[Federal Register Volume 69, Number 45 (Monday, March 8, 2004)]
[Notices]
[Pages 10791-10803]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-5112]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-49345; File No. SR-NYSE-2004-02]


Self-Regulatory Organizations; Notice of Filing and Order 
Granting Accelerated Approval of Proposed Rule Change by the New York 
Stock Exchange, Inc. Relating to Follow-up Amendments to Its 
Constitution and Rules in Connection With Its New Governance and 
Management Architecture

March 1, 2004.
    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 January 16, 2004, the New York Stock Exchange, Inc. 
(``NYSE'' 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 the Exchange. 
The Commission is publishing this notice to 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 Exchange proposes to amend its Constitution and Rules. The 
changes to the NYSE Constitution and Rules constitute follow-up 
amendments related to the Exchange's new governance and management 
architecture, which was approved by the Securities and Exchange 
Commission on December 17, 2003.\3\
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    \3\ See Securities Exchange Act Release No. 48946 (December 17, 
2003), 68 FR 74678 (December 24, 2003) (``Approval Order'').
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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 III below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.
    The amended and restated Constitutional provisions and revised 
Rules, marked to show changes from the Exchange's existing Constitution 
and Rules, are set forth in Exhibit A hereto.

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

1. Purpose
    By order dated December 17, 2003, the Commission approved a 
proposed rule change submitted by the Exchange to amend and restate the 
Exchange's Constitution to reform the governance and management 
architecture of the Exchange.\4\ The Commission's approval order noted 
that the Exchange contemplated adopting several further amendments to 
the Constitution.\5\ This filing proposes those additional amendments.
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    \4\ See Securities Exchange Act Release No. 48946 (December 17, 
2003); 68 FR 74678 (December 24, 2003).
    \5\ Id., at note 4.
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    The proposed amendments to the Exchange's Constitution will 
accomplish the following:
     Amend Article IV, section 12(a) to codify that 
each of the Standing Committees of the Board of Directors shall have 
the authority to engage independent legal counsel and other advisors as 
it determines necessary to carry out its duties, specifying that they 
should be other than the counsel or other advisors who advise Exchange 
officers or employees.\6\
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    \6\ This was first proposed with respect to the Audit Committee 
only, but was later expanded to cover any Standing Committee and to 
add the caveat regarding use of different advisors.
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     Amend Article IV, section 12(a) to clarify that 
the Chief Executive Officer (``CEO'') is recused from Board 
deliberations on the activities of the Standing Committees specified in 
that paragraph.\7\
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    \7\ These are the Nomination & Governance, Human Resources & 
Compensation, Audit, and Regulatory Oversight & Regulatory Budget 
Committees.
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     Amend Article IV, section 14(a) to clarify that 
rulemaking on the subjects described in that paragraph as normally 
confined to the Board or its committees may, if necessary, be 
authorized by an officer of the Exchange between board meetings, 
subject to informing the Board at its next meeting, and to the prior 
approval of the Chief Regulatory Officer if on a regulatory matter.\8\
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    \8\ As originally provided to the membership in a Special 
Membership Bulletin regarding Additional Amendments to the 
Constitution (``Special Membership Bulletin''), dated November 26, 
2003, this language would have authorized an officer to ``adopt 
rules or otherwise act as aforesaid.'' The Exchange notes that, at 
the suggestion of Commission staff, the ``otherwise act'' language 
was deleted to avoid ambiguity. The Exchange further indicates that 
in the same section, again at the suggestion of Commission staff, 
language was added to clarify that a ``committee consisting solely 
of directors'' means a committee consisting solely of independent 
directors, i.e., excluding the Chief Executive Officer. Under 
Article XIV, section 1 of the Constitution, minor, clarifying 
changes such as these may be made by the Board of the Exchange 
without the need for a further notice to the members or a waiting 
period.
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     Amend Article VI, section 1 to clarify that it 
is the Chief Regulatory Officer who appoints regulatory officers, and 
amend section 3 of that Article to clarify that the CEO's 
responsibilities are subject to the specific provisions elsewhere in 
the Constitution regarding the separation of the regulatory functions.
     Modify Article V, section 2(b) to add an 
individual investor

[[Page 10792]]

representative to the Board of Executives.
     Modify Article V, section 2(b)(ii) to remove the 
requirement that Specialist representatives on the Board of Executives 
be the chief or a principal executive officer of the specialist firm, 
thereby increasing the pool of potential candidates, while adding a 
requirement that each person in this category be registered as a 
specialist and spend substantial time on the floor of the Exchange.
    In addition to the foregoing Constitutional amendments, the 
proposed rule change also includes several amendments to the Exchange's 
Rules. In general, each of these changes is intended to conform the 
Exchange's Rules to its new Constitution.
    More specifically, the proposed amendments to the Exchange's Rules 
will accomplish the following:
     Accommodate the separation of the offices of the 
Chairman of the Board of Directors and the CEO by, among other things, 
differentiating the authority and responsibilities of the Chairman and 
CEO.
     Eliminate the office, authority and 
responsibilities of the Vice Chairman.
     Provide generally that the various 
administrative duties and responsibilities exercised under the Rules by 
the Floor Directors will now be exercised by the Floor representatives 
serving on the new Board of Executives.
     Specify under Rule 103C (Listed Company 
Relations Proceedings) that the Listed Company Relations Subcommittee 
of the Quality of Markets Committee, previously consisting of two 
listed company members of the committee and two Vice Chairmen of the 
Exchange, will instead consist of four members of the Board of 
Executives, two of whom shall be representatives of listed companies.
     Amend Rule 476 (Disciplinary Proceedings) to 
specify that a review by the Board may be required by any member of the 
Board of Executives, as well as by any member of the Board of 
Directors.
     Amend Rule 499, Commentary .70 (as well as the 
identical provision found in section 804 of the Listed Company Manual) 
to cross reference specifically to the Committee specified in section 
12(b)(1) of Article IV of the Exchange's Constitution.
1. Statutory Basis
    The basis for this proposed rule change is the requirement under 
section 6(b)(1)\9\ of the Act that an exchange be organized and have 
the capacity to be able to carry out the purposes of the Act; the 
requirement under section 6(b)(3)\10\ that the rules of an exchange 
assure a fair representation of its members in the selection of its 
directors and administration of its affairs and provide that one or 
more directors shall be representative of issuers and investors; and 
the requirement under section 6(b)(5)\11\ that an exchange have rules 
that are designed to prevent fraudulent and manipulative acts and 
practices, to promote just and equitable principles of trade, to remove 
impediments to and perfect the mechanism of a free and open market, 
and, in general, to protect investors and the public interest.
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    \9\ 15 U.S.C. 78f(b)(1).
    \10\ 15 U.S.C. 78f(b)(3).
    \11\ 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. 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. 
Comments may also be submitted electronically at the following e-mail 
address: [email protected]. All comment letters should refer to 
File No. SR-NYSE-2004-02. 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, comments should be sent in 
hardcopy or by e-mail but not by both methods. 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 such filing will also be available for 
inspection and copying at the principal office of the Exchange. All 
submissions should refer to File No. SR-NYSE-2004-02 and should be 
submitted by March 29, 2004.

IV. Commission's Findings and Order Granting Accelerated Approval of 
Proposed Rule Change

    The Commission finds that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder applicable to a national securities exchange.\12\ In 
particular, the Commission finds that the proposed rule change is 
consistent with section 6(b)(1)\13\ of the Act, which requires that the 
exchange be so organized and have the capacity to be able to carry out 
the purposes of the Act. The Commission also finds that the proposed 
rule change is consistent with section 6(b)(3)\14\ of the Act, which 
requires that one or more directors of an exchange be representative of 
issuers and investors, and section 6(b)(5)\15\ of the Act, which 
requires that the rules of an exchange be designed to promote just and 
equitable principles of trade, 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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    \12\ In approving this proposal, the Commission has considered 
its impact on efficiency, competition, and capital formation. 15 
U.S.C. 78c(f).
    \13\ 15 U.S.C. 78f(b)(1).
    \14\ 15 U.S.C. 78f(b)(3).
    \15\ 15 U.S.C. 78f(b)(5).
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    The Commission believes that the proposed rule change should help 
facilitate the implementation of the NYSE's new governance structure, 
to the benefit of the Exchange, its constituencies, investors and the 
public generally.\16\ The Commission believes that the proposed 
Constitutional changes relating to the operation of the Exchange's 
Standing Committees, namely the authority of the Standing Committees to 
engage independent legal counsel and other advisors, and the

