Self-Regulatory Organizations; Order Approving Proposed Rule Change and Amendments No. 1 Thereto and Notice of Filing and Order Granting Accelerated Approval to Amendment No. 2 by the New York Stock Exchange, Inc. Relating to Appointments to the NYSE's Board of Arbitration and Other Changes to the NYSE's Arbitration Program, 10729-10731 [E5-900]
Download as PDF
<![CDATA[
Federal Register / Vol. 70, No. 42 / Friday, March 4, 2005 / Notices
450 Fifth Street, NW., Washington, DC
20549–0609.
All submissions should refer to File
Number SR–NASD–2004–125. 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 (https://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
Section. Copies of such filing also will
be available for inspection and copying
at the principal office of NASD. 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–NASD–2004–125 and
should be submitted on or before March
25, 2005.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.17
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5–873 Filed 3–3–05; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–51273; File No. SR–NYSE–
2004–031]
Self-Regulatory Organizations; Order
Approving Proposed Rule Change and
Amendments No. 1 Thereto and Notice
of Filing and Order Granting
Accelerated Approval to Amendment
No. 2 by the New York Stock
Exchange, Inc. Relating to
Appointments to the NYSE’s Board of
Arbitration and Other Changes to the
NYSE’s Arbitration Program
February 28, 2004.
I. Introduction
On June 21, 2004, the New York Stock
Exchange, Inc. (‘‘NYSE’’ or ‘‘Exchange’’)
filed with the Securities and Exchange
Commission (‘‘SEC’’ or ‘‘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 relating to
amendments to NYSE Rules 633, 634,
and 635 relating to the administration of
the Exchange’s arbitration program. On
October 29, 2004, the Exchange filed
Amendment No. 1 to the proposed rule
change.3 The proposed rule change, as
amended, was published for comment
in the Federal Register on January 4,
2005.4
On January 18, 2005, the Exchange
filed Amendment No. 2 to the proposed
rule change, which proposed certain
technical changes to the rule text.5 The
Commission received one comment
letter in response to the proposed rule
change.6 For the reasons discussed
below, the Commission is approving the
proposed rule change as amended.
II. Description of the Proposed Rule
Change
A. Description of the Proposal
The proposed rule change consists of
amendments to NYSE Rules 633, 634,
and 635 concerning appointments of
members of the Board of Arbitration,
appointments to panels of securities and
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 Letter from Karen Kupersmith, Director of
Arbitration, NYSE, to Catherine McGuire, Chief
Counsel, Division of Market Regulation, SEC, dated
October 29, 2004.
4 Exchange Act Release No. 50939 (Dec. 28, 2004),
70 FR 00420 (Jan. 4, 2005).
5 Amendment 2, submitted electronically to the
Commission on January 18, 2005 and signed by
Mary Yeager, Assistant Corporate Secretary.
6 Letter to Jonathan G. Katz, Secretary,
Commission, from Robert S. Clemente, Esq., dated
January 24, 2005, available online at https://
www.sec.gov/rules/sro /nyse/nyse200431/
rsclemente4506.htm.
2 17
17 17
CFR 200.30–3(a)(12).
VerDate jul<14>2003
19:07 Mar 03, 2005
Jkt 205001
PO 00000
Frm 00139
Fmt 4703
Sfmt 4703
10729
non-securities arbitrators, and the
appointment of the Director of
Arbitration of the Exchange. NYSE Rule
633 governs the appointment of a Board
of Arbitration, whose membership
consists of current or former members of
the Exchange, allied members, or
officers of member corporations.
