58570 Federal Register / Vol. 69, No. 189 / Thursday, September 30, 2004 / Notices 

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

2 17 CFR 240.19b–4.

3See letter from Mai S. Shiver, Director, 

Regulatory Policy, PCX, to Nancy J. Sanow, 

Assistant Director, Division of Market Regulation 

(‘‘Division’’), Commission, dated September 15, 

2004. 4See PCXE Rule 1.1(n).

5See letter from Mai Shiver, Director, Regulatory 

Policy, PCX, to Annette L. Nazareth, Director, 

Division, Commission, dated September 15, 2004, 

regarding Subpenny Trading Increment for 

Securities Priced Less Than $1.00 (‘‘Exemptive 

Request’’). In this letter, the Exchange requested 

exemptive relief from Rules 11Ac–1, 11Ac1–2 and 

11Ac1–4 to allow ArcaEx, its ETP Holders, and 

vendors that disseminate ArcaEx quotation 

information to round quotes for securities priced 

less than $1.00 to the nearest penny increment (up, 

for orders to sell, or down, for orders to buy) for 

display purposes, while such quotes may be entered 

and executed in increments of $0.001.

6The Nasdaq Stock Market, Chicago Stock 

Exchange, Inc., and National Stock Exchange, Inc., 

who have all received similar exemptive relief from 

the Commission, have also agreed to provide the 

Commission with similar monthly reports on their 

subpenny trading activity as a condition to 

receiving such relief.

7See Securities Exchange Act Release No. 49325 

(February 26, 2004), 69 FR 11125 (March 9, 2004). 

The Exchange notes that the Regulation NMS 

proposal’s limitation on subpenny trading would 

exclude securities priced below $1.00. The 

Exchange understands that the Commission’s 

proposed Regulation NMS may have an impact on 

this pilot program. Accordingly, the Exchange has 

stated that it will undertake to work with the 

Commission to ensure that the pilot program would 

be consistent with the rules and regulations that 

may be adopted by the Commission in connection 

with its Regulation NMS proposal.

8See PCXE Rule 7.6(a), Commentary .07, ArcaEx 

is able to execute Midpoint Cross Orders and 

Directed Fills in increments smaller than the 

minimum price variation i.e., in subpennies.

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–50441; File No. SR–PCX–

2003–71] 

Self-Regulatory Organizations; Notice 

of Filing and Order Granting 

Accelerated Approval of Proposed 

Rule Change and Amendment No. 1 

Thereto by the Pacific Exchange, Inc., 

Relating to Trading Securities Valued 

at Less Than $1.00 in Subpenny 

Increments 

September 24, 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 December 

22, 2003 the Pacific Exchange, Inc. 

(‘‘PCX’’ or ‘‘Exchange’’), through its 

wholly-owned subsidiary PCX Equities, 

Inc. (‘‘PCXE’’), filed with the Securities 

and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I and II 

below, which Items have been prepared 

by the Exchange. On September 15, 

2004, the Exchange submitted 

Amendment No. 1 to the proposal.3 The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change, as amended, from interested 

persons. As discussed below, the 

Commission is granting accelerated 

approval of the proposed rule change, as 

amended, for a pilot period.

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to modify the 

interpretation to PCXE Rule 7.6(a) to 

provide for order entry and trading of 

securities that are priced less than $1.00 

to be entered, executed and reported in 

subpenny increments. 

I. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

Exchange included statements 

concerning the purpose of, and basis for, 

the proposed rule change and discussed 

any comments it received on the 

proposed rule change. The text of these 

statements may be examined at the 

places specified in Item III below. The 

Exchange has prepared summaries, set 

forth in Sections A, B, and C below, of 

the most significant aspects of such 

statements. 

The text of the proposed rule change 

is set forth in Exhibit A hereto. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

As part of its continuing efforts to 

enhance participation on the 

Archipelago Exchange (‘‘ArcaEx’’) 

facility, the PCX is proposing, on a pilot 

basis through September 30, 2005, to 

permit trading of securities that are 

priced at less than $1.00 to be traded in 

increments of $0.001. Currently, 

interpretation .05 to PCXE Rule 7.6(a) 

stipulates that the minimum price 

variation for quoting and entry of orders 

traded on ArcaEx is $0.01. The 

Exchange proposes modifying this 

interpretation to allow for order entry in 

increments of $0.001 for Nasdaq 

National Market (‘‘NNM’’), Nasdaq 

Small Cap, and exchange-listed 

securities that are priced less than 

$1.00. In addition, the Exchange 

acknowledges the Commission’s 

concern that allowing trading in $0.001 

increments in securities priced less than 

$1.00 could permit ArcaEx ETP Holders 

to trade ahead of customers whose limit 

orders are at the national best bid or 

offer (‘‘NBBO’’) in those securities by 

improving upon the quoted price in 

$0.001 increments.4 Accordingly, the 

Exchange is also proposing to modify 

PCXE Rule 6.16, which governs trading 

ahead of customers’ limit orders. The 

Exchange proposes to add a 

Commentary to PCXE Rule 6.16 to 

indicate that, during the term of this 

pilot, for securities priced less than 

$1.00, the minimum amount of price 

improvement necessary to execute an 

incoming marketable order on a 

proprietary basis by an ETP Holder 

when holding an unexecuted customer 

limit order otherwise due an execution 

pursuant to PCXE Rule 6.16 in that same 

security is $0.01.

