Federal Register / Vol. 65, No. 205 / Monday, October 23, 2000 / Notices 63269

2The note will provide for the payments to be

made by IPC at times and in amounts, which will

correspond to the payments regarding the principal

of, premium, if any, and interest on the related TaxExempt Bonds.

1Mobile Energy is wholly owned limited liability

company subsidiary of Holdings to which Holdings

transferred all of its assets other than its equity

interest in Mobile Energy in July 1995. Mobile

Energy is an electric utility company within the

meaning of section 2(a)(3) of the Act.

2000 to June 30, 2004 (‘‘Extended

Authorization Period’’). During the

Extended Authorization Period, IES

proposes to issue from time to time in

one or more transactions Trust Bonds,

Senior Debentures, and Unsecured

Debentures and to enter into agreements

with respect to Tax-Exempt Bonds in an

aggregate principal amount not to

exceed $200 million, excluding Trust

Bonds and any other form of collateral.

IES states that all other terms,

conditions, and limitations contained in

the Current Financing Order will

continue to apply.

Interstate Power Company (70–9377)

Interstate Power Company (‘‘IPC’’),

1000 Main Street, P.O. Box 769,

Dubuque, Iowa 52004–07691, a wholly

owned gas and electric utility subsidiary

company of Alliant Energy Corporation,

a registered holding company, has filed

a post-effective amendment under

sections 6(a) and 7 of the Act and rule

54 under the Act to its declaration

previously filed under the Act.

By order dated November 25, 1998

(HCAR No. 26946) (‘‘Current Financing

Order’’), the Commission authorized IPC

to issue and sell from time to time,

through December 31, 2000, in one or

more series, any combination of first

mortgage bonds (‘‘First Mortgage

Bonds’’), senior unsecured debentures

(‘‘Senior Debentures’’) and unsecured

subordinated debentures

(‘‘Subordinated Debentures’’). The

Current Financing Order also authorized

IPC to enter into an agreement or

agreements for the issuance and sale of

one or more series of tax-exempt bonds

(‘‘Tax-Exempt Bonds’’), maturing no

later than 30 years from the first day of

the month in which they are issued

initially, for the financing or refinancing

of air and water pollution control

facilities and sewage and solid waste

disposal facilities (‘‘Facilities’’). As

security for IPC’s obligations under any

agreement relating to the Tax-Exempt

Bonds, IPC was also authorized to: (1)

Issue its non-negotiable promissory note

or notes to evidence loans to IPC by the

issuer of the proceeds of the TaxExempt Bonds; 2 (2) convey a

subordinated security interest in any

Facilities that are financed through the

issuance of Tax-Exempt Bonds; (3) issue

and pledge one or more new series of

First Mortgage Bonds; (4) acquire and

deliver letters of credit guaranteeing

payment of the Tax-Exempt Bonds and

enter into related reimbursement

agreements; (5) acquire insurance

policies guaranteeing payment of the

Tax-Exempt Bonds; and (6) provide a

direct guarantee of payment of the

principal of and premium, if any, and

interest on the Tax-Exempt Bonds.

Under the Current Financing Order,

the aggregate principal amount of the

First Mortgage Bonds, Senior

Debentures, Subordinated Debentures,

and Tax-Exempt Bonds will not exceed

$80 million, excluding the principal

amount of any First Mortgage Bonds

issued as collateral security for TaxExempt Bond obligations and any other

forms of collateral related to the TaxExempt Bonds. Each series of First

Mortgage Bonds, Senior Debentures and

Subordinated Debentures will mature

not later than 30 years from the day of

issuance. The Current Financing Order

provides that no series of First Mortgage

Bonds will be issued at rates in excess

of the lower of 15% per annum or those

rates generally obtainable at the time of

pricing for first mortgage bonds having

reasonably similar maturities, issued by

companies of the same or reasonably

comparable credit quality and having

reasonably similar terms, conditions

and features (‘‘Ceiling Rate’’). Further,

the Current Financing Order provides

that no series of Senior Debentures or

Subordinated Debentures will be sold if

their fixed interest rate or initial

adjustable interest rate exceeds the

Ceiling Rate.

