Rules and Regulations. Notice of Meeting of SEC Advisory Committee on Improvements to Financial Reporting

23,565 words·~107 min read·/register/2008/01/23/08-232

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

BILLING CODE 7590-01-P SECURITIES AND EXCHANGE COMMISSION Submission for OMB Review; Comment Request *Upon Written Request, Copies Available From:* Securities and Exchange Commission, Office of Investor Education and Advocacy, Washington, DC 20549-0213. *Extension:* Rule 204-2; SEC File No. 270-215; OMB Control No. 3235-0278. Notice is hereby given that pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 *et seq.* ) the Securities and Exchange Commission (“Commission”) has submitted to the Office of Management and Budget (“OMB”) a request for extension of the previously approved collection of information discussed below.

The title for the collection of information is “Rule 204-2” (17 CFR 275.204-2) under the Investment Advisers Act of 1940 (15 U.S.C. 80b-1). Rule 204-2 requires SEC-registered investment advisers to maintain copies of certain books and records relating to their advisory business. The collection of information under rule 204-2 is necessary for the Commission staff to use in its examination and oversight program. This collection of information is mandatory. The respondents to the collection of information are investment advisers registered with the Commission.

As of August 31, 2007, there were 10,787 SEC registered advisers. Responses provided to the Commission in the context of its examination and oversight program are generally kept confidential. The records that an adviser must keep in accordance with rule 204-2 must generally be retained for not less than five years. The Commission has estimated that compliance with the requirements of the rule imposes a total burden of approximately 181.1541 hours for an adviser. Based on our experience, the Commission staff estimates a total annual burden of 1,954,109 hours for the collection of this information.

An agency may not conduct or sponsor, and a person is not required to respond to a collection of information unless it displays a currently valid control number. General comments regarding the above information should be directed to the following persons:

(i)Desk Officer for the Securities and Exchange Commission, Office of Information and Regulatory Affairs, Office of Management and Budget, Room 10102, New Executive Office Building, Washington, DC 20503 or e-mail to: *Alexander_T._Hunt@omb.eop.gov* and

(ii)R. Corey Booth, Director/Chief Information Officer, Securities and Exchange Commission, C/O Shirley Martinson, 6432 General Green Way, Alexandria, VA 22312, or send an e-mail to: *PRA_Mailbox@sec.gov* . Comments must be submitted to OMB within 30 days of this notice. Dated: January 14, 2008. Florence E. Harmon, Deputy Secretary. [FR Doc. E8-1056 Filed 1-22-08; 8:45 am] BILLING CODE 8011-01-P SECURITIES AND EXCHANGE COMMISSION Submission for OMB Review; Comment Request *Upon Written Request, Copies Available From:* Securities and Exchange Commission, Office of Investor Education and Advocacy, Washington, DC 20549-0213. *Extension:* Rule 237, SEC File No. 270-465, OMB Control No. 3235-0528. Notice is hereby given that, pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520), the Securities and Exchange Commission (the “Commission”) has submitted to the Office of Management and Budget a request for extension and approval of the collection of information discussed below. In Canada, as in the United States, individuals can invest a portion of their earnings in tax-deferred retirement savings accounts (“Canadian retirement accounts”). In cases where these individuals move to the United States, these participants (“Canadian/U.S. Participants” or “participants”) may not be able to manage their Canadian retirement account investments. Most securities and most investment companies (“funds”) that are “qualified investments” for Canadian retirement accounts are not registered under the U.S. securities laws. Those securities, therefore, generally cannot be publicly offered and sold in the United States without violating the registration requirements of the Securities Act of 1933 (“Securities Act”). 1 As a result of these registration requirements of the U.S. securities laws, Canadian/U.S. Participants, in the past, had not been able to purchase or exchange securities for their Canadian retirement accounts as needed to meet their changing investment goals or income needs. 1 15 U.S.C. 77a. In 2000, the Commission issued a rule that enabled Canadian/U.S. Participants to manage the assets in their Canadian retirement accounts by providing relief from the U.S. registration requirements for offers of securities of foreign issuers to Canadian/U.S. Participants and sales to their accounts. 2 Rule 237 under the Securities Act 3 permits securities of foreign issuers, including securities of foreign funds, to be offered to Canadian/U.S. Participants and sold to their Canadian retirement accounts without being registered under the Securities Act. 2 See Offer and Sale of Securities to Canadian Tax-Deferred Retirement Savings Account, Release Nos. 33-7860, 34-42905, IC-24491 (June 7, 2000) [65 FR 37672 (June 15, 2000)]. 3 17 CFR 230.237. Rule 237 requires written offering materials for securities that are offered and sold in reliance on the rule to disclose prominently that those securities are not registered with the Commission and may not be offered or sold in the United States unless they are registered or exempt from registration under the U.S. securities laws. Rule 237 does not require any documents to be filed with the Commission. The burden under the rule associated with adding this disclosure to written offering documents is minimal and is non-recurring. The foreign issuer, underwriter or broker-dealer can redraft an existing prospectus or other written offering material to add this disclosure statement, or may draft a sticker or supplement containing this disclosure to be added to existing offering materials. In either case, based on discussions with representatives of the Canadian fund industry, the staff estimates that it would take an average of 10 minutes per document to draft the requisite disclosure statement. The Commission understands that there are approximately 3,500 Canadian issuers other than funds that may rely on rule 237 to make an initial public offering of their securities to Canadian/U.S. Participants. The staff estimates that in any given year approximately 35 (or 1 percent) of those issuers are likely to rely on rule 237 to make a public offering of their securities to participants, and that each of those 35 issuers, on average, distributes 3 different written offering documents concerning those securities, for a total of 105 offering documents. The staff therefore estimates that during each year that rule 237 is in effect; approximately 35 respondents 4 would be required to make 105 responses by adding the new disclosure statements to approximately 105 written offering documents. Thus, the staff estimates that the total annual burden associated with the rule 237 disclosure requirement would be approximately 17.5 hours (105 offering documents x 10 minutes per document). The total annual cost of burden hours is estimated to be $5,110.00 (17.5 hours x $292 5 per hour of attorney time). 4 This estimate of respondents also assumes that all respondents are foreign issuers. The number of respondents may be greater if foreign underwriters or broker-dealers draft a sticker or supplement to add the required disclosure to an existing offering document. 5 The Commission's estimate concerning the wage rate for attorney time is based on salary information for the securities industry compiled by the Securities Industry Association. $292 per hour figure for an attorney is from the SIA Report on Management & Professional Earnings in the Securities Industry 2006, modified to account for an 1800-hour work-year and multiplied by 5.35 to account for bonuses, firm size, employee benefits and overhead. In addition, issuers from foreign countries other than Canada could rely on rule 237 to offer securities to Canadian/U.S. Participants and sell securities to their accounts without becoming subject to the registration requirements of the Securities Act. Because Canadian law strictly limits the amount of foreign investments that may be held in a Canadian retirement account, however, the staff believes that the number of issuers from other countries that relies on rule 237, and that therefore is required to comply with the offering document disclosure requirements, is negligible. These burden hour estimates are based upon the Commission staff's experience and discussions with the fund industry. The estimates of average burden hours are made solely for the purposes of the Paperwork Reduction Act. These estimates are not derived from a comprehensive or even a representative survey or study of the costs of Commission rules. Compliance with the collection of information requirements of the rule is mandatory and is necessary to comply with the requirements of the rule in general. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid control number. Please direct general comments regarding the above information to the following persons:

(i)Desk Officer for the Securities and Exchange Commission, Office of Management and Budget, Room 10102, New Executive Office Building, Washington, DC 20503 or e-mail to: *Alexander_T._Hunt@omb.eop.gov* ; and

(ii)R. Corey Booth, Director/Chief Information Officer, Securities and Exchange Commission, C/O Shirley Martinson, 6432 General Green Way, Alexandria, VA 22312; or send an email to: *PRA_Mailbox@sec.gov* . Comments must be submitted to OMB within 30 days of this notice. Dated: January 14, 2008. Florence E. Harmon, Deputy Secretary. [FR Doc. E8-1058 Filed 1-22-08; 8:45 am] BILLING CODE 8011-01-P SECURITIES AND EXCHANGE COMMISSION Submission for OMB Review; Comment Request *Upon Written Request, Copies Available From:* Securities and Exchange Commission, Office of Investor Education and Advocacy, Washington, DC 20549-0213. *Extension:* Rule 7d-2, SEC File No. 270-464, OMB Control No. 3235-0527. Notice is hereby given that, pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520), the Securities and Exchange Commission (the “Commission”) has submitted to the Office of Management and Budget a request for extension and approval of the collection of information discussed below. In Canada, as in the United States, individuals can invest a portion of their earnings in tax-deferred retirement savings accounts (“Canadian retirement accounts”). In cases where these individuals move to the United States, these participants (“Canadian/U.S. Participants” or “participants”) may not be able to manage their Canadian retirement account investments. Most securities and most investment companies (“funds”) that are “qualified investments” for Canadian retirement accounts are not registered under the U.S. securities laws. Those securities, therefore, generally cannot be publicly offered and sold in the United States without violating the registration requirements of the Securities Act of 1933 (“Securities Act”) 1 and, in the case of securities of an unregistered fund, the Investment Company Act of 1940 (“Investment Company Act”). 2 As a result of these registration requirements of the U.S. securities laws, Canadian/U.S. Participants, in the past, had not been able to purchase or exchange securities for their Canadian retirement accounts as needed to meet their changing investment goals or income needs. 1 15 U.S.C. 77a. 2 15 U.S.C. 80a. In 2000, the Commission issued two rules that enabled Canadian/U.S. Participants to manage the assets in their Canadian retirement accounts by providing relief from the U.S. registration requirements for offers of securities of foreign issuers to Canadian/U.S. Participants and sales to their accounts. 3 Rule 237 under the Securities Act 4 permits securities of foreign issuers, including securities of foreign funds, to be offered to Canadian/U.S. Participants and sold to their Canadian retirement accounts without being registered under the Securities Act. Rule 7d-2 under the Investment Company Act 5 permits foreign funds to offer securities to Canadian/U.S. Participants and sell securities to their Canadian retirement accounts without registering as investment companies under the Investment Company Act. 3 See Offer and Sale of Securities to Canadian Tax-Deferred Retirement Savings Account, Release Nos. 33-7860, 34-42905, IC-24491 (June 7, 2000) [65 FR 37672 (June 15, 2000)]. 4 17 CFR 230.237. 5 17 CFR 270.7d-2. Rule 7d-2 requires written offering documents for securities offered or sold in reliance on the rule to disclose prominently that the securities are not registered with the Commission and may not be offered or sold in the United States unless registered or exempt from registration under the U.S. securities laws, and also to disclose prominently that the fund that issued the securities is not registered with the Commission. The burden under the rule associated with adding this disclosure to written offering documents is minimal and is non-recurring. The foreign issuer, underwriter or broker-dealer can redraft an existing prospectus or other written offering material to add this disclosure statement, or may draft a sticker or supplement containing this disclosure to be added to existing offering materials. In either case, based on discussions with representatives of the Canadian fund industry, the staff estimates that it would take an average of 10 minutes per document to draft the requisite disclosure statement. The staff estimates that there are approximately 1,994 publicly offered Canadian funds that potentially would rely on the rule to offer securities to participants and sell securities to their Canadian retirement accounts without registering under the Investment Company Act. Most of these funds have already relied upon the rule and have made the one time change to their offering documents required to rely on the rule. The staff estimates that approximately 100 (5 percent) additional Canadian funds may newly rely on the rule each year to offer securities to Canadian/U.S. Participants and sell securities to their Canadian retirement accounts, thus incurring the paperwork burden required under the rule. The staff estimates that each of those funds, on average, distributes 3 different written offering documents concerning those securities, for a total of 300 offering documents. The staff therefore estimates that approximately 100 respondents would make 300 responses by adding the new disclosure statement to approximately 300 written offering documents. The staff therefore estimates that the annual burden associated with the rule 7d-2 disclosure requirement would be approximately 50 hours (300 offering documents × 10 minutes per document). The total annual cost of these burden hours is estimated to be $14,600.00 (50 hours × $292.00 per hour of attorney time). 6 6 The Commission's estimate concerning the wage rate for attorney time is based on salary information for the securities industry compiled by the Securities Industry Association. $292 per hour figure for an attorney is from the SIA Report on Management & Professional Earnings in the Securities Industry 2005, modified to account for an 1800-hour work-year and multiplied by 5.35 to account for bonuses, firm size, employee benefits and overhead. These burden hour estimates are based upon the Commission staff's experience and discussions with the fund industry. The estimates of average burden hours are made solely for the purposes of the Paperwork Reduction Act. These estimates are not derived from a comprehensive or even a representative survey or study of the costs of Commission rules. Compliance with the collection of information requirements of the rule is mandatory and is necessary to comply with the requirements of the rule in general. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid control number. Please direct general comments regarding the above information to the following persons:

(888)830-6260 and using code number 763960. Persons needing special accommodations to take part because of a disability should notify a contact person listed below. The agenda for the meeting includes:

(1)Discussion and deliberation of a draft progress report with developed proposals, conceptual approaches and currently identified future considerations based on the Committee's deliberations of the Draft Decision Memorandum presented at its January 11, 2008 meeting in the areas of substantive complexity, standard setting, audit process and compliance and delivery of financial information;

(2)a vote on a proposal to publish the Committee's draft progress report in final form to the Commission and for public feedback; and

