Consolidated Tape Association; Notice of Filing of the Seventh Substantive Amendment to the Second Restatement of the Consolidated Tape Association Plan and the Fifth Substantive Amendment to the Restated Consolidated Quotation Plan, 3075-3077 [E5-172]
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Federal Register / Vol. 70, No. 12 / Wednesday, January 19, 2005 / Notices
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–51012; File No. SR–CTA/
CQ–2004–01]
Consolidated Tape Association; Notice
of Filing of the Seventh Substantive
Amendment to the Second
Restatement of the Consolidated Tape
Association Plan and the Fifth
Substantive Amendment to the
Restated Consolidated Quotation Plan
January 10, 2005.
Pursuant to Rule 11Aa3–2 1 under the
Securities Exchange Act of 1934
(‘‘Act’’), notice is hereby given that on
December 3, 2004, the Consolidated
Tape Association (‘‘CTA’’) Plan and
Consolidated Quotation (‘‘CQ’’) Plan
Participants (‘‘Participants’’) 2 filed with
the Securities and Exchange
Commission (‘‘SEC’’ or ‘‘Commission’’)
a proposal to amend the CTA and CQ
Plans (collectively, the ‘‘Plans’’). The
proposal represents the 7th substantive
amendment made to the Second
Restatement of the CTA Plan and the
5th substantive amendment to the
Restated CQ Plan, and reflects changes
unanimously adopted by the
Participants. The proposed amendments
would modify the procedures for joining
the Plans as a new Participant. In
addition, the proposed amendments
would perform the ‘‘housekeeping’’
function of incorporating into the text of
the Plans changes to the corporate
names and addresses of some
Participants. The Commission is
publishing this notice to solicit
comments from interested persons on
the proposed amendments to the Plans.
I. Description and Purpose of the
Amendments
A. Rule 11Aa3–2 3
The proposed amendments would
modify the procedures pursuant to
which a new national securities
exchange or new national securities
association may join the Plans as a new
Participant. More specifically, the
proposed amendments would modify
the process for determining the fees that
a new national securities exchange or a
1 17
CFR 240.11Aa3–2.
Participant executed the proposed
amendments. The Participants are the American
Stock Exchange LLC (‘‘Amex’’); Boston Stock
Exchange, Inc. (‘‘BSE’’); Chicago Board Options
Exchange, Inc. (‘‘CBOE’’); Chicago Stock Exchange
(‘‘CHX’’), Inc.; National Association of Securities
Dealers, Inc. (‘‘NASD’’); National Stock Exchange
(‘‘NSX’’); New York Stock Exchange, Inc. (‘‘NYSE’’);
Pacific Exchange, Inc. (‘‘PCX’’); and Philadelphia
Stock Exchange, Inc. (‘‘Phlx’’).
3 17 CFR 240.11Aa3–2.
2 Each
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15:11 Jan 18, 2005
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new national securities association must
pay in order to join the Plans.
Currently, both Plans require a new
entrant to pay the Participants an
amount that ‘‘attributes an appropriate
value to the assets, both tangible and
intangible, that CTA has created and
will make available to such new
Participant.’’ 4 The Plans allow for the
Participants to consider one or more of
six factors in assessing the appropriate
value.5 The Commission approved the
addition of these entry-fee criteria to
both Plans in 1993.6 However, since the
criteria were adopted, no entity has
joined the Plans. CBOE was the last
Participant to join the Plans, having
done so in 1991.
In 1999, the Options Price Reporting
Authority (‘‘OPRA’’) Plan Participants
sought to adopt the same criteria
adopted by the CTA to determine the
appropriate participation fee to join the
OPRA Plan.7 The Commission received
negative comments regarding the
previously approved factors OPRA
proposed to consider in determining the
amount of its participation fee. The
commenters asserted that the proposed
OPRA Plan criteria could create a
barrier to entry into the options industry
that could harm competition. In
response, OPRA modified and adopted
new, more objective factors to be
considered in determining the
appropriate new entrant participation
fee.8 Consequently, in light of the
comments received on the current CTA/
CQ Plan criteria that OPRA was
proposing to adopt, at the October 2001
CTA meeting, a Division of Market
Regulation (‘‘Division’’) staff member
suggested that the CTA consider
amending its Plan criteria for
determining new entrant fees to
conform to the criteria that was more
recently adopted by OPRA.
