Self-Regulatory Organizations; American Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change and Amendment Nos. 1 and 2 Thereto Relating to Specialists' Transactions With Public Customers, 15775-15778 [E6-4537]
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Federal Register / Vol. 71, No. 60 / Wednesday, March 29, 2006 / Notices
2. In determining whether to approve
a joint transaction under rule 17d–1
under the Act, the Commission will
consider whether the participation by
the investment company in the joint
transaction or arrangement is consistent
with the provisions, policies, and
purposes of the Act, and the extent to
which the participation is on a basis
different from or less advantageous than
that of other participants. Applicants
submit that the investment by the
Investing Funds in shares of the Cash
Management Funds will be on the same
basis and will be indistinguishable from
any other shareholder account
maintained by the same class of the
Cash Management Funds, and the
proposed transactions satisfy the
standards of rule 17d–1 under the Act.
hsrobinson on PROD1PC68 with NOTICES
Applicants’ Conditions
Applicants agree that the order
granting the requested relief shall be
subject to the following conditions:
1. Shares of the Cash Management
Funds sold to and redeemed by the
Investing Funds will not be subject to a
sales load, redemption fee, distribution
fee under a plan adopted in accordance
with rule 12b–1 under the Act, or
service fee (as defined in rule 2830(b)(9)
of the NASD Conduct Rules), or if such
shares are subject to any such fee, the
Adviser will waive its advisory fee for
each Investing Fund in an amount that
offsets the amount of such fees incurred
by the Investing Fund.
2. Before the next meeting of the
Board of an Investing Funds held for
purposes of voting on an advisory
contract under Section 15 the Act, the
Adviser to the Investing Fund will
provide the Board with specific
information regarding the approximate
cost to the Adviser of, or portion of the
advisory fee under the existing advisory
contract attributable to, managing the
Uninvested Cash of the Investing Fund
that can be expected to be invested in
the Cash Management Funds. Before
approving any advisory contract for an
Investing Fund, the Board of the
Investing Fund, including a majority of
the Independent Trustees/Directors,
shall consider to what extent, if any, the
advisory fees charged to the Investing
Fund by the Adviser should be reduced
to account for reduced or duplicative
services provided to the Investing Fund
by the Adviser as a result of Uninvested
Cash being invested in the Cash
Management Funds. The minutes of the
meeting of the Investing Fund will
record fully the Board’s considerations
in approving the advisory contract,
including the considerations relating to
fees referred to above.
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3. Each of the Investing Funds will
invest Uninvested Cash in, and hold
shares of, the Cash Management Funds
only to the extent that the Investing
Fund’s aggregate investment of
Uninvested Cash in the Cash
Management Funds does not exceed
25% of the Investing Fund’s total assets.
4. Investment of Cash Balances in
shares of the Cash Management Funds
will be in accordance with each
Investing Fund’s respective investment
restrictions, if any, and will be
consistent with each Investing Fund’s
policies as set forth in its prospectus
and statement of additional information.
5. No Cash Management Fund shall
acquire securities of any investment
company or company relying on section
3(c)(1) or 3(c)(7) of the Act in excess of
the limits contained in section
12(d)(1)(A) of the Act.
6. Each Investing Fund and Cash
Management Fund that may rely on the
requested order shall be advised by the
Adviser.
7. Before an Investing Fund may
participate in a Securities Lending
Program, a majority of the Fund’s Board,
including a majority of the Independent
Trustees/Directors, will approve the
Fund’s participation in the Securities
Lending Program. The Board will
evaluate the Securities Lending Program
and its results no less frequently than
annually and determine that any
investment of Cash Collateral in the
Cash Management Funds is in the best
interests of the shareholders of the
Investing Fund.
8. The Board of any Investing Fund
will satisfy the fund governance
standards as defined in rule 0–1(a)(7)
under the Act by the compliance date
for the rule.
For the Commission, by the Division of
Investment Management, under delegated
authority.
