[Federal Register: December 29, 2006 (Volume 71, Number 250)]
[Notices]
[Page 78499-78501]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr29de06-123]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-54982; File No. SR-NYSE-2006-61]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing of Proposed Changes and Amendment No. 1 thereto to
Rules 601, 607, 612 and 629 Relating to Single Arbitrators for Claims
not Exceeding $200,000
December 20, 2006.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 \2\ thereunder, notice is hereby given
that on July 13, 2006, the New York Stock Exchange LLC (``NYSE'' or the
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the NYSE. On December
19, 2006, the NYSE filed Amendment No. 1 to the proposed rule change
(``Amendment No. 1'').\3\ The Commission is publishing this notice to
solicit comments on the proposed rule change, as amended, from
interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ In Amendment No. 1, which supplemented the original filing,
the Exchange provided more information regarding the proposed
amendments to certain arbitration fees and hearing deposits, and
clarified certain aspects of the rule filing.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Under the proposed rule change, matters in controversy involving
customer or non-member claims not exceeding $200,000 (excluding costs
and interest) would be decided by one public arbitrator, unless the
customer or non-member requests that the matter be decided by one
securities industry arbitrator.\4\ In addition, the proposed rule
change would reduce several customers' fees and hearing deposits for
matters involving one arbitrator. The text of the proposed rule change,
as amended, is available on the NYSE's Web site (http://www.NYSE.com),
at the NYSE's principal office, and at the Commission's Public
Reference Room.
---------------------------------------------------------------------------
\4\ NYSE stated that approximately one-third of NYSE arbitration
matters since 2002 have involved claims of less than $200,000.
Telephone conversation among Karen Kupersmith, Director of
Arbitration, NYSE; Lourdes Gonzalez, Assistant Chief Counsel--Sales
Practices, Commission; and Michael Hershaft, Special Counsel,
Commission (Dec. 20, 2006).
---------------------------------------------------------------------------
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the NYSE included statements
concerning the purpose of and basis for the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The NYSE has prepared summaries, set forth in Sections
A, B, and C below, of the most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The NYSE is proposing to amend Rules 601 (Simplified Arbitration),
607 (Appointment of Arbitrators), 612 (Initiation of Proceedings), and
629 (Schedule of Fees). As described in more detail below, the proposed
amendments would provide that all arbitration matters involving
customers or non-members not exceeding $25,000 would be resolved on the
papers (i.e., without a hearing) by one public arbitrator or, upon
request of the customer or non-member, by one securities industry
arbitrator. The customer or non-member also could demand or consent to
a hearing for matters not exceeding $25,000.
In addition, all arbitration matters involving customers or non-
members exceeding $25,000, but not exceeding $200,000 (excluding costs
and interest), would be heard by one public arbitrator at a hearing,
unless the customer or non-member requests that the matter be heard by
one securities industry arbitrator. The proposed amendments would
clarify that, to the extent the rules provide for a choice in panel
composition or method of arbitrator appointment, the customer's choice
prevails.\5\ Finally, the proposed amendments also would reduce several
fees and hearing deposits for matters heard by one arbitrator.
---------------------------------------------------------------------------
\5\ In arbitration matters involving non-members and members,
but not customers, the non-member's choice prevails. See NYSE Rules
607(a)(1) and 607(c)(2)(i)(a)-(b).
---------------------------------------------------------------------------
[[Page 78500]]
Simplified Arbitration
NYSE Rule 601 currently provides that any dispute, claim or
controversy between a customer and an associated person or a member not
exceeding $25,000 is resolved by one public arbitrator on the papers,
unless the customer requests or consents to a hearing, or the
arbitrator calls a hearing.\6\ If the respondent files a related
counterclaim exceeding $25,000, the arbitrator may refer the claim,
counterclaim and/or a third-party claim to a panel of three
arbitrators.\7\ The arbitrator also may dismiss the counterclaim and/or
third-party claim, without prejudice to the counterclaimants and/or
third-party claimants pursuing their claims in a separate proceeding.
---------------------------------------------------------------------------
\6\ NYSE Rule 601(f).
\7\ NYSE Rule 601(d).
