[Federal Register Volume 67, Number 224 (Wednesday, November 20, 2002)]
[Notices]
[Pages 70098-70102]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-29403]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-46824; File No. SR-NYSE-2002-43]


Self-Regulatory Organizations; New York Stock Exchange, Inc.; 
Notice of Filing of Proposed Rule Change Relating to Arbitration

 November 13, 2002.
    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 September 3, 2002, the New York Stock Exchange, Inc. filed with the 
Securities and Exchange Commission the proposed rule change as 
described in items I, II and III below, which items have been prepared 
by the Exchange. The Commission is publishing this notice to

[[Page 70099]]

solicit comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The proposed rule change consists of amendments to rules 601 
(Simplified Arbitration), 607 (Designation of Number of Arbitrators), 
612 (Initiation of Proceedings), 617 (Adjournments), 629 (Schedule of 
Fees), 631 (Schedule for Member Controversies) and 632 (Member 
Controversies). The text of the proposed rule change is set forth 
below. New text is italicized; deletions are in brackets.

Rule 601. Simplified Arbitration

    (a) Any dispute, claim or controversy, arising between a [public] 
customer(s) and an associated person or a member subject to arbitration 
under this Code involving a dollar amount not exceeding $[10,000] 
25,000 exclusive of attendant costs and interest, shall be arbitrated 
as hereinafter provided.
    (b) The Claimant shall file with the Director of Arbitration an 
executed Submission Agreement and a copy of the Statement of Claim of 
the controversy in dispute and the required non-refundable filing fee 
and deposit, together with the documents in support of the Claim. 
Sufficient copies of the Submission Agreement and the Statement of 
Claim and supporting documents shall be provided to the Director of 
Arbitration for each party and the Arbitrator. The Statement of Claim 
shall specify the relevant facts, the remedies sought and whether or 
not a hearing is demanded.
    (c) The Claimant shall pay a non-refundable filing fee and [remit] 
a hearing deposit as [specified in rule 629 upon the filing of the 
Submission Agreement.] follows:\3\
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    \3\ The original proposed rule change omitted ``(c) '' from the 
first line of this subparagraph. Commission staff made the 
correction. Telephone conference between Robert Clemente, Director--
Arbitration, NYSE, and Steven Johnston, Special Counsel, Division of 
Market Regulation (``Division''), Commission on November 4, 2002.

                              Fees for Simplified Arbitration Customer as Claimant
----------------------------------------------------------------------------------------------------------------
                                                                                    Decision on   Decision after
        Amount in dispute (excluding interest and costs)            Filling fee       papers          hearing
----------------------------------------------------------------------------------------------------------------
$1,000 or less..................................................             $15             $15             $15
1,001 to 2,500..................................................              25              25              25
2,501 to 5,000..................................................              50              75             100
5,000 to 10,000.................................................              75              75             200
10,001 to 25,000................................................             100             100             400
----------------------------------------------------------------------------------------------------------------


                                              Industry as Claimant
----------------------------------------------------------------------------------------------------------------
                                                                                    Decision on   Decision after
        Amount in dispute (excluding interest and costs)            Filing fee        papers          hearing
----------------------------------------------------------------------------------------------------------------
$25,000 or less.................................................            $500            $300            $300
----------------------------------------------------------------------------------------------------------------

    (Excluding Interest Decision Decision after and Costs) Filing Fee 
On Papers Hearing $25,000 or less $500 $300 $600
    The final disposition of the [sum] filing fee and hearing deposit 
shall be determined by the Arbitrator.
    (d) The Director of Arbitration shall endeavor to serve promptly by 
mail or otherwise on the Respondent(s) one (1) copy of the Submission 
Agreement and one (1) copy of the Statement of Claim. Within twenty 
(20) calendar days from the receipt of the Statement of Claim, 
Respondent(s) shall serve each party with an executed Submission 
Agreement and a copy of Respondent's Answer. Respondent's executed 
Submission Agreement and Answer shall also be filed with the Director 
of Arbitration with sufficient \4\ copies for the Arbitrator(s) along 
with any deposit required under the schedule of fees above. The Answer 
shall designate all available defenses to the Claim and may set forth 
any related Counterclaim and/or related Third Party Claim the 
Respondent(s) may have against the Claimant or any other person. If the 
Respondent(s) has interposed a Third Party Claim, the Respondent(s) 
shall serve the Third Party Respondent with an executed Submission 
Agreement, a copy of Respondent's answer containing the Third Party 
Claim, and a copy of the original Claim filed by the Claimant. The 
Third Party Respondent shall respond in the manner herein provided for 
response to the Claim. If the Respondent(s) files a related 
Counterclaim exceeding $[10,000] 25,000, the Arbitrator may refer the 
Claim, Counterclaim and/or Third Party Claim, if any, to a panel of 
three (3) arbitrators in accordance with rule 607 of this Code, or he 
may dismiss the Counterclaim and/or Third Party Claim, without 
prejudice to the counter-claimants and/or third party claimants 
pursuing the Counterclaim and/or Third Party Claim in a separate 
proceeding. The costs to the Claimant under either proceeding shall in 
no event exceed the total amount specified [in rule 629] in the 
schedule above.
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    \4\ There appears to be confusion among various texts of current 
NYSE rule 601 as to whether this word should be ``sufficient'' or 
``additional.'' The NYSE intends to use the word ``sufficient.'' 
Telephone conversation among Robert Clemente, Director--Arbitration, 
NYSE and Florence Harmon, Senior Special Counsel, and Steven 
Johnston, Special Counsel, Division, Commission on October 24, 2002.
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    (e) to (h) Unchanged.
    [(i) Upon the request of the arbitrator, the Director of 
Arbitration shall appoint two (2) additional arbitrators to the panel 
which shall decide the matter in controversy.
    (j) In any case where there is more than one (1) arbitrator, the 
majority will be public arbitrators.]
    [(k)] (i) In his discretion, the arbitrator may, at the request of 
any party, permit such party to submit additional documentation 
relating to the pleadings.
    [(l)](j) Except as otherwise provided herein, the general 
arbitration rules of the New York Stock Exchange, Inc. shall be 
applicable to the proceedings instituted under this Rule.

