(The news featured below is a selection from the news covered in the Federal Securities Report Letter, which is distributed to subscribers of the Federal Securities Law Reports.)

NYSE Proposes Changes to its Governance Structure

The New York Stock Exchange filed a proposed rule change under Exchange Act Section 19(b)(1) to amend the exchange constitution to implement a series of governance changes at the NYSE. Comments on the proposal are due to the SEC by December 3,2003.

According to the NYSE, the objectives of the new corporate governance structure are to 1) place responsibility for governance, compensation and internal controls, as well as for supervision of regulation, in the hands of an independent board of directors and 2) separately preserve the existing engagement of the broker-dealer community and listed company community with the NYSE. The exchange intends to accomplish this goal by creating a board of executives that will include executives of major public and private "buy-side" entities as well as smaller members of the exchange.

The exchange stated that the required "independence from owner-constituents goes beyond what we expect of public companies, and it aligns the exchange's board with the interests of investors." In addition, according to the NYSE, ther egulatory unit would report directly to the independent board rather than the CEO. This structure would provide "sufficient proximity to the marketplace to assure the market sensitivity that the exchange believes is fundamental to effective regulation of the capital markets," concluded the NYSE.

The exchange described its proposals as a "transitional measure." In its filing with the SEC, the NYSE noted that it was not presenting the questions of the future form of broker-dealer self-regulation or the separation of the trading rights from equity ownership. These issues, stated the NYSE, "have far too many ramifications to be the subject of proposal by an interim chairman."

SEC Chairman William Donaldson stated that the proposal " represents a significant rethinking of the structure that has existed at the NYSE and addresses the issue of independent oversight of the exchange's regulatory structure." The chairman added that "the Commission will continue to consider further market-wide reforms, including governance and regulatory reforms, in the coming months as it proceeds with its broad review of market structure issues."

The full text of the notice published by the SEC is available on the agency Web site at http://www.sec.gov/rules/sro/34-48764.pdf.