[Federal Register: March 15, 2007 (Volume 72, Number 50)]
[Notices]
[Page 12227-12233]
[DOCID:fr15mr07-111]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-27750; 812-13336]

Vanguard Bond Index Funds, et al.; Notice of Application

March 9, 2007.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of an application for an order under section 6(c) of the
Investment Company Act of 1940 (the ``Act'') for exemptions from
sections 2(a)(32), 18(f)(1), 18(i), 22(d) and 24(d) of the Act and rule
22c-1 under the Act,

and under sections 6(c) and 17(b) of the Act for exemptions from
sections 17(a)(1) and (2) of the Act.

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Summary of Application: Applicants request an order that would permit
the following: (a) An open-end management investment company, the
series of which consist of the component securities of certain fixed
income securities indices, to issue a class of shares (``ETF Shares'')
that can be purchased from the investment company and redeemed only in
large aggregations (``Creation Units''); (b) secondary market
transactions in ETF Shares to occur at negotiated prices on a national
securities exchange, as defined in section 2(a)(26) of the Act
(``Exchange''); (c) dealers to sell ETF Shares to purchasers in the
secondary market unaccompanied by a prospectus when prospectus delivery
is not required by the Securities Act of 1933 (``Securities Act''); and
(d) certain affiliated persons of the series to deposit securities
into, and receive securities from, the series in connection with the
purchase and redemption of Creation Units.

Applicants: Vanguard Bond Index Funds (``Trust''), The Vanguard Group,
Inc. (``VGI''), and Vanguard Marketing Corporation (``VMC'').

Filing Dates: The application was filed on October 25, 2006 and amended
on January 23, 2007. Applicants have agreed to file an amendment during
the notice period, the substance of which is reflected in the notice.

Hearing or Notification of Hearing: An order granting the application
will be issued unless the Commission orders a hearing. 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 March 30, 2007, 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, U.S. Securities and Exchange Commission, 100 F
Street, NE., Washington, DC 20549-1090. Applicants, c/o Barry A.
Mendelson, The Vanguard Group, Inc., P.O. Box 2600, Valley Forge, PA
19482.

FOR FURTHER INFORMATION CONTACT: Keith A. Gregory, Senior Counsel at
(202) 551-6815, or Michael W. Mundt, Senior Special Counsel, at (202)
551-6821 (Division of Investment Management, Office of Investment
Company Regulation).

SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained for a fee at the
Commission's Public Reference Desk, 100 F Street, NE., Washington, DC
20549-0102, telephone<PHONE_NUMBER>.

Applicants' Representations

    1. The Trust is an open-end management investment company
registered under the Act and organized as a Delaware statutory trust.
The Trust currently has four series (``Existing Funds''). Each Existing
Fund currently offers separate classes of shares for retail and
institutional investors (such classes of shares collectively,
``Conventional Shares''). In the future, the Trust or another
registered open-end management investment company may offer other
series (``Future Funds,'' and together with Existing Funds, ``Funds'').
Any Future Fund will: (a) Be advised by VGI or an entity controlled by
or under common control with VGI and (b) comply with the terms and
conditions of any order granted pursuant to the application.
    2. VGI is a Pennsylvania corporation that is wholly and jointly
owned by 35 investment companies and the series of those investment
companies (each series, a ``Vanguard Fund'' and collectively, the
``Vanguard Fund Complex''). VGI is registered as an investment adviser
under the Investment Advisers Act of 1940 and as a transfer agent under
the Securities Exchange Act of 1934 (``Exchange Act''). VGI provides
each Vanguard Fund with corporate management, administrative, and
transfer agency services at cost. VGI also provides advisory services
at cost to certain Vanguard Funds, including each of the Existing
Funds. VMC, a wholly owned subsidiary of VGI, is registered as a
broker-dealer under the Exchange Act. VMC provides all distribution and
marketing services to the Vanguard Funds, including each of the
Existing Funds.
    3. Each Existing Fund seeks to track as closely as possible the
performance of a different index that measures the performance of the
bond market as a whole or a discrete segment of the bond market (the
``Target Indexes'').\1\ The bond holdings of each Existing Fund are
selected through a sampling process and at least 80% (and in most cases
more than 90%) of an Existing Fund's assets will be invested in bonds
included in the Existing Fund's Target Index.\2\ The remainder is
typically invested in bonds that are not included in the Existing
Fund's Target Index, cash and cash equivalents, futures, and swap
contracts. Unlike the other three Existing Funds, the Vanguard Total
Bond Market Index Fund (``Total Bond Market Index Fund'') holds
government mortgage-backed securities (``MBS''), asset backed
securities (``ABS''), and commercial mortgage-backed securities
(``CMBS'').\3\ The Total Bond Market Index Fund seeks to track that
portion of the Lehman Agg. Index devoted to MBS by investing a
corresponding percentage of its assets either in MBS included in the
index or in ``to-be-announced'' (``TBA'') transactions on MBS.\4\
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    \1\ The Target Indexes are Lehman Brothers Aggregate Bond Index
``Lehman Agg. Index''), Lehman Brothers 1-5 Year Government/Credit
Index, Lehman Brothers 5-10 Year Government/Credit Index and Lehman
Brothers Long Government/Credit Index.
    \2\ Each Fund invests in a representative sample of bonds from
its Target Index that will resemble the full index in terms of
characteristics such as maturity, credit quality, issuer type and
yield.
    \3\ The Total Bond Market Index Fund will hold MBS, ABS, and
CMBS in approxiamtely the same percentages as those securities are
represented in the Lehman Agg. Index. ABS and CMBS will not be among
the Deposit Securities required to purchase a Creation Unit or among
the Redemption Securities an investor will receive when redeeming a
Creation Unit.
    \4\ A ``TBA transaction'' is essentially a purchase or sale of
an MBS for future settlement at an agreed-upon date. Applicants
state that most MBS trades are executed as TBA transactions.
Applicants state that TBA transactions increase the liquidity and
pricing efficiency of transactions in MBS because they permit
similar MBS to be traded interchangeably pursuant to commonly
observed settlement and delivery requirements.
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    4. Applicants state that, historically, the difference between the
performance of an Existing Fund and the performance of its Target Index
has rarely exceeded one percentage point and in almost all cases has
been significantly less than one percentage point. Applicants expect
that, in the future, both the Existing Funds and Future Funds will
track their Target Indexes with the same degree of precision, and will
have a tracking error of less than 5% per annum. No entity that
creates, compiles, sponsors, or maintains a Target Index is or will be
an affiliated person, as defined in section 2(a)(3) of the Act, or an
affiliated person of an affiliated person, of the Funds, VGI, any
adviser to or promoter of a Fund, or VMC.
    5. Each Fund proposes to create ETF Shares, a class of shares that
would be listed on an Exchange and trade in the secondary market at
negotiated prices. Applicants submit that the availability of ETF
Shares would satisfy market

