[Federal Register Volume 69, Number 29 (Thursday, February 12, 2004)]
[Notices]
[Pages 7046-7051]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-3024]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-49197; File No. S7-966]


Program for Allocation of Regulatory Responsibilities Pursuant to 
Rule 17d-2; Notice of Filing and Order Granting Approval of Amendment 
to the Plan for the Allocation of Regulatory Responsibilities Among the 
American Stock Exchange LLC, the Boston Stock Exchange, Inc., the 
Chicago Board Options Exchange, Inc., the International Securities 
Exchange, Inc., the National Association of Securities Dealers, Inc., 
the New York Stock Exchange, Inc., the Pacific Exchange, Inc., and the 
Philadelphia Stock Exchange, Inc.

February 5, 2004.
    Notice is hereby given that the Securities and Exchange Commission 
(``SEC'' or ``Commission'') has issued an Order, pursuant to sections 
17(d) \1\ and 11A(a)(3)(B) \2\ of the Securities Exchange Act of 1934 
(``Act''), granting approval of an amendment to the plan for allocating 
regulatory responsibility filed pursuant to Rule 17d-2 of the Act,\3\ 
by the American Stock Exchange LLC (``Amex''), the Boston Stock 
Exchange, Inc. (``BSE''), the Chicago Board Options Exchange, Inc. 
(``CBOE''), the International Securities Exchange, Inc. (``ISE''), the 
National Association of Securities Dealers, Inc. (``NASD''), the New 
York Stock Exchange, Inc. (``NYSE''), the Pacific Exchange, Inc. 
(``PCX''), and the Philadelphia Stock Exchange, Inc. (``Phlx'') 
(collectively the ``SRO participants'').
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    \1\ 15 U.S.C. 78q(d).
    \2\ 15 U.S.C. 78k-1(a)(3)(B).
    \3\ 17 CFR 240.17d-2.
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I. Introduction

    Section 19(g)(1) of the Act,\4\ among other things, requires every 
national securities exchange and registered securities association 
(``SRO'') to examine for, and enforce, compliance by its members and 
persons associated with its members with the Act, the rules and 
regulations thereunder, and the SRO's own rules, unless the SRO is 
relieved of this responsibility pursuant

[[Page 7047]]

to section 17(d) or 19(g)(2) \5\ of the Act. Without this relief, the 
statutory obligation of each individual SRO could result in a pattern 
of multiple examinations of broker-dealers that maintain memberships in 
more than one SRO (``common members''). This regulatory duplication 
would add unnecessary expenses for common members and their SROs.
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    \4\ 15 U.S.C. 78s(g)(1).
    \5\ 15 U.S.C. 78s(g)(2).
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    Section 17(d)(1) of the Act was intended, in part, to eliminate 
unnecessary multiple examinations and regulatory duplication.\6\ With 
respect to a common member, section 17(d)(1) authorizes the Commission, 
by rule or order, to relieve an SRO of the responsibility to receive 
regulatory reports, to examine for and enforce compliance with 
applicable statutes, rules and regulations, or to perform other 
specified regulatory functions.
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    \6\ See Securities Act Amendments of 1975, Report of the Senate 
Committee on Banking, Housing, and Urban Affairs to Accompany S. 
249, S. Rep. No. 94-75, 94th Cong., 1st Session. 32 (1975).
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    To implement section 17(d)(1), the Commission adopted two rules: 
Rule 17d-1 and Rule 17d-2 under the Act.\7\ Rule 17d-1, adopted on 
April 20, 1976,\8\ authorizes the Commission to name a single SRO as 
the designated examining authority (``DEA'') to examine common members 
for compliance with the financial responsibility requirements imposed 
by the Act, or by Commission or SRO rules. When an SRO has been named 
as a common member's DEA, all other SROs to which the common member 
belongs are relieved of the responsibility to examine the firm for 
compliance with applicable financial responsibility rules.
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    \7\ 17 CFR 240.17d-1 and 17 CFR 240.17d-2.
    \8\ See Securities Exchange Act Release No. 12352 (April 20, 
1976), 41 FR 18809 (May 3, 1976).
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    On its face, Rule 17d-1 deals only with an SRO's obligations to 
enforce broker-dealers' compliance with the financial responsibility 
requirements. Rule 17d-1 does not relieve an SRO from its obligation to 
examine a common member for compliance with its own rules and 
provisions of the Federal securities laws governing matters other than 
financial responsibility, including sales practices, and trading 
activities and practices.
    To address regulatory duplication in these other areas, on October 
28, 1976, the Commission adopted Rule 17d-2 under the Act.\9\ This rule 
permits SROs to propose joint plans allocating regulatory 
responsibilities with respect to common members. Under paragraph (c) of 
Rule 17d-2, the Commission may declare such a plan effective if, after 
providing for notice and comment, it determines that the plan is 
necessary or appropriate in the public interest and for the protection 
of investors, to foster cooperation and coordination among the SROs, to 
remove impediments to and foster the development of a national market 
system and a national clearance and settlement system, and in 
conformity with the factors set forth in section 17(d) of the Act. 
Commission approval of a plan filed pursuant to Rule 17d-2 relieves an 
SRO of those regulatory responsibilities allocated by the plan to 
another SRO.
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    \9\ See Securities Exchange Act Release No. 12935 (October 28, 
1976), 41 FR 49093 (November 8, 1976).
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II. The Plan

