Federal Register / Vol. 72, No. 57 / Monday, March 26, 2007 / Notices 14145 

1 [In conjunction with the proposed change, 

technical specifications (TS) requirements for a 

Bases Control Program, consistent with the TS 

Bases Control Program described in Section 5.5 of 

the applicable vendor’s standard TS (STS), shall be 

incorporated into the licensee’s TS, if not already 

in the TS.] 

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

2 17 CFR 240.19b–4. 

Change Tstf–477, Add An Action 

Statement For Two Inoperable Control 

Room Air Conditioning Subsystems To 

The Technical Specifications Using 

Consolidated Line Item Improvement 

Process 

Gentlemen: In accordance with the 

provisions of 10 CFR 50.90 [LICENSEE] is 

submitting a request for an amendment to the 

technical specifications (TS) for [PLANT 

NAME, UNIT NOS.]. 

The proposed amendment would modify 

the TS by adding an action statement for two 

inoperable control room AC subsystems to 

the plant specific TS. 

Enclosure 1 provides a description of the 

proposed change, the requested confirmation 

of applicability, and plant-specific 

verifications. Enclosure 2 provides the 

existing TS pages marked up to show the 

proposed change. Enclosure 3 provides 

revised (clean) TS pages. Enclosure 4 

provides the existing TS Bases pages marked 

up to show the proposed change in 

accordance with 10 CFR 50.36(a). 

[LICENSEE] requests approval of the 

proposed license amendment by [DATE], 

with the amendment being implemented [BY 

DATE OR WITHIN X DAYS]. 

In accordance with 10 CFR 50.91, a copy 

of this application, with enclosures, is being 

provided to the designated [STATE] Official. 

I declare under penalty of perjury under 

the laws of the United States of America that 

I am authorized by [LICENSEE] to make this 

request and that the foregoing is true and 

correct. (Note that request may be notarized 

in lieu of using this oath or affirmation 

statement). 

If you should have any questions regarding 

this submittal, please contact [NAME, 

TELEPHONE NUMBER] 

Sincerely, 

[Name, Title] 

Enclosures: 

1. Description and Assessment 

2. Proposed Technical Specification 

Changes 

3. Revised Technical Specification Pages 

4. Marked up Existing TS Bases Changes 

cc: NRC Project Manager 

NRC Regional Office 

NRC Resident Inspector 

State Contact 

Enclosure 1—Description and Assessment 

1.0 Description 

The proposed amendment would modify 

technical specifications by adding an Action 

Statement to the Limiting Condition for 

Operation (LCO). The new Action Statement 

allows a finite time to restore one control 

room AC subsystem to operable status and 

requires verification that control room 

temperature remains < 90 °F every 4 hours.1

The changes are consistent with Nuclear 

Regulatory Commission (NRC) approved 

Industry/Technical Specification Task Force 

(TSTF) TSTF–477 Revision 3. The 

availability of this TS improvement was 

published in the Federal Register on [DATE] 

as part of the consolidated line item 

improvement process (CLIIP). 

2.0 Assessment 

2.1 Applicability of TSTF–477, and 

Published Safety Evaluation 

[LICENSEE] has reviewed TSTF–477 

(Reference 1), and the NRC model safety 

evaluation (SE) (Reference 2) as part of the 

CLIIP. [LICENSEE] has concluded that the 

information in TSTF–477, as well as the SE 

prepared by the NRC staff are applicable to 

[PLANT, UNIT NOS.] and justify this 

amendment for the incorporation of the 

changes to the [PLANT] TS. [NOTE: Only 

those changes proposed in TSTF–477 are 

addressed in the model SE. The model SE 

addresses the entire fleet of General Electric 

Boiling Water Reactors. The plants adopting 

TSTF–477 must confirm the applicability of 

the changes to their plant.] 

2.2 Optional Changes and Variations 

[LICENSEE] is not proposing any variations 

or deviations from the TS changes described 

in TSTF–477 or the NRC staff’s model safety 

evaluation dated [DATE]. [NOTE: The CLIIP 

does not prevent licensees from requesting an 

alternate approach or proposing changes 

without the requested Bases or Bases control 

program. However, deviations from the 

approach recommended in this notice may 

require additional review by the NRC staff 

and may increase the time and resources 

needed for the review. Significant variations 

from the approach, or inclusion of additional 

changes to the license, will result in staff 

rejection of the submittal. Instead, licensees 

desiring significant variations and/or 

additional changes should submit a LAR that 

does not claim to adopt TSTF–477.] 

