Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; Order Granting Accelerated Approval to a Proposed Rule Change, as Modified by Amendment No. 3, Relating to Complex Orders, 64268-64269 [E7-22294]

Download as PDF 64268 Federal Register / Vol. 72, No. 220 / Thursday, November 15, 2007 / Notices 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, 100 F Street, NE., Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. Copies of such filing also will be available for inspection and copying at the principal office of Phlx. 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–Phlx–2007–85 and should be submitted on or before December 6, 2007. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.18 Florence E. Harmon, Deputy Secretary. [FR Doc. E7–22293 Filed 11–14–07; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–56760; File No. SR–Phlx– 2007–40] Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.; Order Granting Accelerated Approval to a Proposed Rule Change, as Modified by Amendment No. 3, Relating to Complex Orders pwalker on PROD1PC71 with NOTICES November 7, 2007. I. Introduction On May 21, 2007, the Philadelphia Stock Exchange, Inc. (‘‘Phlx’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 19b–4 thereunder,2 a proposed rule change to amend Phlx Rule 1066, ‘‘Certain Types of Orders Defined,’’ to revise the definition of ‘‘synthetic option,’’ and to amend Phlx Rule 1083(c) to modify the definition of ‘‘Complex Trade’’ as it relates to the Plan for the Purpose of Creating and Operating an Intermarket 18 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 VerDate Aug<31>2005 19:50 Nov 14, 2007 Jkt 214001 Options Linkage (‘‘Linkage Plan’’). The Exchange filed Amendment No. 1 to the proposal on September 4, 2007, and withdrew Amendment No. 1 on October 1, 2007. The Exchange filed Amendment No. 2 to the proposal on October 1, 2007, and withdrew Amendment No. 2 on the same day. The Phlx filed Amendment No. 3 to the proposal on October 1, 2007.3 The proposed rule change, as modified by Amendment No. 3, was published for comment in the Federal Register on October 11, 2007.4 The Commission received no comments regarding the proposed rule change, as amended. This order approves the proposed rule change, as modified by Amendment No. 3, on an accelerated basis. II. Description of the Proposal A. Phlx Rule 1066(g) Currently, Phlx Rule 1066(g) defines a ‘‘synthetic option’’ as an order to buy or sell a stated number of option contracts and the underlying stock or ExchangeTraded Fund Share in an amount that would offset the options position on a one-for-one basis. The Phlx proposes to amend Phlx Rule 1066(g) to define a ‘‘synthetic option’’ as an order to buy or sell a stated number of units of an underlying stock or a security convertible into the underlying stock (‘‘convertible security’’) coupled with either (i) the purchase or sale of option contract(s) on the opposite side of the market representing either the same number of units of the underlying stock or convertible security or the number of units of the underlying stock or convertible security necessary to create a delta neutral position; or (ii) the purchase or sale of an equal number of put and call option contracts, each having the same exercise price, expiration date, and each representing the same number of units of stock as, and on the opposite side of the market from, the stock or convertible security portion of the order. The revised definition of ‘‘synthetic option’’ will permit the purchase or sale of options on the opposite side of the market representing the number of units of the underlying stock or convertible security necessary to create a delta neutral position, rather than requiring that the stock and option components of the synthetic option order offset each other on a one-for-one basis. The revised definition is substantially similar to the definition of ‘‘stock-option order’’ 3 Amendment No. 3 replaces and supersedes the original filing and previous amendments in their entirety. 