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Code · REGISTER · 2007-07-20 · Securities and Exchange Commission (“SEC” or the “Commission”) · Notices

Notices. Notice of application (“Application”) for exemption, pursuant to section 6(c) of the Investment Company Act of 1940, as amended (the “1940 Act”), from the provisions of sections 9(a), 13(a), 15(a) and 15(b) of the Act and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder

19,610 words·~89 min read·/register/2007/07/20/07-3540

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

BILLING CODE 7710-FW-M SECURITIES AND EXCHANGE COMMISSION [Release No. IC-27886; File No. 812-13333] Delaware VIP Trust et al., Notice of Application July 16, 2007. AGENCY: Securities and Exchange Commission (“SEC” or the “Commission”). ACTION: Notice of application (“Application”) for exemption, pursuant to section 6(c) of the Investment Company Act of 1940, as amended (the “1940 Act”), from the provisions of sections 9(a), 13(a), 15(a) and 15(b) of the Act and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder.
Applicants: Delaware VIP Trust (the “Fund”) and Delaware Management Company, a series of Delaware Management Business Trust and investment manager to the Fund (“DMC”) (collectively the “Applicants”). SUMMARY: Applicants request an order exempting them from the provisions of sections 9(a), 13(a), 15(a) and 15(b) of the Act and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent necessary to permit shares of the Fund and shares of any other investment company or portfolio that is designed to fund insurance products and for which DMC or any of its affiliates, may serve in the future as investment adviser, manager, principal underwriter, sponsor, or administrator (“Future Funds”) (the Fund, together with Future Funds, the “Funds”) to be sold to and held by:
(a)Separate accounts funding variable annuity contracts and variable life insurance policies (collectively “Variable Contracts”) issued by both affiliated life insurance companies and unaffiliated life insurance companies;
(b)trustees of qualified group pension and group retirement plans outside of the separate account context (“Qualified Plans”);
(c)separate accounts that are not registered as investment companies under the 1940 Act pursuant to exemptions from registration under section 3(c) of the 1940 Act;
(d)DMC or its affiliates who serve or may serve as an investment manager, investment adviser, principal underwriter, sponsor or administrator of a Fund (collectively, “DMC Entities”) for the purpose of providing initial capital to a Fund; and
(e)any other account of a Participating Insurance Company permitted to hold shares of the Funds (“General Account”). DATES: The Application was filed on September 26, 2006, and amended on July 11, 2007. Hearing or Notification of Hearing: An order granting the application will be issued unless the Commission orders a hearing. Interested persons may request a hearing by writing to the Secretary of the Commission and serving Applicants with a copy of the request, personally or by mail. Hearing requests should be received by the Commission by 5:30 p.m. on August 8, 2007, and should be accompanied by proof of service on Applicants in the form of an affidavit or, for lawyers, a certificate of service. Hearing requests should state the nature of the requester's interest, the reason for the request, and the issues contested. Persons who wish to be notified of a hearing may request notification by writing to the Secretary of the Commission. ADDRESSES: The Commission: Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090; Applicants: David P. O'Connor, Esq. c/o Delaware VIP Trust, 2005 Market Street, Philadelphia, Pennsylvania 19103. FOR FURTHER INFORMATION CONTACT: Rebecca A. Marquigny, Senior Counsel, or Joyce M. Pickholz, Branch Chief, Office of Insurance Products, Division of Investment Management, at
(202)551-6795. SUPPLEMENTARY INFORMATION: The following is a summary of the Application. The complete Application is available for a fee from the SEC's Public Reference Branch, 100 F Street, NE., Room 1580, Washington, DC 20549 (telephone
(202)551-8090). Applicant's Representations 1. The Fund (File No. 811-05162) is registered under the 1940 Act as an open-end management investment company comprised of and offering shares of beneficial interest (“shares”) in 15 investment portfolios (each a “Portfolio” and, collectively, the “Portfolios”). The Fund or any Future Funds may offer one or more additional investment portfolios in the future (also referred to as “Portfolios”). Applicants state that the Fund's shares are registered under the Securities Act of 1933, as amended (the “1933 Act”) (File No. 033-14363) and the investment manager to the Fund, DMC, is registered with the Commission as an investment adviser under the Investment Advisers Act of 1940, as amended. 2. Applicants represent that there will be no public shareholders of any Portfolio. Applicants state that pursuant to exemptive relief provided in a 1987 SEC order (Rel. IC-16105), Fund shares are being offered to both affiliated and unaffiliated insurance company separate accounts funding variable annuity or variable life insurance products. Applicants state that separate accounts which currently or in the future may hold shares are (or will be) registered as unit investment trusts under the 1940 Act or exempt from such registration (individually, a “Separate Account” and collectively, “Separate Accounts”). Insurance companies whose Separate Account(s) may now or in the future own shares are referred to herein as “Participating Insurance Companies.” 3. Applicants propose that the Funds be permitted to offer and/or sell shares to Separate Accounts funding Variable Contracts issued by Participating Insurance Companies. Applicants represent that the Participating Insurance Companies at the time of their investment in the Funds either have or will establish their own Separate Accounts and design their own Variable Contracts. Each Participating Insurance Company has or will have the legal obligation of satisfying all applicable requirements under both state and federal law. Applicants represent that each Participating Insurance Company, on behalf of its Separate Accounts, has or will enter into an agreement with the Funds concerning such Participating Insurance Company's participation in the relevant Portfolio (a “Participation Agreement”). The role of the Funds under this agreement, insofar as the federal securities laws are applicable, will consist of, among other things, offering shares of the Portfolios to the participating Separate Accounts and complying with any conditions that the Commission may impose. 4. Applicants propose that the Funds be permitted to offer and/or sell Shares to Qualified Plans. section 817(h) of the Internal Revenue Code of 1986, as amended (the “Code”), imposes certain diversification standards on the assets underlying Variable Contracts, such as those in each Portfolio. The Code provides that Variable Contracts will not be treated as annuity contracts or life insurance contracts for any period (or any subsequent period) for which the underlying assets are not, in accordance with regulations issued by the Treasury Department (individually, a “Treasury Regulation” and collectively the “Treasury Regulations”), adequately diversified. section 817(h) of the Code and the Regulations thereunder provide, in general, that the ability to look through to the assets of an underlying fund in applying the diversification test is only available if all of the beneficial interests in the investment company are held by the segregated asset accounts of one or more insurance companies. However, the Regulations contain certain exceptions to this requirement, one of which allows shares in an underlying mutual fund to be held by the trustees of a qualified pension or retirement plan without adversely affecting the tax status of Variable Contracts. (Treas. Reg. 1.817-5(f)(3)(iii)). Applicants represent that as a result of this exception to the general diversification requirement, shares of the Portfolios sold to the Qualified Plans would be held by the trustees of such Qualified Plans as required by section 403(a) of the Employee Retirement Income Security Act, as amended (“ERISA”). 5. Applicants also propose that the Funds be permitted to offer and/or sell shares to DMC Entities for the purpose of providing initial capital to a Fund and to General Accounts. The Regulations permit sales of Portfolio shares to General Accounts and DMC Entities so long as the return on shares held by each is computed in the same manner as for shares held by a Separate Account, and the General Accounts and DMC Entities do not intend to sell shares of the Portfolio held by it to the Public. The Regulations impose an additional restriction on sales to investment advisers, who may hold shares only in connection with the creation of the Portfolio. Applicants anticipate that sales in reliance on these provisions of the Regulations will be made to DMC Entities for purposes of providing the initial capital for a Fund and that any Portfolio shares purchased by DMC Entities will be redeemed immediately if and when a DMC Entity no longer serves as an investment adviser to such Portfolio. Applicants' Legal Analysis 1. In connection with the funding of scheduled premium variable life insurance contracts issued through a Separate Account registered as a unit investment trust (“UIT”) under the 1940 Act, Rule 6e-2(b)(15) provides partial exemptions from sections 9(a), 13(a), 15(a) and 15(b) of the 1940 Act. Section 9(a)(2) of the 1940 Act makes it unlawful for any company to serve as an investment adviser or principal underwriter of any UIT, if an affiliated person of that company is subject to a disqualification enumerated in section 9(a)(1) or
(2)of the 1940 Act. Sections 13(a), 15(a) and 15(b) of the 1940 Act have been deemed by the Commission to require “pass-through” voting with respect to an underlying investment company's shares. Rule 6e-2(b)(15) provides these exemptions apply only where all of the assets of the UIT are shares of management investment companies “which offer their shares exclusively to variable life insurance separate accounts of the life insurer or of any affiliated life insurance company.” Therefore, the relief granted by Rule 6e-2(b)(15) is not available with respect to a scheduled premium life insurance Separate Account that owns shares of an underlying fund that also offers its shares to a variable annuity Separate Account or flexible premium variable life insurance Separate Account of the same company or any other affiliated insurance company. The use of a common management investment company as the underlying investment vehicle for both variable annuity and variable life insurance separate accounts of the same life insurance company or of any affiliated life insurance company is referred to herein as “mixed funding.” 2. The relief granted by Rule 6e-2(b)(15) also is not available with respect to a scheduled premium variable life insurance Separate Account that owns shares of an underlying fund that also offers its shares to Separate Accounts funding Variable Contracts of one or more unaffiliated life insurance companies. The use of a common management investment company as the underlying investment vehicle for variable annuity and/or variable life insurance Separate Accounts of unaffiliated life insurance companies is referred to herein as “shared funding.” 3. The relief under Rule 6e-2(b)(15) is available only where shares are offered exclusively to variable life insurance Separate Accounts of a life insurer or any affiliated life insurance company; additional exemptive relief is necessary if the shares of the Portfolios are also to be sold to Qualified Plans, DMC Entities and General Accounts (collectively “Eligible Purchasers”). Applicants note that if shares of the Portfolios are sold only to Qualified Plans, exemptive relief under Rule 6e-2 would not be necessary. The relief provided for under this section does not relate to Qualified Plans or to a registered investment company's ability to sell its shares to Qualified Plans. The use of a common management investment company as the underlying investment vehicle for variable annuity and variable life Separate Accounts of affiliated and unaffiliated insurance companies, and for Qualified Plans, is referred to herein as “extended mixed and shared funding.” 4. In connection with flexible premium variable life insurance contracts issued through a separate account registered under the 1940 Act as a UIT, Rule 6e-3(T)(b)(15) provides partial exemptions from sections 9(a), 13(a), 15(a) and 15(b) of the 1940 Act. The exemptions granted by Rule 6e-3(T)(b)(15) are available only where all the assets of the Separate Account consist of the shares of one or more registered management investment companies that offer to sell their shares “exclusively to separate accounts of the life insurer, or of any affiliated life insurance companies, offering either scheduled contracts or flexible contracts, or both; or which also offer their shares to variable annuity separate accounts of the life insurer or of an affiliated life insurance company or which offer their shares to any such life insurance company in consideration solely for advances made by the life insurer in connection with the operation of the separate account.” Therefore, Rule 6e-3(T)(b)(15) permits mixed funding but does not permit shared funding. 5. Because the relief under Rule 6e-3(T) is available only where shares are offered exclusively to variable life insurance separate accounts of a life insurer or any affiliated life insurance company, additional exemptive relief is necessary if the shares of the Portfolios are also to be sold to Eligible Purchasers, as described above. Applicants note that if shares of the Portfolios were sold only to Qualified Plans, exemptive relief under Rule 6e-3(T)(b)(15) would not be necessary. The relief provided for under this section does not relate to Qualified Plans or to a registered investment company's ability to sell its shares to Qualified Plans. 