[[Page 10793]]

limitation on the involvement of the Exchange's CEO in the 
deliberations of the Standing Committees, should help ensure the 
independence of these key committees, which are charged with overseeing 
critical Exchange operations. The Commission also believes that the 
proposed Constitutional changes relating to the NYSE's Chief Regulatory 
Officer, including the explicit authority of the Chief Regulatory 
Officer to appoint other regulatory officers, and the clarification of 
the authority of the Exchange's CEO regarding regulatory matters, are 
designed to further insulate the Exchange's regulatory function from 
undue management pressures.
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    \16\ The Commission notes that the NYSE expressed its intention 
to pursue these Constitutional changes in the Special Membership 
Bulletin, and in a letter to the Director, Division of Market 
Regulation, which outlined the proposed additional changes to the 
Constitution. See Special Membership Bulletin, supra note 8, and 
letter from Darla C. Stuckey, Corporate Secretary, NYSE, to Annette 
L. Nazareth, Director, Division of Market Regulation, Commission, 
dated December 4, 2003. The Commission also referred to these 
prospective Constitutional changes in the Approval Order, at notes 
14, 22, 23, 35, 36, 39, 40, and 88.
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    In addition, the Commission believes that the NYSE's proposals to 
remove the requirement that specialist representatives on the Board of 
Executives be the chief or a principal officer of the specialist firm, 
and to add the requirement that the specialist representative spend a 
substantial amount of time on the floor of the Exchange, should broaden 
the pool of qualified specialist candidates for the Board of 
Executives. The Commission also believes that the Exchange's proposal 
to allow the Board to delegate the rulemaking authority referenced in 
section 14(a) of the Constitution to an Exchange officer between Board 
meetings (subject to appropriate notice and approval, where 
appropriate, from the Chief Regulatory Officer) should provide adequate 
flexibility for the Exchange to effect necessary changes during the 
periods between Board meetings, while maintaining the Board's and the 
Chief Regulatory Officer's oversight and control.
    The Commission also believes that the Exchange's proposal to 
require that at least one member of the Board of Executives represent 
individual investors in equity securities furthers the objective of 
section 6(b)(3) \17\ of the Act that investors be represented in the 
governance of an exchange. The Commission notes that in order to 
fulfill the requirements of section 6(b)(3) of the Act, the NYSE 
Constitution now requires that the Nominating & Governance Committee 
recommend at least one candidate representing issuers and one candidate 
representing investors for membership on the Board of Directors.\18\ 
The Commission believes that the current proposal to reserve a specific 
slot for an individual investor representative to the Board of 
Executives advances the goal of ensuring that the various Exchange 
constituencies are represented and given an opportunity to provide 
their input in the Exchange's governance.
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    \17\ 15 U.S.C. 78f(b)(3).
    \18\ NYSE Constitution, Article IV, section 12(a)(1).
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    The Commission finds that the proposed amendments to the Exchange's 
Rules conform these Rules to recent changes to the Constitution. The 
Commission notes, for example, that the proposed changes to Exchange 
Rules that further delineate the authority and responsibilities of the 
NYSE Chairman and CEO are consistent with the Exchange's goal to 
clarify the roles of these two positions. The Commission also notes 
that the Exchange has proposed other changes to the Exchange's Rules to 
reflect its new governance and management structure. For example, by 
replacing references to ``Floor Directors'' in the Exchange's Rules 
with ``Board of Executive Floor Representatives,'' the Exchange simply 
reflects the fact that, under the new governance structure, the 
position of ``Floor Director'' no longer exists. The Commission also 
believes that revising the composition of the Listed Company Relations 
Subcommittee of the Quality of Markets Committee to consist of four 
Board of Executive members, two of whom represent listed companies, and 
a senior officer of the Exchange reflects the recent Constitutional 
changes. Similarly, in the Commission's view the rule revisions to 
permit a member of the Board of Executives to call for Board review of 
a determination or penalty imposed by a Hearing Panel comports with the 
recent change to Article IX of the Constitution. Finally, the 
Commission believes that other proposed changes to the Exchange's Rules 
to delete references to obsolete terms and offices conform the Rules to 
the Constitution.
    Accordingly, the Commission finds good cause, pursuant to section 
19(b)(2)\19\ of the Act, for approving the proposed rule change prior 
to the thirtieth day after the date of publication of notice thereof in 
the Federal Register. The Commission believes that granting accelerated 
approval to the proposal should help the Exchange to implement the 
recent changes to the NYSE's governance and management structure, 
clarify certain Constitution provisions, and conform various Exchange 
rules to the new Constitution.
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    \19\ 15 U.S.C. 78s(b)(2).
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V. Conclusion

    It is therefore ordered, pursuant to section 19(b)(2) of the 
Act,\20\ that the proposed rule change (SR-NYSE-2004-02), is hereby 
approved on an accelerated basis.
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    \20\ Id.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\21\
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    \21\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
Exhibit A
    Text of the Proposed Rule Change (Changes are italicized; deleted 
material is in [brackets].)
New York Stock Exchange, Inc.
Constitution
Article IV
Board of Directors
* * * * *
    Sec. 12. Standing Committees. The Standing Committees and their 
respective Chairmen shall be appointed by the Board at its annual 
organizational meeting. The Board shall adopt for each Standing 
Committee a charter consistent with the duties prescribed in the 
subsections below, and including such additional duties as may be 
considered appropriate and not inconsistent with this Constitution. 
Each Standing Committee shall have the authority to engage independent 
legal counsel and other advisors as it determines necessary to carry 
out its duties, but may not use counsel or other advisors who advise 
Exchange officers or employees.
    (a) Committees Consisting Solely of Directors. The Standing 
Committees described in Section 12(a)(1)-(4) shall consist solely of 
directors, other than the Chief Executive Officer, and shall report to 
the Board. Such Standing Committees may be combined with any other such 
Standing Committee, be subdivided into one or more such Standing 
Committees, or the Board may constitute itself as a committee of the 
whole in respect of such a Standing Committee. [; provided, however, 
that if the Board constitutes itself] The Chief Executive Officer shall 
be recused from deliberations of the Board, whether it is acting as the 
Board or as a committee of the whole, with respect to the activities of 
the Nominating & Governance Committee, the Human Resources & 
Compensation Committee, the Audit Committee or the Regulatory Oversight 
& Regulatory Budget Committee [, the Chief Executive Officer shall be 
recused from such Board deliberations].
    (1) Nominating & Governance Committee. The Nominating & Governance 
Committee shall be

[[Page 10794]]

