[Federal Register Volume 70, Number 2 (Tuesday, January 4, 2005)]
[Notices]
[Pages 420-421]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-78]



[[Page 420]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-50939; File No. SR-NYSE-2004-031]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change and Amendment No. 1 Thereto by the New York Stock Exchange, Inc. 
Relating to Amendments to Exchange Rule 633, 634, and 635

December 28, 2004.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on June 21, 2004, the New York Stock Exchange, Inc. (``NYSE'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed amendments to its arbitration rules as 
described in items I, II and III below, which items have been prepared 
by the Exchange. On October 29, 2004, the Exchange filed Amendment No. 
1 to the proposed rule change.\3\ The Commission is publishing this 
notice to solicit comments on the proposed rule change, as amended, 
from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See letter from Karen Kupersmith, Director of Arbitration, 
New York Stock Exchange, to Catherine McGuire, Chief Counsel, 
Division of Market Regulation, dated October 29, 2004 (``Amendment 
No. 1''). In Amendment No. 1, the Exchange amended a proposal to 
allow Wither its Chief Executive Officer or its Chief Regulatory 
Officer to appoint a Director of Arbitration, and it provided 
additional clarifications to the Statement of Purpose reflected in 
Item II.A.1, below.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The proposed rule change consists of amendments to Rules 633, 634, 
and 635 concerning appointments of members of the Board of Arbitration, 
appointments to the panels of securities and non-securities 
arbitrators, and the appointment of the Director of Arbitration of the 
Exchange. The text of the proposed new rules, as amended, appears 
below. Proposed deletions appear in [brackets]; proposed new language 
appears in italics.
* * * * *
Rule 633
[Promptly after the annual election of the Exchange, the Chairman of 
the Board of Directors shall appoint, subject to the approval of the 
Board of Directors,] The Director of Arbitration shall appoint a Board 
of Arbitration to be composed of such number of present or former 
members, allied members and officers of member corporations of the 
Exchange who are not members of the Board of [Directors] Executives [as 
the Chairman of the Board of Directors shall deem necessary 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].
Rule 634
The [Chairman of the Board of Directors] Director of Arbitration shall 
from time to time appoint two panels of arbitrators, [composed of 
persons who are residents of or have their places of business in the 
Metropolitan areas of the City of New York]. [The] the first of such 
panels shall be composed of persons engaged in or retired from the 
securities business and the second of such panels shall be composed of 
persons not engaged in the securities business. [The Chairman of the 
Board of Directors may likewise appoint panels similar to the panels 
above described to serve outside the City of New York.]
Rule 635
The [Chairman of the Board,] Chief Regulatory Officer shall designate 
one of the officers or other employees of the Exchange as Director of 
Arbitration. The Director of Arbitration shall be charged with the duty 
of performing all ministerial duties in connection with matters 
submitted for arbitration pursuant to these Rules.
* * * * *

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

    In its filings with the Commission, the Exchange included 
statements concerning the purpose of and basis for the proposed rule 
change. The text of these statements may be examined at the places 
specified in item IV below. 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
    NYSE Rule 633 currently provides that the Chairman of the NYSE 
Board appoints, subject to approval by the Board of Directors, a Board 
of Arbitration. Members of the Board of Arbitration are current or 
former members, allied members and/or officers of member corporations. 
Controversies between parties who are members, allied members, member 
firms or member corporations (i.e., there are no non-members involved 
in the controversy) are submitted for arbitration to members of the 
Board of Arbitration. The director of Arbitration is the person most 
familiar with the individuals being proposed as members of the Board of 
Arbitration. Involvement of the Chairman and the Board of Directors in 
the process does not serve a valid regulatory purpose, nor is their 
oversight of this appointment process otherwise required. Therefore, 
the proposed amendment would eliminate the involvement of both the 
Chairman and the Board, and allow the director of Arbitration to 
appoint a Board of Arbitration. The proposed amendment also would 
delete the references in the rule to the annual election of the 
Exchange, as the review of the members of the Board of Arbitration will 
be an ongoing process, and the Board will no longer be involved. 
Moreover, the proposal would delete the references to the Chairman's 
discretion as to the number of members of the Board of Arbitration, as 
the Chairman will no longer be involved. In addition, consistent with 
the recent corporate reorganization at the Exchange, the proposed 
amendment would delete the reference to the Board of Directors and 
instead would reference the Board of Executives with regard to the 
composition of the Board of Arbitration.
    NYSE Rule 634 currently provides that the Chairman of the NYSE 
Board appoints two standing panels (rosters) of arbitrators, one roster 
of securities arbitrators and one roster of non-securities arbitrators. 
Arbitration panels for individual cases, pursuant to the rules, are 
typically composed of three arbitrators, two non-securities arbitrators 
and one securities arbitrator. The authority of the Chairman to appoint 
arbitrators to the standing panels has, pursuant to the Delegation of 
Authority, been delegated to the Vice President, Arbitration and 
Hearing Board.\4\ In practice, arbitration department management 
routinely appoints new individuals to the rosters of arbitrators, 
subject to the oversight of the Vice President. In that the Chairman 
has not played a role in this regard, the amendment would conform the 
rule to current practice, but would give the Director of Arbitration 
the direct authority to appoint individuals to the rosters of 
arbitrators. The proposed amendment also would delete the references in 
the current rule to the appointment of panels of arbitrators

[[Page 421]]

within any particular geographic region. This proposed change would 
conform the rule to current practice as the Exchange does not require 
that arbitrators who serve in a particular region either be residents 
of that region or have their principal place of business in that 
region.
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    \4\ See NYSE Constitution, Article IV, Section 14.
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    NYSE Rule 635 provides that the Chairman of the Board appoints the 
Director of Arbitration from the officers or employees of the Exchange. 
Pursuant to a recent restructuring at the Exchange, the Arbitration 
Department reports to the Chief Regulatory Officer (through the Vice 
President, Arbitration and Hearing Board).\5\ The proposed amendment, 
in recognition of that restructuring, provides that the Chief 
Regulatory Officer would designate the Director of Arbitration, which 
is subject to the approval of the Regulatory Oversight Committee.\6\
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    \5\ See Securities Exchange Act Release No. 48946 (December 17, 
2003), 68 FR 74678.
    \6\ See NYSE Constitution, Article IV, Section 12(a)(4).
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2. Statutory Basis
    The proposed changes are consistent with section 6(b)(5) of the 
Act,\7\ in that they promote just and equitable principles of trade by 
ensuring that members and member organizations and the public have a 
fair and impartial forum for the resolution of their disputes.
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    \7\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others

    The Exchange has neither solicited nor received written comments on 
the proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 35 days of publication of this notice in the Federal 
Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve 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 the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an e-mail to [email protected]. Please include 
File Number SR-NYSE-2004-031 on the subject line.

Paper Comments

     Send paper comments in triplicate to Jonathan G. Katz, 
Secretary, Securities and
    Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-
0609. All submissions should refer to File Number SR-NYSE-2004-031. The 
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; please use only one method.
    The Commission will post all comments on the Commission's Internet 
Web site (http://www.sec.gov/rules/sro.shtml). Copies of the 
submission, all subsequent amendments, all written communications 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 Section, 450 Fifth Street, NW., Washington, DC 20549. 
Copies of such filing will also be available for inspection and copying 
at the principal office of the New York Stock Exchange, Inc. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NYSE-2004-031 and should be 
submitted by January 25, 2005.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 05-78 Filed 1-3-05; 8:45 am]
BILLING CODE 8010-01-M