Federal Register / Vol. 69, No. 189 / Thursday, September 30, 2004 / Notices 58563

7 15 U.S.C. 78k(a).

8See Chapter V, Section 18(e) of the BOX Rules 

(definition of Primary Improvement Order).

9See CBOE Rule 43.12A (Crossing Trades).

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

11 15 U.S.C. 78f(b)(5).

12 15 U.S.C. 78s(b)(3)(A).

13 17 CFR 240.19b–4(f)(6).

14For purposes of calculating the sixty-day 

abrogation period, the Commission considers the 

abrogation period to have begun on September 10, 

2004, the date BSE submitted Amendment No. 1. 

See 15 U.S.C. 78s(b)(3)(C). 15 17 CFR 200.30–3(a)(12).

Exchange has prepared summaries, set 

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

the most significant parts of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

When the Exchange drafted the rules 

that would govern the allocation of 

customer orders on BOX with respect to 

the PIP, it took care to comply with the 

requirements of Section 11(a) of the 

Act 7 and provide priority to public 

customer and non-member orders as 

well as adhere to a policy of not 

allowing a trade allocation guarantee of 

more than 40% of a facilitated order to 

the facilitator of that customer order. At 

that time, the Exchange believed it was 

necessary to allocate any guaranteed 

portion of the Primary Improvement 

Order 8 based on what remained of the 

customer order at a given price level 

after all public customer and nonmember orders had been executed, and 

drafted the BOX rules accordingly. It 

has since come to the attention of the 

Exchange that the rules of at least one 

other options exchange provide for the 

allocation of a guaranteed portion of 

comparable facilitated orders based on 

the original size of such facilitated 

orders, and not on the amount that 

remains at a price level after orders with 

priority have been executed.9 Members 

of the Exchange who participate on BOX 

requested that, in this regard, the BOX 

rules be modified to match those of 

other options exchanges.

2. Statutory Basis 

The Exchange believes that the 

proposed rule change is consistent with 

Section 6(b) of the Act,10 in general, and 

Section 6(b)(5) of the Act,11 in 

particular, in that it is designed to 

promote just and equitable principles of 

trade, and 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 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 (1) does not significantly affect 

the protection of investors or the public 

interest; (2) does not impose any 

significant burden on competition; and 

(3) by its terms, does not become 

operative until 30 days from the date on 

which it was filed, or such shorter time 

as the Commission may designate if 

consistent with the protection of 

investors and the public interest, and 

the Exchange provided the Commission 

with written notice of its intent to file 

the proposed rule change at least five 

business days prior to the date of filing 

of the proposed rule change, it has 

become effective pursuant to Section 

19(b)(3)(A) of the Act 12 and Rule 19b–

4(f)(6) thereunder.13 At any time within 

60 days of the filing of this proposed 

rule change,14 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 rulecomments@sec.gov. Please include File 

Number SR–BSE–2004–36 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–BSE–2004–36. 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 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–

2004–36 and should be submitted on or 

before October 21, 2004.

For the Commission, by the Division of 

Market Regulation, pursuant to delegated 

authority.15

Margaret H. McFarland, 

Deputy Secretary.

[FR Doc. E4–2416 Filed 9–29–04; 8:45 am] 

BILLING CODE 8010–01–P

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–50433; File No. SR–ISE–

2004–18] 

Self-Regulatory Organizations; 

International Securities Exchange, Inc.; 

Order Approving Proposed Rule 

Change and Amendments No. 1 and 2 

Thereto To Amend the Market Maker 

Information Barrier Requirements 

Under ISE Rule 810 

September 23, 2004. 

On May 26, 2004, the International 

Securities Exchange, Inc. (‘‘ISE’’) filed 

with the Securities and Exchange 

Commission (‘‘Commission’’), pursuant 

58564 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.

3 ISE Rule 100(a)(32) defines ‘‘Public Customer’’

as ‘‘a person that is not a broker-dealer in 

securities.’’ ISE Rule 100(a)(33) defines ‘‘Public 

Customer Order’’ as ‘‘an order for the account of a 

Public Customer.’’

4On August 6, 2004, the ISE filed a Form 19b4, which replaced the original filing in its entirety 

(‘‘Amendment No. 1’’).

5On August 13, 2004, the ISE filed a Form 19b4, which replaced the original filing and 

Amendment No. 1 in their entirety (‘‘Amendment 

No. 2’’).

6See Securities Exchange Act Release No. 50197 

(August 13, 2004), 69 FR 51735.

7 In approving the proposed rule change, the 

Commission has considered the proposed rule’s 

impact on efficiency, competition, and capital 

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

8 15 U.S.C. 78f(b)(5).

9The Commission notes that this section of the 

proposal is similar to Pacific Exchange, Inc. Rule 

7.26. See Securities Exchange Act Release No. 

49264 (February 17, 2004), 69 FR 8510 (February 

24, 2004)(SR–PCX–2003–49).

10 15 U.S.C. 78s(b)(2).

11 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

3 17 CFR 240.19b–4(f)(6).