4 See Securities Exchange Act Release No. 56608 (October 3, 2007), 72 FR 57985. PO 00000 Frm 00078 Fmt 4703 Sfmt 4703 adopted by other U.S. options exchanges.5 B. Phlx Rule 1083(c) The Phlx also proposes to amend Phlx Rule 1083(c) to revise the definition of ‘‘Complex Trade’’ for purposes of the Linkage Plan, which provides an exception to Trade-Through 6 liability and Satisfaction Order 7 liability when the transaction that caused the TradeThrough was the result of a Complex Trade. The proposed changes to Phlx Rule 1083(c) are almost identical to changes proposed by the other Linkage Plan Participants,8 which the Commission is approving in a separate order today.9 Specifically, the Phlx proposes to revise Phlx Rule 1083(c) to: (1) Provide that the option orders in a Complex Trade may be in a ratio equal to or greater than one-to-three (.333) and less than or equal to three-to-one (3.0); and (2) add a certain limited type of synthetic option order to the definition of Complex Trade. Phlx Rule 1083(c)(ii) defines a ‘‘stock-option order’’ as an order to buy or sell a stated number of units of an underlying stock or a security convertible into the underlying stock (‘‘convertible security’’), coupled with the purchase or sale of option contract(s) on the opposite side of the market representing either (A) the same number of units of the underlying stock or convertible security; or (B) the number of units of the underlying stock or convertible security necessary to create a delta neutral position, but in no case in a ratio greater than eight option contracts per unit of trading of the underlying stock or convertible security established for that series by the Clearing Corporation. 5 See, e.g., Amex Rule 950–ANTE(e)(viii)(1); CBOE Rule 1.1(ii); and ISE Rule 722(a)(5)(i). 6 In connection with the Linkage Plan, a ‘‘TradeThrough’’ means a transaction in an options series at a price that is inferior to the National Best Bid or Offer (‘‘NBBO’’), but shall not include a transaction that occurs at a price that is one minimum quoting increment inferior to the NBBO provided a Linkage Order is contemporaneously sent to each Participant Exchange disseminating the NBBO for the full size of the Participant Exchange’s bid (offer) that represents the NBBO. See Phlx Rule 1083(t). 7 In connection with the Linkage Plan, a Satisfaction Order is an order sent through the Linkage to notify a member of another Participant Exchange of a Trade-Through and to seek satisfaction of the liability arising from that TradeThrough. See Phlx Rule 1083(k)(iii). 8 Phlx Rule 1083(c)(ii) refers to ‘‘stock-option orders’’ as synonymous with ‘‘synthetic option orders’’ to be consistent with the definitions proposed by the other Linkage Plan Participants. 9 See Securities Exchange Act Release No. 56761 (November 7, 2007) (order approving File Nos. SR– Amex–2007–65; SR–BSE–2007–45; SR–CBOE– 2007–64; SR–ISE–2007–44; and SR–NYSEArca– 2007–65) (‘‘Complex Trade Order’’). E:\FR\FM\15NON1.SGM 15NON1 Federal Register / Vol. 72, No. 220 / Thursday, November 15, 2007 / Notices pwalker on PROD1PC71 with NOTICES III. Commission Findings and Order Granting Accelerated Approval of the Proposed Rule Change, as Amended After careful review, the Commission finds that the proposed rule change, as amended, is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange.10 In particular, the Commission finds that the proposal is consistent with Section 6(b)(5) of the Act,11 which requires, among other things, that the rules of a national securities exchange be designed to prevent fraudulent and manipulative acts and practices, 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 Commission believes that the revised definition of ‘‘synthetic option’’ could help enable the Phlx to compete with other U.S. options exchanges whose definitions of ‘‘stock-option order’’ currently permit delta neutral positions, thereby increasing the number of markets in which customers may execute such orders. The Commission also believes that the proposed changes to Phlx Rule 1083(c) will ensure that the Phlx’s definition of ‘‘Complex Trade’’ is consistent with the definition of ‘‘Complex Trade’’ adopted by the other Linkage Plan Participants. The Commission believes that by amending the definition of ‘‘Complex Trade’’ to include certain stock-option orders, as described above, and by providing a consistent definition of ‘‘Complex Trade’’ in the rules of the exchanges, the proposal may facilitate the execution of such Complex Trades. The Commission finds good cause for approving the proposed rule change, as amended, prior to the thirtieth day after the date of publication of notice of filing thereof in the Federal Register. The proposal was subject to a 21-day comment period, and the Commission received no comments on the proposal. In addition, as described more fully above, the revised definition of ‘‘synthetic option’’ in Phlx Rule 1066(g) is substantially similar to the definition of ‘‘stock-option order’’ adopted by other U.S. options exchanges 12 and does not raise new regulatory issues. Similarly, the proposed changes to Phlx Rule 1083(c) are nearly identical to 10 In approving the proposed rule change, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 11 15 U.S.C. 78f(b)(5). 