[Federal Register Volume 70, Number 162 (Tuesday, August 23, 2005)]
[Notices]
[Pages 49341-49342]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-4595]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52275; File No. SR-Amex-2005-003]


Self-Regulatory Organizations; American Stock Exchange LLC; Order 
Granting Approval to Proposed Rule Change, and Amendment No. 1 Thereto, 
to Expand the Types of Trusts Permitted to Directly Own Amex 
Memberships

August 16, 2005.
    On January 7, 2005, the American Stock Exchange LLC (``Amex'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to amend Amex Rule 356 to expand the types of 
trusts permitted to directly own Amex memberships. On June 7, 2005, the 
Exchange filed Amendment No. 1 to the proposed rule change.\3\ The 
proposed rule change, as amended, was published for comment in the 
Federal Register on June 28, 2005.\4\ The Commission received no 
comments on the proposal.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ In Amendment No. 1, the Exchange revised the proposed rule 
text to clarify that an Exchange member owner who does not conduct 
broker-dealer activities on the floor of the Exchange is not 
required to be registered with the Commission as a broker-dealer. 
Member owners can be individuals, partnerships, corporations, 
custodial accounts or, pursuant to the proposed rule change, grantor 
trusts. Amendment No. 1 replaced and superseded the original filing 
in its entirety.
    \4\ See Securities Exchange Act Release No. 51900 (June 22, 
2005), 70 FR 37139.
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    The Exchange proposed to amend Amex Rule 356 to permit grantor 
trusts to directly own Exchange memberships. Currently, the Exchange 
permits certain pension trusts (generally comprised of trusts or 
custodial accounts, i.e., Keoghs and IRAs) to directly own Exchange 
memberships for investment purposes and either lease the seat or 
designate a nominee to operate the seat.
    Under the proposed rule change, grantor trusts will be able to 
acquire one or more Amex memberships either by transfer from an 
existing owner of an Amex membership or by a direct purchase. The 
grantor of the trust (i.e., either the member transferring a membership 
to a trust or the grantor of the trust purchasing a membership) will be 
required during the grantor's lifetime or existence (in the case of a 
non-natural person) to be a beneficiary of the trust. In the event that 
the trust terminates or is amended such that it no longer qualifies to 
own an Amex membership, any memberships held by the trust will revert 
to the grantor.
    As is the case with pension trusts, the trustee and grantor will be 
required on behalf of the trust to execute an agreement with the 
Exchange acknowledging that the trust will own the membership subject 
to the Exchange's Constitution and Rules, as well as certain other 
limitations and indemnifications, and will also be required to provide 
a legal opinion confirming that the trust was validly created and is 
authorized to own a membership and that the trustee is vested with all 
necessary authority to either appoint a nominee to operate the seat on 
behalf of the trust and/or lease the seat, as well as to enter into the 
requisite agreement. Additionally, the trustee and the grantor will be 
required to become allied members or approved persons of the Exchange, 
as applicable.
    After careful review, the Commission finds that the proposed rule 
change, as amended, is consistent with the requirements of the Act and 
the rules and regulations thereunder applicable to a national 
securities exchange \5\ and, in particular, the requirements of Section 
6(b) of the Act \6\ and the rules and regulations thereunder. The 
Commission finds specifically that the proposed rule change, as 
amended, is consistent with Section 6(b)(5) of the Act \7\ in 
particular, which requires, among other things, that the rules of an 
exchange be designed to promote just and equitable principles of trade, 
to remove impediments to and perfect the mechanism of a free and open 
market and a national market system, and, in general, to protect 
investors and the public interest.
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    \5\ In approving this proposed rule change, the Commission notes 
that it has considered the proposed rule's impact on efficiency, 
competition, and capital formation. 15 U.S.C. 78c(f).
    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
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    The Commission believes that permitting grantor trusts to directly 
own Amex memberships is designed to provide Amex members with increased 
estate and tax planning options and to achieve a reasonable balance 
between the Exchange's interest in providing members with the 
flexibility to plan their estates and the Exchange's interest in 
regulating and protecting its membership. The Commission notes that the 
grantor of the trust would be required during the grantor's lifetime or 
existence to be a beneficiary of the trust. Moreover, the trustee and 
grantor will be required on behalf of the trust to execute an agreement 
with the Exchange acknowledging that the trust will own

[[Page 49342]]

the membership subject to the Exchange's Constitution and Rules. In 
addition, the trustee and grantor will be required to become allied 
members or approved persons of the Exchange, as applicable, and will 
remain subject to the Constitution and Rules of the Exchange. The 
Commission also notes that the proposal is similar to a Chicago Board 
Options Exchange, Incorporated (``CBOE'') rule \8\ that was previously 
approved by the Commission and permits trusts to directly own CBOE 
seats.
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    \8\ See CBOE Rule 3.25.
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\9\ that the proposed rule change (SR-Amex-2005-003), as amended, 
be, and hereby is, approved.
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    \9\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5-4595 Filed 8-22-05; 8:45 am]
BILLING CODE 8010-01-P