[Federal Register Volume 66, Number 248 (Thursday, December 27, 2001)]
[Notices]
[Pages 66958-66961]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-31743]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-45163; File No. SR-Amex-2001-101]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the American Stock Exchange 
LLC Relating to an Increase in Floor, Membership and Options Trading 
Fees

December 18, 2001.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and rule 19b-4 \2\ thereunder, notice is hereby given 
that on November 30, 2001, the American Stock Exchange LLC (``Amex'' or 
``Exchange'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items, I, II, 
and III below, which Items have been prepared by the Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
---------------------------------------------------------------------------

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

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

    The Exchange proposes to increase floor, membership and options 
trading fees as described herein.\3\
---------------------------------------------------------------------------

    \3\ Under Amex-2001-102, the Exchange seeks to impose the floor, 
membership, options trading, and comparison and floor brokerage 
fees, as described in this current proposal, as of August 1, 2001. 
In addition, the Exchange proposes to impose the License Fees and 
the elimination of the fee cap for options, as described in this 
proposal, as of October 1, 2001. See Securities Exchange Act Release 
No. 45165 (December 18, 2001).
---------------------------------------------------------------------------

    The text of the proposed rule change appears below. New text is in 
italics; deletions are in brackets.

Fee Schedule

I. Floor fees

[[Page 66959]]



------------------------------------------------------------------------
                  Type                              Annual fee
------------------------------------------------------------------------
Floor Fees:
(payable monthly)
    Floor Clerk........................  $[300.00]  900.00 ($75/month).
    Floor Facility--Regular & Options..  [1,400.00]  2400.00 ($200/
                                          month).
Principal
    Floor Facility--Limited Trading      [700.00]  2400.00 ($200/month).
     Permit.
    Floor Wire Privilege...............  [400.00]  800.00 ($66.67/
                                          month).
    Post Fee per Podium................  750.00
    Specialist Registration Fee........  [400.00]  800.00 ($66.67/
                                          month).
    Technology.........................  [1,200.00]  3000.00 ($250/
                                          month).
    No further change..................
------------------------------------------------------------------------

II. Member Fees

------------------------------------------------------------------------
            Membership Dues                         Annual fee
------------------------------------------------------------------------
<divide> Associate.....................  $[750.00]  1500.00 ($125/
                                          month).
<divide> Options Principal (OPM).......  [750.00]  1500.00 ($125/month).
<divide> Regular.......................  [750.00]  1500.00 ($125/month).
<divide> Limited Trading Permit (LTP)..  [750.00]  1500.00 ($125/month).
No further changes.....................
------------------------------------------------------------------------

III. Options Fees

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                        Specialist, market
                 Type                              Firm \2\                maker (ROTs)             Broker/dealer                   Customer \3\
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                   I. Options Transaction Fee \1\ (per contract side)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Equity Options........................  $0.19.........................        $[0.17] 0.26  $0.19........................  No Charge.
Index Options.........................  0.11..........................        [0.12] 0.21]  0.11.........................  $0.10.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                   II. Options Comparison Fee \1\ (per contract side)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Equity Options........................  $0.04.........................        $[0.04] 0.05  $0.04........................  No Charge.
Index Options.........................  0.04..........................         [0.04] 0.05  0.04.........................  $0.04.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                III. Options Floor Brokerage Fee \1\ (per contract side)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Equity Options........................  $0.03.........................        $[0.03] 0.05  $0.03........................  No Charge.
Index Options.........................  0.03..........................         [0.03] 0.05  0.03.........................  0.03.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                    IV. Options Marketing Fee \4\ (per contract side)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Equity Options........................  No Charge.....................               $0.40  No Charge....................  No Charge.
 V Options Licensing Fee (per contract
                 side)
--------------------------------------------------------------------------------------------------------------------------------------------------------
MNX, NDX and QQQ......................  No Charge.....................               $0.10  No Charge....................  No Charge.
OEF...................................  No Charge.....................                0.05  No Charge....................  No Charge.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes:
\1\ The increase of $0.09 in transaction fees, of $0.01 in comparison fees, and of $0.02 floor brokerage fees will only be imposed on the first 3,000
  contracts executed for the accounts of specialists, registered options traders, and non-member broker dealers as either an accommodation trade (also
  known as ``Cabinet Trades'') or part of the following strategies: (a) reversal and conversions; (b) dividend spreads; and (c) box spreads. A Fee
  Reimbursement Form must be submitted to the Exchange in order to receive a reimbursement of the fee increases charged on contracts in excess of 3,000.
 
