[Federal Register Volume 70, Number 10 (Friday, January 14, 2005)]
[Notices]
[Pages 2688-2693]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-144]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-51015; File No. SR-NYSE-2004-54]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the New York Stock Exchange, Inc. Relating to Amendments to 
the NYSE Constitution and the Adoption of an Independence Policy of the 
NYSE Board of Directors

January 11, 2005.
    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 September 17, 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, II, and III below, which Items have been prepared by the self-
regulatory organization. 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 is proposing amendments to the various provisions of 
the NYSE Constitution. These amendments further implement the new 
governance architecture adopted by the Exchange in December 2003. The 
text of the proposed rule change is attached hereto as Exhibits A-1 and 
A-2.

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 NYSE included statements 
concerning the purpose of, and basis for, its proposal and discussed 
any comments it received on the proposal. The text of these statements 
may be examined at the places specified in Item IV below. The NYSE 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
Changes to the NYSE Constitution
    The proposed amendments to the NYSE Constitution follow the basic 
constructs of the Exchange's new governance architecture. The proposed 
amendments to the various provisions of the NYSE Constitution and the 
proposed Independence Policy of the Exchange Board of Directors, 
containing standards which NYSE directors must meet in order to be 
considered independent, are attached, respectively, as Exhibits A-1 and 
A-2 hereto.
    The proposed amendments to the NYSE Constitution mostly clarify the 
positions of the separate Chief Executive Officer and the members of 
the Exchange's Board of Executives under that architecture. One 
proposed change allows the Board to set the annual membership meeting 
earlier in the year

[[Page 2689]]

than the June date set under the current scheme.
    Under Article XIV, Section 1 of the Constitution, amendment to many 
Constitutional provisions requires adoption by the members. However, 
amendment to certain Constitutional provisions (generally, provisions 
dealing with the internal Exchange matters not directly involving the 
membership or other Exchange constituent groups) may be made by the 
Board without the vote of members, except that no such amendment by the 
Board alone can take effect without two weeks' notice being given to 
the members. Following are descriptions of the proposed amendments to 
the NYSE Constitution. The last five amendments, amendments (6)-(10), 
did not require a membership vote.
    1. An amendment to Article III, Section 1 of the Constitution will 
enable the Board to move up the Annual Meeting of members closer to the 
end of the fiscal (calendar) year. The amendment also provides the 
Board a degree of time flexibility in reporting nominations to the 
membership, but without reducing the current time period for members to 
propose nominations by petition.
    2. An amendment to Article IV, Section 14(b) of the Constitution 
will recuse the Chief Executive Officer from participation in the 
review by the Board of Directors of decisions by Exchange staff, 
officers and committees. The Exchange believes that this is appropriate 
because decisions appealed to the Board include decisions in the 
regulatory area, and decisions by the Chief Executive Officer and those 
reporting to the Chief Executive Officer. Such recusal of the Chief 
Executive Officer is consistent with the oversight of Exchange 
management by the independent Directors.
    3. An amendment to Article IX, Section 3 will prohibit Board of 
Executives members from serving on the Hearing Board in light of the 
participation of certain Board of Executives members on the Regulation, 
Enforcement & Listing Standards Committee.
    4. An amendment to Article IX, Section 6 will prohibit the Chief 
Executive Officer from requiring reviews of disciplinary decisions and 
will recuse the Chief Executive Officer from participating in reviews 
by the Board of disciplinary decisions. The Exchange believes that this 
is consistent with the Chief Executive Officer's separation from the 
regulatory function.
    5. An amendment to Article XV, Section 9 will correct an incomplete 
cross-reference in that section from ``Nominating Committee'' to 
``Nominating & Governance Committee.''
    As discussed above, the following amendments did not require a 
member vote.
    6. An amendment to Article IV, Section 12(a)(1)(vii) will eliminate 
the Chairman as a mandated subject of succession planning by the 
Nominating & Governance Committee. Under the Exchange's new governance 
architecture, the Board determines from time to time whether to 
continue to separate the offices of the Chairman of the Board and the 
Chief Executive Officer. The Exchange believes that succession planning 
with respect to the Chief Executive Officer is the norm in corporate 
governance practice.
    7. An amendment to Article IV, Section 14(a) will correct an 
erroneous cross-reference from ``Article VII, Section 1'' (which 
pertains to Exchange Contracts), to ``Article VIII, Section 1'' (which 
pertains to regulation).
    8. Amendments to Article V, Sections 2(b) and 6(a), and to Article 
VI, Section 2 will permit either the Chairman of the Board, or the 
Chief Executive Officer, as the Chairman determines from time to time, 
to preside over meetings of the Board of Executives, to call meetings 
of the Board of Executives and to determine when circumstances require 
shorter notice of meetings of the Board of Executives than otherwise 
provided for that group--all in the event the Chairman is not also the 
Chief Executive Officer. The Exchange believes that these changes are 
consistent with the function of the Board of Executives to advise the 
Chief Executive Officer in the management of the operations of the 
Exchange.
    9. An additional amendment to Article V, Section 2(b) will clarify 
that the Board may appoint as a non-specialist floor member of the 
Board of Executives any non-specialist who spends a substantial part of 
his or her time on the Floor of the Exchange. (The current description 
of the non-specialist floor members of the Board of Executives was 
carried over from a category of ``industry director'' which applied 
under the prior Exchange governance structure and appears to not 
include the entire non-specialist constituency as it exists today.)
    10. An amendment to Article V, Section 11 will replace the 
requirement for Plenary Sessions of the Board and the Board of 
Executives with a more specific requirement for each director to be 
present for at least three meetings of the Board of Executives each 
year. A related change in Article VI, Section 2 provides for the 
Chairman to make the Annual Report on the Exchange's activities to the 
Board of Executives, rather than to a ``Plenary Session'' of the Board 
and the Board of Executives.
Independence Policy of the NYSE Board of Directors
    The NYSE Board of Directors also has adopted an Independence Policy 
of the Exchange Board of Directors (the ``Independence Policy'') in 
accordance with the Constitution to ensure the independence of its 
elected Directors and its non-executive Chairman. Under the 
Independence Policy, an elected Director will not be considered 
independent unless he or she meets the independence standards required 
of a director of an NYSE listed company. Additional requirements 
address independence from Exchange constituents. Under Article IV, 
Section 2 of the Exchange Constitution, the Independence Policy must be 
filed with and approved by the Commission. The Board is following this 
policy pending Commission action.\3\
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    \3\ The Commission notes that it recently published for comment 
a proposed rulemaking that, among other things, would establish 
governance requirements for national securities exchanges and 
registered securities associations and would include a definition of 
the term ``independent director.'' See Securities Exchange Act 
Release No. 50699 (November 18, 2004), 69 FR 71126 (December 8, 
2004).
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2. Statutory Basis
    The Exchange represents that the basis under the Act for this 
proposed rule change is the requirement under Section 6(b)(5) \4\ 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 a national market system, and, in 
general, to protect investors and the public interest.
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    \4\ 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.

