[Federal Register Volume 68, Number 156 (Wednesday, August 13, 2003)]
[Notices]
[Pages 48431-48436]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-20600]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-48299; File No. SR-NYSE-2002-36]


Self-Regulatory Organizations; Notice of Filing of Amendment Nos. 
2 and 3 to Proposed Rule Change by the New York Stock Exchange, Inc. To 
Adopt Amendments to Exchange Rule 342 (``Offices--Approval, Supervision 
and Control'') and its Interpretation, Rule 401 (``Business Conduct''), 
Rule 408 (``Discretionary Power in Customers' Accounts''), and Rule 410 
(``Records of Orders'')

August 7, 2003.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby 
given that on August 16, 2002, the New York Stock Exchange, Inc. 
(``NYSE'' or ``Exchange'') filed with the Securities and Exchange 
Commission (``SEC'' or ``Commission'') the proposed rule change. On 
November 20, 2002, the Exchange submitted Amendment No. 1 to the 
proposed rule change.\3\ The proposed rule change, as amended, was 
published for public comment in the Federal Register on November 27, 
2002.\4\ On April 28, 2003, the Exchange submitted Amendment No. 2 to 
the proposed rule change.\5\ On August 7, 2003, the Exchange filed 
Amendment No. 3 to the proposed rule change.\6\ Amendment Nos. 2 and 3 
are described in Items I, II, and III below, which Items have been 
prepared by the Exchange. The Commission is publishing this notice to 
solicit comments on Amendment Nos. 2 and 3 to 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.
    \3\ See letter to Nancy Sanow, Assistant Director, Division of 
Market Regulation, Commission, from Darla Stuckey, Corporate 
Secretary, NYSE, dated November 18, 2002 (``Amendment No. 1''). In 
Amendment No. 1, the Exchange added ``customer changes of investment 
objectives'' to the list of enumerated activities with regard to 
which Exchange members must maintain written policies and 
procedures.
    \4\ See Securities Exchange Act Release No. 46858 (November 20, 
2002), 67 FR 70994 (``Original Notice'').
    \5\ In Amendment No. 2, the Exchange submitted a response to 
comments received in response to the Original Notice. Also, the 
Exchange amended the rule text to address certain of the commenters' 
concerns.
    \6\ Amendment No. 3 replaces and supercedes Amendment No. 2 in 
its entirety.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The proposed amendments address several issues involving the

[[Page 48432]]

establishment, maintenance, and testing of internal controls as well as 
several supervisory issues. Included are amendments to NYSE Rule 342 
(``Offices--Approval, Supervision and Control'') and its 
Interpretation, NYSE Rule 401 (``Business Conduct''), NYSE Rule 408 
(``Discretionary Power in Customers' Accounts''), and NYSE Rule 410 
(``Records of Orders'').
    The text of the proposed rule change is set forth below. Proposed 
new language is in italics; proposed deletions are in brackets.
* * * * *

Offices--Approval, Supervision and Control

    Rule 342. (a) through (e) unchanged.
    Supplementary Material:
    .10 through .18 unchanged.
    .19 Supervision of Managers.--Members and member organizations must 
develop and implement written policies and procedures reasonably 
designed to independently review and supervise customer account 
activity conducted by each Branch Office Manager, Sales Manager, 
Regional/District Sales Manager, or by any person performing a similar 
supervisory function. Such supervisory reviews must be performed by a 
qualified person pursuant to Rule 342.13 who is senior to the Manager 
under review.
    .20 through .22 unchanged.
    .23 Internal Controls--Pursuant to paragraphs (a) and (b) of this 
Rule, members and member organizations must develop and maintain 
adequate controls over each of its business activities. Such controls 
must provide for the establishment of procedures for independent 
verification and testing of those business activities. An ongoing 
analysis, based upon appropriate criteria, may be employed to assess 
and prioritize those business activities requiring independent 
verification and testing. A review of each member's or member 
organization's efforts with respect to internal controls, including a 
summary of tests conducted and significant exceptions identified, must 
be included in the Annual Report required by .30 of this Rule.
    The independent verification and testing procedures shall not apply 
to members and member organizations that do not conduct a public 
business, or that have a capital requirement of $5,000 or less, or that 
employ 10 or fewer registered representatives.
    (See also Rule 401(b))
    .30 Annual Report.--By April 1 of each year, each member not 
associated with a member organization and each member organization 
shall prepare, and each member organization shall submit to its chief 
executive officer or managing partner, a report on the member's or 
member organization's supervision and compliance effort during the 
preceding year. The report shall include:
    (a) A tabulation of the reports pertaining to customer complaints 
and internal investigations made to the Exchange during the preceding 
year pursuant to Rules 351(d) and (e)(ii).
    (b) Identification and analysis of significant compliance problems, 
plans for future systems or procedures to prevent and detect violations 
and problems, and an assessment of the preceding year's efforts of this 
nature, and
    (c) Discussion of the preceding year's compliance efforts, new 
procedures, educational programs, etc. in each of the following areas:
    (i) Antifraud and trading practices,
    (ii) Investment banking activities,
    (iii) Sales practices,
    (iv) Books and records,
    (v) Finance and operations, [and]
    (vi) Supervision[.] , and
    (vii) Internal controls.
    If any of these areas do not apply to the member or member 
organization, the report should so state.