responsible for (i) recommending to the Board candidates for Board 
membership in accordance with Article IV, Section 2 and candidates for 
Trustees of the Gratuity Fund, (ii) recommending to the Board 
candidates for Board of Executives membership, (iii) conducting the 
Board's annual governance review, (iv) reviewing and recommending the 
Exchange's corporate governance guidelines, (v) establishing an 
appropriate process for, and overseeing implementation of, the Board's 
self-assessments (including Board self-assessment, committee self-
assessments and director assessments) and the Board of Executives' 
self-assessments, (vi) recommending director compensation, and (vii) 
succession planning for the Chairman and Chief Executive Officer of the 
Exchange. In discharging its responsibilities under clause (i) of the 
immediately preceding sentence, the Nominating & Governance Committee 
shall propose persons as candidates for the Board who, in the opinion 
of the Committee, (a) are committed to serving the interests of the 
public and strengthening the Exchange as a public securities market; 
and (b) include among their number individuals at least one of whom is 
intended to allow the Exchange to meet the requirements of section 
6(b)(3) of the Act concerning issuers and at least one of whom is 
intended to allow the Exchange to meet the requirements of section 
6(b)(3) of the Act concerning investors. In addition, the Nominating & 
Governance Committee shall establish procedures to solicit the input of 
investors in equity securities and members regarding Board candidates. 
The Nominating & Governance Committee shall also solicit input from the 
various Exchange communities regarding candidates for appointment by 
the Board to the Board of Executives. Consensus recommendations for 
candidates to represent the groups referenced in clauses (ii), (iii) 
and (iv) of Article V, Section 2(b) put forward by the respective 
representatives of those groups shall be forwarded to the Board as the 
recommendations of the Nominating & Governance Committee unless and to 
the extent such Committee determines that a candidate does not qualify 
for the position.
    (2) Human Resources & Compensation Committee. The Human Resources & 
Compensation Committee shall be responsible for (i) reviewing and 
approving corporate goals and objectives relevant to Chief Executive 
Officer compensation, evaluating the Chief Executive Officer's 
performance in light of those goals and objectives, and, together with 
the other directors elected by the members, determining and approving 
such compensation, (ii) reviewing and approving recommendations 
regarding compensation and personnel actions involving senior Exchange 
personnel, including such recommendations involving senior regulatory 
personnel received from the Regulatory Oversight & Regulatory Budget 
Committee, and (iii) reporting annually to the members and the public 
on the compensation of the five most highly compensated officers of the 
Exchange (as well as director compensation) and on the compensation 
philosophy and methodology used to award that compensation (including 
information relating to appropriate comparisons, benchmarks, 
performance measures and evaluation processes consistent with the 
mission of the Exchange).
    (3) Audit Committee. The Audit Committee shall be responsible for 
assisting the board in its oversight of the integrity of the Exchange's 
financial statements, the Exchange's compliance with legal and 
regulatory requirements, and the independent auditor's qualifications 
and independence, including the direct responsibility for (i) the 
hiring, firing and compensation of the independent auditor, (ii) 
overseeing the independent auditor's engagement, (iii) meeting 
regularly in executive session with the auditor, (iv) reviewing the 
auditor's reports with respect to the Exchange's internal controls, (v) 
pre-approving all audit and non-audit services performed by the auditor 
and (vi) determining the budget and staffing for the Internal Audit 
Unit. The Audit Committee charter shall contain additional duties and 
responsibilities comparable to those required of issuers listed on the 
Exchange.
    (4) The Regulatory Oversight & Regulatory Budget Committee. The 
Regulatory Oversight & Regulatory Budget Committee shall be responsible 
for (i) assuring the effectiveness, vigor and professionalism of the 
Exchange's regulatory program, (ii) determining the budget for the 
Regulatory Group, the Listings and Compliance Unit, the Hearing Board, 
the Arbitration Unit and the Regulatory Quality Review Unit and (iii) 
oversight of the Regulation, Enforcement & Listing Standards Committee 
and the Regulatory Quality Review Unit. This Committee shall determine 
the Exchange's regulatory plan, budget and staffing proposals annually 
and shall be responsible for assessing the Exchange's regulatory 
performance and recommending compensation and personnel actions 
involving senior regulatory personnel to the Board's Human Resources & 
Compensation Committee for action.
(b) Joint Committees
    (1) The Regulation, Enforcement & Listing Standards Committee shall 
be composed of both directors (other than the Chief Executive Officer) 
and Board of Executives members (including at least one Industry Member 
of the Board of Executives) as selected by the Board; provided, 
however, that a majority of the members of such committees voting on a 
matter subject to a vote of such Committee shall be directors. Such 
committee shall report to the Regulatory Oversight & Regulatory Budget 
Committee and shall (i) review and provide general advice with respect 
to the Exchange's programs for market surveillance, member and member 
organization regulation and enforcement, and the listing and de-listing 
of securities, and (ii) hear appeals of disciplinary determinations and 
determinations to de-list a listed company.
    (2) Additional joint committees may be appointed by the Board from 
time to time in its discretion; provided that each shall consist of at 
least one director (other than the Chief Executive Officer). All such 
committees shall report to the Board.
    Sec. 13. Special Committees, Advisory Committees, Etc. Special 
committees, subcommittees, advisory committees, boards or councils may 
be appointed from time to time in the Board's discretion and may be 
comprised of individuals who are not directors or members of the Board 
of Executives.
    Sec. 14. Delegation.
    (a) Delegation Authority. The Board may delegate such of its powers 
as it may from time to time determine, subject to the provisions of the 
Constitution and applicable law, to the Board of Executives, to such 
officers and employees of the Exchange, and to such committees, 
composed either of directors or otherwise, as the Board may from time 
to time authorize; provided, however, that, except as this Constitution 
otherwise provides, the Board may not delegate, and no committee may 
re-delegate, to the Board of Executives, to officers and employees of 
the Exchange or to any committee other than a committee consisting 
solely of directors (other than the Chief Executive Officer), authority 
either to adopt rules under Article VIII, Section 1 or Article IX, 
Section 1, or to act on any subject matter described in Article IV, 
Section 12(a) or (b)(1), except by effecting a rule change within the 
meaning of Section 19(b)(1) of the Act.

[[Page 10795]]

Notwithstanding the foregoing, the Board may authorize an officer or 
officers of the Exchange to adopt rules as aforesaid, so long as the 
Board is informed of any such action at its next meeting, and the prior 
approval of the Chief Regulatory Officer is obtained for any regulatory 
matter. Any committee of directors to which authority is delegated to 
adopt rules under Article VII, Section 1 or Article IX, Section 1 shall 
include thereon at least one director nominated by the Industry Members 
of the Board of Executives, as provided in Article IV, Section 2. The 
Board shall diligently oversee the activities of the Board of 
Executives, the officers and employees of the Exchange, and any 
committees to which the Board has delegated authority pursuant hereto.
    (b) Limitation of Delegation Authority. A member, member 
organization, allied member or approved person affected by a decision 
of any officer, employee or committee acting under powers delegated by 
the Board may require a review by the Board of such decision, by filing 
with the Secretary of the Exchange a written demand therefore within 10 
days after the decision has been rendered, except as otherwise provided 
in Article IX, Section 6. Any and all powers delegated by the Board may 
continue to be exercised by the Board notwithstanding such delegation, 
and the Board may exercise such review and oversight over the exercise 
of (or omission to exercise) any delegated authority as it shall at any 
time determine.
* * * * *
Article V
Board of Executives
    Sec. 1. Powers and Authority of the Board of Executives. The Board 
shall establish a Board of Executives. Subject to the Board's ultimate 
authority, review and oversight and except with respect to the 
responsibilities delegated to the Standing Committees, pursuant to 
Article IV, Section 12, the Board of Executives shall advise the Chief 
Executive Officer in his or her management of the operations of the 
Exchange. Copies of any materials, documents or reports prepared or 
received by the Board of Executives shall be furnished to the Board of 
Directors. Industry Members of the Board of Executives (as defined in 
Section 2 of this Article) shall also be responsible for recommending 
to the Board candidates for Board membership in accordance with, and 
who meet the criteria provided for in, Article IV, Section 2 of this 
Constitution. In discharging this responsibility, the Industry Members 
of the Board of Executives shall propose persons who, in their opinion, 
(i) are committed to serving the interests of the public and 
strengthening the Exchange as a public market, and (ii) will allow the 
Exchange to meet the requirements of section 6(b)(3) of the Act 
concerning members of the Exchange.
    Sec. 2. Composition of Board of Executives.
    (a) The Board of Executives shall provide a reasonably balanced 
representation of the many communities that come together in the 
Exchange: listed companies, investors, members and member 
organizations, and lessor members.
    (b) The Board of Executives shall consist of the Chairman of the 
Board (who shall be the Chairman of the Board of Executives), the Chief 
Executive Officer (if such individual is not also the Chairman), and at 
least 20 but no more than 25 members (``Board of Executives members''). 
The Board of Executives members (other than the Chairman and Chief 
Executive Officer) shall be appointed by the Board at its annual 
organizational meeting and shall consist of (i) at least six 
individuals who are either the chief executive or a principal executive 
officer of a member organization that engages in a business involving 
substantial direct contact with securities customers, (ii) at least two 
individuals, each of whom is registered as a specialist and spends a 
substantial part of his or her time on the Floor of the Exchange, [who 
are either the chief executive or a principal executive officer of a 
specialist member organization,] (iii) at least two individuals, each 
of whom spends a majority of his or her time on the Floor of the 
Exchange, and has as a substantial part of his or her business the 
execution of transactions on the Floor of the Exchange for other than 
his or her own account or the account of his or her member 
organization, but who shall not be registered as a specialist, (iv) at 
least two individuals who are lessor members who are not affiliated 
with a broker or dealer in securities, (v) at least four individuals 
who are either the chief executive or a principal executive officer of 
an institution that is a significant investor in equity securities, as 
least one of whom shall be a fiduciary of a public pension fund; (vi) 
at least one individual intended to represent individuals who invest in 
equity securities and are retail clients of member organizations, and 
(vii) at least four individuals who are either the chief executive or a 
principal executive officer of a listed company (the members of the 
Board of Executives referenced in subsections (i), (ii), and (iii) 
herein collectively shall be called ``Industry Members of the Board of 
Executives''). If the Board increases the size of the Board of 
Executives it shall strive to maintain approximately the same balance 
between Industry Members of the Board of Executives and other members 
of the Board of Executives as is represented above. If the Board 
increases the size of the Board of Executives, it shall also be free to 
add members to the Board of Executives who represent other elements of 
the Exchange community. Each person who is not a member of the Exchange 
and is appointed to the Board of Executives shall, by the acceptance of 
such position, be deemed to have agreed to uphold this Constitution.
* * * * *
Article VI
Officers
    Sec. 1. Officers. The officers of the Exchange shall include the 
Chairman of the Board, the Chief Executive Officer, the President, if 
there be one, the Chief Regulatory Officer, one or more Vice Presidents 
(one or more of whom may be designated as Executive Vice Presidents or 
as Senior Vice Presidents or by other designations), a Secretary, a 
Treasurer, a Controller and such other officers as the Chief Executive 
Officer may propose, subject to the approval of the Board. Any office 
may be occupied by more than one individual. An officer, if a member of 
the Exchange at the time of election, shall promptly thereafter dispose 
of his or her membership by sale or lease, and if by lease, the power 
to vote must be disposed of by the lease. The Board shall appoint the 
Chairman, the Chief Executive Officer, and the Chief Regulatory 
Officer. If the Chairman is neither the Chief Executive Officer nor 
chosen from among the directors elected by the members, he or she must 
satisfy the independence criteria for Board membership set forth in 
Article IV, Section 2 of this Constitution. The President and the non-
regulatory officers of the Exchange shall be appointed by the Chief 
Executive Officer, subject to approval of the Board. The Chief 
Regulatory Officer shall appoint the officers reporting to him or her, 
subject to approval of the Board. Each officer of the Exchange, by his 
or her acceptance of such office, shall be deemed to have agreed to 
uphold this Constitution. While no officer of the Exchange shall have 
any authority to recommend candidates for election to the Board or for 
appointment by the Board to any committee, the Board or the Nominating 
& Governance