In 2002, The Nasdaq Stock Market,
Inc. (‘‘Nasdaq’’) and Island ECN
expressed interest in joining the Plans
and inquired as to the amount of the
entry fee. In response, the Participants
engaged Deloitte & Touche, asking it to
assign a value to each of the six current
4 Section
III(c) of the Plans.
5 Id.
6 See Securities Exchange Act Release No. 33319
(December 10, 1993), 58 FR 66040 (December 17,
1993) (File No. S7–27–93).
7 See Securities Exchange Act Release No. 42002
(October 13, 1999), 64 FR 56543 (October 20, 1999)
(notice of File No. SR–OPRA–99–01).
8 See Securities Exchange Act Release No. 43697
(December 8, 2000), 65 FR 78518 (December 15,
2000) (order approving File No. SR–OPRA–00–08);
see also Securities Exchange Act Release Nos.
43347 (September 26, 2000), 65 FR 59035 (October
3, 2000) (notice of File No. SR–OPRA–00–08); and
42817 (May 24, 2000), 65 FR 35147 (June 1, 2000)
(notice of filing and order granting accelerated
effectiveness to File No. SR–OPRA–99–01).
PO 00000
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Fmt 4703
Sfmt 4703
3075
Plan criteria for determining a new
entrant’s fee. The Division expressed
concerns to the Participants regarding
the methodology contemplated by the
CTA and Deloitte & Touche because it
believed that the methodology
contained factors that should not be
considered in determining a proper
entrance fee for new entrants.9 The
Division further noted that the entrance
fee amount the Committee was
considering at the time might have an
anti-competitive effect on potential new
entrants.10
In light of the Division’s concerns that
the current Plan standards do not
provide an objective basis for
determining entrance fees for new
Participants and that the fees should be
based solely on objective criteria and
costs that could be easily calculated and
that could be readily discernable
(similar to the methodology currently
used for determining such fees in the
OPRA Plan),11 the Participants are
proposing new standards for
determining a new Participant’s entry
fee based on the OPRA Plan criteria.
The proposed amendments would allow
the Participants to consider one or both
of the following in determining a new
entrant’s fee: (1) The portion of costs
previously paid by the CTA for the
development, expansion and
maintenance of CTA’s facilities which,
under generally accepted accounting
principles (‘‘GAAP’’), could have been
treated as capital expenditures and, if so
treated, would have been amortized
over the five years preceding the
admission of the new Participant (and
for this purpose all such capital
expenditures shall be deemed to have a
five-year amortizable life) 12; and (2)
previous amounts paid by other new
9 See letters to William J. Brodsky, Chairman and
Chief Executive Officer, CBOE; David Colker,
President and Chief Executive Officer, NSX; Philip
D. DeFeo, Chairman and Chief Executive Officer,
PCX; Meyer S. Frucher, Chairman and Chief
Executive Officer, Phlx; Richard Grasso, Chairman
and Chief Executive Officer, NYSE; David A.
Herron, Chief Executive Officer, CHX; Richard
Ketchum, President and Deputy Chairman, Nasdaq;
Kenneth L. Leibler, Chairman and Chief Executive
Officer, BSE; and Salvatore F. Sadano, Chairman
and Chief Executive Officer, Amex, from Annette L.
Nazareth, Director, dated March 13, 2003.
10 Id.
11 See letters to Thomas E. Haley, Chairman, CTA,
from Annette L. Nazareth, Director, Division,
Commission, dated August 3, and November 3,
2004.