12 See supra note 5. VerDate Aug<31>2005 19:50 Nov 14, 2007 Jkt 214001 changes proposed by the other Linkage Plan Participants that the Commission is approving in a separate order.13 Accordingly, accelerated approval of the changes to Phlx Rule 1083(c) will ensure that the Phlx’s definition of ‘‘Complex Trade’’ is consistent with the definition of ‘‘Complex Trade’’ adopted by the other Linkage Plan Participants. For these reasons, the Commission finds good cause, consistent with Sections 6(b)(5) and 19(b) of the Act, to approve the proposal, as amended, on an accelerated basis. IV. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act,14 that the proposed rule change (SR–Phlx–2007– 40), as modified by Amendment No. 3, is approved on an accelerated basis. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.15 Florence E. Harmon, Deputy Secretary. [FR Doc. E7–22294 Filed 11–14–07; 8:45 am] BILLING CODE 8011–01–P SMALL BUSINESS ADMINISTRATION Small Business Size Standards: Waiver of the Nonmanufacturer Rule U.S. Small Business Administration. ACTION: Notice of intent to Waive the Nonmanufacturer Rule for Irradiation Apparatus Manufacturing. AGENCY: SUMMARY: The U.S. Small Business Administration (SBA) is considering granting a request for a waiver of the Nonmanufacturer Rule for Irradiation Apparatus Manufacturing, Computerized axial tomography (CT/ CAT) scanners manufacturing; CT/CAT (computerized axial tomography) scanners manufacturing; Fluoroscopes manufacturing; Fluoroscopic X-ray apparatus and tubes manufacturing; Generators, X-ray, manufacturing; Irradiation equipment manufacturing; X-ray generators manufacturing; and Xray irradiation equipment manufacturing. According to the request, no small business manufacturers supply these classes of products to the Federal government. If granted, the waiver would allow otherwise qualified regular dealers to supply the products of any domestic manufacturer on a Federal contract set aside for small businesses; service13 See Complex Trade Order, supra note 9. U.S.C. 78s(b)(2). 15 15 17 CFR 200.30–3(a)(12). 14 15 PO 00000 Frm 00079 Fmt 4703 Sfmt 4703 64269 disabled veteran-owned small businesses or SBA’s 8(a) Business Development Program. DATES: Comments and source information must be submitted November 30, 2007. ADDRESSES: You may submit comments and source information to Edith G. Butler, Program Analyst, U.S. Small Business Administration, Office of Government Contracting, 409 3rd Street, SW., Suite 8800, Washington, DC 20416. FOR FURTHER INFORMATION CONTACT: Edith G. Butler, Program Analyst, by telephone at (202) 619–0422; by FAX at (202) 481–1788; or by e-mail at Edith.butler@sba.gov. SUPPLEMENTARY INFORMATION: Section 8(a)(17) of the Small Business Act (Act), 15 U.S.C. 637(a)(17), requires that recipients of Federal contracts set aside for small businesses, service-disabled veteran-owned small businesses, or SBA’s 8(a) Business Development Program provide the product of a small business manufacturer or processor, if the recipient is other than the actual manufacturer or processor of the product. This requirement is commonly referred to as the Nonmanufacturer Rule. The SBA regulations imposing this requirement are found at 13 CFR 121.406(b). Section 8(a)(17)(b)(iv) of the Act authorizes SBA to waive the Nonmanufacturer Rule for any ‘‘class of products’’ for which there are no small business manufacturers or processors available to participate in the Federal market. As implemented in SBA’s regulations at 13 CFR 121.1202(c), in order to be considered available to participate in the Federal market for a class of products, a small business manufacturer must have submitted a proposal for a contract solicitation or received a contract from the Federal government within the last 24 months. The SBA defines ‘‘class of products’’ based on six digit coding system. The coding system is the Office of Management and Budget North American Industry Classification System (NAICS). The SBA is currently processing a request to waive the Nonmanufacturer Rule for Irradiation Apparatus Manufacturing, Computerized axial tomography (CT/CAT) scanners manufacturing; CT/CAT (computerized axial tomography) scanners manufacturing; Fluoroscopes manufacturing; Fluoroscopic X-ray apparatus and tubes manufacturing; Generators, X-ray, manufacturing; Irradiation equipment manufacturing; X-ray generators manufacturing; and Xray irradiation equipment manufacturing, North American E:\FR\FM\15NON1.SGM 15NON1