6. Applicants maintain, as discussed below, that there is no policy reason for the sale of the Portfolios' shares to Eligible Purchasers to result in a prohibition against, or otherwise limit a Participating Insurance Company from relying on the relief provided by Rules 6e-2(b)(15) and 6e-3(T)(b)(15). However, because the relief under Rules 6e-2(b)(15) and 6e-3(T)(b)(15) is available only when shares are offered exclusively to Separate Accounts, additional exemptive relief may be necessary if the shares of the Portfolios are also to be sold to Eligible Purchasers. Applicants therefore request relief in order to have the Participating Insurance Companies enjoy the benefits of the relief granted in Rules 6e-2(b)(15) and 6e-3(T)(b)(15). Applicants note that if the Portfolios' shares were to be sold only to Eligible Purchasers and/or Separate Accounts funding variable annuity contracts, exemptive relief under Rule 6e-2 and Rule 6e-3(T) would be unnecessary. The relief provided for under Rules 6e-2(b)(15) and 6e-3(T)(b)(15) does not relate to Qualified Plans, DMC Entities, or General Accounts, or to a registered investment company's ability to sell its shares to such purchasers. 7. Consistent with the Commission's authority under section 6(c) of the 1940 Act to grant exemptive orders to a class or classes of persons and transactions, the Application requests relief for the class consisting of Participating Insurance Companies and their Separate Accounts that will invest in the Portfolios, and, to the extent necessary, Qualified Plans, investment advisers, principal underwriters and depositors of such Separate Accounts. 8. In effect, the partial relief granted in Rules 6e-2(b)(15) and 6e-3(T)(b)(15) under the 1940 Act from the requirements of section 9 of the 1940 Act limits the amount of monitoring necessary to ensure compliance with section 9 to that which is appropriate in light of the policy and purposes of section 9. Those rules recognize that it is not necessary for the protection of investors or the purposes fairly intended by the policy and provisions of the 1940 Act to apply the provisions of section 9(a) to individuals in a large insurance company complex, most of whom will have no involvement in matters pertaining to investment companies in that organization. Applicants assert that the Participating Insurance Companies and Qualified Plans are not expected to play any role in the management of the Funds and that those individuals who participate in the management of the Funds will remain the same regardless of which Separate Accounts or Qualified Plans invest in the Funds. Applicants argue that applying the monitoring requirements of section 9(a) of the 1940 Act because of investment by separate accounts of other insurers or Qualified Plans would be unjustified, would not serve any regulatory purpose and monitoring costs could reduce the net rates of return realized by contract owners due to the increased monitoring costs. 9. Rules 6e-2(b)(15)(iii) and 6e-3(T)(b)(15)(iii) under the 1940 Act provide exemptions from the pass-through voting requirement with respect to several significant matters, assuming the limitations on mixed and shared funding are observed. Rules 6e-2(b)(15)(iii)(A) and 6e-3(T)(b)(15)(iii)(A) provide that the insurance company may disregard the voting instructions of its contract owners with respect to the investments of an underlying fund, or any contract between such a fund and its investment adviser, when required to do so by an insurance regulatory authority (subject to the provisions of paragraphs (b)(5)(i) and (b)(7)(ii)(A) of Rules 6e-2 and 6e-3(T), respectively, under the 1940 Act). Rules 6e-2(b)(15)(iii)(B) and 6e-3(T)(b)(15)(iii)(A)(2) provide that the insurance company may disregard the voting instructions of its contract owners if the contract owners initiate any change in an underlying fund's investment policies, principal underwriter, or any investment adviser (provided that disregarding such voting instructions is reasonable and subject to the other provisions of paragraphs (b)(5)(ii), (b)(7)(ii)(B), and (b)(7)(ii)(C), respectively, of Rules 6e-2 and 6e-3(T) under the 1940 Act). 10. Rule 6e-2 under the 1940 Act recognizes that a variable life insurance contract, as an insurance contract, has important elements unique to insurance contracts and is subject to extensive state regulation of insurance. In adopting Rule 6e-2(b)(15)(iii), the Commission expressly recognized that state insurance regulators have authority, pursuant to state insurance laws or regulations, to disapprove or require changes in investment policies, investment advisers, or principal underwriters. The Commission also expressly recognized that state insurance regulators have authority to require an insurer to draw from its general account to cover costs imposed upon the insurer by a change approved by contract owners over the insurer's objection. The Commission, therefore, deemed such exemptions necessary “to assure the solvency of the life insurer and performance of its contractual obligations by enabling an insurance regulatory authority or the life insurer to act when certain proposals reasonably could be expected to increase the risks undertaken by the life insurer.” In this respect, flexible premium variable life insurance contracts are identical to scheduled premium variable life insurance contracts. Applicants, therefore, assert that the corresponding provisions of Rule 6e-3(T) under the 1940 Act undoubtedly were adopted in recognition of the same factors. 11. Applicants also assert that the sale of Shares to Qualified Plans, the Investment Manager and General Accounts will not have any impact on the relief requested. With respect to the Qualified Plans, which are not registered as investment companies under the 1940 Act, shares of a portfolio of a fund sold to a Qualified Plan must be held by the trustees of the Qualified Plan pursuant to section 403(a) of the Employee Retirement Income Security Act, as amended (“ERISA”). Applicants note that
(1)section 403(a) of ERISA endows Qualified Plan trustees with the exclusive authority and responsibility for voting proxies provided neither of two enumerated exceptions to that provision applies;
(2)some of the Qualified Plans, may provide for the trustee(s), an investment adviser (or advisers), or another named fiduciary to exercise voting rights in accordance with instructions from participants; and
(3)there is no requirement to pass through voting rights to Qualified Plan participants. 12. Applicants argue that an Investment Manager and General Accounts are similar in that they are not subject to any pass-through voting requirements. Applicants therefore conclude that, unlike the case with insurance company Separate Accounts, the issue of resolution of material irreconcilable conflicts with respect to voting is not present with Eligible Purchasers. 13. Applicants represent that where a Qualified Plan does not provide participants with the right to give voting instructions, the trustee or named fiduciary has responsibility to vote the shares held by the Qualified Plan in the best interest of the Qualified Plan participants. Accordingly, Applicants argue that even if DMC or an affiliate of DMC were to serve in the capacity of trustee or named fiduciary with voting responsibilities, DMC or the affiliates would have a fiduciary duty to vote those shares in the best interest of the Qualified Plan participants. 14. Further, Applicants assert that even if a Qualified Plan were to hold a controlling interest in a Portfolio, Applicants do not believe that such control would disadvantage other investors in such Portfolio to any greater extent than is the case when any institutional shareholder holds a majority of the voting securities of any open-end management investment company. In this regard, Applicants submit that investment in a Portfolio by a Qualified Plan will not create any of the voting complications occasioned by mixed funding or shared funding. Unlike mixed funding or shared funding, Applicants argue that Qualified Plan investor voting rights cannot be frustrated by veto rights of insurers or state regulators. 15. Where a Qualified Plan provides participants with the right to give voting instructions, Applicants see no reason to believe that participants in Qualified Plans generally or those in a particular Qualified Plan, either as a single group or in combination with participants in other Qualified Plans, would vote in a manner that would disadvantage Variable Contract holders. Applicants assert that the purchase of Shares by Qualified Plans that provide voting rights does not present any complications not otherwise occasioned by mixed or shared funding. 16. Applicants do not believe that sale of the shares of the Portfolios to Qualified Plans will increase the potential for material irreconcilable conflicts of interest between or among different types of investors. In particular, Applicants see very little potential for such conflicts beyond those which would otherwise exist between variable annuity and variable life insurance contract owners. 17. Unlike the circumstances of many investment companies that serve as underlying investment media for variable insurance products, the Fund may be deemed to lack an insurance company “promoter” for purposes of Rule 14a-2 under the 1940 Act. Accordingly, the Fund and any other such Future Funds or Portfolios that are established as new registrants will be subject to the requirements of section 14(a) of the 1940 Act, which generally requires that an investment company have a net worth of $100,000 upon making a public offering of its shares. Portfolios also will require more limited amounts of initial capital in connection with the creation of new series and the voting of initial shares of such series on matters requiring the approval of shareholders. A potential source of the requisite initial capital is a Portfolio's adviser or a Participating Insurance Company. Either of these parties may have an interest in making the requisite capital investments. Applicants note, however, that the provision of initial capital may be deemed to violate the exclusivity requirement of Rule 6e-2(b)(15) and/or Rule 6e-3(T)(b)(15). 18. Given the conditions of Treas. Reg. 1.817-5(f)(3) and the harmony of interest between a Portfolio, on the one hand, and DMC Entities or a Participating Insurance Company, on the other, Applicants assert that little incentive for overreaching exists. Applicants further assert that such investment should not implicate the concerns discussed above regarding the creation of material irreconcilable conflicts. Instead, Applicants argue that permitting investment by DMC Entities or Participating Insurance Companies' General Accounts will permit the orderly and efficient creation of the Funds or series thereof, and reduce the expense and uncertainty of using outside parties at the early stages of Portfolio operations. Applicants' Conditions Applicants agree that the order granting the requested relief shall be subject to the following conditions: 1. A majority of the Board of Trustees (the “Board”) of the Fund will consist of persons who are not “interested persons” of the Fund, as defined by section 2(a)(19) of the 1940 Act, and the rules thereunder, and as modified by any applicable orders of the Commission, except that if this condition is not met by reason of the death, disqualification, or bona-fide resignation of any trustee or trustees, then the operation of this condition will be suspended:
(a)For a period of 90 days if the vacancy or vacancies may be filled by the Board;
(b)for a period of 150 days if a vote of shareholders is required to fill the vacancy or vacancies; or
(c)for such longer period as the Commission may prescribe by order upon application or by future rule. 2. The Board will monitor the Fund for the existence of any material irreconcilable conflict between the interests of the contract owners of all Separate Accounts and participants of all Qualified Plans investing in the Fund, and determine what action, if any should be taken in response to such conflicts. A material irreconcilable conflict may arise for a variety of reasons, including:
(a)An action by any state insurance regulatory authority;
(b)a change in applicable federal or state insurance, tax, or securities laws or regulations, or a public ruling, private letter ruling, no-action or interpretative letter, or any similar action by insurance, tax, or securities regulatory authorities;
(c)an administrative or judicial decision in any relevant proceeding;
(d)the manner in which the investments of the Fund are being managed;
(e)a difference in voting instructions given by variable annuity contract owners, variable life insurance contract owners, and trustees of the Qualified Plans;
(f)a decision by a Participating Insurance Company to disregard the voting instructions of contract owners; or
(g)if applicable, a decision by a Qualified Plan to disregard the voting instructions of Qualified Plan participants. 3. Participating Insurance Companies (on their own behalf, as well as by virtue of any investment of general account assets in a Portfolio), DMC Entities, and any trustee on behalf of a Qualified Plan that executes a Participation Agreement upon becoming an owner of 10 percent or more of the assets of any Portfolio (collectively, “Participants”) will report any potential or existing conflicts to the Board. Participants will be responsible for assisting the Board in carrying out the Board's responsibilities under these conditions by providing the Board with all information reasonably necessary for the Board to consider any issues raised. This responsibility includes, but is not limited to, an obligation of each Participating Insurance Company to inform the Board whenever contract owner voting instructions are disregarded, and, if pass-through voting is applicable, an obligation of each of the trustees on behalf of a Qualified Plan to inform the Board whenever it has determined to disregard Qualified Plan participant voting instructions. The responsibility to report such information and conflicts, and to assist the Board, will be a contractual obligation of all Participating Insurance Companies under their Participation Agreements with the Fund, and these responsibilities will be carried out with a view only to the interests of the contract owners. The responsibility to report such information and conflicts, and to assist the Board, also will be contractual obligations of all Qualified Plans under their Participation Agreements, and such agreements will provide that these responsibilities will be carried out with a view only to the interests of Qualified Plan participants. 4. If it is determined by a majority of the Board or a majority of the disinterested trustees of the Board, that a material irreconcilable conflict exists, then the relevant Participant will, at its expense and to the extent reasonably practicable (as determined by a majority of the disinterested trustees), take whatever steps are necessary to remedy or eliminate the material irreconcilable conflict, up to and including:
(a)Withdrawing the assets allocable to some or all of the Separate Accounts from the relevant Portfolio and reinvesting such assets in a different investment vehicle including another Portfolio, or in the case of a Participating Insurance Company Participant submitting the question as to whether such segregation should be implemented to a vote of all affected contract owners and, as appropriate, segregating the assets of any appropriate group (i.e., annuity contract owners or life insurance contract owners of one or more Participating Insurance Companies) that votes in favor of such segregation, or offering to the affected contract owners the option of making such a change; and
(b)establishing a new registered management investment company or managed separate account. If a material irreconcilable conflict arises because of a decision by a Participating Insurance Company to disregard contract owner voting instructions, and that decision represents a minority position or would preclude a majority vote, then the insurer may be required, at the election of the Fund, to withdraw such insurer's Separate Account's investment in the Fund, and no charge or penalty will be imposed as a result of such withdrawal. If a material irreconcilable conflict arises because of a Qualified Plan's decision to disregard Qualified Plan participant voting instructions, if applicable, and that decision represents a minority position or would preclude a majority vote, the Qualified Plan may be required, at the election of the Fund, to withdraw its investment in the Fund, and no charge or penalty will be imposed as a result of such withdrawal. The responsibility to take remedial action in the event of a Board determination of a material irreconcilable conflict and to bear the cost of such remedial action will be a contractual obligation of all Participants under their agreements governing participation in the Fund, and these responsibilities will be carried out with a view only to the interests of contract owners and Qualified Plan participants. For purposes of this Condition 4, a majority of the disinterested members of the Board Fund will determine whether or not any proposed action adequately remedies any material irreconcilable conflict, but, in no event will the Fund, DMC or an affiliate of DMC, as relevant, be required to establish a new funding vehicle for any Variable Contract. No Participating Insurance Company will be required by this Condition 4 to establish a new funding vehicle for any Variable Contract if any offer to do so has been declined by vote of a majority of the contract owners materially and adversely affected by the material irreconcilable conflict. Further, no Qualified Plan will be required by this Condition 4 to establish a new funding vehicle for the Qualified Plan if:
(a)A majority of the Qualified Plan participants materially and adversely affected by the irreconcilable material conflict vote to decline such offer, or
(b)pursuant to documents governing the Qualified Plan, the Qualified Plan makes such decision without a Qualified Plan participant vote. 5. The Board's determination of the existence of a material irreconcilable conflict and its implications will be made known in writing promptly to all Participants. 6. As to Variable Contracts issued by Separate Accounts registered under the 1940 Act, Participating Insurance Companies will provide pass-through voting privileges to all Variable Contract owners as required by the 1940 Act as interpreted by the Commission. However, as to Variable Contracts issued by unregistered Separate Accounts, pass-through voting privileges will be extended to contract owners to the extent granted by the issuing insurance company. Accordingly, such Participants, where applicable, will vote shares of the applicable Portfolio held in their Separate Accounts in a manner consistent with voting instructions timely received from Variable Contract owners. Participating Insurance Companies will be responsible for assuring that each Separate Account investing in a Portfolio calculates voting privileges in a manner consistent with other Participants. The obligation to calculate voting privileges as provided in the Application will be a contractual obligation of all Participating Insurance Companies under their agreement with the Funds governing participation in a Portfolio. Each Participating Insurance Company will vote shares for which it has not received timely voting instructions, as well as shares held in its General Account or otherwise attributed to it, in the same proportion as it votes those shares for which it has received voting instructions. Each Qualified Plan will vote as required by applicable law and governing Qualified Plan documents. 7. As long as the 1940 Act requires pass-through voting privileges to be provided to variable contract owners, DMC Entities and any General Account will vote its shares of any Portfolio in the same proportion as all variable contract owners having voting rights with respect to that Portfolio; provided, however, that DMC Entities or any insurance company General Account shall vote its shares in such other manner as may be required by the Commission or its staff. 8. The Fund will comply with all provisions of the 1940 Act requiring voting by shareholders, which for these purposes, shall be the persons having a voting interest in the shares of the respective Portfolio, and, in particular, the Fund will either provide for annual meetings (except to the extent that the Commission may interpret section 16 of the 1940 Act not to require such meetings) and will comply with section 16(a) of the 1940 Act, section 16(c) of the 1940 Act (although the Fund is not one of those trusts of the type described in section 16(c) of the 1940 Act) and, if and when applicable, section 16(b) of the 1940 Act. Further, the Fund will act in accordance with the Commission's interpretation of the requirements of section 16(a) with respect to periodic elections of directors/trustees and with whatever rules the Commission may promulgate with respect thereto. 9. A Portfolio will make its shares available under Variable Contracts and to Qualified Plans at or about the same time it accepts any seed capital from DMC Entities or a General Account of a Participating Insurance Company. 10. The Fund will notify all Participants that Separate Account prospectus disclosure or Qualified Plan prospectuses or other Qualified Plan disclosure documents regarding potential risks of mixed and shared funding may be appropriate. The Fund will disclose in its prospectus that
(a)shares of the Fund may be offered to Separate Accounts of both variable annuity and variable life insurance contracts and, if applicable, to Qualified Plans;
(b)due to differences in tax treatment and other considerations, the interests of various contract owners participating in the Fund and the interests of Qualified Plans investing in the Fund, if applicable, may conflict; and
(c)the Fund's Board will monitor events in order to identify the existence of any material irreconcilable conflicts and to determine what action, if any, should be taken in response to any such conflict. 11. If and to the extent that Rule 6e-2 and Rule 6e-3(T) under the 1940 Act are amended, or proposed Rule 6e-3 under the 1940 Act is adopted, to provide exemptive relief from any provision of the 1940 Act, or the rules promulgated thereunder, with respect to mixed or shared funding, on terms and conditions materially different from any exemptions granted in the order requested in the Application, then the Fund and/or Participating Insurance Companies, as appropriate, shall take such steps as may be necessary to comply with Rules 6e-2 and 6e-3(T), or Rule 6e-3, as such rules are applicable. 12. The Participants, at least annually, will submit to the Board such reports, materials, or data as a Board reasonably may request so that the trustees of the Board may fully carry out the obligations imposed upon the Board by the conditions contained in the Application. Such reports, materials, and data will be submitted more frequently if deemed appropriate by the Board. The obligations of the Participants to provide these reports, materials, and data to the Board, when it so reasonably requests, will be a contractual obligation of all Participants under their agreements governing participation in the Portfolios. 13. All reports of potential or existing conflicts received by the Board, and all Board action with regard to determining the existence of a conflict, notifying Participants of a conflict, and determining whether any proposed action adequately remedies a conflict, will be properly recorded in the minutes of the Board or other appropriate records, and such minutes or other records shall be made available to the Commission upon request. 14. The Fund will not accept a purchase order from a Qualified Plan if such purchase would make the Qualified Plan shareholder an owner of 10 percent or more of the assets of a Portfolio unless the Trustees of such Qualified Plan execute an agreement with the Fund governing participation in such Portfolio that includes the conditions set forth herein to the extent applicable. The Trustees of a Qualified Plan will execute an application containing an acknowledgment of this condition at the time of its initial purchase of shares of any Portfolio. Conclusions Applicants submit that, for the reasons summarized above and to the extent necessary or appropriate to provide for the transactions described herein, the requested exemptions from sections 9(a), 13(a), 15(a), and 15(b) of the 1940 Act and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, in accordance with the standards of section 6(c) of the 1940 Act, are in the public interest and consistent with the protection of investors and the purposes fairly intended by the policy and provisions of the 1940 Act. For the Commission, by the Division of Investment Management, pursuant to delegated authority. Florence E. Harmon, Deputy Secretary. [FR Doc. E7-14028 Filed 7-19-07; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-56064; File No. SR-CHX-2006-42] Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; Notice of Filing of Proposed Rule Change, as Modified by Amendment No. 1 Thereto, To Modify Provisions Relating to Cross With Yield Orders July 13, 2007. 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 December 22, 2006, the Chicago Stock Exchange, Inc. (“CHX” 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 substantially prepared by the CHX. On July 6, 2007, the Exchange filed Amendment No. 1 to the proposed rule change. 3 The Commission is publishing this notice to solicit comments on the proposed rule change, as amended, from interested persons. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 Amendment No. 1, which replaced the original filing in its entirety, removed a proposal that would have allowed the Exchange's Matching System to reprice sell short mid-point cross orders. The Exchange believes that such repricing is no longer necessary due to the Commission's recent decision to eliminate Rule 10a-1 and all similar pricing tests that might be applied to sell short orders. *See* Securities Exchange Act Release No. 55970 (June 28, 2007), 72 FR 36348 (July 3, 2007). Amendment No. 1 also removed a proposed effective date for the new order type and made other small wording changes to the narrative description. I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The CHX proposes to amend its rules to permit participants submitting “cross with yield” orders to elect to yield to undisplayed interest. The text of this proposed rule change is available at the Exchange, on the Exchange's Web site at: *http://www.chx.com/rules/proposed_rules.htm* , and in 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 CHX 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 CHX 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 As part of the Exchange's new trading model, the CHX offers its participants a wide variety of order types that may be submitted to the CHX and its central matching engine (“Matching System”). 4 As the CHX and its participants gain familiarity with this new trading model, further dialogue with participant firms, as well as industry developments, will likely necessitate further refinement of the CHX new trading model rules, including the sort of order type enhancement proposed in this submission. 4 *See, e.g.* , CHX Article 1, Rule 2 and CHX Article 20, Rule 4 (outlining the range of available order types). This proposed rule change would amend the definition of a “cross with yield” order to permit a CHX participant to elect to yield to undisplayed market interest in addition to bids and offers that are displayed in the Matching System. This change is consistent with the purpose of a cross with yield order—a participant selects this type of order because it wants its customer order to interact with available market interest. This proposal, which simply expands the types of orders to which a participant's interest would yield, is reflected in changes to Article 1, Rule 2(h) and Article 20, Rules 4(b)(7) and 8(e) of the Exchange's rules. 2. Statutory Basis The CHX believes the proposal is consistent with the requirements of the Act and the rules and regulations thereunder that are applicable to a national securities exchange, and, in particular, with the requirements of section 6(b). 5 The CHX believes the proposal is consistent with section 6(b)(5) of the Act 6 in that it is designed to promote just and equitable principles of trade, to remove impediments to, and to perfect the mechanism of, a free and open market and a national market system, and, in general, to protect investors and the public interest by permitting the Exchange to further refine its product offerings. 5 15 U.S.C. 78f(b). 6 6 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. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others No written comments were either solicited or received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 35 days of the date of publication of this notice in the **Federal Register** or within such longer period