IPC now proposes to extend the

authorization period under the Current

financing Order from December 31,

2000 to June 30, 2004 (‘‘Extended

Authorization Period’’). During the

Extended Authorization Period, IPC

proposes to issue from time to time in

one or more transactions First Mortgage

Bonds, Senior Debentures and

Subordinated Debentures and to enter

into agreements regarding Tax-Exempt

Bonds in an aggregate principal amount

not to exceed $80 million, excluding

First Mortgage Bonds issued as

collateral for IPC’s Tax-Exempt Bond

obligations and any other related form

of collateral. IPC states that all other

terms, conditions and limitations

contained in the Current Financing

Order will continue to apply.

For the Commission, by the Division of

Investment Management, under delegated

authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 00–27131 Filed 10–20–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 35–27254]

Filing Under the Public Utility Holding

Company Act of 1935, as Amended

(‘‘Act’’)

October 16, 2000.

Notice is hereby given that the

following filing(s) has/have been made

with the Commission pursuant to

provisions of the Act and rules

promulgated under the Act. All

interested persons are referred to the

application(s) and/or declaration(s) for

complete statements of the proposed

transaction(s) summarized below. The

applicant(s) and/or declaration(s) and

any amendment(s) is/are available for

public inspection through the

Commission’s Branch of Public

Reference.

Interested persons wishing to

comment or request a hearing on the

application(s) and/or declaration(s)

should submit their views in writing by

November 10, 2000, to the Secretary,

Securities and Exchange Commission,

Washington, DC 20549–0609, and serve

a copy on the relevant application(s)

and/or declarant(s) at the address(es)

specified below. Proof of service (by

affidavit or, in the case of an attorney at

law, by certificate) should be filed with

the request. Any request for hearing

should identify specifically the issues of

facts or law that are disputed. A person

who so requests will be notified of any

hearing, if ordered, and will receive a

copy of any notice or order issued in the

matter. After November 10, 2000, the

application(s) and/or declaration(s), as

filed or as amended, may be granted

and/or permitted to become effective.

The Southern Company, et al. (70–9771)

The Southern Company (‘‘Southern’’),

270 Peachtree Street, NW., Atlanta,

Georgia 30303, a registered holding

company, and its wholly owned

subsidiaries, Mobile Energy Services

Holdings, Inc. (‘‘Holdings’’) and Mobile

Energy Services Company, L.L.C.

(‘‘Mobile Energy’’) 1 both located at 900

Ashwood Parkway, Suite 500, Atlanta

Georgia 30338 (collectively,

‘‘Applicants’’), have filed an

application-declaration (‘‘Application’’)

under sections 6(a), 7, 11(f), 11(g), 12(a),

12(b), 12(d), 12(e), 12(f) and rules 45, 54,

63 and 64 of the Act.

63270 Federal Register / Vol. 65, No. 205 / Monday, October 23, 2000 / Notices

2Section 11(f) of the Act provides, in relevant

part, that ‘‘a reorganization plan for a registered

holding company, or any subsidiary thereof, * * *

shall not become effective unless such plan shall

have been approved by the Commission after

opportunity for hearing prior to its submission to

the court.’’

3Section 11(g)(2) of the Act provides, in relevant

part, that any solicitation for consents to or

authorization of any reorganization plan of a

registered holding company or any subsidiary

company thereof shall be ‘‘accompanied or

preceded by a copy of a report on the plan which

shall be made by the Commission after an

opportunity for a hearing on the plan and other

plans submitted to it, or by an abstract of such

report made or approved by the Commission.’’

4Applicants state the Bondholder Steering

Committee is currently composed of CS First

Boston, Miller Anderson & Sherrerd, LLP; Pan

American Life Insurance Company; Franklin

Advisors, Inc.; Van Kampen Interest and Advisory

Corp.; and First Union National Bank.

5On Dec. 13, 1994 the Commission authorized

Southern to organize Holdings as a new subsidiary

and acquire all of its common stock. HCAR No.

26815.

6As part of the settlement with KCTC a new

contract to provide electric power and steam

processing services, the ‘‘New Tissue Mill ESA,’’

was entered into between KCTC Mobile Energy.

