Document ID: SEC-2005-0207-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: American Stock Exchange LLC
Posted Date: 2005-11-07T05:00Z

[Federal Register: November 7, 2005 (Volume 70, Number 214)]
[Notices]               
[Page 67504-67506]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr07no05-107]                         

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52701; File No. SR-Amex-2005-101]

 
Self-Regulatory Organizations; American Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change, 
and Amendment Nos. 1 and 2 Thereto, Relating to Equity Transaction 
Charges

October 28, 2005.
    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 September 30, 2005, 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 prepared by the Amex. On October 
18, 2005, the Exchange filed Amendment No. 1 to the proposed rule 
change.\3\ On October 27, 2005, the Amex filed Amendment No. 2 to the 
proposed rule change.\4\ Amex has designated this proposal as one 
establishing or changing a due, fee, or other charge imposed by the 
Exchange under Section 19(b)(3)(A),\5\ and Rule 19b-4(f)(2) 
thereunder,\6\ which renders the proposal effective upon filing with 
the Commission. The Commission is publishing this notice to solicit 
comments on the proposed rule change, as amended, from interested 
persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ On October 27, 2005, the Amex withdrew Amendment No. 1.
    \4\ In Amendment No. 2, the Exchange: (1) Clarified its current 
practice of assessing equity fees on transactions rather than 
orders; (2) provided further explanation of how the proposed rule 
change will attract additional order flow to the Exchange; (3) 
changed the name of the current ``Regulatory Fee'' to a ``Specialist 
Transaction Fee'' and provided clarification as to the purpose of 
that change; (4) amended the rule text to specifically indicate that 
System Orders are subject to a transaction charge; and (5) generally 
provided clarification regarding the purpose of the proposed rule 
change.
    \5\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \6\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

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

    The Exchange proposes to revise a variety of equity transaction 
fees that Exchange members are charged for executions on the Exchange. 
These fee changes will only apply to equity issues, and, accordingly 
will leave unchanged the current transaction charges for Portfolio 
Depositary Receipts, Index Fund Shares and Trust Issued Receipts 
(``Exchange-Traded Funds'' or ``ETFs'').
    The text of the proposed rule change, as amended, is available on 
the Amex's Web site at http://www.amex.com, at the Office of the 

Secretary, the Amex, and at the Commission's Public Reference Room.

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, as 
amended, and discussed any comments it received on the proposal. 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Amex is proposing to amend its Equity Fee Schedule to revise a 
variety of transaction fees applicable to Exchange members. These fee 
changes will be assessed on Exchange members commencing October 3, 
2005.
    The Exchange proposes the following changes to the Amex Equity Fee 
Schedule: (i) Adoption of a monthly transaction charge of $.0030 per 
share for up to 50 million shares and $.0025 per share for amounts over 
50 million shares; (ii) elimination of transaction charges based upon 
the total gross dollar amount; (iii) clarification that transaction 
charges are calculated based on each transaction rather than each 
order; (iv) revision to the transaction charges so that only the first 
5,000 shares of each executed transaction are assessed the charge; (v) 
elimination of transaction charges for transactions resulting from 
electronic orders of up to 500 shares; \7\ (vi) elimination of the fee 
exemption for transactions by Amex option specialists and registered 
options traders (``ROTs'') in paired securities; (vii) elimination of 
the 50% fee exemption for proprietary trades in Canadian securities; 
and (viii) changing the name of the ``Regulatory Fee'' to the

[[Page 67505]]

``Specialist Transaction Fee,'' eliminating application of the fee to 
all market participants except specialists, and increasing the fee from 
$.00005 to $.00007 of the total value of all specialist transactions in 
equities.
---------------------------------------------------------------------------

    \7\ The Commission notes that a clarifying change was made to 
item (v). Telephone conference between Jeffrey P. Burns, Associate 
General Counsel, Amex, and Johnna B. Dumler, Attorney, Division of 
Market Regulation, Commission, on October 28, 2005.
---------------------------------------------------------------------------

    The Amex currently charges members monthly fees for transactions in 
equity securities (excluding ETFs) executed on the Exchange. Although 
the current Equity Fee Schedule states that in calculating the 
transaction charges, each order is assessed on the first 25,000 shares 
only, the Exchange's current process is to assess transaction charges 
on each transaction rather than on each order. In order to accurately 
reflect the manner in which equity transaction charges are presently 
assessed, in addition to revising the amount of the ``Transaction 
Charges'' as described below, the Exchange also is clarifying that 
assessment of transaction charges is based on each transaction 
(including transactions resulting from orders entered electronically) 
rather than on each order. The current transaction charges are shown in 
the table below.