(3)a discussion of next steps and planning for the next meeting. The public is invited to submit written statements for the meeting. DATES: Written statements should be received on or before February 4, 2008. ADDRESSES: Written statements may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet submission form ( *http://www.sec.gov/rules/other.shtml* ); or • Send an e-mail to *rule-comments@sec.gov.* Please include File Number 265-24 on the subject line. Paper Comments • Send paper statements in triplicate to Nancy M. Morris, Federal Advisory Committee Management Officer, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090. All submissions should refer to File No. 265-24. This file number should be included on the subject line if e-mail is used. To help us process and review your statements more efficiently, please use only one method. The Commission staff will post all statements on the Advisory Committee's Web site ( *http://www.sec.gov/about/offices/oca/acifr.shtml* ). Statements also will be available for public 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. All statements received will be posted without change; we do not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. FOR FURTHER INFORMATION CONTACT: James L. Kroeker, Deputy Chief Accountant, or Shelly C. Luisi, Senior Associate Chief Accountant, at

(202)551-5300, Office of the Chief Accountant, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-6561. SUPPLEMENTARY INFORMATION: In accordance with Section 10(a) of the Federal Advisory Committee Act, 5 U.S.C. App. 1, section 10(a), James L. Kroeker, Designated Federal Officer of the Committee, has approved publication of this notice. Dated: January 16, 2008. Nancy M. Morris, Committee Management Officer. [FR Doc. E8-1053 Filed 1-22-08; 8:45 am] BILLING CODE 8011-01-P SECURITIES AND EXCHANGE COMMISSION Sunshine Act Meeting Notice is hereby given, pursuant to the provisions of the Government in the Sunshine Act, Public Law 94-409, that the Securities and Exchange Commission will hold the following meeting during the week of January 21, 2008: A Closed Meeting will be held on Thursday, January 24, 2008 at 2 p.m. Commissioners, Counsel to the Commissioners, the Secretary to the Commission, and recording secretaries will attend the Closed Meeting. Certain staff members who have an interest in the matters may also be present. The General Counsel of the Commission, or his designee, has certified that, in his opinion, one or more of the exemptions set forth in 5 U.S.C. 552b(c)(3), (5), (7), (8), (9)(B), and

(10)and 17 CFR 200.402(a)(3), (5), (7), (8), 9(ii) and (10), permit consideration of the scheduled matters at the Closed Meeting. Commissioner Atkins, as duty officer, voted to consider the items listed for the closed meeting in closed session. The subject matter of the Closed Meeting scheduled for Thursday, January 24, 2008 will be: Formal orders of investigations; Institution and settlement of injunctive actions; Institution and settlement of administrative proceedings of an enforcement nature; A regulatory matter regarding a financial institution; and Other matters related to enforcement proceedings. At times, changes in Commission priorities require alterations in the scheduling of meeting items. For further information and to ascertain what, if any, matters have been added, deleted or postponed, please contact: The Office of the Secretary at

(202)551-5400. Dated: January 17, 2008. Nancy M. Morris, Secretary [FR Doc. E8-1072 Filed 1-22-08; 8:45 am] BILLING CODE 8011-01-P SECURITIES AND EXCHANGE COMMISSION [Investment Company Act Release No. 28119; 812-13424] Northern Institutional Funds, et al.; Notice of Application January 16, 2008. AGENCY: Securities and Exchange Commission (“Commission”). ACTION: Notice of application for an order under section 12(d)(1)(J) of the Investment Company Act of 1940 (“Act”) for an exemption from sections 12(d)(1)(A) and

(B)of the Act, and under sections 6(c) and 17(b) of the Act for an exemption from section 17(a) of the Act. Summary of the Application: Applicants request an order that would permit certain registered open-end management investment companies to acquire shares of other registered open-end management investment companies and unit investment trusts that are within and outside the same group of investment companies. Applicants: Northern Institutional Funds (“NIF”), Northern Funds (“NF,” and together with NIF, the “Trusts”), and Northern Trust Investments, N.A. (“Adviser”). Filing Dates: The application was filed on September 12, 2007. Applicants have agreed to file an amendment during the notice period, the substance of which is reflected in this notice. 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 Commission's Secretary and serving applicants with a copy of the request, personally or by mail. Hearing requests should be received by the Commission by 5:30 p.m. on February 11, 2008, and should be accompanied by proof of service on applicants in the form of an affidavit or, for lawyers, a certificate of service. Hearing requests should state the nature of the writer's interest, the reason for the request, and the issues contested. Persons who wish to be notified of a hearing may request notification by writing to the Commission's Secretary. ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090; Applicants, c/o Diana E. McCarthy, Drinker Biddle & Reath LLP, One Logan Square, 18th and Cherry Streets, Philadelphia, PA 19103-6996. FOR FURTHER INFORMATION CONTACT: Emerson S. Davis, Sr., Senior Counsel, at

(202)551-6868, or Mary Kay Frech, Branch Chief, at

(202)551-6821 (Office of Investment Company Regulation, Division of Investment Management). SUPPLEMENTARY INFORMATION: The following is a summary of the application. The complete application may be obtained for a fee at the Commission's Public Reference Desk, 100 F Street, NE., Washington, DC 20549-0102 (telephone

(202)551-5850). Applicants' Representations 1. The Trusts, organized as Delaware statutory trusts, are registered under the Act as open-end management investment companies and offer multiple series, each of which has its own distinct investment objectives and policies (“Funds”). The Balanced Portfolio, a series of NIF, is currently the only Fund that intends to rely on the requested relief. The Adviser, a wholly-owned subsidiary of The Northern Trust Company, is registered as an investment adviser under the Investment Advisers Act of 1940 and serves as investment adviser to the Funds. 2. Applicants request relief to permit:

(a)A Fund (a “Fund of Funds”) to acquire shares of registered open-end management investment companies that are not part of the “same group of investment companies” (as defined in section 12(d)(1)(G)(ii) of the Act) as the Fund of Funds (the “Unaffiliated Investment Companies”) and unit investment trusts (“UITs”) that are not part of the same group of investment companies as the Fund of Funds (“Unaffiliated Trusts,” and together with Unaffiliated Investment Companies, the “Unaffiliated Funds”);

(b)the Unaffiliated Funds, their principal underwriter and any broker or dealer registered under the Securities Exchange Act of 1934 (“Broker”) to sell their shares to the Fund of Funds;

(c)the Fund of Funds to acquire shares of certain other Funds in the same group of investment companies as the Fund of Funds (the “Affiliated Funds,” and together with the Unaffiliated Funds, the “Underlying Funds”); and

(d)the Affiliated Funds, their principal underwriter and Brokers to sell their shares to the Fund of Funds. 1 Certain of the Unaffiliated Funds may be registered under the Act as either UITs or open-end management investment companies and have received exemptive relief to permit their shares be listed and traded on a national securities exchange at negotiated prices (“ETFs”). 2 Each Fund of Funds also may invest in government securities, domestic and foreign common and preferred stock, income-bearing securities, certain types of futures contracts and options thereon, and in other securities and investments that are not issued by registered investment companies and that are consistent with its investment objective, including money market instruments. 1 Applicants request that the order extend to any future Funds, and any other existing or future registered open-end management investment companies and their series that are part of the same group of investment companies, as defined in section 12(d)(1)(G)(ii) of the Act, as the Trusts and are, or may in the future be, advised by the Adviser or any other investment adviser controlling, controlled by, or under common control with the Adviser (included in the term, “Funds”). The Trusts are the only registered investment companies that currently intend to rely on the requested order. Any other entity that relies on the order in the future will comply with the terms and conditions of the application. 2 Certain of the Affiliated Funds also may operate as ETFs; however, no Fund of Funds will be an ETF. *See also infra* note 5. Applicants' Legal Analysis A. Section 12(d)(1) 1. Section 12(d)(1)(A) of the Act prohibits a registered investment company from acquiring shares of an investment company if the securities represent more than 3% of the total outstanding voting stock of the acquired company, more than 5% of the total assets of the acquiring company, or, together with the securities of any other investment companies, more than 10% of the total assets of the acquiring company. Section 12(d)(1)(B) of the Act prohibits a registered open-end investment company, its principal underwriter and any broker or dealer from selling the shares of the investment company to another investment company if the sale will cause the acquiring company to own more than 3% of the acquired company's voting stock, or if the sale will cause more than 10% of the acquired company's voting stock to be owned by investment companies generally. 2. Section 12(d)(1)(J) of the Act provides that the Commission may exempt any person, security, or transaction, or any class or classes of persons, securities or transactions, from any provision of section 12(d)(1) if the exemption is consistent with the public interest and the protection of investors. Applicants seek an exemption under section 12(d)(1)(J) of the Act to permit the Funds of Funds to acquire shares of the Underlying Funds in excess of the limits set forth in section 12(d)(1)(A) of the Act and to permit the Underlying Funds, their principal underwriters and any Broker to sell shares to the Funds of Funds in excess of the limits set forth in section 12(d)(1)(B) of the Act. 3. Applicants state that the proposed arrangement will not give rise to the policy concerns underlying sections 12(d)(1)(A) and (B), which include concerns about undue influence by a fund of funds or its affiliated persons over underlying funds, excessive layering of fees, and overly complex fund structures. Accordingly, applicants believe that the requested exemption is consistent with the public interest and the protection of investors. 4. Applicants state that the proposed arrangement will not result in undue influence by a Fund of Funds or its affiliated persons over the Underlying Funds. The concern about undue influence does not arise in connection with a Fund of Funds' investment in the Affiliated Funds, since they are part of the same group of investment companies. To limit the control that a Fund of Funds or its affiliated persons may have over an Unaffiliated Fund, applicants propose condition 1 below, which prohibits:

(a)The Adviser and any person controlling, controlled by or under common control with the Adviser, any investment company and any issuer that would be an investment company but for section 3(c)(1) or section 3(c)(7) of the Act advised or sponsored by the Adviser or any person controlling, controlled by or under common control with the Adviser (collectively, the “Group”), and

(b)any investment adviser within the meaning of section 2(a)(20)(B) of the Act to a Fund of Funds (“Sub-Adviser”) and any person controlling, controlled by or under common control with the Sub-Adviser, and any investment company or issuer that would be an investment company but for section 3(c)(1) or 3(c)(7) of the Act (or portion of such investment company or issuer) advised by the Sub-Adviser or any person controlling, controlled by or under common control with the Sub-Adviser (collectively, the “Sub-Adviser Group”) from controlling (individually or in the aggregate) an Unaffiliated Fund within the meaning of section 2(a)(9) of the Act. 5. Applicants further state that condition 2 below precludes a Fund of Funds or the Adviser, any Sub-Adviser, promoter or principal underwriter of a Fund of Funds, and any person controlling, controlled by, or under common control with any of those entities (each, a “Fund Affiliate”) from taking advantage of an Unaffiliated Fund with respect to transactions between a Fund of Funds or a Fund Affiliate and the Unaffiliated Fund or its investment adviser(s), sponsor, promoter, and principal underwriter and any person controlling, controlled by or under common control with any of those entities (each, an “Unaffiliated Fund Affiliate”). No Fund of Funds or Fund Affiliate (except to the extent it is acting in its capacity as an investment adviser to an Unaffiliated Investment Company or sponsor to an Unaffiliated Trust) will cause an Unaffiliated Fund to purchase a security in an offering of securities during the existence of any underwriting or selling syndicate of which a principal underwriter is an officer, director, trustee, advisory board member, investment adviser, Sub-Adviser, or employee of the Fund of Funds, or a person of which any such officer, director, trustee, investment adviser, Sub-Adviser, member of an advisory board, or employee is an affiliated person (each, an “Underwriting Affiliate,” except any person whose relationship to the Unaffiliated Fund is covered by section 10(f) of the Act is not an Underwriting Affiliate). An offering of securities during the existence of any underwriting or selling syndicate of which a principal underwriter is an Underwriting Affiliate is an “Affiliated Underwriting.” 6. To further assure that an Unaffiliated Investment Company understands the implications of an investment by a Fund of Funds under the requested order, prior to a Fund of Funds' investment in the shares of an Unaffiliated Investment Company in excess of the limit in section 12(d)(1)(A)(i) of the Act, a Fund of Funds and the Unaffiliated Investment Company will execute an agreement stating, without limitation, that their boards of directors or trustees (“Boards”) and their investment advisers understand the terms and conditions of the order and agree to fulfill their responsibilities under the order (“Participation Agreement”). 7. Applicants do not believe that the proposed arrangement will involve excessive layering of fees. The Board of each Fund of Funds, including a majority of the trustees who are not “interested persons,” as defined in section 2(a)(19) of the Act (“Independent Trustees”), will find that the advisory fees charged under the advisory contract are based on services provided that are in addition to, rather than duplicative of, services provided pursuant to any Underlying Fund's advisory contract(s). Applicants further state that the Adviser will waive fees otherwise payable to it by a Fund of Funds in an amount at least equal to any compensation (including fees received pursuant to any plan adopted by an Unaffiliated Investment Company pursuant to rule 12b-1 under the Act) received from an Unaffiliated Fund by the Adviser, or an affiliated person of the Adviser, other than any advisory fees paid to the Adviser or an affiliated person of the Adviser by the Unaffiliated Fund, in connection with the investment by the Fund of Funds in the Unaffiliated Fund. 8. Applicants state that any sales charges and/or service fees charged with respect to shares of a Fund of Funds will not exceed the limits applicable to funds of funds set forth in Rule 2830 of the Conduct Rules of the NASD. 9. Applicants state that the proposed arrangement will not create an overly complex fund structure. Applicants note that an Underlying Fund will be prohibited from acquiring securities of any investment company or company relying on section 3(c)(1) or 3(c)(7) of the Act in excess of the limits contained in section 12(d)(1)(A) of the Act, except in certain circumstances identified in condition 12 below. Applicants also represent that a Fund of Funds' prospectus and sales literature will contain concise, “plain English” disclosure designed to inform investors about the unique characteristics of the proposed arrangement, including, but not limited to, the expense structure and the additional expenses of investing in Underlying Funds. B. Section 17(a) 1. Section 17(a) of the Act generally prohibits sales or purchases of securities between a registered investment company and any affiliated persons of the company. Section 2(a)(3) of the Act defines an “affiliated person” of another person to include