Applicants propose that the

Commission issue (1) an order under

section 11(f) of the Act approving the

amended Joint Plan or Reorganization

(‘‘Plan’’) and certain related transactions

under the Plan 2 and (2) a report on the

Plan under section 11(g) that may

accompany a solicitation of creditors

and any other interest holders for

approval of the Plan in the bankruptcy

proceedings.3

The Application includes the Plan

and disclosure statement for Mobile

Energy and Holdings. On January 14,

1999, Mobile Energy and Holdings

(collectively, ‘‘Debtors’’) filed voluntary

petitions in the Bankruptcy Court for

the Southern District of Alabama

(‘‘Bankruptcy Court’’) for protection

under Chapter 11 of the Bankruptcy

Code. Both entities filed as debtors in

possession continuing their operations;

as a result, no trustee or receiver has

been appointed by the Bankruptcy

Court. The original Plan was filed with

the Bankruptcy Court on August 4,

2000. The disclosure statement and the

amended Plan were filed with the

Bankruptcy Court on September 15,

2000. Under section 1125 of the

Bankruptcy Code, the Debtors may not

solicit votes for acceptances of the Plan

until the Bankruptcy Court approves a

disclosure statement that contains

information of a kind, and in sufficient

detail, adequate to enable creditors to

make an informed judgment whether to

vote for acceptance or rejection of the

Plan. A hearing is scheduled with the

Bankruptcy Court for October 19, 2000,

to determine whether the disclosure

statement filed on September 15, 2000,

meets the requirements of section 1125

of the Bankruptcy Code. Applicants

state notice of the October 19, 2000

hearing has been provided in

accordance with the Bankruptcy Code

and the applicable Federal Rules of

Bankruptcy Procedure.

Applicants state the purposes of the

transactions described in the Plan are to:

(1) Permit Mobile Energy and Holdings

to reorganize and emerge from

bankruptcy; (2) maximize the recovery

of Mobile Energy’s bondholders on their

capital investment; (3) eliminate the

direct and indirect equity ownership of

Southern in Mobile Energy and

Holdings; and (4) allow Mobile Energy

to operate as a qualifying facility under

the Public utility Regulatory Policies

Act of 1978 after the effective date of the

Plan, which will cause Mobile Energy

and Holdings to no longer be subject to

the Act. Certain transactions

contemplated by the Plan require

Commission authorization. The

jurisdictional aspects of the Plan are

summarized below.

I. Overview of the Plan

Applicants request authorization for

the solicitation regarding the Plan under

sections 11(g) and 11(f) of the Act, and

authorization under section 12(e) to

solicit consents and approvals from the

holders of the securities of Mobile

Energy and Holdings, along with other

ancillary and related authorizations to

implement the Plan. The pre-petition

shares of common stock issued by

Holdings and held by Southern will not

receive any distributions under the

Plan, and the shares will be cancelled

and extinguished on the effective date of

the Plan. The entire equity interest in

the reorganized Holdings will then be

held by the existing bondholders.

Upon implementation of the Plan, the

ownership interests of Southern and its

affiliates in the Debtors will terminate.

Applicants state Southern and its

affiliates will have substantially reduced

obligations going forward with respect

to Mobile Energy and Holdings.

Southern Energy Resources, Inc.

(‘‘SERI’’) will continue to operate

Mobile Energy’s facilities through

March 31, 2001 at the latest. Southern

guaranteed certain of Mobile Energy’s

obligations to its existing customers in

1995, and these guarantees will remain

in place but Mobile Energy will

indemnify Southern against any liability

under those guarantees. Southern

Energy, Inc. (‘‘Southern Energy’’) will

assign certain contract rights and

obligations to Mobile Energy related to

a combustion turbine being

manufactured for it by general Electric

Company (‘‘GE’’) and under a long term

services agreement related to that

turbine by General Electric International

Inc. (‘‘GEII’’). Southern Energy will

remain liable if Mobile Energy does not

meet those obligations and Mobile

Energy will indemnify Southern Energy

against any of these costs.

The proponents of the Plan include a

Bondholder Steering Committee which

represents more than 70% of the current

outstanding bondholders of the

Debtors.4 The Bondholder Steering

Committee includes First Union

National Bank as the indenture trustees

for each of the two bond issuances as an

ex officio member. The indenture

trustees represent all of the

bondholders.