    On September 8, 1983, the Commission approved the SRO participants' 
plan for allocating regulatory responsibilities pursuant to Rule 17d-
2.\10\ On May 23, 2000, the Commission approved an amendment to the 
plan that added the ISE as a participant.\11\ On November 8, 2002, the 
Commission approved another amendment that replaced the original plan 
in its entirety and, among other things, allocated regulatory 
responsibilities among all the participants in a more equitable 
manner.\12\ The plan reduces regulatory duplication for a large number 
of firms currently members of two or more of the SRO participants by 
allocating regulatory responsibility for certain options-related sales 
practice matters to one of the SRO participants.
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    \10\ See Securities Exchange Act Release No. 20158 (September 8, 
1983), 48 FR 41256 (September 14, 1983).
    \11\ See Securities Exchange Act Release No. 42816 (May 23, 
2000), 65 FR 24759 (May 31, 2000). This Amendment also updated the 
corporate names of the Amex, the Midwest Stock Exchange (now known 
as the Chicago Stock Exchange, Inc.), and the Pacific Stock Exchange 
Incorporated (now known as the Pacific Exchange, Inc.).
    \12\ See Securities Exchange Act Release No. 46800 (November 8, 
2002), 67 FR 69774 (November 19, 2002).
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    Generally, under the plan, the SRO participant responsible for 
conducting options-related sales practice examinations of a firm, and 
investigating options-related customer complaints and terminations for 
cause of associated persons of that firm, is known as the firm's 
``Designated Options Examining Authority'' (``DOEA''). Pursuant to the 
plan, any other SRO of which the firm is a member is relieved of these 
responsibilities during the period the firm is assigned to a DOEA.

III. Proposed Amendment to the Plan

    On February 5, 2004, the parties submitted a proposed amendment to 
the plan. The primary purpose of the amendment is to include the BSE, 
which proposes establish a new options trading facility to be known as 
the Boston Options Exchange (``BOX''), as an SRO participant. The 
amended agreement replaces the previous agreement in its entirety. The 
text of the proposed amended 17d-2 plan is as follows (additions are 
italicized; deletions are bracketed): \13\
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    \13\ Changes are marked from the most recent plan approved by 
the Commission on November 8, 2002. See supra note 12.

    Agreement among the American Stock Exchange LLC, the Boston 
Stock Exchange, Inc., the Chicago Board Options Exchange, Inc., the 
International Securities Exchange, Inc., the National Association of 
Securities Dealers, Inc., the New York Stock Exchange, Inc., the 
Pacific Exchange Inc., and the Philadelphia Stock Exchange, Inc., 
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Pursuant to Rule 17d-2 under the Securities Exchange Act of 1934.

