Self-Regulatory Organizations; Order Approving 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, 9688-9690 [E5-785]
Download as PDF
<![CDATA[
9688
Federal Register / Vol. 70, No. 38 / Monday, February 28, 2005 / Notices
to assure, among other things,
economically efficient execution of
securities transactions, and fair
competition among brokers and dealers,
among exchange markets, and between
exchange markets and markets other
than exchange markets.
The Commission believes that CBOE’s
proposal is reasonable because it
prohibits a DPM from charging a
customer a commission for an order
executed without assistance or handling
by the DPM or that is not executed at
all. The Commission notes that
Susquehanna suggested that Section
6(e)(1) of the Act 13 prohibits the
Commission from approving a rule that
limits the fees charged by DPMs with
respect to orders for which DPMs have
agency or order handling
responsibilities. The Commission
disagrees with this commenter and
notes that the Commission has not
viewed an SRO’s limits on fees that its
members may charge, even when the
member is acting as agent, as
inconsistent with Section 6(e) of the
Act.14
Section 6(e) of the Act 15 was adopted
by Congress in 1975 to statutorily
prohibit the fixed minimum
commission rate system. As noted in a
report of the House of Representatives,
one of the purposes of the legislation
was to ‘‘reverse the industry practice of
charging fixed rates of commissions for
transactions on the securities
exchanges.’’ 16 The fixed minimum
commission rate system allowed
exchanges to set minimum commission
rates that their members had to charge
their customers, but allowed members
to charge more. CBOE’s proposal, by
contrast, does not establish a minimum
commission rate, but instead prohibits
commissions in circumstances in which
the DPM is not handling the order or in
which the order is not executed.
Accordingly, the Commission does not
believe that the CBOE’s proposal to
limit the fees charged by DPMs
constitutes fixing commissions,
allowances, discounts, or other fees for
purposes of Section 6(e)(1) of the Act.17
In addition, CBOE’s limits on fees that
DPMs may charge applies only to
members who choose to be DPMs on
CBOE. Therefore, CBOE is not fixing
fees generally; it is merely imposing a
condition, which is consistent with the
Act, on a member’s appointment as a
U.S.C. 78f(e)(1).
Securities Exchange Act Release No. 49220
(February 11, 2004), 69 FR 7836 (February 19, 2004)
(Order approving File No. SR–NASD–2003–128).
15 15 U.S.C. 78f(e).
16 H.R. Rep. No. 94–123, 94th Cong., 1st Sess. 42
(1975).
17 15 U.S.C. 78f(e)(1).
DPM. Finally, the Commission does not
agree with Susquehanna that the CBOE
must expressly provide that DPMs never
have any agency obligations towards
orders for which they are prohibited
from charging a commission.
V. Conclusion
For the foregoing reasons, the
Commission finds that the proposed
rule change is consistent with the Act
and the rules and regulations
thereunder applicable to a national
securities exchange, and, in particular,
with Sections 6(b)(5) and 6(e)(1) of the
Act.18
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,19 that the
proposed rule change (SR–CBOE–2004–
73) is approved.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.20
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5–786 Filed 2–25–05; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–51217; File No. SR–NYSE–
2004–54]
Self-Regulatory Organizations; Order
Approving 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
February 16, 2005.
I. Introduction
On September 17, 2004, the New York
Stock Exchange, Inc. (‘‘NYSE’’ or
‘‘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
implement certain amendments to its
Constitution. The proposed rule was
published for comment in the Federal
Register on January 14, 2005.3 The
Commission received no comment
letters on the proposed rule change.
13 15
14 See
VerDate jul<14>2003
16:34 Feb 25, 2005
Jkt 205001
U.S.C. 78f(b)(5) and 78f(e)(1).
U.S.C. 78s(b)(2).
20 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 51015
(January 11, 2005), 70 FR 2688.
PO 00000
18 15
19 15
Frm 00081
Fmt 4703
Sfmt 4703
This order approves the proposed rule
change.