demand for investment company securities which would provide intra-day
liquidity and low cost exposure to an index of bonds. Applicants state
that, by creating an exchange-traded class of shares, the Funds will
offer short-term investors an attractive means of investing in the
Funds.\5\ Applicants state that offering ETF Shares will benefit the
Funds by reducing the portfolio disruption and transaction costs caused
by short-term investors.
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    \5\ Applicants expect ETF Shares to appeal to short-term
investors because they can be bought and sold continuously
throughout the day at market price rather than at net asset value
(``NAV''), which is calculated only once per day at the close of
trading on the New York Stock Exchange (``NYSE''). Transactions in
Conventional Shares will continue to be priced at NAV.
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    6. The Funds will issue ETF Shares only in Creation Units,
aggregations of a specified number of shares ranging from 50,000 to
100,000 shares. The price of a Creation Unit will range from $1,500,000
to $10,000,000. Orders to purchase Creation Units must be placed with
VMC by or through an ``Authorized Participant,'' which is a Depository
Trust Company (``DTC'') participant that has executed a participant
agreement with VMC. Creation Units will be issued in exchange for an
in-kind deposit of securities and cash (``Creation Deposit'').\6\ The
Creation Deposit will consist of a basket of approximately 50 to 100
fixed income securities selected by VGI (``Deposit Securities'') \7\
and a cash payment to equalize any difference between the total
aggregate market value of the Deposit Securities and the NAV per
Creation Unit of the Fund (``Purchase Balancing Amount'').\8\ An
investor purchasing a Creation Unit from a Fund will be charged a fee
(``Transaction Fee'') to prevent any dilution of the interests of
remaining shareholders due to the Fund incurring costs in connection
with the investor's purchase of the Creation Unit(s).\9\ Each purchaser
of a Creation Unit will receive a prospectus for the ETF Shares (the
``ETF Prospectus'') that discloses the maximum Transaction Fee, and the
method of calculating Transaction Fees will be disclosed in the Fund's
Statement of Additional Information (``SAI''). A Fund's Conventional
Shares will be covered by a separate prospectus (the ``Conventional
Prospectus'').
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    \6\ On each business day, prior to the opening of trading on the
Exchange, VGI will make available through the National Securities
Clearing Corporation (``NSCC'') (or through some other party if NSCC
is unwilling or unable to perform this function) the list of the
names and the required amount of each Deposit Security to be
included in the Creation Deposit for each Fund. Each Fund reserves
the right to permit or require the purchaser of a Creation Unit to
substitute cash or a different security to replace a Deposit
Security under certain circumstances.
    \7\ Applicants state that it would be impractical to ask an
Authorized Participant to assemble a basket of several hundred or
several thousand bonds that replicate the portfolio of a Fund.
Accordingly, VGI will select a subset of the Fund's portfolio using
a representative sampling strategy.
    \8\ The Funds must comply with the federal securities laws in
accepting Deposit Securities and satisfying redemptions with
Redemption Securities (as defined below), including that the Deposit
Securities and Redemption Securities are sold in transactions that
would be exempt from registration under the Securities Act. If at
any time in the future the Funds accept Deposit Securities or
satisfy redemptions with Redemption Securities that are restricted
securities eligible for resale pursuant to rule 144A under the
Securities Act, the Funds will comply with the conditions of rule
144A, including in satisfying redemptions with such rule 144A
eligible restricted Redemption Securities. The prospectus for the
Funds will state that ``An Authorized Participant that is not a
`qualified institutional buyer' as defined in rule 144A under the
Securities Act of 1933 will not be able to receive, as part of the
redemption basket, restricted securities eligible for resale under
rule 144A.''
    \9\ When a Fund permits an investor to substitute cash for a
Deposit Security, the investor may be assessed a higher Transaction
Fee to offset the increased cost to the Fund of buying the necessary
Deposit Security for its portfolio.
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    7. The Funds will accept purchase orders only on days that the NYSE
is open for business. Purchase orders must be received by VMC prior to
the closing time of the regular trading session of the NYSE. VMC will
transmit all purchase orders to the Funds, maintain a record of each
Creation Unit purchaser, and send out an ETF Prospectus and
confirmation to such purchasers.
    8. The purchaser of a Creation Unit will be able to separate the
Creation Unit into individual ETF Shares.\10\ ETF Shares will be listed
on an Exchange and traded in the secondary market in the same manner as
shares of other exchange-traded funds. One or more Exchange specialists
(``Specialists'') will be assigned to make a market in the ETF Shares.
The price of ETF Shares traded on an Exchange will be based on a
current bid/offer market, and each ETF Share is expected to have an
initial market value of between $30 and $100. Transactions involving
the sale of ETF Shares in the secondary market will be subject to
customary brokerage commissions and charges.
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    \10\ Applicants state that persons purchasing Creation Units
will be cautioned in the ETF Prospectus that some activities on
their part may, depending on the circumstances, result in their
being deemed a statutory underwriter and subject them to the
prospectus delivery and liability provisions of the Securities Act.
For example, a broker-dealer firm and/or its client may be deemed a
statutory underwriter if it purchases Creation Units from a Fund,
breaks them down into the constituent ETF Shares, and sells ETF
Shares directly to its customers, or if it chooses to couple the
purchase of a supply of new ETF Shares with an active selling effort
involving solicitation of secondary market demand for ETF Shares.
The ETF Prospectus will state that whether a person is an
underwriter depends on all the facts and circumstances pertaining to
that person's activities. The ETF Prospectus also will state that
broker-dealer firms should note that dealers who are not
``underwriters'' but are participating in a distribution (as
contrasted to an ordinary secondary trading transaction), and thus
dealing with ETF Shares that are part of an ``unsold allotment''
within the meaning of section 4(3)(C) of the Securities Act, would
be unable to take advantage of the prospectus delivery exemption
provided by section 4(3) of the Securities Act.
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    9. Applicants expect that purchasers of Creation Units will include
institutional investors and arbitrageurs. A Specialist, in providing
for a fair and orderly secondary market for ETF Shares, also may
purchase Creation Units for use in its market making activities on the
Exchange. Applicants expect that secondary market purchasers of ETF
Shares will include both institutional and retail investors.\11\
Applicants believe that arbitrageurs will purchase or redeem Creation
Units to take advantage of discrepancies between the ETF Shares' market
price and the ETF Shares' NAV. Applicants expect that this arbitrage
activity will provide a market discipline that will result in a close
correspondence between the price at which the ETF Shares trade and
their NAV. Applicants do not expect ETF Shares to trade at a
significant premium or discount to their NAV.\12 \
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    \11\ ETF Shares will be registered in book-entry form only. DTC
or its nominee will be the registered owner of all outstanding ETF
Shares. Records reflecting the beneficial owners of ETF Shares will
be maintained by DTC or its participants.
    \12\ Every 15 seconds throughout the trading day, the Exchange
will disseminate via the facilities of the Consolidated Tape
Association the market value of an ETF Share and, separate from the
consolidated tape, the Exchange or another information provider will
disseminate a calculation of the approximate NAV of an ETF Share.
Applicants state that an investor comparing the two figures will be
able to determine whether, and to what extent, ETF Shares are
selling at a premium or discount to NAV.
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    10. Applicants will make available an ETF Shares product
description (``Product Description'') for distribution in accordance
with an Exchange rule requiring Exchange members and member
organizations effecting transactions in ETF Shares to deliver a Product
Description to investors purchasing ETF Shares, whether on or away from
the Exchange. Applicants state that any other Exchange that applies for
unlisted trading privileges in ETF Shares will have to adopt a similar
rule, requiring delivery of the Product Description. The Product
Description will provide a plain English overview of a Fund, including
its investment objective and investment strategies, the identity of
VGI, the material risks of investing in the Fund, and the frequency of
dividends and capital gains distributions. The Product Description also
will provide a brief, plain English

description of the salient features of ETF Shares. The Product
Description will advise investors that an ETF Prospectus and SAI may be
obtained, without charge, from the investor's broker or from VMC. The
Product Description also will identify a Web site address where
investors can obtain information about the composition and compilation
methodology of the Target Index. Applicants expect that the number of
purchases of ETF Shares in which an investor will not receive a Product
Description will not constitute a significant portion of the market
activity in ETF Shares.
    11. Except in connection with the liquidation of a Fund (or of a
Fund's ETF Share class), ETF Shares will only be redeemable in Creation
Units through each Fund. An investor redeeming a Creation Unit
generally will receive (a) A basket of securities (``Redemption
Securities''), which in most cases will be the same as the Deposit
Securities required of investors purchasing Creation Units on the same
day, and (b) a cash amount equal to the difference in the value of the
Redemption Securities and the NAV of a Creation Unit, which in most
cases will be the same as the Purchase Balancing Amount paid (or
received) by investors purchasing Creation Units on the same day. A
Fund may make redemptions partly in cash in lieu of transferring one or
more Redemption Securities to a redeeming investor, if the Fund
determines that such alternative is warranted. A Fund may make such a
determination if, for example, a redeeming investor is unable, by law
or policy, from owning a particular Redemption Security. In order to
cover the Fund's transaction costs, redeeming investors will pay a
Transaction Fee.\13\
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    \13\ Investors who redeem for cash, rather than in kind, may pay
a higher Transaction Fee.
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Applicants' Legal Analysis

    1. Applicants request an order under section 6(c) of the Act for
exemptions from sections 2(a)(32), 18(f)(1), 18(i), 22(d) and 24(d) of
the Act and rule 22c-1 under the Act; and under sections 6(c) and 17(b)
of the Act for exemptions from sections 17(a)(1) and (2) of the Act.
    2. Section 6(c) of the Act provides that the Commission may exempt
any person, security, or transaction, or any class or classes of
persons, securities, or transactions, from any provision or provisions
of the Act, or any rule or regulation thereunder, if and to the extent
that such exemption is necessary or appropriate in the public interest
and consistent with the protection of investors and the purposes fairly
intended by the policy and provisions of the Act.

Section 2(a)(32) of the Act

    3. Section 2(a)(32) of the Act defines ``redeemable security'' as
any security, other than short-term paper, under the terms of which the
holder, upon its presentation to the issuer, is entitled to receive
approximately his proportionate share of the issuer's current net
assets, or the cash equivalent. Applicants request an order under
section 6(c) to permit ETF Shares to be redeemed in Creation Units
only. Applicants note that because of the arbitrage possibilities
created by the redeemability of Creation Units, it is expected that the
market price of an ETF Share will not vary much from its NAV.

Section 18(f)(1) and 18(i) of the Act

    4. Section 18(f)(1) of the Act, in relevant part, prohibits a
registered open-end company from issuing any class of ``senior
security,'' which is defined in section 18(g) to include any stock of a
class having a priority over any other class as to the distribution of
assets or payment of dividends. Section 18(i) of the Act requires that
every share of stock issued by a registered management company be
voting stock, with the same voting rights as every other outstanding
voting stock. Rule 18f-3 permits an open-end fund to issue multiple
classes of shares representing interests in the same portfolio without
seeking exemptive relief from section 18(f)(1) and 18(i), provided that
the fund complies with certain requirements. Applicants state that they
will comply in all respects with rule 18f-3, except the requirements
that (a) Each class have the same rights and obligations as each other
class (other than the differences allowed by the rule), and (b) if a
class has a different distribution arrangement, the class must pay all
of the expenses of the arrangement. Because applicants, therefore, may
not rely on rule 18f-3, they request an exemption under section 6(c)
from sections 18(f)(1) and 18(i).
    5. Applicants state that there are four ways in which the
Conventional Shares and ETF Shares of each Fund will have different
rights: (a) Conventional Shares are individually redeemable, while ETF
Shares will be redeemable in Creation Units only; (b) ETF Shares will
be traded on an Exchange, while Conventional Shares will not; (c)
Conventional Shares declare dividends daily, while ETF Shares will
declare dividends monthly; and (d) although all shares classes of a
Fund will pay dividends monthly, the payment date for the Conventional
Shares will be the same as the ex dividend date (``ex date''), while
the payment date for the ETF Share will be four days or more after the
ex date. Applicants assert that different trading and redemption rights
are necessary if their proposal is to have the desired benefits.
Applicants note that a Fund's ETF Shares will be tradable on an
Exchange and redeemable only in large aggregations in order to
encourage short-term investors to conduct their trading activities in a
way that does not disrupt the management of the Fund's portfolio.
Applicants assert that there is no reason to make Conventional Shares
tradable and that it would be counterproductive to facilitate the
ability of market timers to disrupt a Fund by making ETF Shares
individually redeemable.
    6. Applicants state the proposal to declare dividends to the ETF
Share class on a monthly basis, as opposed to on a daily basis for the
Conventional Share class, will result in a higher net asset value
(``NAV'') for the ETF Share class during a monthly period due to the
presence of accrued but undistributed income.\14\ Applicants submit
that absent adjustment, this difference would result in a
disproportionate allocation of a fund's income, realized capital gains
and losses, and unrealized appreciation and depreciation (``Allocable
Items'') to the ETF Shares relative to the Conventional Shares because
such items are allocated among a fund's classes based upon relative net
assets. Applicants intend to eliminate this potential inequality by
allocating the Allocable Items on the basis of class-level net assets
adjusted to factor out the differences introduced by the application of
the different dividend policies (``Asset Adjustment''). Applicants
submit that the use of the Asset Adjustment will ensure that the daily
allocation of Allocable Items to ETF Shares and Conventional Shares is
not distorted by the classes' differing dividend policies.\15\
Applicants state

