Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) and Rule 196-4 thereunder, notice is hereby given that on June 30, 2000, 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.
17 CFR 240.19b-4.
I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change
The Exchange is proposing (i) to create an options principal membership seat upgrade program and (ii) to amend Article IV, Sections 1 (a)(1) and (b)(1) of the Exchange Constitution to increase the number of authorized regular memberships to accommodate the program. Below is the test of the proposed rule change. Proposed new language is in italics; proposed deletions are in brackets.
American Stock Exchange Constitution—Article IV
Admission to Membership
Number of Regular Memberships
SEC. 1(a)(1) Regular membership—There shall be up to 864 [661] regular memberships in the Exchange[.], inclusive of any regular memberships created through the options principal membership upgrade program. The number of regular memberships shall be increased only if the Board of Governors requests The Amex Corporation to issue additional regular memberships. Any such issuance of additional regular memberships shall require the approval of a majority of the regular and options principal members voting together as a single class at a meeting called for the purpose of considering the request that new regular memberships be issued.
(2)-(3) No change.
Number of Options Principal Memberships
(b)(1) Options principal membership—There shall be 203 options principal memberships in the Exchange[.], but this number shall be reduced by the number of options principal memberships upgraded to regular memberships. The number of options principal memberships shall be increased only if the Board of Governors requests The Amex Corporation to issue additional options principal memberships. Any such issuance of additional options principal memberships shall require the approval of a majority of the regular and options principal members voting together as a single class at a meeting called for the purpose of considering the request that additional options principal memberships be issued.
(2)-(5) No change.
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 Statutory Basis for, the Proposed Rule Change
1. Purpose
The recent increase in the number of securities listed on the Exchange, especially options and Exchange-traded funds, has led to a greater demand for specialists and brokers to handle the increased volume. Specialists and brokers are required to be regular members of the Exchange. Exchange members requested that the Exchange explore the feasibility of a voluntary Options Principal Membership (“OPM”) Seat Upgrade Program (“Program”), with the potential for upgrading 203 options principal memberships into regular memberships. In response to that request, the Exchange proposed the Program as one approach to creating additional regular memberships. The effective date of the Program will be determined by the Exchange once it is approved by the Commission.
The one-time fee to upgrade an OPM membership to a regular membership under the proposed Program will be $30,000 or $36,000, depending on whether the OPM owner elects to participate in the Program within 120 days of the effective date of the Program.
OPM owners that elect to upgrade to a regular membership within 240 days would be entitled to pay on a monthly basis for 12 months. After 240 days from Program effectiveness, an OPM owner would be required to pay a lump sum payment of $36,000 at the time of election. New applications for the Program would not be accepted after 18 months from the Program's effective date. At the end of the 18 month period, the Program would terminate unless the Exchange elects to continue it. Fund proceeds, less administrative costs to the Exchange, would be distributed equally to regular seat owners of record at the time of distribution (excluding regular seat owners who upgraded their OPM seats). The final distribution would occur no later than the end of the 21st month from the Program's effective date, because fund proceeds could be payable through the 20th month from the effective date of the Program.
At that time, the Exchange could consider changing the terms of the Program, including raising the cost of upgrading an OPM seat. The Commission notes and the Exchange acknowledges that it would be required to file a proposed rule change with the Commission pursuant to Section 19(b) of the Act if it decides to extend or make any changes to the Program. Telephone call between Ivonne Lugo, Assistant General Counsel, Amex, and Sonia Patton, Attorney, Division of Market Regulation (“Division”), Commission, on July 13, 2000.
Within 21 months of the Program's effective date, the Exchange would distribute the proceeds received from OPM owners that elected to upgrade to regular memberships within 18 months, regardless of whether it decides to continue the Program. Telephone call between Ivonne Lugo, Assistant General Counsel, Amex, and Sonia Patton, Attorney, Division, Commission, on July 13, 2000.
For instance, an OPM owner that elects to participate in the Program on the 240th day would be entitled to make monthly payments for 12 months and would pay the last monthly installment the 20th month from the effective date of the Program.
All payments made to the Exchange by OPMs under the Program would be deposited into a fund created and managed by the Exchange for the purpose of collecting proceeds for subsequent distribution to regular members (excluding regular seat owners who updated their OPM seats) as described above. Interest on fund deposits would accrue to the regular members. Participants that elect to upgrade to a regular membership within 240 days would be billed by the Exchange on a monthly basis and would be subject to Exchange policy on billing matters. Program participants who are delinquent in their installment payments by more than sixty days would forfeit all payments made to date and their seats would revert to OPM status.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent with the provisions of paragraphs (b) and (c) Section 6 of the Act, in general, and furthers the objectives of Section 6(c)(4), in particular, in that it is designed to increase or to remove any limitation on the number of memberships in the Exchange or the number of members or designated representatives of members permitted to effect transactions on the floor of the Exchange.
15 U.S.C. 78f(b) and (c).
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will result in any burden on competition that is 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
The Exchange did not solicit or receive written comments on the proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action
Within 35 days of the date of publication of this notice in the Federal Register or within such longer period (i) as the Commission may designate up to 90 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the Exchange consents, the Commission will:
(A) By order approve such proposed rule change, or
(B) Institute proceedings to determine whether the proposed rule change should be disapproved.
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, N.W., Washington, D.C. 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 the filing will also be available for inspection and copying in the Commission's Public Reference Room. Copies of the filing will also be available for inspection and copying at the principal office of the Amex. All submissions should refer to the File No. SR-Amex-00-36 and should be submitted by August 28, 2000.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-19910 Filed 8-4-00; 8:45 am]
BILLING CODE 8010-01-M