II. Description of the Proposed Rule
Change
The Exchange has proposed
amendments to its Constitution with
respect to the new governance
architecture that was approved by the
Commission and implemented by the
Exchange in December 2003.4 The
Exchange also has proposed an
Independence Policy for its Board of
Directors (‘‘Board’’), which contains
standards that NYSE directors must
meet to be considered independent.
The proposed changes to the NYSE
Constitution are summarized below:
• The Board would have the
flexibility to move up its annual
meeting of members to make it closer to
the end of the Exchange’s fiscal year,
which coincides with the calendar year,
and also to give the Board more
flexibility with respect to the timing
necessary to report its director
nominations to the Exchange’s
membership, but without reducing the
current time period for members to
propose nominations by petition.
• The Chief Executive Officer
(‘‘CEO’’) would be recused from
participating in any Board review of
decisions made by Exchange staff,
officers or committees.
• The CEO would be prohibited from
requiring reviews of disciplinary
decisions and would be recused from
participating in Board reviews of any
disciplinary decisions.
• In the event the Chairman of the
Board is also not the CEO, the CEO
would be permitted to serve as
Chairman 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.
• Members of the Board of Executives
would be barred from serving on the
Hearing Board in light of their
participation on the Regulation,
Enforcement & Listing Standards
Committee.
• The qualifications of the floor
member representatives on the Board of
Executives would be revised to include
any individual, other than a specialist,
who spends a substantial amount of
time on the Exchange floor, in order to
reflect the Exchange’s entire nonspecialist floor member constituency as
it currently exists.
• The current requirement that the
Board and the Board of Executives have
4 See Securities Exchange Act Release No. 48946
(December 17, 2003), 68 FR 74678 (December 24,
2003).
E:\FR\FM\28FEN1.SGM
28FEN1
Federal Register / Vol. 70, No. 38 / Monday, February 28, 2005 / Notices
two plenary sessions a year would be
replaced by a requirement that each
member of the Board attend at least
three Board of Executives meetings
annually and the Chairman would make
an Annual Report on the Exchange’s
activities solely to the Board of
Executives.
• A reference to ‘‘Nominating
Committee’’ would be revised to reflect
the change in name to ‘‘Nominating &
Governance Committee.’’
• The Nominating & Governance
Committee no longer would be required
to conduct succession planning with
respect to the Exchange’s Chairman,
because the Board now decides whether
to separate the offices of Chairman and
CEO and then selects the Chairman, if
it determines to separate those offices.
• An erroneous reference to ‘‘Article
VII, Section I’’ is corrected to refer to
‘‘Article VIII, Section 1.’’
In addition to the changes to the
NYSE Constitution, the Exchange also
has proposed an Independence Policy
for the Board. The Independence Policy
would apply to all members of the
Board and would require the Board to
make an independence determination
with respect to each director upon his
or her nomination or appointment to the
Board and thereafter as the Board
considers advisable, but no less
frequently than annually. A director
would be independent only if the Board
determined that the director has no
material relationship with the Exchange.
In making a determination of
independence, the Board would have to
consider the special responsibilities of a
director in light of the status of the
NYSE as a New York non-profit
corporation, as a self-regulatory
organization, and as a national
securities exchange subject to the
Commission’s supervision, as well as
the specific independence qualification
standards set forth in the proposed
policy. The Independence Policy sets
forth standards when a director would
not be independent as a result of a
relationship with the Exchange,
Exchange members, member
organizations, non-member brokerdealers, or listed companies. Each
director would be responsible for
informing the Exchange promptly of any
relationships that might bear on the
determination of his or her
independence. Any director who is no
longer independent as a result of the
existence of a relationship that violates
the independence standards in the
NYSE Constitution, or whom the Board
determines is no longer independence
under the Independence Policy, would
be deemed to have tendered his or her
resignation. Under Article IV, Section 2
VerDate jul<14>2003
16:34 Feb 25, 2005
Jkt 205001
of the NYSE Constitution, the Board is
required to adopt specific standards
relating to the independence
determination, which are to be
comparable to standards required of
issuers listed on the Exchange, by
effecting a rule change within the
meaning of Section 19(b)(1) of the Act.