3.0 Regulatory Analysis 

3.1 No Significant Hazards Consideration 

Determination 

[LICENSEE] has reviewed the proposed no 

significant hazards consideration 

determination (NSHC) published in the 

Federal Register as part of the CLIIP. 

[LICENSEE] has concluded that the proposed 

NSHC presented in the Federal Register 

notice is applicable to [PLANT] and is hereby 

incorporated by reference to satisfy the 

requirements of 10 CFR 50.91(a). 

3.2 Verification and Commitments 

As discussed in the notice of availability 

published in the Federal Register on [DATE] 

for this TS improvement, plant-specific 

verifications were performed as follows: 

In addition, [LICENSEE] has proposed TS 

Bases consistent with TSTF–477 which 

provide guidance and details on how to 

implement the new requirements. Finally, 

[LICENSEE] has a Bases Control Program 

consistent with Section 5.5 of the Standard 

Technical Specifications (STS). 

4.0 Environmental Evaluation 

The amendment changes requirements 

with respect to the installation or use of a 

facility component located within the 

restricted area as defined in 10 CFR part 20. 

The NRC staff has determined that the 

amendment adopting TSTF–477, Rev 3, 

involves no significant increase in the 

amounts and no significant change in the 

types of any effluents that may be released 

offsite, and that there is no significant 

increase in individual or cumulative 

occupational radiation exposure. The 

Commission has previously issued a 

proposed finding that TSTF–477, Rev 3, 

involves no significant hazards 

considerations, and there has been no public 

comment on the finding in Federal Register 

Notice 71 FR 75774, December 18, 2006. 

Accordingly, the amendment meets the 

eligibility criteria for categorical exclusion 

set forth in 10 CFR 51.22(c)(9). Pursuant to 

10 CFR 51.22(b), no environmental impact 

statement or environmental assessment need 

be prepared in connection with the issuance 

of the amendment. 

5.0 References 

1. TSTF–477, Revision 3, ‘‘Adding an 

Action Statement for Two Inoperable Control 

Room Air Conditioning Subsystems.’’

2. NRC Model Safety Evaluation Report. 

Enclosure 2—Proposed Technical 

Specification Changes (Mark-Up) 

Enclosure 3—Proposed Technical 

Specification Pages 

[Clean copies of Licensee specific 

Technical Specification (TS) pages, 

corresponding to the TS pages changed by 

TSTF–477, Rev 3, are to be included in 

Enclosure 3] 

Enclosure 4—Proposed Changes to Technical 

Specification Bases Pages 

[FR Doc. E7–5434 Filed 3–23–07; 8:45 am] 

BILLING CODE 7590–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–55491; File No. SR–CBOE–

2006–95] 

Self-Regulatory Organizations; 

Chicago Board Options Exchange, 

Incorporated; Notice of Filing and 

Order Granting Accelerated Approval 

of Proposed Rule Change as Modified 

by Amendment Nos. 1 and 2 Thereto 

To List for Trading Options on the 

Vanguard Emerging Markets 

Exchange Traded Fund 

March 19, 2006. 

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 November 

30, 2006, the Chicago Board Options 

Exchange, Incorporated (‘‘CBOE’’ or 

‘‘Exchange’’) filed with the Securities 

and Exchange Commission 

(‘‘Commission’’) the proposed rule 


cprice-sewell on PROD1PC66 with NOTICES
14146 Federal Register / Vol. 72, No. 57 / Monday, March 26, 2007 / Notices 

3CBOE Rules 5.3.06 and 5.4.08 set forth the 

initial listing and maintenance standards for 

registered investment companies (or series thereof) 

organized as open-end management investment 

companies, unit investment trust or other similar 

entities traded on a national securities exchange or 

through the facilities of a national securities 

exchange (‘‘Exchange Traded Funds’’). See 

Exchange Act Release, No. 34–40166 (July 2, 1998), 

63 FR 37430 (July 10, 1998) (approval order for SR–

CBOE–97–45, predating U.S. Securities and 

Exchange Commission’s (‘‘Commission’’) adoption 

of Rule 19b–4(e) of the Securities Exchange Act of 

1934 (‘‘New Product Release’’). See Exchange Act 

Release No. 34–40761 (Dec. 8, 1998), 63 FR 70952 

(Dec. 22, 1998)). 