The facilities at issue are located

inside a large pulp, paper and tissue

manufacturing complex in Mobile,

Alabama. Some of the facilities now

owned by Mobile Energy were originally

constructed by the Scott Paper Company

(‘‘Scott’’) in the early 1960s. Scott sold

the energy facilities, black liquor

recovery equipment, and related assets,

permits and agreements (‘‘Energy

Complex’’) to Holdings.5 Mobile Energy

was formed as a limited liability

company on July 13, 1995. Mobile

Energy acquired ownership from

Holdings of the Energy Complex on July

14, 1995. Mobile Energy owns and

operates the Energy Complex which was

constructed specifically to serve the

Scott mill operations. In late 1995 Scott

was merged into a subsidiary of

Kimberly Clark Corporation and the

resulting entity was renamed Kimberly

Clark Tissue Company (‘‘KCTC’’). In

1998, KCTC notified Mobile Energy that

KCTC would close its pulp mill and

terminate its contract to purchase

energy services from Mobile Energy.

The consequences from the anticipated

loss of the KCTC pulp mill contract and

operations triggered the filing by Mobile

Energy and Holdings of cases under

Chapter 11 of the Bankruptcy Code.

II. Key Elements of the Plan

A. KCTC Settlement Agreement

The settlement agreement between the

Debtors and KCTC (‘‘KCTC Settlement

Agreement’’) encompasses certain

transactions, some of which occurred

soon after the Bankruptcy Court

approved the settlement, and other

transactions that will occur later if

certain conditions are met. Particularly,

on February 8, 2000, Mobile Energy and

KCTC executed: (1) The New Tissue

Mill ESA,6 which provides for

electricity and steam processing services

to be supplied by Mobile Energy to

KCTC’s tissue mill at market prices; and

Federal Register / Vol. 65, No. 205 / Monday, October 23, 2000 / Notices 63271

7Applicants note the Cogen Project will be

owned either by Mobile Energy or an affiliate which

is an exempt wholesale generator as defined in

section 32 of the Act.

8The No. 8 Recovery Boiler will be distributed by

Mobile Energy to Holdings and then contributed by

Holdings to Pulpco LLC whose members will be

holdings and Jubilee Pulp, Inc. The original cost to

Mobile Energy of the recovery boiler was

$11,852,824, which has been amortized in part over

the intervening years, an the net book value as of

December 31, 2000 will be approximately

$86,241,000.

(2) an Option Agreement for Mobile

Energy or its assignee to purchase

KCTC’s pulp mill and related assets to

be used for a new 800 short ton per day

pulp mill. On the closing date, if certain

conditions are met, KCTC will pay

Mobile Energy approximately $30.12

million, KCTC will transfer certain

assets to Mobile Energy and Mobile

Energy will transfer certain other assets

to KCTC. KCTC and Mobile Energy will

also enter into an agreement which will

set out the respective rights and

obligations of Mobile Energy and KCTC

to operate and maintain the No. 6 Power

Boiler and related facilities.

B. Cogen Project

The Plan contemplates resumption,

on a reduced scale, of pulp mill

operations under different ownership, a

more efficient use of resources (e.g.,

recovery boiler), the possible expansion

of electric generating capacity by

purchasing a combustion turbine and

developing a 165 megawatt facility

(‘‘Cogen Project’’) 7 and a revised

agreement to provide energy services to

the tissue mill within the industrial

complex. The development of the Cogen

Project will occur under the MESC

Cogeneration Development Agreement

dated February 9, 2000, between Mobile

Energy, Holdings, Southern Energy, and

SERI, as amended by Amendment No. 1

dated August 11, 2000 (‘‘Development

Agreement’’). The Development

Agreement provides, among other

things, that: (1) Mobile Energy has an

option to purchase from Southern

Energy a combustion turbine being

manufactured for Southern Energy by

GE to be used to develop the Cogen

Project at Southern Energy’s cost and

pay Southern Energy $2.9 million as an

option fee; (2) Southern Energy will

assign its rights under a long term

services agreement related to that

turbine with GEII to Mobile Energy; (3)

Mobile Energy will terminate the Mobile

Energy Operating Agreement no later

than March 31, 2001; (4) Mobile Energy

will pay one-half the actual cost of a

retention and severance program

implemented by SERI for its workers at

Mobile Energy’s facilities, up to a total

of $2 million; (5) Southern, Southern

Energy, SERI, Mobile Energy, Holdings,

the indenture trustee and the collateral

agent will exchange releases of claims;

(6) Southern, Southern Energy, SERI,

Mobile Energy and Holdings will

provide certain indemnities to each

other; and (7) Southern, Southern

Energy and SERI will hold a first

priority lien on the Debtor’s assets and

those of any affiliate set up to own the

Cogen Project to secure performance of

all obligations which may be owed to

Southern, Southern Energy and SERI

under the Development Agreement.