Members of the Board of Arbitration
decide controversies between parties
who are members of the Exchange,
allied members, member firms or
member corporations. Currently, the
Chairman of the NYSE Board appoints
the members of the Board of Arbitration
annually. As proposed, the Chairman
will no longer appoint the members of
the Board of Arbitration. Rather, the
Director of Arbitration will do so, and
she or he will do so on an ongoing basis
rather than annually. Moreover, under
the proposal, members of the Board of
Arbitration may not be members of the
Board of Executives.7 Currently, under
NYSE Rule 633, they may not be
members of the Board of Directors.8
NYSE Rule 634 provides for the
appointment of securities and nonsecurities arbitrators to standing panels
of arbitrators available to decide
customer disputes. Arbitration panels
for individual disputes are typically
composed of two non-securities
arbitrators and one securities arbitrator.9
Under the proposal, these arbitrators
would be appointed by the Director of
Arbitration rather than the Chairman of
the NYSE Board, as is currently the
case.10 The proposal also would remove
a provision stating that the NYSE will
keep separate arbitration panels to serve
within or outside of the New York
metropolitan area because the provision
7 The NYSE Board of Executives, which includes
the Chairman of the NYSE Board and investors and
representatives from member organizations, advises
the Chief Executive Officer of the Exchange in his
or her management of the operations of the
Exchange. See NYSE Constitution, Article V,
Section 1.
8 Amendment No. 2, submitted on January 18,
2005, proposes a technical correction to the text of
NYSE Rule 633, as follows. A proposed deletion
appears in [brackets].
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 Executives.
9 A securities arbitrator is someone ‘‘engaged in
or retired from the securities business’’ and a nonsecurities arbitrator is someone ‘‘not engaged in the
securities business.’’ See NYSE Rule 634.
10 As permitted by the NYSE Constitution, this
authority has been delegated to the Vice President,
Arbitration and Hearing Board. NYSE stated in its
proposal that, in practice, arbitration department
management routinely appoints new individuals to
the rosters of arbitrators subject to the oversight of
the Vice President.
E:\FR\FM\04MRN1.SGM
04MRN1
10730
Federal Register / Vol. 70, No. 42 / Friday, March 4, 2005 / Notices
does not reflect current Exchange
practice.11
Currently, NYSE Rule 635 provides
that the Chairman of the NYSE Board
appoints the Director of Arbitration. In
light of a recent corporate restructuring
at the Exchange,12 the proposal instead
provides that the Chief Regulatory
Officer will designate the Director of
Arbitration, subject to the approval of
the NYSE’s Regulatory Oversight
Committee.13
B. Comment Summary
The proposed rule change was
published for comment in the Federal
Register on January 4, 2005, and the
Commission received one comment
letter in response.14 The commenter
opposed the proposal. With regard to
the Exchange’s proposed changes to
Rules 633 and 634, the commenter
contended that the NYSE should
separate itself and its management from
the process of appointing arbitrators by
implementing a system of review and
oversight of the arbitrator appointment
process. The commenter opposed
delegating the arbitrator selection
process to the Director of Arbitration.
With regard to Rule 635, the
commenter stated that the rule should
be amended to specify that the
appointment of the Director of
Arbitration by the Chief Regulatory
Officer must be subject to the review
and approval of the Regulatory
Oversight Committee.
III. Discussion and Findings
After careful consideration of the
proposal and the comment that was
received, the Commission finds that the
proposed rule change, as amended, is
consistent with the requirements of the
Act and the rules and regulations
thereunder applicable to a national
securities exchange.15 Specifically, the
Commission finds that the proposal is
consistent with Section 6(b)(5) of the
Act in that it promotes just and
11 Amendment No. 2 also proposes a technical
correction to the text of NYSE Rule 634, as follows.
The proposed deletion appears in [brackets]:
The Director of Arbitration shall from time to
time appoint two panels of arbitrators,[.] 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.
12 See Exchange Act Release No. 48946 (Dec. 17,
2003), 68 FR 74678 (Dec. 24, 2003).
13 See NYSE Constitution, Article IV, Section
12(a)(4) (the Regulatory Oversight Committee is
responsible for, inter alia, ‘‘personnel actions
involving senior regulatory personnel’’).
14 See supra note 6.
15 In approving this proposed rule change, the
Commission notes that it has considered the
proposed rule’s impact on efficiency, competition,
and capital formation. 15 U.S.C. 78c(f).
