Federal Register / Vol. 69, No. 22 / Tuesday, February 3, 2004 / Notices 5227

1 15 U.S.C. 78s(b)(1).

2 17 CFR 240.19b–4.

3Amendment No. 1 replaces and supercedes the 

original filing in its entirety.

4See Securities Exchange Act Release No. 46428 

(August 28, 2002), 67 FR 56607 (September 4, 

2002). At present, the exemption extends to 

transactions in three designated Exempt ETFs—the 

Nasdaq-100 Index (‘‘QQQ’’), the Dow Jones 

Industrial Average (‘‘DIAMONDs’’) and the 

Standard & Poor’s 500 Index (‘‘SPDRs’’)—when the 

transactions are ‘‘executed at a price that is no more 

than three cents lower than the highest bid 

displayed in CQS and no more than three cents 

higher than the lowest offer displayed in CQS’’

(each, an ‘‘Exempted Trade-Through’’). The 

exemption was effective as of September 4, 2002. 

The Exchange notes that the Commission’s 

exemption extended to the subject transactions

rather than the three subject issues. For purposes of 

this submission, however, the Exchange will refer 

to such issues at the ‘‘Exempt ETFs.’’

5See Securities Exchange Act Release No. 47950 

(May 30, 2003), 68 FR 33748 (June 5, 2003).

6See supra note 3, 67 FR at 56607–56608.

7See Securities Exchange Act Release No. 46760 

(November 1, 2002), 67 FR 68219 (November 8, 

2002). The CHX rule language approved by the 

Commission is currently in effect until March 4, 

2004, the expiration date of the Exemption order. 

See Securities Exchange Act Release No. 48202 

(July 21, 2003), 68 FR 44370 (July 28, 2003).

8The CHX believes that the proposed rule 

change, which broadens the scope of Interpretation 

and Policy .10 to CHX Article XX, Rule 37, 

contemplates the proposal outlined above. To the 

extent that the CHX Board of Governors designates 

subject issues other than or in addition to the 

Exempt ETFs, the Exchange will file those changes 

with the Commission as an interpretation of an 

existing rule pursuant to Section 19(b)(3)(A) of the 

Act and Rule 19b–4(f)(1).

revenue, provided that the total of such 

estimated payments or billings shall be 

reconciled at the end of each calendar year 

and, if necessary, adjusted by March 32st of 

the following year. Interest shall be included 

in quarterly payments and in adjusted 

payments made on March 31st of the 

following year. Such interest shall accrue 

monthly during the period in which revenue 

was earned and not yet paid and will be 

based on the 90-day Treasury bill rate in 

effect at the end of the quarter in which the 

payment is made. Interest shall not accrue 

during the period of up to 45 days between 

the end of each calendar quarter and the date 

on which an estimated quarterly payment or 

billing is made. 

In conjunction with calculating estimated 

quarterly and reconciled annual payments 

under this Exhibit 1, the Processor shall 

submit to the Participants an itemized 

statement setting forth the basis upon which 

net operating income was calculated, 

including an itemized statement of the 

Processor costs set forth in Paragraph 3 of 

this Exhibit. Such Processor costs shall be 

reconciled annually based solely on the 

Processor’s audited annual financial 

information. By majority vote of the 

Operating Committee, the Processor shall 

engage an independent auditor to audit the 

Processor’s costs or other calculation(s), the 

cost of which audit shall be shared equally 

by all Participants. The Processor agrees to 

cooperate fully in providing the information 

necessary to complete such audit.

[FR Doc. 04–2146 Filed 2–2–04; 8:45 am] 

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–49130; File No. SR–CHX–

2003–27] 

Self-Regulatory Organizations; Notice 

of Filing of Proposed Rule Change and 

Amendment No. 1 Thereto by the 

Chicago Stock Exchange, Incorporated 

Relating to Execution of Limit Orders 

Following Exempted ITS TradeThrough 

January 27, 2004. 

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 August 7, 

2003, the Chicago Stock Exchange, 

Incorporated (‘‘CHX’’ or ‘‘Exchange’’) 

filed with the Securities and Exchange 

Commission (the ‘‘Commission’’) the 

proposed rule change as described in 

Items I, II and III below, which Items 

have been prepared by the Exchange. 

