Federal Register / Vol. 69, No. 245 / Wednesday, December 22, 2004 / Notices 76801

10 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

3Amendment No. 1 replaced the original 

proposed rule change in its entirety.

permit unfair discrimination between 

customers, issuers, brokers and dealers.

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 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 

No written comments were solicited 

or received with respect to the proposed 

rule change. 

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 longer 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 such 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, as amended, 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–Amex–2003–90 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–Amex–2003–90. 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 

offices of the Amex. 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–Amex–

2003–90 and should be submitted on or 

before January 12, 2005.

For the Commission by the Division of 

Market Regulation, pursuant to delegated 

authority.10

Margaret H. McFarland, 

Deputy Secretary.

[FR Doc. 04–27969 Filed 12–21–04; 8:45 am] 

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–50871; File No. SR–Amex–

2004–72] 

Self-Regulatory Organizations; Notice 

of Filing of Proposed Rule Change and 

Amendment No. 1 Thereto by the 

American Stock Exchange LLC To 

Amend Its Minor Rule Violation Plan 

December 16, 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 August 

23, 2004, the American Stock Exchange 

LLC (‘‘Amex’’ 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. 

On November 23, 2004, Amex filed 

Amendment No. 1 to the proposed rule 

change.3 The Commission is publishing 

this notice to solicit comments on the 

proposed rule change, as amended, from 

interested persons.

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

Amex proposes to amend Exchange 

Rule 590, its Minor Rule Violation Fine 

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

rule change is available at Amex’s Office 

of the Secretary and at the 

Commission’s Public Reference Room. 

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, as amended, 

and discussed any comments it 

received. 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 the 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange has had the Plan since 

1976 which provides a simplified 

procedure for the resolution of minor 

rule violations. Codified in Amex Rule 

590, the Plan has three distinct parts: 

Part 1 (‘‘General Rule Violations’’) 

covers more substantive matters that, 

nonetheless, are deemed ‘‘minor’’ by 

Amex; Part 2 (‘‘Floor Decorum’’) covers 

floor decorum and operational matters; 

and Part 3 (‘‘Reporting Violations’’) 

covers the late submission of routine 

reports. 

Amex is proposing to amend Part 1 of 

Amex Rule 590 to bring additional rules 

within its coverage. Amex believes that 

inclusion of such matters within Part 1 

of Amex Rule 590 would provide a fair 

means of prompt resolution of minor 

rule violations that do not rise to the 

level of a formal enforcement action. 

Specifically, Amex is proposing to add 

the following violations to Part 1 of 

Amex Rule 590: 

(i) Failure to comply with trade 

reporting requirements for options 

(Amex Rule 992 requires the member 

initiating the options transaction to 

report, or ensure the transaction is 

reported, within 90 seconds of the 

76802 Federal Register / Vol. 69, No. 245 / Wednesday, December 22, 2004 / Notices 

4See Securities Exchange Act Release No. 27542 

(December 15, 1989), 54 FR 53222 (December 27, 

1989) (SR–Amex–89–17).

5See Amex Member Firm Regulation 

Informational Circular 98–0234 which pertains to 

Diamonds, SPDRS, MIDCAP SPDRS, and the 

various WEBS series known as iSHARES.

6See Amex Member Firm Regulation 

Informational Circular 97–597, which states that the 

Form 1–S will be due on the Friday following the 

week included in the report.

7 15 U.S.C. 78f(b).

8 15 U.S.C. 78f(b)(1).

9 15 U.S.C. 78f(b)(6).

10 15 U.S.C. 78f(b)(7).

execution to be disseminated to the 

Options Price Reporting Authority). 

(ii) Expand the current violation 

under the Plan where a specialist 

deactivates quote assist without proper 

authorization to include options (Amex 

Rules 950(g), Commentary .01 and 950–

ANTE(g), Commentary .01). 

(iii) Violation of Exchange rules 

regarding the Options Linkage program 

relating to the responding to, and 

receiving of, Linkage orders (Amex Rule 

941(d) and (e)); avoidance and 

satisfaction of trade-throughs (Amex 

Rule 942(a)); and locked markets (Amex 

Rule 943).