In conjunction with this proposed 

filing, the Exchange has requested 

exemptive relief that would permit, on 

a one-year pilot basis through 

September 30, 2005, ArcaEx’s ETP 

Holders to provide for order entry and 

trading of securities traded on ArcaEx 

(NNM securities, Small Cap Securities, 

and exchange-listed securities) that are 

priced less than $1.00 to be entered, 

executed and reported in increments of 

$0.001, while ArcaEx and vendors that 

disseminate ArcaEx quotation 

information report and disseminate 

quotes for those securities in penny 

increments.5

Further, to advance the Commission’s 

review, and as a condition to the 

exemption relief sought, the Exchange 

has agreed to provide the Commission 

with monthly reports on its activity in 

subpenny increments. Such information 

will include reported volume of orders 

received and executed in subpenny 

increments (in terms of both trades and 

shares), the execution price points, and 

the nature of the subpenny orders 

received and executed (i.e., agency, 

principal, or otherwise).6

The Exchange believes that allowing 

executions on ArcaEx in securities 

priced less than $1.00 would enable 

investors to sell the security in the event 

it becomes necessary, e.g., where 

delisting proceedings have been 

announced or are imminent. The 

limited number of price points in low 

priced stocks necessitates the ability to 

trade in smaller increments.7 Also, 

because the securities subject to this 

proposal are limited to those that meet 

ArcaEx’s listing standards or are eligible 

for trading pursuant to the unlisted 

trading privileges, there are few (less 

than 1%) that will be impacted by this 

proposal. Moreover, the Exchange also 

has the ability to execute in subpennies 

under certain circumstances 8 and this 

proposal, although it relates to all order 

types, is a limited extension of that 

Federal Register / Vol. 69, No. 189 / Thursday, September 30, 2004 / Notices 58571

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

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

11 In approving this proposal, the Commission has 

considered its impact on efficiency, competition, 

and capital formation. 15 U.S.C. 78c(f).

12 15 U.S.C. 78f(b)(5).

13See Exemptive Request, supra note 5.

14 17 CFR 240.11Ac1–1(e).

15 17 CFR 240.11Ac1–2(g).

16 17 CFR 240.11Ac1–4(d).

17See letter from David S. Shillman, Associate 

Director, Division, Commission, to Mai S. Shiver, 

Director, Regulatory Policy, PCX (September 24, 

2004) (‘‘Exemptive Relief Letter’’). The relief 

granted to PCX is expressly conditioned upon 

providing the Commission with data specified in 

the Exemptive Relief Letter. The Commission 

intends to reconsider the position expressed in its 

letter before the expiration of the exemption on 

September 30, 2005.

18The Commission notes that the approval of this 

proposal in no way prejudges or determines what 

action the Commission may take with respect to any 

part of the Regulation NMS proposal.

19 15 U.S.C. 78s(b)(2).

same principle restricted to securities 

priced less than $1.00.

2. Statutory Basis 

The Exchange believes that the 

proposed rule change is consistent with 

Section 6(b) 9 of the Act, in general, and 

furthers the objectives of Section 

6(b)(5),10 in particular, because it is 

designed to promote just and equitable 

principals of trade, to foster cooperation 

and coordination with persons engaged 

in facilitating transactions in securities, 

to remove impediments 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 

Written comments on the proposed 

rule change were neither solicited nor 

received. 

III. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods:

Electronic Comments 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/

rules/sro.shtml); or 

• Send an e-mail to rulecomments@sec.gov. Please include File 

Number SR–PCX–2003–71 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Jonathan G. Katz, Secretary, 

Securities and Exchange Commission, 

450 Fifth Street, NW., Washington, DC 

20549–0609. 

All submissions should refer to File 

Number SR–PCX–2003–71. This file 

number should be included on the 

subject line if e-mail is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

Internet Web site (http://www.sec.gov/

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

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

available for inspection and copying in 

the Commission’s Public Reference 

Section, 450 Fifth Street, NW., 

Washington, DC 20549. Copies of such 

filing also will be available for 

inspection and copying at the principal 

office of the Exchange. All comments 

received will be posted without change; 

the Commission does not edit personal 

identifying information from 

submissions. You should submit only 

information that you wish to make 

available publicly. All submissions 

should refer to File Number SR–PCX–

2003–71 and should be submitted on or 

before October 21, 2004. 

