change will impose any burden on competition 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, or
(B)Institute proceedings to determine whether the proposed rule change should be disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov* . Please include File Number SR-CBOE-2005-65 on the subject line. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-CBOE-2005-65. 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-CBOE-2005-65 and should be submitted on or before June 28, 2006. 21 17 CFR 200.30-3(a)(12). For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 21 J. Lynn Taylor, Assistant Secretary. [FR Doc. E6-8801 Filed 6-6-06; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-53922; File No. SR-CBOE-2006-52] Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Order Granting Accelerated Approval of a Proposed Rule Change Extending the Exchange's Preferred Market-Maker Pilot Program June 1, 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 May 22, 2006, the Chicago Board Options Exchange, Incorporated (“CBOE” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons and is approving the proposal on an accelerated basis, for a pilot period through June 2, 2007. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend its rules to extend the Preferred Market-Maker Pilot Program for one year, until June 2, 2007. The text of the proposed rule change is set forth below. Brackets indicate deletions; *italics* indicates new text. Chicago Board Options Exchange, Incorporated Rules Rule 8.13 Preferred Market-Maker Program
(a)Generally. The Exchange may allow, on a class-by-class basis, for the receipt of marketable orders, through the Exchange's Order Routing System when the Exchange's disseminated quote is the NBBO, that carry a designation from the member transmitting the order that specifies a Market-Maker in that class as the “Preferred Market-Maker” for that order. A qualifying recipient of a Preferred Market-Maker order shall be afforded a participation entitlement as set forth in subparagraph
(c)below. The Preferred Market-Maker Program shall be in effect until June 2, 200 *7* [6] on a pilot basis. (b)-(c) No change. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item III 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 In June 2005, CBOE obtained approval of a filing adopting a Preferred DPM Program. 3 This allowed order providers to send orders to the Exchange designating a Preferred DPM from among the DPM complex. If the Preferred DPM was quoting at the NBBO at the time the order was received by CBOE, the Preferred DPM was entitled to the entire DPM participation entitlement. The Exchange subsequently modified the applicable participation entitlement percentages under the program 4 and, then expanded the scope of the program to apply to qualifying Market-Makers (as opposed to just DPMs). 5 At that time, the program was renamed the Preferred Market-Maker Program. 3 *See* Securities Exchange Act Release No. 51779 (June 2, 2005), 70 FR 33564 (June 8, 2005) (approving SR-CBOE-2004-71). 4 *See* Securities Exchange Act Release Nos. 51824 (June 10, 2005), 70 FR 35476 (June 20, 2005) (approving SR-CBOE-2005-45); and 52021 (July 13, 2005), 70 FR 41462 (July 19, 2005) (approving SR-CBOE-2005-50). 5 *See* Securities Exchange Act Release No. 52506 (September 23, 2005), 70 FR 57340 (September 30, 2005) (approving SR-CBOE-2005-58). CBOE Rule 8.13 establishes a Preferred Market-Maker Program on a pilot basis. The pilot is due to expire on June 2, 2006. CBOE proposes extending the pilot program an additional year, until June 2, 2007. According to CBOE, since the pilot program was put into operation it has been positively received by the options trading community. CBOE believes that there has not been any adverse or unanticipated negative impact on the market by the presence of the Preferred Market-Maker Program. Further, CBOE believes that the pilot program helps generate greater order flow for the Exchange. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with section 6(b) of the Act 6 in general, and furthers the objectives of section 6(b)(5) of the Act 7 in particular, in that it should promote just and equitable principles of trade, serve to remove impediments to and perfect the mechanism of a free and open market and a national market system, and protect investors and the public interest. 6 15 U.S.C. 78f(b). 7 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 The Exchange has not solicited, and does not intend to solicit comments on the proposed rule change. III. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act and whether the pilot time frame is appropriate. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov.* Please include File Number SR-CBOE-2006-52 on the subject line. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-CBOE-2006-52. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room. Copies of such filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-CBOE-2006-52 and should be submitted on or before June 28, 2006. IV. Commission's Findings and Order Granting Accelerated Approval of the Proposed Rule Change The Exchange has asked the Commission to approve the proposed rule change on an accelerated basis for an additional year so that the pilot program may continue uninterrupted. After careful consideration, the Commission finds that the proposed rule change is consistent with the requirements of section 6 of the Act 8 and the rules and regulations thereunder applicable to a national securities exchange, 9 and, in particular, the requirements of section 6(b)(5) of the Act. 10 Section 6(b)(5) requires, among other things, that the rules of a national securities exchange be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. The Commission notes that the current pilot was approved on a one-year basis to give the Commission an opportunity to evaluate the impact of the pilot program on the options markets to determine whether it would be beneficial to customers and to the options markets as a whole before approving any request for permanent approval of the pilot program. The Commission believes that a one-year extension of the pilot period would provide the Commission with additional time to continue evaluate the Exchange's Preferred Market-Maker Program. 8 15 U.S.C. 78f. 9 In approving this proposal, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). 10 15 U.S.C. 78f(b)(5). The Exchange has requested that the Commission find good cause for approving the proposed rule change prior to the thirtieth day after publication of notice thereof in the **Federal Register** . The Commission believes that granting accelerated approval of the proposed rule change would allow the pilot program to continue without disruption while the Commission and the Exchange continue to review the pilot program's impact on the options market. Accordingly, the Commission finds good cause, consistent with section 19(b)(2) of the Act, 11 for approving the proposed rule change prior to the thirtieth day after publication of notice thereof in the **Federal Register** . 11 15 U.S.C. 78s(b)(2). V. Conclusion *It is therefore ordered* , pursuant to section 19(b)(2) of the Act, 12 that the proposed rule change (SR-CBOE-2006-52), which institutes the pilot program through June 2, 2007, is hereby approved on an accelerated basis. 12 15 U.S.C. 78s(b)(2). For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 13 13 17 CFR 200.30-3(a)(12). J. Lynn Taylor, Assistant Secretary. [FR Doc. E6-8805 Filed 6-6-06; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-53921; File No. SR-ISE-2006-28] Self-Regulatory Organizations; International Securities Exchange, Inc.; Notice of Filing and Order Granting Accelerated Approval of a Proposed Rule Change To Extend the Pilot Period for Preferenced Orders June 1, 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 May 18, 2006, the International Securities Exchange, Inc. (“ISE” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons and is approving the proposal on an accelerated basis, for a pilot period through June 10, 2007. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange is proposing to extend the pilot program for Preferenced Orders until June 10, 2007. The text of the proposed rule change is set forth below. Brackets indicate deletions; *italics* indicates new text. Rule 713. Priority of Quotes and Orders
(a)through
(f)no change. Supplementary Material to Rule 713 .01 through .02 no change. .03 Preferenced Orders. For a pilot period ending [June 10, 2006] *June 10, 2007* , an Electronic Access Member may designate a “Preferred Market Maker” on orders it enters into the System (“Preferenced Orders”).
