Federal Register / Vol. 69, No. 223 / Friday, November 19, 2004 / Notices 67767

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

2Securities Exchange Act Release No. 50457 

(September 27, 2004), 69 FR 59283.

3Each consequence remains effective for a period 

beginning on the date on which the member fell 

below such level and continuing until the ninetieth 

calendar day after the date on which such member 

returned to compliance with the applicable 

standard. If the consequence consists of a 

reclassification and the member does not return to 

compliance with its original minimum financial 

requirements within 90 calendar days of falling out 

of compliance, then the reclassification becomes 

permanent.

4Treating a bank or other non-Inter-Dealer Broker 

Category 1 Member as a Category 2 non-Inter-Dealer 

Broker Member for clearing fund purposes results 

in a higher clearing fund requirement for such a 

member because higher margin rates are imposed 

on non-Inter-Dealer Broker Category 2 Dealer 

Members than are imposed on banks and non-InterDealer Broker Category 1 Members.

FOR FURTHER INFORMATION CONTACT: To 

request more information or to obtain a 

copy of the information collection 

justification, forms, and/or supporting 

material, please call the RRB Clearance 

Officer at (312) 751–3363 or send an email request to 

Charles.Mierzwa@RRB.GOV. Comments 

regarding the information collection 

should be addressed to Ronald J. 

Hodapp, Railroad Retirement Board, 844 

North Rush Street, Chicago, Illinois 

60611–2092 or send an e-mail to 

Ronald.Hodapp@RRB.GOV. Written 

comments should be received within 60 

days of this notice.

Charles Mierzwa, 

Clearance Officer.

[FR Doc. 04–25719 Filed 11–18–04; 8:45 am] 

BILLING CODE 7905–01–P

SECURITIES AND EXCHANGE 

COMMISSION 

Sunshine Act Meeting 

Notice is hereby given, pursuant to 

the provisions of the Government in the 

Sunshine Act, Pubic Law 94–409, that 

the Securities and Exchange 

Commission will hold the following 

meeting during the week of November 

22, 2004: 

A Closed Meeting will be held on 

Tuesday, November 23, 2004 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), (6), (7), (9)(B), and 

(10) and 17 CFR 200.402(a)(3), (5), (7), 

9(ii) and (10), permit consideration of 

the scheduled matters at the Closed 

Meeting. 

Commissioner Campos, 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 Tuesday, 

November 23, 2004 will be:

Formal orders of investigations; 

Institution and settlement of 

injunctive actions; 

Institution and settlement of 

administrative proceedings of an 

enforcement nature; and 

Adjudicatory matters. 

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) 

942–7070.

Dated: November 16, 2004. 

Jonathan G. Katz, 

Secretary.

[FR Doc. 04–25797 Filed 11–17–04; 11:36 

am] 

BILLING CODE 8010–01–P

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–50659; File No. SR–FICC–

2004–11] 

Self-Regulatory Organizations; Fixed 

Income Clearing Corporation; Order 

Granting Approval of a Proposed Rule 

Change To Amend the Rules of the 

Government Securities Division To 

Modify the Penalty Assessment 

Process for Violations of Minimum 

Financial Standards and for Failures of 

Members To Submit Requisite 

Financial Reports on a Timely Basis 

November 15, 2004. 

I. Introduction 

On May 17, 2004, the Fixed Income 

Clearing Corporation (‘‘FICC’’) filed 

with the Securities and Exchange 

Commission (‘‘Commission’’) and on 

August 4, 2004, amended proposed rule 

change File No. SR–FICC–2004–11 

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

Securities Exchange Act of 1934 

(‘‘Act’’).1 Notice of the proposed rule 

change was published in the Federal 

Register on October 4, 2004.2 No 

comment letters were received. For the 

reasons discussed below, the 

Commission is now granting approval of 

the proposed rule change.

II. Description 

The proposed rule change amends the 

rules of its Government Securities 

Division (‘‘GSD’’) by modifying the 

penalty assessment process for 

violations of minimum financial 

standards and for failure to submit 

requisite financial reports on a timely 

basis. 

