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Notice

Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change by the American Stock Exchange LLC Relating to an Increase in Floor, Membership and Options Trading Fees

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Start Preamble December 18, 2001.

Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”),[1] and rule 19b-4 [2] thereunder, notice is hereby given that on November 30, 2001, the American Stock Exchange LLC (“Amex” or “Exchange”) filed with the Securities and Exchange Commission (the “Commission”) the proposed rule change as described in Items, I, II, and III below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons.

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

The Exchange proposes to increase floor, membership and options trading fees as described herein.[3]

The text of the proposed rule change appears below. New text is in italics; deletions are in brackets.

Fee Schedule

I. Floor feesStart Printed Page 66959

TypeAnnual fee
Floor Fees:
(payable monthly)
Floor Clerk$[300.00] 900.00 ($75/month).
Floor Facility—Regular & Options[1,400.00] 2400.00 ($200/month).
Principal
Floor Facility—Limited Trading Permit[700.00] 2400.00 ($200/month).
Floor Wire Privilege[400.00] 800.00 ($66.67/month).
Post Fee per Podium750.00
Specialist Registration Fee[400.00] 800.00 ($66.67/month).
Technology[1,200.00] 3000.00 ($250/month).
No further change.

II. Member Fees

Membership DuesAnnual fee
÷ Associate$[750.00] 1500.00 ($125/month).
÷ Options Principal (OPM)[750.00] 1500.00 ($125/month).
÷ Regular[750.00] 1500.00 ($125/month).
÷ Limited Trading Permit (LTP)[750.00] 1500.00 ($125/month).
No further changes.

III. Options Fees

TypeFirm 2Specialist, market maker (ROTs)Broker/dealerCustomer 3
I. Options Transaction Fee 1 (per contract side)
Equity Options$0.19$[0.17] 0.26$0.19No Charge.
Index Options0.11[0.12] 0.21]0.11$0.10.
II. Options Comparison Fee 1 (per contract side)
Equity Options$0.04$[0.04] 0.05$0.04No Charge.
Index Options0.04[0.04] 0.050.04$0.04.
III. Options Floor Brokerage Fee 1 (per contract side)
Equity Options$0.03$[0.03] 0.05$0.03No Charge.
Index Options0.03[0.03] 0.050.030.03.
IV. Options Marketing Fee 4 (per contract side)
Equity OptionsNo Charge$0.40No ChargeNo Charge.
V Options Licensing Fee (per contract side)
MNX, NDX and QQQNo Charge$0.10No ChargeNo Charge.
OEFNo Charge0.05No ChargeNo Charge.
Notes:
1The increase of $0.09 in transaction fees, of $0.01 in comparison fees, and of $0.02 floor brokerage fees will only be imposed on the first 3,000 contracts executed for the accounts of specialists, registered options traders, and non-member broker dealers as either an accommodation trade (also known as “Cabinet Trades”) or part of the following strategies: (a) reversal and conversions; (b) dividend spreads; and (c) box spreads. A Fee Reimbursement Form must be submitted to the Exchange in order to receive a reimbursement of the fee increases charged on contracts in excess of 3,000.
[There is a cap on the number of options contracts per trade subject to Exchange options charges. Options charges will be imposed on member firm proprietary, specialist, market maker and non-member broker/dealer trades for the first 3,000 contracts. The caps will apply to all three options charge—transaction, comparison, and floor brokerage—and will apply to one day's trades of 100 or more contracts per execution on one side of any series executed by one specialist/trader/broker (for one member firm) and cleared by one clearing firm. The cap will also apply to trades of less than 100 contracts that are multiple per copy contract parties to trades of 100 or more contracts. The same fee schedule and cap provision will apply to LEAPS and FLEX options.]
2 Customer facilitated orders will continue to be charged a transaction fee of $0.07 per contract side.
3 Index Options machine delivered ≤ 30 contracts are not assessed a transaction fee.
4 Excludes options trades between and among Registered Options Traders and Specialists.
Start Printed Page 66960

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

The Exchange proposes to increase the following Exchange Floor fees:

(1) The Technology fee would be increased from $1200 to $3000 annually ($250 per month); (2) the Floor Facility fee would be increased from $1400 to $2400 annually ($200 per month) for Regular and Options Principal Members. This fee would also be increased from $700 to $2400 annually for holders of Limited Trading Permits; (3) the Floor Clerk fee would be increased from $300 to $900 annually ($75 per month); (4) the Specialist Registration fee would be increased from $400 to $800 annually ($66.67 per month); and (5) the Floor Wire Privilege fee would be increased from $400 to $800 annually ($66.67 per month).

A. Member Fees

Membership Dues would be increased from $750 to $1500 annually ($125 monthly) for all Regular Members, Options Principal Members, Associate Members and holders of Limited Trading Permits.