(a)through
(c)no change. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item III 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 According to the Exchange, the purpose of the proposed rule change is to extend, until June 10, 2007, the pilot period for preferenced orders as provided in paragraph .03 of the Supplementary Material to ISE Rule 713. The proposal amends ISE's procedure for allocating trades among market makers and non-customer orders under ISE Rule 713 to provide an enhanced allocation to a “Preferred Market Maker” when it is quoting at the national best bid or offer (“NBBO”). Specifically, under the proposal, an Electronic Access Member may designate any market maker appointed to an options class to be a Preferred Market Maker on orders it enters into the Exchange's system (“Preferenced Orders”). If the Preferred Market Maker is not quoting at the NBBO at the time the Preferenced Order is received, the Exchange's existing allocation and execution procedures will be applied to the execution. 3 The proposed rule is subject to a pilot program that is currently set to expire on June 10, 2006. 4 3 Marketable customer orders are not automatically executed at prices inferior to the NBBO. If the ISE best bid or offer is inferior to the NBBO, it is handled by the Primary Market Maker according to ISE Rule 803(c). 4 *See* Securities Exchange Act Release No. 52066 (July 20, 2005), 70 FR 43479 (July 27, 2005). Under the proposal, if a Preferred Market Maker is quoting at the NBBO at the time a Preferenced Order is received, the allocation procedure is modified so that the Preferred Market Maker (instead of the Primary Market Maker 5 ) would receive an enhanced allocation equal to the greater of:
(i)The proportion of the total size at the best price represented by the size of its quote; or
(ii)sixty percent of the contracts to be allocated if there is only one other Non-Customer Order or market maker quotation at the best price and forty percent if there are two or more other Non-Customer Orders and/or market maker quotes at the best price. 6 Unexecuted contracts remaining after the Preferred Market Maker's allocation would be allocated pro-rata based on size as described above. 5 A Primary Market Maker may be the Preferenced Market Maker, in which case such market maker would receive the enhanced allocation for Preferenced Market Makers. 6 All allocations are automatically performed by the Exchange's system. The Exchange believes the proposed rule change is a necessary competitive response to the preferencing rules adopted by other options exchanges and would help the ISE attract and retain order flow. The Exchange believes that this order flow would add depth and liquidity to the Exchange's markets and enable the Exchange to continue to compete effectively with other options exchanges. 2. Statutory Basis The Exchange 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)(5) of the Act 8 in particular, in that the proposed rule change is designed to promote just and equitable principles of trade, remove impediments to and perfect the mechanisms of a free and open market and a national market system and, in general, to protect investors and the public interest. The Exchange also believes that extension of the pilot program would allow the Exchange and the Commission to evaluate the rule change over an additional one-year period. 7 15 U.S.C. 78f(b). 8 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 The Exchange has not solicited, and does not intend to solicit comments on the proposed rule change. III. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act and whether the pilot time frame is appropriate. 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-2006-28 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-2006-28. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room. Copies of such filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-ISE-2006-28 and should be submitted on or before June 28, 2006. IV. Commission's Findings and Order Granting Accelerated Approval of the Proposed Rule Change The Exchange has asked the Commission to approve the proposed rule change on an accelerated basis for an additional year in order to avoid disruption in the operation of the market. After careful consideration, the Commission finds that the proposed rule change is consistent with the requirements of section 6 of the Act 9 and the rules and regulations thereunder applicable to a national securities exchange, 10 and, in particular, the requirements of section 6(b)(5) of the Act. 11 Section 6(b)(5) requires, among other things, that the rules of a national securities exchange be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. The Commission notes that the current pilot was approved for a total of one year 12 to give the Commission an opportunity to evaluate the impact of the pilot program on the options markets to determine whether it would be beneficial to customers and to the options markets as a whole before approving any request for permanent approval of the pilot program. The Commission believes that a one-year extension of the pilot period would provide the Commission with additional time to continue to evaluate the Exchange's Preferenced Order program. 9 15 U.S.C. 78f. 10 In approving this proposal, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). 11 15 U.S.C. 78f(b)(5). 12 The Commission initially approved the Exchange's Preferenced Order program on a six week pilot basis while the Commission sought comment on the proposed rule change. *See* Securities Exchange Act Release No. 51818 (June 10, 2006), 70 FR 35146 (June 16, 2006). The Commission subsequently extended to the pilot period until June 10, 2006, which was one year from the date the Commission first approved the Exchange's Preferenced Order program on a pilot basis. *See* Securities Exchange Act Release No. 52066 (July 20, 2005), 70 FR 43479 (July 27, 2005). The Exchange has requested that the Commission find good cause for approving the proposed rule change prior to the thirtieth day after publication of notice thereof in the **Federal Register** . The Commission believes that granting accelerated approval of the proposed rule change would allow the pilot program to continue without disruption while the Commission and the Exchange continue to review the pilot program's impact on the options market. Accordingly, the Commission finds good cause, consistent with section 19(b)(2) of the Act, 13 for approving the proposed rule change prior to the thirtieth day after publication of notice thereof in the **Federal Register** . 13 15 U.S.C. 78s(b)(2). V. Conclusion *It is therefore ordered* , pursuant to section 19(b)(2) of the Act, 14 that the proposed rule change (SR-ISE-2006-28), which institutes the pilot program through June 10, 2007, is hereby approved on an accelerated basis. 14 15 U.S.C. 78s(b)(2). For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 15 15 17 CFR 200.30-3(a)(12). J. Lynn Taylor, Assistant Secretary. [FR Doc. E6-8804 Filed 6-6-06; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-53910; File No. SR-ISE-2006-22] Self-Regulatory Organizations; International Securities Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change and Amendment No. 1 Thereto Relating to Fee Changes May 31, 2006. Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (the “Act”), 1 and Rule 19b-4 thereunder, 2 notice is hereby given that on April 26, 2006, the International Securities Exchange, Inc. (“ISE” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the ISE. On May 18, 2006, ISE filed Amendment No. 1 to the proposed rule change. 3 The ISE has designated this proposal as one establishing or changing a due, fee, or other charge imposed by the ISE under 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 Amendment No. 1 made certain clarifying changes to the purpose section regarding fees charged to non-ISE market makers for transactions in options on the Premium Products that are the subject of this filing. These changes did not affect the fees covered by this filing. 4 15 U.S.C. 78s(b)(3)(A)(ii). 5 17 CFR 240.19b-4(f)(2). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The ISE is proposing to amend its Schedule of Fees to establish fees for transactions in options on two Premium Products. 6 The text of the proposed rule change, as amended, is available on the ISE's Web site ( *http://www.iseoptions.com/legal/proposed _rule_changes.asp* ), at the principal office of the ISE, and at the Commission's Public Reference Room. 6 “Premium Products” is defined in the ISE's Schedule of Fees as the products enumerated therein. The Exchange represents that the Premium Products that are the subject of this proposed rule change, iShares S&P 500 Index Fund and iShares MSCI Hong Kong Index Fund, constitute “Fund Shares,” as defined by ISE Rule 502(h). II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the ISE included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The ISE 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 amend its Schedule of Fees to establish fees for transactions in options on the following two Premium Products: iShares S&P 500 Index Fund (“IVV”) 7 and iShares MSCI Hong Kong Index Fund (“EWH”). 8 Specifically, the Exchange is proposing to adopt an execution fee and a comparison fee for all transactions in options on IVV and EWH. 9 The amount of the execution fee and comparison fee for products covered by this filing shall be $0.15 and $0.03 per contract, respectively, for all Public Customer Orders 10 and Firm Proprietary orders. The amount of the execution fee and comparison fee for all ISE Market Maker transactions and all non-ISE Market Maker transactions shall be equal to the execution fee and comparison fee currently charged by the Exchange for ISE Market Maker transactions and non-ISE Market Maker transactions in equity options. 11 All of the applicable fees covered by this filing are identical to fees charged by the Exchange for all other Premium Products. The Exchange believes the proposed rule change will further the Exchange's goal of introducing new products to the marketplace that are competitively priced. 7 iShares® is a registered trademark of Barclays Global Investors, N.A. (“BGI”), a wholly owned subsidiary of Barclays Bank PLC. “Standard & Poor's®,” “S&P®,” “S&P 500®,” are trademarks of The McGraw-Hill Companies, Inc. (“McGraw-Hill”), and have been licensed for use for certain purposes by BGI. IVV is not sponsored, sold or endorsed by Standard & Poor's, (“S&P”), a division of McGraw-Hill, and S&P makes no representation regarding the advisability of investing in IVV. BGI, McGraw-Hill and S&P have not licensed or authorized ISE to
(i)engage in the creation, listing, provision of a market for trading, marketing, and promotion of options on IVV or
(ii)to use and refer to any of their trademarks or service marks in connection with the listing, provision of a market for trading, marketing, and promotion of options on IVV or with making disclosures concerning options on IVV under any applicable federal or state laws, rules or regulations. BGI, McGraw-Hill and S&P do not sponsor, endorse, or promote such activity by ISE and are not affiliated in any manner with ISE. 8 iShares® is a registered trademark of BGI, a wholly owned subsidiary of Barclays Bank PLC. “MSCI Hong Kong Index” is a service mark of Morgan Stanley Capital International (“MSCI”) and has been licensed for use for certain purposes by BGI. All other trademarks and service marks are the property of their respective owners. EWH is not sponsored, endorsed, issued, sold or promoted by MSCI. BGI and MSCI have not licensed or authorized ISE to
(i)engage in the creation, listing, provision of a market for trading, marketing, and promotion of options on EWH or