Business Conduct

    Rule 401. (a) Every member, allied member and member organization 
shall at all times adhere to the principles of good business practice 
in the conduct of his or its business affairs.
    (b) Each member and member organization shall maintain written 
policies and procedures, administered pursuant to the internal control 
requirements prescribed under Rule 342.23, specifically with respect to 
the following activities:
    (1) Transmittals of funds (e.g., wires, checks, etc.) or 
securities:
    (i) from customer accounts to third party accounts (i.e., a 
transmittal that would result in a change of beneficial ownership);
    (ii) from customer accounts to outside entities (e.g., banks, 
investment companies, etc.);
    (iii) from customer accounts to locations other than a customer's 
primary residence (e.g., post office box, ``in care of'' accounts, 
alternate address, etc.); and
    (iv) between customers and registered representatives (including 
the hand-delivery of checks).
    (2) Customer changes of address.
    (3) Customer changes of investment objectives.
    The policies and procedures required under (b)(1), (b)(2), and 
(b)(3) above must include a means/method of customer confirmation, 
notification, or follow-up that can be documented.

Discretionary Power in Customers' Accounts

    Rule 408
    (a) through (c) unchanged.
    (d) The provisions of this rule shall not apply to discretion as to 
the price at which or the time when an order given by a customer for 
the purchase or sale of a definite amount of a specified security shall 
be executed. The authority to exercise time and price discretion will 
be considered to be in effect only until the end of the business day on 
which the customer granted such discretion, absent a specific, written, 
contrary indication signed and dated by the customer. This limitation 
shall not apply to time and price discretion exercised by Floor brokers 
pursuant to valid Good-Till-Cancelled instructions issued on a ``not-
held'' basis. Any exercise of time and price discretion must be 
reflected on the order ticket.

Records of Orders

    Rule 410. (a) Every member or [his] member organization must 
[shall] preserve for at least three years the first two years in an 
easily accessible place, a record of:

[Transmitted to Floor
    (1) Every order transmitted directly or indirectly by such member 
or organization to the Floor, which record shall include the name and 
amount of the security, the terms of the order, the time when it was so 
transmitted, and the time at which a report of execution was received.

Carried to the Floor]
    [(2)] (1) every order received by such member or member 
organization, either orally or in writing, [and carried by such member 
to the Floor,] which record must [shall] include the name and amount of 
the security, the terms of the order, the time when it was so received 
and the time at [as] which a report of execution was received.
[Entered Off Hours]
    [(3)] (2) every order entered by such member or member organization 
into the Off-Hours Trading Facility (as Rule 900 (Off-Hours Trading: 
Applicability and Definitions) defines that term), which record must 
[shall] include the name and amount of the security, the terms of the 
order, the time when it was so entered, and the time at which a report 
of execution was received. [Cancellation]
    [(4)] (3) the time of the entry of every cancellation of an order 
covered by (1)[,] and (2) [and (3)] above.
[By Accounts] Changes In Account Name or Designation
    Before any order covered by (1)[,] or (2) [or (3)] above is 
executed, there must