VerDate jul<14>2003
19:07 Mar 03, 2005
Jkt 205001
equitable principles of trade by helping
to ensure that members and member
organizations and the public have a fair
and impartial forum for the resolution of
their disputes.16
The NYSE is updating its arbitration
selection process to reflect more
accurately the way in which arbitrators
are selected. Specifically, as amended,
NYSE Rule 633 would rest the
obligation of selecting members of the
Board of Arbitration with the Director of
Arbitration, who is the NYSE staff
person responsible for recruiting
potential arbitrators. Similarly, NYSE
Rule 634, as amended, would authorize
the Director of Arbitration to appoint
arbitration panel members. The Director
of Arbitration reports to the Chief
Regulatory Officer, who in turn reports
to the Regulatory Oversight Committee
and NSYE Board.
In response to the comment received,
the Commission believes that the
proposed rule change provides
appropriate oversight over the
appointment of arbitrators.17 Important
functions of the Exchange are routinely
delegated to the Exchange staff.
Nevertheless, the Board of Directors
maintains the ultimate authority, and
the responsibility, to ensure that the
actions of the Exchange staff are carried
out in a manner that is consistent with
the federal securities laws.18 Similarly,
although the proposed text of Rule 635
does not expressly require that the
Regulatory Oversight Committee review
the Chief Regulatory Officer’s
appointment of a Director of Arbitration,
as the commenter recommended, this
appointment is subject to the oversight
of the Regulatory Oversight Committee
as a function of the Exchange’s routine
corporate governance structure.19
Therefore, we believe the proposal
sufficiently addresses the commenter’s
concerns.
The Commission finds good cause for
approving Amendment No. 2 before the
thirtieth day after the date of
publication of notice of filing thereof in
the Federal Register. The proposed
Amendment No. 2 makes necessary
technical corrections to the rule text and
does not alter the substantive content of
the rules.
U.S.C. 78f(b)(5).
e.g., NYSE Constitution, Article IV,
Section 14(a) (‘‘Delegation Authority’’); id., Article
VI, Section 4(a) (responsibilities of the Chief
Regulatory Officer are ‘‘[s]ubject to the authority of
the Board and the Regulatory Oversight &
Regulatory Budget Committee’’).
18 Increased scrutiny of applicants for the position
of arbitrator, while a laudable goal, is beyond the
scope of this particular proposed rule change.
19 See Exchange Act Release No. 50939, supra
note 4, 70 FR at 00421, citing NYSE Constitution,
Article IV, Section 12(a)(4).
PO 00000
16 15
17 See,
Frm 00140
Fmt 4703
Sfmt 4703
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning Amendment No.
2, including whether Amendment No. 2
is consistent with the Act. Comments
may be submitted by any of the
following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. 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. 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 its Internet Web
site (https://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 Amendment
No. 2 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 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–
2004–031 and should be submitted on
or before March 25, 2005.
V. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,20 that the
proposed rule change (SR–NYSE–2004–
031), as amended, be, and hereby is,
approved, and that Amendment No. 2
thereto to the proposed rule change be,
20 15
E:\FR\FM\04MRN1.SGM
U.S.C. 78s(b)(2).
04MRN1
Federal Register / Vol. 70, No. 42 / Friday, March 4, 2005 / Notices
and hereby is, approved on an
accelerated basis.
Commission is publishing this notice
and order to solicit comments on the
proposed rule change, as amended, from
interested persons and to approve the
proposed rule change on an accelerated
basis.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.21
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5–900 Filed 3–3–05; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–51245; File No. SR–PCX–
2004–117]
Self-Regulatory Organizations; Notice
of Filing and Order Granting
Accelerated Approval of Proposed
Rule Change and Amendment No. 1
Thereto by the Pacific Exchange, Inc.
To Trade the streetTRACKS Gold
Shares Pursuant to Unlisted Trading
Privileges
February 23, 2005.
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 December
10, 2004, the Pacific Exchange, Inc.
