Subject: File No. SR-NYSE-2004-031
From: Robert S. Clemente, Esq.
Affiliation: Of Counsel, Liddle Robinson, L.L.P.

January 24, 2005

January 24, 2005

Jonathan G. Katz, Secretary
U.S. Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549-0609

Re: File Number SR-NYSE-2004-31
Proposed Amendment NYSE Rule 633 Board of Arbitration
Rule 634 Panel of Arbitrators Rule 635 Director of Arbitration

Dear Mr. Katz:

I welcome the opportunity to comment on the New York Stock Exchanges NYSE or Exchange proposal to amend NYSE Rules 633, 634 and 635 as they relate to the appointment of the Board of Arbitrators the two standing panels of arbitrators securities and non-securities arbitrators and, the appointment of the Director of Arbitration. As the person who held the position of NYSE Director of Arbitration from 1991 through 2003, and as a current practitioner in both NYSE and NASD arbitrations, I believe I possess particular insights into the operation and governance of the forum, which the Commission may find helpful and informative.

It is absurd that the NYSEs stated purpose in amending Rules 633 and 634 to eliminate the role of the Exchange Chairman or its Board regarding the appointment of arbitrators based upon the following: 1 that the Director of Arbitration is the person most familiar with the individuals being proposed as members of the Board of Arbitration or that involvement of the Chairman and the Board of Directors in the process does not serve a valid regulatory purpose, nor is their oversight of this appointment process otherwise required. The rule by its own terms states that the Board of Arbitration is composed of such number of present or former members, allied members and officers of member corporations of the Exchange who are not members of the Board of Directors Therefore, the Exchange should separate itself and its management from the process by implementing a system of review and oversight of the arbitrator appointment process, rather than leaving it to the sole discretion of a low level manger who, presumably, has some familiarity with these individuals unknown or outside of public scrutiny.

From the perspective of the users of the Exchanges arbitration forum, and in light of recent revelations of how the Exchanges management, left unchecked, were able to manipulate, for their own purposes and interests, among other things, the Exchanges regulatory function, one would expect the Exchange to institute more, rather than less, accountability and oversight of its regulatory functions, including arbitration. Clearly, removing any accountability from the Chairman, and the Board, as to which members or officers of member corporations, or other individuals serve as arbitrators, is not in line with the current trend toward greater accountability in corporate governance.

The Exchange should implement more and better procedures for attracting, screening and evaluating arbitrators whether for the Board of Arbitration or the general Panel, a process that over the years the Exchange has evidenced little or no commitment of resources to. In fact, just recently it was revealed that the NYSE does not maintain nor confirm complete and accurate background information on its arbitrators when an investor was forced to seek court intervention to remove an arbitrator who had undisclosed conflicts with the securities industry.

In this climate, the Exchange should be expanding, not contracting, the process of vetting its arbitrators, with greater scrutiny, by independent and objective sources rather than relying upon its entrenched management personnel, who are generally more responsive and attuned to its membership. Moreover, with a roster of approximately 2000 to 3000 active arbitrators, and an equal number of new applicants from all across the country and presumably overseas according to its website, it is impossible for the Director of Arbitration, or any other single individual, to have more than a cursory knowledge of who the arbitrators are and whether their disclosure information is complete and accurate.

Accordingly, the SEC should reject the NYSEs proposal to amend Rules 633 and 634 and require the Exchange to propose and implement a systematic process by which potential arbitrators are reviewed, and their backgrounds verified, and approved by a group of knowledgeable individuals who are independent of the NYSE and its members.

In regard to the Exchanges proposal to amend Rule 635, while it appears, on the surface to make sense, in light of recent restructuring at the Exchange, to provide that the Chief Regulatory Officer designate the Director of Arbitration, at a minimum, the proposal should be amended to require the appointment of the Director of Arbitration be subject to review and approval of the Exchanges Regulatory Oversight Board. In addition, the Exchange has not, at least within the confines of its current rule filing, provided any description, purpose or requirement for the intermediary position of Vice President, Arbitration.

While current NYSE rules provide a description of the role and responsibilities of the Director of Arbitration, it is silent as to this newly created position of Vice President, Arbitration, who apparently, has authority and influence over the Director of Arbitration and thereby over the decisions made by he or she. The introduction of this new position of Vice President is at best redundant and at worst creates the appearance that this new intermediary position, which has no clearly defined regulatory function nor accountability to either the Exchanges Regulatory Oversight Committee, the Board of Directors or any non-Exchange member constituencies that use the arbitration forum, can influence the decisions and outcome of cases filed with the Exchange. Therefore, this portion of the proposal should be dropped from the amendment or disapproved.

Accordingly, pending a more clearly defined regulatory function, delineated responsibilities, and accountability to the Exchanges Regulatory Oversight Committee and the non-exchange member constituent users of the arbitration forum, the proposed amendment to Rule 635 should be disapproved and the NYSE Director of Arbitration should, in the interim, continue to be appointed by the Chairman of the Board.

I thank you for your consideration. If you have any questions or require additional information please contact me.

Respectfully yours,

Robert S. Clemente