Agencies

[Federal Register Volume 72, Number 220 (Thursday, November 15, 2007)]
[Notices]
[Pages 64268-64269]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-22294]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56760; File No. SR-Phlx-2007-40]


 Self-Regulatory Organizations; Philadelphia Stock Exchange, 
Inc.; Order Granting Accelerated Approval to a Proposed Rule Change, as 
Modified by Amendment No. 3, Relating to Complex Orders

November 7, 2007.

I. Introduction

    On May 21, 2007, the Philadelphia Stock Exchange, Inc. (``Phlx'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to amend Phlx Rule 1066, ``Certain Types of Orders 
Defined,'' to revise the definition of ``synthetic option,'' and to 
amend Phlx Rule 1083(c) to modify the definition of ``Complex Trade'' 
as it relates to the Plan for the Purpose of Creating and Operating an 
Intermarket Options Linkage (``Linkage Plan''). The Exchange filed 
Amendment No. 1 to the proposal on September 4, 2007, and withdrew 
Amendment No. 1 on October 1, 2007. The Exchange filed Amendment No. 2 
to the proposal on October 1, 2007, and withdrew Amendment No. 2 on the 
same day. The Phlx filed Amendment No. 3 to the proposal on October 1, 
2007.\3\ The proposed rule change, as modified by Amendment No. 3, was 
published for comment in the Federal Register on October 11, 2007.\4\ 
The Commission received no comments regarding the proposed rule change, 
as amended. This order approves the proposed rule change, as modified 
by Amendment No. 3, on an accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Amendment No. 3 replaces and supersedes the original filing 
and previous amendments in their entirety.
    \4\ See Securities Exchange Act Release No. 56608 (October 3, 
2007), 72 FR 57985.
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II. Description of the Proposal

A. Phlx Rule 1066(g)

    Currently, Phlx Rule 1066(g) defines a ``synthetic option'' as an 
order to buy or sell a stated number of option contracts and the 
underlying stock or Exchange-Traded Fund Share in an amount that would 
offset the options position on a one-for-one basis. The Phlx proposes 
to amend Phlx Rule 1066(g) to define a ``synthetic option'' as an order 
to buy or sell a stated number of units of an underlying stock or a 
security convertible into the underlying stock (``convertible 
security'') coupled with either (i) the purchase or sale of option 
contract(s) on the opposite side of the market representing either the 
same number of units of the underlying stock or convertible security or 
the number of units of the underlying stock or convertible security 
necessary to create a delta neutral position; or (ii) the purchase or 
sale of an equal number of put and call option contracts, each having 
the same exercise price, expiration date, and each representing the 
same number of units of stock as, and on the opposite side of the 
market from, the stock or convertible security portion of the order.
    The revised definition of ``synthetic option'' will permit the 
purchase or sale of options on the opposite side of the market 
representing the number of units of the underlying stock or convertible 
security necessary to create a delta neutral position, rather than 
requiring that the stock and option components of the synthetic option 
order offset each other on a one-for-one basis. The revised definition 
is substantially similar to the definition of ``stock-option order'' 
adopted by other U.S. options exchanges.\5\
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    \5\ See, e.g., Amex Rule 950-ANTE(e)(viii)(1); CBOE Rule 
1.1(ii); and ISE Rule 722(a)(5)(i).
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B. Phlx Rule 1083(c)