B. License Fees

In recent years, the Exchange has entered into license agreements with providers of indexes to use such indexes for the trading of options. In an effort to recoup some of the costs of these licenses, the Exchange proposes to establish a licensing fee for specialists and registered options traders. The fee, the amount of which may vary from product to product, would be collected on every transaction in the product in which the specialist or registered options trader is a party. Initially, the fees and products would be as follows: Options on the Nasdaq 100 Index Tracking Stock (symbol: QQQ), Nasdaq 100 Index (symbol: NDX) and Mini NDX (symbol: MNX)—$0.10 per contract side, and options on the S&P 100 iShares (symbol: OEF)—$0.05 per contract side.

C. Options Fees

Transaction, Comparison and Floor Brokerage Fees—For all specialists and registered options trader transactions in both equity and index options, the options fees would be increased as follows: (1) The Options Transaction fee per contract side is increased from $0.17 to $0.26 for equity options and from $0.12 to $0.21 for index options; (2) the options comparison fee is increased from $0.04 to $0.05 per contract side; and (3) the floor brokerage fee per contract side is increased from $0.03 to $0.05.

Elimination of Fee Cap—The Exchange states that currently all three types of options fees—transaction, comparison, and floor brokerage—are subject to a cap on the number of options contracts subject to the charges on a given day. The current cap is set at 3,000 contracts.

The Exchange proposes to eliminate the cap on orders executed for the accounts of specialists, registered options traders, and non-member broker dealers. Thus, transaction, comparison, and floor brokerage fees would apply to all option contracts executed for those accounts on a given day. Notwithstanding the foregoing, the Exchange has determined that accommodation trades (also known as “Cabinet Trades”) [4] and trades occurring as part of certain types of strategies would be eligible for the cap on that portion of the transaction, option clearance, and floor brokerage fees that represent the increase in fees established in this filing. Thus, for contracts executed in excess of 3,000 on a given day, the transaction fee increase of $0.09, the options comparison fee increase of $0.01 and the floor brokerage fee increase of $0.02 would be reimbursed as set forth below. Transaction, options comparison, and floor brokerage fees would continue to be charged for only the first 3,000 contracts executed as an accommodation trade or pursuant to one of the following strategies: (1) Reversals and conversion; [5] (2) dividend spreads; [6] and (3) box spreads.[7] The Exchange states that its billing system is unable to distinguish among these types of transactions; therefore, a manual procedure has been developed. Specifically, within thirty calendar days of the particular transaction date, a Fee Reimbursement Form must be completed and submitted to the Exchange. Upon acceptance, the Exchange would delivery to that member's clearing firm a reimbursement check in the amount of the transaction, clearance, and brokerage fee increases (a total of $0.12) charged on contracts in excess of 3,000 executed pursuant to an accommodation trade or one of the strategies described above.

The Exchange states that the Floor and Member Fees would be increased in order to better align the Exchange's fees with the actual cost of delivering the specified services and to reduce Exchange subsidization of such services. The increase in options transactions charges would be necessitated by the large and increasing costs incurred by the Exchange in implementing options trading technology.

(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) [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 issuers and other persons using its facilities.

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.Start Printed Page 66961

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)(ii) of the Act [10] and rule 19b-4(f)(2) [11] thereunder because it establishes or changes a due, fee, or charge imposed by the Exchange. At any time within 60 days of the filing of such 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.

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 Room. Copies of such filing will also be available for inspection and copying at the principal office of the Amex. All submissions should refer to File No. SR-Amex-2001-101 and should be submitted by January 17, 2002.

Start Signature

For the Commission, by the Division of Market Regulation, pursuant to delegated authority.[12]

Margaret H. McFarland,

Deputy Secretary.

End Signature End Preamble

Footnotes

3.  Under Amex-2001-102, the Exchange seeks to impose the floor, membership, options trading, and comparison and floor brokerage fees, as described in this current proposal, as of August 1, 2001. In addition, the Exchange proposes to impose the License Fees and the elimination of the fee cap for options, as described in this proposal, as of October 1, 2001. See Securities Exchange Act Release No. 45165 (December 18, 2001).

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4.  See Annex Rule 959 for a description of an accommodation trade.

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5.  The Exchange defines a “conversion” as a strategy in which a long put and a short call with the same strike price and expiration date are combined with long underlying stock to lock in a nearly riskless profit. A “reversal” is a strategy in which a short put and long call with the same strike price and expiration date are combined with short stock to lock in a nearly riskless profit.

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6.  The Exchange defines a “dividend spread” as any trade done within a defined time frame in which a dividend arbitrage can be achieved between any two deep-in-money options.

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7.  The Exchange defines a “box spread” as a spread strategy that involves a long call and short put at one strike price as well as a short call and long put at another strike price. This is a synthetic long stock position at one strike price and a synthetic short stock position at another strike price.

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10.  15 U.S.C. 78s(b)(3)(A)(ii).

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[FR Doc. 01-31743 Filed 12-26-01; 8:45 am]

BILLING CODE 8010-01-M