that it is industry practice for bond ETFs to declare dividends
monthly.
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    \14\ When dividends are declared monthly, as opposed to daily,
each day's accrued income is reflected as an increase in the shares'
NAV. At the end of the month, when dividends are declared, the NAV
drops by the amount of the dividend. By contrast, when dividends are
declared daily, the amount of the daily income accrual is offset by
a corresponding distribution payable liability. As a result, the net
effect on the shares' NAV typically is zero.
    \15\ Applicants will not rely on the requested order until the
board of trustees (``Board'') of each Fund has formally determined
that, after applying the Asset Adjustment, the annualized rates of
return of the ETF and Conventional Share classes generally will
differ only by the expense differentials among the classes, as
required by rule 18f-3(c)(1)(v) under the Act.
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    7. Applicants state that the accrual of dividends in the NAV of the
ETF Shares but not the Conventional Shares will have an effect on the
voting power of the respective classes because the shareholders of the
Funds are given voting rights proportionate to the NAV of their shares.
Applicants assert that such effects on voting power will be minor and
that this treatment of voting rights meets the standards of section
18(i) because every share issued by the Funds will have equal voting
rights in that each share will be entitled to one vote per dollar of
NAV and a fractional vote per fractional dollar of NAV.
    8. Applicants state that although Conventional Shares and ETF
Shares both pay dividends monthly, another difference between the
classes is that the holders of Conventional Shares are able to reinvest
dividends immediately when paid, while the ETF Shareholders would have
to wait a few days to receive their payments through their brokers. As
a result, holders of Conventional Shares of the Funds who reinvest will
be continuously invested, while ETF Shareholders who reinvest will be
``out of the market'' for four days with respect to the amount of the
dividend.\16\ Applicants state that the four day difference will affect
the relative performance of the classes because during the time the
dividend is out of the market, ETF Shareholders will not receive income
or experience appreciation or depreciation on the amount of the
dividend. Applicants do not expect this economic difference to be
significant.
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    \16\ Applicants assert that the delay between the ex date and
the payment/reinvestment date occurs for all ETFs, whether they are
stand-alone ETFs or part of a multi-class structure, and regardless
of whether an ETF Shareholder elects to reinvest dividends.
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    9. Applicants assert that the different rights do not implicate the
concerns underlying section 18 of the Act, including excessive
leverage, conflicts of interest and investor confusion. With respect to
the potential for investor confusion, applicants will take a variety of
steps to ensure that investors understand the key differences between
Conventional Shares and ETF Shares. Applicants state that the ETF
Shares will not be marketed as a mutual fund investment. Marketing
materials may refer to ETF Shares as an interest in an investment
company or fund, but will not make reference to an ``open-end fund'' or
``mutual fund,'' except to compare or contrast the ETF Shares with the
shares of a conventional open-end management investment company. Any
marketing or advertising materials addressed primarily to prospective
investors will emphasize that (a) ETF Shares are not redeemable from a
Fund other than in Creation Units, (b) ETF Shares, other than in
Creation Units, may be sold only through a broker, and the shareholder
may have to pay brokerage commissions in connection with the sale, and
(c) a selling shareholder may receive less than NAV in connection with
the sale of ETF Shares. The same type of disclosure will be provided in
the Conventional Prospectus, ETF Prospectus, Product Description, SAI,
and any document addressed primarily to prospective investors. The
prospectus for the Fund's Conventional Shares will disclose that
dividends are declared daily and paid monthly. The prospectus and
Product Description for the ETF Shares will disclose that dividends are
declared monthly and paid monthly and that the reinvestment of
dividends (if elected), will not occur until approximately four days
after the ex date. The applicants also note that (a) All references to
a Fund's exchange-traded class of shares will use a form of the name
``ETF Shares'' rather than the Fund name, (b) the cover and summary
page of the ETF Prospectus will state that the ETF Shares are listed on
an Exchange and are not individually redeemable, (c) VMC will only
market Conventional Shares and ETF Shares in the same advertisement or
marketing material when the advertisement or marketing material
contains appropriate disclosure explaining the relevant features of
each class of shares and highlighting the differences between the share
classes, and (d) applicants have prepared educational materials
describing the ETF Shares.
    10. Applicants currently allocate distribution expenses among funds
in the Vanguard Fund Complex according to a cost-sharing formula
approved by the Commission in 1981 as part of an order allowing the
Vanguard Fund Complex to internalize its distribution services (``1981
Order'').\17\ For those funds in the Vanguard Fund Complex offering
multiple classes of shares, applicants apply the formula in the 1981
Order by treating each class as a separate fund (``Multi-Class
Distribution Formula'').
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    \17\ Investment Company Act Release No. 11645 (Feb. 25, 1981)
(Opinion of the Commission and Final Order). Under the formula, each
Vanguard Fund's contribution is based 50% on its average month-end
net assets during the preceding quarter relative to the average
month-end net assets of the other Vanguard Funds, and 50% on its
sales of new shares relative to the sales of new shares of the other
Vanguard Funds during the preceding 24 months. So that a new fund is
not unduly burdened, the formula caps each Vanguard Fund's
contribution at 125% of the average expenses of the Vanguard Funds
collectively, with any amounts above the cap redistributed among the
other Vanguard Funds. In addition, no fund may pay more than 0.2% of
its average month-end net assets for distribution.
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    11. Applicants propose to apply the Multi-Class Distribution
Formula to each Fund's class of ETF Shares. Applicants acknowledge
that, because ETF Shares may have a distribution arrangement that
differs from that for Conventional Shares, the proposed allocation
method is inconsistent with rule 18f-3. Applicants contend, however,
that the Multi-Class Distribution Formula is a fundamental feature of
Vanguard's unique, internally-managed structure, and that the proposed
allocation method is consistent with the method approved by the
Commission in the 1981 Order. The Multi-Class Distribution Formula has
been approved by the Board of each Fund, and the Board of each Fund,
including a majority of the trustees who are not interested persons, as
defined in section 2(a)(19) of the Act (``Disinterested Trustees''),
will review the application of the Multi-Class Distribution Formula on
an annual basis and determine that the proposed allocation is in the
best interests of each class of shareholders and of the Fund as a
whole.

Section 22(d) of the Act and Rule 22c-1 Under the Act

    12. Section 22(d), among other things, prohibits a dealer from
selling a redeemable security that is currently being offered to the
public by or through an underwriter, except at a current public
offering price described in the prospectus. Rule 22c-1 generally
requires that a dealer selling, redeeming, or repurchasing a redeemable
security do so only at a price based on its NAV. Applicants state that
secondary market trading in ETF Shares will take place at negotiated
prices, not at a current offering price described in the ETF
Prospectus, and not at a price based on NAV. Thus, purchases and sales
of ETF Shares in the secondary market will not comply with section
22(d) and rule 22c-1. Accordingly, applicants request exemptions from
these provisions under section 6(c) of the Act.
    13. Applicants assert that the sale of ETF Shares at negotiated
prices does not present the opportunity for any of the abuses that
section 22(d) and rule 22c-1 were designed to prevent. Applicants
maintain that while there is little legislative history regarding
section 22(d), its provisions, as well as those of rule 22c-1, appear
to have been designed to (a) Prevent dilution caused by certain
riskless trading schemes by

principal underwriters and contract dealers, (b) prevent unjust
discrimination or preferential treatment among buyers resulting from
sales at different prices, and (c) ensure an orderly distribution of
investment company shares by eliminating price competition from dealers
offering shares at less than the published sales price and repurchasing
shares at more than the published redemption price. Applicants state
that secondary market trading in ETF Shares would not cause dilution
for existing Fund shareholders because such transactions would not
directly or indirectly affect the Fund's assets. Applicants further
state that secondary market trading in ETF Shares would not lead to
discrimination or preferential treatment among purchasers because, to
the extent that different prices exist during a given trading day or
from day to day, these variances will occur as a result of market
forces. Finally, applicants contend that the proposed distribution
system will be orderly because, among other things, arbitrage activity
will ensure that the difference between the market price of ETF Shares
and their NAV remains narrow.

Section 24(d) of the Act

    14. Section 24(d) provides, in relevant part, that the prospectus
delivery exemption provided to dealer transactions by section 4(3) of
the Securities Act does not apply to transactions in a redeemable
security issued by an open-end investment company. Applicants request
an exemption under section 6(c) of the Act from section 24(d) to permit
dealers selling ETF Shares to rely on the prospectus delivery exemption
provided by section 4(3) of the Securities Act.\18\
---------------------------------------------------------------------------

    \18\ Applicants do not seek relief from the prospectus delivery
requirement for non-secondary market transactions, including
purchases of Creation Units or those involving an underwriter.
---------------------------------------------------------------------------

    15. Applicants state that ETF Shares will be listed on an Exchange
and will be traded in a manner similar to other equity securities,
including the shares of closed-end investment companies. Applicants
note that dealers selling shares of closed-end investment companies in
the secondary market generally are not required to deliver a prospectus
to the purchaser. Applicants contend that ETF Shares, as a listed
security, merit similar treatment, reducing compliance costs and
regulatory burdens that result from the imposition of a prospectus
delivery requirement on secondary market transactions. Applicants state
that because ETF Shares will be exchange-listed, prospective investors
will have access to several types of market information about the ETF
Shares. Applicants state that information regarding market price and
volume will be continually available on a real-time basis throughout
the day on brokers' computer screens and other electronic services. The
previous day's price and volume information also will be published
daily in the financial section of newspapers.
    16. Applicants further state that investors that purchase ETF
Shares in the secondary market will receive a Product Description,
describing the Fund and its ETF Shares. Applicants state that, while
not intended as a substitute for a prospectus, the Product Description
will contain information about ETF Shares that is tailored to meet the
needs of investors purchasing ETF Shares in the secondary market.