12 The Commission notes that the Participants
should only consider tangible assets that are capital
expenditures under GAAP in the fee calculation. In
addition, the Commission notes that the
Participants should not to consider any historical
costs of operating the systems prior to the time the
new Participant joins the Plans.
E:\FR\FM\19JAN1.SGM
19JAN1
3076
Federal Register / Vol. 70, No. 12 / Wednesday, January 19, 2005 / Notices
Participants to joined the Plans.13 In
addition, the proposed amendments
would require the new Participant to
reimburse the Plan Processor for the
costs that the Processor incurs in
modifying CTS and CQS systems to
accommodate the new Participant and
for an additional capacity costs.14 Any
disagreement among the Participants
regarding the fee calculation would be
subject to Commission review pursuant
to Section 11A(b)(5) of the Act.15
Finally, the proposed amendments
would perform the ‘‘housekeeping’’
function of updating the names and
addresses of the Plans’’ Participants. In
the last few years, the ‘‘Pacific Stock
Exchange, Inc.’’ has become the ‘‘Pacific
Exchange, Inc.,’’ the ‘‘American Stock
Exchange, Inc.’’ has become the
‘‘American Stock Exchange, LLC,’’ and
the Cincinnati Stock Exchange, Inc.’’
has become the ‘‘National Stock
Exchange.’’
F. Written Understanding or Agreements
Relating to Interpretation of, or
Participation in, Plan
B. Governing or Constituent Documents
Not applicable.
J. Method of Determination and
Imposition, and Amount of, Fees and
Charges
C. Implementation of Amendment
The Participants have manifested
their approval of the proposed
amendments to the Plans by means of
their execution of the proposed
amendments. The proposed
amendments would become effective
upon Commission approval of the
amendments.
Not applicable.
G. Approval by Sponsors in Accordance
With Plan
Upon the Commission’s receipt of
executed versions of the proposed
amendments by each of the Plans’
Participants, each of the Participants
shall have approved the proposed
amendments in accordance with Section
IV(b) of the CTA Plan and Section IV(c)
of the CQ Plan.
H. Description of Operation of Facility
Contemplated by the Proposed
Amendment
I. Terms and Conditions of Access
See Item I(A) above.
See Item I(A) above.
K. Method and Frequency of Processor
Evaluation
Not applicable.
L. Dispute Resolution
Not applicable.
II. Rule 11Aa3–1 17
A. Reporting Requirements
E. Analysis of Impact on Competition
The Participants believe that the
proposed amendments do not impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. The
Participants do not believe that the
proposed Plan amendments introduce
terms that are unreasonably
discriminatory for the purposes of
Section 11A(c)(1)(D) 16 of the Act.
B. Manner of Collecting, Processing,
Sequencing, Making Available and
Disseminating Last Sale Information
Commission notes that in considering the
amounts that have been paid by other Participants
to join the Plans, the Participants should only
consider such fees on a ‘‘going forward’’ basis,
which are determined by the proposed
methodology. The Commission further notes that
the fee that CBOE paid to join the Plans in 1991
should not be considered because it was not based
on the proposed factors and therefore does not
constitute a relevant fee for comparison purposes.
14 The Commission notes that in utilizing this
criteria, the Participants should not consider any
criteria that would result in a ‘‘double counting’’ of
costs because the new entrant and other Plan
participants are required to individually pay their
own costs (e.g., capacity needs).
15 15 U.S.C. 78k–1(b)(5).
16 15 U.S.C. 78k–1(c)(1)(D).
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15:11 Jan 18, 2005
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Not applicable.
Not applicable.
C. Manner of Consolidation
Not applicable.
D. Standards and Methods Ensuring
Promptness, Accuracy and
Completeness of Transaction Reports
Not applicable.
E. Rules and Procedures Addressed to
Fraudulent or Manipulative
Dissemination
Not applicable.
F. Terms of Access to Transaction
Reports
Not applicable.
