FR Doc 03-28487

[Federal Register: November 13, 2003 (Volume 68, Number 219)]
[Notices]
[Page 64380-64409]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr13no03-88]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-48764; File No. SR-NYSE-2003-34]

Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by the New York Stock Exchange, Inc. Relating to the Amendment
and Restatement of the Constitution of the Exchange To Reform the
Governance and Management Architecture of the Exchange

November 7, 2003.
Pursuant to section 19(b)(1) of the Securities Exchange Act of
1934, (the ``Act'' or ``Exchange Act'') \1\ and Rule 19b-4
thereunder,\2\ notice is hereby given that on November 7, 2003, the New
York Stock Exchange, Inc. (``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 prepared by the self-regulatory organization. The Commission is
publishing this notice to solicit comments on the proposed rule change
from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

The Exchange is amending and restating the Constitution of the
Exchange. The changes to the Constitution will significantly reform the
governance and management architecture of the Exchange.

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. The
text of these statements may be examined at the places specified in
item IV 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 is proposing to amend and restate its Constitution to
significantly change and enhance its governance structure. The amended
and restated Constitution, marked to show changes from the Exchange's
existing Constitution, is included in Exhibit A hereto.
The objectives of the new governance architecture are to
(1) Place responsibility for governance, compensation and internal
controls, as well as for supervision of regulation, in the hands of a
Board of Directors that is independent both from NYSE management and
from the members, member organizations and listed companies.
(2) Separately preserve the existing engagement of the broker-
dealer community and listed company community with the NYSE by creating
a Board of Executives that will also include the executives of major
public and private ``buy-side'' entities as well as lessor members of
the Exchange.
Thus, the proposed rule change calls for a Board of Directors that
is completely independent except for the CEO. Requiring independence
from owner-constituents goes beyond what we expect of public companies,
and it aligns the Exchange's Board with the interests of investors. It
is the additional Board of Executives that is intended to ensure
ongoing engagement with all of our constituents. Moreover, the
Regulatory unit reports directly--and not through the CEO--to our
independent Board of Directors, yet retains sufficient proximity to the
marketplace to assure the market sensitivity that the Exchange believes
is fundamental to effective regulation of the capital markets.
The Exchange notes that its current investigation of specialist
trading practices, and the Commission's parallel investigation
regarding our surveillance for and enforcement of the affected rules,
have caused commentators to call for changes that would end broker
dealer self-regulation through exchanges as well as radically alter the
auction market. The Exchange also notes that, while the preliminary
findings of the internal review of its compensation practices and the
preliminary findings of the Commission's inspection and investigation
of our specialist regulation have informed our new architecture,
neither of these processes are complete and, therefore, the Exchange
cannot be

[[Page 64381]]

certain that further changes in our architecture may not be warranted.
In this regard, the Exchange notes that under the amended and restated
Constitution the new Board will, for the first time, have authority
concurrent with our member owners to change specific provisions
pertaining to our governance architecture, which means that further
changes can be effected in those provisions without another membership
vote.
The Exchange believes that its new architecture empowers a Board of
Directors with the independence to address issues objectively and the
constituent input to address them intelligently. The Exchange believes
that directors who have the degree of independence and experience that
our governance architecture promises--as evidenced by the quality of
our nominees--will assure that the Exchange's regulatory function is
both independent and robust. Thus, the Exchange believes its
architecture guarantees the independence of our regulatory function
both from members and member organizations and from inappropriate
linkage with our marketplace function, while assuring the function's
sensitivity to the market.
Nevertheless, the Exchange notes that this proposed rule change
does not ask the Commission to approve either the continuation of self-
regulation in the United States or the continuation of the role of the
specialist on the Exchange. Both issues should be addressed in the
context of how well the new Board implements both the architecture and
the programmatic changes that the Exchange has undertaken in response
to the Commission (as well as other programmatic changes that the Board
can be expected to initiate), all of which the Commission is carefully
monitoring through the ongoing engagement of its market regulation,
inspection and enforcement staffs with these matters.
Thus, while the Exchange does seek the Commission's approval of
what it regards as a greatly improved architecture for self-regulation
through the Exchange, and while the Exchange continues to believe that
its specialist/auction market delivers high quality executions at low
cost to investors, it does not at this time seek the Commission's
premature decisions on this work-in-progress. Nor does the Exchange
seek from the Commission at this time any action on the question of the
separation of the trading rights from equity ownership, and thereby on
the question of who should elect the Exchange Board over the longer
term, which has far too many ramifications to be the subject of
proposal by an interim chairman. That issue, and the other issues
described in the proxy statement that go beyond board and management
architecture, must be taken up by an unconflicted Board in a way that
takes into account the many public policy and practical issues that
such a separation implies.
All the Exchange seeks at this time is the Commission's approval of
a transitional structure that allows it to move from the current
situation to one in which a Board of independent, distinguished and
experienced men and women can take on the formidable challenges facing
the Exchange.
A complete explanation of the purposes and details of the new
architecture, and the reasons why the Exchange is desirous of making
these changes, is contained in the proxy statement and related
materials which have been furnished to the Exchange's membership in
connection with the upcoming membership vote on the proposal. All of
these materials are contained in Exhibit B hereto. Also contained in
the proxy statement are the names of the eight persons whom the members
are being asked to vote to elect as the new Board of Directors of the
Exchange.
Clarifying changes to certain Constitutional provisions which will
be added by Board action promptly following member approval of the
amended and restated Constitution and election of the new Board are
described in a supplementary letter contained in Exhibit C hereto. Upon
approval by the Board, the additional changes to the Constitution will
be filed with the Commission for approval.
2. Statutory Basis
The basis under the Act for this proposed rule change is the
requirement under section 6(b)(1) \3\ that an exchange be organized and
have the capacity to be able to carry out the purposes of the Exchange
Act, the requirement under section 6(b)(3) \4\ that the rules of an
exchange assure a 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
the requirement under section 6(b)(5)\5\ that an exchange have rules
that are designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, to remove
impediments to, and perfect the mechanism of a free and open market
and, in general, to protect investors and the public interest.
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\3\ 15 U.S.C. 78f(b)(1).
\4\ 15 U.S.C. 78f(b)(3).
\5\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

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

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

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

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.
The amended and restated Constitution is subject to the approval of
the members of the Exchange, and a vote is currently scheduled for
November 18, 2003. The Exchange hereby consents to an extension of the
period of time specified in section 19(b)(2) of the Act \6\ until at
least thirty-five days after the Exchange files an appropriate
amendment to this filing setting forth the completion of all additional
action required under the Certificate of Incorporation, Constitution
and rules of the Exchange with respect to this proposed rule change.
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\6\ 15 U.S.C. 78s(b)(2).
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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. Persons making written submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609.
Copies of the submission, all subsequent amendments, all written
statements

[[Page 64382]]

with respect to the proposed rule change 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 will also be available for
inspection and copying at the principal office of the Exchange. All
submissions should refer to File No. SR-NYSE-2003-34 and should be
submitted by December 4, 2003.

For the Commission, by the Division of Market Regulation,
pursuant to the delegated authority.\7\
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\7\ 17 CFR 200.30-3(a)(12).
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Jonathan G. Katz,
Secretary.
Exhibit A.--Text of the Proposed Rule Change (Changes are italicized;
deleted material is in brackets)

New York Stock Exchange, Inc.

CONSTITUTION

Article I

Title--Objects--Definitions

Sec. 1. Title. The title of the corporation is the ``New York Stock
Exchange, Inc.''
Sec. 2. Objects and Purposes. Its objects and purposes shall be:
(a) To furnish exchange rooms for the convenient transaction of
their business by its members; to furnish other facilities for its
members, allied members and member organizations; to maintain high
standards of commercial honor and integrity among its members, allied
members and member organizations; and to promote and inculcate just and
equitable principles of trade and business;
(b) to conduct and carry on the functions of a ``board of trade''
within the meaning of that term in the New York Not-for-Profit
Corporation Law;
(c) to conduct and carry on the functions of an ``exchange'' within
the meaning of that term in the Act; and
(d) to conduct and carry on any and all activities incidental to
the foregoing which may lawfully be conducted and carried on by a
corporation of its type formed under the New York Not-for-Profit
Corporation Law.
Sec. 3. Definition of Terms. Unless the context requires otherwise,
the terms defined in this Section shall, for all purposes of this
Constitution, have the meanings herein specified:
(a) The term ``Act'' means the Securities Exchange Act of 1934 and
the rules and regulations thereunder, as from time to time amended.
(b) The term ``Exchange'' means the New York Stock Exchange, Inc.

Membership

(c) The term ``allied member'' means:
(i) a general partner in a member firm, or an employee who controls
a member firm, who is not a member of the Exchange and who has become
an allied member as provided in the rules of the Exchange, or
(ii) an employee of a member corporation who is not a member of the
Exchange, who has become an allied member as provided in the rules of
the Exchange, and who is either:
--a principal executive officer of such corporation, or
--a person who controls such corporation.
(d) The term ``approved person'' means a person who is not a member
or an allied member of the Exchange or an employee of a member
organization, who has become an approved person as provided in the
rules of the Exchange and who is either:
(i) a person who controls a member or member organization, or
(ii) a person engaged in a securities or kindred business who is
controlled by or under common control with a member or member
organization.
(e) The term ``electronic access member'' means one of the members
who has the right to maintain electronic or telephonic access to the
floor facilities of a member or member organization, the Designated
Order Turnaround System of the Exchange and such other automated
trading systems of the Exchange as the Board may determine.
(f) The term ``lessee member'' means a member who has become a
member by leasing the membership of a regular member.
(g) The term ``lessor member'' means regular member who has leased
his or her membership.
(h) The term ``member'' means a natural person who is a member of
the Exchange. A member may be associated as a member with no more than
one member organization.
(i) The term ``member corporation'' means a corporation or other
limited liability entity, registered as a broker or dealer in
securities under, unless exempted by, the Act, approved by the Board as
a member corporation, at least one of whose officers or employees is a
member of the Exchange, or which has the status of a member corporation
by virtue of permission given to it pursuant to the rules of the
Exchange.
(j) The term ``member firm'' means a partnership, registered as a
broker or dealer in securities under, unless exempted by, the Act,
approved by the Board as a member firm, at least one of whose general
partners or employees is a member of the Exchange, or which has the
status of a member firm by virtue of permission given to it pursuant to
the rules of the Exchange.
(k) The term ``member organization'' includes ``member firm'' and
``member corporation.''
(l) The term ``membership'' refers to the members of the Exchange.
(m) The term ``physical access member'' means one of the members
who is not a regular member but has the right to enter physically upon
the trading floor and to have facilities thereon for the execution of
orders.
(n) The term ``regular member'' means one of the members who upon
liquidation, dissolution or winding up of the affairs of the Exchange,
has distributive rights in its assets.

Board and Board of Executives

(o) The term ``Board'' means the Board of Directors of the
Exchange.
(p) The term ``entire Board'' means the total number of directors
[which] that the [Exchange] Board would have if there were no
vacancies, [other than any vacancy that may exist in the office of
Executive Vice Chairman or President, or both] on the Board.
[(q) The term ``industry director'' means a director of the
Exchange who is
(i) a member or allied member of the Exchange who is
--the chief executive officer, or a principal executive officer,
and a director of a member corporation; or
--the general partner of a member firm who has primary executive
responsibilities; or
(ii) a member of the Exchange who is not a holder of voting stock
in any member corporation or a partner in any member firm; or
(iii) the chief executive officer, or a principal executive
officer, and a director of a person which controls and has as its
principal subsidiary a member corporation.]
(q) The term ``Board of Executives'' means the Board of Executives
of the Exchange described in Article V of this Constitution.
[(r) The term ``public director'' means a director of the exchange
who is a representative of the public, except that no person who is or
is affiliated with a broker or dealer in securities shall be a public
director. For the purposes of this definition, a person shall be
considered to be affiliated with a broker or dealer in securities if
such person is a partner, officer, employee or director of such

[[Page 64383]]

broker or dealer, or controls such broker or dealer, or is an officer
or employee of a person, one of the significant subsidiaries of which
is such broker or dealer. No person who is an employee of an issuer of
securities that are admitted to dealings upon the Exchange shall be a
public director, unless such person is the chief executive officer or a
principal executive officer of such issuer at the time of his or her
first election to the Board as a public director.]
(r) The term ``entire Board of Executives'' means the total number
of members that the Board of Executives would have if there were no
vacancies on the Board of Executives.
Other terms used in this Constitution may be defined by rules
adopted by the affirmative vote of a majority of the entire Board.

Article II

Membership

Sec. 1. Regular Members, Electronic Access Members, Physical Access
Members. Subject to Section 2 of this Article, the membership of the
Exchange shall consist of:
(a) 1366 regular members, each of whom shall, upon liquidation,
dissolution, or winding up of the affairs of the Exchange, have
distributive rights in its assets; and
(b) such number of physical access members, not to exceed twenty-
four (24), each of whom shall have paid an annual membership fee, which
shall entitle such member, during the period for which such fee has
been paid and while such member remains in good standing, to enter
physically upon the trading floor and to have facilities thereon for
the execution of orders; and
(c) such number of electronic access members as the Board may from
time to time determine, each of whom shall have paid an annual
membership fee, which shall entitle such member, during the period for
which such fee has been paid and while such member remains in good
standing, to maintain electronic or telephonic access to (i) the floor
facilities of a member or member organization, and (ii) the Designated
Order Turnaround System of the Exchange, and (iii) such other automated
trading systems of the Exchange as the Board may from time to time
determine.
None of the members described in subsections (b) or (c) of this
Section shall have any interest in or any right to share in any
distribution of the assets of the Exchange in the event of any
liquidation, dissolution, or winding up of the affairs of the Exchange.
Sec. 2. Lessee Members. A regular member in good standing may lease
his or her membership to a person approved by the Exchange subject to
and in accordance with such rules as may be adopted from time to time
by the Board. During the term of such lease, for the purposes of this
Constitution and the rules hereunder, the lessee shall be considered to
be, and the lessor shall not be considered to be, a member of the
Exchange, except that the lessor, and not the lessee, shall be deemed
to be the member for the purposes of the Gratuity Fund, and shall be
entitled to receive, with respect to such membership, any distribution
of the assets of the Exchange in the event of any liquidation,
dissolution, or winding up of the affairs of the Exchange. Under the
lease agreement the lessor may retain the right to vote the leased
membership or that right may pass to the lessee.
Sec. 3. Approval of Members. To become a member, or to be
reinstated or readmitted as a member, a person must be approved by the
Board.
Sec. 4. Fee Payable by New Members. Each person (hereinafter
referred to as a ``new member''), upon becoming a regular member, shall
pay to the Exchange a fee which shall be determined as follows:
(a) in the event that the new member shall have purchased such
membership through a membership auction facility furnished by the
Exchange, then the fee shall be the lesser of $7,500 or such amount as
shall be equal to ten percent of the purchase price paid for the
membership;
(b) in the event that:
(i) a regular member (hereinafter referred to as ``outgoing
member'') whose membership shall be transferred to a new member shall
have had a contractual obligation to transfer the membership to such
person as may be designated by the member organization of which the
outgoing member then shall be a partner or an officer or employee, and
(ii) said contractual obligation shall have been entered into at
the same time as the outgoing member shall have acquired said
membership, and
(iii) the Exchange at the time said contractual obligation shall
have been entered into shall have in writing approved or consented to
the entering into of said obligation, and
(iv) the membership of the outgoing member shall in satisfaction of
such obligation be transferred to the new member pursuant to such a
designation, and the new member shall have substantially the same
relationship to and financial interest in the member organization as
the outgoing member had, and
(v) the new member shall have a contractual obligation to the same
member organization to transfer the membership of the new member to
such person as may be designated by the member organization, which
obligation shall be upon substantially the same terms and conditions of
said contractual obligation of the outgoing member to the member
organization,

then the fee shall be lesser of $7,500 or such amount as shall be equal
to five percent of the purchase price at which the most recent
contractual sale of a membership occurred through the auction facility
prior to the date on which notice of the transfer shall have been
posted; and
(c) in the event that the membership of a new member shall have
been acquired in a manner other than as contemplated in either
subsection (a) or subsection (b) of this Section, then the fee shall be
the lesser of $7,500 or such amount as shall be equal to ten percent of
the purchase price at which the most recent contracted sale of a
membership occurred through the auction facility prior to the date on
which notice of the transfer shall have been posted.
Notwithstanding the foregoing provisions of this Section, the Board
may by rule eliminate the fee payable by a new member or reduce such
fee below the minimum otherwise provided in this Section. The Board may
also by rule require the payment of a fee upon the commencement or
termination, or both, of any lease of membership referred to in Section
2 of this Article.
Sec. 5. Signing Constitution. No person admitted to membership
shall be entitled to any privileges thereof until such member shall
have signed the Constitution of the Exchange. By such signature such
member pledges to abide by the same as the same has been or shall be
from time to time amended, and by all rules adopted pursuant to this
Constitution.
Sec. 6. Use of Exchange Facilities. The Exchange shall not be
liable for any damages sustained by a member, allied member or member
organization growing out of the use or enjoyment by such member, allied
member or member organization of the facilities afforded by the
Exchange, except as provided in the rules.
Sec. 7. Alternates on Floor. The Board may, by the affirmative vote
of a majority of the entire Board, extend to a member who [is a
director, who is an officer of one of the affiliated companies of the
Exchange] serves on the Board of Executives or who, in time of national