(a)any person directly or indirectly owning, controlling, or holding with power to vote, 5% or more of the outstanding voting securities of the other person;

(b)any person 5% or more of whose outstanding voting securities are directly or indirectly owned, controlled, or held with power to vote by the other person; and

(c)any person directly or indirectly controlling, controlled by, or under common control with the other person. 2. Applicants state that the Funds of Funds and the Affiliated Funds may be deemed to be under common control of the Adviser and therefore affiliated persons of one another. Applicants also state that a Fund of Funds and the Underlying Funds may be deemed to be affiliated persons of each other if a Fund of Funds acquires 5% or more of an Underlying Fund's outstanding voting securities. In light of these possible affiliations, section 17(a) could prevent an Underlying Fund from selling shares to and redeeming shares from a Fund of Funds. 3 3 Applicants acknowledge that receipt of any compensation by

(a)an affiliated person of a Fund of Funds, or an affiliated person of such person, for the purchase by the Fund of Funds of shares of an Underlying Fund or

(b)an affiliated person of an Underlying Fund, or an affiliated person of such person, for the sale by the Underlying Fund of its shares to a Fund of Funds may be prohibited by section 17(e)(1) of the Act. The Participation Agreement also will include this acknowledgement. 3. Section 17(b) of the Act authorizes the Commission to grant an order permitting a transaction otherwise prohibited by section 17(a) if it finds that

(a)the terms of the proposed transaction are fair and reasonable and do not involve overreaching on the part of any person concerned;

(b)the proposed transaction is consistent with the policies of each registered investment company involved; and

(c)the proposed transaction is consistent with the general purposes of the Act. Section 6(c) of the Act permits the Commission to exempt any person or transactions from any provision of the Act if such exemption is necessary or appropriate in the public interest and consistent with the protection of investors and the purposes fairly intended by the policy and provisions of the Act. 4. Applicants submit that the proposed transactions satisfy the requirements for relief under sections 17(b) and 6(c) of the Act as the terms are fair and reasonable and do not involve overreaching. Applicants state that the terms upon which an Underlying Fund will sell its shares to or purchase its shares from a Fund of Funds will be based on the net asset value of each Underlying Fund. 4 Applicants also state that the proposed transactions will be consistent with the policies of each Fund of Funds and Underlying Fund, and with the general purposes of the Act. 4 Applicants note that a Fund of Funds generally would purchase and sell shares of an Unaffiliated Fund that operates as an ETF through secondary market transactions at market prices rather than through principal transactions with the Unaffiliated Fund at net asset value. Applicants would not rely on the requested relief from section 17(a) for such secondary market transactions. A Fund of Funds could seek to transact in “Creation Units” directly with an ETF that is an Unaffiliated Fund pursuant to the requested section 17(a) relief. Applicants are not requesting, and the Commission is not granting, any relief from section 17(a) to purchase and redeem Creation Units of any ETF that is an Affiliated Fund. Applicants' Conditions Applicants agree that any order granting the requested relief shall be subject to the following conditions: 1. The members of the Group will not control (individually or in the aggregate) an Unaffiliated Fund within the meaning of section 2(a)(9) of the Act. The members of a Sub-Adviser Group will not control (individually or in the aggregate) an Unaffiliated Fund within the meaning of section 2(a)(9) of the Act. If, as a result of a decrease in the outstanding voting securities of an Unaffiliated Fund, the Group or a Sub-Adviser Group, each in the aggregate, becomes a holder of more than 25% of the outstanding voting securities of the Unaffiliated Fund, then the Group or the Sub-Adviser Group will vote its shares of the Unaffiliated Fund in the same proportion as the vote of all other holders of the Unaffiliated Fund's shares. This condition will not apply to a Sub-Adviser Group with respect to an Unaffiliated Fund for which the Sub-Adviser or a person controlling, controlled by, or under common control with the Sub-Adviser acts as the investment adviser within the meaning of section 2(a)(20)(A) of the Act (in the case of an Unaffiliated Investment Company) or as the sponsor (in the case of an Unaffiliated Trust). 2. No Fund of Funds or Fund Affiliate will cause any existing or potential investment by the Fund of Funds in an Unaffiliated Fund to influence the terms of any services or transactions between the Fund of Funds or a Fund Affiliate and the Unaffiliated Fund or an Unaffiliated Fund Affiliate. 3. The Board of each Fund of Funds, including a majority of the Independent Trustees, will adopt procedures reasonably designed to assure that its Adviser and any Sub-Adviser to the Fund of Funds are conducting the investment program of the Fund of Funds without taking into account any consideration received by the Fund of Funds or Fund Affiliate from an Unaffiliated Fund or an Unaffiliated Fund Affiliate in connection with any services or transactions. 4. Once an investment by a Fund of Funds in the securities of an Unaffiliated Investment Company exceeds the limit of section 12(d)(1)(A)(i) of the Act, the Board of the Unaffiliated Investment Company, including a majority of the Independent Trustees, will determine that any consideration paid by the Unaffiliated Investment Company to a Fund of Funds or a Fund Affiliate in connection with any services or transactions:

(a)Is fair and reasonable in relation to the nature and quality of the services and benefits received by the Unaffiliated Investment Company;

(b)is within the range of consideration that the Unaffiliated Investment Company would be required to pay to another unaffiliated entity in connection with the same services or transactions; and

(c)does not involve overreaching on the part of any person concerned. This condition does not apply with respect to any services or transactions between an Unaffiliated Investment Company and its investment adviser(s), or any person controlling, controlled by, or under common control with such investment adviser(s). 5. No Fund of Funds or Fund Affiliate (except to the extent it is acting in its capacity as an investment adviser to an Unaffiliated Investment Company or sponsor to an Unaffiliated Trust) will cause an Unaffiliated Fund to purchase a security in any Affiliated Underwriting. 6. The Board of an Unaffiliated Investment Company, including a majority of the Independent Trustees, will adopt procedures reasonably designed to monitor any purchases of securities by the Unaffiliated Investment Company in an Affiliated Underwriting once an investment by a Fund of Funds in the securities of the Unaffiliated Investment Company exceeds the limit of section 12(d)(1)(A)(i) of the Act, including any purchases made directly from an Underwriting Affiliate. The Board of the Unaffiliated Investment Company will review these procedures periodically, but no less frequently than annually, to determine whether the purchases were influenced by the investment by the Fund of Funds in the Unaffiliated Investment Company. The Board of the Unaffiliated Investment Company will consider, among other things:

(a)Whether the purchases were consistent with the investment objectives and policies of the Unaffiliated Investment Company;

(b)how the performance of securities purchased in an Affiliated Underwriting compares to the performance of comparable securities purchased during a comparable period of time in underwritings other than Affiliated Underwritings or to a benchmark such as a comparable market index; and

(c)whether the amount of securities purchased by the Unaffiliated Investment Company in Affiliated Underwritings and the amount purchased directly from an Underwriting Affiliate have changed significantly from prior years. The Board of an Unaffiliated Investment Company will take any appropriate actions based on its review, including, if appropriate, the institution of procedures designed to assure that purchases of securities in Affiliated Underwritings are in the best interests of shareholders. 7. Each Unaffiliated Investment Company will maintain and preserve permanently in an easily accessible place a written copy of the procedures described in the preceding condition, and any modifications to such procedures, and will maintain and preserve for a period of not less than six years from the end of the fiscal year in which any purchase from an Affiliated Underwriting occurred, the first two years in an easily accessible place, a written record of each purchase of securities in an Affiliated Underwriting once an investment by a Fund of Funds in the securities of an Unaffiliated Investment Company exceeds the limit of section 12(d)(1)(A)(i) of the Act, setting forth the

(a)party from whom the securities were acquired,

(b)identity of the underwriting syndicate's members,

(c)terms of the purchase, and

(d)information or materials upon which the determinations of the Board of the Unaffiliated Investment Company were made. 8. Prior to its investment in shares of an Unaffiliated Investment Company in excess of the limit in section 12(d)(1)(A)(i) of the Act, the Fund of Funds and the Unaffiliated Investment Company will execute a Participation Agreement stating, without limitation, that their Boards and their investment advisers understand the terms and conditions of the order and agree to fulfill their responsibilities under the order. At the time of its investment in shares of an Unaffiliated Investment Company in excess of the limit in section 12(d)(1)(A)(i), a Fund of Funds will notify the Unaffiliated Investment Company of the investment. At such time, the Fund of Funds will also transmit to the Unaffiliated Investment Company a list of the names of each Fund of Funds Affiliate and Underwriting Affiliate. The Fund of Funds will notify the Unaffiliated Investment Company of any changes to the list as soon as reasonably practicable after a change occurs. The Unaffiliated Investment Company and the Fund of Funds will maintain and preserve a copy of the order, the Participation Agreement, and the list with any updated information for the duration of the investment and for a period of not less than six years thereafter, the first two years in an easily accessible place. 9. Before approving any advisory contract under section 15 of the Act, the Board of each Fund of Funds, including a majority of the Independent Trustees, shall find that the advisory fees charged under the advisory contract are based on services provided that are in addition to, rather than duplicative of, services provided under the advisory contract(s) of any Underlying Fund in which the Fund of Funds may invest. Such finding, and the basis upon which the finding was made, will be recorded fully in the minute books of the appropriate Fund of Funds. 10. The Adviser will waive fees otherwise payable to it by a Fund of Funds in an amount at least equal to any compensation (including fees received pursuant to any plan adopted by an Unaffiliated Investment Company pursuant to rule 12b-1 under the Act) received from an Unaffiliated Fund by the Adviser, or an affiliated person of the Adviser, other than any advisory fees paid to the Adviser or its affiliated person by the Unaffiliated Fund, in connection with the investment by the Fund of Funds in the Unaffiliated Fund. Any Sub-Adviser will waive fees otherwise payable to the Sub-Adviser, directly or indirectly, by the Fund of Funds in an amount at least equal to any compensation received by the Sub-Adviser, or an affiliated person of the Sub-Adviser, from an Unaffiliated Fund, other than any advisory fees paid to the Sub-Adviser or its affiliated person by the Unaffiliated Investment Company, in connection with the investment by the Fund of Funds in the Unaffiliated Investment Company made at the direction of the Sub-Adviser. In the event that the Sub-Adviser waives fees, the benefit of the waiver will be passed through to the Fund of Funds. 11. Any sales charges and/or service fees charged with respect to shares of a Fund of Funds will not exceed the limits applicable to funds of funds set forth in NASD Conduct Rule 2830. 12. No Underlying Fund will acquire securities of any other investment company or company relying on section 3(c)(1) or 3(c)(7) of the Act, in excess of the limits contained in section 12(d)(1)(A) of the Act, except to the extent that such Underlying Fund:

(a)Receives securities of another investment company as a dividend or as a result of a plan of reorganization of a company (other than a plan devised for the purpose of evading section 12(d)(1) of the Act); or

(b)acquires (or is deemed to have acquired) securities of another investment company pursuant to exemptive relief from the Commission permitting such Underlying Fund to:

(i)Acquire securities of one or more affiliated investment companies for short-term cash management purposes, or

(ii)engage in interfund borrowing and lending transactions. For the Commission, by the Division of Investment Management, pursuant to delegated authority. Florence E. Harmon, Deputy Secretary. [FR Doc. E8-1057 Filed 1-22-08; 8:45 am] BILLING CODE 8011-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-57154; File No. SR-Amex-2008-03] Self-Regulatory Organizations; American Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to “Amex Only” Orders and Quotes January 15, 2008. 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 January 9, 2008, the American Stock Exchange LLC (“Amex” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I and II below, which Items have been prepared substantially by the Amex. The Amex has submitted the proposed rule change under 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 Amex proposes to amend Rule 131—AEMI, “Types of Orders,” to provide for “Amex Only” orders and quotes that will trade only at the Amex or be cancelled. The text of the proposed rule change is available at *http://www.amex.com,* the principal office of the Amex, and the Commission's Public Reference Room. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Amex included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Amex has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Amex proposes to add new paragraph