III. Discussion and Commission
Findings
After careful consideration, the
Commission finds that the proposed
rule change is consistent with the Act
and the rules and regulations
thereunder applicable to a national
securities exchange.5 In particular, the
Commission finds that, the proposed
rule change is consistent with Section
6(b)(1) of the Act 6 which requires that
the exchange be ‘‘so organized and
[have] the capacity to carry out the
purposes of [the Act]’’ and to ‘‘enforce
compliance by its members and persons
associated with its members with the
provisions of [the Act].’’ The
Commission also finds that, the
proposed rule change is consistent with
Section 6(b)(3) of the Act,7 which
requires that the rules of a national
securities exchange assure the 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 not be associated with a member of
the exchange, broker, or dealer. In
addition, the Commission finds that the
proposed rule change is consistent with
Section 6(b)(5) of the Act 8 in that it is
designed, among other things, to
facilitate transactions in securities; 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, and does not permit
unfair discrimination among issuers.
Further, the Commission finds that the
proposed rule change is consistent with
Section 6(b)(7) of the Act,9 which,
among other things, requires that the
rules of a national securities exchange
provide a fair procedure for the
disciplining of members and persons
associated with members.
5 In approving this proposed rule change, the
Commission notes that it has considered the
proposed rule’s impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
6 15 U.S.C. 78f(b)(1).
7 15 U.S.C. 78f(b)(3).
8 15 U.S.C. 78s(b)(5).
9 15 U.S.C. 78s(b)(7).
PO 00000
Frm 00082
Fmt 4703
Sfmt 4703
9689
The Commission notes that the
proposed changes to the NYSE
Constitution would prohibit the CEO
from participating in any Board review
of decisions by Exchange staff, officers
or committees; from requiring reviews
of disciplinary decisions; and from
participating in reviews by the Board of
disciplinary decisions. The Commission
also notes that the proposed NYSE
Constitution changes would allow the
CEO 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.
The Commission believes that these
changes are designed, in a manner
consistent with the Exchange’s
governance architecture, to clarify the
role of the CEO and to bolster the
separation of the business and
regulatory functions of the Exchange.
The Commission finds that these NYSE
Constitution revisions are consistent
with the Act. Further, the proposed rule
change would eliminate the Chairman
as a subject of mandated succession
planning for the Nominating &
Governance Committee. In the
Commission’s view, this change is
appropriate in light of the Board’s
authority to decide whether the offices
of Chairman and CEO should be
separated.
The Commission also notes that the
proposed rule change would prohibit
members of the Board of Executives
from serving on the Exchange’s Hearing
Board in light of the fact that members
of the Board of Executives currently
serve on the Regulation, Enforcement &
Listing Standards Committee, which has
been delegated by the Board the
responsibility to hear appeals of
disciplinary matters considered by a
Hearing Panel. The Commission notes
that the Hearing Board would still
consist of members and allied members
of the Exchange who are not members
of the Board or Board of Executives and
registered employees and non-registered
employees of members and member
organizations. The Commission believes
that prohibiting members of the Board
of Executives from serving on the
Hearing Board is consistent with the
Act’s requirements.
The Commission notes that the
proposed rule change seeks to make
several changes to the NYSE
Constitution that would affect the
administration of the Exchange. These
changes include allowing the Board to
schedule the annual meeting of
members closer to the end of the
Exchange’s fiscal year; giving the Board
more flexibility on the timing of
E:\FR\FM\28FEN1.SGM
28FEN1
9690
Federal Register / Vol. 70, No. 38 / Monday, February 28, 2005 / Notices
submission of director nominations to
the membership; and requiring Board
members to attend at least three
meetings of the Board of Executives
annually instead of requiring two
plenary sessions between the Board and
the Board of Executives. While these
changes are designed to provide the
Board with greater flexibility in
administering the affairs of the
Exchange, particularly with respect to
the annual meeting process, they require
that the Board provide sufficient
advance notice to members of the
annual meeting to take into account the
number of days for the filing of
nomination petitions, the determination
by the Board of petition candidates’
eligibility, and notice to members of the
annual meeting. In the Commission’s
view, these proposed changes are
consistent with the Act. In addition, the
Commission notes that the proposed
rule change would allow the Board to
appoint to the Board of Executives as a
floor member representative any
member, other than a specialist, who
spends a substantial amount of time on
the floor. Because this change is
intended to reflect more accurately the
entire constituency of floor members,
other than specialists, who are eligible
to serve on the Board of Executives, the
Commission believes that this proposal
is consistent with the Act.
