[Federal Register Volume 72, Number 129 (Friday, July 6, 2007)]
[Notices]
[Pages 37059-37061]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-13023]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55983; File No. SR-Amex-2007-68]


Self-Regulatory Organizations; American Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Modify the Fees Charged to Member Organizations for Transactions in 
Exchange-Traded Funds and To Implement a Revenue Sharing Program for 
Specialists in Exchange-Traded Funds

June 29, 2007.
    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 June 28, 2007, the American Stock Exchange LLC (``Exchange'' or 
``Amex'') 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 substantially prepared by the 
Exchange. 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.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to: (1) Amend the Exchange Traded Funds 
(``ETFs'') and Trust Issued Receipts Fee Schedule (``Fee Schedule'') to 
revise various transaction fees; and (2) adopt a revenue sharing 
program for specialists and registered traders in ETFs. The text of the 
proposed rule change is available on the Exchange's Web site (http://www.amex.com), at the Exchange's principal office, and at 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, the Exchange 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. The Exchange 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
    a. Charges Assessed for Transactions in Customer Accounts
    The Exchange proposes to revise the fees it charges to members for 
transactions in customer accounts.\3\ Currently, Amex transaction 
charges for ETFs are assessed for customer accounts monthly on a per-
share basis with the application of various caps and discounts. The 
Exchange now proposes to: (1) Decrease the transaction charge for 
customers from $0.0030 to $0.0023 (given the lower rate, the $100 per 
transaction cap will result in transaction charges being assessed only 
on the first 43,478 shares); (2) eliminate the waiver of fees for 
electronically entered orders of 2,400 shares or less; (3) establish a 
flat rate of $0.0007 per share (or seven cents per 100 shares) for 
clearing charges for orders routed to and executed at another market 
center; (4) establish a flat rate of $0.0030 per share for orders 
routed to and executed at another market center; \4\ and (5) establish 
a fee of 0.3% of the total dollar value of the transaction for ETFs 
trading with a share price of less than $1.00.\5\
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    \3\ Customer accounts are defined for purposes of the fee 
schedule to include accounts for all market participants except 
specialists and registered traders. Therefore, customer accounts 
(and the fees charged to them) include members' off-floor 
proprietary accounts, competing market makers on other exchanges, 
and other member and non-member broker-dealers.
    \4\ Orders routed to and executed at another exchange are 
charged this fee in lieu of the Amex transaction charge.
    \5\ Item (5) was corrected to clarify that the proposed fee 
change set forth therein applies to ETFs and not to equities, as the 
text originally read in the Exchange's filing. Telephone 
Conversation between Claire McGrath, Senior Vice President and 
General Counsel, Exchange, and Nathan Saunders, Special Counsel, 
Division of Market Regulation, Commission, on June 29, 2007.
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    b. Transaction Charges for Specialists.
    Currently, ETF specialists and registered traders are assessed a 
transaction charge of $0.0003 per share (or 3 cents per 100 shares) for 
all shares executed per month. In addition, transaction charges for ETF 
specialists are capped at $400,000 per month. There are no caps or 
discounts applied to transaction charges for ETF registered traders. In 
conjunction with the revenue sharing program described below and a 
prohibition on specialist commissions, which is proposed by means of a 
separate filing \6\ submitted in conjunction with this proposal, the 
Exchange proposes to eliminate

[[Page 37060]]

transaction charges for ETF specialists and ETF registered traders and 
the $400,000 per-month cap for ETF specialists.
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    \6\ See File No. SR-Amex 2007-67, filed on June 28, 2007.
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    c. Revenue Sharing Program.
    The Exchange proposes to introduce a revenue sharing program for 
ETF specialists. Revenue sharing payments will be made from the 
Exchange's general revenues and will not be limited to a particular 
revenue source. The Exchange's reasons for introducing this revenue 
sharing program for specialists reflect a recognition of both the 
uncertainties faced by specialists in light of the implementation of 
Regulation NMS and their proposed loss of commission income. To provide 
ETF specialists with a source of payments in lieu of commissions and to 
provide incentives to specialists to quote aggressively in Amex-traded 
shares, the Exchange proposes to distribute revenue to the ETF 
specialists and ETF registered traders as outlined below. The program 
will be in effect through the end of December 2007.
    There will be two ways in which ETF specialists will participate in 
revenue sharing. An ETF specialist will receive a payment (calculated 
monthly) of $0.0024 per share (or 24 cents per 100 shares) whenever the 
specialist either buys or sells its specialty ETF on the Exchange and 
is a provider of liquidity in that transaction (e.g., the specialist's 
quote is traded against or the specialist offsets an order imbalance as 
part of an opening or closing transaction). Additionally, an ETF 
specialist will receive a payment (calculated monthly) of $0.0004 per 
share (or 4 cents per 100 shares) for all shares executed on the 
Exchange in its specialty ETF in which the specialist does not 
participate. A registered trader in ETFs will receive a revenue sharing 
payment of $0.0010 per share (or 10 cents per 100 shares) whenever the 
registered trader either buys or sells an ETF on the Exchange and is a 
provider of liquidity in that transaction. Neither the specialist nor 
the registered trader will receive a payment when it is a contra-party 
to the same transaction.
    Revenue sharing will also be paid on transactions in securities 
trading at less than $1.00, equal to the amount collected by the 
Exchange. However, the revenue sharing payment for such transactions 
will be paid only on the portion of the transaction for which the 
Exchange collects revenue. As discussed above, customer transaction 
charges are capped at $100 per transaction, which means that 
transaction charges are assessed on only the first 43,478 shares. Thus, 
for transactions of more than 43,478 shares, specialists and registered 
traders will receive payments based only on the first 43,478 shares.
    The revisions to the Fee Schedule and the adoption of a revenue 
sharing program for ETF specialists and ETF registered traders will be 
implemented beginning July 1, 2007. As discussed above, the Exchange is 
also proposing to eliminate ETF specialist commissions in a separate 
filing in which the Exchange requests waiver of the 30-day operative 
delay under Rule 19b-4(f)(6)(iii) \7\ so that the prohibition on ETF 
specialists' commissions will also take effect on July 1, 2007.
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    \7\ 17 CFR 19b-4(f)(6)(iii).
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act \8\ in general, and furthers the 
objectives of Section 6(b)(4) of the Act \9\ in particular, in that it 
is designed to provide for the equitable allocation of reasonable dues, 
fees, and other charges among its members and other persons using its 
facilities. Specifically, the Exchange is proposing to reduce and/or 
eliminate various fees for its market participants while instituting a 
revenue sharing program to provide incentives for an increase in order 
flow.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 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 that is not necessary or appropriate 
in furtherance of the purposes of the Act.

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

    Because the foregoing proposed rule change has been designated by 
the Exchange as one that establishes or changes a due, fee, or other 
charge imposed by the Exchange, it has become effective upon filing 
pursuant to Section 19(b)(3)(A) of the Act \10\ and Rule 19b-4(f)(2) 
thereunder.\11\ 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.
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 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 No. SR-Amex-2007-68 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.
    All submissions should refer to File Number SR-Amex-2007-68. 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, 100 F Street, 
NE., Washington, DC 20549, on official business days between the hours 
of 10 a.m. and 3 p.m. 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-2007-68 and should be 
submitted on or before July 27, 2007.


[[Page 37061]]


    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-13023 Filed 7-5-07; 8:45 am]
BILLING CODE 8010-01-P