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Notice

Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change by the American Stock Exchange LLC Reducing to Option Transaction Fees

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Start Preamble June 30, 2003.

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 May 29, 2003, 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 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 establish, on a three month pilot basis, a fee reduction for Exchange specialists and registered options traders (“ROTs”) in connection with equity option and QQQ option transactions where the other side of the trade is a market maker, i.e. specialist, ROT or away market maker. The reduction of these fees will be $0.08 per contract side for equity options and $0.18 per contract side for QQQ options. The text of the proposed rule change is available at the Office of the Secretary, Amex and at the Commission.

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 the Statutory Basis for, the Proposed Rule Change

1. Purpose

The Amex charges fees for transactions in options executed on the Exchange by Exchange specialists and ROTs. Current charges for specialist and ROT transactions in equity options is $0.36 per contract side which includes a $0.26 transaction charge, a $0.05 comparison fee and a $0.05 brokerage fee. In addition, for transactions in QQQ options, the fee for ROTs and specialists amounts to $0.46 per contract side consisting of a $0.26 transaction fee, a $0.10 licensing fee, a $0.05 comparison fee and a $0.05 brokerage fee.[3]

For the purpose of attracting increased options volume to the floor of the Exchange, the Amex believes that certain transaction fees in connection with equity option and QQQ option transactions of specialists and ROTs should be reduced.[4] This proposal Start Printed Page 40727seeks, on a three month pilot basis, to reduce these charges by $0.08 for equity options and $0.18 for QQQ options. In order for a specialist or ROT to qualify for the fee reduction, the option trades must be between market makers,[5] i.e. the other side of the trade must be a specialist, ROT or away market maker.[6] The Exchange believes that a three month pilot program for this fee reduction program is appropriate so that it is able to monitor and evaluate the effectiveness of the fee reduction.

This proposed change is expected to reduce the overall option transaction fee for specialists and ROTs to $0.28 for both equity and QQQ options in connection with market maker to market maker trades. In the case of equity option market maker to market maker trades, the new fee breakdown after the fee reduction will consist of a $0.18 transaction fee, a $0.05 comparison fee and a $0.05 brokerage fee. For QQQ option market maker to market maker trades, the new fee breakdown after the fee reduction will consist of a $0.08 transaction fee, a $0.10 licensing fee, a $0.05 comparison fee and a $0.05 brokerage fee. The Amex believes that the proposed fee reduction of transaction costs for market maker to market maker trades is reasonable and will help to make the Exchange's fees more attractive and competitive with the other options exchanges.

2. Basis

The Exchange believes the proposed rule change is consistent with section 6(b) of the Act,[7] in general, and with section 6(b)(4)[8] in particular, in that it provides for the equitable allocation of reasonable dues, fees, and other charges among its members.

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.

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 proposed rule change has been designated as a fee change pursuant to section 19(b)(3)(A)(ii) of the Act [9] and Rule 19b-4(f)(2)[10] thereunder. 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 the 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 proposal 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-2003-52 and should be submitted by July 29, 2003.

Start Signature

For the Commission by the Division of Market Regulation, pursuant to delegated authority.[11]

Margaret H. McFarland,

Deputy Secretary.

End Signature End Preamble

Footnotes

3.  Customers are not charged a transaction fee, licensing fee, comparison fee, or brokerage fee.

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4.  The Amex believes that reducing these fees should encourage specialists and ROTS to attract additional order flow to the Exchange. Telephone call between Jeffrey P. Burns, Associate General Counsel, Amex, and Sonia Trocchio, Special Counsel, Division of Market Regulation (“Division”), Commission (June 26, 2003).

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5.  Section 3(a)(38) of the Act defines “market maker” as any specialist permitted to act as a dealer, any dealer acting in the capacity of block positioner, and any dealer who, with respect to a security, holds himself out (by entering quotations in an inter-dealer communications system or otherwise) as being willing to buy and sell such security for his own account on a regular or continuous basis.

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6.  An “away market maker” is a member of another national securities exchange registered as a market maker in an options class(es). An “away market maker” is considered to be a “broker-dealer” for purposes of the Exchange's fee schedule. Thus, “away market makers” would pay a $0.19 transaction fee for equity options, including the QQQ options; a $0.04 comparison fee; and a $0.03 floor brokerage fee. Telephone Call between Jeffrey P. Burns, Associate General Counsel, Amex, Kelly Riley, Senior Special Counsel, Division, Commission, and Sonia Trocchio, Special Counsel, Division, Commission (June 16, 2003).

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9.  15 U.S.C. 78s(b)(3)(A)(ii).

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[FR Doc. 03-17144 Filed 7-7-03; 8:45 am]

BILLING CODE 8010-01-P