On January 20, 2004, the Exchange filed 

Amendment No. 1 to the proposed rule 

change.3 The Commission is publishing 

this notice to solicit comments on the 

proposed rule change from interested 

persons.

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to amend 

certain provisions of CHX Article XX, 

Rule 37, which governs, among other 

things, execution of limit orders, in 

listed securities, in a CHX specialist’s 

book following a trade-through in the 

primary market. Specifically, the CHX 

seeks to render voluntary a CHX 

specialist’s obligation to fill limit orders 

in the specialist’s book when the 

primary market is trading at the limit 

price, if the issue traded constitutes an 

Exempt ETF (as defined below). The 

text of the proposed rule change is 

available at the Commission and at the 

CHX. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

CHX included statements concerning 

the purpose of and basis for the 

proposed rule change and discussed any 

comments it received regarding the 

proposal. The text of these statements 

may be examined at the places specified 

in Item IV below. The CHX has prepared 

summaries, set forth in Sections A, B, 

and C below, of the most significant 

aspects of such statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

On August 28, 2002, the Commission 

issued an order granting a de minimis

exemption (the ‘‘Exemption’’) for 

transactions in certain exchange-traded 

funds (the ‘‘Exempt ETFs’’) from the 

trade-through provisions of the 

Intermarket Trading System (‘‘ITS’’) 

Plan.4 On May 30, 2003, the 

Commission issued an order extending 

effectiveness of the Exemption, through 

March 4, 2004.5 In its orders relating to 

the Exemption, the Commission clearly 

outlined its belief that the nature of the 

ETF market is so dynamic and rapidlychanging that the trade-through 

provisions of the ITS Plan are 

inadequate and unduly restrictive.6

Article XX, Rule 37(a)(3) of the CHX 

Rules, which governs execution of limit 

orders in a CHX specialist’s book, 

provides for execution of such orders at 

the limit price, i.e., it requires the CHX 

specialist to provide ‘‘limit order 

protection,’’ when certain conditions 

occur in the primary market. Among 

other things, these provisions generally 

obligate a CHX specialist to fill limit 

orders in his book if the primary market 

is trading at or through the limit price. 

Following issuance of its Exemption 

order, the Commission approved a rule 

change proposed by the CHX, removing 

the requirement that CHX specialists 

guarantee limit order protection in the 

case of an Exempt Trade-Through in the 

primary market.7 CHX specialists are 

permitted to provide this protection on 

a voluntary basis.

The Exchange believes that it is 

appropriate to extend the effect of this 

rule change by removing the remaining 

limit order protection requirements for 

orders in any of the Exempt ETFs. 

Specifically, the CHX believes that in 

instances where the primary market in 

an Exempt ETF is trading at the limit 

price, the CHX specialist should not be 

required to execute resting limit orders 

in his book under CHX Article XX, Rule 

37(a)(3)(a) and 37(a)(3)(c). 

Accordingly, the proposed rule 

change would permit, but would not 

require, a CHX specialist to fill limit 

orders in his book when the primary 

market in an Exempt ETF is trading at 

the limit price.8 The CHX asserts that 

rationale for this proposal is similar to 

that articulated by the Commission in 

the Exemption order—it is difficult, if 

5228 Federal Register / Vol. 69, No. 22 / Tuesday, February 3, 2004 / Notices 

9 15 U.S.C. 78(f)(b).

10 15 U.S.C. 78f(b)(5).

11 17 CFR 200.30–3(a)(12).

1 15 U.S.C. 78s(b)(1).

2 17 CFR 240.19b–4.

3See Securities Exchange Act Release No. 48981 

(December 23, 2003), 68 FR 75704. The Release was 

incorrectly identified in the Federal Register as 34–

48961. The correct number is 34–48981.

4 15 U.S.C. 78s(b)(2).

5 17 CFR 200.30–3(a)(31).

not impossible, for a CHX specialist to 

obtain liquidity on behalf of his 

customer via the ITS system in the case 

of Exempt ETFs, given the dynamic and 

rapidly changing nature of the Exempt 

ETF market.