Sections 17(a)(1) and (2) of the Act

    17. Sections 17(a)(1) and (2) generally prohibit an affiliated
person of a registered investment company, or an affiliated person of
an affiliated person, acting as principal, from selling any security
to, or purchasing any security from, the company. Sections 2(a)(3)(A)
and (C) of the Act define ``affiliated person,'' respectively, as any
person who owns 5% or more of an issuer's outstanding voting securities
and any person who controls the fund. Section 2(a)(9) of the Act
provides that a control relationship will be presumed where one person
owns 25% or more of another person's voting securities. Applicants
state that a large institutional investor or the Specialist could own
5% or more, or more than 25%, of a Fund's outstanding voting securities
and, as a result, be deemed to be an affiliated person of the Fund
under section 2(a)(3)(A) or (C). Applicants further state that, because
purchases and redemptions of Creation Units would be in-kind, rather
than for cash, those investors would be precluded by sections 17(a)(1)
and (2) from purchasing or redeeming Creation Units from the Fund.
Accordingly, applicants request an exemption under sections 6(c) and
17(b) of the Act to permit these affiliated persons, and affiliated
persons of such affiliated persons who are not otherwise affiliated
with the Fund, to purchase and redeem Creation Units through in-kind
transactions.
    18. Section 17(b) of the Act authorizes the Commission to exempt a
proposed transaction from section 17(a) if evidence establishes that
the terms of the transaction, including the consideration to be paid or
received, are reasonable and fair and do not involve overreaching, and
the proposed transaction is consistent with the policies of the
registered investment company involved and the general purposes of the
Act. Applicants contend that no useful purpose would be served by
prohibiting persons affiliated with a Fund, as described above, from
purchasing or redeeming Creation Units from the Fund. Applicants
represent that Fund affiliates making in-kind purchases and redemptions
would be treated no differently from non-affiliates making the same
types of transactions. Applicants state that all purchases and
redemptions of Creation Units would be at the Fund's next calculated
NAV. Applicants also state that, in all cases, Deposit Securities and
Redemption Securities will be valued in the same manner and using the
same standards as those securities are valued for purposes of
calculating the Fund's NAV. Applicants assert that, for these reasons,
the requested relief meets the standards of sections 6(c) and 17(b).

Applicants' Conditions

    Applicants agree that the order granting the requested relief will
be subject to the following conditions:
    1. The ETF Shares Prospectus and the Product Description for each
Fund will clearly disclose that, for purposes of the Act, ETF Shares
are issued by the Fund and the acquisition of ETF Shares by investment
companies is subject to the restrictions of section 12(d)(1) of the
Act, except as permitted by an exemptive order that permits registered
investment companies to invest in a Fund beyond the limits of section
12(d)(1), subject to certain terms and conditions.
    2. As long as a Fund operates in reliance on the requested order,
the ETF Shares will be listed on an Exchange.
    3. The ETF Shares of a Fund will not be advertised or marketed as
shares of an open-end investment company or mutual fund. The ETF Shares
Prospectus of each Fund will prominently disclose that ETF Shares are
not individually redeemable and will disclose that holders of ETF
Shares may acquire the shares from the Fund and tender the shares for
redemption to the Fund in Creation Unit aggregations only. Any
advertising material that describes the purchase or sale of Creation
Units or refers to redeemability will prominently disclose that ETF
Shares are not individually redeemable and that holders of ETF Shares
may acquire the shares from the Fund and tender the shares for
redemption to the Fund in Creation Unit aggregations only.

    4. Before a Fund may rely on the order, the Commission will have
approved, pursuant to rule 19b-4 under the Exchange Act, an Exchange
rule requiring Exchange members and member organizations effecting
transactions in ETF Shares to deliver a Product Description to
purchasers of ETF Shares.
    5. On an annual basis the Board of each Fund, including a majority
of Disinterested Trustees, must determine, for each Fund, that the
allocation of distribution expenses among the classes of Conventional
Shares and ETF Shares in accordance with the Multi-Class Distribution
Formula is in the best interests of each class and of the Fund as a
whole. Each Fund will preserve for a period of not less than six years
from the date of a Board determination, the first two years in an
easily accessible place, a record of the determination and the basis
and information upon which the determination was made. This record will
be subject to examination by the Commission and its staff.
    6. Applicants' Web site, which is and will be publicly accessible
at no charge, will contain the following information, on a per ETF
Share basis, for each Fund: (a) The prior business day's closing NAV
and the midpoint of the bid-asked spread at the time the Fund's NAV is
calculated (``Bid-Asked Price'') and a calculation of the premium or
discount of the Bid-Asked Price in relation to the closing NAV; and (b)
data for a period covering at least the four previous calendar quarters
(or the life of a Fund, if shorter) indicating how frequently each
Fund's ETF Shares traded at a premium or discount to NAV based on the
Bid-Asked Price and closing NAV, and the magnitude of such premiums and
discounts. In addition, the Product Description for each Fund will
state that applicants' Web site has information about the premiums and
discounts at which the Fund's ETF Shares have traded.
    7. The ETF Shares Prospectus and annual report will include, for
each Fund: (a) The information listed in condition 6(b), (i) In the
case of the ETF Shares Prospectus, for the most recently completed
calendar year (and the most recently completed quarter or quarters, as
applicable), and (ii) in the case of the annual report, for no less
than the immediately preceding five fiscal years (or the life of the
Fund, if shorter); and (b) the cumulative total return and the average
annual total return for one, five and ten year periods (or the life of
the Fund, if shorter) of (i) an ETF Share based on NAV and the Bid-
Asked Price and (ii) the Fund's Target Index.

    For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-4721 Filed 3-14-07; 8:45 am]

BILLING CODE 8010-01-P


[Federal Register: September 20, 2006 (Volume 71, Number 182)]
[Rules and Regulations]
[Page 54928-54933]
[DOCID:fr20se06-13]

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 180

[EPA-HQ-OPP-2006-0617; FRL-8091-6]

Pantoea Agglomerans Strain E325; Exemption from the Requirement
of a Tolerance

AGENCY: Environmental Protection Agency (EPA).

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: This regulation establishes an exemption from the requirement
of a tolerance for residues of the Pantoea agglomerans strain E325 on
apples and pears when applied/used as a microbial pesticide. Northwest
Agricultural Products submitted a petition to EPA under the Federal
Food, Drug, and Cosmetic Act (FFDCA), as amended by the Food Quality
Protection Act of 1996 (FQPA), requesting an exemption from the
requirement of a tolerance. This regulation eliminates the need to
establish a maximum permissible level for residues of Pantoea
agglomerans strain E325.

DATES: This regulation is effective September 20, 2006. Objections and
requests for hearings must be received on or before November 20, 2006,
and must be filed in accordance with the instructions provided in 40
CFR part

178 (see also Unit I.C. of the SUPPLEMENTARY INFORMATION).

ADDRESSES: EPA has established a docket for this action under docket
identification (ID) number EPA-HQ-OPP-2006-0617. All documents in the
docket are listed in the index for the docket. Although listed in the
index, some information is not publicly available, e.g., Confidential
Business Information (CBI) or other information whose disclosure is
restricted by statute. Certain other material, such as copyrighted
material, is not placed on the Internet and will be publicly available
only in hard copy form. Publicly available docket materials are
available in the electronic docket at http://www.regulations.gov, or,

if only available in hard copy, at the OPP Regulatory Public Docket in
Rm. S-4400, One Potomac Yard (South Bldg.), 2777 S. Crystal Dr.,
Arlington, VA. The Docket Facility is open from 8:30 a.m. to 4 p.m.,
Monday through Friday, excluding legal holidays. The Docket Facility
telephone number is<PHONE_NUMBER>.

FOR FURTHER INFORMATION CONTACT: Leonard Cole, Biopesticides and
Pollution Prevention Division (7511P), Environmental Protection Agency,
1200 Pennsylvania Ave., NW., Washington, DC 20460-0001; telephone
number:<PHONE_NUMBER>; e-mail address<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION:

I. General Information

A. Does this Document Apply to Me?

    You may be potentially affected by this action if you are an
agricultural producer, food manufacturer, or pesticide manufacturer.
Potentially affected entities may include, but are not limited to:
     Crop production (NAICS code 111).
     Animal production (NAICS code 112).
     Food manufacturing (NAICS code 311).
     Pesticide manufacturing (NAICS code 32532).
    This listing is not intended to be exhaustive, but rather provides
a guide for readers regarding entities likely to be affected by this
action. Other types of entities not listed in this unit could also be
affected. The North American Industrial Classification System (NAICS)
codes have been provided to assist you and others in determining
whether this action might apply to certain entities. If you have any
questions regarding the applicability of this action to a particular
entity, consult the person listed under FOR FURTHER INFORMATION
CONTACT.

B. How Can I Access Electronic Copies of this Document?

    In addition to accessing an electronic copy of this Federal
Register document through the electronic docket at http://www.regulations.gov
, you may access this ``Federal Register'' document

electronically through the EPA Internet under the ``Federal Register''
listings at http://www.epa.gov/fedrgstr. You may also access a

frequently updated electronic version of 40 CFR part 180 through the
Government Printing Office's pilot e-CFR site at http://www.gpoaccess.gov/ecfr
.

C. Can I File an Objection or Hearing Request?

    Under section 408(g) of FFDCA, as amended by FQPA, any person may
file an objection to any aspect of this regulation and may also request
a hearing on those objections. The EPA procedural regulations which
govern the submission of objections and requests for hearings appear in
40 CFR part 178. You must file your objection or request a hearing on
this regulation in accordance with the instructions provided in 40 CFR
part 178. To ensure proper receipt by EPA, you must identify docket ID
number EPA-HQ-OPP-2006-0617 in the subject line on the first page of
your submission. All requests must be in writing, and must be mailed or
delivered to the Hearing Clerk on or before November 20, 2006.
    In addition to filing an objection or hearing request with the
Hearing Clerk as described in 40 CFR part 178, please submit a copy of
the filing that does not contain any CBI for inclusion in the public
docket that is described in ADDRESSES. Information not marked
confidential pursuant to 40 CFR part 2 may be disclosed publicly by EPA
without prior notice. Submit your copies, identified by docket ID
number EPA-HQ-OPP-2006-0617, by one of the following methods.
     Federal eRulemaking Portal: http://www.regulations.gov.

