[Federal Register Volume 68, Number 60 (Friday, March 28, 2003)]
[Notices]
[Pages 15250-15252]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-7401]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-47562; File No. SR-Amex-2003-14]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change and Amendment Nos. 1, 2, and 3 Thereto by the American Stock 
Exchange LLC Relating to a One-Year Pilot Program in Connection With 
Exchange Fees for Options Intermarket Linkage Orders

March 21, 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 February 28, 2003, 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. On March 
7, 2003, Amex submitted Amendment No. 1 to the proposed rule change.\3\ 
On March 19, 2003, Amex submitted Amendment No. 2 to the proposed rule 
change.\4\ On March 21, 2003, Amex submitted Amendment No. 3 to the 
proposed rule change.\5\ The Commission is publishing this notice to 
solicit comments on the proposed rule change, as amended, from 
interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See letter from Jeffrey P. Burns, Assistant General Counsel, 
Amex, to Jennifer Lewis, Attorney, Division of Market Regulation 
(``Division''), Commission, dated March 6, 2003 (``Amendment No. 
1''). In Amendment No. 1, the Exchange clarified that market makers 
from other options exchanges sending Principal Acting as Agent 
Orders through the options intermarket linkage (``Linkage'') that 
are executed at the Exchange will pay the same fees that are paid 
for transactions executed on the Exchange by Exchange specialists 
and registered options traders. In addition, Amex amended the 
Options Fee Schedule to reflect that these linkage fees are pursuant 
to a one-year pilot program.
    \4\ See letter from Jeffrey P. Burns, Assistant General Counsel, 
Amex, to Jennifer Lewis, Attorney, Division, Commission, dated March 
18, 2003 (``Amendment No. 2''). In Amendment No. 2, the Exchange 
made corrections to its fee schedule.
    \5\ See letter from Jeffrey P. Burns, Assistant General Counsel, 
Amex, to Jennifer Lewis, Attorney, Division, Commission, dated March 
20, 2003 (``Amendment No. 3''). In Amendment No. 3, the Exchange 
marked its fee schedule to show the changes it had made in Amendment 
No. 2.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend its Options Fee Schedule in order to 
clarify that market makers on other exchanges that send orders through 
the Linkage (``Linkage Orders'') to the Amex for execution will be 
charged the same fees that the Exchange charges Exchange specialists 
and registered options traders (``ROTs'') for the orders these entities 
execute on the Exchange. Because of the lack of experience in operating 
the Linkage, however, the Exchange proposes, along with the other 
options exchanges, a one-year pilot program in connection with the fees 
applicable to Linkage Orders.
    The text of the proposed rule change is below. Proposed language is

[[Page 15251]]

italicized; deleted language is in brackets.
* * * * *

                                                                  Options Fee Schedule
                                                                     [Options fees]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                   Specialist,  Market Maker
               Type                          Firm (2)                    (ROTs) [(6)]                  Broker/Dealer                 Customer (3)
--------------------------------------------------------------------------------------------------------------------------------------------------------
I Options Transaction Fee (1) (6)
(per contract side)
    Equity Options...............  $0.19                         $0.26                         $0.19                         No Charge
    Index Options................  $0.15                         $0.21                         $0.15                         $0.15
    Options on S&P100 iShares      Same as Equity Options        Same as Equity Options        Same as Equity Options        $0.15
II Options Comparison Fee (1) (6)
(per contract side)
    Equity Options...............  $0.04                         $0.05                         $0.04                         No Charge
    Index Options................  $0.04                         $0.05                         $0.04                         $0.04
III Options Floor Brokerage Fee
 (1)(6)
(per contract side)
    Equity Options...............  $0.03                         $0.05                         $0.03                         No Charge
    Index Options................  $0.03                         $0.05                         $0.03                         $0.03
IV Options Marketing Fee (4)
(per contract side)
    Equity Options...............  No Charge                     $0.40                         No Charge                     No Charge
V Options Licensing Fee
(per contract side)
    MNX, NDX and QQQ.............  No Charge                     $0.10                         No Charge                     No Charge
Type:
    OEF..........................  No Charge                     $0.05                         No Charge                     No Charge
    LQD..........................  No Charge                     $0.10                         No Charge                     No Charge
    ICF..........................  No Charge                     $0.09                         No Charge                     No Charge
VI Options Order Cancellation Fee
 (5)
                                   $1.00                         $1.00                         $1.00                         $1.00
VII Broker-Dealer Auto-Ex Fees
(per contract side)
    Options Transaction Fee
        Equity Options...........  $0.50                         $0.50                         $0.50                         N/A
        Index Options............  $0.50                         $0.50                         $0.50                         N/A
        Options on S&P100 iShares  $0.50                         $0.50                         $0.50                         N/A
    Options Comparison Fee
        Equity Options...........  $0.04                         $ [0.50] 0.05                 $0.04                         N/A
        Index Options............  $0.04                         $ [0.50] 0.05                 $0.04                         N/A
    Options Floor Brokerage Fee
        Equity Options...........  $0.03                         $ [0.50] 0.05                 $0.03                         N/A
        Index Options............  $0.03                         $ [0.50] 0.05                 $0.03                         N/A
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes:
(1) The increase of $0.09 in transaction fees, of $0.01 in comparison fees, and of $0.02 floor brokerage fees will not be imposed on contracts executed
  for the accounts of specialists, registered options traders, and non-member broker dealers as either an accommodation trade (also known as ``Cabinet
  Trades'') or part of the following strategies: (a) Reversals and conversions; (b) dividend spreads; and (c) box spreads. A Fee Reimbursement Form must
  be submitted to the Exchange in order to receive a reimbursement of the fee increases charged.
(2) Customer facilitated orders will continue to be charged a transaction fee of $0.07 per contract side.
(3) Index Options machine delivered < 30 contracts are not assessed a transaction fee.
(4) Excludes options trades between and among Registered Options Traders and Specialists. Effective August 1, 2001, this fee has been suspended.
(5) The executing clearing member is charged $1.00 for every order that it cancels through the Amex Order File in a given month when the total number of
  orders the executing clearing member canceled through AOF in that month exceeds the total number of orders that same Clearing Member executed through
  AOF in that same month. This fee will not apply to executing Clearing Members that cancel fewer than 500 orders through AOF in a given month.
(6) Pursuant to a one-year pilot program, the fees applicable to specialists, market maker (ROTs) [I]include members of other options exchanges
  executing Linkage transactions except for Satisfaction Orders.