G. Identification of Marketplace of
Execution
PO 00000
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed Plan
amendment is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–CTA/CQ–2004–01 on the
subject line.
Paper Comments
Not applicable.
D. Development and Implementation
Phases
Not applicable.
13 The
III. Solicitation of 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–CTA/CQ–2004–01. 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 (https://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 office of the CTA. 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–CTA/CQ–2004–01 and
should be submitted on or before
February 9, 2005.
Not applicable.
17 17
CFR 240.11Aa3–1.
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Federal Register / Vol. 70, No. 12 / Wednesday, January 19, 2005 / Notices
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.18
Jill M. Petersen,
Assistant Secretary.
[FR Doc. E5–172 Filed 1–18–05; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. IC–26723; 812–13135]
Wachovia Corporation, et al.; Notice of
Application and Temporary Order
January 12, 2005.
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Temporary order and notice of
application for a permanent order under
section 9(c) of the Investment Company
Act of 1940 (‘‘Act’’).
AGENCY:
Applicants
have received a temporary order
exempting them from section 9(a) of the
Act, with respect to an injunction
entered against Wachovia Corporation
(‘‘Wachovia’’) 1 on or about November
12, 2004 by the United States District
Court for the District of Columbia (the
‘‘Injunction’’), from January 12, 2005
until the Commission takes final action
on an application for a permanent order.
Applicants also have requested a
permanent order.
APPLICANTS: Wachovia, Evergreen
Investment Management Co, LLC
(‘‘EIMCO’’), Evergreen Investment
Services, Inc. (‘‘EIS’’), First International
Advisors, LLC (d/b/a Evergreen
International Advisors) (‘‘FIA’’), JL
Kaplan Associates, LLC (‘‘Kaplan’’),
SouthTrust Investment Advisors, A
Division of SouthTrust Bank (‘‘STIA’’),
and Tattersall Advisory Group, Inc.
(‘‘TAG’’) (EIMCO, FIA, Kaplan, STIA
and TAG are collectively referred to as
the ‘‘Advisers’’), and Evergreen
Investment Services, Inc. (‘‘EIS’’) (the
‘‘Underwriter’’ and, together with the
Advisers and Wachovia, the
‘‘Applicants’’).2
FILING DATES: The application was filed
on November 5, 2004, and amended on
January 5, 2005.
HEARING OR NOTIFICATION OF HEARING: An
order granting the application will be
SUMMARY OF APPLICATION:
18 17
CFR 200.30–3(a)(27).
is the surviving entity of the merger
between First Union Corporation and the company
known as Wachovia Corporation (‘‘Legacy
Wachovia’’) on September 1, 2001.
2 Applicants request that any relief granted
pursuant to the application also apply to any other
company of which Wachovia is or hereafter
becomes an affiliated person in the future (included
in the term ‘‘Applicants’’).
1 Wachovia
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15:11 Jan 18, 2005
Jkt 205001
issued unless the Commission orders a
hearing or further extends the temporary
exemption. Interested persons may
request a hearing by writing to the
Commission’s Secretary and serving
Applicants with a copy of the request,
personally or by mail. Hearing requests
should be received by the Commission
by 5:30 p.m. on February 7, 2005, and
should be accompanied by proof of
service on Applicants, in the form of an
affidavit, or for lawyers, a certificate of
service. Hearing requests should state
the nature of the writer’s interest, the
reason for the request, and the issues
contested. Persons who wish to be
notified of a hearing may request
notification by writing to the
Commission’s Secretary.
ADDRESSES: Secretary, Commission, 450
Fifth Street, NW., Washington, DC
20549–0609. Applicants, c/o Mark C.
Treanor, Esq., Wachovia Corporation,
301 South College Street, Suite 4000,
One Wachovia Center, Charlotte, NC
28288–0013.