IV. Commission’s Findings and Order 

Granting Accelerated Approval of 

Proposed Rule Change 

The Commission finds that the 

proposed rule change, as amended, is 

consistent with the requirements of the 

Act and the rules and regulations 

thereunder applicable to a national 

securities exchange.11 In particular, the 

Commission finds that the proposed 

rule change is consistent with Section 

6(b)(5) 12 of the Act, which requires that 

an exchange’s rules be 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.

Simultaneous with the filing of this 

proposal, the Commission received a 

request for exemptive relief submitted 

by the Exchange that would allow the 

ArcaEx, ArcaEx ETP holders, and 

vendors that disseminate ArcaEx quote 

information to display and disseminate 

their quotes for securities priced less 

than $1.00 in penny increments without 

a rounding identifier, while ArcaEx ETP 

Holders provide for order entry and 

trading in subpenny increments.13 By 

letter dated September 21, 2004, the 

Division, pursuant to delegated 

authority under Rules 11Ac1–1(e),14

11Ac1–2(g),15 and 11Ac1–4(d) 16 under 

the Act, granted a conditional temporary 

exemption to ArcaEx, ArcaEx ETP 

Holders, and vendors that disseminate 

ArcaEx quote information to permit 

them to display and disseminate their 

quotes for securities priced less than 

$1.00 in rounded, penny increments 

without a rounding identifier.17 The 

exemption expires September 30, 2005. 

The Commission notes that the Nasdaq 

Stock Market, Chicago Stock Exchange, 

Inc., and National Stock Exchange, Inc. 

currently trade in subpennies pursuant 

to similar exemptive and no-action 

relief from the Commission. Unlike 

these other exchanges whose subpenny 

trading is not restricted to a particular 

price level, the Commission notes that 

the PCX, by this proposed rule change, 

is seeking to allow subpenny trading on 

ArcaEx only in securities priced less 

than $1.00, which the Exchange has 

represented is fewer than one percent of 

all securities traded on ArcaEx. The 

Commission also notes that, as part of 

the proposed rule change, the Exchange 

is amending its rule relating to trading 

ahead of customer orders to require 

ArcaEx ETP Holders to improve on their 

customers’ subpenny quotes by a full 

penny in order to trade of such 

customer orders. The Commission 

believes that the proposed rule change 

should allow for additional liquidity at 

the less than $1.00 price level, while 

providing protection to customer limit 

orders in the subpenny trading 

environment by helping to ensure that 

such orders will continue to have access 

to market liquidity ahead of ArcaEx ETP 

Holders’ orders in appropriate 

circumstances.18

Accordingly, the Commission finds 

good cause, pursuant to Section 

19(b)(2) 19 of the Act, for approving the 

proposed rule change, as amended, on 

a pilot basis through September 30, 

2005, prior to the thirtieth day after the 

58572 Federal Register / Vol. 69, No. 189 / Thursday, September 30, 2004 / Notices 

20 Id.

21 17 CFR 200.30–3(a)(12).

date of publication of notice thereof in 

the Federal Register.

V. Conclusion 

It is therefore ordered, pursuant to 

section 19(b)(2) of the Act,20 that the 

proposed rule change (SR–PCX–2003–

71), as amended, is hereby approved on 

an accelerated basis until September 30, 

2005.

For the Commission, by the Division of 

Market Regulation, pursuant to delegated 

authority.21

Margaret H. McFarland, 

Deputy Secretary.

Exhibit A 

Proposed new text is italicized.

Rule 7—Equities Trading 

Trading Differentials 

Trading Ahead of Customer Limit 

Orders 

Rule 6.16(a)–(d)—No change.

Commentary:

.01 For all securities that are priced 

less than $1.00 that are traded pursuant 

to the pilot program under Commentary 

.05 of PCXE Rule 7.6(a) with a minimum 

price variation of $0.001, the minimum 

amount of price improvement necessary 

to execute an incoming marketable 

order on a proprietary basis by an ETP 

Holder when holding an unexecuted 

customer limit order otherwise due an 

execution pursuant to Rule 6.16(a) in 

that same security is $0.01.

Rule 7.6(a)—No change.

Commentary:

.01–.04—No change. 

.05 The minimum price variation 

(‘‘MPV’’) for quoting and entry of orders 

in equity securities traded on the 

Archipelago Exchange is $0.01, with the 

exception of securities that are priced 

less than $1.00 in which case, on a pilot 

basis through September 30, 2005, the 

MPV for order entry will be $0.001.

.06–.07—No change. 