Finally, the Commission notes that
the NYSE has submitted an
Independence Policy pursuant to the
requirement of Article IV, Section 2 of
the NYSE Constitution. This provision
of the NYSE Constitution requires the
Exchange to adopt standards for
determining the independence of its
directors, which are to be comparable to
the standards required of the Exchange’s
listed issuers, and to file such standards
with the Commission as a proposed rule
change under Section 19(b)(1) of the
Act.10 The Commission believes that
generally the NYSE’s Independence
Policy comports with the independence
standards required of the Exchange’s
listed issuers, but the Exchange has
tailored its policy to address its role as
a self-regulatory organization and as a
listed market.11 The Commission
recently proposed governance standards
for national securities exchanges and
registered securities associations,
which, among other things, would
require that a majority of the directors
of an exchange or association be
10 15
U.S.C. 78s(b)(1).
11 The independence standards for NYSE listed
issuers are found in Section 303A.00 of the NYSE
Listed Company Manual.
VerDate jul<14>2003
16:34 Feb 25, 2005
Jkt 205001
independent.12 The SRO Governance
Proposal also would set forth specific
criteria for determining the
independence of an exchange’s or
association’s directors that are similar,
but not identical, to the Exchange’s
Independence Policy. The Commission
believes that, in the current context, the
Exchange’s proposed Independence
Policy is consistent with the Act. The
Commission notes, however, that the
Exchange would have to conform its
Independence Policy, as well as its
Constitution and rules, to any rules the
Commission may adopt with respect to
the governance of exchanges and
associations and the independence of
their directors.
U.S. Small Business Administration,
409 3rd Street, Suite 6050, Washington,
DC 20416.
SUPPLEMENTARY INFORMATION: Notice is
hereby given that as a result of the
Administrator’s disaster declaration,
applications for disaster loans may be
filed at the address listed above or other
locally announced locations.
The following areas have been
determined to be adversely affected by
the disaster:
Primary Counties
San Bernardino.
Contiguous Counties
IV. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,13 that the
proposed rule change (SR–NYSE–2004–
54) is hereby approved.
California
Inyo, Kern, Los Angeles, Orange, and
Riverside.
Arizona
La Paz and Mohave.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.14
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5–785 Filed 2–25–05; 8:45 am]
BILLING CODE 8010–01–P
SMALL BUSINESS ADMINISTRATION
[Disaster Declaration # 10027 and # 10028]
California Disaster # CA–00003
U.S. Small Business
Administration.
ACTION: Notice.
AGENCY:
SUMMARY: This is a Notice of an
Administrative declaration of a disaster
for the State of California, dated
February 18, 2005.
Incident: Severe Storms, Flooding,
Debris Flows, and Mudslides.
Incident Period: December 27, 2004,
through January 11, 2005.
EFFECTIVE DATE: February 18, 2005.
Physical Loan Application Deadline
Date: April 19, 2005.
EIDL Loan Application Deadline Date:
November 18, 2005.
ADDRESSES: Submit completed loan
applications to: U.S. Small Business
Administration, Disaster Area Office 1,
360 Rainbow Blvd. South 3rd Floor,
Niagara Falls, NY 14303.
FOR FURTHER INFORMATION CONTACT: A.
Escobar, Office of Disaster Assistance,
12 See Securities Exchange Act Release No. 50699
(November 18, 2004), 69 FR 71126 (December 8,
2004) (‘‘SRO Governance Proposal’’).
