[Federal Register: December 29, 2005 (Volume 70, Number 249)]
[Notices]
[Page 77204-77207]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr29de05-100]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-52994; File No. SR-Amex-2005-122]
Self-Regulatory Organizations; American Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change
and Amendment Nos. 1 and 2 Thereto Relating to Exchange Traded Fund
Transaction Charges
December 21, 2005.
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 November 29, 2005, 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. On
December 14, 2005, the Amex submitted Amendment No. 1 to the proposed
rule change. On December 21, 2005, the Amex submitted Amendment No. 2
to the proposed rule change. The Amex has designated this proposal, as
amended, as one changing a fee imposed by the Amex under section
19(b)(3)(A)(ii) of the Act \3\ and Rule 19b-4(f)(2) thereunder,\4\
which renders the proposal effective upon filing with the
[[Page 77205]]
Commission. The Commission is publishing this notice to solicit
comments on the proposed rule change, as amended, from interested
persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A)(ii).
\4\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Amex proposes to revise a variety of transaction fees that
Exchange members are charged for executions on the Exchange in
connection with transactions in exchange traded fund shares (``ETFs'')
and trust issued receipts (``TIRs'') (collectively, ``Exchange Traded
Funds''). The text of the proposed rule change, as amended, is
available on the Amex's Web site (http://www.amex.com), at the Amex's
Office of the Secretary, and at the Commission's Public Reference Room.
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, as
amended, 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
The Amex proposes to revise its Equity Fee Schedule and its
Exchange Traded Funds and Trust Issued Receipts Fee Schedule (the
``ETF/TIR Fee Schedule'') to revise the transaction fees applicable to
Exchange members in connection with Exchange Traded Funds. The Amex
states that these fee changes will be assessed on Exchange members
commencing December 1, 2005.
For the purpose of clarity, the Exchange proposes to eliminate in
the Equity Fee Schedule references to Exchange Traded Funds, as
applicable. Those sections of the Equity Fee Schedule that relate
solely to Exchange Traded Funds will be deleted and, if necessary,
added to the ETF/TIR Fee Schedule. In this manner, equities and
Exchange Traded Funds will now have separate and distinct fee
schedules.
The Exchange proposes the following changes to the ETF/TIR Fee
Schedule: (i) adoption of transaction charges for all market
participants of $0.34 per 100 shares per trade for all Exchange Traded
Funds (except the SPDR O-Strip); (ii) adoption of transaction charges
for all market participants of $0.50 per 100 shares per trade in
connection with the SPDR O-Strip; (iii) elimination of customer
transaction charge fee waivers for the ETFs listed in Note 2 to the
Equity Fee Schedule and Note 3 of the ETF/TIR Fee Schedule; (iv)
elimination of the fee suspensions for specialists, registered traders
and broker-dealers in connection with iShares Lehman 1-3 Year Treasury
Bond Fund (``SHY''), iShares Lehman 7-10 Year Treasury Bond Fund
(``IEF''), iShares Lehman 20+ Year Treasury Bond Fund (``TLT'') and
iShares Goldman Sachs InvestTop Corporate Bond Fund (``LQD''); (v)
elimination of the transaction fee waivers in connection with ETFs that
are executed as part of an exchange-for-physical transaction (``EFP'');
(vi) addition of the ``Order Cancellation Fee'' previously set forth
only in the Equity Fee Schedule; (vii) reduction of the current
exemption for transaction charges for electronic orders from up to
5,099 shares to up to 2,400 shares; and (viii) renaming of the
``Regulatory Fee'' as the ``Value Based Fee.''
The Amex currently charges members transaction fees on a per trade
basis for Exchange Traded Funds transactions executed on the Exchange.
The current transaction charges are shown in the table below.
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Specialists Registered traders Customer/broker-dealer (off-floor)
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I. Transaction Charges for ETFs Without Unreimbursed Fees to a Third Party
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Per Share Side....................... $0.0033 ($0.33 per 100 $0.0036 ($.36 per 100 $0.0060 ($.60 per 100 shares)
shares). shares).
Subject to the following per trade $300 (90,909 shares)........ $300 (83,333 shares)........ $100 (16,667 shares).
maximums.
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II. Transaction Charges for ETFs for which the Exchange Pays Unreimbursed Fees to a Third Party
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Per Share Side....................... $0.0037 ($0.37 per 100 $0.0038 ($0.50 per 100 $0.0060 ($.60 per 100 shares)
shares). shares).
Subject to the following per trade $300 (81,081 shares)........ $300 (78,947 shares)........ $100 (16,667 shares).
maximums.
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III. Transaction Charges for SPDR O-Strip
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Per Share Side....................... $0.0050 ($0.50 per 100 $0.0050 ($0.50 per 100 $0.0060
shares. shares).
Subject to the following per trade $300 (60,000 shares)........ $300 (60,000 shares)........ $100 (16,667 shares).
maximums.