    The Phlx also proposes to amend Phlx Rule 1083(c) to revise the 
definition of ``Complex Trade'' for purposes of the Linkage Plan, which 
provides an exception to Trade-Through \6\ liability and Satisfaction 
Order \7\ liability when the transaction that caused the Trade-Through 
was the result of a Complex Trade. The proposed changes to Phlx Rule 
1083(c) are almost identical to changes proposed by the other Linkage 
Plan Participants,\8\ which the Commission is approving in a separate 
order today.\9\
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    \6\ In connection with the Linkage Plan, a ``Trade-Through'' 
means a transaction in an options series at a price that is inferior 
to the National Best Bid or Offer (``NBBO''), but shall not include 
a transaction that occurs at a price that is one minimum quoting 
increment inferior to the NBBO provided a Linkage Order is 
contemporaneously sent to each Participant Exchange disseminating 
the NBBO for the full size of the Participant Exchange's bid (offer) 
that represents the NBBO. See Phlx Rule 1083(t).
    \7\ In connection with the Linkage Plan, a Satisfaction Order is 
an order sent through the Linkage to notify a member of another 
Participant Exchange of a Trade-Through and to seek satisfaction of 
the liability arising from that Trade-Through. See Phlx Rule 
1083(k)(iii).
    \8\ Phlx Rule 1083(c)(ii) refers to ``stock-option orders'' as 
synonymous with ``synthetic option orders'' to be consistent with 
the definitions proposed by the other Linkage Plan Participants.
    \9\ See Securities Exchange Act Release No. 56761 (November 7, 
2007) (order approving File Nos. SR-Amex-2007-65; SR-BSE-2007-45; 
SR-CBOE-2007-64; SR-ISE-2007-44; and SR-NYSEArca-2007-65) (``Complex 
Trade Order'').
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    Specifically, the Phlx proposes to revise Phlx Rule 1083(c) to: (1) 
Provide that the option orders in a Complex Trade may be in a ratio 
equal to or greater than one-to-three (.333) and less than or equal to 
three-to-one (3.0); and (2) add a certain limited type of synthetic 
option order to the definition of Complex Trade. Phlx Rule 1083(c)(ii) 
defines a ``stock-option order'' as an order to buy or sell a stated 
number of units of an underlying stock or a security convertible into 
the underlying stock (``convertible security''), coupled with the 
purchase or sale of option contract(s) on the opposite side of the 
market representing either (A) the same number of units of the 
underlying stock or convertible security; or (B) the number of units of 
the underlying stock or convertible security necessary to create a 
delta neutral position, but in no case in a ratio greater than eight 
option contracts per unit of trading of the underlying stock or 
convertible security established for that series by the Clearing 
Corporation.

[[Page 64269]]

III. Commission Findings and Order Granting Accelerated Approval of the 
Proposed Rule Change, as Amended

    After careful review, the Commission finds that the proposed rule 
change, as amended, is consistent with the requirements of the Act and 
the rules and regulations thereunder applicable to a national 
securities exchange.\10\ In particular, the Commission finds that the 
proposal is consistent with Section 6(b)(5) of the Act,\11\ which 
requires, among other things, that the rules of a national securities 
exchange be designed to prevent fraudulent and manipulative acts and 
practices, 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.
---------------------------------------------------------------------------

    \10\ In approving the proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \11\ 15 U.S.C. 78f(b)(5).
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    The Commission believes that the revised definition of ``synthetic 
option'' could help enable the Phlx to compete with other U.S. options 
exchanges whose definitions of ``stock-option order'' currently permit 
delta neutral positions, thereby increasing the number of markets in 
which customers may execute such orders. The Commission also believes 
that the proposed changes to Phlx Rule 1083(c) will ensure that the 
Phlx's definition of ``Complex Trade'' is consistent with the 
definition of ``Complex Trade'' adopted by the other Linkage Plan 
Participants. The Commission believes that by amending the definition 
of ``Complex Trade'' to include certain stock-option orders, as 
described above, and by providing a consistent definition of ``Complex 
Trade'' in the rules of the exchanges, the proposal may facilitate the 
execution of such Complex Trades.
    The Commission finds good cause for approving the proposed rule 
change, as amended, prior to the thirtieth day after the date of 
publication of notice of filing thereof in the Federal Register. The 
proposal was subject to a 21-day comment period, and the Commission 
received no comments on the proposal. In addition, as described more 
fully above, the revised definition of ``synthetic option'' in Phlx 
Rule 1066(g) is substantially similar to the definition of ``stock-
option order'' adopted by other U.S. options exchanges \12\ and does 
not raise new regulatory issues. Similarly, the proposed changes to 
Phlx Rule 1083(c) are nearly identical to changes proposed by the other 
Linkage Plan Participants that the Commission is approving in a 
separate order.\13\ Accordingly, accelerated approval of the changes to 
Phlx Rule 1083(c) will ensure that the Phlx's definition of ``Complex 
Trade'' is consistent with the definition of ``Complex Trade'' adopted 
by the other Linkage Plan Participants. For these reasons, the 
Commission finds good cause, consistent with Sections 6(b)(5) and 19(b) 
of the Act, to approve the proposal, as amended, on an accelerated 
basis.
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    \12\ See supra note 5.
    \13\ See Complex Trade Order, supra note 9.
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\14\ that the proposed rule change (SR-Phlx-2007-40), as modified 
by Amendment No. 3, is approved on an accelerated basis.
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    \14\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\15\
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    \15\ 15 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-22294 Filed 11-14-07; 8:45 am]
BILLING CODE 8011-01-P