Proposed Rules. Notice of Availability (NOA)
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BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-54089; File No. SR-NASD-2006-077] Self-Regulatory Organizations; National Association of Securities Dealers, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Eliminate Its Current General Revenue Sharing Program Under NASD Rule 7010(u) and To Adopt a Revenue Sharing Program Limited to Transactions in Nasdaq-Listed Securities Reported to the Trade Reporting Service of the Nasdaq Market Center June 30, 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 June 22, 2006, the National Association of Securities Dealers, Inc. (“NASD”), through its subsidiary, The Nasdaq Stock Market, Inc. (“Nasdaq”), filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I and II below, which Items have been prepared by Nasdaq. Nasdaq has filed the proposal as a “non-controversial” 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 proposal effective upon filing with the Commission. 5 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). 5 Nasdaq gave the Commission written notice of its intent to file the proposed rule change on May 31, 2006 and has asked the Commission to waive the 30-day operative delay. *See* Rule 19b-4(f)(6)(iii). 17 CFR 240.19b-4(f)(6)(iii).
I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change Nasdaq proposes to eliminate its current general revenue sharing plan under NASD Rule 7010(u) and to adopt a revenue sharing program limited to transactions in Nasdaq-listed securities reported to the Trade Reporting Service of the Nasdaq Market Center. Nasdaq will implement the proposed rule change on July 1, 2006. The text of the proposed rule change is below. Proposed new language 6 is in *italics* ; proposed deletions are in [brackets]. 6 With Nasdaq's permission, the Commission modified the proposed rule text to add italics to item (g)(1).
See e-mail from John Yetter, Senior Associate General Counsel, Nasdaq, to Joseph Morra, Special Counsel, Division of Market Regulation, Commission, dated June 28, 2006. 7010. System Services (a)-(f) No change.
(g)Nasdaq Market Center Trade Reporting *(1)* No change to text. *(2) Nasdaq Market Center Trade Reporting Revenue Sharing Program* *After Nasdaq earns total operating revenue sufficient to offset actual expenses and working capital needs, a percentage of Reporting Participant Operating Revenue (“RPOR”) associated with transactions in Nasdaq-listed securities reported to the Trade Reporting Service of the Nasdaq Market Center shall be eligible for sharing with Nasdaq Market Makers and Nasdaq ECNs (as defined in the Rule 4700 Series). RPOR is defined as operating revenue that is generated by Nasdaq Market Makers and Nasdaq ECNs and consists of transaction fees and market data revenue that is attributable to Nasdaq Market Makers' and Nasdaq ECNs' transactions in Nasdaq-listed securities reported to the Trade Reporting Service of the Nasdaq Market Center. RPOR shall not include any investment income or regulatory monies. The sharing of RPOR shall be based on each Nasdaq Market Maker's and Nasdaq ECN's pro rata contribution to RPOR. In no event shall the amount of revenue shared with Nasdaq Market Makers and Nasdaq ECNs under Rule 7010(g)(2) exceed RPOR. To the extent market data revenue is subject to year-end adjustment, RPOR revenue may be adjusted accordingly. Credits will be provided on a quarterly basis.* (h)-(t) No change.
(u)[Nasdaq Revenue Sharing Program] *Reserved* [After Nasdaq earns total operating revenue sufficient to offset actual expenses and working capital needs, a percentage of all Market Participant Operating Revenue (“MPOR”) shall be eligible for sharing with Nasdaq Quoting Market Participants (as defined in Rule 4701). MPOR is defined as operating revenue that is generated by Nasdaq Quoting Market Participants. MPOR consists of transaction fees, technology fees, and market data revenue that is attributable to Nasdaq Quoting Market Participant activity in Nasdaq National Market and Capital Market securities. MPOR shall not include any investment income or regulatory monies. The sharing of MPOR shall be based on each Nasdaq Quoting Market Participant's pro rata contribution to MPOR. In no event shall the amount of revenue shared with Nasdaq Quoting Market Participants exceed MPOR. To the extent market data revenue is subject to year-end adjustment, MPOR revenue may be adjusted accordingly.] (v)-(w) No change. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, Nasdaq included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. Nasdaq has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose Nasdaq is proposing to modify the scope of its current programs for revenue sharing by replacing its current general revenue sharing program under NASD Rule 7010(u) with a program limited to transactions in Nasdaq-listed securities reported to the Trade Reporting Service of the Nasdaq Market Center. The program will be similar in structure to Nasdaq's current program, in that it will share a percentage of operating revenue with members based on their pro rata contribution to such revenues. Like the revenue sharing program recently instituted by NYSE Arca, Inc. (“NYSE Arca”), 7 however, it will be narrower in its application because it will be limited to transactions in Nasdaq-listed securities reported to the Trade Reporting Service of the Nasdaq Market Center. In SR-PCX-2005-121, the Pacific Exchange (now NYSE Arca) instituted a general revenue sharing program for Cross Orders in Nasdaq-listed securities. As provided in NYSE Arca Rule 7.31(s), a Cross Order allows an NYSE Arca member to internalize orders and report them through NYSE Arca after the matched order is processed through a limited algorithm designed to pursue price improvement opportunities on NYSE Arca and markets to which it routes. 7 Securities Exchange Act Release No. 52672 (October 25, 2005), 70 FR 66885 (November 3, 2005) (SR-PCX-2005-121). Under Nasdaq's proposal, Nasdaq Market Makers and Nasdaq ECNs ( *i.e.* , market makers and ECNs that post quotes in one or more Nasdaq-listed stocks in the Nasdaq Market Center) would be eligible to share in Reporting Participant Operating Revenue (“RPOR”) associated with transactions in Nasdaq-listed securities reported to the Trade Reporting Service of the Nasdaq Market Center. RPOR is defined as operating revenue that is generated by Nasdaq Market Makers and ECNs from transaction fees and market data revenue attributable to trade reports. RPOR will not include any investment income or regulatory monies. The proposed new rule provides that the amount of revenue shared with Nasdaq Market Makers and Nasdaq ECNs under NASD Rule 7010(g)(2) may not exceed RPOR. As with the current rule, Nasdaq's Board of Directors (either acting through its Finance Committee or as a whole) will have the authority to determine on an ongoing basis the appropriate amount of RPOR to be shared with Nasdaq Market Makers and Nasdaq ECNs, on a pro rata basis. In making this determination, the Board will balance the objective of sharing a meaningful percentage of RPOR with the objective of maintaining Nasdaq's financial integrity. In particular, Nasdaq will not compromise its regulatory responsibilities by sharing revenue that would more appropriately be used to fund regulatory responsibilities. Nasdaq will be mindful of its regulatory responsibilities when determining its working capital needs. This determination will be made, and the credits will be provided, on a quarterly basis. These changes are designed to provide a competitive response to efforts by NYSE Arca and potentially other venues to attract order flow that is matched by a broker-dealer and then submitted to a self-regulatory organization for clearing and reporting to the tape. Nasdaq evaluated the economics of modifying its current approach to revenue sharing and determined that the approach reflected in the proposed rule was feasible and appropriate, given the costs involved and competitive concerns. 2. Statutory Basis Nasdaq believes that the proposed rule change is consistent with the provisions of Section 15A of the Act, 8 in general, and with Sections 15A(b)(5) 9 and (b)(6) of the Act, 10 in particular, in that it provides for the equitable allocation of reasonable dues, fees and other charges among members and issuers and other persons using any facility or system which the NASD operates or controls; and in that it is designed to facilitate transactions in securities, to promote just and equitable principles of trade, to enhance competition, and to protect investors and the public interest. 8 15 U.S.C. 78 *o* -3. 9 15 U.S.C. 78 *o* -3(b)(5) 10 15 U.S.C. 78 *o* -3(b)(6). B. Self-Regulatory Organization's Statement on Burden on Competition Nasdaq does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act, as amended. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others Written comments were neither solicited nor received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing proposed rule change does not:
(i)Significantly affect the protection of investors or the public interest;
(ii)impose any significant burden on competition; and
(iii)become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest, the proposed rule change has become effective pursuant to Section 19(b)(3)(A) of the Act 11 and Rule 10b-4(f)(6) thereunder. 12 11 15 U.S.C. 78s(b)(3)(A). 12 17 CFR 240.19b-4(f)(6). At any time within 60 days of the filing of such proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. Nasdaq has requested that the Commission waive the 30-day operative delay contained in Rule 19b-4(f)(6)(iii) under the Act 13 based upon a representation that the proposal will allow Nasdaq to implement more competitive pricing for transactions reported to the trade reporting service of the Nasdaq Market Center, and in that it is intended as a response to a similar program instituted by a competitor on an immediately effective basis. In light of the foregoing, the Commission believes such waiver is consistent with the protection of investors and the public interest. Accordingly, the Commission designates the proposal to be effective and operative upon filing with the Commission. 14 13 17 CFR 240.19b-4(f)(6)(iii). 14 For purposes only of waiving the 30-day operative delay of this proposal, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov.* Please include File Number SR-NASD-2006-077 on the subject line. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, Station Place, 100 F Street, NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-NASD-2006-077. 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 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-2006-077 and should be submitted on or before July 31, 2006. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 15 15 17 CFR 200.30-3(a)(12). Nancy M. Morris, Secretary. [FR Doc. E6-10713 Filed 7-7-06; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-54088; File No. SR-NASD-2004-135] Self-Regulatory Organizations; National Association of Securities Dealers, Inc.; Order Granting Approval of Proposed Rule Change and Amendment Nos. 1, 2, and 3 Thereto, and Notice of Filing and Order Granting Accelerated Approval of Amendment No. 4 to the Proposed Rule Change, to Adopt NASD Rule 2441 to Require Disclosure and Consent When Trading on a Net Basis With Customers June 30, 2006 I. Introduction On September 1, 2004, the National Association of Securities Dealers, Inc. (“NASD”) filed with the Securities and Exchange Commission (“SEC” or “Commission”), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) 1 and Rule 19b-4 thereunder, 2 a proposed rule change to require disclosure and consent when trading on a net basis with customers. NASD amended the proposed rule change on February 16, 2005, 3 February 25, 2005, 4 and March 21, 2005. 