[There is a cap on the number of options contracts per trade subject to Exchange options charges. Options charges will be imposed on member firm
  proprietary, specialist, market maker and non-member broker/dealer trades for the first 3,000 contracts. The caps will apply to all three options
  charge--transaction, comparison, and floor brokerage--and will apply to one day's trades of 100 or more contracts per execution on one side of any
  series executed by one specialist/trader/broker (for one member firm) and cleared by one clearing firm. The cap will also apply to trades of less than
  100 contracts that are multiple per copy contract parties to trades of 100 or more contracts. The same fee schedule and cap provision will apply to
  LEAPS and FLEX options.]
\2\ Customer facilitated orders will continue to be charged a transaction fee of $0.07 per contract side.
\3\ Index Options machine delivered <ls-thn-eq> 30 contracts are not assessed a transaction fee.
\4\ Excludes options trades between and among Registered Options Traders and Specialists.


[[Page 66960]]

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 increase the following Exchange Floor 
fees:
    (1) The Technology fee would be increased from $1200 to $3000 
annually ($250 per month); (2) the Floor Facility fee would be 
increased from $1400 to $2400 annually ($200 per month) for Regular and 
Options Principal Members. This fee would also be increased from $700 
to $2400 annually for holders of Limited Trading Permits; (3) the Floor 
Clerk fee would be increased from $300 to $900 annually ($75 per 
month); (4) the Specialist Registration fee would be increased from 
$400 to $800 annually ($66.67 per month); and (5) the Floor Wire 
Privilege fee would be increased from $400 to $800 annually ($66.67 per 
month).
A. Member Fees
    Membership Dues would be increased from $750 to $1500 annually 
($125 monthly) for all Regular Members, Options Principal Members, 
Associate Members and holders of Limited Trading Permits.
B. License Fees
    In recent years, the Exchange has entered into license agreements 
with providers of indexes to use such indexes for the trading of 
options. In an effort to recoup some of the costs of these licenses, 
the Exchange proposes to establish a licensing fee for specialists and 
registered options traders. The fee, the amount of which may vary from 
product to product, would be collected on every transaction in the 
product in which the specialist or registered options trader is a 
party. Initially, the fees and products would be as follows: Options on 
the Nasdaq 100 Index Tracking Stock (symbol: QQQ), Nasdaq 100 Index 
(symbol: NDX) and Mini NDX (symbol: MNX)--$0.10 per contract side, and 
options on the S&P 100 iShares (symbol: OEF)--$0.05 per contract side.
C. Options Fees
    Transaction, Comparison and Floor Brokerage Fees--For all 
specialists and registered options trader transactions in both equity 
and index options, the options fees would be increased as follows: (1) 
The Options Transaction fee per contract side is increased from $0.17 
to $0.26 for equity options and from $0.12 to $0.21 for index options; 
(2) the options comparison fee is increased from $0.04 to $0.05 per 
contract side; and (3) the floor brokerage fee per contract side is 
increased from $0.03 to $0.05.
    Elimination of Fee Cap--The Exchange states that currently all 
three types of options fees--transaction, comparison, and floor 
brokerage--are subject to a cap on the number of options contracts 
subject to the charges on a given day. The current cap is set at 3,000 
contracts.
    The Exchange proposes to eliminate the cap on orders executed for 
the accounts of specialists, registered options traders, and non-member 
broker dealers. Thus, transaction, comparison, and floor brokerage fees 
would apply to all option contracts executed for those accounts on a 
given day. Notwithstanding the foregoing, the Exchange has determined 
that accommodation trades (also known as ``Cabinet Trades'') \4\ and 
trades occurring as part of certain types of strategies would be 
eligible for the cap on that portion of the transaction, option 
clearance, and floor brokerage fees that represent the increase in fees 
established in this filing. Thus, for contracts executed in excess of 
3,000 on a given day, the transaction fee increase of $0.09, the 
options comparison fee increase of $0.01 and the floor brokerage fee 
increase of $0.02 would be reimbursed as set forth below. Transaction, 
options comparison, and floor brokerage fees would continue to be 
charged for only the first 3,000 contracts executed as an accommodation 
trade or pursuant to one of the following strategies: (1) Reversals and 
conversion; \5\ (2) dividend spreads; \6\ and (3) box spreads.\7\ The 
Exchange states that its billing system is unable to distinguish among 
these types of transactions; therefore, a manual procedure has been 
developed. Specifically, within thirty calendar days of the particular 
transaction date, a Fee Reimbursement Form must be completed and 
submitted to the Exchange. Upon acceptance, the Exchange would delivery 
to that member's clearing firm a reimbursement check in the amount of 
the transaction, clearance, and brokerage fee increases (a total of 
$0.12) charged on contracts in excess of 3,000 executed pursuant to an 
accommodation trade or one of the strategies described above.
---------------------------------------------------------------------------