(i)as the Commission may designate up to 90 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or
(ii)as to which the Exchange consents, the Commission will:
(A)By order approve such proposed rule change, or
(B)institute proceedings to determine whether the proposed rule change should be disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to: *rule-comments@sec.gov.* Please include File Number SR-CHX-2006-42 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-CHX-2006-42. 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, 100 F Street, NE., Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-CHX-2006-42 and should be submitted on or before August 10, 2007. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 7 7 17 CFR 200.30-3(a)(12). Florence E. Harmon, Deputy Secretary. [FR Doc. E7-14037 Filed 7-19-07; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-56068; File No. SR-NASDAQ-2007-062] Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Exclude Partial Trading Days From the Calculation of a Member's Average Daily Volume July 13, 2007. Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) 1 and Rule 19b-4 thereunder, 2 notice is hereby given that on June 21, 2007, The NASDAQ Stock Market LLC (“Nasdaq”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I, II, and III below, which Items have been substantially prepared by Nasdaq. Nasdaq has filed the proposal pursuant to section 19(b)(3)(A) 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). 4 17 CFR 240.19b-4(f)(2). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change Nasdaq proposes to exclude partial trading days from the calculation of a member's average daily volume. The text of the proposed rule change is available at Nasdaq, the Commission's Public Reference Room, and *http://www.nasdaq.com* . II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, Nasdaq included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. Nasdaq has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose Nasdaq proposes to modify the manner in which a member's average daily volume is determined by excluding from the calculation days when the market is not open for the entire trading day. An example of such a partial trading day is Tuesday, July 3, 2007. On that day Nasdaq will cease trading at 1 p.m. Eastern Time (“ET”) 5 and, thus, trading for that day will be excluded from the calculation of a member's average daily volume. The change will ensure that members close to achieving the average daily volume required for a particular pricing level will not find it more difficult to achieve that level simply because a month contains a partial trading day. 5 Although Nasdaq will officially “close” at 1 p.m. ET, Nasdaq will continue trading in an after hours session until 5 p.m. ET; compared to “full trading days” times of 4 p.m. ET and 8 p.m. ET, respectively. 2. Statutory Basis Nasdaq believes that the proposed rule change is consistent with the provisions of section 6 of the Act, 6 in general, and with sections 6(b)(4) of the Act, 7 in particular, in that the proposal provides for the equitable allocation of reasonable dues, fees, and other charges among its members and issuers and other persons using any facility or system which Nasdaq operates or controls. Nasdaq believes that the change is reasonable because it will facilitate members achieving volume levels required for particular pricing levels in months with partial trading days. 6 15 U.S.C. 78f. 7 15 U.S.C. 78f(b)(4). B. Self-Regulatory Organization's Statement on Burden on Competition Nasdaq does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others Written comments were neither solicited nor received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective pursuant to section 19(b)(3)(A)(ii) of the Act 8 and subparagraph (f)(2) of Rule 19b-4 thereunder 9 because it establishes or changes a due, fee, or other charge applicable only to a member imposed by the self-regulatory organization. Accordingly, the proposal is effective upon Commission receipt of the filing. 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. 8 15 U.S.C. 78s(b)(3)(A)(ii). 9 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-NASDAQ-2007-062 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-NASDAQ-2007-062. 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, 100 F Street, NE., Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. Copies of the filing also will be available for inspection and copying at the principal office of Nasdaq. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-NASDAQ-2007-062 and should be submitted on or August 10, 2007. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 10 10 17 CFR 200.30-3(a)(12). Florence E. Harmon, Deputy Secretary. [FR Doc. E7-14055 Filed 7-19-07; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-56072; File No. SR-NYSEArca-2007-61] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Adding a New Order Type Known As the Mid-Point Passive Liquidity Order July 13, 2007. Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) 1 and Rule 19b-4 thereunder, 2 notice is hereby given that on June 29, 2007, NYSE Arca, Inc. (“NYSE Arca” or “Exchange”), through its wholly-owned subsidiary, NYSE Arca Equities, Inc. (“NYSE Arca Equities” or “Corporation”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I and II below, which Items have been substantially prepared by the Exchange. The Exchange filed the proposed rule change pursuant to section 19(b)(3)(A) of the Act 3 and Rule 19b-4(f)(6) thereunder, which renders it effective upon filing with the Commission. 4 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, through its wholly-owned subsidiary, NYSE Arca Equities proposes to amend its rules in order to add a new order type known as the Mid-Point Passive Liquidity Order (“MPL Order”). The changes described in this rule proposal would add new NYSE Arca Equities Rule 7.31(h)(5) and would amend existing Rule 7.37(d)(2). The text of the proposed rule change is available at the Exchange, the Commission's Public Reference Room, and *http://www.nyse.com.* 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 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 As part of its continuing efforts to provide additional flexibility and increased functionality to its system and its Users, 5 the Exchange proposes to add a new order type known as the MPL Order. The MPL Order is a version of the NYSE Arca Passive Liquidity Order, 6 except that it will be executable only at the midpoint of the Protected Best Bid and Offer (“PBBO”). 7 5 *See* NYSE Arca Equities Rule 1.1(yy) for the definition of “User.” 6 *See* NYSE Arca Equities Rule 7.31(h)(4). 7 *See* NYSE Arca Equities Rule 1.1(eee) for the definitions of “Protected Bid” and Protected Offer.” MPL Order Execution in NYSE Arca The MPL Order will follow the same execution priority rules as the Passive Liquidity Order. 8 MPL Orders always execute at the midpoint of the PBBO and do not receive price improvement. 8 *See* NYSE Arca Equities Rule 7.31(h)(4) and 7.37(b)(2)(A)(iv). MPL Orders will be ranked in time priority for the purposes of execution as long as the midpoint is within the limit range of the order. The Exchange may set a minimum entry size for MPL Orders from time to time, with the initial minimum entry size set at 1,000 shares. Users may specify a minimum executable size for an MPL Order, but no less than 1,000 shares. An MPL Order with a specified minimum executable size will execute against an incoming order that meets the minimum executable size and is priced at or better than the midpoint of the PBBO. 9 9 For example, an order may be entered to buy 10,000 MPL with a minimum size of 2,000. This would allow for execution of the MPL order only if the contra size order were at least 2,000 shares. If the leaves quantity becomes less than the minimum size, the minimum size restriction will no longer be enforced on executions. An MPL Order may be executed in subpennies if necessary to attain a midpoint price. Users may mark incoming limit orders with a “No Midpoint Execution” designator; so marked, those limit orders will ignore MPL Orders and trade against the rest of the book in the ordinary course. MPL Orders will not be exclusive to Lead Market Makers 10 (“LMMs”) where NYSE Arca is the primary listings market. MPL Orders will be valid for any session but will not participate in any auctions. If the market is locked, the eligible MPL Order will trade at the locked price. If the market is crossed, the MPL Order will wait for the market to uncross before becoming eligible to trade again. MPL Orders will interact with all order types including contra MPL Orders, with the exception of cross orders. 10 *See* NYSE Arca Equities Rule 1.1(ccc) for definition of “Lead Market Makers.” MPL Orders will not route out of NYSE Arca to other market centers. For purposes of the NYSE Arca rules related to Regulation NMS, MPL Orders will never be routed to Protected or Manual Quotations. An MPL Order will not trade-through a Protected Quotation. The Exchange believes that the implementation of the aforementioned rule changes adding a new order type and the related NYSE Arca order processing modifications will enhance order execution opportunities on NYSE Arca. 11 The Exchange believes that the proposed order type will allow for additional opportunities for liquidity providers, especially institutions, to passively interact with interest in the NYSE Arca book. 11 This proposed order type is similar to the MidPoint Match mechanism of the International Securities Exchange, Inc. (“ISE”), previously approved by the Commission. *See* Securities Exchange Act Release No. 54528 (September 28, 2006), 71 FR 58650 (October 4, 2006) (SR-ISE-2006-48). 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with section 6(b) of the Act 12 in general, and furthers the objectives of section 6(b)(5) of the Act 13 in particular, because it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in facilitating transactions in securities, and to remove impediments to and perfect the mechanism of a free and open market and a national market system. 12 15 U.S.C. 78f(b). 13 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 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, it has become effective pursuant to section 19(b)(3)(A) 14 of the Act and Rule 19b-4(f)(6) thereunder. 15 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. 14 15 U.S.C. 78s(b)(3)(A). 15 17 CFR 240.19b-4(f)(6). NYSE Arca has asked the Commission to waive the 30-day operative delay. The Commission believes such a waiver is consistent with the protection of investors and the public interest because it would permit the Exchange to codify the proposed order type, the MPL without delay. 16 For this reason, the Commission designates the proposal to be operative upon filing with the Commission. 16 For purposes only of waiving the 30-day pre-operative period, the Commission has considered the proposed rule's impact on efficiency, competition and capital formation. 15 U.S.C. 78c(f). IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form: ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to: *rule-comments@sec.gov* . Please include File Number SR-NYSEArca-2007-61 on the subject line. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-NYSEArca-2007-61. 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, 100 F Street, NE., Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. Copies of such filing also will be available for inspection and copying at the principal office of NYSE Arca. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-NYSEArca-2007-61 and should be submitted on or before August 10, 2007. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 17 17 17 CFR 200.30-3(a)(12). Florence E. Harmon, Deputy Secretary. [FR Doc. E7-14036 Filed 7-19-07; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-56069; File No. SR-OCC-2006-19] Self-Regulatory Organizations; The Options Clearing Corporation; Order Granting Approval of a Proposed Rule Change Relating to Close-Out Netting Procedures July 13, 2007. I. Introduction On October 10, 2006, The Options Clearing Corporation (“OCC”) filed with the Securities and Exchange Commission (“Commission”) proposed rule change SR-OCC-2006-19 pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”). 1 On May 15, 2007, OCC amended the proposed rule change. Notice of the proposal was published in the **Federal Register** on May 29, 2007. 2 On June 21, 2007, OCC again amended the proposed rule change. 3 Three comment letters were received. 4 For the reasons discussed below, the Commission is granting approval of the proposed rule change. 1 15 U.S.C. 78s(b)(1). 2 Securities Exchange Act Release No. 55788 (May 21, 2007), 72 FR 29569. 3 Although the proposed rule change was amended after it was noticed for comment in the **Federal Register** , republication of the notice was not necessary because the June 21, 2007, amendment made only a technical change regarding the application of a financial accounting interpretation. 