5 The proposed rule change, as modified by Amendment Nos. 1, 2, and 3, was published for notice and comment in the **Federal Register** on April 6, 2005. 6 The Commission received three comments on the proposal. 7 On September 13, 2005, NASD responded to the comments, and amended the proposed rule change. 8 This order provides notice of filing of Amendment No. 4, and approves the proposed rule change as modified by Amendment Nos. 1, 2, 3, and grants accelerated approval to Amendment No. 4. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 *See* Amendment No. 1. 4 *See* Amendment No. 2. 5 *See* Amendment No. 3. 6 *See* Securities Exchange Act Release No. 51457 (March 31, 2005), 70 FR 17489. 7 *See* April 20, 2005 letter from David Sieradzki, Esquire, Milbank Tweed, to Lourdes Gonzales, Division of Market Regulation, SEC (via e-mail) (“Milbank Letter”); April 27, 2005 letter from Klindt Ginsberg, Managing Director, The Seidler Companies, Inc. (via e-mail) (“Seidler Letter”); May 4, 2005 letter from Amal Aly and Ann Vlcek, Vice Presidents and Associate General Counsels, Securities Industry Association (“SIA”), to Jonathan G. Katz, Secretary, SEC (“SIA Letter”). 8 *See* Amendment No 4. II. Summary of Comments The Commission received a total of three comment letters on the NASD's proposal to require consent and disclosure when trading with customers on a net basis. One commenter requested clarification with respect to the interplay between the proposal and NASD Rule 4632. The other two comment letters expressed various objections to the proposal. The following summary of comments provides an overview of the commenters' concerns. • *With Respect to Non-Institutional Clients, Requiring Mandatory, Written, Pre-trade Disclosure and Consent on an Order-By-Order Basis is Unnecessarily Burdensome to Broker-Dealers* One commenter asserts that the rule as proposed places an unnecessary burden on broker-dealers when trading on a net basis on behalf of non-institutional clients. The rule requires that, for non-institutional clients, broker-dealers must provide pre-trade disclosure to and obtain consent from the client in writing on an order-by-order basis. 9 The commenter stated that “the actions detailed in this proposed rule change would be confusing to the client, costly to the firm, and impossible to manage and track on an order-by-order basis.” 10 The commenter expressed concern that “[t]he proposed rule would burden the firm with additional time and money spent on record keeping and auditing practices” and hinder a broker-dealer's ability to obtain best execution of its customers' orders. 11 Similarly, another commenter—while agreeing in principle with disclosure and consent rules—stated that the requirement “for a knowing, written consent on an order-by-order basis * * * is impractical where most orders are not taken in writing, and there is no opportunity to obtain [such a consent].” 12 This commenter proposed modifying the rule to permit the use of negative consent letters (similar to what the rule requires vis-à-vis institutional clients) or of obtaining oral consent on an order-by-order basis and to permit such consent to be evidenced on the customer order ticket. 13 9 This contrasts with the lower burden for institutional clients under the proposed rule, in which broker-dealers may fulfill their disclosure and consent requirements via a one-time “negative consent” letter. *See* Securities Exchange Act Release No. 51457 (March 31, 2005), 70 FR 17489 (April 6, 2005) (SR-NASD-2004-135). 10 Seidler Letter. 11 *Id* . 12 SIA Letter at 5. 13 SIA Letter at 2, 5. The letter further recommended that, for firms choosing to obtain oral consent on an order-by-order basis, pre-trade disclosure be required in the form of a one-time comprehensive disclosure statement, and also that, for fiduciaries of non-institutional customers granted trading discretion who on their own qualify as an “institutional account” under the proposed rule, members be permitted to obtain the consent of such fiduciaries in the same manner as permitted for their institutional customers. *Id* . Moreover, the two commenters opined that the additional burdens placed on broker-dealers by the rule could not be justified by any added benefit to investors. 14 One commenter pointed out that, because the advent of decimal pricing in 2000 substantially reduced the practice of net trading generally, the rule would have little practical benefit. 15 14 *See, e.g.* , Seidler Letter (“Having the client sign a disclosure document prior to each and every trade provides no benefit. It will confuse the client and will provide no additional information that is not available elsewhere.”); SIA Letter at 5 (“[N]o purpose is served by imposing onerous and impractical requirements on customers who do wish to consent to [trading on a net basis].”). 15 SIA Letter at 4. • *With Respect to Institutional Clients, Requiring Disclosure and Consent via Negative-Consent Letters is Unnecessarily Burdensome to Broker-Dealers* Regarding institutional clients, the commenters similarly objected to the rule's consent and disclosure requirements via a “negative consent” letter as unnecessarily burdensome. One commenter stated that the rule was wholly unnecessary because “investors already receive a ‘net' trading disclosure when an account is opened * * * [and] institutional investors by nature are accredited and sophisticated.” 16 Another commenter, citing the declining practice of net trading since decimalization, argued that “the costs and burden of sending, receiving and tracking negative consent letters are excessive in light of the fact that institutional customers would receive the requisite level of protection, if not greater, by providing verbal consent on an order-by-order basis.” 17 This commenter therefore suggested modifying the proposed rule to allow the use of negative consent letters or of obtaining oral consent on an order-by-order basis and to permit the consent to be evidenced on the customer order ticket. 18 16 Seidler Letter. 17 SIA Letter at 4. 18 *Id* . at 2, 4. • *Member Firms and Other Registered Broker-Dealers Should Be Explicitly Exempt from the Proposed Rule* One commenter requested that the NASD clarify the proposed rule change to “confirm that member firms and other registered broker-dealers are exempt from the requirements of the Proposed Rule, as they are neither institutional nor non-institutional customers.” 19 19 *Id.* at 2. • *The Proposed Rule Should Be Clarified With Respect to Net Orders Routed Between Broker-Dealers* The commenter further requested that the NASD clarify the proposed rule change to “confirm [that] an executing broker-dealer handling an order marked ‘net' routed to it from an originating broker-dealer has no consent and disclosure obligation to the customer of the originating broker-dealer for whom it is handling the order.” 20 20 SIA Letter at 2. • *The Proposed Rule Potentially Conflicts With Rule 4632(d)(3)(A) Regarding Reporting Trades Exclusive of Any Mark-Up, Mark-Down, or Service Charge* One commenter noted a potential conflict between the proposed rule and Rule 4632(d)(3)(A), which states that trades must be reported exclusive of any mark-up, mark-down, or service charge. 21 21 Milbank Letter. III. The NASD's Response to Comments NASD responded to the comments in Amendment No. 4. Regarding the commenters' assertion that the proposed disclosure and consent requirements were unnecessary for institutional customers, NASD amended the proposed rule change to allow members the option of obtaining consent from institutional customers orally, on an order-by-order basis. However, NASD does not believe a one-time disclosure would be appropriate under such circumstances, thus, NASD proposes that members that choose to obtain oral consent on an order-by-order basis must also explain the terms and conditions for handling the order to the institutional customer before each transaction, and provide the institutional customer with “a meaningful opportunity to object to the execution of the transaction on a net basis.” Additionally, members must document the customer's understanding of the terms and conditions of the order and the customer's consent on an order-by-order basis. Regarding the comments relating to net transactions with non-institutional customers, NASD states it “recognizes the burdens that result from having to obtain written consent on an order-by-order basis” but believes the written disclosure and consent requirements are important to ensure that information regarding members' methods of compensation on transactions is provided to non-institutional customers, and that such customers agree to the methods of compensation. NASD does not believe that the market information available to customers will assist customers to determine whether a member is trading net or to understand the ramifications for the customer of trading net. Ultimately, NASD believes that benefits of requiring member disclosure and consent outweigh the related burdens to members. NASD amended the proposal to allow a member, absent instructions to the contrary, to look to the institutional or non-institutional status of the fiduciary, rather than the underlying account, when deciding which method of disclosure and consent is allowable under the proposal. NASD clarified that the scope of the proposal does not include orders received from member firms and other registered broker-dealers. As such, the proposal would not apply to orders received from members and other registered broker-dealers, nor would a receiving broker-dealer handling an order marked “net” routed to it from an originating broker-dealer have consent and disclosure obligations to the customer of the originating broker-dealer. 22 In both scenarios, the originating broker-dealer would be responsible for adhering to the requirements. 22 *Id* . at 10-11. Finally, with regard to the possible inconsistency between net trading and NASD Rule 4632(d)(3)(A), NASD explained that the trade reporting requirements for net trades “are not germane to this proposed rule change” and that no changes to those requirements are needed. 23 23 *Id* . at 19. IV. Discussion and Commission Findings The Commission has reviewed carefully the proposed rule change, the comment letters, and the NASD's response to the comments, and finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities association. 24 Specifically, the Commission finds that the proposed rule change is consistent with the provisions of Section 15A(b)(6) of the Act, which requires, among other things, that NASD's rules be designed to prevent fraudulent and manipulative acts and practices, promote just and equitable principles of trade, and, in general, protect investors and the public interest. The Commission believes that the proposed rule change should promote investor protection by codifying the requirement that members provide disclosure and obtain customer consent when trading on a net basis. The consent provided by non-institutional investors must evidence the customer's understanding of the terms and conditions of the order. The Commission also believes that the benefit to investors of requiring certain disclosures and obtaining customer consent when trading on a net basis outweighs the additional responsibilities placed on broker-dealers. 24 In approving this proposed rule change, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). The Commission understands the commenters' assertion that the proposed rule change's disclosure and consent requirements were unnecessary for institutional customers, and is satisfied that NASD's modification of the proposal to require that members that choose to obtain oral consent on an order-by-order basis also explain the terms and conditions for handling the order to the institutional customer before each transaction and provide the institutional customer with an opportunity to object to the execution of the transaction on a net basis in a meaningful way to be a reasonable resolution of the issue. The Commission also believes it is reasonable and not unduly burdensome to require members to document a customer's understanding of the terms and conditions of the order and the customer's consent on an order-by-order basis. The Commission believes that the modifications to the proposed rule change that NASD made in response to issues raised by the commenters are reasonable and designed to ease the burdens placed on members without sacrificing the benefits to investors contemplated by the proposal. For example, the Commission believes that