    \4\ See Annex Rule 959 for a description of an accommodation 
trade.
    \5\ The Exchange defines a ``conversion'' as a strategy in which 
a long put and a short call with the same strike price and 
expiration date are combined with long underlying stock to lock in a 
nearly riskless profit. A ``reversal'' is a strategy in which a 
short put and long call with the same strike price and expiration 
date are combined with short stock to lock in a nearly riskless 
profit.
    \6\ The Exchange defines a ``dividend spread'' as any trade done 
within a defined time frame in which a dividend arbitrage can be 
achieved between any two deep-in-money options.
    \7\ The Exchange defines a ``box spread'' as a spread strategy 
that involves a long call and short put at one strike price as well 
as a short call and long put at another strike price. This is a 
synthetic long stock position at one strike price and a synthetic 
short stock position at another strike price.
---------------------------------------------------------------------------

    The Exchange states that the Floor and Member Fees would be 
increased in order to better align the Exchange's fees with the actual 
cost of delivering the specified services and to reduce Exchange 
subsidization of such services. The increase in options transactions 
charges would be necessitated by the large and increasing costs 
incurred by the Exchange in implementing options trading technology.
(2) Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act \8\ in general and furthers the objectives 
of Section 6(b)(4) \9\ in particular in that it is designed to provide 
for the equitable allocation of reasonable dues, fees, and other 
charges among its members and issuers and other persons using its 
facilities.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78f(b).
    \9\ 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.

[[Page 66961]]

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

    No written comments were solicited or received with respect to the 
proposed rule change.

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

    The foregoing rule change has become effective pursuant to section 
19(b)(3)(A)(ii) of the Act \10\ and rule 19b-4(f)(2) \11\ thereunder 
because it establishes or changes a due, fee, or 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.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \11\ 17 CFR 240.19-4(f)(2).
---------------------------------------------------------------------------

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. 
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. Copies of such filing will also be 
available for inspection and copying at the principal office of the 
Amex. All submissions should refer to File No. SR-Amex-2001-101 and 
should be submitted by January 17, 2002.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\12\
Margaret H. McFarland,
Deputy Secretary.
---------------------------------------------------------------------------

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

[FR Doc. 01-31743 Filed 12-26-01; 8:45 am]
BILLING CODE 8010-01-M