Document ID: SEC-2007-0482-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: American Stock Exchange LLC
Posted Date: 2007-04-02T04:00Z

[Federal Register: April 2, 2007 (Volume 72, Number 62)]
[Notices]               
[Page 15733-15734]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr02ap07-116]                         

[[Page 15733]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55533; File No. SR-Amex-2007-13]

 
Self-Regulatory Organizations; American Stock Exchange LLC; 
Notice of Filing of Proposed Rule Change Relating to Exchange Rules 
Regarding Specialist Commissions

March 26, 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 29, 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 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.
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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 Rules 154-AEMI and 154-AEMI One to 
extend its rule regarding specialist commissions. The text of the 
proposed rule change is available at http://www.amex.com, at the 

Exchange's principal office, 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 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

1. Purpose
    The Exchange recently adopted Rule 154(b) setting forth the 
circumstances under which specialists may charge members and member 
organizations a commission for executing orders in equities.\3\ The 
Exchange adopted this rule to provide consistency and clarity to all 
members and the public that orders sent to the Amex will not be subject 
to excessive or arbitrary costs; and to preserve the cost 
competitiveness of the Exchange.
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    \3\ See, Securities Exchange Act Release No. 55008 (December 22, 
2006), 72 FR 597 (January 5, 2007) (Order approving SR-Amex 2006-
98).
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    The Exchange now proposes to adopt subparagraph (k) to Rule 154-
AEMI and to Rule 154-AEMI One to: (1) Extend the application of the 
prohibitions on specialist commissions to Exchange Traded Fund Shares 
(``ETFs'') and equities trading on the AEMI System; (2) expand the 
prohibition on specialist commissions to market at the close orders and 
limit at the close orders; and (3) specify that specialist commissions 
can only be charged for orders that are executed and not for orders 
that are cancelled or expire unexecuted. Thus proposed Rules 154-AEMI 
(k) and 154-AEMI One (k) would prohibit specialists from charging a 
commission for orders or portions of orders that have not been 
executed. This includes but is not limited to, a prohibition on 
specialists charging for order cancellations and orders that expire due 
to the passage of time.\4\ As noted above, the proposed rule will 
extend the prohibitions in Rule 154(b) to ETFs and equities now trading 
on the AEMI System which include prohibiting specialists from charging 
a commission on off floor orders that are electronically delivered to 
the specialist except in cases of orders that require special handling 
by the specialist or for which the specialist provides a service. The 
proposed rule would also prohibit specialists from billing for 
electronically delivered orders that are executed automatically by the 
Exchange's order processing facilities upon receipt. Orders executed on 
an opening or reopening would not be ``billable.'' In addition, 
proposed Rules 154-AEMI (k) and 154-AEMI One (k) will reference Rule 
152-AEMI (c) or Rule 152-AEMI One (c), respectively, which prohibits 
specialists from charging a commission where they act as principal in 
the execution of an order entrusted to them as agent. The proposed rule 
will also set forth the types of orders specialists would be allowed 
(but not required) to bill a commission.
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    \4\ The Commission made minor clarifications to this sentence 
pursuant to a telephone call with the Exchange. See telephone call 
by and between Rahman Harrison, Special Counsel, Division of Market 
Regulation, Commission, and Claire P. McGrath, Senior Vice President 
and General Counsel, Amex, on February, 28, 2007.
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    In general, ``routine'' orders are not subject to specialist 
commissions while orders that require special handling or for which the 
specialist provides a service may be subject to a commission. Thus, 
proposed Rules 154-AEMI (k) and 154-AEMI One (k) (consistent with the 
recently adopted Rule 154(b)) will provide that specialists may (but 
are not required to) bill for: (i) Limit orders that remain on the book 
for more than two minutes; (ii) tick sensitive orders (e.g., an order 
to sell short in a security subject to the Commission's ``tick-test''); 
(iii) stop or stop limit orders; (iv) fill-or-kill and immediate-or-
cancel orders; and (v) orders for the account of a competing market 
maker.\5\ It should be noted that the proposed rules eliminate the 
following order types from the list of orders for which the specialist 
may bill a commission as set forth in Rule 154(b) since these order 
types are not used in the AEMI System: (i) A non-regular way settlement 
(market or limit) order; and (ii) a market or marketable limit order 
stopped at one price and executed at a better price.
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    \5\ The Commission made minor conforming changes to this 
sentence pursuant to a telephone call with the Exchange. See 
telephone call by and between Rahman Harrison, Special Counsel, 
Division of Market Regulation, Commission, and Claire P. McGrath, 
Senior Vice President and General Counsel, Amex, on February, 28, 
2007.
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    Specialist commissions increase the cost of doing business on the 
Exchange. These increased costs weaken the Exchange's competitive 
position relative to other markets as other markets do not need to 
compete as aggressively with the Exchange to cut their prices to 
investors. The Exchange consequently believes that the proposed rule 
would benefit investors if implemented and would strengthen the 
Exchange's competitive position.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Act and the rules and regulations under the Act applicable to a 
national securities exchange and, in particular, the requirements of 
Section 6(b) \6\ of the Act. Specifically, the Exchange believes the 
proposed rule change is consistent with the requirements of Section 
6(b)(5) \7\ of the Act that the rules of an exchange be designed to 
promote just and equitable principles of trade, to prevent fraudulent 
and manipulative acts and practices, and, in general, to protect 
investors and the public interest. In addition, the Exchange believes 
that the proposed rule change is consistent with

[[Page 15734]]

the provisions of Section 6(b)(4),\8\ which requires that the rules of 
an 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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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
    \8\ 15 U.S.C. 78f(b)(4).
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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

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding, or (ii) as to 
which the Amex consents, the Commission will:
    A. By order approve such proposed rule change; or
    B. Institute proceedings to determine whether the proposed rule 
change should be disapproved.

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-2007-13 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-Amex-2007-13. 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 
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 publicly available. All submissions should refer to 
File Number SR-Amex-2007-13 and should be submitted on or before April 
23, 2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-5982 Filed 3-30-07; 8:45 am]

BILLING CODE 8010-01-P