(i)absent instructions to the contrary, it is reasonable for a member to look to the institutional or non-institutional status of the fiduciary, rather than the underlying account, when deciding which method of disclosure and consent is consistent with the rule, and
(ii)NASD's decision to allow members the option of obtaining consent from institutional customers orally on an order-by-order basis, but not allowing a one-time disclosure under such circumstances, is consistent with investor protection and the public interest. Additionally, the Commission is satisfied that the clarifications NASD offered in response to the comments should provide sufficient guidance to allow members to satisfy the requirements of the rule. Finally, the Commission agrees with NASD that the trade reporting requirements for net trades contained in NASD Rule 4632(d)(3)(A) are not implicated in this proposed rule change. The Commission finds good cause for approving Amendment No. 4 on an accelerated basis. Amendment No. 4 modifies the proposal in response to issues raised by the commenters. Because Amendment No. 4 raises no novel issues, and provides improvements to the proposed rule change in direct response to issues raised by the commenters, the Commission finds good cause for approving Amendment No. 4 before the 30th day since its publication in the **Federal Register** . V. Conclusion *It is therefore ordered* , pursuant to Section 19(b)(2) of the Act 25 , that the proposed rule change (SR-NASD-2004-135), as modified by Amendment Nos. 1, 2, 3 be, and it hereby is, approved, and Amendment No. 4 is approved on an accelerated basis. 25 15 U.S.C. 78s(b)(2). 26 17 CFR 200.30-3(a)(12). For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 26 Nancy M. Morris, Secretary. [FR Doc. E6-10718 Filed 7-7-06; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-54086; File No. SR-NYSE-2006-24] Self-Regulatory Organizations; New York Stock Exchange LLC; Order Approving Proposed Rule Change To Lower the Minimum Display Size Requirement for Specialists To Maintain Undisplayed Reserve Interest at the Exchange Best Bid or Offer in the NYSE Hybrid Market June 30, 2006. On April 7, 2006, the New York Stock Exchange LLC (“NYSE” 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 a proposed rule change to amend Exchange Rule 104(d)(i) to provide that specialists shall have the ability to maintain undisplayed reserve interest on behalf of the dealer account at the Exchange best bid or offer (“BBO”), provided at least 1,000 shares of dealer interest is displayed at that price, on the same side of the market as the reserve interest. This proposed rule change would lower the specialist's minimum display size requirement from at least 2,000 shares to at least 1,000 shares at the Exchange BBO and would conform the minimum display requirements for reserve interest for specialists and floor brokers. 3 In addition, the Exchange proposes to make a conforming change to Exchange Rule 104(d)(ii) to require that after an execution at the Exchange BBO that does not exhaust the specialist's interest, the specialist's displayed interest would be automatically replenished from its reserve interest, if any, so that at least a minimum of 1,000 shares is displayed (or whatever amount remains if the reserve interest is less than 1,000 shares). The proposed rule change was published for comment in the **Federal Register** on May 16, 2006. 4 The Commission received no comments regarding the proposal. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 NYSE permits floor brokers to maintain undisplayed reserve interest at the Exchange BBO, provided floor brokers display at least 1,000 shares. *See* NYSE Rule 70.20(c)(ii). 4 *See* Securities Exchange Act Release No. 53780 (May 10, 2006), 71 FR 28398. The Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange, and, in particular, with the requirements of Section 6(b) of the Act. 5 Specifically, the Commission finds that the proposed rule change is consistent with Section 6(b)(5) of the Act 6 in that it is designed, among other things, to promote just and equitable principle of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. 5 15 U.S.C. 78f(b). In approving this proposed rule change, the Commission considered the proposed rule's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). 6 15 U.S.C. 78f(b)(5). The Commission previously approved NYSE's proposal to permit specialists and floor brokers to maintain undisplayed reserve interest at the Exchange BBO, provided that they display a minimum number of shares and yield priority to all displayed interest. 7 In the Hybrid Market Order, the Commission found it to be consistent with the requirements of the Act to allow specialists to place reserve interest in the Display Book system because it could increase the liquidity available for execution at the Exchange BBO. The Commission specifically noted that the minimum size requirement and the priority of displayed interest over undisplayed reserve interest should help ensure that market participants continue to have an incentive to display quotes or orders on NYSE. The Commission stated that, taken together, these requirements could promote additional depth at the Exchange BBO, while preserving incentives for investors to display limit orders. Since NYSE's proposal would retain the requirements that specialists display a minimum amount of size at the BBO in order to maintain undisplayed reserve interest and that undisplayed reserve interest yield priority to displayed interest at that price, the Commission finds that the proposed rule change remains consistent with the requirements of the Act. 7 *See* Securities Exchange Act Release No. 53539 (March 22, 2006), 71 FR 16353 (March 31, 2006) (“Hybrid Market Order”). *It is therefore ordered,* pursuant to Section 19(b)(2) of the Act, 8 that the proposed rule change (SR-NYSE-2006-24) is hereby approved. 8 15 U.S.C. 78s(b)(2). 9 17 CFR 200.30-3(a)(12). For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 9 Nancy M. Morris, Secretary. [FR Doc. E6-10716 Filed 7-7-06; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-54078; File No. SR-PCX-2005-54] Self-Regulatory Organizations; NYSE Arca, Inc., Notice of Filing of Proposed Rule Change and Amendment Nos. 1 and 2 Thereto Requiring OTP Holders and OTP Firms To Participate in the Federal Trade Commission's National Do-Not-Call Registry June 30, 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 18, 2006, NYSE Arca, Inc. (“NYSE Arca” or “Exchange”) 3 filed with the Securities and Exchange Commission (“Commission” or “SEC”) the proposed rule change as described in Items I, II and III below, which Items have been prepared by the self-regulatory organization. On May 26, 2006, NYSE Arca filed Amendment No. 1 to the proposed rule change. 4 On June 21, 2006, NYSE Arca filed Amendment No. 2 to the proposed rule change. 5 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 On March 6, 2006, the Pacific Exchange, Inc. filed a rule proposal, effective upon filing, to amend its rules to reflect these name changes: from Pacific Exchange, Inc. to NYSE Arca, Inc.; from PCX Equities, Inc. to NYSE Arca Equities, Inc.; from PCX Holdings, Inc., to NYSE Arca Holdings, Inc.; and from the Archipelago Exchange, L.L.C. to NYSE Arca, L.L.C. *See* File No. SR-PCX-2006-24 (March 6, 2006). This proposal has been amended to reflect these name changes. 4 In Amendment No. 1, NYSE Arca partially amended the text of proposed amended NYSE Arca Rule 9.20 and made conforming and technical changes to the original filing. 5 In Amendment No. 2, NYSE Arca made additional changes to the text of proposed amended NYSE Arca Rule 9.20 and to the original filing. I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change NYSE Arca proposes to amend NYSE Arca Rule 9.20. The proposed rule change would require OTP Holders and OTP Firms to participate in the Federal Trade Commission's (“FTC”) national do-not-call registry. The current text of Arca Rule 9.20(b) would be deleted. The text of the proposed rule change is set forth below. *Italics* indicate new text. Rules of the NYSE Arca, Inc. RULE 9 CONDUCTING BUSINESS WITH THE PUBLIC Telemarketing 9.20(b) *(1) General Telemarketing Requirements. No OTP Firm, OTP Holder or associated person shall make any telephone solicitation, as defined in Section 9.20(b)(10)(B) to:* *(A) Any residence of a person before the hour of 8 a.m. or after 9 p.m. (local time at the called party's location), unless:* *(i) The OTP Firm or OTP Holder has an established business relationship with the person pursuant to Section 9.20(b)(10)(A);* *(ii) The OTP Firm or OTP Holder has received that person's prior express invitation or permission; or* *(iii) The person called is a broker or dealer.* *(B) Any person that previously has stated that he or she does not wish to receive an outbound telephone call made by or on behalf of the OTP Firm or OTP Holder; or* *(C) Any person who has registered his or her telephone number on the Federal Trade Commission's national do-not-call registry.*
(2)*National Do-Not-Call Registry Exceptions. An OTP Firm or OTP Holder will not be liable for violating Section 9.20(b)(1)(C) if:*
(A)*The OTP Firm or OTP Holder has an established business relationship with the recipient of the call. A person's request to be placed on an OTP Firm's or OTP Holder's firm-specific do-not-call list terminates the established business relationship exception to that national do-not-call registry provision for that OTP Firm or OTP Holder even if the person continues to do business with the OTP Firm or OTP Holder;*
(B)*The OTP Firm or OTP Holder has obtained the person's prior express invitation or permission. Such permission must be evidenced by a signed, written agreement between the person and the OTP Firm or OTP Holder that states that the person agrees to be contacted by the OTP Firm or OTP Holder and includes the telephone number to which the calls may be placed; or*
(C)*The associated person making the call has a personal relationship with the recipient of the call.*
(3)*Safe Harbor Provision. The OTP Firm, OTP Holder or associated person making telephone solicitations will not be liable for violating Section 9.20(b)(1)(C) if the OTP Firm, OTP Holder or associated person demonstrates that the violation is the result of an error and that as part of the OTP Firm's or OTP Holder's routine business practice it meets the following standards:*
(A)*The OTP Firm or OTP Holder has established and implemented written procedures to comply with the national do-not-call rules;*
(B)*The OTP Firm or OTP Holder has trained its personnel, and any entity assisting in its compliance, in procedures established pursuant to the national do-not-call rules;*
(C)*The OTP Firm or OTP Holder has maintained and recorded a list of telephone numbers that it may not contact; and*