[[Page 2690]]

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

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) by order approve 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-2004-54 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-2004-54. 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, 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 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 also will be available for inspection and copying at the 
principal office of the NYSE. 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-2004-54 and should be submitted on or before 
February 4, 2005.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\5\
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    \5\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.

Exhibit A-1--Text of the Proposed Rule Change

    (New language is italicized; deletions are [bracketed].)

Constitution of the NYSE

* * * * *

Article III. Meetings of Members

    Sec. 1. Annual Meeting. A meeting of the members of the Exchange 
entitled to vote thereat shall be held annually for the election of 
directors and other elective positions, and for the transaction of any 
other proper business, at such time and date as the Board may select 
[on], but in no event later than the first Thursday in June [in each 
year] or, if the Exchange is not open for business on that day, on the 
next succeeding business day. At such annual election, there shall be 
elected by the membership by ballot:
    (a) all directors to be elected by members to serve for a term of 
one year;
    (b) two Trustees of the Gratuity Fund who shall be regular members 
(and not lessor members), to serve for a term of three years; and
    (c) qualified persons to fill any vacancies among the trustees of 
the Gratuity Fund.
    The Board shall distribute its annual nominating report, which 
lists the nominees to serve in the elective positions, to each member 
[not less than 60 days in advance of the annual meeting] a sufficient 
number of days in advance of the annual meeting to take into account 
the number of days for the filing of petitions by members for the 
proposal of nominations for elective positions, the determination by 
the Board of eligibility of persons nominated by petition and the 
notice to members of said annual meeting, all as provided in this 
Article III.

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. 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.
    (1) Nominating & Governance Committee. The Nominating & Governance 
Committee shall be 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

[[Page 2691]]

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.

Article IV. Board of Directors

* * * * *
    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. 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] VIII, 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 therefor[e] 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. Notwithstanding any other provisions of 
this paragraph (b), the Chief Executive Officer shall be recused from 
deliberations and actions of the Board with respect to matters to be 
reviewed by the Board pursuant to this paragraph (b).
    Article V. Board of Executives.
* * * * *
    Sec. 2. Composition of Board of Executives.
* * * * *
    (b) The Board of Executives shall consist of the Chairman of the 
Board [(who shall be the Chairman of the Board of Executives)] (if such 
individual is not also the Chief Executive Officer), 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''). Either the Chairman of the Board or the Chief Executive 
Officer, as the Chairman of the Board determines from time to time, 
shall serve as Chairman of the Board of Executives. 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, (iii) at least two 
individuals, each of whom spends a [majority] substantial part of his 
or her time on the Floor of the Exchange [, and has 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, at[s] 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.
* * * * *
    Sec. 6. Meetings. (a) Frequency of Meetings. The Board of 
Executives shall have not less than six meetings each year. Special 
meetings of the Board of Executives may be called by the Chairman of 
the Board or by the Chief Executive Officer, or pursuant to the written 
request of not less than one third of the Board of Executives members 
then in office, in accordance with the provision of notice of meetings, 
except that when in the judgment of the Chairman of the Board or the 
Chief Executive Officer, emergency requires shorter notice.
* * * * *

