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Notice

Self-Regulatory Organizations; Notice of Filing of Proposed Rule Change by the American Stock Exchange LLC Increasing Regular Memberships and Creating Two-Year Permits

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Start Preamble May 23, 2001.

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 March 19, 2001, 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 the Amex. The Exchange submitted Amendment Nos. 1, 2, and 3 to the proposed rule change on May 3, 2001,[3] May 16, 2001,[4] and May 18, 2001,[5] respectively. The Commission is publishing this notice to solicit comments on the proposed rule change, as amended, from interested persons.

I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change

The Amex proposes to increase the number of regular memberships and create 25 two-year permits as a result of a Regular Seat and Two-Year Permit Offering Plan (the “Plan”). The text of the proposed rule change is set forth below. New language is in italics. Deletions are in brackets.

AMERICAN STOCK EXCHANGE CONSTITUTION

Article IV

Admission to Membership

Number of Regular Memberships

SEC. 1(a)(1) Regular Membership—There shall be up to 889[864] regular memberships in the Exchange, inclusive of any regular memberships created through the options principal membership upgrade program. The number of regular memberships shall be increased only if the Board of Governors requests The Amex Membership Corporation to issue additional regular memberships. Any such issuance of additional regular memberships shall require the approval of a majority of the regular and options principal members voting together as a single class at a meeting called for the purpose of considering the request that new regular memberships be issued.

(2)-(3) No change.

(b)-(h) No change.

(i) Two-Year Permits

(1) There shall be maximum of twenty-five two-year permits. Two-year permits shall expire two years from the effective date of the membership, but may be renewed for an additional two years at the discretion of the Exchange's Seat Fund Committee. Two-year permits are non-transferable. The price for two-year permits will be determined by the Exchange's Seat Fund Committee at the beginning of a 120-day offering period, but shall not be less than $14,000. A two-year permit will automatically terminate in the event the holder goes out of business or is delinquent in payment of dues, fines, fees, charges and any other financial responsibility owed to the Exchange for more than thirty (30) consecutive days. In the event a two-year permit holder goes out of business, any monies for unpaid dues, fines, fees, charges and any other financial responsibility due to the Exchange or any other creditor, will be collected by the Exchange out of the proceeds of the sale of the two-year permits.

(2) Requirements for Issuance

A two-year permit holder must:

(i) be at least the minimum age of majority required to be responsible for his contracts in each jurisdiction in which he conducts business:

(ii) agree that his primary occupation will be the transaction of business on the Floor of the Exchange in his capacity as a permit holder; and

(iii) obtain a waiver letter from their clearing firms waiving their right to file a claim against the permit should the permit holder owe them money or, Start Printed Page 29849alternatively, a guarantee from another member acceptable to the Exchange's Seat Fund Committee; and

(iv) meet such other qualifications as may be specified in the plan approved by the regular members of the Exchange providing for the offering of such permits. Applications must be approved by the Exchange in accordance with the provisions of Section 1(g) of this Article IV. No person whose application for a permit has been approved by the Exchange shall be admitted to the privileges thereof until he shall have signed the Constitution of the Exchange. By such signature he shall pledge himself to abide by the Constitution as the same has been or shall be from time to time amended and by all rules, regulations, requirements, orders, directions or decisions adopted or made in accordance therewith.

(3) Rights and Obligations

A two-year permit holder shall have all the rights, privileges and obligations of a regular member, but shall have no distribution or voting rights.

(j) [i] Class C Trading Rights

No change.

(k) [j] New Trading Rights

No change.

* * * * *

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 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. The 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

During the last few years, volume on the trading floor of the Exchange has increased dramatically, while memberships have remained unchanged. Exchange members have identified a need for the issuance of additional seats.

In response to the apparent need for additional seats and to allow Exchange members to remain competitive and afford customers an optimal level of service, the Exchange is proposing to issue 25 additional regular seats and 25 two-year permits pursuant to the Plan, to be allocated as determined by the Exchange's Seat Fund Committee (“Committee”). The Committee would determine the sale price for regular seats and two-year permits and the effective date of the Plan. The price for regular seats would be at least $600,000. The price for two-year permits would be at least $14,000, per month. Authority to resolve and reach a final determination on any and all issues relating to the administration of the Plan would be vested in the Committee.