[[Page 48433]]

[shall] be placed upon the order slip or other similar record of the 
member[,] or [his] member organization the name or designation of the 
account for which such order is to be executed. No change in such 
account name (including related accounts) or designation (including 
error accounts) shall be made unless the change has been authorized by 
[the] a member, [or another member,] allied member, or a person or 
persons designated under the provisions of Rule 342(b)(1). [in his 
organization who shall,] Such person must, prior to giving his or her 
approval of [such] the account designation change, be personally 
informed of the essential facts relative thereto and [shall] indicate 
his or her approval of such change in writing on the order or other 
similar record of the member or member organization. The essential 
facts relied upon by the person approving the change must be documented 
in writing and maintained with the order or other similar record for at 
least three years, the first two in an easily accessible place as that 
term is used in Securities Exchange Act Rule 17a-4.

Exceptions

    Under exceptional circumstances, the Exchange may upon written 
request waive the requirements contained in (1), (2) and (3) above.
    (b) Every order in any manner transmitted or carried to the Floor 
and [covered by (1) or (2) above to be] executed pursuant to Section 
11(a)(1)(G) of the Act and Rule 11a1-1(T) thereunder must [shall] be 
identified in a manner that will enable the executing member to 
disclose to other members that the order is subject to those 
provisions.
    (See also Rules 112A.10 and 123A.45.)
    .10 For purposes of this Rule, a person designated under the 
provisions of Rule 342(b)(1) to approve account name or designation 
changes must pass an examination acceptable to the Exchange.
INTERPRETATION
Rule 342 OFFICES--APPROVAL, SUPERVISION AND CONTROL
    (a)(b)
.03 Annual Branch Office Inspection
    [At least annual b]Branch office inspections by members and member 
organizations are expected to be conducted at least annually pursuant 
to this Rule, unless it has been demonstrated to the satisfaction of 
the Exchange that because of proximity, special reporting or 
supervisory practice, other arrangements[,] may satisfy the Rule's 
requirements. [certain offices may not warrant an annual inspection.] 
All required inspections must be conducted by a person who is 
independent of the direct supervision or control of the branch office 
(i.e., not the Branch Office Manager, or any person who reports to such 
Manager, or any person to whom such Manager directly reports). Written 
reports of these inspections, or the written authorization of an 
alternative arrangement, are to be kept on file by the organization for 
a minimum period of three years.
    An annual branch office inspection program must include, but is not 
limited to, testing and independent verification of internal controls 
related to the following areas:
    1) Safeguarding of customer funds and securities,
    2) Maintaining books and records,
    3) Supervision of customer accounts serviced by Branch Office 
Managers,
    4) Transmittal of funds between customers and registered 
representatives and between customers and third parties,
    5) Validation of customer address changes, and
    6) Validation of changes in customer account information.
    For purposes of this interpretation, ``annually'' means once in a 
calendar year.
* * * * *

