[Federal Register Volume 65, Number 77 (Thursday, April 20, 2000)]
[Notices]
[Pages 21223-21224]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-9917]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-42675; File No. SR-Amex-00-15]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the American Stock Exchange 
LLC Relating to Transaction, Clearance, and Floor Brokerage Fees

April 13, 2000.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on March 10, 2000, the American Stock Exchange LLC (``Amex'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I, II and III below, which Items have been prepared by the 
Exchange. On April 1, 2000, the Exchange filed Amendment No. 1 to the 
proposed rule change with the Commission, which amendment replaces and 
supersedes the original proposal.\3\ The Commission is publishing this 
notice to solicit comments on the proposed rule change, as amended, 
from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Letter from Scott Van Hatten, Legal Counsel, Derivative 
Securities, Nasdaq-Amex, to Nancy Sanow, Assistant Director, 
Division of Market Regulation (``Division''), Commission, dated 
March 31, 2000 (``Amendment No. 1''). In response to comments from 
Commission staff, the Exchange submitted Amendment No. 1 to withdraw 
the portion of the filing that would increase the equity options 
transaction fees charged to non-member broker-dealers. Amendment No. 
1 also: (i) makes certain technical corrections to the Amex's 
options fee schedule; (ii) proposes to increase the specialist and 
market maker floor brokerage fee from $0.02 to $0.03 per contract 
side for both equity and index options; (iii) states that all fee 
changes are effective April 1, 2000; and (iv) clarifies that the 
cost savings estimate to customers is based on third quarter, 1999 
trading volume.
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I. Self-Regulatory Organization's Statement of the Terms of 
Substance of the Proposed Rule Change

    The Amex proposes to eliminate transaction, clearance, and floor 
brokerage fees for customer equity options orders. The Exchange also 
proposes to increase the specialist and market maker floor brokerage 
fee for both equity and index options transactions.\4\
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    \4\ Id.
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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 Amex proposes to eliminate transaction, clearance, and floor 
brokerage fees for customer equity options orders. The Exchange also 
proposes to increase the specialist and market maker floor brokerage 
fee for both equity and index options transactions. The proposed fee 
schedule would be applicable to options transactions effected on and 
after April 1, 2000.\5\
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    \5\ Id.
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    The Amex currently imposes a transaction charge on options trades 
executed on the Exchange. The charges vary depending on whether the 
transaction involves an equity or index option and whether the 
transaction is executed for a member firm proprietary account, a 
specialist or market maker account, or a customer account. The Amex 
also imposes a charge for clearance of options trades and an options 
floor brokerage charge, which also depends upon the type of account for 
which the trade is executed. In addition, all three of charges--
transaction, options clearance, and options floor brokerage--are 
subject to caps on the number of options contracts subject to the 
charges on a given day.\6\
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    \6\ The current caps are set at 2,000 contracts for customer 
trades and 3,000 contracts for member firm proprietary, non-member 
broker-dealer, specialist and market maker trades.
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    Current, for customer equity and index options transactions, the 
Amex does not charge a transaction fee for market and marketable limit 
orders of 30 contracts or less.\7\ The Amex charges a transaction fee 
of $0.10 for customer equity and index options transactions (per 
contract side) for limit orders up to 30 contracts and all orders 
exceeding 30 contracts.\8\ These customer options transactions fees 
also apply to both LEAPS \9\ and FLEX \10\ options. The current 
clearance fee for customer equity options transactions is $0.04 per 
contract side. The floor brokerage fee for customer equity options 
orders is $0.02 per contract side.
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    \7\ See Securities Exchange Act Release No. 41370 (May 5, 1999), 
64 FR 25931 (May 13, 1999).
    \8\ Id.
    \9\ LEAPs are Long Term Equity Anticipation Securities or 
options with durations of up to 36 months. See Amex Rule 903C.
    \10\ FLEX options are customized options with individually 
specified terms such as strike price, expiration date, and exercise 
style. See Amex Rule 900G.
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    Under the revised fee schedule, the Exchange proposes to eliminate 
all transaction, clearance, and floor brokerage fees for customer 
equity options orders. Fees currently charged to customers for 
transactions in index options will remain unchanged. To offset the 
Exchange's elimination of transaction, clearance, and floor brokerage 
fees for customer equity options transactions, the Exchange proposes to 
raise certain fees charged to members. Specifically the Exchange 
proposes to increase the equity options transaction fee from $0.07 to 
$0.19 per contract side for member firm proprietary orders and from 
$0.08 to $0.17 per contract side for specialist and market maker 
orders. Transaction charges for broker-dealers facilitating customer 
equity options orders will remain unchanged at $0.07 per contract side.
    Under the Exchange's proposal, options clearance fees for member 
firms, specialists, and market makers will remain unchanged at $0.04 
per contract side. The Exchange proposes to increase the specialist and 
market marker options floor brokerage fee from $0.02 to $0.03 per 
contract side for both equity and index transactions.\11\ Options floor 
brokerage fees for member firms will remains unchanged at $0.03.
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    \11\ See Amendment No. 1, supra note 3.
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    The Exchange represents that customers will receive actual cost 
savings of approximately $17.5 million, based upon third quarter, 1999 
annualized option contract volume.\12\ The Exchange believes that the 
proposed fee changes are necessary to make the Exchange's options 
transaction charges more competitive with other options exchanges' fees 
and with the

[[Page 21224]]

costs of trading other financial instruments, and to increase the 
number of options orders that are routed to the Exchange. While the 
Exchange anticipates that other options exchanges may also reduce fees 
charged to customers, it believes that the proposed fee changes will 
increase options usage among all investors and stimulate industry-wide 
growth in the options business.
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    \12\ Id.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act \13\ in general, and furthers the 
objectives of Section 6(b)(4) \14\ in particular, in that it provides 
for the equitable allocation of reasonable dues, fees and other charges 
among its members and other persons using its facilities.
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    \13\ 15 U.S.C. 78f(b).
    \14\ 15 U.S.C. 78f(b)(4).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Amex does not believe that the proposed rule change will impose 
any burden on competition.

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

    The Exchange has neither solicited nor received comments on the 
proposed rule change.

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

    The proposed rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act,\15\ and Rule 19b-4(f)(2) thereunder,\16\ in 
that it establishes or changes a due, fee, or other charge imposed by 
the Exchange. At any time within 60 days of the filing of such 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.\17\
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    \15\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \16\ 17 CFT 240.19b-4(f)(2).
    \17\ In reviewing this proposal, the Commission has considered 
its impact on efficiency, competition, and capital formation. 15 
U.S.C. 78c(f).
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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. Persons making written 
submissions should file six copies thereof with the Secretary, 
Securities and Exchange Commission, 450 Fifth Street, N.W., Washington, 
D.C. 20549-0609. 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 at the Commission's Public Reference Room. Copies of such 
filing will also be available for inspection and copying at the 
principal office of the Exchange. All submissions should refer to the 
File No. SR-Amex-00-15 and should be submitted by May 11, 2000.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12)
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Jonathan G. Katz,
Secretary.
[FR Doc. 00-9917 Filed 4-19-00; 8:45 am]
BILLING CODE 8010-01-M