(D)*The OTP Firm or OTP Holder uses a process to prevent telephone solicitations to any telephone number on any list established pursuant to the do-not-call rules, employing a version of the national do-not-call registry obtained from the administrator of the registry no more than thirty-one
(31)days prior to the date any call is made, and maintains records documenting this process.* *(4) Procedures. Prior to engaging in telemarketing, an OTP Firm or OTP Holder must institute procedures to comply with Section 9.20(b)(1). Such procedures must meet the minimum standards:* *(A) Written policy. The OTP Firm or OTP Holder must have a written policy available upon demand for maintaining a do-not-call list.* *(B) Training of personnel engaged in telemarketing. Personnel engaged in any aspect of telemarketing must be informed and trained in the existence and use of the do-not-call list, including the policies and procedures of the firm regarding communication with the public.* *(C) Recording, honoring do-not-call requests. If an OTP Firm or OTP Holder receives a request from a person not to receive calls from that OTP Firm or OTP Holder, the OTP Firm or OTP Holder must record the request and place the person's name, if provided, and telephone number on the firm's do-not-call list at the time the request is made. The OTP Firm or OTP Holder must honor a person's do-not-call request within a reasonable time from the date such request is made. This period may not exceed 30 days from the date of such request. If such requests are being recorded or maintained by a party other than the OTP Firm or OTP Holder on whose behalf the telemarketing call is made, the OTP Firm or OTP Holder on whose behalf the telemarketing call is made will be liable for any failure to honor the do-not-call request.* *(D) Identification of sellers and telemarketers. An OTP Firm or OTP Holder or person associated with an OTP Firm or OTP Holder making a call for telemarketing purposes must provide the called party with the name of the individual caller, the name of the OTP Firm or OTP Holder, an address or telephone number at which the OTP Firm or OTP Holder may be contacted, and that the purpose of the call is to solicit the purchase or sale of securities or a related service. The telephone number provided may not be a 900 number or any other number for which charges exceed local or long distance transmission charges.* *(E) Affiliated persons or entities. In the absence of a specific request by the person to the contrary, a person's do-not-call request shall apply to the OTP Firm or OTP Holder making the call, and will not apply to affiliated entities unless the consumer reasonably would expect them to be included given the identification of the caller and the product or service being advertised.* *(F) Maintenance of do-not-call lists. An OTP Firm or OTP Holder making calls for telemarketing purposes must maintain a record of the caller's request not to receive further telemarketing calls. A firm-specific do-not-call request must be honored for five years from the time the request is made.* *(5) Wireless Communications.* *(A) OTP Firms and OTP Holders are prohibited from using an automatic telephone dialing system or an artificial or prerecorded voice when initiating a telephone call to any telephone number assigned to a paging service, cellular telephone service, specialized mobile radio service, or other radio common carrier service, or any service for which the called party is charged for the call.* *(B) The provisions set forth in this rule are applicable to OTP Firms and OTP Holders telemarketing or making telephone solicitations calls to wireless telephone numbers.* *(6) Outsourcing Telemarketing. If an OTP Firm or OTP Holder uses another entity to perform telemarketing services on its behalf, the OTP Firm or OTP Holder remains responsible for ensuring compliance with all provisions contained in this rule.* *(7) Pre-Recorded Messages.* *
(A)An OTP Firm or OTP Holder may not initiate any telephone call to any residence using an artificial or prerecorded voice to deliver a message, without the prior express consent of the person called, unless the call: * *(i) Is not made for a commercial purpose;* *(ii) Is made for a commercial purpose, but does not include or introduce an unsolicited advertisement or constitute a telephone solicitation; or* *(iii) Is made to any person with whom the OTP Firm or OTP Holder has an established business relationship at the time the call is made.* *(B) All artificial or prerecorded telephone messages shall:* *(i) At the beginning of the message, state clearly the identity of the OTP Firm or OTP Holder that is responsible for initiating the call. The OTP Firm or OTP Holder responsible for initiating the call must state the name under which the OTP Firm or OTP Holder is registered to conduct business with the applicable State Corporation Commission (or comparable regulatory authority); and* *(ii) During or after the message, the OTP Firm or OTP Holder must state clearly the telephone number (other than that of the autodialer or prerecorded message player that placed the call) of such OTP Firm or OTP Holder. The telephone number provided may not be a 900 number or any other number for which charges exceed local or long distance transmission charges.* *(iii) For telemarketing messages to a residence, such telephone number, mentioned in Section 9.20(b)(7)(B)(ii) above, must permit any person to make a do-not-call request during regular business hours for the duration of the telemarketing campaign.* *(8) Telephone Facsimile or Computer Advertisements* *No OTP Firm, OTP Holder or associated person may use a telephone facsimile machine, computer or other device to send an unsolicited advertisement to a telephone facsimile machine, computer or other device.* *(A) For purposes of Section 9.20(b)(8) of this rule, a facsimile advertisement is not “unsolicited” if the recipient has granted the OTP Firm, OTP Holder or associated person prior express invitation or permission to deliver the advertisement. Such express invitation or permission must be evidenced by a signed, written statement that includes the facsimile number to which any advertisements may be sent and clearly indicates the recipient's consent to receive such facsimile advertisements from the OTP Firm, OTP Holder or associated person.* *(B) OTP Firms, OTP Holders and associated persons must clearly mark, in a margin at the top or bottom of each page of the transmission, the date and time it is sent and an identification of the OTP Firm, OTP Holder or associated person sending the message and the telephone number of the sending machine or of the OTP Firm, OTP Holder or associated person sending the transmission.* *(9) Caller Identification Information * *(A) Any OTP Firm or OTP Holder that engages in telemarketing, as defined in Section 9.20(b)(10)(B) of this rule, must transmit caller identification information. Such caller identification information must include either the Calling Party Number (“CPN”) or the calling party's billing number, also known as the Charge Number (“ANI”), and, when available from the telephone carrier, the name of the OTP Firm or OTP Holder. The telephone number so provided must permit any person to make a do-not-call request during regular business hours. Whenever possible, CPN is the preferred number and should be transmitted.* *(B) Any OTP Firm or OTP Holder that engages in telemarketing, as defined in Section 9.20(b)(10)(B) of this rule, is prohibited from blocking the transmission of caller identification information.* *(C) Provision of caller identification information does not obviate the requirement for a caller to verbally supply identification information during a call.* *(10) Definitions.* *(A) For purposes of Section 9.20, an OTP Firm or OTP Holder has an “established business relationship” with a person if:* *(i) The person has made a financial transaction or has a security position, a money balance, or account activity with the OTP Firm or OTP Holder or at a clearing firm that provides clearing services to such OTP Firm or OTP Holder within the previous 18 months immediately preceding the date of the telemarketing call;* *(ii) The OTP Firm or OTP Holder is the broker-dealer of record for an account of the person within the previous 18 months immediately preceding the date of the telemarketing call; or* *(iii) The person has contacted the OTP Firm or OTP Holder to inquire about a product service offered by the OTP Firm or OTP Holder within the previous three months immediately preceding the date of the telemarketing call, which relationship has not been previously terminated by either party.* *A person's established business relationship with an OTP Firm or OTP Holder does not extend to the OTP Firm's or OTP Holder's affiliated entities unless the person would reasonably expect them to be included, given the nature and type of products or services offered by the affiliate and the identity of the affiliate. Similarly, a person's established business relationship with an OTP Firm's or Holder's affiliate does not extend to the OTP Firm or OTP Holder unless the person would reasonably expect the OTP Firm or OTP Holder to be included. A person's request to be placed on an OTP Firm's or OTP Holder's firm-specific do-not-call list as set forth in Section 9.20(b)(1)(B) of this rule terminates an established business relationship for purposes of telemarketing and telephone solicitation, even if the person continues to do business with the OTP Holder or OTP Firm.* *(B) The terms “telemarketing” and “telephone solicitation” mean the initiation of a telephone call or message for the purpose of encouraging the purchase or rental of, or investment in, property, goods, or services, which is transmitted to any person.* *(C) The term “personal relationship” means any family member, friend or acquaintance of the telemarketer making the call.* *(D) The term “account activity” shall include, but not be limited to, purchases, sales, interest credits or debits, charges or credits, dividend payments, transfer activity, securities receipts or deliveries, and/or journal entries relating to securities or funds in the possession or control of the OTP Firm or OTP Holder.* *(E) The term “broker-dealer of record” refers to the broker-dealer identified on a customer's account application for accounts held directly at a mutual fund or variable insurance product issuer.* *(F) The terms “automatic telephone dialing system” and “autodialer” mean equipment which has the capacity to store or produce telephone numbers to be called using a random or sequential number generator and to dial such numbers.* *(G) The term “telephone facsimile machine” means equipment which has the capacity to transcribe text or images (or both) from paper, into an electronic signal and to transmit that signal over a regular telephone line, or to transcribe text or images (or both) from an electronic signal received over a regular telephone line onto paper.* *(H) The term “unsolicited advertisement” means any material advertising the commercial availability or quality of any products or services which is transmitted to any person without that person's prior express invitation or permission.* Rule 9.20(c)-(d)—No Change. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections (A),
(B)and