                           Transaction Charges
------------------------------------------------------------------------
                                   Rate      Value-based
   Share-based charge: total       per      charge: total      Rate per
          shares/month            share      gross dollar        1000
------------------------------------------------------------------------
Up to 16,500,000...............  $.00225  Up to 200,000,000       .07500
16,500,001-25,000,000..........  .00200   $200,000,001-300,       .07000
                                           000,000.
25,000,001-33,000,000..........  .00175   $300,000,001-400,       .06500
                                           000,000.
Over 33,000,000................   .0015   Over $400,000,000
------------------------------------------------------------------------

    The Exchange is largely proposing to revise the current equity 
transaction fee to clarify and simplify execution charges on the 
Exchange applicable to equity transactions. The proposed changes will 
not apply to transactions in ETFs. The Amex expects the proposal to 
generate additional revenue for ongoing operations while also being 
attractive to market participants and competitive with other exchanges. 
In particular, the Exchange believes that the proposal will attract 
additional order flow because the current transaction charge ceiling of 
25,000 shares will be lowered to 5,000 shares. The Exchange believes 
that this is particularly significant for those market participants 
transacting in ``lower-priced'' stocks at the Exchange since the 
transaction fee as a percentage of the total transaction value will be 
significantly reduced.\8\ Accordingly, although the proposal will 
increase specialist fees in connection with equity transactions, the 
Exchange submits that the reduction in aggregate transaction fees (even 
though the rate per share will increase) for all other market 
participants is expected to help attract additional order flow to the 
Exchange.
---------------------------------------------------------------------------

    \8\ For example, based on the current Equity Fee Schedule, the 
monthly maximum share-based transaction charge for up to 16.5 
million shares is $56.25 per transaction plus a maximum value-based 
charge of $40 per trade. Under the proposal, the monthly maximum 
transaction charge for up to 16.5 million shares will be $15 per 
transaction.
---------------------------------------------------------------------------

    The Amex's equity transaction fee proposal also provides for the 
elimination of the graduated monthly transaction fees, as set forth 
above, and the adoption of monthly transaction fees that consist of a 
per share charge of $.0030 for monthly transactions of shares of up to 
50 million and a $.0025 per share charge for monthly transactions of 
greater than 50 million shares. The current value-based charge assessed 
on the total gross dollar amount of a transaction would also be 
eliminated. The Exchange proposes to calculate the new transaction 
charges on the first 5,000 shares rather than the current 25,000 
shares. The Exchange submits that the current Equity Fee Schedule does 
not properly reflect how transaction charges are assessed. Therefore, 
the Exchange proposes in its filing to clarify that the calculation of 
transaction charges will be assessed on each transaction, not on each 
order.
    According to the Exchange, specialist trades will continue to be 
free of monthly per share transaction charges, while the current fee 
exemption for transactions by Amex options specialists and ROTs in 
paired securities \9\ will be eliminated. The proposal also seeks to 
eliminate the 50% fee exemption for proprietary trades in Canadian 
securities. In both cases, the Exchange believes that the exemptions 
are unnecessary in order to attract order flow in equity securities.
---------------------------------------------------------------------------

    \9\ The term ``paired security'' means a security that is the 
subject of securities trading on the Exchange and Exchange option 
trading, provided, however, that the term ``paired security'' does 
not mean an Exchange-Traded Fund Share or Trust Issued Receipt which 
is the subject of securities trading on the Exchange and Exchange 
option trading if the Exchange-Traded Fund Share or Trust Issued 
Receipt meet the criteria set forth in Commentary .03(a) to Amex 
Rule 1000 or Commentary .02(a) to Amex Rule 1000A, or approved by 
the Commission as eligible for trading arrangements under Rule 
175(c)(2) and Rule 958(e).
---------------------------------------------------------------------------

    In addition, transactions resulting from orders entered 
electronically into the Amex Order File from off the floor of the 
Exchange (``System Orders'') of up to 500 shares (instead of the 
current 2,099 shares) will not be assessed a transaction charge. The 
Exchange has also proposed to change the name of the ``Regulatory Fee'' 
to a ``Specialist Transaction Fee.'' \10\ Pursuant to the Amex 
proposal, the Specialist Transaction Fee will only be applied to 
specialist transactions (unlike the ``Regulatory Fee'' that applied to 
all market participants) and will be increased from the current level 
of $.00005 to $.00007 of the total value of specialist transactions in 
equity securities.\11\ In addition, the Exchange proposes to eliminate 
the exemption from assessment of the Regulatory Fee (now the 
``Specialist Transaction Fee'') for transactions resulting from System 
Orders of up to 2,099 shares. In this manner, all specialist system 
orders will be subject to the Specialist Transaction Fee. The Amex 
submits that the Specialist Transaction Fee is the only transaction-
based fee that the Exchange charges specialists in connection with 
equity securities.
---------------------------------------------------------------------------

