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Self-Regulatory Organizations; Order Granting Approval to Proposed Amendments to the Amex Constitution by the American Stock Exchange LLC Eliminating the Requirement That the Chairman Also Be the CEO

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Information about this document as published in the Federal Register.

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Start Preamble April 13, 2000.

I. Introduction

On July 16, 1999, the American Stock Exchange, Inc. (“Amex” or “Exchange”) submitted to 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 [2] thereunder, a proposed rule change. In its proposal, Amex seeks to eliminate the requirement that the Chairman also be the Chief Executive Officer (“CEO”) of the Exchange. The proposed rule change was published for comments in the Federal Register on January 7, 2000.[3] The Commission received no comments on the filing and this order approves the proposal.

II. Description of the Proposal

Article II, Section 4(a) of the Amex Constitution currently requires that the Chairman of the Board also act as the CEO of the Exchange. The Chairman thus performs the standard functions of a Board Chairman, as well as being responsible to the Board for the management and administration of the affairs of the Exchange as CEO.

The Exchange proposes to amend Article II, Section 4(a) of the Constitution to eliminate the requirement that the Chairman also act as the CEO of the Exchange. Amex represents that the NASD's two other subsidiaries (the Nasdaq Stock Market and NASD Regulation), both have non-executive Chairmen. Amex believes that having a non-executive Chairman attend to the functions of a Chairman would allow the CEO to focus on the operations of the Exchange. Nevertheless, the proposal gives Amex the flexibility to choose to have two people fill the Chairman and CEO positions or to have the same person fill these two positions.

As a result of the amendment to Article II, Section 4(a) of the Constitution, Amex made a number of conforming changes to other provisions of the Constitution and rules. Before this proposal, Amex's rules generally did not make a distinction between whether the Chairman/CEO was serving in his capacity as the Chairman or the CEO and used the term “Chairman” for both of these functions. To allow for separate persons to serve as Chairman and CEO, Amex examined its rules and made a determination as to whether a particular function was normally handled by the Chairman or CEO. Based on this examination, Amex then changed the term “Chairman” to CEO when it determined that Chairman/CEO was acting in his capacity as the CEO. Amex had to make choices, however, when the function was properly performed by either the Chairman or the CEO. In addition, Article II, Section 3 (Chairman) and Article II, Section 4(a) (Chief Executive Officer), discussing the selection and authority of the Chairman and CEO respectively, have been appropriately rearranged. Other than splitting the Chairman and CEO roles and making the above-mentioned conforming changes, the Amex represents that there are no substantive changes being made.

III. Discussion

The Commission finds that the proposed rule change is consistent with Start Printed Page 21225the requirements of the Act. [4] In particular, the Commission finds the proposal is consistent with Section 6(b)(5)[5] of the Act. Section 6(b)(5) requires, among other things, that the rules of an exchange be designed to promote just and equitable principles of trade and to protect investors and the public interest.

The Commission believes that the proposal is consistent with the Act. In particular, Amex represented that splitting the Chairman/CEO functions will allow the CEO to focus on the operations of the Exchange. The Commission agrees and believes that the proposal should allow the CEO to devote more time to the day-to-day operations of the Exchange.

In approving this rule change, however, the Commission notes that the proposed language now permits the Chairman to be affiliated with a member of the Exchange if separate persons hold the Chairman and CEO positions. As the Commission stated in the order approving the International Securities Exchange LLS's application for registration as a national securities exchange, the affiliation of the Chairman with one of the Exchange's members implicates certain conflicts of interest, or at least gives the appearance of such conflicts.[6] Amex represented that it made this change to make its corporate governance structure consistent with other NASD entities, such as NASD Regulation, which in 1999 had a Chairman who was affiliated with an NASD member. Amex also represented that the change, other than splitting the Chairman and CEO positions, will have no substantive effect on the operation of the Exchange. Nevertheless, if Amex chooses to split the Chairman/CEO positions and has a Chairman affiliated with a member, Amex's Chairman should avoid actual or apparent conflicts of interest.

IV. Conclusion

It is therefore ordered, pursuant to Section 19(b)(2) of the Act,[7] that the proposed rule change (SR-Amex-99-25) is approved.

Start Signature

For the Commission, by the Division of Market Regulation, pursuant to delegated authority.[8]

Jonathan G. Katz,


End Signature End Preamble


3.  See Securities Exchange Act Release No. 42307 (January 3, 2000), 65 FR 1206.

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4.  In addition, purusant to Section 3(f) of the Act, the Commission has considered the proposed rule's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f).

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6.  See Securities Exchange Act Release No. 42455 (February 24, 2000), 65 FR 11401 (March 2, 2000) (File No. 10-127).

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[FR Doc. 00-9919 Filed 4-19-00; 8:45 am]