(z)to Rule 131—AEMI to adopt a new order and a new quote type: the “Amex Only” order (“AOO”) and the “Amex Only” quote (“AOQ”). AOOs and AOQs will enable quoting and other market participants to post liquidity on the AEMI Book that will trade only at the Amex, and therefore will not incur the costs of routing to away markets. If any portion of an AOO or AOQ would otherwise be required, under Regulation NMS, 5 to route to another market to avoid a trade-through or a locked or crossed market, AEMI would automatically cancel that portion of the AOO or AOQ. Additionally, if auto-ex is disabled during the regular trading session, all AOOs or AOQs on the AEMI Book would be cancelled (and all incoming AOOs and AOQs rejected), because neither AOOs nor AOQs would be permitted to participate in intra-day pair-offs. 5 17 CFR 242.600 *et seq.* AOOs and AOQs may be entered only during the pre-opening or regular trading session. AOOs may be limit or market orders. Quoting participants entering AOQs are limited to one per price point per side of the market in the particular security being quoted, and only those streaming quotes to the Amex via proprietary systems will have AOQ functionality, when implemented. 6 6 *See* Rule 131—AEMI, Commentary .04. The Amex states that it is introducing AOOs and AOQs in response to market participants' strong demands for more flexible order and quote types that will provide more control over transaction charges—one of the primary present drivers of order flow decisions. By using AOOs and AOQs, market participants on Amex will be able to be certain of either trading immediately against the contra side of the market on Amex, posting all or part of their order/quote on the AEMI Book, or cancelling the order/quote. The Amex notes that another market already has a similar order type in place, 7 so competitive reasons also are driving the Amex's decision to offer comparable functionality to liquidity providers. 7 *See* NYSE Rule 13 (“Do Not Ship” or “DNS” Orders). *See also* Securities Exchange Act Release No. 55768 (May 15, 2007), 72 FR 28532 (May 21, 2007) (File No. SR-NYSE-2007-24) (notice of filing and immediate effectiveness of proposal to establish the DNS order type). 2. Statutory Basis The proposed rule change is designed to be consistent with Regulation NMS, as well as Section 6(b) of the Act, 8 in general, and furthers the objectives of Section 6(b)(5) of the Act, 9 in particular, in that it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. 8 15 U.S.C. 78f(b). 9 15 U.S.C. 78f(b)(5). B. Self-Regulatory Organization's Statement on Burden on Competition The Amex believes that the proposed rule change does not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others No written comments were solicited or received with respect to the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The Amex has designated the proposed rule change as one that:

(1)Does not significantly affect the protection of investors or the public interest;

(2)does not impose any significant burden on competition; and

(3)does not become operative for 30 days from the date of filing, or such shorter time as the Commission may designate if consistent with the protection of investors and the public interest. In addition, as required under Rule 19b-4(f)(6)(iii), 10 the Amex provided the Commission with written notice of its intention 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 filing the proposal with the Commission. Therefore, the proposed rule change has become effective pursuant to Section 19(b)(3)(A) of the Act 11 and Rule 19b-4(f)(6) thereunder. 12 10 17 CFR 240.19b-4(f)(6)(iii). 11 15 U.S.C. 78s(b)(3)(A). 12 17 CFR 240.19b-4(f)(6). The Amex has requested that the Commission waive the 30-day operative delay for competitive reasons. The Commission hereby grants the Amex's request. 13 AOOs and AOQs are substantially similar to order types that have been established on other exchanges. 14 The Amex's proposal does not appear to raise any novel regulatory issues. Therefore, the Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest. 13 For purposes of waiving the 30-day operative delay, the Commission has considered the proposal's impact on efficiency, competition, and capital formation. *See* 15 U.S.C. 78c(f). 14 *See* note 7, *supra.* *See also* Philadelphia Stock Exchange Rule 185(b)(1)(D) (providing for Limit Orders and Reserve Orders with Do Not Route instructions). At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov.* Please include File Number SR-Amex-2008-03 on the subject line. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, Station Place, 100 F Street, NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-Amex-2008-03. 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 the Amex. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make publicly available. All submissions should refer to File Number SR-Amex-2008-03 and should be submitted on or before February 13, 2008. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority. 15 15 17 CFR 200.30-3(a)(12). Florence E. Harmon, Deputy Secretary. [FR Doc. E8-1054 Filed 1-22-08; 8:45 am] BILLING CODE 8011-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-57157; File No. SR-BSE-2006-16] Self-Regulatory Organizations; Boston Stock Exchange, Inc.; Notice of Filing of Amendment No. 3 to the Proposed Rule Change and Order Granting Accelerated Approval of Proposed Rule Change, as Modified by Amendments No. 1 and 3 Thereto, To Adopt a Universal Price Improvement Period for Public Customer Orders January 15, 2008. I. Introduction On December 11, 2006, the Boston Stock Exchange, Inc. (“BSE” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”), pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) 1 and Rule 19b-4 thereunder, 2 a proposal to amend the rules of the Boston Options Exchange (“BOX”) to adopt a Universal Price Improvement Period (“UPIP”), an auction that offers the opportunity for price improvement for eligible Public Customer orders. On February 1, 2007, BSE filed Amendment No. 1 to the proposed rule change. The proposed rule change, as amended, was published for comment in the **Federal Register** on February 9, 2007. 3 The Commission received three comment letters regarding the proposal. 4 BSE filed Amendment No. 2 to the proposed rule change and a response to the comment letters on November 19, 2007. 5 On December 13, 2007, BSE withdrew Amendment No. 2 and filed Amendment No. 3 to the proposed rule change. The Commission is publishing this notice to solicit comments on the proposed rule change, as amended, from interested persons and is simultaneously approving the proposed rule change, as modified by Amendments No. 1 and 3, on an accelerated basis. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 3 *See* Securities Exchange Act Release No. 55230 (February 2, 2007), 72 FR 6302 (“Notice”). 4 *See* letter from Michael T. Bickford, Senior Vice President, American Stock Exchange LLC (“Amex”), to Nancy M. Morris, Secretary, Commission, dated March 2, 2007 (“Amex Letter”); letter from Michael J. Simon, Secretary, International Securities Exchange, LLC (“ISE”), to Nancy M. Morris, Secretary, Commission, dated March 5, 2007 (“ISE Letter”); and letter from Matthew B. Hinerfeld, Managing Director and Deputy General Counsel, Citadel Investment Group, L.L.C. (“Citadel”), to Nancy Morris, Secretary, Commission, dated March 6, 2007 (“Citadel Letter”). 5 *See* letter to Nancy M. Morris, Secretary, Commission, from John Katovich, Chief Legal Officer, BSE, dated November 19, 2007 (“BSE Letter”). II. Description of the Proposal A. UPIP Eligibility BOX will automatically initiate a UPIP auction for Public Customer orders 6 (“Eligible Orders”) provided certain conditions have been satisfied. 7 For example, the Eligible Order must be a Limit, Market, or BOX-Top Order that is marketable against the National Best Bid or Offer (“NBBO”). 8 Further, a Price Improvement Period (“PIP”) auction or UPIP auction in the same series cannot already be underway and, if the NBBO is locked or crossed, the BOX Best Bid or Offer (“BBO”) on the same side of the market as the Eligible Order must not equal the NBBO. 6 “Public Customer” means a person that is not a broker or dealer in securities. *See* Section 1(a)(50), Chapter I of the BOX Rules. 7 *See* proposed Section 29(e), Chapter V of the BOX Rules. 8 An Eligible Order also must be for a series of options that is open for trading and cannot indicate a minimum quantity condition or be an Inbound Inter-Market Linkage P/A order. *See* proposed Section 29(e)(v), Chapter V of the BOX Rules. In Amendment No. 3, the Exchange clarified that a “Fill and Kill” order is not included in the definition of an Eligible Order. *See* proposed Section 29(e)(vi), Chapter V of the BOX Rules. B. The UPIP Auction The UPIP will be three seconds or less, as determined by BOX on a class-by-class basis. 9 BOX will inform Options Participants as to the duration of the UPIP auctions by publishing a Regulatory Circular. Upon initiation of a UPIP auction, the Box Trading Host will transmit a broadcast message (“Broadcast Message”) to Options Participants informing them of the auction's initiation, the relevant details of the UPIP Order 10 ( *i.e.* , the UPIP Order's series, size, and side of the market), the end time of the auction, and the applicable Start Price. 11 The Start Price will be one improvement increment ( *e.g.* , a penny) better than the NBBO if the BBO is equal to the NBBO. If the BBO does not equal the NBBO, the Start Price will be the NBBO. The same conditions apply with respect to the Start Price whether or not the NBBO is locked or crossed. 9 The Exchange clarified in Amendment No. 3 that the UPIP auction shall be permitted on a class-by-class basis. *See* proposed Section 29(f), Chapter V of the BOX Rules. Amendment No. 3 also amends proposed Section 29(g), Chapter V of the BOX Rules to provide that if a UPIP Order was previously processed as a Directed Order accompanied by a Guaranteed Directed Order (“GDO”) pursuant to Chapter VI, Section 5(c)(iii)(2) of BOX Rules, the duration of the UPIP will not be less than the time the GDO is required to be withheld from trading with the Directed Order as provided in Chapter VI, Section 5(c)(iii)(2)(b)(4) of the BOX Rules. *See* proposed Section 29(g), Chapter V of the BOX Rules. 10 Upon commencement of the UPIP auction the “Eligible Order” is referred to as the “UPIP Order.” 11 The Start Price is defined as the minimum/maximum (buy/sell) price at which an Improvement Order must be submitted. *See* proposed Section 29(h), Chapter V of the BOX Rules. UPIP Orders can be modified and cancelled at any time prior to the conclusion of the UPIP auction. The cancellation of a UPIP Order will result in the subsequent cancellation of all related Improvement Orders and the UPIP auction. 12 Certain modifications of a UPIP Order will not result in the termination of the UPIP auction. 13 12 In Amendment No. 3, the Exchange clarified that the cancellation of a UPIP Order will result in the cancellation of the related Improvement Orders *and* the UPIP auction itself. 13 Such modifications are: The reduction of a UPIP Order quantity; the recharacterization of the UPIP Order type from a Limit Order to a BOX Top or Market Order; and an improvement of the UPIP Order's original limit price. Any other modification will result in the termination of the UPIP auction. *See* proposed Section 29(n), Chapter V of the BOX Rules. The UPIP Order will be “stopped” against any quote(s) or order(s) on the BOX Book that is marketable against the UPIP Order at the time the UPIP Order is received by the Trading Host (“Initial BOX Book Quote”) up to the aggregate size of the Initial Box Book Quote (“Initial Aggregate Quote Size”). 14 14 The Initial BOX Book Quote is defined as the quote(s) and/or order(s) on the BOX Book at the best price, on the opposite side, and in the same series as the Eligible Order at the time the Trading Host receives it. The Initial Aggregate Quote Size is defined as the aggregate size of the Initial BOX Book Quote. *See* proposed Section 29(o), Chapter V of the BOX Rules. A modification or cancellation of the Initial BOX Book Quote during the UPIP auction that would decrease the Initial Aggregate Quote Size below the size of the UPIP Order, at the commencement of the UPIP auction, will cause the UPIP auction to immediately terminate. Such modification or cancellation will only be processed after the UPIP Order has been executed. An Options Participant who is part of the Initial Box Book Quote, and whose cancellation or modification of its order or quote causes the UPIP auction to terminate, will have its order or quote placed at the end of the quote and order queue at the applicable price level on the BOX Book. Any modification or cancellation of the Initial BOX Book Quote that does not cause the Initial Aggregate Quote Size to decrease below the size of the UPIP Order, however, will be processed immediately by the Trading Host without penalty and the UPIP auction will continue. 15 15 Any orders or quotes on the opposite side of the UPIP Order that are received by the BOX Book after the UPIP auction has commenced ( *i.e.* , orders that are not otherwise part of the Initial BOX Book Quote) may be cancelled or modified without causing the UPIP auction to terminate. *See* proposed Section 29(o), Chapter V of the BOX Rules. C. Improvement Orders Any Options Participant may submit an Improvement Order in response to a Broadcast Message for an impending UPIP auction. 16 Improvement Orders will be visible to all Options Participants, can be submitted in increments of one cent, and must equal or improve the Start Price. Improvement Orders may be cancelled or modified by the Options Participant prior to the conclusion of the UPIP auction. An increase in the quantity of the Improvement Order or modification of the Improvement Order's limit price will result in the creation of a new Improvement Order reflecting the revised terms and the cancellation of the original Improvement Order. At the conclusion of a UPIP auction, the unexecuted portion of an Improvement Order will be cancelled by the Trading Host. 17 16 Improvement Orders are those orders submitted to a UPIP auction in response to a Broadcast Message by Options Participants that are on the opposite side of the market as the UPIP Order. *See* proposed Section 29(j), Chapter V of the BOX Rules. 17 *See* Amendment No. 3. 1. Proprietary Improvement Orders An Options Participant who submits an Eligible Order to BOX, which order starts a UPIP, and subsequently submits a Proprietary Improvement Order will be last in time priority at all price levels in the relevant UPIP auction. However, if the Proprietary Improvement Order is generated by an automated quotation system that operates independently from the existence or non-existence of the pending Eligible Order prior to its submission to BOX, the Options Participant's Proprietary Improvement Order will be treated like an ordinary Improvement Order and qualify for execution at each price level without prejudice. 18 18 *See* proposed Section 29(k), Chapter V of the BOX Rules. UPIP will default any Proprietary Improvement Order to the end of the priority queue in the UPIP. 19 If an Options Participant desires to have its status in the queue changed and be exempted from the rule, then the Options Participant would need to affirmatively identify its orders from an automated quotation system as the Exchange deems necessary. 20 19 *See* BSE Letter, *supra* note 5, at 7. 20 *Id.* 2. Executing Participant Improvement Orders An Executing Participant is a Market Maker that systemically indicates its willingness to accept and receive Directed Orders. 21 An Executing Participant that receives a Directed Order that is released to the BOX Book will be last in priority at all price levels for any Improvement Order or quote submitted to a subsequent UPIP auction related to that Directed Order. 22 Time priority will prevail between a Proprietary Improvement Order and an Improvement Order submitted by an Executing Participant. 23 21 *See* Section 5(c)(i), Chapter VI of the BOX Rules. 22 *See* proposed Section 29(l), Chapter V of the BOX Rules. 23 *See* Amendment No. 3 and proposed Sections 29(o)(i) and 29(s)(ii) of the Box Rules. In Amendment No. 3, BSE addressed the instance in which a Directed Order with an attached GDO has been entered into the UPIP auction and the UPIP auction is prematurely terminated because of a modification to or cancellation of an order or quote that is a component of the Initial BOX Book Quote or the receipt of a same side, executable order. When a UPIP auction is prematurely terminated in such circumstances, subsequent to the execution of the UPIP Order pursuant to Chapter V, section 29(p) of the BOX Rules, the GDO will be permitted to immediately execute directly against the remaining size of the UPIP Order. 24 This means that a GDO will be permitted to execute against the remaining size of the UPIP Order prior to three seconds having elapsed, but only if there is no other interest on BOX at the same (or better) price as the GDO. 25 It will be considered conduct inconsistent with just and equitable principles of trade for an Executing Participant to directly or indirectly enter, modify or cancel quotes or orders on BOX for the purpose of disrupting, prematurely terminating or manipulating any Improvement Auction, including a UPIP auction. 26 24 *See* proposed Section 5(c)(iii)(2)(b)(4), Chapter VI of the BOX Rules and Amendment No. 3. 25 *See* telephone conference among William Easley, Vice Chairman, BOX; Lisa Fall, General Counsel, BOX; Wayne Pestone, Bingham McCutchen LLP; and Heather Seidel, Assistant Director, Division of Trading and Markets (“Division”), Commission, on January 11, 2008. 26 *See* proposed Section 5(c)(iii)(2)(b)(4), Chapter VI of the BOX Rules and Amendment No. 3. 3. Customer Price Improvement Orders (“CPOs”) Similar to the CPO in the PIP, OFPs may provide Public Customers with access to the UPIP auction through a CPO, provided certain conditions have been met. The CPO must indicate the price at which the order will be placed in the BOX Book (“BOX Book Reference Price”) as well as the price at which the Public Customer would like to participate in any UPIP that may occur while the order is on the BOX Book (“CPO Auction Reference Price”). 27 Further, the terms of the CPO shall include the size of the order. In order for the CPO to be eligible for participation in a UPIP auction, the BOX Book Reference Price must equal the BBO at the commencement of a UPIP auction. 28 The CPO may also benefit from enhanced time priority pursuant to NBBO Prime. 27 The BOX Book reference price must be stated in standard five-cent or ten-cent increments, and the CPO Auction Reference Price must be stated in one-cent increments. *See* proposed Section 29(m)(i), Chapter V of the BOX Rules. 28 A CPO must be in the same series and on opposite side of the UPIP Order. *See* proposed Section 29(m)(iii), (iv), Chapter V of the BOX Rules. 4. NBBO Prime An Improvement Order or multiple Improvement Orders may be designated as NBBO Prime (“NBBO Prime Order”) in a particular UPIP auction. The NBBO Prime designation is only applicable for a UPIP auction, not the PIP, and generally confers time priority to a particular Improvement Order over other Improvement Orders and Unrelated Orders with the same price. 29 Any Improvement Order may be eligible for the NBBO Prime designation in a UPIP auction. 29 *See* proposed Section 30, Chapter V of the BOX Rules. In order to be designated as NBBO Prime, the same beneficial account 30 for whom the Options Participant is submitting the NBBO Prime Order must have quotes or orders on the BOX Book that are on the opposite side of the UPIP Order (“NBBO Prime Participant Quote”). The NBBO Prime Participant Quote must be equal to the NBBO and must have been on the BOX Book prior to the time the Eligible Order was presented to the Trading Host. An NBBO Prime Order will only have enhanced time priority for size of its NBBO Prime Participant Quote. Any residual quantity of the NBBO Prime Order will be handled in accordance with the normal time priority rules. Priority among NBBO Prime Orders at the same price will be based on the relevant Trading Host order receipt time stamp of each NBBO Prime Participant Quote. NBBO Prime Orders retain their priority even if the NBBO Prime Participant's Quote is subsequently modified or cancelled during the relevant UPIP auction. 30 For purposes of NBBO Prime, a “beneficial account” means the underlying type of account ( *e.g.* , customer, broker-dealer, market maker, etc.) on whose behalf the Participant is trading. *See* Notice, *supra* note 3, at note 14. An Options Participant seeking priority through the NBBO Prime designation must indicate to the Trading Host the order number of the NBBO Prime Participant Quote when the Options Participant submits the Improvement Order for the same beneficial account. In addition, the Options Participant may indicate whether the NBBO Prime Participant Quote size should be decremented to reflect any execution of the NBBO Prime Order. In the absence of such an indication, the Trading Host will not decrement the NBBO Prime Participant Quote. Market Makers will not be required to identify their relevant order number but will need to indicate to the Trading Host that their applicable NBBO Prime Participation Quote size should be decremented; otherwise their NBBO Prime Participation Quote size will remain unchanged on the BOX Book. 31 31 *See* proposed Section 29(j)(iv), Chapter V of the BOX Rules. D. Execution in the UPIP At the conclusion of the UPIP auction, including in the event of a premature termination, the UPIP Order will be matched against the best prevailing orders (including Improvement Orders, CPOs, and Unrelated Orders) and quotes (including the Initial Box Book Quote) submitted during the UPIP auction that are equal to or better than the Start Price, in accordance with the price/time algorithm in section 16(a) of Chapter V, with the following exceptions to time priority:

(1)As provided in proposed paragraphs (k), (l), and

(o)of section 29, Chapter V, regarding Proprietary Improvement Orders and Improvement Orders submitted by Executing Participants; 32 and

(2)as provided in proposed paragraphs

(b)to

(d)of section 30, Chapter V, regarding NBBO Prime Orders. 33 Further, in no circumstances will an order for a non-market maker broker-dealer account of an Options Participant be executed ahead of a Public Customer order(s) or a non-BOX Options Participant broker-dealer order(s) at the same price within the UPIP auction. This means that no order for the account of a non-market maker Options Participant will be executed ahead of the order(s) of any Public Customers or non-members of BOX. 34 32 *See supra* notes 18 through 23 and accompanying text. 33 *See* proposed Section 29(p), Chapter V of the BOX Rules. *See also* Amendment No. 3, which clarifies these exceptions in proposed Section 29(p), Chapter V, the substance of which were discussed in the Notice, *supra* note 3. 34 *See* proposed Section 29(p), Chapter V of the BOX Rules and Amendment No. 3. At the conclusion of the UPIP auction, the UPIP Order will be filtered to prevent a trade-through of the NBBO at the conclusion of the auction and will not execute against orders or quotes at prices inferior to the NBBO except in the following circumstances:

(1)In accordance with Chapter XII, section 3(e) of BOX Rules; 35 or

(2)the away options exchange posting the NBBO is conducting a trading rotation in that options class. 36 If the UPIP Order cannot be executed on BOX at or better than the NBBO, it will be routed to another market center(s) posting the NBBO. 35 Chapter XII, Section 3(e) of the BOX Rules states that “[u]nder circumstances where the Options Official determines that quotes from one or more particular away markets in one or more classes of options are not reliable, the Options Official may direct the Market Operations Center (`MOC') to exclude the unreliable quotes from the determination of the NBBO in the particular class(es).” 36 The original filing provided that only the quantity of the UPIP Order that exceeded the Initial Aggregate Quote Size was filtered at the conclusion of the UPIP auction. The Exchange modified the rule text in Amendment No. 3 to apply the NBBO trade-through filter to the entire size of the UPIP Order. Any unexecuted portion of the UPIP Order not executed in the UPIP auction will be released to the Box Book and handled as provided in section 16, Chapter V of the BOX Rules, except that a quote or order on the BOX Book that is for the same beneficial account as an Improvement Order that executed against the UPIP Order in the UPIP auction and that was on the BOX Book before the UPIP Order was received by BOX will have time priority over other quotes and orders on the BOX Book (except customer orders). 37 37 *See* proposed Section 16(a)(iv), Chapter V of the BOX Rules. In Amendment No. 3, BSE clarified that such order on the BOX Book will receive only *time* priority. *See* Amendment No. 3. E. Treatment of Unrelated Orders in the UPIP Unrelated Orders that are submitted to the Trading Host during a UPIP auction that are on the opposite side of the market from a UPIP Order and are executable against the NBBO will be executed immediately against the UPIP Order at the mid-point of the

(i)NBBO and

(ii)the best of the UPIP Improvement Order, the UPIP Start Price or the NBBO. 38 If the Unrelated Order on the opposite side of the market as the UPIP Order has a quantity equal to or greater than the UPIP Order, the UPIP auction will terminate. Otherwise, the immediate execution of the Unrelated Order against the UPIP Order will not cause the termination of the UPIP auction and the auction will continue. Conversely, an Unrelated Order that is on the same side of the market as the UPIP Order that is executable against the NBBO will cause the UPIP to immediately terminate and the UPIP Order will be executed pursuant to proposed section 29(p) of Chapter V of the BOX Rules. 39 38 *See* proposed Section 29(s)(i), Chapter V of the BOX Rules. Any rounding required will be to the benefit of the Unrelated Order. *Id.* 39 If the Unrelated Order is still UPIP eligible, a new UPIP will commence. If the Unrelated Order is no longer UPIP eligible, the order will go on the BOX Book. *See* telephone conference among William Easley, Vice Chairman, BOX; Lisa Fall, General Counsel, BOX; and Heather Seidel, Division, Commission, on December 21, 2007. In Amendment No. 3, BSE amended paragraph

(s)of section 29, Chapter V of the BOX Rules to emphasize that it will be considered conduct inconsistent with just and equitable principles of trade for any Options Participant to enter Unrelated Orders into BOX for the purpose of disrupting or manipulating any UPIP auction, including purposely causing premature termination. 40 40 *See* Amendment No. 3. III. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change, as amended, is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov.* Please include File Number SR-BSE-2006-16 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 BSE-2006-16. 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 BSE. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-BSE-2006-16 and should be submitted on or before February 13, 2008. IV. Discussion After careful consideration of the amended proposal and the comment letters, the Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange 41 and, in particular, the requirements of section 6 of the Act. 42 Specifically, the Commission finds that the proposed rule change is consistent with section 6(b)(5) of the Act, 43 which requires, among other things, that the rules of a national securities exchange be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. Significant aspects of the proposal are discussed below. 41 In approving this proposed rule change, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). 42 15 U.S.C. 78f. 43 15 U.S.C. 78f(b)(5). The Commission notes that the UPIP is similar to BOX's existing price improvement auction, the PIP, and other price improvement mechanisms, such as the Price Improvement Mechanism (“PIM”) of the ISE, that initiate auctions in penny increments through which exchange participants compete to potentially price improve a customer order. However, unlike the PIP, in the UPIP customer orders do not depend on the ability of at least one party to guarantee price improvement for the full size of the Customer Order. 44 44 The Commission notes that the Simple Auction Liaison System of the Chicago Board Options Exchange, Incorporated (“CBOE”), which provides for the automatic initiation of an auction process in certain circumstances for any order that is eligible for automatic execution by the Hybrid System, also does not depend on a contra-side order. *See* Securities Exchange Act Release No. 54229 (July 27, 2006), 71 FR 44058 (August 3, 2006) (SR-CBOE-2005-90). A. Price Competition One commenter believes that the UPIP auction would encourage Market Makers to post wide and shallow quotes and discourage Market Makers from quoting aggressively until the UPIP auction begins because:

(1)The most desirable orders will bypass the centralized auction;

(2)after a UPIP auction is completed, the centralized auction will be exposed to UPIP “rejects;” and

(3)the UPIP Order can be cancelled or modified but orders on the top of the BOX Book when the auction starts cannot. 45 This commenter also believes that transparency will suffer because market participants will hide their true trading interest until a UPIP auction begins. 46 45 *See* Citadel Letter, *supra* note 4, at 1 to 2 and 4. 46 *Id.* at 4. Another commenter believes that the ability of a Participant to modify or cancel a UPIP Order, while the quotes and orders on the top of the BOX Book will essentially be frozen, will provide a three-second option or “second-look” opportunity for the Participant that submitted the UPIP Order to the detriment of the quotes and orders at the top of the book. 47 The commenter believes that this could severely limit the amount of liquidity Market Makers would be willing to provide on BOX. This commenter further believes that the dissemination of Improvement Orders during the UPIP auction, which allows the Participant that entered the UPIP Order to monitor the amount of price improvement being offered (if any), compounds the “second look” problem. 48 This commenter also believes that this inability to cancel or modify an order at the top of the BOX Book raises customer protection issues, and that customers and their brokers should be made aware that cancelling or modifying their orders on the BOX Book may actually cause them to be executed at an undesirable price. 49 47 *See* ISE Letter, *supra* note 4, at 1 to 2. *See also* Citadel Letter, *supra* note 4, at 4 (stating that the ability of the UPIP Order to cancel will give investors a free option to cancel their orders based on intervening market movements, while orders at the top of the book are frozen). 48 *See* ISE Letter, *supra* note 4, at 2-3. 49 Id. at 1 to 2. In response, BSE notes that in general BOX Market Makers have several meaningful incentives to consistently quote at or establish the NBBO, including:

(1)An open and competing market maker structure with no specialist/designated primary market maker and no regulatory limits to the number of market makers appointed in a given class;

(2)low costs to enter the market;

(3)low transaction costs;