4As provided by Morgan Stanley Capital 

International, Inc. (‘‘MSCI’’), which is the entity 

that created and currently maintains the Index, the 

Index is a capitalization-weighted index whose 

component securities are adjusted for available float 

and must meet objective criteria for inclusion in the 

Index. The Index aims to capture 85% of the 

publicly available total market capitalization in 

each emerging market included in the Index. As of 

September 29, 2006, the Index was comprised of 

852 constituents with the top five constituents 

representing the following weights: 5.01%, 4.09%, 

1.82%, 1.79%, and 1.76%. The Index is rebalanced 

quarterly, calculated in U.S. Dollars on a real time 

basis, and disseminated every 60 seconds during 

market trading hours. 

5The ten largest holdings are: (1) OAO Gazprom 

ADR, (2) Samsung Electronics Co., Ltd., (3) China 

Mobile (Hong Kong), Ltd., (4) America Movil SA de 

CV, (5) Lukoil Sponsored ADR; (6) Taiwan 

Semiconductor Manufacturing Co., Ltd., (7) 

Petroleo Brasileiro SA Pfd (8) Hon Hai Precision 

Industry Co., Ltd., (9) Cemex SA CPO, and (10) 

Petroleo Brasileiro SA. See https://

flagship.vanguard.com/VGApp/hnw/

FundsSnapshot?FundId=0964&FundIntExt=INT. 

6See Exchange Act Release No. 34–44990, n. 16 

(Oct. 25, 2001), 66 FR 56869 (Nov. 13, 2001) 

(approval order for SR–Amex–2001–45, noting that 

local restrictions on transfers of securities to and 

between certain kinds of investors exist in certain 

foreign markets that preclude in-kind creation and 

redemptions of Exchange-Traded Funds). 

7See Securities Exchange Act Release No. 40166 

(July 2, 1998), 63 FR 37430 (July 10, 1998). 

change as described in Items I and II 

below, which Items have been 

substantially prepared by the Exchange. 

The Exchange submitted Amendment 

No. 1 to the proposed rule change on 

December 6, 2006. The Exchange 

submitted Amendment No. 2 to the 

proposed rule change on February 28, 

2007. The Commission is publishing 

this notice and order to solicit 

comments on the proposal, as amended, 

from interested persons and to approve 

the proposed rule change, as modified 

by Amendment Nos. 1 and 2, on an 

accelerated basis. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to list and 

trade options on the Vanguard

Emerging Markets Exchange Traded 

Fund (‘‘Fund Options’’). The text of the 

proposed rule change is available on the 

Exchange’s Web site (http:// 

www.cboe.org/legal), at the Office of the 

Secretary, CBOE 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. 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 parts 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 purpose of this rule change is to 

obtain approval to list for trading on the 

Exchange options on the Vanguard

Emerging Markets Exchange Traded 

Fund (‘‘Fund’’) on a pilot basis for six 

months to commence on the date of 

approval and through six months after 

that date. The Exchange currently has in 

place initial listing and maintenance 

standards set forth in CBOE Rules 5.3.06 

and 5.4.08, respectively (‘‘Listing 

Standards’’) that are designed to allow 

the Exchange to list funds structured as 

open-end investment companies, such 

as the Fund, without having to file for 

Commission approval to list for trading 

options on the fund.3 The request for 

approval is based on the Exchange’s 

determination that the Fund meets 

substantially all of the Listing Standards 

requirements, and for the requirements 

that are not met, sufficient mechanisms 

exist that would provide the Exchange 

with adequate surveillance and 

regulatory information with respect to 

the Fund. 

