Document ID: SEC-2007-0176-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: American Stock Exchange LLC
Posted Date: 2007-02-06T05:00Z

[Federal Register: February 6, 2007 (Volume 72, Number 24)]
[Notices]               
[Page 5469-5472]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr06fe07-65]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55195; File No. SR-Amex-2006-117]

 
Self-Regulatory Organizations; American Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
and Amendment No. 1 Thereto Relating to Transaction Charges for 
Equities and ETFs

January 30, 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 December 20, 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 substantially prepared by the 
Exchange. 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 19b-4(f)(2) thereunder,\4\ which renders the proposal effective 
upon filing with the Commission. On January 26, 2007, the Exchange 
submitted Amendment No. 1 to the proposed rule change.\5\ The 
Commission is publishing this notice to solicit comments on the 
proposed rule change, as amended, 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).
    \5\ In Amendment No. 1, the Exchange made clean-up changes to 
its proposed rule text.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to revise the equities and Exchange Traded 
Fund Shares (``ETFs'') Fee Schedules to establish new transaction 
charges and revise the cancellation fee charged for cancellations of 
orders in equities and ETFs.
    The text of the proposed rule change is available on the Exchange's 
Web site (http://www.amex.com/atamex/

[[Page 5470]]

ruleFilings/2006/SR--Amex-- 2006--117--initial.pdf), 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 implementation of the new hybrid market trading platform (known 
as ``AEMI''), the adoption and implementation of Regulation NMS by the 
Commission, and changes in the competitive landscape have resulted in a 
review by the Exchange of the fee schedule for equities and ETFs. The 
full costs of execution are a major factor in determining where order 
flow providers direct their orders. The Exchange will impose the new 
transaction charges on its members and member organizations effective 
January 2, 2007. The Exchange is currently in the process of moving its 
equities and ETFs on to the AEMI trading system. The new fees will 
apply to all equities and ETFs regardless of whether they have been 
moved on to AEMI. It is expected that by January 2, 2007, approximately 
one-quarter of the Exchange's equities and ETFs will be trading on 
AEMI.

Transaction Charges for Equities and ETFs

    Currently, Amex transaction charges for equities and ETFs are 
assessed for all market participants monthly on a per-share basis with 
the application of various caps and discounts. The Exchange proposes to 
revise the manner in which transaction charges are applied in order to 
encourage market participants to send order flow to the Exchange and 
provide liquidity (i.e., quotes and limit orders) at and around the 
National Best Bid and Offer (``NBBO''). The Amex Fee Schedule currently 
has separate schedules for equities and ETFs, and although the proposed 
new fees will be the same for both product lines, the Exchange has 
decided to continue to maintain two separate Fee Schedules. Each Fee 
Schedule will be separated into two schedules one with the transaction 
charges for customers and the other with transaction charges for 
Specialists and Registered Traders.

Transaction Charges for Customers

    Transaction charges for customers \6\ for executions in equities 
and ETFs will be divided into two tiers based on the average daily 
volume of each security as reported by the appropriate NMS Plan in the 
security industry-wide. As described below, the transaction charges 
will vary within each tier depending on the type of orders submitted 
for the customer account and the types of quotes and orders submitted 
for Specialist and Registered Trader accounts.
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    \6\ Customers will be defined for purposes of the proposed new 
fee schedule to include all market participants except Specialists 
and Registered Traders. Therefore, customers (and the fees charged 
to them) will include members, off-floor proprietary accounts, 
competing market makers, and other member and non-member broker-
dealers.
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Tier One Pricing for Customers