Nancy M. Morris,
Secretary,
[FR Doc. E6–4518 Filed 3–28–06; 8:45 am]
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15775
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–53540; File No. SR–Amex–
2006–14]
Self-Regulatory Organizations;
American Stock Exchange LLC; Notice
of Filing and Immediate Effectiveness
of Proposed Rule Change and
Amendment Nos. 1 and 2 Thereto
Relating to Specialists’ Transactions
With Public Customers
March 22, 2006.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on February
7, 2006, 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 and II below, which Items have
been prepared by Amex. On March 16,
2006, the Exchange filed Amendment
No. 1 to the proposed rule change.3 On
March 17, 2006, the Exchange filed
Amendment No. 2 to the proposed rule
change.4 The Exchange filed the
proposal as a ‘‘non-controversial’’
proposed rule change pursuant to
Section 19(b)(3)(A)(iii) of the Act 5 and
Rule 19b–4(f)(6) thereunder.6 The
Commission is publishing this notice to
solicit comments on the proposed rule
change, as amended, from interested
persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
Amex Rule 190 and Section 910 of the
Amex Company Guide to permit
business transactions between a
specialist or his member organization,
or any member, officer, employee or
approved person therein and the
sponsor of any exchange traded fund
(‘‘ETF’’) in which the specialist is
registered. The text of the proposed rule
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 In Amendment No. 1, the Exchange revised
proposed Amex Rule 190, Commentary .07 (iv), to
require that a specialist represent to the Amex that
neither the specialist nor his affiliates are making
a market in any of the underlying component
securities, currencies, or commodities of any ETF
issued by the sponsor with which the specialist has
entered into a business transaction.
4 In Amendment No. 2, the Exchange made
further changes to proposed Amex Rule 190,
Commentary .07 (iv), to apply the requirement
therein to transactions entered into by either
specialist or his member organization or any
member, officer, employee or approved person
therein.
5 15 U.S.C. 78s(b)(3)(A)(iii).
6 17 CFR 240.19b–4(f)(6).
2 17
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Federal Register / Vol. 71, No. 60 / Wednesday, March 29, 2006 / Notices
change, as amended, is attached hereto
as Exhibit A and is also available on the
Amex Web site https://www.amex.com,
at the principal office of Amex, 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
Exchange included statements
concerning the purpose of, and basis for,
the proposed rule change, as amended,
and discussed any comments it received
on the proposal. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange 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
hsrobinson on PROD1PC68 with NOTICES
1. Purpose
Amex Rule 190 (Specialist’s
Transactions with Public Customers)
and Section 910 (Relationship with
Specialists) of the Amex Company
Guide generally restrict business
transactions between a specialist or his
member organization, or any member,
officer, employee or approved person
therein (collectively, ‘‘affiliates’’) and
any company or any officer, director, or
10% stockholder of a company in whose
stock the specialist is registered. The
restriction is intended to ensure that a
specialist or his affiliates do not enter
into a material business relationship
with a company in whose security the
specialist is registered, such that the
specialist’s or his affiliates’ status
creates conflicts of interest with respect
to the specialist’s affirmative and
negative obligations to maintain a fair
and orderly market in the security.
Currently, Amex Rule 193 provides
exemptions from Amex Rule 190(a) and
(b) to an approved person or member
organization that is affiliated with a
specialist member organization with
respect to business transactions with
issuers. This is due to the fact that the
functional separation required by Amex
Rule 193 eliminates conflict of interest
concerns. The Exchange proposes to add
an exemption to Amex Rule 190 and
Section 910 of the Amex Company
Guide that would apply to business
transactions between a specialist or his
affiliates and the sponsor of any ETF in
which the specialist is registered. The
Commission previously approved a
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similar rule filing by the New York
Stock Exchange, Inc. (‘‘NYSE’’).7
For the purposes of the proposed rule
change, ETFs are Portfolio Depositary
Receipts (as defined in Rule 1000),
Index Fund Shares (as defined in Rule
1000A), Trust Issued Receipts (as
defined in Rule 1200) and derivative
instruments based on one or more
securities, currencies or commodities.
The Exchange believes that potential
conflicts of interest will be reduced due
to the nature of how ETFs are traded.
Since the trading price of an ETF is
generally based on the price(s) of one or
more security, commodity, currency or
related futures contract (collectively,
‘‘underlying assets’’), the Exchange
believes that the potential for conflicts
of interest that might have an undue
influence or impact on the trading price
of an ETF will be minimal. The
Exchange also believes that conflict of
interest or undue influence concerns
will be further minimized by the fact
that the underlying assets of an ETF are
typically traded on a different exchange
or market than Amex or in a different
location within Amex.