As provided in the Fund’s most recent 

prospectus, dated November 10, 2006, 

the Fund is an open-end investment 

company that is designed to hold a 

portfolio of securities that tracks the 

Morgan Stanley Capital International, 

Inc. Emerging Markets Index (‘‘MSCI 

Emerging Markets Index’’ or ‘‘Index’’), 

which includes approximately 850 

common stocks of companies located in 

25 emerging markets around the world.4

The Fund employs a ‘‘passive 

management’’—or indexing—

investment approach by investing 

substantially all (normally about 95%) 

of its assets in the common stocks that 

comprise the MSCI Emerging Markets 

Index while employing a form of 

sampling to reduce risk. 

As of January 31, 2007, the Fund was 

comprised of 862 securities and the ten 

largest holdings in the fund made up 

18.5% of the total assets in the Fund.5

The security with the greatest 

individual weight of 5.4% is OAO 

Gazprom ADRSamsung Electronics Co 

LTD GDR Registered, a South 

KoreanRussian security. The security 

with the smallest weight is Thanachart 

Capital Public Company Ltd., 

Metropolitan Bank & Trust Coa Thai 

security, at less than 0.01%. As of 

January 31, 2007, the largest markets 

covered in the Fund were South Korea 

(14.9%), Taiwan (12.3%), Russia (9.9%), 

Brazil (10.7%) and South Africa (8.5%). 

The Exchange believes that 

Vanguard’s stated investment policies 

prevent the Fund from being excessively 

weighted in any single security or small 

group of securities and significantly 

reduces concerns that trading in the 

Fund could become a surrogate for 

trading in unregistered securities. 

Shares of the Fund (‘‘Fund Shares’’) 

are issued in exchange for an ‘‘in kind’’

deposit of a specified portfolio of 

securities, together with a cash 

payment, in minimum size aggregation 

of 100,000 shares (each, a ‘‘Creation 

Unit’’), as set forth in the Fund’s 

prospectus.6 The Fund issues and sells 

Fund Shares in Creation Unit sizes 

through a principal underwriter on a 

continuous basis at the net asset value 

per share next determined after an order 

to purchase Fund Shares and the 

appropriate securities are received. 

Following issuance, Fund Shares are 

traded on an exchange like other equity 

securities, and equity-trading rules 

apply. Likewise, redemption of Fund 

Shares is made in Creation Unit size and 

‘‘in kind,’’ with a portfolio of securities 

and cash exchanged for Fund Shares 

that have been tendered for redemption. 

The Exchange notes that the 

maintenance Listing Standards set forth 

in Rule 5.4.08 for open-end investment 

companies do not include criteria based 

on either the number of shares or other 

units outstanding or on their trading 

volume. As explained in SR–CBOE–97–

03,7 the absence of such criteria is 

justified on the ground that since it 

should always be possible to create 

additional shares or other interests in 

open-end investment companies at their 

net asset value by making an in-kind 

deposit of the securities that comprise 

the underlying index or portfolio, there 

is no limit on the available supply of 

such shares or interests. This, in turn, 

should make it highly unlikely that the 

market for listed, open-end investment 

company shares could be capable of 


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Federal Register / Vol. 72, No. 57 / Monday, March 26, 2007 / Notices 14147 

8See Exchange Act Release No. 34–53621 (April 

10, 2006), 71 FR 79568 (April 14, 2006) (approving 

60 day pilot listing and trading, until June 9, 2006); 

see also Exchange Act Release No. 34–53960 (June 

1, 2006), 71 FR 33322 (June 8, 2006) (continuation 

of pilot program for additional 90 days, until 

September 7, 2006); see also Exchange Act Release 

No. 34–54347 (Aug. 22, 2006), 71 FR 51242 (Aug. 

29, 2006) (continuation of pilot program for 

additional 90 days, until December 7, 2006); see 

also Exchange Act Release No. 34–54876 (Dec. 5, 

2006), 71 FR 74968 (Dec. 13, 2006) (continuation of 

pilot program for additional six months, until June 

7, 2007). 

9The CNBV is the successor to the Comision 

Nacional y de Valores of Mexico, which was 

merged with the Mexican Banking Commission in 

April 1995 to form the CNBV. See Exchange Act 

Release No. 36415, at n.23 (Oct. 25, 1995), 60 FR 

55620 (Nov. 1, 1995) (approval order for SR–CBOE–

95–045). The Bolsa falls within the regulatory 

oversight of CNBV. 