[[Page 10796]]

Committee may solicit the input of any Exchange officer at its own 
initiative and discretion.
    Sec. 2. The Chairman. The Chairman shall preside at all meetings of 
the Board and of the Board of Executives and shall decide all questions 
of order, subject, however, to an appeal to the Board; provided, 
however, that if the Chairman is also the Chief Executive Officer, he 
or she shall not participate in executive sessions of the Board. If the 
Chairman is not the Chief Executive Officer, he or she shall act as 
liaison officer between the Board and the Chief Executive Officer. In 
addition to his or her usual duties, the Chairman shall make an Annual 
Report on the Exchange's activities to a Plenary Session.
    Sec. 3. The Chief Executive Officer. Subject to the authority of 
the Board, and to the functional separation of the regulatory functions 
of the Exchange as described in this Constitution, the Chief Executive 
Officer of the Exchange shall be responsible for the management and 
administration of the affairs of the Exchange.
    Sec. 4. Chief Regulatory Officer and Other Officers.
    (a) Chief Regulatory Officer. Subject to the authority of the Board 
and the Regulatory Oversight & Regulatory Budget Committee, and to the 
administrative standards and policies established by the Chief 
Executive Officer made applicable to the Chief Regulatory Officer by 
the Regulatory Oversight & Regulatory Budget Committee, the Chief 
Regulatory Officer shall be responsible for the management and 
administration of the regulatory functions of the Exchange.
    (b) Other Officers. The President and other officers shall have 
such functions and responsibilities as the Chief Executive Officer may 
from time to time assign, subject to the approval of the Board, and, in 
the case of senior regulatory personnel, subject to the specific 
oversight and control of the Regulatory Oversight & Regulatory Budget 
Committee.
    Sec. 5. Absence, Inability to Act or Vacancy in Office of the 
Chairman. In case of the absence, inability to act or vacancy in office 
of the Chairman of the Board, such other person or persons as the 
Board, by the affirmative vote of a majority of the entire Board, may 
designate shall assume all the functions and discharge all the duties 
of the Chairman.
    Sec. 6. Removal. Any officer of the Exchange may be removed, either 
with or without cause, by the affirmative vote of a majority of the 
entire Board.
New York Stock Exchange, Inc.
Rules
Rule 16
Liability of Exchange Relating to Operation of ITS and Pre-Opening 
Application
* * * * *
    (B)(a) For the convenience of members on the Floor, the Exchange 
shall furnish employees, known as ``ITS clerks'', who will, on behalf 
of such members, send and receive through the System commitments and 
obligation to trade, pre-opening notifications and responses thereto. 
All errors and omissions made by one or more ITS clerks with respect to 
any single System Transaction or proposed System Transaction shall give 
rise to a single claim against the Exchange by the on-Floor member who 
instructed the ITS clerk or clerks who made the errors or omissions for 
all loss, cost, damage or expense (hereinafter called ``loss'') 
suffered by such member, or any other member or member organization for 
which he acted, as a result of such error and omissions, but only to 
the extent and as provided in this paragraph (B), and the Exchange 
shall be free to assert any defense to such claim it may have. No claim 
shall arise as to errors or omissions which are found to have resulted 
from any failure by a member (whether or not such member is a party to 
the claim against the Exchange pursuant to this paragraph (B)) to place 
or cancel an instruction clearly and accurately with the ITS clerk on a 
timely basis, in writing on such form or forms as the Exchange may 
provide for such purpose, and containing such information as may be 
required by the Exchange from time to time in connection with such 
instruction.
    In addition, no claim shall be allowed if, in the opinion of the 
arbitration panel provided for in subparagraph (c) of this paragraph 
(B), the member making such claim did not take promptly, upon discovery 
of the error or omission, all proper steps to correct such error or 
omission and to establish and mitigate the loss resulting therefrom.
    Further, it shall be the responsibility of the member on the Floor 
who places an instruction with an ITS clerk to keep abreast of the 
status of that instruction. The ITS clerk shall only be responsible to 
respond, as promptly as possible, to the member's inquiry concerning 
the status of his instruction. No claim shall be allowed which is based 
on a member's assertion that he was not made aware of the status of his 
instruction and thus failed to take further appropriate action.
    (b) Any claim for loss arising from errors or omissions of an ITS 
clerk or clerks shall be presented in writing to the Exchange no later 
than the opening of trading on the next business day following the day 
on which the error or omission giving rise to the loss occurred or 
within such longer period as the Exchange shall consider equitable 
under the circumstances.
    (c) All disputed claims shall be referred for binding arbitration 
to an arbitration panel and the decision of a majority of the 
arbitrators selected to hear and determine the controversy shall be 
final and there shall be no appeal to the Board of Directors from the 
decision of such panel. The arbitration panel shall be composed of an 
odd number of panelists. Each of the parties to the dispute shall 
select one member or allied member to serve as panelist on the 
arbitration panel. The panelists so selected shall then select one or 
more additional panelist(s); provided that the additional panelist(s) 
so selected are either members or allied members of the Exchange, and 
provided further that no member of the arbitration panel may be a 
person with a direct or indirect financial interest in the claim. In 
the event that the initial panelists selected by the parties to the 
dispute cannot agree on the selection of the additional panelist or 
panelists, as the case may be, then in that event such additional 
panelist(s) shall be appointed by a [Floor Director] BOE Floor 
Representative who has no direct or indirect financial interest in the 
claim. Each party to the dispute may make oral and written submissions 
and present witnesses to the arbitration panel.
Rule 22
Disqualification Because of Personal Interest
    (a) No member of the Board of Directors or of the Board of 
Executives or of any committee authorized by the Board shall 
participate (except to the extent of testifying at the request of such 
Board or of such committee) in the investigation or consideration of 
any matter relating to any member, allied member, approved person, or 
member organization with knowledge that such member, allied member, 
approved person, or member organization is indebted to such director or 
committee member, or to their member organization or any participant 
therein, or that they, their member organization or any participant 
therein is indebted to such member, allied member, approved person, or 
member organization, excluding, however, any indebtedness arising in 
the ordinary course of