The Exchange also believes that the
potential for conflicts of interest that
might arise between a specialist or his
affiliates and a sponsor of an ETF will
be negligible because the
responsibilities of a sponsor of an ETF
are limited to establishing the trust that
issues ETF shares, registering the ETF
shares with the SEC, and filing required
periodic reports. Thus, while the ETF
sponsor generally oversees the
performance of the trustee of the ETF
and the trust’s principal service
providers, the trustee is responsible for
the day-to-day administration of the
trust.
The proposed rule change would
provide that in order to take advantage
of the exemption the following
conditions must be met: (i) The business
transaction may only be entered into
with the sponsor of the ETF and the
sponsor may not be involved in the dayto-day administration of the ETF; (ii)
any fee or other compensation paid in
connection with the business
transaction to a specialist or his
affiliates must not have any relationship
to the trading price or daily trading
volume of the ETF; (iii) the specialist or
his affiliate must notify and provide a
full description to the Exchange of any
business transaction or relationship it
may have with any sponsor of an ETF
in which the specialist or any of its
affiliates is registered; and (iv) the
7 See Securities Exchange Act Release No. 52838
(November 28, 2005); 70 FR 72320 (December 2,
2005) (SR–NYSE–2005–66).
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specialist or his affiliate must make a
representation to the Exchange
indicating that the neither the specialist
nor his affiliates are making a market in
any of the underlying component
securities, currencies or commodities of
any ETF issued by the sponsor with
which such specialist or affiliate has
entered into a business transaction.
The Exchange believes that the abovelisted conditions will serve as an
additional layer of protection against
conflicts of interest by diminishing any
potential ability for a specialist or his
affiliates to unduly influence trading for
their own benefit and any incentive for
such specialist to compromise his
specialist obligations in maintaining fair
and orderly markets. The Exchange also
believes that such conditions will help
to ensure that the ETF sponsor does not
unduly influence its specialist or his
affiliates.
2. Statutory Basis
The Exchange believes that the
proposed rule change, as amended, is
consistent with Section 6(b) of the Act,8
in general, and furthers the objectives of
Section 6(b)(5) of the Act,9 in particular,
in that it is designed to promote just and
equitable principles of trade, to foster
cooperation and coordination with
persons engaged in regulating, clearing,
settling, processing information with
respect to, and facilitating transactions
in securities, to remove impediments to
and perfect the mechanism of a free and
open market and a national market
system, and, in general, to protect
investors and the public interest.
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 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 any written comments with
respect to the proposed rule change, as
amended.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change, as
amended, has become effective pursuant
to Section 19(b)(3)(A) of the Act 10 and
8 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
10 15 U.S.C. 78s(b)(3)(A).
9 15
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Federal Register / Vol. 71, No. 60 / Wednesday, March 29, 2006 / Notices
Rule 19b–4(f)(6) thereunder 11 in that
the proposed rule change (i) does not
significantly affect the protection of
investors or the public interest; (ii) does
not impose any significant burden on
competition; and (iii) by its terms, does
not become operative for 30 days after
the date of the filing, or such shorter
time as the Commission may designate
if consistent with the protection of
investors and the public interest.
The Exchange has requested that the
Commission waive the five-day prefiling notice requirement and the 30-day
operative delay period for ‘‘noncontroversial’’ proposals and make the
proposed rule change, as amended,
effective and operative upon filing. The
Commission has determined to waive
the five-day pre-filing notice
requirement and the 30-day operative
delay period.12 The Commission notes
that the proposed rule change imposes
conditions for specialist transactions
with sponsors of ETFs that are
substantially identical to those
contained in NYSE Rule 460,
Commentary .25 and NYSE Rule
103B.VIII.
Therefore, the foregoing rule change,
as amended, has become immediately
effective and operative upon filing
pursuant to Section 19(b)(3)(A)(iii) of
the Act 13 and Rule 19b–4(f)(6)
thereunder.14 At any time within 60
days of the filing of the 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.15
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
11 17
CFR 240.19b–4(f)(6).
purposes only of accelerating the operative
date of this proposal, the Commission has
considered the proposed rule’s impact on
efficiency, competition, and capital formation. 15
U.S.C. 78c(f).
13 15 U.S.C. 78s(b)(3)(A)(iii).
14 17 CFR 240.19b–4(f)(6).