FOR FURTHER INFORMATION CONTACT:
Janis F. Kerns, Senior Counsel, or Todd
F. Kuehl, Branch Chief, at 202–942–
0564 (Division of Investment
Management, Office of Investment
Company Regulation).
SUPPLEMENTARY INFORMATION: The
following is a temporary order and a
summary of the application. The
complete application may be obtained
for a fee at the Commission’s Public
Reference Branch, 450 Fifth Street, NW.,
Washington, DC 20549–0102 (telephone
202–942–8090).
3077
(‘‘Complaint’’) that Legacy Wachovia
and First Union Corporation (‘‘First
Union’’) violated sections 13(a) and
14(a) of the Exchange Act and rules
12b–20, 13a–3 and 14a–9 thereunder.4
The alleged violations occurred in
connection with material factual
omissions in a joint proxy statement/
prospectus and quarterly reports filed
by Legacy Wachovia and First Union in
May and June 2001 during the pendency
of First Union’s offer to purchase Legacy
Wachovia. Without admitting or
denying any of the allegations in the
Complaint, except as to jurisdiction,
Wachovia consented to the entry of the
Injunction and the payment of a civil
penalty.
Applicants’ Legal Analysis
Applicants’ Representations
1. Wachovia is a holding company
that, through its subsidiaries and
affiliates, provides banking, investment,
financing, advisory, and related
products and services on a global basis.
Wachovia is the ultimate parent
company of the Advisers and
Underwriter. Each Adviser is an
investment adviser registered under the
Investment Advisers Act of 1940 and
serves as investment adviser or subadviser to certain registered investment
companies (‘‘Funds’’). The Underwriter
is a broker-dealer registered under the
Securities Exchange Act of 1934
(‘‘Exchange Act’’) that acts as a principal
underwriter for certain Funds.
2. On or about November 12, 2004,
the United States District Court for the
District of Columbia entered the
Injunction against Wachovia in a matter
brought by the Commission.3 The
Commission alleged in its complaint
1. Section 9(a)(2) of the Act, in
relevant part, prohibits a person who
has been enjoined from engaging in or
continuing any conduct or practice in
connection with the purchase or sale of
a security from acting, among other
things, as an investment adviser or
depositor of any registered investment
company or a principal underwriter for
any registered open-end investment
company, registered unit investment
trust or registered face-amount
certificate company. Section 9(a)(3) of
the Act makes the prohibition in section
9(a)(2) applicable to a company, any
affiliated person of which has been
disqualified under the provisions of
section 9(a)(2). Section 2(a)(3) of the Act
defines ‘‘affiliated person’’ to include
any person directly or indirectly
controlling, controlled by, or under
common control with, the other person.
Applicants state that Wachovia is an
affiliated person of each of the other
Applicants within the meaning of
section 2(a)(3) of the Act. Applicants
state that, as a result of the Injunction,
they became subject to the prohibitions
of Section 9(a).
2. Section 9(c) of the Act provides that
the Commission shall grant an
application for exemption from the
disqualification provisions of section
9(a) if it is established that these
provisions, as applied to Applicants, are
unduly or disproportionately severe or
that Applicants’ conduct has been such
as not to make it against the public
interest or the protection of investors to
grant the application. Applicants have
filed an application pursuant to section
9(c) seeking temporary and permanent
orders exempting them from the
disqualification provisions of section
3 Securities and Exchange Commission v.
Wachovia Corporation, et al., Civil Action No. 04–
1911 (D.D.C. filed Nov. 12, 2004).
4 Securities and Exchange Commission v.
Wachovia Corporation, et al., Civil Action No. 04–
1910 (D.D.C. filed Nov. 4, 2004).
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]]>Agencies
[Federal Register Volume 70, Number 12 (Wednesday, January 19, 2005)]
[Notices]
[Pages 3075-3077]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E5-172]
[[Page 3075]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-51012; File No. SR-CTA/CQ-2004-01]
Consolidated Tape Association; Notice of Filing of the Seventh
Substantive Amendment to the Second Restatement of the Consolidated
Tape Association Plan and the Fifth Substantive Amendment to the
Restated Consolidated Quotation Plan
January 10, 2005.
