Document ID: SEC-2006-0253-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: American Stock Exchange LLC
Posted Date: 2006-02-28T05:00Z

[Federal Register: February 28, 2006 (Volume 71, Number 39)]
[Notices]               
[Page 10085-10086]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr28fe06-129]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-53341; File No. SR-Amex-2006-15]

 
Self-Regulatory Organizations; American Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change to 
Increase the Options Marketing Fee Applicable to Certain Types of 
Equity Options

February 21, 2006.
    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 February 15, 2006, 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. The Amex has 
designated this proposal as one establishing or changing a due, fee, or 
other charge imposed by a self-regulatory organization pursuant to 
Section 19(b)(3)(A)(ii) of the Act \3\ and Rule 19-4(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)(ii).
    \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 increase the options marketing fee 
applicable to certain equity options. The text of the proposed rule 
change is available on the Amex's Web site at http://www.amex.com, at 

the principal office of the Exchange, 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 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 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
    In June 2003, the Exchange re-instated its options marketing fee of 
$0.40 per contract on the transactions of specialists and registered 
options traders (``ROTs'') in equity options.\5\ Currently, the options 
marketing fee is eligible to be assessed on all equity options 
transactions (including options on exchange-traded funds and trust 
issued receipts). The Exchange now proposes to amend the equity options 
marketing fee to increase the fee from the current level of $0.40 to 
$0.75 per contract (except for SPDR options, which will continue to 
remain subject to the current fee level of $1.00 per contract).\6\ The 
Exchange also proposes to revise the equity options marketing fee by 
limiting its assessment to customer orders that are from payment 
accepting firms with whom a specialist has negotiated a payment for 
order flow arrangement and that are executed electronically (i.e., 
through the Exchange's ANTE system).\7\ The current equity options 
marketing fee is assessed on all executed customer orders (whether 
electronically or manually executed) of payment accepting firms. This 
revision further limits the assessment of the marketing fee to 
electronic executions.
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    \5\ See Securities Exchange Act Release No. 48053 (June 17, 
2003), 68 FR 37880 (June 25, 2003).
    \6\ See Securities Exchange Act Release No. 51685 (May 11, 
2005), 70 FR 28587 (May 18, 2005).
    \7\ Telephone conversation between Caroline McCaffery, Assistant 
General Counsel, Amex, and Hong Anh Tran, Special Counsel, Division 
of Market Regulation, on February 17, 2006.
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    The Exchange represents that it has no role with respect to the 
negotiations between specialists and payment accepting firms. The 
Exchange states that it collects and administers the payment of the fee 
collected on those transactions for which the specialist has

[[Page 10086]]

advised the Exchange that it has negotiated with a payment accepting 
firm to pay for the firm's order flow. Included in this general 
administrative support, the Exchange tracks the number of qualified 
orders sent by a payment accepting firm, bills specialists and ROTs 
through their clearing firms and issues payments to payment accepting 
firms to reflect the collection and payment of the marketing fee. The 
Exchange rebates to specialists and ROTs, on a quarterly basis, the 
amount of marketing fees collected that have not been paid to order 
flow providers.
    The Exchange further states that the specialists are solely 
responsible, but are not required, to negotiate payment for order flow 
agreements with payment accepting firms and are responsible for any 
arrangements made with the payment accepting firms. The specialists 
will use the funds that are collected from a particular post on the 
Exchange to market for those specific products traded at that 
particular post on the Exchange. So long as it is within the above 
described parameters, the specific terms governing the orders that 
qualify for payment and the amount of any payments are determined by 
the specialists in their discretion.
    The Exchange asserts that the proposal is equitable as required by 
Section 6(b)(4) of the Act.\8\ In connection with the revision to the 
equity options marketing fee, the Exchange notes that increasing the 
fee from $0.40 to $0.75 per contract (except for SPDR options, which 
will continue to remain subject to the current fee level of $1.00 per 
contract) and limiting assessment to the electronic executions of 
customer orders from payment accepting firms is reasonable given the 
competitive pressure to attract options order flow. In addition, the 
Exchange submits that those trading crowds that benefit from a payment 
for order flow arrangement negotiated by the specialist should 
contribute to the success of the particular products. Accordingly, the 
Exchange believes that the proposal is an equitable allocation of 
reasonable fees among Exchange members.
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    \8\ Section 6(b)(4) of the Act, 15 U.S.C. 78f(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.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\9\ in general, and furthers the 
objectives of Section 6(b)(4),\10\ 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 facilities.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(4).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange believes that the proposed rule change will 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

    The Exchange has neither solicited nor received comments on the 
proposed rule change. The Amex has not received any unsolicited written 
comments from members or other interested parties.

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

    The foregoing proposed rule change has become effective pursuant to 
Section 19(b)(3)(A)(ii) of the Act,\11\ and paragraph (f)(2) of Rule 
19b-4 thereunder \12\ because it establishes or changes a due, fee, or 
other charge. 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-2006-15 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-2006-15. 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 such 
filing also will be available for inspection and copying at 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-2006-15 
and should be submitted on or before March 21, 2006.

    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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Nancy M. Morris,
Secretary.
[FR Doc. E6-2752 Filed 2-27-06; 8:45 am]

BILLING CODE 8010-01-P