[[Page 64384]]

emergency is on active duty in the armed forces of the United States or
an ally of the United States or is engaged in public service incident
to the national defense, the privilege of designating an alternate who
shall have the power to transact in the place and stead of such member
the usual business of such member on the floor of the Exchange, under
such conditions and to such extent as the Board may prescribe, but only
at such times as such [director or officer] member is prevented from
transacting his or her usual business on the floor by the duties
imposed by virtue of acting as such [director or officer] member of the
Board of Executives or by the national emergency. If such member is a
general partner or employee of a member firm, such member and the
general partners of such firm may designate as such alternate a person
approved by the Board. If such member is an officer or employee of a
member corporation, such member and the directors of such member
corporation may designate as such alternate a person approved by the
Board. Every contract made on the floor by an alternate shall have the
same force and effect as if it had been made by the member for whom
such alternate is acting; and a member for whom an alternate is acting
shall be liable to the same discipline and penalties for any act or
omission of such alternate as for such member's own personal act or
omission.
A majority of the entire Board may withdraw such privilege for any
cause or without cause.
Sec. 8. Options Trading Rights. A regular member or lessor member
may lease or transfer the right of entering physically upon the trading
floor for the purpose of effecting transactions in options that are
from time to time admitted to dealings on the Exchange (the ``options
trading right'') to any person approved by the Exchange, provided that
such lessor or transferor has not previously leased or transferred such
right. The lessee or transferee of such right (the ``options trading
right holder'') shall not, by virtue of such lease or transfer, be a
member of the Exchange for any purpose of this Constitution or rules of
the Board, but may maintain facilities on the trading floor for the
execution of orders to buy and sell options that are from time to time
admitted to dealings on the Exchange (``Exchange options'').
An options trading right holder who has acquired an options trading
right by transfer may lease or transfer such right to any person
approved by the Exchange.
A regular member or lessor member who has leased or transferred the
options trading right relating to his or her membership shall not,
during the term of such lease or after such transfer, exercise such
right. If a regular member transfers the options trading right relating
to his or her membership and thereafter transfers such membership
unaccompanied by an options trading right, the transferee shall not, as
a result of such transfer, acquire an options trading right. A regular
member who has transferred the options trading right relating to his or
her membership, or who has acquired by transfer such a membership which
does not include an options trading right, may, if approved by the
Exchange, acquire an options trading right and may thereafter lease or
transfer such right, either together with or apart from his or her
membership.
Except as expressly provided in the lease agreement between a
lessor member and a lessee member, the options trading right relating
to such membership shall remain with the lessor member.
The Board may, by the affirmative vote of a majority of the entire
Board, adopt, amend and repeal such rules as it may deem necessary or
proper relating to options trading right holders, the approval and
disapproval thereof, the transfer or lease of options trading rights,
the regulation of the activities and business associations of, and the
conduct of business by, options trading right holders and brokers and
dealers with which they are associated as partners, officers or
employees, the imposition of charges with respect to, and the
discipline of, options trading right holders and such brokers and
dealers, and such other similar matters as the Board shall deem
appropriate.
[Sec. 9. Temporary Options Trading Rights. The Board may at any
time and from time to time and subject to such rules as the Board may
from time to time adopt, issue options trading rights to any one or
more or all persons that are members in good standing of any national
securities exchange registered with the Securities and Exchange
Commission or contract market designated as such by the Commodity
Futures Trading Commission, which exchange or market is located in the
United States of America; provided, however, that no such options
trading right so issued to any person that is a member of the New York
Futures Exchange, Inc. shall continue to confer any right beyond the
third anniversary of the commencement of trading on the Exchange of any
Exchange option and no other such options trading right so issued to
any other person shall continue to confer any right beyond the first
anniversary of such commencement. Any person to which any one or more
options trading rights are issued pursuant to this Section shall be
included within the term ``options trading right holders'' but no such
options trading right so issued may be leased or transferred by the
person to which issued. Notwithstanding the foregoing, any person to
which any option trading right is issued pursuant to this Section,
other than a natural person, may designate as the nominee of such
person a natural person who is approved by the Exchange to exercise the
right conferred by such option trading right and may change such
designation from time to time, subject to the approval of the
Exchange.]
Sec. 9. (Reserved).
Sec. 10. Transfer and Lease of Regular Membership. A transfer of
membership of a regular member and the lease (which shall not be
considered a transfer) of such a membership may be made upon the
approval of the transfer or lease by the Board. The membership of a
physical access member, electronic access member or lessee member shall
not be transferable. The Board may, by the affirmative vote of a
majority of the entire Board, adopt, amend and repeal such rules as it
may deem necessary or proper relating to the posting of notice of the
proposed transfer or lease of a membership, the right of a member to
make contracts on the Exchange after such posting, the procedures to be
followed with respect to such transfer or lease, the status of open
Exchange Contracts of a member who transfers or leases his or her
membership and of his or her member organization, and other similar
matters.
Sec. 11. Distribution of Transfer Proceeds. Upon any transfer of a
membership, whether made by a member or his or her legal representative
or by the Board, the proceeds thereof shall be applied by the Exchange
to the following purposes and in the following order of priority, viz:
First. The payment of such sums as the Board shall determine are or
may become due to the Exchange from the member whose membership is
transferred or from a member organization with which such member is
associated as a member.
Second. The payment of such sums as the Board shall determine are
due by such member or such member organization to other members or
member organizations as a result of losses arising directly from the
closing out under this Constitution and rules adopted pursuant hereto
(or, to the extent made applicable by such rules,

[[Page 64385]]

under the rules of The Options Clearing Corporation) of contracts
entered into in the ordinary course of business on the Exchange for the
purchase, sale, borrowing or loaning of securities.
There shall not be allowed as entitled to priority in payment under
this subsection any claim otherwise allowable under the foregoing
paragraph, with respect to which the claimant, in the opinion of the
Board, did not take promptly all other proper steps under this
Constitution, the rules adopted pursuant hereto and practice of the
Exchange to protect his or her rights and to enforce such claim when
due.
No claim asserted under this subsection shall be considered by the
Board nor shall any member or member organization asserting such a
claim have any rights thereunder, unless a written statement of such
claim shall have been filed with the Secretary of the Exchange prior to
the transfer of the membership of the member against whom claim is
being made.
If the proceeds of the transfer of a membership are insufficient to
pay in full all claims allowed under this subsection, payment shall be
made pro rata upon all such allowed claims.
Third. After provisions for the payment of sums payable under
subsections First and Second hereof, there may, in the discretion of
the Board, be deducted from the remaining proceeds, if any, and paid to
the Exchange the amount of any unusual expenses incurred by the
Exchange in connection with litigation involving the disposition of
such proceeds, including counsel fees and disbursements and the cost of
producing records pursuant to a court order or other legal process.
Fourth. The surplus, if any, of the proceeds of the transfer of a
membership, after provision for the payment of sums payable under
subsections First, Second and Third hereof, shall be paid directly to
the person whose membership is transferred, or to his or her legal
representative, upon the execution and delivery to the Exchange by him
or her or such representative of a release or releases satisfactory to
the Board, unless the Board, in its discretion, determines that such
surplus should be paid to the member organization or former member
organization with which such member is or was last associated as a
member, in view of the fact that such member had expressly agreed,
either in the partnership articles or in a writing filed with the
Exchange, that such surplus shall be paid either directly by him or her
or directly by the Exchange to such member organization. In the event
the Board makes such determination, such surplus shall be paid to such
member organization, upon the execution and delivery to the Exchange by
such member or such member organization, or both, of a release or
releases satisfactory to the Board.
No payment of such surplus under the provisions of this subsection
shall be made to a member organization or former member organization
with which such member is or had previously been associated as a member
if such member organization, in the opinion of the Board, did not take
promptly all proper steps to protect and enforce its rights, or if the
Board, in its sole discretion, shall determine that an unreasonable
time has elapsed between the date when he or she ceased to be such a
member in such member organization and the date of the transfer.
Except as otherwise specifically provided for by this Constitution,
no recognition or effect shall be given by the Exchange to any
agreement or to any instrument entered into or executed by a member or
his or her legal representatives which purports to transfer or assign
such member's interest in his or her membership, or in the proceeds or
any part thereof, or which purports to create any lien or other right
with respect thereto, or which purports in any manner to provide for
the disposition of such proceeds to a creditor of such member; nor
shall payment of such proceeds be made by the Exchange to any agent or
attorney-in-fact of a member except as may be permitted by the rules
adopted by the Board in those cases in which such agent or attorney-in-
fact (a) is acting solely for and on behalf of such member and is
neither directly nor indirectly acting in his or her own behalf or in
behalf of any third person or (b) is a partner of the member firm or an
officer in a member corporation with which such member is associated as
a member.
If the amount of any sum payable under the provisions of this
Section cannot for any reason be immediately ascertained and
determined, the Board may, out of the proceeds of the membership,
reserve and retain such amount as it may deem appropriate, pending
determination of the amount so payable.
Sec. 12. Disposition by Board. When a regular member dies or is
expelled, his or her membership may be disposed of by the Board.
Sec. 13. Death of Sole Exchange Member. If, upon the death of a
regular member who, at the time of his or her death, was associated as
a member with a member organization and was the only member so
associated, the following conditions exist:
(1) the member organization continues in business, and
(2) the deceased member shall have agreed in a writing filed with
the Exchange that such continuing member organization, if permitted by
the Board to have the status of a member organization, shall be
entitled to have the use of his or her membership from the date of his
or her death until the termination of such status of such continuing
organization or until a member of the Exchange becomes associated with
such organization as a member and that, subject to this Constitution
and the rules of the Exchange, the proceeds of his or her membership
shall be an asset of the continuing member organization during such
period, and
(3) such continuing member organization shall be permitted by the
Board to have the status of a member organization,

then upon the transfer of the membership of such deceased member the
proceeds thereof shall be applied to the same purposes and in the same
order or priority as if such member had continued to be a member of the
Exchange associated as such with such continuing member organization
until the date of the termination of such status, or until a member of
the Exchange becomes associated as a member with such continuing member
organization, whichever event occurs first.
Sec. 14. Rights Under Section 11. The death, expulsion or
suspension of a member or the transfer of his or her membership, or the
suspension, retirement or dissolution of a member organization shall
not affect the rights of creditors, or the rights of such member, his
or her estate or such member organization under the provisions of
Section 11 of this Article.

Article III

Meetings of Members

Sec. 1. Annual Meeting. A meeting of the members of the Exchange
entitled to vote thereat shall be held annually for the election of
directors and other elective positions, and for the transaction of any
other proper business, at such time as the Board may select on the
first Thursday in June in each year or, if the Exchange is not open for
business on that day, on the next succeeding business day. At such
annual election, there shall be elected by the membership by ballot:
[(a) A class of twelve directors to serve for a term of two years,
six of

[[Page 64386]]

whom shall be public directors and six of whom shall be industry
directors, the members of which shall be qualified to serve under this
Constitution,]
(a) all directors to be elected by members to serve for a term of
one year;
[(b) A class of four members of the Nominating Committee to serve
for a term of two years, two of whom shall be persons who would, were
they directors, satisfy the definition of public director, and two of
whom shall be persons who would, were they directors, satisfy the
definition of industry director,]
(b) two Trustees of the Gratuity Fund who shall be regular members
(and not lessor members), to serve for a term of three years; and
[(c) Two trustees of the Gratuity Fund who shall be regular members
(and not lessor members), to serve for a term of three years,
(d) Qualified persons to fill any vacancies in the Board, the
Nominating Committee, or the trustees of the Gratuity Fund.]
(c) qualified persons to fill any vacancies among the trustees of
the Gratuity Fund.
The Board shall distribute its annual nominating report, which
lists the nominees to serve in the elective positions, to each member
not less than 60 days in advance of the annual meeting.
Nominees by Petition. Members of the Exchange may propose by
petition nominees for the positions to be filled at the elections
prescribed by this Constitution. Any such nominee must be endorsed by
not less than forty members and no member shall endorse more than one
nominee, provided, however, that not less than one hundred members may,
by petition, propose an entire ticket or any portion thereof. Such
petition shall contain for each such potential nominee to the Board a
completed questionnaire used by the Board to gather information
concerning its nominees (which form the Secretary of the Exchange shall
provide upon the request of any member). The petitions shall be filed
with the Secretary of the Exchange in sealed envelopes within two weeks
after the date fixed for the publication of the Board's annual
nominating report. The Secretary of the Exchange shall provide such
petitions to the Board. The persons nominated by petition, if found
eligible for election by the Board, consistent with the criteria
articulated in Article IV, Section 2 of this Constitution, shall be
deemed nominees for such offices or positions. The Board's
determination of such eligibility shall be final and conclusive.
Prior to the annual meeting proxies shall be solicited for the
election of directors and trustees of the Gratuity Fund and for action
on such other business as may come before the meeting, in accordance
with the further provisions of this Article, including sections 5 and 7
below.
The annual meeting shall be held in the Board room of the Exchange
or at such other place as may be fixed in advance by the Board. At the
annual meeting, the Board shall present a report for the preceding
fiscal year as prescribed by law.
Sec. 2. Commencement of Term. The term of office of the persons
elected at each annual election shall commence immediately after the
annual meeting of members.
Sec. 3. Vote Required to Elect. In determining those nominees who
have been successfully elected to serve [in any class of] as directors,
[members of the Nominating Committee,] or trustees of the Gratuity Fund
(including nominees to fill any vacancies), nominees [in each such
class] receiving the highest number of votes shall be declared elected.
[; provided, however, that in determining the results of an election in
any class in which there are more nominees than there are offices or
positions to be filled, the nominees whose election would result in the
required composition of the class shall be declared elected in the
order of the highest number of votes received by such nominees in such
class, to the exclusion of nominees whose election would not result in
the required composition of such class.
For the purpose of determining the results of an election in which
there are more nominees than there are offices to be filled in a class
of directors, the Nominating Committee, prior to the time when the
names of nominees are reported to the Exchange, shall advise the
Secretary of the Exchange which of the nominees named by it for such
class are:
(a) qualified to serve as public directors, and of these:
(i) which are associated with corporations that are not financial
institutions and are the issuers of securities that are admitted to
dealings upon the Exchange, and
(ii) which are associated with financial institutions that are
significant investors in equity securities; or
(b) qualified to serve as industry directors, and of these:
(i) which are associated with member organizations that engage in a
business involving substantial direct contact with securities
customers,
(ii) which are registered as specialists and spend a substantial
part of their time on the floor of the Exchange,
(iii) which is associated with a member organization that has its
principal place of business in the metropolitan area of New York City,
is not national in nature and is not engaged in activities as a
specialist,
(iv) which spends a majority of his or her time on the floor of the
Exchange, has as a substantial part of his or her business the
execution of transactions on the floor of the Exchange for other than
his or her own account or for the account of his or her member
organization, but is not registered as a specialist, and
(v) which of those described in (i) above reside and have their
principal places of business outside the metropolitan area of New York
City.
The Board, prior to such time, shall determine which of the
nominees named by petition for any class of directors fall within one
or more of the categories specified above.] In the case of a tie vote,
the names of the nominees involved shall be referred to the Board,
which, by the affirmative vote of a majority of the entire Board, shall
make a selection.
Sec. 4. Special Meetings of Members. Special meetings of the
members may be called by the Chairman of the Board. The Chairman of the
Board shall call[ed] a special meeting of members upon the direction of
the Board or upon the written request of one hundred members.
Sec. 5. Notice of Meetings of Members. Notice of each meeting of
members shall be written, shall state the date, time and place of the
meeting, shall state the purpose or purposes for which the meeting is
called and unless it is the annual meeting, indicate that it is being
issued at the direction of the person or persons calling the meeting.
The Secretary of the Exchange shall mail a copy of the notice not less
than ten nor more than fifty days before the date of the meeting, to
each person who on the date the notice is mailed, is a member who would
be entitled to vote at such meeting, and shall deliver a copy to each
person who becomes a member entitled to vote at such meeting thereafter
and prior to the meeting or any adjournment thereof. If a member shall
have filed with the Secretary a proxy authorizing another person or
persons to act for such member at any meeting of members, the Secretary
shall concurrently mail a copy of the notice of any meeting to the
holder of such proxy. When a meeting is adjourned to another time or
place, notice shall be given of the adjourned meeting and at

[[Page 64387]]

the adjourned meeting any business may be transacted that might have
been transacted on the original date of the meeting. With the notice of
annual meeting, the Secretary of the Exchange shall furnish a form of
proxy, which shall designate [the] one or more members of the
[Nominating Committee or any one or more of them,] Exchange as persons
authorized to act thereunder at the annual meeting.
Sec. 6. Quorum at Meetings of Members. Members entitled to cast a
majority of the total number of votes entitled to be cast at any
meeting, present in person or by proxy, shall constitute a quorum of
the members of the Exchange for the transaction of any business, but
the members present and entitled to vote thereat may adjourn any
meeting despite the absence of a quorum.
Sec. 7. Proxies. A member may authorize another person or persons
to represent and act as attorney-in-fact for the member in voting on
any and all matters at any annual or special meeting of members held
during the term of the proxy, or in expressing consent or dissent
without a meeting, and in any and all things incidental thereto, such
as requesting the call of special meetings of members, proposing by
petition nominees for offices or positions to be filled at elections,
proposing amendments to this Constitution, or executing for and on
behalf of the member waivers of notice. Any such proxy shall be in form
satisfactory to the Exchange.
Sec. 8. Presiding Officer. At any meeting of the members of the
Exchange, if neither the Chairman of the Board nor any person
authorized to act for the Chairman under Section 5 of Article VI shall
be present, the members present, in person or by proxy, shall elect a
presiding officer for the meeting.
Sec. 9. Vote of Members. (a) Each regular member in good standing
shall be entitled to one vote on each office or position to be filled
at any election or upon any other matter at any meeting of the members
of the Exchange, including:
(i) any sale, lease, exchange or other disposition of all, or
substantially all, the assets of the Exchange,
(ii) any merger or consolidation in which the Exchange is to
participate as a constituent corporation within the meaning of the New
York Not-For-Profit Corporation Law, and
(iii) any dissolution or final liquidation of the Exchange.
(b) Each physical access member in good standing shall be entitled
to one vote, and each electronic access member in good standing who
became such prior to [the effective date referred to in subsection (c)]
March 30, 1986 shall be entitled to one-half vote, on each office or
position to be filled at any election or upon any other matter at any
meeting of the members of the Exchange, provided, however, that such
member shall not be entitled to vote on any of the following matters:
(i) any sale, lease, exchange or other disposition of all, or
substantially all, the assets of the Exchange,
(ii) any merger or consolidation in which the Exchange is to
participate as a constituent corporation within the meaning of the New
York Not-For-Profit Corporation Law,
(iii) any dissolution or final liquidation of the Exchange,
(iv) any proposal to amend any of the rights and privileges or
limitations thereon pertaining to such a member, or
(v) any election or amendment concerning the Gratuity Fund or the
trustees of the Gratuity Fund.
(c) An electronic access member who becomes such on or after [the
effective date] March 30, 1986 shall have no vote at any election or
upon any other matter at any meeting of the members. [''Effective
date'' shall mean the date that is 30 days after the date on which this
subsection becomes effective.]
(d) Whenever any corporate action, other than the election of a
person to a position or office, is to be taken by vote of the members,
it shall, except as otherwise required by law or by th[is]e
Constitution, be authorized by a majority of the votes cast by the
members entitled to vote thereon, in person or by proxy, at a meeting
of the members.
Sec. 10. Inspectors. The Board shall, in advance of any meeting of
members at which a vote is to be conducted, appoint an inspector to act
at the meeting or any adjournment thereof. The person so appointed
shall not be an officer or employee of the Exchange, a director of the
Exchange, or a director, officer, partner or employee of a member
organization.