Pursuant to Rule 11Aa3-2 \1\ under the Securities Exchange Act of
1934 (``Act''), notice is hereby given that on December 3, 2004, the
Consolidated Tape Association (``CTA'') Plan and Consolidated Quotation
(``CQ'') Plan Participants (``Participants'') \2\ filed with the
Securities and Exchange Commission (``SEC'' or ``Commission'') a
proposal to amend the CTA and CQ Plans (collectively, the ``Plans'').
The proposal represents the 7th substantive amendment made to the
Second Restatement of the CTA Plan and the 5th substantive amendment to
the Restated CQ Plan, and reflects changes unanimously adopted by the
Participants. The proposed amendments would modify the procedures for
joining the Plans as a new Participant. In addition, the proposed
amendments would perform the ``housekeeping'' function of incorporating
into the text of the Plans changes to the corporate names and addresses
of some Participants. The Commission is publishing this notice to
solicit comments from interested persons on the proposed amendments to
the Plans.
---------------------------------------------------------------------------
\1\ 17 CFR 240.11Aa3-2.
\2\ Each Participant executed the proposed amendments. The
Participants are the American Stock Exchange LLC (``Amex''); Boston
Stock Exchange, Inc. (``BSE''); Chicago Board Options Exchange, Inc.
(``CBOE''); Chicago Stock Exchange (``CHX''), Inc.; National
Association of Securities Dealers, Inc. (``NASD''); National Stock
Exchange (``NSX''); New York Stock Exchange, Inc. (``NYSE'');
Pacific Exchange, Inc. (``PCX''); and Philadelphia Stock Exchange,
Inc. (``Phlx'').
---------------------------------------------------------------------------
I. Description and Purpose of the Amendments
A. Rule 11Aa3-2 \3\
---------------------------------------------------------------------------
\3\ 17 CFR 240.11Aa3-2.
---------------------------------------------------------------------------
The proposed amendments would modify the procedures pursuant to
which a new national securities exchange or new national securities
association may join the Plans as a new Participant. More specifically,
the proposed amendments would modify the process for determining the
fees that a new national securities exchange or a new national
securities association must pay in order to join the Plans.
Currently, both Plans require a new entrant to pay the Participants
an amount that ``attributes an appropriate value to the assets, both
tangible and intangible, that CTA has created and will make available
to such new Participant.'' \4\ The Plans allow for the Participants to
consider one or more of six factors in assessing the appropriate
value.\5\ The Commission approved the addition of these entry-fee
criteria to both Plans in 1993.\6\ However, since the criteria were
adopted, no entity has joined the Plans. CBOE was the last Participant
to join the Plans, having done so in 1991.
---------------------------------------------------------------------------
\4\ Section III(c) of the Plans.
\5\ Id.
\6\ See Securities Exchange Act Release No. 33319 (December 10,
1993), 58 FR 66040 (December 17, 1993) (File No. S7-27-93).
---------------------------------------------------------------------------
In 1999, the Options Price Reporting Authority (``OPRA'') Plan
Participants sought to adopt the same criteria adopted by the CTA to
determine the appropriate participation fee to join the OPRA Plan.\7\
The Commission received negative comments regarding the previously
approved factors OPRA proposed to consider in determining the amount of
its participation fee. The commenters asserted that the proposed OPRA
Plan criteria could create a barrier to entry into the options industry
that could harm competition. In response, OPRA modified and adopted
new, more objective factors to be considered in determining the
appropriate new entrant participation fee.\8\ Consequently, in light of
the comments received on the current CTA/CQ Plan criteria that OPRA was
proposing to adopt, at the October 2001 CTA meeting, a Division of
Market Regulation (``Division'') staff member suggested that the CTA
consider amending its Plan criteria for determining new entrant fees to
conform to the criteria that was more recently adopted by OPRA.
