[Federal Register Volume 60, Number 181 (Tuesday, September 19, 1995)]
[Notices]
[Pages 48576-48577]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-23164]



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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-36222; Filed No. SR-NYSE-95-25]


Self-Regulatory Organizations; New York Stock Exchange, Inc.; 
Order Granting Approval to Proposed Rule Change Relating to Amendments 
to Rules 600 (Arbitration), 619 (General Provision Governing Subpoenas, 
Production of Documents, etc.), 629 (Schedule of Fees), and 637 
(Failure to Honor Award)

September 13, 1995.
    On June 26, 1995, the New York Stock Exchange, Inc. (``NYSE'' or 
``Exchange'') submitted to the Securities and Exchange Commission 
(``SEC'' or ``Commission''), pursuant to Section 19(b)(1) of the 
Securities Exchange Act of 1934 (``Act'')\1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change to adopt certain arbitration 
procedures.

    \1\15 U.S.C. 78s(b)(1).
    \2\17 CFR 240.19b-4.
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    The proposed rule change was published for comment in the Federal 
Register on July 26, 1995.\3\ No comments were received on the 
proposal.

    \3\Securities Exchange Act Release No. 36001 (July 20, 1995), 60 
FR 38389.
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    As described more fully below, the Exchange has proposed amendments 
to its arbitration procedures that were developed primarily by the 
Securities Industry Conference on Arbitration.\4\

    \4\NYSE Rule 600(d)(iii) corresponds to Securities Industry 
Conference on Arbitration Uniform Code of Arbitration (``SICA UCA'') 
Section 1(d)(iii) (as amended Jan. 20, 1994); NYSE Rule 619(c) 
corresponds to SICA UCA Section 20(c) (as amended Jan. 7, 1993 and 
Oct. 21, 1994); NYSE Rule 629(e) corresponds to SICA UCA Section 
30(e) (as amended Oct. 21, 1994).
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    The Commission has reviewed carefully the NYSE's proposed rule 
changes and concludes that the proposed changes are consistent with the 
requirements of the Act and the rules and regulations thereunder 
applicable to a national securities exchange, and, in particular, with 
the requirements of Section 6(b).\5\ The Exchange proposes to amend 
NYSE Rules 600 (Arbitration), 619 (General Provision Governing 
Subpoenas, Production of Documents, etc.) 629 (Schedule of Fees), and 
637 (Failure to Honor Award).\6\

    \5\15 U.S.C. 78f(b).
    \6\The Commission notes that it has approved some of the 
proposals contained in this filing previously for another self-
regulatory organization. See Securities Exchange Act Release Nos. 
35525 (Mar. 23, 1995), 60 FR 16219 (increasing the NASD's prehearing 
document exchange deadline from 10 days to 20 days before the 
arbitration hearing); 35167 (Dec. 28, 1994), 60 FR 1816 (unifying 
the NASD's nonrefundable filing fee for industry parties at $500); 
33939 (Apr. 20, 1994), 59 FR 22032 (excluding all class action 
claims from NASD arbitration.
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    NYSE Rule 600(d)(iii) currently bars members, allied members, 
member organizations, and associated persons from seeking to enforce an 
agreement to arbitrate against a customer where the customer has 
initiated in court a putative class action or is a member of a putative 
or certified class with respect to any claims encompassed by the class 
action. The rule, however, omits specific reference to claims filed by 
members, allied members, member organizations, and associated persons 
against other members, allied members, member organizations, and 
associated persons. This proposed amendment clarifies that all class 
actions, including claims involving members, allied members, member 
organizations, and associated persons, are ineligible for submission to 
the Exchange's arbitration facility.
    The Commission finds that the proposed amendment to NYSE Rule 
600(d)(iii) is consistent with the Section 6(b)(5)\7\ requirements that 
the rules of an exchange be designed to promote just and equitable 
principles of trade, prevent unfair discrimination between customers, 
issuers, brokers, or dealers, and, in general, protect investors and 
the public. Over the years, the courts have developed procedures and 
expertise for managing class action litigation and duplicating the 
often complex procedural safeguards necessary for these lawsuits is 
unnecessary. In addition, access to the courts for class action 
litigation should be preserved for claims filed by 

[[Page 48577]]
members, allied members, member organizations, and associated persons 
against other members, allied members, member organizations, and 
associated persons, as well as for claims involving investors. Hence, 
this rule change should provide a sound procedure for the management of 
class action disputes, should promote the efficient resolution of these 
types of class action disputes, and should prevent wasteful litigation 
over the possible applicability of agreements to arbitrate between 
members, allied members, member organizations, and associated persons, 
notwithstanding the exclusion of class action claims from NYSE 
arbitration.