    This Agreement, among the American Stock Exchange LLC, the Boston 
Stock Exchange, Inc., the Chicago Board Options Exchange, Inc., the 
International Securities Exchange, Inc., the National Association of 
Securities Dealers, Inc., the New York Stock Exchange, Inc., the 
Pacific Exchange Inc., and the Philadelphia Stock Exchange, Inc., 
hereinafter collectively referred to as the Participants, is made this 
[first] 14th day of [July, 2002] January, 2004 pursuant to the 
provisions of Rule 17d-2 under the Securities Exchange Act of 1934 (the 
``Act''), which allows for plans among self-regulatory organizations to 
allocate regulatory responsibility.
    WHEREAS, the Participants are desirous of allocating regulatory 
responsibilities with respect to their common members (members of two 
or more of the Participants) for compliance with common rules relating 
to the conduct by broker-dealers of accounts for listed options or 
index warrants (collectively, ``Covered Securities''); and
    WHEREAS, the Participants are desirous of executing a plan for this 
purpose pursuant to the provisions of Rule 17d-2 and filing such plan 
with the Securities and Exchange Commission (``SEC'' or the 
``Commission'') for its approval;
    NOW, THEREFORE, in consideration of the mutual covenants contained 
hereafter, the Participants agree as follows:
    I. Except as otherwise provided herein, each Participant shall 
assume Regulatory Responsibility (as hereinafter

[[Page 7048]]