[[Page 2692]]

    Sec. 11. [Plenary Sessions of the] Board Member Attendance at 
Meetings of [and] the Board of Executives. [The Board and the Board of 
Executives shall meet jointly (a ``Plenary Session'')] Each member of 
the Board shall attend a meeting of the Board of Executives at least 
[twice] three times each year. [The Chairman of the Board shall chair 
all Plenary Sessions.]
* * * * *
    Article VI. Officers.
* * * * *
    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] the Board of Executives.
* * * * *
    Article IX. Disciplinary Proceedings.
* * * * *
    Sec. 3. Hearing Board. The Chairman of the Board, subject to the 
approval of the Board, 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 or of the Board of 
Executives, and registered employees and non-registered employees of 
members and member organizations, as the Chairman of the Board shall 
deem necessary. The members of the hearing board shall be appointed 
annually and serve at the pleasure of the Board. The Chairman of the 
Board, subject to the approval of the Board, 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.
* * * * *
    Sec. 6. Review. In a disciplinary proceeding not involving a 
written consent to the imposition of a specified penalty, any member, 
member organization, allied member, approved person, or registered or 
non-registered employee of a member or member organization, adjudged 
guilty of any charge, or the division or department of the Exchange 
which brought the charges, or any member of the Board or the Board of 
Executives, may, in accordance with procedures set forth in the rules 
of the Exchange, require a review by the Board, of any determination or 
penalty, or both, imposed by the hearing panel. Upon review, the Board, 
by the affirmative vote of a majority of the entire Board, may sustain 
any determination or penalty imposed, may modify or reverse any such 
determination, and may increase, decrease or eliminate any such 
penalty, or impose any penalty permitted under this Article as it deems 
appropriate.
    In a disciplinary proceeding involving a written consent to the 
imposition of a specified penalty, any member of the Board or the Board 
of Executives may require a review by the Board of any determination or 
penalty, or both, imposed by the hearing panel. In any such proceeding, 
the division or department which entered into the written consent, may 
require a review by the Board of any penalty, including any 
determination related thereto, imposed by the hearing panel, 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 any rejection of the written consent by the 
hearing panel. Any review provided in this paragraph shall be conducted 
in accordance with procedures set forth in the rules of the Exchange. 
Upon review, the Board, by the affirmative vote of a majority of the 
entire Board, may fix and impose the penalty agreed to in such written 
consent or any penalty which is less severe than the stipulated 
penalty, or remand the case for further proceedings.
    Notwithstanding any other provisions of this Section, the Chief 
Executive Officer (a) may not require a review by the Board under this 
Section and (b) shall be recused from deliberations and actions of the 
Board with respect to matters to be reviewed by the Board under this 
Section.
* * * * *
    Article XV. The Gratuity Fund.
* * * * *
    Sec. 9. Management of Gratuity Fund. The management and 
distribution of the Gratuity Fund shall be under the charge of a board 
of trustees, acting as agent for the Exchange, to be known as the 
``trustees of the Gratuity Fund,'' and shall consist of six regular 
members of the Exchange who are not lessor members and are elected by 
the membership. In case of a vacancy among the trustees, the Board, at 
its next regular meeting thereafter, shall proceed to fill the same 
until the next annual election of the Exchange. Prior to filling such 
vacancy, the Board shall request the Nominating & Governance Committee 
to submit to the Board the name of the person recommended by the 
Nominating & Governance Committee to fill such vacancy.

Exhibit A-2--Text of the Proposed Rule Change

    (New language is italicized.)

INDEPENDENCE POLICY OF THE EXCHANGE BOARD OF DIRECTORS

Purpose

    The purpose of this Policy is to set forth the independence 
requirements that shall apply to the members of the Board of Directors 
(the ``Board'') of the Exchange in accordance with Article IV, Section 
2 of the New York Stock Exchange Constitution.