15 The effective date of the original proposed rule
change is February 7, 2006, the date of the original
filing, and the effective dates of Amendment Nos.
1 and 2 are, respectively, March 16, 2006 and
March 17, 2006, the filing dates of the amendments.
For purposes of calculating the 60-day abrogation
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
March 17, 2006, the date on which the Exchange
submitted Amendment No. 2. See 15 U.S.C.
78s(b)(3)(C).
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12 For
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the Act. Comments may be submitted by
any of the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–Amex–2006–14 on the
subject line.
15777
For the Commission by the Division of
Market Regulation, pursuant to delegated
authority.16
Nancy M. Morris,
Secretary.
Exhibit A—American Stock Exchange
LLC
Proposed Rule Change
Italicized text indicates material to be
added. [Bracketed] text indicates
material to be deleted.
Paper Comments
Specialist’s Transactions With Public
Customers
• Send paper comments in triplicate
Rule 190. (a) through (e) No change.
to Nancy M. Morris, Secretary,
* * * Commentary
Securities and Exchange Commission,
.01 through .06 No change.
100 F Street, NE., Washington, DC
.07 The restrictions in paragraph (a)
20549–1090.
above relating to business transactions
between a specialist or his member
All submissions should refer to File
organization or any member, officer,
Number SR–Amex–2006–14. This file
employee or approved person therein
number should be included on the
subject line if e-mail is used. To help the and a company in which stock the
specialist is registered shall not apply to
Commission process and review your
Portfolio Depositary Receipts (as
comments more efficiently, please use
defined in Rule 1000), Index Fund
only one method. The Commission will
Shares (as defined in Rule 1000A), Trust
post all comments on the Commission’s Issued Receipts (as defined in Rule
Internet Web site (https://www.sec.gov/
1200) and derivative instruments based
rules/sro.shtml). Copies of the
on one or more securities, currencies or
submission, all subsequent
commodities (all of the foregoing
amendments, all written statements
collectively referred to in this
with respect to the proposed rule
Commentary .07 as ‘‘ETFs’’), if the
change that are filed with the
following conditions are met:
Commission, and all written
(i) the specialist or his member
communications relating to the
organization or any member, officer,
proposed rule change between the
employee or approved person therein
Commission and any person, other than only enters into the business transaction
with the sponsor of the ETF and the
those that may be withheld from the
sponsor is not involved in the day-topublic in accordance with the
day administration of the ETF; and
provisions of 5 U.S.C. 552, will be
(ii) any fee or other compensation in
available for inspection and copying in
connection with the business
the Commission’s Public Reference
transaction paid to the specialist or his
Section, 100 F Street, NE., Washington,
DC 20549. Copies of such filing also will member organization or any member,
officer, employee or approved person
be available for inspection and copying
therein must not be dependent on the
at the principal office of Amex. All
trading price or daily trading volume of
comments received will be posted
the ETF;
without change; the Commission does
(iii) the specialist or his member
not edit personal identifying
organization or any member, officer,
information from submissions. You
employee or approved person therein
should submit only information that
must notify and provide a full
you wish to make available publicly. All description to the Exchange of any
submissions should refer to File
business transaction or relationship it
Number SR–Amex–2006–14 and should may have with any sponsor of an ETF
be submitted on or before April 19,
that he or it is registered as specialist in;
2006.
and
(iv) the specialist or his member
organization or any member, officer,
employee or approved person therein
represents to the Exchange that the
specialist, member organization or any
member, officer, employee or approved
person therein are not making a market
in any of the underlying component
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CFR 200.30–3(a)(12).
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Federal Register / Vol. 71, No. 60 / Wednesday, March 29, 2006 / Notices
securities, currencies or commodities of
any ETF issued by the sponsor with
which such specialist, member
organization or any member, officer,
employee or approved person therein
has entered into a business transaction.
hsrobinson on PROD1PC68 with NOTICES
AMEX Company Guide Relationship
With Specialist Procedures, Rules and
Regulations
Sec. 910. Introduction and (a) through
(c) No change.
(d) Exchange Rules Governing
Specialist’s Activities—In addition to
certain provisions of the Securities
Exchange Act of 1934, a number of
Exchange regulations place clearly
defined limits on a specialist’s
activities. An awareness of both the
intent and spirit of Exchange rules, and
the responsibilities the Exchange places
on the specialist, will help ensure that
contacts between company officials and
the specialist are conducted within the
framework provided for above.