Article IV

Board of Directors

Sec. 1. Powers of Board. The Board shall be vested with all powers
necessary for the govern[m]ance[nt] of the Exchange, the regulation of
the business conduct of members, allied members and member
organizations of the Exchange and of approved persons in connection
with their conduct of the business of member organizations and the
promotion of the welfare, objects and purposes of the Exchange and in
the exercise of such powers may adopt such rules, issue such orders and
directions and make such decisions as it may deem appropriate.
The Board may prescribe and impose penalties for the violation of
rules adopted pursuant to this Constitution and for neglect or refusal
to comply with orders, directions or decisions of the Board or for any
offense against the Exchange, the penalty for which is not specifically
prescribed by this Constitution. The Board shall have the power to hold
meetings at such times and places as it deems advisable, to appoint the
Board of Executives, to appoint committees, to appoint officers as
provided herein, to employ necessary employees, to authorize proper
operating expenditures and to take such other action as may be
necessary or proper to carry out the purposes of the Exchange.
Each person elected to the Board, and each person serving as a
member of the Board of Executives, who is not a member of the Exchange
shall have the right to go upon the Floor of the Exchange but shall not
have the right to transact business thereon.
[Sec. 2. Composition of Board. The Board shall consist of twenty-
four directors elected by the members of the Exchange, a Chairman of
the Board, the Executive Vice Chairman, if there be one, and the
President, if there be one. The directors elected by the members shall
consist of twelve public directors and twelve industry directors.
Directors elected by the members of the Exchange shall be divided into
two classes of twelve each (sometimes referred to as class A and class
B) whose terms of office shall expire in alternate years. Each class
shall consist of six public directors and six industry directors.
(a) the public directors shall include the following:
(i) at least one of the public directors shall be associated with a
corporation that is not a financial institution and is the issuer of
securities that are admitted to dealings upon the Exchange, and
(ii) at least one of the public directors shall be associated with
a financial institution that is a significant investor in equity
securities.
(b) the industry directors shall include the following:
(i) two of the industry directors in class A and three of the
industry directors in class B shall be associated with member
organizations that engage in a business involving substantial direct
contact with securities customers and shall reside and have their
principal places of business within the metropolitan area of New York
City, and
(ii) one of the industry directors of each class shall be
associated with a

[[Page 64388]]

member organization that engages in a business involving substantial
direct contact with securities customers and shall reside and have his
or her principal place of business outside the metropolitan area of New
York City, and
(iii) one of the industry directors in class A and two of the
industry directors in class B shall be registered as specialists and
shall spend a substantial part of their time on the floor of the
Exchange, and
(iv) one of the industry directors in class A shall be associated
with a member organization that has its principal place of business in
the metropolitan area of New York City, is not national in nature and
is not engaged in activities as a specialist, and
(v) one of the industry directors in class A shall spend a majority
of his or her time on the floor of the Exchange, shall have as a
substantial part of his or her business the execution of transactions
on the floor of the Exchange for other than his or her own account or
for the account of his or her member organization, but shall not be
registered as a specialist.
No person who has been elected a director by the membership to
three consecutive terms shall be eligible for election as a director
except after an interval of at least two years. Each person who is not
a member of the Exchange and is elected to the Board shall, by the
acceptance of the position of director, be deemed to have agreed to
uphold this Constitution.]
Sec. 2. Composition of the Board. The Board shall consist of the
Chairman of the Board, the Chief Executive Officer (if such individual
is not also the Chairman), and such number of directors elected by the
members of the Exchange as is fixed from time to time by resolution of
the Board, provided that such number shall not be less than six nor
more than twelve. The directors elected by the members shall be
independent of management of the Exchange, the members, and issuers of
securities listed on the Exchange, and shall include directors who will
enable the Exchange to comply with the requirements of Section 6(b)(3)
of the Act. Among other things, no director elected by the members
shall be (a) a member, allied member, lessor member or approved person;
(b) an officer or employee of the Exchange; (c) a person employed by or
affiliated, directly or indirectly, with a member organization, or with
a broker or dealer that engages in a business involving substantial
direct contact with securities customers; or (d) an executive officer
of an issuer of securities that are listed on the Exchange. In
addition, no director shall qualify as independent unless the Board
affirmatively determines that the director has no material relationship
with the Exchange. The Board shall adopt specific standards relating to
such determination, comparable to the standards required of issuers
listed on the Exchange, by effecting a rule change within the meaning
of Section 19(b)(1) of the Act. Candidates for the Board shall be
selected in accordance with such further criteria as the Nominating &
Governance Committee shall establish, as set forth in Section 12(a)(1)
of this Article IV. The Nominating & Governance Committee shall
recommend to the Board the candidates for Board membership; provided,
however, that, in order to assure the Exchange is able to meet the
requirements of Section 6(b)(3) of the Act concerning members of the
Exchange, the Industry Members of the Board of Executives shall
recommend to the Board candidates constituting 20% of the number of
directors to be elected by the members of the Exchange, but in no event
fewer than two directors.
When a single individual serves as both the Chairman and Chief
Executive Officer, the Board shall designate a director elected by the
members as a lead director to preside over executive sessions of the
Board; the Chief Executive Officer shall not participate in executive
sessions of the Board. The Board shall also publicly disclose the lead
director's name and a means by which interested parties may communicate
with the lead director. Each person who is elected to the Board shall,
by the acceptance of the position of director, be deemed to have agreed
to uphold this Constitution.
[Sec. 3. Meetings of Board. Meetings of the Board shall be held at
the Exchange's principal office in the state of New York or at such
other place, within or without such state, as the Board may from time
to time determine or as shall be specified in the notice of any such
meeting. The Board shall meet for the purpose of organization, the
election of officers and the transaction of other business, on the same
day the annual meeting of members is held. Notice of such meeting need
not be given. Special meetings of the Board may be called by the
Chairman of the Board or pursuant to the written request of four
directors upon notice as below prescribed.]
Sec. 3. Term of Office. Directors shall serve for a term of one
year (or until the end of the term of his or her predecessor if he or
she shall have been elected to succeed a person who has not completed
his or her one-year term).
Sec. 4. Resignation of Directors. Any director may resign at any
time by giving written notice of resignation to the Board or the
Chairman of the Board or the Secretary of the Exchange. Any such
resignation shall take effect at the time specified therein, or, if the
time when it shall become effective shall not be so specified, then it
shall take effect immediately upon its receipt.
Sec. 5. Vacancies. Any Board vacancy shall be filled, after
nomination by the Nominating & Governance Committee or the Industry
Members of the Board of Executives, as the case may be, by the
affirmative vote of a majority of the entire Board, unless the Board
shall determine that the vacancy need not be filled until the next
annual election. A director so elected shall serve until the next
annual election of the Exchange and until his or her successor is
elected and takes office.
Sec. 6. Meetings.
(a) Frequency of Meetings. The Board shall have not less than four
meetings each year. Special meetings of the directors may be called by
the Chairman of the Board, or pursuant to the written request of not
less than one-third of the directors then in office, in accordance with
the provision of notice of meetings, except when in the judgment of the
Chairman, emergency requires shorter notice.
(b) Place of Meetings. Meetings of the Board shall be held at the
Exchange's principal office in the state of New York or at such other
place, within or without such state, as the Board may from time to time
determine or as shall be specified in the notice of any such meeting.
(c) Notice of [Board] Meetings. Notice of a meeting of the Board
shall be given by the Secretary of the Exchange or by a person calling
the meeting to each director, other than any who have duly waived
notice, by written notice mailed first class postage prepaid, not later
than five business days before the meeting, or by electronic
communication. Any notice shall be sufficient if addressed to a
director at his or her office or at such other address as he or she
shall have requested the Secretary of the Exchange to direct notices.
[Sec. 5.](d) Quorum [at Board Meetings]; Action. A majority of the
entire Board shall be present in person at any meeting of the Board in
order to constitute a quorum for the transaction of business at such
meeting. Participation in a meeting by means of a conference telephone
or similar communications equipment allowing all persons participating
in the meeting to hear each other at the same time shall constitute
presence in person at a

[[Page 64389]]

meeting. Except as otherwise expressly required by law or the
certificate of incorporation of the Exchange or this Constitution, the
act of a majority of the directors present at any meeting at which a
quorum is present shall be the act of the Board. In the absence of a
quorum at any meeting of the Board, a majority of the directors present
may adjourn such meeting from time to time until a quorum shall be
present. Notice of any adjourned meeting shall be promptly given. At
any adjourned meeting at which a quorum is present, any business may be
transacted which might have been transacted at the meeting as
originally called. The directors shall act only as a Board and the
individual [D]directors shall have no power as such.
[Sec. 6. Organization Meeting.] (e) Annual Organizational Meeting.
The Board shall hold its annual organizational meeting on the same day
as the annual meeting of the members. Notice of the meeting need not be
given. At its organizational meeting, the Board, by the affirmative
vote of a majority of the entire Board, shall: (1) Elect the Chairman
of the Board--[and, from among the industry directors, one or more Vice
Chairmen of the Board as the Board may deem appropriate, such Chairman
and each such Vice Chairman to serve until the next organization
meeting of the Board and until their successors have been elected and
take office. At its organization meeting, the Board in its discretion
may also], and such Chairman shall serve until his or her successor has
been elected and takes office; (2) appoint the members of the Board of
Executives; and (3) take such other organizational actions as may be
appropriate, including the appointment of committees and the
appointment or approval of the officers of the Exchange. The Board, at
its organizational meeting, shall by the affirmative vote of a majority
[of the entire Board, elect an Executive Vice Chairman of the Board to
serve for such period as the Board shall determine. The Board, at its
organization meeting, shall by the affirmative vote] of the entire
Board, designate the person or persons to serve in the absence,
inability to act or vacancy in the office of the Chairman of the Board.
[Sec. 7. Resignation of Directors. Any director may resign at any
time by giving written notice of resignation to the Board or the
Chairman of the Board or the Secretary of the Exchange. Any such
resignation shall take effect at the time specified therein, or, if the
time when it shall become effective shall not be so specified, then it
shall take effect immediately upon its receipt.
Sec. 8. Vacancies. Any vacancy in the office of a director of any
class elected by the membership shall be filled by the affirmative vote
of a majority of the entire Board, unless the Board shall determine
that the vacancy need not be filled until the next annual election.
Prior to filling such vacancy, the Board shall request the Nominating
Committee to submit to the Board the name of the person recommended by
the Nominating Committee to fill such vacancy. Any person to be
eligible to fill such vacancy must meet the qualifications for election
in the class of directors in which the vacancy exists, so that upon his
or her election the composition of that class shall meet the
requirements of this Article. A director so elected shall serve until
the next annual election of the Exchange and until his or her successor
is elected and takes office.
Sec. 9. Loss of Qualification. If the Board shall determine by the
affirmative vote of a majority of the entire Board that any director
has lost any qualification needed for office, such person shall cease
to be a director and his or her office shall become vacant.
Sec. 10.]
Sec. 7. Action by Written Consent. Any action required or permitted
to be taken by the Board or any committee thereof may be taken without
a meeting if all members of the Board or the committee unanimously
consent in writing to the adoption of a resolution authorizing the
action.
Sec. [11.]8. Fees and Compensation. By the affirmative vote of a
majority of the entire Board, the Board may fix the fees and
compensation to be paid to the directors, members of [such committees
as it may from time to time authorize] the Board of Executives,
committee members, the Chairman of the Board, other officers of the
Exchange, arbitrators and the trustees of the Gratuity Fund.
Sec. [12.] 9. Loss of Qualification. If a director ceases to meet
the requirements for directors, such director shall be deemed to have
tendered his or her resignation for consideration by the Board, and
such resignation shall not be effective unless and until accepted by
the Board.
Sec. 10. Failure to Discharge Duties. In the event of the refusal
or failure of a director of the Exchange, or a trustee of the Gratuity
Fund, to discharge his or her duties, or for any cause deemed
sufficient by the Board, the Board may, by the affirmative vote of a
majority of the entire Board, remove any such director or trustee and
declare that office or position to be vacant.
Sec. [13.]11. Interpretation of Constitution and Rules. The Board
shall have power to interpret this Constitution and all rules adopted
pursuant hereto. Any interpretation made by it shall be final and
conclusive.
Sec. 12. Standing Committees. The Standing Committees and their
respective Chairmen shall be appointed by the Board at its annual
organizational meeting. The Board shall adopt for each Standing
Committee a charter consistent with the duties prescribed in the
subsections below, and including such additional duties as may be
considered appropriate and not inconsistent with this Constitution.
(a) Committees Consisting Solely of Directors. The Standing
Committees described in Section 12(a)(1)-(4) shall consist solely of
directors, other than the Chief Executive Officer, and shall report to
the Board. Such Standing Committees may be combined with any other such
Standing Committee, be subdivided into one or more such Standing
Committees, or the Board may constitute itself as a committee of the
whole in respect of such a Standing Committee; provided, however, that
if the Board constitutes itself as a committee of the whole with
respect to the activities of the Nominating & Governance Committee, the
Human Resources & Compensation Committee, the Audit Committee or the
Regulatory Oversight & Regulatory Budget Committee, the Chief Executive
Officer shall be recused from such Board deliberations.
(1) Nominating & Governance Committee. The Nominating & Governance
Committee shall be responsible for (i) recommending to the Board
candidates for Board membership in accordance with Article IV, Section
2 and candidates for Trustees of the Gratuity Fund, (ii) recommending
to the Board candidates for Board of Executives membership, (iii)
conducting the Board's annual governance review, (iv) reviewing and
recommending the Exchange's corporate governance guidelines, (v)
establishing an appropriate process for, and overseeing implementation
of, the Board's self-assessments (including Board self-assessment,
committee self-assessments and director assessments) and the Board of
Executives' self-assessments, (vi) recommending director compensation,
and (vii) succession planning for the Chairman and Chief Executive
Officer of the Exchange. In discharging its responsibilities under
clause (i) of the immediately preceding sentence, the Nominating &
Governance Committee shall propose persons as candidates for the Board
who, in the opinion of the Committee, (a) are committed to serving

[[Page 64390]]

the interests of the public and strengthening the Exchange as a public
securities market; and (b) include among their number individuals at
least one of whom is intended to allow the Exchange to meet the
requirements of section 6(b)(3) of the Act concerning issuers and at
least one of whom is intended to allow the Exchange to meet the
requirements of section 6(b)(3) of the Act concerning investors. In
addition, the Nominating & Governance Committee shall establish
procedures to solicit the input of investors in equity securities and
members regarding Board candidates. The Nominating & Governance
Committee shall also solicit input from the various Exchange
communities regarding candidates for appointment by the Board to the
Board of Executives. Consensus recommendations for candidates to
represent the groups referenced in clauses (ii), (iii) and (iv) of
Article V, Section 2(b) put forward by the respective representatives
of those groups shall be forwarded to the Board as the recommendations
of the Nominating & Governance Committee unless and to the extent such
Committee determines that a candidate does not qualify for the
position.
(2) Human Resources & Compensation Committee. The Human Resources &
Compensation Committee shall be responsible for (i) reviewing and
approving corporate goals and objectives relevant to Chief Executive
Officer compensation, evaluating the Chief Executive Officer's
performance in light of those goals and objectives, and, together with
the other directors elected by the members, determining and approving
such compensation, (ii) reviewing and approving recommendations
regarding compensation and personnel actions involving senior Exchange
personnel, including such recommendations involving senior regulatory
personnel received from the Regulatory Oversight & Regulatory Budget
Committee, and (iii) reporting annually to the members and the public
on the compensation of the five most highly compensated officers of the
Exchange (as well as director compensation) and on the compensation
philosophy and methodology used to award that compensation (including
information relating to appropriate comparisons, benchmarks,
performance measures and evaluation processes consistent with the
mission of the Exchange).
(3) Audit Committee. The Audit Committee shall be responsible for
assisting the board in its oversight of the integrity of the Exchange's
financial statements, the Exchange's compliance with legal and
regulatory requirements, and the independent auditor's qualifications
and independence, including the direct responsibility for (i) the
hiring, firing and compensation of the independent auditor, (ii)
overseeing the independent auditor's engagement, (iii) meeting
regularly in executive session with the auditor, (iv) reviewing the
auditor's reports with respect to the Exchange's internal controls, (v)
pre-approving all audit and non-audit services performed by the auditor
and (vi) determining the budget and staffing for the Internal Audit
Unit. The Audit Committee charter shall contain additional duties and
responsibilities comparable to those required of issuers listed on the
Exchange.
(4) The Regulatory Oversight & Regulatory Budget Committee. The
Regulatory Oversight & Regulatory Budget Committee shall be responsible
for (i) assuring the effectiveness, vigor and professionalism of the
Exchange's regulatory program, (ii) determining the budget for the
Regulatory Group, the Listings and Compliance Unit, the Hearing Board,
the Arbitration Unit and the Regulatory Quality Review Unit and (iii)
oversight of the Regulation, Enforcement & Listing Standards Committee
and the Regulatory Quality Review Unit. This Committee shall determine
the Exchange's regulatory plan, budget and staffing proposals annually
and shall be responsible for assessing the Exchange's regulatory
performance and recommending compensation and personnel actions
involving senior regulatory personnel to the Board's Human Resources &
Compensation Committee for action.
(b) Joint Committees
(1) The Regulation, Enforcement & Listing Standards Committee shall
be composed of both directors (other than the Chief Executive Officer)
and Board of Executives members (including at least one Industry Member
of the Board of Executives) as selected by the Board; provided,
however, that a majority of the members of such committees voting on a
matter subject to a vote of such Committee shall be directors. Such
committee shall report to the Regulatory Oversight & Regulatory Budget
Committee and shall (i) review and provide general advice with respect
to the Exchange's programs for market surveillance, member and member
organization regulation and enforcement, and the listing and de-listing
of securities, and (ii) hear appeals of disciplinary determinations and
determinations to de-list a listed company.
(2) Additional joint committees may be appointed by the Board from
time to time in its discretion; provided that each shall consist of at
least one director (other than the Chief Executive Officer). All such
committees shall report to the Board.
Sec. 13. Special Committees, Advisory Committees, Etc. Special
committees, subcommittees, advisory committees, boards or councils may
be appointed from time to time in the Board's discretion and may be
comprised of individuals who are not directors or members of the Board
of Executives.
Sec. 14. Delegation.
(a) Delegation Authority. The Board may delegate such of its powers
as it may from time to time determine, subject to the provisions of
th[is]e Constitution and applicable law, to the Board of Executives, to
such officers and employees of the Exchange, and to such committees,
composed either of directors or otherwise, as the Board may from time
to time authorize; provided, however, that[a], except as this
Constitution otherwise provides, the Board may not delegate, and no
committee may re-delegate, to the Board of Executives or to any
committee not consisting solely of directors, authority either to adopt
rules under Article VIII, Section 1 or Article IX, Section 1, or to act
on any subject matter described in Article IV, Section 12(a) or (b)(1),
except by effecting a rule change within the meaning of Section
19(b)(1) of the Act. Any committee of directors to which authority is
delegated to adopt rules under Article VIII, Section 1 or Article IX,
Section 1 shall include thereon at least one director nominated by the
Industry Members of the Board of Executives, as provided in Article IV,
Section 2. The Board shall diligently oversee the activities of the
Board of Executives, the officers and employees of the Exchange, and
any committees to which the Board has delegated authority pursuant
hereto.
(b) Limitation of Delegation Authority. A member, member
organization, allied member or approved person affected by a decision
of any officer, employee or committee acting under powers delegated by
the Board may require a review by the Board of such decision, by filing
with the Secretary of the Exchange a written demand therefore within 10
days after the decision has been rendered, except as otherwise provided
in Article IX [or the rules thereunder.], Section 6. Any and all powers
delegated by the Board may continue to be exercised by the Board
notwithstanding such delegation, and the Board may exercise such review
and oversight over the exercise of (or omission to exercise) any
delegated authority as it shall at any time determine.

[[Page 64391]]

Sec. 15. Conflict of Interest. No director shall participate in the
deliberation or adjudication of any matter in which he or she is
personally interested.

Article V

[Nominating Committee

Sec. 1. Composition, Organization Meeting and Eligibility. The
Nominating Committee shall be composed of:
(a) Four persons who would, were they directors, satisfy the
definition of public director; and
(b) Four persons who would, were they directors, satisfy the
definition of industry director.
The members of the Nominating Committee shall be divided into two
classes of four each whose terms of office shall expire in alternate
years. Each class shall consist of two persons described in (a) above,
and two persons described in (b) above.
On the first Monday after the annual election of the Exchange, or
as soon thereafter as may be practicable, the members of the Nominating
Committee, by the affirmative vote of a majority of such members, shall
elect a chairman who shall be a member of the Nominating Committee and
who shall serve until the next annual meeting of the Nominating
Committee and until his or her successor is elected and takes office.
The chairman of the Nominating Committee shall not succeed himself or
herself as chairman and the office of chairman shall alternate from
year to year between a member of the Nominating Committee described in
(a) above and a member of the Nominating Committee described in (b)
above.
No director shall be eligible to serve on the Nominating Committee.
No member of the Nominating Committee who has served the full term for
which he or she was elected by the membership shall be eligible for
reelection to the Nominating Committee in the year during which such
term expires. No member of the Nominating Committee who has been
elected to fill a vacancy in the Nominating Committee shall be eligible
for reelection to the Nominating Committee in the year during which the
term of the member being replaced expires. Any vacancy in the
Nominating Committee shall be filled by the remaining members thereof,
who shall elect a person qualified to fill the vacancy who shall serve
until the next annual election of the Exchange and until his or her
successor is elected and takes office. The Board shall have no control
over or power with respect to the Nominating Committee. Nothing in this
Section is to be construed to prevent the Nominating Committee from
soliciting the views of the Chairman or other members of the Board.
Sec. 2. Public Meetings. The Nominating Committee shall hold one or
more meetings, to which all members and allied members shall be invited
for the purpose of suggesting nominees for the offices and positions to
be filled at the annual election of the Exchange. The Nominating
Committee shall report to the Secretary of the Exchange, not later than
the second Monday in March, nominees for such offices and positions.
Each nominee shall be a person who, in the opinion of the Nominating
Committee, is eligible for election to the office or position for which
he or she is nominated. The Secretary of the Exchange shall, on receipt
of the report of the Nominating Committee, notify the members of the
Exchange of the names of such nominees. The Chairman of the Board shall
serve in a consultative role to the Nominating Committee. In that
capacity the Chairman of the Board shall meet with the Nominating
Committee prior to March 1 of each year to report on the needs of the
Board and to provide any other information relevant to the work of the
Nominating Committee.
Sec. 3. Nominees by Petition. Members of the Exchange may propose
by petition nominees for the offices or positions to be filled at the
elections prescribed by this Constitution. Any such nominee must be
endorsed by not less than forty members and no member shall endorse
more than one nominee, provided, however, that one hundred members may,
by petition, propose an entire ticket or any portion thereof. The
petitions shall be filed with the Secretary of the Exchange in sealed
envelopes within two weeks after the date fixed for the report of the
Nominating Committee. The Nominating Committee and the Secretary of the
Exchange shall open such envelopes and shall report to the Board the
names of the persons nominated by petition who, if found eligible for
election by the Board, shall be deemed nominees for such offices or
positions.
Sec. 4. Names of Nominees. The names of all nominees shall be
arranged on the ballot in alphabetical order for each class of office
or position and shall be reported to the Exchange promptly after the
Board shall have passed upon the eligibility of the persons nominated
by petition. The names of the persons nominated by the Nominating
Committee shall be identified by an appropriate legend or symbol.
Sec. 5. Death, etc., of Nominee. In case of the death, withdrawal,
disqualification or failure to qualify, at any time in advance of the
annual election, of any nominee for one of the offices or positions to
be filled at such annual election, the election of a person to fill
such office or position shall not be held at the annual meeting of the
members of the Exchange, but this shall not delay the election of
persons to fill all other offices or positions. The Board, by the
affirmative vote of a majority of the entire Board, thereupon may
declare such office or position vacant and if the election for such
office or position was not contested may elect a person to fill the
vacancy to hold office until the annual election of the Exchange in the
succeeding year. Prior to filling such vacancy, the Board shall request
the Nominating Committee to submit to the Board the name of the person
recommended by the Nominating Committee to fill such vacancy. If such
election was contested, the Board shall direct that such office or
position be filled by vote of the members of the Exchange entitled to
vote thereon at a special meeting of the members. If such special
meeting shall be directed, the Board shall call the meeting and
determine the procedure for nominations and voting by proxy at the
meeting.
Sec. 6. Selection of Nominees. The Nominating Committee in seeking
nominees for all offices and positions shall propose persons who, in
the opinion of the Nominating Committee, are committed to serving the
interests of the public and strengthening the Exchange as a public
securities market.
In selecting nominees who are to be members of the Nominating
Committee, the Nominating Committee should consider representatives
from all Exchange constituencies, taking care to avoid having an undue
concentration of such nominees from any one area or industry.
In seeking nominees who are to be public directors, the Nominating
Committee should consider, among others, representatives of
corporations, the securities of which are admitted to dealings upon the
Exchange and representatives of financial institutions, such as
investment companies, banks and trust companies, and insurance
companies, which are significant investors in equity securities, care
being taken to avoid having an undue concentration of such nominees
from any one area or industry.]