defined) for its members that are both (i) members of more than one 
Participant (hereinafter the ``Common Members'') and (ii) allocated to 
it in accordance with the terms hereof. For purposes of this Agreement, 
a Participant shall be considered to be the Designated Options 
Examining Authority (``DOEA'') of each Common Member allocated to it.
    II. As used herein, the term ``Regulatory Responsibility'' shall 
mean the inspection, examination and enforcement responsibilities 
relating to compliance by the Common Members and persons associated 
therewith with the rules of the applicable Participant that are 
substantially similar to the rules of the other Participants (the 
``Common Rules'') and the provisions of the Act and the rules and 
regulations thereunder, insofar as they apply to the conduct of 
accounts for Covered Securities. In discharging its Regulatory 
Responsibility, a DOEA may act directly and perform such 
responsibilities itself or may make arrangements for the performance of 
such responsibilities on its behalf by The Options Clearing 
Corporation, a national securities exchange registered with the SEC 
under Section 6(a) of the Act or a national securities association 
registered with the SEC under Section 15A of the Act, but excluding an 
association registered for the limited purpose of regulating the 
activities of members who are registered as brokers or dealers in 
security futures products. Without limiting the foregoing, a non-
exhaustive list of the current, Common Rules of each Participant 
applicable to the conduct of accounts for Covered Securities is 
attached hereto as Exhibit A. Notwithstanding anything herein to the 
contrary, it is explicitly understood that the term ``Regulatory 
Responsibility'' does not include, and each of the Participants shall 
(unless allocated pursuant to Rule 17d-2 otherwise than under this 
Agreement) retain full responsibility for:
    (a) surveillance and enforcement with respect to trading activities 
or practices involving its own marketplace, including without 
limitation its rules relating to the rights and obligations of 
specialists and other market makers;
    (b) registration pursuant to its applicable rules of associated 
persons;
    (c) discharge of its duties and obligations as a Designated 
Examining Authority pursuant to Rule 17d-1 under the Act;
    (d) evaluation of advertising, responsibility for which shall 
remain with the Participant to which a Common Member submits same for 
approval; and
    (e) any rules of a Participant that are not substantially similar 
to the rules of all of the other Participants.
    III. Apparent violations of another Participant's rules discovered 
by a DOEA, but which rules are not within the scope of the discovering 
DOEA's Regulatory Responsibility, shall be referred to the relevant 
Participant for such action as the Participant to which such matter has 
been referred deems appropriate. Notwithstanding the foregoing, nothing 
contained herein shall preclude a DOEA in its discretion from 
requesting that another Participant conduct an enforcement proceeding 
on a matter for which the requesting DOEA has Regulatory 
Responsibility. If such other Participant agrees, the Regulatory 
Responsibility in such case shall be deemed transferred to the 
accepting Participant. Each Participant agrees, upon request, to make 
available promptly all relevant files, records and/or witnesses 
necessary to assist another Participant in an investigation or 
enforcement proceeding.
    IV. This Agreement shall be administered by a committee known as 
the Options Self-Regulatory Council (the ``Council''). The Council 
shall be composed of one representative designated by each of the 
Participants. Each Participant shall also designate one or more persons 
as its alternate representative(s). In the absence of the 
representative of a Participant, such alternate representative shall 
have the same powers, duties and responsibilities as the 
representative. Each Participant may, at any time, by notice to the 
then Chair of the Council, replace its representative and/or its 
alternate representative on such Council. A majority of the Council 
shall constitute a quorum and, unless specifically otherwise required, 
the affirmative vote of a majority of the Council members present (in 
person, by telephone or by written consent) shall be necessary to 
constitute action by the Council. From time to time, the Council shall 
elect one member of the Council to serve as Chair and another to serve 
as Vice Chair (to substitute for the Chair in the event of his or her 
unavailability) for such term as shall be designated and until his or 
her successor is duly elected, provided that in the event a Participant 
replaces a representative who is acting as Chair or Vice Chair, such 
representative shall also assume the position of Chair or Vice Chair, 
as applicable. All notices and other communications for the Council 
shall be sent to it in care of the Chair or to each of the 
representatives.
    V. The Council shall determine the times and locations of Council 
meetings, provided that the Chair, acting alone, may also call a 
meeting of the Council in the event the Chair determines that there is 
good cause to do so. To the extent reasonably possible, notice of any 
meeting shall be given at least ten business days prior thereto. 
Notwithstanding anything herein to the contrary, representatives shall 
always be given the option of participating in any meeting 
telephonically at their own expense rather than in person.
    VI. For the purpose of fulfilling the Participants' DOEA Regulatory 
Responsibilities, the Council shall allocate Common Members that 
conduct a public options business among Participants from time to time 
in such manner as the Council deems appropriate, provided that any such 
allocation shall be based on the following [principals] principles 
except to the extent all affected Participants consent:
    (a) The Council may not allocate a member to a Participant unless 
the member is a member of that Participant.
    (b) To the extent practical, Common Members that conduct a public 
options business shall be allocated among the Participants of which 
they are members in such manner as to equalize as nearly as possible 
the allocation among such Participants. For example, if sixteen Common 
Members that conduct a public options business are members only of 
three Participants, such members shall be allocated among such 
Participants such that no Participant is allocated more than six such 
members and no Participant is allocated less than five such members.
    (c) To the extent practical, the allocation of Common Members shall 
take into account the amount of customer activity conducted by each 
member in Covered Securities such that Common Members shall be 
allocated among the Participants of which they are members in such 
manner as most evenly divides the Common Members with the largest 
amount of customer activity among such Participants.
    (d) Insofar as practical, it is intended that allocation of Common 
Members to Participants will be rotated among the applicable 
Participants and, more specifically, that Common Members shall not be 
allocated to a Participant as to which such member was allocated within 
the previous two years.
    (e) The Council shall make general reallocations of Common Members 
from time-to-time as it deems appropriate.
    (f) Whenever a Common Member ceases to be a member of its DOEA, the 
DOEA shall promptly inform the Council, which shall promptly review the 
matter and allocate the Common Member to another Participant.

[[Page 7049]]

