Document ID: SEC-2007-0766-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: New York Stock Exchange LLC
Posted Date: 2007-06-04T04:00Z

[Federal Register: June 4, 2007 (Volume 72, Number 106)]
[Notices]               
[Page 30898-30900]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr04jn07-109]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55818; File No. SR-NYSE-2007-48]

 
Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing of Proposed Rule Change Relating to Proposed 
Amendments to Rule 600 to Provide Guidance Regarding New and Pending 
Arbitration Claims in Light of the Consolidation of NYSE Regulation 
into NASD DR

May 25, 2007.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that on May 23, 2007, the New York Stock Exchange LLC (``NYSE'' 
or the ``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 substantially prepared by the 
NYSE. 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\ 15 U.S.C. 78a.
    \3\ 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 NYSE proposes to amend current Rule 600 and adopt a new Rule 
600A.
    As part of the consolidation of the member firm regulation function 
of NYSE Regulation, Inc. (``NYSE Regulation'') with the National 
Association of Securities Dealers, Inc. (``NASD''), NYSE Regulation 
will cease to provide an arbitration program, and its existing 
arbitration department (``NYSE Arbitration'') will be consolidated with 
that of NASD Dispute Resolution, Inc. (``NASD DR''). The proposed 
amendments provide that the arbitration rules of the Exchange shall 
apply only to NYSE arbitration cases pending prior to the effective 
date of the consolidation, and that, thereafter, claims involving 
member organizations, and/or associated persons, and/or other related 
parties will be arbitrated under the Codes of Arbitration Procedure of 
NASD DR. The text of the proposed rule is set forth below. Proposed new 
language is underlined.
* * * * *

Rule 600 Arbitration

* * * * *

Supplementary Material

    Rules 600 through 639, with the exception of Rule 600A, apply only 
to arbitrations commenced prior to [insert effective date of the 
consolidation] and are otherwise of no force or effect. Notwithstanding 
the foregoing, arbitrations filed with NYSE Arca on or prior to January 
31, 2007 continue to be governed by the NYSE Arca Rule 12 in effect on 
or prior to January 31, 2007, and arbitrations filed with NYSE Arca 
Equities on or prior to January 31, 2007 continue to be governed by the 
NYSE Arca Equities Rule 12 in effect on or prior to January 31, 2007. 
On and after [insert effective date of the consolidation] all such 
arbitrations shall, until concluded, be administered by NASD Dispute 
Resolution, Inc. (``NASD DR'') pursuant to a Regulatory Services 
Agreement with the Exchange.
* * * * *

Rule 600A

    (a) Duty to Arbitrate. (i) Any dispute, claim or controversy 
between a member organization and another member organization shall be 
arbitrated pursuant to the Codes of Arbitration Procedure of NASD DR; 
and, (ii) any dispute, claim or controversy between a customer or non-
member and a member organization and/or associated person and/or other 
related party, or between an associated person and a member 
organization and/or an associated person arising in connection with the 
business of such member organization and/or associated person in 
connection with his or her activities as an associated person, shall be 
arbitrated pursuant to NASD DR Codes of Arbitration Procedure as 
provided by any duly executed and enforceable written agreement, or 
upon the demand of the customer or non-member. However, such obligation 
to arbitrate shall not extend to any controversy that is not permitted 
to be arbitrated under NASD DR Codes of Arbitration Procedure.
    (b) Referrals. The Exchange may receive, investigate and take 
disciplinary action with respect to any referral it receives from an 
NASD DR arbitrator of any matter which comes to the attention of such 
arbitrator during and in connection with the arbitrator's participation 
in a proceeding, either from the record of the proceeding or from 
material or communications related to the proceeding, that the 
arbitrator has reason to believe may constitute a violation of the 
Exchange's Rules or the federal securities laws.
    (c) Failure to Arbitrate or to Pay an Arbitration Award. Any member 
organization or associated person who fails to submit to arbitration a 
matter required to be arbitrated pursuant to this Rule, or that fails 
to honor an arbitration award made pursuant to the Codes of Arbitration 
Procedure of NASD DR, or made under the auspices of any other self-
regulatory organization, shall be subject to disciplinary proceedings 
in accordance with Exchange Rule 476.
    (d) Other Actions. The submission of any matter to arbitration as 
provided for under this Rule shall in no way limit or preclude any 
right, action or determination by the Exchange that it would otherwise 
be authorized to adopt, administer or enforce.
* * * * *