Independence Requirements

    1. Each Director elected by the members and the Chairman of the 
Board if not also the Chief Executive Officer shall be independent 
within the meaning of this Policy. A list of the Directors shall be 
maintained on the Exchange's web site.
    2. A Director shall be independent only if the Board determines 
that the Director does not have any material relationships with the 
Exchange. When assessing a Director's relationships and interests, the 
Board shall consider the issue not merely from the standpoint of the 
Director, but also from the standpoint of persons or organizations with 
which the Director is affiliated \6\ or associated.
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    \6\ An ``affiliate'' of, or a person ``affiliated'' with, a 
specific person is a person that directly, or indirectly through one 
or more intermediaries, controls, or is controlled by, or is under 
common control with, the person specified.
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    3. In making independence determinations, the Board shall consider 
the special responsibilities of a Director in light of the status of 
the Exchange as a New York not-for-profit corporation, and as a self-
regulatory organization and national securities exchange subject to the 
supervision of the Securities and Exchange Commission.
    4. The Board shall make an independence determination with respect 
to each Director elected by the members upon the Director's nomination 
or appointment to the Board and thereafter at such times as the Board 
considers advisable in light of the Director's circumstances and any

[[Page 2693]]

changes to this Policy, but in any event not less frequently than 
annually. Upon adoption of this Policy, the Board shall make an 
affirmative determination with respect to the independence of each 
Director then serving on the Board.
    5. It shall be the responsibility of each Director to inform the 
Chairman of the Board and the Chairman of the Nominating & Governance 
Committee promptly and otherwise as requested of the existence of such 
relationships and interests which might reasonably be considered to 
bear on the Director's independence.
    6. Any Director elected by the members who is no longer independent 
due to the existence of a relationship described in Article IV, Section 
2(a)-(d) of the Constitution or whom the Board otherwise determines not 
to be independent from the Exchange under this Policy shall, pursuant 
to Article IV, Section 9, be deemed to have tendered his or her 
resignation for consideration by the Board, and such resignation shall 
not be effective unless and until accepted by the Board.

Independence Qualifications

    1. In making an independence determination with respect to any 
Director or Director candidate, the Board shall consider the standards 
below with respect to relationships or interests of the Director or 
Director candidate with or in (a) the Exchange or its subsidiaries, (b) 
members, allied members, and lessor members, (c) member organizations 
of the Exchange (``Member Organizations'') or non-member broker-dealers 
that engage in business involving substantial direct contact with 
securities customers (``Non-Member Broker-Dealers''), and (d) companies 
other than Member Organizations whose securities are listed on the 
Exchange (``Listed Companies''). The standards below relating to 
category (a) are the same as those that the Exchange applies to its own 
listed companies. The standards below relating to categories (b), (c) 
and (d) stem from the differing regulatory responsibilities and roles 
that the Exchange exercises in overseeing the organizations and 
companies included in those categories.
    2. The term ``approved person'' used herein has the meaning set 
forth in the NYSE Constitution.
    3. The term ``immediate family member'' with respect to any 
Director has the meaning set forth in the NYSE Listed Company Manual.
    4. The following independence criteria shall apply:

Independence From the Exchange

    A Director is not independent if the Director or an immediate 
family member of the Director has or had a relationship or interest 
with or in the Exchange which, if such relationship or interest existed 
with respect to a Listed Company, would preclude a Director of the 
Listed Company from being considered an independent Director of the 
Listed Company pursuant to Section 303A.02(a) or (b) of the Listed 
Company Manual.\7\
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    \7\ The relevant sections of the Listed Company Manual and 
commentary are available on the website at www.nyse.com/pdfs/finalcorpgovrules.pdf
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Members, Allied Members and Lessor Members

    A Director is not independent if he or she is, or within the last 
three years was, or has an immediate family member who is, or within 
the last three years was, a member, allied member, lessor member or 
approved person.

Member Organizations

    A Director is not independent if the Director (a) is, or within the 
last three years was, employed by a Member Organization, (b) has an 
immediate family member who is, or within the last three years was, an 
executive officer of a Member Organization, (c) has within the last 
three years received from any Member Organization more than $100,000 
per year in direct compensation, or received from Member Organizations 
in the aggregate an amount of direct compensation which in any one year 
is more than 10 percent of the Director's annual gross income for such 
year, excluding in each case Director and committee fees and pension or 
other forms of deferred compensation for prior service (provided such 
compensation is not contingent in any way on continued service), or (d) 
is affiliated, directly or indirectly, with a Member Organization.

Non-Member Broker-Dealers

    A Director is not independent if the Director is employed by or 
affiliated, directly or indirectly, with a Non-Member Broker-Dealer.

Listed Companies

    A Director is not independent if the Director is an executive 
officer of an issuer of securities listed on the Exchange.
    5. The Exchange shall make disclosure of any charitable 
relationship that a listed company would be required to disclose 
pursuant to Listed Company Manual Section 303A.02(b)(v) and commentary. 
Gifts by the Exchange or by the NYSE Foundation shall not favor 
charities on which any Director serves as an executive officer or 
member of the board of trustees or directors or comparable governing 
body.
[FR Doc. E5-144 Filed 1-13-05; 8:45 am]
BILLING CODE 8010-01-P