Document ID: SEC-2007-0295-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: American Stock Exchange LLC
Posted Date: 2007-02-27T05:00Z

[Federal Register: February 27, 2007 (Volume 72, Number 38)]
[Notices]               
[Page 8814-8816]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr27fe07-145]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55296; File No. SR-Amex-2007-14]

 
Self-Regulatory Organizations; American Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Relating to the Options Fee Schedule

February 14, 2007.
    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 January 30, 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 has filed the proposal pursuant to Section 19(b)(3)(A) 
of the Act \3\ and Rule 19b-4(f)(2) thereunder,\4\ which renders the 
proposal effective upon filing with the Commission. The Commission is 
publishing this notice to solicit comments on the proposed rule change 
from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend its options fee schedule (the ``Fee 
Schedule'') to (i) reduce the daily maximum aggregate fee charged for 
all dividend strategies, merger spreads and short stock interest 
spreads to $100, (ii) reduce the monthly maximum aggregate fee charged 
for such trades to $12,500, (iii) replace the term ``dividend spread'' 
with ``dividend strategies,'' (iv) extend the fee cap pilot program 
until February 1, 2008, and (v) increase the licensing fee for the 
Russell Index and Russell ETF Options (together the ``Russell Index 
Options'') from $0.10 to $0.15 per contract side The text of the 
proposed rule change is available at the Exchange, the Commission's 
Public Reference Room, and 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

[[Page 8815]]

rule change. The text of these statements may be examined at the places 
specified in Item IV below. The Amex 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

Fee Cap Program

    Currently, specialists, registered options traders, non-member 
market makers, firms, and member and non-member broker-dealers option 
transaction, comparison and floor brokerage fees are limited to an 
aggregate fee of $1,000 for all dividend spreads,\5\ merger spreads and 
short stock interest spreads executed on the same trading day in the 
same option class.\6\ In addition, such fees are also limited to 
$50,000 per month per initiating firm. In order to attract additional 
order flow to the Exchange, this proposal seeks to reduce the daily 
aggregate to $100 and the monthly aggregate to $12,500. The Exchange 
submits that the reduced fees may increase the trading opportunities 
for its members as well as enable the Exchange to attract new business.
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    \5\ A ``dividend spread'' is any trade done within a defined 
time frame in which a dividend arbitrage can be achieved between any 
two (2) deep-in-the-money options.
    \6\ These fees are charged only to Exchange members.
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    This proposal will also amend the Fee Schedule to expand dividend 
spreads to ``dividend strategies.'' Dividend strategies are 
transactions done to achieve a dividend arbitrage involving the 
purchase, sale and exercise of in-the-money options of the same class, 
executed prior to the date on which the underlying stock goes ex-
dividend. The proposed amendment is similar to the definition currently 
used by the Chicago Board Options Exchange (``CBOE'') as well as other 
exchanges.\7\
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    \7\ See CBOE Fee Schedule and Philadelphia Stock Exchange Fee 
Schedule.
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    The fee cap program is currently operated on a six (6) month pilot 
basis. The proposal seeks to extend the pilot for an additional year, 
through February 1, 2008. To date, the Exchange believes that the fee 
cap program has been beneficial, and submits, that a one (1) year 
extension is warranted.

Russell Index Option License Fee

    The proposal also seeks to increase the licensing fees for the 
Russell Index Options. Currently, the licensing fees for the Russell 
Index Options are $0.10 per contract side. The Exchange proposes to 
increase this fee to $0.15 per contract side as a result of an increase 
in the license agreement for the Russell Index Options.
    As detailed in the original filing regarding license fees for 
Russell Index Options,\8\ the Exchange typically pays an index license 
fee to a third party as a condition to the listing and trading of such 
index options. In many cases, the Exchange is required to pay a 
significant licensing fee to the index provider that may not be 
reimbursed. In an effort to recoup the costs associated with certain 
index licenses, the Exchange has established a per contract licensing 
fee for the orders of specialists, registered options traders, firms, 
non-member market makers and broker-dealers, that is collected on every 
option transaction in designated products in which such market 
participant is a party.\9\
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    \8\ See Securities Exchange Act Release No. 53968 (June 9, 
2006), 71 FR 34971 (June 16, 2006) (SR-Amex-2006-56).
    \9\ See Securities Exchange Act Release No. 52493 (September 22, 
2005), 70 FR 56941 (September 29, 2005) (SR-Amex-2005-087).
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    The purpose of the proposal is to charge a licensing fee of $0.15 
per contract side for Russell Index Options for specialist, registered 
options trader, firm, non-member market maker and broker-dealer orders 
executed on the Exchange. In all cases, the fees are charged only to 
Exchange members through whom the orders are placed.
    The proposal will allow the Exchange to recoup its costs in 
connection with the index license fee for the trading of Russell Index 
Options. The Exchange notes that the Amex in recent years has revised a 
number of fees to better align Exchange fees with the actual cost of 
delivering services and reduce Exchange subsidies of such services. 
Implementation of this proposal is consistent with the reduction and/or 
elimination of these subsidies.
    The Exchange asserts that the proposal is equitable as required by 
Section 6(b)(4) of the Act.\10\ Further, the Exchange believes that 
charging an options licensing fee, where applicable, to all market 
participant orders except for customer orders is reasonable given the 
competitive pressures in the industry.
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    \10\ 15 U.S.C. 78f(b)(4). Section 6(b)(4) of the Act states that 
the rules of a national securities exchange provide for the 
equitable allocation of reasonable dues, fees, and other charges 
among its members and issuers and other persons using its 
facilities.
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2. Statutory Basis
    The Exchange asserts that the proposal is equitable as required by 
Section 6(b)(4) of the Act.

B. Self-Regulatory Organization's Statement on Burden on Competition

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

    The foregoing proposed rule change is subject to Section 
19(b)(3)(A)(ii) of the Act \11\ and subparagraph (f)(2) of Rule 19b-4 
thereunder \12\ because it establishes or changes a due, fee, or other 
charge applicable only to a member imposed by the self-regulatory 
organization. Accordingly, the proposal is effective upon the 
Commission's receipt of the filing. At any time within 60 days of the 
filing of the 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.
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    \11\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \12\ 17 CFR 240.19b-4(f)(2).
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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 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-2007-14 on the 

subject line.

Paper Comments

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

[[Page 8816]]

All submissions should refer to File Number SR-Amex-2007-14. 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 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 the 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-2007-14 and should be submitted on or before March 20, 2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-3285 Filed 2-26-07; 8:45 am]

BILLING CODE 8010-01-P