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Code · REGISTER · 2006-10-12 · National Aeronautics and Space Administration (NASA). *Notice:* (06-076) · Notices

Notices. Notice of information collection

30,650 words·~139 min read·/register/2006/10/12/06-8662·

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BILLING CODE 4410-15-M NATIONAL AERONAUTICS AND SPACE ADMINISTRATION Notice of Information Collection AGENCY: National Aeronautics and Space Administration (NASA). *Notice:* (06-076). ACTION: Notice of information collection. SUMMARY: The National Aeronautics and Space Administration, as part of its continuing effort to reduce paperwork and respondent burden, invites the general public and other Federal agencies to take this opportunity to comment on proposed and/or continuing information collections, as required by the Paperwork Reduction Act of 1995 (Pub. L. 104-13, 44 U.S.C. 3506(c)(2)(A)).
DATES: All comments should be submitted within 60 calendar days from the date of this publication. ADDRESSES: All comments should be addressed to Mr. Walter Kit, National Aeronautics and Space Administration, Washington, DC 20546-0001. FOR FURTHER INFORMATION CONTACT: Requests for additional information or copies of the information collection instrument(s) and instructions should be directed to Mr. Walter Kit, NASA PRA Officer, NASA Headquarters, 300 E Street, SW., JE000, Washington, DC 20546,
(202)358-1350, *Walter.Kit-1@nasa.gov.* SUPPLEMENTARY INFORMATION: I. Abstract Pursuant to 35 U.S.C. 209, applicants for a license under a patent or patent application must submit information in support of their request for a license. NASA uses the submitted information to grant the license. II. Method of Collection The current paper-based system is used to collect the information. It is deemed not cost effect to collect the information using a Web site form since the applications submitted vary significantly in format and volume. III. Data *Title:* Application for Patent License. *OMB Number:* 2700-0039. *Type of review:* Extension of currently approved collection. *Affected Public:* Business or other for-profit, and individuals or households. *Number of Respondents:* 60. *Responses per Respondent:* 1. *Annual Responses:* 60. *Hours per Request:* 10 hours. *Annual Burden Hours:* 600. IV. Request for Comments Comments are invited on:
(1)Whether the proposed collection of information is necessary for the proper performance of the functions of NASA, including whether the information collected has practical utility;
(2)the accuracy of NASA's estimate of the burden (including hours and cost) of the proposed collection of information;
(3)ways to enhance the quality, utility, and clarity of the information to be collected; and
(4)ways to minimize the burden of the collection of information on respondents, including automated collection techniques or the use of other forms of information technology. Comments submitted in response to this notice will be summarized and included in the request for OMB approval of this information collection. They will also become a matter of public record. Gary Cox, Deputy Chief Information Officer (Acting). [FR Doc. E6-16854 Filed 10-11-06; 8:45 am] BILLING CODE 7510-13-P NATIONAL AERONAUTICS AND SPACE ADMINISTRATION Notice of Information Collection AGENCY: National Aeronautics and Space Administration (NASA). *Notice:* (06-077). ACTION: Notice of information collection. SUMMARY: The National Aeronautics and Space Administration, as part of its continuing effort to reduce paperwork and respondent burden, invites the general public and other Federal agencies to take this opportunity to comment on proposed and/or continuing information collections, as required by the Paperwork Reduction Act of 1995 (Pub. L. 104-13, 44 U.S.C. 3506(c)(2)(A)). DATES: All comments should be submitted within 60 calendar days from the date of this publication. ADDRESSES: All comments should be addressed to Mr. Walter Kit, National Aeronautics and Space Administration, Washington, DC 20546-0001. FOR FURTHER INFORMATION CONTACT: Requests for additional information or copies of the information collection instrument(s) and instructions should be directed to Mr. Walter Kit, NASA PRA Officer, NASA Headquarters, 300 E Street, SW., JE000, Washington, DC 20546,
(202)358-1350, *Walter.Kit-1@nasa.gov.* SUPPLEMENTARY INFORMATION: I. Abstract NASA grants patent licenses for the commercial application of NASA-owned inventions. Each licensee is required to report annually on it activities in commercializing its licensed inventions(s) and on any royalties due. NASA attorneys use this information to determine of a licensee is achieving and maintaining practical application of the licensed inventions as required by its license agreement. II. Method of Collection The current paper-based system is used to collect the information. It is deemed not cost effect to collect the information using a Web site form since the reports submitted vary significantly in format and volume. III. Data *Title:* Patent License Report. *OMB Number:* 2700-0010. *Type of review:* Extension of currently approved collection. *Affected Public:* Business or other for-profit; individuals or households. *Number of Respondents:* 90. *Responses per Respondent:* 1. *Annual Responses:* 90. *Hours per Request:* 0.5 hour. *Annual Burden Hours:* 45. *Frequency of Report:* Annually. IV. Request for Comments Comments are invited on:
(1)Whether the proposed collection of information is necessary for the proper performance of the functions of NASA, including whether the information collected has practical utility;
(2)the accuracy of NASA's estimate of the burden (including hours and cost) of the proposed collection of information;
(3)ways to enhance the quality, utility, and clarity of the information to be collected; and
(4)ways to minimize the burden of the collection of information on respondents, including automated collection techniques or the use of other forms of information technology. Comments submitted in response to this notice will be summarized and included in the request for OMB approval of this information collection. They will also become a matter of public record. Gary Cox, Deputy Chief Information Officer (Acting). [FR Doc. E6-16855 Filed 10-11-06; 8:45 am] BILLING CODE 7510-13-P NUCLEAR REGULATORY COMMISSION [Docket No. 52-011] Southern Nuclear Operating Company; Notice of Hearing and Opportunity to Petition for Leave to Intervene on An Early Site Permit for the Vogtle ESP Site Pursuant to the Atomic Energy Act of 1954, as amended (the Act), and the regulations in Title 10 of the Code of Federal Regulations, Part 50, Domestic Licensing of Production and Utilization Facilities, Part 52, Early Site Permits, Standard Design Certifications, and Combined Licenses for Nuclear Power Plants, and Part 2, Rules of Practice for Domestic Licensing Proceedings and Issuance of Orders, notice is hereby given that a hearing will be held, at a time and place to be set in the future by the United States Nuclear Regulatory Commission (NRC, the Commission) or designated Atomic Safety and Licensing Board (Board). The hearing will consider the application dated August 14, 2006, filed by Southern Nuclear Operating Company (SNC), pursuant to Subpart A of 10 CFR part 52 for an early site permit (ESP). The application which was supplemented by letters dated August 17, September 6 (two letters), and September 13, 2006 requests approval of a site located in eastern Georgia (near Waynesboro, Georgia) identified as the Vogtle ESP site, for one or more new nuclear reactors that would, if authorized for construction and operation in a separate licensing proceeding under subpart C of 10 CFR part 52 or under 10 CFR part 50, have a capacity of no more than 6800 Megawatts (thermal) additional for the site. The application was accepted for docketing on September 19, 2006. The docket number established for this application is 52-011. The hearing will be conducted by a Board which will be designated by the Chairman of the Atomic Safety and Licensing Board Panel or by the Commission. Notice as to the membership of the Board will be published in the **Federal Register** at a later date. The NRC staff will complete a detailed technical review of the application and will document its findings in a safety evaluation report
(SER)and an environmental impact statement (EIS). In addition, the Commission will refer a copy of the application to the Advisory Committee on Reactor Safeguards
(ACRS)in accordance with 10 CFR 52.23, and the ACRS will report on those portions of the application that concern safety. Upon receipt of the ACRS report and completion of the Nuclear Regulatory Commission
(NRC)staff's SER and EIS, the Director, Office of Nuclear Reactor Regulation, NRC, will propose findings on the following issues: Issues Pursuant to the Atomic Energy Act of 1954, as Amended
(1)Whether the issuance of an ESP will be inimical to the common defense and security or to the health and safety of the public (Safety Issue 1); and
(2)whether, taking into consideration the site criteria contained in 10 CFR part 100, a reactor, or reactors, having characteristics that fall within the parameters for the site, can be constructed and operated without undue risk to the health and safety of the public (Safety Issue 2). Issue Pursuant to the National Environmental Policy Act
(NEPA)of 1969, as Amended Whether, in accordance with the requirements of subpart A of 10 CFR part 51, the ESP should be issued as proposed. The Board will conduct the hearing in accordance with 10 CFR part 2. If the hearing is contested as defined by 10 CFR 2.4, the Board will consider Safety Issues 1 and 2 and the issue pursuant to NEPA set forth above. If the hearing is not a contested proceeding as defined in 10 CFR 2.4, the Board will determine without conducting a de novo review: Whether the application and the record of the proceeding contain sufficient information, and the review of the application by the Commission's staff has been adequate to support a negative finding on Safety Issue 1 above, and an affirmative finding on Safety Issue 2 above, as proposed to be made by the Director, Office of Nuclear Reactor Regulation; and whether the review conducted by the Commission pursuant to NEPA has been adequate. Regardless of whether the proceeding is contested or uncontested, the Board will:
(1)Determine whether the requirements of Section 102(2)(A), (C), and
(E)of NEPA and subpart A of 10 CFR part 51 have been complied with in the proceeding;
(2)independently consider the final balance among the conflicting factors contained in the record of the proceeding with a view to determining the appropriate action to be taken; and
(3)determine, after considering reasonable alternatives, whether the ESP should be issued, denied, or appropriately conditioned to protect environmental values. In accordance with 10 CFR 2.309, any person whose interest may be affected by this proceeding and who desires to participate as a party must file a written petition for leave to intervene and must specify the contentions which the person seeks to have litigated in the hearing. A petition for leave to intervene shall set forth with particularity the interest of the petitioner in the proceeding, and how that interest may be affected by the results of the proceeding. The petition must specifically state:
(1)The name, address and telephone number of the petitioner;
(2)the nature of the petitioner's right under the Act to be made a party to the proceeding;
(3)the nature and extent of the petitioner's property, financial or other interest in the proceeding; and
(4)the possible effect of any decision or order that may be issued in the proceeding on the petitioner's interest. Each contention must contain a specific statement of the issue of law or fact to be raised or controverted. A petitioner must also provide the following information with respect to each contention:
(1)A brief explanation of the basis for the contention;
(2)a concise statement of the alleged facts or expert opinions which support the petitioner's position on the issue and on which the petitioner intends to rely at hearing, together with references to the specific sources and documents on which the petitioner intends to rely to support its position on the issue; and
(3)sufficient information to show that a genuine dispute exists with the applicant/licensee on a material issue of law or fact. This information must include references to specific portions of the application (including the applicant's environmental report and safety report) that the petitioner disputes and the supporting reasons for each dispute, or, if the petitioner believes that the application fails to contain information on a relevant matter as required by law, the identification of each failure and the supporting reasons for the petitioner's belief. For each contention, the petition must demonstrate that the issue raised in the contention is within the scope of this proceeding and that the issue raised in the contention is material to the findings the NRC must make to support the action that is involved in this proceeding. A petitioner who fails to satisfy these requirements with respect to at least one contention will not be permitted to participate as a party. All such petitions must be filed no later than 60 days from the date of publication of this notice in the **Federal Register** . Non-timely filings will not be entertained absent a determination by the Commission, or the Atomic Safety and Licensing Board designated to rule on the petition, that the petition should be granted based upon a balancing of the factors specified in 10 CFR 2.309(c)(i)-(viii). A petition for leave to intervene must be filed by:
(1)First class mail addressed to the Office of the Secretary of the Commission, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001, Attention: Rulemaking and Adjudications Staff;
(2)courier, express mail, and expedited delivery services: Office of the Secretary, Sixteenth Floor, One White Flint North, 11555 Rockville Pike, Rockville, Maryland 20852, Attention: Rulemaking and Adjudications Staff;
(3)E-mail addressed to the Office of the Secretary, U.S. Nuclear Regulatory Commission, *HearingDocket@nrc.gov;* or
(4)facsimile transmission addressed to the Office of the Secretary, U.S. Nuclear Regulatory Commission, Washington, DC, Attention: Rulemakings and Adjudications Staff at
(301)415-1101, verification number is
(301)415-1966. A copy of the request for hearing and petition for leave to intervene should also be sent to the Office of the General Counsel, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001, and it is requested that copies be transmitted either by means of facsimile transmission to
(301)415-3725 or by e-mail to *OGCMailCenter@nrc.gov.* A copy of the request for hearing and petition for leave to intervene should also be sent to the attorneys for the licensee: Bentina C. Terry, Southern Nuclear Operating Company, Inc., Bin B-022, P.O. Box 1295, Birmingham, Alabama 35201-1295, and Stanford M. Blanton, Esq., Balch and Bingham, P.O. Box 306, Birmingham, Alabama 35201. All petitions must be accompanied by proof of service upon all parties to the proceeding or their attorneys of record. A person who is not a party may, in the discretion of the presiding officer, be permitted to make a limited appearance by making an oral or written statement of his position on the issues at any session of the hearing or any prehearing conference within such limits and on such conditions as may be fixed by the presiding officer, but may not otherwise participate in the proceeding. A copy of the SNC ESP application is available for public inspection at the Commission's Public Document Room, located at One White Flint North, 11555 Rockville Pike (first floor), Rockville, Maryland. Publicly available records are accessible from the Agencywide Documents Access and Management System (ADAMS) Public Electronic Reading Room on the Internet at the NRC Web site, *http://www.nrc.gov/reading-rm/adams.html.* The accession number for the application is ML062290248. The accession numbers for the supplements to the application are ML062340398, ML062510149, ML062510145, and ML062580074. Persons who do not have access to ADAMS, or who encounter problems in accessing the documents located in ADAMS, should contact the NRC Public Document Room staff by telephone at 1-800-397-4209,
(301)415-4737 or by e-mail to *pdr@nrc.gov.* The application is also available to local residents at the Burke County Library in Waynesboro, Georgia, and is available on the NRC Web page at *http://www.nrc.gov/reactors/new-licensing/esp.html.* Dated at Rockville, Maryland this 5th day of October, 2006. For the Nuclear Regulatory Commission. Annette L. Vietti-Cook, Secretary of the Commission. [FR Doc. E6-16868 Filed 10-11-06; 8:45 am] BILLING CODE 7590-01-P NUCLEAR REGULATORY COMMISSION Advisory Committee On Nuclear Waste; Procedures for Meetings Background This notice describes procedures to be followed with respect to meetings conducted pursuant to the Federal Advisory Committee Act
(FACA)by the Nuclear Regulatory Commission's (NRC's) Advisory Committee on Nuclear Waste (ACNW). These procedures are set forth so that they may be incorporated by reference in future notices for individual meetings. The ACNW meetings are conducted in accordance with FACA. The ACNW advises the NRC on technical issues related to nuclear materials and waste management. The bases of ACNW reviews include 10 CFR parts 20, 60, 61, 63, 70, 71, and 72 and other applicable regulations and legislative mandates, such as the Nuclear Waste Policy Act as amended, the Low-Level Radioactive Waste Policy Act as amended, and the Uranium Mill Tailings Radiation Control Act, as amended. The Committee's reports become a part of the public record. The ACNW meetings are normally open to the public and provide opportunities for oral or written statements from members of the public to be considered as part of the Committee's information gathering process. The meetings are not adjudicatory hearings such as those conducted by the NRC's Atomic Safety and Licensing Board Panel as part of the Commission's licensing process. ACNW meetings are conducted in accordance with the Federal Advisory Committee Act. General Rules Regarding ACNW Meetings An agenda is published in the **Federal Register** for each full Committee meeting and is available on the Internet at *http://www.nrc.gov/ACRSACNW.* There may be a need to make adjustments to the agenda to facilitate the conduct of the meeting. The Chairman of the Committee is empowered to make such adjustments to conduct the meeting in a manner that, in his judgment, will facilitate the orderly conduct of business, including making provisions to continue the discussion of matters not completed on the scheduled day during another meeting. Persons planning to attend a meeting may contact the Designated Federal Official
(DFO)specified in the individual **Federal Register** Notice prior to the meeting to be advised of any changes to the agenda that may have occurred. The following requirements shall apply to public participation in ACNW meetings:
(a)Persons who plan to submit written comments at the meeting should provide 35 copies to the DFO at the beginning of the meeting. Persons who cannot attend the meeting but wish to submit written comments regarding the agenda items may do so by sending a readily reproducible copy addressed to the DFO specified in the **Federal Register** Notice, care of the Advisory Committee on Nuclear Waste, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001. Comments should be in the possession of the DFO prior to the meeting to allow time for reproduction and distribution. Comments should be limited to topics being considered by the Committee.
(b)Persons desiring to make oral statements at the meeting should make a request to do so to the DFO. If possible, the request should be made five days before the meeting, identifying the topic(s) to be discussed and the amount of time needed for presentation so that orderly arrangements can be made. The Committee will hear oral statements on topics being reviewed at an appropriate time during the meeting as scheduled by the Chairman.
(c)Information regarding topics to be discussed, changes to the agenda, whether the meeting has been canceled or rescheduled, and the time allotted to present oral statements can be obtained by contacting the DFO.
(d)The use of still, motion picture, and television cameras may be limited to selected portions of the meeting as determined by the Chairman and subject to the condition that the use of such equipment will not interfere with the conduct of the meeting. The DFO will have to be notified prior to the meeting and will authorize the installation or use of such equipment after consultation with the Chairman. The use of such equipment will be restricted as is necessary to protect proprietary or privileged information that may be present in the meeting room. Electronic recordings will be permitted only during those portions of the meeting that are open to the public.
(e)A transcript is kept for certain open portions of the meeting and will be available in the NRC Public Document Room (PDR), One White Flint North, Room O-1F21, 11555 Rockville Pike, Rockville, MD 20852-2738. A copy of the certified minutes of the meeting will be available at the same location up to three months following the meeting. Copies may be obtained upon payment of appropriate reproduction charges. ACNW meeting agenda, transcripts, and letter reports are available through the NRC Public Document Room at * pdr@nrc.gov,* by calling the PDR at 1-800-394-4209, or from the Publicly Available Records System
(PARS)component of NRC's document system (ADAMS) which is accessible from the NRC Web site at *http://www.nrc.gov/reading-rm/adams.html* or *http://www.nrc.gov/reading-rm/doc-collections/* (ACNW schedules and agendas).
