[Federal Register Volume 65, Number 77 (Thursday, April 20, 2000)]
[Notices]
[Pages 21224-21225]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-9919]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-42687; File No. SR-Amex-99-25]


Self-Regulatory Organizations; Order Granting Approval to 
Proposed Amendments to the Amex Constitution by the American Stock 
Exchange LLC Eliminating the Requirement That the Chairman Also Be the 
CEO

April 13, 2000.

I. Introduction

    On July 16, 1999, the American Stock Exchange, Inc. (``Amex'' or 
``Exchange'') submitted to the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'')\1\ and Rule 19b-4 \2\ thereunder, a 
proposed rule change. In its proposal, Amex seeks to eliminate the 
requirement that the Chairman also be the Chief Executive Officer 
(``CEO'') of the Exchange. The proposed rule change was published for 
comments in the Federal Register on January 7, 2000.\3\ The Commission 
received no comments on the filing and this order approves the 
proposal.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4
    \3\ See Securities Exchange Act Release No. 42307 (January 3, 
2000), 65 FR 1206.
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II. Description of the Proposal

    Article II, Section 4(a) of the Amex Constitution currently 
requires that the Chairman of the Board also act as the CEO of the 
Exchange. The Chairman thus performs the standard functions of a Board 
Chairman, as well as being responsible to the Board for the management 
and administration of the affairs of the Exchange as CEO.
    The Exchange proposes to amend Article II, Section 4(a) of the 
Constitution to eliminate the requirement that the Chairman also act as 
the CEO of the Exchange. Amex represents that the NASD's two other 
subsidiaries (the Nasdaq Stock Market and NASD Regulation), both have 
non-executive Chairmen. Amex believes that having a non-executive 
Chairman attend to the functions of a Chairman would allow the CEO to 
focus on the operations of the Exchange. Nevertheless, the proposal 
gives Amex the flexibility to choose to have two people fill the 
Chairman and CEO positions or to have the same person fill these two 
positions.
    As a result of the amendment to Article II, Section 4(a) of the 
Constitution, Amex made a number of conforming changes to other 
provisions of the Constitution and rules. Before this proposal, Amex's 
rules generally did not make a distinction between whether the 
Chairman/CEO was serving in his capacity as the Chairman or the CEO and 
used the term ``Chairman'' for both of these functions. To allow for 
separate persons to serve as Chairman and CEO, Amex examined its rules 
and made a determination as to whether a particular function was 
normally handled by the Chairman or CEO. Based on this examination, 
Amex then changed the term ``Chairman'' to CEO when it determined that 
Chairman/CEO was acting in his capacity as the CEO. Amex had to make 
choices, however, when the function was properly performed by either 
the Chairman or the CEO. In addition, Article II, Section 3 (Chairman) 
and Article II, Section 4(a) (Chief Executive Officer), discussing the 
selection and authority of the Chairman and CEO respectively, have been 
appropriately rearranged. Other than splitting the Chairman and CEO 
roles and making the above-mentioned conforming changes, the Amex 
represents that there are no substantive changes being made.

III. Discussion

    The Commission finds that the proposed rule change is consistent 
with

[[Page 21225]]

the requirements of the Act. \4\ In particular, the Commission finds 
the proposal is consistent with Section 6(b)(5)\5\ of the Act. Section 
6(b)(5) requires, among other things, that the rules of an exchange be 
designed to promote just and equitable principles of trade and to 
protect investors and the public interest.
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    \4\ In addition, purusant to Section 3(f) of the Act, the 
Commission has considered the proposed rule's impact on efficiency, 
competition, and capital formation. 15 U.S.C. 78c(f).
    \5\ 15 U.S.C. 78f(b)(5).
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    The Commission believes that the proposal is consistent with the 
Act. In particular, Amex represented that splitting the Chairman/CEO 
functions will allow the CEO to focus on the operations of the 
Exchange. The Commission agrees and believes that the proposal should 
allow the CEO to devote more time to the day-to-day operations of the 
Exchange.
    In approving this rule change, however, the Commission notes that 
the proposed language now permits the Chairman to be affiliated with a 
member of the Exchange if separate persons hold the Chairman and CEO 
positions. As the Commission stated in the order approving the 
International Securities Exchange LLS's application for registration as 
a national securities exchange, the affiliation of the Chairman with 
one of the Exchange's members implicates certain conflicts of interest, 
or at least gives the appearance of such conflicts.\6\ Amex represented 
that it made this change to make its corporate governance structure 
consistent with other NASD entities, such as NASD Regulation, which in 
1999 had a Chairman who was affiliated with an NASD member. Amex also 
represented that the change, other than splitting the Chairman and CEO 
positions, will have no substantive effect on the operation of the 
Exchange. Nevertheless, if Amex chooses to split the Chairman/CEO 
positions and has a Chairman affiliated with a member, Amex's Chairman 
should avoid actual or apparent conflicts of interest.
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    \6\ See Securities Exchange Act Release No. 42455 (February 24, 
2000), 65 FR 11401 (March 2, 2000) (File No. 10-127).
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\7\ that the proposed rule change (SR-Amex-99-25) is approved.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\8\
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    \7\ 15 U.S.C. 78s(b)(2).
    \8\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
[FR Doc. 00-9919 Filed 4-19-00; 8:45 am]
BILLING CODE 8010-01-M