(‘‘PCX’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been
substantially prepared by the Exchange.
The proposal would permit the
Exchange to trade the streetTRACKS
Gold Shares (‘‘GLD’’ or ‘‘Shares’’)
pursuant to unlisted trading privileges
(‘‘UTP’’). The Shares represent units of
fractional undivided beneficial interests
in and ownership of the streetTRACKS
Gold Trust (‘‘Trust’’). The Commission
previously has approved GLD for
original listing and trading on the New
York Stock Exchange (‘‘NYSE’’).3
On January 28, 2005, PCX filed
Amendment No. 1 to the proposal.4 The
21 17
CFR 200.20–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 50603
(October 28, 2004), 69 FR 64614 (November 5, 2004)
(‘‘NYSE Approval Order’’).
4 In Amendment No. 1, PCX replaced the filing in
its entirety to, among other things: (1) Amend the
proposed rule text to reference PCXE Rule 8.201(g)–
(i); (2) clarify that the Shares would trade until 4:15
p.m. New York time; (3) clarify that last sale prices
for the Shares are disseminated on a real-time basis;
(4) represent that it would provide a link on its Web
site to the NYSE Web site and the Trust Web site;
(5) state that it would cease trading of the Shares
if they were delisted from NYSE and not relisted
on another exchange; (6) clarify that PCXE Rule
8.201(b) would be applicable to the Shares; (7) state
that the Shares would be subject to trade-through
provisions; (8) represent that its surveillance
procedures would be adequate to deter
1 15
VerDate jul<14>2003
19:07 Mar 03, 2005
Jkt 205001
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
PCX, through its wholly owned
subsidiary PCX Equities, Inc. (‘‘PCXE’’),
proposes to amend its rules governing
the Archipelago Exchange (‘‘ArcaEx’’),
the equities trading facility of PCXE, by
adopting PCXE Rule 5.2(j)(5). The
proposal would permit the Exchange to
trade GLD on a UTP basis. The text of
the proposed rule change is available on
the Exchange’s Web site (https://
www.pacificex.com), at the principal
office of the Exchange, and at the
Commission’s Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of, and basis for,
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item III below. The
Exchange has prepared summaries, set
forth in Sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to trade the
streetTRACKS Gold Shares (ticker
symbol: GLD) pursuant to UTP. The
value of each Share will correspond to
a fixed amount of gold 5 and fluctuate
with the spot price of gold. Purchasing
Shares in the Trust provides investors a
mechanism to participate in the gold
market.
a. Description of the Gold Market. The
global trade in gold consists of over-thecounter (‘‘OTC’’) transactions in spot,
forwards, and options and other
derivatives, together with exchangetraded futures and options. The global
manipulation; and (9) state the restrictions of PCXE
Rule 8.201(g)–(i) on ETP Holders acting as GLD
market makers would apply.
5 Initially, each Share will correspond to onetenth of a troy ounce of gold. The amount of gold
associated with each Share is expected to decrease
over time as the Trust incurs and pays maintenance
fees and other expenses.
PO 00000
Frm 00141
Fmt 4703
Sfmt 4703
10731
gold market consists of the following
components, described briefly below.
(1) The OTC Market. The OTC market
trades on a continuous basis 24 hours
per day and accounts for most global
gold trading. Liquidity in the OTC
market can vary from time to time
during the course of the 24-hour trading
day. Fluctuations in liquidity are
reflected in adjustments to dealing
spreads—the differential between a
dealer’s ‘‘buy’’ and ‘‘sell’’ prices.
According to the Trust’s Registration
Statement, the period of greatest
liquidity in the gold market is typically
when trading in the European time
zones overlaps with trading in the
United States, which is when OTC
market trading in London, New York,
and other centers coincides with futures
and options trading on the Commodity
Exchange Inc. (‘‘COMEX’’), a division of
the New York Mercantile Exchange, Inc.
(‘‘NYMEX’’). This period lasts for
approximately four hours each New
York business day morning.