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IV. Transaction Charges for iShares FTSE/Xinhua China 25 Index Fund
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Per Share Side....................... $0.0039 ($0.39 per 100 $0.0042 ($0.42 per 100 $0.0060
shares). shares).
Subject to the following per trade $300 (76,923 shares)........ $300 (71,428 shares)........ $100 (16,667 shares).
maximums.
The proposed revision to the per trade transaction charge in connection with Exchange Traded Funds executed on the Exchange are set forth below.
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I. Transaction Charges for ETFs/TIRs (except the SPDR O-Strip)
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Per Share Side....................... $0.0034 ($0.34 per 100 $0.0034 ($.34 per 100 $0.0034 ($.34 per 100 shares)
shares). shares).
Subject to the following per trade $300 (88,235 shares)........ $300 (88,235 shares)........ $100 (29,411 shares).
maximums.
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[[Page 77206]]
II. Transaction Charges for SPDR O-Strip
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Per Share Side....................... $0.0050 ($0.50 per 100 $0.0050 ($.50 per 100 $0.0050 ($.50 per 100 shares)
shares). shares).
Subject to the following per trade $300 (60,000 shares)........ $300 (60,000 shares)........ $100 (20,000 shares).
maximums.
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The Exchange is proposing to clarify and simplify transaction
charges applicable to Exchange Traded Funds that affect members and
market participants. In particular, the Exchange believes that the
proposal will attract additional order flow as a result of the
reduction in the per share rate charge, especially in connection with
customer and broker-dealer orders. Currently, the per share rate charge
for customers and broker-dealer orders is $0.0060, or $0.60 per 100
shares. The proposal will significantly reduce this charge by $0.0026
per share to $0.0034 per share, or $0.34 per 100 shares. The Exchange
believes that order flow providers will find this transaction fee
reduction attractive.
The Exchange is proposing to adopt a uniform Exchange Traded Fund
transaction fee that is attractive to market participants and easier to
calculate and administer. As stated above, the proposed transaction fee
applicable to Exchange Traded Funds (except the SPDR O-Strip) will be
$0.0034 per share, or $0.34 per 100 shares, subject to the existing fee
cap per trade. The current transaction charge per trade is capped at
$300 for specialists and registered traders and $100 for broker-dealers
and customers. In connection with the SPDR O-Strip, the Exchange states
that it proposes to levy a higher transaction charge due to a more
expensive license agreement than is typically found in other ETFs.
Specifically, the proposed transaction fee applicable to the SPDR O-
Strip will be $0.0050 per share, or $0.50 per 100 shares, subject to
the existing fee cap per trade. The current transaction charge per
trade is capped at $300 for specialists and registered traders and $100
for broker-dealers and customers. In addition, specialist transaction
charges will continue to be capped at $400,000 per month per specialist
unit.
For clarity and ease of administration, the Exchange believes that
the elimination of various transaction fee waivers is warranted. As a
result, customer transaction charge fee waivers for the ETFs listed in
Note 2 of the Equity Fee Schedule and Note 3 of the ETF/TIR Fee
Schedule; fee suspensions for specialists, registered traders, and
broker-dealers in connection with SHY, IEF, TLT, and LQD; and
transaction fee waivers in connection with ETFs that are executed as
part of an EFP will be terminated in connection with this proposal. The
existing specialist fee waiver in connection with QQQQ trades will
continue to apply and will expire as expected on December 31, 2005.\5\
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\5\ See Securities Exchange Act Release No. 52736 (November 4,
2005), 70 FR 69171 (November 14, 2005).
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The ``Order Cancellation Fee'' applicable to Exchange Traded Funds
is currently set forth in the Equity Fee Schedule.\6\ In order to
provide a ``stand alone'' fee schedule for Exchange Traded Funds, the
``Order Cancellation Fee'' section in the Equity Fee Schedule will also
be set forth in the ETF/TIR Fee Schedule.
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\6\ See Securities Exchange Act Release No. 52533 (September 29,
2005), 70 FR 58496 (October 6, 2005) (SR-Amex-2005-085).
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The Exchange further proposes that orders entered electronically
into the Amex Order File from off the Floor (``System Orders'') for up
to 2,400 shares in Exchange Traded Funds will not be assessed a
transaction charge. The current ETF/TIR Fee Schedule provides that up
to 5,099 shares in Exchange Traded Funds are not assessed a transaction
charge. As is the case in the existing Fee Schedule, this provision
does not apply to System Orders of a member or member organization
trading as an agent for the account of a non-member competing market
maker.\7\ Therefore, this limited fee exemption is not available to
non-member competing market makers.\8\ The Amex states that this
limited fee exemption was originally intended to attract ``smaller
orders'' to the Exchange. However, as the size of orders that are
deemed ``small'' continues to decrease, the Exchange believes that the
proposed modification to the transaction fee exemption will reflect
this reality. In addition, the Exchange submits that reducing the fee
exemption for System Orders from 5,099 shares to 2,400 shares should
help generate additional revenue to fund Exchange operations.