(f)Video teleconferencing service is available for observing open sessions of ACNW meetings. Those wishing to use this service for observing ACNW meetings should contact Mr. Theron Brown, ACNW Audio Visual Technician, (301-415-8066) between 7:30 a.m. and 3:45 p.m. Eastern Time at least 10 days before the meeting to ensure the availability of this service. Individuals or organizations requesting this service will be responsible for telephone line charges and for providing the equipment and facilities that they use to establish the video teleconferencing link. The availability of video teleconferencing services is not guaranteed. ACNW Working Group Meetings From time to time the ACNW may sponsor an in-depth meeting on a specific technical issue to understand staff expectations and review work in progress. Such meetings are called Working Group meetings. These Working Group meetings will also be conducted in accordance with the procedures noted above for the ACNW meeting, as appropriate. When Working Group meetings are held at locations other than at NRC facilities, reproduction facilities may not be available at a reasonable cost. Accordingly, 50 copies of the materials to be used during the meeting should be provided for distribution at such meetings. ACNW Ad Hoc Subcommittee Meetings In accordance with the revised FACA, the agency is no longer required to apply the FACA requirements to meetings conducted by the Subcommittees of the NRC Advisory Committees, if the Subcommittee's recommendations would be independently reviewed by its parent Committee. The ACNW, however, chose to conduct its Subcommittee meetings in accordance with the procedures noted above for ACNW full Committee meetings, as appropriate, to facilitate public participation, and to provide a forum for stakeholders to express their views on regulatory matters being considered by the ACNW. When Subcommittee meetings are held at locations other than at NRC facilities, reproduction facilities may not be available at a reasonable cost. Accordingly, 50 copies of the materials to be used during the meeting should be provided for distribution at such meetings. Special Provisions When Proprietary Sessions are To be Held If it is necessary to hold closed sessions for the purpose of discussing matters involving proprietary information, persons with agreements permitting access to such information may attend those portions of the ACNW meetings where this material is being discussed upon confirmation that such agreements are effective and related to the material being discussed. The DFO should be informed of such an agreement at least five working days prior to the meeting so that it can be confirmed, and a determination can be made regarding the applicability of the agreement to the material that will be discussed during the meeting. The minimum information provided should include information regarding the date of the agreement, the scope of material included in the agreement, the project or projects involved, and the names and titles of the persons signing the agreement. Additional information may be requested to identify the specific agreement involved. A copy of the executed agreement should be provided to the DFO prior to the beginning of the meeting for admittance to the closed session. Dated: October 5, 2006. Andrew L. Bates, Advisory Committee Management Officer. [FR Doc. E6-16870 Filed 10-11-06; 8:45 am] BILLING CODE 7590-01-P NUCLEAR REGULATORY COMMISSION Abnormal Occurrence Reports: Implementation of Section 208 of the Energy Reorganization Act of 1974; Revised Policy Statement AGENCY: Nuclear Regulatory Commission. ACTION: Issuance of Revised Policy Statement on Abnormal Occurrence Criteria. SUMMARY: This policy statement presents the revised abnormal occurrence
(AO)criteria the Commission uses for selecting AO's for the annual report to Congress as required by Section 208 of the Energy Reorganization Act of 1974 (Pub. L. 93-438). Section 208 of the act defines an AO as an unscheduled incident or event which the U.S. Nuclear Regulatory Commission
(NRC)determines to be significant from the standpoint of public health or safety. The AO criteria have been amended to ensure that the criteria are consistent with the NRC's Strategic Plan for Fiscal Year
(FY)2004-2009 and the NRC rulemaking on Title 10, Part 35, of the Code of Federal Regulations (10 CFR Part 35), “Medical Use of Byproduct Material.” Additionally, risk-informed criteria based on the NRC Accident Sequence Precursor
(ASP)Program and Reactor Oversight Process
(ROP)have been added for selecting abnormal occurrences at commercial nuclear power plants for the report to Congress. The ASP program assesses the risk significance of issues and events. The ROP is a risk-informed, tiered approach to ensuring the safety of nuclear power plants. The ROP is a process for collecting information about licensee performance, assessing the safety significance of the information, taking appropriate actions, and ensuring that licensees correct deficiencies. Some sections of the AO criteria have been restructured. The restructuring accommodates the changes in the criteria and minimizes duplication. DATES: *Effective Date:* All revisions included in this publication are complete and accurate as of September 21, 2006. FOR FURTHER INFORMATION CONTACT: Sheryl A. Burrows, telephone:
(301)415-6086; e-mail: *SAB2@nrc.gov* ; USNRC, Office of Nuclear Regulatory Research, Mail Stop T9-F31, Washington, DC 20555-0001. SUPPLEMENTARY INFORMATION: I. Background Section 208 of the Energy Reorganization Act of 1974 (Pub. L. 93-438) defines an abnormal occurrence
(AO)as an unscheduled incident or event which the U.S. Nuclear Regulatory Commission
(NRC)determines to be significant from the standpoint of public health or safety. The Federal Reports Elimination and Sunset Act of 1995 (Public Law 104-66) requires that AOs be reported to Congress annually. Section 208 requires that the discussion of each event include the date and place, the nature and probable consequences, the cause or causes, and the action taken to prevent recurrence. The Commission must also widely disseminate the AO report to the public within 15 days of sending it to Congress. Abnormal Occurrence Reporting The AO policy statement has been developed to comply with Section 208 of the Energy Reorganization Act of 1974, as amended. The intent of the act is to keep Congress and the public informed of unscheduled incidents or events which the Commission considers significant from the standpoint of public health and safety. The policy reflects a range of health and safety concerns and applies to incidents and events involving a single individual, as well as those having overall impact on the general public. The AO criteria results in reports to Congress only for those events considered significant from the standpoint of public health and safety. Licensee Reports This general policy statement will not change the reporting requirements for NRC licensees in Commission regulations, license conditions, or technical specifications (TS). NRC licensees will continue to submit required reports on a wide range of events, including instrument malfunctions and deviations from normal operating procedures that are not significant from the standpoint of the public health and safety but provide data useful to the Commission in monitoring operating trends at licensed facilities and in comparing the actual performance of the facilities with their design and/or licensing basis. Applicability Implementation of Section 208 of the Energy Reorganization Act of 1974, as amended, “Abnormal Occurrence Reports”, involves the conduct of Commission business and does not impose requirements on licensees or certified facilities. The reports cover certain unscheduled incidents or events related to the manufacture, construction, or operation of a facility or conduct of an activity subject to the requirements of Parts 20, 30 through 36, 39, 40, 50, 61, 70, 71, 72 or 76 of Chapter I of Title 10 of the Code of Federal Regulations (10 CFR). Agreement States provide information to the NRC on incidents and events involving applicable nuclear materials in their States. Events reported by Agreements States that reach the threshold for reporting as AOs are also published in the “Report to Congress on Abnormal Occurrences.” Abnormal Occurrence General Statement of Policy The Commission will apply the following policy in determining whether an incident or event at a facility or involving an activity that is licensed or otherwise regulated by the Commission is an AO. An incident or event is considered an AO if it involves a major reduction in the protection of public health or safety. The incident or event has a moderate or severe impact on public health or safety and could include, but need not be limited to, the following:
(1)Moderate exposure to, or release of, radioactive material licensed or otherwise regulated by the Commission,
(2)Major degradation of essential safety-related equipment, or
(3)Major deficiencies in the design, construction, or use of management controls for facilities or radioactive material. The criteria for determining whether to consider an incident or event for reporting as an AO are set forth in Appendix A of this policy statement. Commission Dissemination of AO Information The Commission widely disseminates the AO reports to the public. The Commission submits an annual report to Congress on AOs at or associated with any facility or activity which is licensed or otherwise regulated pursuant to the Atomic Energy Act of 1954, as amended, or the Energy Reorganization Act of 1974, as amended. This report gives the date, place, nature, and probable consequences of each AO, the cause or causes of each AO, and any actions taken to prevent recurrence. Appendix A: Abnormal Occurrence Criteria The following criteria are used to determine whether to consider events for reporting as AOs: I. For All Licensees A. Human Exposure to Radiation from Licensed Material 1. Any unintended radiation exposure to an adult (any individual 18 years of age or older) resulting in an annual total effective dose equivalent
(TEDE)of 250 mSv (25 rem) or more; or an annual sum of the deep dose equivalent (external dose) and committed dose equivalent (intake of radioactive material) to any individual organ other than the lens of the eye, the bone marrow, and the gonads of 2,500 mSv (250 rem) or more; or an annual dose equivalent to the lens of the eye of 1 Sv (100 rem) or more; or an annual sum of the deep dose equivalent and committed dose equivalent to the bone marrow of 1 Sv (100 rem) or more; or a committed dose equivalent to the gonads of 2,500 mSv (250 rem) or more; or an annual shallow-dose equivalent to the skin or extremities of 2,500 mSv (250 rem) or more. 2. Any unintended radiation exposure to any minor (an individual less than 18 years of age) resulting in an annual TEDE of 50 mSv (5 rem) or more, or to an embryo/fetus resulting in a dose equivalent of 50 mSv (5 rem) or more. 3. Any radiation exposure that has resulted in unintended permanent functional damage to an organ or a physiological system as determined by a physician. B. Discharge or dispersal of radioactive material from its intended place of confinement which results in the release of radioactive material to an unrestricted area in concentrations which, if averaged over a period of 24 hours, exceeds 5,000 times the values specified in Table 2 of Appendix B to 10 CFR Part 20, unless the licensee has demonstrated compliance with § 20.1301 using § 20.1302(b)(1) or § 20.1302(b)(2)(ii). This criterion does not apply to transportation events. C. Theft, Diversion, or Loss of Licensed Material, or Sabotage or Security Breach 1 2 1 Information pertaining to certain incidents may be either classified or under consideration for classification because of national security implications. Classified information will be withheld when formally reporting these incidents in accordance with Section 208 of the ERA of 1974, as amended. Any classified details regarding these incidents would be available to the Congress, upon request, under appropriate security arrangements. 2 Due to increased terrorist activities worldwide, the AO report would not disclose specific classified information and sensitive information, the details of which are considered useful to a potential terrorist. Classified information is defined as information that would harm national security if disclosed in an unauthorized manner. 1. Any unrecovered lost, stolen, or abandoned sources that exceed the values listed in Appendix P to Part 110, “High Risk Radioactive Material, Category 2.” Excluded from reporting under this criterion are those events involving sources that are lost, stolen, or abandoned under the following conditions: sources abandoned in accordance with the requirements of 10 CFR 39.77(c); sealed sources contained in labeled, rugged source housings; recovered sources with sufficient indication that doses in excess of the reporting thresholds specified in AO criteria I.A.1 and I.A.2 did not occur while the source was missing; and unrecoverable sources (sources that have been lost and for which a reasonable attempt at recovery has been made without success) lost under such conditions that doses in excess of the reporting thresholds specified in AO criteria I.A.1 and I.A.2 are not known to have occurred and the agency has determined that the risk of theft or diversion is acceptably low. 2. A substantiated 3 case of actual theft or diversion of licensed, risk-significant radioactive sources or a formula quantity 4 of special nuclear material; or act that results in radiological sabotage. 5 3 “Substantiated” means a situation where an indication of loss, theft, or unlawful diversion such as: an allegation of diversion, report of lost or stolen material, statistical processing difference, or other indication of loss of material control or accountability cannot be refuted following an investigation; and requires further action on the part of the Agency or other proper authorities. 4 A formula quantity of special nuclear material is defined in 10 CFR 70.4. 5 Radiological sabotage is defined in 10 CFR 73.2. 3. Any substantiated 3 loss of a formula quantity 4 of special nuclear material or a substantiated 3 inventory discrepancy of a formula quantity 4 of special nuclear material that is judged to be caused by theft or diversion or by a substantial breakdown 6 of the accountability system. 6 A substantial breakdown is defined as a red finding in the security inspection program, or any plant or facility determined to have overall unacceptable performance, or in a shutdown condition (inimical to the effective functioning of the nation's critical infrastructure) as a result of significant performance problems and/or operational events. 4. Any substantial breakdown 6 of physical security or material control (i.e., access control containment or accountability systems) that significantly weakened the protection against theft, diversion, or sabotage. 5. Any significant unauthorized disclosures (loss, theft, and/or deliberate) of classified information that harms national security or safeguards information that harms the public health and safety. D. Initiation of High-Level NRC Team Inspections 7 7 Initiation of any Incident Investigation Teams, as described in NRC Management Directive
(MD)8.3, “NRC Incident Investigation Program,” or initiation of any Accident Review Groups, as described in MD 8.9, “Accident Investigation.” II. For Commercial Nuclear Power Plant Licensees A. Malfunction of Facility, Structures, or Equipment 1. Exceeding a safety limit of license technical specification
(TS)[10 CFR 50.36(c)]. 2. Serious degradation of fuel integrity, primary coolant pressure boundary, or primary containment boundary. 3. Loss of plant capability to perform essential safety functions so that a release of radioactive materials which could result in exceeding the dose limits of 10 CFR Part 100 or 5 times the dose limits of 10 CFR Part 50, Appendix A, General Design Criterion
(GDC)19, could occur from a postulated transient or accident (e.g., loss of emergency core cooling system, loss of control rod system). B. Design or Safety Analysis Deficiency, Personnel Error, or Procedural or Administrative Inadequacy 1. Discovery of a major condition not specifically considered in the safety analysis report
(SAR)or TS that requires immediate remedial action. 2. Personnel error or procedural deficiencies that result in loss of plant capability to perform essential safety functions so that a release of radioactive materials which could result in exceeding the dose limits of 10 CFR Part 100 or 5 times the dose limits of 10 CFR Part 50, Appendix A, GDC 19, could occur from a postulated transient or accident (e.g., loss of emergency core cooling system, loss of control rod drive mechanism). C. Any reactor events or conditions that are determined to be of high safety significance. 8 8 The NRC ROP uses four colors to describe the safety significance of licensee performance. As defined in NRC Management Directive 8.13, “Reactor Oversight Process,” green is used for very low safety significance, white is used for low to moderate safety significance, yellow is used for substantial safety significance, and red is used for high safety significance. Reactor conditions or performance indicators evaluated to be red are considered Abnormal Occurrences. Additionally, Criterion II.C also includes any events or conditions evaluated by the NRC ASP program to have a conditional core damage probability
(CCDP)or change in core damage probability
(CDP)of greater than 1×10 −3 . D. Any operating reactor plants that are determined to have overall unacceptable performance or that are in a shutdown condition as a result of significant performance problems and/or operational event(s). 9 9 Any plants assessed by the ROP to be in the unacceptable performance column, as described in NRC Inspection Manual Chapter 0305, “Operating Reactor Assessment Program.” This assessment of safety performance is based on the number and significance of NRC inspection findings and licensee performance indicators. III. Events at Facilities Other Than Nuclear Power Plants and All Transportation Events A. Events Involving Design, Analysis, Construction, Testing, Operation, Transport, Use, or Disposal of Licensed Facilities or Regulated Materials 1. An accidental criticality [10 CFR 70.52(a)]. 2. A major deficiency in design, construction, control, or operation having significant safety implications that require immediate remedial action. 3. A serious safety-significant deficiency in management or procedural controls. 4. A series of events (in which the individual events are not of major importance), recurring incidents, or incidents with implications for similar facilities (generic incidents) that raise a major safety concern. B. For Fuel Cycle Facilities 1. Absence or failure of all safety-related or security-related controls (engineered and human) for an NRC-regulated lethal hazard (radiological or chemical) while the lethal hazard is present. 2. An NRC-ordered safety-related or security-related immediate remedial action. C. For Medical Licensees A medical event that: 1. Results in a dose that is a. Equal to or greater than 1Gy (100 rad) to a major portion of the bone marrow or to the lens of the eye; or equal or greater than 2.5 Gy (250 rad) to the gonads; or b. Equal to or greater than 10 Gy (1,000 rad) to any other organ or tissue; and 2. Represents either a. A dose or dosage that is at least 50 percent greater than that prescribed, or b. A prescribed dose or dosage that
(i)Uses the wrong radiopharmaceutical or unsealed byproduct material; or
(ii)Is delivered by the wrong route of administration; or
(iii)Is delivered to the wrong treatment site; or
(iv)Is delivered by the wrong treatment mode; or
(v)Is from a leaking source or sources; or
(vi)Is delivered to the wrong individual or human research subject. IV. Other Events of Interest The Commission may determine that events other than AOs may be of interest to Congress and the public and should be included in an appendix to the AO report as “Other Events of Interest.” Such events may include, but are not necessarily limited to, events that do not meet the AO criteria but that have been perceived by Congress or the public to be of high health and safety significance, have received significant media coverage, or have caused the NRC to increase its attention to or oversight of a program area, or a group of similar events that have resulted in licensed materials entering the public domain in an uncontrolled manner. 5 U.S.C. 552(a)] Dated at Rockville, Maryland, this 5th day of October 2006. For the U.S. Nuclear Regulatory Commission. Annette L. Vietti-Cook, Secretary of the Commission. [FR Doc. E6-16871 Filed 10-11-06; 8:45 am] BILLING CODE 7590-01-P NUCLEAR REGULATORY COMMISSION [NUREG-1852] “Demonstrating the Feasibility and Reliability of Operator Manual Actions in Response to Fire, Draft Report for Comment” AGENCY: Nuclear Regulatory Commission. ACTION: Notice of availability of NUREG-1852, “Demonstrating the Feasibility and Reliability of Operator Manual Actions in Response to Fire, Draft Report For Comment,” and request for public comment. SUMMARY: The Nuclear Regulatory Commission
(NRC)is announcing the availability of and is seeking comments on NUREG-1852, “Demonstrating the Feasibility and Reliability of Operator Manual Actions in Response to Fire, Draft Report For Comment.” DATES: Comments on this document should be submitted by November 6, 2006. Comments received after that date will be considered to the extent practical. To ensure efficient and complete comment resolution, comments should include references to the section, page, and line numbers of the document to which the comment applies, if possible. ADDRESSES: Members of the public are invited and encouraged to submit written comments to Michael Lesar, Chief, Rulemaking, Directives, and Editing Branch, Office of Administration, Mail Stop T6-D59, U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001. Hand-deliver comments attention to Michael Lesar, 11545 Rockville Pike, Rockville, MD, between 7:30 a.m. and 4:15 p.m. on Federal workdays. Comments may also be sent electronically to *NRCREP@nrc.gov.* This document, NUREG-1852, is available at the Agencywide Documents Access and Management System (ADAMS) Public Electronic Reading Room on the Internet at the NRC Web site at *http://www.nrc.gov/reading-rm/adams.html* under Accession No. ML062350285; on the NRC Web site *http://www.nrc.gov/reading-rm/doc-collections/nuregs/docs4comment.html;* and at the NRC Public Document Room, 11555 Rockville Pike, Rockville, MD. The PDR's mailing address is USNRC PDR, Washington, DC 20555; telephone