The OTC market has no formal
structure and no open-outcry meeting
place. The main centers of the OTC
market are London, New York, and
Zurich. Bullion dealers have offices
around the world, and most of the
world’s major bullion dealers are either
members or associate members of the
London Bullion Market Association
(‘‘LBMA’’), a trade association of
participants in the London Bullion
market.
There are no authoritative published
figures for overall worldwide volume in
gold trading. There are certain
published sources that do suggest the
significant size of the overall market.
The LBMA publishes statistics compiled
from the five members offering clearing
services.6 The monthly average daily
volume figures published by the LBMA
for 2003 range from a high of 19 million
to a low of 13.6 million troy ounces per
day.7 COMEX publishes price and
volume statistics for transactions in
contracts for the future delivery of gold.
COMEX figures for 2003 indicate that
the average daily volume for gold
6 Information regarding clearing volume estimates
by the LBMA can be found at https://
www.lbma.org.uk/clearing_table.htm. The three
measures published by LBMA are: volume, the
amount of metal transferred on average each day
measured in million of troy ounces; value,
measured in U.S. dollars, using the monthly average
London p.m. fixing price; and the number of
transfers, which is the average number recorded
each day. The statistics exclude allocated and
unallocated balance transfers where the sole
purpose is for overnight credit and physical
movements arranged by clearing members in
locations other than London.
7 See NYSE Approval Order, 69 FR at 64614.
E:\FR\FM\04MRN1.SGM
04MRN1
]]>Agencies
[Federal Register Volume 70, Number 42 (Friday, March 4, 2005)]
[Notices]
[Pages 10729-10731]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E5-900]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-51273; File No. SR-NYSE-2004-031]
Self-Regulatory Organizations; Order Approving Proposed Rule
Change and Amendments No. 1 Thereto and Notice of Filing and Order
Granting Accelerated Approval to Amendment No. 2 by the New York Stock
Exchange, Inc. Relating to Appointments to the NYSE's Board of
Arbitration and Other Changes to the NYSE's Arbitration Program
February 28, 2004.
I. Introduction
On June 21, 2004, the New York Stock Exchange, Inc. (``NYSE'' or
``Exchange'') filed with the Securities and Exchange Commission
(``SEC'' or ``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 relating to amendments to NYSE
Rules 633, 634, and 635 relating to the administration of the
Exchange's arbitration program. On October 29, 2004, the Exchange filed
Amendment No. 1 to the proposed rule change.\3\ The proposed rule
change, as amended, was published for comment in the Federal Register
on January 4, 2005.\4\
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Letter from Karen Kupersmith, Director of Arbitration, NYSE,
to Catherine McGuire, Chief Counsel, Division of Market Regulation,
SEC, dated October 29, 2004.
\4\ Exchange Act Release No. 50939 (Dec. 28, 2004), 70 FR 00420
(Jan. 4, 2005).
---------------------------------------------------------------------------
On January 18, 2005, the Exchange filed Amendment No. 2 to the
proposed rule change, which proposed certain technical changes to the
rule text.\5\ The Commission received one comment letter in response to
the proposed rule change.\6\ For the reasons discussed below, the
Commission is approving the proposed rule change as amended.
---------------------------------------------------------------------------
\5\ Amendment 2, submitted electronically to the Commission on
January 18, 2005 and signed by Mary Yeager, Assistant Corporate
Secretary.
\6\ Letter to Jonathan G. Katz, Secretary, Commission, from
Robert S. Clemente, Esq., dated January 24, 2005, available online
at https://www.sec.gov/rules/sro/nyse/nyse200431/rsclemente4506.htm.
---------------------------------------------------------------------------
II. Description of the Proposed Rule Change
A. Description of the Proposal
The proposed rule change consists of amendments to NYSE Rules 633,
634, and 635 concerning appointments of members of the Board of
Arbitration, appointments to panels of securities and non-securities
arbitrators, and the appointment of the Director of Arbitration of the
Exchange. NYSE Rule 633 governs the appointment of a Board of
Arbitration, whose membership consists of current or former members of
the Exchange, allied members, or officers of member corporations.