[FR Doc. 04–21883 Filed 9–29–04; 8:45 am] 

BILLING CODE 8010–01–P

SMALL BUSINESS ADMINISTRATION

[Declaration of Disaster #3624] 

State of Alabama 

As a result of the President’s major 

disaster declaration on September 15, 

2004, I find that Baldwin, Butler, Clarke, 

Coffee, Conecuh, Covington, Crenshaw, 

Escambia, Geneva, Mobile, Monroe and 

Washington Counties in the State of 

Alabama constitute a disaster area due 

to damages caused by Hurricane Ivan 

occurring on September 13, 2004, and 

continuing. Applications for loans for 

physical damage as a result of this 

disaster may be filed until the close of 

business on November 15, 2004, and for 

economic injury until the close of 

business on June 15, 2005, at the 

address listed below or other locally 

announced locations: U.S. Small 

Business Administration, Disaster Area 

2 Office, One Baltimore Place, Suite 

300, Atlanta, GA 30308. 

In addition, applications for economic 

injury loans from small businesses 

located in the following contiguous 

counties may be filed until the specified 

date at the above location: Choctaw, 

Dale, Houston, Lowndes, Marengo, 

Montgomery, Pike and Wilcox in the 

State of Alabama; Escambia, Holmes, 

Jackson, Okaloosa, Santa Rosa and 

Walton Counties in the State of Florida; 

and George, Greene, Jackson and Wayne 

Counties in the State of Mississippi. 

The interest rates are:

Percent 

For Physical Damage:

Homeowners with credit available elsewhere ........................ 6.375 

Homeowners without credit available elsewhere ........................ 3.187 

Businesses with credit available 

elsewhere ................................ 5.800 

Businesses and non-profit organizations without credit available elsewhere ........................ 2.900 

Others (including non-profit organizations) with credit available 

elsewhere ................................ 4.875 

For Economic Injury:

Businesses and small agricultural cooperatives without 

credit available elsewhere ....... 2.900 

The number assigned to this disaster 

for physical damage is 362408. For 

economic injury the number is 9ZW300 

for Alabama; 9ZW400 for Florida; and 

9ZW500 for Mississippi.

(Catalog of Federal Domestic Assistance 

Program Nos. 59002 and 59008).

Dated: September 20, 2004. 

Herbert L. Mitchell, 

Associate Administrator for Disaster 

Assistance.

[FR Doc. 04–21898 Filed 9–29–04; 8:45 am] 

BILLING CODE 8025–01–P

SMALL BUSINESS ADMINISTRATION

Notice Seeking Exemption Under 

Section 312 of the Small Business 

Investment Act, Conflicts of Interest 

Notice is hereby given that Horizon 

Ventures Fund II, L.P. (‘‘Licensee’’), 4 

Main Street, Suite 50, Los Altos, CA 

94022, an SBIC Licensee under the 

Small Business Investment Act of 1958, 

as amended (‘‘the Act’’), in connection 

with the financing of a small concern, 

has sought an exemption under section 

312 of the Act and § 107.730, Financings 

which Constitute Conflicts of Interest, of 

the Small Business Administration 

(‘‘SBA’’) rules and regulations (13 CFR 

107.730 (2004)). Horizon Ventures Fund 

II, L.P. proposes to provide equity 

financing to Invivodata, Inc., 5815 

Scotts Valley Drive, Suite 150, Scotts 

Valley, CA 95066. The financing is 

contemplated for growth, 

modernization, working capital and 

business expansion. 

The financing is brought within the 

purview of Section 107.730(a)(1) of the 

Regulations because Horizon Ventures 

Fund I, L.P. and Horizon Ventures 

Advisors Fund I, L.P., Associates of the 

Licensee currently own greater than 10 

percent of Invivodata, Inc., and 

therefore Invivodata, Inc. is considered 

an Associate of the Licensee as defined 

in § 107.50 of the Regulations. 

Notice is hereby given that any 

interested person may submit written 

comments on the transaction to the 

Associate Administrator for Investment, 

U.S. Small Business Administration, 

409 Third Street, SW., Washington, DC 

20416.

Dated: September 23, 2004. 

Jeffrey D. Pierson, 

Associate Administrator for Investment.

[FR Doc. 04–21997 Filed 9–29–04; 8:45 am] 

BILLING CODE 8025–01–P

SMALL BUSINESS ADMINISTRATION

Revocation of License of Small 

Business Investment Company 

Pursuant to the authority granted to 

the United States Small Business 

Administration by the Final Order of the 

United States District Court for the 

District of Massachusetts, dated July 21, 

2004, in Case No. oocv10652 RGS, the 

United States Small Business 

Administration hereby revokes the 

license of The Argonauts MESBIC 

Corporation, a Massachusetts 

corporation, to function as a small 

business investment company under the 

Small Business Investment Company 

License No. 01/01–5343 issued to The 

Argonauts MESBIC Corporation on June 

17, 1988 and said license is hereby 

declared null and void as of September 

21, 2004.

Dated: September 24, 2004.