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
    On August 15, 2002, the Exchange submitted to the Commission File 
No. SR-NYSE-2002-36, which proposed several rule amendments intended to 
strengthen members' and member organizations' supervisory procedures 
and internal controls. Included are amendments to NYSE Rule 342 
(``Offices--Approval, Supervision and Control'') and the Interpretation 
to that Rule, NYSE Rule 401 (``Business Conduct''), NYSE Rule 408 
(``Discretionary Power in Customers' Accounts''), and NYSE Rule 410 
(``Records of Orders'').
    On November 18, 2002, Amendment No. 1 was submitted to the SEC, 
which added paragraph (b)(3) to NYSE Rule 401 to include ``customer 
changes of investment objectives'' with the enumeration of business 
activities subject to written policies and procedures.
    The filing was published in the Federal Register for comment on 
November 27, 2002.\7\ The comment period, which ended January 17, 2003, 
resulted in letters from two NYSE member organizations (A.G. Edwards & 
Sons, Inc. and Charles Schwab & Co.), a letter from a non-NYSE member 
organization (Cadaret, Grant & Co.),\8\ and a letter from the 
Securities Industry Association (``SIA'').\9\ Proposed rule text 
amendments representing the Exchange's response to industry comments 
were submitted to the Commission on April 25, 2003 as Amendment No. 2. 
Amendment No. 3 subsumes Amendment No. 2 and includes additional 
amendments requested by Commission staff. Several comments and concerns 
expressed in the A.G. Edwards, Schwab, and SIA letters are very similar 
and thus will be addressed collectively in this filing as remarks from 
the ``Commenters.'' When an issue is unique to a particular letter, it 
will be noted. Amendments to SR-NYSE-2002-36 proposed by the Exchange 
in response to this collective commentary, as well as discussion of the 
issues raised, follow:
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    \7\ See note 4 supra.
    \8\ While this letter references the NYSE filing, its comments 
substantively address the comparable NASD filing (SR-NASD-2002-162), 
and therefore the comments made in this letter will not be discussed 
herein.
    \9\ See letters from Brian Underwood, Senior Vice President, 
Director of Compliance, A.G. Edwards & Sons, Inc., dated December 
18, 2002 (``A.G. Edwards Letter''); Christopher R. Franke, Chairman, 
Self-Regulation and Supervisory Practices Committee, Securities 
Industry Association, dated December 18, 2002 (``SIA Letter''); 
Selwyn J. Noteovitz, Senior Vice President, Global Compliance, 
Charles Schwab & Co., Inc., dated February 25, 2003 (``Schwab 
Letter''), collectively (``Commenters''); and Arthur Grant, 
President, Cadaret, Grant & Co (``Cadaret Letter''), dated December 
17, 2002, to Jonathan G. Katz, Secretary, Commission.
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General Issue
    The SIA suggests that, given implementation costs and business 
model differences, the proposed rule amendments should be adopted in 
the form of ``principles for effective

[[Page 48434]]

