Document ID: SEC-2008-0557-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: American Stock Exchange LLC
Posted Date: 2008-04-11T04:00Z

[Federal Register: April 11, 2008 (Volume 73, Number 71)]
[Notices]               
[Page 19913-19914]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr11ap08-116]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57625; File No. SR-Amex-2008-28]

 
Self-Regulatory Organizations; American Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Relating to Rebates to Specialists for Options Transaction Fees 
Resulting From Linkage P/A Orders

April 4, 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 March 20, 2008, 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 
Exchange. The Exchange filed the proposed rule change 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

    Amex proposes to rebate options transaction fees incurred by 
specialists in connection with a principal acting as agent order (``P/A 
Order'') \5\ executed via the Intermarket Option Linkage (``Options 
Linkage'' or ``Linkage''). The text of the proposed rule change is 
available at Amex, the Commission's Public Reference Room, and http://
www.amex.com.
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    \5\ A P/A Order as defined in Amex Rule 940(b)(10)(i) means an 
order for the principal account of a specialist (or equivalent 
entity on another Participant exchange that is authorized to 
represent Public Customer Orders), reflecting the terms of a related 
unexecuted Public Customer Order for which the specialist is acting 
as agent. See Section 2(16)(a) of the Plan for the Purpose of 
Creating and Operating an Intermarket Option Linkage.
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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

Purpose
    The Exchange proposes to rebate options transaction fees incurred 
by specialists as a result of the obligation to send customer orders 
through the Linkage to the away options exchange disseminating the 
national best bid or offer (``NBBO'').\6\ A P/A Order is used by 
specialists for this purpose. Currently, a specialist will be charged 
two separate transaction fees upon completion of a transaction 
involving a P/A Order. First, the away options exchange will charge the 
P/A Order a transaction fee upon execution of the order. This fee 
varies by the particular options exchange. Second, in order to transfer 
the trade resulting from the P/A Order at the away options exchange 
into the customer account, the Amex specialist is then required to 
execute a trade on the Exchange. At this point, the Exchange will 
charge the applicable options transaction fees set forth in the Amex 
Options Fee Schedule to the specialist. This proposal seeks to rebate 
these exchange transaction fees incurred by specialists as a result of 
the obligations imposed by the Options Linkage.
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    \6\ The proposed fee rebate of transaction fees incurred by 
specialists as a result of the obligation to send P/A Orders does 
not include the rebate of OCC fees and clearing firm fees associated 
with P/A Orders. See e-mail from Jeff Burns, Vice President & 
Associate General Counsel, Amex, to Brian O'Neill, Attorney, and 
Molly Kim, Special Counsel, Division of Trading and Markets, 
Commission, on April 1, 2008 (``April 1 E-mail'').
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    The current Amex Options Fee Schedule imposes a charge of $0.20 per 
contract side on specialist trades in equity options and $0.31 per 
contract side on specialist trades for index options. In connection 
with transferring the P/A Order execution into the customer account, 
the Amex specialist will incur a charge of $0.20 or $0.31 per contract 
side, depending on whether the option is an equity option or index 
option. Under this proposal, the Exchange will rebate the transaction 
charges incurred by the specialist to transfer the P/A Order execution 
into the customer account.\7\ In addition, on a monthly basis, the 
Exchange will calculate the amount of the transaction fees incurred by 
the specialist in connection with his or her obligation to send P/A 
Orders to away options exchanges. This amount will also be

[[Page 19914]]

credited to the specialist account for that month's charges.
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    \7\ The proposal to rebate transaction fees incurred by 
specialists as a result of the obligations imposed by the Options 
Linkage would also include any specialist subject to the BD Auto-Ex 
Fee. This could occur if a specialist submitted an order 
electronically through order-entry lines, such as CMS and/or FIX, 
for automatic execution, for the purpose of transferring a trade 
resulting from the P/A Order at the away options exchange into the 
customer account. The Exchange would then charge to the specialist, 
the BD Auto-Ex Fee together with the other applicable options 
transaction fees set forth in the Options Fee Schedule. The proposal 
set forth in this proposal seeks to rebate these transaction fees 
incurred by a specialist. See e-mail from the Jeff Burns, Vice 
President & Associate General Counsel, Amex, to Brian O'Neill, 
Attorney, and Molly Kim, Special Counsel, Division of Trading and 
Markets, Commission, on April 3, 2008.
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    In order for a specialist to be subject to the fee rebates under 
this proposal, the Exchange will require that specialists use the 
``Auto Route'' functionality in ANTE for orders up to 1,000 
contracts.\8\ Auto Route automatically sends a P/A Order through the 
Linkage to execute against the NBBO at another options exchange.\9\
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    \8\ As long as a specialist satisfies this condition, such 
specialist would be eligible for the fee rebate, regardless of the 
size of the order received. For example, if the specialist satisfies 
the rebate condition and sets the Auto Route functionality in ANTE 
for orders up to 1,000 contracts, such specialist would be eligible 
for the fee rebate even though the order received is greater than 
1,000 contracts and thereby not subject to auto routing but to 
manual handling by the specialist. See April 1 E-mail, supra note 6.
    \9\ Auto Route automatically sends a P/A Order through the 
Linkage to execute against the NBBO at another options exchange if 
such order is not executable against the Amex best bid or offer. See 
April 1 E-mail, supra note 6.
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    The Exchange believes that this proposal to rebate specialist 
transaction charges associated with P/A Orders is necessary in order 
for the Exchange to remain competitive with other options exchanges 
that currently provide transaction fee rebates/credits for executing 
orders through the Linkage. The Exchange states that both the Chicago 
Board Options Exchange, Incorporated and the Philadelphia Stock 
Exchange, Inc. have fee rebate or credit programs for fees incurred 
executing orders through the Linkage.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Act,\10\ in general, and furthers the objectives of Section 
6(b)(4),\11\ 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. The 
Exchange believes that the proposal provides for an equitable 
allocation of reasonable fees among members consistent with Section 
6(b)(4),\12\ by rebating/crediting transaction fees incurred by a 
specialist as a result of the obligation imposed by the sending of P/A 
Orders through the Linkage.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(4).
    \12\ Id.
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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.

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 effective upon filing 
pursuant to Section 19(b)(3)(A)(ii) \13\ of the Act and Rule 19b-
4(f)(2) \14\ thereunder, because it establishes or changes a due, fee, 
or other charge applicable only to a member imposed by the Exchange. 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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    \13\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \14\ 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-2008-28 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.

All submissions should refer to File Number SR-Amex-2008-28. 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, on official business 
days between the hours of 10 a.m. and 3 p.m. Copies of such filing will 
also be available for inspection and copying at the principal office of 
the Exchange. 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 No. SR-Amex-
2008-28 and should be submitted on or before May 2, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E8-7656 Filed 4-10-08; 8:45 am]

BILLING CODE 8011-01-P