[[Page 10797]]

business out of transactions on any exchange, out of transactions in 
the over-the-counter markets, or out of the lending and borrowing of 
securities.
    (b) No person shall participate in the adjudication of any matter 
in which they are personally interested.
Rule 37
Visitors
    Visitors shall not be admitted to the Floor of the Exchange except 
by permission of an Officer of the Exchange, a Senior Floor Official, 
Executive Floor Official, a Floor Governor, or a [Floor Director] BOE 
Floor Representative between the hours of 10:00 a.m. and 3:30 p.m. 
Approval of an Exchange Officer or a [Floor Director] BOE Floor 
Representative (or Senior Floor Official, Executive Floor Official, or 
Floor Governor in the absence of the [Floor Directors] BOE Floor 
Representatives) is required to bring visitors onto the Floor 30 
minutes before or after the opening and 30 minutes prior to closing.
Rule 38
Communications
    Communications or announcements shall not be posted on the bulletin 
board without the consent of the [Chairman of the Board] Chief 
Executive Officer, or a person authorized by the Exchange to give such 
consent.
Rule 46
Floor Officials--Appointment
    (a) Each [Director who is active on the Floor] member of the Board 
of Executives who represents the groups referenced in clauses (ii) and 
(iii) of Article V, Section 2(b) of the Constitution shall be a BOE 
Floor Representative and shall be [appointed] approved as a Floor 
Official.
    (b) The Chairman, in consultation with the [Floor Directors] BOE 
Floor Representatives and with the approval of the Board, shall, at the 
annual meeting of the Board of Directors or at such other time as may 
be deemed necessary:
    (i) designate as Floor Officials such other members as he may 
determine, who shall perform such duties as are prescribed by the Rules 
of the Board to serve at the pleasure of the Board of Directors or 
until the next annual election of the Exchange and their successors are 
appointed and take office.
    (ii) designate twenty such other members as Floor Governors, who 
shall be empowered to perform any duty, make any decision or take any 
action assigned to or required of a [Floor Director] BOE Floor 
Representative as are prescribed by the Rules of the Board or as may be 
designated by the Board.
    For purposes of this rule, a Floor Governor, by virtue of his 
appointment as such, shall also be deemed to be a Floor Official, and, 
therefore empowered to perform such duties as are specifically 
prescribed by the Rules of the Board or as may be designated by the 
Board regarding Floor Officials.
* * * * *
Rule 51
Hours for Business
    Except as may be otherwise determined by the Board of Directors as 
to particular days, the Exchange shall be open for the transaction of 
business on every business day, excluding Saturdays, (a) for a 9:30 
a.m. to 4:00 p.m. trading session and (b) for the purposes of ``Off-
Hours Trading'' (as Rule 900 (Off-Hours Trading: Applicability and 
Definitions) defines that term), during such hours as the Exchange may 
from time to time specify.
    Except as may be otherwise determined by the Board of Directors, 
the [Chairman of the Board] Chief Executive Officer shall have the 
power to halt or suspend trading in some or all securities traded on 
the Exchange, to close some or all Exchange facilities, and to 
determine the duration of any such halt, suspension or closing, when he 
deems such action to be necessary or appropriate for the maintenance of 
a fair and orderly market or the protection of investors, or otherwise 
in the public interest, due to extraordinary circumstances, such as (1) 
actual or threatened physical danger, severe climatic conditions, civil 
unrest, terrorism, acts of war, or loss or interruption of facilities 
utilized by the Exchange, or (2) a request by a governmental agency or 
official, or (3) a period of mourning or recognition for a person or 
event. In considering such action, the [Chairman of the Board] Chief 
Executive Officer shall consult with [the Vice Chairman, if available, 
and]such available [Floor Directors] BOE Floor Representatives as he 
deems appropriate under the circumstances. The [Chairman of the Board] 
Chief Executive Officer shall notify the Board of actions taken 
pursuant to this Rule, except for a period of mourning or recognition 
for a person or event, as soon thereafter as is feasible.
* * * * *
Rule 103
Registration of Specialists
* * * * *
    Supplementary Material:
* * * * *
    .11 Temporary Reallocation of Stocks.--The [Chairman, Vice 
Chairman] Chief Executive Officer and the [Senior Floor Director] two 
most senior BOE Floor Representatives, or in the absence from the Floor 
of [any] either of them, the next senior [Floor Director] BOE Floor 
Representative present on the Floor, acting by a majority shall have 
the power to reallocate temporarily any stock on an emergency basis to 
another location on the Floor whenever in their opinion such 
reallocation would be in the public interest.
    The member to whom a stock has been temporarily reallocated under 
the provisions of this Rule will be registered as the regular 
specialist therein until the Board of Directors determines the ultimate 
location of the security.
Rule 103B
Specialist Stock Allocation
Allocation Policy and Procedures
III. Allocation Panel
Selection
    Panel members are nominated by the membership. A selection 
committee, appointed by the [Floor Directors] BOE Floor 
Representatives, reviews the nominations and recommends panel 
appointments to the [Floor Directors] BOE Floor Representatives, who 
finalize recommendations for presentation to the QOMC. The selection 
committee operates in accordance with such guidelines as are 
established and made known to the membership from time to time. The 
selection committee and, in turn, the [Floor Directors] BOE Floor 
Representatives seek to develop a representative panel that maximizes 
professional expertise and broad exposure on the Floor by including 
members from various types of firms and from diverse locations on the 
Floor. To the maximum extent possible, the Floor members on the panel 
are expected to be a core group of experienced, senior professionals, 
such as former Allocation Committee chairmen, Senior Floor Officials, 
Executive Floor Officials, and current and former Floor Governors.
    In the case of allied members and representatives of institutional 
investor organizations, the allied member organization and the 
institutional investor organization are appointed to the panel. The 
individual representative is then selected by the organization. A 
[Floor Director] BOE Floor Representative gives guidance to the

[[Page 10798]]

organization in selecting an appropriate representative.
Eligibility
    Professional expertise and experience are essential to the 
excellence of the allocation system. Therefore, a Floor member must 
have a minimum of 5 years experience as a member on the Floor in order 
to be eligible for appointment to the Allocation Panel. In the case of 
allied members and representatives of institutional investor 
organizations, the organization shall select a representative with at 
least 5 years of trading experience in listed equities and a senior 
position on the trading desk, and each may designate one alternate who 
meets the Panel qualifications, subject to approval by the [Floor 
Directors] BOE Floor Representatives.
* * * * *
V. Policy Notes
Allocation Freeze Policy
    In the event that a specialist unit: (i) loses its registration in 
a specialty stock as a result of proceedings under Exchange Rules 103A, 
475 or 476; or (ii) voluntarily withdraws its registration in a 
specialty stock as a result of possible proceedings under those rules, 
the unit will be ineligible to apply for future allocations for the six 
month period immediately following the reassignment of the security 
(``Allocation Prohibition'').
    Following the Allocation Prohibition, a second six month period 
will begin during which a specialist unit may apply for new listings, 
provided that the unit demonstrates to the Exchange relevant efforts 
taken to resolve the circumstances that triggered the Allocation 
Prohibition. The determination as to whether a unit may apply for new 
listings will be made by Exchange staff, in consultation with the 
[Floor Directors] BOE Floor Representatives. The factors the Exchange 
will consider will vary depending on the unit's particular situation, 
but may include one or more steps such as:

--Supplying additional manpower/experience;
--Changes in professional staff;
--Attaining appropriate dealer participation;
--Enhancing back-office staff; and
--Implementing more stringent supervision/new procedures.
* * * * *
Rule 103C
Listed Company Relations Proceedings
    (a) A listed company may file with the New Listings & Client 
Service Division a written notification (``Issuer Notice''), signed by 
the company's chief executive officer, that it wishes to commence a 
proceeding whereby the Quality of Markets Committee (``QOMC'') shall 
attempt to mediate and resolve non-regulatory issues that have arisen 
between the company and its assigned specialist unit. The Issuer Notice 
shall indicate the specific issues sought to be mediated and resolved, 
and what steps, if any, have been taken to try to address them before 
the filing of the Notice.
    (b) The QOMC shall refer the Issuer Notice to its Listed Company 
Relations Subcommittee (the ``Subcommittee'') which shall consist of 
[two listed company members of the QOMC, as well as a senior officer 
and two vice chairman of the Exchange, provided these individuals are 
also members of the QOMC] four Board of Executives members (two of whom 
are representatives of listed companies) and a senior officer of the 
Exchange. The Subcommittee shall review the Issuer Notice and shall 
notify the subject specialist unit that a Listed Company Relations 
Proceeding (``LCRP'') is being commenced pursuant to this rule, and 
that the LCRP shall run for one year from the date of notice to the 
specialist unit, unless concluded earlier by the listed company. The 
specialist unit shall be provided with a copy of the Issuer Notice, and 
shall be given two weeks within which to submit a written response to 
the Subcommittee.
* * * * *
Rule 123A
Miscellaneous Requirements
* * * * *
Broker's Obligation In the Handling of Certain Orders
    .45 Members' off-floor orders.--Two persons consisting of two 
[Floor Directors] BOE Floor Representatives, or in the absence of any 
of them, Floor Governors, Senior Floor Officials, or Executive Floor 
Officials in the order of seniority, have the authority to limit or ban 
the execution of off-Floor orders for accounts in which members or 
member organizations have an interest.
* * * * *
Rule 123D
Openings and Halts in Trading
    (1) Delayed Openings/Halts in Trading--
* * * * *
    All indications require the supervision and approval of a Floor 
Official. If it involves a bank or brokerage stock, a [Floor Director] 
BOE Floor Representative's approval is required. If a [Floor Director] 
BOE Floor Representative is unavailable, a Floor Governor's or Senior 
Floor Official's approval must be obtained. In addition to the 
mandatory criteria, specialists should use their judgment as to when it 
is appropriate to seek Floor Official approval for disseminating a 
price indication.
    Mandatory indication policy applies to a foreign-listed security 
only if the opening price will be at a significant price change (see 
chart above) from its closing price in the foreign market or the 
current price in the foreign market.
    Mandatory indications for convertible preferred stocks are only 
required if an indication was disseminated in the underlying common 
stock.
    In this regard the following procedures should be followed for 
delayed opening and trading halt indications:
    The length of time for the dissemination of indications should be 
in proportion to the anticipated disparity of the opening or reopening 
price from the prior sale.
    The number of indications should increase in proportion to the 
anticipated disparity in the opening or reopening price, with 
increasingly definitive, ``telescoped'' indications when an initial 
narrow indication spread is impractical.
    An indication should be published immediately when trading is 
halted for a non-regulatory order imbalance. Such indications should be 
broad enough to allow flexibility, but narrow enough to convey as 
accurate a picture of supply and demand as possible at the time. In 
most cases, a final indication with a one point spread would be 
appropriate. Further telescoping to one-half point could result in 
unnecessary delay due to a change in the terms of a pivotal order. Even 
if an indication is not disseminated, specialists should endeavor to 
provide brokers with an approximate range within which they believe a 
stock will open.
    Tape indications before the opening should be disseminated at 9:15 
a.m., if possible, but any tape indications disseminated prior to 9:30 
a.m. require the approval of a [Floor Director] BOE Floor 
Representative or Floor Governor, or the approval of a Floor Official 
if it relates to a spin-off or if trading had been halted and not 
resumed the prior day.
    ITS Pre-Opening Applications must be followed when necessary based 
upon