    (g) A DOEA may request that a Common Member that is allocated to it 
be reallocated to another Participant by giving thirty days written 
notice thereof. The Council, in its discretion, may approve such 
request and reallocate such Common Member to another Participant.
    (h) All determinations by the Council with respect to allocations 
shall be by the affirmative vote of a majority of the Participants 
that, at the time of such determination, share the applicable Common 
Member being allocated; a Participant shall not be entitled to vote on 
any allocation relating to a Common Member unless the Common Member is 
a member of such Participant.
    (i) Allocations for calendar years [2003 and] 2004 and 2005 shall 
also be subject to the provisions set forth at Appendix A hereof, which 
provisions shall control in the event of any conflict between them and 
the provisions set forth above.
    VII. Each DOEA shall conduct a routine inspection and examination 
of each Common Member allocated to it on a cycle not less frequently 
than determined by the Council. The other Participants agree that, upon 
request, relevant information in their respective files relative to a 
Common Member will be made available to the applicable DOEA. At each 
meeting of the Council, each Participant shall be prepared to report on 
the status of its examination program for the previous quarter and any 
period prior thereto that has not previously been reported to the 
Council. In the event a DOEA believes it will not be able to complete 
the examination cycle for its allocated firms, it will so advise the 
Council. The Council will undertake to remedy this situation by 
allocating selected firms and, if necessary, lengthening the cycles for 
selected firms.
    VIII. Each Participant will, upon request, promptly furnish a copy 
of the report, or applicable portions thereof relating to Covered 
Securities, of any examination made pursuant to the provisions of this 
Agreement to each other Participant of which the Common Member examined 
is a member.
    IX. Each Participant will, routinely, forward to each other 
Participant of which a Common Member is a member, copies of all 
communications regarding deficiencies relating to Covered Securities 
noted in a report of examination conducted by each Participant. If an 
examination relating to Covered Securities conducted by a Participant 
reveals no deficiencies, such fact will also, upon request, be 
communicated to each other Participant of which the Common Member 
concerned is a member.
    X. Each DOEA's Regulatory Responsibility shall include 
investigations into terminations ``for cause'' of associated persons 
relating to Covered Securities, unless such termination is related 
solely to another Participant's market. In the latter instance, that 
Participant to whose market the termination for cause relates shall 
discharge Regulatory Responsibility with respect to such termination 
for cause. In connection with a DOEA's examination, investigation and/
or enforcement proceeding regarding a Covered Security-related 
termination for cause, the other Participants of which the Common 
Member is a member shall furnish, upon request, copies of all pertinent 
materials related thereto in their possession. As used in this Section, 
``for cause'' shall include, without limitation, terminations 
characterized on Form U5 [U-5] under the label ``Permitted to Resign,'' 
``Discharge'' or ``Other.''
    XI. Each DOEA shall discharge the Regulatory Responsibility 
relative to a Covered Securities-related customer complaint or Form U4 
[U-4] filing[,] unless such complaint or filing is uniquely related to 
another Participant's market. In the latter instance, the DOEA shall 
forward the matter to that Participant to whose market the matter 
relates, and the latter shall discharge Regulatory Responsibility with 
respect thereto. If a Participant receives a customer complaint for a 
Common Member related to a Covered Security for which the Participant 
is not the DOEA, the Participant shall promptly forward a copy of such 
complaint to the DOEA.
    XII. Any written notice required or permitted to be given under 
this Agreement shall be deemed given if sent by certified mail, return 
receipt requested, to each Participant entitled to receipt thereof, to 
the attention of the Participant's representative on the Council at the 
Participant's then principal office or by e-mail at such address as the 
representative shall have filed in writing with the Chair.
    XIII. The costs incurred by each Participant in discharging its 
Regulatory Responsibility under this Agreement are not reimbursable. 
However, any Participants may agree that one or more will compensate 
the other(s) for costs.
    XIV. The Participants shall notify the Common Members of this 
Agreement by means of a uniform joint notice approved by the Council.
    XV. This Agreement may be amended in writing duly approved by each 
Participant.
    XVI. Any of the Participants may manifest its intention to cancel 
its participation in this Agreement at any time upon the giving to the 
Council of written notice thereof at least 90 days prior to such 
cancellation. Upon receipt of such notice the Council shall allocate, 
in accordance with the provisions of this Agreement, those Common 
Members for which the petitioning party was the DOEA. Until such time 
as the Council has completed the reallocation described above, the 
petitioning Participant shall retain all its rights, privileges, duties 
and obligations hereunder.
    XVII. The cancellation of its participation in this Agreement by 
any Participant shall not terminate this Agreement as to the remaining 
Participants. This Agreement will only terminate following notice to 
the Commission, in writing, by the then Participants that they intend 
to terminate the Agreement and the expiration of the applicable notice 
period. Such notice shall be given at least six months prior to the 
intended date of termination, provided that in the event a notice of 
cancellation is received from a Participant that, assuming the 
effectiveness thereof, would result in there being just one remaining 
member of the Council, notice to the Commission of termination of this 
Agreement shall be given promptly upon the receipt of such notice of 
cancellation, which termination shall be effective upon the 
effectiveness of the cancellation that triggered the notice of 
termination to the Commission.