13 Id.
14 17 CFR 200.30–3(a)(12).
PO 00000
Frm 00083
Fmt 4703
Sfmt 4703
Nevada
Clark.
The Interest Rates are:
Percent
Homeowners with credit available
elsewhere ....................................
Homeowners without credit available elsewhere ............................
Businesses with credit available
elsewhere ....................................
Businesses and Small Agricultural
Cooperatives without credit available elsewhere ............................
Other (Including Non-Profit Organizations) with credit available
elsewhere ....................................
Businesses and Non-Profit Organizations without credit available
elsewhere ....................................
5.875
2.937
5.800
4.000
4.750
4.000
The number assigned to this disaster
for physical damage is 10027B and for
economic injury is 100280.
The States which received EIDL Decl#
are California, Arizona and Nevada.
(Catalog of Federal Domestic Assistance
Numbers 59002 and 59008)
Dated: February 18, 2005.
Hector V. Barreto,
Administrator.
[FR Doc. 05–3819 Filed 2–25–05; 8:45 am]
BILLING CODE 8025–01–P
SMALL BUSINESS ADMINISTRATION
[Disaster Declaration # 10032]
Kansas Disaster # KS–00001 Disaster
Declaration
U.S. Small Business
Administration.
ACTION: Notice.
AGENCY:
E:\FR\FM\28FEN1.SGM
28FEN1
]]>Agencies
[Federal Register Volume 70, Number 38 (Monday, February 28, 2005)]
[Notices]
[Pages 9688-9690]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E5-785]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-51217; File No. SR-NYSE-2004-54]
Self-Regulatory Organizations; Order Approving 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
February 16, 2005.
I. Introduction
On September 17, 2004, the New York Stock Exchange, Inc. (``NYSE''
or ``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 implement certain amendments to its
Constitution. The proposed rule was published for comment in the
Federal Register on January 14, 2005.\3\ The Commission received no
comment letters on the proposed rule change. This order approves the
proposed rule change.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 51015 (January 11,
2005), 70 FR 2688.
---------------------------------------------------------------------------
II. Description of the Proposed Rule Change
The Exchange has proposed amendments to its Constitution with
respect to the new governance architecture that was approved by the
Commission and implemented by the Exchange in December 2003.\4\ The
Exchange also has proposed an Independence Policy for its Board of
Directors (``Board''), which contains standards that NYSE directors
must meet to be considered independent.
---------------------------------------------------------------------------
\4\ See Securities Exchange Act Release No. 48946 (December 17,
2003), 68 FR 74678 (December 24, 2003).
---------------------------------------------------------------------------
The proposed changes to the NYSE Constitution are summarized below:
The Board would have the flexibility to move up its annual
meeting of members to make it closer to the end of the Exchange's
fiscal year, which coincides with the calendar year, and also to give
the Board more flexibility with respect to the timing necessary to
report its director nominations to the Exchange's membership, but
without reducing the current time period for members to propose
nominations by petition.
The Chief Executive Officer (``CEO'') would be recused
from participating in any Board review of decisions made by Exchange
staff, officers or committees.
The CEO would be prohibited from requiring reviews of
disciplinary decisions and would be recused from participating in Board
reviews of any disciplinary decisions.
In the event the Chairman of the Board is also not the
CEO, the CEO would be permitted to serve as Chairman 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.
Members of the Board of Executives would be barred from
serving on the Hearing Board in light of their participation on the
Regulation, Enforcement & Listing Standards Committee.
The qualifications of the floor member representatives on
the Board of Executives would be revised to include any individual,
other than a specialist, who spends a substantial amount of time on the
Exchange floor, in order to reflect the Exchange's entire non-
specialist floor member constituency as it currently exists.
The current requirement that the Board and the Board of
Executives have
[[Page 9689]]
two plenary sessions a year would be replaced by a requirement that
each member of the Board attend at least three Board of Executives
meetings annually and the Chairman would make an Annual Report on the
Exchange's activities solely to the Board of Executives.
A reference to ``Nominating Committee'' would be revised
to reflect the change in name to ``Nominating & Governance Committee.''