Board of Executives

Sec. 1. Powers and Authority of the Board of Executives. The Board
shall

[[Page 64392]]

establish a Board of Executives. Subject to the Board's ultimate
authority, review and oversight and except with respect to the
responsibilities delegated to the Standing Committees, pursuant to
Article IV, Section 12, the Board of Executives shall advise the Chief
Executive Officer in his or her management of the operations of the
Exchange. Copies of any materials, documents or reports prepared or
received by the Board of Executives shall be furnished to the Board of
Directors. Industry Members of the Board of Executives (as defined in
Section 2 of this Article) shall also be responsible for recommending
to the Board candidates for Board membership in accordance with, and
who meet the criteria provided for in, Article IV, Section 2 of this
Constitution. In discharging this responsibility, the Industry Members
of the Board of Executives shall propose persons who, in their opinion,
(i) are committed to serving the interests of the public and
strengthening the Exchange as a public market, and (ii) will allow the
Exchange to meet the requirements of section 6(b)(3) of the Act
concerning members of the Exchange.
Sec. 2. Composition of Board of Executives.
(a) The Board of Executives shall provide a reasonably balanced
representation of the many communities that come together in the
Exchange: listed companies, investors, members and member
organizations, and lessor members.
(b) The Board of Executives shall consist of the Chairman of the
Board (who shall be the Chairman of the Board of Executives), the Chief
Executive Officer (if such individual is not also the Chairman), and at
least 20 but no more than 25 members (``Board of Executives members'').
The Board of Executives members (other than the Chairman and Chief
Executive Officer) shall be appointed by the Board at its annual
organizational meeting and shall consist of (i) at least six
individuals who are either the chief executive or a principal executive
officer of a member organization that engages in a business involving
substantial direct contact with securities customers, (ii) at least two
individuals who are either the chief executive or a principal executive
officer of a specialist member organization, (iii) at least two
individuals, each of whom spends a majority of his or her time on the
Floor of the Exchange, and has as a substantial part of his or her
business the execution of transactions on the Floor of the Exchange for
other than his or her own account or the account of his or her member
organization, but who shall not be registered as a specialist, (iv) at
least two individuals who are lessor members who are not affiliated
with a broker or dealer in securities, (v) at least four individuals
who are either the chief executive or a principal executive officer of
an institution that is a significant investor in equity securities, at
least one of whom shall be a fiduciary of a public pension fund; and
(vi) at least four individuals who are either the chief executive or a
principal executive officer of a listed company (the members of the
Board of Executives referenced in subsections (i), (ii), and (iii)
herein collectively shall be called ``Industry Members of the Board of
Executives''). If the Board increases the size of the Board of
Executives it shall strive to maintain approximately the same balance
between Industry Members of the Board of Executives and other members
of the Board of Executives as is represented above. If the Board
increases the size of the Board of Executives, it shall also be free to
add members to the Board of Executives who represent other elements of
the Exchange community. Each person who is not a member of the Exchange
and is appointed to the Board of Executives shall, by the acceptance of
such position, be deemed to have agreed to uphold this Constitution.
Sec. 3. Term of Office. Board of Executives members shall serve for
a term of one year (or until the end of the respective term of his or
her predecessor if he or she shall have been appointed to succeed a
person who has not completed his or her term).
Sec. 4. Resignation of Board of Executives Members. Any Board of
Executives member may resign at any time by giving written notice of
resignation to the Board of Directors, the Chairman of the Board, or
the Secretary of the Exchange. Any such resignation shall take effect
at the time specified therein, or, if the time when it shall become
effective shall not be so specified, then it shall take effect
immediately upon its receipt.
Sec. 5. Vacancies. Any vacancy in the office of a Board of
Executives member may be filled by the Board. A Board of Executives
member so appointed shall serve until the next annual organizational
meeting of the Board of Executives and until his or her successor is
appointed by the Board and takes office.
Sec. 6. Meetings.
(a) Frequency of Meetings. The Board of Executives shall have not
less than six meetings each year. Special meetings of the Board of
Executives may be called by the Chairman of the Board, or pursuant to
the written request of not less than one third of the Board of
Executives members then in office, in accordance with the provision of
notice of meetings, except that when in the judgment of the Chairman of
the Board, emergency requires shorter notice.
(b) Place of Meetings. Meetings of the Board of Executives shall be
held at the Exchange's principal office in the state of New York or at
such other place, within or without such state, as the Board of
Executives may from time to time determine or as shall be specified in
the notice of any such meeting.
(c) Notice of Meetings. Notice of a meeting of the Board of
Executives shall be given by the Secretary of the Exchange or by a
person calling the meeting to each Board of Executives member, other
than any who have duly waived notice, by written notice mailed first
class postage prepaid, not later than five business days before the
meeting, or by electronic communication. Any notice shall be sufficient
if addressed to a Board of Executives member at his or her office or at
such other address as he or she shall have requested the Secretary of
the Exchange to direct notices. Whenever any notice is required to be
given under the provisions of the certificate of incorporation or the
Constitution of the Exchange, a waiver thereof in writing signed by the
person or persons entitled to such notice, whether before or after the
time stated therein, shall be deemed equivalent to the giving of such
notice.
(d) Quorum; Action. A majority of the entire Board of Executives
shall be present in person at any meeting of the Board of Executives in
order to constitute a quorum for the transaction of business at such
meeting. Participation in a meeting by means of a conference telephone
or similar communications equipment allowing all persons participating
in the meeting to hear each other at the same time shall constitute
presence in person at a meeting. Except as otherwise expressly required
by law or the certificate of incorporation of the Exchange or the
Constitution, the act of a majority of the members of the Board of
Executives present at any meeting at which a quorum is present shall be
the act of the Board of Executives. In the absence of a quorum at any
meeting of the Board of Executives, a majority of the members of the
Board of Executives present may adjourn such meeting from time to time
until a quorum shall be present. Notice of any adjourned meeting shall
be promptly given. At any adjourned meeting at which a quorum is
present, any business may be transacted which might have been
transacted at the

[[Page 64393]]

meeting as originally called. The members of the Board of Executives
shall act only as a Board of Executives and the individual members
shall have no power as such.
(e) Annual Organizational Meeting. The Board of Executives shall
hold its annual organizational meeting as soon following the
organizational meeting of the Board of Directors as practical. Notice
of such meeting need not be given.
Sec. 7. Action by Written Consent. Any action required or permitted
to be taken by the Board of Executives or any committee thereof may be
taken without a meeting if all members of the Board of Executives or
the committee unanimously consent in writing to the adoption of a
resolution authorizing the action.
Sec. 8. Loss of Qualification. If a Board of Executives member
ceases to meet the requirements for members of the Board of Executives,
such Board of Executives member shall be deemed to have tendered his or
her resignation for consideration by the Board, and such resignation
shall not be effective unless and until accepted by the Board.
Sec. 9. Failure to Discharge Duties. A member of the Board of
Executives has under the New York Not-for-Profit Corporation Law the
duties of an officer of the Exchange. In the event of the refusal or
failure of a member of the Board of Executives to discharge his or her
duties, or for any cause deemed sufficient by the Board of Executives
or the Board of Directors, the Board of Executives or the Board of
Directors may, by the affirmative vote of a majority of the entire
Board or the entire Board of Executives, remove any such Board of
Executives member and declare that office or position to be vacant.
Sec. 10. Conflict of Interest. No Board of Executives member shall
participate in the deliberation or adjudication of any matter in which
he or she is personally interested.
Sec. 11. Plenary Sessions of the Board and the Board of Executives.
The Board and the Board of Executives shall meet jointly (a ``Plenary
Session'') at least twice each year. The Chairman of the Board shall
chair all Plenary Sessions.

Article VI

Officers

Sec. 1. [Titles]Officers. The officers of the Exchange shall
include the Chairman of the Board, the Chief Executive [Vice Chairman,
if there be one, one or more Vice Chairmen]Officer, the President, if
there be one, the Chief Regulatory Officer, one or more Vice Presidents
(one or more of whom may be designated as Executive Vice Presidents or
as Senior Vice Presidents or by other designations), a Secretary, a
Treasurer, a Controller and such other officers as the [Chairman]Chief
Executive Officer may propose, subject to the approval of the Board.
Any office may be occupied by more than one individual. An officer,
[other than any Vice Chairman,] if a member of the Exchange at the time
of election, shall promptly thereafter dispose of his or her membership
by sale or lease, and if by lease, the power to vote must be disposed
of by the lease. The Board shall appoint the Chairman, the Chief
Executive Officer, and the Chief Regulatory Officer. If the Chairman is
neither the Chief Executive Officer nor chosen from among the directors
elected by the members, he or she must satisfy the independence
criteria for Board membership set forth in Article IV, Section 2 of
this Constitution. The President and the officers of the Exchange,
[other than the Executive Vice Chairman and the Vice Chairmen,] shall
be appointed by the [Chairman] Chief Executive Officer, subject to
approval of the Board. Each officer of the Exchange, by his or her
acceptance of such office, shall be deemed to have agreed to uphold
this Constitution. While no officer of the Exchange shall have any
authority to recommend candidates for election to the Board or for
appointment by the Board to any committee, the Board or the Nominating
& Governance Committee may solicit the input of any Exchange officer at
its own initiative and discretion.
[Sec. 2. Chairman of the Board. The Chairman of the Board shall be
the chief executive officer of the Exchange, responsible for the
management and administration of its affairs, and shall be the official
representative of the Exchange in all public matters. The Chairman of
the Board shall be the presiding officer of the Board and an ex officio
member of all committees authorized by the Board. The Chairman of the
Board may call special meetings of the Board and shall call special
meetings of the Board upon the written request of four directors.
Sec. 3. The Executive Vice Chairman, the President and Officers
other than Vice Chairmen. The Executive Vice Chairman, the President
and other officers, other than Vice Chairmen, shall have such functions
and responsibilities as the Chairman may from time to time assign,
subject to the approval of the Board.]
Sec. 2. The Chairman. The Chairman shall preside at all meetings of
the Board and of the Board of Executives and shall decide all questions
of order, subject, however, to an appeal to the Board; provided,
however, that if the Chairman is also the Chief Executive Officer, he
or she shall not participate in executive sessions of the Board. If the
Chairman is not the Chief Executive Officer, he or she shall act as
liaison officer between the Board and the Chief Executive Officer. In
addition to his or her usual duties, the Chairman shall make an Annual
Report on the Exchange's activities to a Plenary Session.
Sec. 3. The Chief Executive Officer. Subject to the authority of
the Board, the Chief Executive Officer of the Exchange shall be
responsible for the management and administration of the affairs of the
Exchange.
Sec. 4. [The Vice Chairmen. Each Vice Chairman of the Board] Chief
Regulatory Officer and Other Officers.
(a) Chief Regulatory Officer. Subject to the authority of the Board
and the Regulatory Oversight & Regulatory Budget Committee, and to the
administrative standards and policies established by the Chief
Executive Officer made applicable to the Chief Regulatory Officer by
the Regulatory Oversight & Regulatory Budget Committee, the Chief
Regulatory Officer shall be responsible for the management and
administration of the regulatory functions of the Exchange.
(b) Other Officers. The President and other officers shall have
such functions and responsibilities as the [Board] Chief Executive
Officer may from time to time assign[.], subject to the approval of the
Board, and, in the case of senior regulatory personnel, subject to the
specific oversight and control of the Regulatory Oversight & Regulatory
Budget Committee.
Sec. 5. Absence, Inability to Act or Vacancy in Office of the
Chairman. In case of the absence, inability to act or vacancy in office
of the Chairman of the Board, such other person or persons as the
Board, by the affirmative vote of a majority of the entire Board, may
designate shall assume all the functions and discharge all the duties
of the Chairman.
Sec. 6. Removal. Any officer of the Exchange [approved by the Board
may be removed, either with or without cause, at any time by the
Chairman subject to approval by the Board. The Chairman] may be
removed, either with or without cause, by the affirmative vote of a
majority of the entire Board.

[[Page 64394]]

Article VII

Exchange Contracts

Sec. 1. Exchange Contracts. All contracts of a member of the
Exchange or a member organization with any member of the Exchange or
with any member organization for the purchase, sale, borrowing, loaning
or hypothecation of securities (other than option contracts issued or
issuable by The Options Clearing Corporation), or for the borrowing,
loaning or payment of money, whether occurring on the Exchange or
elsewhere, shall be Exchange Contracts, unless made subject to the
rules of another [E]exchange, or unless the parties thereto have
expressly agreed that the same shall not be Exchange Contracts.
Sec. 2. Constitution and Rules Part of Exchange Contracts. The
provisions of this Constitution and of the rules adopted pursuant
hereto shall be a part of the terms and conditions of all Exchange
Contracts and all such contracts shall be subject to the exercise by
the Board of the powers with respect thereto vested in them by this
Constitution and such rules.
Sec. 3. Binding Nature of Floor Transactions. Each contract entered
into on the floor of the Exchange by any member who is associated as a
member with any member organization shall be binding on such member
organization in all respects and without limit and such member
organization shall be fully responsible therefor. Each member
organization shall execute and file with the Exchange such
documentation as the Board by rule may require evidencing (a) the
authority of any member who is an officer or employee of such member
organization to transact business on the floor on behalf of such member
organization, and (b) such member organization's responsibility and
obligation with respect to any contract entered into on the floor by
any such member.
Sec. 4. Options Contracts. All contracts for the purchase or sale
or writing of options contracts issued or issuable by The Options
Clearing Corporation, occurring on the Exchange, shall be made subject
to the provisions of this Constitution and of the rules adopted
pursuant hereto and of the by-laws and rules of The Options Clearing
Corporation; and all such contracts shall be subject to the exercise by
the Board and The Options Clearing Corporation of the powers with
respect thereto vested in them by this Constitution and the rules
adopted pursuant hereto and by the by-laws and rules of The Options
Clearing Corporation.

Article VIII

Regulation

Sec. 1. Rulemaking. The Board may, by the affirmative vote of a
majority of the entire Board, adopt, amend or repeal such rules as it
may deem necessary or proper, including rules with respect to (a) the
making and settling of Exchange Contracts, (b) the access of members to
and the conduct of members upon the floor of the Exchange and their use
of floor facilities, (c) insolvency of members and member
organizations, (d) the formation of member organizations, the
continuance thereof and the interests of members, allied members and
other persons therein, (e) the partners, officers, directors,
stockholders and employees of members and member organizations, (f) the
offices of members, allied members and member organizations, (g) the
business conduct of members, allied members and member organizations,
(h) the business connections of members, allied members and member
organizations, and their association with or domination by or over
corporations or other persons engaged in the securities business, (i)
capital requirements for members and member organizations, (j) the
procedure for arbitration, (k) transfers of memberships and disposition
of the proceeds of such transfers, (l) types, terms, conditions and
issuance of securities by member organizations and trading in such
securities, (m) the conduct and procedure for disciplinary hearings and
reviews therefrom, (n) the location and use on the floor of the
Exchange of such facilities as may be approved by the Board to permit
members to send orders from the floor to other markets and receive
orders on the floor from other markets for the purchase or sale of
securities traded on the Exchange, and (o) options trading rights and
options trading right holders.
Sec. 2. Supervision. The Board shall have general supervision over
members, allied members and member organizations and over approved
persons in connection with their conduct of the business of member
organizations. It may examine into the business conduct and financial
condition of members, allied members, approved person and member
organizations. It shall have supervision over partnership and corporate
arrangements and over all offices of such members and organizations,
whether foreign or domestic, and over all persons employed by such
members and organizations, and may adopt such rules with respect to the
employment, compensation and duties of such employees as it may deem
appropriate. [The Board may require that transactions in securities
admitted to dealings on the Exchange shall be executed on the
Exchange.] It shall have supervision over all matters relating to the
collection, dissemination and use of quotations and of reports of
prices on the Exchange. It shall have the power to approve or
disapprove of any connection or means of communication with the floor
and may require the discontinuance of any such connection or means of
communication. It may disapprove of any member acting as a specialist
or odd-lot dealer.
Sec. 3. Listing of Securities. The Board may approve applications
for the listing of securities and the admission of securities,
including securities on a ``when issued'' or ``when distributed''
basis, to dealings on the Exchange, and may suspend dealings in such
securities and may remove the same from listing.
[Sec. 4. Corners. Whenever in the opinion of the Board a corner has
been created in a security admitted to dealings on the Exchange, or a
single interest or group has acquired such control of a security so
admitted that the same cannot be obtained for delivery on existing
contracts except at prices and on terms arbitrarily dictated by such
interest or group, the Board may postpone the time for deliveries on
Exchange Contracts therein, and may from time to time further postpone
such time or may postpone deliveries until further action by the Board,
and may at any time by resolution declare that if such security is not
delivered on any contract calling for delivery thereof at or before the
time to which delivery has been postponed or which has been fixed by
the Board for such delivery, such contract shall be settled by the
payment to the party entitled to receive such security or by the credit
to such party of a fair settlement price as agreed by the parties to
the contract, or if the parties to any contract which is to be settled
on the basis of such fair settlement price do not agree with respect
thereto, such fair settlement price and the date for the payment of the
same may be fixed by the Board. The Board before fixing the same shall
give the parties to the contract which is to be settled on the basis
thereof an opportunity to be heard either before the Board or before a
committee authorized for the purpose. Any such committee shall report
the testimony together with its conclusions thereon to the Board which
may act upon such report without further hearing or may accord the
parties a further hearing before acting thereon.]