Limitation of Liability

    No Participant nor the Council nor any of their respective 
directors, governors, officers, employees or representatives shall be 
liable to any other Participant in this Agreement for any liability, 
loss or damage resulting from or claimed to have resulted from any 
delays, inaccuracies, errors or omissions with respect to the provision 
of Regulatory Responsibility as provided hereby or for the failure to 
provide any such Responsibility, except with respect to such liability, 
loss or damages as shall have been suffered by one or more of the 
Participants and caused by the willful misconduct of one or more of the 
other participants or their respective directors, governors, officers, 
employees or representatives. No warranties, express or implied, are 
made by any or all of the Participants or the Council with respect to 
any Regulatory

[[Page 7050]]

Responsibility to be performed by each of them hereunder.

Relief From Responsibility

    Pursuant to Section 17(d)(1)(A) of the Securities Exchange Act of 
1934 and Rule 17d-2 promulgated pursuant thereto, the Participants join 
in requesting the Securities and Exchange Commission, upon its approval 
of this Agreement or any part thereof, to relieve those Participants 
which are from time to time participants in this Agreement which are 
not the DOEA as to a Common Member of any and all Regulatory 
Responsibility with respect to the matters allocated to the DOEA.
    In Witness Whereof, the Participants hereto have executed this 
Agreement as of the date and year first above written.

APPENDIX A--ALLOCATION PROVISIONS FOR CALENDAR YEARS [2003 AND] 2004 
AND 2005

    The allocation for calendar year [2003] 2004 shall be performed 
in accordance with the provisions of Section VI, provided that there 
shall be a partial allocation to the Boston Stock Exchange, Inc. 
whereby the Boston Stock Exchange, Inc. is allocated one-half of its 
share of the total number of Common Members. For calendar year 2005, 
there shall be a reallocation whereby the Boston Stock Exchange, 
Inc. shall receive from the other DOEAs a number of Common Members 
to make the allocation equitable [immediately following the initial 
allocation there shall be a partial reallocation whereby one-half of 
the Common Members allocated to the International Stock Exchange, 
Inc., the Pacific Exchange, Inc. and the Philadelphia Stock 
Exchange, Inc. (such Participants being herein called the ``New 
DOEAs'') are reallocated among the other Participants that have such 
member in common. In the event that an initial allocation results in 
a New DOEA being allocated an odd number of Common Members, for 
purposes of the reallocation, such number shall be deemed to be 
increased by one or decreased by one to the extent this will result 
in the number of Common Members allocated to the remaining DOEAs 
being more equal. For example, if sixteen Common Members are members 
of one New DOEA as well as two DOEAs that are not New DOEAs, such 
members shall be allocated among such DOEAs in the normal manner 
such that two DOEAs are allocated five such members and the 
remaining DOEA is allocated six members. Thereafter and assuming 
only five Common Members were allocated to the New DOEA, three of 
the members allocated to the New DOEA would be reallocated among the 
DOEAs that are not New DOEAs such that the New DOEA shall end up 
with two Common Members allocated to it and the remaining two DOEAs 
shall both end up with seven Common Members. Again by way of 
example, if twenty-one Common Members are members of one New DOEA as 
well as three DOEAs that are not New DOEAs and the New DOEA received 
an allocation of five members and two of the remaining DOEAs also 
received an allocation of five members with the fourth DOEA 
receiving an allocation of six members, only two of the five Common 
Members allocated to the New DOEA would be reallocated since such 
reallocation would result in an equal allocation of six each among 
the remaining DOEAs. For calendar year 2004, the Common Members 
reallocated from the New DOEAs to the remaining DOEAs as part of the 
allocation for calendar year 2003 shall be reallocated back to the 
New DOEA to which such Common Member was originally allocated].