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\7\ The Amex states that a ``competing market maker'' is defined
as a specialist or market maker registered as such on a registered
stock exchange (other than the Amex), or a market maker bidding and
offering over-the-counter, in an Amex-traded security.
\8\ The Exchange states that it intends to revise its rules to
conform to Rule 610 of Regulation NMS prior to the compliance date
of such rule.
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The Exchange has also proposed to change the name of the
``Regulatory Fee'' to ``Value Based Fee.'' \9\ As with the current
``Regulatory Fee,'' the Amex states that the ``Value Based Fee'' will
only be applied to System Orders entered by a member or member
organization trading as agent for the account of a non-member competing
market maker.\10\ The rate of the fee (.000075) also will not change.
The Exchange submits that changing the name of the ``Regulatory Fee''
to ``Value Based Fee'' better reflects the intent and type of this fee.
The System Orders of all other market participants will continue to not
be subject to this Value Based Fee. The Exchange states that the
proposed language set forth under the ``Value Based Fee'' Section is
identical in operation and meaning to the existing text of the
``Regulatory Fee.'' Accordingly, the Exchange states that the operation
of the ``Value Based Fee'' will be applied identically to the current
``Regulatory Fee'' in the ETF/TIR Fee Schedule.
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\9\ The Exchange submits that its regulatory obligations are
funded by numerous sources.
\10\ The Exchange states that it intends to revise its rules to
conform to Rule 610 of Regulation NMS prior to the compliance date
of such rule.
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The Exchange believes that the proposed revision to Exchange Traded
Funds transaction fees will benefit the Exchange by providing greater
incentive for market participants to send order flow to the Amex. In
addition, the revision also clarifies the transaction fees that market
participants will be charged for transactions in Exchange Traded Funds
due to the elimination of various fee waivers that are currently part
of the ETF/TIR Fee Schedule.
The Exchange submits that this proposal to revise Exchange Traded
Funds transaction fees applicable to Exchange members is consistent
with section 6(b)(4) of the Act.\11\ The Exchange believes that the
proposal provides for an equitable allocation of reasonable fees among
Exchange members largely through the adoption of a uniform transaction
fee for Exchange Traded Funds and the elimination of various fee
waivers. In addition, the Exchange expects the
[[Page 77207]]
proposal to attract additional order flow largely due to the
simplification and reduction of per share fee rates, especially in
connection with customer and broker-dealer orders. Therefore, the
Exchange maintains that the proposed Exchange Traded Funds transaction
fee changes, in the aggregate, are an equitable allocation of
reasonable fees among Exchange members.
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\11\ 15 U.S.C. 78f(b)(4).
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2. Statutory Basis
The Exchange believes that the proposed rule change, as amended, is
consistent with section 6(b) of the Act,\12\ in general, and furthers
the objectives of section 6(b)(4) of the Act,\13\ in particular, in
that it is intended to assure the equitable allocation of reasonable
dues, fees, and other charges among its members and issuers and other
persons using its facilities.
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\12\ 15 U.S.C. 78f(b).
\13\ 15 U.S.C. 78f(b)(4).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change, as
amended, will impose any inappropriate burden on competition 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
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing proposed rule change, as amended, has been designated
as a fee change pursuant to section 19(b)(3)(A)(ii) of the Act \14\ and
Rule 19b-4(f)(2) \15\ thereunder, because it establishes or changes a
due, fee, or other charge imposed by the Exchange. Accordingly, the
proposal, as amended, will take effect upon filing with the Commission.
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.\16\
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\14\ 15 U.S.C. 78s(b)(3)(A)(ii).
\15\ 17 CFR 240.19b-4(f)(2).
\16\ The effective date of the original proposed rule change is
November 29, 2005, the effective date of Amendment No. 1 is December
14, 2005, and the effective date of Amendment No. 2 is December 21,
2005. For purposes of calculating the 60-day period within which the
Commission may summarily abrogate the proposed rule change, as
amended, under Section 19(b)(3)(C) of the Act, the Commission
considers the period to commence on December 21, 2005, the date on
which the Exchange submitted Amendment No. 2. See 15 U.S.C.
78s(b)(3)(C).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change, as amended, is consistent with the Act. Comments may be
submitted by any of the following methods:
Electronic Comments
Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml.
); or Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-Amex-2005-122 on the subject line.
Paper Comments
Send paper comments in triplicate to Jonathan G. Katz,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-9303.
All submissions should refer to File Number SR-Amex-2005-122. 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,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml
). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change, as
amended, 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 also will be available for
inspection and copying at the principal office of the Amex. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-Amex-2005-122 and should be
submitted on or before January 19, 2006.
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\17\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\17\
Jonathan G. Katz,
Secretary.
[FR Doc. E5-8059 Filed 12-28-05; 8:45 am]
BILLING CODE 8010-01-P