10See Exchange Act Release No. 36415 (Oct. 25, 

1995), 60 FR 55620 (Nov. 1, 1995) (approval order 

for SR–CBOE–95–045). 

11See n. 4, supra. 

12The Exchange notes that the component 

securities of the Fund change periodically. 

Therefore, the Exchange may in fact have in place 

CSSAs that would otherwise cover the percent 

weighting requirements set forth in the Listing 

Standards for securities not trading on the Bolsa. In 

this event, the Fund would satisfy all of the Listing 

Standards and reliance on an approval order for the 

Fund would be unnecessary. 

manipulation, since whenever the 

market price for such shares departs 

from net asset value, arbitrage will 

occur. Similarly, since the Fund meets 

all of the requirements of the Listing 

Standards, except as described below, 

the Exchange believes that the same 

analysis applies to the Fund. 

The Exchange has reviewed the Fund 

and determined that it satisfies the 

Listing Standards, except for the 

requirement set forth in CBOE Rule 

5.3.06(A), which requires the Fund to 

meet the following condition: ‘‘any nonU.S. component securities of the index 

or portfolio on which the Units are 

based that are not subject to 

comprehensive surveillance agreements 

do not in the aggregate represent more 

than 50% of the weight of the index or 

portfolio.’’ The Exchange currently has 

in place comprehensive surveillance 

sharing agreements (‘‘CSSA’’) with 

foreign exchanges that cover 48.10% of 

the securities in the Fund. One of the 

foreign exchanges on which component 

securities of the Fund are traded and 

with which the Exchange does not have 

a CSSA is the Bolsa Mexicana de 

Valores (‘‘Bolsa’’). The percentage of the 

weight of the Fund represented by these 

securities is 6.60%. 

The Exchange notes that the 

Commission recently approved the 

listing and trading of options on the 

iShares MSCI Emerging Markets Index 

Fund on a on a pilot basis 8 and 

permitted the Exchange to rely on the 

memorandum of understanding 

executed by the Commission and the 

CNBV, dated as of October 18, 1990 

(‘‘MOU’’) for purposes of satisfying its 

surveillance and regulatory 

responsibilities for the component 

securities in the Fund that trade on the 

Bolsa until the Exchange is able to 

secure a surveillance agreement with 

the Bolsa.9

Specifically, in connection with the 

listing and trading of options on the 

iShares MSCI Emerging Markets Index 

Fund, the Exchange contacted the Bolsa 

with a request to enter into a CSSA. In 

response, the Bolsa expressed a 

willingness to enter into a surveillance 

sharing agreement but indicated that it 

was unable to provide certain 

information that is required as part of a 

CSSA. As a result of being unable to 

secure a CSSA with the Bolsa, the 

Exchange requested permission to rely 

for a pilot period on the MOU and the 

Exchange agreed to use its best efforts 

that during this period to obtain a CSSA 

with the Bolsa, which would reflect the 

following: (1) Express language 

addressing market trading activity, 

clearing activity, and customer identify; 

(2) the Bolsa’s reasonable ability to 

obtain access to and produce requested 

information; and (3) based on the CSSA 

and other information provided by the 

Bolsa, the absence of existing rules, law 

or practices that would impede the 

Exchange from obtaining foreign 

information relating to market activity, 

clearing activity, or customer identity, 

or in the event such rules, laws, or 

practices exist, they would not 

materially impede the production of 

customer or other information. 

On other occasions, the Commission 

has been willing to allow an exchange 

to rely on a memorandum of 

understanding entered into between 

regulators in the event that the 

exchanges themselves cannot enter into 

a CSSA. For example, the Exchange 

previously attempted to enter into a 

CSSA with the Bolsa around the time 

the Exchange sought approval to list for 

trading options on the CBOE Mexico 30 

Index in 1995, which was comprised of 

stocks trading on the Bolsa.10 Since the 

Bolsa was unable to provide a CSSA, the 

Commission allowed the Exchange to 

rely on the MOU between the SEC and 

CNBV. 