(A) Violations of Minimum Financial 

Standards 

The rules of the GSD require netting 

members and clearing members to meet 

and maintain certain minimum 

financial standards at all times. While 

the majority of GSD members 

consistently satisfy their minimum 

financial requirements, occasionally 

members do breach these requirements 

and create undue risk for FICC and its 

GSD members. FICC has decided that a 

more uniform system of enforcing 

minimum financial requirements within 

the GSD would enhance the ability of 

FICC to minimize risk to itself and its 

members in a fair and effective manner. 

Currently, the GSD Rules provide 

clearing fund consequences for the 

various categories of netting members 

that fall out of compliance with 

minimum financial requirements as 

follows:

Netting membership category Current clearing fund consequence for falling below minimum financial standard 3

Bank Member ...................................................... Treated as a Category 2 Dealer.4

Category 1 Dealer Member ................................. Treated as a Category 2 Dealer. 

Category 2 Dealer Netting Member .................... Impose Required Fund Deposit equal to 150 percent of the normal calculation of Required 

Fund Deposit. 

Category 1 Futures Commission Merchant 

Member.

Treated as a Category 2 Futures Commission Merchant. 

Category 2 Futures Commission Merchant 

Member.

Impose Required Fund Deposit equal to 150 percent of the normal calculation of Required 

Fund Deposit. 

67768 Federal Register / Vol. 69, No. 223 / Friday, November 19, 2004 / Notices 

5The proposed rule change only applies to GSD 

members that have minimum financial 

requirements (i.e., GSD netting members).

6 ‘‘Unadjusted’’ means the standard calculation 

before any additional assessments.

7 If GSD Category 1 Dealer Netting Members, GSD 

Category 1 Futures Commission Merchant Netting 

Members and GSD Category 2 Inter-Dealer Broker 

Netting Members do not meet the membership 

qualifications applicable to the new category of 

netting member, then they will be subject to the 

increased margin premium specified above.

8Securities Exchange Act Release No. 49947 

(June 30, 2004), 69 FR 41316 [File No. SR–FICC–

2003–01].

9 15 U.S.C. 78q–1(b)(3)(F).

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.

3See letter from Michael J. Simon, Senior Vice 

President and General Counsel, ISE, to Nancy 

Sanow, Assistant Director, Division of Market 

Regulation (‘‘Division’’), Commission, dated 

November 8, 2004 (‘‘Amendment No. 1’’). In 

Amendment No. 1, the ISE clarified: (1) That the 

phrase ‘‘customer order’’ should be replaced with 

the phrase ‘‘Public Customer Order,’’ relating to the 

Payment for Order Flow execution fee on the ISE 

schedule of fees; (2) the meaning of ‘‘member 

refresh program;’’ (3) that the Cabinet Lease/

Maintenance and the Additional Servers fees are 

the only computer fees subject to the waiver; and 

(4) the list of fee waivers that have expired and the 

list of delisted products that are proposed to be 

deleted.

4 15 U.S.C. 78s(b)(3)(A).

Netting membership category Current clearing fund consequence for falling below minimum financial standard 3

Category 1 Inter-Dealer Broker Member ............ Treated as a Category 1 Dealer as far as Required Fund Deposit exceeds $5 million. 

Category 2 Inter-Dealer Broker Member ............ Treated as a Category 1 Inter-Dealer Broker, if it qualifies as such, or if it does not so qualify, 

impose Required Fund Deposit equal to 150 percent of the normal calculation of the Required Fund Deposit. 

Government Securities Issuer Member .............. Treated as a Category 2 Dealer. 