(C)below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of this Amendment No. 2 is to make the proposed rule consistent with NYSE Rule 404A by including provisions concerning general telemarketing requirements, procedures, wireless communications, outsourcing telemarketing, pre-recorded messages, telephone facsimile or computer advertisements and caller identification. This Amendment No. 2 replaces the original filing in its entirety. In 2003, the FTC, via its Telemarketing Sales Rule, and the Federal Communications Commission (“FCC”), via its Miscellaneous Rules Relating to Common Carriers, established requirements for sellers and telemarketers to participate in a national do-not-call registry. 6 Since June 2003, consumers have been able to enter their home telephone numbers into the national do-not-call registry, which is maintained by the FTC. Under rules of the FTC and FCC, sellers and telemarketers generally are prohibited from making telephone solicitations to consumers whose numbers are listed in the national do-not-call registry. The FCC's do-not-call rules apply to broker-dealers while the FTC's rules do not. 7 6 The do-not-call rules of the FCC and FTC are very similar in terms of substance, in part, because Congress directed the FCC to consult with the FTC to maximize consistency between their respective do-not-call rules. *See* The Do-Not-Call Implementation Act, 108 Public Law 10, 117 Stat. 557 (March 11, 2003). 7 *See* 15 U.S.C. 6102(d)(2)(A), which provides that “The Rules promulgated by the Federal Trade Commission under subsection
(a)shall not apply to * * * [among other persons, brokers or dealers]. * * *” The FTC's rules were not promulgated under 15 U.S.C. 6102. The FCC's rules are not subject to this limitation and apply to all sellers and telemarketers. In February 2005, the SEC requested that NYSE Arca adopt the proposed telemarketing rules to require OTP Holders and OTP Firms to participate in the do-not-call registry. 8 Because broker-dealers are subject to the FCC's do-not-call rules, NYSE Arca modeled its rules in this area after those of the FCC and codified these do-not-call requirements in NYSE Arca Rule 9.20(b), with minor modifications tailoring the rules to broker-dealer activities and the securities industry. Current NYSE Arca Rule 9.20(b) will be deleted and replaced in its entirety with proposed Rule 9.20(b) set forth in Exhibit 5. 8 The Telemarketing and Consumer Fraud and Abuse Prevention Act of 1994 (codified at 15 U.S.C. 6102) requires the SEC to promulgate telemarketing rules substantially similar to those of the FTC or to direct self-regulatory organizations to promulgate such rules unless the SEC determines that such rules are not in the interest of investor protection. Safe Harbor Provision for the National Do-Not-Call Registry Requirements The FCC and FTC each provided persons subject to their respective do-not-call rules a “safe harbor” providing that a seller or telemarketer is not liable for a violation of the do-not-call rules that is the result of an error if the seller or telemarketer's routine business practice meets certain standards. The Exchange has provided a parallel safe harbor in paragraph
(3)of proposed NYSE Arca Rule 9.20(b); the safe harbor is limited the requirements of paragraph (1)(C) of proposed NYSE Arca Rule 9.20(b), which prohibits an OTP Firm, OTP Holder or associated person from initiating any telephone solicitation to any person who has registered his or her phone number with the national do-not-call registry. To be eligible for this proposed NYSE Arca Rule 9.20(b) safe harbor, an OTP Holder or OTP Firm must demonstrate that the OTP Holder's or OTP Firm's routine business practice meets four standards in proposed Rule 9.20(b). First, the OTP Holder or OTP Firm must have established and implemented written procedures to comply with the national do-not-call rules. Second, the OTP Holder or OTP Firm must have trained its personnel, and any entity assisting it in its compliance, in procedures established pursuant to the national do-not-call rules. Third, the OTP Holder or OTP Firm must have maintained and recorded a list of telephone numbers that the OTP Holder or OTP Firm may not contact. Fourth, the OTP Holder or OTP Firm must use a process to prevent telephone solicitations to any telephone number on any list established pursuant to the do-not-call rules, employing a version of the national do-not-call registry obtained from the FTC no more than *thirty-one (31)* days prior to the date any call is made, and must maintain records documenting this process. Other Provisions This Amendment No. 2 includes additional provisions concerning general telemarketing requirements, procedures, wireless communications, outsourcing telemarketing, pre-recorded messages, telephone facsimile or computer advertisements and caller identification. Proposed Section 9.20(b)(1) outlines the General Telemarketing Requirements specifying when OTP Holders, OTP Firms and associated persons may not contact residences and certain persons. Proposed Section 9.20(b)(2) provides an exception for calling a person on the national do-not-call registry if the OTP Holder or OTP Firm has the person's permission to make calls, or if the OTP Holder or OTP Firm has an established business relationship with the person. Proposed Section 9.20(b)(4) sets forth the procedures that OTP Firms or OTP Holders must institute to comply with the General Telemarketing Requirements set forth in Section 9.20(b)(1). Proposed Section 9.20(b)(5) sets forth when OTP Firms and OTP Holders are prohibited from using wireless communications. Proposed Section 9.20(b)(6) sets forth the requirement that OTP Firms and OTP Holders outsourcing telemarketing remain responsible for compliance with Section 9.20(b). Proposed Section 9.20(b)(7) sets forth the requirements that OTP Firms and OTP Holders must satisfy to utilize pre-recorded messages. Proposed Section 9.20(b)(8) prohibits OTP Firms, OTP Holders or associated person from using a telephone facsimile machine, computer or other device to send unsolicited advertisements to a telephone facsimile machine, computer or other device. Finally, proposed Section 9.20(b)(9) sets forth the requirement that OTP Firms and OTP Holders engaging in telemarketing must transmit caller identification information. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with section 6(b) of the Exchange Act 9 in general, and furthers the objectives of section 6(b)(5) 10 in particular, because it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, and, in general, to protect investors and the public interest. The Exchange believes that the proposed rule change will increase the protection of investors by enabling investors who do not want to receive telephone solicitations from OTP Firms or OTP Holders to receive the benefits and protections of the national do-not-call registry. 9 15 U.S.C. 78f(b). 10 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 Exchange Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others Written comments on the proposed rule change were neither solicited nor received by the Exchange. 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 rule change, or
(B)Institute proceedings to determine whether the proposed rule change should be disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change, as amended, is consistent with the Exchange Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov.* • Please include File Number SR-PCX-2005-54 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-PCX-2005-54. 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, Station Place, 100 F Street, NE., Washington, DC 20549-1090. 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-PCX-2005-54 and should be submitted on or before July 31, 2006. 11 17 CFR 200.30-3(a)(12). For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 11 Nancy M. Morris, Secretary. [FR Doc. E6-10681 Filed 7-7-06; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-54079; File No. SR-PCX-2005-97] Self-Regulatory Organizations; NYSE Arca, Inc., Notice of Filing of Proposed Rule Change and Amendment Nos. 1 and 2 Thereto Requiring ETP Holders To Participate in the Federal Trade Commission's National Do-Not-Call Registry June 30, 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 18, 2006, NYSE Arca, Inc. (“NYSE Arca” or “Exchange”) 3 filed with the Securities and Exchange Commission (“Commission” or “SEC”) the proposed rule change as described in Items I, II and III below, which Items have been prepared by the self-regulatory organization. On May 26, 2006, NYSE Arca filed Amendment No. 1 to the proposed rule change. 4 On June 21, 2006, NYSE Arca filed Amendment No. 2 to the proposed rule change. 5 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 On March 6, 2006, the Pacific Exchange, Inc. filed a rule proposal, effective upon filing, to amend its rules to reflect these name changes: from Pacific Exchange, Inc. to NYSE Arca, Inc.; from PCX Equities, Inc. to NYSE Arca Equities, Inc.; from PCX Holdings, Inc., to NYSE Arca Holdings, Inc.; and from the Archipelago Exchange, L.L.C. to NYSE Arca, L.L.C. *See* File No. SR-PCX-2006-24 (March 6, 2006). This proposal has been amended to reflect these name changes. 4 In Amendment No. 1, NYSE Arca partially amended the text of proposed amended NYSE Arca Equities Rule 9.20 and made conforming and technical changes to the original filing. 5 In Amendment No. 2, NYSE Arca made additional changes to the text of proposed amended NYSE Arca Equities Rule 9.20 and to the original filing. I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange, through its wholly-owned subsidiary NYSE Arca Equities, Inc. (“NYSE Arca Equities” or the “Corporation”), proposes to amend NYSE Arca Equities Rule 9.20. The proposed rule change would require ETP Holders to participate in the Federal Trade Commission's (“FTC”) national do-not-call registry. The current text of Arca Equities Rule 9.20(b) would be deleted. The text of the proposed rule change is set forth below. *Italics* indicate new text. NYSE Arca Equities Rules RULE 9 CONDUCTING BUSINESS WITH THE PUBLIC Telemarketing 9.20(b) *(1) General Telemarketing Requirements. No ETP Holder or associated person shall make any telephone solicitation, as defined in Section 9.20(b)(10)(B) to:* *(A) Any residence of a person before the hour of 8 a.m. or after 9 p.m. (local time at the called party's location), unless:* *(i) The ETP Holder has an established business relationship with the person pursuant to Section 9.20(b)(10)(A);* *(ii) The ETP Holder has received that person's prior express invitation or permission; or* *(iii) The person called is a broker or dealer.* *(B) Any person that previously has stated that he or she does not wish to receive an outbound telephone call made by or on behalf of the ETP Holder; or* *(C) Any person who has registered his or her telephone number on the Federal Trade Commission's national do-not-call registry.*
(2)*National Do-Not-Call Registry Exceptions. An ETP Holder will not be liable for violating Section 9.20(b)(1)(C) if:*
(A)*The ETP Holder has an established business relationship with the recipient of the call. A person's request to be placed on an ETP Holder's firm-specific do-not-call list terminates the established business relationship exception to that national do-not-call registry provision for that ETP Holder even if the person continues to do business with the ETP Holder;*
(B)*The ETP Holder has obtained the person's prior express invitation or permission. Such permission must be evidenced by a signed, written agreement between the person and the ETP Holder that states that the person agrees to be contacted by the ETP Holder and includes the telephone number to which the calls may be placed; or*
(C)*The associated person making the call has a personal relationship with the recipient of the call.*
(3)*Safe Harbor Provision. The ETP Holder or associated person making telephone solicitations will not be liable for violating Section 9.20(b)(1)(C) if the ETP Holder or associated person demonstrates that the violation is the result of an error and that as part of the ETP Holder's routine business practice it meets the following standards:*