(301)415-4737 or
(800)397-4205; fax
(301)415-3548; e-mail *PDR@NRC.GOV.* FOR FURTHER INFORMATION, CONTACT: Erasmia Lois, Human Factors and Reliability Branch, Office of Nuclear Regulatory Research, telephone
(301)415-6560, e-mail *exl1@nrc.gov.* SUPPLEMENTARY INFORMATION: NUREG-1852, “Demonstrating the Feasibility and Reliability of Operator Manual Actions in Response to Fire, Draft Report For Comment,” September 2006 This NUREG provides criteria that licensees may use to demonstrate the feasibility and reliability of operator manual actions in response to fire. This NUREG does not clarify circumstances under which licensees may use operator manual actions in lieu of fire barriers. Licensees should refer to 10 CFR 50.48 and their license bases to determine applicable regulatory requirements with respect to operator manual actions in fire protection. Additional guidance on regulatory requirements pertaining to operator manual actions are provided in Regulatory Issue Summary 2006-10, “Regulatory Expectations with Appendix R, Paragraph III.G.2 Operator Manual Actions,” dated June 2006. Section 9.5.1, “Fire Protection Program,” of the Standard Review Plan, NUREG-0800, will be revised to incorporate the guidance provided by RIS 2006-10 and NUREG-1852. The NRC is seeking public comment in order to receive feedback from the widest range of interested parties and to ensure that all information relevant to developing this document is available to the NRC staff. This document is issued for comment only and is not intended for interim use. The NRC will review public comments received on the document, incorporate suggested changes as necessary, and issue the final NUREG-1852 for use. Dated at Rockville, MD, this 11th day of September, 2006. For the Nuclear Regulatory Commission. Farouk Eltawila, Director, Division of Risk Assessment and Special Projects, Office of Nuclear Regulatory Research. [FR Doc. E6-16872 Filed 10-11-06; 8:45 am] BILLING CODE 7590-01-P SECURITIES AND EXCHANGE COMMISSION Proposed Collections; Comment Request Upon written request; copies available from: Securities and Exchange Commission, Office of Filings and Information Services, Washington, DC 20549. *Extensions:* Rule 12d1-3, OMB Control No. 3235-0109, SEC File No. 270-116. Schedule 13E-4F, OMB Control No. 3235-0375, SEC File No. 270-340. Form F-X, OMB Control No. 3235-0379, SEC File No. 270-336. Notice is hereby given that pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 *et seq.* ) the Securities and Exchange Commission (“Commission”) is soliciting comments on the collection of information summarized below. The Commission plans to submit this existing collection of information to the Office of Management and Budget for approval. Rule 12d1-3 (17 CFR 240.12d1-3) requires a certification that a security has been approved by an exchange for listing and registration pursuant to Section 12(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78 *l* (d)) to be filed with the Commission. The information required under Rule 12d1-3 must be filed with the Commission and is publicly available. We estimate that it takes one-half hour per response to provide the information required under Rule 12d1-3 and that the information is filed by 688 respondents for a total annual reporting burden of 344 hours (.5 hours per response × 688 responses). Schedule 13E-4F (17 CFR 240.13e-102) may be used by any foreign private issuer if:
(1)The issuer is incorporated or organized under the laws of Canada;
(2)the issuer is making a cash tender or exchange offer for the issuer's own securities; and
(3)less than 40 percent of the class of such issuer's securities outstanding that is the subject of the tender offer is held by U.S. holders. The information collected must be filed with the Commission and is publicly available. We estimate that it takes 2 hours per response to prepare Schedule 13E-4F and that the information is filed by 3 respondents for a total annual reporting burden of 6 hours (2 hours per response × 3 responses). Form F-X (17 CFR 239.42) is used to appoint an agent for service of process by Canadian issuers registering securities on Form F-7, F-8, F-9 or F-10 or filing periodic reports on Form 40-F under the Exchange Act of 1934 (15 U.S.C. 78a *et seq.* ). The information collected must be filed with the Commission and is publicly available. We estimate that it takes 2 hours per response to prepare Form F-X and that the information is filed by 129 respondents for a total annual reporting burden of 258 hours (2 hours per response × 129 responses). Written comments are invited on:
(a)Whether these proposed collections of information are necessary for the performance of the functions of the agency, including whether the information will have practical utility;
(b)the accuracy of the agency's estimate of the burden imposed by the collections of information;
(c)ways to enhance the quality, utility, and clarity of the information collected; and
(d)ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology. Consideration will be given to comments and suggestions submitted in writing within 60 days of this publication. Please direct your written comment to R. Corey Booth, Director/Chief Information Officer, Securities and Exchange Commission, C/O Shirley Martinson, 6432 General Green Way, Alexandria, Virginia 22312; or send an e-mail to: *PRA_Mailbox@sec.gov.* Dated: September 28, 2006. J. Lynn Taylor, Assistant Secretary. [FR Doc. E6-16849 Filed 10-11-06; 8:45 am] BILLING CODE 8011-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-54565; File No. SR-Amex-2006-84] Self-Regulatory Organizations; American Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to a Suspension of Transaction Charges for Specialist Orders in the Nasdaq-100 Tracking Stocksup®
(QQQQ)October 3, 2006. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”), 1 and Rule 19b-4 thereunder, 2 notice is hereby given that on September 8, 2006, the American Stock Exchange LLC (“Amex” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I, II and III below, which Items have been prepared by the Amex. The Amex has designated this proposal as one establishing or changing a member due, fee, or other charge imposed by a self-regulatory organization pursuant to Section 19(b)(3)(A)(ii) of the Act 3 and Rule 19b-4(f)(2) thereunder, 4 which renders the proposal effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 15 U.S.C. 78s(b)(3)(A)(ii). 4 17 CFR 240.19b-4(f)(2). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend the Amex Exchange Traded Funds and Trust Issued Receipts Fee Schedule to suspend transaction charges for specialist orders in connection with the trading of the Nasdaq-100 Index Tracking Stock® (Symbol: QQQQ) from September 8, 2006 through December 31, 2006. The text of the proposed rule change is available on the Amex's Web site at *http://www.amex.com,* at the principal office of the Exchange, and at the Commission's Public Reference Room. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Amex included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposal. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to suspend transaction charges for specialist orders in the Nasdaq-100 Index Tracking Stocksup®
(QQQQ)from September 8, 2006 through December 31, 2006. Previously, the Amex suspended the transaction charges of specialist orders in connection with the QQQQ through August 31, 2006. 5 5 *See* Securities Exchange Act Release No. 54227 (July 27, 2006), 71 FR 44055 (August 3, 2006) (SR-Amex-2006-65). Currently, specialist orders are charged $0.0034 ($0.34 per 100 shares), capped at $300 per trade (88,235 shares). Effective December 1, 2004, the Nasdaq-100 Index Tracking Stock® (formerly “QQQ”) transferred its listing from the Amex to the Nasdaq Stock Market, Inc. It now trades on Nasdaq under the symbol QQQQ. After the transfer, the Amex began trading QQQQ on an unlisted trading privileges basis. The Exchange believes that the proposed suspension of transaction fees for specialist orders in connection with the QQQQ is consistent with Section 6(b)(4) of the Act. 6 Specifically, the Exchange believes that the proposal provides for an equitable allocation of reasonable fees among Exchange members largely based on the fact that a specialist has greater obligations than other members and is also subject to other Exchange fees, in addition to transaction fees. 6 15 U.S.C. 78f(b)(4). Section 6(b)(4) of the Act requires that the rules of a national securities exchange provide for the equitable allocation of reasonable dues, fees, and other charges among its members and issuers and other persons using its facilities. For example, specialists are subject to a variety of Exchange fees other than transaction charges; the Exchange imposes floor fees solely on specialists such as a floor clerk fee, a floor facility fee, a post fee, and registration fee. 7 In addition, for those members on the floor of the Exchange, a technology fee and membership fees are also charged by the Exchange. 8 Certain market participants, such as customers, non-member broker-dealers, market-makers and member broker-dealers are not subject to the majority of these fees. 7 The floor clerk, floor facility, post and registration fees on an annual basis are $900, $2,400, $1,000 and $800, respectively. 8 A technology fee of $6,000 per year is assessed on all specialists and other floor participants at the Exchange. Annual membership dues of $1,500 must be paid by all members while annual membership fees are payable depending on the type of membership and circumstances. Non-members are not subject to these fees. In addition, specialists have certain obligations under Exchange rules as well as the Act that do not exist for other market participants. For example, pursuant to Amex Rule 170, a specialist must maintain a fair and orderly market in his or her assigned securities. Other members of the Exchange as well as non-member market participants do not have this obligation. To adequately “make a market” in assigned securities, a specialist unit must be sufficiently staffed 9 and have adequate technology resources to handle the volume of orders (especially in the QQQQ) that are sent to the Exchange. As a result, the Exchange believes that the proposed suspension of transaction charges for specialist orders in the QQQQ is reasonable and equitable given the obligations that specialists must adhere to in making markets. 9 *See* Securities Exchange Act Release No. 53386 (February 28, 2006), 71 FR 11250 (March 6, 2006) (SR-Amex-2005-110). Further, the Exchange submits that the fee suspension will provide greater incentive to the specialist to continue to provide market liquidity, rendering the Exchange an attractive venue for market participants to execute orders. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act 10 in general, and furthers the objectives of Section 6(b)(4) 11 in particular, in that it is designed to provide for the equitable allocation of reasonable dues, fees, and other charges among its members and issuers and other persons using facilities. 10 15 U.S.C. 78f(b). 11 15 U.S.C. 78f(b)(4). B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange believes that the proposed rule change does not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were solicited or received with respect to the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing proposed rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act, 12 and paragraph (f)(2) of Rule 19b-4 thereunder 13 because it establishes or changes a member due, fee, or other charge. At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. 12 15 U.S.C. 78s(b)(3)(A)(ii). 13 17 CFR 240.19b-4(f)(2). IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov.* Please include File Number SR-Amex-2006-84 on the subject line. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-Amex-2006-84. 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 Amex. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-Amex-2006-84 and should be submitted on or before November 2, 2006. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 14 J. Lynn Taylor, Assistant Secretary. 14 17 CFR 200.30-3(a)(12). [FR Doc. E6-16848 Filed 10-11-06; 8:45 am] BILLING CODE 8011-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-54563; File No. SR-CBOE-2006-78] Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to the Exchange and Regulatory Bulletin Annual Subscription Fee October 3, 2006. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934, (“Act”), 1 and Rule 19b-4 thereunder, 2 notice is hereby given that on September 22, 2006, the Chicago Board Options Exchange, Incorporated (“CBOE” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I, and II below, which Items have been prepared by the Exchange. CBOE has designated this proposal as one establishing or changing a due, fee, or other charge imposed by CBOE under Section 19(b)(3)(A)(ii) of the Act 3 and Rule 19b-4(f)(2) thereunder, 4 which renders the proposal effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested parties. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 15 U.S.C. 78s(b)(3)(A)(ii). 4 17 CFR 240.19b-4(f)(2). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend its Fees Schedule to amend the Exchange and Regulatory Bulletin annual subscription fee. The text of the proposed rule change is set forth below. Proposed new language is *italicized;* proposed deletions are in [brackets]. CHICAGO BOARD OPTIONS EXCHANGE, INC. FEES SCHEDULE 1.-4. Unchanged. Footnotes: (1)-(16) Unchanged. 5.-14. Unchanged. 15. *MISCELLANEOUS:* Periodic license or royalty fees for DPM-traded products—CBOE costs passed-through to DPM
(12)Member Death Benefit (calculated @ $50,000 divided by number of members assessed) Trading Floor Printer Maintenance (Per Month) $75 Exchange Bulletin Subscription (Annual) $200 [paper] *per hard copy subscription* ; no charge for electronic delivery Late Payment Penalty (Assessed to balances over 30 days old, per month, compounded) prime rate Market Maker Failure to Change Appointment or Failure to meet in-person Trading Requirements (allowed 1 warning letter before fee) $250 per quarter ABIL Brokerage Billing $.005 per contract, minimum $50, maximum $200 per month ORS Analysis, Floor Efficiency Project or Market Penetration Reports $100 per month Ad Hoc Information Services Requests Production Costs DPM requests for post modifications/equipment CBOE costs passed-through Crowd Space Dispute Resolution Hearing Fee (per hearing, per member) * $1,000 * The Crowd Space Dispute Resolution Hearing Fee is $1,000 per hearing for each party to the dispute and will escalate under certain circumstances pursuant to CBOE Rule 24.21(e). After the hearing is held and all rights of appeal are exhausted, the prevailing party in dispute shall obtain a refund of the Hearing Fee from the Exchange. Remainder of Fees Schedule—Unchanged. 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 CBOE has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, Proposed Rule Change 1. Purpose The Exchange states that the Exchange and Regulatory Bulletin (“Bulletin”) is a weekly publication of the Exchange that contains Exchange notices of a regulatory, administrative, operational and informational nature. Currently, the Exchange provides each member with either an e-mail or a hard copy subscription to the Bulletin free of charge. Non-members, and members who wish to receive additional hard copy subscriptions, are charged $200 annually per hard copy subscription. There is no charge for e-mail delivery of the Bulletin. In order to encourage even greater use of electronic delivery, the Exchange proposes to eliminate the complimentary hard copy subscription for members and assess a fee of $200 per year for each hard copy subscription to the Bulletin. The Exchange intends to implement the revised fee effective October 1, 2006. 2. Statutory Basis. The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act 5 in general, and furthers the objectives of Section 6(b)(4) of the Act 6 in particular, in that it is an equitable allocation of reasonable dues, fees, and other charges among Exchange members and other persons using its facilities. 5 15 U.S.C. 78f(b). 6 15 U.S.C. 78f(b)(4). B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange believes that the proposed rule change will not impose any burden on competition that is not necessary or appropriate in furtherance of purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others No written comments were solicited or received with respect to the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing proposed rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act 7 and subparagraph (f)(2) of Rule 19b-4 8 thereunder, because it establishes or changes a due, fee, or other charges imposed by the Exchange. At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. 7 15 U.S.C. 78s(b)(3)(A)(ii). 8 17 CFR 240.19b-4(f)(2). IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml)* ; or • Send an e-mail to *rule-comments@sec.gov.* Please include File Number SR-CBOE-2006-78 on the subject line. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-CBOE-2006-78. 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 the CBOE. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-CBOE-2006-78 and should be submitted on or before November 2, 2006. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 9 9 17 CFR 200.30-3(a)(12). Nancy M. Morris, Secretary. [FR Doc. E6-16853 Filed 10-11-06; 8:45 am] BILLING CODE 8011-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-54559; File No. SR-NYSE-2006-63] Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Rule 19 (Locking or Crossing Protected Quotations in NMS Stocks) October 2, 2006. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”), 1 and Rule 19b-4 thereunder, 2 notice is hereby given that on September 28, 2006, the New York Stock Exchange LLC (“NYSE” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. The NYSE has filed the proposed rule change, pursuant to Section 19(b)(3)(A)(iii) 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)(iii). 4 17 CFR 240.19b-4(f)(6). 5 The Exchange requested the Commission to waive the five-day pre-filing notice requirement and the 30-day operative delay, as specified in Rule 19b(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 The Exchange is proposing to adopt Exchange Rule 19 in order to require its members to reasonably avoid displaying quotations that lock or cross any protected quotations in a Regulation NMS (“NMS”) stock or any quotation, protected or not in an NMS stock that is disseminated pursuant to an effective national market system plan. The text of the proposed rule change is below. Proposed new language is in *italics.* Rule 19. Locking or Crossing Protected Quotations in NMS Stocks. *(a) Definitions. For purposes of this Rule, the following definitions shall apply:* *(1) The terms automated quotation, effective national market system plan, intermarket sweep order, manual quotation, NMS stock, protected quotation, regular trading hours, and trading center shall have the meanings set forth in Rule 600(b) of Regulation NMS under the Securities Exchange Act of 1934.* *(2) The term crossing quotation shall mean the display of a bid for an NMS stock during regular trading hours at a price that is higher than the price of an offer for such NMS stock previously disseminated pursuant to an effective national market system plan, or the display of an offer for an NMS stock during regular trading hours at a price that is lower than the price of a bid for such NMS stock previously disseminated pursuant to an effective national market system plan.* *(3) The term locking quotation shall mean the display of a bid for an NMS stock during regular trading hours at a price that equals the price of an offer for such NMS stock previously disseminated pursuant to an effective national market system plan, or the display of an offer for an NMS stock during regular trading hours at a price that equals the price of a bid for such NMS stock previously disseminated pursuant to an effective national market system plan.* *(b) Prohibition. Except for quotations that fall within the provisions of paragraph
(d)of this Rule, members of the Exchange shall reasonably avoid displaying, and shall not engage in a pattern or practice of displaying, any quotations that lock or cross a protected quotation, and any manual quotations that lock or cross a quotation previously disseminated pursuant to an effective national market system plan.* *(c) Manual quotations. If a member of the Exchange displays a manual quotation that locks or crosses a quotation previously disseminated pursuant to an effective national market system plan, such member of the Exchange shall promptly either withdraw the manual quotation or route an intermarket sweep order to execute against the full displayed size of the locked or crossed quotation.* *(d) Exceptions.* *(1) The locking or crossing quotation was displayed at a time when the trading center displaying the locked or crossed quotation was experiencing a failure, material delay, or malfunction of its systems or equipment.* *(2) The locking or crossing quotation was displayed at a time when a protected bid was higher than a protected offer in the NMS stock.* *(3) The locking or crossing quotation was an automated quotation, and the member of the Exchange displaying such automated quotation simultaneously routed an intermarket sweep order to execute against the full displayed size of any locked or crossed protected quotation.* *(4) The locking or crossing quotation was a manual quotation that locked or crossed another manual quotation, and the member of the Exchange displaying the locking or crossing manual quotation simultaneously routed an intermarket sweep order to execute against the full displayed size of the locked or crossed manual quotation.* II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, NYSE included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The NYSE has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange seeks to amend its rules to include Rule 19 in order to comply with its obligation to establish, maintain and enforce written rules that require NYSE members to reasonably avoid displaying quotations that lock or cross any protected quotations in an NMS stock or any quotation, protected or not in an NMS stock that is disseminated pursuant to an effective national market system plan. 6 6 *See,* 17 CFR 242.610(d)(1). Generally, the proposed rule provides that members of the Exchange shall not display any quotations that lock or cross a protected quotation unless an exception applies. Paragraph