---------------------------------------------------------------------------
The proposal would amend NYSE Rules 601(a) and 601(f) to provide
that all arbitration matters involving customers or non-members not
exceeding $25,000 would be resolved by one public arbitrator on the
papers, unless the customer or non-member demands or consents to a
hearing, or the arbitrator calls a hearing. The proposed amendments to
NYSE Rule 601(f) also would clarify that the customer or non-member may
request that the matter be resolved by one securities industry
arbitrator.
The proposal also would amend NYSE Rule 601(d)(2) to provide that
if the respondent files a related counterclaim or third-party claim
exceeding $25,000 but not exceeding $200,000, any party or the
arbitrator may request a hearing before one arbitrator. If the
respondent files a related counterclaim or third-party claim exceeding
$200,000, the proposed amendments to NYSE Rule 601(d)(2) would provide
that the arbitrator may refer the claim, counterclaim and/or third-
party claim to a panel of three arbitrators pursuant to NYSE Rule 607.
Under the proposed amendments to Rule 601(d)(2), the arbitrator also
may dismiss the counterclaim and/or third-party claim, without
prejudice to the counterclaimants and/or third-party claimants pursuing
their claims in a separate proceeding.
The proposed amendments to the ``Fees for Simplified Arbitration,
Industry as Claimant'' Schedule in NYSE Rule 601 would reduce the
hearing deposit that members, member firms, member corporations, or
allied members and non-members pay for claims not exceeding $25,000.
Specifically, the proposed amendments would reduce the hearing deposit
from $600 to $450 when the industry is a claimant and the decision is
made after a hearing. The filing fee ($500) and fee for a decision on
the papers ($300) would not be changed under the proposal.
Appointment of Arbitrators
NYSE Rule 607(a)(1) currently provides that in all matters
involving customers or non-members where the matter in controversy
exceeds $25,000 or where the matter in controversy does not involve or
disclose a money claim, the Director of Arbitration appoints a panel of
three arbitrators, a majority of whom are public, unless the customer
or non-member requests that a majority be from the securities industry.
The proposed amendments to NYSE Rule 607(a)(1)(i) would provide that
all arbitration matters involving customers or non-members where the
matter in controversy exceeds $25,000, but does not exceed $200,000
(excluding costs and interest), would be heard by one public
arbitrator, unless the customer or non-member requests a securities
industry arbitrator.
Under the proposed amendments to NYSE Rule 607(a)(1)(ii), all
arbitration matters involving customers or non-members where the matter
in controversy exceeds $200,000 would be heard by three arbitrators, a
majority of whom would be public, unless the customer or non-member
requests that a majority be from the securities industry.
The proposed amendments also would add a new paragraph (2) to NYSE
Rule 607(b) which would clarify that, in all arbitration matters
involving customers or non-members, to the extent the NYSE arbitration
rules provide for a choice in panel composition or method of arbitrator
appointment, the customer's choice would prevail.\8\
---------------------------------------------------------------------------
\8\ See footnote 5.
---------------------------------------------------------------------------
Initiation of Proceedings
Current NYSE Rule 612 sets forth the procedures for initiating a
customer or non-member arbitration proceeding that is not being filed
under NYSE Rule 601, which governs Simplified Arbitration. The proposed
amendments to NYSE Rule 612 are intended to conform that rule with the
proposed changes to NYSE Rules 601 and 607. In particular, the proposed
amendments to NYSE Rule 612(c)(1) would provide that in matters
exceeding $25,000, but not exceeding $200,000, if the respondent(s)
files a related counterclaim, third-party claim, or cross-claim
exceeding $200,000, the arbitrator may refer the claim, counterclaim,
third-party claim, and/or cross-claim, to a panel of three arbitrators
in accordance with Rule 607. The arbitrator also may dismiss the
counterclaim, third-party claim, and/or cross-claim without prejudice
to the counterclaimants, third-party claimants, and/or cross-claimants
pursuing their claims in a separate proceeding pursuant to the proposed
amendments to NYSE Rule 612(c)(1).
Schedule of Fees
NYSE Rule 629 sets forth the required fees and hearing deposits for
arbitrations in the NYSE arbitration forum. The proposed amendments to
NYSE Rule 629 would reduce the fees and hearing deposits that
customers, members, and non-members pay for claims exceeding $25,000
and not exceeding $200,000, to reflect the reduced costs associated
with a hearing by one arbitrator, rather than three. The proposed
amendments to the schedules contained in NYSE Rules 629(c)(1)-(2) and
629(i) would reduce the hearing deposits to $450 from a maximum of $750
under the existing rule.
