[Federal Register Volume 70, Number 137 (Tuesday, July 19, 2005)]
[Notices]
[Pages 41466-41467]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E5-3830]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-52016; File No. SR-NYSE-2005-29]


Self-Regulatory Organizations; New York Stock Exchange, Inc; 
Order Granting Approval of a Proposed Rule Change To Remove Incorrect 
Reference in Its Rule Relating to Failure To Honor an Arbitration Award

July 12, 2005.
    On April 25, 2005, the New York Stock Exchange, Inc., (``NYSE'' or 
the ``Exchange'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to amend NYSE Rule 637. The proposed rule change 
was published for comment in the Federal Register on May 6, 2005.\3\ 
The Commission received one comment on the proposal.\4\ On July 5, 
2005, the NYSE filed a response to the comment letter.\5\ This order 
approves the proposed rule change.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \1\ See Securities Exchange Act Release No. 51622 (April 27, 
2005), 70 FR 24146.
    \4\ See letter from Robert S. Clemente to Jonathan G. Katz, 
Secretary, Commission, dated May 13, 2005 (``Clemente Letter'').
    \5\ See letter to Katherine A. England, Assistant Director, 
Division of Market Regulation (``Division''), Commission, from Mary 
Yeager, Assistant Secretary, NYSE, dated July 5, 2005 (``NYSE 
Response Letter'').
---------------------------------------------------------------------------

I. Description of Proposed Rule Change

    Current NYSE Rule 637 provides that Exchange members, allied 
members, registered representatives, and member organizations that fail 
to honor arbitration awards of the NYSE, other self-regulatory 
organizations, or the American Arbitration Association are ``subject to 
disciplinary proceedings in accordance with NYSE Rule 476, NYSE Rule 
476A \6\ or Article IX'' of the NYSE Constitution and Rules.
---------------------------------------------------------------------------

    \6\ 6 NYSE Rule 476A provides that the Exchange may impose a 
fine, not to exceed $5000, on any member, member organization, 
allied member, approved person, or registered or non-registered 
employee of a member or member organization for a minor violation of 
certain specified Exchange rules. The NYSE represents that the 
purpose of the NYSE Rule 476A procedure is to provide a meaningful 
sanction for a rule violation when the initiation of a disciplinary 
proceeding under NYSE Rule 476 would be more costly and time 
consuming than would be warranted given the minor nature of the 
violation, or when the violation calls for a stronger regulatory 
response than an admonition letter would convey. The NYSE states 
that NYSE Rule 476A preserves due process rights, identifies those 
rule violations that may be the subject of summary fines, and 
includes a schedule of fines.
---------------------------------------------------------------------------

    Although current NYSE Rule 637 specifies NYSE Rule 476A as a 
possible vehicle for disciplinary action to remedy violations of NYSE 
Rule 637, NYSE Rule 637 was never added to NYSE Rule 476A's ``List of 
Exchange Rule Violations and Fines Applicable Thereto Pursuant to NYSE 
Rule 476A.'' This discrepancy could be eliminated by adding NYSE Rule 
637 to the list of rules in NYSE Rule 476A. However, due to the serious 
nature of any failure to honor an arbitration award,\7\ the Exchange's 
management concluded that violations of NYSE Rule 637 are not properly 
remedied through the minor fine provisions of NYSE Rule 476A. 
Therefore, the discrepancy would be more appropriately eliminated 
through an amendment deleting NYSE Rule 637's reference to NYSE Rule 
476A.
---------------------------------------------------------------------------

    \7\ The NYSE represents that Exchange arbitration awards rarely 
remain unsatisfied.
---------------------------------------------------------------------------

II. Summary of Comment and NYSE's Response

    The Commission received a comment letter on the proposed rule 
change that supported the adoption of the proposal.\8\ The commenter 
further suggested that the NYSE propose another change to NYSE Rule 637 
to conform to NASD Rule 9554 by extending the penalty of disciplinary 
action to cover failure to honor an arbitration award to any settlement 
agreement in any dispute submitted to the NYSE. In its response to the 
comment, the NYSE maintained that the amendment to NYSE Rule 637 
suggested by the commenter is beyond the scope of the proposed rule 
change.\9\
---------------------------------------------------------------------------

    \8\ See Clemente Letter, supra note 4.
    \9\ See NYSE Response Letter, supra note 5.
---------------------------------------------------------------------------

III. Discussion

    The Commission has carefully reviewed the proposed rule change, the 
comment letter, and the NYSE's response and 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.\10\ In particular, the Commission believes that the proposed 
rule change is consistent with Section 6(b)(6) of the Act \11\ because 
it is designed to provide that NYSE's members and persons associated 
with its members be appropriately disciplined for violation of Exchange 
rules.
---------------------------------------------------------------------------

    \10\ In approving this proposal, the Commission has considered 
the proposed rule's impact on efficiency, competition, and capital 
formation. See 15 U.S.C. 78c(f).
    \11\ 15 U.S.C. 78f(b)(6).
---------------------------------------------------------------------------

    The Exchange has proposed to delete a cross-reference in NYSE Rule 
637 that states that a failure to honor an arbitration award is 
punishable under the Exchange's minor rule violation

[[Page 41467]]

plan, when in fact it is not. The Commission believes that clarifying 
the Exchange's rules in this manner is appropriate. The one comment 
received by the Commission only makes suggestions for further Exchange 
rulemaking and, as such, does not raise any issue that would preclude 
approval of the instant proposal.

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\12\ that the proposed rule change (SR-NYSE-2005-29) is approved.
---------------------------------------------------------------------------

    \12\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\13\
---------------------------------------------------------------------------

    \13\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Jill M. Peterson,
Assistant Secretary.
[FR Doc. E5-3830 Filed 7-18-05; 8:45 am]
BILLING CODE 8010-01-P