[[Page 64395]]

Article IX

Disciplinary Proceedings

Sec. 1. Disciplinary Rules. The Board shall adopt such rules as it
deems necessary or appropriate for the discipline of members, member
organizations, allied members, approved persons, and registered and
non-registered employees of members and member organizations for the
violation of the Act, the rules of the Exchange and for such other
offenses as may be set forth in the rules of the Exchange. The Board
shall also adopt such rules as it deems necessary or appropriate
governing the conduct of disciplinary proceedings including
disciplinary hearings and reviews thereof. The determination and
penalty, if any, of the Board after review shall be final and
conclusive, subject to the provisions of the Act.
Sec. 2. Hearing Panel. All proceedings relating to disciplinary
matters, except as otherwise specifically set forth in the rules of the
Exchange with respect to procedural and evidentiary matters, shall be
conducted before a hearing panel consisting of at least three persons;
a hearing officer, who shall be chairman of the panel, with the
remainder of the panel being members of the hearing board.
Sec. 3. Hearing Board. The Chairman of the Board, subject to the
approval of the Board, shall from time to time appoint a hearing board
to be composed of such number of members and allied members of the
Exchange who are not members of the Board, and registered employees and
non-registered employees of members and member organizations, as the
Chairman of the Board shall deem necessary. The members of the hearing
board shall be appointed annually and serve at the pleasure of the
Board. The Chairman of the Board, subject to the approval of the Board,
shall also designate from among the officers and employees of the
Exchange a chief hearing officer and one or more other hearing officers
who shall have no Exchange duties or functions relating to the
investigation or preparation of disciplinary matters and who shall be
appointed annually and shall serve as hearing officers at the pleasure
of the Board.
Sec. 4. Composition of Hearing Panel. In any disciplinary
proceeding involving as a respondent therein a member, member
organization, allied member, or approved person, the members of the
hearing board serving on the panel shall be members or allied members.
In any such proceeding relating to activities on the floor of the
Exchange, at least one of the persons serving on the panel shall be a
member active on the floor of the Exchange. In any such proceeding
relating to any other activities, at least one of the persons serving
on the panel shall work in the office of a member or member
organization which engages in a business involving substantial direct
contact with securities customers.
In any disciplinary proceeding involving as a respondent therein a
registered or non-registered employee of a member or member
organization who is not a member or allied member, the members of the
hearing board serving on the panel shall be registered employees or
non-registered employees of members or member organizations who are not
members or allied members. In any such proceeding relating to such
employee's activities on the floor of the Exchange, at least one of the
persons serving on the panel shall be a registered or non-registered
employee of a member or member organization active on the floor of the
Exchange who is not a member or allied member.
In any such proceeding relating to any other activities, at least
one of the persons serving on the panel shall work in the office of a
member or member organization which engages in a business involving
substantial direct contact with securities customers.
In any disciplinary proceeding involving as joint respondents
therein one or more members or member organizations, allied members or
approved persons, together with one or more registered or non-
registered employees of a member or member organization who are not
members or allied members, at least one of the persons serving on the
panel shall be a member or allied member and at least one other person
serving on the panel shall be a registered or non-registered employee
of a member or member organization who is not a member or allied
member, and the functional qualifications required of hearing panel
members as stated in this Section shall be satisfied.
The decision of a majority of the panel shall be the decision of
the panel and shall be final and conclusive, unless a request to the
Board for review is filed as provided in this Article and in the rules
of the Exchange.
Sec. 5. Penalties [and Review]. If a member, member organization,
allied member, approved person or registered or non-registered employee
of a member or member organization is adjudged guilty in any
disciplinary proceeding, the hearing panel shall impose one or more of
the following disciplinary sanctions: expulsion, suspension; limitation
as to activities, functions, and operations, including the suspension
or cancellation of a registration in, or assignment of, one or more
stocks, fine, censure, suspension or bar from being associated with any
member or member organization, or any other fitting sanction. In any
disciplinary proceeding, any sanction imposed may be remitted or
reduced by the hearing panel on such terms and conditions as it shall
deem fair and equitable. In a disciplinary proceeding involving a
written consent to the imposition of a specified penalty, the hearing
panel, in imposing a penalty, may impose the penalty agreed to or any
penalty which is less severe than the stipulated penalty as it deems
appropriate or the hearing panel may reject such consent.
Sec. 6. Review [by Board]. In a disciplinary proceeding not
involving a written consent to the imposition of a specified penalty,
any member, member organization, allied member, approved person, or
registered or non-registered employee of a member or member
organization, adjudged guilty of any charge, or the division or
department of the Exchange which brought the charges, or any member of
the Board or the Board of Executives, may, in accordance with
procedures set forth in the rules of the Exchange, require a review by
the Board, of any determination or penalty, or both, imposed by the
hearing panel. Upon review, the Board, by the affirmative vote of a
majority of the entire Board, may sustain any determination or penalty
imposed, may modify or reverse any such determination, and may
increase, decrease or eliminate any such penalty, or impose any penalty
permitted under this Article as it deems appropriate.
In a disciplinary proceeding involving a written consent to the
imposition of a specified penalty, any member of the Board or the Board
of Executives may require a review by the Board of any determination or
penalty, or both, imposed by the hearing panel. In any such proceeding,
the division or department which entered into the written consent, may
require a review by the Board of any penalty, including any
determination related thereto, imposed by the hearing panel, which is
less severe than the stipulated penalty. The respondent or the division
or department which entered into the written consent may require a
review by the Board of any rejection of the written consent by the
hearing panel. Any review provided in this paragraph shall be conducted
in accordance with procedures set forth in the rules of the Exchange.
Upon review, the Board, by

[[Page 64396]]

the affirmative vote of a majority of the entire Board, may fix and
impose the penalty agreed to in such written consent or any penalty
which is less severe than the stipulated penalty, or remand the case
for further proceedings.

Article X

Membership Fees

Sec. 1. Amount fixed by Board. (a) The membership fee payable by a
regular or lessee member, exclusive of fines and of such other charges
as may be imposed pursuant to this Constitution and of contributions to
the Gratuity Fund, shall be fixed by the Board from time to time and
shall not exceed $1,500 in any calendar year. Such membership fee shall
be payable in advance on the first of each month.
(b) The membership fee payable by a physical access member, with
respect to each year of such membership, exclusive of fines and of such
other charges as may be imposed pursuant to this Constitution, shall be
the sum of (i) the average of the annual rentals payable under the bona
fide leases of membership entered into during the six calendar months
(or another period representative of the current lease market) prior to
the beginning of such year, (ii) $1,500, and (iii) with respect to the
first year of such membership only, $5,000; provided, however, that if
at any time the membership fee payable pursuant to Section 1(a) of this
Article is in excess of, or less than, $1,500 per year, the amount
provided in clause (ii) above shall be correspondingly increased or
reduced, and if the maximum amount payable by a new member described in
Section 4(a) or (b) of Article II is in excess of, or less than,
$5,000, the amount provided in clause (iii) above shall be
correspondingly increased or reduced. Such membership fee shall be paid
in full prior to admission to membership, and prior to any renewal of
such member's membership.
(c) The membership fee payable by an electronic access member,
exclusive of fines and of such other charges as may be imposed pursuant
to th[is]e Constitution, shall be fixed by the Board from time to time,
and shall be not less than $13,500 annually. Such membership fee shall
be paid in full prior to admission to membership, and prior to any
renewal of such member's membership.
Sec. 2. Exemption to Members in Armed Forces. The Board may, on the
request of a member who, in time of national emergency,
(a) is on active duty in the armed forces of the United States, or
(b) is on active duty in the armed forces of any nation or state
which is then allied or associated with the United States,

and who, in the determination of the Board, is not able to obtain a
qualified alternate, exempt such member from the payment of membership
fees, under such terms and conditions and to such extent as the Board
may prescribe.
Sec. 3. Allocation of Membership Fees. The membership fees payable
by any regular or lessee member may be divided by the Board into two
parts, one of which shall constitute the member's contribution to the
current expenses of the Exchange for the quarter, as estimated by the
Board, and the other of which shall constitute the member's
contribution towards the capital investment of the Exchange, which
shall include advances to its subsidiaries to cover capital
expenditures.
Sec. 4. Charges on Floor Transactions. The Board may, from time to
time, fix and impose a charge upon members and member organizations,
measured by the number of, the value of, the number of shares,
warrants, rights or bonds associated with, or the commissions or net
commissions on, transactions effected on the Exchange. The total
charges imposed on any member or member organization pursuant to this
paragraph relating to purchases and sales of stocks and bonds on the
Exchange during any calendar month shall not exceed two percent of the
total of the net commissions of such member or member organization
relating to such purchases and sales during such month. Such charge
shall be payable at such times and shall be collected in such manner as
may be determined by the Board.
The Board may, from time to time, fix and impose a charge upon
members and member organizations measured by their respective odd-lot
purchase and sales transactions as odd-lot dealers on the Exchange. The
amount of such charge shall not exceed one quarter of one cent per
share on any odd-lot purchase or sale. Such charge shall be payable at
such time and shall be collected in such manner as may be determined by
the Board.
Sec. 5. Charges or Fees for Facilities or Services. The Board may,
from time to time, fix and impose other charges or fees to be paid to
the Exchange by members and member organizations for the use of
equipment or facilities or for particular services or privileges
granted.
Sec. 6. Penalty for Non-payment. (a) A regular or lessee member who
shall not pay his or her membership fees, or any member who shall not
pay a fine, or a contribution to the Gratuity Fund or any other sums
due the Exchange, within forty-five days after the same shall become
payable shall be reported by the Treasurer to the Chairman of the Board
and, after written notice mailed to him or her of such arrearages, may
be suspended by the Board until payment is made.
(b) Whenever the Treasurer shall report to the Chairman of the
Board that a member organization has neglected to pay a fine or any
other sums due the Exchange within forty-five days after the same shall
become payable, any member in such member organization, after written
notice mailed to such member of such arrearages, may be suspended by
the Board until payment is made.
(c) Whenever the Treasurer shall report to the Chairman of the
Board that an allied member has neglected to pay a fine or any other
sums due the Exchange within forty-five days after the same shall
become payable, the allied membership of such allied member shall
terminate, unless the Board shall have granted an extension of time to
pay such fine.
(d) Should any payment referred to in this Section not be made
within one year after payment is due, the membership of a delinquent
regular or lessee member may be disposed of by the Board on at least
ten days' written notice mailed to such member (and to the lessor of
such membership, if any) at the address registered with the Exchange.
Sec. 7. Effect of Suspension. A member suspended under the
provisions of this Article shall be deprived, during the period of his
or her suspension, of all rights and privileges of membership, but such
member may be proceeded against by the Exchange for any offense
committed by such member either before or after such suspension. No
such suspension shall operate to bar or affect the payments provided
for by the Gratuity Fund in the event of the death of the suspended
member.
The suspension of a member under the provisions of this Article
shall create a vacancy in any office or position held by him or her.
Sec. 8. Liability for Fees and Contributions Until Transfer.
Notwithstanding the death or expulsion of a regular or lessee member,
the membership of such member until transferred shall continue liable
for membership fees to the Exchange, as from time to time fixed by the
Board, for contributions to the Gratuity Fund and for any other
payments due the Exchange.

[[Page 64397]]

Sec. 9. Other Charges. In addition to the fees and charges provided
for or authorized by Sections 1, 4 and 5 of this Article, the Board may
from time to time fix and impose such other charge or charges upon
members and member organizations as are authorized by this
Constitution; provided, however, that any such charge or charges
imposed upon member organizations shall be measured by the number of,
the value of, or the commissions or net commissions on, transactions
effected on the floor of the Exchange or transactions in securities
admitted to dealings on the Exchange regardless of the market in which
such transactions are effected.

Article XI

Arbitration

Sec. 1. Controversies Arbitrated. Any controversy between parties
who are members, allied members or member organizations and any
controversy between a member, allied member or member organization and
any other person arising out of the business of such member, allied
member or member organization, or the dissolution of a member
organization, shall at the instance of any such party be submitted for
arbitration in accordance with the provisions of this Constitution and
such rules as the Board may from time to time adopt.
Sec. 2. Arbitration Rules. All arbitration proceedings shall be
conducted in accordance with, and before arbitrators selected as
provided by, such rules as the Board shall from time to time adopt.
Sec. 3. Power to Decline Use of Arbitration Facilities. The Board
may decline in any case to permit the use of the arbitration facilities
of the Exchange and may delegate such power.

Article XII

Indemnification

Sec. 1. Indemnification. Any person made, or threatened to be made,
a party to any action or proceeding, whether civil or criminal, by
reason of the fact that he or she, his or her testator or intestate, is
or was a director or officer of the Exchange or a member of the Board
of Executives or serves or served any other corporation, or any
partnership, joint venture, trust or other enterprise, in any capacity
at the request of the Exchange, shall be indemnified by the Exchange,
and the Exchange may advance his or her related expenses, to the full
extent permitted by law.
Indemnification shall be accorded by the Exchange, and related
expenses may be advanced, in respect of members of any committee
authorized by this Constitution or by the Board, the members of the
Board of Executives, floor officials, arbitrators, members of the
hearing board, trustees of the Gratuity Fund, trustees of the
Exchange's Special Trust Fund, employees of the Exchange and directors,
officers and employees of any corporation a majority of the stock of
which is held by the Exchange to the same extent as provided by law in
respect of directors and officers. The foregoing right of
indemnification shall not affect any rights to indemnification to which
persons other than directors and officers of the Exchange may be
entitled by contract or otherwise under law.

Article XIII

(Reserved.)

[Management in an Emergency

Sec. 1. Emergency Powers. Whenever it shall appear to the Board
that an emergency exists, other than as provided for in the following
Sections of this Article, it may by resolution adopted by a majority of
the entire Board delegate all of its powers which may lawfully be
delegated, for such period as it may determine, to a special committee,
to be composed of three or more directors, at least one-half of whom
shall be industry directors. The Board by such resolution may designate
one or more industry directors as alternates for the members of such
committee who are industry directors of the Exchange and one or more
other directors as alternates for the members of such committee who are
public directors. Directors so designated may replace any absent member
or members for whom they are alternates at any meeting of such
committee.
Sec. 2. Defense Emergency Act. The provisions of the balance of
this Article constitute emergency by-laws under Subdivision 17 of
Section 12 of the New York State Defense Emergency Act, as amended. In
the event that an attack as herein and therein defined occurs and the
New York State Defense Council issues an order applicable to the
Exchange authorizing or directing the effectiveness of emergency by-
laws of New York corporations, then, notwithstanding any provisions of
the certificate of incorporation of the Exchange or the provisions of
any of the other Articles of this Constitution or of the rules
thereunder, all the rights, powers and duties of the Board shall
immediately vest in an emergency committee and continue to be so vested
during the period of emergency.
The term ``attack'' for the purpose of this Article means and
includes any attack, actual or imminent, or series of attacks by an
enemy or a foreign nation upon the United States causing, or which may
cause, substantial damage or injury to civilian property or persons in
the United States in any manner by sabotage or by the use of bombs,
shellfire, or nuclear, radiological, chemical, bacteriological, or
biological means or other weapons or processes.
The term ``emergency committee'' for the purpose of this Article
shall mean a committee of six members composed as provided in Section 3
of this Article.
The term ``period of emergency'' for the purpose of this Article
shall mean the period commencing with the vesting of the powers of the
Board in the emergency committee and ending on the date when the New
York State Defense Council declares that the period of attack has ended
or on such earlier date as may be fixed (a) by the Board in office at
the inception of the emergency or (b) by a majority vote of the
membership at a special meeting of the members called for the purpose
or (c) by the emergency committee. On the date so declared or so fixed
all of the committee's powers shall revert to the Board.
If there are any vacancies in the Board on the date the emergency
committee's powers are to revert to the Board, the emergency committee
may make such provisions as it deems advisable for the election, by the
members of the Exchange, of persons to fill such vacancies and may, in
connection therewith, fix the time, place and manner of nominating
persons to fill such vacancies and the time and place for a special
meeting of the members of the Exchange for the purpose of such
election.
Sec. 3. Composition of Emergency Committee. The emergency committee
shall, at the inception of the period of emergency, be composed of the
following six directors who are available and able to meet together--
the Chairman of the Board, the Executive Vice Chairman, if one is then
in office, each Vice Chairman of the Board then in office, the
President, if one is then in office, and such number of the industry
directors in order of seniority as are necessary to bring the committee
up to its full complement of six. If any of the foregoing are not
available or able to meet together, vacancies shall be filled from
other members of the Board in order of their seniority. If there are
not six members of the Board available and able to meet together,
vacancies shall be filled in the order of their seniority, from the
industry directors who retired

[[Page 64398]]

from the Board at the last annual election. If all of the vacancies
cannot be filled from such former directors, they shall be filled in
order of seniority, from the industry directors who retired at the next
to the last annual election, and so on until there are six such
directors or former directors available and able to meet together.
The seniority of a director or former director for the purpose of
this Article shall be determined by the length of time he or she has
served as a director (including service as Chairman of the Board)
whether or not his or her terms of service have been consecutive.
After the emergency committee has been initially constituted as
above provided, the committee shall fill any vacancies which occur by
appointing directors or former directors of the Exchange, may increase
the number of such directors and former directors who constitute the
committee, and thereafter may reduce such number, provided the number
is not reduced below five. In filling vacancies and in adding members
to the committee, seniority shall not control. The emergency committee
may remove any member of the committee with or without cause.
In the event that at any time during the emergency there are less
than three members of the committee available and able to meet
together, the vacancies shall automatically be filled in the same
manner as the committee was originally constituted.
Sec. 4. Meetings of Emergency Committee. Meetings of the emergency
committee shall be held at such times and places as the committee may
designate by resolution and special meetings of the committee shall be
held on the call of any member of the committee. A member of the
emergency committee calling a meeting shall attempt to give notice
thereof by making such reasonable efforts as circumstances may permit
to notify each committee member of the meeting. Such notification may
be oral, written or by publication and specify the purposes thereof.
Failure of any member of the committee to receive actual notice of a
meeting of the committee shall not affect the power of the committee
members present at such meeting to exercise the powers of the emergency
committee.
Three members of the emergency committee shall be sufficient to
constitute a quorum for any meeting of that committee, and any action
taken pursuant to the vote of a majority of the members of the
committee present at a meeting shall be deemed to be the action of the
committee, even though this Constitution requires a specified vote by
the members of the Board had that action been taken by the Board.
Any action by an emergency committee shall be valid and binding as
if taken by the Board if such committee certifies that it is the
properly constituted emergency committee even though it may
subsequently develop that at the time of such action the committee was
not a duly qualified emergency committee.
If the emergency committee elects a person to an office which it
believes to be vacant, the acts of such newly elected officer shall be
valid and binding although it may subsequently develop that such office
was not in fact vacant.]