(iv) Violation of the Exchange’s policy 

with regard to affirmative determination 

of the availability for borrowing of 

shares of Amex-listed issues prior to 

effecting short sale transactions 

(Circular 90–25).4

(v) Effecting or causing to be effected 

a transaction outside of business hours 

through the Intermarket Trading System 

(Amex Rules 1, 100, and 233). 

Amex also is proposing to amend and 

relocate Part 2(d)(3) of Amex Rule 590 

(failure to submit option trade 

comparison data to the Exchange by 

specified deadlines) to Part 1(g) of Amex 

Rule 590. The proposed amendment 

would expand the requirement of 

reporting trade comparison data to 

include all transactions effected on the 

Exchange (presently, the rule only 

applies to options). Repositioning the 

above-mentioned violation would allow 

such behavior to be subject to Amex 

Enforcement Department action rather 

than Amex Floor Official action and 

also would increase the size of possible 

fines. The Exchange believes that 

inclusion of such matters within Part 1 

of Amex Rule 590 would provide a fair 

means of prompt resolution of minor 

rule violations that do not rise to the 

level of a formal enforcement action. 

As previously noted, Part 3 of Amex 

Rule 590, Reporting Violations, allows 

the specified departments of the 

Exchange that routinely receive 

regulatory reports from members and 

member organizations to issue 

abbreviated ‘‘written statements’’ to 

persons who may have violated the 

specified reporting rules, identifying the 

rules violated, the act or omission 

constituting the violation, and the 

amount of the fine. The fines are $50 per 

day for each day the report is late. The 

Exchange is proposing to revise Part 3 

of Amex Rule 590 to reflect the current 

filing schedule for the Form 50 (Short 

Position), which was previously only 

required to be filed at or about midmonth but is now additionally required 

to be filed at or about the end of the 

month for selected derivative products.5

The text of Part 3(g) of Amex rule 590 

as it discusses Form 1–S (Round Lot 

Short Sales Transactions) is being 

corrected to reflect that the form is due 

on Friday rather than Thursday.6

2. Statutory Basis 

Amex believes that the proposed rule 

change, as amended, is consistent with 

Section 6(b) of the Act,7 in general, and 

furthers the objectives of Sections 

6(b)(1),8 6(b)(6),9 and 6(b)(7),10 in 

particular, in that it would enhance the 

ability of the Exchange to enforce 

compliance by its members and persons 

associated with its members with the 

provisions of the Act, the rules and 

regulations thereunder, and the rules of 

the Exchange; it would help ensure that 

members and persons associated with 

members are appropriately disciplined 

for violations of the Act, the rules and 

regulations thereunder, and the rules of 

the Exchange; and it would provide a 

fair procedure for disciplining members 

and persons associated with members.

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

Amex believes the proposed rule 

change, as amended, would impose no 

burden on competition not necessary or 

appropriate in furtherance of the 

purposes of the Act.

C. Self-Regulatory Organization’s 

Statement of Comments on the 

Proposed Rule Change Received From 

Members, Participants or Others 

No written comments were solicited 

or received with respect to the proposed 

rule change. 

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 longer 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 such 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. 

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–Amex–2004–72 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–Amex–2004–72. 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 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 

offices 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–Amex–

2004–72 and should be submitted on or 

before January 12, 2005.

Federal Register / Vol. 69, No. 245 / Wednesday, December 22, 2004 / Notices 76803

11 17 CFR 200.30–3(a)(12).

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

2 17 CFR 240.19b–4.

3The proposed rule is substantially similar to 

NASD Rule 2370. See Securities Exchange Act 

Release No. 48424 (August 29, 2003), 68 FR 52806 

(September 5, 2003). NASD Rule 2370 was 

amended in Securities Exchange Act Release No. 

49269 (February 18, 2004), 69 FR 8718 (February 25 

2004).

For the Commission by the Division of 

Market Regulation, pursuant to delegated 

authority.11

Margaret H. McFarland, 

Deputy Secretary.

