Document ID: SEC-2008-0576-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: American Stock Exchange LLC
Posted Date: 2008-04-16T04:00Z

[Federal Register: April 16, 2008 (Volume 73, Number 74)]
[Notices]               
[Page 20724-20726]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr16ap08-117]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57641; File No. SR-Amex-2007-107]

 
Self-Regulatory Organizations; American Stock Exchange LLC; 
Notice of Filing of Proposed Rule Change, as Modified by Amendment No. 
3 Thereto, Relating to Section 31 Related Fees

April 9, 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 October 2, 2007, the American Stock Exchange, LLC (``Amex'' 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 
Amex. The Amex filed Amendment No. 2 to the proposed rule change on 
March 19, 2008.\3\ The Amex filed Amendment No. 3 to the proposed rule 
change on April 7, 2008.\4\ 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\ The Amex previously filed and withdrew Amendment No. 1 to 
the proposed rule change.
    \4\ Amendment No. 3 replaces all previous amendments in their 
entirety. Amendment No. 3 added new effective dates of the proposed 
rule change and would eliminate non-substantive and extraneous text 
from proposed Commentary .01 to Rule 393.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to adopt new Commentary to Rule 393 to allow 
member firms to voluntarily submit, during a six-month period after the 
effective date of this rule proposal, funds previously accumulated by 
the member firms pursuant to Rule 393. In addition, the proposed rule 
change would allow the Exchange to use accumulated funds to pay its 
current Section 31 fees or, to the extent of any surplus, offset other 
Exchange regulatory costs.
    The text of the proposed rule change is available at the Amex's 
principal office, from the Commission's Public Reference Room, and on 
the Amex's Web site at http://www.amex.com.

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 Amex 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 III 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
    Pursuant to Section 31 of the Act \5\ and Rule 31 thereunder,\6\ 
national securities exchanges and associations (collectively ``SROs'') 
are required to pay a transaction fee to the Commission that is 
designed to recover the costs related to the government's supervision 
and regulation of the securities markets and securities professionals. 
To offset this obligation, the Amex assesses its clearing and self-
clearing members a regulatory fee in accordance with Rule 393, which 
mirrors Section 31 in both

[[Page 20725]]