Rule 607. Designation of Number of Arbitrators

    (a)(1) In all arbitration matters involving [public] customers and 
non-members where the matter in controversy exceeds $[10,000] 25,000, 
or

[[Page 70100]]

where the matter in controversy does not involve or disclose a money 
claim, the Director of Arbitration shall appoint an arbitration panel 
which shall consist of no less than three (3) arbitrators, at least a 
majority of whom shall not be from the securities industry, unless the 
[public] customer or non-member requests a panel consisting of at least 
a majority from the securities industry.

Rule 612. Initiation of Proceedings

    Except as otherwise provided herein, an arbitration proceeding 
under this Code shall be instituted as follows:
    (a) Statement of Claim
    The Claimant shall file with the Director of Arbitration an 
executed Submission Agreement, a Statement of Claim together with 
documents in support of the claim and the required filing fee and 
hearing deposit. Sufficient additional copies of the Submission 
Agreement and the Statement of Claim and supporting documents shall be 
provided to the Director of Arbitration for each party and each 
arbitrator. The Statement of Claim shall specify the relevant facts and 
the remedies sought. The Director of Arbitration shall endeavor to 
serve promptly by mail or otherwise on the Respondent(s) one (1) copy 
of the Submission Agreement and one (1) copy of the Statement of Claim.
    (b) Unchanged.\5\
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    \5\ NYSE authorized Commission staff to clarify omitted rule 
text. Telephone conversation Robert Clemente, Director--Arbitration, 
NYSE and Florence Harmon, Senior Special Counsel, and Steven 
Johnston, Special Counsel, Division, Commission on November 7, 2002.
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    (c)(1) and (c)(2) Unchanged.\6\
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    \6\ See footnote 5, above.
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    (c)(3) Respondent(s) shall serve each party with a copy of any 
Third Party Claim. The Third Party Claim shall also be filed with the 
Director of Arbitration with sufficient additional copies for the 
arbitrator(s), along with any deposit required under [the] rule 629(i) 
schedule of fees. Third Party Respondent(s) shall answer in the manner 
provided for response to the Claim, as provided in paragraphs (1) and 
(2) above.

Rule 617. Adjournments

    (a) Unchanged.\7\
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    \7\ See footnote 5, above.
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    (b) A party requesting an adjournment after arbitrators have been 
appointed shall, if an adjournment is granted, deposit a fee, equal to 
the initial deposit of hearing session fees for the first adjournment 
and twice the initial deposit of hearing session fees, not to exceed 
$[1,000] 1,500, for a second or subsequent adjournment requested by 
that party. The arbitrators may waive the deposit of this fee or in 
their awards may direct the return of the adjournment fee.

Rule 629. Schedule of Fees

    (a)-(g) Unchanged.
    (h) The fee for a pre-hearing conference with an arbitrator shall 
be:

    Schedule for Pre-Hearing Conference with One Arbitrator[(s)]: \1\
------------------------------------------------------------------------
                Amount in controversy                    Conference fee
------------------------------------------------------------------------
$1,000 or less.......................................             $15.00
1,00[0.01] 1 up to 2,500.............................              25.00
2,50[0.01] 1 up to 5,000.............................             100.00
5,00[0.01] 1 up to 10,000............................             200.00
10,00[0.01] 1 up to [30,000] 25,000..................             300.00
[30,000.01 up to 50,000..............................             300.00
50,000.01 up to 100,000..............................             300.00
100,001 up to 500,000................................             300.00
500,001 up to 5 million..............................             300.00
Greater than 5 million...............................            300.00]
Over 25,000..........................................            450.00
------------------------------------------------------------------------
\1\ Fee for pre-hearing conference with three arbitrators shall be based
  on applicable hearing session deposit fee.