Exhibit A \14\--Participant Rules Applicable to the Conduct of Covered 
Securities: Rules Enforced Under 17d-2 Agreement
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    \14\ This is a partial list of the rules provided to the 
Commission. The full list of rules provided to the Commission is 
available at the principal offices of each of the SROs and at the 
Commission's Public Reference Room.
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Opening of Accounts
    AMEX--Rules 411 and 921
    CBOE--Rule 9.7
    ISE--Rule 608
    NASD--Rule 2860(b)(16); IM-2860-2
    NYSE--Rules 721 and 405
    PHLX--Rule 1024(b)
    PCX--Rule 9.2(a) and Rule 9.18(b)
    BSE/BOX--Chapter XI, Section 9
Supervision
    AMEX--Rules 411 and 922
    CBOE--Rule 9.8
    ISE--Rule 609
    NASD--Rule 2860(b)(20)
    NYSE--Rules 722, 342 and 343
    PHLX--Rule 1025
    PCX--Rule 9.2(b)
    BSE/BOX--Chapter XI, Section 10
Suitability
    AMEX--Rule 923
    CBOE--Rule 9.9
    ISE--Rule 610
    NASD--Rule 2860(b)(19)
    NYSE--Rule 723
    PHLX--Rule 1026
    PCX--Rule 9.18(c)
    BSE/BOX--Chapter XI, Section 11

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the amended plan 
is consistent with the Act. Persons making written submissions should 
file six copies thereof with the Secretary, Securities and Exchange 
Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. Comments 
may also be submitted electronically at the following e-mail address: 
[email protected]. All comment letters should refer to File No. S7-
966. 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, comments should be sent in hard copy or by e-mail but not 
by both methods. Copies of the submission, all subsequent amendments, 
all written statements with respect to the amended plan that are filed 
with the Commission, and all written communications relating to the 
amended plan between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for inspection and copying in the 
Commission's Public Reference Section. Copies of such filing will also 
be available for inspection and copying at the principal office of each 
of the SROs. All submissions should refer to File No. S7-966 and should 
be submitted by March 4, 2004.

V. Discussion

    The Commission continues to believe that the proposed plan is an 
achievement in cooperation among the SRO participants, and will reduce 
unnecessary regulatory duplication by allocating to the designated SRO 
the responsibility for certain options-related sales practice matters 
that would otherwise be performed by multiple SROs. The plan promotes 
efficiency by reducing costs to firms that are members of more than one 
of the SRO participants. In addition, because the SRO participants 
coordinate their regulatory functions in accordance with the plan, the 
plan promotes, and will continue to promote, investor protection.
    Under paragraph (c) of Rule 17d-2, the Commission may, after 
appropriate notice and comment, declare a plan, or any part of a plan, 
effective.\15\ In this instance, the Commission believes that 
appropriate notice and comment can take place after the proposed 
amendment is effective. The primary purpose of the amendment is to add 
the BSE as an SRO participant. By approving it today, the amendment can 
be implemented prior to the BSE's options trading facility, BOX, 
beginning its operations. In addition, the prior plan, which this 
amends, was published for comment, and no comments were received.\16\ 
The Commission does not believe that the amendment raises any new 
regulatory issues.
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    \15\ 17 CFR 240.17d-2(c).
    \16\ See supra note 12.
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    This order gives effect to the amended plan submitted to the 
Commission that is contained in File No. S7-966. The SRO participants 
shall notify all members affected by the amended plan of their rights 
and obligations under the amended plan.

[[Page 7051]]

    It is therefore ordered, pursuant to sections 17(d) \17\ and 
11A(a)(3)(B) \18\ of the Act, that the amended plan of the Amex, BSE, 
CBOE, ISE, NASD, NYSE, PCX, and Phlx filed pursuant to Rule 17d-2 \19\ 
is approved.
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    \17\ 15 U.S.C. 78q(d).
    \18\ 15 U.S.C. 78k-1(a)(3)(B).
    \19\ 17 CFR 240.17d-2.
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    It is further ordered that those SRO participants that are not the 
DOEA as to a particular member are relieved of those responsibilities 
allocated to the member's DOEA under the amended plan.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(34).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 04-3024 Filed 2-11-04; 8:45 am]
BILLING CODE 8010-01-P