Follow the on-line instructions for submitting comments.
     Mail: Office of Pesticide Programs (OPP) Regulatory Public
Docket (7502P), Environmental Protection Agency, 1200 Pennsylvania
Ave., NW., Washington, DC 20460-0001.
     Delivery: OPP Regulatory Public Docket (7502P),
Environmental Protection Agency, Rm. S-4400, One Potomac Yard (South
Bldg.), 2777 S. Crystal Dr., Arlington, VA. Deliveries are only
accepted during the Docket's normal hours of operation (8:30 a.m. to 4
p.m., Monday through Friday, excluding legal holidays). Special
arrangements should be made for deliveries of boxed information. The
Docket Facility telephone number is<PHONE_NUMBER>.

II. Background and Statutory Findings

    In the Federal Register of July 26, 2006 (71 FR 42395) (FRL-8080-
6), EPA issued a notice pursuant to section 408(d)(3) of FFDCA, 21
U.S.C. 346a(d)(3), announcing the filing of a pesticide tolerance
petition (PP 6F7086) by Northwest Agricultural Products, 821 South
Chestnut Ave., Pasco, Washington 99301. The petition requested that 40
CFR part 180 be amended by establishing an exemption from the
requirement of a tolerance for residues of Pantoea agglomerans strain
E325. This notice included a summary of the petition prepared by the
petitioner Northwest Agricultural Products. There were no comments
received in response to the notice of filing.
    Section 408(c)(2)(A)(i) of FFDCA allows EPA to establish an
exemption from the requirement for a tolerance (the legal limit for a
pesticide chemical residue in or on a food) only if EPA determines that
the exemption is ``safe.'' Section 408(c)(2)(A)(ii) of FFDCA defines
``safe'' to mean that ``there is a reasonable certainty that no harm
will result from aggregate exposure to the pesticide chemical residue,
including all anticipated dietary exposures and all other exposures for
which there is reliable information.'' This includes exposure through
drinking water and in residential settings, but does not include
occupational exposure. Pursuant to section 408(c)(2)(B) of FFDCA, in
establishing or maintaining in effect an exemption from the requirement
of a tolerance, EPA must take into account the factors set forth in
section 408(b)(2)(C) of FFDCA, which require EPA to give special
consideration to exposure of infants and children to the pesticide
chemical residue in establishing a tolerance and to ``ensure that there
is a reasonable certainty that no harm will result to infants and
children from aggregate exposure to the pesticide chemical residue....
'' Additionally, section 408(b)(2)(D) of FFDCA requires that the Agency
consider ``available information concerning the cumulative effects of a
particular pesticide's residues'' and ``other substances that have a
common mechanism of toxicity.''
    EPA performs a number of analyses to determine the risks from
aggregate exposure to pesticide residues. First, EPA determines the
toxicity of pesticides. Second, EPA examines exposure to the pesticide
through food, drinking water, and through other

exposures that occur as a result of pesticide use in residential
settings.

III. Toxicological Profile

    Consistent with section 408(b)(2)(D) of FFDCA, EPA has reviewed the
available scientific data and other relevant information in support of
this action and considered its validity, completeness, and reliability
and the relationship of this information to human risk. EPA has also
considered available information concerning the variability of the
sensitivities of major identifiable subgroups of consumers, including
infants and children.
    Pantoea agglomerans strain E325 was originally isolated from apple
blooms in Wenatchee, Washington. Pantoea agglomerans strain E325 was
isolated from an apple flower stigma by washing the flower in buffer
and plating dilutions on agar media. The Microbial Pest Control Agent
(MPCA) was selected from among more than 1,000 bacteria and yeast
isolates evaluated for potential use in the control of fire blight.
Screening assays were based on the ability of test organisms to
colonize the stigma and preemptively exclude the disease organism which
was introduced 24 hours after treatment with the test organism.
    Pantoea agglomerans is ubiquitous in the environment, and is
recognized as an epiphyte of a wide variety of plants, such as
buckwheat, weeds, oilseed rape, sweet potato, rice, and trees of the
Rosaceae family. Pantoea agglomerans is found on a wide variety of
plant parts, including the rhizosphere, leaves, and seeds. The species
is also a heavy colonizer of cotton plants, grass and silage and is the
prominent species in organic dust. The organism has also been isolated
from soil and water. Recent reports have also identified P. agglomerans
on retail salad vegetables.
    Pantoea agglomerans is a common organism of the gut microbiota of
mosquitos and locusts. In fecal pellets of the locust, the organism is
responsible for the release of guaiacol and phenol, essential
components of the locust cohesion pheromone. These components are not
produced in germ-free locusts. Pantoea agglomerans (Enterobacter
agglomerans) was also identified in association with sheep scab mites,
and as an intracellular symbiotic bacteria of the cereal weevil and the
apple maggot fly. It has been demonstrated that Enterobacter
agglomerans (in the gut of the fly) is able to detoxify the defense
chemical (phloridzin) of the apple tree, which would otherwise kill the
fly.
    Fire blight is caused by the phytopathogenic bacterium Erwinia
amylovora which colonizes predominately on the stigmatic surfaces of
the apple or pear. The pathogen may enter the tree through the
blossoms, leaves, or stem wounds. Usually the disease is spread by
bacteria that over winter in holdover cankers in the main stem and
branches or infected twigs. In the spring, when the blossoms begin to
open, the cankers exude drops of bacterial ooze that are disseminated
to the blossoms and young leaves by rain, heavy dew, or windblown mist.
Fire blight may also be spread by pollinating insects such as bees,
sucking, chewing, or boring insects, and unsanitary pruning tools. Warm
temperatures (24-28[deg]C) and high humidity are the optimal conditions
for infection and disease development.
    The disease becomes apparent in the spring, when infected blossoms
suddenly wilt and turn brown. Later, twigs and leaves also turn brown
and appear to be scorched by fire. The affected leaves usually remain
on the tree well into the winter. Young infected fruits become watery
or oily in appearance and exude droplets of clear, milky, or amber
colored ooze. They later become leathery and turn brown, dark brown, or
black, depending on the species. The shriveled fruit usually remains
attached to the tree.
    Fire blight is considered one of the most destructive diseases of
fruit trees in North America. It occurs sporadically and unpredictably
and occasionally reaches epidemic levels. A severe outbreak can
seriously damage or kill mature pear, apple, or crab apple trees in one
season. Other ornamentals such as hawthorn, plum, chokecherry,
saskatoon, cotoneaster, and spirea may also be affected.
    1. Acute oral toxicity/pathogenicity--rats (OPPTS 885.3050).
Nineteen male and 19 female Sprague-Dawley rats were dosed with the
test substance, Pantoea agglomerans strain E325, at a rate of 1.05 x
10\8\ colony forming unit (CFU) per animal. (Master Record
Identification Number (MRID) 464678-02) (Ref 1). Three animals were
sacrificed on day 3, 7, and 14. All rats survived to the scheduled
sacrifice. There was no change in organ weights (brain, blood, cecum
contents, kidneys, liver, lungs, lymph nodes, and spleen) of male and
female test animals from beginning of testing to sacrifice. The MPCA
was detected at high levels in the organs of all test animals.
Clearance of the MPCA from the blood and lymph node was achieved in all
test animals. Counts of the MPCA had fallen in the lungs and kidney of
test animals by day 7. Results from day 14 showed that the MPCA was
cleared from all organs in all test animals. No clinical manifestations
of treatment were noted. Gross necropsy revealed no indications of
treatment-related pathology or any unusual findings. It is concluded
that Pantoea agglomerans strain E325 is not acutely toxic to rats
following oral administration.
    2. Acute pulmonary toxicity/pathogenicity--rat (OPPTS 885.3150).
Forty-eight male and 48 female Sprague-Dawley rats were dosed with the
test substance, Pantoea agglomerans strain E325 at a rate of 1.8 x
10\11\ CFU per animal. (MRID 464678-03) Ref 2. The test material was
determined to be below 100 CFU per animal at all time points tested.
The test organism (Pantoea agglomerans strain E325) was cleared from
the cecum contents by day 7 and from the lungs by day 14. The MPCA was
detected in the kidney and lymph nodes, spleen, and brain up to day 14,
but had cleared in all animals by day 21. Therefore, based on the
presented/submitted data, the test organism was not toxic nor
pathogenic to the test animals.
    3. Acute dermal toxicity--rabbits (OPPTS 870.2500 and OPPTS
885.3100). The registrant has requested that the dermal irritation
study be waived. Pantoea agglomerans is found on a wide variety of
plant parts, including the rhizosphere, leaves, and seeds. The species
is also a heavy colonizer of cotton plants, grass, and silage, and is
the prominent species in organic dust. The organism has also been
isolated from soil and water. Recent reports have also identified P.
agglomerans on retail salad vegetables. There have been no adverse
dermal effects or dermal irritation reported in any cited literature
for Pantoea agglomerans strain E325. In light of the strong evidence
indicating no adverse effects due to dermal exposure to Pantoea
agglomerans, EPA has agreed to waive dermal toxicity testing. Further,
data show that exposure from ambient populations is sufficiently high
that it indicates there would be no adverse dermal effects from
pesticidal use no matter what the residue level is.
     4. Primary eye irritation (OPPTS 870.2400). The registrant has
requested a waiver for the primary eye irritation study. Due to the
fact that Pantoea agglomerans is found in food and drinking water, and
there have been no adverse eye irritation effects reported, Pantoea
agglomerans is not considered to be an eye irritant. Additionally
Pantoea agglomerans is ubiquitous in the environment, and it is
recognized as an epiphyte of a wide variety of plants such as sweet
potato, rice, and organic

