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Self-Regulatory Organizations; Order Approving Proposed Rule Change by the American Stock Exchange LLC To Establish an Interim Seat Allocation Program

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Information about this document as published in the Federal Register.

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Start Preamble July 7, 2000.

I. Introduction

On April 14, 2000, the American Stock Exchange LLC (“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 thereunder,[2] a proposed rule change to establish an Interim Seat Allocation Program. The proposed rule change was published for comment in the Federal Register on June 7, 2000.[3] The Commission received no comments on the proposal. This order approves the Amex's proposal.

II. Description of the Proposal

Active seats on the Exchange are assigned to a person, not a firm. Consequently, when a person to whom a seat is assigned is absent from the trading floor, the seat cannot be used to participate in trading activities.

The Exchange has proposed an Interim Seat Allocation Program, which will allow an active member (i.e., the person to whom the seat has been assigned and who actively participates in securities transactions on the Exchange floor) temporarily to allocate the membership to an interim member when the active member is absent from the trading floor. An interim member must be approved for membership in accordance with the Amex's Constitution and Rules. The Exchange also will require prior approval of the interim member by the lessor of the seat. An active member must pay an interim member status annual fee of $1,500 for the right make any allocations and a flat fee of $250 for each allocation. After an interim member has been approved for membership and the active member has paid the necessary fees and submitted the appropriate form to the Exchange's Membership Services Department, the active member may allocate its seat to the interim member. A temporary allocation may be for a minimum of one day to a maximum of one year.

Contracts made on the trading floor by an interim member will be considered contracts made by the active member, and the active member will be responsible for all obligations to the Exchange and all obligations to other members resulting from Exchange transactions, or transactions in other securities, conducted by the interim member. The owner of the membership, rather than the interim member, will be deemed to be the member of the Amex for purposes of participating in any distribution of the assets and funds of the Exchange in the event of any voluntary or involuntary final liquidation, dissolution, or winding up of the Exchange's affairs. The owner of the membership or active member (as the case may be), rather than the interim member, would be the Participant in the Exchange's Gratuity Fund and entitled to the benefits described in Article IX of the Exchange Constitution. In addition, and interim member may not vote the active member's seat or serve on an Exchange committee in the place of the active member.

If an interim member is not allocated the membership held by the active member within one year of approval by Start Printed Page 44553the Exchange's Membership Services Department, the individual's eligibility for interim membership would be terminated. To become eligible again for interim member status, the individual would have to requalify for membership in accordance with the Constitution and Rules of the Exchange.

III. Discussion

After careful review, the Commission finds that the proposed rule change is consistent with the requirements of the Act.[4] In particular, the Commission finds the proposal is consistent with Sections 6(b)(4) and 6(b)(5) of the Act.[5]

Section 6(b)(5) of the Act [6] 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 proposed Interim Seat Allocation program will promote just and equitable principles of trade and will protect the public interest by maximizing Amex members' use of personal and capital resources. Currently, seats on the Exchange may not be available for use during absences by active members due, for example, to vacation or illness. Allowing interim members to fill these seats, and to use then to continue trading, will provide greater liquidity on the Exchange than may exist otherwise. Furthermore, the proposed rule change is designed to protect investors because interim members must be approved for membership in accordance with the Exchange's rules in the same manner as active members. The public interest and investor protection will also be served by the requirement that the active member bear responsibility for all obligations to the Exchange and to other members resulting from Exchange transactions conducted by an interim member.

Section 6(b)(4) of the Act [7] requires that the rules of the exchange provide for the equitable allocation of reasonable dues, fees, and other charges among its members. All of the Exchange's members that wish to avail themselves of the Interim Seat Allocation Program will be subject to the same fees, and these fees do not appear to be unreasonable. Therefore, the Commission believes that the Exchange's proposal meets the requirements of Section 6(b)(4) of the Act.

IV. Conclusion

It is therefore ordered, pursuant to Section 19(b)(2) of the Act,[8] that the proposed rule change (SR-Amex-00-19) is approved.

Start Signature

For the Commission, by the Division of Market Regulation, pursuant to delegated authority.[9]

Margaret H. McFarland,

Deputy Secretary

End Signature End Preamble


3.  Securities Exchange Act Release No. 42853 (May 30, 2000), 65 FR 36182.

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4.  In approving this proposal, the Commission has considered its impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f).

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5.  15 U.S.C. 78f(b)(4) and (b)(5).

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[FR Doc. 00-18071 Filed 7-17-00; 8:45 am]