[Federal Register Volume 64, Number 213 (Thursday, November 4, 1999)]
[Notices]
[Pages 60254-60256]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-28872]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-42067; File No. SR-Amex-99-44]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the American Stock Exchange 
LLC Relating to Revised Equity Fee Schedule and Specialist Commissions

October 28, 1999.
    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 October 22, 1999, the American Stock Exchange LLC (``Amex'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or Commission'') the proposed rule change as described in 
Items I, II, and III below, which Items have been prepared by the 
Exchange. The Commission is publishing this notice to solicit comments 
on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 USC 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

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

    The Exchange proposes to: (1) amend the Amex Equity Fee Schedule 
for certain orders entered electronically

[[Page 60255]]

into the Amex Order File \3\ from off the floor of the Amex (``System 
Orders''); (2) eliminate specialist commissions on certain System 
Orders; and (3) implement a program of revenue sharing with exchange 
specialists. The text of the proposed rule change is available at the 
Office of the Secretary, the Amex, and at the Commission.
---------------------------------------------------------------------------

    \3\ The Amex Order File, previously referred to as the Post 
Execution Report (``PER'') system provides member firms with the 
means to electronically transmit equity orders, up to volume 
specified by the Amex, directly to a specialist's post on the 
trading floor of the Amex.
---------------------------------------------------------------------------

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

Equity Fee Schedule

    The Amex Equity Fee Schedule currently imposes transaction charges 
on equity orders entered on the Exchange which include both a share-
based charge (total shares per month) and a value-based charge (total 
gross dollar value per month). These charges are not imposed on System 
Orders up to 1,099 shares except for that System Orders of a member or 
member organization trading as an agent for the account of a non-member 
competing market maker. System Orders less than or equal to 1,099 
shares of a member or member organization trading as an agent for the 
account of a non-member competing market maker are subject to 
transaction charges. In addition, the Exchange imposes a regulatory fee 
for orders in equities with the exception of certain trades executed in 
SPDRs, Select Sector SPDRsMidCap 
SPDRsTM, DIAMONDS, and Nasdaq-100 
Shares.TM
    The Exchange is amending the Amex Equity Fee Schedule to provide 
that certain System Orders up to 2,099 shares will not be assessed a 
share or value charge. This provision does not apply to the System 
Orders of a member or member organization trading as an agent for the 
account of a non-member competing market maker. In addition, the 
revised Equity Fee Schedule also provides that System Orders for up to 
2,099 shares will not be assessed a regulatory fee, except for the 
System Orders of a member or member organization trading as an agent 
for the account of a non-member competing market maker.
    The Exchange imposes a separate fee schedule for executing trades 
in Exchange-traded fund products. This fee schedule currently applies 
to SPDRs, MidCap SPDRs, DIAMONDS, Select Sector SPDRs, and the Nasdaq-
100 Index Trust.\4\ The Amex proposes to revise the 
separate fee schedule for exchange-traded fund products to apply it to 
all Portfolio Depositary Receipts, Index Fund Shares and Trust Issued 
Receipts traded on the Exchange,\5\ as well as those that commence 
trading in the future. Thus, World Equity Benchmark SharesTM 
(``WEBSTM''), for example, which currently are traded on the 
Exchange, will become subject to the separate fee schedule.
---------------------------------------------------------------------------

    \4\ See Securities Exchange Act Release No. 40881 (January 4, 
1999), 64 FR 1836 (January 12, 1999) (notice of filing and immediate 
effectiveness of File No. SR-Amex-98-46).
    \5\ The Commission approved Amex's listing of Trust Issued 
Receipts in Securities Exchange Act Release No. 41892 (September 21, 
1999), 64 FR 188 (September 29, 1999) (order approving File No. SR-
Amex-99-20).
---------------------------------------------------------------------------

    Currently, all trades executed on the Amex in SPDRs, MidCap SPDRs, 
DIAMONDS, Select Sector SPDRs, and Nasdaq-100 Shares are exempt from 
the Amex's regulatory fee, except for System Orders of a member or 
member organization trading as agent for the account of a non-member 
competing market maker. Under the new Equity Fee Schedule, all trades 
on the Exchange in Portfolio Depositary Receipts, Index Fund Shares and 
Trust Issued Receipts will be exempt from the regulatory fee, except 
for System Orders of a member or member organization trading as agent 
for the account of a non-member competing market maker.
    The Exchange anticipates that the revised Equity Fee Schedule will 
become effective as of November 1, 1999. In the event that the Exchange 
has not implemented system changes to permit billing under the new 
schedule by November 1, 1999, members and member organizations will 
continue to be billed under the previous schedule but, after 
implementation of the revised billing system, will receive a credit for 
the excess amount billed. The Exchange will issue an Information 
Circular to members and member organizations regarding the revised 
schedule prior to its implementation.

