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Notice

Self-Regulatory Organizations; Notice of Filing and Immediate Effectiveness of Proposed Rule Change by the American Stock Exchange LLC to Cap Monthly Options Transactions Fees Incurred by Specialists and Registered Options Traders (“ROTs”) in any Single Options Class at $72,000, and Implement Market Share Fee Program for Specialists and ROTs in the Top 300 Equity Options

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Start Preamble January 5, 2004.

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 December 1, 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 Exchange. The Amex has designated this proposal as one establishing or changing a due, fee, or other charge imposed by the Amex under Section 19(b)(3)(A)(ii) of the Act,[3] which renders the proposal effective upon filing with the Commission. 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 adopt the following changes to its Options Fee Schedule: (i) A transaction fee cap of $72,000 per month in any single options class, exclusive of the options licensing fee, for specialists and registered options traders (“ROTs”), and (ii) a market share fee program for the top 300 equity options that would reduce transaction fees paid by specialists and ROTs in such classes if a 20% or greater monthly market share is maintained. The text of the proposed rule change is available at the 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 Start Printed Page 2024the 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

Options Fee Cap for Specialists and ROTs

The Exchange is proposing to adopt a transaction fee cap of $72,000 per month in any single options class, exclusive of the options licensing fee, for specialists and ROTs. Specialists and ROTs that have incurred transaction fees, which include the options transaction fee, the options comparison fee, and the options floor brokerage fee, greater than $72,000 per month in any single options class going forward, will now be billed at the capped fee of $72,000.

The Exchange believes that specialists and ROTs who bring in substantial order flow to the Exchange should be rewarded through the proposed fee reduction. As proposed, specialists and ROTs in any single option class will be required to trade 200,000 contracts for equity options and 232,258 contracts in index options to reach the cap (based on the current rate of $0.36 per contract side). However, the number of contracts required to reach the fee cap in the top 300 equity options may increase as a result of the market share fee program described below. Although the Exchange submits that only a small number of firms will reach these limits, the proposal is intended to provide additional incentives to firms to continue to attract order flow.

Market Share Fee Program

The Exchange is proposing to adopt a market share fee program for the top 300 equity options (“Program”). The Program will commence on December 1, 2003. The Program is designed to provide incentives to specialists and ROTs to maintain and increase the Exchange's market share of total national volume in the top 300 equity option classes.

The Amex believes the Program will provide incentives to maintain highly competitive quotes by reducing the applicable options transaction fees as long as the specialist or ROT maintains a 20% market share on a monthly basis.

Specialists and ROTs in the top 300 equity option classes who maintain an Amex market share of at least 20% in those classes in a particular month will receive a lower options transaction fee for their transactions in those classes during that month. The revised options transaction fee will be as follows:

Options transaction feeMarket share break point
$0.260% to 19.99%
0.2420% to 24.99%
0.2125% and greater

Because clearing firms for specialists and ROTs are unable to immediately calculate the effective transaction fee based upon the relevant market share, the Exchange will implement a manual procedure. Specifically, at the end of each month, the Exchange will calculate the market share of each option class and then send the appropriate credit amount through to each clearing firm for the account of the specialist or ROT. The credit amount is the amount such specialist or ROT overpaid for those option transactions that are subject to the lower fee.[4] For example, specialists/ROTs that maintain a market share of 20-24.99% in a top 300 equity options class will receive a $.02 per contract credit amount while those specialists/ROTs that maintain a market share of 25% or greater in a top 300 equity options class will receive a $.05 per contract credit amount. All specialists and ROTs will be provided with reports showing the total credit they received along with all details supporting the Exchange's calculations on or about the fifteenth (15) business day of the subsequent month.

The program is intended to provide positive incentives for specialists/ROTs to increase or maintain their market shares by continuing to provide highly competitive quotes. The Exchange further believes that those specialists and ROTs that provide substantial order flow to the Exchange should be rewarded through the proposed fee reduction.

2. Statutory Basis

The Exchange believes the proposal is consistent with Section 6(b) of the Act,[5] in general, and Section 6(b)(4) of the Act,[6] in particular, in that it provides for the equitable allocation of reasonable dues, fees, and other charges among exchange members and other persons using exchange facilities.

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

The Exchange does not believe 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 become effective pursuant to Section 19(b)(3)(A)(ii) of the Act [7] and subparagraph (f)(2) of Rule 19b-4[8] thereunder, because it establishes or changes a due, fee, or other 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 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. Comments may also be submitted electronically at the following e-mail address: rule-comments@sec.gov. All comment letters should refer to File No. SR-Amex-2003-104. This file number should be included on the subject line if e-mail is used. To help the Commission process and review your comments more efficiently, comments should be sent in hardcopy or by e-mail but not by both methods. 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 Start Printed Page 2025those 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-2003-104 and should be submitted by February 3, 2004.

Start Signature

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

Jill M. Peterson,

Assistant Secretary.

End Signature End Preamble

Footnotes

3.  15 U.S.C. 78s(b)(3)(A)(ii).

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4.  The current transaction fee applicable to specialists/ROTs is $0.36 per contract side for equity options.

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7.  15 U.S.C. 78s(b)(3)(A)(ii).

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[FR Doc. 04-615 Filed 1-12-04; 8:45 am]

BILLING CODE 8010-01-P