4 Edward S. Grieb, Managing Director and Financial Controller, Lehman Brothers Holdings Inc. (June 19, 2007); Matthew Schroeder, Chairman, Dealer Accounting Committee, Securities Industry and Financial Markets Association (June 19, 2007); Gregory A. Sigrist, Managing Director, Morgan Stanley, New York, New York (June 19, 2007). II. Description Background OCC was asked by several of its Clearing Members to consider adopting a rule that would allow for close-out netting of obligations running between OCC and Clearing Members in the event of an OCC default or insolvency. The reason was that such a rule could reduce applicable capital requirements for a Clearing Member's parent company where the parent is a U.S. or non-U.S. bank or part of a Consolidated Supervised Entity (“CSE”). The absence of a netting agreement that would apply in a default or insolvency of OCC could cause the minimum capital requirement applicable to such a parent company and its subsidiaries to be substantially larger on a consolidated basis than it would be otherwise. In the absence of a netting agreement, applicable banking regulations generally prohibit offsetting the Clearing Member's liabilities to OCC on short positions in options and on other obligations against the Clearing Member's credits from OCC with respect to long options positions and from other obligations of OCC. In addition, OCC believes that a close-out netting rule would clarify the accounting treatment of obligations between OCC and its Clearing Members. The proposed rule change is designed to allow Clearing Members to comply with international standards under the Basel Capital Accord adopted by the Basel Committee on Banking Supervision relating to bilateral netting (“Basel Netting Standards”). 5 It is OCC's understanding that the capital rules applicable to most banks following the Basel Netting Standards require that an enforceable netting agreement be in place in order for mutual obligations between a Clearing Member that is a bank affiliate and a counterparty such as OCC to be treated on a net basis. The policy behind this requirement is to ensure that obligations that are treated on a net basis for capital purposes can actually be offset against one another in the event of the failure of the counterparty. In the absence of an enforceable netting agreement, there is concern that the representative of the failed counterparty ( *i.e.* , OCC in this scenario) under applicable insolvency law might be able to “cherry pick” by assuming the benefit of contracts representing an asset to the bankruptcy estate while rejecting contracts representing a liability. This would force the non-defaulting counterparty ( *i.e.* , the Clearing Member in this scenario) to perform in full on its liabilities while sharing with other unsecured creditors in any amounts available for distribution from the bankruptcy estate to satisfy its claims. An enforceable netting agreement providing for “close-out netting” in the event of a default or insolvency of OCC would avoid this potential result. 5 For more information on the Basel Committee on Banking Supervision and the Basel Netting Standards, see the Bank for International Settlement's Web site at: *http://www.bis.org.* Chapter XI of OCC's Rules, Suspension of a Clearing Member, provides in considerable detail for liquidation of the accounts of an insolvent Clearing Member including provisions for close-out netting of the Clearing Member's obligations against its assets to the extent permitted by customer protection rules under the Act and under the Commodity Exchange Act (“CEA”). However, OCC's rules do not presently contain any provisions that specifically provide for close-out netting in the event of a default or insolvency of OCC. Indeed, an OCC default or insolvency has always been considered so unlikely that OCC's rules do not contain any provisions whatever contemplating such events. OCC's management does not believe that an OCC default or insolvency has become any more likely. On the contrary, OCC's long history of safe operations and continually improved methods of risk management suggest that such an event is more remote than ever. Nevertheless, the Basel Netting Standards make it desirable for OCC to put in place such a netting provision in order to clarify the capital requirements applicable on a consolidated basis to parent companies of Clearing Members that are subject to the Basel Netting Standards. The Basel Netting Standards are not directly applicable to the determination of net capital requirements for broker-dealers under Commission Rule 15c3-1. 6 However, some Clearing Members are subsidiaries of banks or bank holding companies that are subject to the Basel Netting Standards when computing capital requirements on a consolidated basis. In addition, several of OCC's largest Clearing Members have volunteered to participate in the Commission's CSE program. Finally, as noted below, OCC believes that a close-out netting rule would also clarify the accounting treatment of obligations between OCC and a Clearing Member under FIN 39. 7 6 17 CFR 240.15c3-1. 7 Financial Account Standards Board (“FASB”) Interpretation No. 39, Offsetting of Amounts Related to Certain Contracts. FIN 39 specifies the circumstances in which assets and liabilities may be treated as offsetting in financial statements. The Basel Netting Standards and FIN 39 (collectively “Netting Standards”) are stated in general terms and do not contain detailed requirements. OCC's proposed close-out netting procedures would clearly permit Clearing Members to treat their obligations to OCC on a net basis to the fullest extent consistent with the Commission's customer protection rules in the event of an OCC default or insolvency. The proposed rule change is also intended to protect the clearing system from being thrown out of balance or forced into a disorderly liquidation by a single Clearing Member's exercise of netting rights. Unlike typical, purely bilateral OTC derivatives relationships, OCC's contractual rights and obligations, while bilateral between OCC and any individual Clearing Member, represent a balanced structure in which every obligation owed by OCC to a Clearing Member is in turn matched by a corresponding obligation of a Clearing Member to OCC. The creation of individually exercisable netting rights that could be exercised independently by each Clearing Member in the event of an OCC default or insolvency could result in unfairness and disruption if no coordination is imposed. The Basel Netting Standards The Basel Netting Standards are contained in Basel II: International Convergence of Capital Measurement and Capital Standards: A Revised Framework—Comprehensive Version (June 2006) (“Basel II Accord”). The Basel Netting Standards provide that a bank 8 may net transactions subject to any legally valid form of bilateral netting, including netting of bilateral obligations arising from novation, if the bank satisfies its national supervisor that it has a netting contract with the counterparty “which creates a single legal obligation, covering all included transactions, such that the bank would have either a claim to receive or obligation to pay only the net sum of the positive and negative mark-to-market values of included individual transactions in the event a counterparty fails to perform due to any * * * default, bankruptcy, liquidation or similar circumstances.” 9 8 These same standards are also applied to bank holding companies. 9 Basel Committee on Banking Supervision, Basel Capital Accord: Treatment of Potential Exposure for Off-Balance Sheet Items (April 1995) at Annex, p. 4. The relevant bilateral netting standards under this 1995 publication were not overridden by the Basel II Accord. Basel II Accord at p. 213. Basel II also allows cross-product netting. The Basel Netting Standards also require that the bank have certain “written and reasoned legal opinions that, in the event of a legal challenge, the relevant courts and administrative authorities would find the bank's exposure to be the net amount.” The national supervisor must be satisfied that the netting is enforceable under the laws of each relevant jurisdiction. The proposed close-out netting procedures are intended to support such an opinion. The Basel Netting Standards have been incorporated in applicable bank regulatory laws or regulations in various jurisdictions. For example, the substance of this standard appears in Article 12f of the Swiss Banking Ordinance. It has also been incorporated into the capital guidelines for various U.S. financial institutions. 10 10 *See e.g.* , Regulations of the Office of the Comptroller of the Currency applicable to national banks set forth at 12 CFR appendix A to part 3 section (3)(b)(5)(ii)(B) (adopted July 1, 2002). FDICIA and Bankruptcy Code The proposed close-out netting procedures are designed to take advantage of the netting provisions of Title IV of the Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”) and of the applicable provisions of the United States Bankruptcy Code. Section 404 of FDICIA generally validates netting contracts among members of clearing organizations notwithstanding any other provision of law. 11 In order to qualify for this benefit, the “netting contract” must be between “members” of a “clearing organization,” as each of these terms is defined in FDICIA. OCC meets the definition of “clearing organization” under FDICIA, and both it and its Clearing Members meet the definition of “members.” Under FDICIA, the rules of a clearing organization are expressly included within the definition of “netting contract.” Accordingly, under section 404 of FDICIA, the netting provisions of OCC's By-Laws and Rules, including the proposed revised netting procedures, will be given effect in the event of OCC's default or insolvency. 11 12 U.S.C. 4403. Section 362(b) of the United States Bankruptcy Code 12 exempts from the automatic stay provisions of the Bankruptcy Code the setoff by, among other parties, stockbrokers, commodity brokers, or clearing agencies of mutual debts or claims under commodity or securities contracts. This section preserves OCC's ability to net obligations between OCC and a suspended Clearing Member and similarly would protect the ability of Clearing Members to net obligations under the proposed netting procedures in the event of OCC's default or insolvency. In addition, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (“BAPCPA”) 13 added to the Bankruptcy Code new subsection 362(o) which provides that the right of setoff and other relevant rights may not be stayed by any order of a court or administrative agency in any proceeding under the Bankruptcy Code. 14 This addition was a significant expansion of the protections for financial contracts under the Bankruptcy Code. 12 11 U.S.C. 362(b). 13 Public Law 109-8, 119 Stat. 23 (2005). 14 11 U.S.C. 362(o). Prior Netting Filing and Clearing Member Comments OCC previously submitted and subsequently withdrew a proposed rule change with respect to close-out netting (“Prior Netting Filing”). 15 After reviewing the Prior Netting Filing, some Clearing Members questioned whether the netting procedures set forth in that filing satisfied the Netting Standards. Specifically, Clearing Members questioned whether: 15 File No. SR-OCC-2005-17. 1. The definition of insolvency in the Prior Netting Filing, which covered only voluntary or involuntary cases under Chapter 7, needed to be expanded to include other types of bankruptcies, particularly Chapter 11 cases, and non-bankruptcy defaults; 2. The procedures set forth in the Prior Netting Filing complied with the Netting Standards in light of the inability of the Clearing Members as the non-defaulting parties to initiate the netting process; and 3. The proposed procedures gave Clearing Members the ability to promptly net and to close-out positions as required to comply with the Netting Standards given the degree of control that OCC reserved to itself in the process. After considering the Clearing Members' comments, OCC withdrew the Prior Netting Filing and made modifications to the proposed netting provisions which are reflected in the current filing. The primary differences between the currently-proposed close-out netting procedures and those contained in the Prior Netting Filing are that the currently-proposed procedures: 1. Significantly expand the definition of insolvency to include non-bankruptcy defaults, specifically any failure by OCC to comply with an undisputed obligation to deliver money or property to a Clearing Member for a period of thirty days after the obligation becomes due, and to include bankruptcy or insolvency proceedings under statutory provisions other than Chapter 11 of the U.S. Bankruptcy Code; 2. Provide that upon the occurrence of an event of default or insolvency, any Clearing Member that is neither suspended nor in default with regard to an obligation to OCC may provide a notice to OCC of its intention to terminate all cleared contracts and stock loan and borrow positions in all of its accounts; and 3. Establish a fixed termination time for all cleared contracts and stock loan and borrow positions, which would be the close of business on the third business day after OCC's receipt of the prescribed notice from a Clearing Member unless a different time is mandated by the Bankruptcy Code, and provide that the liquidation settlement date will occur as promptly as practicable after the termination time (the original provisions granted OCC the discretion to establish the termination time and provided that the liquidation settlement date would occur no earlier than the business day following the termination date). OCC believes that the above modifications address the Clearing Members' concerns while still permitting the liquidation process to proceed in an orderly manner and the clearance system to remain in balance. Overview of Proposed Rule Change The proposed rule change consists of a single new Section 27, Close-Out Netting, of Article VI of OCC's By-Laws, Clearance of Exchange Transactions. Consistent with the requirements of the Basel Netting Standards, the netting provision is applicable in the event that OCC fails to perform its obligations with respect to cleared contracts as the result of