[Federal Register Volume 68, Number 21 (Friday, January 31, 2003)]
[Notices]
[Pages 5059-5060]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-2291]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-47216; File No. SR-Amex-2002-114]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the American Stock Exchange 
LLC Relating to the Addition of a Fee for the Automatic Execution of 
Broker-Dealer Options Orders

January 17, 2003.
    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 23, 2002, 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 Amex. 
On January 14, 2003, Amex filed Amendment No. 1 to its proposal with 
the Commission.\3\ The Commission is publishing this notice as amended 
to solicit comments on the proposed rule change from interested 
persons.\4\
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See letter from Jeffery P. Burns, Assistant General Counsel, 
Amex, to Katherine A. England, Assistant Director, Division of 
Market Regulation (``Division''), Commission, dated January 13, 
2003. In Amendment No. 1, the Amex made technical corrections to the 
proposed rule change.
    \4\ On September 20, 2002, the Exchange submitted a proposed 
rule change (SR-Amex-2002-75) to adopt a broker-dealer Auto-Ex fee. 
The Commission returned the filing for failure to comply with the 
requirements of Section 19(b) of the Act and Form 19b-4, thereunder. 
See letter from Kelly Riley, Senior Special Counsel, Division, 
Commission to Jeffery P. Burns, Assistant General Counsel, Amex, 
dated October 16, 2002. The Exchange submitted a new Form 19b-4 (SR-
Amex-2002-93) to comply with the filing requirements of Section 
19(b) of the Act and Form 19b-4 on November 8, 2002. Because the 
proposed fee in SR-Amex-2002-93 did not accurately reflect the 
intention of the Exchange, Amex has withdrawn the filing. The 
instant proposal (SR-Amex-2002-114) corrects the prior inaccuracies.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Amex proposes to modify its options fee schedule adding a fee 
for the automatic execution of broker-dealer orders. The text of the 
proposed rule change is available at the Office of the Secretary, 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 Amex 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 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    On June 24, 2002, the Exchange filed with the SEC a proposal to 
permit broker-dealer orders to be executed through Auto-Ex (the ``BD 
Auto-Ex Proposal'').\5\ The Commission approved the BD Auto-Ex Proposal 
on September 10, 2002.\6\ The Amex is now proposing

[[Page 5060]]

to add new Section VII entitled ``Broker-Dealer Auto-Ex Fee'' to the 
Options Fee Schedule for the purpose of adopting a $0.50 transaction 
fee per contract side for all broker-dealer orders \7\ executed via the 
Exchange's automatic execution system (``Auto-Ex''). \8\ Broker-dealer 
orders executed through Auto-Ex would also be subject to the Exchange's 
existing options comparison fee and options floor brokerage fee. For 
firms and broker-dealers, the comparison fee and floor brokerage fee is 
$0.04 and $0.03 per contract side, respectively, while for specialists 
and market makers these charges per contract side are each $0.05.
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    \5\ See Securities Exchange Act Release No. 46479 (September 10, 
2002), 67 FR 58654 (September 17, 2002) (SR-Amex-2002-57).
    \6\ See Securities Exchange Act Release No. 46479 (September 10, 
2002), 67 FR 58654 (September 17, 2002) (SR-Amex-2002-57). The 
Commission has also approved similar proposals by other options 
exchanges to permit the execution of broker-dealer orders through 
automatic execution systems that previously were limited to public 
customer orders. Securities Exchange Act Release Nos. 45032 
(November 6, 2001), 66 FR 57145 (November 14, 2001) (SR-PCX-2000-05) 
and 45967 (May 20, 2002), 67 FR 37888 (May 30, 2002) (SR-CBOE-2002-
22) (CBOE six-month pilot program permitting broker-dealer orders 
for QQQ options to be Executed on RAES); and 46113 (June 25, 2002), 
67 FR 44486 (SR-CBOE-2002-35) (July 2, 2002) (extending CBOE pilot 
to all index products).
    \7\ A broker-dealer order is an order for the account of a 
registered broker-dealer.
    \8\ The Commission has approved the adoption of broker-dealer 
automatic execution fees for other options exchanges. See Securities 
Exchange Act Release Nos. 45662 (March 27, 2001), 67 FR 16786 (April 
8, 2002) (SR-PCX-2002-10); 46212 (July 16, 2002), 67 FR 48235 (July 
23, 2002) (SR-Phlx-2002-36); and 46455 (September 3, 2002), 67 FR 
57468 (September 10, 2002) (SR-CBOE-2002-42).
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    The Exchange represents that broker-dealer orders subject to the 
proposed fee, include without limitation, firm orders, specialist 
orders, market maker orders and orders for the account of registered 
broker-dealers. The Amex notes that it will only charge this fee to 
member firms through the customary monthly billing that occurs shortly 
after the close of each trading month. The Amex represents that non-
members will not be subject to this proposed fee. Accordingly, the Amex 
will assess this fee solely against firms executing orders for the 
accounts of broker-dealers.
    Broker-dealers who want to access the Exchange's markets without 
paying this additional fee may continue to send their orders to a floor 
broker for manual execution. However, broker-dealer orders that are 
automatically executed through Auto-Ex are not subject to fees 
otherwise imposed by an Amex floor broker in connection with a manual 
execution. The Amex believes that the benefits of automatic execution 
outweigh the potential burden of paying the proposed fee.
    The Exchange submits that the proposed fee will provide additional 
revenue and recoup the costs associated with permitting the automatic 
execution of broker-dealer orders. In addition, the Amex submits that 
this fee will help to allocate to broker-dealer orders a fair share of 
the related costs of operating Auto-Ex and related Exchange systems. 
The Exchange further asserts that permitting the Auto-Ex system to 
accept and execute broker-dealer orders requires design modification, 
programming and testing. Accordingly, the Exchange believes that the 
proposed fee is reasonable.
2. Statutory Basis
    The Exchange believes the proposed rule change, as amended, is 
consistent with Section 6(b) of the Act,\9\ in general, and with 
Section 6(b)(4)\10\ in particular, in that it provides for the 
equitable allocation of reasonable dues, fees, and other charges among 
its members.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 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 foregoing rule change establishes or changes a due, fee, or 
other charge and, therefore, has become effective immediately pursuant 
to Section 19(b)(3)(A)(ii) of the Act \11\ and Rule 19b-4(f)(2) 
thereunder.\12\ 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 the furtherance of the purposes of the Act.
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    \11\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \12\ 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 proposed rule 
change 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 No. SR-Amex-2002-114 and 
should be submitted by February 21, 2003.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-2291 Filed 1-30-03; 8:45 am]
BILLING CODE 8010-01-P