    Tier One pricing will be applied to all Amex-listed securities 
(equities and ETFs) whose industry-wide average daily trading volume is 
500,000 shares or greater during the previous rolling quarter. In 
addition, Tier One pricing will apply to all securities traded on the 
Exchange pursuant to unlisted trading privileges (``UTP'') regardless 
of the their average daily trading volume. All new listings including 
IPOs, transfers, and dual listings will initially be categorized as 
Tier One securities until the next quarterly recalculation. Based on 
third quarter average daily trading volumes, 55 Amex listed equities, 
84 ETFs, and over 100 UTP securities would have been eligible for Tier 
One pricing. These Tier One securities currently represent 
approximately 60% of Amex daily volume. Determining whether a security 
receives Tier One pricing will be based on 12 weeks of trading data. 
Two weeks prior to the start of a calendar quarter the Exchange will 
announce which securities will be eligible for Tier One pricing during 
the next quarter beginning with the first trading day of the calendar 
quarter. For example, Tier One securities (except UTP securities) for 
the second quarter of 2007 will be determined based on average daily 
trading volume for the period beginning December 13, 2006 and ending 
March 14, 2007. An announcement will be made on March 15, 2007 setting 
forth the securities eligible for Tier One pricing effective April 1, 
2007. The list of Tier One eligible securities will also be available 
on the Amex Web site.
    Transaction charges for executions by customers of Tier One 
securities will vary depending on the type of order submitted to Amex. 
There will be no transaction charges for the execution of cross orders 
\7\ occurring within the AEMI trading system (``electronic crosses''). 
The lowest fees will be charged for the execution of limit orders \8\ 
which are not immediately executable when submitted to the Exchange and 
whose limit is near, at, or improves the prevailing national best bid 
(for buy orders) or the national best offer (for sell orders) 
(collectively, the NBBO) at the time of order entry. As set forth in 
the revised Fee Schedule, transaction charges for the execution of 
limit orders (1) at the current NBBO or that betters the current NBBO 
will be $0.03 per 100 shares; (2) within three minimum price variations 
or ``ticks'' of the NBBO will be $0.05 per 100 shares; and (3) all 
other limit orders at prices outside three ticks from the NBBO will be 
$0.10 per 100 shares. Orders that are submitted prior to the opening of 
trading at 9:30 a.m. when NBBO data is not available will be charged as 
follows: the execution of market orders will be charged $0.25 per 100 
shares, and the execution of all limit orders will be charged $0.03 per 
100 shares (regardless of limit price). Transaction charges for 
negotiated \9\ and open-outcry cross transactions \10\ will be $0.15 
per 100 shares. Transaction charges for the execution of market,\11\ 
marketable limit orders, and any other orders that take liquidity out 
of the market will be $0.25 per 100 shares. Similarly, transaction 
charges for at the opening-only orders

[[Page 5471]]

(OPG) \12\ and at-the-close orders (MCC, MOC, and LOC) \13\ will be 
$0.25 per 100 shares.
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    \7\ A cross order is defined in Amex Rule 131-AEMI(r) as ``* * 
*an order submitted by a member or member organization to AEMI with 
buy and sell interest specified in a single order.''
    \8\ A limit order is defined in Amex Rules 131(b) and 131-
AEMI(b) as ``* * *an order to buy or sell a stated amount of a 
security at a specified price, or at a better price if obtainable 
after the order is represented in the Trading Crowd or is received 
in the AEMI Book.''
    \9\ Negotiated Trades are one-to-one trades between two crowd 
members.
    \10\ Open Outcry Cross Transactions are discussed in Amex Rule 
151-AEMI and occur when a member executes a customer order to buy 
against a customer order to sell outside the AEMI system or in open 
outcry.
    \11\ A market order is defined in Amex Rules 131(a) and 131-
AEMI(a) as ``* * *an order to buy or sell a stated amount of a 
security at the most advantageous price obtainable after the order 
is presented in the trading crowd or is received in the AEMI Book.''
    \12\ An at the opening order is defined in Amex Rules 131(f) and 
131-AEMI(e) as ``* * *a market or limited price order which is to be 
executed on the opening in the stock on the Exchange or not at all, 
and any such order or portion thereof not so executed is to be 
treated as cancelled.''
    \13\ At-the-close orders are defined in Amex Rules 131(e), 131, 
Commentary .03, 131-AEMI(d) and 131-AEMI, Commentary 03. There are 
three types of at the close orders, market-at-the-close, limit-at-
the-close, and market-at-4:00-p.m. cash-close. A market-at-the-close 
(MOC) order is an order to buy or sell a stated amount of a security 
at the Exchange's closing price. If the MOC order cannot be executed 
in its entirety at the Exchange closing price it will be cancelled. 
A limit-at-the-close (LOC) order is an order to buy or sell a stated 
amount of a security at the Exchange's closing price if that closing 
price is at the order's limit price, or better. If the LOC order 
cannot be so executed, in whole or in part, the amount of the order 
not so executed is to be cancelled. A market-at-4:00-p.m. cash-close 
(MCC) order is an order in an ETF that trades to 4:15, which is to 
be executed at or as close as practicable to the close of the 
regular equity trading session on the Exchange (normally 4 p.m. 
Eastern Time.)
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    The Exchange proposes to revise its traditional way of assessing 
transaction charges in order to provide incentives for liquidity 
providers to send limit orders in the most active securities to the 
Exchange at and around the NBBO. The Exchange believes that liquidity 
takers, market participants who send in market orders or marketable 
limit orders for immediate execution at the NBBO or better, should pay 
for the service of accessing liquidity at the best possible price.

