[Federal Register Volume 67, Number 168 (Thursday, August 29, 2002)]
[Notices]
[Pages 55441-55443]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-22097]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-46400; File No. SR-Amex-2002-66]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the American Stock Exchange 
LLC Relating to a Waiver of Transaction Fees for Exchange-Traded Funds

August 22, 2002.
    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 August 6, 2002, 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 prepared by the Exchange. The Amex 
has designated this proposal as one establishing or changing a due, 
fee, or

[[Page 55442]]

other charge imposed by the Exchange 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. 
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.
    \3\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \4\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Amex proposes to waive transaction fees on Exchange-Traded 
Funds (``ETFs'') that are part of an exchange-for-physical transaction 
(``EFP''). The text of the proposed rule change is available at the 
Amex and at the Commission.

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 its proposal and discussed any 
comments it received regarding the proposal. The text of these 
statements may be examined at the places specified in Item IV below. 
The Amex 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 currently imposes a charge for transactions in ETF 
products executed on the Exchange. Currently, charges include fees for 
Registered Options Traders (``ROTs''), Specialists and Customer Broker-
Dealers. The current rate for Specialist transactions in these products 
is $0.0063 per share ($0.63 per 100 shares), capped at $300 per trade 
(47,619 shares). The current rate for ROT transactions is $0.0073 per 
share ($.73 per 100 shares), capped at $350 per trade (47,945 shares). 
Off-floor orders (i.e., customer and broker-dealer) are charged $0.006 
per share ($0.60 per 100 shares), capped at $100 per trade (16,667 
shares).\5\
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    \5\ The Exchange in response to the New York Stock Exchange, 
Inc. (``NYSE'') trading of ETFs has waived customer transaction 
charges for certain ETFs and Holding Company Depositary Receipts 
(HOLDRS). Specifically, customer transaction charges have been 
waived for DIAMONDS, QQQs, SPDRS, iShares S&P 500, MidCAP SPDRS, all 
Select SPDRS and all HOLDRS. See Exhibit A.
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    The Amex now proposes that transaction fees paid in connection with 
ETFs be waived for EFP transactions. An EFP is a transaction in which 
one party buys the cash market and sells the futures market while the 
opposite party sells the cash market and buys the futures market. The 
terms of such transactions are privately negotiated. An EFP may be 
executed on or off the trading floor in the futures market while the 
cash side of the trade may be executed in the over-the-counter market 
or on the Exchange. Consistent with the Commodity Exchange Act 
(``CEA'') and the rules of the Chicago Mercantile Exchange (``CME''), 
ETFs are currently permitted by the CME to be used as the cash market 
side of certain stock index futures products. In such case, the cash 
market product is required to be comparable with respect to the 
quantity, value or risk exposure to the futures contract utilized.
    The Exchange believes that ETF trades in connection with EFPs are 
taking place off-floor largely due to the imposition of transaction 
fees. As a result, the Amex has proposed this waiver of ETF transaction 
fees for those ETFs that are part of an EFP.\6\
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    \6\ The fees that are being waived are member fees only, and the 
waiver is applied in a non-discriminatory fashion. The Amex will 
file a proposed rule change if the Amex decides to either establish 
new fees or reinstate the fees it waived with this proposed rule 
change. August 22, 2002 telephone conversation between Jeffrey P. 
Burns, Assistant General Counsel, Amex, and Joseph Morra, Special 
Counsel, SEC.
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    However, because the Exchange's billing system is unable to 
distinguish an ETF transaction that is part of an EFP from any other 
ETF transaction, a manual procedure has been developed. Specifically, 
within thirty (30) calendar days of the particular transaction date, a 
Fee Reimbursement Form must be completed and submitted to the Exchange. 
Upon acceptance, the Exchange will deliver to that member's clearing 
firm a reimbursement check in the amount of the transaction fee charged 
on ETF transactions executed pursuant to an EFP trade as described 
above.
2. Statutory Basis
    The Exchange believes that the proposal is consistent with Section 
6(b) of the Act \7\ in general, and furthers the objectives of Section 
6(b)(4) \8\ in particular in that it is designed to provide for the 
equitable allocation of reasonable dues, fees, and other charges among 
the Amex's members and issuers and other persons using the Amex's 
facilities.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(4).
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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

    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 proposed rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act \9\ and subparagraph (f)(2) of Rule 19b-4 
thereunder,\10\ because it establishes or changes a due, fee, or other 
charge imposed by the Amex. 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.
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    \9\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \10\ 17 CFR 240.19b-4(f)(2).
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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 proposal is 
consistent with the Act. Persons making written submissions 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 number SR-Amex-2002-66 and should be 
submitted by September 19, 2002.


[[Page 55443]]


    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-22097 Filed 8-28-02; 8:45 am]
BILLING CODE 8010-01-P