(A)*The ETP Holder has established and implemented written procedures to comply with the national do-not-call rules;*
(B)*The ETP Holder has trained its personnel, and any entity assisting in its compliance, in procedures established pursuant to the national do-not-call rules;*
(C)*The ETP Holder has maintained and recorded a list of telephone numbers that it may not contact; and*
(D)*The ETP Holder uses a process to prevent telephone solicitations to any telephone number on any list established pursuant to the do-not-call rules, employing a version of the national do-not-call registry obtained from the administrator of the registry no more than thirty-one
(31)days prior to the date any call is made, and maintains records documenting this process.* *(4) Procedures. Prior to engaging in telemarketing, an ETP Holder must institute procedures to comply with Section 9.20(b)(1). Such procedures must meet the minimum standards:* *(A) Written policy. The ETP Holder must have a written policy available upon demand for maintaining a do-not-call list.* *(B) Training of personnel engaged in telemarketing. Personnel engaged in any aspect of telemarketing must be informed and trained in the existence and use of the do-not-call list, including the policies and procedures of the firm regarding communication with the public.* *(C) Recording, honoring do-not-call requests. If an ETP Holder receives a request from a person not to receive calls from that ETP Holder, the ETP Holder must record the request and place the person's name, if provided, and telephone number on the firm's do-not-call list at the time the request is made. The ETP Holder must honor a person's do-not-call request within a reasonable time from the date such request is made. This period may not exceed 30 days from the date of such request. If such requests are being recorded or maintained by a party other than the ETP Holder on whose behalf the telemarketing call is made, the ETP Holder on whose behalf the telemarketing call is made will be liable for any failure to honor the do-not-call request.* *(D) Identification of sellers and telemarketers. An ETP Holder or person associated with an ETP Holder making a call for telemarketing purposes must provide the called party with the name of the individual caller, the name of the ETP Holder, an address or telephone number at which the ETP Holder may be contacted, and that the purpose of the call is to solicit the purchase or sale of securities or a related service. The telephone number provided may not be a 900 number or any other number for which charges exceed local or long distance transmission charges.* *(E) Affiliated persons or entities. In the absence of a specific request by the person to the contrary, a person's do-not-call request shall apply to the ETP Holder making the call, and will not apply to affiliated entities unless the consumer reasonably would expect them to be included given the identification of the caller and the product or service being advertised.* *(F) Maintenance of do-not-call lists. An ETP Holder making calls for telemarketing purposes must maintain a record of the caller's request not to receive further telemarketing calls. A firm-specific do-not-call request must be honored for five years from the time the request is made.* *(5) Wireless Communications.* *(A) ETP Holders are prohibited from using an automatic telephone dialing system or an artificial or prerecorded voice when initiating a telephone call to any telephone number assigned to a paging service, cellular telephone service, specialized mobile radio service, or other radio common carrier service, or any service for which the called party is charged for the call.* *(B) The provisions set forth in this rule are applicable to ETP Holders telemarketing or making telephone solicitations calls to wireless telephone numbers.* *(6) Outsourcing Telemarketing. If an ETP Holder uses another entity to perform telemarketing services on its behalf, the ETP Holder remains responsible for ensuring compliance with all provisions contained in this rule.* *(7) Pre-Recorded Messages.* *(A) An ETP Holder may not initiate any telephone call to any residence using an artificial or prerecorded voice to deliver a message, without the prior express consent of the person called, unless the call:* *(i) Is not made for a commercial purpose;* *(ii) Is made for a commercial purpose, but does not include or introduce an unsolicited advertisement or constitute a telephone solicitation; or* *(iii) Is made to any person with whom the ETP Holder has an established business relationship at the time the call is made.* *(B) All artificial or prerecorded telephone messages shall:* *(i) At the beginning of the message, state clearly the identity of the ETP Holder that is responsible for initiating the call. The ETP Holder responsible for initiating the call must state the name under which the ETP Holder is registered to conduct business with the applicable State Corporation Commission (or comparable regulatory authority); and* *(ii) During or after the message, the ETP Holder must state clearly the telephone number (other than that of the autodialer or prerecorded message player that placed the call) of such ETP Holder. The telephone number provided may not be a 900 number or any other number for which charges exceed local or long distance transmission charges.* *
(iii)For telemarketing messages to a residence, such telephone number, mentioned in Section 9.20(b)(7)(B)(ii) above, must permit any person to make a do-not-call request during regular business hours for the duration of the telemarketing campaign. * *(8) Telephone Facsimile or Computer Advertisements* *No ETP Holder or associated person may use a telephone facsimile machine, computer or other device to send an unsolicited advertisement to a telephone facsimile machine, computer or other device.* *(A) For purposes of Section 9.20(b)(8) of this rule, a facsimile advertisement is not “unsolicited” if the recipient has granted the ETP Holder or associated person prior express invitation or permission to deliver the advertisement. Such express invitation or permission must be evidenced by a signed, written statement that includes the facsimile number to which any advertisements may be sent and clearly indicates the recipient's consent to receive such facsimile advertisements from the ETP Holder or associated person.* *(B) ETP Holders and associated persons must clearly mark, in a margin at the top or bottom of each page of the transmission, the date and time it is sent and an identification of the ETP Holder or associated person sending the message and the telephone number of the sending machine or of the ETP Holder or associated person sending the transmission.* *(9) Caller Identification Information* *(A) Any ETP Holder that engages in telemarketing, as defined in Section 9.20(b)(10)(B) of this rule, must transmit caller identification information. Such caller identification information must include either the Calling Party Number (“CPN”) or the calling party's billing number, also known as the Charge Number (“ANI”), and, when available from the telephone carrier, the name of the ETP Holder. The telephone number so provided must permit any person to make a do-not-call request during regular business hours. Whenever possible, CPN is the preferred number and should be transmitted.* *(B) Any ETP Holder that engages in telemarketing, as defined in Section 9.20(b)(10)(B) of this rule, is prohibited from blocking the transmission of caller identification information.* *(C) Provision of caller identification information does not obviate the requirement for a caller to verbally supply identification information during a call.* *(10) Definitions.* *(A) For purposes of Section 9.20, an ETP Holder has an “established business relationship” with a person if:* *(i) The person has made a financial transaction or has a security position, a money balance, or account activity with the ETP Holder or at a clearing firm that provides clearing services to such ETP Holder within the previous 18 months immediately preceding the date of the telemarketing call;* *(ii) The ETP Holder is the broker-dealer of record for an account of the person within the previous 18 months immediately preceding the date of the telemarketing call; or* *(iii) The person has contacted the ETP Holder to inquire about a product service offered by the ETP Holder within the previous three months immediately preceding the date of the telemarketing call, which relationship has not been previously terminated by either party.* *A person's established business relationship with an ETP Holder does not extend to the ETP Holder's affiliated entities unless the person would reasonably expect them to be included, given the nature and type of products or services offered by the affiliate and the identity of the affiliate. Similarly, a person's established business relationship with an ETP Holder's affiliate does not extend to the ETP Holder unless the person would reasonably expect the ETP Holder to be included. A person's request to be placed on an ETP Holder's firm-specific do-not-call list as set forth in Section 9.20(b)(1)(B) of this rule terminates an established business relationship for purposes of telemarketing and telephone solicitation, even if the person continues to do business with the ETP Holder.* *(B) The terms “telemarketing” and “telephone solicitation” mean the initiation of a telephone call or message for the purpose of encouraging the purchase or rental of, or investment in, property, goods, or services, which is transmitted to any person.* *(C) The term “personal relationship” means any family member, friend or acquaintance of the telemarketer making the call.* *(D) The term “account activity” shall include, but not be limited to, purchases, sales, interest credits or debits, charges or credits, dividend payments, transfer activity, securities receipts or deliveries, and/or journal entries relating to securities or funds in the possession or control of the ETP Holder.* *(E) The term “broker-dealer of record” refers to the broker-dealer identified on a customer's account application for accounts held directly at a mutual fund or variable insurance product issuer.* *(F) The terms “automatic telephone dialing system” and “autodialer” mean equipment which has the capacity to store or produce telephone numbers to be called using a random or sequential number generator and to dial such numbers.* *(G) The term “telephone facsimile machine” means equipment which has the capacity to transcribe text or images (or both) from paper, into an electronic signal and to transmit that signal over a regular telephone line, or to transcribe text or images (or both) from an electronic signal received over a regular telephone line onto paper.* *(H) The term “unsolicited advertisement” means any material advertising the commercial availability or quality of any products or services which is transmitted to any person without that person's prior express invitation or permission.* Rule 9.20(c)-(d)—No Change. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections (A),
(B)and