Members of the Board of Arbitration decide controversies between
parties who are members of the Exchange, allied members, member firms
or member corporations. Currently, the Chairman of the NYSE Board
appoints the members of the Board of Arbitration annually. As proposed,
the Chairman will no longer appoint the members of the Board of
Arbitration. Rather, the Director of Arbitration will do so, and she or
he will do so on an ongoing basis rather than annually. Moreover, under
the proposal, members of the Board of Arbitration may not be members of
the Board of Executives.\7\ Currently, under NYSE Rule 633, they may
not be members of the Board of Directors.\8\
---------------------------------------------------------------------------
\7\ The NYSE Board of Executives, which includes the Chairman of
the NYSE Board and investors and representatives from member
organizations, advises the Chief Executive Officer of the Exchange
in his or her management of the operations of the Exchange. See NYSE
Constitution, Article V, Section 1.
\8\ Amendment No. 2, submitted on January 18, 2005, proposes a
technical correction to the text of NYSE Rule 633, as follows. A
proposed deletion appears in [brackets].
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 Executives.
---------------------------------------------------------------------------
NYSE Rule 634 provides for the appointment of securities and non-
securities arbitrators to standing panels of arbitrators available to
decide customer disputes. Arbitration panels for individual disputes
are typically composed of two non-securities arbitrators and one
securities arbitrator.\9\ Under the proposal, these arbitrators would
be appointed by the Director of Arbitration rather than the Chairman of
the NYSE Board, as is currently the case.\10\ The proposal also would
remove a provision stating that the NYSE will keep separate arbitration
panels to serve within or outside of the New York metropolitan area
because the provision
[[Page 10730]]
does not reflect current Exchange practice.\11\
---------------------------------------------------------------------------
\9\ A securities arbitrator is someone ``engaged in or retired
from the securities business'' and a non-securities arbitrator is
someone ``not engaged in the securities business.'' See NYSE Rule
634.
\10\ As permitted by the NYSE Constitution, this authority has
been delegated to the Vice President, Arbitration and Hearing Board.
NYSE stated in its proposal that, in practice, arbitration
department management routinely appoints new individuals to the
rosters of arbitrators subject to the oversight of the Vice
President.
\11\ Amendment No. 2 also proposes a technical correction to the
text of NYSE Rule 634, as follows. The proposed deletion appears in
[brackets]:
The Director of Arbitration shall from time to time appoint two
panels of arbitrators,[.] 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.
---------------------------------------------------------------------------
Currently, NYSE Rule 635 provides that the Chairman of the NYSE
Board appoints the Director of Arbitration. In light of a recent
corporate restructuring at the Exchange,\12\ the proposal instead
provides that the Chief Regulatory Officer will designate the Director
of Arbitration, subject to the approval of the NYSE's Regulatory
Oversight Committee.\13\
---------------------------------------------------------------------------
\12\ See Exchange Act Release No. 48946 (Dec. 17, 2003), 68 FR
74678 (Dec. 24, 2003).
\13\ See NYSE Constitution, Article IV, Section 12(a)(4) (the
Regulatory Oversight Committee is responsible for, inter alia,
``personnel actions involving senior regulatory personnel'').
---------------------------------------------------------------------------
B. Comment Summary
The proposed rule change was published for comment in the Federal
Register on January 4, 2005, and the Commission received one comment
letter in response.\14\ The commenter opposed the proposal. With regard
to the Exchange's proposed changes to Rules 633 and 634, the commenter
contended that the NYSE should separate itself and its management from
the process of appointing arbitrators by implementing a system of
review and oversight of the arbitrator appointment process. The
commenter opposed delegating the arbitrator selection process to the
Director of Arbitration.
---------------------------------------------------------------------------
\14\ See supra note 6.
---------------------------------------------------------------------------
With regard to Rule 635, the commenter stated that the rule should
be amended to specify that the appointment of the Director of
Arbitration by the Chief Regulatory Officer must be subject to the
review and approval of the Regulatory Oversight Committee.