(ii)to use and refer to any of their trademarks or service marks in connection with the listing, provision of a market for trading, marketing, and promotion of options on EWH or with making disclosures concerning options on EWH under any applicable federal or state laws, rules or regulations. BGI and MSCI do not sponsor, endorse, or promote such activity by ISE, and are not affiliated in any manner with ISE. 9 The Exchange represents that these fees will be charged only to Exchange members. Under a pilot program that is set to expire on July 31, 2006, these fees will also be charged to Linkage Orders (as defined in ISE Rule 1900). 10 Public Customer Order is defined in ISE Rule 100(a)(33) as an order for the account of a Public Customer. Public Customer is defined in ISE Rule 100(a)(32) as a person that is not a broker or dealer in securities. 11 Telephone conversation between Samir Patel, Assistant General Counsel, ISE, and Richard Holley III, Special Counsel, Division of Market Regulation, Commission, on May 31, 2006. Additionally, the Exchange proposes to remove SWH (Software HOLDRS) from the list of Premium Products on the Schedule of Fees. SWH has been delisted from ISE and no longer trades on the Exchange. 2. Statutory Basis The Exchange believes that the basis under the Act for this proposed rule change is the requirement under section 6(b)(4) of the Act 12 that an exchange have an equitable allocation of reasonable dues, fees and other charges among its members and other persons using its facilities. 12 15 U.S.C. 78f(b)(4). B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange believes that the proposed rule change, as amended, 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 The Exchange has not solicited, and does not intend to solicit, comments on this proposed rule change. The Exchange has not received any unsolicited written comments from members or other interested parties. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing rule change, as amended, establishes or changes a due, fee, or other charge imposed by the Exchange, it has become effective pursuant to section 19(b)(3) of the Act 13 and Rule 19b-4(f)(2) 14 thereunder. At any time within 60 days of the filing of such amended 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). 14 17 CFR 19b-4(f)(2). 15 The effective date of the original proposed rule is April 26, 2006. The effective date of Amendment No. 1 is May 18, 2006. For purposes of calculating the 60-day period within which the Commission may summarily abrogate the proposed rule change under section 19(b)(3)(C) of the Act, the Commission considers the period to commence on May 18, 2006, the date on which the ISE submitted Amendment No. 1. *See* 15 U.S.C. 78s(b)(3)(C). IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change, as amended, is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov* . Please include File No. SR-ISE-2006-22 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-ISE-2006-22. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room. Copies of such filing also will be available for inspection and copying at the principal office of the ISE. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-ISE-2006-22 and should be submitted on or before June 28, 2006. 16 17 CFR 200.30-3(a)(12). For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 16 J. Lynn Taylor, Assistant Secretary. [FR Doc. E6-8806 Filed 6-6-06; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-53914; File No. SR-ISE-2006-25] Self-Regulatory Organizations; International Securities Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change and Amendment No. 1 Thereto Relating to Fee Changes May 31, 2006. Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (the “Act”), 1 and Rule 19b-4 thereunder, 2 notice is hereby given that on May 5, 2006, the International Securities Exchange, Inc. (“ISE” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the ISE. On May 23, 2006, ISE filed Amendment No. 1 to the proposed rule change. 3 The ISE has designated this proposal as one establishing or changing a due, fee, or other charge imposed by the ISE under 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 Amendment No. 1 added clarifying language to the purpose section of the filing regarding fees charged to non-ISE Market Makers for transactions in options on the Premium Products and made a technical change to the text of Exhibit 5 (ISE's Schedule of Fees) correcting the symbol for the Mini FTSE 100 Index from UKZ to UKX. The correction to Exhibit 5 does not affect the fees covered by this filing. 4 15 U.S.C. 78s(b)(3)(A)(ii). 5 17 CFR 240.19b-4(f)(2). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The ISE is proposing to amend its Schedule of Fees to establish fees for transactions in options on two Premium Products. 6 The text of the proposed rule change, as amended, is available on the ISE's Web site ( *http://www.iseoptions.com/legal/proposed_rule_changes.asp* ), at the principal office of the ISE, and at the Commission's Public Reference Room. 6 Premium Products is defined in the Schedule of Fees as the products enumerated therein. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the ISE included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The ISE 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 amend its Schedule of Fees to establish fees for transactions in options on the following two Premium Products: Mini FTSE 100 Index (“UKX”) and Mini FTSE 250 Index (“FTZ”). 7 Specifically, the Exchange is proposing to adopt an execution fee and a comparison fee for all transactions in options on UKX and FTZ. 8 The amount of the execution fee and comparison fee for products covered by this filing shall be $0.15 and $0.03 per contract, respectively, for all Public Customer Orders 9 and Firm Proprietary orders. The amount of the execution fee and comparison fee for all ISE Market Maker transactions and all non-ISE Market Maker transactions shall be equal to the execution fee and comparison fee currently charged by the Exchange for ISE Market Maker transactions and non-ISE Market Maker transactions in equity options. 10 All of the applicable fees covered by this filing are identical to fees charged by the Exchange for all other Premium Products. The Exchange believes the proposed rule change will further the Exchange's goal of introducing new products to the marketplace that are competitively priced. 7 *See* Securities Exchange Act Release No. 53484 (March 14, 2006), 71 FR 14268 (March 21, 2006) (SR-ISE-2005-25) (order approving the trading of options on full and reduced values of the FTSE 100 Index and FTSE 250 Index, including Long-Term Options). 8 The Exchange represents that these fees will be only charged to Exchange members. Under a pilot program that is set to expire on July 31, 2006, these fees will also be charged to Linkage Orders (as defined in ISE Rule 1900). 9 Public Customer Order is defined in ISE Rule 100(a)(33) as an order for the account of a Public Customer. Public Customer is defined in ISE Rule 100(a)(32) as a person that is not a broker or dealer in securities. 10 Telephone conversation between Samir Patel, Assistant General Counsel, ISE, and Richard Holley, Special Counsel, Division of Market Regulation, Commission, on May 31, 2006. Additionally, the Exchange has entered into a license agreement with FTSE International Limited in connection with the listing and trading of options on UKX and FTZ. As with certain other licensed options, the Exchange is adopting a fee of ten
(10)cents per contract for trading in these options to defray the licensing costs. The Exchange believes charging the participants that trade this instrument is the most equitable means of recovering the costs of the license. However, because of competitive pressures in the industry, the Exchange proposes to exclude Public Customer Orders from this surcharge fee. Accordingly, this surcharge fee will only be charged to Exchange members with respect to non-Public Customer Orders ( *e.g.* , ISE Market Maker, non-ISE Market Maker & Firm Proprietary orders) and shall apply to Linkage Orders 11 under a pilot program that is set to expire on July 31, 2006. Further, since options on UKX and FTZ are not multiply-listed, the Payment for Order Flow fee shall not apply. 11 *See* ISE Rule 1900. 2. Statutory Basis The Exchange believes that the proposed rule change, as amended, is consistent with section 6(b)(4) of the Act, 12 which requires that an exchange have an equitable allocation of reasonable dues, fees, and other charges among its members and other persons using its facilities. 12 15 U.S.C. 78f(b)(4). B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange believes that the proposed rule change 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 The Exchange has not solicited, and does not intend to solicit, comments on this proposed rule change. The Exchange has not received any unsolicited written comments from members or other interested parties. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective pursuant to section 19(b)(3)(A) of the Act 13 and Rule 19b-4(f)(2) 14 thereunder because it changes a fee imposed by the Exchange. At any time within 60 days of the filing of such amended 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). 14 17 CFR 19b-4(f)(2). 15 The effective date of the original proposed rule is May 5, 2006. The effective date of Amendment No. 1 is May 23, 2006. For purposes of calculating the 60-day period within which the Commission may summarily abrogate the proposed rule change under Section 19(b)(3)(C) of the Act, the Commission considers the period to commence on May 23, 2006, the date on which the ISE submitted Amendment No. 1. *See* 15 U.S.C. 78s(b)(3)(C). IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change, as amended, is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or • Send an e-mail to *rule-comments@sec.gov* . Please include File No. SR-ISE-2006-25 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-ISE-2006-25. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room. Copies of such filing also will be available for inspection and copying at the principal office of the ISE. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-ISE-2006-25 and should be submitted on or before June 28, 2006. 16 17 CFR 200.30-3(a)(12). For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 16 J. Lynn Taylor, Assistant Secretary. [FR Doc. E6-8807 Filed 6-6-06; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-53913; File No. SR-NASDAQ-2006-008] Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change by The NASDAQ Stock Market LLC To Require Securities Be Eligible for a Direct Registration System May 31, 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 27, 2006, The NASDAQ Stock Market LLC (“Nasdaq”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change described in Items I, II, and III below, which items have been prepared primarily by Nasdaq. The Commission is publishing this notice to solicit comments on the proposed rule change from interested parties. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change Nasdaq proposes to require securities to be eligible for a Direct Registration System (“DRS”). 3 The text of the proposed rule change is below. Proposed new language is in *italics* , and proposed deletions are in brackets. 4 3 Nasdaq refers to a Direct Registration System as a Direct Registration Program. For purposes of clarity and consistency with other related filings referred to below, the term Direct Registration System or DRS will be used in place of Direct Registration Program or DRP in this notice. 4 Changes are marked to the rules of The NASDAQ Stock Market LLC found at *http://www.nasdaqtrader.com.* These rules will become effective when Nasdaq fulfills certain conditions and commences operations as a national securities exchange, which became effective April 17, 2006, but has not yet been published. *See* Exchange Act Release No. 53128 (January 13, 2006), 71 FR 3550 (January 23, 2006) [File No. 10-131]. Nasdaq modified the title to Rule 4350. This filing reflects the revised title. Rule 4350. Qualitative Listing Requirements for Nasdaq Issuers Except for Limited Partnerships (a)-(k) No change.
