[Federal Register Volume 70, Number 193 (Thursday, October 6, 2005)]
[Notices]
[Pages 58496-58498]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-5469]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52533; File No. SR-Amex-2005-085]


Self-Regulatory Organizations; American Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Relating to the Implementation of a Cancellation Fee for Equities and 
ETFs

September 29, 2005.
    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 September 20, 2005, 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 September 23, 
2005, Amex filed Amendment No. 1 to the proposed rule change.\3\ On 
September 26, 2005, Amex filed Amendment No. 2 to the proposed rule 
change.\4\ Amex has designated this proposal as one establishing or 
changing a due, fee, or other charge imposed by Amex under Section 
19(b)(3)(A)(ii) of the Act,\5\ and Rule 19b-4(f)(2) thereunder,\6\ 
which renders the proposal effective upon filing with the Commission. 
The Commission is publishing this notice to solicit comments on the 
proposed rule change, as amended, from interested parties.
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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: (1) Clarified that 
cancellations resulting from ``Immediate or Cancel'' and ``Fill or 
Kill'' orders will not be counted when determining the amount of the 
cancellation fee to be charged to an executing clearing member and 
updated the corresponding proposed rule text; and (2) stated that 
Amex plans to begin billing the cancellation fee in November 2005 
based on order cancellations and executions occurring in October 
2005.
    \4\ In Amendment No. 2, the Exchange made technical corrections 
to the proposed rule text. The effective date of the original 
proposed rule change is September 20, 2005, the effective date of 
Amendment No. 1 is September 23, 2005, and the effective date of 
Amendment No. 2 is September 26, 2005. For purposes of calculating 
the 60-day period within which the Commission may summarily abrogate 
the proposed rule change under Section 19(b)(3)(C) of the Act, the 
Commission considers the period to commence on September 23, 2005, 
the date on which Amex filed Amendment No. 1. See 15 U.S.C. 
78s(b)(3)(C).
    \5\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \6\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Amex proposes to establish a fee based on the number of order 
cancellations in equities, Exchange Traded Fund Shares and Trust Issued 
Receipts (hereinafter referred to as ``equities and ETFs'') routed 
through Amex systems. Below is the text of the proposed rule change, as 
amended. Proposed new language is italicized; proposed deletions are in 
[brackets].
* * * * *
Amex Equity Fee Schedule
I. Transaction Charges

    No change.

II. Equities Order Cancellation Fee

    The executing clearing member is charged $0.25 for every equities 
and ETF order sent for a mnemonic and cancelled through Amex systems in 
a given month when the total number of equities and ETF orders executed 
for that mnemonic is less than or equal to 10% of equities and ETF 
orders cancelled through Amex systems for that mnemonic in that same 
month. The fee does not apply to mnemonics for which fewer than 100,000 
orders were cancelled through Amex systems and does not apply to the 
first 100,000 cancellations submitted for a mnemonic. In addition, 
cancellations resulting from ``Immediate or Cancel'' or ``Fill or 
Kill'' orders will not be counted towards the number of cancellations 
used to determine whether the fee should be applied to a mnemonic and 
will not be counted when determining the amount of the cancellation fee 
charged to an executing clearing member. Executions of ``Immediate or 
Cancel'' and ``Fill or Kill'' orders will however be counted towards 
the number of executions.

[II.] III. Regulatory Fee

    No change.
* * * * *

Amex Exchange Traded Funds and Trust Issued Receipts Fee Schedule

    Exchange Traded Funds (ETFs) include Portfolio Depositary Receipts, 
Index Fund Shares and Trust Issued Receipts. The fee imposed for 
executing trades in these securities will vary depending on for whom 
the trade is executed as follows:
I. Transaction Charges for ETFs Without Unreimbursed Fees to a Third 
Party
    No change.

[[Page 58497]]

II. Transaction Charges for ETFs for which the Exchange Pays 
Unreimbursed Fees to a Third Party
    No change.
III. Transaction Charges for SPDR O-Strip
    No change.
IV. Transaction Charges for iShares FTSE/Xinhua China 25 Index Fund
    No change.

Notes:

    No change.

V. ETF Order Cancellation Fee

    The executing clearing member is charged $0.25 for every equities 
and ETF order sent for a mnemonic and cancelled through Amex systems in 
a given month when the total number of equities and ETF orders executed 
for that mnemonic is less than or equal to 10% of equities and ETF 
orders cancelled through Amex systems for that mnemonic in that same 
month. The fee does not apply to mnemonics for which fewer than 100,000 
orders were cancelled through Amex systems and does not apply to the 
first 100,000 cancellations submitted for a mnemonic. In addition, 
cancellations resulting from ``Immediate or Cancel'' or ``Fill or 
Kill'' orders will not be counted towards the number of cancellations 
used to determine whether the fee should be applied to a mnemonic and 
will not be counted when determining the amount of the cancellation fee 
charged to an executing clearing member. Executions of ``Immediate or 
Cancel'' and ``Fill or Kill'' orders will however be counted towards 
the number of executions.