defaults by OCC in performing its obligations under its rules or as the result of bankruptcy, a liquidation of OCC, or similar circumstances. The close-out netting procedures are drafted in such a way that they would only be triggered by an event of default, as defined in new section 27(a). The procedures would not be triggered by any delay in performance that is permitted under OCC's By-Laws or Rules. For example, section 19 of Article VI of OCC's By-Laws permits OCC to take specified actions, including suspension of settlement obligations, in the event of a shortage of underlying securities. These delays would not be considered an event of default under section 27 and therefore would not allow a Clearing Member to initiate the close-out netting procedures. Under the proposed close-out netting procedures, in the event of a default or insolvency by OCC, OCC would be required to provide notice of the default or insolvency to the Commission, the CFTC, all Clearing Members, any clearing organizations with which OCC has cross-margining or cross-guarantee agreements, and all markets for which OCC clears transactions. The proposed procedures further provide that in the event of an OCC default, any Clearing Member, so long as it is not suspended or in default, may provide a written notice to OCC of its intent to initiate the liquidation process with regard to its own contracts and stock loan and borrow positions. This notice would, however, trigger a liquidation of cleared contracts and positions of all Clearing Members. This procedure is necessary because liquidating contracts and positions of less than all Clearing Members would result in an imbalance of the clearing system and therefore would be unworkable. The proposed procedures establish the close of business on the third business day after OCC's receipt of the liquidation notice from a Clearing Member as the termination time unless the Bankruptcy Code prescribes a different time. The proposed close-out netting procedures provide that when a triggering event occurs, rights and obligations within and between accounts of each Clearing Member will be netted to the same extent as if the Clearing Member had been suspended and its accounts were being liquidated under Chapter XI of the Rules. This is appropriate in that those rules generally provide for the netting of assets against liabilities to the extent permitted under applicable law, including the customer protection rules referred to above. Assets remaining after all legally permissible offsets would be returned to the Clearing Member entitled to them. The Clearing Member would remain obligated to OCC only to the extent of any remaining net liabilities following such permitted offsets. If close-out netting were ever required because of the default or insolvency of OCC, it seems likely that there would be no market available in which to liquidate positions in cleared contracts through market transactions. Accordingly, the proposed procedures contain a provision for valuation of open cleared contracts based upon market values of underlying interests and provide a reasonable means for OCC to fix all necessary values of assets and liabilities for purposes of the netting. Under the procedures, OCC is to provide valuations as promptly as practicable but in any event within thirty days of the termination time. Valuations would be based upon available market information. FIN 39: Offsetting of Amounts Related to Certain Contracts In addition to the potential benefit of the proposed close-out netting procedures with respect to capital requirements applicable to certain Clearing Members and their affiliates on a consolidated basis under the Basel Netting Standards, OCC believes that the proposed close-out netting procedures should also clarify the accounting treatment of mutual obligations running between OCC and its Clearing Members. OCC's Clearing Members most commonly prepare their financial statements using United States Generally Accepted Accounting Principles (“US GAAP”). FIN 39 responds to certain questions relating to the circumstances in which assets and liabilities may be treated as offsetting in financial statements. FIN 39 is an interpretation of Accounting Principles Board (“APB”) Opinion No. 10, which states that “it is a general principle of accounting that the offsetting of assets and liabilities in the balance sheet is improper except where a right of setoff exists.” FIN 39 provides a definition of a right of setoff and a statement of the conditions under which a right of setoff exists. FIN 39 states, “A right of setoff is a debtor's legal right, by contract or otherwise, to discharge all or a portion of the debt owed to another party by applying against the debt an amount that the other party owes to the debtor.” FIN 39 sets forth the following four conditions which must be met for there to exist a right of setoff:
(1)Each of two parties owes the other determinable amounts.
(2)The reporting party has the right to set off the amount owed with the amount owed by the other party.
(3)The reporting party intends to set off.
(4)The right of setoff is enforceable at law. It is the obligation of each Clearing Members to determine its proper application of U.S. GAAP but OCC believes that proposed new section 27 will enable Clearing Members to conclude that conditions (1), (2), and
(4)have been met. (Condition
(3)deals with intent, which is a factual question.) Discussion of Specific Provisions of Section 27 The text of proposed new section 27 of Article VI of the By-Laws is largely self-explanatory in light of the foregoing discussion of its purpose. A few comments may nevertheless be helpful. Under proposed sections 27(a) and (b), if OCC should ever give notice of its default or insolvency and a Clearing Member in turn provide a notice of termination, the termination time may be later than the time at which a Clearing Member's liquidation notice is given. 16 This leaves open at least the theoretical possibility that, if there are trading days or hours left between the time the notice is given and the termination time, market participants could attempt to engage in closing transactions at prices determined in the market to avoid being subject to a forced liquidation at prices fixed by OCC. 17 16 Under proposed section 27(b), the termination time would be the close of business on the third business day following a Clearing Member's liquidation notice unless the Bankruptcy Code prescribes a different time. Under section 502(b) of the Bankruptcy Code, claims against a debtor are valued as of the date of the filing of the bankruptcy petition. Accordingly, in the event of a bankruptcy the termination time would be on the date of the filing of the petition. 17 17 Such activity of market participants could start at the time of OCC's default notice rather than the time of the liquidation notice although as a practical matter a liquidation notice would likely closely follow the default notice. Proposed section 27(b) provides that in the event of a default or insolvency and the requisite notice by a Clearing Member, positions of all Clearing Members will be liquidated to the maximum extent permitted by law and the By-Laws and Rules. The limitations on netting under OCC's By-Laws and Rules are in general those mandated by applicable law, such as the Commission's Rule 15c3-3. For example, where a Clearing Member carries both proprietary and customer accounts netting across accounts could cause the Clearing Member to be in violation of Rule 15c3-3 and other customer protection rules. Accordingly, section 27 generally provides for netting within and not across different accounts with specific exceptions set forth in section 27(d). In addition, CEA segregation rules require separate segregation of customer funds of futures customers. Accordingly, netting across futures segregated funds accounts and other accounts is also generally prohibited. Otherwise, the provisions of section 27(d) are intended to maximize netting where consistent with customer protection rules. While securities market-makers and specialists are generally not customers within the meaning of Rule 15c3-3, they are ordinarily “customers” within the meaning of the Commission's hypothecation rules. 18 OCC has historically not permitted setoff between market-maker accounts and customer accounts in which positions of other securities customers are carried. This separation has been preserved in section 27(d)(3). 18 17 CFR 240.8c-1 and 240.15c2-1. III. Comments The Commission received three comment letters to the proposed rule change. 19 All three comment letters support the proposed rule change. Two of the comment letters, one from the Dealer Accounting Committee of the Securities Industry and Financial Markets Association and one from Lehman Brothers Holdings, Inc., state that the commenters support the proposed rule change because it is designed to allow OCC's members to comply with the Basel Capital Accord standards relating to bilateral netting and because it will clarify the accounting treatment of obligations between OCC and its clearing members. The third comment letter, from Morgan Stanley, states that Morgan Stanley believes the proposed rule change would result in significant improvement in financial reporting, would better align financial reporting with risk management practices, and would result in presenting the net credit risk exposure related to derivative instruments cleared through the OCC. 19 *Supra* note 4. IV. Discussion Section 17A(b)(3)(F) of the Act requires, among other things, that the rules of a clearing agency be designed to remove impediments to and perfect the mechanism of a national system for the prompt and accurate clearance and settlement of securities transactions. 20 The proposed rule change should help to reduce uncertainty by establishing the procedures OCC and its Clearing Members must follow in the event of an OCC default or insolvency. Accordingly, because the proposed rule change establishes procedures that should reduce uncertainty and streamline the final clearance and settlement process in the event OCC defaults on it obligations to its members or otherwise becomes insolvent, we find that the proposed rule change is designed to remove impediments to and perfect the mechanism of a national system for the prompt and accurate clearance and settlement of securities transactions. 20 5 U.S.C. 78q-1(b)(3)(F). Although the proposed rule change applies in the event of the default or insolvency of OCC, OCC considers such an event to be unlikely. OCC's purpose in making the rule change is to allow its Clearing Members and certain affiliates of its Clearing Members to obtain better treatment under regulatory and financial standards where such better treatment requires that close-out netting procedures are in place. The close-out netting procedures are intended to allow Clearing Members to
(1)reduce the applicable capital requirements for the Clearing Member's parent company where the parent is a U.S. or non-U.S. bank or part of a CSE under the Basel Netting Standards;
(2)take advantage of the netting provisions of FDICIA and the applicable provisions of the United States Bankruptcy Code; and
(3)clarify the accounting treatment of obligations between OCC and each Clearing Member under FIN 39. While the Commission believes that these intended benefits of the proposed rule change are not inconsistent with our finding above that the proposed rule change is designed to remove impediments to and perfect the mechanism of a national system for the prompt and accurate clearance and settlement of securities transactions under section 17A the Act, we note that this order relates only to OCC's obligations under section 17A of the Act and neither makes any findings nor expresses any opinion with respect to OCC's representations and interpretations regarding the application of the Basel Netting Standards, FDCIA, Bankruptcy Code, or FIN 39. V. Conclusion On the basis of the foregoing, the Commission finds that the proposed rule change is consistent with the requirements of the Act and in particular section 17A of the Act and the rules and regulations thereunder. 21 21 In approving the proposed rule change, the Commission considered the proposal's impact on efficiency, competition and capital formation. 15 U.S.C. 78c(f). *It is therefore ordered* , pursuant to section 19(b)(2) of the Act, that the proposed rule change (File No. SR-OCC-2006-19) be and hereby is approved. For the Commission by the Division of Market Regulation, pursuant to delegated authority. 22 22 17 CFR 200.30-3(a)(12). Florence E. Harmon, Deputy Secretary. [FR Doc. E7-14019 Filed 7-19-07; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-56076; File No. SR-Phlx-2007-46] Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Priority of Synthetic Option Orders in Open Outcry July 16, 2007. Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”), 1 and Rule 19b-4 thereunder, 2 notice is hereby given that on June 26, 2007, the Philadelphia Stock Exchange, Inc. (“Phlx” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I and II, below, which Items have been substantially prepared by the Phlx. The Exchange filed the proposed rule change pursuant to section 19(b)(3)(A) of the Act 3 and Rule 19b-4(f)(6) thereunder, 4 which renders the 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 Phlx proposes to adopt, on a permanent basis, Exchange Rule 1033(e), which is currently subject to a pilot program (the “pilot”) scheduled to expire June 30, 2007. Exchange Rule 1033(e) affords priority to synthetic option orders (as defined below) traded in open outcry over bids and offers in the trading crowd but not over bids (offers) of public customers on the limit order book and not over crowd participants who are willing to participate in the synthetic option order at the net debit or credit price. The rule applies to orders for 100 contracts or more. The Exchange proposes to adopt the rule on a permanent basis. The text of the proposed rule change is set forth below. Brackets indicate deletions; *italics* indicate new text. Bids And Offers—Premium Rule 1033. (a)-(d) No change.