[[Page 10799]]

the anticipated opening price. For example, a Pre-Opening Notification 
must be issued if a stock is going to open more than .10 of a point 
from a composite last sale under $15 or more than .25 of a point from a 
composite last sale of $15 or higher. The spread in the Pre-Opening 
Application may not exceed .50 of a point if the consolidated close is 
under $50 or one point if the consolidated close is $50 or higher with 
limited exception. If a Pre-Opening Application is required on an 
opening or any reopening and a tape indication is also issued, the 
indication satisfies the Pre-Opening Application requirement if it is 
also sent to the ITS participants by the specialist in the form of Pre-
Opening Notification. In that case, the maximum ITS spread would not 
apply. Three minutes must elapse from the time a Pre-Opening 
Application is issued, and an additional one minute if subsequent 
notifications are required, before a stock should open.
    As with other openings, tape indications are discretionary for 
IPO's with the approval of a [Floor Director] BOE Floor Representative 
or Floor Governor except that it is mandatory if the opening price 
change as measured from the offering price meets the requirements for a 
mandatory indication.
    If an indication is disseminated after the opening bell, it must be 
considered a delayed opening. In addition, any stock that is not opened 
with a trade or reasonable quotation within 30 minutes after the 
opening of business must be considered a delayed opening (except for 
IPO's) and requires Floor Official supervision, as well as an 
indication. That 30-minute time frame may only be extended by a [Floor 
Director] BOE Floor Representative on a Floor-wide basis.
    More than one indication should be disseminated if an opening will 
be outside the first indication or if the first indication had a wide 
spread, especially if the time frame for delayed openings has been 
extended by the [Floor Director] BOE Floor Representative. A reduction 
in time between indications can be used when multiple indications are 
disseminated. Generally, a minimum of 10 minutes must elapse between 
the first indication and a stock's opening as measured by the time the 
indication appears on the PDU. However, when more than one indication 
is disseminated, a stock may open five minutes after the last 
indication provided that at least 10 minutes must have elapsed from the 
dissemination of the first indication.
    With respect to a post-opening trading halt, a minimum of five 
minutes must elapse between the first indication and a stock's 
reopening. However, where more than one indication is disseminated, a 
stock may re-open three minutes after the last indication, provided 
that at least five minutes must have elapsed from the dissemination of 
the first indication.
    Tape indications must be disseminated with the approval of a Floor 
Official prior to the opening or reopening in a stock subject to a 
regulatory or nonregulatory halt in trading or a delayed opening. A 
Floor Governor should be consulted if a significant price change is 
anticipated.
    A [Floor Director] BOE Floor Representative or Floor Governor 
should be consulted in any case where there is not complete agreement 
among the Floor Officials participating in the discussion.
    Floor Governors should keep apprised of developments when 
consulted, and should seek the assistance of [Floor Director] BOE Floor 
Representatives, when appropriate, as soon as possible. Floor Governors 
should be prepared to balance the opportunity for brokers to 
participate in the opening with the need for timeliness, and should 
assist in identifying opportunities for opening the security, based 
upon the shifting supply and demand in conjunction with appropriate 
specialist participation.
    Specialists should make every effort to balance timeliness with the 
opportunity for customer reaction and participation. Although the 
correct price based on information available at the time is always the 
goal, specialists and supervising Floor Governors should recognize 
customers' desires for a timely opening. When the specialist and Floor 
Governor agree that all participants have had a reasonable opportunity 
to participate, the specialist should open the stock.
    Once trading has commenced, trading may only be halted with the 
approval of a Floor Governor or two Floor Officials. A [Floor Director] 
BOE Floor Representative, or in their absence a Senior Floor Governor, 
should be consulted if it is felt that trading should be halted in a 
bank or brokerage stock due to a potential misperception regarding the 
company's financial viability.
    Sometimes the Client Service Division is notified by a listed 
company in advance of publication concerning news which might have a 
substantial market impact. That Division will immediately notify the 
Floor Operations Division, which will advise a [Floor Director] BOE 
Floor Representative or Floor Governor, or in their absence a Floor 
Official.
    If Client Service Division makes a recommendation that trading 
should be halted in a stock pending a public announcement by the 
company and the [Floor Director] BOE Floor Representative or Floor 
Governor disagrees, he or she should seek the opinion of another [Floor 
Director] BOE Floor Representative or Floor Governor. If the [Floor 
Director] BOE Floor Representatives or Floor Governors are in agreement 
that trading should not be halted, trading should continue. If one of 
the two is in agreement with the recommendation to halt trading, then 
trading should be halted. While the time period may vary from case-to-
case as a result of the particular circumstances involved, normally if 
the announcement is not made within approximately 30 minutes after the 
delay or halt is implemented, the Exchange may commence the opening or 
reopening of trading in the stock. Special care is taken to ensure that 
material non'public information is not disclosed, even inadvertently, 
as a result of someone overhearing details relating to trading halts or 
delayed opening situations.
* * * * *
Rule 304
Allied Members and Approved Persons
* * * * *
    (f) When an allied member is elected Chairman of the Board [of 
Directors] or Chief Executive Officer or is elected to membership in 
the Exchange, his allied membership shall terminate.
* * * * *
Rule 308
Acceptability Proceedings
* * * * *
    (g) Any person whose application has been disapproved by an 
Acceptability Committee, or any member of the Board of Directors or of 
the Board of Executives of the Exchange may require a review by the 
Board of any determination of an Acceptability Committee. A request for 
review shall be made by filing with the Secretary of the Exchange a 
written request therefore, within twenty days after notification of the 
determination of the Acceptability Committee. Upon review, the Board of 
Directors may sustain any determination, or may modify or reverse any 
such determination as it deems appropriate. The determination of the 
Board of Directors shall be final and conclusive action by the 
Exchange.