(4)price and time priority on the BOX Book; and

(5)anonymous trading on the BOX Book. 50 Further, BSE notes that the UPIP rules allow certain Improvement Order to be designated as NBBO Prime Orders. An NBBO Prime designation confers time priority in a UPIP auction to a particular Improvement Order over other Improvement Orders and Unrelated Orders with the same price upon satisfaction of certain conditions. To be eligible to be designated NBBO Prime, the same beneficial account for whom the Options Participant is acting and that is seeking the NBBO Prime designation must have had a quote or order on the BOX Book on the opposite side of the UPIP Order equal to the NBBO prior to receipt of the UPIP Order by the Trading Host. BSE believes that this requirement will encourage all Options Participants to compete aggressively to match or establish a new NBBO. 51 50 *See* BSE Letter, *supra* note 5, at 2. 51 *Id.* NBBO Prime is similar to the “Market Maker Prime” (“MMP”) designation in a PIP auction that is awarded to a Market Maker that is first to establish a quote on BOX equal to the NBBO or establish a new NBBO. The Commission does not believe that, given the overall structure of BOX and the NBBO Prime functionality, the UPIP auction will discourage aggressive quoting on BOX. The availability of the NBBO Prime functionality is designed to encourage market makers and other market participants to aggressively post quotes or limit orders on the BOX Book, to be the first to match the NBBO, or to establish a new NBBO, because those participants will have time priority in the UPIP auction. Further, because NBBO Prime Orders only receive enhanced time priority for the quantity that does not exceed the size of the related order that was on the BOX Book, market participants may be incented to post greater size in order to receive priority on a larger allocation. Finally, with regard to BSE's proposal to allow Public Customers to cancel UPIP Orders, BSE states that, because the UPIP does not guarantee price improvement, the ability to cancel a UPIP Order is necessary to allow an OFP to manage an order that has not been executed and for which no trade confirmation has been issued. 52 The Commission believes that the ability for UPIP Orders to be cancelled is consistent with the Act. 52 *See* BSE Letter, *supra* note 5, at 4. B. NBBO Prime Requirements One commenter doubts the technological feasibility of the NBBO Prime functionality because firms seeking NBBO Prime status will be required to specify the number of their order on the BOX Book that was first in time priority at the top of the BOX Book. 53 BSE represents that the requirement to provide the unique order identifier to BOX for the appropriate order on the BOX Book utilizes the same technology that firms currently use to cancel or modify orders on BOX and that an OFP cannot be certified to trade on BOX unless it can perform this task. 54 The Commission therefore does not believe this requirement should place an unreasonable burden on Options Participants to be able to avail themselves of the NBBO Prime functionality. 53 *See* Citadel Letter, *supra* note 4, at note 12. 54 *See* BSE Letter, *supra* note 5, at note 10. C. “Freezing” Top of the Book Quotes and Orders As noted above, two commenters expressed concerns about BSE's proposal to prohibit orders and quotes at the top of the BOX Book at the commencement of a UPIP auction to be cancelled. 55 In response, BSE stated that “freezing” certain quotes and orders on the BOX Book at the start of a UPIP auction is necessary to comply with the Quote Rule, 56 and disagrees that quotes or orders on the BOX Book held firm in this manner will be disadvantaged. BSE believes such orders and quotes will be treated as the entering participant intends— *i.e.* , executable at the limit price when matched with a contra-side order and cancellable only when there is no pending execution. 55 *See supra* note 47 and accompanying text. 56 17 CFR 242.602. Rule 602 under the Act requires a responsible broker or dealer to execute orders to buy or sell a security presented to it by another broker or dealer, or any other person belonging to a category of persons with whom such responsible broker or dealer customarily deals, at a price at least as favorable to such buyer or seller as the responsible broker's or dealer's published bid or published offer in any amount up to its published quotation size. 57 Therefore, the Commission agrees that the “stop” feature is necessary to ensure market participants' compliance with Rule 602 under the Act and believes that it is consistent with the Act. The Commission notes, however, that BOX Participants should, as with any order type or exchange functionality, take steps necessary to ensure their customers understand the operation of the UPIP auction with respect to incoming orders and orders resting on the BOX Book. 57 *Id.* D. Private Auctions One commenter argues that, because the broadcast message commencing a UPIP auction and the responding Improvement Orders will only be accessible to BOX participants and will not be publicly disseminated, only BOX Participants will know the “true” BOX market. 58 58 *See* Citadel Letter, *supra* note 4, at 4. Under the Commission's Quote Rule, an exchange is required to collect, process, and make available to quotation vendors the best bid, the best offer, and aggregate quotation sizes for each subject security listed or admitted to unlisted trading privileges which is communicated on any national securities exchange by any responsible broker or dealer. 59 The Commission believes that because the UPIP auction is at most only 3 seconds in length, it is analogous to the open outcry auctions conducted on floor-based exchanges, where auction prices are not widely disseminated and are available only for the order that initiated the auction and other orders in the crowd at that particular time. 60 Accordingly, the Commission finds the UPIP auction to be consistent with the Quote Rule. 59 17 CFR 242.602(a)(i). 60 *See* Securities Exchange Act Release Nos. 49068 (January 14, 2003), 68 FR 3062 (January 22, 2003) (Commission approval establishing trading rules for BOX, including rules for the PIP); 49323 (February 26, 2004), 69 FR 10087 (March 3, 2004) (Commission approval establishing rules for PIM); and 53222 (February 3, 2006), 71 FR 7089 (February 10, 2006) (Commission approval establishing rules for CBOE's Automated Improvement Mechanism (“AIM”)). One commenter notes that unlike the PIP, the proposed UPIP auction does not require at least three market makers to quote in an options series before a UPIP may be initiated. 61 The Commission does not believe that the Act requires an exchange to have market makers in an auction. Although Market Makers could be an important source of liquidity in the UPIP auction, they likely will not be the only source. Any Options Participant can submit an Improvement Order in a UPIP Auction, on its own behalf or on behalf of a customer. Further, the Auto Auction Order (“AAO”) 62 and CPO are specifically designed to allow customers to more easily participate in an Improvement Auction, including the UPIP. The Commission therefore believes that the proposal not to require minimum market maker participation in the UPIP is consistent with the Act. 61 *See* ISE Letter, *supra* note 4, at 3. 62 *See* Securities Exchange Act Release No. 56186 (August 2, 2007), 72 FR 44593 (August 8, 2007) (approving the AAO functionality on BOX). Another commenter notes that the proposal provides that the duration of the UPIP will be 3 seconds or less as determined by the Board on a case-by-case basis and questions whether a UPIP duration of less than 3 seconds would result in a meaningful auction. 63 This commenter also inquires how Options Participants will be informed about the exposure time of UPIP auctions if they are reduced. The Commission believes that BSE's response that BOX will inform Options Participants regarding the duration of the UPIP auctions by publishing a Regulatory Circular is consistent with the Act. 64 The Commission also notes that the UPIP auction is designed to provide an opportunity for price improvement for certain orders, without a guarantee to a facilitating firm. Thus, the Commission does not believe that the UPIP auction raises the same potential conflict concerns as an auction where there is a guarantee from a facilitating firm. The Commission therefore believes that the duration of the UPIP auction, as proposed, is consistent with the Act. 63 *See* Amex Letter, *supra* note 4, at 4. 64 *See* BSE Letter, *supra* note 5, at 6. E. NBBO Protection A commenter requested clarification as to what would occur in a UPIP auction if the BBO does not equal the NBBO and there are no Improvement Orders entered during the UPIP auction. Specifically, this commenter asked if the UPIP Order would be executed at the NBBO, or if the UPIP Order would be routed through the Options Intermarket Linkage to a better away market. 65 This commenter further asked at what price the UPIP Order is executed if the NBBO changes during the UPIP auction. 66 Similarly, another commenter noted that the UPIP Order would not execute against a better price if the NBBO changes during the UPIP Auction. 67 65 *See* Amex Letter, *supra* note 4, at 2. 66 *Id.* 67 *See* Citadel Letter, *supra* note 4, at 6. BSE responded that the UPIP Order is not guaranteed an execution at the NBBO. 68 At the conclusion of the UPIP auction, the UPIP Order will be matched against the best prevailing orders or quotes, whether Improvement Orders, Unrelated Orders, or the Initial BOX Book Quote, that are equal to or better than the Start Price, which is at least as good a price as the NBBO at the commencement of the auction. 69 In addition, at the conclusion of the UPIP auction the entire UPIP Order will be filtered to prevent BOX from executing any portion of the UPIP Order at a price inferior to the NBBO at the end of the UPIP auction. If the UPIP Order cannot be executed on BOX at or better than the NBBO, then the UPIP Order will be routed through Intermarket Linkage to another market displaying the NBBO at the conclusion of the UPIP auction. 70 The Commission believes that BSE adequately clarified this aspect of the proposal, as amended, and that it is consistent with the Act. 68 *See* BSE Letter, *supra* note 5, at 5. 69 Such matching shall occur in compliance with the priority provisions of proposed Chapter V, Section 29(p) of the BOX Rules. 70 *See* BSE Letter, *supra* note 5, at 5 and Chapter V, Section 29(q) of the BOX Rules. F. Compliance With the Act 1. Quote Rule One commenter believes that the ability to cancel Improvement Orders during a UPIP auction is inconsistent with the purpose and intent of BOX's firm quote rule. This commenter argues that an Options Participant would have a free look at the UPIP Order during the auction and could withdraw its Improvement Order if the market moved unfavorably. 71 71 *See* Amex Letter, *supra* note 4, at 3. The Commission's Quote Rule requires a responsible broker or dealer to execute any order presented to it at its published price and up to the full amount of its published size. 72 Because no order would be presented to execute against an Improvement Order until the end of the UPIP auction, the Commission believes that the ability to cancel an Improvement Order prior to the termination of the UPIP auction does not violate the Quote Rule. 72 17 CFR 242.602(b)(2). 2. Section 11(a) of the Act Section 11(a) of the Act prohibits a member of a national securities exchange from effecting transactions on that exchange for its own account, the account of an associated person, or an account over which it or its associated person exercises discretion, unless an exception applies. 73 Section 11(a)(1)(G) and Rule 11a1-1(T) under the Act provide an exception to the general prohibition in section 11(a) on an exchange member effecting transactions for its own account. Specifically, a member that “is primarily engaged in the business of underwriting and distributing securities by other persons, selling securities to customer, and acting as broker, or any one or more of such activities, and whose gross income normally is derived principally from such business and related activities” 74 and effects a transaction in compliance with the requirements in Rule 11a1-1(T)(a) 75 may effect a transaction for its own account. Among other things, Rule 11a1-1(T)(a)(3) requires that an exchange member presenting a bid or offer for its own account or the account of another member shall grant priority to any bid or offer at the same price for the account of a non-member of the exchange. 76 73 15 U.S.C. 78k(a). 74 15 U.S.C. 78k(a)(1)(G)(i). Paragraph

(b)of Rule 11a1-1(T) under the Act provides that the requirements of Section 11(a)(1)(G)(i) of the Act are met if during its preceding fiscal year more than 50% of the member's gross revenues was derived from one or more of the sources specified in that section. In addition to any revenue which independently meets the requirements of Section 11(a)(1)(G)(i), revenue derived from any transaction specified in paragraph (A), (B), or