[II.] VI. Regulatory Fee

    No charge.
Note:
    1. This exemption does not apply to System Orders of a member or 
member organization trading as agent for the account of a non-member 
competing market maker, who will be charged $.000075 x Total Value
* * * * *

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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to establish a fee on the cancellation of 
orders in equities and ETFs. The Amex believes that this fee is 
necessary given the often disproportionate number of order 
cancellations received relative to order executions and the increased 
costs associated with the practice of immediately following an order 
routed through exchange systems with a cancel request for that order. 
These order cancellations utilize system capacity and may require 
manual processing by specialist unit personnel, which may unnecessarily 
distract specialist staff from other responsibilities. Cancellations 
often come in large numbers creating backlogs in Amex systems, 
increasing Exchange costs, adversely impacting public customers, their 
clearing firms and specialists and resulting in less than timely 
executions of customer orders. The large volume of order cancellations 
requires an increase in Exchange spending on systems and related 
hardware used to process increased message traffic.
    The cancellation fee for equities and ETFs is similar in structure 
to the options order cancellation fee adopted by the Exchange in 
2001.\7\ The fee will apply to the executing clearing member when the 
number of cancellations of equity and ETF orders exceeds certain 
parameters. The cancellation fee for equities and ETFs will be 
calculated and applied on a ``mnemonic-by-mnemonic'' basis for each 
clearing member. Mnemonics are reference numbers or codes used by 
executing clearing members to designate: (1) Either the branch, trading 
desk or account from which orders, cancellations or other messages are 
sent to Amex; or (2) the types of products for which orders, 
cancellations or other types of messages are sent to Amex. For example, 
some clearing firms use one mnemonic to send equity orders and 
cancellations and another mnemonic to send ETF orders and 
cancellations. Each executing clearing member has at least one 
mnemonic, while many executing clearing members have two or more. 
Calculating and applying the cancellation fee for equities and ETFs on 
a mnemonic-by-mnemonic basis provides a more precise way of billing 
executing clearing members.
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    \7\ See Securities Exchange Act Release No. 45110 (November 27, 
2001), 66 FR 63080 (December 4, 2001).
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    Specifically, an executing clearing member will be charged $0.25 
for every equities and ETF order sent for a mnemonic and cancelled 
through Amex systems in a given month when the total number of equities 
and ETF orders executed for that mnemonic is less than or equal to 10% 
of the equities and ETF orders cancelled through Amex systems for that 
mnemonic in that same month. The fee does not apply to mnemonics for 
which fewer than 100,000 orders were cancelled through Amex systems and 
does not apply to the first 100,000 cancellations submitted for a 
mnemonic. For example, in August 2005, an executing clearing member 
submitted, for one mnemonic, 313,511 orders in Amex equities. For that 
same mnemonic, the executing clearing member cancelled 286,556 of those 
orders and executed 26,955. Pursuant to the proposed cancellation fee, 
the executing clearing member would have been subject to a fee of 
$46,639 (286,556x100,000 x $0.25) for that mnemonic. Cancellations 
resulting from ``Immediate or Cancel'' or ``Fill or Kill'' orders \8\ 
will not be counted towards the number of cancellations, since those 
order types, which combine an order with its cancellation in one 
message, do not add to the message traffic sent through Exchange 
systems. Cancellations resulting from ``Immediate or Cancel'' and 
``Fill or Kill'' orders will not be counted when determining the amount 
of the cancellation fee charged to an executing clearing member. 
Executions of ``Immediate or Cancel'' and ``Fill or Kill'' orders will, 
however, be counted towards the number of executions.\9\
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    \8\ A ``Fill or Kill'' order is a market or limited price order 
which is to be executed in its entirety as soon as it is represented 
in the trading crowd, and such order, if not so executed, is to be 
treated as cancelled. An ``Immediate or Cancel'' order is a market 
or limited price order which is to be executed in whole or in part 
as soon as such order is represented in the trading crowd, and the 
portion not so executed, is to be treated as cancelled. See Amex 
Rules 131(i) and (k).
    \9\ See Amendment No. 1, supra note 3.
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    Amex plans to begin billing the cancellation fee in November 2005 
based on order cancellations and executions occurring in October 
2005.\10\
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    \10\ Id.
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2. Statutory Basis
    Amex believes that the proposed rule change, as amended, is 
consistent with Section 6(b) of the Act,\11\ in general, and furthers 
the objectives of Section 6(b)(4)

[[Page 58498]]

of the Act,\12\ in particular, in that it is designed to provide for 
the equitable allocation of reasonable dues, fees, and other charges 
among its members and issuers and other persons using its facilities. 
In particular, Amex believes that the proposed cancellation fee will 
allow the Exchange to more equitably recover systems capacity costs 
from its members.
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    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(4).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    Amex does not believe that the proposed rule change, as amended, 
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 has become effective pursuant to Section 
19(b)(3)(A) of the Act \13\ and subparagraph (f)(2) of Rule 19b-4 
thereunder \14\ since it establishes or changes a due, fee or other 
charge imposed by the Exchange.
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    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 17 CFR 240.19b-4(f)(2).
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    At any time within 60 days of the filing of the 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 furtherance of the purposes of the Act.\15\
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    \15\ See supra note 4.
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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, as amended, 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-2005-085 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street, NE., Washington, DC 20549-9303.
    All submissions should refer to File Number SR-Amex-2005-085. 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 Room. Copies of such 
filing also will be available for inspection and copying at the 
principal office of the 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-2005-085 and should be submitted on or before 
October 27, 2005.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
 [FR Doc. E5-5469 Filed 10-5-05; 8:45 am]
BILLING CODE 8010-01-P