III. Discussion and Findings
After careful consideration of the proposal and the comment that
was received, the Commission finds that the proposed rule change, as
amended, is consistent with the requirements of the Act and the rules
and regulations thereunder applicable to a national securities
exchange.\15\ Specifically, the Commission finds that the proposal is
consistent with Section 6(b)(5) of the Act in that it promotes just and
equitable principles of trade by helping to ensure that members and
member organizations and the public have a fair and impartial forum for
the resolution of their disputes.\16\
---------------------------------------------------------------------------
\15\ In approving this proposed rule change, the Commission
notes that it has considered the proposed rule's impact on
efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
\16\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The NYSE is updating its arbitration selection process to reflect
more accurately the way in which arbitrators are selected.
Specifically, as amended, NYSE Rule 633 would rest the obligation of
selecting members of the Board of Arbitration with the Director of
Arbitration, who is the NYSE staff person responsible for recruiting
potential arbitrators. Similarly, NYSE Rule 634, as amended, would
authorize the Director of Arbitration to appoint arbitration panel
members. The Director of Arbitration reports to the Chief Regulatory
Officer, who in turn reports to the Regulatory Oversight Committee and
NSYE Board.
In response to the comment received, the Commission believes that
the proposed rule change provides appropriate oversight over the
appointment of arbitrators.\17\ Important functions of the Exchange are
routinely delegated to the Exchange staff. Nevertheless, the Board of
Directors maintains the ultimate authority, and the responsibility, to
ensure that the actions of the Exchange staff are carried out in a
manner that is consistent with the federal securities laws.\18\
Similarly, although the proposed text of Rule 635 does not expressly
require that the Regulatory Oversight Committee review the Chief
Regulatory Officer's appointment of a Director of Arbitration, as the
commenter recommended, this appointment is subject to the oversight of
the Regulatory Oversight Committee as a function of the Exchange's
routine corporate governance structure.\19\ Therefore, we believe the
proposal sufficiently addresses the commenter's concerns.
---------------------------------------------------------------------------
\17\ See, e.g., NYSE Constitution, Article IV, Section 14(a)
(``Delegation Authority''); id., Article VI, Section 4(a)
(responsibilities of the Chief Regulatory Officer are ``[s]ubject to
the authority of the Board and the Regulatory Oversight & Regulatory
Budget Committee'').
\18\ Increased scrutiny of applicants for the position of
arbitrator, while a laudable goal, is beyond the scope of this
particular proposed rule change.
\19\ See Exchange Act Release No. 50939, supra note 4, 70 FR at
00421, citing NYSE Constitution, Article IV, Section 12(a)(4).
---------------------------------------------------------------------------
The Commission finds good cause for approving Amendment No. 2
before the thirtieth day after the date of publication of notice of
filing thereof in the Federal Register. The proposed Amendment No. 2
makes necessary technical corrections to the rule text and does not
alter the substantive content of the rules.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning Amendment No. 2, including whether Amendment No. 2
is consistent with the Act. Comments may be submitted by any of the
following methods:
Electronic Comments
Use the Commission's Internet comment form (https://
www.sec.gov/rules/sro.shtml); or
Send an e-mail to rule-comments@sec.gov. 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. 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 its Internet Web site (https://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 Amendment
No. 2 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 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-2004-031 and should be
submitted on or before March 25, 2005.
V. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\20\ that the proposed rule change (SR-NYSE-2004-031), as amended,
be, and hereby is, approved, and that Amendment No. 2 thereto to the
proposed rule change be,
[[Page 10731]]
and hereby is, approved on an accelerated basis.
---------------------------------------------------------------------------
\20\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\21\
---------------------------------------------------------------------------
\21\ 17 CFR 200.20-3(a)(12).
---------------------------------------------------------------------------
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. E5-900 Filed 3-3-05; 8:45 am]
BILLING CODE 8010-01-P