    \10\ The Exchange submits that its regulatory obligations are 
funded by numerous sources.
    \11\ The equity regulatory fee amount has remained relatively 
unchanged since 1994. See Securities Exchange Act Release No. 33456 
(January 11, 1994), 59 FR 2886 (January 19, 1994).
---------------------------------------------------------------------------

    The revised equity transaction charges, as proposed, are set forth 
below.

                           Transaction Charges
------------------------------------------------------------------------
                                                               Rate per
           Share-based charge: total share/month                share
------------------------------------------------------------------------
Up to 50,000,000...........................................       $.0030
Over 50,000,000............................................        .0025
------------------------------------------------------------------------

    According to the Exchange, the proposal to revise equity 
transaction fees applicable to Exchange members is consistent with 
Section 6(b)(4) of the Act.\12\ The Exchange believes that the

[[Page 67506]]

proposal provides for an equitable allocation of reasonable fees among 
Exchange members largely through the elimination of various fee 
exemptions and a small increase in the specialist transaction fee 
(formerly, the regulatory fee). Specifically, the increase in the 
specialist transaction fee that will be assessed on the total value of 
specialist transactions is the only transaction-based fee that 
specialists pay in connection with equity securities. In addition, the 
Exchange expects the proposal to attract additional order flow largely 
due to the reduction in the current transaction charge ceiling even 
though the transaction fee rate per share is slightly increased. 
Therefore, the Exchange maintains that the proposed equity transaction 
fee changes, in the aggregate, are an equitable allocation of 
reasonable fees among its members.
---------------------------------------------------------------------------

    \12\ Section 6(b)(4) 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. 15 U.S.C. 
78(f)(b)(4).
---------------------------------------------------------------------------

    The Exchange believes that the proposed revision to equity 
transaction fees will better clarify for all market participants the 
transaction charges applicable to equity orders executed on the 
Exchange. In addition, the Exchange also submits that the revision will 
provide additional revenue to support ongoing operations as well as 
create greater incentives for market participants to send order flow to 
the Amex.
2. Statutory Basis
    Amex believes that the proposed rule change, as amended, is 
consistent with Section 6(b) of the Act,\13\ in general, and furthers 
the objectives of Section 6(b)(4) of the Act,\14\ in particular, in 
that it is designed to assure the equitable allocation of reasonable 
dues, fees, and other charges among its members and issuers and other 
persons using its facilities.
---------------------------------------------------------------------------

    \14\ 15 U.S.C. 78f(b).
    \15\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

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

    Amex does not believe that the proposed rule change, as amended, 
will 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 rule change, as amended, has become effective 
pursuant to Section 19(b)(3)(A) of the Act \15\ and subparagraph (f)(2) 
of Rule 19b-4 thereunder,\16\ since it establishes or changes a due, 
fee or other charge imposed by the Exchange.
---------------------------------------------------------------------------

    \15\ 15 U.S.C. 78s(b)(3)(A).
    \16\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

    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 of appropriate 
in the public interest, for the protection of investors, or otherwise 
in the furtherance of the purposes of the Act.\17\
---------------------------------------------------------------------------

    \17\ The effective date of the original proposed rule change is 
September 30, 2005, and the effective date of Amendment No. 2 is 
October 27, 2005. For purposes of calculating the 60-day period 
within which the Commission may summarily abrogate the proposed rule 
change under Section 19(b)(3)(C) of the Act, the Commission 
considers the period to commence on October 27, 2005, the date on 
which Amex filed Amendment No. 2. See 15 U.S.C. 78s(b)(3)(C).
---------------------------------------------------------------------------

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change, as amended, 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-2005-101 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-9303.
    All submissions should refer to File Number SR-Amex-2005-101. 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 Section. 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 No. SR-Amex-2005-101 and 
should be submitted on or before November 28, 2005.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\18\
---------------------------------------------------------------------------

    \18\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Jonathan G. Katz,
Secretary.
 [FR Doc. E5-6141 Filed 11-4-05; 8:45 am]

BILLING CODE 8010-01-P