Elimination of Specialist Commissions

    In conjunction with implementation of the revised Equity Fee 
Schedule described above, the Amex is implementing a policy to 
eliminate specialist commissions for System Orders up to 2,099 shares, 
i.e., orders entered electronically into the Amex Order File from off 
the Amex floor. System Orders greater than 2,099 shares, manually 
delivered orders, and all orders in Portfolio Depositary Receipts, 
Index Fund Shares and Trust Issued Receipts will continue to be subject 
to applicable specialist commissions. In addition, System Orders up to 
2,099 shares of a member or member organization trading as an agent for 
the account of a non-member competing market maker will continue to be 
subject to specialist commissions. This policy will be implemented on 
the date of implementation of the revised Equity Fee Schedule.
    The elimination of specialist commissions for System Orders of less 
than 2,099 shares will reduce the cost of executions on the Amex, with 
the aim of attracting additional order flow, and, in particular, small 
sized retail orders, to the Exchange. The lower cost of executions is 
intended to improve the cost competitiveness of Amex executions, which 
the Amex believes will inure to the benefit of investors and 
institutions as well as members and member organizations.

Exchange Revenue Sharing

    In order to offset the specialists' loss of commissions, the 
Exchange is instituting a program of revenue sharing with Exchange 
specialists. Revenue sharing payments to specialists will be made from 
the Exchange's general revenues and will not be limited to a particular 
revenue source. The applicable rate for revenue sharing will be 
calculated on the basis of average daily Amex (not consolidated) 
trading volume, excluding Portfolio Depositary Receipts, Index Fund 
Shares and Trust Issued Receipts, and based on the following 
incremental rates per 100 shares:

------------------------------------------------------------------------
                                                               Rate per
              Average daily volume (millions)                 100 shares
------------------------------------------------------------------------
Up to 40...................................................         $.25
From 40 to 60..............................................          .23
From 60 to 80..............................................          .20
Over 80....................................................          .18
------------------------------------------------------------------------

    The applicable rate(s) will be calculated monthly. Payments on

[[Page 60256]]

qualified orders will be made monthly in arrears to qualifying 
specialists at a rate calculated as a single weighted average rate 
based on volume for the month most recently ended. A qualifying 
specialists is an equity specialist. Qualifying orders are certain 
orders delivered electronically from off the floor of the Exchange, 
excluding all orders for Portfolio Depositary Receipts, Index Fund 
Shares, and Trust Issued Receipts. System Orders up to 2,099 shares of 
a member or member organization trading as an agent for the account of 
a non-member competing market maker will not be subject to revenue 
sharing.
    In its pending filing with the Commission relating to the 
Exchange's proposed New Equity Market Structure,\6\ the Exchange has 
stated that specialists will not be permitted to charge commissions 
upon the execution of orders delivered electronically from off the 
floor for securities traded under the New Equity Market Structure. 
Specialists would continue to be able to charge floor brokerage on 
manually delivered orders and could charge a fee on hand delivered 
orders when acting as principal if the member leaving the order 
consents. In addition, following the implementation of the New Equity 
Market Structure, the Amex will share Exchange revenue with specialists 
based on a specified rate schedule to effectively offset the 
specialists' loss of floor brokerage with respect to orders delivered 
electronically from off the floor. The elimination of specialist 
commissions and the Exchange's revenue sharing initiative that are the 
subject of the instant filing are independent from and not conditioned 
upon implementation of the New Equity Market Structure.
---------------------------------------------------------------------------

    \6\ See Securities Exchange Act Release No. 41527 (June 15, 
1999), 64 FR 33533 (June 23, 1999) (notice of filing of File No. SR-
Amex-99-08).
---------------------------------------------------------------------------

2. Statutory Basis
    The Amex believes that the proposed rule change is consistent with 
Section 6(b) of the Act in general and furthers the objectives of 
Section 6(b)(4) in particular in that it is intended to assure the 
equitable allocation of reasonable dues, fees and other charges among 
members, issuers, and other persons using the Exchange facilities.\7\
---------------------------------------------------------------------------

    \7\ The Commission notes that the filing may raise questions 
concerning payment for order flow. To the extent that it does raise 
such issues, Exchange members should consider any associated 
disclosure obligations, namely pursuant to Rules 10b-10 and 11Ac1-3 
under the Act, 17 CFR 240.10b-10 and 17 CFR 240.11Ac1-3, 
respectively.
---------------------------------------------------------------------------

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

    The proposed rule change will impose no 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, which establishes or changes a due, fee, 
or other charge imposed by the Exchange, has become effective pursuant 
to Section 19(b)(3)(A) of the Act \8\ and subparagraph (f)(2) of Rule 
19b-4 thereunder.\9\
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 240.19b-4(f)(2). In reviewing the proposal, the 
Commission has considered the proposal's impact on efficiency, 
competition, and capital formation. 15 USC 78c(f).
---------------------------------------------------------------------------

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

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing including whether the proposed rule 
is consistent with the Act. Persons making written submissions should 
file six copies thereof with the Secretary, Securities and Exchange 
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549-0609. 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 in Washington, D.C. Copies of such 
filing will also be available for inspection and copying at the 
principal office of the Amex. All submissions should refer to File No. 
SR-Amex-99-44 and should be submitted by November 26, 1999.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\10\
---------------------------------------------------------------------------

    \10\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-28872 Filed 11-3-99; 8:45 am]
BILLING CODE 8010-01-M