[Federal Register Volume 72, Number 140 (Monday, July 23, 2007)]
[Notices]
[Pages 40184-40187]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-14165]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-56071; File No. SR-NYSEArca-2007-59]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
of Proposed Rule Change and Amendment No. 1 Thereto Relating to
Amendments to Rule 12 To Provide Guidance Regarding New and Pending
Arbitration Claims in Light of the Consolidation of NYSE Regulation
Into NASD DR
July 13, 2007.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that on June 26, 2007, NYSE Arca, Inc. (``NYSE Arca'' or
``Exchange'') filed with the Securities and Exchange Commission the
proposed rule change as described in Items I, II, and III below, which
Items have been prepared by NYSE Arca. On July 13, 2007, the NYSEArca
filed Amendment No. 1 to the proposed rule change.\4\ The Commission is
publishing this notice to solicit comments on the proposed rule change,
as amended, from interested persons.
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\1\ 15 U.S.C.78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
\4\ 4 In Amendment No. 1, which supplemented the original
filing, the Exchange clarified the applicability of Rule 12 as it
was in effect on or prior to January 31, 2007.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
NYSE Arca proposes to amend NYSE Arca Rule 12.
NYSE Regulation, Inc. (``NYSE Regulation'') administers an
arbitration program for NYSE Arca. As part of the consolidation of the
member firm regulation function of NYSE Regulation with the National
Association of Securities Dealers, Inc. (``NASD''), NYSE Regulation
will cease to provide an arbitration program, and its existing
arbitration department (``NYSE Arbitration'') will be consolidated with
that of NASD Dispute Resolution, Inc. (``NASD DR'').
The proposed amendments provide that: (i) All arbitrations filed
with NYSE Arca after January 31, 2007 and prior to the later of the
effective date of the consolidation or approval of this proposed rule
change (the ``Effective Date''), shall continue to be governed by the
Code of Arbitration contained in the 600 series of the New York Stock
Exchange LLC Rules (``NYSE Arbitration Rules''); (ii) arbitrations
filed on or prior to January 31, 2007 shall continue to be governed by
NYSE Arca Rule 12 as it was in effect on or prior to January 31, 2007;
and (iii) from and after the Effective Date, disputes between NYSE Arca
Option Trading Permit (``OTP'') holders and NYSE Arca OTP firms,
associated persons, and/or their customers will be arbitrated under the
NASD DR Codes of Arbitration Procedure. The text of the proposed rule
change is set forth below. Proposed new language is in italics;
proposed deletions are in brackets.
* * * * *
Rule 12 Arbitration
(a) General. All arbitrations filed with NYSE Arca after January
31, 2007 and
[[Page 40185]]
prior to [insert later of effective date of the consolidation or
approval of this proposed rule change] shall be governed by the Code of
Arbitration contained in the 600 series of the New York Stock Exchange,
L.L.C. Rules (``NYSE Arbitration Rules''), as the same may be in effect
from time to time, except that arbitrations filed on or prior to
January 31, 2007 shall be governed by NYSE Arca Rule 12 as it was in
effect on or prior to January 31, 2007 [as may be specified in this
Rule 12]. The term ``member'' as used in this Rule 12 and in the NYSE
Arbitration Rules shall mean and refer to OTP Holders and OTP Firms.
From and after [insert later of effective date of the consolidation or
approval of this proposed rule change] (i) any dispute, claim or
controversy between or among OTP Holders and/or OTP Firms and/or
associated persons shall be arbitrated pursuant to the NASD Dispute
Resolution, Inc. (``NASD DR'') Codes of Arbitration Procedure; and,
(ii) any dispute, claim or controversy between a customer or non-member
and an OTP Holder and/or OTP Firm and/or associated person arising in
connection with the business of such OTP Holder and/or OTP Firm and/or
in connection with the activities of an associated person, shall be
arbitrated pursuant to NASD DR Codes of Arbitration Procedure as
provided by any duly executed and enforceable written agreement, or
upon demand of the customer or non-member. Such obligation to arbitrate
shall extend only to those matters that are permitted to be arbitrated
under NASD DR Codes of Arbitration Procedure.
(b) Referrals. NYSE Arca may receive, investigate and take
disciplinary action with respect to any referral it receives from a
NASD DR arbitrator of any matter which comes to the attention of such
arbitrator during and in connection with the arbitrator's participation
in a proceeding, either from the record of the proceeding or from
material or communications related to the proceeding, that the
arbitrator has reason to believe may constitute a violation of NYSE
Arca's Rules or the federal securities laws.
