[Federal Register Volume 66, Number 239 (Wednesday, December 12, 2001)]
[Notices]
[Pages 64324-64325]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-30652]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-45130; File No. SR-Amex-2001-17]


Self-Regulatory Organizations; Order Approving Proposed Rule 
Change by the American Stock Exchange LLC Increasing Regular 
Memberships and Creating Two-Year Permits

December 5, 2001.

I. Introduction

    On March 19, 2001, the American Stock Exchange LLC (``Exchange'' or 
``Amex'') submitted to the Securities and Exchange Commission 
(``Commission''), pursuant to section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change increasing the number of regular memberships on 
the Exchange and creating two-year permits. The Exchange submitted 
Amendment Nos. 1, 2, and 3 to the proposed rule change on May 3, 
2001,\3\ May 16, 2001,\4\ and May 18, 2001,\5\ respectively. The

[[Page 64325]]

proposed rule change was published for comment in the Federal Register 
on June 1, 2001.\6\ The Commission received no comments on the 
proposal. This order approves the proposal. The portion of the proposed 
rule change establishing the trading permits is approved on a pilot 
basis for a minimum of two years and a maximum of four years, in the 
event that the Exchange's Seat Fund Committee exercises its authority 
to renew the permits for an additional two years.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Letter from Ivonne Natal, Assistant General Counsel, Amex, 
to Nancy Sanow, Assistant Director, Division of Market Regulation 
(``Division''), Commission dated April 30, 2001 (``Amendment No. 
1''). Amendment No. 1 states that on April 30, 2001, a majority of 
the regular and options principal members, voting as a single class, 
voted in favor of the proposed rule change.
    \4\ Letter from Ivonne Natal, Assistant General Counsel, Amex, 
to Nancy Sanow, Assistant Director, Division, Commission, dated May 
14, 2001 (``Amendment No. 2''). Amendment No. 2 requests the 
Commission to consider the Plan on a pilot basis for a minimum of 
two years and a maximum of four years, in the event the Seat Fund 
Committee exercises its discretion to extend the Plan. Amendment No. 
2 also states that there are approximately 300 members trading 
equities on the Exchange floor.
    \5\ Letter from Ivonne Natal, Assistant General Counsel, Amex, 
to Nancy Sanow, Assistant Director, Division, Commission, dated May 
17, 2001 (``Amendment No. 3''). Amendment No. 3 clarifies that the 
administrative fee that the Amex would receive for administering the 
Plan would be $750.00 per sale/lease and that the administrative fee 
will be collected out of the sale proceeds, prior to their 
distribution to the members. Amendment No. 3 also states that Amex 
members and the Board of Governors have approved this fee.
    \6\ Securities Exchange Act Release No. 44341 (May 23, 2001), 66 
FR 29848.
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II. Description of the Proposal

    The Amex proposes to increase by 25 the number of regular 
memberships and create 25 two-year permits as a result of a Regular 
Seat and Two-Year Permit Offering Plan (the ``Plan''). The seats and 
the permits would be allocated as determined by the Exchange's Seat 
Fund Committee (``Committee''). The Committee would determine the sale 
price for regular seats would be at least $600,000. The price for two-
year permits would be at least $14,000, per month.
    The Committee would be able to renew the two-year permits once for 
an additional two years, but the permits would be non-transferable. A 
two-year permit would terminate if the holder went out of business. Any 
regular seats offered but not sold would be permitted to be converted 
into two-year permits as determined by the Committee.\7\ The two-year 
permits would have no distribution or voting rights.
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    \7\ Consequently, if the Exchange did not sell any of the 
authorized seats, a maximum of 25 additional trading permits could 
be authorized, for a total of 50.
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    All prospective seat and/or permit holders would be required to be 
approved by the Exchange prior to the sale of a seat or the transfer of 
a permit by the Exchange. The Exchange would receive a $750 
administrative fee for each sea/permit for administering the sale/
transfer for prospective seat/permit owners.
    Prior to any seat sale or permit transfer by the Exchange, a non-
member or a person/organization that was not currently the owner of a 
regular membership would be required to meet all requirements currently 
applicable to regular or two-year permit holders. If the purchaser of a 
seat intended to lease the seat pursuant to a special transfer 
agreement or transfer the seat to a nominee, the lessee or nominee 
would also be required to meet all Exchange requirements. All 
applicable fees due by persons/organizations that are not owners of 
regular memberships or members of the Exchange would be required to be 
paid before the sale of any seat or transfer of any permit.
    Sale proceeds will be distributed to all seat owners at a date to 
be determined by the Committee. The Ex-date for determining 
distribution of sale proceeds to owners would be the date of approval 
of the Plan by the Commission.

III. Discussion

    The Commission finds that 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) of the Act.\8\ Specifically, the Commission finds that the 
proposed rule change is consistent with section 6(b)(5) of the Act,\9\ 
in that it is designed to remove impediments to and perfect the 
mechanism of a free and open market.\10\
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
    \10\ In approving this rule change, the Commission has 
considered the proposal's impact on efficiency, competition, and 
capital formation. 15 U.S.C. 78c(f).
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    The Commission believes that the proposed rule change will remove 
impediments to and perfect the mechanism of a free and open market by 
enhancing the depth and liquidity of the Amex floor by bringing 
additional capital and market participants to the Amex, which should 
attract more order flow. In addition, the Commission believes that the 
proposed rule change will enable the Exchange to better handle 
increased volume on the Exchange. The Commission believes that 
increasing the number of seats and providing a limited number of 
trading permits should enable Exchange members to afford customers an 
optimal level of service. The Commission notes that there are currently 
864 Amex seat holders that have the ability to trade securities 
pursuant to the Exchange's equity trading rules and approximately 300 
equity seat holders.\11\ These traders are fully represented on the 
Exchange's Board and key committees. The Commission specifically notes 
that the proposed trading permits are limited in duration to a maximum 
of four years and constitute a de minimis number in relation to regular 
members that trade equities.\12\ The Commission also notes that a 
majority of the Exchange's regular and options principal members voted 
in favor of the proposed rule change.
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    \11\ Options seat holders are permitted to trade exchange traded 
funds, which trade pursuant to the Exchange's equity rules.
    \12\ The Act requires an Exchange to ``assure a fair 
representation of its members in the selection of its directors and 
administration of its affairs. . . .'' See section 6(b)(3) of the 
Act, 15 U.S.C. 78f(b)(3). This requirement serves to ensure that an 
exchange is administered in a way that is equitable to all those who 
trade on the exchange. If the trading permits had an unlimited term 
or more than a de minimis number of trading permits were being 
issued, the permit holders would be entitled to fair representation.
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IV. Conclusion

    It is Therefore Ordered, pursuant to section 19(b)(2) of the 
Act,\13\ that the proposed rule change (SR-Amex-2001-17) is approved. 
The portion of the proposed rule change establishing trading permits is 
approved on a pilot basis for a minimum of two years and a maximum of 
four years.
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    \13\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland.
Deputy Secretary.
[FR Doc. 01-30652 Filed 12-11-01; 8:45 am]
BILLING CODE 8010-01-M