(d)sets forth the four exceptions under the rule. Pursuant to the rule, a locking or crossing quotation does not violate the prohibition when:
(i)The trading center displaying the locked or crossed quotation is experiencing system malfunction;
(ii)the protected bid was higher than the protected offer;
(iii)the locking or crossing quotation was an automated quotation and the member simultaneously routed an intermarket sweep order to execute against the full displayed size of any locked or crossed quotation; or
(iv)a manual quotation locks and crosses another manual quotation and the member that caused the lock or cross simultaneously routed an intermarket sweep order to execute against the full displayed size of the locked or crossed manual quotation. Exchange Rule 19 addresses intentional locks or crosses because it is understood that inadvertent locks or crosses will occur. It does not specify how market centers should reconcile locks or crosses between two automated quotations. The Commission's interpretation of the rule suggests that the market centers should continue trading and natural market forces will reconcile the locks or crosses. However, if a manual quotation locks or crosses a previously disseminated automated quotation to a national market system plan, the member that disseminated the manual quotation is required pursuant to paragraph
(c)of the rule to, “* * * promptly either withdraw the manual quotation or route an intermarket sweep order to execute against the full displayed size of the locked or crossed quotation.” In addition to the proposal of Rule 19, it should be noted that the Exchange's technology will automatically route an intermarket sweep order to execute against the full displayed size of any participating market center that would be locked or crossed by an Exchange quotation prior to quoting. 2. Statutory Basis P>The NYSE believes the proposed rule change is consistent with Section 6(b) of the Act 7 in general, and furthers the objectives of Section 6(b)(5) of the Act, 8 in particular, in that it is designed to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system and, in general, to protect investors and the public interest. The NYSE believes that the proposed rule change is consistent with these objectives in that it enables the Exchange to meets its obligations pursuant to Regulation NMS, which serves to modernize and strengthen the national market system. 7 15 U.S.C. 78f(b). 8 15 U.S.C. 78f(b)(5). B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others The Exchange has neither solicited nor received written comments on the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective pursuant to Section 19(b)(3)(A) of the Act 9 and Rule 19b-4(f)(6) 10 thereunder because the proposed rule change:
(i)does not significantly affect the protection of investors or the public interest;
(ii)does not impose any significant burden on competition; and
(iii)does not become operative for 30 days from the date of the filing, or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest pursuant to Section 19(b)(3)(A)(iii) of the Act 11 and Rule 19b-4(f)(6) thereunder. 12 9 15 U.S.C. 78s(b)(3)(A). 10 17 CFR 240.19b-4(f)(6). 11 15 U.S.C. 78s(b)(3)(A)(iii). 12 17 CFR 240.19b-4(f)(6). NYSE has requested that the Commission waive both the five-day pre-filing requirement and the 30-day delayed operative delay. 13 The Commission is exercising its authority to waive the five-day pre-filing notice requirement and believes that the waiver of the 30-day operative delay is consistent with the protection of investors and the public interest. Waiver of the five-day pre-filing and 30-day operative periods will allow NYSE to adopt its uniform locking and crossing rule for NMS stocks similar to those adopted by other self-regulatory organizations and approved by the Commission. 14 Accordingly, the Commission designates the proposal to be effective and operative upon filing with the Commission. 15 13 17 CFR 240.19b-4(f)(6)(iii). 14 *See* Securities Exchange Act Release No. 54391 (August 31, 2006), 71 FR 52836 (September 7, 2006) (File No. SR-NSX-2006-08). 15 For purposes only of waiving the 30-day operative delay, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). At any time within sixty
(60)days of the filing of the proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors or otherwise in furtherance of the purposes of the Act. 16 16 *See* Section 19(b)(3)(C) of the Act, 15 U.S.C. 78s(b)(3)(C). IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov.* Please include File Number SR-NYSE-2006-63 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-NYSE-2006-63. 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 the NYSE. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-NYSE-2006-63 and should be submitted on or before November 2, 2006. For the Commission by the Division of Market Regulation, pursuant to delegated authority. 17 17 17 CFR 200.30-3(a)(12). Nancy M. Morris, Secretary. [FR Doc. E6-16846 Filed 10-11-06; 8:45 am] BILLING CODE 8011-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-54560; File No. SR-NYSE-2006-74] Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Rule 17 October 2, 2006. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) 1 and Rule 19b-4 thereunder, 2 notice is hereby given that on September 28, 2006, the New York Stock Exchange LLC (“NYSE” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. The Exchange filed the proposal pursuant to Section 19(b)(3)(A) of the Act 3 and Rule 19b-4(f)(6) thereunder, 4 which renders the proposal effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 15 U.S.C. 78s(b)(3)(A). 4 17 CFR 240.19b-4(f)(6). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange is proposing to add Rule 17T (“Exchange Designated Default Sponsoring Member”) in order to establish an Exchange designated default sponsoring member broker/dealer for use when routing orders to the best bids and offers on other market centers in accordance with Exchange rules and SEC Regulation NMS. The text of the proposed rule change is available on the NYSE's Web site ( *http://www.nyse.com* ), at the NYSE's Office of the Secretary, and at the Commission's Public Reference Room. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The NYSE has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change 1. Purpose Since 1978, the Exchange has routed orders (as commitments to trade) to other market centers and received them through the Intermarket Trading System (“ITS”). 5 Current anticipated changes to ITS, in addition to the adoption of Regulation National Market System (“Regulation NMS”) 6 to modernize and strengthen the regulatory structure of the National Market System, result in the Exchange's need to establish a designated default sponsoring member broker/dealer in the destination market (hereinafter “default Sponsoring Member”) in order to ensure that customer orders sent to the Exchange for execution are able to access better prices on other markets. 5 ITS facilitates trades between members located in different markets. Through ITS, a member in any participating market may send orders, as commitments to trade, at the bid or offer on any other participating market. The ITS Plan is administered by the participating markets, and is filed with and approved by the Securities and Exchange Commission in accordance with Section 11A of the Securities Exchange Act of 1934. 6 *See* Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496 (June 29, 2005). On July 17, 2006, the American Stock Exchange LLC, the Boston Stock Exchange, Inc., the Chicago Board Options Exchange, Inc., the Chicago Stock Exchange, Inc., the Nasdaq Stock Market LLC, the National Stock Exchange, the New York Stock Exchange LLC, and the NYSE Arca, Inc., executed and filed with the Commission a “Plan for the Purpose of Creating and Operating an Intermarket Communications Linkage Pursuant to Section 11A(a)(3)(B) of the Securities Exchange Act of 1934” (“Linkage Plan”). 7 Pursuant to the Linkage Plan the Securities Industry Automation Corporation (“SIAC”) will serve as the facilities manager for the data processing hardware, software and communications network (the “System”) that links electronically the market participants. SIAC will further be responsible for the operation and maintenance of the System. The current ITS hardware will remain in use until June 30, 2007. 7 The Commission approved the NMS Linkage Plan on September 29, 2006. *See* Securities Exchange Act Release No. 54551 (Sept. 29, 2006). It should be noted that the Philadelphia Stock Exchange, Inc. (“Phlx”) executed the Linkage Plan on August 1, 2006. Under the Linkage Plan, member access is provided to each market participant through the clearing member on the order or through the mechanism of a default Sponsoring Member. Upon the effective date of the Linkage Plan (October 1, 2006), through the end of June 2007, the Exchange intends to provide member access to the other market center participants in the Linkage Plan by utilizing the identifier of the default Sponsoring Member. Specifically, the System will automatically substitute the identifier of all member organizations' orders that are routed to other market centers with the identifier of the default Sponsoring Member prior to the routing of the orders to the appropriate destination market. The Linkage Plan allows participants to charge for orders executed in their market through the Linkage Plan. The destination market may bill the default Sponsoring Member for executions in that market, pursuant to such market's transaction fee schedule, based on the monthly reports provided by SIAC. As a result, the Exchange anticipates charging a fee for the services of the default Sponsoring Member. Charges related to the services of the default Sponsoring Member will be the subject of a separate fee filing. In addition, pursuant to the proposed rule change, neither the Exchange nor the default Sponsoring Member shall be liable for any damages sustained by an allied member or member organization as a result of the services provided by the default Sponsoring Member, except as stated in Exchange Rules. The interim establishment of the default Sponsoring Member serves only to provide member access to other destination market(s) for execution of orders at more favorable prices. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act 8 in general and furthers the objectives of Section 6(b)(5) 9 in particular, in that it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to remove impediments to, and perfect the mechanism of, a free and open market and a national market system, and in general, to protect investors and the public interest. 8 15 U.S.C. 78f(b). 9 15 U.S.C. 78f(b)(5). B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others No written comments were solicited or received with respect to the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing proposed rule change does not:
(i)Significantly affect the protection of investors or the public interest;
(ii)Impose any significant burden on competition; and
(iii)Become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, if consistent with the protection of investors and the public interest, it has become effective pursuant to Section 19(b)(3)(A) of the Act 10 and Rule 19b-4(f)(6) thereunder. 11 As required under Rule 19b-4(f)(6)(iii) under the Act, 12 the Exchange provided the Commission with written notice of its intent to file the proposed rule change, along with a brief description and text of the proposed rule change, at least five business days prior to the date of the filing of the proposed rule change. 10 15 U.S.C. 78s(b)(3)(A). 11 17 CFR 240.19b-4(f)(6). 12 17 CFR 240.19b-4(f)(6)(iii). A proposed rule change filed under 19b-4(f)(6) normally may not become operative prior to 30 days after the date of filing. 13 However, Rule 19b-4(f)(6)(iii) 14 permits the Commission to designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has requested that the Commission waive the 30-day operative delay and render the proposed rule change to become operative immediately. The Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest. The Linkage Plan is expected to become operative on October 2, 2006, and waiving the 30-day operative period would enable the Exchange to implement the default Sponsoring Member mechanism at the start of the Linkage Plan's operation. For the reasons stated above, the Commission therefore designates the proposal to become operative upon filing with the Commission. 15 13 *Id.* 14 *Id.* 15 For purposes of waiving the operative date of this proposal only, the Commission has considered the impact of the proposed rule on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov.* Please include File Number SR-NYSE-2006-74 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-NYSE-2006-74. 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 NYSE. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-NYSE-2006-74 and should be submitted on or before November 2, 2006. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 16 16 17 CFR 200.30-3(a)(12). Nancy M. Morris, Secretary. [FR Doc. E6-16847 Filed 10-11-06; 8:45 am] BILLING CODE 8011-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-54577; File No. SR-NYSE-2006-36] Self-Regulatory Organizations; New York Stock Exchange LLC; Order Approving Proposed Rule Change and Amendment Nos. 1 and 2 Thereto To Provide Floor Brokers With the Ability To Enter Discretionary Instructions and/or Pegging Instructions With Respect to Floor Broker Agency Interest Files (e-Quotes) October 5, 2006. I. Introduction On May 16, 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 provide floor brokers with the ability to enter discretionary and pegging instructions with respect to their floor broker agency interest files. On June 14, 2006 and July 11, 2006, NYSE filed Amendment Nos. 1 3 and 2 4 to the proposed rule change, respectively. The proposed rule change, as amended, was published for comment in the **Federal Register** on July 21, 2006. 5 The Commission received six comment letters from three commenters. 6 On September 13, 2006, the Exchange filed a response to the comment letters. 7 This order approves the proposed rule change, as amended. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 In Amendment No. 1, NYSE proposed additional changes and clarifications to the proposal. 4 Amendment No. 2 supersedes and replaces the original rule change and Amendment No. 1 in their entirety. 5 *See* Securities and Exchange Act Release No. 54150 (July 14, 2006), 71 FR 41496. 6 *See* Letters from George Rutherfurd, Consultant, dated June 22, 2006 (“Rutherfurd I”), August 3, 2006 (“Rutherfurd II”) and September 21, 2006 (“Rutherfurd Letter III”); Warren Meyers, President, Independent Brokers Action Committee, dated August 11, 2006 (“IBAC Letter”); and Junius W. Peake, Monfort Distinguished Emeritus Professor of Finance, Kenneth W. Monfort College of Business, dated August 18, 2006 (“Peake Letter I”) and October 3, 2006 (“Peake Letter II”). 7 *See* Letter from Mary Yeager, Secretary, NYSE, to Nancy Morris, Secretary, Commission, dated September 13, 2006 (“Response to Comments”). II. Background On March 22, 2006, the Commission approved NYSE's proposal to establish a Hybrid Market, which will alter the Exchange's market structure from a floor-based auction market with limited automated order interaction to a more automated market with limited floor-based auction market availability. 8 To create its Hybrid Market, NYSE changed its rules to permit its floor members to participate in the market electronically. For example, specialists will have the ability to manually and systematically place in a separate file (“specialist interest file”) within the Display Book system 9 their proprietary interest at prices at or outside the Exchange best bid or offer (“BBO”). In addition, specialists will establish algorithms (“Specialist Algorithm”) 10 to send messages via an Exchange-owned application program interface to quote and trade for their proprietary accounts. 11 8 *See* Securities and Exchange Act Release No. 53539, 71 FR 16353 (March 31, 2006) (“Hybrid Market Order”). 9 The Display Book system (“Display Book system”) is an order management and execution facility. The Display Book system receives and displays orders to the specialists, contains the customer limit order display book (“Book”), and provides a mechanism to execute and report transactions and publish the results to the Consolidated Tape. In addition, the Display Book system is connected to a variety of Exchange systems for the purposes of comparison, surveillance, and reporting information to customers and other market data and national market systems, *i.e.* , the Intermarket Trading System, the Consolidated Tape Association, Consolidated Quotation System, etc. 10 *See* NYSE Rule 104(b). 11 *See* NYSE Rule 104(e). As approved in the Hybrid Market Order, floor brokers will represent their customers' orders electronically in a separate file in the Display Book system (“floor broker agency interest file”) at multiple prices at or outside the Exchange BBO (“e-Quotes”). As approved, e-Quotes can participate in automatic executions at the Exchange BBO or outside the Exchange BBO during a sweep. E-Quotes may not, however, initiate trades with incoming orders at prices better than the Exchange BBO. Accordingly, the Exchange now proposes additional changes that it believes will further replicate electronically the manner in which floor brokers represent their customers' orders on the floor. Specifically, NYSE proposes to provide floor brokers with the ability to enter discretionary instructions as to the size and/or price at which their e-Quotes may trade (“d-Quotes”). 12 In addition, the Exchange proposes to provide floor brokers with the ability to set their e-Quotes and d-Quotes to peg to the Exchange BBO so that their e-Quotes or d-Quotes would be available for execution at the BBO as the Exchange BBO changes (“pegging”). 12 NYSE also refers to d-Quotes as “discretionary e-Quotes” in its proposed rule text. III. Description of the Proposal A. Proposed Discretionary Instructions for e-Quotes The Exchange proposes NYSE Rule 70.25 to permit floor brokers to enter discretionary instructions with respect to the size and/or price at which the e-Quote would trade through the d-Quote functionality. 13 Unlike e-Quotes, d-Quotes would provide floor brokers with the means to express a price range within which they are willing to actively trade at prices at or better than the BBO. The discretionary instructions would relate to the price at which the d-Quote could trade and the number of shares to which the discretionary price instructions would apply. 14 13 *See* proposed NYSE Rule 70.25(a)(i). 14 *See* proposed NYSE Rule 70.25(a)(i). The discretionary instructions would only be active when the e-Quote is at or joins the existing Exchange BBO or would establish a new Exchange BBO. 15 Furthermore, discretionary instructions would be active for automatic executions only, and not active with respect to the opening or closing transactions on the Exchange. 16 NYSE would also apply the discretionary instructions of a d-Quote only if all the d-Quoting prerequisites are met; otherwise, the d-Quote would be handled as a regular e-Quote (notwithstanding the fact that the floor broker has designated the e-Quote as a d-Quote). 17 For instance, to qualify as a d-Quote, the e-Quote would be required to have a discretionary price range. 18 Furthermore, the floor brokers must comply with the requirements for e-Quotes, as approved in the Hybrid Market, with regard to d-Quotes, including the requirement that floor brokers be present in the Crowd when they have placed interest in their floor broker agency interest files. 19 15 *See* proposed NYSE Rule 70.25(a)(ii). 16 *See* proposed NYSE Rule 70.25(a)(iii). 17 *See* proposed NYSE Rule 70.25(a)(iv). For example, if the d-Quote is not at the Exchange BBO, it would not exercise its discretionary instructions and accordingly, would function like an e-Quote instead. 18 *See* proposed NYSE Rule 70.25(a)(iv). 19 *See* proposed NYSE Rule 70.25(a)(v). Floor brokers would be permitted to have multiple d-Quotes, with different price and size instructions, on the same side of the market. Such multiple d-Quotes would not compete with each other for execution priority; rather, the trading volume would be allocated by floor broker, not the number of d-Quotes participating in an execution. 20 Discretionary instructions would apply to both displayed and/or reserve interest. 21 The specialist on the floor and the Specialist Algorithm would not have access to the discretionary instructions entered by floor brokers with respect to their e-Quotes. 22 20 *See* proposed NYSE Rule 70.25(a)(vi). 21 *See* proposed NYSE Rule 70.25(a)(vii). 22 *See* proposed NYSE Rule 70.25(a)(viii). 1. Discretionary Price Instructions NYSE proposes to provide floor brokers with the ability to set a discretionary price range within the Exchange BBO to designate the prices at which their customers are willing to trade. 23 The floor brokers' e-Quote must be represented in the Exchange BBO for discretionary pricing to be utilized. The price discretion set by the floor broker would be used to initiate or participate in a trade with an incoming order that is capable of trading at a price within the Exchange BBO and the discretionary price range. 24 23 *See* proposed NYSE Rule 70.25(b)(i). 24 *See* proposed NYSE Rule 70.25(b)(i). The minimum price range for a d-Quote would be the minimum price variation set forth in NYSE Rule 62, currently $0.01 for equity securities and $0.10 for equity securities trading at a price of $100,000 or greater. *See* proposed NYSE Rule 70.25(b)(ii) and NYSE Rules 62.10 and 62.20. Floor brokers may also specify whether their discretionary price instructions would apply to all or only a portion of their d-Quotes. If price discretion is provided for only a portion of a d-Quote, the residual would be treated as an e-Quote. 25 Finally, when price discretion is used, NYSE proposes that the shares executed from the d-Quote be decremented from reserve size first, if any, and then from its displayed size. 26 25 *See* proposed NYSE Rule 70.25(b)(iii). 26 *See* proposed NYSE Rule 70.25(b)(iv). 2. Discretionary Size Instructions In addition to discretionary price instructions, a floor broker may enter discretionary size instructions. Discretionary size instructions designate the portion of the e-Quote to which the discretionary price instructions would apply. 