(l)Direct Registration Program *(1) All securities initially listing on Nasdaq on or after January 1, 2007, must be eligible for a Direct Registration Program operated by a clearing agency registered under Section 17A of the Exchange Act. This provision does not extend to:
(i)additional classes of securities of companies which already have securities listed on Nasdaq;
(ii)companies which immediately prior to such listing had securities listed on another registered securities exchange in the U.S.; or,
(iii)non-equity securities which are book-entry-only.* *(2) On and after January 1, 2008, all securities listed on Nasdaq (except non-equity securities which are book-entry-only) must be eligible for a Direct Registration Program operated by a clearing agency registered under Section 17A of the Exchange Act.* *(3)* If an issuer establishes or maintains a Direct Registration Program for its shareholders, the issuer shall, directly or through its transfer agent, participate in an electronic link with a [securities depository] clearing agency registered under Section 17A of the Exchange Act to facilitate the electronic transfer of securities held pursuant to such program. (m)-(n) No change. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, Nasdaq included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. Nasdaq has prepared summaries, set forth in sections (A), (B), and
(C)below, of the most significant aspects of these statements. 5 5 The Commission has modified portions of the text of the summaries prepared by the Nasdaq. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose Nasdaq Rule 4350(l) currently allows an issuer to establish a DRS for its shareholders provided the issuer, directly or through its transfer agent, participates in an electronic link with a clearing agency registered under Section 17A of the Exchange Act. DRS permits an investor's ownership position to be recorded and maintained in book-entry form on the records of the issuer or its transfer agent. Because ownership positions are recorded in book-entry form, investors receive an account statement from the issuer or its transfer agent as evidence of ownership instead of receiving a physical certificate. Brokerage firms and transfer agents are linked through an electronic system administered by The Depository Trust Company (“DTC”) thereby permitting securities positions to be electronically transferred between a broker-dealer and a transfer agent without the need to transfer for physical certificates. 6 6 Currently, the only registered clearing agency operating a DRS is DTC. For a description of DRS and the DRS facilities administered by DTC, see Securities Exchange Act Release Nos. 37931 (November 7, 1996), 61 FR 58600 (November 15, 1996), [File No. SR-DTC-96-15] (order granting approval to establish DRS) and 41862 (September 10, 1999), 64 FR 51162 (September 21, 1999), [File No. SR-DTC-99-16] (order approving implementation of the Profile Modification System). Nasdaq believes that DRS will be an important step in reducing the use of physical certificates which will facilitate efficiencies and reduced risks in securities transactions and could eventually lead to lower costs for issuers and investors. 7 As such, to encourage the use of DRS, Nasdaq is proposing to amend its rules to require that all listed securities be eligible to participate in DRS. 8 While this proposed rule change would require that issuers' securities be eligible for DRS, it would not require issuers to participate in DRS and would not mandate the elimination of physical certificates. As a result, subject to applicable state law and the company's governing documents, an investor could still elect to receive a certificate if the issuer chose to make certificates available. 7 In March 2004, the Commission published a concept release that discussed, among other things, whether more should be done to reduce the use of physical certificates by individual investors. The Commission noted that the use of physical certificates increases the costs and risks of clearing and settling securities transactions, costs that most often are ultimately born by investors. Securities Exchange Act Release 8398 (March 11, 2004), 69 FR 12922 (March 18, 2004) [File No. S7-13-04] (Securities Transaction Settlement concept release). 8 The New York Stock Exchange LLC and the American Stock Exchange LLC have also filed proposed rule changes with the Commission that would require certain listed companies securities DRS eligible. Securities Exchange Act Release Nos. 53912 (May 31, 2006) [File No. SR-NYSE-2006-29] and 53911 (May 31, 2006) [File No. SR-Amex-2006-40]. Because currently the only DRS operated by a registered clearing agency is that of DTC, in order for a security to be eligible to participate in DRS, the issuer is required to use a transfer agent that meets DTC's insurance and connectivity requirements. As a result, some transfer agents acting for Nasdaq issuers may have to make changes to comply with these requirements, and some issuers may choose to change transfer agents. Certain issuers may also have to make amendments to their governing documents, such as their by-laws, to be eligible to issue securities that are not represented by certificates. To allow sufficient time for any of these changes that need to take place, Nasdaq proposes to implement the proposed rule change January 1, 2008, for the securities of issuers with securities already listed on Nasdaq or another listed marketplace at the time the proposed rule change is approved. Companies listing for the first time should have greater flexibility to adopt any changes required to have their securities DRS eligible and therefore, the proposed rule change requirement would be applicable to new listings beginning January 1, 2007. In addition, Nasdaq proposes that the requirement not apply to non-equity securities that are held in book-entry-only form. 2. Statutory Basis The statutory basis under the Act for this proposed rule change is the requirement under Section 6(b)(5) of the Act, which requires, among other things, that the rules of an exchange are 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 perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. 9 Nasdaq believes that requiring securities to be eligible for DRS will ease the trading of securities in book-entry form, which will facilitate transactions in securities. 9 15 U.S.C. 78f(b)(5). B. Self-Regulatory Organization's Statement on Burden on Competition The Nasdaq does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others On March 7, 2005, Nasdaq solicited comment from issuers on the impact of a rule requiring securities to be eligible for DRS. Nasdaq received nine responses to this solicitation, all from representatives of issuers. Eight responses, including five participants in DRS, were supportive citing factors such as cost savings, shareholder service, and efficiency. One respondent was opposed because of the associated costs and perceived negative response of shareholders. Nasdaq notes, however, that the concerns expressed by this commenter may not be applicable to this proposed rule change because this proposal would not mandate the use of DRS. 10 10 Nasdaq's solicitation and the comments received are attached as Exhibit 2 to this proposed rule change, which can be found at *www.nasd.com.* III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within thirty-five 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 ninety days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding; or
(ii)as to which the self-regulatory organization consents, the Commission will:
(A)By order approve such proposed rule change or
(B)Institute proceedings to determine whether the proposed rule change should be disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change 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-2006-008 in 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-NASDAQ-2006-008. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Section, 100 F Street, NE., Washington, DC 20549. Copies of such filings also will be available for inspection and copying at the principal office of Nasdaq and on Nasdaq's Web site, *http://www.nasdaq.com.* 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-NASDAQ-2006-008 and should be submitted on or before June 28, 2006. For the Commission by the Division of Market Regulation, pursuant to delegated authority. 11 11 17 CFR 200.30-3(a)(12). Jill M. Peterson, Assistant Secretary. [FR Doc. E6-8819 Filed 6-6-06; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-53920; File No. SR-NASD-2006-039] Self-Regulatory Organizations; National Association of Securities Dealers, Inc.; Notice of Filing of Proposed Rule Change and Amendment No. 1 Thereto To Amend NASD Rules To Modify and Expand NASD's Authority To Initiate Trading and Quotation Halts in OTC Equity Securities June 1, 2006. Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) 1 and Rule 19b-4 thereunder, 2 notice is hereby given that on March 22, 2006, the National Association of Securities Dealers, Inc. (“NASD”) filed with the Securities and Exchange Commission (“SEC” or “Commission”) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by NASD. On May 23, 2006, NASD filed with the Commission Amendment No. 1 to the proposed rule change. 3 The Commission is publishing this notice to solicit comments on the proposed rule change, as amended, from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 Amendment No. 1 replace and susperseded the original rule filing in its entirety. I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change NASD is proposing to
(1)amend NASD rules to modify and expand NASD's authority to initiate trading and quotation halts in over-the-counter (“OTC”) equity securities; 4 and
(2)adopt IM-6660-1 to identify certain factors that NASD may consider in determining, in its discretion, whether imposing a trading and quotation halt in an OTC equity security is appropriate. Below is the text of the proposed rule change, as amended. Proposed new language is in italics; proposed deletions are in brackets. 5 4 *See* NASD Rule 6610. 5 The proposed rule text incorporates certain technical corrections that NASD will incorporate into an amendment that it will file with the Commission before approval of the proposed rule change. Telephone conversation between Kosha Dalal, Associate General Counsel, NASD and Tim Fox, Special Counsel, Commission on June 1, 2006. [6545] 6660 . Trading and Quotation Halt in OTC[BB-Eligible] Equity Securities
(a)Authority for Initiating a Trading and Quotation Halt In circumstances in which it is necessary to protect investors and the public interest, NASD may direct members, pursuant to the procedures set forth in paragraph (b), to halt trading and quotations in *OTC Equity Securities (as such term is defined in Rule 6610* )[the over-the-counter (“OTC”) market of a security or an American Depository Receipt (“ADR”), that is included in the OTC Bulletin Board (“OTCBB”)] if:
(1)The OTC[BB] *Equity* S[s]ecurity or the security underlying *an American Depository Receipt (“ADR”) that is an OTC Equity Security (“OTC ADR”)* [the OTCBB ADR] is listed on or registered with a foreign securities exchange or market, and the foreign securities exchange, market, or regulatory authority overseeing such issuer, exchange, or market, halts trading in such security for regulatory reasons because of public interest concerns (“Foreign Regulatory Halt”); provided, however, that NASD will not impose a trading and quotation halt if the Foreign Regulatory Halt was imposed solely for material news, a regulatory filing deficiency, or operational reasons; [or]
(2)The OTC[BB] *Equity S* [s]ecurity or the security underlying [the] *an* OTC[BB] ADR is a derivative or component of a security listed on or registered with a national securities exchange, The Nasdaq Stock Market, or foreign securities exchange or market (“listed security”) and the national securities exchange, The Nasdaq Stock Market, or foreign securities exchange or market, imposes a trading halt in the listed security[.] *; or*
(3)*NASD determines that an extraordinary event has occurred or is ongoing that has had a material effect on the market for the OTC Equity Security or has caused or has the potential to cause major disruption to the marketplace and/or significant uncertainty in the settlement and clearance process.* [the issuer of the OTCBB security or the security underlying the OTCBB ADR fails to comply with the requirements of SEC Rule 10b-17 regarding Untimely Announcements of Record Dates.]