supervision'' or ``best practices'' that could be tailored to various 
business models rather than ``prescriptive rules that apply to firms 
across the board.''
    The Exchange does not agree that the proposed rules should be 
adopted in the form of ``principles'' or ``best practices.'' The degree 
of authority carried by rules and their interpretations is deemed to be 
the appropriate impetus to encourage the conduct intended by the 
amendments. However, as discussed in detail below, the Exchange agrees 
that greater flexibility is needed in certain respects to account for 
variations in member organization business models.
Independent Supervision of Managers' Activity
    Proposed NYSE Rule 342.19 requires written policies and procedures 
reasonably designed to independently supervise the customer account 
activity of Sales Managers. The Commenters seek clarification of the 
``independence'' standard. It is contended that individuals within a 
firm at equal or higher organizational levels, peripherally involved, 
or who receive an indirect benefit from the activity being reviewed 
may, nevertheless, have sufficient independence to perform this 
function.
    In response, the proposed amendments to NYSE Rule 342.19 have been 
revised to provide greater flexibility by clarifying that reviews of 
Sales Managers' customer activity may be conducted by a ``qualified 
person,'' provided such person is senior to the manager (i.e., not the 
manager him/herself, or any person with the same job function as such 
manager,\10\ or any person subordinate to the manager). The proposed 
rule has also been revised to make clear that the ``qualified person'' 
standard, in the context of NYSE Rule 342.19, is defined by NYSE Rule 
342.13, which requires passing specified supervisory qualification 
examinations (e.g., Series 9/10).
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    \10\ Telephone conversation between Steve Kasprzak, Attorney, 
NYSE and Jennifer Colihan, Special Counsel, Division of Market 
Regulation, Commission, on August 7, 2003.
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Supervisory Controls and Independent Testing and Verification
    Proposed NYSE Rule 342.23 requires members and member organizations 
to develop adequate controls over each of their business activities. 
The Rule further requires that such controls provide for the 
establishment of procedures for independent verification and testing of 
those business activities. The Commenters sought clarification as to 
who would be sufficiently ``independent'' to perform these 
``verification and testing'' functions.
    While Commenters acknowledge that supervisors lack sufficient 
independence to verify and test procedures they personally implement, 
flexibility to accommodate a variety of supervisory structures beyond 
self-supervision is sought. Commenters contended that senior 
supervisors in a hierarchal supervisory structure should not be 
excluded because they may derive an ``indirect benefit'' from the 
activity under review.
    The Exchange recognizes the far-ranging scope and variety of 
activities subject to the verification and testing requirements. 
Accordingly, the requirement that internal control procedures be 
``separate and apart from the day-to-day supervision of such 
functions'' has been deleted from the proposed amendments to NYSE Rule 
342.23 to allow greater flexibility in establishing such internal 
controls. However, firms will be expected to make an informed 
determination that persons responsible for verification and testing of 
business activities are sufficiently independent and qualified to do so 
effectively.
    Commenters also seek clarification and assurance that the proposed 
requirements do not create an obligation for firms to annually test and 
verify ``every aspect'' of their supervisory procedures but rather 
allow for a ``risk-based approach'' based upon ongoing assessments of 
the firm's business.
    In response, the proposed amendments to NYSE Rule 342.23 have been 
revised to allow for an ongoing analysis, based upon appropriate 
criteria, to assess and prioritize those business activities requiring 
independent verification and testing.
Designated Internal Control Requirements
    Proposed NYSE Rule 401(b) (``Business Conduct'') requires that 
written policies and procedures, administered pursuant to the internal 
control requirements prescribed under proposed NYSE Rule 343.23, must 
specifically address transmittals of funds between accounts, changes in 
investment objectives, and changes of address. These designated 
policies and procedures must include a means/method of customer 
confirmation, notification, or follow-up that can be documented.
    The SIA has proposed that these requirements should apply only to 
retail accounts. An ``institutional carve-out'' is sought, given that 
much of such business is done DVP or through Prime Brokerage accounts.
    The Exchange believes that an exemption for institutional accounts 
is inappropriate. In order for an internal controls policy to be 
effective, it must be comprehensive. Accordingly, it is reasonable and 
appropriate that regulatory oversight in the sensitive areas designated 
in proposed NYSE Rule 401(b) should extend to institutional account 
activity.
Time and Price Discretion
    Proposed amendments to paragraph (d) of NYSE Rule 408 (`` 
Discretionary Power in Customers' Accounts'') require that time and 
price discretionary authority be limited to the day it is granted, 
absent written customer authorization to the contrary.
    Commenters suggest consideration of an ``institutional exemption'' 
from the requirement on the basis that requiring such written 
authorization would be inconvenient and unnecessary for sophisticated 
institutional clients who do not need the same level of protection as 
retail clients. Such clients are accustomed to entering orders that are 
``worked'' over one or more days on a Good-Till-Cancelled/Not Held 
basis.
    The Exchange believes that a general institutional exemption is 
inappropriate. However, the amendments have been revised to clarify 
that written authorization need not be obtained for the exercise of 
time and price discretion beyond the day a customer grants such 
discretion for orders exercised by Floor brokers pursuant to valid 
Good-Till-Cancelled instructions issued on a ``not held'' basis.
    In addition, Commenters seek clarification as to whether the 
written authorization for the exercise of time and price discretion 
beyond the business day it was granted need be obtained on an ``order-
by-order basis,'' or whether general ``standing instructions'' from the 
customer are permitted.
    The current text of NYSE Rule 408(d) clearly limits the exercise of 
time and price discretion to ``the purchase or sale of a definite 
amount of a specified security. * * *.'' Any written authorization 
granting time and price discretion must comply with this established, 
trade-specific standard. Customers who wish to grant more extensive 
discretionary authority to their registered representative may do so 
pursuant to a fully executed trading authorization.
Maintenance of ``Account Designation Change'' Documentation
    The proposed amendments to NYSE Rule 410 (``Records of Orders'') 
state, in

[[Page 48435]]

