6348 Federal Register / Vol. 69, No. 27 / Tuesday, February 10, 2004 / Notices 

25See Company Guide section 107A.

26The ABS Securities will be registered under 

section 12 of the Act. 27See supra note 12.

28 15 U.S.C. 78f(b)(5) and 78s(b)(2).

29 15 U.S.C. 78o–3(b)(6) and 78s(b)(2).

30 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

securities will mature on the latest 

maturity date of the Underlying 

Securities. However, due to the passthrough nature of the ABS Securities, 

the level of risk involved in the 

purchase or sale of the ABS Securities 

is similar to the risk involved in the 

purchase or sale of traditional common 

stock.

The Commission notes that the 

Exchange’s rules and procedures that 

address the special concerns attendant 

to the trading of hybrid securities will 

be applicable to the ABS Securities. In 

particular, by imposing the hybrid 

listing standards, suitability, disclosure, 

and compliance requirements noted 

above, the Commission believes the 

Exchange has addressed adequately the 

potential problems that could arise from 

the hybrid nature of the ABS Securities. 

Moreover, the Commission notes that 

the Exchange will distribute a circular 

to its membership calling attention to 

the specific risks associated with the 

ABS Securities. 

The Commission notes that the ABS 

Securities are dependent upon the 

individual credit of the issuers of the 

Underlying Securities. To some extent 

this credit risk is minimized by the 

Exchange’s listing standards in section 

107A of the Company Guide which 

provide that only issuers satisfying asset 

and equity requirements may issue 

securities such as the ABS Securities. In 

addition, the Exchange’s ‘‘Other 

Securities’’ listing standards further 

provide that there is no minimum 

holder requirement if the securities are 

traded in thousand dollar 

denominations.25 The Commission 

notes that the Exchange has represented 

that the ABS Securities will be listed in 

$1000 denominations with its existing 

debt floor trading rules applying to the 

trading. In any event, financial 

information regarding the issuers of the 

Underlying Securities will be publicly 

available.26

Due to the pass-through and passive 

nature of the ABS Securities, the 

Commission does not object to the 

Exchange’s reliance on the assets and 

stockholder equity of the Underlying 

Securities rather than the Trust to meet 

the requirement in section 107A of the 

Company Guide. The Commission notes 

that the distribution and principal 

amount/aggregate market value 

requirements found in sections 107A(b) 

and (c), respectively, will otherwise be 

met by the Trust as issuer of the ABS 

Securities. Thus, the ABS Securities 

will conform to the initial listing 

guidelines under section 107A and 

continued listing guidelines under 

sections 1001–1003 of the Company 

Guide, except for the assets and 

stockholder equity characteristics of the 

Trust. At the time of issuance, the 

Commission also notes that the ABS 

Securities will receive an investment 

grade rating from an NRSRO. 

The Commission also believes that the 

listing and trading of the ABS Securities 

should not unduly impact the market 

for the Underlying Securities or raise 

manipulative concerns. As discussed 

more fully above, the Exchange 

represents that, in addition to requiring 

the issuers of the Underlying Securities 

meet the Exchange’s section 107A 

listing requirements (in the case of 

Treasury securities, the Exchange will 

rely on the fact that the issuer is the 

United States Government rather than 

the asset and stockholder tests found in 

section 107A), the Underlying Securities 

will be required to meet or exceed the 

Exchange’s Bond and Debenture Listing 

Standards pursuant to section 104 of the 

Amex’s Company Guide, which among 

other things, requires that underlying 

debt instrument receive at least an 

investment grade rating of ‘‘B’’ or 

equivalent from an NRSRO. 

Furthermore, at least 75% of the basket 

is required to contain Underlying 

Securities from issuances of $100 

million or more. The Amex also 

represents that the basket of Underlying 

Securities will not be managed and will 

remain static over the term of the ABS 

securities. In addition, the Amex’s 

surveillance procedures will serve to 

deter as well as detect any potential 

manipulation. 