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 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 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
    The purpose of the proposed rule change is to provide guidance 
regarding both new and pending arbitration claims in light of the 
consolidation of NYSE Regulation into NASD DR. NYSE

[[Page 30899]]

Arbitration currently administers an arbitration program for NYSE 
Regulation, governed by NYSE Regulation Rules 600 through 639. NYSE 
Arbitration also administers a program for NYSE Arca, Inc. (``NYSE 
Arca'') and NYSE Arca Equities, Inc. (``NYSE Arca Equities''), governed 
by what is referred to as ``Rule 12.'' \4\
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    \4\ NYSE Arca and NYSE Arca Equities have two separate rules 
that govern arbitrations, one for Equity Trading Permit (``ETP'') 
holders, and one for Option Trading Permit (``OTP'') holders and OTP 
firms; both rules are known as ``Rule 12.'' Although Rule 12 has 
subsequently been amended, for purposes of administering NYSE Arca 
and NYSE Arca Equities arbitrations filed on or prior to January 31, 
2007, NYSE Arbitration follows Rule 12 as it was in effect on that 
date.
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    As part of the consolidation of NYSE Regulation with NASD,\5\ NYSE 
Regulation will cease to administer an arbitration program, and its 
existing arbitration department will be consolidated with NASD DR. As a 
result, on or after the date of the consolidation, all arbitration 
claims filed prior to the date of the consolidation and previously 
subject to NYSE Regulation rules and administration will be 
administered by NASD DR pursuant to a Regulatory Services Agreement 
with the NYSE.
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    \5\ Additional information regarding the consolidation may be 
found in: SR-NASD-2007-23 (March 19, 2007) concerning proposed 
amendments to the By-Laws of NASD to implement governance and 
related changes to accommodate the consolidation of the member firm 
regulatory functions of NASD and NYSE Regulation, Inc.; and SR-NYSE-
2007-22 (February 27, 2007) concerning proposed amendments to 
several NYSE rules which, among other matters, harmonize the rules 
with corresponding NASD regulatory requirements.
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    However, the rules governing the administration of any particular 
arbitration will depend on the date the case was filed. This will 
ensure that any person that commenced arbitration under a particular 
set of arbitration rules will continue to have the case administered 
pursuant to those rules through to the case's conclusion. There are two 
categories of cases. First, NYSE arbitration cases filed before the 
effective date of the consolidation will continue to be governed by 
existing NYSE Regulation arbitration rules, as would pending NYSE Arca 
and NYSE Arca Equities cases filed on or after February 1, 2007.\6\ 
Second, those NYSE Arca and NYSE Arca Equities cases filed on or prior 
to January 31, 2007 are (and will continue to be) governed by Rule 12.
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    \6\ See Release No. 34-55142 (January 19, 2007), 72 FR 3898 
(January 26, 2007) (SR-NYSEArca-2006-54) and Release No. 34-55141 
(January 19, 2007), 72 FR 3897 (January 26, 2007) (SR-NYSEArca-2006-
55).
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    Proposed Exchange Rule 600A provides detailed guidance concerning 
claims involving member organizations, and/or associated persons and/or 
other related parties, that are asserted on and after the date of the 
consolidation. First, any dispute, claim or controversy between a 
member organization and another member organization shall be arbitrated 
pursuant to the Codes of Arbitration Procedure of NASD DR. Second, any 
dispute, claim or controversy between a customer or a non-member and a 
member organization, and/or associated person and/or other related 
party shall be arbitrated pursuant to NASD DR Codes of Arbitration 
Procedure as provided by any duly executed and enforceable written 
agreement, or upon the demand of the customer or non-member. Third, any 
dispute, claim or controversy between an associated person and a member 
organization and/or an associated person arising in connection with the 
business of such member organization and/or associated person in 
connection with his or her activities as an associated person, shall be 
arbitrated pursuant to NASD DR Codes of Arbitration Procedure as 
provided by any duly executed and enforceable written agreement.
    In almost all cases the change from NYSE to NASD DR arbitration 