    (i) Schedule of Fees
    For purposes of the schedule of fees the term ``claim'' includes 
Claims, Counterclaims, Third-Party Claims or Cross-Claims. Any such 
claim submitted by a customer is a customer claim. Any such claim 
submitted by a member, allied member, registered representative, member 
firm or member corporation against a [public] customer or other non-
member is an industry claim.
    For claims of $25,000 or less see schedule of fees in Rule 601. 
Simplified Arbitration.

                                              Customer as Claimant
----------------------------------------------------------------------------------------------------------------
                                                                                  Hearing deposit
    Amount of dispute ([exclusive of] excluding interest and     -----------------------------------------------
                            expenses)                               Filing fee     [Simplified]      [Hearing]
----------------------------------------------------------------------------------------------------------------
[$1,000 or less.................................................             $15             $15             $15
1,001 to 2,500..................................................              25              25              25
2,501 to 5,000..................................................              50              75             100
5,001 to 10,000.................................................              75              75             200
10,001 to 30,000................................................             100             N/A            400]
[30,001] 25,001 to 50,000.......................................             120           [N/A]             400
50,001 to 100,000...............................................             150           [N/A]             500
100,001 to 500,000..............................................             200           [N/A]             750
500,001 to 5,000,000............................................             250           [N/A]           1,000
Over 5,000,000..................................................             300           [N/A]           1,500
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[[Page 70101]]


                                            Industry as Claimant \1\
----------------------------------------------------------------------------------------------------------------
                                                                                       Hearing deposit
  Amount of Dispute [exclusive of] excluding interest        Filing fee    -------------------------------------
                       expenses)                                                  1 Arb.            3 Arbs.
----------------------------------------------------------------------------------------------------------------
[$1,000 or less........................................               $500               $300               $600
1,001 to 2,500.........................................                500                300                600
2,501 to 5,000.........................................                500                300                600
5,001 to 10,000........................................                500                300                600
10,001 to 30,000.......................................                500                300                600
30,001 to 50,000.......................................                500                300               600]
[50,001] 25,001 to 100,000.............................                500              [300]                600
100,001 to 500,000.....................................                500              [300]                750
500,001 to 5,000,000...................................                500              [300]              1,000
Over 5,000,000.........................................                500              [300]             1,500
----------------------------------------------------------------------------------------------------------------
1 This is the fee schedule for claims submitted by members, member firms, member corporations or allied members
  against members, member firms, member corporations or allied members, [public] customers, registered
  representatives or non-members other than [public] customers, and for claims submitted by registered
  representatives or non-members other than [public] customers against members, member firms, member
  corporations, allied members or non-members. [The one arbitrator column is for pre-hearing conferences and for
  simplified arbitration, where the industry party is a claimant against a public customer].

[Rule 631. Schedule for Member Controversies

    At the time of filing a Claim, Counterclaim, Third-Party Claim or 
Cross-Claim, a party shall pay a non-refundable filing fee and remit a 
hearing session deposit with the New York Stock Exchange, Inc. in the 
amounts indicated below:

------------------------------------------------------------------------
         Amount in dispute              Filing fee      Hearing deposit
------------------------------------------------------------------------
$5,000 or less....................               $100               $200
5,001 to $100,000.................                200                750
100,001 or more...................                300              1,000
------------------------------------------------------------------------

    Where the claim or controversy does not involve or disclose a money 
claim or is unspecified, the filing fee will be $300 and the hearing 
session deposit shall be $1,000 per hearing session.
    The fee for a pre-hearing conference with an arbitrator in a member 
controversy shall be as follows:

------------------------------------------------------------------------
                  Amount in dispute                      Conference fee
------------------------------------------------------------------------
$5,000 or less.......................................               $150
5,001 to 100,000.....................................                300
100,001 or more......................................                500
------------------------------------------------------------------------

Rule 632. Member Controversies

    Any controversy between parties who are members, allied members, 
member firms or member corporations shall be submitted for arbitration 
to members of the Board of Arbitration, unless non-members are also 
parties to the controversy. If the amount ([exclusive of] excluding 
interest and costs) involved in the controversy is less than $[10,000] 
25,000 the controversy shall be heard by one arbitrator. If such amount 
is $[10,000] 25,000 or more the controversy shall be heard by [at 
least] three (3) [but not more than five (5)] arbitrators unless the 
parties consent to one arbitrator. If non-members are also parties to 
such controversies, the arbitrators shall be appointed in accordance 
with rule 607 unless the non-member(s) consent to arbitration before 
members of the Board of Arbitration.