---------------------------------------------------------------------------
\7\ See Securities Exchange Act Release No. 42002 (October 13,
1999), 64 FR 56543 (October 20, 1999) (notice of File No. SR-OPRA-
99-01).
\8\ See Securities Exchange Act Release No. 43697 (December 8,
2000), 65 FR 78518 (December 15, 2000) (order approving File No. SR-
OPRA-00-08); see also Securities Exchange Act Release Nos. 43347
(September 26, 2000), 65 FR 59035 (October 3, 2000) (notice of File
No. SR-OPRA-00-08); and 42817 (May 24, 2000), 65 FR 35147 (June 1,
2000) (notice of filing and order granting accelerated effectiveness
to File No. SR-OPRA-99-01).
---------------------------------------------------------------------------
In 2002, The Nasdaq Stock Market, Inc. (``Nasdaq'') and Island ECN
expressed interest in joining the Plans and inquired as to the amount
of the entry fee. In response, the Participants engaged Deloitte &
Touche, asking it to assign a value to each of the six current Plan
criteria for determining a new entrant's fee. The Division expressed
concerns to the Participants regarding the methodology contemplated by
the CTA and Deloitte & Touche because it believed that the methodology
contained factors that should not be considered in determining a proper
entrance fee for new entrants.\9\ The Division further noted that the
entrance fee amount the Committee was considering at the time might
have an anti-competitive effect on potential new entrants.\10\
---------------------------------------------------------------------------
\9\ See letters to William J. Brodsky, Chairman and Chief
Executive Officer, CBOE; David Colker, President and Chief Executive
Officer, NSX; Philip D. DeFeo, Chairman and Chief Executive Officer,
PCX; Meyer S. Frucher, Chairman and Chief Executive Officer, Phlx;
Richard Grasso, Chairman and Chief Executive Officer, NYSE; David A.
Herron, Chief Executive Officer, CHX; Richard Ketchum, President and
Deputy Chairman, Nasdaq; Kenneth L. Leibler, Chairman and Chief
Executive Officer, BSE; and Salvatore F. Sadano, Chairman and Chief
Executive Officer, Amex, from Annette L. Nazareth, Director, dated
March 13, 2003.
\10\ Id.
---------------------------------------------------------------------------
In light of the Division's concerns that the current Plan standards
do not provide an objective basis for determining entrance fees for new
Participants and that the fees should be based solely on objective
criteria and costs that could be easily calculated and that could be
readily discernable (similar to the methodology currently used for
determining such fees in the OPRA Plan),\11\ the Participants are
proposing new standards for determining a new Participant's entry fee
based on the OPRA Plan criteria. The proposed amendments would allow
the Participants to consider one or both of the following in
determining a new entrant's fee: (1) The portion of costs previously
paid by the CTA for the development, expansion and maintenance of CTA's
facilities which, under generally accepted accounting principles
(``GAAP''), could have been treated as capital expenditures and, if so
treated, would have been amortized over the five years preceding the
admission of the new Participant (and for this purpose all such capital
expenditures shall be deemed to have a five-year amortizable life)
\12\; and (2) previous amounts paid by other new
[[Page 3076]]
Participants to joined the Plans.\13\ In addition, the proposed
amendments would require the new Participant to reimburse the Plan
Processor for the costs that the Processor incurs in modifying CTS and
CQS systems to accommodate the new Participant and for an additional
capacity costs.\14\ Any disagreement among the Participants regarding
the fee calculation would be subject to Commission review pursuant to
Section 11A(b)(5) of the Act.\15\
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\11\ See letters to Thomas E. Haley, Chairman, CTA, from Annette
L. Nazareth, Director, Division, Commission, dated August 3, and
November 3, 2004.