2. Statutory Basis 

The CHX believes the proposal is 

consistent with the requirements of the 

Act and the rules and regulations 

thereunder that are applicable to a 

national securities exchange, and, in 

particular, with the requirements of 

Section 6(b).9 The CHX believes the 

proposal is consistent with Section 

6(b)(5) of the Act 10 in that it is designed 

to promote just and equitable principles 

of trade, to remove impediments to, and 

to perfect the mechanism of, a free and 

open market and a national market 

system, and, in general, to protect 

investors and the public interest.

B. Self-Regulatory Organization’s 

Statement of Burden on Competition 

The Exchange does not believe that 

the proposed rule change will impose 

any inappropriate burden on 

competition. 

C. Self-Regulatory Organization’s 

Statement on Comments Regarding 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 other period (i) 

as the Commission may designate up to 

90 days of such date if it finds such 

longer period to be appropriate and 

publishes its reasons for so finding or 

(ii) as to which the self-regulatory 

organization consents, the Commission 

will: 

(A) By order approve the 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. 

Persons making written submissions 

should file six copies thereof with the 

Secretary, Securities and Exchange 

Commission, 450 Fifth Street NW., 

Washington, DC 20549–0609. 

Comments may also be submitted 

electronically at the following e-mail 

address: rule-comments@sec.gov. All 

comment letters should refer to File No. 

SR–CHX–2003–27. 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, comments 

should be sent in hardcopy or by e-mail 

but not by both methods. Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for inspection and copying in 

the Commission’s Public Reference 

Room. Copies of such filing will also be 

available for inspection and copying at 

the principal office of the Exchange. All 

submissions should refer to File No. 

SR–CHX–2003–27 and be submitted by 

February 24, 2004.

For the Commission, by the Division of 

Market Regulation, pursuant to delegated 

authority.11

Jill M. Peterson, 

Assistant Secretary.

[FR Doc. 04–2144 Filed 2–2–04; 8:45 am] 

BILLING CODE 8010–01–P

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–49129; File No. SR–NASD–

2003–176] 

Self-Regulatory Organizations; Notice 

of Designation of Longer Period for 

Commission Action and Extension of 

Comment Period on a Proposed Rule 

Change by the National Association of 

Securities Dealers, Inc. Relating to 

Chief Executive Officer and Chief 

Compliance Officer Certification 

January 27, 2004. 

On November 28, 2003, the National 

Association of Securities Dealers, Inc. 

(‘‘NASD’’) filed with the Securities and 

Exchange Commission (‘‘Commission’’), 

pursuant to section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’)1 and Rule 19b–4 thereunder,2 a 

proposed rule change to add NASD Rule 

3013. Notice of the proposed rule 

change was published for public 

comment in the Federal Register on 

December 31, 2003.3 The notice 

provided that comments on the 

proposed rule change should be 

submitted to the Commission by January 

21, 2004.

Section 19(b)(2) of the Act 4 provides 

that within thirty-five days of the 

publication of notice of the filing of a 

proposed rule change, or within such 

longer period as the Commission may 

designate up to ninety days of such date 

if it finds such longer period to be 

appropriate and publishes its reasons 

for so finding the Commission shall 

either approve the proposed rule change 

or institute proceedings to determine 

whether the proposed rule change 

should be disapproved. That thirty-five 

day period will end on February 4, 

2004, with respect to the proposed rule 

change. The Commission has received 

comments on the proposed rule change, 

which it is still reviewing. The 

Commission finds it appropriate to 

designate a longer period within which 

to take action on the proposed rule 

change so that it has sufficient time to 

consider the comments.

Accordingly, the Commission hereby 

designates March 30, 2004 as the date 

by which the Commission shall either 

approve the proposed rule change or 

institute proceedings to determine 

whether to disapprove it. The 

Commission is also extending the 

period for public comment through 

February 6, 2004.

For the Commission, by the Division of 

Market Regulation, pursuant to delegated 

authority.5

Jill M. Peterson, 

Assistant Secretary.

[FR Doc. 04–2092 Filed 2–2–04; 8:45 am] 

BILLING CODE 8010–01–P