(e)Synthetic Option Orders. When a member holding a synthetic option order, as defined in Rule 1066, and bidding or offering on the basis of a total credit or debit for the order has determined that the order may not be executed by a combination of transactions at or within the bids and offers established in the marketplace, then the order may be executed as a synthetic option order at the total credit or debit with one other member, provided that, the member executes the option leg at a better price than the established bid or offer for that option contract, in accordance with Rule 1014. [Subject to a pilot expiring June 30, 2007, s] *S* ynthetic option orders in open outcry, in which the option component is for a size of 100 contracts or more, have priority over bids (offers) of crowd participants who are bidding (offering) only for the option component of the synthetic option order, but not over bids (offers) of public customers on the limit order book, and not over crowd participants that are willing to participate in the synthetic option order at the net debit or credit price. (f)-(i) No change. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Phlx included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Phlx has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of the proposed rule change is to adopt, on a permanent basis, Exchange Rule 1033(e), which facilitates the execution of option orders that are represented in the crowd together with a stock component, known under the Exchange's rules as synthetic option orders, 5 which by virtue of the stock component may be difficult to execute without a limited exception to current Exchange priority rules. The pilot was originally adopted in July 2005, 6 extended for an additional six-month period through June 30, 2006, 7 and subsequently extended for one year, which is scheduled to expire June 30, 2007. 8 5 Exchange Rule 1066(g) currently defines a synthetic option order as an order to buy or sell a stated number of option contracts and buy or sell the underlying stock or Exchange-Traded Fund Share in an amount that would offset (on a one-for-one basis) the option position. For example:
(1)Buy-write: An example of a buy-write is an order to sell one call and buy 100 shares of the underlying stock or Exchange-Traded Fund Share.
(2)Synthetic put: An example of a synthetic put is an order to buy one call and sell 100 shares of the underlying stock or Exchange-Traded Fund Share.
(3)Synthetic call: An example of a synthetic call is an order to buy (or sell) one put and buy (or sell) 100 shares of the underlying stock or Exchange-Traded Fund Share. 6 *See* Securities Exchange Act Release No. 52140 (July 27, 2005), 70 FR 45481 (August 5, 2005) (SR-Phlx-2005-31). 7 *See* Securities Exchange Act Release No. 53004 (December 22, 2005), 70 FR 77234 (December 29, 2005) (SR-Phlx-2005-78). 8 *See* Securities Exchange Act Release No. 54017 (June 19, 2006), 71 FR 36596 (June 27, 2006) (SR-Phlx-2006-38). Currently, Exchange Rule 1033(e) provides that, if an Exchange member who is holding a synthetic option order and is bidding or offering on a net debit or credit basis determines that such synthetic option order cannot be executed at the net debit or credit against the established bids and offers in the crowd, the member bidding for or offering the synthetic option on a net debit or credit basis may execute the synthetic option order with one other crowd participant, provided that the option portion of the synthetic option order is executed at a price that is better than the established bid or offer for the option. Thus, if the desired net debit or credit amount cannot be achieved by way of executing against the established bids and offers in the crowd, the member may elect to trade at the desired net debit or credit amount with one other member, provided that there is price improvement for the option component of the synthetic option order. Exchange Rule 1033(e) affords synthetic option orders priority over bids (offers) of the trading crowd but not over bids (offers) of public customers on the limit order book and not over crowd participants who are willing to participate in the synthetic option order at the net debit or credit price. The effect of the rule is that a crowd participant bidding or offering for the synthetic option order has priority over other crowd participants that are bidding or offering only for the option component of the order. The rule applies only to synthetic option orders of 100 contracts or more. In addition, the rule provides that members bidding and offering for synthetic option orders of 100 contracts or more do not have priority over bids (offers) of public customers on the limit order book. 9 Therefore, if members of the trading crowd wish to trade a synthetic option order that is marketable against public customer orders on the limit order book, public customers would have priority. Multiple public customer orders at the same price are accorded priority based on time. 9 *See* Exchange Rule 1080, Commentary .02. The Exchange believes that Exchange Rule 1033(e), which provides a limited exception to the Exchange's priority rules only with respect to controlled accounts 10 competing at the same price, should enable Floor Brokers representing synthetic option orders to provide best executions to customers placing such orders and should enable the Exchange to provide liquid markets and compete for order flow in such orders. 10 A controlled account includes any account controlled by or under common control with a broker-dealer. Customer accounts are all other accounts. Orders of controlled accounts are required to yield priority to customer orders when competing at the same price. Orders of controlled accounts generally are not required to yield priority to other controlled account orders. *See* Exchange Rule 1014(g)(i)(A). As stated above, the rule applies only to synthetic option orders in which the option component is for a size of 100 contracts or more that are represented in the trading crowd in open outcry. 2. Statutory Basis The Exchange believes that its proposal is consistent with section 6(b) of the Act 11 in general and furthers the objectives of section 6(b)(5) of the Act 12 in particular in that it is designed to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest, by adopting a limited exception to the Exchange's priority rules concerning synthetic option orders. 11 15 U.S.C. 78f(b). 12 15 U.S.C. 78f(b)(5). B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were either solicited or received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action 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 13 and Rule 19b-4(f)(6) thereunder. 14 At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. 15 13 15 U.S.C. 78s(b)(3)(A). 14 17 CFR 240.19b-4(f)(6). 15 As required by Rule 19b-4(f)(6)(iii) under the Act, the Exchange provided the Commission with written notice of its intent to file the proposed rule change, along with a brief description of the text of the proposed rule change, at least five business days prior to the date of the filing of the proposed rule change. The Exchange requests that the Commission waive the 30-day operative period under Rule 19b-4(f)(6)(iii) 16 in order to ensure the continuity of the rule. The Commission believes that it is consistent with the protection of investors and the public interest to waive the 30-day operative delay. 17 The Commission believes that the waiver of the 30-day operative delay will allow the Exchange to continue, without interruption, the existing operation of its rule. 16 17 CFR 240.19b-4(f)(6)(iii). 17 For purposes only of waiving the 30-day operative delay of this proposal, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to: *rule-comments@sec.gov.* Please include File Number SR-Phlx-2007-46 on the subject line. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-Phlx-2007-46. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room, 100 F Street, NE., Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Phlx. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-Phlx-2007-46 and should be submitted on or before August 10, 2007. 18 17 CFR 200.30-3(a)(12). For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 18 Florence E. Harmon, Deputy Secretary. [FR Doc. E7-14023 Filed 7-19-07; 8:45 am] BILLING CODE 8010-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-56076; File No. SR-Phlx-2007-46] Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Priority of Synthetic Option Orders in Open Outcry July 16, 2007. Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”), 1 and Rule 19b-4 thereunder, 2 notice is hereby given that on June 26, 2007, the Philadelphia Stock Exchange, Inc. (“Phlx” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I and II, below, which Items have been substantially prepared by the Phlx. The Exchange filed the proposed rule change pursuant to section 19(b)(3)(A) of the Act 3 and Rule 19b-4(f)(6) thereunder, 4 which renders the 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 Phlx proposes to adopt, on a permanent basis, Exchange Rule 1033(e), which is currently subject to a pilot program (the “pilot”) scheduled to expire June 30, 2007. Exchange Rule 1033(e) affords priority to synthetic option orders (as defined below) traded in open outcry over bids and offers in the trading crowd but not over bids (offers) of public customers on the limit order book and not over crowd participants who are willing to participate in the synthetic option order at the net debit or credit price. The rule applies to orders for 100 contracts or more. The Exchange proposes to adopt the rule on a permanent basis. The text of the proposed rule change is set forth below. Brackets indicate deletions; *italics* indicate new text. Bids and Offers—Premium Rule 1033.(a)-(d) No change.
(e)Synthetic Option Orders. When a member holding a synthetic option order, as defined in Rule 1066, and bidding or offering on the basis of a total credit or debit for the order has determined that the order may not be executed by a combination of transactions at or within the bids and offers established in the marketplace, then the order may be executed as a synthetic option order at the total credit or debit with one other member, provided that, the member executes the option leg at a better price than the established bid or offer for that option contract, in accordance with Rule 1014. [Subject to a pilot expiring June 30, 2007, s] *S* ynthetic option orders in open outcry, in which the option component is for a size of 100 contracts or more, have priority over bids (offers) of crowd participants who are bidding (offering) only for the option component of the synthetic option order, but not over bids (offers) of public customers on the limit order book, and not over crowd participants that are willing to participate in the synthetic option order at the net debit or credit price. (f)-(i) No change. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Phlx included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Phlx has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of the proposed rule change is to adopt, on a permanent basis, Exchange Rule 1033(e), which facilitates the execution of option orders that are represented in the crowd together with a stock component, known under the Exchange's rules as synthetic option orders, 5 which by virtue of the stock component may be difficult to execute without a limited exception to current Exchange priority rules. The pilot was originally adopted in July 2005, 6 extended for an additional six-month period through June 30, 2006, 7 and subsequently extended for one year, which is scheduled to expire June 30, 2007. 8 5 Exchange Rule 1066(g) currently defines a synthetic option order as an order to buy or sell a stated number of option contracts and buy or sell the underlying stock or Exchange-Traded Fund Share in an amount that would offset (on a one-for-one basis) the option position. For example:
(1)Buy-write: An example of a buy-write is an order to sell one call and buy 100 shares of the underlying stock or Exchange-Traded Fund Share.