\12\ The Commission notes that the Participants should only
consider tangible assets that are capital expenditures under GAAP in
the fee calculation. In addition, the Commission notes that the
Participants should not to consider any historical costs of
operating the systems prior to the time the new Participant joins
the Plans.
\13\ The Commission notes that in considering the amounts that
have been paid by other Participants to join the Plans, the
Participants should only consider such fees on a ``going forward''
basis, which are determined by the proposed methodology. The
Commission further notes that the fee that CBOE paid to join the
Plans in 1991 should not be considered because it was not based on
the proposed factors and therefore does not constitute a relevant
fee for comparison purposes.
\14\ The Commission notes that in utilizing this criteria, the
Participants should not consider any criteria that would result in a
``double counting'' of costs because the new entrant and other Plan
participants are required to individually pay their own costs (e.g.,
capacity needs).
\15\ 15 U.S.C. 78k-1(b)(5).
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Finally, the proposed amendments would perform the ``housekeeping''
function of updating the names and addresses of the Plans''
Participants. In the last few years, the ``Pacific Stock Exchange,
Inc.'' has become the ``Pacific Exchange, Inc.,'' the ``American Stock
Exchange, Inc.'' has become the ``American Stock Exchange, LLC,'' and
the Cincinnati Stock Exchange, Inc.'' has become the ``National Stock
Exchange.''
B. Governing or Constituent Documents
Not applicable.
C. Implementation of Amendment
The Participants have manifested their approval of the proposed
amendments to the Plans by means of their execution of the proposed
amendments. The proposed amendments would become effective upon
Commission approval of the amendments.
D. Development and Implementation Phases
Not applicable.
E. Analysis of Impact on Competition
The Participants believe that the proposed amendments do not impose
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act. The Participants do not believe
that the proposed Plan amendments introduce terms that are unreasonably
discriminatory for the purposes of Section 11A(c)(1)(D) \16\ of the
Act.
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\16\ 15 U.S.C. 78k-1(c)(1)(D).
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F. Written Understanding or Agreements Relating to Interpretation of,
or Participation in, Plan
Not applicable.
G. Approval by Sponsors in Accordance With Plan
Upon the Commission's receipt of executed versions of the proposed
amendments by each of the Plans' Participants, each of the Participants
shall have approved the proposed amendments in accordance with Section
IV(b) of the CTA Plan and Section IV(c) of the CQ Plan.
H. Description of Operation of Facility Contemplated by the Proposed
Amendment
Not applicable.
I. Terms and Conditions of Access
See Item I(A) above.
J. Method of Determination and Imposition, and Amount of, Fees and
Charges
See Item I(A) above.
K. Method and Frequency of Processor Evaluation
Not applicable.
L. Dispute Resolution
Not applicable.
II. Rule 11Aa3-1 \17\
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\17\ 17 CFR 240.11Aa3-1.
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A. Reporting Requirements
Not applicable.
B. Manner of Collecting, Processing, Sequencing, Making Available and
Disseminating Last Sale Information
Not applicable.
C. Manner of Consolidation
Not applicable.
D. Standards and Methods Ensuring Promptness, Accuracy and Completeness
of Transaction Reports
Not applicable.
E. Rules and Procedures Addressed to Fraudulent or Manipulative
Dissemination
Not applicable.
F. Terms of Access to Transaction Reports
Not applicable.
G. Identification of Marketplace of Execution
Not applicable.
III. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed Plan
amendment is consistent with the Act. Comments may be submitted by any
of the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://
www.sec.gov/rules/sro.shtml); or
Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-CTA/CQ-2004-01 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-CTA/CQ-2004-01. 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 (https://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 office of the CTA. 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-CTA/CQ-2004-01 and should be submitted on or before
February 9, 2005.
[[Page 3077]]
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\18\
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\18\ 17 CFR 200.30-3(a)(27).
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Jill M. Petersen,
Assistant Secretary.
[FR Doc. E5-172 Filed 1-18-05; 8:45 am]
BILLING CODE 8010-01-P