(D)of Section 11(a)(1) of the Act or specified in Rule 11a1-4(T) shall be deemed to be revenue derived from one or more of the sources specified in Section 11(a)(1)(G)(i). 75 15 U.S.C. 78k(a)(1)(G)(ii). 76 17 CFR 240.11a1-1(T)(a)(3). BSE's proposal provides that “no order for a non-market maker broker-dealer account of an Options Participant will be executed before Public Customer order(s) and non-BOX Options Participant broker-dealer order(s) at the same price.” 77 Because BSE's proposed rules will require Options Participants that are not Market Makers to yield priority in the UPIP auction to all non-member orders, 78 the Commission believes that the proposal is consistent with the yielding requirements in section 11(a)(1)(G) and Rule 11a1-1(T) under the Act. However, the Commission notes that, in addition to yielding priority to non-member orders at the same price, members also must meet the other requirements under section 11(a)(1)(G) and Rule 11a1-1(T) to effect transactions for their own accounts in reliance on this exception (or satisfy the requirements of another exception). 77 *See* proposed Section 29(p), Chapter V of the BOX Rules. 78 *See* Amendment No. 3. G. Surveillance The proposal provides that the UPIP will default any Proprietary Improvement Order to the end of the priority queue in the UPIP unless the Options Participant affirmatively identifies that its order was generated by an automated quotation system that operates independently from the existence or non-existence of a pending UPIP Order. A commenter questioned how the BOX system will differentiate between proprietary orders that have or have not been generated by automated quotation systems, and what standard (if any) will be used for making a determination that a particular system is an automated quotation system. 79 BSE has represented that it will surveil for compliance with this rule through its current examination program. 80 BSE also notes that ISE uses a similar mechanism for its Directed Order process. 81 79 *See* Amex Letter, *supra* note 4, at 3 to 4. 80 *See* BSE Letter, *supra* note 5, at 7. 81 *Id.* H. Interaction Among UPIP and PIP One commenter asks for more clarity on the interaction of the PIP, UPIP, and directed order functionalities. 82 In response, BSE noted that a PIP or a UPIP auction will not run simultaneously with another PIP or UPIP auction in the same series, nor will PIP or UPIP auctions interact, queue, or overlap in any manner. 83 BSE states that any order that is received while a UPIP is underway for the same series, which would otherwise meet the price conditions to initiate a UPIP auction, will cause the UPIP auction to immediately terminate. 84 Further, any order that is received while a PIP auction is underway, that would otherwise meet the price conditions to initiate a UPIP will interact with the PIP as an Unrelated Order under the PIP rules. 85 Any request to initiate a PIP (including from a market maker that has received a directed order) while a PIP or UPIP is already in progress in the same series will be rejected. 86 The Commission believes that BSE has adequately clarified the interaction among the UPIP, PIP, and directed orders. 87 82 *See* ISE Letter, *supra* note 4, at 3. For example, this commenter noted that when a market maker receives a directed order on BOX, it must either initiate a PIP or release the order to the market within three seconds. Therefore, if there is a UPIP in progress at the time the directed order is received, the market maker cannot initiate a PIP. *Id.* at note 3. 83 *See* proposed Section 18, Chapter V, Supplementary Material .02 and proposed Section 29, Chapter V, Supplementary Material .01 of the BOX Rules. 84 *See* proposed Section 29(s), Chapter V of the BOX Rules. 85 *See* proposed Chapter V, Section 18(i) of the BOX Rules. 86 *Id.* and BSE Letter, *supra* note 5, at 6. 87 Another commenter believes that the Commission should not approve the proposed rule change until it has addressed the issue of whether market makers will be able to unfairly discriminate against certain customers when the UPIP or PIP auctions are used in conjunction with a Directed Order process without anonymity. *See* Amex Letter, *supra* note 4, at 2-3. The Commission believes that the issue of anonymity in the Directed Order process is more appropriately addressed in the context of the BSE proposed rule change on that issue. *See* Securities Exchange Act Release Nos. 56014 (July 5, 2007), 72 FR 38104 (July 12, 2007) (SR-BSE-2007-31) (extending to January 31, 2008 the effective date of Section 5(c)(i), Chapter 6 of the BOX Rules, which allows the BOX Trading Host to identify to an Executing Participant the identity of the firm entering a Directed Order); and 53357 (February 23, 2006), 71 FR 10730 (March 2, 2006) (SR-BSE-2005-52) (notice of proposed rule change to permit Executing Participants to choose the firms from which they will accept Directed Orders while providing complete anonymity for Directed Orders that are passed on to the Executing Participant for possible representation in a PIP auction). One commenter questioned whether the AAO would interact in a UPIP Auction. 88 In response, BSE clarifies that the recently approved AAO will be able to interact in a UPIP. 89 88 *See* ISE Letter, *supra* note 4, at 3. 89 *See* BSE Letter, *supra* note 5, at note 26. BSE also notes that the Limit Order that is associated with the AAO that is priced at the standard minimum trading increment of five or ten cents can start a UPIP if, at its rounded price, it would be executable at the NBBO. 90 90 *Id.* I. Penny Pilot One commenter argues that the Penny Pilot Program 91 initiative should prohibit the approval of the UPIP. This commenter believes that the UPIP will distort Penny Pilot data. 92 Another commenter believes that the Penny Pilot is the appropriate method to approach penny pricing in the options market because it is a fair and transparent environment. 93 91 The Penny Pilot was approved by the Commission to allow BOX to quote certain options series in pennies on a pilot basis. *See e.g.,* Securities Exchange Act Release No. 55155 (January 23, 2007), 72 FR 4741 (February 1, 2007) (SR-BSE-2006-49). 92 *See* Citadel Letter, *supra* note 4, at 7. 93 *See* ISE Letter, *supra* note 4, at 3 to 4. As discussed above, with respect to the commenters' substantive arguments, the Commission believes the proposed rule change is consistent with the Act. The Commission has previously approved exchange proposals to trade in penny increments, including BSE's PIP. 94 The Commission believes it is consistent with the Act to approve the BSE's initiative designed to allow trading in penny increments. 95 94 *See* Securities Exchange Act Release Nos. 49068 (PIP); 49323 (PIM); and 53222 (AIM), *supra* note 60. 95 The Exchange has represented that it will provide the Commission with statistics regarding the UPIP for those classes included in the Penny Pilot. *See* BSE Letter, *supra* note 5, at 8. J. Acceleration of Proposed Rule Change as Amended The Commission finds good cause to approve the proposal prior to the thirtieth day after the proposal was published for comment in the **Federal Register** . The proposed rule change, as modified by Amendment No. 1, was published for full notice and comment. 96 The Commission believes that the changes made in Amendment No. 3 generally strengthen the proposal. In Amendment No. 3, BSE made several changes to clarify its rules, 97 respond to commenters, 98 and comply with the requirements of the Act. 99 The Commission believes that it has received and fully considered substantial, meaningful comments with respect to the BSE's proposal, as amended, and that Amendment No. 3 does not raise issues that warrant further delay. For these reasons, the Commission finds good cause, consistent with section 19(b)(2) of the Act, 100 to grant accelerated approval of the proposed rule change, as amended. 96 *See* Notice, *supra* note 3. 97 *See, e.g.,* BSE clarifies that: The definition of an Eligible Order does not include “fill or kill” orders; the UPIP auction will only be available for certain classes of options as determined from time-to-time by BOX; the cancellation of the UPIP Order will result in the cancellation of the related Improvement Orders and the UPIP auction itself; any unexecuted portion of an Improvement Order will be cancelled; time priority will prevail between a Proprietary Improvement Order and an Improvement Order submitted by an Executing Participant; and in the instance when a UPIP is concluded, only time priority will be granted to an order on the BOX Book that executes against the remaining portion of a UPIP Order if that order has been placed for the same beneficial account as an Improvement Order in the UPIP auction. 98 *See, e.g.,* BSE revises the proposal to apply its NBBO trade-through filter at the conclusion of the UPIP auction. 99 *See, e.g.,* BSE revises the proposal to provide that: In no circumstances will the orders for a non-market maker broker-dealer account of an Options Participant be executed before a Public Customer or non-BOX Options Participant at the same price in the UPIP; and it will be conduct inconsistent with just and equitable principles of trade for

(1)any Options Participant to enter Unrelated Orders into BOX for the purpose of disrupting or manipulating any UPIP auction, including purposely causing premature termination or

(2)for an Executing Participant to directly or indirectly enter, modify, or cancel quotes or orders on BOX for the purpose of disrupting, prematurely terminating or manipulating any Improvement Auction. 100 15 U.S.C. 78s(b)(2). V. Conclusion *It is therefore ordered,* pursuant to section 19(b)(2) of the Act, 101 that the proposed rule change (SR-BSE-2006-16), as amended, be, and it hereby is, approved on an accelerated basis. 101 15 U.S.C. 78s(b)(2). For the Commission, by the Division of Trading and Markets, pursuant to delegated authority. 102 102 17 CFR 200.30-3(a)(12). Florence E. Harmon, Deputy Secretary. [FR Doc. E8-1037 Filed 1-22-08; 8:45 am] BILLING CODE 8011-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-57153; File No. SR-ISE-2008-04] Self-Regulatory Organizations; International Securities Exchange, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change, as Modified by Amendment No. 1 Thereto, Relating to Fee Waiver January 15, 2008. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the “Act”), 1 and Rule 19b-4 thereunder, 2 notice is hereby given that on January 2, 2008, the International Securities Exchange, LLC (“ISE” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I, II, and III below, which Items have been substantially prepared by ISE. ISE has designated this proposal as one establishing or changing a due, fee, or other charge applicable only to a member under 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. On January 15, 2008, ISE submitted Amendment No. 1 to the proposed rule change. 5 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 15 U.S.C. 78s(b)(3)(A). 4 17 CFR 240.19b-4(f)(2). 5 For purposes of calculating the 60-day period within which the Commission may summarily abrogate the proposed rule change under Section 19(b)(3)(C) of the Act, the Commission considers the period to commence on January 15, 2008, the date on which the Exchange filed Amendment No. 1. *See* 15 U.S.C. 78s(b)(3)(C). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change ISE is proposing a one-time waiver of the annual renewal fee for Registered Representatives. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the ISE included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. ISE has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose Pursuant to ISE Rules 601, 602, and 603, members are required to electronically file a Uniform Application for Securities Industry Registration or Transfer (Form U4) with the Web CRD System operated by the Financial Industry Regulatory Authority, Inc. (“FINRA”) when registering, transferring, or terminating a registered person. Pursuant to the Exchange's Schedule of Fees, members pay fees related to these U4 filings, which are collected by FINRA on behalf of the Exchange. In particular, members are assessed an annual renewal fee of $55 for each Registered Representative. The purpose of this rule filing is to grant a one-time waiver of the $55 annual renewal fee for Registered Representatives for 2008. The Exchange updated its rules regarding its registration requirements in June 2007, 6 which resulted in some members registering a substantial number of representatives with the Exchange for the first time in the later part of 2007. 6 *See* Securities Exchange Act Release No. 55899 (June 12, 2007), 72 FR 33794 (June 19, 2007) (SR-ISE-2007-30). Specifically, the Exchange initially requested that members comply with the revised registration requirements by no later than October 31, 2007, but subsequently extended this date until January 31, 2008. Because the 2008 annual renewal fee is assessed based on the number of Registered Representatives a member has registered with the ISE on the Web CRD system at the beginning of 2008, any member that registered its representatives prior to the end of 2007 would be assessed the annual renewal fee for each Registered Representative, whereas those firms that waited until after January 1, 2008 to register their representatives would not incur the 2008 annual renewal fee. In effect, assessing the 2008 annual renewal fee would penalize those members that complied with the Exchange's registration requirements more timely. The Exchange therefore believes it is appropriate to waive the 2008 annual renewal fee for all members. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with the objectives of Section 6 of the Act, 7 in general, and furthers the objectives of Section 6(b)(4) of the Act, 8 in particular, in that it is designed to provide for the equitable allocation of reasonable dues, fees and other charges among its members and other persons using its facilities. 7 15 U.S.C. 78f(b). 8 15 U.S.C. 78f(b)(4). B. Self-Regulatory Organization's Statement on Burden on Competition The proposed rule change does not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others The Exchange has not solicited, and does not intend to solicit, comments on this proposed rule change. The Exchange has not received any unsolicited written comments from members or other interested parties. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective pursuant to Section 19(b)(3)(A) of the Act 9 and Rule 19b-4(f)(2) 10 thereunder because it establishes or changes a due, fee, or other charge imposed by the Exchange. At any time within 60 days of the filing of such proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. 9 15 U.S.C. 78s(b)(3)(A). 10 17 CFR 240.19b-4(f)(2). IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov* . Please include File No. SR-ISE-2008-04 on the subject line. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, Station Place, 100 F Street, NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-ISE-2008-04. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site ( *http://www.sec.gov/rules/sro.shtml* ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying in the Commission's Public Reference Room 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 the ISE. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-ISE-2008-04 and should be submitted on or before February 12, 2008. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority. 11 11 17 CFR 200.30-3(a)(12). Florence E. Harmon, Deputy Secretary. [FR Doc. E8-1011 Filed 1-22-08; 8:45 am] BILLING CODE 8011-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-57156; File No. SR-NYSE-2007-120] Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend NYSE Rules 13, 60, and 1000 To Allow for the Automatic Execution of G-Quotes in the Display Book January 15, 2008. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the “Act”), 1 and Rule 19b-4 thereunder, 2 notice is hereby given that on December 24, 2007, the New York Stock Exchange LLC (“NYSE” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I, II, and III below, which Items have been substantially prepared by the NYSE. The proposed rule change has been filed by the NYSE as effecting a change in an existing order-entry or trading system pursuant to Section 19(b)(3)(A) of the Act, 3 and Rule 19b-4(f)(5) 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)(5). I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The NYSE proposes to amend NYSE Rules 13 and 1000 to allow for the automatic execution of G-Quotes in the Display Book® (the “Display Book”). The Exchange is also seeking to make conforming changes to NYSE Rule 60. The text of the proposed rule change is available on the Exchange's Web site ( *http://www.nyse.com* ), at the Exchange, and at the Commission's Public Reference Room. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the NYSE included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The NYSE has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend NYSE Rules 1000 and 13 to allow for the automatic execution of G-Quotes in the Display Book. 5 The Exchange is also seeking to make conforming changes to NYSE Rule 60. 5 The Display Book® system is an order management and execution facility. The Display Book system receives and displays orders to the specialists, contains the Book, and provides a mechanism to execute and report transactions and publish the results to the Consolidated Tape. The Display Book system is connected to a number of other Exchange systems for the purposes of comparison, surveillance, and reporting information to customers and other market data and national market systems. Background An automatically executable (“auto-ex”) order is an order in a security, other than a bond traded in NYSE Bonds, that initiates an automatic execution in accordance with and to the extent provided by NYSE Rule 1000, immediately upon entry into Exchange systems. Currently, NYSE Rule 13 lists the categories of auto-ex orders and NYSE Rule 1000 permits automatic execution of orders reflected in the Exchange published quotation, orders on the Book, Floor broker agency file interest (“e-Quotes”), specialist interest (“s-Quotes”), and CAP-DI orders. The current rule does not include G-Quotes as an order type eligible order for automatic execution. Section 11(a)(1) of the Act 6 generally prohibits a member of a national securities exchange from effecting transactions on that exchange for its own account, the account of an associated person, or any account over which it or an associated person exercises discretion. Subsection