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 self-regulatory organization 
included statements concerning the purpose of and basis for the 
proposed rule change. The text of these statements may be examined at 
the places specified in item IV below and is set forth in sections A, B 
and C below.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for the Proposed Rule Change

1. Purpose
    The proposed rule changes are intended to:
    [sbull] Increase the ceiling for claims eligible for submission 
under the Simplified Arbitration procedures from $10,000 to $25,000 
(rules 601, 607 and 629).
    [sbull] Clarify that both a filing fee and hearing deposit must be 
submitted with the filing of a claim in arbitration (rule 612).
    [sbull] Increase the maximum adjournment fee from $1,000 to $1,500 
to conform to the maximum hearing deposit upon which adjournment fees 
are based (rule 617).
    [sbull] Increase pre-hearing conference fees in claims over $25,000 
from $300 to $450 (rule 629(h)).
    [sbull] Incorporate filing fees and hearing deposits for disputes 
between members into the schedule of fees for ``Industry as Claimants'' 
(rules 629(i) and 631).
    [sbull] Increase the ceiling from $10,000 to $25,000 for claims 
between members to be decided by one arbitrator. In addition eliminate 
reference to a panel ``of no more than five arbitrators'' (rule 632).
    The proposed amendments to rules 601, 607 and 629 increase the 
ceiling on claims eligible for submission under the Simplified 
Arbitration procedures from $10,000 to $25,000. Under the Simplified 
Arbitration procedures, one arbitrator is appointed to decide the 
dispute based upon the parties' submissions, unless the customer 
requests a hearing. These proposed amendments conform to amendments to 
the Uniform Code of Arbitration adopted by the Securities Industry 
Conference on Arbitration (``SICA'') and adopted by other SROs.\8\
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    \8\ NASD rule 10302(a).
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    In addition, the amendments simplify the rules by placing the fee 
schedule for Simplified Arbitration in rule 601 rather than referring 
to rule 629. The proposed

[[Page 70102]]

amendment to rule 607 conform the rule to the increase in the claims 
eligible for submission under the Simplified Arbitration procedure 
(rule 601). These amendments do not impact the cost to customers who 
submit their claims to arbitration.
    The proposed amendments to rules 612 and 617 are housekeeping in 
nature and not substantive changes. The amendments to rule 612 clarify 
that both a filing fee and hearing deposit must be submitted with the 
filing of a claim in arbitration. The amendments to rule 617 increase 
the maximum adjournment fee from $1,000 to $1,500. This is to conform 
the adjournment fees to the maximum hearing deposit, upon which 
adjournment fees are based.
    In addition, the Exchange is proposing to increase pre-hearing 
conference fees in claims over $25,000 from $300 to $450 (rule 629(h)). 
The increase in pre-hearing conference fees is warranted by the 
increased frequency and complexity of pre-hearing conferences. This 
increase conforms to the pre-hearing conference fees assessed by other 
SROs.\9\
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    \9\ NASD rule 10332(k).
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    The proposed amendments to rule 629(i) eliminate the need for rule 
631 by incorporating the fees and deposits for disputes between members 
into the schedule of fees for ``Industry Claimants'' under rule 629. 
These amendments will increase the cost to members in disputes with 
other members and provides for a more equitable distribution of the 
cost of arbitration of member to member disputes with all other 
disputes initiated by a member or associated person. These amendments 
also simplify the fee schedules by deleting rule 631 (Schedule for 
Member Controversies) and consolidating that fee schedule with the 
Schedule of Fees for Industry Claimants (rule 629).
    The proposed amendments to rule 632 increase the ceiling from 
$10,000 to $25,000 for claims between members that are heard and 
decided by one arbitrator. In addition, the proposed amendment 
eliminates the clause that provided for an arbitration panel of no more 
than five arbitrators. The Exchange has not impaneled five arbitrators 
on a case since the mid-1980s when the general rules were amended to 
provide for a panel of no less than three arbitrators. A panel of five 
arbitrators is unnecessarily burdensome and provides no benefit to the 
process.
2. Statutory Basis
    The proposed changes are consistent with section 6(b)(5) of the Act 
\10\ in that they promote just and equitable principles of trade by 
insuring that members and member organizations and the public have a 
fair and impartial forum for the resolution of their disputes.
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    \10\ 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 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 has neither solicited nor received 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 self-regulatory organization consents, the Commission will:
    (A) By order approve the proposed rule changes, or
    (B) Institute proceedings to determine whether the proposed rule 
changes 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, NW., Washington, DC 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 at the principal office of the New 
York Stock Exchange. All submissions should refer to SR-NYSE-2002-43 
and should be submitted by December 11, 2002.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 02-29403 Filed 11-19-02; 8:45 am]
BILLING CODE 8010-01-P