The Committee would be able to renew the two-year permits once for an additional two years, but the permits would be non-transferable. A two-year permit would terminate if the holder went out of business. Monies owed to the Exchange by a two-year permit holder who went out of business would be collected by the Exchange out of the proceeds of sale of regular seats and two-year permits under the Plan. Any regular seats offered but not sold would be permitted to be converted into two-year permits as determined by the Committee. The two-year permits would have no distribution or voting rights.

All prospective seat and/or permit holders would be required to be approved by the Exchange prior to the sale of a seat or the transfer of a permit. The Exchange would receive a $750 administrative fee for each seat/permit for administering the sale/transfer for prospective seat/permit owners.

Prior to any seat sale or permit transfer, a non-member or a person/organization that was not currently the owner of a regular membership would be required to meet all requirements currently applicable to regular or two-year permit holders. If the purchaser of a seat intended to lease the seat pursuant to a special transfer agreement or transfer the seat to a nominee, the lessee or nominee would also be required to meet all Exchange requirements. All applicable fees due by persons/organizations that are not owners of regular memberships or members of the Exchange would be required to be paid before the sale of any seat or transfer of any permit.

Sale proceeds will be distributed to all seat owners at a date to be determined by the Committee. The Ex-date for determining distribution of sale proceeds to owners would be the date of approval of the Plan by the Commission.

2. Statutory Basis

The Exchange believes that the proposed rule change is consistent with section 6(b) of the Act [6] in general and furthers the objectives of section 6(b)(2) [7] in particular in that it is designed to provide that any registered broker or dealer or natural person associated with a registered broker or dealer may become a member of such exchange and any person may become associated with a member thereof.

B. Self-Regulatory Organization's Statement on Burden on Competition

The Exchange does not believe that the proposed rule change will result in 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

The Exchange did not solicit or receive written comments on the proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action

Within 35 days of the date of publication of this notice in the Federal Register or within such longer period (i) as the Commission may designate up to 90 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the Exchange consents, the Commission will:

(A) By order approve such proposed rule change, or

(B) Institute proceedings to determine whether the proposed rule change should be disapproved.

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. Persons making written submissions should file six copies thereof with the Secretary, Securities and Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. 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 Start Printed Page 29850Room. Copies of the filing will also be available for inspection and copying at the principal office of the Amex. All submissions should refer to the File No. SR-Amex-2001-17 and should be submitted by June 22, 2001.

Start Signature

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

Margaret H. McFarland,

Deputy Secretary.

End Signature End Preamble

Footnotes

3.  Letter from Ivonne Natal, Assistant General Counsel, Amex, to Nancy Sanow, Assistant Director, Division of Market Regulation (“Division”), Commission, dated April 30, 2001 (“Amendment No. 1”). Amendment No. 1 states that on April 30, 2001, a majority of the regular and options principal members, voting as a single class, voted in favor of the proposed rule change.

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4.  Letter from Ivonne Natal, Assistant General Counsel, Amex, to Nancy Sanow, Assistant Director, Division, Commission, dated May 14, 2001 (“Amendment No. 2”). Amendment No. 2 requests the Commission to consider the Plan on a pilot basis for a minimum of two years and a maximum of four years, in the event the Seat Fund Committee exercises its discretion to extend the Plan. Amendment No. 2 also states that there are approximately 300 members trading equities on the Exchange floor.

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5.  Letter from Ivonne Natal, Assistant General Counsel, Amex, to Nancy Sanow, Assistant Director, Division, Commission, dated May 17, 2001 (“Amendment No. 3”). Amendment No. 3 clarifies that the administrative fee that the Amex would receive for administering the Plan would be $750.00 per sale/lease and that the administrative fee will be collected out of the sale proceeds, prior to their distribution to the members. Amendment No. 3 also states that Amex members and the Board of Governors have approved this fee.

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[FR Doc. 01-13754 Filed 5-31-01; 8:45 am]

BILLING CODE 8010-01-M