Document ID: SEC-2006-1069-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: American Stock Exchange LLC
Posted Date: 2006-08-18T04:00Z

[Federal Register: August 18, 2006 (Volume 71, Number 160)]
[Notices]               
[Page 47831-47833]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr18au06-131]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-54314; File No. SR-Amex-2006-27]

 
Self-Regulatory Organizations; American Stock Exchange LLC; Order 
Approving a Proposed Rule Change and Amendments No. 1 and 2 Thereto 
Relating to Interim Members

August 14, 2006.

I. Introduction

    On March 23, 2006, the American Stock Exchange LLC (``Amex'' or 
``Exchange'') filed with 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 thereunder,\2\ a 
proposal to amend Amex Rule 353 to limit members and member 
organizations from allocating their seats

[[Page 47832]]

to interim members on the Floor of the Exchange for a maximum of 
fifteen aggregate days that may be used consecutively or non-
consecutively for a one-year period beginning on the date of approval 
as an interim member (``approval date''). On June 15, 2006, Amex filed 
Amendment No. 1 to the proposed rule change and on June 27, 2006, Amex 
filed Amendment No. 2 to the proposed rule change. The proposed rule 
change, as amended, was published for comment in the Federal Register 
on July 13, 2006. The Commission received no comments regarding the 
proposal.\3\ This order approves the proposed rule change, as amended.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ The comment period expired on August 3, 2006.
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II. Description of the Proposal

    Currently, Amex Rule 353 permits unfettered temporary allocation of 
a membership to an interim member \4\ on the Floor of the Exchange so 
long as the duration is no less than one day and no more than one year. 
The Exchange proposes to amend Amex Rule 353 to reduce the maximum 
number of days the member or member organization can allocate its 
membership to an interim member to fifteen days, which may be used by 
each interim member consecutively or non-consecutively for a one-year 
period beginning on the date of approval of such interim member by the 
Exchange. Upon approval of this proposed rule change by the Commission, 
(1) all interim members currently on seats will be able to use their 
fifteen day allocation for the duration of the year from the date on 
which they were approved for interim membership and (2) interim members 
that are subsequently approved will have a year beginning on their 
individual approval dates to use their fifteen day allocation.
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    \4\ An interim member is an individual, pre-qualified by the 
Exchange, who is designated by a member or member organization to 
temporarily use the membership for a specified period of time when 
the member is absent from the Trading Floor. Article IV, Section 
3(e) of the Amex Constitution explicitly states that the designation 
of an interim member is ``subject to and in accordance with such 
rules as may be adopted from time to time by the Board of 
Governors.'' Amex Rule 353 sets forth the specific requirements, 
rights, and limitations of interim members.
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    If an interim member has exhausted the fifteen day period, even if 
this occurs prior to end of the one-year period, the member or member 
organization may regain interim membership status by designating 
another interim member, or redesignating the same interim member, to 
the seat by filing documents required by the Membership Services 
Department and paying the maintenance fee in accordance with Article 
VII, Section 1(g) of the Amex Constitution.\5\
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    \5\ The maintenance fee is a $1500 charge that is paid by a 
member or member organization annually to the Exchange in order to 
maintain interim member status. This proposal does not affect the 
amount of the maintenance fee.
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    In addition, the proposed rule change will (1) eliminate the $250 
allocation fee in Article IV, Section 3(e) and Article VII, Section 
1(g) of the Amex Constitution, which specify the fees associated with 
the Interim Member program, and all references thereto; (2) waive the 
$1,500 initiation fee associated with the transfer of a membership 
pursuant to a special transfer agreement \6\ in Article IV, Section 
1(f) and Article VII, Section 1(c) of the Amex Constitution for interim 
members who wish to lease a seat immediately following their allotted 
time as an interim member; (3) make clarifications in Amex Rule 353 and 
Article IV, Section 3(e) of the Amex Constitution that an interim 
member will become effective upon submission of the appropriate form to 
and approval by the Membership Services Department of the Exchange; and 
(4) make corresponding changes related to this proposed rule change to 
the Member Fee Schedule, which sets forth the fees that Amex charges 
its members.
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    \6\ A special transfer agreement is an agreement between the 
owner of a regular or options principal membership and an individual 
who is authorized to use the membership for a specified period of 
time or until the occurrence of a specified event.
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III. Discussion

    After careful consideration of the proposal, the Commission finds 
that the proposed rule change, as amended, is consistent with the 
requirements of the Act and the rules and regulations thereunder 
applicable to a national securities exchange \7\ and, in particular, 
the requirements of Section 6 of the Act.\8\ Specifically, the 
Commission finds that the proposed rule change is consistent with 
Section 6(b)(5) of the Act,\9\ which requires, among other things, that 
the rules of a national securities exchange be designed to promote just 
and equitable principles of trade, to foster cooperation and 
coordination with persons engaged in regulating, clearing, settling, 
processing information with respect to, and 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. Section 6(b)(5) of the Act 
\10\ also requires that the rules of an exchange not be designed to 
permit unfair discrimination among customers, issuers, brokers, or 
dealers. In addition, the Commission believes that the proposal is 
consistent with Section 6(b)(4) of the Act,\11\ in that the proposed 
rule change provides for the equitable allocation of reasonable dues, 
fees, and other charges among the Exchange's members and issuers and 
other persons using its facilities.
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    \7\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. 15 U.S.C. 78c(f).
    \8\ 15 U.S.C. 78f.
    \9\ 9 15 U.S.C. 78f(b)(5).
    \10\ Id.
    \11\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that allowing unlimited allocation of 
temporary membership days to interim members lessens the value of 
memberships by essentially permitting individuals who do not own or 
lease seats to operate as members.\12\ The Exchange believes that this 
circumvention of seat leasing and ownership increases the number of 
unleased seats and decreases the demand for a membership, thereby 
artificially lessening the value of the membership. However, the 
Exchange also believes that the Interim Member program has served a 
useful function on the Floor by providing members with protection in 
cases of illnesses or emergencies and coverage when vacation is taken. 
The Exchange believes that the proposed rule change adequately balances 
concerns over having adequate emergency coverage on the Floor and 
concerns over the devaluation of memberships. The Commission believes 
that is consistent with the Act for the Exchange to make the changes 
described above to limit the interim membership program to balance 
these concerns.
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    \12\ 12 The Exchange represents that if the proposed rule change 
had been implemented at the start of 2005, approximately half of the 
21 interim members would have exhausted their fifteen aggregate days 
by the beginning of November.
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    While some members may incur additional expense as a result of the 
proposed restrictions to the Interim Member program, the proposed rule 
change should also provide some economic relief to these members. For 
example, the elimination of the $250 allocation fee, which the Exchange 
charges each time an interim member is designated to a seat, should 
permit members to more effectively use the fifteen days for 
emergencies, illnesses, and vacations on a non-consecutive basis. 
Further, waiving the $1,500 initiation fee, which is charged whenever a 
member enters into a special transfer agreement, for those who wish to 
lease a seat immediately following their allotted time as an

[[Page 47833]]

interim member, will provide relief to members who encounter serious 
emergencies, as well as offer a financial incentive for interim members 
to enter into special transfer agreements.

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\13\ that the proposed rule change (SR-Amex-2006-27), as amended, 
is approved.
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    \13\ 15 U.S.C. 78s(b)(2).
    \14\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\14\
Nancy M. Morris,
Secretary.
[FR Doc. E6-13636 Filed 8-17-06; 8:45 am]

BILLING CODE 8010-01-P