    \7\15 U.S.C. 78f(b)(5).
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    NYSE Rule 619(c) currently requires all parties to serve on each 
other copies of documents in their possession that they intend to 
present at the hearing and to identify witnesses they intend to present 
at the hearing not less than ten calendar days prior to the first 
scheduled hearing date. The Exchange is proposing to amend this rule to 
allow parties to: (1) Provide a list of documents that have been 
produced previously to the other side, instead of providing the actual 
documents; (2) require the list identifying witnesses to include the 
address and business affiliation of the witnesses listed; and (3) 
require prehearing exchanges of documents and the list of documents 
previously produced to occur twenty days in advance of the hearing, 
instead of ten days as is presently required.
    The Commission finds that the proposed amendments to NYSE Rule 
619(c) are consistent with Section 6(b)(5) because they are designed to 
promote just and equitable principles of trade, prevent unfair 
discrimination between customers, issuers, brokers, or dealers, and, in 
general, protect investors and the public,.\8\ The proposed amendments 
should increase the efficiency of the arbitration process because they: 
(1) Eliminate duplicative prehearing document exchanges; (2) should 
assist parties in the process of preparing and organizing their cases 
by providing them with advance notice regarding the background of 
witnesses and the location of nonparty witnesses; (3) should reduce the 
number of instances of surprise; and (4) should provide the parties 
with a more reasonable time frame in which to address last minute 
discovery requests.

    \8\15 U.S.C. 78f(b)(5).
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    NYSE Rule 629(e) presently provides that the nonrefundable filing 
fee for a dispute that does not specify a money claim shall be $250, 
while NYSE Rule 629(i) charges industry parties a $500 nonrefundable 
filing fee when the dispute does state a money claim. The proposed 
amendment to NYSE Rule 629(e) would unify the nonrefundable filing fee 
for all industry claims at $500.
    The commission finds that this proposed amendment is consistent 
with Section 6(b)(4)\9\ because it provides for the equitable 
allocation of reasonable fees among its members and other persons using 
its facilities. A uniform filing fee would remove any temptation for an 
industry party to purposely omit the monetary amount of their claim in 
order to reduce the nonrefundable filing fee from $500 to $250.\10\

    \9\15 U.S.C. 78f(b)(4).
    \10\See Securities Exchange Act Release No. 35167 (Dec. 28, 
1994), 60 FR 1816 (approving File No. SR-NASD-94-75 and publishing 
the NASD's determination that there have been situations in which 
industry parties have purposely not disclosed the monetary amount of 
their claim in order to reduce the nonrefundable filing fee from 
$500 to $250).
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    Currently, NYSE Rule 637 subjects any member, allied member, 
registered representative, or member organization who fails to honor an 
award of arbitrators appointed by the Exchange to disciplinary 
proceedings in accordance with the Exchange's constitution and rules. 
The proposed amendment to NYSE Rule 637 would expand the coverage of 
this rule to include arbitration awards issued at another self-
regulatory organization or by the American Arbitration Association. As 
amended, the penalties authorized under this rule would include 
disciplinary proceedings at the Exchange or the imposition of a fine by 
way of a summary proceeding.
    The Commission finds that this proposed amendment is consistent 
with the section 6(b)(6)\11\ requirement that the rules of an exchange 
provide for appropriate disciplinary action for violating the 
provisions of the Act, the rules and regulations thereunder, or the 
rules of the Exchange. This proposal would establish the enforceability 
of arbitration awards issued by other self-regulatory organizations and 
by the American Arbitration Association and, in turn, should increase 
the effectiveness of the arbitration process.

    \11\15 U.S.C. 78f(b)(6).
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    It therefore is ordered, pursuant to Section 19(b)(2) of the 
Act,\12\ that the proposed rule change (SR-NYSE-95-25) is approved.

    \12\15 U.S.C. 78s(b)(2).
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    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\

    \13\17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-23164 Filed 9-18-95; 8:45 am]
BILLING CODE 8010-01-M