scope and amount. Clearing members may in turn seek to charge a fee to 
their customers or correspondent firms. Any allocation of the fee 
between a clearing member and its correspondent firm or customer is the 
responsibility of the clearing member.
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    \5\ 15 U.S.C. 78ee.
    \6\ 17 CFR 240.31.
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    Reconciling the amounts reported to the Amex and the amounts 
collected from the customers historically had been difficult for member 
firms, causing surpluses to accumulate at some member firms (referred 
to as ``accumulated funds''). These accumulated funds were not remitted 
to the Amex by certain members, despite the fact that these charges may 
have been previously identified as ``Section 31 Fees'' or ``SEC Fees'' 
by the firms.\7\ In addition, since the Amex uses a ``self-reporting'' 
methodology for its members to report and remit amounts payable 
pursuant to Rule 393, the Amex has and continues to accumulate amounts 
in excess of the amounts paid by the Amex to the Commission pursuant to 
Section 31 and Rule 31 (``Exchange accumulated funds'').
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    \7\ The Commission stated in its release adopting new Rule 31 
and Rule 31T that ``it is misleading to suggest that a customer or 
[SRO] member incurs an obligation to the Commission under Section 
31.'' Securities Exchange Act Release No. 49928 (June 28, 2004), 69 
FR 41060, 41072 (July 7, 2004). In response to this statement, the 
Exchange issued a notice to members regarding its Rule 393 Fee and 
the Commission's ``Section 31 Fee,'' and provided guidance for 
members and member organizations that choose to charge their 
customers fees. See Amex Notice REG 2004-42 Finance (October 29, 
2004).
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    In November 2004, the Amex and the other SROs received a letter 
from the Commission's Division of Market Regulation requesting, among 
other things, that each SRO conduct an analysis to ascertain the amount 
of accumulated funds and present a plan for broker-dealers to dispose 
of or otherwise resolve title to such accumulated funds.\8\ The NASD 
was asked by the Commission to take the lead in coordinating this 
effort with the other SROs. To ascertain the amount of accumulated 
funds, the NASD surveyed 240 clearing and self-clearing member firms to 
review their practices regarding the collection of such fees from 
customers. After compiling and analyzing the data provided by these 
firms, the NASD staff found that fewer than half the firms surveyed had 
an accumulated fund balance. The NASD worked with the other SROs to 
recommend a potential solution to allow the clearing and self-clearing 
firms to resolve title to the accumulated funds. It was determined, 
based upon information provided in connection with the NASD's survey, 
that it would be virtually impossible to return customer-related 
accumulated funds to the customers that had paid these funds to the 
firms.\9\
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    \8\ In its response to the Division of Market Regulation's 
letter, the Amex advised that it is in possession of accumulated 
funds collected from its members as Section 31 fees. Previous to the 
adoption of Rules 31 and 31T, all monies received by the Amex 
pursuant to Rule 393 were forwarded to the Commission. However, with 
the recalculation of Section 31 fees for the whole of the 
Commission's fiscal year 2004, the Amex found that its members 
reported and submitted fees exceeding the amount billed by the 
Commission for fiscal year 2004. See Letter to Robert L.D. Colby, 
Deputy Director, Division of Market Regulation, Commission, from 
Claire P. McGrath, Senior Vice President and Deputy General Counsel, 
Amex, dated January 11, 2005.
    \9\ The NASD had asked all surveyed firms whether they could 
``identify and relate the funds to specific customers on a 
transaction by transaction basis.'' The surveyed firms universally 
stated that tracking fractions of a penny to individual customers 
would be impossible and any over-collections could not be passed 
back at the customer level. See Securities Exchange Act Release No. 
55886 (June 8, 2007), 72 FR 32935 (June 14, 2007) (Order approving 
SR-NASD-2007-027).
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    The proposed rule change is aimed at enabling those fees that may 
have been collected for purposes of paying an ``SEC Fee'' or ``Section 
31 Fee'' to be used to pay such fees. The Exchange is proposing a new 
Commentary to Rule 393 that will allow firms, on a one-time-only basis, 
voluntarily to remit historically accumulated funds to the Exchange. 
These funds then would be used to pay the Exchange's current Section 31 
fees in conformity with prior representations made by member firms. In 
addition, a member or member organization may designate all or part of 
the Exchange-accumulated excess held by the Exchange and allocated to 
such member be used by the Exchange in accordance with the new 
Commentary to Rule 393. Finally, to the extent the payment of these 
historically accumulated funds or Exchange accumulated funds is in 
excess of the Section 31 fees due the Commission from the Amex, such 
surplus shall be used by the Exchange to offset regulatory costs.
    The Amex proposes that the effective date of the proposed rule 
change would be the date the Commission Order approving the proposed 
rule filing is published in the Federal Register and the effectiveness 
of Commentary .01 to Rule 393, once approved, would be for a period of 
six months.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\10\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\11\ in particular, in that it 
is designed to prevent fraudulent and manipulative acts and practices, 
to promote just and equitable principles of trade, to foster 
cooperation and coordination with persons engaged in facilitating 
transactions in securities, to remove impediments to and perfect the 
mechanism of a free and open market and a national market system, and, 
in general, to protect investors and the public interest. The Exchange 
believes that the proposed rule change will provide a transparent way 
of addressing the issue of accumulated funds held by member firms and 
by the Exchange.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange believes that the proposed rule change does not 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

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

III. 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. 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 rule-comments@sec.gov. Please include 
File Number SR-Amex-2007-107 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-Amex-2007-107. 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

[[Page 20726]]

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 also will be available for 
inspection and copying at the principal office of the Amex. 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 Number SR-Amex-2007-107 and should be 
submitted on or before May 7, 2008

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8-8152 Filed 4-15-08; 8:45 am]

BILLING CODE 8010-01-P