[Federal Register Volume 69, Number 8 (Tuesday, January 13, 2004)]
[Notices]
[Pages 2023-2025]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-615]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-49019; File No. SR-Amex-2003-104]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change by the American Stock Exchange 
LLC to Cap Monthly Options Transactions Fees Incurred by Specialists 
and Registered Options Traders (``ROTs'') in any Single Options Class 
at $72,000, and Implement Market Share Fee Program for Specialists and 
ROTs in the Top 300 Equity Options

January 5, 2004.
    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 1, 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. The Amex 
has designated this proposal as one establishing or changing a due, 
fee, or other charge imposed by the Amex under Section 19(b)(3)(A)(ii) 
of the Act,\3\ 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).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to adopt the following changes to its Options 
Fee Schedule: (i) A transaction fee cap of $72,000 per month in any 
single options class, exclusive of the options licensing fee, for 
specialists and registered options traders (``ROTs''), and (ii) a 
market share fee program for the top 300 equity options that would 
reduce transaction fees paid by specialists and ROTs in such classes if 
a 20% or greater monthly market share is maintained. 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 Amex included statements 
concerning

[[Page 2024]]

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
Options Fee Cap for Specialists and ROTs
    The Exchange is proposing to adopt a transaction fee cap of $72,000 
per month in any single options class, exclusive of the options 
licensing fee, for specialists and ROTs. Specialists and ROTs that have 
incurred transaction fees, which include the options transaction fee, 
the options comparison fee, and the options floor brokerage fee, 
greater than $72,000 per month in any single options class going 
forward, will now be billed at the capped fee of $72,000.
    The Exchange believes that specialists and ROTs who bring in 
substantial order flow to the Exchange should be rewarded through the 
proposed fee reduction. As proposed, specialists and ROTs in any single 
option class will be required to trade 200,000 contracts for equity 
options and 232,258 contracts in index options to reach the cap (based 
on the current rate of $0.36 per contract side). However, the number of 
contracts required to reach the fee cap in the top 300 equity options 
may increase as a result of the market share fee program described 
below. Although the Exchange submits that only a small number of firms 
will reach these limits, the proposal is intended to provide additional 
incentives to firms to continue to attract order flow.
Market Share Fee Program
    The Exchange is proposing to adopt a market share fee program for 
the top 300 equity options (``Program''). The Program will commence on 
December 1, 2003. The Program is designed to provide incentives to 
specialists and ROTs to maintain and increase the Exchange's market 
share of total national volume in the top 300 equity option classes.
    The Amex believes the Program will provide incentives to maintain 
highly competitive quotes by reducing the applicable options 
transaction fees as long as the specialist or ROT maintains a 20% 
market share on a monthly basis.
    Specialists and ROTs in the top 300 equity option classes who 
maintain an Amex market share of at least 20% in those classes in a 
particular month will receive a lower options transaction fee for their 
transactions in those classes during that month. The revised options 
transaction fee will be as follows:

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         Options  transaction fee             Market share break point
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$0.26....................................  0% to 19.99%
0.24.....................................  20% to 24.99%
0.21.....................................  25% and greater
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    Because clearing firms for specialists and ROTs are unable to 
immediately calculate the effective transaction fee based upon the 
relevant market share, the Exchange will implement a manual procedure. 
Specifically, at the end of each month, the Exchange will calculate the 
market share of each option class and then send the appropriate credit 
amount through to each clearing firm for the account of the specialist 
or ROT. The credit amount is the amount such specialist or ROT overpaid 
for those option transactions that are subject to the lower fee.\4\ For 
example, specialists/ROTs that maintain a market share of 20-24.99% in 
a top 300 equity options class will receive a $.02 per contract credit 
amount while those specialists/ROTs that maintain a market share of 25% 
or greater in a top 300 equity options class will receive a $.05 per 
contract credit amount. All specialists and ROTs will be provided with 
reports showing the total credit they received along with all details 
supporting the Exchange's calculations on or about the fifteenth (15) 
business day of the subsequent month.
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    \4\ The current transaction fee applicable to specialists/ROTs 
is $0.36 per contract side for equity options.
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    The program is intended to provide positive incentives for 
specialists/ROTs to increase or maintain their market shares by 
continuing to provide highly competitive quotes. The Exchange further 
believes that those specialists and ROTs that provide substantial order 
flow to the Exchange should be rewarded through the proposed fee 
reduction.
2. Statutory Basis
    The Exchange believes the proposal is consistent with Section 6(b) 
of the Act,\5\ in general, and Section 6(b)(4) of the Act,\6\ in 
particular, in that it provides for the equitable allocation of 
reasonable dues, fees, and other charges among exchange members and 
other persons using exchange facilities.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 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 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 \7\ and subparagraph (f)(2) of Rule 19b-4\8\ 
thereunder, because it establishes or changes a due, fee, or other 
charge imposed by the Exchange. 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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    \7\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \8\ 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. Comments 
may also be submitted electronically at the following e-mail address: 
[email protected]. All comment letters should refer to File No. SR-
Amex-2003-104. This file number should be included on the subject line 
if e-mail is used. To help the Commission process and review your 
comments more efficiently, comments should be sent in hardcopy or by e-
mail but not by both methods. 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

[[Page 2025]]

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-2003-104 and should be submitted by February 3, 2004.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 04-615 Filed 1-12-04; 8:45 am]
BILLING CODE 8010-01-P