With respect to any security in which
a specialist is registered, Exchange rules
prohibit specialists (and, with respect to
paragraphs iii through ix, the member
firm or member corporation of which
the specialist is a member) from:
(i) through (v) No change.
(vi) effecting, directly or indirectly,
any business transaction with the issuer
of any such security or any officer,
director or 10% stockholder of any such
issuer, except as provided in
Commentary .07 to Rule 190 with
respect to business transactions, under
certain conditions, between a specialist
or his member organization or any
member, officer, employee or approved
person therein and the sponsor of an
ETF (as defined therein) that he or it is
registered as specialist in;
(vii) through (ix) No change.
With respect to any security in which
a specialist is registered, Exchange rules
require the specialist to report to the
Exchange:
(i) through (iii) No change.
(iv) any unusual transaction in which
the specialist participates as a broker or
dealer; [and]
(v) each purchase and sale for the
specialists’ own account[.]; and
(vi) a full description of any business
transaction or relationship that a
specialist or his member organization or
any member, officer, employee or
approved person therein may have,
under certain conditions as provided in
Commentary .07 to Rule 190, with any
sponsor of an ETF (as defined therein)
that he or it is registered as specialist in.
(e) No change.
[FR Doc. E6–4537 Filed 3–28–06; 8:45 am]
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–53537; File No. SR–CBOE–
2006–15]
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change and Amendment No. 1
Thereto To Reflect Committee
Revisions
March 21, 2006.
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 February
6, 2006, the Chicago Board Options
Exchange, Incorporated (‘‘CBOE’’ 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 March 13, 2006,
the CBOE filed Amendment No. 1 to the
proposed rule change.3 The CBOE has
designated the proposed rule change as
concerned solely with the
administration of the Exchange under
Section 19(b)(3)(A)(iii) of the Act,4 and
Rule 19b–4(f)(3) thereunder,5 which
renders the proposal effective upon
filing with the Commission.6 The
Commission is publishing this notice to
solicit comments on the proposed rule
change, as amended, from interested
persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend its
rules to delete or modify specific
references to certain committees that
have been eliminated and to modify
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 Amendment No. 1 replaces the original filing in
its entirety. In Amendment No. 1, the Exchange: (i)
revised the rule text to reflect revisions that had
become effective through separate, unrelated rule
change filings and to correct typographical errors;
and (ii) made certain clarifications in the text of
CBOE Rule 4.11, Interpretation and Policy .05(b)
regarding the Exchange’s procedures in the event
that a Market-Maker’s position limit exemption
request is denied and in the event that the Exchange
subsequently reviews a position limit exemption
request that it had granted.
4 15 U.S.C. 78s(b)(3)(A)(iii).
5 17 CFR 240.19b–4(f)(3).
6 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
March 13, 2006, the date on which the Exchange
submitted Amendment No. 1. See 15 U.S.C.
78s(b)(3)(C).
2 17
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specific references to other committees
whose titles or authorities have
changed. All references that currently
relate to committees that are being
eliminated will be replaced with terms
such as the ‘‘appropriate Exchange
committee’’ or the ‘‘Exchange.’’ All
references to committees that have
changed titles or authorities will be
amended accordingly. The text of the
proposed rule change is available on the
Exchange’s Web site (https://
www.cboe.com), at the Exchange’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
Exchange 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
Exchange 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 purpose of the proposed rule
change, as amended, is to delete from
the CBOE Rules any specific references
to the Clearing Procedures Committee,
Exemption Committee, Modified
Trading System Appointments (‘‘MTS’’)
Committee, appropriate Screen-Based
Trading (‘‘SBT’’) Trading Committee,
appropriate SBT DPM Appointments
Committee, and Special Product
Assignment Committee. The Exchange
is proposing to make these changes at
this time because it recently determined
to eliminate these committees and
reassign their respective authorities to
other committees and/or to Exchange
staff.7 The Exchange is also deleting all
references to the Allocation Committee
in the CBOE Rules in order to simplify
the rule text and avoid confusion over
the division of authorities among that
7 For example, the authorities of the former MTS
Committee have been reassigned to the Allocation
Committee and the appropriate Market Performance
Committees. There were also other committees that
the Exchange eliminated for which there are no
specific references in the CBOE rules that need to
be updated. For example, the Market Fee Oversight
Committee was eliminated and its specific
authorities have been reassigned to the appropriate
Market Performance Committees.