The Commission noted in the 

Approval Order regarding the CBOE 

Mexico 30 Index that, in cases where it 

would be impossible to secure a CSSA, 

the Commission has relied in the past 

on surveillance sharing agreements 

between the relevant regulators. The 

Commission further noted in the 

Approval Order that, pursuant to the 

terms of the MOU, it was the 

Commission’s understanding that both 

the Commission and the CNBV could 

acquire information from and provide 

information to the other, similar to that 

which would be required in a CSSA 

between exchanges. Therefore, should 

CBOE need information on Mexican 

trading in the component securities of 

the CBOE Mexico 30 Index, the 

Commission could request such 

information from the CNBV under the 

MOU. 

The practice of relying on 

surveillance agreements between 

regulators when a foreign exchange was 

unable or unwilling to provide a CSSA 

was affirmed by the Commission in the 

Commission’s New Product Release.11

In the New Product Release, the 

Commission noted that if securing an 

information sharing agreement is not 

possible, an exchange should contact 

the Commission prior to listing a new 

derivative securities product. The 

Commission also noted that the 

Commission might determine instead 

that it is appropriate to rely on a 

memorandum of understanding between 

the Commission and the foreign 

regulator. 

Given the Exchange’s current inability 

to enter into a CSSA with the Bolsa, the 

Exchange requests permission to rely on 

a pilot basis on the MOU entered into 

between the Commission and the CNBV 

for purposes of satisfying its 

surveillance and regulatory 

responsibilities for the component 

securities in the Fund that trade on the 

Bolsa until the Exchange is able to 

secure a CSSA with the Bolsa. The 

Exchange believes this request is 

reasonable because the Commission has 

already acknowledged that the MOU 

permits both the Commission and the 

CNBV to acquire information from and 

provide information to the other, which 

is similar to that which would be 

required in a surveillance sharing 

agreement between exchanges. 

Additionally, if the Commission 

approves the listing of the Fund on a 

pilot basis, during this period, the 

Exchange represents that it will 

continue its efforts to obtain a CSSA 

with the Bolsa. The Exchange also 

represents that it will regularly update 

the Commission on the status of its 

discussions with the Bolsa. The 

Commission’s approval of this request 

would otherwise render the Fund 

compliant with all of the Listing 

Standards.12


cprice-sewell on PROD1PC66 with NOTICES
14148 Federal Register / Vol. 72, No. 57 / Monday, March 26, 2007 / Notices 

13 15 U.S.C. 78a et seq. 

14 15 U.S.C. 78(f)(b). 

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

16 In approving this rule change, the Commission 

notes that it has considered the proposed rule’s 

impact on efficiency, competition, and capital 

formation. See 15 U.S.C. 78c(f). 17 15 U.S.C. 78f(b)(5). 

18 15 U.S.C. 78s(b)(2). 

19 Id. 

2. Statutory Basis 

The Exchange believes the proposed 

rule change is consistent with the Act 13

and the rules and regulations under the 

Act applicable to a national securities 

exchange and, in particular, the 

requirements of Section 6(b) of the 

Act.14 Specifically, the Exchange 

believes the proposed rule change is 

consistent with the Section 6(b)(5) 15

requirements that the rules of an 

exchange be designed to promote just 

and equitable principles of trade, to 

prevent fraudulent and manipulative 

acts 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 

No written comments were solicited 

or received with respect to the proposed 

rule change. 

III. 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–CBOE–2006–95 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Nancy M. Morris, Secretary, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number SR–CBOE–2006–95. 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 

Room. 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–CBOE–2006–95 and should 

be submitted on or before April 16, 

2007. 

IV. Commission’s Findings and Order 

Granting Accelerated Approval of the 

Proposed Rule Change 

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.16 In particular, the 

Commission finds that the proposed 

rule change is consistent with Section 

6(b)(5) of the Act,17 which requires that 

an exchange have rules designed, among 

other things, 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. 