Tier Two Pricing for Customers

    Tier Two pricing will be applied to all Amex-listed securities 
(equities and ETFs) whose industry-wide average daily trading volume is 
less than 500,000 shares during the previous rolling quarter. 
Transaction charges for executions by customers of Tier Two securities 
will be $0.30 per 100 shares for limit orders, market orders, and at-
the-opening and at-the-close orders, and $0.25 per 100 shares for 
electronic crosses, open-outcry cross transactions, and negotiated 
transactions.

Transaction Charges for Specialists and Registered Traders

    Transaction charges for executions by Specialists and Registered 
Traders of all equities and ETFs will vary depending on the type of 
order or quote submitted to Amex. The lowest fee of $0.03 per 100 
shares will be charged for an execution against a Specialist or 
Registered Trader quote that had been entered at the NBBO and for 
negotiated trades. A transaction charge of $0.05 per 100 shares will be 
charged for all other Specialist and Registered Trader executions, 
including executions against a Specialist or Registered Trader quote 
that is within three or more ticks of the NBBO, executions of hit-or-
take orders,\14\ executions in which the Specialist and/or Registered 
Trader has participated in a percentage order,\15\ intraday pair-offs, 
and the pair-offs of at-the-opening or at-the-close orders. Transaction 
charges for Specialists and Registered Traders are at lower rates in 
order to encourage them to quote more competitively and make more 
liquid markets.
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    \14\ Hit-or-take orders are defined in Amex Rule 131-AEMI(t) and 
are available only for securities trading on the AEMI system. A hit-
or-take order is a type of order that is available to any member to 
trade against the Amex Published Quote (``APQ''). It is an order 
that expires if not immediately executed but that is capable of 
generating away market obligations to clear better away markets.
    \15\ A percentage order is defined in Rules 131(n) and 131-
AEMI(m) as ``* * *a limited price order to buy (or sell) 50% of the 
volume of a specified stock after its entry.''
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Revisions to Cancellation Fees

    Currently, the executing clearing member is charged $0.25 for every 
equities and ETF order sent for a mnemonic and cancelled through Amex 
systems in a given month when the total number of equities and ETF 
orders executed for that mnemonic is less than or equal to 10% of the 
equities and ETF orders cancelled through Amex systems for that 
mnemonic in that same month. The fee does not apply to mnemonics for 
which fewer than 100,000 orders were cancelled through Amex systems and 
does not apply to the first 100,000 cancellations submitted for a 
mnemonic. To align the Exchange's cancellation fee with others in the 
industry, the proposed cancellation fee for orders and cancellations 
sent to Amex in equities and ETFs will be revised to apply to each 
clearing member mnemonic whose ratio of cancellations to executions is 
greater than 50-to-one. However, the Exchange also proposes to 
eliminate the 100,000 cancellation threshold, and the charge of $0.25 
per cancellation will apply to all cancellations beyond the 50-to-one 
ratio for that mnemonic. Thus, the proposed cancellation fee will apply 
to fewer clearing member mnemonics since the ratio of cancellations to 
executions is higher than the current ratio and the proposed 
cancellation fees are applicable on a marginal basis. For example, if a 
clearing member executes two orders and cancels 120 orders in a 
mnemonic, the clearing member will be assessed a cancellation fee only 
on 20 cancellations.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Act,\16\ in general, and furthers the objectives of Section 
6(b)(4),\17\ 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. 
Specifically, the Exchange is proposing to establish new transaction 
charges for equities and ETFs and revise its cancellation fees.
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    \16\ 15 U.S.C. 78f(b).
    \17\ 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

    The foregoing proposed rule change has become effective pursuant to 
Section 19(b)(3)(A)(ii) of the Act \18\ and Rule 19b-4(f)(2) thereunder 
\19\ because it establishes or changes a due, fee, or other charge 
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.\20\
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    \18\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \19\ 17 CFR 19b-4(f)(2).
    \20\ For purposes of calculating the 60-day period within which 
the Commission may summarily abrogate the proposed rule change, the 
Commission considers the period to commence on January 26, 2007, the 
date on which the Exchange filed Amendment No. 1.
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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:

[[Page 5472]]

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 No. SR-Amex-2006-117 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-2006-117. 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 Commissions 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 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-2006-117 and should be submitted on or before February 27, 
2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\21\
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    \21\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-1830 Filed 2-2-07; 8:45 am]

BILLING CODE 8011-01-P