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Self-Regulatory Organizations; American Stock Exchange LLC; Order Granting Approval to Proposed Rule Change and Amendment No. 1 Thereto Relating to an Increase in the Exchange Regulatory Fee

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Start Preamble January 8, 2002.

On May 7, 2001, the American Stock Exchange LLC (“Amex” or “Exchange”) filed with 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 amend the Amex Equity Fee Schedule to increase the regulatory fee from .00005 x Total Value to .000075 x Total Value for certain orders in Portfolio Depositary Receipts, Index Fund Shares, and Trust Issued Receipts (collectively, the “Products”) entered electronically into the Amex Order File from off the Floor (“System Orders”) by a member or member organization trading as an agent for the account of a non-member competing market maker.

The proposed rule change was published for comment in the Federal Register on June 18, 2001.[3] The Commission received no comments on the proposal. On December 12, 2001, the Amex filed an amendment to the proposed rule change.[4] In Amendment No. 1, the Amex made a technical amendment to the proposed rule change by further clarifying its purpose for increasing the Exchange's regulatory fee that does not need to be published for comment. In Amendment No. 1, the Exchange states that the regulatory fee increase has been put in place to ensure that the Amex has the appropriate resources to provide the regulatory, operational, and business development function necessary to meet the increasing demands of a complex and competitive marketplace.[5]

The Commission notes that the proposed rule change allows for disparate treatment of competing market makers in that it increases the regulatory fee for System Orders in the Products by a member or member organization trading as an agent for the account of a non-member.[6] However, the Commission notes that under the Amex's current fee schedule, orders in the Products by a member or member organization trading as an agent for the account of a non-member were not entitled to the same treatment as other orders in the fee schedule in that they were not exempt from the regulatory fee. This proposed rule change does not alter this result. Furthermore, the Commission believes that the Intermarket Trading System (“ITS”) will continue to provide an alternative means by which non-member competing market makers can access the Amex. ITS provides an avenue for non-member competing market makers to interact with trading interests on the Amex, fee-free.

For these reasons, the Commission finds that the proposed rule change and Amendment No. 1 are consistent with the requirements of the Act and the rules and regulations thereunder Start Printed Page 2003applicable to a national securities exchange.[7] In particular, the Commission finds that the proposed rule change and Amendment No. 1 are consistent with section 6(b)(4) of the Act [8] in that it provides for the equitable allocation of reasonable dues, fees, and other charges among Exchange members, issuers, and other persons using its facilities.

It is therefore ordered, pursuant to section 19 (b)(2) of the Act [9] , that the proposed rule change (File No. SR-Amex-2001-26) and Amendment No. 1 be, and it hereby is, approved.

Start Signature

For the Commission, by the Division of Market Regulation, pursuant to delegated authority.[10]

Margaret H. McFarland,

Deputy Secretary.

End Signature End Preamble


3.  See Securities Exchange Act Release No. 44410 (June 12, 2001), 66 FR 32852.

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4.  See letter from Michael J. Ryan, Jr., Executive Vice President & General Counsel, Amex, to Katherine England, Assistant Director, Division of Market Regulation, Commission, dated December 11, 2001 (“Amendment No. 1”).

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5.  Specifically, the Amex states that the Exchange continues to make heavy investments in: technologies to support the efficient trading of Exchange Traded Funds (“ETFs”) and HOLDRS on the Exchange; product development to bring new products to market; and the regulation of the EFT and HOLDRs markets. The Exchange believes that non-member competing market markers receive the most benefit from trading ETFs and HOLDRs on the Amex, with associated Amex technological enhancements and regulatory structure. The Exchange believes that the fee increase will support the infrastructure relied upon by the broader marketplace including competitive exchanges and market participants. Id.

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6.  The Commission does not intend this proposal to establish a precedent to permit a primary market to make distinctions in the treatment of orders on its Floor as a means to discriminate unfairly against its competitors.

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7.  In approving this proposed rule change, the Commission notes that it has considered the proposed rule's impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f).

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[FR Doc. 02-943 Filed 1-14-02; 8:45 am]