dust. No reports of eye irritation have been reported for this
organism.
    5. Data waiver requests. Data waiver requests were made for the
following requirements for the Technical Grade of the Active
Ingredient/Manufacturing-use Product (TGAI/MP) and Experimental Product
(EP):
     Acute Intravenous (IV), Intracerebral (IC),
Intraperitoneal (IP) injection Toxicity/Pathogenicity (OPPTS 885.3200).
     Cell Culture (OPPTS 885.3500).
     Immune Response (OPPTS 880.3800).
     Hypersensitivity study.
     Hypersensitivity Incidents (OPPTS 885.3400).
     i. Acute inhalation toxicity/pathogenicity. The registrant cited
the acute pulmonary toxicity/pathogenicity study (see Unit III.?.3.) to
justify waiving the acute inhalation study. In the acute pulmonary
toxicity/pathogenicity study Pantoea agglomerans strain E325, was not
found in any organs or tissues which indicates that the active
ingredient cleared tissues and was not toxic, infective, or pathogenic
to rats when instilled intratracheally. Additionally, when this product
is applied, applicators will be required to wear the necessary
protective equipment to prevent inhalation, and this justifies granting
this request to waive acute-inhalation data requirements.
     ii. Acute IV/IP/IC study. In an acute oral toxicity/pathogenicity
study (see Unit III.1. and 2.), no clinical signs of toxicity were
observed in rats and no Pantoea agglomerans strain E325 was recovered
from organs or tissues. These data show that Pantoea agglomerans strain
E325 was considered to clear rapidly from the test animal in that it
was never detected. The active ingredient Pantoea agglomerans strain
E325 is considered to be non-toxic. Based on the low toxicity potential
indicated by these observations, the request to waive the acute IP
study was granted.
     iii. Cell culture. This study is required for a virus and is not
required for a bacterial active ingredient such as Pantoea agglomerans
strain E325.
     iv. Immune response. The lack of pathogenicity seen in the acute
oral toxicity/pathogenicity study with the active ingredient indicates
the immune system was not adversely affected by Pantoea agglomerans
strain E325. Based on these considerations, the justifications to
support the request to waive data requirements for the immune response
studies for the TGAI/MP are acceptable.
     v. Hypersensitivity study. No incidents of hypersensitivity have
occurred during the research, development, or testing of Pantoea
agglomerans strain E325 or the end use product, Bloomtime. A
hypersensitivity study is not required at this time, but may be
required in the future if there are reports of hypersensitivity
incidents associated with this active ingredient used in pesticides. If
a person is abnormally physiologically susceptible to a specific agent,
there are a number of symptoms that the individual will exhibit. This
organism has been in nature for many years, and there have been no
reports of any human or animal exhibiting any symptoms after having
been in contact with the organism.
     vi. Hypersensitivity incidents (OPPTS 885.3400). The registrant
requested to waive reports of hypersensitivity incidents, because no
incidents of hypersensitivity associated with the TGAI or the EP have
been reported. However, the registrant agreed to report
hypersensitivity incidents, should they occur in the future. This
guideline requirement is satisfied at this time. In order to comply
with the Federal Insecticide, Fungicide, and Rotenticide Act (FIFRA)
requirements under section 6(a)(2), any incident of hypersensitivity
associated with the use of this pesticide must be reported to the
Agency. This data requirement has not been waived.
     6. Subchronic, chronic toxicity and oncogenicity, and residue
data. Based on the data generated in accordance with the Tier I data
requirements set forth in 40 CFR 158.740(c), the Tier II and Tier III
data requirements were not triggered and, therefore, not required in
connection with this action. In addition, because the Tier II and Tier
III data requirements were not required, the residue data requirements
set forth in 40 CFR 158.740(b) also were not required.

IV. Aggregate Exposures

    In examining aggregate exposure, section 408 of FFDCA directs EPA
to consider available information concerning exposures from the
pesticide residue in food and all other non-occupational exposures,
including drinking water from ground water or surface water and
exposure through pesticide use in gardens, lawns, or buildings
(residential and other indoor uses).

A. Dietary Exposure

    Use of Pantoea agglomerans strain E325 is not expected to cause any
harm via consumption of food or feed treated with the microbial
pesticide, which is not applied directly to food as discussed in this
unit.
    1. Food. Residues of Pantoea agglomerans strain E325 are not
expected on treated food commodities from the proposed use patterns.
The product, Bloomtime, containing Pantoea agglomerans strain E325, is
applied at bloom followed by a second application at first petal fall-
full bloom. After Bloomtime is applied, the pesticide becomes non-
viable very rapidly, which causes the need for more than one
application. The pesticide itself is not in direct contact with the
food commodities. This pesticide is applied prior to fruiting. There is
no post-harvest treatment directly to the food commodities.
Furthermore, the active ingredient is not a systemic pesticide. Thus,
detectable residues of Pantoea agglomerans strain E325 are not expected
on treated fruit trees or their food commodities. Furthermore, as
previously stated, Pantoea agglomerans strain E325 is found in soil,
water, and air. Data submissions to the Agency show that residues of
the Pantoea agglomerans strain E325 are not found on the food
commodities. Finally, as discussed previously in Unit III., the acute
oral tests demonstrate low toxicity potential via dietary exposure to
this Toxicity Category IV pesticide. Hence, even if the pesticide was
present in or on food commodities, exposure via the dietary route is
not expected to cause any harm. Therefore, the Agency has decided that
dietary exposure from the proposed uses of Pantoea agglomerans strain
E325 is not expected to adversely affect the U.S. adult population,
infants, and children.
    2. Drinking water exposure. No drinking water exposure is
anticipated because of the use pattern and use sites. There are no
aquatic use sites permitted for this pesticide, so exposure to drinking
water is not expected. Further, there is no evidence of adverse effects
from exposure to this organism. Exposure from the proposed use of
Pantoea agglomerans strain E325 is not likely to pose any incremental
risk via consumption of drinking water to adult humans, infants and
children.

B. Other Non-Occupational Exposure

    The proposed product is an end-use product to be commercially used
in apple and pear orchards. No non-occupational residential, school or
day care exposure is anticipated because of the use pattern of this
product. The use of Panteoa agglomerans strain E325 should result in
minimal to non-existent, non-occupational risk. No indoor residential,
school, or daycare uses are permitted on the label of this product.

    1. Dermal exposure. The low toxicity potential observed in the
acute dermal studies discussed in Unit III., the low exposure potential
based on low application rates, and the lack of persistence of the
active ingredient, leads EPA to conclude that this pesticide poses
minimal risk to human populations via non-occupational dermal exposure.
Moreover, potential non-occupational dermal exposure to Panteoa
agglomerans strain E325 is unlikely because the use sites are
commercial and agricultural.
     As previously discussed in Units III. and IV., a lack of
hypersensitivity incidents indicates Panteoa agglomerans strain E325
poses minimal risk to populations via non-occupational dermal exposure.
Thus, the Agency does not expect pesticides containing Panteoa
agglomerans strain E325 to pose a non-occupational dermal exposure
risk.
    2. Inhalation exposure. Non-occupational inhalation exposure to the
active ingredient itself is not expected to pose an inhalation risk. No
treatment-related effects associated with the active ingredient were
observed in the pulmonary tests reported in Unit II. Based on the low
potential for non-occupational inhalation exposure, the Agency does not
expect Pantoea agglomerans strain E325 to pose an inhalation risk.

V. Cumulative Effects

    The Agency has considered the potential for cumulative effects of
Pantoea agglomerans strain E325 and other substances in relation to a
common mechanism of toxicity. These considerations include the possible
cumulative effects of such residues on infants and children. As
demonstrated in the toxicity assessment, Pantoea agglomerans strain
E325 is non-toxic and non-pathogenic to mammals. Because no mechanism
of pathogenicity or toxicity in mammals has been identified for this
organism, no cumulative effects from the residues of this product with
other related microbial pesticides are anticipated.

VI. Determination of Safety for U.S. Population, Infants and Children

    There is reasonable certainty that no harm will result to the U.S.
population, including infants and children, from aggregate exposures to
residues of Pantoea agglomerans strain E325, as a result of its
proposed uses. This includes all anticipated dietary exposures and all
other exposures for which there is reliable information. As discussed
previously, there appears to be no potential for harm, from this
bacterium in its use as a microbial pesticide in apple and pear
orchards. Furthermore, the organism is non-toxic and non-pathogenic to
animals and humans. The Agency has arrived at this conclusion based on
the very-low levels of mammalian toxicity for acute oral, pulmonary,
and dermal effects with no toxicity or infectivity at the doses tested
(see Unit III.). Moreover, potential non-occupational inhalation or
dermal exposure is not expected to pose any adverse effects to exposed
populations via aggregate and cumulative exposure.

VII. Other Considerations

A. Endocrine Disruptors

    EPA is required under section 408(p) of FFDCA, as amended by FQPA,
to develop a screening program to determine whether certain substances
(including all pesticide active and other ingredients) ``may have an
effect in humans that is similar to an effect produced by a naturally-
occurring estrogen, or other such endocrine effects as the
Administrator may designate.'' Following the recommendations of its
Endocrine Disruptor Screening and Testing Advisory Committee (EDSTAC),
EPA determined that there was scientific basis for including, as part
of the program, the androgen and thyroid systems, in addition to the
estrogen hormone system. EPA also adopted EDSTAC's recommendation that
the program include evaluations of potential effects in wildlife. For
pesticide chemicals, EPA will use FIFRA and, to the extent that effects
in wildlife may help determine whether a substance may have an effect
in humans, FFDCA authority, to require the wildlife evaluations. As the
science develops and resources allow, screening of additional hormone
systems may be added to the Endocrine Disruptor Screening Program
(EDSP). The Agency is not requiring information on the endocrine
effects of this active ingredient at this time. The Agency has
considered, among other relevant factors, available information
concerning whether the microorganism may have an effect in humans
similar to an effect produced by a naturally-occurring estrogen or
other endocrine effects.
    There is no known metabolite produced by this bacterium that acts
as an endocrine disruptor. The submitted and cited toxicity/
pathogenicity studies in rodents indicate that following injection and
pulmonary routes of exposure, no test substance was found in organs or
tissues of test animals. This indicates that the body is able to
process and clear the active ingredient. The Agency concludes that
there will be no incremental adverse effects to the endocrine system.