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 amend ISE Rule 810 by 

replacing the term ‘‘Chinese Wall’’ with 

the term, ‘‘Information Barrier;’’ and 

eliminating the requirement that a 

market maker maintain an Information 

Barrier in the limited circumstances 

where the sole extent to which such 

market maker or affiliated broker-dealer 

handles listed options orders as agent 

on behalf of Public Customers 3 or 

broker-dealers consists of handling such 

orders pursuant to an exchange 

sponsored Directed Order Program. The 

proposal would also exempt a market 

maker from the Information Barrier 

requirements of ISE Rule 810 to the 

extent that the market maker or 

affiliated broker-dealer engages solely in 

proprietary trading and does not, under 

any circumstances, maintain customer 

accounts or solicit orders or funds from 

or on behalf of Public Customers or 

broker-dealers. The ISE also proposed a 

non-substantive clarification and certain 

non-substantive technical changes to 

ISE Rule 810(a). The ISE amended the 

proposal on August 6, 20044 and August 

13, 2004.5 The proposed rule change, as 

amended, was published for comment 

in the Federal Register on August 20, 

2004.6 The Commission received no 

comments on the proposed rule change, 

as amended. This order approves the 

proposed rule change, as amended.

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.7 In particular, the 

Commission believes that the proposed 

rule change is consistent with Section 

6(b)(5) of the Act,8 which requires, 

among other things, that the ISE’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. 

Specifically, the Commission believes 

that the ISE’s proposal to provide two 

additional exceptions from the 

Information Barrier requirements of ISE 

Rule 810 is consistent with the Act.

One exception would eliminate the 

requirement that a market maker 

maintain an Information Barrier in the 

limited circumstances where a market 

maker or affiliated broker-dealer engages 

solely in proprietary trading.9 The 

Commission believes it is reasonable to 

remove this requirement, since the 

market maker, or its affiliated brokerdealer, is not engaged in activities that 

would inappropriately benefit other 

business activities within the firm. 

However, the Commission notes that if 

in the future these market makers, or 

their affiliated broker-dealers, engage in 

other business activities, such as 

investment banking or market making in 

the stocks underlying the options in 

which it makes markets, or maintain 

customer accounts, or solicit or accept 

Public Customer orders, the 

Commission expects that the ISE will 

require compliance with the 

Information Barrier requirements of ISE 

Rule 810.

The second exception from ISE Rule 

810 would not require an Information 

Barrier between an ISE Member’s ISE 

market making operations and options 

market making operations on other 

exchanges where that Member handles 

orders as agent only for the accounts of 

affiliated entities or solely in an eligible 

Directed Order Program. Eligible 

Directed Order Programs must contain 

rules designed to ensure that market 

makers do not gain an advantage in 

handling Directed Orders because the 

information they possess may be used 

inappropriately for the benefit of the 

market maker receiving the Directed 

Order. For example, a market maker that 

chooses to accept Directed Orders must 

accept all orders directed to it, may not 

accept orders directly, other than 

through an exchange system, and the 

market maker may not handle such 

orders on a disclosed or discretionary 

basis. Therefore, the Commission 

believes that it is reasonable to not 

require an Information Barrier in such 

cases, since the rules of such Directed 

Order Programs should provide 

safeguards that should limit the misuse 

of information with regard to the terms 

of orders that affiliates of ISE members 

are handling as agent. 

It is therefore ordered, pursuant to 

section 19(b)(2) of the Act,10 that the 

proposed rule change (SR–ISE–2004–

18), as amended, is approved.

For the Commission, by the Division of 

Market Regulation, pursuant to delegated 

authority.11

Margaret H. McFarland, 

Deputy Secretary.

[FR Doc. 04–21885 Filed 9–29–04; 8:45 am] 

BILLING CODE 8010–01–P

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–50434; File No. SR–NASD–

2004–134] 

Self-Regulatory Organizations; Notice 

of Filing and Immediate Effectiveness 

of Proposed Rule Change by the 

National Association of Securities 

Dealers, Inc., Relating to Multiple 

Market Participant Identifiers 

September 23, 2004. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

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

notice is hereby given that on 

September 1, 2004, the National 

Association of Securities Dealers, Inc. 

(‘‘NASD’’), through its subsidiary, The 

Nasdaq Stock Market, Inc. (‘‘Nasdaq’’), 

filed with the Securities and Exchange 

Commission (‘‘Commission’’) the 

proposed rule change as described in 

Items I, II, and III below, which Items 

have been prepared by Nasdaq. The 

proposed rule change has been filed by 

Nasdaq as a ‘‘non-controversial’’ rule 

change pursuant to Rule 19b–4(f)(6) 

under the Act.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 

Nasdaq proposes to continue two 

pilot programs that provide market 

participants who execute transactions in 

Nasdaq and exchange-listed securities 

through its systems the ability to display 

trading interests using up to 10 

individual Market Participant Identifiers 

(‘‘MPIDs’’). The text of the proposed 

rule change is below. Proposed new