(C)below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of this Amendment No. 2 is to make the proposed rule consistent with NYSE Rule 404A by including provisions concerning general telemarketing requirements, procedures, wireless communications, outsourcing telemarketing, pre-recorded messages, telephone facsimile or computer advertisements and caller identification. This Amendment No. 2 replaces the original filing in its entirety. In 2003, the FTC, via its Telemarketing Sales Rule, and the Federal Communications Commission (“FCC”), via its Miscellaneous Rules Relating to Common Carriers, established requirements for sellers and telemarketers to participate in a national do-not-call registry. 6 Since June 2003, consumers have been able to enter their home telephone numbers into the national do-not-call registry, which is maintained by the FTC. Under rules of the FTC and FCC, sellers and telemarketers generally are prohibited from making telephone solicitations to consumers whose numbers are listed in the national do-not-call registry. The FCC's do-not-call rules apply to broker-dealers while the FTC's rules do not. 7 6 The do-not-call rules of the FCC and FTC are very similar in terms of substance, in part, because Congress directed the FCC to consult with the FTC to maximize consistency between their respective do-not-call rules. *See* The Do-Not-Call Implementation Act, 108 Pub. L. 10, 117 Stat. 557 (March 11, 2003). 7 *See* 15 U.S.C. 6102(d)(2)(A), which provides that “The Rules promulgated by the Federal Trade Commission under subsection
(a)shall not apply to * * * [among other persons, brokers or dealers] .* * * ” The FTC's rules were not promulgated under 15 U.S.C. 6102. The FCC's rules are not subject to this limitation and apply to all sellers and telemarketers. In February 2005, the SEC requested that NYSE Arca adopt the proposed telemarketing rules to require ETP Holders to participate in the do-not-call registry. 8 Because broker-dealers are subject to the FCC's do-not-call rules, NYSE Arca modeled its rules in this area after those of the FCC and codified these do-not-call requirements in NYSE Arca Equities Rule 9.20(b), with minor modifications tailoring the rules to broker-dealer activities and the securities industry. Current NYSE Arca Rule 9.20(b) will be deleted and replaced in its entirety with proposed Rule 9.20(b) set forth in Exhibit 5. 8 The Telemarketing and Consumer Fraud and Abuse Prevention Act of 1994 (codified at 15 U.S.C. 6102) requires the SEC to promulgate telemarketing rules substantially similar to those of the FTC or to direct self-regulatory organizations to promulgate such rules unless the SEC determines that such rules are not in the interest of investor protection. Safe Harbor Provision for the National Do-Not-Call Registry Requirements The FCC and FTC each provided persons subject to their respective do-not-call rules a “safe harbor” providing that a seller or telemarketer is not liable for a violation of the do-not-call rules that is the result of an error if the seller or telemarketer's routine business practice meets certain standards. The Corporation has provided a parallel safe harbor in paragraph
(3)of proposed NYSE Arca Equities Rule 9.20(b); the safe harbor is limited the requirements of paragraph (1)(C) of proposed NYSE Arca Equities Rule 9.20(b), which prohibits an ETP Holder or associated person from initiating any telephone solicitation to any person who has registered his or her phone number with the national do-not-call registry. To be eligible for this proposed NYSE Arca Equities Rule 9.20(b) safe harbor, an ETP Holder must demonstrate that the ETP Holder's routine business practice meets four standards in proposed Rule 9.20(b). First, the ETP Holder must have established and implemented written procedures to comply with the national do-not-call rules. Second, the ETP Holder must have trained its personnel, and any entity assisting it in its compliance, in procedures established pursuant to the national do-not-call rules. Third, the ETP Holder must have maintained and recorded a list of telephone numbers that the ETP Holder may not contact. Fourth, the ETP Holder must use a process to prevent telephone solicitations to any telephone number on any list established pursuant to the do-not-call rules, employing a version of the national do-not-call registry obtained from the FTC no more than thirty-one
(31)days prior to the date any call is made, and must maintain records documenting this process. Other Provisions This Amendment No. 2 includes additional provisions concerning general telemarketing requirements, procedures, wireless communications, outsourcing telemarketing, pre-recorded messages, telephone facsimile or computer advertisements and caller identification. Proposed Section 9.20(b)(1) outlines the General Telemarketing Requirements specifying when ETP Holders and associated persons may not contact residences and certain persons. Proposed Section 9.20(b)(2) provides an exception for calling a person on the national do-not-call registry if the ETP Holder has the person's permission to make calls, or if the ETP Holder has an established business relationship with the person. Proposed Section 9.20(b)(4) sets forth the procedures that ETP Holders must institute to comply with the General Telemarketing Requirements set forth in Section 9.20(b)(1). Proposed Section 9.20(b)(5) sets forth when ETP Holders are prohibited from using wireless communications. Proposed Section 9.20(b)(6) sets forth the requirement that ETP Holders outsourcing telemarketing remain responsible for compliance with Section 9.20(b). Proposed Section 9.20(b)(7) sets forth the requirements that ETP Holders must satisfy to utilize pre-recorded messages. Proposed Section 9.20(b)(8) prohibits ETP Holders or associated person from using a telephone facsimile machine, computer or other device to send unsolicited advertisements to a telephone facsimile machine, computer or other device. Finally, proposed Section 9.20(b)(9) sets forth the requirement that ETP Holders engaging in telemarketing must transmit caller identification information. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with section 6(b) of the Exchange Act 9 in general, and furthers the objectives of section 6(b)(5) 10 in particular, because it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, and, in general, to protect investors and the public interest. The Exchange believes that the proposed rule change will increase the protection of investors by enabling investors who do not want to receive telephone solicitations from ETP Holders to receive the benefits and protections of the national do-not-call registry. 9 15 U.S.C. 78f(b). 10 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 Exchange Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others Written comments on the proposed rule change were neither solicited nor received by the Exchange. 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 rule change, or
(B)Institute proceedings to determine whether the proposed rule change should be disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change, as amended, is consistent with the Exchange Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov* . • Please include File Number SR-PCX-2005-97 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-PCX-2005-97. 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, Station Place, 100 F Street, NE., Washington, DC 20549-1090. 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-PCX-2005-97 and should be submitted on or before July 31, 2006. 11 17 CFR 200.30-3(a)(12). For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 11 Nancy M. Morris, Secretary. [FR Doc. E6-10685 Filed 7-7-06; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-54060; File No. SR-OCC-2006-07] Self-Regulatory Organizations; The Options Clearing Corporation; Notice of Filing of Proposed Rule Change Relating to a Surcharge for Non-Clearing Member Subscribers That Have Not Met a Mandated Conversion Date for Data Distribution Service June 28, 2006. Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”), 1 notice is hereby given that on May 15, 2006, The Options Clearing Corporation (“OCC”) 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 OCC. 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 proposed rule change would implement a surcharge to the monthly service fee charged to non-clearing member subscribers of OCC's Data Distribution Service (“DDS”) that have not converted to the new DDS format by the revised mandated conversion date of September 29, 2006. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for the Proposed Rule Change In its filing with the Commission, OCC 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. OCC 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 the text of the summaries prepared by OCC.
(A)Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change The proposed rule change would implement a surcharge to the monthly ancillary service fee for non-clearing member subscribers that have not converted to the new DDS 3 format by the revised mandated conversion date of September 29, 2006. 4 3 For a description of the services, including DDS, offered through OCC's ancillary services program, see Securities Exchange Act File Nos. 53400 (March 2, 2006), 71 FR 12226 (March 9, 2006) [File No. SR-OCC-2006-01] and 52125 (July 26, 2005), 70 FR 44414 (August 2, 2005) [File No. SR-OCC-2005-09]. 4 By a separate proposed rule change, OCC will apply the same surcharge to clearing member DDS subscribers that likewise do not convert to the new DDS format by the mandated date. File No. SR-OCC-2006-06. Background Both clearing members and non-clearing members may subscribe to DDS. A clearing member may subscribe to DDS in order to receive in a machine readable format data processed by OCC that is proprietary to such clearing member ( *e.g.* , position and post-trade entries) as well as non-proprietary data ( *i.e.* , data not specific to the clearing member) produced by OCC ( *e.g.* , options, series and prices). Non-clearing members may subscribe to DDS in order to receive certain non-proprietary data. Discussion In December, 2004, OCC informed all DDS subscribers that OCC was requiring them to convert to the new ENCORE 5 DDS format by February 28, 2006. Although OCC diligently worked with subscribers to facilitate their implementation of the new DDS format, it became apparent that subscribers needed additional time in order to complete their systems work. Accordingly, in December, 2005, OCC announced an extension of the mandated conversion date to September 29, 2006. 5 ENCORE is OCC's clearing system. After the mandated conversion date, OCC will continue to support the legacy data service distribution system. However, for subscribers that do not meet the revised conversion date of September 29, 2006, OCC proposes to charge a monthly surcharge of $1,000 per month in order to reasonably allocate the costs of continuing to support the legacy data distribution system. The surcharge will be imposed starting with the October, 2006, billing cycle and will continue until the subscriber converts to the new DDS format and ceases to receive any legacy data service distribution transmissions. By a separate proposed rule change, File No. SR-OCC-2006-06, OCC is similarly proposing to apply the $1,000 per month surcharge to clearing member subscribers to DDS that likewise fail to convert to the new format. If this filing, which is to implement the surcharge for non-clearing member subscribers, is not approved by the Commission by October, 2006, OCC will defer implementing the surcharge to clearing members until the Commission has approved this filing. 6 6 OCC's amended Schedule of Fees is attached to the proposed rule filing. OCC believes that the proposed change is consistent with Section 17A of the Act, as amended, because it involves a fee, due or charge applicable to non-clearing member subscribers of DDS that provides for the reasonable allocation of costs to support a legacy system. The proposed rule change is not inconsistent with the existing rules of OCC, including any other rules proposed to be amended.
(B)Self-Regulatory Organization's Statement on Burden on Competition OCC does not believe that the proposed rule change would impose any burden on competition.