The Commission notes that the 

investors may obtain price information 

on the Underlying Securities through 

market venders such Bloomberg, or 

though Web sites such as http://

www.investinginbonds.com (for 

Underlying Corporate Bonds) and

http://publicdebt.treas.gov and http://

www.govpx.com (for Treasury Securities 

and GSE Securities, respectively). 

The Commission finds good cause for 

approving the proposed rule change 

prior to the thirtieth day after the date 

of publication of notice thereof in the 

Federal Register. The Amex has 

requested accelerated approval because 

these products are virtually identical to 

Select Notes Trust currently listed and 

traded on the Amex.27 The Commission 

believes that the ABS Securities will 

provide investors with an additional 

investment choice and that accelerated 

approval of the proposal will allow 

investors to begin trading the ABS 

Securities promptly. Additionally, the 

ABS Securities will be listed pursuant 

to Amex’s existing hybrid security 

listing standards as described above. 

Based on the above, the Commission 

believes that there is good cause, 

consistent with sections 6(b)(5) and 

19(b)(2) of the Act 28 to approve the 

proposal on an accelerated basis.

V. Conclusion 

It is therefore ordered, pursuant to 

section 19(b)(2) of the Act,29 that the 

proposed rule change (SR–Amex–2003–

99) is hereby approved on an 

accelerated basis.

For the Commission, by the Division of 

Market Regulation, pursuant to delegated 

authority.30

Margaret H. McFarland, 

Deputy Secretary.

[FR Doc. 04–2826 Filed 2–9–04; 8:45 am] 

BILLING CODE 8010–01–P

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–49180; File No. SR–BSE–

2004–02] 

Self-Regulatory Organizations; Notice 

of Filing and Immediate Effectiveness 

of Proposed Rule Change by the 

Boston Stock Exchange, Inc. Relating 

to Complex Orders 

February 3, 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 January 

28, 2004 the Boston Stock Exchange, 

Inc. (‘‘BSE’’ 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 prepared by the Exchange. 

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 its 

rule regarding Complex Orders. The text 

of the proposed rule change is available 

at the Exchange and at the Commission. 

Federal Register / Vol. 69, No. 27 / Tuesday, February 10, 2004 / Notices 6349

3 15 U.S.C. 78f(b).

4 15 U.S.C. 78f(b)(5).

5 15 U.S.C. 78s(b)(3)(A).

6 17 CFR 240.19b–4(f)(6).

7 17 CFR 240.19b–4(f)(6)(iii).

8For purposes only of accelerating the 30-day 

operative period for this proposal, the commission 

has considered the proposed rule’s impact on 

efficiency, competition and capital formation. 15 

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

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 

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 IV below. The 

Exchange 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 Chapter V, Section 

27 of the Rules of the Boston Options 

Exchange (the ‘‘BOX Rules’’) relating to 

the trading of Complex Orders. The 

Exchange is proposing to amend Section 

27 by adding new paragraph (c) 

specifying the process by which Boston 

Options Exchange (‘‘BOX’’) Options 

Participants (‘‘BOX Participants’’) must 

notify BOX of a proposed Complex 

Order strategy. The Exchange is also 

setting forth, in the same paragraph, that 

an advisory message regarding a 

Complex Order strategy would be sent 

by BOX to all BOX Participants at its 

creation and prior to the start of its 

trading. 

Each Complex Order strategy would 

be treated as a separate trading 

instrument on the Complex Order Book. 

During the trading day BOX would 

maintain a listing, accessible to all BOX 

Participants through the BOX system, of 

all Complex Order strategies available 

on BOX. This list would not show any 

orders or prices. A BOX Participant who 

wishes to propose trading in a Complex 

Order strategy, that is not already listed 

as available on the BOX Complex Order 

Book, must either send an electronic 

Complex Order strategy request to BOX 

through the BOX trading system or 

make a telephone request with the BOX 

Market Operations Center. Along with 

this request, the BOX Participant may 

also place a Complex Order in the 

proposed strategy. BOX would check 

each strategy request to validate that the 

option components of the strategy are 

listed on BOX and that the Complex 

Order type is available on BOX. 