The listing of the Fund Options does 

not satisfy CBOE Rule 5.3.06(A), which 

requires that: ‘‘any non-U.S. component 

securities of the index or portfolio on 

which the Units are based that are not 

subject to comprehensive surveillance 

agreements do not in the aggregate 

represent more than 50% of the weight 

of the index or portfolio.’’ Although the 

Commission has been willing to allow 

an exchange to rely on a memorandum 

of understanding entered into between 

regulators where the listing SRO finds it 

impossible to enter into an information 

sharing agreement, it is not clear that 

that CBOE has exhausted all avenues of 

discussion with foreign markets, 

including Bolsa, in order to obtain such 

an agreement. Indeed, with regard to 

Bolsa, conditions may have changed in 

the time period since CBOE last raised 

the issue with Bolsa in 1995 such that 

Bolsa now would be able to entering a 

comprehensive surveillance agreement 

with CBOE. 

Consequently, the Commission has 

determined to approve CBOE’s listing 

and trading of Fund Options for a sixmonth pilot period during which time 

CBOE may rely on the MOU with 

respect to Fund components trading on 

Bolsa. During this period, the Exchange 

has agreed to use its best efforts to 

obtain a comprehensive surveillance 

agreement with Bolsa, which shall 

reflect the following: (1) Express 

language addressing market trading 

activity, clearing activity, and customer 

identify; (2) the Bolsa’s reasonable 

ability to obtain access to and produce 

requested information; and (3) based on 

the CSSA and other information 

provided by the Bolsa, the absence of 

existing rules, law or practices that 

would impede the Exchange from 

obtaining foreign information relating to 

market activity, clearing activity, or 

customer identity, or in the event such 

rules, laws, or practices exist, they 

would not materially impede the 

production of customer or other 

information. 

The Exchange also represents that it 

will regularly update the Commission 

on the status of its negotiations with 

Bolsa. In approving the proposed rule 

change, the Commission notes that 

CBOE currently has in place 

surveillance agreements with foreign 

exchanges that cover 48.10% of the 

securities in the Fund and that the 

Index upon which the Fund is based 

appears to be a broad-based index. 

The Exchange has requested 

accelerated approval of the proposed 

rule change. The Commission finds 

good cause, consistent with Section 

19(b)(2) of the Act,18 for approving this 

proposed rule change before the 

thirtieth day after the publication of 

notice thereof in the Federal Register. 

The Exchange has agreed to use its best 

efforts to obtain a comprehensive 

surveillance agreement with the Bolsa 

during a six-month pilot period in 

which the Exchange will rely on the 

MOU. 

V. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,19 that the 


cprice-sewell on PROD1PC66 with NOTICES
Federal Register / Vol. 72, No. 57 / Monday, March 26, 2007 / Notices 14149 

20 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See NASD’s comment letter dated March 15, 

2005 in response to the SEC’s Concept Release 

Concerning Self-Regulation, Securities Exchange 

Act Release No. 50700 (November 18, 2004), 69 FR 

71256 (December 8, 2004) (File No. S7–40–04). 

4At the closing of the Transaction, NASD will 

adopt a new corporate name. The proposed rule 

change refers to the newly named entity as the 

‘‘New SRO.’’

proposed rule change (SR–CBOE–2006–

95), as modified by Amendment Nos. 1 

and 2, be, and it hereby is approved on 

an accelerated basis for a six-month 

pilot period ending on September 19, 

2007. 

For the Commission, by the Division of 

Market Regulation, pursuant to delegated 

authority.20

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E7–5423 Filed 3–23–07; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–55495; File No. SR–NASD–

2007–023] 

Self-Regulatory Organizations; 

National Association of Securities 

Dealers, Inc.; Notice of Filing of 

Proposed Rule Change To Amend the 

By-Laws of NASD To Implement 

Governance and Related Changes To 

Accommodate the Consolidation of the 

Member Firm Regulatory Functions of 

NASD and NYSE Regulation, Inc. 

March 20, 2007. 

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

Securities Exchange Act of 1934 (‘‘Act’’

or ‘‘Exchange Act’’) 1 and Rule 19b–4 

thereunder,2 notice is hereby given that 

on March 19, 2007, the National 

Association of Securities Dealers, Inc. 