(2)Synthetic put: An example of a synthetic put is an order to buy one call and sell 100 shares of the underlying stock or Exchange-Traded Fund Share.
(3)Synthetic call: An example of a synthetic call is an order to buy (or sell) one put and buy (or sell) 100 shares of the underlying stock or Exchange-Traded Fund Share. 6 *See* Securities Exchange Act Release No. 52140 (July 27, 2005), 70 FR 45481 (August 5, 2005) (SR-Phlx-2005-31). 7 *See* Securities Exchange Act Release No. 53004 (December 22, 2005), 70 FR 77234 (December 29, 2005) (SR-Phlx-2005-78). 8 *See* Securities Exchange Act Release No. 54017 (June 19, 2006), 71 FR 36596 (June 27, 2006) (SR-Phlx-2006-38). Currently, Exchange Rule 1033(e) provides that, if an Exchange member who is holding a synthetic option order and is bidding or offering on a net debit or credit basis determines that such synthetic option order cannot be executed at the net debit or credit against the established bids and offers in the crowd, the member bidding for or offering the synthetic option on a net debit or credit basis may execute the synthetic option order with one other crowd participant, provided that the option portion of the synthetic option order is executed at a price that is better than the established bid or offer for the option. Thus, if the desired net debit or credit amount cannot be achieved by way of executing against the established bids and offers in the crowd, the member may elect to trade at the desired net debit or credit amount with one other member, provided that there is price improvement for the option component of the synthetic option order. Exchange Rule 1033(e) affords synthetic option orders priority over bids (offers) of the trading crowd but not over bids (offers) of public customers on the limit order book and not over crowd participants who are willing to participate in the synthetic option order at the net debit or credit price. The effect of the rule is that a crowd participant bidding or offering for the synthetic option order has priority over other crowd participants that are bidding or offering only for the option component of the order. The rule applies only to synthetic option orders of 100 contracts or more. In addition, the rule provides that members bidding and offering for synthetic option orders of 100 contracts or more do not have priority over bids (offers) of public customers on the limit order book. 9 Therefore, if members of the trading crowd wish to trade a synthetic option order that is marketable against public customer orders on the limit order book, public customers would have priority. Multiple public customer orders at the same price are accorded priority based on time. 9 *See* Exchange Rule 1080, Commentary .02. The Exchange believes that Exchange Rule 1033(e), which provides a limited exception to the Exchange's priority rules only with respect to controlled accounts 10 competing at the same price, should enable Floor Brokers representing synthetic option orders to provide best executions to customers placing such orders and should enable the Exchange to provide liquid markets and compete for order flow in such orders. 10 A controlled account includes any account controlled by or under common control with a broker-dealer. Customer accounts are all other accounts. Orders of controlled accounts are required to yield priority to customer orders when competing at the same price. Orders of controlled accounts generally are not required to yield priority to other controlled account orders. *See* Exchange Rule 1014(g)(i)(A). As stated above, the rule applies only to synthetic option orders in which the option component is for a size of 100 contracts or more that are represented in the trading crowd in open outcry. 2. Statutory Basis The Exchange believes that its proposal is consistent with section 6(b) of the Act 11 in general and furthers the objectives of section 6(b)(5) of the Act 12 in particular in that it is designed to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest, by adopting a limited exception to the Exchange's priority rules concerning synthetic option orders. 11 15 U.S.C. 78f(b). 12 15 U.S.C. 78f(b)(5). B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were either solicited or received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action 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 13 and Rule 19b-4(f)(6) thereunder. 14 At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. 15 13 15 U.S.C. 78s(b)(3)(A). 14 17 CFR 240.19b-4(f)(6). 15 As required by Rule 19b-4(f)(6)(iii) under the Act, the Exchange provided the Commission with written notice of its intent to file the proposed rule change, along with a brief description of the text of the proposed rule change, at least five business days prior to the date of the filing of the proposed rule change. The Exchange requests that the Commission waive the 30-day operative period under Rule 19b-4(f)(6)(iii) 16 in order to ensure the continuity of the rule. The Commission believes that it is consistent with the protection of investors and the public interest to waive the 30-day operative delay. 17 The Commission believes that the waiver of the 30-day operative delay will allow the Exchange to continue, without interruption, the existing operation of its rule. 16 17 CFR 240.19b-4(f)(6)(iii). 17 For purposes only of waiving the 30-day operative delay of this proposal, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to: *rule-comments@sec.gov.* Please include File Number SR-Phlx-2007-46 on the subject line. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-Phlx-2007-46. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room, 100 F Street, NE., Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Phlx. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-Phlx-2007-46 and should be submitted on or before August 10, 2007. For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 18 18 17 CFR 200.30-3(a)(12). Florence E. Harmon, Deputy Secretary. [FR Doc. E7-14024 Filed 7-19-07; 8:45 am] BILLING CODE 8010-01-P DEPARTMENT OF TRANSPORTATION Federal Aviation Administration [Docket No. FAA-2007-28041] Notice of Availability and Public Comment Period for the Draft Air Quality General Conformity Determination
(DGCD)for Proposed Operations of Lynx Aviation, Inc. at Denver International Airport, Denver, CO AGENCY: Federal Aviation Administration (FAA), Department of Transportation (DOT). ACTION: Notice of availability of the Draft Air Quality General Conformity Determination and notice of public comment period. SUMMARY: The FAA is issuing this notice to advise the public that FAA has prepared a Draft Air Quality General Conformity Determination
(DGCD)for Proposed Operations of Lynx Aviation, Inc. (Lynx Aviation) at Denver International Airport
(DEN)and to request comments from the public on the DGCD. In accordance with Section 176(c) of the Clean Air Act, FAA has assessed whether the emissions that would result from FAA's action in approving the proposed operation specifications (OPSPECS) for Lynx Aviation's proposed operations at DEN conform to the applicable Colorado State Implementation Plans (SIPs). The DGCD contains this assessment. DATES: Submit comments on or before August 20, 2007. ADDRESSES: Interested parties may view hard copies of the document in Denver, Monday through Friday, from 8 a.m. to 4 p.m. Mountain Daylight Time at Environmental Services Section, Department of Aviation, City and County of Denver, Elrey B. Jeppesen Terminal Building, Level 6, Room 6619-20, 8400 Peña Boulevard, Denver, CO 80249. Please contact Ms. Aimee Fenlon at 303-342-2636 for appointments. To request mailed hard copies of the Draft GCD, contact Mr. Dennis Harn, Operations Specialist, Safety Evaluation and Analysis Branch, ANM-240, FAA Northwest Mountain Region Headquarters, 1601 Lind Ave., SW., Suite 560, Renton, WA 98057; telephone: 425-227-2560; e-mail: *Dennis.Harn@faa.gov.* The DGCD is also available for review electronically on the Department of Transportation's Docket Management System
(DMS)at *http://dms.dot.gov/.* Do a simple search for docket number 28041. You may submit comments, identified by docket number FAA-2007-28041, by any of the following methods: 1. By mail to: Docket Management Facility, U.S. Department of Transportation, 1200 New Jersey Avenue, SE., Washington, DC 20590-0001. 2. By hand delivery to Docket Management Facility, 1200 New Jersey Avenue, SE., Washington, DC, between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays; 3. By fax to the Docket Management Facility at 202-493-2251; or 4. By electronic submission through the DMS Web site at *http://dms.dot.gov/submit/.* See SUPPLEMENTARY INFORMATION for additional information about electronic filing. FOR FURTHER INFORMATION CONTACT: Mr. Dennis Harn, telephone: 425-277-2560; e-mail; *Dennis.Harn@faa.gov.* SUPPLEMENTARY INFORMATION: The Denver Metropolitan Area is an EPA-designated attainment/maintenance area for the criteria pollutants carbon monoxide, particulate matter with aerodynamic diameter of 10 micrometers or less (PM <sup>10</sup> ), and ozone (1-hour standard). In addition, DEN is located in an Early Action Compact area for the 8-hour ozone standard. The FAA demonstrates in the DGCD that the sum of the existing aircraft operations at DEN plus the proposed aircraft operations by Lynx Aviation is below the forecast values incorporated into the State Implementation Plan (SIP), and therefore aircraft emissions attributed to flights by Lynx Aviation are already accounted for in the SIP emissions inventories. As a result, the FAA can demonstrate that the proposed action conforms to the SIP. Comment Filing Instructions All submissions received must include the agency name and docket number or Regulatory Information Number (RIN). You may submit comments electronically through the DMS Web site at *http://dms.dot.gov/submit/* . You have the option of submitting comments either by typing your comment into the DMS or by uploading a previously completed comment document as a file. If you upload a file it must be in one of the following file format types: MS Word (Versions 95-97); MS Word for Mac (Versions 6-8); Rich Text File (RTF); American Standard Code Information Interchange (ASCII) (TXT); Portable Document Format (PDF); or Word Perfect
(WPD)(Versions 7-8). See the Electronic Submission Help and Guidelines screen at *http://dms.dot.gov/help/es_help.cfm* for additional guidance. The FAA will accept comments on the DCGD until August 20, 2007. Written comments must be postmarked and electronic submissions received by not later than midnight, August 20, 2007. After FAA reviews and addresses all comments, FAA will publish a notice of availability of the Final General Conformity Determination. Issued in Washington, DC on July 16, 2007. John M. Allen, Acting Director, Flight Standards Service. [FR Doc. 07-3540 Filed 07-19-07; 8:45 am]
Connectionstraces to 8
6 references not yet in our index
  • 17 CFR 240.19
  • 17 CFR 240.15
  • Pub. L. 109-8
  • 119 Stat. 23
  • 17 CFR 240.8
  • 5 USC 78q-1(b)(3)(F)
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cites case law
Notices
Notice of application (“Application”) for exemption, pursuant to section 6(c) of the Investment Company Act of 1940, as amended (the “1940 Act”), from the provisions of sections 9(a), 13(a), 15(a) and 15(b) of the Act and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder
C.F.R.§ 1.817-5
U.S.C.§ 78s
U.S.C.§ 78f
U.S.C.§ 552
C.F.R.§ 200.30-3
U.S.C.§ 78c
U.S.C.§ 4403
U.S.C.§ 362
Cite17 CFR 240.19
Cite17 CFR 240.15
Pub. L.Pub. L. 109-8
Stat.119 Stat. 23
Cites 14 · showing 12Cited by 0 across 0 sources
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