After validation, an ‘‘advisory’’

message regarding the Complex Order 

strategy would be sent by BOX to all 

BOX Participants, stating the terms of 

the strategy created and the time when 

Complex Orders on the new strategy 

will begin to trade. Trading would not 

begin until at least five minutes has 

elapsed from the time the advisory 

message was sent from BOX to all BOX 

Participants. Any Complex Orders on 

the newly-created strategy that are 

received prior to the start of trading 

would be placed in the Complex Order 

Book. Complex Orders on the Complex 

Order Book are not disseminated to the 

Options Price Reporting Authority 

(‘‘OPRA’’), but are separately 

disseminated by BOX through a 

broadcast to all BOX Participants, 

showing the five best limits for each 

strategy. Trading in the newly-created 

strategy would commence at the time 

announced in the advisory message. 

2. Statutory Basis 

The Exchange believes that the 

proposed rule change is consistent with 

the requirements of Section 6(b) of the 

Act,3 in general, and Section 6(b)(5) of 

the Act,4 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 

protect investors and the public interest 

by granting the Exchange greater 

authority to regulate the trading of 

Complex Orders.

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.

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 

The foregoing rule change has become 

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

of the Act 5 and Rule 19b-4(f)(6) 6

thereunder because it does not: (i) 

Significantly affect the protection of 

investors or the public interest; (ii) 

impose any significant burden on 

competition; and (iii) become operative 

for 30 days from the date on which it 

was filed, or such shorter time as the 

Commission may designate; and the 

Exchange has given the Commission 

written notice of its intention to file the 

proposed rule change. 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.

Under Rule 19b–4(f)(6)(iii) of the 

Act,7 the proposed rule change does not 

become operative for 30 days after the 

date of filing, or such shorter time as the 

Commission may designate if consistent 

with the protection of investors and the 

public interest. The Exchange has 

requested that the Commission 

accelerate the thirty-day operative date 

of the proposal and waive the 

requirement that the Exchange submit 

the pre-filing period written notice of its 

intent to file the proposed rule change 

at least five business days prior to the 

filing date, so that the Exchange may 

remain competitive with other 

exchanges that currently have similar 

rules in effect and may begin the trading 

of Complex Orders in options on the 

Exchange. The Commission, consistent 

with the protection of investors and the 

public interest, has determined to waive 

the requirements that notice be filed at 

least five business days prior to the 

filing and to accelerate the 30-day 

operative date to February 3, 2004,8 and, 

therefore, the proposal is effective and 

operative on that date.

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–BSE–2004–02. 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, comments 

should be sent in hardcopy or by e-mail 

6350 Federal Register / Vol. 69, No. 27 / Tuesday, February 10, 2004 / Notices 

9 17 CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1).

2 17 CFR 240.19b–4. 3File No. SR–BSE–2004–03 replaces and 

supersedes File No. SR-BSE–2003–24. See letter 

from John Boese, Vice President, Legal and 

Compliance, BSE, dated January 23, 2004.

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

5 17 CFR 240.19b–4(f)(6). 6See BOX Rules Chapter V, Section 18.

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 filings will also be 

available for inspection and copying at 

the principal office of the Exchange. All 

submissions should refer to File No. 

SR–BSE–2004–02 and should be 

submitted by March 2, 2004.

For the Commission, by the Division of 

Market Regulation, pursuant to delegated 

authority.9

Margaret H. McFarland, 

Deputy Secretary.