[[Page 10800]]

Rule 422
Loans of and to Directors, etc.
    Without the prior consent of the Board of Directors no member of 
the Board of Directors or of the Board of Executives or of any 
committee of the Exchange, and no officer or employee of the Exchange 
shall directly or indirectly make any loan of money or securities to or 
obtain any such loan from any member organization member, allied 
member, approved person, employee or any employee pension, retirement 
or similar plan of any member organization unless such loan be (a) 
fully secured by readily marketable collateral, or (b) made by a 
director or committee member to or obtained by a director or committee 
member from the member organization of which he is a member, allied 
member or employee or from a member, allied member or employee therein.
Rule 440B
Short Sales
* * * * *
    Supplementary Material:
Interpretations of Securities and Exchange Commission and New York 
Stock Exchange Rules
* * * * *
    .19 Exemptions from the requirements of Regulation Sec. -240.10a-
2(a). Under amended Regulation Sec. -240.10a-2, if a broker discovers 
prior to delivery date that a sale was effected pursuant to an order 
which through error was incorrectly marked ``long,'' the requirements 
of Regulation Sec. -240.10a-2(a) will not apply provided the exchange 
on which the transaction took place or the NASD as to a sale which took 
place in the over-the-counter market is satisfied as to the existence 
of the conditions described in (i), (ii) and (iii) of Regulation Sec. -
240.10a-2(b)(2).
    Members should submit all requests to the Exchange for exemptions 
to the [Floor Directors] BOE Floor Representatives as promptly as 
possible after discovery of the errors involved. Such requests may be 
made in writing, or by telephone or telegraph provided they are 
promptly confirmed in writing by the member or member organization. 
Out-of-town organizations may submit their requests through their New 
York correspondents.
    In order that the Exchange may make a proper determination in each 
case, it is imperative that all requests contain sufficient information 
to indicate clearly that the conditions described in (i), (ii) and 
(iii) of Regulation Sec. -240.10a-2(b)(2) actually obtain.
* * * * *
Rule 476
Disciplinary Proceedings Involving Charges Against Members, Member 
Organizations, Allied Members, Approved Persons, Employees, or Others
* * * * *
    (b) All proceedings under this Rule, except as to matters referred 
to in paragraph (c), shall be conducted at a Hearing in accordance with 
the provisions of this Rule and shall be held before a Hearing Panel 
consisting of at least three persons: A Hearing Officer, who shall be 
Chairman of the Panel, with the remainder of the Panel being members of 
the Hearing Board.
    The Chairman [of the Board of the Exchange], subject to the 
approval of the Board of Directors, shall from time to time appoint a 
Hearing Board to be composed of such number of members and allied 
members of the Exchange who are not members of the Board of Directors, 
and registered employees and non-registered employees of members and 
member organizations, as the Chairman [of the Board of the Exchange] 
shall deem necessary. The members of the Hearing Board shall be 
appointed annually and shall serve at the pleasure of the Board of 
Directors. The Chairman [of the Board of the Exchange], subject to the 
approval of the Board of Directors, shall also designate from among the 
officers and employees of the Exchange a Chief Hearing Officer and one 
or more other Hearing Officers who shall have no Exchange duties or 
functions relating to the investigation or preparation of disciplinary 
matters and who shall be appointed annually and shall serve as Hearing 
Officers at the pleasure of the Board of Directors.
* * * * *
    (f) The Division or Department of the Exchange which brought the 
charges, the respondent, or any member of the Board of Directors or of 
the Board of Executives of the Exchange may require a review by the 
Board of any determination or penalty, or both, imposed by a Hearing 
Panel. A request for review shall be made by filing with the Secretary 
of the Exchange a written request therefor, which states the basis and 
reasons for such review, within twenty-five days after notice of the 
determination and/or penalty is served upon the respondent. The 
Secretary of the Exchange shall give notice of any such request for 
review to the Division or Department of the Exchange which brought the 
charges and any respondent affected thereby.
    Any review by the Board of Directors shall be based on oral 
arguments and written briefs and shall be limited to consideration of 
the record before the Hearing Panel. Upon review, the Board of 
Directors, by the affirmative vote of a majority of the Directors then 
in office, may sustain any determination or penalty imposed, or both, 
may modify or reverse any such determination, and may increase, 
decrease or eliminate any such penalty, or impose any penalty permitted 
under the provisions of this Rule, as it deems appropriate. Unless the 
Board of Directors otherwise specifically directs, the determination 
and penalty, if any, of the Board of Directors after review shall be 
final and conclusive subject to the provisions for review of the 
Securities Exchange Act of 1934.
    Notwithstanding the foregoing, if either party upon review applies 
to the Board of Directors for leave to adduce additional evidence, and 
shows to the satisfaction of the Board of Directors that the additional 
evidence is material and that there was reasonable ground for failure 
to adduce it before the Hearing Panel, the Board of Directors may 
remand the case to a Hearing Panel for further proceedings, in whatever 
manner and on whatever conditions the Board of Directors considers 
appropriate.
    (g) In lieu of the procedures set forth in paragraph (d) above, a 
Hearing Panel, at a Hearing called for that purpose, shall also 
determine whether a member, member organization, allied member, 
approved person, or registered or non-registered employee of a member 
or member organization has committed any one or more of the offenses 
specified in paragraph (a) above, on the basis of a written Stipulation 
and Consent entered into between the respondent and any authorized 
officer or employee of the Exchange. Any such Stipulation and Consent 
shall contain a stipulation with respect to the facts, or the basis for 
findings of fact by the Hearing Panel; a consent to findings of fact by 
the Hearing Panel, including a finding that a specified offense had 
been committed; and a consent to the imposition of a specified penalty.
    Notice of any Hearing held for the purpose of considering a 
Stipulation and Consent shall be served upon the respondent as provided 
in paragraph (d) above. In any such Hearing, if the Hearing Panel 
determines that the respondent has committed an offense, it may impose 
the penalty agreed to in such Stipulation and Consent or any penalty 
which is less severe than the stipulated penalty, as it deems 
appropriate. In addition, a Hearing Panel may reject such Stipulation 
and Consent.

[[Page 10801]]

    Such rejection shall not preclude the parties to the proceeding 
from entering into a modified Stipulation and Consent which shall be 
presented to a Hearing Panel in accordance with the provisions of this 
subsection, nor shall such rejection preclude the Exchange from 
bringing or presenting the same or different charges to a Hearing Panel 
in accordance with the provisions of paragraph (d) above. The Exchange 
shall keep a record of any Hearing conducted under this Rule and a 
written notice of the result setting forth the requirements contained 
in Section 6(d)(1) of the Securities Exchange Act of 1934 shall be 
served on the parties to the proceeding.
    The determination of the Hearing Panel and any penalty imposed 
shall be final and conclusive, twenty-five days after notice thereof 
has been served upon the respondent in the manner provided in paragraph 
(d) above, unless a request to the Board of Directors for review of 
such determination and/or penalty is filed as hereinafter provided. If 
such a request to the Board of Directors for review is filed as 
hereinafter provided, any penalty imposed shall be stayed pending the 
outcome of such review.
    Any member of the Board of Directors or of the Board of Executives 
of the Exchange may require a review by the Board of any determination 
or penalty, or both, imposed by a Hearing Panel in connection with a 
Stipulation and Consent. In addition, the Division or Department of the 
Exchange which entered into the written consent may require a review by 
the Board of Directors of any penalty which is less severe than the 
stipulated penalty. The respondent or the Division or Department which 
entered into the written consent may require a review by the Board of 
Directors of any rejection of a Stipulation and Consent by the Hearing 
Panel.
    A request for review shall be made by filing with the Secretary of 
the Exchange a written request therefor, which states the basis and 
reasons for such review, within twenty-five days after notice of the 
determination and/or penalty is served on the respondent. The Secretary 
of the Exchange shall give notice of any such request for review to the 
Division or Department of the Exchange involved in the proceeding and 
any respondent affected thereby.
    Any review by the Board of Directors shall consist of oral 
arguments and written briefs and shall be limited to consideration of 
the record before the Hearing Panel. Upon review, the Board of 
Directors, by the affirmative vote of a majority of the Directors then 
in office, may fix and impose the penalty agreed to in such Stipulation 
and Consent or any penalty which is less severe than the stipulated 
penalty, or may remand for further proceedings. Unless the Board of 
Directors otherwise specifically directs, the determination and 
penalty, if any, of the Board of Directors after review shall be final 
and conclusive subject to the provisions for review of the Securities 
Exchange Act of 1934.
* * * * *
Rule 476A
Imposition of Fines for Minor Violation of Rules
* * * * *
    (d) Any person against whom a fine is imposed pursuant to this Rule 
may contest the Exchange's determination by filing with the Division or 
Department of the Exchange taking the action not later than the date by 
which such determination must be contested, a written response meeting 
the requirements of an ``Answer'' as provided in Rule 476(d), at which 
point the matter shall become a ``disciplinary proceeding'' subject to 
the provisions of Rule 476. In any such disciplinary proceeding, if the 
Hearing Panel determines that the person charged is guilty of the rule 
violation(s) charged, the Panel shall (i) be free to impose any one or 
more of the disciplinary sanctions provided in Rule 476 and (ii) 
determine whether the rule violation(s) is minor in nature. The 
Division or Department of the Exchange which commenced the action under 
this Rule, the person charged, and any member of the Board of Directors 
or of the Board of Executives of the Exchange may require a review by 
the Board of any determination by the Hearing Panel by proceeding in 
the manner described in Rule 476(f).
* * * * *
Rule 499
Suspension From Dealings or Removal From List by Action of the Exchange
    The aim of the New York Stock Exchange is to provide the foremost 
auction market for securities of well-established companies in which 
there is a broad public interest and ownership.
    Securities admitted to the list may be suspended from dealings or 
removed from the list at any time.
    Supplementary Material:
    .70 Procedure for Delisting.--
    a. If the Exchange staff should determine that a security be 
removed from the list, it will so notify the issuer in writing, 
describing the basis for such decision and the specific policy or 
criterion under which such action is to be taken. The Exchange will 
simultaneously (1) issue a press release disclosing the company's 
status and basis for the Exchange's determination and (2) begin daily 
dissemination of ticker and information notices identifying the 
security's status, and include similar information on the Exchange's 
web site. The notice to the issuer shall also inform the issuer of its 
right to a review of the determination by the Committee specified in 
Section 12(b)(1) of Article IV of the Exchange's Constitution [a 
Committee of the Board of Directors of the Exchange (a majority of the 
members of such Committee voting on each determination must be public 
Directors)], provided a written request for such review is filed with 
the Secretary of the Exchange within ten business days after receiving 
the aforementioned notice.
* * * * *
    c. If a review is requested, the review will be scheduled for the 
first Review Day which is at least 25 business days from the date the 
request for review is filed with the Secretary of the Exchange, unless 
the next subsequent Review Day must be selected to accommodate the 
Committee's schedule. Because Section 12(b)(1) of Article IV of the 
Constitution specifies that a majority of the members of the Committee 
voting on a matter shall be members of the Exchange's Board of 
Directors, the [The] Chairman of the Committee will disclose to the 
company and the staff at the commencement of the review which of the 
Committee members [industry Directors present] will be voting on the 
matter, although all Committee members [directors] will be entitled to 
participate in the discussion. The Committee's review and final 
decision shall be based on oral argument (if any) and the written 
briefs and accompanying materials submitted by the parties.
* * * * *
Listed Company Manual
Section 804.00 Procedure for Delisting
     If the Exchange staff should determine that a 
security be removed from the list, it will so notify the issuer in 
writing, describing the basis for such decision and the specific policy 
or criterion under which such action is to be taken. The Exchange will 
simultaneously (1) issue a press release disclosing the company's 
status and basis for the Exchange's determination and (2) begin daily 
dissemination of ticker and information notices identifying the 
security's status, and include similar information on the Exchange's 
Web site.