Under the proposed rule change, a 

violation of a minimum financial 

requirement by a member 5 of the GSD 

would result in the imposition on such 

member of a margin premium equal to 

the greater of (a) 25 percent of the 

member’s unadjusted 6 clearing fund 

requirement or (b) $1,000,000, to 

continue for ninety calendar days after 

the later to occur of (i) the member’s 

return to compliance with applicable 

minimum financial standards or (ii) 

FICC’s discovery of the applicable 

violation. This increase would not apply 

to Category 1 Dealer Netting Members, 

Category 1 Futures Commission 

Merchant Netting Members or Category 

2 Inter-Dealer Broker Netting Members, 

where such members would continue to 

be reclassified as a different category 

netting member.7 In addition, such 

violation would result in (a) a report of 

the violation to the FICC Membership 

and Risk Management Committee at its 

next regularly scheduled meeting or 

sooner if deemed appropriate by FICC 

and (b) the placement of such member 

on FICC’s ‘‘watch list’’ subjecting it to 

more frequent and thorough monitoring. 

None of these consequences would 

preclude FICC from imposing any other 

margin consequences permitted by 

GSD’s Rules.

(B) Failure To Submit Requisite 

Financial Reports on a Timely Basis 

Certain members that are required to 

provide monthly or quarterly financial 

data to FICC at times have violated 

GSD’s membership requirements by not 

timely providing such financial data. In 

such instances, management contacts 

each offending member and follows up 

with a letter. 

Failure to timely receive required 

information creates risk to FICC and 

hinders FICC’s ability to appropriately 

assess the financial condition of such 

members. To encourage timely 

submission of required financial data, 

FICC has established a mechanism to 

fine delinquent members.8 FICC has 

proposed two additional measures to 

enforce timely filing of financial 

information.

First, FICC will subject delinquent 

members to a more stringent clearing 

fund requirement. Specifically, FICC 

will automatically impose a margin 

premium equal to the greater of (a) 25 

percent of the member’s unadjusted 

clearing fund requirement or (b) 

$1,000,000. The margin premium will 

be applied until the appropriate 

financial data is submitted to FICC and 

is reviewed for compliance purposes. In 

addition, delinquent members will be 

precluded from taking back any excess 

clearing fund collateral to which they 

might ordinarily be entitled. 

Second, members that fail to submit 

requisite financial reports on a timely 

basis will also automatically be placed 

on FICC’s ‘‘watch list’’ and subject to 

more frequent and thorough monitoring.

III. Discussion 

Section 17A(b)(3)(F) of the Act 

requires among other things that the 

rules of a clearing agency be designed to 

assure the safeguarding of securities and 

funds in its custody or control or for 

which it is responsible.9 The 

Commission finds that FICC’s proposed 

rule change is consistent with this 

requirement because by encouraging 

members to maintain their minimum 

financial standards and to submit their 

required financial reports on a timely 

basis, FICC’s ability to maintain a 

financially sound membership base 

should be enhanced.

IV. Conclusion 

On the basis of the foregoing, the 

Commission finds that the proposed 

rule change is consistent with the 

requirements of the Act and in 

particular Section 17A of the Act and 

the rules and regulations thereunder. 

It is therefore ordered, pursuant to 

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

proposed rule change (File No. SR–

FICC–2004–11) be and hereby is 

approved.

For the Commission by the Division of 

Market Regulation, pursuant to delegated 

authority.11

Margaret H. McFarland, 

Deputy Secretary.

[FR Doc. 04–25705 Filed 11–18–04; 8:45 am] 

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–50658; File No. SR–ISE–

2004–32] 

Self-Regulatory Organizations; Notice 

of Filing and Immediate Effectiveness 

of a Proposed Rule Change and 

Amendment No. 1 Thereto by 

International Securities Exchange, Inc., 

Relating to Fee Changes 

November 12, 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 30, 2004, the International 

Securities Exchange, Inc. (the 

‘‘Exchange’’ or the ‘‘ISE’’) filed with the 

Securities and Exchange Commission 

(‘‘SEC’’ or ‘‘Commission’’) the proposed 

rule change as described in Items I and 

II below, which Items have been 

prepared by the Exchange. On 

November 8, 2004, the ISE filed 

Amendment No. 1 to the proposed rule 

change.3 The ISE filed the proposal 

pursuant to section 19(b)(3)(A) under 

the Act,4 which renders the proposal 

effective upon filing the amended