(C)Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others Written comments were not and are not intended to be solicited with respect to the proposed rule change and none have been received. 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-OCC-2006-07 on the subject line. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-OCC-2006-07. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Section, 100 F Street, NE., Washington, DC 20549. Copies of such filing also will be available for inspection and copying at the principal office of OCC and on OCC's Web site at *http://www.optionsclearing.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-OCC-2006-07 and should be submitted on or before July 31, 2006. 7 17 CFR 200.30-3(a)(12). For the Commission by the Division of Market Regulation, pursuant to delegated authority. 7 Nancy M. Morris, Secretary. [FR Doc. E6-10720 Filed 7-7-06; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-54059; File No. SR-OCC-2006-06] Self-Regulatory Organizations; The Options Clearing Corporation; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to a Surcharge for Clearing Member Subscribers That Have Not Met the Mandated Conversion Date for Data Distribution Service June 28, 2006. Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”), 1 notice is hereby given that on May 15, 2006, The Options Clearing Corporation (“OCC”) 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 OCC. OCC filed the proposed rule change pursuant to section 19(b)(3)(A)(ii) of the Act 2 and Rule 19b-4(f)(2) thereunder 3 so that the proposal was effective upon filing with the Commission. 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 15 U.S.C. 78s(b)(3)(A)(ii). 3 17 CFR 240.19b-4(f)(2). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The proposed rule change would implement a surcharge to the monthly ancillary service fee for clearing member subscribers that have not converted to the new Data Distribution Service (“DDS”) format by the revised mandated conversion date of September 29, 2006. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, OCC 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. OCC 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 OCC.
(A)Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change The proposed rule change would implement a surcharge to the monthly ancillary service fee for clearing member subscribers that have not converted to the new DDS 5 format by the revised mandated conversion date of September 29, 2006. 6 5 For a description of the services, including DDS, offered through OCC's ancillary services program, see Securities Exchange Act File Nos. 53400 (March 2, 2006), 71 FR 12226 (March 9, 2006) [File No. SR-OCC-2006-01] and 52125 (July 26, 2005), 70 FR 44414 (August 2, 2005) [File No. SR-OCC-2005-09]. 6 By a separate proposed rule change, OCC will apply the same surcharge to non-clearing member DDS subscribers that likewise do not convert to the new DSS format by the mandated date. File No. SR-OCC-2006-07. Background Both clearing members and non-clearing members may subscribe to DDS. A clearing member may subscribe to DDS in order to receive in a machine readable format data processed by OCC that is proprietary to such clearing member ( *e.g.* , position and post-trade entries) as well as non-proprietary data ( *i.e.* , data not specific to the clearing member) produced by OCC ( *e.g.* , options, series and prices). Non-clearing members may subscribe to DDS in order to receive certain non-proprietary data. Discussion In December, 2004, OCC informed all DDS subscribers that OCC was requiring them to convert to the new ENCORE 7 DDS format by February 28, 2006. Although OCC diligently worked with subscribers to facilitate their implementation of the new DDS format, it became apparent that subscribers needed additional time in order to complete their systems work. Accordingly, in December, 2005, OCC announced an extension of the mandated conversion date to September 29, 2006. 7 ENCORE is OCC's clearing system. After the mandated conversion date, OCC will continue to support the legacy data service distribution system. However, for subscribers that do not meet the revised conversion date of September 29, 2006, OCC proposes to charge a monthly surcharge of $1,000 per month in order to reasonably allocate the costs of continuing to support the legacy data distribution system. The surcharge will be imposed starting with the October, 2006, billing cycle and will continue until the subscriber converts to the new DDS format and ceases to receive any legacy data service distribution transmissions. By a separate proposed rule change, File No. SR-OCC-2006-07, OCC is similarly proposing to apply the $1,000 per month surcharge to non-clearing member subscribers to DDS that likewise fail to convert to the new format. If that filing is not approved by the Commission by October, 2006, OCC will defer implementing the surcharge to clearing members until the Commission has approved File No. SR-OCC-2006-07. 8 8 OCC's amended Schedule of Fees is attached to the proposed rule filing. OCC believes that the proposed change is consistent with section 17A of the Act, as amended, because it involves a fee, due, or charge applicable to clearing member subscribers of DDS that provides for the reasonable allocation of costs to support a legacy system. The proposed rule change is not inconsistent with the existing rules of OCC, including any other rules proposed to be amended.
(B)Self-Regulatory Organization's Statement on Burden on Competition OCC does not believe that the proposed rule change would impose any burden on competition.
(C)Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others Written comments were not and are not intended to be solicited with respect to the proposed rule change, and none have been received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective upon filing pursuant to section 19(b)(3)(A)(ii) of the Act 9 and Rule 19b-4(f)(2) 10 thereunder because the proposed rule establishes or changes a due, fee, or other charge. At any time within sixty days of the filing of such rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. 9 15 U.S.C. 78s(b)(3)(A)(i). 10 17 CFR 240.19b-4(f)(1). IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ) or • Send an e-mail to *rule-comments@sec.gov.* Please include File Number SR-OCC-2006-06 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-OCC-2006-06. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Section, 100 F Street, NE., Washington, DC 20549. Copies of such filing also will be available for inspection and copying at the principal office of OCC and on OCC's Web site at *http://www.optionsclearing.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-OCC-2006-06 and should be submitted on or before July 31, 2006. 11 17 CFR 200.30-3(a)(12). For the Commission by the Division of Market Regulation, pursuant to delegated authority. 11 Nancy M. Morris, Secretary. [FR Doc. E6-10722 Filed 7-7-06; 8:45 am] BILLING CODE 8010-01-P DEPARTMENT OF TRANSPORTATION Federal Highway Administration Draft Environmental Impact Statement: Pulaski and Laurel Counties, KY AGENCY: Federal Highway Administration (FHWA), USDOT. ACTION: Notice of Availability (NOA). SUMMARY: This announces the availability of the Draft Environmental Impact Statement
(DEIS)for the proposed interstate facility in the south-central portion of Kentucky, between the Somerset Northern Bypass (I-66) and London, KY. In accordance with the National Environmental Policy Act of 1969 (NEPA), this DEIS examines the potential social, economic, and environmental impacts of the proposed build alternatives and includes the no-build alternative. FOR FURTHER INFORMATION CONTACT: Ms. Mary Murray, Transportation Engineer/Project Manager, Federal Highway Administration, 330 West Broadway, Frankfort, Kentucky 40601,
(502)223-6745, by e-mail to *Mary.Murrary@fhwa.dot.gov* ; or Mr. Joe Cox, Kentucky Transportation Cabinet (KYTC), District 8, PO Box 780, Somerset, KY 42501, by e-mail to *Joe.Cox@kt.gov* , by fax to
(606)677-4013. SUPPLEMENTARY INFORMATION: Background The Transamerica Transportation Corridor (I-66) was defined in an Interstate 66 Feasibility Study. This study focused on the feasibility of various alternative transportation concepts. The report recognized that further analyses could find that some individual segments of the Transamerica Transportation Corridor would be more feasible than others and would be more desirable from a State or regional perspective. The Interstate 66 Feasibility Study was funded through the 1991 U.S. Department of Transportation Appropriation Act. The Transamerica Transportation Corridor extended from the East Coast to the West Coast, and was generally located between I-70 and I-40. It included a “Southern Kentucky Corridor” centered on the cities of Pikeville, Jenkins, Hazard, London, Somerset, Columbia, Bowling Green, Hopkinsville, Benton and Paducah. The Southern Kentucky Corridor, Economic Justification & Financial Feasibility Study, May 1997, followed the Interstate 66 Feasibility Study. This study included public participation through an advisory committee, public meetings, press releases, and newsletters sent to all parties who expressed an interest in the Southern Kentucky Corridor. The study identified the Somerset to London segment of the proposed I-66 Southern Kentucky Corridor as a high priority segment. In June 2000, the I-66 Southern Kentucky Corridor Scoping Study (Pulaski and Laurel Counties, KY) was completed. The document developed an environmental footprint, gathered resources agency and public input, and identified areas of concern, as well as the potential benefits of an interstate facility within the Southern Kentucky Corridor. The Federal Highway Administration issued a Notice of Intent to prepare an Environmental Impact Statement for the segment of I-66 between Somerset and London, Kentucky, on April 29, 2002 [FR Doc. 02-10410]. This DEIS addresses the direct, indirect, and cumulative impacts from the proposed project on the natural and human environments. Six Pulaski County and five Laurel County alternatives were analyzed in detail. The DEIS addresses impacts from each of the interstate build alternatives and, in addition, discusses the no-build alternative. Public involvement was integral throughout the development of the DEIS. Nine Citizens Advisory Group meetings were held with members representing the concerns of Businesses, Economic Development, Communities, and the Environment, in order to solicit input and provide project development information prior to the publication of the DEIS. Additional public involvement included public meetings, project newsletters, press releases, and Section 106 consulting party meetings. Resource agencies were consulted and invited to comment during resource agency meetings held on December 14, 1999, March 14, 2000, and July 10-11, 2003. A public hearing Pulaski and Laurel counties will be held in August, 2006. Public notice will be given of the time and place of the hearings. All comments on the DEIS are to be sent to the Federal Highway Administration, KY Division Office, 330 W. Broadway Street, Frankfort, Kentucky 40601 (Attn: Jose Sepulveda). Electronic Access A copy of the DEIS has been sent to affected Federal, State and local agencies and made available for public review. In addition, the document will be available electronically on the following Web site: *http://www.interstate66.com* An electronic copy of this NOA may be downloaded from the Office of the Federal Register's home page at *http://www.archives.gov/federal-register* and the Government Printing Office's Web page at *http://www.gpoaccess.gov/fr/index.html.* (Catalogue of Federal Domestic Assistance Program Number 20.205, Highway Planning and Construction. The regulations implementing Executive Order 12372 regarding intergovernmental consultation on Federal programs and activities apply to this program) (23 U.S.C. 315; 49 CFR 1.48) Dated: June 29, 2006. Jose Sepulveda, Kentucky Division Administrator. [FR Doc. 06-6057 Filed 7-7-06; 8:45 am]
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- 17 CFR 240.19
- 15 USC 78
- 117 Stat. 557
- 49 CFR 1.48
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