Applicants state the Doctors will use

the $30.12 million to be received from

KCTC in part for the development of the

Cogen Project. The balance of the cost

of the Cogen Project will be funded

through debt and/or equity financing in

addition to the funds otherwise

available to the Debtors.

C. The New Pulp Mill

The Plan contemplates that a new 800

short ton per day pulp mill will be

developed at the Mobile facility under

a term sheet agreed to by Jubilee Pulp,

Inc. and Mobile Energy (‘‘New Pulp

Mill’’). The transactions necessary to

develop the New Pulp Mill include: (1)

Consummation of the KCTC Settlement

Agreement; (2) consummation of certain

agreements with the Debtors to effect

the distribution of the No. 8 Recovery

Boiler by Mobile Energy to Holdings

and its contribution by Holdings to a

new limited liability company; 8 and (3)

new energy services agreements

between Mobile Energy and the

developer of the New Pulp Mill. Jubilee

Pulp, Inc. and Mobile Energy also

intend to execute the New Pulp Mill

ESA under which Mobile Energy will

provide electric power processing

services, steam processing services and

steam conditioning services to Jubilee

Pulp, Inc.

III. Treatment of Claims Under the Plan

A. Unsecured Creditors; Others

Under the Plan, the claims of the

general unsecured creditors and the

claims of all other creditors, except

Southern and its affiliates will be paid

in full.

B. First Mortgage Bonds

The first mortgage bonds were issued

by Mobile Energy on August 1, 1995, in

the principal amount of $255,210,000

due January 1, 2017 and bearing annual

interest at 8.665%. Under the Plan, the

first mortgage bonds will be exchanged

for new taxable bonds in an aggregate

principal amount of $51,535,000 and

bearing annual interest at 10%. In

addition, the Plan contemplates

7,259,400 shares of new common stock

of Holdings will be distributed to the

holders of the first mortgage bonds.

Each share of new common stock will

be entitled to one vote per share. Certain

holders of the first mortgage bonds will

be entitled to registration rights.

C. Tax Exempt Bonds

In December 1983, the Industrial

Development Board of Mobile, Alabama

(‘‘IDB’’) issued tax-exempt bonds (‘‘1983

Tax Exempt Bonds’’) to finance the

construction of the No. 7 Power Boiler

and certain auxiliary systems. In

December 1994 (‘‘1984 Tax Exempt

Bonds’’), the IDB issued tax-exempt

bonds to refund the 1983 Tax Exempt

Bonds.

Refunding of the 1984 Tax Exempt

Bonds occurred in 1995 by means of

tax-exempt bonds in the original

principal amount of $85,000,000

scheduled to mature January 1, 2000.

Under the Plan, the tax-exempt bonds

will be exchanged for new tax-exempt

bonds in an aggregate principal amount

of $20,035,000 (subject to increase of up

to an additional $2,003,500 aggregate

principal amount of new tax-exempt

bonds if each holder of allowed taxexempt bondholder receives additional

new tax-exempt bonds rather than

common stock of Holdings as described

below) and bear interest at the rate of

8% per annum.

In addition, the Plan contemplates up

to an aggregate of 2,740,600 shares of

new common stock will be issued to the

tax-exempt bondholders (based on the

number of tax-exempt bondholders that

elect to receive new common stock).

Each share of new common stock will

be entitled to one vote per share. Certain

holders will be entitled to registration

rights. Each of the tax-exempt

bondholders may elect, in lieu of

receiving any common stock in

Holdings, to receive additional new taxexempt bonds equal to 10% of the new

bonds to be received by the holder from

$20,035,000 principal amount of new

tax-exempt bonds to be distributed to all

these holders.

D. Southern’s and Its Affiliates’ Claims

Under the Plan, Southern and its

affiliates will receive the treatment

provided in the Development

Agreement, described above, in full

satisfaction of their claims.

63272 Federal Register / Vol. 65, No. 205 / Monday, October 23, 2000 / Notices

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

2 17 C.F.R. 240.19b–4.

3Securities Exchange Act Release No. 42168

(November 22, 1999), 64 FR 66952 (November 30,

1999) (notice of rule proposal filing and accelerated

approval of order establishing Pilot) (‘‘Original

Notice’’); Securities Exchange Act Release No.