(b)Procedure for Initiating a Trading and Quotation Halt
(1)When a halt is initiated under subparagraph (a)(1) of this rule, upon receipt of information from a foreign securities exchange or market on which the OTC[BB] *Equity S* [s]ecurity or the security underlying the OTC[BB] ADR is listed or registered, or from a regulatory authority overseeing such issuer, exchange, or market, NASD will promptly evaluate the information and determine whether a trading and quotation halt in the OTC[BB] * Equity S* [s]ecurity is appropriate.
(2)Should NASD determine that a basis exists under this rule for initiating a trading and quotation halt, the commencement of the trading and quotation halt will be effective simultaneous with the issuance of appropriate public notice.
(3)Trading and quotations in the OTC market may resume when NASD determines that the basis for the halt no longer exists, or when [five] *ten* business days have elapsed from the date NASD initiated the trading and quotation halt in the security, whichever occurs first. NASD shall disseminate appropriate public notice that the trading and quotation halt is no longer in effect.
(c)Violation of OTC[BB] Trading and Quotation Halt Rule If a security is subject to a trading and quotation halt initiated pursuant to this rule, it shall be deemed conduct inconsistent with just and equitable principles of trade and a violation of Rule 2110 for a member:
(1)To effect, directly or indirectly, a trade in such security; or
(2)To publish a quotation, a priced bid and/or offer, an unpriced indication of interest (including “bid wanted” and “offer wanted” indications), or a bid or offer accompanied by a modifier to reflect unsolicited customer interest, in any quotation medium. For purposes of this rule, “quotation medium” shall mean any: system of general circulation to brokers or dealers that regularly disseminates quotations of identified brokers or dealers; or publication, alternative trading system or other device that is used by brokers or dealers to disseminate quotations to others. IM-6660-1 Factors To Be Considered When Initiating a Trading and Quotation Halt * NASD may impose a trading and quotation halt in an OTC Equity Security pursuant to Rule 6660(a)(3) where NASD determines, in its discretion, based on the facts and circumstances of the particular event, that halting trading in the security is the appropriate mechanism to protect investors and ensure a fair and orderly marketplace. As a general matter, NASD does not favor imposing a trading and quotation halt in an OTC Equity Security and will exercise this authority in very limited circumstances. In determining whether to impose a trading halt under Rule 6660(a)(3), NASD will consider several factors in making its determination, including but not limited to:
(1)The material nature of the event;
(2)the material facts surrounding the event are undisputed and not in conflict;
(3)the event has caused widespread confusion in the trading of the security;
(4)there has been a material negative effect on the market for the subject security;
(5)the potential exists for a major disruption to the marketplace;
(6)there is significant uncertainty in the settlement and clearance process for the security; and/or
(7)such other factors as NASD deems relevant in making its determination. NASD may review all or some of these factors as it determines appropriate. * 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, as amended, and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. 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 Effective October 1, 2005, NASD transferred ownership and operations of the OTC Bulletin Board (“OTCBB”) from The Nasdaq Stock Market, Inc. (“Nasdaq”) to NASD. Prompted in part by the transition of the OTCBB, NASD has been analyzing the regulatory framework in this sector of the marketplace to determine whether changes in this area are appropriate. 6 As part of this ongoing effort, NASD is proposing several changes related to its current authority under NASD Rule 6545 to halt trading and quotations in the OTC market of a security or American Depository Receipt (“ADR”) that is included in the OTCBB. Generally, national securities exchanges, such as the New York Stock Exchange LLC (“NYSE”) as well as Nasdaq, have the authority to halt trading and quotations in a security listed on such exchange. 7 Issuers that have securities listed on a national securities exchange enter into a listing agreement with such exchange that provides, among other things, that such issuer will give timely notice of material news affecting the security or issuer. Such exchanges generally have the authority to halt trading and quotations in a security to allow a company to announce important news or where there is a significant order imbalance between buyers and sellers in a security. 6 *See, e.g.* , Securities Exchange Act Release No. 53224 (February 3, 2006), 71 FR 7101 (February 10, 2006) (SR-NASD-2005-112) (approving amendments to NASD Rule 3360 to expand the short interest reporting requirements to OTC equity securities). 7 *See, e.g.* , NYSE Rule 80B (Circuit Breakers); Section 202.06 of the NYSE Listed Company Manual (Procedure for Public Release of Information); and NASD Rule 4120 (Trading Halts). NASD, however, does not have a listing agreement or similar relationship with issuers of OTC Equity Securities 8 and cannot compel such issuers to disclose material information. As a result, NASD currently has limited trade halt authority with respect to these securities. Specifically, NASD Rule 6545(a) currently provides NASD with authority to halt trading and quotations of OTCBB securities only where:
(1)The OTCBB security (or security underlying an OTCBB ADR) is listed on or registered with a foreign market and the foreign regulatory authority or market halts trading in the security;
(2)the OTCBB security (or the security underlying the OTCBB ADR) is a derivative or component of a security listed on or registered with Nasdaq, a national securities exchange or foreign exchange and the exchange or market halts trading in the underlying security; or
(3)the OTCBB issuer fails to comply with the requirements of Rule 10b-17 under the Act, 9 which generally requires the issuer of a class of securities that are publicly traded to give notice to NASD no later than 10 days prior to the record date of a dividend or distribution. Pursuant to NASD Rule 6545, NASD has authority to halt trading and quotations of OTCBB-eligible securities for up to five business days. 8 The term “OTC Equity Security” as used in proposed NASD Rule 6660 is defined in NASD Rule 6610(d), as may be amended from time to time. NASD Rule 6610(d) provides that the term means any equity security not classified as a “designated security,” for purposes of the NASD Rule 4630 and 4640 Series. This term also includes certain exchange-listed securities that do not otherwise qualify for real-time trade reporting because they are not “eligible securities” as defined in NASD Rule 6410(d). The term “OTC Equity Security” does not include “restricted securities,” as defined by Rule 144(a)(3) under the Securities Act of 1933, nor any securities designated in the PORTAL Market under the NASD Rule 5300 Series. 9 17 CFR 240.10b-17. NASD is proposing four amendments to expand its current authority to halt trading and quotations: First, NASD is proposing to expand the scope of its current trade halt authority to include authority to halt trading and quotations in all OTC Equity Securities, which includes ADRs that trade in the OTC market. NASD's existing trading halt authority is limited to OTCBB securities and therefore NASD does not have authority to impose trading or quotation halts in other OTC Equity Securities ( *e.g.* , securities quoted exclusively on the Pink Sheets). NASD believes that its trading and quotation halt authority should apply uniformly to all OTC Equity Securities and is therefore proposing to expand NASD's existing trading halt authority to all OTC Equity Securities. 10 NASD believes that eliminating this disparity will further investor protections in this area of the securities market. 10 In addition, because the current NASD Rule 6500 Series relates solely to OTCBB securities, NASD is proposing to renumber the amended NASD Rule 6545 as NASD Rule 6660, which would be part of the NASD Rule 6600 Series (OTC Equity Securities). Second, NASD is proposing to modify and expand NASD's existing trading halt authority to provide more general trading and quotation halt authority beyond halts related to non-compliance with Rule 10b-17, while limiting such authority to only those extraordinary events that have a material effect on the market for the OTC Equity Security and that have the potential to cause major disruption to the marketplace and/or cause significant uncertainty in the settlement and clearance process. Specifically, the proposed trading and quotation halt authority would provide NASD with the ability to impose a trading and quotation halt for material events, where NASD determines, in its discretion, based on the facts and circumstances of the particular event, that halting trading in the security is the appropriate mechanism to protect investors and ensure a fair and orderly marketplace. Third, NASD is proposing to increase the maximum number of business days that it can impose a trading and quotation halt from up to five business days to ten business days. NASD believes that a period of up to ten business days is consistent with the maximum duration that the Commission is permitted to suspend trading in securities in accordance with section 12(k) of the Act. 11 NASD believes increasing the maximum number of days from five to ten business days will allow more time for regulators to act and for the market of the subject security to stabilize. 11 15 U.S.C. 78 *1* (k). Fourth, NASD is proposing to adopt IM-6660-1 to identify certain factors that NASD may consider in determining, in its discretion, whether halting trading in an OTC Equity Security under proposed NASD Rule 6660(a)(3) is appropriate. Proposed IM-6660-1 provides that as a general matter, NASD would not favor imposing a trading halt and thus would exercise this authority in very limited circumstances. It identifies factors that NASD would consider in determining whether to impose a trading halt under this expanded authority. Specifically, IM-6660-1 provides that NASD would consider several factors in making its determination, including but not limited to:
(1)The material nature of the event;
(2)whether the material facts surrounding the event are undisputed and not in conflict;
(3)whether the event has caused widespread confusion in the trading of the security;
(4)whether there has been a material negative effect on the market for the subject security;
(5)whether the potential exists for a major disruption to the marketplace;
(6)whether there is significant uncertainty in the settlement and clearance process for the security; and/or
(7)such other factors as NASD deems relevant in making its determination. NASD may review all or some of these factors as it determines appropriate. NASD staff would weigh the relevant information and make a determination whether halting trading in the security is appropriate and may consult with NASD's Uniform Practice Code (“UPC”) Committee (or any successor thereto) as it deems necessary or appropriate. 12 12 The UPC Committee is a standing committee of NASD, currently consisting of six professionals in the securities industry. The UPC Committee has authority to advise NASD on issues of interest and concern to the securities industry, including specifically interpretations with respect to the UPC. NASD staff may present matters relating to possible trading halts to the UPC Committee from time to time. However, the role of the UPC Committee in this regard is advisory only. NASD staff will retain full power and authority to make all determinations under proposed NASD Rule 6660 and IM-6660-1. NASD is proposing to expand its trading and quotation halt authority in the OTC market at this time in large part due to several recent events, for which NASD believes that having this type of authority would have been beneficial to investors and the marketplace. For example, in 2005, an issuer announced that 3 million shares of its common stock, an OTC Equity Security, were issued improperly prior to the impending payment of a 3 million for 1 share dividend ( *i.e.* , a forward split) in the security. As a result, significant questions arose regarding the accuracy of publicly disseminated information concerning the issuer, including the total shares outstanding, the availability of non-restricted shares for trading and delivery, the issuer's shareholders, and rights with respect to shares of the issuer. The impact of this event was far-reaching, including widespread investor confusion and the potential for several large clearing firms to be forced to recognize substantial net capital charges on their short positions and open fails. 13 13 *See* SEC Order of Suspension of Trading, In the Matter of Gluv Corporation (File No. 500-1; May 27, 2005). *See also* NASD Notice to Members 05-41 (June 2005). Based on NASD's experience to date, each event presents a unique set of facts and circumstances. As a result, NASD would exercise significant discretion in determining whether a particular event affecting a security warranted a trading and quotation halt. The authority would not be used to correct informational imbalances resulting from corporate news about the issuer ( *e.g.* , financial results, release of new product, or pending regulatory investigation) because NASD has no listing or other agreement with the issuer of an OTC Equity Security and therefore cannot compel such issuers to disclose material information. It is important to note that for OTC Equity Securities, quoting may not automatically resume when a trading halt ends. Rule 15c2-11 under the Act 14 and NASD Rule 6740 require a broker-dealer to review information about the issuer and have a reasonable basis under the circumstances to believe that the information on the issuer is accurate in all material respects and the sources of such information are reliable unless an exception to Rule 15c2-11 is available. If a trading or quotation halt is in effect for more than four consecutive business days, the “piggyback” exception of Rule 15c2-11(f)(3) 15 would not be available. As a result, broker-dealers would be required to comply with the requirements of Rule 15c2-11 and NASD Rule 6740 before resuming publication of quotations for the subject security. 14 17 CFR 240.15c2-11. 15 17 CFR 240.15c2-11(f)(3). NASD believes that the proposed amendments will further the goal of investor protection in this sector of the marketplace and enhance the quality of the OTC market. NASD will announce the effective date of the proposed rule change in a Notice to Members to be published no later than 60 days following Commission approval. The effective date will be 30 days following publication of the Notice to Members announcing Commission approval. 2. Statutory Basis NASD believes that the proposed rule change, as amended, is consistent with the provisions of section 15A(b)(6) of the Act, 16 which requires, among other things, that NASD rules must be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, and, in general, to protect investors and the public interest. NASD believes that the proposed rule change, as amended, will further investor protection and the operation of a fair and orderly market by expanding NASD's current authority to halt trading and quotation in OTCBB securities to
(1)all OTC Equity Securities and
(2)extraordinary events that have the potential to cause major market disruption. 16 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, as amended, will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others Written comments were neither solicited nor received by NASD. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 35 days of the date of publication of this notice in the **Federal Register** or within such longer period
(i)as the Commission may designate up to 90 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or
(ii)as to which the self-regulatory organization consents, the Commission will:
(A)By order approve such proposed rule change, as amended, or
(B)Institute proceedings to determine whether the proposed rule change, as amended, should be disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change, as amended, is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov.* Please include File Number SR-NASD-2006-039 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-2006-039. 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-2006-039 and should be submitted on or before June 28, 2006. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 17 17 17 CFR 200.30-3(a)(12). J. Lynn Taylor, Assistant Secretary. [FR Doc. E6-8810 Filed 6-6-06; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-53924; File No. SR-NYSE-2006-40] Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to NYSE Rule 476 June 1, 2006. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the “Act”), 1 and Rule 19b-4 thereunder, 2 notice is hereby given that on May 22, 2006, the New York Stock Exchange LLC (“NYSE” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the Exchange. The Exchange filed the proposed rule change pursuant to Section 19(b)(3)(A) of the Act 3 and Rule 19b-4(f)(6) thereunder, 4 which renders the proposed rule change effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 15 U.S.C. 78s(b)(3)(A). 4 17 CFR 240.19b-4(f)(6). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change NYSE is proposing to amend NYSE Rule 476 in order to make technical changes to the text of the second paragraph of NYSE Rule 476(k). The text of the proposed rule change is available on the Exchange's Web site ( *http://www.nyse.com* ), at the Exchange's Office of the Secretary, and at the Commission's Public Reference Room. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose On March 27, 2006, the Exchange filed SR-NYSE-2006-23 5 (“NYSE-2006-23”) with the Commission to reconcile recent amendments to the text of NYSE Rules 475 and 476. 6 NYSE-2006-23 deleted inadvertently inserted text from previously approved changes made to NYSE Rule 476(l) 7 and incorporated the corrected paragraph of NYSE Rule 476(l) 8 into NYSE Rule 476(k). Further, NYSE-2006-23 made technical changes to the rules and rendered the rules gender neutral. 5 *See* Securities Exchange Act Release No. 53575 (March 30, 2006), 71 FR 17537 (April 6, 2006) (SR-NYSE-2006-23). NYSE-2006-23 became effective upon filing with the Commission pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-4(f)(6) thereunder. 6 *See* Securities Exchange Act Release Nos. 53124 (January 13, 2006), 71 FR 3595 (January 23, 2006) (SR-NYSE-2005-37) (which became operative on April 1, 2006), and 53382 (February 27, 2006), 71 FR 11251 (March 6, 2006) (SR-NYSE-2005-77). Telephone conversation between Deanna Logan, Director, NYSE, and Jan Woo, Attorney, Division of Market Regulation, Commission, on May 25, 2006. 7 *See* Securities Exchange Act Release No. 53382 (February 27, 2006), 71 FR 11251 (March 6, 2006) (SR-NYSE-2005-77). 8 *Id.* However, in NYSE-2006-23, the Exchange failed to remove superfluous text in the second paragraph of NYSE Rule 476(k). Currently the paragraph reads: Any member, member organization or allied of a member organization who shall not pay a fine, or any other sums due to the Exchange, within forty-five days after the same shall become payable, shall be reported by the Exchange Treasurer to the Chairman of the Exchange Board of Directors and, after written notice mailed to such member, member organization or allied member of such arrearages, may be suspended by the Exchange Board of Directors until payment is made. The Exchange seeks to delete the words “of a” after the first reference to “allied” in the paragraph and the word “organization” that follows the third reference to the word “member” so that the phrase reads “* * * allied member who shall not * * *.” The class of membership governed by this rule is an allied member and the Exchange seeks this amendment in order accurately reflect that class of membership. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with the requirement under Section 6(b)(5) of the Act 9 that an exchange have rules that are designed to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system and, in general, to protect investors and the public interest. The Exchange believes that the proposed rule change is consistent with these objectives in that it enables the Exchange to further enhance the process by which securities are allocated. 9 15 U.S.C. 78f(b)(5). B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that the proposed rule change 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 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:
(1)Significantly affect the protection of investors or the public interest;
(2)impose any significant burden on competition; and
(3)by its terms, 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, the proposed rule change has become effective pursuant to Section 19(b)(3)(A) 10 of the Act and Rule 19b-4(f)(6) thereunder. 10 15 U.S.C. 78s(b)(3)(A). A proposed rule change filed under Rule 19b-4(f)(6) 11 normally may not become operative prior to 30 days after the date of filing. However, Rule 19b-4(f)(6)(iii) 12 permits the Commission to designate a shorter time if such action is consistent with the protection of investors and the public interest. The NYSE has requested that the Commission waive the 5-day pre-filing notice requirement and the 30-day operative delay, which would make the rule change effective and operative upon filing. The Commission believes that waiver of the 5-day pre-filing notice and the 30-day operative delay is consistent with the protection of investors and the public interest. 13 The Commission notes that such waiver would allow the Exchange to implement the proposed rule change immediately and thus to avoid any potential confusion in the class of membership governed by the rule. Accordingly, the Commission designates that the proposed rule change effective and operative upon filing with the Commission. 11 17 CFR 240.19b-4(f)(6). 12 17 CFR 240.19b-4(f)(6)(iii). 13 For purposes only of waiving the operative delay for this proposal, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. *See* 15 U.S.C. 78c(f). At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov* . Please include File No. SR-NYSE-2006-40 on the subject line. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, Station Place, 100 F Street, NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-NYSE-2006-40. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room. Copies of such filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-NYSE-2006-40 and should be submitted on or before June 28, 2006. 14 7 CFR 200.30-3(a)(12). For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 14 J. Lynn Taylor, Assistant Secretary. [FR Doc. E6-8800 Filed 6-6-06; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-53912; File No. SR-NYSE-2006-29] Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change by the New York Stock Exchange LLC Amending the Listed Company Manual To Mandate Listed Companies Become Eligible To Participate in a Direct Registration System May 31, 2006. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”), 1 notice is hereby given that on May 6, 2006, the New York Stock Exchange LLC (“NYSE”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change described in Items I, II, and III below, which items have been prepared primarily by the NYSE. The Commission is publishing this notice to solicit comments on the proposed rule change from interested parties. 1 15 U.S.C. 78s(b)(1). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The NYSE proposes to amend its Listed Company Manual (“Manual”) to mandate that all listed companies become eligible to participate in a Direct Registration System (“DRS”) administered by a clearing agency registered under Section 17A of the Act. 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 NYSE 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 has prepared summaries, set forth in sections (A), (B), and
(C)below, of the most significant aspects of these statements. 2 2 The Commission has modified portions of the text of the summaries prepared by the NYSE. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The NYSE proposes to amend its Manual to mandate that all listed companies become eligible to participate in DRS administered by a clearing agency registered under Section 17A of the Act. A DRS is a system that allows an investor to establish either through the issuer's transfer agent or through the investor's broker-dealer a book-entry position in eligible securities on the books of the issuer and to electronically transfer her position between the transfer agent and the broker-dealer. 3 DRS, therefore, allows an investor to have eligible securities registered in her name without having a certificate issued to her and to electronically transfer, thereby eliminating the risk and delays associated with the use of certificates, her securities to her broker-dealer in order to effect a transaction. In 1996 the NYSE amended its rules to permit companies to participate in DRS although such participation was voluntary. 4 Approximately 649 issuers listed on the NYSE currently participate in DRS. 3 Currently, the only registered clearing agency operating a DRS is the Depository Trust Company (“DTC”). For a description of DRS and the DRS facilities administered by DTC, see Securities Exchange Act Release Nos. 37931 (November 7, 1996), 61 FR 58600 (November 15, 1996), [File No. SR-DTC-96-15] (order granting approval to establish DRS) and 41862 (September 10, 1999), 64 FR 51162 (September 21, 1999), [File No. SR-DTC-99-16] (order approving implementation of the Profile Modification System). 4 Securities Exchange Act Release No. 37937 (November 8, 1996), 61 FR 58728 (November 18, 1996), [File No. SR-NYSE-96-29]. In 2004, the Commission issued a concept release, Securities Transaction Settlement, discussing whether self-regulatory organizations (“SROs”) that list securities should adopt rules to require issuers to participate in DRS. 5 Subsequently, representations of the NYSE, the NASDAQ Stock Market, the American Stock Exchange, DTC, and the Securities Industry Association entered into discussions that resulted in the decision to propose a common approach that would require listed companies to become eligible to participate in DRS but would not require listed companies to participate in DRS. 6 There is an expectation that requiring listed companies to be eligible to participate in DRS will accelerate the trend already evident among companies to participate in DRS. 5 Securities Exchange Act Release No. 49405 (March 11, 2004), 69 FR 12922 (March 18, 2004), [File No. S7-13-04]. 6 NASDAQ Stock Market LLC and the American Stock Exchange LLC have also filed proposed rule changes with the Commission that would require certain listed companies securities DRS eligible. Securities Exchange Act Release Nos. 53913 (May 31, 2006) [File No. SR-NASDAQ-2006-008] and 53911 (May 31, 2006) [File No. SR-Amex-2006-40]. NYSE expects that NYSE Arca will submit a similar rule filing in the near future. Under the proposed rule change, NYSE will impose its DRS eligibility requirement pursuant to proposed new Section 501.00 of the Manual. 7 Proposed Section 501.00 does not specifically require that securities must be eligible for the DRS. Rather it requires listed companies' securities to be eligible for a direct registration system operated by a clearing agency, as defined in Section 3(a)(23) of the Act, 8 that is registered with the Commission pursuant to Section 17A(b)(2) of the Act. Therefore, while the DRS currently operated by DTC is currently the only DRS facility meeting the definition, Section 501.00 will provide issuers with the option of using another qualified DRS if one should exist in the future. 7 The exact text of the NYSE prepared rule change is set forth in its filing which can be found at *http://www.nyse.com/RegulationFrameset.* 8 15 U.S.C. 78a. In order to make a security DRS-eligible, as currently operated by DTC, the issuer must have a transfer agent which is a DTC DRS Limited Participant. 9 NYSE understands that the larger transfer agents serving NYSE's listed company community are already eligible to participate in DRS. However, taking into account all the diverse issuers and transfer agents involved across all the markets that will be proposing similar rules regarding DRS eligibility, some transfer agents may need to take steps to become eligible to participate in DRS, and some issuers may wish to change their transfer agent in connection with this process. In addition, NYSE has been notified that some issuers may need to amend their certificate of incorporation or by-laws to become DRS eligible. 9 DTC's rules require that a transfer agent (including an issuer acting as its own transfer agent) acting for a company issuing securities in DRS must be a DRS Limited Participant. Securities Exchange Act Release No. 37931 (November 7, 1996), 61 FR 58600 (November 15, 1996), [File No. SR-DTC-96-15]. To allow sufficient time for any such necessary actions, NYSE proposes to impose the DRS eligibility requirement in two steps. Companies listing for the first time should have greater flexibility to conform to the eligibility requirements; therefore, proposed Section 501.00 would require all securities initially listing on NYSE on or after January 1, 2007, to be eligible for DRS at the time of listing. This provision does not extend to securities of companies