[FR Doc. 04–27970 Filed 12–21–04; 8:45 am] 

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–50874; File No. SR–CBOE–

2004–66] 

Self-Regulatory Organizations; Notice 

of Filing and Immediate Effectiveness 

of Proposed Rule Change by Chicago 

Board Options Exchange, Incorporated 

Relating to Borrowing and Lending by 

Registered Persons 

December 16, 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 October 

18, 2004, the Chicago Board Options 

Exchange, Incorporated (‘‘CBOE’’ 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 CBOE. 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 

CBOE proposes to adopt a new rule 

restricting registered persons of 

members or member organizations from 

borrowing from or lending to their 

customers, except pursuant to the 

conditions specified in the rule. The 

text of the proposed rule change is 

available at the Office of the Secretary, 

CBOE, and at the Commission. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, 

CBOE 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 I above. CBOE 

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 

1. Purpose 

The purpose of the proposed rule 

change is to adopt a rule that prohibits 

registered persons of CBOE members or 

members organizations from borrowing 

money from or lending money to a 

customer unless each of the following 

applies: (1) The members or member 

organization has written procedures 

allowing such borrowing or lending 

arrangements; and (2) the borrowing or 

lending arrangement fall within one of 

five permissible types of lending 

arrangements.3 In certain of these cases, 

the member or member organization 

must also pre-approve the loan in 

writing. The five types of permissible 

lending arrangements are:

(i) The customer is a member of the 

registered person’s immediate family (as 

defined in the proposed rule); 

(ii) The customer is a financial 

institution regularly engaged in the 

business of providing credit, financing, 

or loans, or other entity or person that 

regularly arranges or extends credit in 

the ordinary course of business; 

(iii) The customer and the registered 

person are both registered persons of the 

same member organization; 

(iv) The lending arrangement is based 

on a personal relationship outside of the 

broker-customer relationship; or 

(v) The lending arrangement is based 

on a business relationship outside of the 

broker-customer relationship.

CBOE believes that the solicitation of 

loans from customers by registered 

persons is an area of legitimate CBOE 

interest because of the potential for 

misconduct. CBOE has brought 

disciplinary action against registered 

persons who have violated just and 

equitable principles of trade by taking 

unfair advantage of their customers by 

inducing them to lend money in 

disregard of the customers’ best 

interests, or by borrowing funds from, 

but not repaying, customers. The 

potential for misconduct also exists 

when a registered person lends money 

to a customer. 

The proposed rule change establishes 

a regulatory framework that would give 

members and member organizations 

greater control over, and mores specific 

supervisory responsibilities for, lending 

arrangements between registered 

persons and their customers. Members 

and member organizations could choose 

to permit their registered persons to 

borrow from or lend to customers 

constituent with the requirements of the 

rule or, as was the case before the 

proposal of this new rule, prohibit the 

practice in whole or in part. If members 

or member organizations choose to 

permit their registered persons to engage 

in lending arrangements with 

customers, the proposed rule change 

would require members and member 

organizations to have written 

procedures allowing the borrowing and 

lending of money between registered 

persons and customers or the member or 

member organization. As stated above, 

members and member organizations 

would be permitted to approve loans 

only if the loan falls within one of the 

five types of permissible lending 

arrangements set forth in the rule. 

The proposed rule would require 

members and member organizations to 

pre-approve in writing three out of five 

types of lending arrangements permitted 

by the rule. It would exempt from the 

rule’s notice and approval requirements 

lending arrangements involving a 

registered person and his/her customer 

that is: (1) A member of his/her 

immediate family (as defined in the 

proposed rule); or (2) a financial 

institution regularly engaged in the 

business of providing credit, financing, 

or loans (or other entity or person that 

regularly arranges or extends credit in 

the ordinary course of business), 

provided the loan has been made on 

commercial terms that the customer 

generally makes available to members of 

the general public similarly situated as 

to need, purpose, and creditworthiness. 

The Exchange believes the requirement 

in the proposed rule that certain types 

of lending and borrowing arrangements 

must be pre-approved by the member or 

member organization would enhance 

members’ and member organizations’

ability to supervise such lending and 

borrowing activities of registered 

personnel. 

CBOE also believes that, the proposed 

rule change would also enhance the 

Exchange’s ability to monitor loans 

between registered persons and their 

customers. Currently, under controlling 

Commission decisions, to bring a 

disciplinary action against a registered 

person who has entered into an 

unethical lending arrangement with a 

customer, CBOE generally must prove 

that the arrangement is inconsistent 

with just and equitable principles of 

trade under CBOE Rule 4.1 because the 

registered person has acted in bad faith