27 Floor broker may also specify a minimum and/or maximum size of contra side volume with which it would be willing to trade using price discretion. 28 27 *See* proposed NYSE Rule 70.25(c)(i). 28 *See* proposed NYSE Rule 70.25(c)(ii). According to the Exchange, this should allow for more specific order management by preventing the d-Quote from trading with opposite side interest that the floor broker has judged to be too little or too great in the context of the order or orders it is managing. NYSE proposes that its systems would only consider NYSE displayed interest to determine whether the size of the contra side volume is within the d-Quote's discretionary size range. Contra side reserve and other interest at the possible execution price would not be considered. 29 Interest displayed by other market centers at the price at which a d-Quote could trade would not be considered by Exchange systems when determining if the d-Quote's minimum and/or maximum size range is met, unless the Floor broker electronically designates that such away volume should be included in this determination. 30 Once the total amount of a floor broker's discretionary volume has been executed, the d-Quote's discretionary price instructions would become inactive, and the remainder of such d-Quote would be treated as an e-Quote. 31 29 *See* proposed NYSE Rule 70.25(c)(iii). However, an increase or reduction in the size associated with a particular price that brings the contra side volume within a d-Quote's minimum/maximum discretionary size parameter would trigger an execution of that d-Quote. *See* proposed NYSE Rule 70.25(c)(v). 30 *See* proposed NYSE Rule 70.25(c)(iv). 31 *See* proposed NYSE Rule 70.25(c)(vi). 3. Executions of d-Quotes NYSE stated that the goal of discretionary e-Quoting is to secure the largest execution for the d-Quote, using the least amount of price discretion. Accordingly, d-Quotes may improve the execution price of incoming orders. However, if no discretion is necessary to accomplish a trade, none would be used. 32 In addition, future executions that could occur, such as those resulting from the execution of elected contra side CAP-DI orders, would not be considered in determining when, and to what extent, price discretion would be necessary to accomplish a trade. 33 32 *See* proposed NYSE Rule 70.25(d)(i). 33 *See* proposed NYSE Rule 70.25(d)(i)(A). Pursuant to the proposed rules, d-Quotes would automatically execute against a contra side order that enters the Display Book system, if the order's price is within the discretionary price range, and the order's size meets any minimum or maximum size requirements that have been set for the d-Quote. 34 If there are multiple d-Quotes from different floor brokers on the same side of the market with the same discretionary price instructions, then such d-Quotes would trade on parity, after interest entitled to priority is executed. 35 Multiple d-Quotes from different floor brokers on the same side of the market also would compete for an execution, with the most aggressive price range establishing the execution price. If an incoming order remains unfilled at that price, executions within the less aggressive price range would then occur. 36 In addition, d-Quotes would compete with same-side specialist algorithmic trading messages that seek to trade with incoming orders. 37 If the price of d-Quotes and specialist trading messages are the same, d-Quotes and the specialist messages would trade on parity. 38 34 *See* proposed NYSE Rule 70.25(d)(ii). 35 *See* proposed NYSE Rule 70.25(d)(iii). 36 *See* proposed NYSE Rule 70.25(d)(iv). 37 *See* NYSE Rule 104(b). Specialists are limited in the instances in which they may trade with incoming orders. 38 *See* proposed NYSE Rules 70.25(d)(v) and 104(c)(ix). D-Quotes from floor brokers on the opposite sides of the market could trade with each other. In these circumstances, the d-Quote that arrived at the Display Book system last would use the most discretion necessary to effect a trade. 39 All executions involving d-Quotes must comply with Rule 611 under Regulation NMS (“Reg. NMS”). 40 Accordingly, when a protected bid or offer, as defined in Reg. NMS, 41 is published by another market center at a price that is better than the price at which contra side d-Quotes could trade, the amount of discretion necessary to permit a trade on the Exchange that is consistent with Rule 611 would be used, or such portion of the d-Quote as is necessary would be automatically routed in accordance with Rule 611 in order to permit a trade to occur on the Exchange. 42 39 *See* proposed NYSE Rule 70.25(d)(vi). 40 *See* Rule 611 of Reg. NMS, 17 CFR 242.611 and proposed NYSE Rule 70.25(d)(vii). 41 *See* Rule 600(b)(57) of Reg. NMS, 17 CFR 242.600(b)(57). 42 *See* proposed NYSE Rule 70.25(d)(vi)(A). D-Quotes also could provide price improvement to, and trade with, an incoming contra side specialist algorithmic trading message to “hit bid/take offer,” just as they could with any other marketable incoming interest. 43 D-Quotes may initiate sweeps in accordance with and to the extent provided by NYSE Rules 1000-1004, but only to the extent of their price and volume discretion. They also could participate in sweeps initiated by other orders, but, in such cases, their discretionary instructions would not be active. 44 Finally, d-Quotes would not trade at a price that would trigger a liquidity replenishment point (“LRP”), as defined in NYSE Rule 1000. 45 Accordingly, a sweep involving a d-Quote would always stop at least one cent before an LRP is reached. 46 43 *See* proposed NYSE Rule 70.25(d)(viii). 44 *See* proposed NYSE Rule 70.25(d)(ix). 45 LRPs are pre-determined price points that would halt automatic executions for varying periods depending on the price and remaining size, if any, of an automatic execution order. *See* NYSE Rule 1000. The Commission notes that NYSE has proposed to amend its LRPs. *See* Securities Exchange Act Release No. 54520 (September 27, 2006), 71 FR 57590 (September 29, 2006). 46 *See* proposed NYSE Rule 70.25(d)(ix)(A). B. Pegging NYSE proposes to allow its floor brokers to enter instructions with regard to their e-Quotes so that they would “peg” the Exchange BBO. A pegging instruction may be added as a separate type of discretionary instruction and may be active along with discretionary price instructions. Specifically, under the proposed rules, a floor broker could set an e-Quote, other than a tick-sensitive e-Quote, to be available for execution at the Exchange best bid (for an e-Quote that represents a buy order) or at the Exchange best offer (for an e-Quote that represents a sell order) as the Exchange BBO changes, so long as the Exchange BBO is at or within the e-Quote's limit price. 47 A floor broker could similarly employ pegging for its d-Quotes. 48 47 *See* proposed NYSE Rule 70.26(i). 48 *See* proposed NYSE Rule 70.26(ii). The Exchange proposes that pegging be active only when auto-quoting is active. 49 Pegging interest would trade on parity with other interest at the BBO after the interest entitled to priority has been executed. Pegging is reactive. Accordingly, a pegging e-Quote or d-Quote would not establish the Exchange BBO as result of pegging, 50 and therefore could not establish price priority by pegging. The existence of pegging instructions, however, would not preclude an e-Quote or d-Quote from having priority. 51 49 *See* proposed NYSE Rule 70.26(iii). The Exchange represented that this means when the Autoquote System is active. Telephone conversation between Nancy Reich, Vice President, Office of the General Counsel, NYSE, and Kelly Riley, Assistant Director, Division of Market Regulation, Commission, on October 4, 2006. 50 *See* proposed NYSE Rule 70.26(v). 51 *See* proposed NYSE Rule 70.26(vi). E-Quotes and d-Quotes with pegging instructions will only peg other non-pegging interest. 52 Further, an e-Quote or d-Quote would not be able to sustain the Exchange BBO as a result of pegging, if there is no other non-pegged interest at that price, and such price is not the e-Quote's or d-Quote's limit price. 53 Specifically, if the lowest quotable price established by the floor broker for a pegging e-Quote or d-Quote to buy is the Exchange best bid, and all other interest at that price cancels or is executed, the pegging e-Quote or d-Quote would remain displayed at that best bid price. 54 Similarly, if the highest quotable price established by the floor broker for a pegging e-Quote or d-Quote to sell is the Exchange best offer and all other interest at that price cancels or is executed, the pegging e-Quote or d-Quote would remain displayed at that best offer price. 55 52 *See* proposed NYSE Rule 70.26(vii). 53 *See* proposed NYSE Rule 70.26(viii). 54 *See* proposed NYSE Rule 70.26(viii)(A). 55 *See* proposed NYSE Rule 70.26(viii)(B). Floor brokers may establish price ranges for an e-Quote or d-Quote, beyond which the pegging function would not be available. Specifically, the floor broker can set a “quote price,” which would be the lowest price to which a buy e-Quote or d-Quote could peg or the highest price to which a sell e-Quote or d-Quote could peg. 56 The floor broker may also set a “ceiling price,” which is the highest price to which a buy side e-Quote or d-Quote could peg 57 and a “floor price,” which is the lowest price to which a sell side e-Quote or d-Quote could peg. 58 The quote, ceiling, and floor price may be at a price other than the limit price of the order being e-Quoted or d-Quoted, but may not be inconsistent with the order's limit. 59 56 *See* proposed NYSE Rule 70.26(ix)(A). 57 *See* proposed NYSE Rule 70.26(ix)(B). 58 *See* proposed NYSE Rule 70.26(ix)(C). 59 *See* proposed NYSE Rule 70.26(ix)(D). Under the proposed rules, as long as the Exchange best bid (offer) is at or within the pegging price range selected by the floor broker with respect to a buy-side (sell-side) e-Quote or d-Quote, the pegging e-Quote or d-Quote would join such best bid (offer) as it is auto quoted. 60 If the floor broker does not designate a pegging range, but has instructed that its e-Quote or d-Quote should peg, the e-Quote or d-Quote would peg to the Exchange best bid (offer) as long as such bid (offer) is within the limit of the order that is being e-Quoted or d-Quoted. 61 60 *See* proposed NYSE Rule 70.26(x). *See also* note 49, *supra.* 61 *See* proposed NYSE Rule 70.26(xi). Furthermore, as an e-Quote or d-Quote pegs, its discretionary price range, if any, would move along with it, subject to any floor or ceiling price set by the floor broker. 62 In addition, if the Exchange best bid is higher than the ceiling price of a pegging buy-side e-Quote or d-Quote, the e-Quote or d-Quote would remain at its quote price or the highest price at which there is other interest within its pegging price range, whichever is higher (consistent with the limit price of the order underlying the e-Quote or d-Quote). 63 Similarly, if the Exchange best offer is lower than the floor price of a pegging sell-side e-Quote or d-Quote, the e-Quote or d-Quote would remain at its quote price or the lowest price at which there is other interest within its pegging price range, whichever is lower (consistent with the limit price of the order underlying the e-Quote or d-Quote). 64 However, if the Exchange BBO returns to a price within the pegging price range selected by the floor broker, the e-Quote or d-Quote would once again peg to the Exchange BBO. 65 62 *See* proposed NYSE Rule 70.26(xii). 63 *See* proposed NYSE Rule 70.26(xii)(A). 64 *See* proposed NYSE Rule 70.26(xii)(B). 65 *See* proposed NYSE Rule 70.26(xii)(C). Finally, a floor broker may specify the minimum and/or maximum size of same side volume to which its e-Quote or d-Quote would peg. 66 Other pegging e-Quote or d-Quote volume would not be considered in determining whether the volume parameters set by the floor broker have been met. 67 66 *See* proposed NYSE Rule 70.26(xiii). 67 *See* proposed NYSE Rule 70.26(xiii). C. Other Proposed Changes 1. NYSE Rule 70.20 The Exchange also proposes to amend NYSE Rule 70.20(j)(i) to specify that e-Quotes could participate in the closing trade, in accordance with the policies and procedures of the Exchange and NYSE Rule 70.20(k) to specify that during the close, a floor broker's reserve interest, if any, would be added to the size of its e-Quoted interest. 2. NYSE Rule 123(e) The Exchange proposes to add certain required terms regarding e-Quotes, d-Quotes, and pegging instructions as part of its Rule 123, which requires the entry of certain order information into the Exchange's Front End Systemic Capture System before such order can be represented. 3. NYSE Rule 1000(d) The Exchange proposes to amend NYSE Rule 1000(d)(iii)(A) to specify that d-Quotes will participate in sweeps in the manner specified in proposed NYSE Rule 70.25(d)(ix). D. Implementation As explained in the Response to Comments, NYSE proposes to implement the proposal in Phases 3 and 4 of the Hybrid Market in two parts. 68 The first part, which would be implemented as part of Phase 3 of the Hybrid Market, would provide the pegging and d-Quote functionality with respect to the ability to trade with marketable orders. The second part, which would provide the d-Quote functionality with opposite-side interest anywhere in its discretionary range, is scheduled for implementation in Phase 4 of the Hybrid Market. Phase 3 is currently scheduled to commence on or about October 6, 2006 and is expected to be completed in early-December 2006. Phase 4 is expected to begin in December 2006, immediately following the completion of Phase 3. 68 *See* Response to Comments. IV. Summary of Comments The Commission received a total of six comment letters from three commenters on the proposed rule change 69 and NYSE filed the Response to Comments. 70 One commenter generally supported NYSE's proposal. 71 The other two commenters did not support the proposal and raised specific concerns about the proposal. 69 *See supra* note 6. 70 *See supra* note 7. 71 *See* IBAC Letter. One commenter argued that the proposal raises significant market structure issues because he believes that it will allow hidden orders to compete directly with transparent market interest. 72 This commenter argues that the proposal would allow hidden order trading, 73 which makes the markets less transparent to those who seek liquidity and denies executions to those who post liquidity. Further, the commenter argued that hidden order trading would render meaningless the notion of published quotes or the national best bid/offer (“NBBO”) because of the existence of hidden immediately executable market interest available between the published quote. The commenter believes that these results are inconsistent with the principles of Section 11A of the Act 74 and the Commission's Reg. NMS in that they compromise the notion that a fully transparent market is the fairest for all investors. 75 This commenter also argued that the d-Quote proposal would hinder the price discovery process. By hiding interest willing to trade at a specified price, investors will not be able to make fully informed pricing decisions for their orders. 72 *See* Rutherfurd Letter I. 73 The commenter disagrees with the NYSE's classification of d-Quotes as discretionary order instructions. The commenter argues that d-Quotes are actually conditional limit orders that will be automatically and immediately executed upon the satisfaction of the specified terms entered by the floor broker. *See also* Peake Letters I and II. 74 15 U.S.C. 78k-1. 75 This commenter urges the Commission to issue a concept release on hidden order trading to consider the implications on market transparency, published quotations, public limit order protection, and price discovery processes. *See* Rutherfurd Letter I. The commenter disagreed with NYSE's representation that the proposal replicated the manner in which floor brokers act on behalf of their customers in the physical auction market. 76 The commenter acknowledged that floor brokers have always provided in-between-the-published-quote executions on the floor but that in the physical auction, the decision of the floor broker to participate in an execution is made on a trade-by-trade basis after contra side orders arrive in the crowd. The commenter argued that in the auction “everything is transparent.” 77 While floor brokers may hold discretionary orders that are not known to the public, these orders are not active until the floor broker makes a public bid (offer) that is known to all in the trading crowd. After a floor broker makes its bid (offer) public in the crowd, other brokers or the specialist can compete by bidding higher (offering lower). Thus, the commenter argued, “everything is transparent, as the previously ‘hidden’ discretionary order must be disclosed prior to the trade, and even after it is disclosed, is not guaranteed an opportunity to trade if competing market participants then bid higher (offer lower).” 78 76 *See* Rutherfurd Letters I and III. 77 *See* Rutherfurd Letter III. 78 *Id.* According to the commenter, the d-Quote, however, would allow floor brokers to enter into an automated system better prices that are always available for immediate execution and because they are not disclosed, other market participants are not able to compete with them to provide an even better priced execution. The commenter argues that the proposal gives floor brokers a time/place advantage because they can react to what is placed in the Book. The commenter believes that this time/place advantage is more troubling than what floor members on the Exchange currently possess because it is not mitigated by transparency at the point of sale like it is in the current auction market. 79 Finally, the commenter noted investors do not enjoy the same informational benefit of knowing the prices at which floor brokers' customers are willing to trade. If they did, the commenter argued, they would be able to make the decision of how to price their own orders and thus, would be able to compete with the floor brokers' customers. 79 *See* Rutherfurd Letters I and III. The commenter also argues that the proposal was inconsistent with Sections 6(b)(5) 80 and 11A 81 of the Act. 82 The commenter argues that by giving floor brokers the exclusive ability to enter discretionary instructions, the NYSE proposal is inconsistent with Section 6(b)(5) of the Act, which states that an exchange's rules cannot be designed to “permit unfair discrimination between customers, issuers, brokers or dealers * * *” 83 In addition, the commenter argues that by requiring members to use floor brokers to enter discretionary instructions, the proposal is inconsistent with Section 11A(a)(1)(C)(i) of the Act, 84 which reflects Congress' belief that it is in the public interest and appropriate for the protection of investors and the maintenance of a fair and orderly market to assure the “economically efficient execution of securities transactions.” This commenter argued that NYSE's proposal is a “direct impediment to economically efficient execution of securities transactions” because upstairs members can, and should be permitted to, exercise their own judgment and put discretionary instructions on their own orders without having to incur the significant additional expense of using a floor broker. This commenter believes that floor brokers will merely perform a clerical function of inputting an order with specific conditions and that the NYSE systems will thereafter represent and execute the order. 80 15 U.S.C. 78f(b)(5). 81 15 U.S.C. 78k-1. 82 *See* Rutherfurd Letters I, II and III. 83 The commenter also argues that the proposal is anticompetitive because it benefits one class of market participants (floor brokers) at the expense of other market participants. *See* Rutherfurd Letter III. *See also* Peake Letter II. Another commenter argues that all market participants should have access to the “national market system.” *See* Peake Letter I. 84 15 U.S.C. 78k-1(a)(1)(C)(i). The commenter disagreed with NYSE's representation that the proposal would give floor brokers a means to compete with specialists' algorithmic trading and quoting. The commenter believes that specialist algorithmic trading on parity with interest represented by floor brokers is inconsistent with Section 11A of the Act 85 and argues the floor broker d-Quotes do not rectify this problem with specialist trading in the Hybrid Market. Specifically, the commenter cites Section 11A(a)(1)(C)(v) of the Act, 86 which reflects Congress' belief that investors' orders should have the opportunity to be executed without the participation of a dealer. 87 85 15 U.S.C. 78k-1. 86 15 U.S.C. 78k-1(a)(1)(C)(v). 87 *See* Rutherfurd Letter I. *See also* Peake Letter II. The commenter also argues that specialists trading on parity with investors' orders represented by floor brokers is inconsistent with the specialists' negative obligation. *See* Rutherfurd Letter I. Another commenter argued that floor brokers should continue to be allowed to object to specialists' trading on parity when opening or increasing a position, in order to closely replicate the present auction market. 88 Finally, this commenter urged that d-Quotes and specialist algorithms be phased-in together. 88 *See* IBAC Letter. *See also* Rutherfurd Letter III (stating that if the specialist is permitted to trade on parity, the Commission should demand that NYSE allow a floor broker objection mechanism in the Hybrid Market so that floor brokers could protect the public). NYSE's Response NYSE believes that its proposal does replicate the manner in which floor brokers represent customer orders in the current auction market. Specifically, NYSE believes that d-Quotes are necessary to ensure that floor brokers are able to perform a function similar to that which they perform today as the markets become faster and more automated. NYSE believes that the proposal should allow floor brokers to electronically replicate the order management decisions they make regarding the representation of customer orders. According to NYSE, investors that use floor brokers would not be able to access the market in the manner they do today. NYSE argues that the proposed discretionary instructions and pegging ability will allow floor brokers to use their judgment and expertise in managing their customers' orders in a faster, automated market. In response to the comment that d-Quotes would negatively impact price discovery and provide informational advantages to floor brokers, NYSE noted that d-Quote function is similar to proposals by other markets that permit non-displayed orders that trade between the quote. 