(i)Which already have securities listed on the NYSE,
(ii)which immediately prior to such listing had securities listed on another registered securities exchange in the U.S., or
(iii)which are specifically permitted under NYSE's rules to be and which are book-entry only. 10 On and after January 1, 2008, all securities listed on the NYSE will be required to be eligible for DRS, again excepting those securities which are specifically permitted under NYSE rules to be and which are book-entry only. 10 Securities which the NYSE permits to be book-entry-only include all debt securities, securities issued pursuant to Section 703.19 of the Manual, and nonconvertible preferred stock. NYSE also proposes to amend Section 601.01 of the Manual (“Exchange Approval of Transfer Agents and Registrars”) to require that any issuer required to make a listed security eligible for DRS pursuant to proposed Section 501.00 must maintain a transfer agent for that security which is eligible either for DRS operated by DTC or by another registered clearing agency. In addition, the NYSE proposes to amend the transfer agent agreements in Section 906 of the Manual to require transfer agents for securities subject to proposed Section 501.00 to agree that they will at all times be eligible either for the DRS operated by DTC or by another registered clearing agency. 2. Statutory Basis The statutory basis under the Act for this proposed rule change is the requirement under Section 6(b)(5) of the Act, which requires, among other things, that the rules of an exchange are 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 perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. 11 NYSE believes that the proposed amendments to Sections 501.00, 601.01, and 906 of the Manual are consistent with its obligations under Section 6(b)(5) because issuers will be encouraged to use DRS, which should facilitate reducing the use of securities certificates and in turn should promote more efficient clearing and settling of securities transactions. 11 15 U.S.C. 78f(b)(5). B. Self-Regulatory Organization's Statement on Burden on Competition The NYSE does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The NYSE has neither solicited nor received written comments on the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within thirty-five 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 ninety days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding; or
(ii)as to which the self-regulatory organization consents, the Commission will:
(A)By order approve such proposed rule change or
(B)Institute proceedings to determine whether the proposed rule change should be disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ) or • Send an e-mail to *rule-comments@sec.gov.* Please include File Number SR-NYSE-2006-29 in the subject line. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-NYSE-2006-29. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Section, 100 F Street, NE., Washington, DC 20549. Copies of such filings also will be available for inspection and copying at the principal office of the NYSE and on the NYSE's Web site, *http://www.nyse.com.* All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-NYSE-2006-29 and should be submitted on or before June 28, 2006. For the Commission by the Division of Market Regulation, pursuant to delegated authority. 12 12 17 CFR 200.30-3(a)(12). Jill M. Peterson, Assistant Secretary. [FR Doc. E6-8816 Filed 6-6-06; 8:45 am] BILLING CODE 8010-01-P DEPARTMENT OF TRANSPORTATION Federal Aviation Administration Receipt of Noise Compatibility Program and Request for Review AGENCY: Federal Aviation Administration, DOT. ACTION: Notice. SUMMARY: The Federal Aviation Administration
(FAA)announces that it is reviewing a proposed noise compatibility program that was submitted for Fresno Yosemite International Airport
(FAT)under the provisions of 40 U.S.C. 47501 *et seq.* (the Aviation Safety and Noise Abatement Act, hereinafter referred to as “the Act”) and 14 CFR Part 150 by city of Fresco, California. This program was submitted subsequent to a determination by FAA that associated noise exposure maps submitted under 14 CFR Part 150 for FAT were in compliance with applicable requirements, effective July 6, 2005 (70 FR 50437-50438). The proposed noise compatibility program will be approved or disapproved on or before November 22, 2006. DATES: *Effective Date:* The effective date of the start of FAA's review of the noise compatibility program is May 26, 2006. The public comment period ends July 25, 2006. FOR FURTHER INFORMATION CONTACT: Camille Garibaldi, Environmental Protection Specialist, Federal Aviation Administration, Western Pacific Region, San Francisco Airports District Office, 831 Mitten Road, Suite 210, Burlingame, CA 94010, Telephone
(650)876-2778 extension 613. Comments on the proposed noise compatibility program should also be submitted to the above office. SUPPLEMENTARY INFORMATION: This notice announces that the FAA is reviewing a proposed noise compatibility program for FAT, which will be approved or disapproved on or before November 22, 2006. This notice also announces the availability of this program for public review and comment. An airport operator who has submitted noise exposure maps that are found by FAA to be in compliance with the requirements of Federal Aviation Regulations
(FAR)Part 150, promulgated pursuant to the Act, may submit a noise compatibility program for FAA approval which sets forth the measures the operator has taken or proposes to reduce existing non-compatible uses and prevent the introduction of additional non-compatible uses. The FAA has formally received the noise compatibility program for FAT, effective on May 26, 2006. The airport operator has requested that the FAA review this material and that the noise mitigation measures, to be implemented jointly by the airport and surrounding communities, be approved as a noise compatibility program under section 47504 of the Act. Preliminary review of the submitted material indicates that it conforms to FAR Part 150 requirements for the submittal of noise compatibility programs, but that further review will be necessary prior to approval or disapproval of the program. The formal review period, limited by law to a maximum of 180 days, will be completed on or before November 22, 2006. The FAA's detailed evaluation will be conducted under the provision of 14 CFR Part 150, section 150.33. The primary considerations in the evaluation process are whether the proposed measures may reduce the level of aviation safety or create an undue burden on interstate or foreign commerce, and whether they are reasonably consistent with obtaining the goal of reducing existing non-compatible land uses and preventing the introduction of additional non-compatible land uses. Interested persons are invited to comment on the proposed program with specific reference to these factors. All comments relating to these factors, other than those properly addressed to local land use authorities, will be considered by the FAA to the extent practicable. Copies of the noise exposure maps and the proposed noise compatibility program are available for examination at the following locations: Federal Aviation Administration, National Headquarters, Planning and Environmental Division, APP-400, 800 Independence Avenue, SW., Room 621, Washington, DC 20591. Federal Aviation Administration, Western-Pacific Region Office, Airports Division, Room 3012, 15000 Aviation Boulevard, Hawthorne, California 90261. Federal Aviation Administration, Western-Pacific Region, San Francisco Airports District Office, 831 Mitten Road, Suite 210, Burlingame, California 94010. City of Fresno, Mr. Kevin Meikle, Airport Planning Manager, 4995 East Clinton Way, Fresno, CA 93727-1525. Questions may be directed to the individual named above under the heading FOR FURTHER INFORMATION CONTACT . Issued in Hawthorne, California, on May 26, 2006. Mark A. McClardy, Manager, Airports Division, AWP-600, Western-Pacific Region. [FR Doc. 06-5158 Filed 6-6-06; 8:45 am]
Connectionstraces to 7
9 references not yet in our index
  • 17 CFR 240.17
  • 17 CFR 240.19
  • 17 CFR 19
  • 17 CFR 240.10
  • 15 USC 78
  • 17 CFR 240.15
  • 7 CFR 200.30-3(a)(12)
  • 40 USC 47501
  • 14 CFR 150
Citation graph
cites case law
Notices
Notice of an application to amend a prior order under section 6(c) of the Investment Company Act of 1940 (“Act”) granting an exemption from sections 2(a)(32), 5(a)(1), and 22(d) of the Act and rule 22c-1 under the Act, and under sections 6(c) and 17(b) of the Act granting an exemption from sections 17(a)(1) and (a)(2) of the Act
U.S.C.§ 78a
C.F.R.§ 200.30-3
U.S.C.§ 78s
U.S.C.§ 78c
U.S.C.§ 78f
U.S.C.§ 78q–1
U.S.C.§ 552
Cite17 CFR 240.17
Cite17 CFR 240.19
Cite17 CFR 19
Cite17 CFR 240.10
Cite15 USC 78
Cites 16 · showing 12Cited by 0 across 0 sources
★   the supreme law of the land   ★
Don't Tread on Me
E Pluribus Unum — out of many, one

"If you don't know your rights, you don't have any."

Marginalia · a citizen's law index
A research desk, not legal advice. Always read the cited source before relying on a summary.
Questions or an issue? support@self-law.org
disclaimerMarginalia is a research index, not a law firm. Nothing on this site is legal, tax, or financial advice and no attorney–client relationship is formed by using it. Statutes, regulations, and case law change; summaries, search results, AI output, and member posts may be incomplete, out of date, or wrong. Any interpretation drawn from material on this site should be validated by a licensed attorney in your jurisdiction before you act on it.