Article XIV

[Amendment of the] Amendments to Constitution

Sec. 1. Constitutional Amendments. The provisions of Articles IV
(except for Section 14(b)), V (except for Section 2(a)), VI and XII of
the Constitution may be amended or repealed, and new provisions may be
adopted, by the affirmative vote of a majority of the entire Board, or
by the members of the Exchange who are entitled to vote thereon in
accordance with the procedure specified in this Article; provided,
however, that no Constitutional amendment that may be approved by the
majority of the entire Board without the vote of members may take
effect until the expiration of two weeks from the date the proposed
Constitutional amendment is first furnished to the members.
Notwithstanding the foregoing, the Board may make such changes to such
proposed amendment as it may deem necessary or appropriate to carry out
the intention of such proposed amendment or to make it conform to other
provisions of this Constitution or any applicable federal or state law
without the need for a further waiting period. The remaining provisions
of this Constitution may be amended or repealed, and new provisions may
be adopted, only by the members of the Exchange who are entitled to
vote thereon in accordance with the procedure specified in this
Article. To the extent any amendment requires amendment of a definition
included in Article I, Section 3, such definition as used in the
amended section, may be amended in the same manner as the substantive
provision containing such definition.
Sec. 2. Proposing Amendments. Any member of the Board may propose
an amendment to this Constitution. Amendments may also be proposed by
the signed petition of not less than one hundred and seventy-five
members of the Exchange (who would be entitled to vote on the proposed
amendment) setting forth the proposed amendment and filing the same
with the Secretary of the Exchange who shall present it to the Board at
its next regular meeting. Any [such] proposed amendment to this
Constitution must be presented in writing at a regular meeting of the
Board or at a special meeting expressly called for the purpose of
receiving it. Upon presentation, every [proposed] amendment proposed by
the members shall be laid upon the table for at least two weeks and the
Secretary of the Exchange shall promptly cause a copy thereof to be
delivered to each director.
After any amendment proposed by the petition of members shall have
lain upon the table for two weeks the Board shall, at the next regular
meeting of the Board, or at a special meeting called for the purpose,
and in any event within seven weeks after the proposed amendment has
been presented to the Board, direct that it be submitted, with or
without the approval of the Board, to the members entitled to vote
thereon (or to all members if required by law) at a special meeting of
the members called for the purpose.
In the event that any amendment proposed by one or more directors,
[is] and approved by the affirmative vote of a majority of the entire
Board, requires the vote of the members, the Board shall direct that it
be submitted to the membership for vote thereon (or to all members if
required by law) at a special meeting of the members called for the
purpose.
With the notice of special meeting, the Secretary of the Exchange
shall furnish a form of proxy [designating not less than three] which
shall designate one or more members of the Exchange [to serve as a
proxy committee] as persons authorized to act [for the members]
thereunder at the special meeting. Before submitting any proposed
amendment, the Board may make such changes therein as it may deem
necessary or appropriate to carry out the intention of such proposed
amendment or to make it conform to other provisions of this
Constitution or any applicable federal or state law.
Sec. 3. Quorum. If a quorum shall not be present, in person or by
proxy, at the place and time fixed for a special meeting of the members
called pursuant to this Article, the meeting shall be adjourned to
reconvene at the same time and place on the day two weeks thereafter
or, if the Exchange is not open for business on that day, on the next
succeeding business day. If a quorum shall not then be assembled, the
meeting

[[Page 64399]]

shall be dissolved and the proposed amendment shall not become
effective. For the adoption of any proposed amendment it shall, except
as otherwise required by law or by this Constitution, be authorized by
a majority of the votes cast by the members entitled to vote thereon at
the special meeting at which it is submitted, provided that a quorum is
present, in person or by proxy.
Sec. 4. Gratuity Fund Amendment. Notwithstanding the foregoing
provisions of this Article, no amendment to this Constitution shall
ever be made which will impair in any essential particular, the
obligation of each regular member and lessor member to contribute, not
less than the sum of $15, to the provision for the families of deceased
members, unless such amendment shall be authorized by a unanimous vote,
or by the written consent, of all such members of the Exchange.

Article XV

The Gratuity Fund

Sec. 1. Initial Payment to Gratuity Fund. Every person who shall
become a regular member of the Exchange shall pay to the trustees of
the Gratuity Fund the sum of seventy-five dollars before he or she
shall be admitted to the privilege of membership. For the purpose of
this Article the term member shall mean a regular member and a lessor
member and shall not include a lessee member.
Sec. 2. Contribution on Death of Member. Each member of the
Exchange, by signing this Constitution pledges himself or herself to
make, upon the death of a member of the Exchange, a contribution to the
family of such deceased member in the respective amount hereinafter set
forth according to the length of time that has elapsed between the date
when the deceased became a member and the date of his or her death,
namely

$15.00 if such elapsed time is less than one year,
$30.00 if such elapsed time is one year or more but less than two
years,
$45.00 if such elapsed time is two years or more but less than three
years,
$60.00 if such elapsed time is three years or more but less than four
years,

$75.00 if such elapsed time is four years or more,

such sums to be paid by the member to the Exchange when assessed. The
Treasurer of the Exchange shall pay over monthly to the Gratuity Fund
all amounts collected from members under this Article during the
preceding month.
Sec. 3. Payments on Death. The faith of the Exchange is hereby
pledged to pay, within one year after the proof of death of any member,
out of the money collected under the provisions of this Article, the
respective amount hereinafter set forth according to the length of time
that has elapsed between the date when the deceased became a member and
the date of his or her death, namely

$20,000 if such elapsed time is less than one year,
$40,000 if such elapsed time is one year or more but less than two
years,
$60,000 if such elapsed time is two years or more but less than three
years,
$80,000 if such elapsed time is three years or more but less than four
years,
$100,000 if such elapsed time is four years or more,

or so much thereof as may have been collected, to the persons named in
the next Section as therein provided, which money shall be a
contribution from the other members of the Exchange, free of all debts,
charges or demands whatsoever. The elapsed time referred to in Sections
2 and 3 of this Article shall include any period not in excess of 90
days between the transfer of a membership by the deceased member and
the acquisition of another membership by such deceased member and, for
the purposes of said Sections 2 and 3, the deceased member shall be
deemed to have continued to be a member throughout such period.
Sec. 4. To Whom Paid. Should the member die leaving a surviving
spouse and no child or children and no issue of a deceased child or
children, then the whole sum shall be paid to such surviving spouse for
his or her own use.
Should the member die leaving a surviving spouse and a child or
children or the issue of a deceased child or children, then one-half
shall be paid to the surviving spouse for his or her separate use. The
remaining one-half shall be paid to and divided among the child or
children and the issue of any deceased child or children, such issue to
take per stirpes and not per capita. If any such child or issue shall
be a minor, his or her share shall be paid to his or her duly appointed
guardian of the property.
Should the member die leaving a child or children or the issue of a
deceased child or children and no surviving spouse, then the whole sum
shall be paid to the children and such issue as directed in the
preceding paragraph to be done with the moiety.
Should the member die leaving neither surviving spouse, child nor
issue of a child, then the whole sum shall be paid to the same persons
who would, under the laws of the State of New York, take the same by
reason of relationship to the deceased member had he or she owned the
same at the time of his or her death; and if there be no such person,
then the amount applicable under Section 3 of this Article in such case
shall be held by the trustees of the Gratuity Fund for the general
purposes of that Fund.
The words ``child'' and ``children'' where used in this Section
shall, for the purposes of this Article, be deemed to include an
adopted child or children of the deceased member, provided, however,
that such adoption shall have been in such manner and form that it will
be recognized as valid by the courts of the State of New York; the word
``issue'' where so used shall, for such purposes, be deemed not to
include an adopted child or children.
In case any person entitled to any gratuity shall be under age and
have no guardian entitled to receive payment at the maturity thereof,
the trustees may, in their discretion, deposit such money with a bank
or other financial institution as the property of, and in trust for,
such minor; and in like manner if any person apparently entitled to any
payment fails to claim it, or has disappeared or cannot be found after
reasonable inquiry, the trustees may deposit the presumptive share of
such person with a bank or trust company to the credit of the
``trustees of the Gratuity Fund of the New York Stock Exchange, Inc.,
in trust,'' to the end that it may be paid to such person, if
afterwards found, or otherwise to the parties who may subsequently
establish their right thereto; a similar discretion shall apply in the
case of any dispute between claimants for a gratuity or a portion
thereof.
In all cases a certified copy of the proceedings before a Surrogate
or Judge of Probate shall be accepted as proof of the rights of the
claimants, shall be deemed ample authority to the Exchange to pay over
the money, shall protect the Exchange in so doing, and shall release
the Exchange forever from all further claims or liability whatsoever.
Sec. 5. Limited Liability. Nothing herein contained shall ever be
taken or construed as a joint liability of the Exchange or its members
for the payment of any sum whatever; the liability of each member, at
law or equity, being limited to the payment of the dollar amount
described in Section 2 of this Article only on the death of any

[[Page 64400]]

other member, and the liability of the Exchange being limited to the
payment of the dollar amount described in Section 3 of this Article, or
such part thereof as may be collected, after it shall have been
collected from the members, and not otherwise. Nevertheless, prior to
the collection from the members of the amount of any gratuity payable
under the provisions of this Article, the trustees may, in their
discretion, advance out of the Gratuity Fund (either capital or
accumulated income) to the person or persons entitled thereto, the
whole or any part of such gratuity; and, in every such case, the amount
so advanced shall be repaid to the Gratuity Fund from the payments by
the members when collected.
Sec. 6. No Estate In Esse. Nothing herein shall be construed as
constituting any estate in esse which can be mortgaged or pledged for
the payment of any debts; but it shall be construed as the solemn
agreement of every member of the Exchange to make a contribution to the
family of each deceased member, and of the Exchange, to the best of its
ability, to collect and pay over to such family the said contribution.
Sec. 7. Payments of Excess Net Worth. As of the close of each
quarter in each year, the trustees of the Gratuity Fund shall, provided
the net worth of the Gratuity Fund has been determined (as hereinafter
provided) to be in excess of the sum of one million five hundred
thousand dollars, pay to the Treasurer of the Exchange out of the
Gratuity Fund (either capital or accumulated income) a sum equal in
amount to such portion, if any, of such excess as shall be the highest
whole number multiple of $102,375; if there shall be no whole number
multiple of $102,375 in such excess, no such sum shall be paid by the
trustees of the Gratuity Fund to the Treasurer of the Exchange with
respect to such quarter. As and when such sums are received by the
Treasurer of the Exchange they shall be credited proportionately
against the first amount then or thereafter payable by members pursuant
to Section 2 of this Article.
The ``net worth'' of the Gratuity Fund shall be determined by the
trustees at a meeting in the last month of each quarter and shall be
that amount by which, as of the close of the month preceding, the total
assets (including cash, accounts receivable and investments stated at
their market values but exclusive of accrued interest and accrued
dividends) exceeded all known liabilities.
Sec. 8. Deceased, Expelled and Suspended Members. The provisions of
Sections 2, 3, 4, 5 and 6 of this Article shall not extend to the
family of any deceased former member whose connection with the Exchange
shall have been severed prior to his or her death by the transfer of
his or her membership whether such transfer shall have been made by the
member or his or her legal representatives or by the Board pursuant to
this Constitution, or who has been expelled, but shall extend to the
family of a deceased member who was suspended at the time of his or her
death.
Sec. 9. Management of Gratuity Fund. The management and
distribution of the Gratuity Fund shall be under the charge of a board
of trustees, acting as agent for the Exchange, to be known as the
``trustees of the Gratuity Fund,'' and shall consist of six regular
members of the Exchange who are not lessor members and are elected by
the membership. In case of a vacancy among the trustees, the Board, at
its next regular meeting thereafter, shall proceed to fill the same
until the next annual election of the Exchange. Prior to filling such
vacancy, the Board shall request the Nominating Committee to submit to
the Board the name of the person recommended by the Nominating
Committee to fill such vacancy.
Sec. 10. Investments. The Gratuity Fund may be retained by the
trustees partially or wholly in the form of cash or, in the discretion
of the trustees, may be invested in securities which are legal
investments for trust funds under the laws of the State of New York.
Any securities held by the trustees which cease to be such legal
investments may, nevertheless, in the discretion of the trustees, be
retained by them.
Securities held by the trustees may be in coupon or registered
form. Securities held in registered form shall be registered in the
name of the ``trustees of the Gratuity Fund of the New York Stock
Exchange, Inc.'', but without specifying the individual names of such
trustees, and may be disposed of and assigned by any four of such
trustees.
Sec. 11. Policies and Procedures of Trustees. The trustees may
adopt such policies and procedures and appoint such officers as they
deem appropriate to the discharge of their duties. The trustees shall
have power at their discretion to consult and employ legal counsel and
they shall be authorized to make disbursements out of the Gratuity Fund
to defray necessary and related expenses.
Sec. 12. Inspection. The Board shall, at all times, have the right
to direct the production before it of the securities belonging to the
Gratuity Fund, and all books and records relating to the Gratuity Fund.

Article XVI

2003-04 Transition

The terms of this Article XVI shall apply during the period
commencing on the date this amended and restated Constitution is
approved by members and ending on the date of the next annual meeting
(the ``Transition Period''). Upon expiration of the Transition Period,
this Article shall be of no further force or effect.
Sec. 1. Initial Board. The initial board elected concurrently with
the approval by the members of this amended and restated Constitution
shall be deemed duly nominated, qualified and elected for all purposes.
Sec. 2. Term of Office. The term of each director elected at the
special meeting at which this amended and restated Constitution is
approved by the members continues until the next annual meeting of
members and until his or her successor is elected and qualified.
Sec. 3. Organizational Meeting. The Board shall hold its initial
organizational meeting as soon as practicable following the special
meeting at which this amended and restated Constitution is approved by
the members. At its initial organizational meeting, or as soon
thereafter as practicable, the Board, by the affirmative vote of a
majority of the entire Board, shall, among such other organizational
actions as may be appropriate, appoint the members of the Board of
Executives and of the Committees. The terms of the members of the Board
of Executives and of the Committees continues until their successors
are appointed and qualified.
Sec. 4. Committees. To assure continuity, during the Transition
Period, the Regulation, Enforcement & Listing Standards Committee may
include prior members of the Committee for Review who are neither
directors nor members of the Board of Executives. Such prior members
shall be deemed to be members of the Board of Executives for the
purpose of Committee voting. In addition, notwithstanding the
provisions of Article IV, Section 12(a), the Standing Committees
described therein may include as a member the individual serving as
Chairman and Chief Executive Officer on the date this amended and
restated Constitution is approved by the members.
Sec. 5. Ratification. The extraordinary circumstances under which
this restated and amended Constitution was proposed and the initial
Board of Directors was constituted caused the Exchange to dispense, in
whole or in part, with certain requirements,

[[Page 64401]]

including (a) use of the Nominating Committee to nominate directors,
(b) the opportunity for members to petition to nominate additional
director candidates, and (c) approval of the proposed amendments by the
Board of Directors in accordance with the prescribed time frames. All
such requirements are hereby waived, and the actions taken in
contravention of all such requirements are hereby ratified.
Exhibit B
November 4, 2003
Dear Member:

I am writing to ask your support in reforming the governance and
management architecture of the New York Stock Exchange, Inc. This will
require that you change the Constitution to achieve the following
objectives:
(1) Place responsibility for governance, compensation and internal
controls, as well as for supervision of regulation, in the hands of a
Board of Directors that is independent both from NYSE management and
from the members, member organizations and listed companies.
(2) Separately preserve the existing engagement of the broker-
dealer community and listed company community with the NYSE by creating
a Board of Executives that will also include the executives of major
public and private ``buy side'' entities as well as lessor members.
(3) Make transparent our governance process, its participants,
their compensation, and our charitable donations and political
contributions.
I also seek ``fast track'' authority from you to effect these
changes and enable the new, independent Board to appoint the Board of
Executives and to otherwise assume its responsibilities immediately
following your vote.

Background

You know the background. The Exchange has evolved over many years,
and its Board and management have had to deal with industry, issuer,
operational and governance issues of increasing complexity. Recently,
we have all been embarrassed by a set of problems that has hurt the
Exchange and revealed the clear need to change our structure and
processes at the top.

Proposal

I am asking that we reconstitute our Board. It will have between
six and twelve members, all of whom will be independent, as well as a
Chairman and a Chief Executive Officer (if he or she is not also the
Chairman). The directors will be fiduciaries owing their loyalty to the
NYSE. The proposed slate is as follows:
(1) Madeleine K. Albright
(2) Herbert M. Allison, Jr.
(3) Euan D. Baird
(4) Marshall N. Carter
(5) Shirley Ann Jackson
(6) James S. McDonald
(7) Robert B. Shapiro
(8) Sir Dennis Weatherstone
If you elect these individuals as your initial Board, they will
serve until June 2004. Thereafter, the entire Board will stand for
election in June of each year.
It is important that the role and responsibility of the Board be
clear and that a mechanism for self-appraisal and continual improvement
be in place. This letter and the attached proxy statement describe this
for your information--in essence, the Board's responsibilities are to
supervise our regulatory function; monitor marketplace performance and
competitive position; engage with and approve strategy; hire, fire and
pay the management; ensure an appropriate management succession plan;
and ensure appropriate behavior.
In order for the NYSE to function effectively and continue as a
spokesperson for the industry, the Board and our management must engage
with the member owners and with senior voices from our constituents--
our listed companies, the buy side and sell side entities, and the
trading Floor. To this end:
(1) The Board of Directors will appoint a Board of Executives made
up of approximately 20 constituent representatives, balanced among the
major broker-dealers, the ``Floor,'' lessor members, institutional
investors and large public funds, and listed companies. Members of the
Board of Executives will have the same fiduciary duties to the NYSE as
its officers have.
(2) The Board of Executives will meet at least six times a year and
will discuss Exchange performance, membership issues, listed company
issues and public issues relating to market structure and performance.
(3) The Board of Directors will meet with the Board of Executives
in joint session several times during each year contemporaneous with
its own meetings, and will receive reports of the deliberations of the
Board of Executives. Members of the Board of Executives will serve on
some of the Committees with members of the Board of Directors.
(4) The Board of Directors will stay in touch with the membership
in a variety of ways, including meeting separately at the end of each
year with the lessor and Floor representatives on the Board of
Executives.
In order to work effectively, the Board of Directors will need to
appoint several Committees. Given the Board's small size, it can also
simply appoint Committee Chairmen and function as a Committee of the
whole.
Each year following its election, the Board will organize itself.
As of this writing, I anticipate that the Board will have:
(1) An Audit Committee and a Regulatory Oversight & Regulatory
Budget Committee to ensure proper controls and regulatory supervision
are in place.
(2) A Human Resources & Compensation Committee to ensure that we
have good management that is paid appropriately.
(3) A Nominating & Governance Committee to ensure that the Board of
Directors and Board of Executives function well and that appropriate
people are nominated for the Board and appointed to the Board of
Executives.
The Board will also appoint some of its members to Committees
(joint with Board of Executives members) dealing with the Quality of
Markets, Market Structure and Strategy, Finance, and appeals of
disciplinary actions and de-listings. The Board will create and combine
committees as warranted.

Leadership of the Board and Management

The Board will choose a Chairman and a CEO annually in June. If the
Board of Directors identifies a person able to lead both it and the
Board of Executives and to discharge the functions of chief executive,
it may combine the two roles. Otherwise, it will select a different
person for each role. I will continue in both roles until the new Board
of Directors chooses my successor(s), which I hope will be before the
end of this year. I have indicated to the Board nominees my willingness
to thereafter remain on the Board, if appropriate.

Transparency

The workings of the Board of Directors and its governance must be
transparent. To that end:
(1) Prior to the Annual Meeting, we will publish a proxy statement
disclosing the Board Committee charters and the Committee reports on
their activities for the year; membership on the Board, on the Board of
Executives, and on the various standing and advisory Committees; the
facts establishing each Board member's independence, including any non-
director relationship between Board members and the NYSE itself and any
material relationships among Board members; and Board compensation.

[[Page 64402]]

(2) We will publicly disclose information regarding the means by
which members and investors may communicate with the NYSE's non-
management directors.
(3) The annual report of the Human Resources & Compensation
Committee will detail compensation decisions for the top five officers,
the existence of any contracts for these individuals and the
compensation for the top management team as a whole. The Committee will
detail the competitive comparisons and performance judgments that
guided their recommendations.
(4) The Nominating & Governance Committee will explain its
nominations and make public the procedures that are in place to ensure
that appropriate potential nominees are found and considered.
(5) The Board of Directors will detail the considerations that lead
to membership on the Board of Executives, and the current membership. A
report of the activities of the Board of Executives will be included in
the proxy statement.
(6) The various advisory committees of the NYSE will be identified
and described, and their members listed in the proxy statement.
(7) An annual report detailing the charitable activities of or on
behalf of the Exchange, including the activities of the NYSE
Foundation, will be included with the proxy statement.
(8) A report disclosing NYSE political activities, including a list
of political contributions made by any NYSE PAC, will be made available
prior to the annual meeting.

Rationale

The logic supporting these proposed changes is straightforward.
(1) The NYSE needs a competent, engaged Board without conflicts and
dedicated to the NYSE's long-term interests.
(2) The NYSE will not recover its voice and legitimacy as leader of
the U.S. capital markets until it is seen as an example of good
corporate governance and capable of properly managing its own affairs.
An ``insider board'' is not acceptable--not in general and certainly
not as a supervisor of our regulatory responsibilities.
(3) The members of the Exchange need to be kept informed of Board
decisions and have access to the Board through full disclosure, direct
interaction, an annual meeting and an open election of the Board
itself.
(4) The NYSE has to be deeply engaged with listed companies and buy
and sell side firms, as well as member owners, through substantive,
focused interaction.