89 Furthermore, NYSE believes that d-Quotes would replicate that which occurs in the manual auction market and would not provide more or less information than is currently available in the Exchange's market. According to NYSE, the d-Quote is “as transparent as any other floor broker-represented order that is not fully displayed in accordance with long established trading practices, SEC rules and regulations and NYSE rules and regulations.” Because the Hybrid Market would continue to involve the interaction of floor brokers representing their customer's orders, limit orders on the Display Book system, and the specialist's dealer interest, NYSE believes that the price discovery mechanism would continue to exist. NYSE argues that d-Quotes would “merely enhance the ability of floor brokers to effectively represent their customers' orders in the automated portion of the Hybrid Market” and they do not replace order interaction or the price discovery process. 90 89 NYSE believes that these types of orders were approved in response to market participants' preference for order and customer anonymity, despite the typical argument that such anonymity could be detrimental to other market participants. *See* Response to Comments. *But see* Rutherfurd Letter III (arguing that NYSE is not replicating hidden order (reserve) trading that is conducted in other markets). 90 *But see* Rutherfurd Letter III. Disagreeing with NYSE's response, this commenter argued that floor broker and specialist interest could not promote price discovery when such interest is entirely hidden. In response the commenter's suggestion that d-Quotes would create price uncertainty, NYSE also believes that d-Quotes would provide investors with a better opportunity for price improvement and would moderate volatility by providing liquidity and better price continuity. 91 NYSE believes that d-Quotes would attract liquidity from incoming orders seeking the opportunity for a better priced and/or larger sized transaction that could result from an increase in competition between specialists and other floor brokers' d-Quotes. 92 91 *See* Response to Comments. *But see* Rutherfurd Letter III. This commenter objected to NYSE's position that d-Quotes would provide increased opportunities for price improvement, arguing instead that the e/d-Quote “overhangs” the market and is pre-programmed to trade automatically. The commenter claims, therefore, that the e/d-Quote is, in actuality, the “real”, non-discretionary NYSE market that is willing to trade at such hidden price. Rather than receiving price improvement, the incoming order is merely receiving an execution at the real, pre-existing NYSE price. 92 *But see* Rutherfurd Letter III (arguing that e/d-Quotes could not attract liquidity or enhance competition when they are hidden). With respect to the concern that d-Quotes would create an “unlevel informational playing field,” NYSE noted while investors that use floor brokers would gain the benefits of d-Quotes, the d-Quotes do not create an unequal or unfair advantage for any market participant. NYSE pointed out that specialists and their algorithms would not know about any discretionary instructions, and floor brokers would have access only to information about their own agency interest, not to other broker's files. 93 NYSE refuted one commenter's suggestion that limit orders on the Book would have access to less information as a result of d-Quotes by representing that investors entering limit orders would be privy to the same information as is currently available to them, which, NYSE points out, does not presently include knowledge of a floor broker's decisions regarding order management, until after such decisions are affected. 93 NYSE also indicated that neither the specialist on the floor nor the specialist algorithmic trading system would have access to any of the discretionary instructions entered by the floor broker in connection with the d-Quotes. *See* Response to Comments. With respect to the commenters' implication that d-Quotes would disadvantage limit orders on the Book by denying executions to those who post liquidity, NYSE responded that the principles of priority and parity at the NYSE BBO would not be changed with the introduction of the d-Quote. 94 Accordingly, a limit order with priority at the BBO on the same side of the d-Quote would trade first in any execution at the quote. Furthermore, NYSE stated that d-Quotes would not force nor cause limit orders to accept different or worse prices than what their limits dictate. NYSE explained that because discretionary pricing would allow d-Quotes to trade at prices in between the quote where there are no public limit orders, d-Quotes would provide price improvement to an incoming order capable of trading at such better price and would not negatively impact the limit order displayed at a worse price. If the commenter was implying that the person entering the limit order would have entered his or her limit order at the better price had he or she known there were other market participants interested in trading at such price, NYSE responded that nothing prevented the limit order from being entered at such better price at the outset. 95 Furthermore, NYSE believes that nothing in the securities laws or Exchange rules require that every market participant fully disclose their interest at the best price possible; instead, customers are permitted to choose from a variety of options, including the order management provided by floor brokers. 94 *See* Response to Comments. 95 *But see* Rutherfurd Letter III (arguing that participants entering public limit orders could only react to publicly available information). In response to commenters' suggestion that floor brokers should retain the right to exclude specialists from trading on parity when increasing a position with respect to automatic executions, NYSE noted that this provision was approved in the Hybrid Market Order. To the extent that floor brokers wish to prevent specialists from trading on parity with their orders in the Hybrid Market, NYSE stated that floor brokers could send those orders for execution through SuperDot. 96 In response to a commenter's objection to NYSE's proposal to deactivate the discretionary instructions of a d-Quote during a sweep that is initiated by other orders, 97 NYSE stated that this amendment recognizes that when a d-Quote is participating in a sweep, as opposed to initiating a sweep, employing the discretionary pricing instructions of the d-Quote would not provide additional value to the customer being d-Quoted. 98 With regard to the comments on the Exchange's proposed implementation schedule, 99 NYSE acknowledged that, given the complexity of the software developed for the d-Quote functionality and the extensive system changes required to enable increased automatic execution capabilities, it has not been able to launch all of these initiatives at the same time. 100 NYSE explained that floor brokers had requested the d-Quoting functionality well after the design of e-Quoting was completed and the necessary programming changes were scheduled. As a result, d-Quoting was initially slated for implementation as part of the last phase of the Hybrid Market. However, in response to requests from floor brokers, NYSE claimed that it has made every effort to move d-Quote implementation forward as much as possible. In addition, NYSE stated that it would be adding to the upcoming software releases a number of other changes recently requested by floor brokers, designed to improve the efficiency of the devices they use to access the market. Furthermore, NYSE maintained that the rollout of d-Quotes is timed to a program that provides ample training and trading practice for floor brokers using the new functionality. Accordingly, NYSE believes that the sheer volume of system and other required software changes, coupled with the need for appropriate training, mandates that the Exchange implement d-Quoting in two parts. 101 Finally, NYSE believes that the phase-in process would be sensitive to the varied needs of all market participants affected by the introduction of these complex changes, and that thorough and proper broker training and preparation for the d-Quote is essential, as it protects the broker from making unintended trading errors. 96 NYSE believes this solution was supported by floor brokers who worked with the Exchange in designing the e-Quote. *See* Response to Comments. *But see* Rutherfurd Letter III (arguing that NYSE's response is not providing a feasible means for a floor broker to protect its public customer from unnecessary specialist competition since, as a practical matter, floor brokers would not be able to participate in the Hybrid Market if they were to send their orders through SuperDot). 97 *See* IBAC Letter. 98 *See* Response to Comments. 99 *See* IBAC Letter. 100 *See* Response to Comments. 101 *See* Section III., D. for a complete discussion of the two-part implementation. V. Discussion After careful review and consideration of the comments, the Commission finds that the proposed rule change, as amended, is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange and, in particular, with the requirements of Section 6(b) of the Act. 102 Specifically, the Commission finds that approval of the proposed rule change, as amended, is consistent with Section 6(b)(5) of the Act 103 in that the proposal is designed to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. Further, the Commission believes that the proposed rule change, as amended, is consistent with Section 11A(a)(1)(C) of the Act, 104 in which Congress found that it is in the public interest and appropriate for the protection of investors and the maintenance of fair and orderly markets to assure:
(1)Economically efficient execution of securities transactions;
(2)fair competition among brokers and dealers and among exchange markets, and between exchange markets, and markets other than exchange markets;
(3)the availability to brokers, dealers, and investors of information with respect to quotations and transactions in securities;
(4)the practicability of brokers executing investors' orders in the best markets; and
(5)an opportunity for investors' orders to be executed without the participation of a dealer. 102 15 U.S.C. 78f(b). In approving this proposal, the Commission has considered the proposed rules' impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). 103 15 U.S.C. 78f(b)(5). 104 15 U.S.C. 78k-1(a)(1)(C). Currently in the NYSE auction, floor brokers represent their customers' orders for execution. For many orders, floor brokers have discretion to determine the price at which their customers' orders should be executed, subject to their agency obligations and best execution requirements. As the NYSE market becomes more automated, NYSE and its floor brokers have considered how floor brokers can continue to represent their customers in a meaningful fashion. NYSE continues to believe that its physical auction on the floor will play an important role in its market even as automated execution expands. In the Hybrid Market, as approved, NYSE made provisions to allow its floor brokers to represent their customers in the electronic portion of the market. NYSE, however, also placed restrictions on their activities to reflect the continued role of the auction on the floor. Specifically, NYSE requires its floor brokers to be in the “Crowd” when representing customers electronically so that they can be available to represent their customers should the market move to the floor. With this current proposal, NYSE proposes to give floor brokers more tools with which to represent their customers. NYSE represents that the discretionary instructions that it has proposed are intended to replicate the manner in which floor brokers represent orders in the auction. In addition, NYSE stated that d-Quotes will enable floor brokers to compete with other participants in an automated market place, including specialists, and may enhance the quality of order execution on the Exchange. As discussed above, d-Quotes will enable floor brokers to place within the Display Book system, in a manner that is not displayed, the prices and sizes at which their customers are willing to trade if a contra side order arrives in the market. The d-Quote could enable floor brokers to better compete with other market participants, and possibly enhance the quality of order execution on the Exchange. The Commission believes that the Exchange's proposed d-Quote functionality is broadly consistent with the requirements of the Act, and within the realm of business judgment generally left to the discretion of individual markets. The pegging function will enable floor brokers to remain in the Exchange BBO as the quote moves. As the markets become more electronic it may be very difficult for a floor broker to effectively manually adjust the prices of its customers' orders in the Display Book system. The Commission believes that the proposed pegging function should provide floor brokers with the ability to track the quote as it changes, thereby providing floor brokers with an additional tool to offer liquidity at the Exchange BBO, once the Exchange shifts from the manual auction market to a faster, predominantly electronic market. The pegging function also is designed to help them continuously meet one of the requirements for using the d-Quote—namely, maintaining an e-Quote at the NYSE BBO. Accordingly, the Commission finds that the proposal to implement a pegging function for floor brokers is consistent with the requirements of the Act. A. Comments 1. Transparency One commenter argued that the proposal would have an adverse impact on transparency because the discretionary instructions would not be disclosed to the public. The commenter argued that by not disclosing d-Quotes to the public, the Exchange was making its market less transparent to investors who seek liquidity and would be denying executions to investors who post liquidity. According to the commenter, the proposal would lessen incentives to post liquidity by allowing d-Quotes to trade despite the existence of displayed limit orders. The commenter also argued that the lack of transparency of the d-Quotes would negatively impact the price discovery process by lessening the usefulness of the NBBO. The commenter argued that investors would be denied complete information about the current state of the prices and sizes at which other investors are willing to trade. Unlike the current auction where, according to the commenter, only interest that is disclosed is permitted to participate in an execution, d-Quotes will participate in an execution if their terms are fulfilled without disclosure to other market participants who may be willing to trade at the same or better price. The Commission notes that it has never required complete disclosure of all trading interest, and that it has permitted the use of undisplayed order types. Today, for example, floor brokers may hold significant trading interest that may be available for execution that is not broadly disclosed, but that may participate in a transaction on the Exchange. NYSE has proposed a means by which floor brokers can continue to represent customers without having to disclose the customers' entire orders. Floor brokers will be able to adjust their d-Quotes to reflect their customers' investment strategies. The Commission believes that NYSE has designed its proposal to allow floor brokers to represent their customers in a manner similar to how they operate in the auction market. The Commission believes that the proposal is not likely to substantially reduce transparency because these orders are not currently displayed. The Commission also notes that it has approved similar undisplayed order types for use by other markets. 105 Accordingly, the Commission finds that the proposal is consistent with the Act. 105 *See* Securities Exchange Act Release Nos. 47467 (March 7, 2003), 68 FR 12134 (March 13, 2003) (approving pegging orders in Pacific Exchange, Inc.) and 48798 (November 17, 2003), 68 FR 66147 (November 25, 2003) (approving pegging orders in Nasdaq Stock Market, Inc.); and 44983 (October 25, 2001), 66 FR 55225 (November 1, 2001) (approving discretionary orders in Pacific Exchange, Inc.) and 49085 (January 15, 2004), 69 FR 3412 (January 23, 2004) (approving discretionary orders in Nasdaq Stock Market, Inc.). *See also* Securities Exchange Act Release No. 54511 (September 26, 2006), 71 FR 58460 (October 3, 2006) (approving passive liquidity order in NYSE Arca, Inc.). 2. Informational Advantages for Floor Brokers In the proposal, the Exchange states that it is intending to replicate, in the Hybrid Market, the manner in which floor brokers utilize their judgment in quoting and trading on behalf of their customers' orders in the auction market. One commenter questions whether the proposal actually replicates the auction market. 106 The commenter believes that the proposal would introduce a new manner of trading that is unfair to public limit orders and provides informational advantages to floor brokers. The commenter believes that the proposal would replicate the time and place advantage enjoyed by floor brokers in the auction market, without maintaining the counterbalance of the auction market's transparency of bids and offers, and the requirement that orders cannot trade before they are exposed to the market. Further, the commenter argued that floor brokers could enter their d-Quotes with full knowledge of the public limit orders, while public investors would not be provided reciprocal knowledge of the d-Quotes. Thus, the commenter believes that public investors are inappropriately denied the ability to change their limit prices in response to the trading instructions attached to d-Quotes. 106 *See* Rutherfurd Letters I and III. In the Response to Comments, the Exchange noted that, without d-Quotes, investors that use floor brokers to represent their orders would not be able to access the Hybrid Market in a similar manner to which they access the auction market today. The Exchange believes that it designed the proposal to closely replicate the auction market in an electronic environment. Further, the Exchange responds that in today's auction market, orders that are held and represented by floor brokers are not transparent. The Exchange represented that it designed the proposal to permit floor brokers to make the same types of trading decisions for the orders they hold in the Crowd today. The Exchange believes the proposal would not substantially alter the amount of information currently available on the Exchange. Specialists and floor brokers would not have access to information about d-Quotes entered by other floor brokers. The Exchange also stated that public investors entering limit orders would have the same amount of information as is currently available, which does not include knowledge of floor broker trading interest. Likewise, floor brokers would not have any more market information on the Exchange than they do today. Accordingly, the Commission does not believe that the proposal would provide floor brokers with an inappropriate informational advantage or reduce the amount of information that is currently publicly available. 3. Section 11A of the Act One commenter argued that the proposal was inconsistent with Section 6(b) of the Act and Section 11A(a)(1)(C)(i) of the Act 107 because the commenter believes that the proposal is unfairly discriminatory and anti-competitive. 108 Specifically, the commenter argues that because the proposal would provide floor brokers with an exclusive right to enter d-Quotes, the proposal unfairly discriminates against customers who do not use floor brokers, and places a burden on competition that is not necessary in furtherance of the purposes of the Act. Further, the commenter argues that the proposal inhibits the economically efficient execution of orders, which Section 11A(a)(1)(C)(i) of the Act 109 states is a goal of the national market system. The commenter notes that, under the proposal, investors who seek to utilize discretionary instructions would be forced to pay a floor broker, who the commenter argues, then merely performs the clerical function of entering the order into the Exchange system for execution. The commenter believes that institutional investors should be free to exercise their own judgment without the requirement to employ any third parties. The commenter also noted that all market participants should have a fair opportunity to trade and trading should not be conducted with unnecessary human intervention. 107 15 U.S.C. 78k-1(a)(1)(C)(i). 108 *See* Rutherfurd Letters I and III. 109 15 U.S.C. 78k-1(a)(1)(C)(i). The Commission notes that today if investors wish to have their orders represented in the NYSE auction market, they must either send their order to the Book for representation by a specialist or send their order to a floor broker for representation. 110 In the Hybrid Market, NYSE has decided to retain a role for its floor members in its market. The commenter stated that he believed that “pure electronic trading is not only defensible but highly desirable” and thus, appears to fundamentally disagree with the market structure that NYSE has developed. However, Congress clearly contemplated that the markets should be able to compete through the adoption of different market models. 111 110 Small marketable limit orders can be automatically executed in Direct+. 111 As Congress noted when it adopted the 1975 Act Amendments that it was “not the intention of the bill to force all markets for all securities into a single mold.” *See* S. Rep. No. 94-75, 94th Cong., 1st Sess. 7 (1975). Congress instructed the Commission to seek to “enhance competition and to allow economic forces, interacting with a fair regulatory field, to arrive at appropriate variation in practices and services. It would obviously be contrary to this purpose to compel elimination of differences between types of markets or types of firms that might be competition-enhancing. *Id.* NYSE has sought to replicate its current market in a more electronic manner, yet while retaining some distinctive features of its floor. As the Commission indicated in the Hybrid Market Order, the Exchange has a degree of flexibility to develop its market model so long as it does so within the framework of the Act. The Commission believes that the proposal is broadly consistent with Section 11A of the Act in that it incorporates features that may provide investors with the opportunity to receive economically efficient execution of their securities transactions and promote fair and orderly markets. 