42615 (April 3, 2000), 65 FR 19401 (April 11, 2000)

(notice of rule proposal filing and accelerated

approval of order granting extension of Pilot) (‘‘First

Extension Notice’’).

4The Pilot was due to expire on August 21, 2000.

5First Extension Notice at 65 FR 19403.

6 Id.

7See SR–CBOE–00–21. The proposed rule change

was published for public comment in Securities

Exchange Act Release No. 34–43430 (October 11,

2000).

8See SR–CBOE–00–22.

9 15 U.S.C. 78f(b)(5).

For the Commission, by the Division of

Investment Management, under delegated

authority.

Jonathan G. Katz,

Secretary.

[FR Doc. 00–27132 Filed 10–20–00; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–43448; File No. SR–CBOE–

00–35]

Self-Regulatory Organizations; Notice

of Filing and Order Granting

Accelerated Approval of Proposed

Rule Change by the Chicago Board

Options Exchange, Inc. Relating to

Manual Handling of RAES Orders in

Certain Limited Situations

October 17, 2000.

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 9,

2000, 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 Exchange. The Commission is

publishing this notice to solicit

comments on the proposed rule change

from interested persons and to approve

the extension of a pilot program through

February 21, 2001.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The CBOE proposes to amend

Exchange Rule 6.8(c) in order to extend,

for an additional six-month period, the

pilot program that currently provides for

certain orders to be rejected from RAES

for manual handling under certain

limited conditions (‘‘Pilot’’). The text of

the proposed rule change is available at

the CBOE and 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, the

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 IV below. The 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

Change

1. Purpose

The purpose of the proposed rule

change is to extend the Pilot for an

additional six-month period. The Pilot

provides that orders be rejected from

RAES in the limited situation when an

Autoquote-generated bid or offer for a

particular series of options has become

locked or crossed with the Exchange’s

best bid or offer as established by a

booked order.3 The Exchange is

requesting an extension of the Pilot 4 so

that RAES kick-out procedures may

continue in effect while the Commission

is considering the approval of two

proposed rule changes. The Exchange

represents that these proposed rule

changes, currently pending before the

Commission, were developed to obviate

the need for RAES kick-outs under the

circumstances covered by the Pilot.

In the first extension of the Pilot,5 the

CBOE stated that the Exchange would

continue to seek other alternatives to

having RAES orders rejected in the

limited situation where quotations

generated by the Autoquote system

become locked or crossed with a booked

order.6 During the 6-month period of the

first extension of the Pilot, CBOE

developed two systems changes which

the Exchange represents would, if

implemented, virtually eliminate RAES

kick-outs under the Pilot. The systems

changes are the subject of the two

proposed rule changes currently

pending at the Commission.

The first systems change is an

enhancement to the Automated Book

Priority System (‘‘ABP’’), called ABP

Split Price, that would allow incoming

RAES orders utilizing ABP to be

executed against the book price up to

the applicable book volume, or a larger

amount as predetermined by the

appropriate Floor Procedure Committee,

for the subject option class.7 The

balance of these orders would trade at

the next best available price, whether:

(1) Against another booked order; or (2)

against market-makers logged onto

RAES. If traded against market makers,

the balance of such orders would trade

at the best market-maker quote, whether

generated by Autoquote or verbalized by

a market maker.

The second systems change for which

the CBOE has sought approval is called

Autoquote Triggered EBook Execution

(‘‘Trigger’’).8 Trigger is an enhancement

to the electronic limit order book

(‘‘EBook’’) that would allow certain

booked orders to be automatically

executed up to the RAES contract limit

applicable to the particular series of

options. Trigger would become

operative in the limited situation where

the bid or offer generated by Autoquote

(or any Exchange-approved proprietary

quote generation system) for a particular

options series locks or crosses the

Exchange’s best bid or offer for that

series as established by a booked order.

By providing for automatic execution of

these booked orders, Trigger would

eliminate the vast majority of RAES

kick-outs which result when firms

seeking out pricing anomalies detect a

skewed quote and submit a RAES

eligible order or orders to trade at the

book price.

2. Statutory Basis

The proposed rule change is

consistent with and furthers the

objectives of Section 6(b)(5) of the Act 9

in that it is designed to remove

impediments to a free and open market

and to protect investors and the public

interest.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The CBOE does not believe that the

proposed rule change will impose a

burden on competition that is not

necessary or appropriate in furtherance

of 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