[[Page 10802]]

     The notice to the issuer shall also inform the 
issuer of its right to a review of the determination by the Committee 
specified in Section 12(b)(1) of Article IV of the Exchange's 
Constitution [a Committee of the Board of Directors of the Exchange (a 
majority of the members of such Committee voting on each determination 
must be public Directors)], provided a written request for such a 
review is filed with the Secretary of the Exchange within ten business 
days after receiving the aforementioned notice.
* * * * *
     If a review is requested, the review will be 
scheduled for the first Review Day which is at least 25 business days 
from the date the request for review is filed with the Secretary of the 
Exchange, unless the next subsequent Review Day must be selected to 
accommodate the Committee's schedule. Because Section 12(b)(1) of 
Article IV of the Constitution specifies that a majority of the members 
of the Committee voting on a matter shall be members of the Exchange's 
Board of Directors, the [The] Chairman of the Committee will disclose 
to the company and the staff at the commencement of the review which of 
the Committee members [industry Directors present] will be voting on 
the matter, although all Committee members [directors] will be entitled 
to participate in the discussion. The Committee's review and final 
decision shall be based on oral argument (if any) and the written 
briefs and accompanying materials submitted by the parties.
* * * * *
Rule 792
Days and Hours for Options Trading
* * * * *
    (c) The [Chairman, Vice Chairman and the Senior Floor Director or, 
in the absence from the Floor of any of them, the next senior Floor 
Director] Chief Executive Officer and the two most senior BOE Floor 
Representatives, or in the absence from the Floor of any of them, the 
next senior BOE Floor Representative present on the Floor, acting by a 
majority shall have the power to suspend trading in all option 
contracts whenever in their opinion such suspension would be in the 
public interest. A special meeting of the Board of Directors to 
consider the continuation or termination of such suspension or closing 
the market shall be held as soon thereafter as a quorum of Directors 
can be assembled.
* * * * *
Rule 800
Basket Trading: Applicability and Definitions
Applicability of 800 Series
    The Rules in this 800 series (Rules 800 through 817) shall apply to 
(i) all Exchange contracts made on the Exchange through the ``ESP 
Service'' (as this Rule defines that term) and (ii) the handling of 
orders, and the conduct of accounts and other matters, relating to 
baskets executed through the ESP Service by any member or member 
organization. As modified by this Rule 800, all other Exchange Rules 
shall also so apply, except that the following shall not so apply:
* * * * *
    (F) references in incorporated Rules to ``Floor Officials'' shall 
refer solely to ``Floor Governors'' and ``[Floor Directors] BOE Floor 
Representatives''.
* * * * *
Rule 808
Basket Book Dealers
* * * * *
    Supplementary Material:
Temporary Reallocation of Baskets
    .10 The [Chairman] Chief Executive Officer or, in his absence, such 
Exchange Officer(s), as the [Chairman] Chief Executive Officer may 
designate, or, alternatively, a majority, but not fewer than two, of 
the [Floor Directors] BOE Floor Representatives then available on the 
Floor, may determine to reallocate temporarily any basket on an 
emergency basis to another member or member organization on the Floor 
whenever in their opinion such reallocation would be in the public 
interest.
* * * * *
Rule 816
Discontinuous Auction Markets; Basket Trading Halts
Discontinuous Auction Markets
    (a) Whenever such market conditions as the Exchange may from time 
to time specify are present, the Exchange shall declare a discontinuous 
auction market. Whenever the [Chairman] Chief Executive Officer or, in 
his absence, such other Exchange Officer(s) as the [Chairman] Chief 
Executive Officer may designate, or, alternatively, a majority, but not 
fewer than two, of the [Floor Directors] BOE Floor Representatives then 
available on the Floor, determine that market conditions make it 
unreasonable to conduct basket trading pursuant to regular auction 
procedures, or, pursuant to such guidelines as the Exchange may from 
time to time prescribe, whenever two Floor Governors make such a 
determination, a discontinuous auction market shall be declared. The 
Basket Book Dealer shall monitor market conditions and adherence to the 
guidelines and shall conduct the discontinuous auction market as 
follows:
    (i) Within five minutes from the time at which the discontinuous 
auction market is declared, the Basket Book Dealer will disseminate an 
initial indication of interest.
    (ii) The Basket Book Dealer will periodically disseminate any 
change in any indication of interest or any superior indication of 
interest, and, if he has not updated an indication of interest within 
15 minutes from the previous update, he will indicate that no change 
has occurred.
    The [Chairman] Chief Executive Officer, the [Chairman] Chief 
Executive Officer-designated Officer(s), two [Floor Directors] BOE 
Floor Representatives or two Floor Governors may terminate the 
discontinuous auction market after determining that the conditions that 
precipitated the discontinuous auction market no longer exist.
    The Basket Book Dealer may open or reopen the regular auction 
market in the basket only upon the later of:
    (i) 15 minutes after the initial indication of interests, and
    (ii) Five minutes after he disseminates a revised or updated 
indication of interest.
    The Exchange may from time to time prescribe different 
discontinuous auction market time parameters. The existence of a 
discontinuous auction market suspends the obligations of specialists, 
Basket Book Dealers and Competitive Basket Market-Makers to establish, 
maintain and communicate component stock, mini-basket and basket 
quotations.
Basket Trading Halts
    (b) In addition to any halt in basket trading pursuant to Rule 80B 
(Trading Halts Due to Extraordinary Market Volatility) as Rule 800 
incorporates that Rule into these Basket Rules, basket trading through 
the ESP Service shall halt whenever the [Chairman] Chief Executive 
Officer or, in his absence, such other Exchange Officer(s) as the 
[Chairman] Chief Executive Officer may designate, or, alternatively, a 
majority, but not fewer than two, of the [Floor Directors] BOE Floor 
Representatives then available on the Floor, determines that market 
conditions warrant such a halt.
    Supplementary Material:

[[Page 10803]]

    .10 Prior to disseminating any change in an indication of interest 
or superior indication of interest, or indicating that no change has 
occurred, pursuant to paragraph (a)(ii) of this Rule, the Basket Book 
Dealer may execute paired-off buy and sell basket orders at a price 
that a Floor Governor has approved.
[FR Doc. 04-5112 Filed 3-5-04; 8:45 am]
BILLING CODE 8010-01-P