(c) Failure to Arbitrate or to Pay an Arbitration Award. Any OTP
Holder and/or OTP Firm and/or associated person who fails to submit to
arbitration a matter required to be arbitrated pursuant to this Rule,
or that fails to honor an arbitration award made pursuant to the NASD
DR Codes of Arbitration Procedure, or made under the auspices of any
other self-regulatory organization, shall be subject to disciplinary
proceedings in accordance with NYSE Arca Rule 10.
(d) Other Actions. The submission of any matter to arbitration as
provided for under this Rule shall in no way limit or preclude any
right, action or determination by NYSE Arca that it would otherwise be
authorized to adopt, administer or enforce. [(b) Jurisdiction. Any
dispute, claim or controversy arising out of or in connection with the
business of any member of NYSE Arca, or arising out of the employment
or termination of employment of associated person(s) with any member
may be arbitrated under this Rule 12 except that: (1) A dispute, claim,
or controversy alleging employment discrimination (including a sexual
harassment claim) in violation of a statute may only be arbitrated if
the parties have agreed to arbitrate it after the dispute arose; and
(2) any type of dispute, claim, or controversy that is not permitted to
be arbitrated under the NYSE Arbitration Rules, such as class action
claims, shall not be eligible for arbitration under this Rule 12.
(c) Predispute Arbitration Agreements. The requirements of NYSE
Arbitration Rules shall apply to predispute arbitration agreements
between NYSE Arca members and/or associated persons and their
customers.
(d) Referrals. If any matter comes to the attention of an
arbitrator during and in connection with the arbitrator's participation
in a proceeding, either from the record of the proceeding or from
material or communications related to the proceeding, that the
arbitrator has reason to believe may constitute a violation of NYSE
Arca's Rules or the federal securities laws, the arbitrator may refer
the matter to NYSE Regulation, Inc. for disciplinary investigation.
(e) Payment of Awards. Any member or associated person who fails to
honor an award of arbitrators appointed in accordance with this Rule 12
shall be subject to disciplinary proceedings in accordance with Rule 10
(Disciplinary Proceedings, Other Hearings, and Appeals).
(f) Other Actions. The submission of any matter to arbitration
under this Chapter shall in no way limit or preclude any right, action
or determination by NYSE Arca that it would otherwise be authorized to
adopt, administer or enforce.]
* * * * *
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, NYSE Arca included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. NYSE Arca has prepared summaries, set forth in sections
A, B, and C below, of the most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of the proposed rule change is to provide guidance
regarding both new and pending arbitration claims in light of the
consolidation of the member firm regulation function of NYSE Regulation
into NASD DR.\5\ NYSE Arbitration currently administers an arbitration
program for NYSE Arca, governed by what is referred to as ``Rule 12.''
\6\
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\5\ The NYSE has proposed a separate filing related to the
consolidation of NYSE Arbitration into NASD DR. See Securities
Exchange Act Release No. 55818 (May 25, 2007), 72 FR 30898 (June 4,
2007) (SR-NYSE 2007-48). On June 21, 2007, the NYSE filed Amendment
No. 1 to this proposed rule change. See Securities Exchange Act
Release No. 56015 (July 5, 2007), 72 FR 37811 (July 11, 2007).
\6\ Although Rule 12 has subsequently been amended, for purposes
of administering NYSE Arca arbitrations filed on or prior to January
31, 2007, NYSE Arbitration follows Rule 12 as it was in effect on
that date.
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As part of the consolidation of NYSE Regulation with NASD,\7\ NYSE
Regulation will cease to administer an arbitration program, and its
existing arbitration department will be consolidated with NASD DR. As a
result, on and after the date of the consolidation, all arbitration
claims filed prior to the Effective Date, and previously subject to
Rule 12 or NYSE Regulation rules, will be administered by NASD DR
pursuant to a Regulatory Services Agreement with the New York Stock
Exchange LLC (``NYSE'').
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\7\ Additional information regarding the consolidation may be
found in: SR-NASD-2007-23 (March 19, 2007) concerning proposed
amendments to the By-Laws of NASD to implement governance and
related changes to accommodate the consolidation of the member firm
regulatory functions of NASD and NYSE Regulation, Inc.; and SR-NYSE-
2007-22 (February 27, 2007) concerning proposed amendments to
several NYSE rules which, among other matters, harmonize the rules
with corresponding NASD regulatory requirements.
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The rules governing the administration of any particular
arbitration will depend on the date the case was filed. This will
ensure that any person that filed an arbitration under a particular set
of arbitration rules will continue to have the case administered
pursuant to those rules through to the case's conclusion. There are two
[[Page 40186]]
categories of cases. First, NYSE Arca cases filed on or prior to
January 31, 2007 are and would continue to be governed by Rule 12 as it
was in effect on that date. Second, NYSE Arca cases filed after January
31, 2007, but prior to the Effective Date will continue to be governed
by existing NYSE Regulation arbitration rules.\8\
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\8\ See Securities Exchange Act Release No. 55142 (January 19,
2007), 72 FR 3898 (January 26, 2007) (SR-NYSEArca-2006-54) and
Securities Exchange Act No. 55141 (January 19, 2007), 72 FR 3897
(January 26, 2007)(SR-NYSEArca-2006-55).