112 The Commission believes that while d-Quotes would not be displayed, they could provide benefits to the market such as increased liquidity and improved prices. The Commission notes that undisplayed d-Quotes would never execute ahead of a displayed order that is at the same or better price. 112 15 U.S.C. 78k-1. A significant feature of the d-Quote is to potentially offer public investors a means, through the use of floor brokers, to compete with specialists in providing price improvement to incoming marketable orders. The Commission believes that d-Quote could provide meaningful competition to the specialist in providing price improvement, and thus promote competition on the Exchange floor. Accordingly, the Commission does not believe that the proposal is inconsistent with Section 11A of the Act. 113 113 15 U.S.C. 78k-1. 4. Sweeps In the Hybrid Market, once an auto ex order trades with interest at the Exchange BBO, the remainder, if any, would automatically sweep the Display Book system by trading with liquidity outside the BBO. Under the proposal, d-Quotes could also participate in sweeps initiated by other orders, but their discretionary instructions would not be active. 114 One commenter believes that a sweep initiated by other orders should not deactivate the discretionary instructions. 115 The Exchange responds that when a d-Quote is participating in a sweep, the discretionary functions would not provide additional value to the customer. 114 *See* proposed NYSE Rule 70.25(d)(ix). 115 *See* IBAC Letter. The Commission believes that the Exchange has some latitude to determine the types of functions that it believes would be most attractive to its market participants. Accordingly, the Commission believes that the treatment of d-Quote in sweeps is reasonable and broadly consistent with the requirements of the Act. 5. Implementation The Exchange proposes to implement the d-Quote proposal in two parts, in Phase 3 and Phase 4 of the Hybrid Market implementation. One commenter argued that d-Quote should be implemented at the same time as the Specialist Algorithms, because the commenter believes that the proposal is necessary to maintain market balance. 116 The commenter believes that implementing the Specialist Algorithms first would risk a mass exodus of volume from the Exchange. In the Response to Comments, the Exchange stated that, due to the complexities of the system changes required by the implementation of the Hybrid Market, the Exchange is not able to launch the proposal at the same time as the Specialist Algorithms. 116 *See* IBAC Letter. The Commission believes that the Exchange's proposed implementation schedule is reasonable and consistent with the requirements of the Act. The Commission notes that Phase 3 is when the Exchange anticipates switching to a substantially more automated market, and believes that the proposed staggered implementation schedule is reasonably designed to allow the Exchange to adequately test the changes to its systems. VI. Conclusion For the foregoing reasons, the Commission finds that the proposed rule change, as amended, is consistent with the Act and the rules and regulations thereunder applicable to a national securities exchange, and, in particular, with Section 6(b)(5) of the Act 117 and Section 11A of the Act. 118 117 15 U.S.C. 78f(b)(5). 118 15 U.S.C. 78k-1. *It is therefore ordered,* pursuant to Section 19(b)(2) of the Act, 119 that the proposed rule change (SR-NYSE-2006-36) and Amendment Nos. 1 and 2 are approved. 119 15 U.S.C. 78s(b)(2). 120 17 CFR 200.30-3(a)(12). For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 120 Nancy M. Morris, Secretary. [FR Doc. E6-16888 Filed 10-11-06; 8:45 am] BILLING CODE 8011-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-54578; File No. SR-NYSE-2006-82] Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Order Granting Accelerated Approval of a Proposed Rule Change Relating to A Pilot Until 10/31/06 to Put Into Operation Certain Rule Changes Pending Before the Securities and Exchange Commission to Coincide With the Exchange's Implementation of Phase 3 of the NYSE HYBRID MARKET SM October 5, 2006. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”), 1 and Rule 19b-4 thereunder, 2 notice is hereby given that on October 5, 2006 the New York Stock Exchange LLC (“NYSE” or “Exchange”) filed with the Securities and Exchange Commission (“Commission” or “SEC”) the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. The Commission is publishing this notice and order to solicit comments on the proposed rule change from interested persons and to approve the proposed rule change on an accelerated basis. 1 15 U.S.C 78s(b)(1). 2 17 CFR 240.19b-4. I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange is proposing a pilot (the “Pilot”) to put into operation certain rule changes pending before the Commission to coincide with the Exchange's implementation of NYSE HYBRID MARKET SM (“Hybrid Market”) 3 Phase 3 for the securities identified in Exhibit 3 of its filing. The text of the proposed rule change is available on NYSE's Web site ( *http://www.nyse.com* ), at the principal office of the Exchange, and at the Commission's Public Reference Room. 3 The Hybrid Market was approved on March 22, 2006. *See* Securities Exchange Act Release No. 53539 (March 22, 2006), 71 FR 16353 (March 31, 2006) (SR-NYSE-2004-05) (“Hybrid Market Order”). II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the NYSE included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item III below. The NYSE has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Commission approved the Hybrid Market on March 22, 2006. 4 The approved rules did not become effective immediately; rather they are being implemented in a series of phases over a period of time. 4 *Id.* Implementation of Phase 1 of the Hybrid Market, which focused primarily on the ability of Floor brokers to electronically represent their customers' interest (“e-Quote”), was substantially completed on April 5, 2006. Phase 2 of the Hybrid Market focused primarily on the ability of specialists to use their algorithmic systems to quote and trade. The installation of software necessary to implement Phase 2 of the Hybrid Market has been installed Floor-wide. Some specialist firms have been in the process of readying their systems to quote and trade with receipt of order information, while others have begun quoting with receipt of such information. Phase 2 will continue to become operational concurrently with the roll out of Phase 3. In addition, beginning June 21, 2006, specialists were permitted to algorithmically quote (“s-Quote”) in their specialty securities, without the receipt of order information as such orders are entering Exchange systems. 5 Starting August 15, 2006, specialists were permitted to send algorithmically-generated trading messages to interact with the Exchange quotation (“hit bid/take offer”), also without receipt of order information as such orders are entering Exchange systems. 6 5 *See* Securities Exchange Act Release No. 54024 (June 21, 2006), 71 FR 36849 (June 28, 2006) (SR-NYSE-2006-44). This is effective until Phase 2 is fully implemented. 6 *See* Securities Exchange Act Release No. 54316 (August 15, 2006), 71 FR 48569 (August 21, 2006) (SR-NYSE-2006-59). This is effective until Phase 2 is fully implemented. Phase 3 of the Hybrid Market, as approved, includes implementation of the following features: • Automatic routing of orders to automated markets posting better bids and offers in accordance with Regulation NMS; • Availability of NYSE IOC orders for automatic executions; • Use of indicators to identify NYSE quotations that are not immediately available for automatic execution; • Implementation of gap quoting requirements; • Elimination of 1,099 size restriction for automatic executions and increase in size eligibility for automatic executions to 1 million shares; 7 7 *See* Securities Exchange Act Release No. 54520 (September 27, 2006), 71 FR 57590 (September 29, 2006) (SR-NYSE-2006-65) (proposing to amend several Exchange Rules to clarify certain definitions and systemic processes (“Omnibus Filing”)). • Elimination of 30-second restriction on the entry of auto ex orders on orders from the same person; • Availability of automatic executions through the close; • Elimination of Direct+ availability only to straight limit orders; • Elimination of Direct+ suspensions due to price ( *i.e.* , a trade at a price that would be more than five cents from the last trade in the stock on the Exchange); • Elimination of Direct+ suspensions due to size ( *i.e.* , a 100-share published bid or offer); • Conversion of marketable limit orders to auto ex orders; and • Automatic executions of market orders. 8 8 *Id.* The Exchange intends to begin implementation of Phase 3 on October 6, 2006. The Exchange has proposed changes to some of the rules already approved for implementation in Phase 3 9 as well as moving the implementation of sweeps and liquidity replenishment points (“LRPs”) originally included for Phase 4 to Phase 3. 10 9 *See* Omnibus Filing. 10 The Commission notes that the Exchange has proposed changes to its sweep functionality and LRPs. Specifically, in the Omnibus Filing, the Exchange proposes to amend NYSE Rule 1000(d)(iii) to provide that during a sweep, an order will trade with all interest at each price capable of trading, before moving to the next price point. In addition, the Exchange proposes to amend NYSE Rule 1000(a)(iv) to implement a single LRP rather than the two LRPs originally approved in the Hybrid Market Order. These Omnibus Filing changes are included in the Pilot. In addition, the Exchange has proposed modifications to other Exchange Rules that the Exchange proposes to become operational as part of Phase 3 and are the subject of other pending rule filings. 11 The substantive proposed amendments in the Omnibus Filing, Stabilization Filing and Block Cross Filing are necessary to a successful implementation of Phase 3, except the proposed changes in the Omnibus filing applicable to “auction limit” and “auction market” orders. These order types will not be available in Phase 3. 11 *See* Securities Exchange Act Release No. 54504 (September 26, 2006), 71 FR 57011 (September 28, 2006) (SR-NYSE 2006-76) (proposing to amend the specialist stabilization requirements set forth in Exchange Rule 104.10 (“Stabilization Filing”)); and SR-NYSE-2006-73 (filed on September 13, 2006) (proposing to amend Exchange Rule 127 which governs the execution of a block cross transaction at a price outside the prevailing NYSE quotation (“Block Cross Filing”)). *See also* Omnibus Filing (proposing amendments to Exchange Rules related to stop order and stop limit orders). Accordingly, the Exchange proposes to implement on a pilot basis the changes that the Exchange has proposed in the Omnibus Filing, Stabilization Filing, and the Block Cross Filing. 12 The proposed amendments to rules previously approved in the Hybrid Market 13 and new proposals 14 are discussed in detail in those filings. The Pilot would apply to a group of securities, known as Phase 3 Pilot securities (“Pilot securities”). 15 The Pilot would commence following Securities and Exchange Commission approval of the Pilot 16 and will terminate on the close of business on October 31, 2006. 12 The amendments to Exchange rules proposed pursuant to the Omnibus Filing, Stabilization Filing and Block Cross Filing are attached to the filing, available on the Exchange's Web site, as Exhibits 5A, 5B, and 5C respectively. In Exhibit 5 of the filing the Exchange proposes to retain NYSE Rule 104.10(7) and to add language to NYSE Rule 104.10(5)(i)(a)(II)(a) to clarify that such transactions are other than those reaching across the market. These changes are not reflected in the Stabilization Filing and Exhibit 5B. In addition, in Exhibit 5 of the filing, the Exchange proposes additional changes to Exchange Rule 127 that are also not reflected in the Block Cross Filing and Exhibit 5C. The Exchange intends to submit amendments to the aforementioned filings to the Commission to reflect these changes. 13 *See* Omnibus Filing. 14 *See* Stabilization Filing, Block Cross Filing and proposed amendments to stop orders and stop limit orders contained in Omnibus Filing. 15 Phase 3 Pilot securities will also be posted on the Exchange's Web site. 16 The changes related to stop orders and stop limit orders proposed in the Omnibus Filing will be implemented on October 16, 2006 pending SEC approval of this Pilot, to give customers and member organizations sufficient time to make any changes necessary as a result of the elimination of stop limit orders. The Exchange plans to phase-in the securities in the Pilot, if approved, over several weeks. However, Exchange Rule 1002(P3) (“Availability of Automatic Execution Feature”), which extends automatic executions to the close, will apply to all securities on the Exchange upon commencement of the Pilot. 17 17 The extension of automatic executions to the close as set forth in NYSE Rule 1002 was approved as part of the Hybrid Market filings. *See* Securities Exchange Act Release No. 53539, *supra* note 3. As approved, NYSE Rule 1002 was always intended for implementation in Phase 3. The amendments to NYSE Rule 1002, set forth in the pending Omnibus Filing, are merely technical in nature, clarifying the rule's applicability, rather than the operation. To eliminate possible confusion as to which Exchange Rules or sections thereof apply to the Pilot securities, the Exchange has identified the rules that will be operational during the Pilot with a “P3.” For purposes of the Pilot, the Exchange further requests that the Commission re-interpret the specialist's negative obligation to eliminate the requirement with respect to Exchange Rule 104(a) that each trade by the specialist for the dealer account meet a test of reasonable necessity. 18 The Exchange believes that such an interpretation is appropriate in view of the development of the national market system over the past seventy years since the interpretation was initially issued. 18 The Exchange is not seeking to have the Commission eliminate trade-by-trade analysis with respect to rules specifically calling for such an analysis, such as rules relating to Prohibited trades under NYSE Rule 104.10(5) and Conditional trades in inactive securities and NYSE Rule 104.10(6). According to the Exchange, the Commission has been granted specific authority by Congress to reinterpret the negative obligation. Specifically, in 1975, in connection with the 1975 amendments 19 to the Act, Congress eliminated the negative obligation clause from Section 11(b) of the Act and gave the Commission the flexibility to define dealer obligations for both exchange members and over-the-counter market makers. In making the changes, Congress noted that changes in the marketplace might warrant changes in the scope of the dealer obligation: 19 Securities Acts Amendments of 1975 (“1975 Amendments”), Pub. L. No. 94-29, 89 Stat. 97 (June 4, 1975). It might well be that with active competition among market makers and the elimination of trading advantages specialists now enjoy, such a restriction on specialists' dealings would become unnecessary. Because trading patterns and market making behavior in the context of a national market system cannot now be predicted, it appears appropriate to expand the Commission's rulemaking authority in this area so that the Commission may define responsibilities and restrict activities of specialists in response to changing market conditions. 20 20 S. Rep. No. 94-75, at 100 (1975). The Exchange believes that the conditions for change that were identified by Congress have largely come to pass, and that as a result, it is appropriate to redefine the scope of the specialist's negative obligation. For example, the institutionalization of the market, increased competition, and increased application of computer and communication technology has significantly diminished the time-and-place advantages of specialists. As a result, markets have seen increases in the average daily trading volume and the movement off the Floor of the decision making that affects the direction and extent of movements in the specialty stocks. There is also a dramatic increase in transparency with respect to the specialist's book through, among other things, Exchange initiatives like Exchange OPENBOOK. TM This increased transparency gives all market participants, both on and off the Floor, a greater ability to see and react to market changes. There has also been a significant increase in competition in Exchange-listed securities. For example, unlike in previous years, Exchange specialists must now compete with upstairs liquidity providers and with multiple OTC dealers, crossing networks and Alternative Trading Systems. As a result of UTP and dual listings, specialists also face competition from other national and regional exchanges. For all of these reasons, the Exchange believes that it is appropriate to reinterpret the negative obligation away from an emphasis on trade-by-trade necessity, and toward an approach based on patterns and practices in the trading of specialty securities for the dealer account. New York Stock Exchange Regulation (“NYSER”) has appropriate surveillance procedures in place to surveil for compliance with the negative obligation by specialists. For example, NYSER will monitor, on a pattern and practice basis, specialist activity that appears to cause or exacerbate an excessive price movement in the market, as such transactions would appear to be in violation with a specialist's negative obligation. Additionally, the Division of Market Surveillance of NYSER will monitor for all subsequent action taken by the specialist, or lack thereof, to cushion such price movement. As today, the Exchange will in the context of price volatility alerts, monitor for excessive price movements that may involve a failure to comply with either the affirmative or negative obligation. As the Exchange gains experience with its new market structure, the Exchange will enhance existing surveillances and/or create new surveillances where necessary and appropriate to monitor for compliance with the specialist negative obligations. The Exchange believes the Pilot will prove beneficial from both a technology and a training perspective. The process will allow for a controlled and moderated roll out of the new systems and capabilities. The Pilot will allow the Exchange to commence implementation of Hybrid Market Phase 3, as amended, therefore providing the Exchange and users with real-time testing of those functionalities. Further, the Pilot will give the Exchange the opportunity to identify and address any system problems and to identify and incorporate beneficial system changes that become apparent as a result of usage in real time and under real market conditions. The ability to have such real time user interface will be invaluable, as it is impossible to accurately anticipate behavioral changes in a development or mock-trading environment. In addition, the Pilot will allow users to gain essential practical experience with the new systems and processes in a well-modulated way. Prior to the Pilot, there has been comprehensive training for both Floor brokers and specialists, individually and together in a mock trading environment. Training was conducted by the Exchange and was supplemented in most cases by firm-specific training conducted by member organizations for their employees. The Exchange training environment was made available also to proprietary system vendors for their training sessions. In addition, testing has occurred at all levels, including development testing, automation testing, SIAC testing, NYSE testing, integrated system testing and code reviews, production environment testing, fall-back and recovery testing, and regression and new functionality testing. Moreover, the Exchange intends to have available at all times during the Pilot two versions of the operating software—the new version that would be operational and the original, pre-Pilot version. If a problem develops during the Pilot, the Exchange will be able to revert to the pre-Pilot software within an average time of two minutes or less. The Pilot will also enable the Exchange to be fully Regulation NMS 21 -compliant by February 5, 2007 date and comply with its obligations under the proposed NMS Linkage Plan. 22 Without this Pilot, it is unlikely the Exchange will be able to meet either requirement. 21 *See* Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496 (June 29, 2005) (17 CFR Parts 200, 201, 230, 240, 242, 249, and 270). 22 A “Plan for the Purpose of Creating and Operating an Intermarket Communications Linkage Pursuant to Section 11A(a)(3)(B) of the Securities Exchange Act of 1934” to facilitate trades between different market centers. *See* Securities Exchange Act Release No. 54551 (September 29, 2006). The Commission published notice of the NMS Linkage Plan on July 28, 2006. *See also* Securities Exchange Act Release No. 54239 (July 28, 2006), 71 FR 44328 (August 4, 2006), 17 CFR 242.608. The Exchange anticipates that the Pilot will operate with minimal problems given the amount and degree of testing and training that has occurred to date. Accordingly, the Exchange believes that the extensiveness of the testing and training, the phase-in approach described above and the fall-back capabilities of Exchange Systems provide significant assurances that the Pilot will operate as expected. However, in the event systems or other problems arise with the Pilot that adversely impact investors or impede the Exchange's ability to maintain a fair and orderly market, the Exchange will immediately terminate the Pilot in whole or in part, as appropriate, and return trading to current operations under current NYSE rules. Finally, the Exchange represents that it will provide the Commission with any and all data and analysis the Commission may request regarding the operation of the rules governing stabilization. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with Section 6(b)(5) of the Act 23 that an exchange have rules that are designed to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system and, in general, to protect investors and the public interest. The Exchange believes that the proposed rule change is also designed to support the principles of Section 11A(a)(1) 24 of the Act in that it seeks to assure economically efficient execution of securities transactions, make it practicable for brokers to execute investors' orders in the best market and provide an opportunity for investors' orders to be executed without the participation of a dealer. 23 15 U.S.C. 78f(b)(5). 24 15 U.S.C. 78k-1(a)(1). B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others The Exchange has neither solicited nor received written comments on the proposed rule change. 25 25 The Commission notes that it has received a comment letter in response to the Omnibus Filing. III. Solicitation of Comments Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov.* Please include File Number SR-NYSE-2006-82 on the subject line. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, Station Place, 100 F Street, NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-NYSE-2006-82. 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 NYSE. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-NYSE-2006-82 and should be submitted on or before November 2, 2006. IV. Commission's Finding and Order Granting Accelerated Approval of the Proposed Rule Change The Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange. 26 Specifically, the Commission finds that approval of the proposed rule change is consistent with Section 6(b)(5) of the Act because the proposal is designed to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. 26 In approving this proposal, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). With this proposed rule change, the Exchange has requested temporary approval by the Commission of certain proposed amendments to the rules that govern its Hybrid Market, so that it may begin to implement Phase 3, with the rules that the Exchange has proposed to amend while these changes are pending approval by the Commission. According to the Exchange, this Pilot is necessary so that the Exchange can maintain its planned implementation schedule for the Hybrid Market and meet the Regulation NMS compliance dates. In addition, this Pilot will allow NYSE to comply with the new NMS Linkage Plan. The Commission is considering each of the proposed filings that are pending, including comments received, if any, and has not reached a decision on whether they should be approved or disapproved. The Commission, however, believes that due to the limited nature of the Pilot and its short duration, it is consistent with the Act to allow NYSE to implement the Pilot so that it may remain on schedule for Regulation NMS compliance, begin testing its new systems with this Pilot and comply with the NMS Linkage Plan. The NYSE explained in its filing that it has tested these Hybrid Market functions extensively but that it needs to test them in an actual trading environment to ensure that they operate as intended. Accordingly, NYSE represented that it does not anticipate any significant problems arising from the Pilot. However, NYSE will immediately terminate the Pilot, in whole or in part, as appropriate, should any systems or other problems arise that adversely impact the protection of investors or impede its ability to maintain a fair and orderly market, and return trading to its current operations under current NYSE rules. 27 27 The Exchange stated that it would be able to revert back to pre-Pilot operations within an average of two minutes or less. The Exchange represents that it intends to have available at all times during the Pilot two versions of the operating software:
(1)The new version that would be operational during the Pilot and
(2)the original, pre-Pilot version which would operational in case the Pilot prematurely needs to be terminated. The Exchange will notify the public via its Web site if the Pilot is terminated in whole or in part. In addition, the Exchange will notify floor members at the post if the Pilot is terminated in whole or in part. A. Stabilization Filing The Commission is currently considering the Stabilization Filing. As noted above, the Exchange has also requested a temporary interpretation by the Commission of the specialists' negative obligation set forth in NYSE Rule 104(a) to eliminate the requirement that each trade by a specialist meet a test of reasonable necessity. NYSE Rule 104(a) states that “no specialist shall effect on the Exchange purchases or sales of any security in which such specialist is registered, for any account in which he or his member organization * * * is directly or indirectly interested, unless such dealings are reasonably necessary to permit such specialist to maintain a fair and orderly market * * *” In 1937, the Commission issued an interpretation (“Saperstein Interpretation”) that among other things, stated that each transaction by a specialist for his own account must meet the test of reasonable necessity. 28 The Saperstein Interpretation made clear that specialist's transactions for his own account would be required to meet the rule on a transaction-by-transaction basis, rather than on a review of such transactions generally. 28 *See* Securities Exchange Release No. 1117 (March 30, 1937), at 4. In its filing, the NYSE requested that the Commission re-interpret the specialist's negative obligation to eliminate the requirement that each trade by the specialist for its dealer account meet a test of reasonable necessity. The Exchange has stated that it intends to amend the Stabilization Filing to include such a request there as well. The Commission notes that the comment period for the Stabilization Filing has not yet expired, and the Commission specifically requests comment on the appropriateness of the Exchange's request to amend the Commission's interpretation that the specialist's negative obligation be evaluated on a transaction-by-transaction basis. The Commission agrees with the NYSE that the national market system has changed greatly in the nearly seventy years since the Saperstein Interpretation was issued. The Commission also agrees that increased automation and competition—both within the Hybrid Market and in the markets generally—are significant factors, among others, that must be considered with regard to the scope of specialists' responsibilities and obligations. The Commission intends to fully consider the NYSE's request relating to the transaction-by-transaction requirement of the Saperstein Interpretation when it decides whether to approve the Stabilization Filing, as amended. However, the Commission preliminarily believes that the Exchange's request may have merit and, therefore, is permitting, as part of this Pilot, the Exchange to review the specialists' negative obligations on a pattern and practice basis, rather than on a transaction-by-transaction basis. The Commission emphasizes that this review applies solely to the interpretation of Exchange Rule 104(a) and notes that the specific requirements and restrictions applicable to specialists, set forth in NYSE Rule 104.10(5)(i)(b), Rule 104.10(5)(i)(c), and Rule 104.10(6), must be reviewed and complied with for each individual transaction. Further, this temporary interpretation applies solely to the Pilot Securities. The Exchange represented that it will conduct surveillance of specialist trading for compliance with their negative obligation. NYSE further represented that it will enhance existing surveillance and/or create new surveillances as necessary and appropriate to monitor for compliance with the negative obligation. The Commission wishes to emphasize that specialists remain subject to the restrictions set forth in the negative obligation with regard to proprietary trading. 29 29 *See also* Hybrid Market Order for a discussion of the negative obligation, supra note 3. B. Accelerated Approval of the Pilot Proposal The Commission finds good cause, pursuant to Section 19(b)(2) of the Act, 30 for approving the proposed rule change prior to the thirtieth day after the date of publication of the notice in the **Federal Register** . The Pilot, which as discussed above is limited in scope and duration, will allow the NYSE to remain on schedule for compliance with Regulation NMS, comply with the NMS Linkage Plan and to conduct real-time system and user testing of certain features of the Hybrid Market. According to NYSE, such testing should be beneficial from both a technology and a training perspective. Although preliminary steps have been taken—in the form of NYSE-provided training for both Floor brokers and specialists, training by member organizations for their employees, and training by proprietary system vendors in the NYSE trading environment for their training sessions—the Pilot should give the Exchange the opportunity to identify and address any system problems with these particular rules under the Hybrid Market. Further, the Pilot should allow users to gain essential practical experience with the new systems and processes. Therefore, the Commission finds that immediate implementation of the Pilot, which is limited in both scope and duration, should permit NYSE to remain on schedule to meet the Regulation NMS compliance dates, comply with the NMS Linkage Plan and continue to implement its Hybrid Market changes in an orderly manner. 30 15 U.S.C. 78s(b)(2). V. Conclusion *It is therefor ordered,* pursuant to Section 19(b)(2) of the Act, that the proposed rule change (SR-NYSE-2006-82) is hereby approved on an accelerated basis until October 31, 2006. For the Commission, by the Division of Market Regulation, by delegated authority. 31 31 17 CFR 200.30-3(a)(12). Nancy M. Morris, Secretary. [FR Doc. E6-16897 Filed 10-11-06; 8:45 am] BILLING CODE 8011-01-P SMALL BUSINESS ADMINISTRATION [Disaster Declaration # 10634] Disaster # ZZ-00002; The Entire United States and U.S. Territories AGENCY: U.S. Small Business Administration. ACTION: Notice. SUMMARY: This is a notice of the Military Reservist Economic Injury Disaster Loan Program (MREIDL), dated 10/1/2006. DATES: *Effective Date:* 10/1/2006. *MREIDL Loan Application Deadline Date:* 90 days after the essential employee is discharged or released from active duty. ADDRESSES: Submit completed loan applications to: U.S. Small Business Administration, Processing and Disbursement Center, 14925 Kingsport Road, Fort Worth, TX 76155. FOR FURTHER INFORMATION CONTACT: A. Escobar, Office of Disaster Assistance, U.S. Small Business Administration, 409 3rd Street, SW., Suite 6050, Washington, DC 20416. SUPPLEMENTARY INFORMATION: Notice is hereby given that as a result of Public Law 106-50, the Veterans Entrepreneurship and Small Business Development Act of 1999, this notice establishes the application filing period for the Military Reservist Economic Injury Disaster Loan Program. Effective 10/1/2006, small businesses employing military reservists may apply for economic injury disaster loans if those employees are called up to active duty during a period of military conflict existing on or after March 24, 1999 and those employees are essential to the success of the small business daily operations. The purpose of the Military Reservist economic injury disaster loan program (MREIDL) is to provide funds to eligible small businesses to meet its ordinary and necessary operating expenses that it could have met, but is unable to meet, because an essential employee was called-up to active duty in their role as a military reservist. These loans are intended only to provide the amount of working capital needed by a small business to pay its necessary obligations as they mature until operations return to normal after the essential employee is released from active duty. For information/applications contact 1-800-659-2955 or visit *http://www.sba.gov.* Applications for the Military Reservist Economic Injury Disaster Loan Program may be filed at the above address. The Interest Rate for eligible small businesses is 4.000. The number assigned for economic injury is 10634 0. (Catalog of Federal Domestic Assistance Number 59002). Herbert L. Mitchell, Associate Administrator for Disaster Assistance. [FR Doc. E6-16869 Filed 10-11-06; 8:45 am] BILLING CODE 8025-01-P SMALL BUSINESS ADMINISTRATION Small Business Size Standards: Waiver of the Nonmanufacturer Rule AGENCY: U.S. Small Business Administration. ACTION: Notice of intent to waive the Nonmanufacturer Rule for Personal Computers. SUMMARY: The U.S. Small Business Administration
(SBA)is considering granting a request for a waiver of the Nonmanufacturer Rule for Personal Computers Manufacturing. According to the request, no small business manufacturers are supplying this class of product to the Federal government. If granted, the waiver would allow otherwise qualified regular dealers to supply the products of any domestic manufacturer on a Federal contract set aside for small businesses; service-disabled veteran-owned small business or SBA's 8(a) Business Development Program. DATES: Comments and source information must be submitted October 27, 2006. ADDRESSES: You may submit comments and source information to Edith Butler, Program Analyst, U.S. Small Business Administration, Office of Government Contracting, 409 3rd Street, SW., Suite 8800, Washington, DC 20416. FOR FURTHER INFORMATION CONTACT: Edith Butler, Program Analyst, by telephone at
(202)619-0422; by FAX at
(202)481-1788; or by e-mail at *edith.butler@sba.gov.* SUPPLEMENTARY INFORMATION: Section 8(a)(17) of the Small Business Act (Act), 15 U.S.C. 637(a)(17), requires that recipients of Federal contracts set aside for small businesses, service-disabled veteran-owned small businesses, or SBA's 8(a) Business Development Program provide the product of a small business manufacturer or processor, if the recipient is other than the actual manufacturer or processor of the product. This requirement is commonly referred to as the Nonmanufacturer Rule. The SBA regulations imposing this requirement are found at 13 CFR 121.406(b). Section 8(a)(17)(b)(iv) of the Act authorizes SBA to waive the Nonmanufacturer Rule for any “class of products” for which there are no small business manufacturers or processors available to participate in the Federal market. As implemented in SBA's regulations at 13 CFR 121.1202(c), in order to be considered available to participate in the Federal market for a class of products, a small business manufacturer must have submitted a proposal for a contract solicitation or received a contract from the Federal government within the last 24 months. The SBA defines “class of products” based on a six digit coding system. The coding system is the Office of Management and Budget North American Industry Classification System (NAICS). The SBA is currently processing a request to waive the Nonmanufacturer Rule for Personal Computers, Manufacturing, North American Industry Classification System (NAICS) 334111. The public is invited to comment or provide source information to SBA on the proposed waiver of the Nonmanufacturer Rule for this class of NAICS code within 15 days after date of publication in the **Federal Register** . Dated: October 3, 2006. Karen C. Hontz, Associate Administrator for Government Contracting. [FR Doc. E6-16845 Filed 10-11-06; 8:45 am] BILLING CODE 8025-01-P DEPARTMENT OF STATE [Public Notice 5580] Culturally Significant Objects Imported for Exhibition Determinations: “Albers and Moholy-Nagy: From the Bauhaus to the New World” ACTION: Notice, correction. SUMMARY: On September 15, 2006, Notice was published on page 54548 of the **Federal Register** (volume 71, number 179) of the determinations made by the Department of State pertaining to the exhibit, “Albers and Moholy-Nagy: From the Bauhaus to the New World.” The referenced notice is corrected as to an additional object to be included in the exhibition. Pursuant to the authority vested in me by the Act of October 19, 1965 (79 Stat. 985; 22 U.S.C. 2459), Executive Order 12047 of March 27, 1978, the Foreign Affairs Reform and Restructuring Act of 1998 (112 Stat. 2681, *et seq.* ; 22 U.S.C. 6501 note, *et seq.* ), Delegation of Authority No. 234 of October 1, 1999, Delegation of Authority No. 236 of October 19, 1999, as amended, and Delegation of Authority No. 257 of April 15, 2003 [68 FR 19875], I hereby determine that an additional object to be included in the exhibition “Albers and Moholy-Nagy: From the Bauhaus to the New World,” imported from abroad for temporary exhibition within the United States, is of cultural significance. The additional object is imported pursuant to a loan agreement with the foreign owners or custodians. I also determine that the exhibition or display of the exhibit object at the Whitney Museum of American Art, New York, New York, from on or about November 2, 2006, until on or about January 21, 2007, and at possible additional venues yet to be determined, is in the national interest. Public Notice of these Determinations is ordered to be published in the **Federal Register** . FOR FURTHER INFORMATION CONTACT: For further information, including a list of the exhibit objects, contact Wolodymyr Sulzynsky, Attorney-Adviser, Office of the Legal Adviser, U.S. Department of State (telephone: 202/453-8050). The address is U.S. Department of State, SA-44, 301 4th Street, SW. Room 700, Washington, DC 20547-0001. Dated: October 4, 2006. C. Miller Crouch, Principal Deputy Assistant Secretary for Educational and Cultural Affairs, Department of State. [FR Doc. E6-16937 Filed 10-11-06; 8:45 am] BILLING CODE 4710-05-P DEPARTMENT OF STATE [Public Notice 5576] Meetings of the United States-Chile Environment Affairs Council and the United States-Chile Joint Commission for Environmental Cooperation ACTION: Notice and request for comments. SUMMARY: The Department of State and the Office of the United States Trade Representative
(USTR)are providing notice that, as set forth in Chapter 19 (Environment) of the United States-Chile Free Trade Agreement (FTA), the United States and Chile intend to hold the third meeting of the Environment Affairs Council (the “Council”) and the second meeting of the United States-Chile Joint Commission for Environmental Cooperation (the “Commission”) in Santiago, Chile on October 23-24, 2006. A public information session will be held for members of the public on October 23, at 3:30 p.m., in the Ministry of Foreign Relations, Teatinos 180, Conference Room, 17th floor. The purpose of the Council and Commission meetings is detailed below under SUPPLEMENTARY INFORMATION. The meeting agendas will include an evaluation of the eight cooperative projects outlined in the FTA's Environment Chapter and the 2005-2006 Work Program and a proposed 2007-2008 Work Program pursuant to the United States-Chile Environmental Cooperation Agreement (“the ECA”). The Department of State and USTR invite interested agencies, organizations, and members of the public to submit written comments or suggestions regarding agenda items. In preparing comments, we encourage submitters to refer to: • The FTA's Environment Chapter including Annex 19.3, and the Final Environment Review of the FTA, available at: *http://www.ustr.gov/Trade_Agreements/Bilateral/Chile_FTA/Section_Index.html.* • The ECA, available at: *http://www.state.gov/g/oes/env/tr/.* • Joint Declaration and Project Reports from the 2005 Council meeting at: *http://www.state.gov/g/oes/env/tr/2005/index.htm.* DATES: To be assured of timely consideration, comments are requested no later than October 20, 2006. ADDRESSES: Written comments or suggestions should be submitted to both:
(1)Lawrence Sperling, U.S. Department of State, Bureau of Oceans, Environment, and Science, Office of Policy Coordination Initiatives by electronic mail at *SperlingLI@state.gov* with the subject line “US-Chile EAC and JCEC Meetings” or by fax to
(202)647-5947 or
(202)647-1052; and
(2)Mara M. Burr, Deputy Assistant United States Trade Representative for Environment and Natural Resources, Office of the United States Trade Representative by electronic mail at *mburr@ustr.eop.gov* with the subject line “US-Chile EAC and JCEC Meetings” or by fax to or
(202)395-6865. FOR FURTHER INFORMATION CONTACT: Lawrence Sperling, Telephone
(202)647-2061 or Mara M. Burr, Telephone
(202)395-7320. SUPPLEMENTARY INFORMATION: The United States-Chile Free Trade Agreement
(FTA)entered into force on January 4, 2004. Article 3 of Chapter 19 (Environment) of the FTA establishes an Environment Affairs Council (the “Council”), which is required to meet at least once a year to discuss the implementation of, and progress under, Chapter 19. Chapter 19 requires that meetings of the Council include a public session, unless otherwise agreed by the two governments. Under Chapter 19, the two governments agreed to undertake eight specific cooperative activities set out in Annex 19.3 of the Chapter and to negotiate a United States-Chile Environmental Cooperation Agreement to further environmental cooperative activities. The United States-Chile Environmental Cooperation Agreement (the “ECA”) entered into force on May 1, 2004 and sets out a framework for environmental cooperative activities between the two governments. Article II of the ECA establishes the United States-Chile Joint Commission for Environmental Cooperation (the “Commission”), with responsibilities that include developing and periodically reviewing a Work Program. The Commission is required to meet at least every two years. The first meetings of the Council and the Commission were held on July 22, 2004, in Santiago, Chile, and the second meeting of the Council was held on October 24, 2005, in Washington, DC. Issues of mutual concern related to Chapter 19 of the FTA and progress reports on the eight cooperation projects under Chapter 19 were discussed at the second meeting of the Council. At the upcoming third meeting of the Council and second meeting of the Commission, the Council and Commission will consider implementation of the Chapter, including with respect to public participation, input from advisory committees, review of cooperative projects, the 2005-2006 ECA Work Program, and a proposed 2007-2008 ECA Work Program. At these meetings, the Council and Commission will also consider recommendations for future bilateral environmental cooperation. The public is advised to refer to the State Department Web site at *http://www.state.gov/g/oes/env/* for further information related to the Council and Commission meetings. Dated: October 6, 2006. David E. Brown, Director, Office of Environmental Policy, Department of State. [FR Doc. 06-8662 Filed 10-11-06; 8:45 am]
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18 references not yet in our index
  • Pub. L. 104-13
  • 10 CFR 52
  • 10 CFR 50
  • 10 CFR 100
  • 10 CFR 51
  • 10 CFR 2
  • Pub. L. 93-438
  • 10 CFR 35
  • Pub. L. 104-66
  • 10 CFR 20
  • 17 CFR 240.12
  • 15 USC 78
  • 17 CFR 240.13
  • 17 CFR 240.19
  • Pub. L. 94-29
  • 89 Stat. 97
  • Pub. L. 106-50
  • 79 Stat. 985
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C.F.R.§ 2.4
C.F.R.§ 2.309
C.F.R.§ 39.77
C.F.R.§ 70.4
C.F.R.§ 73.2
C.F.R.§ 50.36
Pub. L.Pub. L. 104-13
Cite10 CFR 52
Cite10 CFR 50
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