(‘‘NASD’’) filed with the Securities and 

Exchange Commission (‘‘SEC’’ or 

‘‘Commission’’) the proposed rule 

change as described in Items I, II, and 

III below, which Items have been 

prepared by NASD. 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 

NASD is proposing to amend the ByLaws of NASD (‘‘NASD By-Laws’’) to 

implement governance and related 

changes to accommodate the 

consolidation of the member firm 

regulatory functions of NASD and NYSE 

Regulation, Inc. (‘‘NYSE Regulation’’). 

The proposed rule change also would 

make limited conforming changes to the 

By-Laws of NASD Regulation, Inc. 

(‘‘NASD Regulation By-Laws’’). 

The text of the proposed rule change 

is available on the NASD’s Web site 

(http://www.nasd.com), at the principal 

office of NASD, and at the 

Commission’s Public Reference Room. 

The text of Exhibit 5 of the proposed 

rule change is also available on the 

Commission’s Web site (http:// 

www.sec.gov). 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, 

NASD 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. NASD 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 

Background and Reasons for the 

Transaction 

The securities industry—both 

domestically and internationally—is in 

the midst of dramatic change. As the 

industry changes, it has become clear 

that the self-regulatory organization 

(‘‘SRO’’) model must be adapted to 

ensure efficient and effective regulation. 

At the moment, both NASD and NYSE 

Regulation oversee the activities of U.S.- 

based broker-dealers doing business 

with the public, approximately 170 of 

which are regulated by both 

organizations. The result is a 

duplicative, sometimes conflicting 

system that makes inefficient use of 

resources and, as such, can be 

detrimental to the ultimate goal of 

investor protection. 

NASD has long supported the idea of 

one SRO having responsibility for all 

member firm regulation.3 At the same 

time, the SEC, Congress, securities 

firms, and independent observers have 

long encouraged greater efficiencies, 

clarity and cost savings in the regulation 

of America’s financial markets. For 

these reasons, NASD and NYSE 

Regulation joined together proactively 

to design a system that would better 

meet the needs of today’s investors and 

securities firms. 

With the support and encouragement 

of the SEC, NASD and NYSE Group, Inc. 

(‘‘NYSE Group’’) representatives began 

meeting in June 2006 to discuss options 

for changes to the self-regulatory 

system. A determination was made that 

the scope of the discussions should be 

limited to eliminating redundant 

member regulation and not to combine 

the market regulatory responsibilities of 

NASD and NYSE Regulation. 

On November 28, 2006, NASD and 

the NYSE Group announced the plan to 

consolidate their member regulation 

operations into a combined organization 

that will be the sole U.S. private-sector 

provider of member firm regulation for 

securities firms that do business with 

the public (the ‘‘Transaction’’).4 This 

consolidation will streamline the 

broker-dealer regulatory system, 

combine technologies, permit the 

establishment of a single set of rules and 

group examiners with complementary 

areas of expertise in a single 

organization—all of which will serve to 

enhance oversight of U.S. securities 

firms and help ensure investor 

protection. Moreover, the new 

organization will be committed to 

reducing regulatory costs and burdens 

for firms of all sizes through greater 

regulatory efficiency. 

The goals of the consolidation plan 

are to: 

• Establish a new organization that 

will be the single SRO for all securities 

firms doing business with the public in 

the U.S.; 

• Build and sustain the confidence 

critical to the operation of vibrant 

capital markets; 

• Increase efficient, effective, and 

consistent regulation of securities firms; 

• Provide cost savings to securities 

firms of all sizes; and 

• Strengthen investor protection and 

market integrity. 

None of NASD’s current functions and 

activities will be eliminated as a result 

of the Transaction. The new 

organization will be responsible for: 

• Regulatory oversight of all 

securities firms that do business with 

the public; 

• Professional training, testing and 

licensing of registered persons; 

• Arbitration and mediation; 

• Market regulation by contract for 

The Nasdaq Stock Market, Inc. 

(‘‘Nasdaq’’), the American Stock 

Exchange LLC, and the International 

Securities Exchange, LLC; and 

• Industry utilities, such as Trade 

Reporting Facilities and other over-thecounter operations. 

The consolidation plan addresses key 

issues raised in the SEC’s 2004 Concept 


cprice-sewell on PROD1PC66 with NOTICES