In Amendment No. 1, the NYSE stated that it is proposing to reduce
fees and hearing deposits because the costs of administering an
arbitration matter with one arbitrator is less than the costs
associated with three arbitrators. In cases with one arbitrator, the
proposed fees and hearing deposits are based on either the current
hearing deposit or the fee charged for a pre-hearing conference with
one arbitrator, whichever is less. The NYSE also notes in Amendment No.
1 that the costs associated with a pre-hearing conference, generally
conducted either on the papers submitted or by telephone, are less than
those associated with an in-person hearing.
In Amendment No. 1, the NYSE stated that the proposed fees and
hearing deposits are intended to permit the NYSE to recover some of its
direct, actual costs of administering arbitration cases. The NYSE
further stated that those direct, actual costs are attributable in part
to arbitrator compensation and travel expenses, court reporters and
(when a hearing takes place outside New York) conference rooms. The
NYSE also stated in Amendment No. 1 that under the proposed rule
changes, the actual costs it bears for administering arbitration
hearings involving a single arbitrator would remain greater than fees
paid by customers or non-members.
Statutory Basis
The NYSE stated that it believes that the proposed rule change is
consistent
[[Page 78501]]
with Section 6(b)(4) \9\ of the Act requiring exchanges to have rules
that provide for the equitable allocation of reasonable dues, fees, and
other charges among its members and other persons using its facilities,
and Section 6(b)(5) \10\ of the Act requiring exchanges to have rules
designed to protect investors and the public interest.
---------------------------------------------------------------------------
\9\ 15 U.S.C. 78f(b)(4).
\10\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
B. Self-Regulatory Organization's Statement on Burden on Competition
The NYSE 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 NYSE has neither solicited nor received written comments on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 35 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) By order approve the proposed rule change, or
(B) Institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change, as amended, is consistent with the Act. The proposed rule
change, as amended, is based on, but not identical to, the Uniform Code
of Arbitration (``SICA Uniform Code'') adopted by the Securities
Industry Conference on Arbitration (``SICA'').
The Commission requests comments on the differences between the
NYSE proposal and the SICA Uniform Code. In particular, under SICA
Uniform Code Section 16(a), one arbitrator hears claims up to $100,000;
whereas the NYSE proposes that one arbitrator would hear claims not
exceeding $200,000. Should NYSE's proposed rule be consistent with the
SICA Uniform Code and only permit matters to be resolved by one
arbitrator if they involve claims of $100,000 or less? In the
alternative, should customers or non-members be able to request one
arbitrator for claims exceeding $200,000? In addition, the SICA Uniform
Code does not contain provisions similar to the amendments proposed to
NYSE Rules 601(d)(2) and 612(c)(1), as discussed above
Comments may be submitted by any of the following methods:
Electronic Comments
Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml.
); or Send e-mail to rule-comments@sec.gov. Please include File
Number SR-NYSE-2006-61 on the subject line.
Paper Comments
Send paper comments in triplicate to Nancy M. Morris,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSE-2006-61. This
file number should be included on the subject line if e-mail is used.
To help the Commission process and review your comments more
efficiently, please use only one method. The Commission will post all
comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro/shtml
). Copies of the submission, all subsequent amendments,
all written statements with respect to the proposed rule change that
are filed with the Commission, and all written communications relating
to the proposed rule change between the Commission and any person,
other than those that may be withheld from the public in accordance
with the provisions of 5 U.S.C. 552, will be available for inspection
and copying in the Commission's Public Reference Room. Copies of such
filing also will be available for inspection and copying at the
principal office of the NYSE. All comments received will be posted
without change; the Commission does not edit personal identifying
information from submissions. You should submit only information that
you wish to make available publicly. All submissions should refer to
File number SR-NYSE-2006-61 and should be submitted on or before
January 19, 2007.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\11\
---------------------------------------------------------------------------
\11\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E6-22401 Filed 12-28-06; 8:45 am]
BILLING CODE 8011-01-P