(G)of Section 11(a)(1) provides an exemption allowing an exchange member to have its own floor broker execute a proprietary transaction (“G order”). A G-Quote is an electronic method for Floor brokers to represent G orders. G orders on NYSE yield priority, parity and precedence based on size to all other non-G orders. 6 15 U.S.C. 78k(a)(1). In current market conditions, if a G-Quote hits the Display Book as a marketable order, it is not eligible for automatic execution. In order to execute a marketable G-Quote once it is received in the Display Book, the Display Book in that security is converted to a slow market to allow for manual execution of the G-Quote. In other words, the receipt of a marketable G-Quote suspends auto-execution of the Display Book until it is manually traded out of the Display Book. In order to reduce the amount of times that the Exchange must set their markets slow, the Exchange is seeking this rule change to add G-Quotes as an order eligible for automatic execution in order to maintain optimum market conditions and prevent further temporary disruptions in the flow of the market by having it go “slow” when a marketable G-Quote hits the Book. Accordingly, the Exchange seeks to amend NYSE Rule 1000 and NYSE Rule 13 to add G-Quotes as automatically executable orders. Aside from now being automatically executed, G-Quotes will be executed in the same manner as they are today, *i.e.* , they still must yield priority, parity and precedence to all other non-G orders. The Exchange also seeks to amend NYSE Rule 1000 to make G-Quotes eligible for sweeps following existing rules for sweeps. Specifically, during a sweep, the unfilled balance (“residual”) of an automatically executing order that is not filled in its entirety due to the volume available in the Exchange best bid and offer, may trade with broker proprietary interest files on the Book capable of execution in accordance with Exchange Rules, at each successive price lower than the displayed bid (in the case of a sweeping sell order) or higher than the displayed offer (in the case of a sweeping buy order) as long as the sweep continues. The Exchange further seeks to make conforming changes to NYSE Rule 60 to provide that the Exchange will autoquote the NYSE's highest bid or lowest offer to reflect G-Quotes. The Exchange notes that in all situations discussed above, the G-Quote will trade as the last interest at a price point, yielding priority, parity and precedence to all other non-G orders. 7 7 Telephone conference among Daniel Labovitz, Managing Director, NYSE Regulation, Inc.; Deanna G. W. Logan, Associate General Counsel, NYSE; Jennifer D. Kim, Counsel, NYSE; Richard Holley, Senior Special Counsel, Division of Trading and Markets (“Division”), Commission; Nathan Saunders, Special Counsel, Division, Commission; and Jan Woo, Special Counsel, Division, Commission, on January 10, 2008. 2. Statutory Basis The Exchange believes that the basis under the Act is the requirement under Section 6(b)(5) that an exchange have rules that are designed to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system and, in general, to protect investors and the public interest. 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 effects a change in an existing order entry or trading system that

(i)does not significantly affect the protection of investors or the public interest;

(ii)does not impose any significant burden on competition; and

(iii)does not have the effect of limiting access to or availability of the system, it has become effective pursuant to Section 19(b)(3)(A)(iii) of the Act 8 and Rule 19b-4(f)(5) thereunder. 9 8 15 U.S.C. 78s(b)(3)(A)(iii). 9 17 CFR 19b-4(f)(5). At any time within 60 days of the filing of such proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission's Internet comment form ( *http://www.sec.gov/rules/sro.shtml* ); or • Send an e-mail to *rule-comments@sec.gov.* Please include File Number SR-NYSE-2007-120 on the subject line. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-NYSE-2007-120. 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 the NYSE. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-NYSE-2007-120 and should be submitted on or before February 13, 2008. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority. 10 Florence E. Harmon, Deputy Secretary. 10 17 CFR 200.30-3(a)(12). [FR Doc. E8-1055 Filed 1-22-08; 8:45 am] BILLING CODE 8011-01-P SECURITIES AND EXCHANGE COMMISSION [Release No. 34-57155; File No. SR-Phlx-2008-02] Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; Notice of Filing of Proposed Rule Change To Amend By-Law Article XIV, Section 14-5 and Phlx Rule 50 January 15, 2008. 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 January 8, 2008, the Philadelphia Stock Exchange, Inc. (“Phlx” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) a proposed rule change as described in Items I, II, and III below, which Items have been substantially prepared by Phlx. 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. I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to:

(i)Modify the timeframes within which monies owed to the Exchange would become reportable to the Board of Governors (“Board”) for further action;

(ii)eliminate references to the monetary threshold of $10,000;

(iii)conform By-Law language to indicate that Members, Member Organizations, participants, and participant organizations would be subject to being terminated for failure to pay; and

(iv)make other clarifying amendments. The text of the proposed rule change is available at Phlx, the Commission's Public Reference Room, and *http://www.phlx.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, 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. 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 amend the language in Phlx By-Law Article XIV, section 14-5 and Exchange Rule 50 to bolster the Exchange's procedures regarding collection of monies owed to the Exchange. The proposed rule change modifies the timeframes within which monies owed to the Exchange would become reportable to the Board, and by which Members, Member Organizations, participants, and participant organizations would be subject to a suspension or termination. The proposed rule change also defines the types of fees subject to each timeframe. Specifically, the previous time limitations of 50 days from the original invoice for certain monies and 20 days for other categories of monies would be removed from By-Law Article XIV, Section 14-5 and the time limitations in Exchange Rule 50 would be amended. The 50 day timeframe applied to dues, foreign currency options users' fees, fees, other charges and other monies due and owed to the Exchange. The 20 day timeframe applied to fines and other monetary sanctions. Under this proposal, a Member, or Member Organization, participant, or participant organization or employee thereof shall be referred to the Board for failure to:

(i)Pay fines and/or other monetary sanctions within 30 days after notice thereof; or

(ii)pay dues, foreign currency options users' fees, fees, other charges, and/or other monies due, including late charges, within 90 days from the date of the original invoice. These timeframes would be amended in Rule 50 and deleted from By-Law Article XIV, section 14-5, rather than appear in both Rule 50 and By-Law Article XIV, section 14-5. The purpose of amending these timeframes is to conform to the Exchange's current accounting and billing cycles and to allow a reasonable time for payment of invoices prior to the necessity to report a past due amount to the Board for further action. In addition, this proposed rule change would eliminate the references to the monetary threshold of $10,000 from both By-Law Article XIV, section 14-5 and Rule 50, so that all past due amounts are reportable to the Board within the specified proposed new timeframes. The requirement to report to the Finance Committee is proposed to be eliminated from Rule 50. Both of these changes are intended to direct collection matters to the Board directly and without regard to the amount, in order to enhance the immediacy of the Exchange's collection efforts. The word “terminate” is proposed to be added to By-Law Article XIV, section 14-5 to conform with the termination language in By-Law Article XIV, section 14-1. By-Law Article XIV, section 14-1 currently provides that the Board shall have the power to establish and assess penalties and late charges for failure to pay any fees, dues, or charges owed to the Exchange, including, without limitation, termination of a permit or participation (which permit or participation may be reissued) and forfeiture of all rights as a Member, Member Organization or participant organization, permit holder or (with respect to a foreign currency options participation) an owner, lessor or lessee. The proposed rule change to By-Law Article XIV, section 14-5 clarifies that the Board has the power to terminate, not just suspend, any permit or rights and privileges of a foreign currency options participation of any Member, foreign currency options participant, 3 Member Organization or participant organization or employee thereof. Currently, By-Law Article XIV, section 14-5 only covers suspension. The Exchange believes it is helpful to add “terminate” to By-Law Article XIV, section 14-5 so that the consequences of a failure to pay appear together, even though By-Law Article XIV, section 14-1 already gives the Board the power to terminate. In other words, the Board's power to terminate is merely being repeated in another by-law and is not being created by this proposed rule change. 3 By-Law Article I, Section 1-1(j) defines a Foreign Currency Options Participation as “the foreign currency options participations issued from time to time by the Exchange.” By-Law Article I, Section 1-1(k) defines a Foreign Currency Options Participant or Participant as “a Member of the Exchange who has purchased a foreign currency options participation and a non-member who has been admitted to the Exchange as a foreign currency options participant by the Admissions Committee.” By-Law Article I, Section 1-1(l) defines a Foreign Currency Options Participant Organization as: “* * * corporation, partnership (general or limited), limited liability partnership, limited liability company, business trust or similar organization, transacting business as a broker or a dealer in securities and which has the status of a foreign currency options participant organization by virtue of

(i)permission given to it by the Admissions Committee pursuant to the provisions of Section 10-6 of these By-Laws or

(ii)the transitional rules adopted by the Exchange pursuant to Section 12-12 of these By-Laws. References herein to officer or partner, when used in the context of a foreign currency options participant organization, shall include any person holding a similar position in any organization other than a corporation or partnership that has the status of a foreign currency options participant organization.” A Member, Member Organization or employee thereof is required to maintain a permit in order to qualify as a member of the Exchange. That permit has certain rights and privileges 4 that allow the Member or Member Organization, and its employees, to access the trading floor and trade, among other things. In order to trade foreign currency options at the Exchange, either a permit or a foreign currency participation is required. 5 4 *See* Exchange Rule 908 (Rights and Privileges of A-1 Permits.) 5 *See* Exchange By-Law Article XXVII, Section 27-1 (Foreign Currency Options Participants) and Exchange By-Law Article XIII, Section 13-1 (Qualification.) *See also* Securities Exchange Act Release No. 49098 (January 16, 2004), 69 FR 3974 (January 27, 2004) (SR-Phlx-2003-73) at n. 8 which states, “The Exchange, however, plans to retain its existing Foreign Currency Option (“FCO”) participations (as defined in section 1-1(i) of the amended By-laws). After the demutualization, the ability to trade FCOs on the Phlx will also be available through a Series A-1 Permit, as set forth in proposed Rule 908(b).” For non-payment of monies owed, the Board may, using its powers in By-Law Article XIV, Sections 14-1 and 14-5, determine to, in the case of a permit:

(1)Suspend trading privileges that flow from the permit for a period of time, until payment is made; or

(2)terminate the permit; or, in the case of a foreign currency options participation,

(3)suspend the rights and privileges for a period of time;

(4)terminate the participation; or

(5)if eligible, pursuant to the last paragraph of By-Law Article XIV, section 14-5, dispose of the participation. In the event that a permit is terminated by the Board, the affected party would be required to reapply for admission with the Exchange for a new permit once payment in full was made of any outstanding balance owed to the Exchange. In the event of disposal, 6 as referenced in the last paragraph of By-Law Article XIV, section 14-5, the Exchange would purchase the participation at the current bid 7 and allocate proceeds to the holder less the amount that was owed the Exchange. 8 This provision is only being changed to delete the $10,000 threshold, such that any amounts owed and not paid after one year may subject a foreign currency options participation to disposal. 6 *See* By-Law Article XXVII, Section 27-3 (Privileges and Obligations of Foreign Currency Options Participants.) 7 The current bid for a Foreign Currency Options Participation is posted weekly in the Exchange bulletin. 8 *See* By-Law Article XV, Section 15-3 (Disposition of Proceeds of Sale of Foreign Currency Options Participation) and By-Law Article XV, Section 15-11 (Foreign Currency Options Participations Purchased by the Exchange.) 2. Statutory Basis The Exchange believes that its proposal is consistent with section 6(b) of the Act, 9 in general, and furthers the objectives of section 6(b)(5) of the Act, 10 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 providing notice and clarity of its reporting procedures for non-payment to the Exchange. 9 15 U.S.C. 78f(b). 10 15 U.S.C. 78f(b)(5). B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the 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 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 Phlx 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-Phlx-2008-02 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-2008-02. 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 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-2008-02 and should be submitted on or before February 13, 2008. 11 17 CFR 200.30-3(a)(12). For the Commission, by the Division of Trading and Markets, pursuant to delegated authority. 11 Florence E. Harmon, Deputy Secretary. [FR Doc. E8-1059 Filed 1-22-08; 8:45 am] BILLING CODE 8011-01-P DEPARTMENT OF TRANSPORTATION Federal Aviation Administration Notice of Approval of the Finding of No Significant Impact and Record of Decision for the Final Environmental Assessment

(EA)for the Construction of a New Land-Based Airport in Akutan, AK AGENCY: Federal Aviation Administration (FAA), Department of Transportation (DOT). ACTION: Notice of approval of the Finding of No Significant Impact/Record of Decision. SUMMARY: The Federal Aviation Administration is announcing the approval of the Finding of No Significant Impact/Record of Decision (FONSI/ROD) for the Final Environmental Assessment

(EA)for the construction of a new land-based airport in Akutan, AK. The FONSI/ROD provides final agency determinations and approvals for the proposed development. FOR FURTHER INFORMATION CONTACT: Patti Sullivan, Environmental Specialist, Federal Aviation Administration, Alaskan Region, Airports Division, 222 W. 7th Avenue #14, Anchorage, AK 99513-7504. Ms. Sullivan may be contacted during business hours at

(907)271-5454 (phone) and

(907)271-2851 (facsimile). SUPPLEMENTARY INFORMATION: The FONSI/ROD is for the approval of actions for the construction of an airport, including a runway, a runway safety area, connecting taxiway, an apron, and a snow removal equipment and maintenance facility; an airport access road; two hovercraft landing pads; a hovercraft storage and maintenance facility; and acquisition of a hovercraft. The FONSI/ROD provides the final agency determinations and approvals for Federal actions by the FAA related to the selection of alternatives to meet the purpose and need for the action. The FONSI/ROD also includes required mitigation measures and conditions of approval. The FONSI/ROD indicates that the selected actions are consistent with existing environmental policies and objectives set forth in the National Environmental Policy Act

(NEPA)of 1969, as amended, as well as other Federal and State statutes, and that the actions will not significantly affect the quality of the environment. The FAA's decision is based upon information contained in the Final EA, issued in December 2007, and on all other applicable documents available to the agency and considered by it, which constitutes the administrative record. The FAA's determinations are discussed in the FONSI/ROD, which was approved on December 26, 2007. FONSI/ROD Availability The FONSI/ROD may be viewed at the following Web site: *http://www.faa.gov/airports_airtraffic/airports/regional_guidance/alaskan/.* Issued in Anchorage, Alaska on January 11, 2007. Byron K. Huffman, Manager, Airports Division, Alaskan Region. [FR Doc. 08-232 Filed 1-22-08; 8:45 am]

Connectionstraces to 15

Traces to 15 documents

U.S. Code