Amex plans new rule on billing

Proposal would stop some specialist charges

September 10, 2004|By BLOOMBERG NEWS

NEW YORK - The American Stock Exchange, the third-biggest U.S. stock-options market, plans to prohibit specialists from billing brokers for most electronically executed trades and for orders that are canceled.

The fee proposal, filed with the Securities and Exchange Commission on Aug. 30 and published in the Federal Register yesterday, follows a plan by Susquehanna Investment Group to charge brokers commissions on orders and cancellations for options and exchange-traded funds.

Susquehanna told "broker dealers and firms" in a letter Aug. 23 that the charges would apply at the Amex, the Chicago Board Options Exchange and the Philadelphia Stock Exchange starting this month.

"Specialist commissions increase the cost of doing business on the exchange," read a summary of the Amex's proposed change, which described Susquehanna's new charges without naming the Bala Cynwyd, Pa.-based company.

Mike Bickford, Amex's senior vice president for options, declined to comment.

"The exchange believes that these increased costs weaken the exchange's competitive position relative to other markets and harm investors as other markets do not need to compete as aggressively with the exchange to cut prices to investors," the summary of Amex's filing said.

Options give the holder the right to buy or sell assets at a set date and price. Specialists facilitate trading by standing ready to buy when investors need to sell, or vice versa.

The Chicago Board Options Exchange interprets its rules as prohibiting specialists from charging for orders that are executed electronically, said spokeswoman Lynne Howard-Reed. Amex could lose business if brokers seeking to avoid Susquehanna's charges at Amex send them instead to the CBOE, the biggest U.S. market for stock and stock-index options.

The Amex would allow specialists to charge for automatically executed orders if they take more than two minutes to be completed and the specialist doesn't participate in the trade.

"The exchange believes that it may be appropriate for the specialist to charge a commission in these circumstances because the specialist has assumed responsibility for the proper execution of the order," the SEC summary of the rule filing said.

Kelly Crudo, a spokeswoman for Susquehanna, didn't immediately return a call requesting comment.

The SEC will accept comments on the proposed rule through Sept. 30.

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