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[Federal Register Volume 71, Number 60 (Wednesday, March 29, 2006)]
[Notices]
[Pages 15775-15778]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-4537]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-53540; File No. SR-Amex-2006-14]
Self-Regulatory Organizations; American Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
and Amendment Nos. 1 and 2 Thereto Relating to Specialists'
Transactions With Public Customers
March 22, 2006.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on February 7, 2006, 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 and
II below, which Items have been prepared by Amex. On March 16, 2006,
the Exchange filed Amendment No. 1 to the proposed rule change.\3\ On
March 17, 2006, the Exchange filed Amendment No. 2 to the proposed rule
change.\4\ The Exchange filed the proposal as a ``non-controversial''
proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act
\5\ and Rule 19b-4(f)(6) thereunder.\6\ 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\ In Amendment No. 1, the Exchange revised proposed Amex Rule
190, Commentary .07 (iv), to require that a specialist represent to
the Amex that neither the specialist nor his affiliates are making a
market in any of the underlying component securities, currencies, or
commodities of any ETF issued by the sponsor with which the
specialist has entered into a business transaction.
\4\ In Amendment No. 2, the Exchange made further changes to
proposed Amex Rule 190, Commentary .07 (iv), to apply the
requirement therein to transactions entered into by either
specialist or his member organization or any member, officer,
employee or approved person therein.
\5\ 15 U.S.C. 78s(b)(3)(A)(iii).
\6\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend Amex Rule 190 and Section 910 of the
Amex Company Guide to permit business transactions between a specialist
or his member organization, or any member, officer, employee or
approved person therein and the sponsor of any exchange traded fund
(``ETF'') in which the specialist is registered. The text of the
proposed rule
[[Page 15776]]
change, as amended, is attached hereto as Exhibit A and is also
available on the Amex Web site https://www.amex.com, at the principal
office of Amex, 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 Exchange included statements
concerning the purpose of, and basis for, the proposed rule change, as
amended, and discussed any comments it received on the proposal. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange 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
Amex Rule 190 (Specialist's Transactions with Public Customers) and
Section 910 (Relationship with Specialists) of the Amex Company Guide
generally restrict business transactions between a specialist or his
member organization, or any member, officer, employee or approved
person therein (collectively, ``affiliates'') and any company or any
officer, director, or 10% stockholder of a company in whose stock the
specialist is registered. The restriction is intended to ensure that a
specialist or his affiliates do not enter into a material business
relationship with a company in whose security the specialist is
registered, such that the specialist's or his affiliates' status
creates conflicts of interest with respect to the specialist's
affirmative and negative obligations to maintain a fair and orderly
market in the security.
Currently, Amex Rule 193 provides exemptions from Amex Rule 190(a)
and (b) to an approved person or member organization that is affiliated
with a specialist member organization with respect to business
transactions with issuers. This is due to the fact that the functional
separation required by Amex Rule 193 eliminates conflict of interest
concerns. The Exchange proposes to add an exemption to Amex Rule 190
and Section 910 of the Amex Company Guide that would apply to business
transactions between a specialist or his affiliates and the sponsor of
any ETF in which the specialist is registered. The Commission
previously approved a similar rule filing by the New York Stock
Exchange, Inc. (``NYSE'').\7\
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\7\ See Securities Exchange Act Release No. 52838 (November 28,
2005); 70 FR 72320 (December 2, 2005) (SR-NYSE-2005-66).
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For the purposes of the proposed rule change, ETFs are Portfolio
Depositary Receipts (as defined in Rule 1000), Index Fund Shares (as
defined in Rule 1000A), Trust Issued Receipts (as defined in Rule 1200)
and derivative instruments based on one or more securities, currencies
or commodities. The Exchange believes that potential conflicts of
interest will be reduced due to the nature of how ETFs are traded.
Since the trading price of an ETF is generally based on the price(s) of
one or more security, commodity, currency or related futures contract
(collectively, ``underlying assets''), the Exchange believes that the
potential for conflicts of interest that might have an undue influence
or impact on the trading price of an ETF will be minimal. The Exchange
also believes that conflict of interest or undue influence concerns
will be further minimized by the fact that the underlying assets of an
ETF are typically traded on a different exchange or market than Amex or
in a different location within Amex.