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Rule 12, as amended, would provide detailed guidance concerning
claims involving OTP Holders and/or OTP Firms and/or associated persons
that are asserted on and after the Effective Date.\9\ First, any
dispute, claim or controversy between or among OTP Holders and/or OTP
Firms and/or associated persons shall be arbitrated pursuant to the
NASD DR Codes of Arbitration Procedure. Second, any dispute, claim or
controversy between a customer or a non-member and an OTP Holder and/or
OTP Firm, and/or associated person arising in connection with the
business of such OTP Holder and/or OTP Firm and/or in connection with
the activities of an associated person, shall be arbitrated pursuant to
NASD DR Codes of Arbitration Procedure as provided by any duly executed
and enforceable written agreement, or upon the demand of the customer
or non-member. This obligation to arbitrate shall extend only to those
matters that are permitted to be arbitrated under NASD DR Codes of
Arbitration Procedure.
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\9\ It is proposed that the provisions in the current Rule
12(b)-(f) be deleted because these sections would be replaced by the
proposed Rule 12 provisions described herein.
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In almost all cases the change from NYSE rules or NYSE Arca rules
to NASD DR arbitration rules should not result in material, substantive
differences to persons participating in the arbitration process.
However, one difference is the treatment of employment discrimination
claims. NASD DR rules provide that any claim alleging employment
discrimination, including any sexual harassment claims, in violation of
a statute, will be eligible for arbitration pursuant to either a pre-
dispute or a post-dispute agreement to arbitrate. In contrast, NYSE
Rule 600(f), NYSE Rule 347(b) and current NYSE Arca Rule 12(b) permit
claims to be arbitrated only when the parties have agreed to arbitrate
the claim after it has arisen.
Proposed Rule 12(b) would explicitly retain NYSE Arca's enforcement
authority related to arbitration. In appropriate cases, arbitrators
would refer to NYSE Arca potential violations of NYSE Arca's rules or
the federal securities laws that come to their attention during and in
connection with a proceeding. Rule 12(b) would specify that NYSE Arca
would retain the ability to take action based on such referrals that
may come from arbitrators in cases being arbitrated at NASD DR.
Proposed Rule 12(c) also would provide that any OTP Holder and/or
OTP Firm, and/or associated person of any OTP Holder and/or OTP Firm,
that fails to honor an award of arbitrators rendered under the NASD DR
Codes of Arbitration Procedure, or under the auspices of any other
self-regulatory organization, shall be subject to disciplinary
proceedings in accordance with NYSE Arca Rule 10. Proposed Rule 12(c)
also would specify that failure to submit a matter to arbitration as
required by Rule 12 also would subject the OTP Holder and/or OTP Firm
and/or associated person to Exchange disciplinary action.
Proposed Rule 12(d) would also specify that the submission of any
matter to arbitration as provided for under the Rule shall in no way
limit or preclude any right, action or determination by NYSE Arca that
it would otherwise be authorized to adopt, administer or enforce.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the requirements of Section 6(b)(5) \10\ of the Act, which
requires, among other things, that the rules of an Exchange be designed
to promote just and equitable principles of trade and to protect
investors and the public interest. The proposed rule change will
streamline the arbitration process and, after a transitional period,
provide for a unified and more efficient arbitration forum with one set
of arbitration rules and administrative procedures. This will allow
resources to be devoted to maintaining and improving the NASD DR
program, rather than splitting resources among duplicative programs. As
a result of these improvements, the proposed rule change will better
protect investors and the public interest.
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\10\ 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.
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 Exchange Act. Comments may
be submitted by any of the following methods:
Electronic Comments
Use the Commission's Internet comment form (http://
www.sec.gov/rules/sro.shtml); or
Send e-mail to rule-comments@sec.gov. Please include File
Number SR-NYSEArca-2007-59 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-NYSEArca-2007-59.
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
[[Page 40187]]
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, 100 F Street, NE.,
Washington, DC 20549, on official business days between the hours of 10
a.m. and 3 p.m. Copies of such filing also will be available for
inspection and copying at the principal office of NYSE Arca. 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-NYSEArca-2007-59 and should
be submitted on or before August 13, 2007.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-14165 Filed 7-20-07; 8:45 am]
BILLING CODE 8010-01-P