Engagement on the Proposals

This letter seeks to highlight some of the most important changes
that I propose in your governance architecture and the reasons why I
recommend them to you.
To assure that you understand my proposals and to afford you the
opportunity to ask questions, I plan to hold several meetings in
various locations. You are invited to attend any of the following
meetings at the location of your choice:

Wednesday, November 5: Washington, DC
Friday, November 7: Boca Raton, Florida
Monday, November 10: Philadelphia, Pennsylvania and New York, New York
Wednesday, November 12: Cleveland, Ohio and Chicago, Illinois
Friday, November 14: Los Angeles, California
Saturday, November 15: San Francisco, California

Please call this toll-free number if you plan to attend and we will
give you the details: 1-888-410-7850. You may also contact us via email at governance@nyse.com.

Proxy Statement and Ballot

The matters to be acted upon are described more fully in the
accompanying Proxy Statement.
I urge you to read it carefully and to vote in favor of the
proposals.
If I can have your support, we will have a solid and independent
Board of Directors directly elected by the members, and a Board of
Executives able to ensure our continued centrality to constituent
concerns. This arrangement will serve you, the Exchange itself and most
importantly, the investing public.
I ask for your vote.
Best,
/s/ John S. Reed,
John S. Reed.

NEW YORK STOCK EXCHANGE, INC.

11 Wall Street

New York, New York 10005

NOTICE OF SPECIAL MEETING

To be held November 18, 2003

To the Members:
Proposal 1. Amend and Restate the Constitution in the form attached
as Annex A.
Proposal 2. Election of eight (8) directors.
Only members of record and in good standing at the close of
business on November 18, 2003 will be entitled to vote at this meeting
or at any adjournments thereof.

By Order of the Interim Chairman of the Board,

/s/ Darla C. Stuckey

Darla C. Stuckey, Secretary
November 4, 2003.

IMPORTANT: To ensure that you are represented at the Special
Meeting, please vote in one of these ways:
[sbull] USE THE TOLL-FREE NUMBER shown on your proxy card;
[sbull] VISIT THE WEBSITE noted on your proxy card to vote via the
Internet;
[sbull] MARK, SIGN, DATE AND PROMPTLY RETURN the enclosed proxy
card in the postage-paid express mail envelope to IVS Associates, Inc.,
111 Continental Drive, Suite 210, Newark, Delaware 19713, or by FAX to
302-369-8486; OR
[sbull] VOTE IN PERSON by appearing at the Special Meeting and
submitting a ballot at the meeting.

TABLE OF CONTENTS

New York Stock Exchange, Inc.
Meeting and Solicitation
The Proposals
Background and Reasons for the Proposals
Proposal to Amend and Restate the Constitution
Board Authority and Accountability
Board of Executives
Governance and Management
Advisory Committees
Other Governance Reforms
Publication and Disclosure
Governance Procedures and Policy
Other Issues
``Fast Track'' Issues
Effectiveness of Constitutional Amendments
Proposal 1
Proposal 2
Nominees for Election as Directors
Other Matters
ANNEX A--Amended and Restated Constitution
ANNEX B--Amended and Restated Constitution Marked to Reflect
Changes
ANNEX C--Diagram: Proposed NYSE Governance Architecture

NEW YORK STOCK EXCHANGE, INC

The New York Stock Exchange, Inc. is the world's premier equities
market. A broad spectrum of participants, including individual
investors, institutional investors, listed companies, and members and
member organizations, create the NYSE auction market. The NYSE is
committed to serving the interests of public investors in equities by
maintaining the most efficient, liquid, fair and orderly markets in the
world.

[[Page 64403]]

The NYSE, founded in 1792, is a New York not-for-profit corporation
which was first incorporated in 1971. The NYSE's executive offices are
located at 11 Wall Street, New York, New York 10005; telephone: (212)
656-3000.

MEETING AND SOLICITATION

The Proposals

This Proxy Statement is being furnished to NYSE members in
connection with the solicitation of proxies for use at a special
meeting to be held on November 18, 2003, at 4:30 p.m. New York time, in
the Board room at the New York Stock Exchange, Inc., 11 Wall Street,
New York, New York 10005 (the ``Special Meeting''). The purpose of this
Special Meeting is for you to consider and vote upon a proposal to
approve an amended and restated Constitution, which provides for a
number of significant changes to the governance of the NYSE, and to
elect a new Board of Directors of the NYSE upon adoption of the amended
Constitution. If elected, these directors will serve until the next
annual meeting of members, scheduled for June 3, 2004.
The Interim Chairman of the Board recommends that you vote FOR the
proposal to amend and restate the Constitution and FOR the election of
the new Board of Directors. This Proxy Statement and the accompanying
proxy card were first sent to members on November 4th, 2003.
Vote of Members; Notice; Quorum
Each regular member in good standing shall be entitled to one vote
on the proposal to amend and restate the Constitution and on each
position to be filled. Each physical access member in good standing
shall be entitled to one vote, and each electronic access member in
good standing who became such prior to March 30, 1986 shall be entitled
to one-half vote. All members of record in good standing on the date of
the mailing of notice are entitled to notice of the Special Meeting and
those members in good standing as of the date of such meeting, or at
any adjournment, are entitled to vote at the meeting. As of the date of
this notice, there are 1365 regular members and 4 physical access
members in good standing, and 2 electronic access members in good
standing who became such prior to March 30, 1986 (one-half vote each).
The amended and restated Constitution shall be authorized by a
majority of the votes cast by the members entitled to vote thereon, in
person or by proxy, at the Special Meeting, if a quorum is present.
Members entitled to cast a majority of the total number of votes
entitled to be cast (1370), present in person or by proxy will
constitute a quorum.

Proxies; Revocation

If you vote by signing a proxy, your votes at the Special Meeting
will be cast as you indicate on your proxy card. If no instructions are
indicated on your signed proxy card, your votes will be cast FOR the
approval and adoption of the amended and restated Constitution and FOR
the election of the new Board of Directors. If you cast your votes
through the Internet or by telephone or fax, your votes will be cast at
the Special Meeting as instructed.
You may revoke your proxy at any time before the proxy is voted at
the Special Meeting. A proxy may be revoked prior to the vote at the
Special Meeting in any of three ways:
[sbull] by submitting a written revocation dated after the date of
the proxy that is being revoked to the Secretary of the New York Stock
Exchange, Inc., 11 Wall Street, New York, NY 10005;
[sbull] by submitting a later-dated proxy by mail, telephone, fax
or Internet; or
[sbull] by attending the Special Meeting and voting by paper ballot
in person.
Attendance at the Special Meeting will not, in itself, constitute
revocation of a previously granted proxy.
The NYSE will pay the costs associated with printing this Proxy
Statement and soliciting proxies for the Special Meeting. Our officers
and employees may solicit proxies by telephone, mail, the Internet or
in person. We have retained MacKenzie Partners, Inc. to assist us in
the solicitation of proxies, using the means referred to above, and
will pay fees of up to $15,000, plus reimbursement of out-of-pocket
expenses.

Adjournments

If no quorum exists of members present or represented by proxy, the
Special Meeting shall be adjourned to reconvene at the same time and
place on the day two weeks thereafter by members who are present or
represented by proxy. If a quorum shall not then be assembled, the
meeting shall be dissolved and the proposed amendment shall not become
effective. At the adjourned meeting, if a quorum is present or
represented by proxy, the members may transact any business that might
have been transacted at the original meeting.

Confidential Voting

It is the Exchange's policy that all proxies, ballots, and voting
tabulations, including telephone, Internet and fax voting, that
identify members be kept confidential. The Exchange has engaged IVS
Associates to count the votes represented by proxies, ballots and cast
by phone. Creighton Dunlop and William Marsh, employees of IVS, will be
appointed Inspectors. The Exchange will pay IVS a fee of $5,500 plus
reasonable out-of-pocket expenses for this service.

THE PROPOSALS

At the NYSE Special Meeting, NYSE members will be asked to vote
upon a proposal to amend the Constitution to enhance the NYSE's
corporate governance structure. To implement the proposed corporate
governance reforms, members will also be asked to vote for the election
of directors. Approval of the amendments to the NYSE Constitution is a
condition to the election of the nominees for directors. Therefore, if
NYSE members wish to approve the new slate of directors, they must also
approve the amended and restated Constitution.

Background and Reasons for the Proposals

Recent events have demonstrated that the NYSE's corporate
governance structure has not kept pace with either the best practices
in corporate governance that have developed over the last three decades
or the tremendous changes in the nature of the Exchange's constituents.
Just as corporate America is re-examining and improving its own
corporate governance in the context of a changing environment, so too
must the NYSE.
In March 2003, Securities and Exchange Commission (``SEC'' or
``Commission'') Chairman William H. Donaldson asked the New York Stock
Exchange, Inc. and the other self-regulatory organizations to review
their corporate governance in light of the broad review of governance
practices throughout corporate America, to ensure that their governance
structures and practices serve the public well. In April 2003, the NYSE
Board created the Special Committee on Governance of the NYSE and
charged it with reviewing the NYSE's governance with a view to making
appropriate reforms. In June 2003, the Special Committee issued an
Initial Report to the Board, which contained ten governance reforms
that the Board put into effect immediately.
The Special Committee continued its work through the summer,
reaching out to a broad range of individuals and organizations
representing investors, listed companies and members. The Special
Committee held five days of hearings in which it heard testimony from
32 groups and individuals. It received six additional written

[[Page 64404]]

submissions from other interested parties. At the October 2, 2003 Board
meeting, the Special Committee presented 33 recommendations for
enhancing the NYSE's governance.
Interim Chairman Reed accepted his current position with the goal
of revamping the Exchange's governance to resolve conflicts of
interests and to increase transparency. He committed the NYSE to
complying with the governance standards comparable to those to which
its listed companies adhere, and to going beyond those standards in
order to meet the special challenges of serving as both a marketplace
and a self-regulatory organization.
Following further study, including extensive discussions with the
NYSE's varied constituencies and the SEC, Interim Chairman Reed
developed the governance structure that forms the basis of the
Constitutional amendments: the engaged separation of the Board of
Executives (constituent representatives) from the Board of Directors
(independent fiduciaries). That approach departs from the approach
espoused by the Special Committee, which struggled to retain
independent directors and constituent representatives in the same
governance body. However, the dual board approach otherwise extends the
Special Committee's recommendations: except for five of them that
cannot be addressed until the new Board is constituted, all of the
Special Committee's recommendations have been incorporated into the
proposed amended and restated Constitution, either literally or in
concept, or are otherwise reflected in this proxy statement.

Proposal to Amend and Restate the Constitution

The next several pages discuss in more detail than the cover letter
many of the important changes that your vote will effect, and also
provide collateral information. The amended and restated Constitution
reflecting these changes is attached as Annex A to this proxy
statement. In addition, attached as Annex B is the amended and restated
Constitution marked to reflect the revisions from the existing
Constitution. A diagram depicting the separate, but engaged,
independent and constituent boards is attached as Annex C. While the
cover letter and the discussions below seek to bring to your attention
many of the important changes that your vote will effect, members are
urged to carefully review the marked Constitution so they will see the
specific language used to effect the new governance architecture.

Board Authority and Accountability

The Board of Directors, including its Chair, is ultimately
responsible to the members of the Exchange (owners) and to the
investing public for the performance of the NYSE. The Chair is
specifically responsible for the proper functioning and the performance
of the Board. To that end:

Operations

The Board will (a) overview the performance of the Exchange, its
relationships with the investor, listed company and broker community
and its role as a public voice, (b) overview the performance of the
Exchange's responsibility as a regulator of the trading Floor, of the
broker-dealer community and of listed companies and its relationship
with other regulators, (c) overview management's assessment of the
Exchange's exposure to risk, both in its regulatory and business
functions, and (d) act as the final approval authority on the budget,
with a separate process for the budget and staffing for the regulatory
function, on major expenditures, technology spending and plans and
rules or relationship changes. With regard to the above, the Board will
understand management's plans and aspirations and will be kept current
with regard to progress or problems related to them.

Strategy

The Board will be kept apprised of the strategic position of the
Exchange and of the many currents impacting on the Exchange's evolution
as a business and as a regulator. It will provide advice and counsel to
the management and approve plans and decisions impacting this
evolutionary pathway.

Behavior

The Board will assure appropriate behavior through the work of the
Audit Committee and the Regulatory Oversight & Regulatory Budget
Committee and through an annual assessment of management which takes
into account both operational performance and its leadership behavior--
emphasizing integrity, respect for the people and culture of the
Exchange and its public role.

Management

The Board will assess management performance, create and oversee
appropriate compensation and recognition practices, and hire/fire
individuals in management positions as needed. The Board will ensure
that appropriate management succession and development plans are in
place and functioning.

Assessment

On an annual basis, in Executive session, the Board will discuss
its own performance. It will at least ask each director to indicate (a)
if the Board's responsibilities are clear, understood and appropriate,
(b) if he/she feels that he/she has appropriate, timely and accurate
information to reasonably meet his/her responsibilities, and (c) if the
organization of the Board, its agendas, Board membership, time and
discussions are appropriate to reasonably meet the Board's
responsibilities. In each instance, if there is a negative view, ideas
for improvement should be discussed, and, if appropriate, implemented.
The process will be documented. Importantly, the Board will have the
authority that boards of publicly-owned corporations have to amend its
own governance by-laws to effect improvements, subject to a special
provision for notice to members of proposed changes. Provided that a
director is performing well, there is no need for him or her to face
term limits and thereby sacrifice his or her familiarity with our
unusual institution and institutional memory.

Board of Executives

Responsibilities

To engage with the senior management and the Board of Directors of
the NYSE to review on an ongoing basis (a) Exchange performance, (b)
membership issues, (c) listed company issues, and (d) public issues
relating to overall market structure and performance.

Functioning

The Board of Executives will meet regularly (to start: six times
per year), will populate committees jointly with the Board of
Directors, and will engage in an annual self-appraisal to ensure
continuing effectiveness comparable to that described above for the
Board of Directors. The Board of Executives will be chaired by the NYSE
Chair and include the CEO (if different).

Members

Approximately 20, appointed by the Board of Directors of the
Exchange. It will be fairly balanced and include (a) executives of the
major broker dealers, (b) representatives from the Floor, (c) lessor
members, (d) executives of listed companies, and (e) executives of
institutional investors and of large public funds. The Nominating &

[[Page 64405]]

Governance Committee will solicit input from each constituent group for
candidates to represent the group on the Board of Executives.

Governance and Management

The Board of Directors and its Chair are ultimately responsible for
the performance of the Exchange, as seen by its owners, the public and
its many professional constituencies.
The Chairman is specifically responsible for the proper functioning
and performance of the Board.
The Board of Executives is an integral part of the governance
process, advising NYSE senior management in both its operational
responsibilities and its role as a public spokesperson. The
composition, meetings and agenda of the Board of Executives are
designed to ensure that the Exchange meets the operational performance
requirements of its constituent parties: the Floor community, member
organizations, the listed companies and investors, large and small * *
* also to provide comment about the regulatory functions--working to
ensure that these are tough, but practical and fair * * * and finally,
to bring the constituents' point of view to senior management's role as
a spokesperson for the U.S. capital markets.
The Board of Directors will meet at least quarterly, and the Board
of Executives, at least six times a year. The Board of Directors will
join with the Board of Executives on dates when their meetings overlap
(probably two to three meetings) and then move to their own Committee
and Board sessions.
There are three types of committees: those including directors only
(Nominating & Governance, Audit, Regulatory Oversight, and
Compensation); those drawn from both boards but with a voting majority
of directors (Regulation, Enforcement & Listing Standards); and those
drawn from both boards without designated composition (Market Structure
& Strategy, Quality of Markets/Public Policy and Finance). All
committees will report to the Board.
Each Board and, as appropriate, committee will define a self-
assessment procedure which will be appropriately documented. Board
processes are expected to improve in response to these assessments.
Below are discussed five areas of particular concern: regulatory
function; hiring, firing, compensation and succession; nominations; the
engagement of the Board of Directors with the Board of Executives; and
engagement with the membership.

Regulatory Function

The proposed architecture provides for a strong, vigorous and
independent regulatory function. The Board will hire a Chief Regulatory
Officer whose line reporting relationship will be to the Board's
Regulatory Oversight & Regulatory Budget Committee. The Board
Regulatory Oversight Committee will determine the Exchange's regulatory
plan, programs, budget and staffing proposals annually and will be
responsible for assessing our regulatory performance and for
recommending compensation and personnel actions involving senior
regulatory personnel to the Board's Compensation Committee. The CEO's
views on the regulatory function, its plans, programs, staffing and
budget will be sought, but the Regulatory Oversight Committee's views
on regulatory performance will be recommended through the Compensation
Committee to the full Board for approval.

Hiring, Firing, Compensation and Succession

The Board of Directors has the responsibility to hire/fire and
compensate the NYSE's senior management, and ensure that an appropriate
succession plan is in place. The Board's Human Resources & Compensation
Committee will keep current on appropriate benchmarks that will inform
compensation recommendations and will evaluate the NYSE's performance
and that of key individuals and major units each year as a part of the
annual review process. Performance will include ``hard measures'' such
as market share, listing activities, revenues and expenses, but also
``softer issues'' such as the working environment, culture and morale
of the various groups that make up the Exchange, progress that is being
made in relationship with the ongoing discussions about market
structure and performance, and the relationships of the NYSE with its
many constituencies and the SEC. The CEO will interact with the
Committee on both compensation and performance (other than his or her
own), but the Committee's ultimate decisions will be made in executive
session without either management or staff present. The recommendations
of the Committee and those that are forwarded from the Regulatory
Oversight Committee will be reported to the full Board for its
approval.

Nominations

A six to twelve person Board will be composed of individuals who
are ``independent'' and owe their loyalty to the NYSE. The Board will
set the size of its membership within these parameters and can change
the size as appropriate between annual meetings. The Nominating &
Governance Committee is responsible for proposing a slate of directors
for election by the members, except that two or three nominees will be
proposed by the Industry Members of the Board of Executives in order to
comply with the requirements of the Securities Exchange Act of 1934
(the ``Act'') regarding the fair representation of members. Nominees
will be selected on the basis of their competence to fulfill the duties
and responsibilities of a director--however, a special process will be
created to solicit potential candidates who are both qualified and
independent from the management and from regulated constituents. If
such person is nominated and elected he/she becomes a director with all
the attendant obligations and duties and in no way can represent any
special interests.

Engagement of the Board of Directors With the Board of Executives

Outlined above are the duties, responsibilities and composition of
the Board of Directors, of the Board of Executives, and of the
Committees, including joint participation on membership and marketplace
issues. As the keystone to the engagement between the two boards, the
Board of Directors will meet with the Board of Executives from time to
time but, in addition, the Board of Directors will always meet alone.
Discussion of issues of importance to the industry involving NYSE
operations, regulatory issues and listing functions (other than
individual disciplinary or delisting cases) will be the subject of
Board of Executives meetings, as will be discussions of market
structure and performance. The operating (non-regulatory) budget of the
NYSE and other financial issues will be the subject of discussion at
meetings of the Finance Committee, which is joint, because the NYSE's
revenue comes from the constituents represented on the Board of
Executives and they should have an appropriate forum to discuss
revenues, expenses, and related financial issues (taxation and
representation). However, specific proposals that are recommended by
the Finance Committee must come to the Board of Directors for ultimate
approval, just as recommendations of the Board of Executives about
operating issues or strategic issues ultimately are advisory to the
Board of Directors (though the weight of judgment and expertise on the
Board of Executives will clearly be of importance). In areas where
expertise is

[[Page 64406]]

clearly at the Board of Executives, the Board of Directors may solicit
the advice and expertise of the Board of Executives, but may not
delegate ultimate responsibility.

Engagement With the Membership

The proposed architecture recognizes the need to engage fully and
substantively with the membership through: (a) The direct election of
directors, (b) the ability to propose nominations to the Board through
their representatives on the Board of Executives and by direct
petition, (c) the ability to require special votes by the membership
(including for the recall of directors for cause), (d) their
representation on the Board of Executives and on standing Committees,
(e) the occasion to meet annually through their representatives with
the Board of Directors to bring special concerns of the membership to
the attention of the Board, and (f) the ability of members to come to
the annual meeting and propose resolutions on that occasion.

