[Federal Register Volume 66, Number 67 (Friday, April 6, 2001)]
[Notices]
[Pages 18330-18331]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-8507]



[[Page 18330]]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-44143; File No. SR-Amex-01-12]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the American Stock Exchange 
LLC Relating to Fees on Transactions of the Specialist and Registered 
Option Traders in Nasdaq 100 Index Options

April 2, 2001.
    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 March 1, 2001, the American Stock Exchange LLC (``Amex'' or 
``Exchange'') filed with the Securities and Exchange Commission the 
proposed rule change as described in Items, I, II, and III below, which 
the Amex has prepared. The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 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 Amex proposes to impose a $0.40 equity option marketing fee on 
the transactions of the specialist and registered options traders 
(``ROTs'') in options on the Nasdaq 100 Index shares, which trade under 
the symbol ``QQQ,'' and to decrease the separate transaction fee that 
is imposed on some transactions in QQQ options from $0.47 to $0.27 per 
contract.

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 had received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Amex has prepared summaries, set forth in section 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 August 2000 the Amex filed two proposed rule changes under 
section 19(b)(3)(A)(ii) of the Act \3\ that imposed transaction fees on 
specialists and ROTs. One proposal imposed a new equity option 
marketing fee of $0.40 on transactions of specialist and ROTs, 
excluding transactions in QQQ options, and allowed the specialists to 
use the proceeds from the marketing fee to attract order flow in equity 
options traded on the Amex.\4\ The other proposal increased, from $0.17 
to $0.47 per contract, the fee imposed on the specialist and ROTs for 
transactions in QQQ options in which a public customer (defined as a 
non-broker-dealer) is a party to the trade.\5\ The Amex now proposed to 
apply the equity option marketing fee to the transactions of the 
specialist and ROTs in QQQ options, and to decrease from $0.47 to $0.27 
per contract the fee that the Amex imposes on the specialist and ROTs 
for transactions in QQQ options that involve a public customer.
---------------------------------------------------------------------------

    \3\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \4\ See Securities Exchange Act Release No. 43228 (August 30, 
2000), 65 FR 54330 (September 7, 2000) (SR-Amex-00-38).
    \5\ See Securities Exchange Act Release No. 43152 (August 14, 
2000), 65 FR 51376 (August 23, 2000) (SR-Amex-00-39).
---------------------------------------------------------------------------

    a. Application of the Marketing Fee. Consistent with the program 
currently in place for all other equity options, the Amex will collect 
a fee of $0.40 on every QQQ option contract that the specialist and 
ROTs execute on the Exchange, with the exception that trades between 
ROTs and trades between the specialist and ROTs will not be subject to 
the program. The Amex will collect the fees and then allocate the funds 
to the specialist in QQQ options. The specialist in turn will use the 
funds to attract orders in the classes of options that the specialist 
trades. The specialist may use the funds to pay broker-dealers for 
orders that they direct to the Amex for execution. The specific terms 
governing the orders that qualify for payment, and the amount of any 
payment to be made, will be determined by the specialist in whatever 
manner the specialist believes is most likely to be effective in 
attracting order flow to the Amex in the options that the specialist 
trades. The specialist will be obligated to account to the Amex for its 
use of the funds made available for this purpose, but the specialist, 
and not the Amex, will make all determinations concerning the amount 
paid for orders and the types and sizes of orders that qualify for 
payment.
    This marketing fee will be assessed monthly, beginning as of March 
1, 2001. The Amex will make the funds generated by the fee available to 
the QQQ option specialist for the specialist's use in attracting orders 
in the classes of options that are traded at the specialist's station. 
ROTs who contribute to the fees collected will also be able to 
participate in the order flow derived from the program. The Amex 
believes that there will be a fair correlation between the fees that 
the specialist and the ROTs contribute to the program and the benefits 
that they will receive from it.
    Under the program, the Amex provides administrative support to the 
QQQ option specialist in such matters as keeping tract of the number of 
qualified orders that each firm directs to the Exchange, and making 
debits and credits to the accounts of the specialist and the firms to 
reflect the payments that are to be made. The Amex may pay such amounts 
directly to the member order flow provider (pursuant to payment 
parameters that the specialist establishes) if the amount of the 
payment that the order flow provider is to receive would exceed any 
fees that it owes to the Amex.
    The Amex believes that the application of the program to QQQ 
options is necessary to promote the Amex's competitiveness with other 
exchanges that trade the QQQ options.
    b. Decrease in Other Transaction Fee. The Amex currently imposes a 
transaction fee on options trades executed on the Exchange, with the 
charges varying depending on whether the transaction involves an equity 
or index option and whether the transaction is executed for a 
specialist or market maker account, a member firm's proprietary 
account, a non-member broker-dealer, or a customer account. The Amex 
also imposes a charge for clearance of options trades and an options 
floor brokerage charge which depend upon the type of account for which 
the trade is executed. All three types of charges--transaction, options 
clearance, and options floor brokerage--are subject to caps on the 
number of options contracts subject to the charges on a given day.\6\ 
Currently, no transaction, clearance, or floor brokerage fees are 
charged for customer equity option transactions.
---------------------------------------------------------------------------

    \6\ The current caps are set at 2,000 contracts for customer 
trades and 3,000 contracts for member firm proprietary, non-member 
broker-dealer, specialist, and market maker trades.
---------------------------------------------------------------------------

    To offset the costs of providing for the trading of QQQ options and 
to enhance the marketing of those options, the Amex currently charges 
the specialist and ROTs a fee of $0.47 per contract for transactions in 
which a public customer

[[Page 18331]]

is a party to the trade.\7\ The Amex now proposes to decrease the fee 
to $0.27. Options clearance and floor brokerage fees for the specialist 
and ROTs will remain unchanged at $0.04 and $0.03 per contract side, 
respectively. The Amex believes that the proposed decrease is necessary 
to allow for the application of $0.40 marketing fee on QQQ options.
---------------------------------------------------------------------------

    \7\ The term public customer shall have the meaning set forth in 
Amex Rule 958A (i.e., a non-broker-dealer).
---------------------------------------------------------------------------

    2. Statutory Basis. The Amex believes that the proposed rule change 
is consistent with section 6(b) of the Act \8\ in general and furthers 
the objectives of section 6(b)(4) of the Act \9\ in particular in that 
it is designed to provide for the equitable allocation of reasonable 
dues, fees, and other charges among its members, issuers, and other 
persons using its facilities.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
rule Change Received From Members, Participants or Others

    The Amex did not solicit or receive any comments with respect to 
the proposed rule change.

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

    The Amex has designated the foregoing proposed rule change as a fee 
change pursuant to section 19(b)(3)(A)(ii) of the Act \10\ and Rule 
19b-4(f)(2) thereunder.\11\ Accordingly, the proposal has become 
effective immediately upon filing with the Commission. At any time 
within 60 days after the filing of this proposed rule change, the 
Commission may summarily abrogate the rule change if it appears to the 
Commission that the action is necessary or appropriate in the public 
interest, for the protection of investors, or otherwise in the 
furtherance of the purposes of the Act.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \11\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

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. Persons making written submission 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, NW., Washington, DC 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. 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-01-12 and should 
be submitted by April 27, 2001.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\12\
---------------------------------------------------------------------------

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

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 01-8507 Filed 4-5-01; 8:45 am]
BILLING CODE 8010-01-M