B. Analytical Methods

    The acute oral studies discussed in Unit II. demonstrate that the
active ingredient, Pantoea agglomerans strain E325 does not pose a
dietary risk. In addition, the active ingredient is not likely to come
into contact with food commodities. Since residues are not expected on
treated commodities, the Agency has concluded that an analytical method
to detect residues of this pesticide on treated food commodities for
enforcement purposes is not needed. Nevertheless, the Agency has
concluded that for analysis of the pesticide itself, microbiological
and biochemical methods exist and are acceptable for enforcement
purposes for product identity of Pantoea agglomerans strain E325. Other
appropriate methods are required for quality control to assure that
product characterization, the control of human pathogens and other
unintentional metabolites or ingredients are within regulatory limits,
and to ascertain storage stability and viability of the pesticidal
active ingredient.

C. CODEX Maximum Residue Level

    There is no CODEX maximum residue level for residues of Pantoea
agglomerans strain E325.

VIII. Conclusions

    The results of the studies discussed in Unit II. are sufficient to
comply with the requirements of FQPA. They support an exemption from
the requirement of a tolerance for residues of Pantoea agglomerans
strain E325 on apples and pears. In addition, the Agency is of the
opinion that, if the microbial active ingredient is used as labeled,
aggregate and cumulative exposures are not likely to pose any undue
risk. Submitted and cited data show that Pantoea agglomerans strain
E325 do not pose an incremental dietary and non-dietary risk to the
adult human U.S. population, children, and infants. Therefore, an
exemption from tolerance is granted in response to pesticide petition
6F7087.

MRID Citation References

    1. 464678-02, Kuhn, J.O., Acute Oral Toxicity/Pathogenicity Study
in Rats With A Microbial Pest Control Agent (MPCA).
    2. 464678-03, Kuhn, J.O., Acute Pulmonary Toxicity/Pathogenicity
Study In Rats With A Microbial Pest Control Agent (MPCA).

IX. Statutory and Executive Order Reviews

    This final rule establishes an exemption from the requirement of a
tolerance under section 408(d) of FFDCA in response to a petition
submitted to the Agency. The Office of Management and Budget (OMB) has
exempted these types of actions from review under Executive Order
12866, entitled Regulatory Planning and Review (58 FR 51735, October 4,
1993). Because this rule has been exempted from review under Executive
Order 12866 due to its lack of significance, this rule is not subject
to Executive Order 13211, entitled Actions Concerning Regulations That
Significantly Affect Energy Supply, Distribution, or Use (66 FR 28355,
May 22, 2001). This final rule does not contain any information
collections subject to OMB approval under the Paperwork Reduction Act
(PRA), 44 U.S.C. 3501 et seq., or impose any enforceable duty or
contain any unfunded mandate as described under Title II of the
Unfunded Mandates Reform Act of 1995 (UMRA) (Public Law 104-4). Nor
does it require any special considerations under Executive Order 12898,
entitled Federal Actions to Address Environmental Justice in Minority
Populations and Low-Income Populations (59 FR 7629, February 16, 1994);
or OMB review or any Agency action under Executive Order 13045,
entitled Protection of Children from Environmental Health Risks and
Safety Risks (62 FR 19885, April 23, 1997). This action does not
involve any technical standards that would require Agency consideration
of voluntary consensus standards pursuant to section 12(d) of the
National Technology Transfer and Advancement Act of 1995 (NTTAA),
Public Law 104-113, section 12(d) (15 U.S.C. 272 note). Since
tolerances and exemptions that are established on the basis of a
petition under section 408(d) of FFDCA, such as the exemption from the
requirement of a tolerance in this final rule, do not require the
issuance of a proposed rule, the requirements of the Regulatory
Flexibility Act (RFA) (5 U.S.C. 601 et seq.) do not apply. In addition,
the Agency has determined that this action will not have a substantial
direct effect on States, on the relationship between the national
government and the States, or on the distribution of power and
responsibilities among the various levels of government, as specified
in Executive Order 13132, entitled Federalism (64 FR 43255, August 10,
1999). Executive Order 13132 requires EPA to develop an accountable
process to ensure ``meaningful and timely input by State and local
officials in the development of regulatory policies that have
federalism implications.'' ``Policies that have federalism
implications'' is defined in the Executive order to include regulations
that have ``substantial direct effects on the States, on the
relationship between the national government and the States, or on the
distribution of power and responsibilities among the various levels of
government.'' This final rule directly regulates growers, food
processors, food handlers, and food retailers, not States. This action
does not alter the relationships or distribution of power and
responsibilities established by Congress in the preemption provisions
of section 408(n)(4) of FFDCA. For these same reasons, the Agency has
determined that this rule does not have any ``tribal implications'' as
described in Executive Order 13175, entitled Consultation and
Coordination with Indian Tribal Governments (65 FR 67249, November 6,
2000). Executive Order 13175, requires EPA to develop an accountable
process to ensure ``meaningful and timely input by tribal officials in
the development of regulatory policies that have tribal implications.''
``Policies that have tribal implications'' is defined in the Executive
order to include regulations that have ``substantial direct effects on
one or more Indian tribes, on the relationship between the Federal
Government and the Indian tribes, or on the distribution of power and
responsibilities between the Federal Government and Indian tribes.''
This rule will not have substantial direct effects on tribal
governments, on the relationship between the Federal Government and
Indian tribes, or on the distribution of power and responsibilities
between the Federal Government and Indian tribes, as specified in
Executive Order 13175. Thus, Executive Order 13175 does not apply to
this rule.

X. Congressional Review Act

    The Congressional Review Act, 5 U.S.C. 801 et seq., as added by the
Small Business Regulatory Enforcement Fairness Act of 1996, generally
provides that before a rule may take effect, the agency promulgating
the rule must submit a rule report, which includes a copy of the rule,
to each House of the Congress and to the Comptroller General of the
United States. EPA will submit a report containing this rule and other
required information to the U.S. Senate, the U.S. House of
Representatives, and the Comptroller General of the United States prior
to publication of this final rule in the Federal Register. This final
rule is not a ``major rule'' as defined by 5 U.S.C. 804(2).

List of Subjects in 40 CFR Part 180

    Environmental protection, Administrative practice and procedure,
Agricultural commodities, Pesticides and pests, Reporting and
recordkeeping requirements.

    Dated: September 11, 2006.
James J. Jones,
Director, Office of Pesticide Programs.

0
Therefore, 40 CFR chapter I is amended as follows:

PART 180--[AMENDED]

0
1. The authority citation for part 180 continues to read as follows:

    Authority: 21 U.S.C. 321(q), 346a and 371.

0
2. Section 180.1272 is added to subpart D to read as follows:

Sec.  180.1272  Pantoea agglomerans strain E325; exemption from the
requirement of a tolerance.

    An exemption from the requirement of a tolerance is established for
residues of Pantoea agglomerans strain E325 when used on apples and
pears.

[FR Doc. 06-8005 Filed 9-19-06; 8:45 am]

BILLING CODE 6560-50-S


  N
  4
  4
  4

  Average
  1711.8
  2387.5
  1461.6

  Std. Dev
  424.4
  325.8
  149.6

  RSD
  24.8%
  13.6%
  10.2%

  A-Y
  A-Y-BL2
  2704
  3075
  1791

  A-Y
  A-Y-BL5
  2169
  2742
  1571

  A-Y
  A-Y-X1
  3218
  3933
  2181

  N
  3
  3
  3

  Average
  2696.8
  3250.2
  1847.6

  Std. Dev
  524.4
  614.1
  309.0

  RSD
  19.4%
  18.9%
  16.7%

  A-Z
  A-Z-BL5
  1818
  2392
  1388

  A-Z
  A-Z-X1
  3234
  3594
  1993

  A-Z
  A-Z-X2
  2436
  2779
  1475

  N
  3
  3
  3

  Average
  2496.0
  2921.6
  1618.5

  Std. Dev
  710.0
  613.2
  327.1

  RSD
  28.4%
  21.0%
  20.2%

  For All A Boards
  For All A Boards

  N
  104
  104
  104

  Average
  1645.4
  2045.3
  1203.4

  Std. Dev
  787.7
  917.0
  543.5

  RSD
  47.9%
  44.8%
  45.2%

  Min
  28
  34
  21

  Max
  3445
  3933
  2186

 <![if supportMisalignedColumns]>

 <![endif]>


[Federal Register: April 8, 2008 (Volume 73, Number 68)]
[Notices]
[Page 19128-19129]
[DOCID:fr08ap08-100]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57608; File No. SR-Phlx-2008-22]

Self-Regulatory Organizations; Philadelphia Stock Exchange, Inc.;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change,
and Amendment No. 1 Thereto, Relating to Floor Broker Charge and
Specialist Unit Credit in Connection With Linkage P/A Orders

April 2, 2008.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'')\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on March 12, 2008, Philadelphia Stock Exchange, Inc. (``Phlx'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been substantially prepared by the
Exchange. On April 1, 2008, Phlx submitted Amendment No. 1 to the
proposed rule change. The Exchange filed the proposed rule change
pursuant to Section 19(b)(3)(A) of the Act,\3\ and Rule 19b-4(f)(2)
thereunder,\4\ which renders the proposal effective upon filing with
the Commission. The Commission is publishing this notice to solicit
comments on the proposed rule change, as amended, from interested
persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    Phlx proposes to charge floor brokers an amount equal to the
transaction fee(s) assessed on options specialist units by another
exchange in connection with customer orders that are delivered to the
limit order book via the Exchange's Options Floor Broker Management
System (``FBMS'')\5\ and subsequently executed via the Intermarket
Option Linkage (``Linkage'') \6\ as a Principal Acting as Agent (``P/
A'') order.\7\ The Exchange also proposes to provide to options
specialist units a credit in an amount equal to the transaction fee(s)
assessed on them by another exchange in connection with executing
customer orders that are delivered to the limit order book via FBMS and
executed via Linkage as P/A orders.
---------------------------------------------------------------------------