* * * * *


II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, 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. 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
    Amex proposes to adopt fees applicable to certain Linkage Orders 
executed on the Exchange. The Plan for

[[Page 15252]]

the Purpose of Creating and Operating an Intermarket Options Market 
Linkage (``Linkage Plan'' or ``Plan'') was originally approved by the 
Commission on July 28, 2000,\6\ and subsequently amended on June 27, 
2001,\7\ May 30, 2002,\8\ January 29, 2003,\9\ and January 31, 
2003.\10\ For the purpose of implementing the Linkage Plan, Amex filed 
and received Commission approval of the Exchange's rules governing the 
operation of the Intermarket Linkage (``Linkage'') on January 31, 
2003.\11\ The Exchange, with the other options exchanges, launched 
Phase I of the Linkage on January 31, 2003.
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    \6\ See Securities Exchange Act Release No. 43086 (July 28, 
2000), 65 FR 48023 (August 4, 2000). On October 19, 1999, the 
Commission issued an order under section 11A(a)(3)(B) of the Act, 
directing the options exchanges to file a national market systems 
plan within 90 days to link the options markets. See Securities 
Exchange Act Release No. 42029 (October 19, 1999), 64 FR 57674 
(October 26, 1999). The options exchanges that are participants to 
the Plan include Amex, Chicago Board Options Exchange, Inc., Pacific 
Exchange, Inc., Philadelphia Stock Exchange, Inc. and the 
International Securities Exchange, Inc. (``options exchanges'').
    \7\ See Securities Exchange Act Release No. 44482 (June 27, 
2001), 66 FR 35470 (July 5, 2001).
    \8\ See Securities Exchange Act Release No. 46001 (May 30, 
2002), 67 FR 38687 (June 5, 2002).
    \9\ See Securities Exchange Act Release No. 47298 (January 31, 
2003), 68 FR 6524 (February 7, 2003) (``Amendment No. 4'').
    \10\ See Securities Exchange Act Release No. 47274 (January 29, 
2003), 68 FR 5313 (February 3, 2003).
    \11\ See Securities Exchange Act Release No. 47297 (January 31, 
2003), 68 FR 6526 (February 7, 2003).
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    In connection with the launch of the Linkage, the Exchange seeks to 
clarify that the existing fee amount of $0.36 per contract side \12\ 
for equity options that currently is charged to Exchange specialists 
and registered options traders (``ROTS'') will also apply to executions 
resulting from Linkage Orders. As a result, market makers from other 
exchanges sending Principal Acting as Agent Orders (``P/A Orders'') or 
Principal Orders (``P Orders'') will pay the same execution fees 
applicable to Exchange specialists and ROTS. The Exchange believes it 
is appropriate to charge market makers on other option exchanges the 
same fees members pay for proprietary transactions when such market 
makers access the liquidity available on the Amex.
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    \12\ The fee amount of $0.36 per contract side consists of a 
$0.26 options transaction fee, a $0.05 options comparison fee, and a 
$0.05 options floor brokerage fee.
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    As set forth in Amendment No. 4 of the Plan recently approved by 
the Commission, fees will not be charged to a member of another options 
exchange that is seeking to satisfy customer orders (i.e., Satisfaction 
Orders) on its book that were traded through.\13\
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    \13\ A trade-through occurs when a broker-dealer executes an 
order on one exchange at a price inferior to another exchange's 
disseminated price.
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    Due to the lack of experience that the options exchanges have in 
operating the Linkage, the Exchange has proposed that a one-year pilot 
program be instituted with respect to the application of Linkage Order 
fees. In this manner, the Amex, as well as the other options exchanges, 
will be able to monitor the operation of the Linkage during its first 
year of operation and reassess whether the proposed fees are adequate 
and reasonable.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with section 6(b)(4) of the Act \14\ regarding the equitable allocation 
of reasonable dues, fees and other charges among exchange members and 
other persons using exchange facilities.
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    \14\ 15 U.S.C. 78f(b)(4).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange believes that the proposed rule change will impose no 
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

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve such proposed rule change; or
    (B) Institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the amended 
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 Amex. 
All submissions should refer to File No. SR-Amex-2003-14 and should be 
submitted by April 18, 2003.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-7401 Filed 3-27-03; 8:45 am]
BILLING CODE 8010-01-P