The Nominating & Governance Committee no longer would be
required to conduct succession planning with respect to the Exchange's
Chairman, because the Board now decides whether to separate the offices
of Chairman and CEO and then selects the Chairman, if it determines to
separate those offices.
An erroneous reference to ``Article VII, Section I'' is
corrected to refer to ``Article VIII, Section 1.''
In addition to the changes to the NYSE Constitution, the Exchange
also has proposed an Independence Policy for the Board. The
Independence Policy would apply to all members of the Board and would
require the Board to make an independence determination with respect to
each director upon his or her nomination or appointment to the Board
and thereafter as the Board considers advisable, but no less frequently
than annually. A director would be independent only if the Board
determined that the director has no material relationship with the
Exchange. In making a determination of independence, the Board would
have to consider the special responsibilities of a director in light of
the status of the NYSE as a New York non-profit corporation, as a self-
regulatory organization, and as a national securities exchange subject
to the Commission's supervision, as well as the specific independence
qualification standards set forth in the proposed policy. The
Independence Policy sets forth standards when a director would not be
independent as a result of a relationship with the Exchange, Exchange
members, member organizations, non-member broker-dealers, or listed
companies. Each director would be responsible for informing the
Exchange promptly of any relationships that might bear on the
determination of his or her independence. Any director who is no longer
independent as a result of the existence of a relationship that
violates the independence standards in the NYSE Constitution, or whom
the Board determines is no longer independence under the Independence
Policy, would be deemed to have tendered his or her resignation. Under
Article IV, Section 2 of the NYSE Constitution, the Board is required
to adopt specific standards relating to the independence determination,
which are to be comparable to standards required of issuers listed on
the Exchange, by effecting a rule change within the meaning of Section
19(b)(1) of the Act.
III. Discussion and Commission Findings
After careful consideration, the Commission finds that the proposed
rule change is consistent with the Act and the rules and regulations
thereunder applicable to a national securities exchange.\5\ In
particular, the Commission finds that, the proposed rule change is
consistent with Section 6(b)(1) of the Act \6\ which requires that the
exchange be ``so organized and [have] the capacity to carry out the
purposes of [the Act]'' and to ``enforce compliance by its members and
persons associated with its members with the provisions of [the Act].''
The Commission also finds that, the proposed rule change is consistent
with Section 6(b)(3) of the Act,\7\ which requires that the rules of a
national securities exchange assure the 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 not be associated with a member of the
exchange, broker, or dealer. In addition, the Commission finds that the
proposed rule change is consistent with Section 6(b)(5) of the Act \8\
in that it is designed, among other things, to facilitate transactions
in securities; 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, and does not permit unfair discrimination among
issuers. Further, the Commission finds that the proposed rule change is
consistent with Section 6(b)(7) of the Act,\9\ which, among other
things, requires that the rules of a national securities exchange
provide a fair procedure for the disciplining of members and persons
associated with members.
---------------------------------------------------------------------------
\5\ In approving this proposed rule change, the Commission notes
that it has considered the proposed rule's impact on efficiency,
competition, and capital formation. See 15 U.S.C. 78c(f).
\6\ 15 U.S.C. 78f(b)(1).
\7\ 15 U.S.C. 78f(b)(3).
\8\ 15 U.S.C. 78s(b)(5).
\9\ 15 U.S.C. 78s(b)(7).
---------------------------------------------------------------------------
The Commission notes that the proposed changes to the NYSE
Constitution would prohibit the CEO from participating in any Board
review of decisions by Exchange staff, officers or committees; from
requiring reviews of disciplinary decisions; and from participating in
reviews by the Board of disciplinary decisions. The Commission also
notes that the proposed NYSE Constitution changes would allow the CEO
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. The Commission believes that these changes are designed, in a
manner consistent with the Exchange's governance architecture, to
clarify the role of the CEO and to bolster the separation of the
business and regulatory functions of the Exchange. The Commission finds
that these NYSE Constitution revisions are consistent with the Act.