    \5\ FBMS is designed to enable floor brokers and/or their
employees to enter, route, and report transactions stemming from
options orders received on the Exchange. FBMS also is designed to
establish an electronic audit trail for options orders represented
and executed by floor brokers on the Exchange such that the audit
trail provides an accurate, time-sequenced record of electronic and
other orders, quotations, and transactions on the Exchange,
beginning with the receipt of an order by the Exchange, and further
documenting the life of the order through the process of execution,
partial execution, or cancellation of that order. See Exchange Rule
1080, Commentary .06.
    \6\ Linkage is governed by the Options Linkage Authority under
the conditions set forth under the Plan for the Purpose of Creating
and Operating an Intermarket Option Linkage (``Linkage Plan''). The
registered U.S. options markets are linked together on a real-time
basis through a network capable of transporting orders and messages
to and from each market.
    \7\ A P/A order is an order for the principal account of a
specialist (or equivalent entity on another participant exchange
that is authorized to represent public customer orders), reflecting
the terms of a related unexecuted public customer order for which
the specialist is acting as agent. See Linkage Plan Section 2(16)(a)
and Exchange Rule 1083.
---------------------------------------------------------------------------

    While changes to the fee schedule pursuant to this proposal are
effective upon filing, the Exchange has designated the changes to be in
effect for transactions settling on or after March 17, 2008, through
July 31, 2008.\8\ The text of the proposed rule change is available at
Phlx, the Commission's Public Reference Room, and http://www.phlx.com.
---------------------------------------------------------------------------

    \8\This proposal is scheduled to be in effect for the same time
period as fees for Linkage Principal and P/A orders. See Securities
Exchange Act Release No. 56166 (July 30, 2007), 72 FR 43312 (August
3, 2007) (SR-Phlx-2007-52).
---------------------------------------------------------------------------

II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements
concerning the purpose of, and basis for, the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
Sections A, B, and C below, of the most significant aspects of such
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to charge floor brokers an amount equal to
the transaction fee(s) \9\ assessed on options specialist units by
another exchange in connection with customer orders that are delivered
to the limit order book via FBMS and executed via Linkage as P/A
orders. The Exchange also proposes to provide to options specialist
units a credit in an amount equal to the transaction fee(s) assessed on
them by another exchange in connection with executing customer orders
that are delivered to the limit order book via FBMS and executed via
Linkage as P/A orders.
---------------------------------------------------------------------------

    \9\ Transaction fees do not include fees assessed by The Options
Clearing Corporation or the Covered Sales Fee. The Covered Sale Fee
is assessed on Phlx members in connection with the sales of
securities on the Exchange with respect to which Phlx is obligated
to pay a fee to the Commission under Section 31 of the Act. Other
exchanges refer to this fee by different names.
---------------------------------------------------------------------------

    The purpose of this proposal is to assist specialist units in
offsetting the costs they incur in routing orders to other exchanges in
order to obtain the National Best Bid or Offer (``NBBO''). By giving a
corresponding credit to specialist units who bear the direct costs of
routing these orders, the Exchange believes that the undue financial
burden of multiple transaction charges imposed on Exchange specialist
units in connection with orders that are executed at an away market
will be lessened. Additionally, the purpose of assessing a fee on floor
brokers who send customer orders that are delivered to the limit order
book via FBMS and executed via Linkage as P/A orders is to more
equitably assess the applicable transaction fee(s) on the member
originally entering the order to be executed. Floor brokers may choose
to route these orders through other systems and not place such orders
on the limit order book.
    The Exchange represents that when members do not want an order to
be routed away through Linkage (thereby avoiding the transaction fees
discussed above), that member may mark the order with an Immediate or
Cancel (``IOC'') designation. IOC orders are not routed to other market
centers. Instead, if they cannot be executed on Phlx, they are
cancelled.
    While changes to the fee schedule pursuant to this proposal were
effective upon filing, the Exchange designated the changes operative
for trades settling

on or after March 17, 2008 through July 31, 2008.\10\
---------------------------------------------------------------------------

    \10\ See supra note 8.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that its proposal to amend its schedule of
fees is consistent with Section 6(b) of the Act,\11\ in general, and
furthers the objectives of Section 6(b)(4) of the Act,\12\ in
particular, in that it is designed to provide for the equitable
allocation of reasonable dues, fees, and other charges among Exchange
members. The Exchange believes that assessing a fee on floor brokers
and giving a corresponding credit to specialist units as described
herein allows for the transaction fee(s) to be assessed on the member
who submits the order and for the credit to be given to the specialist
unit that routed the order to another exchange in order to obtain the
NBBO.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others

    The Exchange has not solicited, and does not intend to solicit,
comments on this proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action

    The foregoing proposed rule change is effective upon filing
pursuant to Section 19(b)(3)(A)(ii) \13\ of the Act and Rule 19b-
4(f)(2) \14\ thereunder, because it establishes or changes a due, fee,
or other charge applicable only to a member imposed by the Exchange. At
any time within 60 days of the filing of the proposed rule change, the
Commission may summarily abrogate such rule change if it appears to the
Commission that such action is necessary or appropriate in the public
interest, for the protection of investors, or otherwise in furtherance
of the purposes of the Act.\15\
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \14\ 17 CFR 240.19b-4(f)(2).
    \15\ For purposes of calcualting the 60-day period within which
the Commission may summarily abrogate the proposed rule change under
Section 19(b)(3)(C) of the Act, the Commission considers that period
to commence on April 1, 2008, the date the Exchange filed Amendment
No. 1 to the proposed rule change. See 15 U.S.C. 78s(b)(3)(C).
---------------------------------------------------------------------------

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change, as amended, is consistent with the Act. Comments may be
submitted by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://
www.sec.gov/rules/sro.shtml); or
     Send an e-mail to<EMAIL_ADDRESS>Please include
File Number SR-Phlx-2008-22 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.

All submissions should refer to File Number SR-Phlx-2008-22. This file
number should be included on the subject line if e-mail is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/sro/
shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for inspection and
copying in the Commission's Public Reference Room, on official business
days between the hours of 10 a.m. and 3 p.m. Copies of such filing will
also be available for inspection and copying at the principal office of
the Exchange. All comments received will be posted without change; the
Commission does not edit personal identifying information from
submissions. You should submit only information that you wish to make
available publicly. All submissions should refer to File No. SR-Phlx-
2008-22 and should be submitted on or before April 29, 2008.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
---------------------------------------------------------------------------

    \16\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8-7312 Filed 4-7-08; 8:45 am]

BILLING CODE 8011-01-P


[Federal Register Volume 83, Number 10 (Tuesday, January 16, 2018)]
[Notices]
[Pages 2275-2276]
[FR Doc No: 2018-00494]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[SEC File No. 270-135, OMB Control No. 3235-0176]

Proposed Collection; Comment Request

Upon Written Request, Copies Available From: Securities and Exchange
Commission, Office of FOIA Services, 100 F Street NE, Washington, DC
20549-2736.

Extension:
    Rules 8b-1 to 8b-33

    Notice is hereby given that, pursuant to the Paperwork Reduction
Act of 1995 (44 U.S.C. 3501 et seq.), the Securities and Exchange
Commission (``Commission'') is soliciting comments

on the collection of information summarized below. The Commission plans
to submit this existing collection of information to the Office of
Management and Budget (``OMB'') for extension and approval.
    Rules 8b-1 to 8b-33 (17 CFR 270.8b-1 to 8b-33) under the Investment
Company Act of 1940 (15 U.S.C. 80a-1 et seq.) (``Investment Company
Act'') set forth the procedures for preparing and filing a registration
statement under the Investment Company Act. These procedures are
intended to facilitate the registration process. These rules generally
do not require respondents to report information.\1\
---------------------------------------------------------------------------

    \1\ Although the rules under Section 8(b) of the Investment
Company Act are generally procedural in nature, two of the rules
require respondents to disclose some limited information. Rule 8b-3
(17 CFR 270.8b-3) provides that whenever a registration form
requires the title of securities to be stated, the registrant must
indicate the type and general character of the securities to be
issued. Rule 8b-22 (17 CFR 270.8b-22) provides that if the existence
of control is open to reasonable doubt, the registrant may disclaim
the existence of control, but it must state the material facts
pertinent to the possible existence of control. The information
required by both of these rules is necessary to insure that
investors have clear and complete information upon which to base an
investment decision.
---------------------------------------------------------------------------

    The Commission believes that it is appropriate to estimate the
total respondent burden associated with preparing each registration
statement form rather than attempt to isolate the impact of the
procedural instructions under Section 8(b) of the Investment Company
Act, which impose burdens only in the context of the preparation of the
various registration statement forms. Accordingly, the Commission is
not submitting a separate burden estimate for rules 8b-1 through 8b-33,
but instead will include the burden for these rules in its estimates of
burden for each of the registration forms under the Investment Company
Act. The Commission is, however, submitting an hourly burden estimate
of one hour for administrative purposes.
    The collection of information under rules 8b-1 to 8b-33 is
mandatory. The information provided under rules 8b-1 to 8b-33 is not
kept confidential. An agency may not conduct or sponsor, and a person
is not required to respond to, a collection of information unless it
displays a currently valid OMB control number.
    Written comments are invited on: (a) Whether the collection of
information is necessary for the proper performance of the functions of
the Commission, including whether the information has practical
utility; (b) the accuracy of the Commission's estimate of the burden of
the collection of information; (c) ways to enhance the quality,
utility, and clarity of the information collected; and (d) ways to
minimize the burden of the collection of information on respondents,
including through the use of automated collection techniques or other
forms of information technology. Consideration will be given to
comments and suggestions submitted in writing within 60 days of this
publication.
    Please direct your written comments to Pamela Dyson, Director/Chief
Information Officer, Securities and Exchange Commission, C/O Remi
Pavlik-Simon, 100 F Street NE, Washington, DC 20549; or send an email
to: [email protected].

    Dated: January 9, 2018.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-00494 Filed 1-12-18; 8:45 am]
 BILLING CODE 8011-01-P