The Exchange also believes that the potential for conflicts of
interest that might arise between a specialist or his affiliates and a
sponsor of an ETF will be negligible because the responsibilities of a
sponsor of an ETF are limited to establishing the trust that issues ETF
shares, registering the ETF shares with the SEC, and filing required
periodic reports. Thus, while the ETF sponsor generally oversees the
performance of the trustee of the ETF and the trust's principal service
providers, the trustee is responsible for the day-to-day administration
of the trust.
The proposed rule change would provide that in order to take
advantage of the exemption the following conditions must be met: (i)
The business transaction may only be entered into with the sponsor of
the ETF and the sponsor may not be involved in the day-to-day
administration of the ETF; (ii) any fee or other compensation paid in
connection with the business transaction to a specialist or his
affiliates must not have any relationship to the trading price or daily
trading volume of the ETF; (iii) the specialist or his affiliate must
notify and provide a full description to the Exchange of any business
transaction or relationship it may have with any sponsor of an ETF in
which the specialist or any of its affiliates is registered; and (iv)
the specialist or his affiliate must make a representation to the
Exchange indicating that the neither the specialist nor his affiliates
are making a market in any of the underlying component securities,
currencies or commodities of any ETF issued by the sponsor with which
such specialist or affiliate has entered into a business transaction.
The Exchange believes that the above-listed conditions will serve
as an additional layer of protection against conflicts of interest by
diminishing any potential ability for a specialist or his affiliates to
unduly influence trading for their own benefit and any incentive for
such specialist to compromise his specialist obligations in maintaining
fair and orderly markets. The Exchange also believes that such
conditions will help to ensure that the ETF sponsor does not unduly
influence its specialist or his affiliates.
2. Statutory Basis
The Exchange believes that the proposed rule change, as amended, is
consistent with Section 6(b) of the Act,\8\ in general, and furthers
the objectives of Section 6(b)(5) of the Act,\9\ in particular, in that
it is designed to promote just and equitable principles of trade, to
foster cooperation and coordination with persons engaged in regulating,
clearing, settling, processing information with respect to, and
facilitating transactions in securities, to remove impediments to and
perfect the mechanism of a free and open market and a national market
system, and, in general, to protect investors and the public interest.
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\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(5).
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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 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 any written comments with
respect to the proposed rule change, as amended.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change, as amended, has become effective
pursuant to Section 19(b)(3)(A) of the Act \10\ and
[[Page 15777]]
Rule 19b-4(f)(6) thereunder \11\ in that the proposed rule change (i)
does not significantly affect the protection of investors or the public
interest; (ii) does not impose any significant burden on competition;
and (iii) by its terms, does not become operative for 30 days after the
date of the filing, or such shorter time as the Commission may
designate if consistent with the protection of investors and the public
interest.
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\10\ 15 U.S.C. 78s(b)(3)(A).
\11\ 17 CFR 240.19b-4(f)(6).
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The Exchange has requested that the Commission waive the five-day
pre-filing notice requirement and the 30-day operative delay period for
``non-controversial'' proposals and make the proposed rule change, as
amended, effective and operative upon filing. The Commission has
determined to waive the five-day pre-filing notice requirement and the
30-day operative delay period.\12\ The Commission notes that the
proposed rule change imposes conditions for specialist transactions
with sponsors of ETFs that are substantially identical to those
contained in NYSE Rule 460, Commentary .25 and NYSE Rule 103B.VIII.
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\12\ For purposes only of accelerating the operative date of
this proposal, the Commission has considered the proposed rule's
impact on efficiency, competition, and capital formation. 15 U.S.C.
78c(f).
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Therefore, the foregoing rule change, as amended, has become
immediately effective and operative upon filing pursuant to Section
19(b)(3)(A)(iii) of the Act \13\ and Rule 19b-4(f)(6) thereunder.\14\
At any time within 60 days of the filing of the 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.\15\
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\13\ 15 U.S.C. 78s(b)(3)(A)(iii).
\14\ 17 CFR 240.19b-4(f)(6).