Further, the proposed rule change would eliminate the Chairman as a
subject of mandated succession planning for the Nominating & Governance
Committee. In the Commission's view, this change is appropriate in
light of the Board's authority to decide whether the offices of
Chairman and CEO should be separated.
The Commission also notes that the proposed rule change would
prohibit members of the Board of Executives from serving on the
Exchange's Hearing Board in light of the fact that members of the Board
of Executives currently serve on the Regulation, Enforcement & Listing
Standards Committee, which has been delegated by the Board the
responsibility to hear appeals of disciplinary matters considered by a
Hearing Panel. The Commission notes that the Hearing Board would still
consist of members and allied members of the Exchange who are not
members of the Board or Board of Executives and registered employees
and non-registered employees of members and member organizations. The
Commission believes that prohibiting members of the Board of Executives
from serving on the Hearing Board is consistent with the Act's
requirements.
The Commission notes that the proposed rule change seeks to make
several changes to the NYSE Constitution that would affect the
administration of the Exchange. These changes include allowing the
Board to schedule the annual meeting of members closer to the end of
the Exchange's fiscal year; giving the Board more flexibility on the
timing of
[[Page 9690]]
submission of director nominations to the membership; and requiring
Board members to attend at least three meetings of the Board of
Executives annually instead of requiring two plenary sessions between
the Board and the Board of Executives. While these changes are designed
to provide the Board with greater flexibility in administering the
affairs of the Exchange, particularly with respect to the annual
meeting process, they require that the Board provide sufficient advance
notice to members of the annual meeting to take into account the number
of days for the filing of nomination petitions, the determination by
the Board of petition candidates' eligibility, and notice to members of
the annual meeting. In the Commission's view, these proposed changes
are consistent with the Act. In addition, the Commission notes that the
proposed rule change would allow the Board to appoint to the Board of
Executives as a floor member representative any member, other than a
specialist, who spends a substantial amount of time on the floor.
Because this change is intended to reflect more accurately the entire
constituency of floor members, other than specialists, who are eligible
to serve on the Board of Executives, the Commission believes that this
proposal is consistent with the Act.
Finally, the Commission notes that the NYSE has submitted an
Independence Policy pursuant to the requirement of Article IV, Section
2 of the NYSE Constitution. This provision of the NYSE Constitution
requires the Exchange to adopt standards for determining the
independence of its directors, which are to be comparable to the
standards required of the Exchange's listed issuers, and to file such
standards with the Commission as a proposed rule change under Section
19(b)(1) of the Act.\10\ The Commission believes that generally the
NYSE's Independence Policy comports with the independence standards
required of the Exchange's listed issuers, but the Exchange has
tailored its policy to address its role as a self-regulatory
organization and as a listed market.\11\ The Commission recently
proposed governance standards for national securities exchanges and
registered securities associations, which, among other things, would
require that a majority of the directors of an exchange or association
be independent.\12\ The SRO Governance Proposal also would set forth
specific criteria for determining the independence of an exchange's or
association's directors that are similar, but not identical, to the
Exchange's Independence Policy. The Commission believes that, in the
current context, the Exchange's proposed Independence Policy is
consistent with the Act. The Commission notes, however, that the
Exchange would have to conform its Independence Policy, as well as its
Constitution and rules, to any rules the Commission may adopt with
respect to the governance of exchanges and associations and the
independence of their directors.
---------------------------------------------------------------------------
\10\ 15 U.S.C. 78s(b)(1).
\11\ The independence standards for NYSE listed issuers are
found in Section 303A.00 of the NYSE Listed Company Manual.
\12\ See Securities Exchange Act Release No. 50699 (November 18,
2004), 69 FR 71126 (December 8, 2004) (``SRO Governance Proposal'').
---------------------------------------------------------------------------
IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\13\ that the proposed rule change (SR-NYSE-2004-54) is hereby
approved.
---------------------------------------------------------------------------
\13\ Id.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\14\
---------------------------------------------------------------------------
\14\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5-785 Filed 2-25-05; 8:45 am]
BILLING CODE 8010-01-P