rules should not result in material, substantive differences to persons 
participating in the arbitration process. However, one difference is 
the treatment of employment discrimination claims. NASD DR rules 
provide that any claim alleging employment discrimination, including 
any sexual harassment claims, in violation of a statute, will be 
eligible for arbitration pursuant to either a pre-dispute or a post-
dispute agreement to arbitrate. In contrast, Exchange Rule 600(f) 
permits claims to be arbitrated only when the parties have agreed to 
arbitrate the claim after it has arisen.
    Rule 600A will explicitly retain the Exchange's enforcement 
authority related to arbitration. In appropriate cases, arbitrators 
refer to the Exchange potential violations of the Exchange's Rules or 
the federal securities laws that come to their attention during and in 
connection with a proceeding. Rule 600A will specify that the Exchange 
will retain the ability to take action based on such referrals that may 
come from arbitrators in cases being arbitrated at NASD DR.
    Rule 600A will also retain the substance of current Exchange Rule 
637, regarding the obligation to honor arbitration awards. It will 
provide that any Exchange member organization, or associated person of 
any Exchange member organization, that fails to honor an award of 
arbitrators rendered under the NASD DR Codes of Arbitration Procedure, 
or under the auspices of any other self-regulatory organization, shall 
be subject to disciplinary proceedings in accordance with Exchange Rule 
476. It will also specify that failure to submit a matter to 
arbitration as required by Rule 600A will also subject the member 
organization to Exchange disciplinary action.
    Rule 600A will also specify that the submission of any matter to 
arbitration as provided for under the Rule shall in no way limit or 
preclude any right, action or determination by the Exchange that it 
would otherwise be authorized to adopt, administer or enforce.
    Finally, Supplementary Material added to existing Rule 600, and to 
become effective on the effective date of the consolidation, will 
specify that the current NYSE arbitration rules, Rules 600 through 639, 
will thereafter apply only to arbitrations commenced prior to the 
effective date of the consolidation and will be otherwise of no force 
or effect. The Supplementary Material will also specify that 
arbitrations filed with NYSE Arca or NYSE Arca Equities on or prior to 
January 31, 2007 will continue to be governed by Rule 12. This will 
ensure that those who commenced arbitrations under a particular set of 
arbitration rules will continue to have their cases administered 
pursuant to those same rules through to the cases' conclusion. The 
Supplementary Material will also note that from and after the effective 
date of the consolidation, all outstanding arbitrations shall, until 
concluded, be administered by NASD DR pursuant to a Regulatory Services 
Agreement with the Exchange.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the requirements of Section 6(b)(5) \7\ of the Act, which 
requires, among other things, that the rules of an Exchange be designed 
to promote just and equitable principles of trade and to protect 
investors and the public interest. The proposed rule change will 
streamline the arbitration process and provide for a unified and more 
efficient arbitration forum with one set of arbitration rules and 
administrative procedures. This will allow resources to be devoted to 
maintaining and improving the NASD DR program, rather than splitting 
resources between two mainly duplicative programs. As a result of these 
improvements, the proposed rule change will better protect investors 
and the public interest.
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    \7\ 15 U.S.C. 78f(b)(5).

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[[Page 30900]]

B. Self-Regulatory Organization's Statement on Burden on Competition

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

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

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

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

    Within 35 days of 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 the 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 rule-comments@sec.gov. Please include 

File Number SR-NYSE-2007-48 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.
    All submissions should refer to File Number SR-NYSE-2007-48. 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-2007-48 and should be submitted on or before June 
25, 2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-10661 Filed 6-1-07; 8:45 am]

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