\15\ The effective date of the original proposed rule change is
February 7, 2006, the date of the original filing, and the effective
dates of Amendment Nos. 1 and 2 are, respectively, March 16, 2006
and March 17, 2006, the filing dates of the amendments. For purposes
of calculating the 60-day abrogation 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 March 17, 2006, 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 (https://
www.sec.gov/rules/sro.shtml); or
Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-Amex-2006-14 on the subject line.
Paper Comments
Send paper comments in triplicate to Nancy M. Morris,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-Amex-2006-14. 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 (https://www.sec.gov/rules/
sro.shtml). 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 Section, 100 F Street,
NE., Washington, DC 20549. Copies of such filing also will be available
for inspection and copying at the principal office of 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-2006-14 and should be
submitted on or before April 19, 2006.
For the Commission by the Division of Market Regulation,
pursuant to delegated authority.\16\
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\16\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
Exhibit A--American Stock Exchange LLC
Proposed Rule Change
Italicized text indicates material to be added. [Bracketed] text
indicates material to be deleted.
Specialist's Transactions With Public Customers
Rule 190. (a) through (e) No change.
* * * Commentary
.01 through .06 No change.
.07 The restrictions in paragraph (a) above relating to business
transactions between a specialist or his member organization or any
member, officer, employee or approved person therein and a company in
which stock the specialist is registered shall not apply to Portfolio
Depositary Receipts (as defined in Rule 1000), Index Fund Shares (as
defined in Rule 1000A), Trust Issued Receipts (as defined in Rule 1200)
and derivative instruments based on one or more securities, currencies
or commodities (all of the foregoing collectively referred to in this
Commentary .07 as ``ETFs''), if the following conditions are met:
(i) the specialist or his member organization or any member,
officer, employee or approved person therein only enters into the
business transaction with the sponsor of the ETF and the sponsor is not
involved in the day-to-day administration of the ETF; and
(ii) any fee or other compensation in connection with the business
transaction paid to the specialist or his member organization or any
member, officer, employee or approved person therein must not be
dependent on the trading price or daily trading volume of the ETF;
(iii) the specialist or his member organization or any member,
officer, employee or approved person therein must notify and provide a
full description to the Exchange of any business transaction or
relationship it may have with any sponsor of an ETF that he or it is
registered as specialist in; and
(iv) the specialist or his member organization or any member,
officer, employee or approved person therein represents to the Exchange
that the specialist, member organization or any member, officer,
employee or approved person therein are not making a market in any of
the underlying component
[[Page 15778]]
securities, currencies or commodities of any ETF issued by the sponsor
with which such specialist, member organization or any member, officer,
employee or approved person therein has entered into a business
transaction.
AMEX Company Guide Relationship With Specialist Procedures, Rules and
Regulations
Sec. 910. Introduction and (a) through (c) No change.
(d) Exchange Rules Governing Specialist's Activities--In addition
to certain provisions of the Securities Exchange Act of 1934, a number
of Exchange regulations place clearly defined limits on a specialist's
activities. An awareness of both the intent and spirit of Exchange
rules, and the responsibilities the Exchange places on the specialist,
will help ensure that contacts between company officials and the
specialist are conducted within the framework provided for above.
With respect to any security in which a specialist is registered,
Exchange rules prohibit specialists (and, with respect to paragraphs
iii through ix, the member firm or member corporation of which the
specialist is a member) from:
(i) through (v) No change.
(vi) effecting, directly or indirectly, any business transaction
with the issuer of any such security or any officer, director or 10%
stockholder of any such issuer, except as provided in Commentary .07 to
Rule 190 with respect to business transactions, under certain
conditions, between a specialist or his member organization or any
member, officer, employee or approved person therein and the sponsor of
an ETF (as defined therein) that he or it is registered as specialist
in;
(vii) through (ix) No change.
With respect to any security in which a specialist is registered,
Exchange rules require the specialist to report to the Exchange:
(i) through (iii) No change.
(iv) any unusual transaction in which the specialist participates
as a broker or dealer; [and]
(v) each purchase and sale for the specialists' own account[.]; and
(vi) a full description of any business transaction or relationship
that a specialist or his member organization or any member, officer,
employee or approved person therein may have, under certain conditions
as provided in Commentary .07 to Rule 190, with any sponsor of an ETF
(as defined therein) that he or it is registered as specialist in.
(e) No change.
[FR Doc. E6-4537 Filed 3-28-06; 8:45 am]
BILLING CODE 8010-01-P