part, that the ``essential facts relied upon by the person approving an 
account designation change must be documented in writing and maintained 
in a central location.''
    A.G. Edwards seeks clarification that such documentation be 
maintained ``in a location where the determination and approval occurs, 
not in the Home Office'' so as to avoid ``duplicate record.''
    The determination of where such documentation should be retained 
would depend on the supervisory structure of the firm. Typically, the 
``central location'' would be where the account designation change was 
approved. However, the proposed rule amendments should not be construed 
to be determinative of where such records should be maintained, nor 
discourage maintenance of records in more than one location if 
regulatory purposes are well served by doing so.
    Accordingly, the requirement that relevant documentation be 
maintained in ``a central location'' has been deleted and replaced with 
the requirement that such documentation be maintained for three years, 
the first two in an ``easily accessible place,'' consistent with the 
meaning of that term under SEC Rule 17a-4.\11\
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    \11\ See 17 CFR 240.17a-4.
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Independent Branch Office Inspections
    Two related issues have been raised regarding proposed amendments 
to the Interpretation of NYSE Rule 342 (``Offices--Approval, 
Supervision, and Control''). The amendments originally required that 
branch office visits be conducted by a person ``independent of the 
ongoing supervision, control, or performance evaluation of the branch 
office (i.e., not the Branch Office Manager, Sales Manager, District/
Regional Manager assigned to the office, or any other person performing 
a similar supervisory function).''
    Commenters have raised concerns that the amendments may result in 
economically burdensome and counter-productive supervisory structures. 
Also, clarification is sought as to who would be sufficiently 
``independent'' to conduct such visits. A more flexible standard is 
sought that would prohibit supervisors from inspecting their own 
offices but would allow other supervisory personnel in a hierarchical 
supervisory system, sufficiently outside of the day-to-day chain of 
command, to meet the ``independence'' standard.
    The Exchange believes that in order for a branch inspection program 
to be effective, reasonable guidelines must be in place to minimize 
conflicts of interest. While these guidelines need not exclude all 
participants at every level of a branch office's hierarchal supervisory 
structure, the Exchange believes it is reasonable that they exclude the 
branch manager, any person to whom the branch manager directly reports, 
and any person who reports to the branch manager. The proposed 
amendments have been revised accordingly.
Number of Annual Branch Office Inspections
    A.G. Edwards raised the concern that the proposed amendments, in 
conjunction with pending NYSE rule proposals that amend the definition 
of ``branch office,'' will create a ``huge burden'' with respect to 
annual inspections for firms with far-reaching branch networks.
    The Exchange currently requires, absent a specific waiver, annual 
inspections of each branch office location.\12\ Pending NYSE Rule 
amendments relating to the definition of a ``branch office''\13\ would 
significantly reduce the types of locations required to be registered 
as branch offices; therefore, the number of branch office inspections 
required of each member organization would either be reduced or remain 
the same.
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    \12\ See NYSE Rule 342(a)(b)/03 in the NYSE Interpretation 
Handbook.
    \13\ See Securities and Exchange Act Release No. 46888 (November 
22, 2002), 67 FR 72257 (December 4, 2002) SR-NYSE-2002-34.
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Effective Date
    Commenters expressed concern has been raised that the effective 
date of any new requirements allow adequate time to enable firms to 
make necessary systems changes in an efficient and cost-effective 
manner. Accordingly, the Exchange intends to establish an effective 
date six months from Commission approval of the proposed rule 
amendments to allow members and member organizations sufficient time to 
address any necessary procedural or systems changes.
2. Statutory Basis
    The Exchange believes that the statutory basis for the proposed 
rule change is Section 6(b)(5) of the Exchange Act,\14\ which requires, 
among other things, that an Exchange have rules that are designed to 
promote just and equitable principles of trade, to remove impediments 
to and to perfect the mechanism of a free and open market and a 
national market and, in general, to protect investors and the public 
interest. The proposed rule amendments are intended to foster the 
strengthening of NYSE members' and member organizations' internal 
controls and supervisory systems
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    \14\ 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 the 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

    SR-NYSE-2002-36 and Amendment No. 1 were published in the Federal 
Register on November 20, 2002.\15\ Commenters included Cadaret, Grant & 
Co., A.G. Edwards & Sons, Inc., Charles Schwab & Co., and the SIA. 
Their comments and the Exchange's response appear above.
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    \15\ See note 4, supra.
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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 Amendment Nos. 2 
and 3, are 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

[[Page 48436]]

the Commission's Public Reference Room. Copies of such filing will also 
be available for inspection and copying at the principal office of the 
NYSE. All submissions should refer to File No. SR-NYSE-2002-36 and be 
submitted by September 3, 2003.

    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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Margaret H. McFarland,
Deputy Secretary,
[FR Doc. 03-20600 Filed 8-18-03; 8:45 am]
BILLING CODE 8010-01-P