[FR Doc. 04–2760 Filed 2–9–04; 8:45 am] 

BILLING CODE 8010–01–P

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–49171; File No. SR–BSE–

2004–03] 

Self-Regulatory Organizations; Notice 

of Filing and Immediate Effectiveness 

of Proposed Rule Change by the 

Boston Stock Exchange, Inc. Relating 

to Its Boston Options Exchange 

Trading Rules 

February 2, 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 January 

29, 2004, the Boston Stock Exchange, 

Inc. (‘‘BSE’’ 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 prepared by the Exchange.3

The BSE has submitted the proposed 

rule change under Section 19(b)(3)(A) of 

the Act 4 and Rule 19b–4(f)(6) 

thereunder,5 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.

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The BSE proposes to add new 

paragraph (f), relating to anticipatory 

hedging, to Chapter III, ‘‘Business 

Conduct,’’ Section 4, ‘‘Prevention of the 

Misuse of Material Nonpublic 

Information,’’ of the Boston Options 

Exchange trading rules (‘‘BOX Rules’’). 

Proposed new language is italicized.

* * * * *

Chapter III Business Conduct 

Sec. 4 Prevention of the Misuse of 

Material NonPublic Information 

(a)–(e) no change 

(f) It may be considered conduct 

inconsistent with just and equitable 

principles of trade for any Participant or 

person associated with a Participant 

who has knowledge of all material terms 

and conditions of:

(i) an order and a solicited order,

(ii) an order being facilitated or 

submitted to the Price Improvement 

Period, or

(iii) orders being crossed;

the execution of which are imminent, to 

enter, based on such knowledge, an 

order to buy or sell an option for the 

same underlying security as any option 

that is the subject of the order, or an 

order to buy or sell the security 

underlying such class, or an order to 

buy or sell any related instrument until 

(a) the terms and conditions of the order 

and any changes in the terms and 

conditions of the order of which the 

Participant or person associated with 

the Participant has knowledge are 

disclosed to the trading crowd, or (b) the 

trade can no longer reasonably be 

considered imminent in view of the 

passage of time since the order was 

received. The terms of an order are 

‘‘disclosed’’ to the trading crowd on 

BOX when the order is entered into the 

BOX Book or the Price Improvement 

Period, as defined in Chapter V, Section 

18 of these Rules. For purposes of this 

Paragraph (f), an order to buy or sell a 

‘‘related instrument’’ means, in 

reference to an index option, an order 

to buy or sell securities comprising 10% 

or more of the component securities in 

the index or an order to buy or sell a 

futures contract on an economically 

equivalent index.

* * * * *

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 

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 IV below. The 

Exchange 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 add new paragraph (f), 

relating to anticipatory hedging, to 

Chapter III, ‘‘Business Conduct,’’

Section 4, ‘‘Prevention of the Misuse of 

Material Nonpublic Information,’’ of the 

BOX Rules. Currently, Chapter III, 

Section 4 of the BOX Rules contains 

policies and procedural requirements, 

as well as definitional language, 

regarding the obligations of Boston 

Options Exchange participants (‘‘BOX 

Participants’’) to prevent the misuse of 

material nonpublic information. To 

remain consistent with similar rules of 

other options exchanges, the BSE is 

proposing to adopt new paragraph (f) 

regarding anticipatory hedging. The rest 

of Chapter III, Section 4, will remain 

unchanged. 

Paragraph (f) would expressly 

prohibit any BOX Participant or person 

associated with a BOX Participant who 

has knowledge of the material terms and 

conditions of a solicited order, an order 

being facilitated or submitted to the 

Price Improvement Period (‘‘PIP’’),6 or 

orders being crossed, the execution of 

which are imminent, from entering, 

based on such knowledge, an order to 

buy or sell an option for the same 

underlying security; an order to buy or 

sell the security underlying such class; 

or an order to buy or sell any related 

instrument. The prohibition would 

remain in effect until the terms and 

conditions of such solicited, facilitated, 

PIP or crossed order are disclosed to the 

trading crowd, or until the trade can no 

longer reasonably be considered 

imminent in view of the passage of time 

since the order was received.

To allow BOX Participants to know 

what constitutes a ‘‘related instrument’’