[Federal Register Volume 69, Number 229 (Tuesday, November 30, 2004)]
[Notices]
[Pages 69649-69650]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E4-3383]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-50716, File No. SR-Amex-2004-88]


Self-Regulatory Organizations; Notice of Filing and Immediate 
Effectiveness of a Proposed Rule Change and Amendment No. 1 Thereto by 
the American Stock Exchange LLC to Adopt a Per-Contract Licensing Fee 
for Options Transactions in SPDR O-Strips

November 22, 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 November 1, 2004, 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 Amex. On November 18, 
2004, Amex filed Amendment No. 1 to the proposed rule change.\3\ 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 Amendment No. 1 from Jeffrey P. Burns, Associate General 
Counsel, Amex, dated November 18, 2004 (``Amendment No. 1''). 
Amendment No. 1 replaced the original proposed rule change in its 
entirety.
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I. Self-Regulatory Organization's Statement of Terms of Substance of 
the Proposed Rule Change

    The Exchange proposes to modify its options fee schedule by 
adopting a per-contract license fee in connection with specialist and 
registered options trader (``ROT'') transactions in options on the SPDR 
O-Strip (``O-Strip'').\4\
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    \4\ The O-Strip is an exchange-traded fund (``ETF'') share that 
seeks to provide investment results corresponding to the newly 
launched Standard & Poor's (``S&P'') 500 O-Strip Index. The S&P 500 
O-Strip Index consists of all the individual S&P 500 component 
securities that are primarily traded in the over-the-counter market. 
The Index currently consists of approximately 75 securities, 
representing approximately 15% of the market capitalization of the 
S&P 500 Index.
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    The text of the revised fee schedule is available at Amex's Office 
of the Secretary and the Commission's Public Reference Room.

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
    The Exchange has entered into numerous agreements with issuers and 
owners of indexes for the purpose of trading options on certain ETFs. 
This requirement to pay an index license fee to third parties is a 
condition to the listing and trading of these ETF options. In many 
cases, the Exchange is required to pay a significant licensing fee to 
issuers or index owners that may not be reimbursed. In an effort to 
recoup the costs associated with index licenses, the Exchange has 
previously established a per-contract licensing fee for specialists and 
ROTs that is collected on every transaction in designated products in 
which a specialist or a ROT is a party. The licensing fee currently 
imposed on specialists and ROTs is as follows: (1) $0.15 per contract 
side for options on the Fidelity Nasdaq Composite Index Trading Stock 
(ONEQ); (2) $0.10 per contract side for options on the Nasdaq-100 Index 
Tracking Stock (QQQ), the Nasdaq-100 Index (NDX), the Mini-NDX (MNX), 
the iShares Goldman Sachs Corporate Bond Fund (LQD), the iShares Lehman 
1-3 Year Treasury Bond Fund (SHY), iShares Lehman 7-10 Year Treasury 
Bond Fund (IEF), iShares Lehman 20+ Year Treasury Bond Fund

[[Page 69650]]

(TLT), iShares Lehman U.S. Aggregate Bond Fund (AGG), and iShares 
Lehman U.S. Treasury Inflation Protected Secutities Fund (TIP); (3) 
$0.09 per contract side for options on the iShares Cohen & Steers 
Realty Majors Index Fund (ICF); and (4) $0.05 per contract side for 
options on the S&P 100 iShares (OEF).
    The Exchange represents that the purpose of the proposed fee is for 
Amex to recoup its costs in connection with the index license fee for 
the trading of options on O-Strips. The proposed licensing fee will be 
collected on every option transaction of O-Strips in which a specialist 
or a ROT is a party. The Exchange proposes to charge $0.20 per contract 
side. The Exchange believes that requiring the payment of a per-
contract licensing fee by those specialists units and ROTs that are the 
beneficiaries of the Exchange's index license agreements is justified 
and consistent with the rules of the Exchange and the Act. In addition, 
the Exchange believes that passing the license fee (on a per-contract 
basis) along to the specialist allocated to O-Strip options and the 
ROTs trading such products, is efficient and consistent with the intent 
of Amex to pass on its non-reimbursed costs to those market 
participants that are the beneficiaries.
    The Exchange notes that Amex in recent years has increased a number 
of member fees to better align Exchange fees with the actual cost of 
delivering services and reduce Exchange subsidies of such services.\5\ 
Therefore, the Exchange believes that implementation of this proposal 
is consistent with the reduction and/or elimination of these subsidies.
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    \5\ See Securities Exchange Act Release Nos. 44286 (May 9, 
2001), 66 FR 27187 (May 16, 2001) and 45360 (January 29, 2002), 67 
FR 5626 (February 6, 2002).
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    The Exchange submits that the proposed license fee will provide 
additional revenue and recoup its costs associated with the trading of 
O-Strip options. Further, the Exchange represents that it will monitor 
the revenue generated in connection with the O-Strip option license 
fee. In the event the revenue generated is greater than the Exchange's 
cost to the index provider, Amex represents that it will seek to rebate 
the difference back to the affected specialists and ROTs. Amex believes 
that this fee will help to allocate to those specialists and ROTs 
transacting in options on the O-Strip, a fair share of the related 
costs of offering such options. 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,\6\ in general, and with 
section 6(b)(4) of the Act,\7\ in particular, in that it provides for 
the equitable allocation of reasonable dues, fees, and other charges 
among its members.
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    \6\ See 15 U.S.C. 78f(b).
    \7\ See 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

    The foregoing rule change, as amended, has become effective 
immediately pursuant to section 19(b)(3)(A)(ii) of the Act \8\ and Rule 
19b-4(f)(2) thereunder,\9\ 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 of 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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    \8\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \9\ 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. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an e-mail to [email protected]. Please include 
File Number SR-Amex-2004-88 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., 
Washington, DC 20549-0609.
    All submissions should refer to File Number SR-Amex-2004-88. 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, please use only one method. The Commission will post all 
comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). 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 Section, 450 Fifth 
Street, NW., Washington, DC 20549. Copies of such filing also will be 
available for inspection and copying at the principal offices of Amex. 
All comments received will be posted without change; the Commission 
does not edit personal identifying information from submissions. You 
should submit only information that you wish to make available 
publicly. All submissions should refer to File Number SR-Amex-2004-88 
and should be submitted on or before December 21, 2004.

    For the Commission by the Division of Market Regulation, 
pursuant to delegated authority.\10\
Margaret H. McFarland,
Deputy Secretary.
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    \10\ 17 CFR 200.30-3(a)(12).
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[FR Doc. E4-3383 Filed 11-29-04; 8:45 am]
BILLING CODE 8010-01-P