Advisory Committees

The Board of Directors will maintain several advisory committees.
The advisory committees will consist primarily of constituent
representatives not serving on the Board of Executives. Like the Board
of Executives, the advisory committees will be organized to represent a
range of constituencies, helping the Board of Directors and management
to hear regularly from all of the Exchange's constituencies and to
maintain a broad perspective on the market and its participants.
By way of example, at present the Individual Investors Advisory
Committee, the Institutional Traders Advisory Committee and the Pension
Managers Advisory Committee represent various investor interests. The
Listed Company Advisory Committee, which represents the views of the
U.S. listed companies, has European, Latin American and Pacific Rim
counterparts. In addition, a number of advisory committees represent
diverse industry interests, such as the Exchange Traders Advisory
Committee and the Upstairs Traders Advisory Committee. Finally, the
Legal Advisory Committee draws practitioners from law firms and the
legal staffs of institutional investors, member organizations and
listed companies, as well as law professors.

Other Governance Reforms

In addition to the governance reforms that require Constitutional
amendments discussed above, the Exchange will implement other reforms
that do not require Constitutional amendment. Certain of these reforms
were implemented by the Board in June 2003, based on the recommendation
of the Special Committee on Governance of the NYSE. Other reforms were
recommended by the Special Committee at the October 2003 Board meeting.
The reforms listed below, which meet, and when appropriate, exceed the
disclosure requirements imposed on the Exchange's listed companies, are
designed to further enhance the transparency and accountability of the
Board.

Publication and Disclosure

In addition to the various transparency initiatives that the cover
letter notes, the Exchange will:
[sbull] Adhere to the SEC's proposed rule regarding director
nominating committee responsibilities, including, among other things,
disclosure concerning the Exchange's policy regarding consideration of
individuals recommended by the public as potential nominees to the
Board; the procedures enabling the public to suggest nominees; and the
process for identifying and evaluating nominees and any differences in
evaluation if the nominee is recommended by the public.
[sbull] Periodically update and post on the NYSE's web-site written
governance principles and the Exchange's codes of business conduct and
ethics.

Governance Procedures and Policy

In addition to the various detail on governance procedure and
policy that the cover letter notes:
[sbull] The Finance Committee is expected to be responsible for
recommending the non-regulatory budget of the Exchange to the Board for
its review and approval, and fee changes to the Board of Directors, if
appropriate. The Market Structure & Strategy Committee is expected to
be responsible for examining issues of the Exchange's market structure
and competitive position. Finally, the Quality of Markets Committee is
expected to advise the Board on member and listed company rules and
oversee the Market Performance Committee and the Allocation Committee.
[sbull] The Exchange will prohibit service by NYSE employees on the
boards of directors of business corporations. The NYSE's Officers' and
Employees' Statement of Business Conduct and Ethics already prohibits
such service, but authorizes the Board to waive the provisions (subject
to firewalls). Waivers are currently in effect until no later than
Spring 2004 with respect to the service of the Presidents on the boards
of two public companies.

Other Issues

During the several weeks preceding the mailing of this proxy
statement, members have identified a variety of other important issues
outside the scope of addressing our governance and process failures.
These issues include, among others, proposals for changing the Gratuity
Fund, for permitting the transfer of memberships to trusts and other
juridical persons, for reducing the number of outstanding trading
rights by eliminating the physical access membership or by the Exchange
buying back regular memberships, and for separating the trading right
from the equity ownership of the Exchange. In some cases, addressing
these issues requires amending the Exchange's certificate of
incorporation; others raise access issues as to which the SEC can be
expected to have strong views. Some of the issues may also be
controversial given the current 50/50 split between member owners
affiliated with member organizations and those who are not. (The 688 of
our 1366 regular members (1/2 is 683) who are not so affiliated are
composed of 415 retired members, 35 widows and other relatives of
deceased members, 86 estates and 152 members who themselves or their
family members have never been so affiliated.)
Each of these issues requires thoughtful consideration by an
unconflicted Board. Therefore, these important issues will be placed on
the agenda of the new Board for its consideration in the coming months.
The directors will report to you on these issues, among others, at the
next annual meeting in June 2004.
Note in this connection that, under State law, the NYSE is required
to have an annual meeting for the election of directors. While the fact
that the entire new Board will stand for election a mere six months
after taking office arguably makes elections premature, these elections
will provide an early check on the new Board's progress towards
implementation of our ambitious restructuring of our governance, as
well as its progress in addressing these issues.

``Fast Track'' Issues

The extraordinary circumstances under which the restated and
amended Constitution is being proposed and the initial Board of
Directors is being constituted caused the Exchange to dispense, in
whole or in part, with certain requirements under the current
Constitution, including (a) use of the Nominating Committee to nominate

[[Page 64407]]

directors, (b) the opportunity for members to petition to nominate
additional director candidates, and (c) approval of the proposed
amendments by the current Board of Directors in accordance with the
prescribed time frames.
In light of these extraordinary circumstances, it is possible that
other governance reforms may be appropriate, or that those included in
the amended and restated Constitution or in this proxy statement may
require modification. The Exchange will have several means of
addressing such issues, if they arise, including: (a) amendment of the
Constitution by the members, (b) amendment by the Board of those
provisions of the Constitution that permit such amendment by the Board,
subject to the requirement that the membership be notified in advance,
and (c) to the extent consistent with the Constitution, adoption by the
Board of appropriate rules, various charters and other ancillary
documents.

Effectiveness of Constitutional Amendments

The NYSE is a self-regulatory organization and national securities
exchange registered with the SEC pursuant to the Act. The NYSE is
required to file with the SEC copies of any proposed rule change,
including these Constitutional amendments. Under the Act, unless
otherwise permitted, these Constitutional amendments will not take
effect until approved by the SEC. The Act provides for public notice of
these Constitutional amendments, for public comment, and for specific
time periods for SEC action.

PROPOSAL 1--Constitutional Amendments

The Interim Chairman of the Board recommends a vote FOR adoption of
the following resolution, which will be presented at the meeting:
----------------
RESOLVED, that the recommendation by the Interim Chairman of the
Board to amend and restate the Constitution in the form attached as
Annex A to this Proxy Statement be and hereby is approved.
----------------

PROPOSAL 2--Election of Directors

The Interim Chairman of the Board recommends a vote FOR the
election of the following directors:
(1) Madeleine K. Albright
(2) Herbert M. Allison, Jr.
(3) Euan D. Baird
(4) Marshall N. Carter
(5) Shirley Ann Jackson
(6) James S. McDonald
(7) Robert B. Shapiro
(8) Sir Dennis Weatherstone
----------------

NOMINEES FOR ELECTION AS DIRECTORS

The number of directors to be elected is eight (8). The designated
proxy holders of the Exchange intend, unless otherwise instructed, to
vote all proxies for the election of the following eight nominees. If
elected, they will hold office until the next annual meeting (June
2004), or until their successors are elected and qualified. Thereafter
the Board will stand for election every year. The following provides
information about each nominee as of November 4, 2003, including his or
her business background.

Name, Principal Occupation and Certain Directorships

MADELEINE K. ALBRIGHT-- Age 66.
Dr. Albright served as the 64th Secretary of State of the United
States. She was the first female Secretary of State and is the highest-
ranking woman in the history of the U.S. government. Her autobiography,
Madam Secretary: A Memoir, was published in September 2003. Dr.
Albright is the founder of The Albright Group LLC, a global strategy
firm. Dr. Albright is the first Michael and Virginia Mortara Endowed
Distinguished Professor in the Practice of Diplomacy at the Georgetown
School of Foreign Service and the first Distinguished Scholar of the
William Davidson Institute at the University of Michigan Business
School. She is also the Chairman of The National Democratic Institute
for International Affairs, Chair of The PEW Global Attitudes Project
and President of the Truman Scholarship Foundation. From 1993-1997, Dr.
Albright served as the United States Permanent Representative to the
United Nations and as a member of the President's Cabinet and National
Security Council. In 1995, she led the U.S. delegation to the UN's
Fourth World Conference on Women in Beijing, China. Dr. Albright was
the Director of Women in Foreign Service Programs and a Research
Professor of International Affairs at Georgetown University during the
decade prior to her return to public service. From 1989-1992, she was
President of the Center for National Policy, a non-profit public policy
organization based in Washington D.C. From 1978-81, Dr. Albright was a
member of President Carter's National Security Council and White House
staff. From 1976-78, she served as Chief Legislative Assistant to U.S.
Senator Edmund S. Muskie. Dr. Albright received her B.A. with Honors
from Wellesley College, Masters and Doctorate from Columbia
University's Department of Public Law and Government, as well as a
Certificate from the Russian Institute.

HERBERT M. ALLISON, JR.-- Age 60.
Mr. Allison became chairman, president and chief executive officer
of Teachers Insurance and Annuity Association and College Retirement
Equities Fund (TIAA-CREF) on November 1, 2002. He joined TIAA-CREF
after a 28-year career at Merrill Lynch & Co., where he last served as
president and chief operating officer. After leaving Merrill Lynch in
mid-1999, Mr. Allison served as national finance chairman for Senator
John McCain's presidential campaign. Prior to his move to TIAA-CREF, he
was president and chief executive officer of the Alliance for Lifelong
Learning, a nonprofit venture of Oxford, Stanford and Yale
universities. Mr. Allison is currently vice chairman of the United
Negro College Fund and serves on the Yale Investment Committee, and on
the Advisory Council of the Yale School of Management. President George
W. Bush recently appointed him to the board of the Vietnam Education
Foundation, a new federal agency, which he now chairs. Mr. Allison is a
former board member of the National Association of Securities Dealers
and Nasdaq and past chairman of the Stanford Business School Advisory
Council. He graduated from Yale College and served as an officer in the
U.S. Navy before earning an M.B.A. from Stanford.

EUAN D. BAIRD-- Age 66.
Mr. Baird, a native of Aberdeen, Scotland, is the Chairman of
Rolls-Royce plc, having been appointed in February 2003. He is also the
retired Chairman, President and Chief Executive Officer of
Schlumberger. Mr. Baird joined Schlumberger in 1960 as a field engineer
and was elected Chairman of the Board, President and Chief Executive
Officer in 1986. He retired from Schlumberger in 2003. Mr. Baird
currently serves as Trustee of the Carnegie Institution of Washington
since 1998; as Trustee of the Tocqueville Alexis Fund (formerly the
Haven Fund) since 1994; as a member of the Prime Minister's Council of
Science and Technology in the UK since 2000; as a member of the
Advisory Committee of Banque de France since November 2001; and on the
Boards of ScottishPower, Areva, and Soci[eacute]t[eacute]
G[eacute]n[eacute]rale since 2001; and on the Board of InterContinental
Exchange since 2002. He attended Aberdeen University and Trinity
College, Cambridge receiving an M.A. in Geophysics from

[[Page 64408]]

Cambridge University in 1960. He also received a D.Sc. from Heriot-Watt
University in 1999 and LL.D degrees from Aberdeen University in 1995
and Dundee University in 1998.

MARSHALL N. CARTER-- Age 63.
Mr. Carter was the Chairman and Chief Executive Officer of the
State Street Bank and Trust Company, and of its holding company, State
Street Corporation, from 1992-2001. He joined State Street in July
1991, as President and Chief Operating Officer, became Chief Executive
Officer in 1992 and Chairman in 1993. A former Marine Corps officer who
was awarded the Navy Cross and Purple Heart during two years' service
in Vietnam, Mr. Carter served from 1975-1976 as a White House Fellow at
the State Department and Agency for International Development. Prior to
joining State Street, Mr. Carter was with the Chase Manhattan Bank for
15 years. Mr. Carter is the Chairman of the Board of Trustees of the
Boston Medical Center. He is also on the Board of Directors of
Honeywell International, Inc. He has previously served on the boards of
CEDEL, Euroclear, and National Securities Clearing Corporation, and was
the Co-chairman of the U.S. Working Group of Thirty between 1988 and
1995, which developed recommendations for revamping world securities
clearance and settlement processes. He was also the Chair of the
Massachusetts Governor's Special Advisory Task Force on Logan Airport
and Massport following the events of September 11th. Mr. Carter holds a
B.S. in civil engineering from the U.S. Military Academy at West Point
(1962), an M.S. in operations research and systems analysis from the
U.S. Naval Postgraduate School, Monterey, California (1970), and an
M.A. in Science, Technology and Public Policy from George Washington
University (1976).

SHIRLEY ANN JACKSON-- Age 57.
Dr. Jackson is the 18th President of Rensselaer Polytechnic
Institute. In 2001, Dr. Jackson became the first African-American woman
elected to the National Academy of Engineering. She is also a Fellow of
the American Academy of Arts and Sciences and the American Physical
Society, and a Life Member of the M.I.T. Corporation (Board of
Trustees). She is President-Elect of the American Association for the
Advancement of Sciences. Prior to becoming President of RPI in 1999,
Dr. Jackson was Chairman of the U.S. Nuclear Regulatory Commission.
Previously she was a Theoretical Physicist at the former AT&T Bell
Laboratories and a professor at Rutgers University. Dr. Jackson serves
on the Executive Committee of the Council on Competitiveness, the
Council of the Government-University-Industry Research Roundtable, the
U.S. Comptroller General's Advisory Committee for the Government
Accounting Office, and formerly served on the Advisory Council for the
Department of Energy National Nuclear Security Administration. Dr.
Jackson also serves on the Boards of Trustees of Pingry School, Emma
Willard School, Rockefeller University, Georgetown University, MIT,
Woodrow Wilson Foundation, Brookings Institution, Universities Research
Association, and Argonne National Laboratory. Dr. Jackson is a director
at Federal Express Corporation, Public Service Enterprise Group
Incorporated, Sealed Air Corporation, Marathon Oil Corporation, United
States Steel Corporation, Medtronic, Inc., and AT&T. Dr. Jackson holds
a Ph.D. in theoretical physics from M.I.T., a B.S. in physics from
M.I.T. and 18 honorary doctoral degrees.

JAMES S. MCDONALD-- Age 50.
Mr. McDonald is the President and Chief Executive Officer of
Rockefeller & Co., Inc. He is also a member of the Board of Directors
of Rockefeller & Co., Inc. and Rockefeller Financial Services. Prior to
joining Rockefeller & Co., Inc., from 1986 to 2000, Mr. McDonald was a
senior officer and director of the Pell, Rudman organization. Among
other positions, he served as President and Chief Executive Officer of
that organization, now known as ``Atlantic Trust/Pell Rudman.'' Prior
to joining Pell, Rudman, he was a partner with the Boston law firm of
Choate, Hall & Stewart, which he joined in 1977. In addition, Mr.
McDonald is a Trustee Emeritus of the Fessenden School, Newton,
Massachusetts (President, 1993-1999), and a member of the Investment
Committees of The United States Holocaust Memorial Museum, Washington,
D.C., the Nightingale School, New York, N.Y., and the Japan Society of
New York. He is a member of the Harvard University Committee on Asia
Activities, and has been active in other community activities. He
received a J.D. in 1977 from the University of Virginia and an A.B.
from Harvard College in 1974.

ROBERT B. SHAPIRO-- Age 65.
Mr. Shapiro is the former Chairman and Chief Executive Officer of
Monsanto Company and the former Chairman of Pharmacia Corporation. He
became Monsanto's President and Chief Operating Officer in 1993;
Chairman and Chief Executive Officer in April 1995; and was appointed
Chairman of Pharmacia Corporation in April 2000 following the merger of
Monsanto Company and Pharmacia and Upjohn, a position he relinquished
in February, 2001. Previously, he was Vice President, General Counsel
for General Instrument Corporation and served as an attorney with the
New York law firm of Poletti, Freidlin, Prashker, Feldman & Gartner.
Mr. Shapiro served as Special Assistant to the General Counsel and
later to the Undersecretary of the U.S. Department of Transportation.
He has served under previous appointments on the President's Advisory
Committee on Trade Policy under President Clinton; White House Domestic
Policy Review of Industrial Innovation under President Carter; the
Civil Aeronautics Board Advisory Committee on Procedure; and the
Massachusetts Governor's Task Force on Transportation. Mr. Shapiro is a
member of the American Society of Corporate Executives and The Business
Council. Mr. Shapiro has received many awards including: the 1999
Emerging Markets CEO of the Year Award, the John R. Miller award as the
Outstanding Corporate Marketing Executive in 1984, and the Special
Citation for Outstanding Achievement from Sales and Management
Magazine. Mr. Shapiro is a graduate of Harvard University and Columbia
University School of Law.

SIR DENNIS WEATHERSTONE-- Age 72.
Sir Dennis Weatherstone is past Chairman and Chief Executive
Officer of J.P. Morgan & Co., having served in those roles from 1990-
1994. From 1995-2001 he served as an independent member of the Board of
Banking Supervision of the Bank of England (later the Financial
Services Authority). He began his career in 1946 at the Guaranty Trust
Company. Sir Dennis Weatherstone is an Associate of the Institute of
Chartered Secretaries and Administrators and a Fellow of the Chartered
Institute of Bankers. He is a Director of Air Liquide and previously
General Motors Corporation and Merck & Co., Inc. Sir Dennis
Weatherstone is a Director of the Institute for International
Economics, a Trustee of the Alfred P. Sloan Foundation, Chairman of the
Royal College of Surgeons Foundation in New York, and an Honorary
Fellow of the Associate of Corporate Treasurers (London). He was
recently elected a Trustee of the International Accounting Standards
Committee Foundation.

OTHER MATTERS

The Exchange knows of no matters to be presented at the meeting
other than

[[Page 64409]]

those included in the Notice preceding this Proxy Statement. If other
matters should come before the meeting which require a membership vote,
it is intended that the proxy holders will use their own discretion in
voting on such other matters.

Annex A & B are not included with this document as filed. The
Amended Constitution, market for changes, is attached as Exhibit A to
this filing.
The diagram in Annex C is available on the NYSE's website.

Exhibit C

November 4, 2003.
Dear Member: After we ``went to the printers'' with the enclosed proxy
statement, we discovered the need to clarify several points on the
``fast track'' authority and the independence of the regulatory
function.
First, I neglected to subject to the SEC process my expectation
that the new boards would begin operating immediately. While I will
immediately begin to work with the new boards, their actions will have
no legal effect under the federal securities laws until the SEC
approves our new Constitution.
Second, my description in the proxy statement of the interaction of
the CEO with the Regulatory Oversight Committee should read: ``The
CEO's views on the regulatory function, its plans, programs, staffing
and budget may be sought, but the Regulatory Oversight Committee's
views on compensating regulatory personnel will be recommended through
the Compensation Committee to the full Board for approval.''
Finally, the new Constitution includes provisions to assure the
separation and independence of the regulatory function from the
Exchange's marketplace function and from inappropriate influence by
members and member organizations. To further clarify and underscore
this separation, we need to makes some additional changes.
The new Constitution permits your new Board to amend four of its 16
articles. At its organizational meeting, I will present specific
language for approval and filing with the SEC. Those further changes
will:
[sbull] Codify the authority of the Audit Committee to hire its own
counsel.
[sbull] Clarify that the CEO is recused from Board deliberations on
the activities of the Standing Committees specified in Article IV,
Section 12(a).
[sbull] Clarify that rulemaking on the subjects described in
Article IV, Section 14(a) as normally confined to the Board or its
committees may, if necessary, be authorized by an officer of the
Exchange in between board meetings, subject to informing the Board at
its next meeting, and to the approval of the Chief Regulatory Officer
if on a regulatory matter.
[sbull] Clarify in Article VI, Section 1 that the President does
not appoint regulatory officers, and in Section 3 that the CEO's
responsibilities are subject to the specific provisions elsewhere in
the Constitution regarding the separation of the regulatory functions.
I apologize for the need to supplement the proxy statement, but it
is important to make clear to all the independence of our regulatory
function under our proposed new architecture.
Best,

John S. Reed.
[FR Doc. 03-28487 Filed 11-10-03; 10:49 am]

BILLING CODE 8010-01-P