2003 annual book
DESCRIPTION
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A n n u a l R e p o r t 2 0 0 3 N e w Y o r k S t o c k E x c h a n g e
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1,500
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NYSE Average Daily Reported Share Volume (millions)
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NYSE Non-U.S. Average Daily Volume (millions)
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88 93 98 03
Global Market Capitalization ($ in trillions)
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Add value to the capital-raising and asset-management
process by providing the highest-quality and most cost-effective
self-regulated marketplace for the trading of financial
instruments, promote confidence in and understanding of that
process, and serve as a forum for discussion of relevant
national and international policy issues.
M I S S I O N S T A T E M E N T
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was asked to serve as your interim chairman and CEO following our
governance problems and the departure of Richard Grasso. My task was to
understand what had happened and institute reforms that would allow us to
regain our reputation and to move forward. This job is essentially done, so I am
taking this space to report to you.
As I came to understand it, our problems stemmed from
• a lack of transparency
• a Board that was too large
• a failure of leadership
• too frequent turnover in committees and in the Board itself
• Board member conflicts.
The McCall-Panetta Board Committee on Corporate Governance had
recommended that we embrace a policy of full disclosure. We have.
In other areas, I felt that we had to go beyond their recommendations. We
• dramatically reduced the size of the Board to between six and twelve members,
in addition to the Chairman and the CEO
• embraced, at least for now, separating the functions of Chairman of the
Board and the CEO, with the Chairman explicitly held responsible for Board
performance and with an annual process requiring an agreement on Board
responsibilities and duties and a self-appraisal of Board effectiveness, all to be
reported publicly
• tried to insure some stability by moving the nominating function into the
Board itself, while providing for annual election by the members but without
term limits
• eliminated conflicts by requiring that the Board be composed entirely of outside,
independent directors, other than the CEO.
At the same time, we maintained the engagement of financial and corporate
leaders, which had been an important component of the old structure, through
the Board of Executives. This, as had been recommended by the McCall-Panetta
committee, was expanded to include additional public and private buy-side
representatives, as well as lessor members.
The objective, of course, was to correct those features that had contributed
to our old problems. More importantly, we tried to create a governance structure
and to “people it” for a clear understanding of the problems we still face: the need
to regain our reputation and the need to actively address the changing and dis-
parate needs of our customers.
Throughout the process, we have tried to be conservative, doing only what
was necessary and sufficient to get the job done and to leave anything beyond that
to the new structure and management.
IR E P O R T T O T H E
M E M B E R S B Y
T H E C H A I R M A N
As you know, the first governance proposals were made to you on
November 4. You voted your approval on November 18. The Securities &
Exchange Commission gave its approval on December 17. We elected our new
Board, which I believe is already deeply and constructively engaged with both the
Board of Executives and with the core issues we face. We appointed John A. Thain
to be our Chief Executive Officer and Richard G. Ketchum to be our Chief
Regulatory Officer on January 8, 2004. I will stay on as Chairman for a while, if
only to assure continuity in our efforts. What is most important is that with the
new architecture, the new Board of Directors, the new Board of Executives
and especially with John Thain, who has been on the job since January 15, and
Rick Ketchum, who has been aboard since March 8, we are as well led as any
institution could hope to be.
My first decision had been to ask Dan Webb, a former U.S. Attorney, of
Chicago-based Winston & Strawn, to help us understand what had happened. I
considered this a key step in regaining our reputation and moving beyond the
past questions about compensation by addressing them fully. As it turns out, the
report to the Board required that we seek redress. The Board met three times to
review the findings and their implications, and we brought in additional legal
help to assist us in deciding how best to proceed. The decision to refer the matter
to the Attorney General of the State of New York and the SEC reflected our deter-
mination that not only was this best for the NYSE and the most responsible way
to meet our obligations as directors, but also to put the matter behind us and be
sure the public’s interest was served.
The rest is up to us. We are in a new era of accountability and it is up to the
Exchange to seize this opportunity to solidify its position as the premier market-
place for investors and listed companies.
John S. ReedChairman
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W E A R E I N A N E W E R A O F A C C O U N TA B I L I T Y
A N D I T I S U P T O T H E E X C H A N G E T O S E I Z E
T H I S O P P O R T U N I T Y T O S O L I D I F Y I T S
P O S I T I O N A S T H E P R E M I E R M A R K E T P L A C E
F O R I N V E S T O R S A N D L I S T E D C O M PA N I E S .
The NYSE Board of Directors appointed John S. ReedChairman and Chief Executive Officer on September 21, 2003.
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s I assume my position as Chief Executive Officer of the New York
Stock Exchange, my overriding objective is to restore investor confidence
and public trust in the Exchange and U.S. financial markets. The reputation
of the NYSE must rest securely on a foundation of integrity and excellence. The
Exchange must maintain its position as the most liquid, lowest cost and most
investor-friendly market in the world.
I am committed to working with the members, employees and clients
of the Exchange as we confront the dramatic economic, regulatory, and
technological changes that are shaping our market environment. Our success
will be built upon our partnership with listed companies and investors,
large and small, and with the Securities and Exchange Commission and
the U.S. Congress.
Our immediate task
is to address the needs and
interests of our customers.
Many of our clients are
calling for speedier access
to our market. We are
responding by bringing
leading-edge technology to
the floor of the Exchange
and striving for even higher
levels of productivity and
innovation.
We are also deter-
mined to provide the
broadest choice of order-execution services, ranging from auction-based to
fully automated electronic access. Many of our listed companies want more
accurate measures of specialist performance. All of our constituents seek more
complete and timely information about the full range of our activities.
Outreach will be key and perhaps my most important task as CEO will
be to listen — constantly, carefully and with an open mind — to the needs and
concerns of all our constituents.
A
W E A R E A L S O D E T E R M I N E D T O
P R O V I D E T H E B R O A D E S T C H O I C E
O F O R D E R - E X E C U T I O N
S E R V I C E S , R A N G I N G F R O M
A U C T I O N - B A S E D T O F U L L Y
A U T O M A T E D E L E C T R O N I C A C C E S S .
L E T T E R F R O M
T H E C H I E FE X E C U T I V E O F F I C E R
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Looking to the future, the Exchange must remain true to the principles
that have made us the largest and most successful equities market in the world.
We will provide customers with the best possible services available. We will
continue to compete with other markets for the trading of NYSE-listed
shares, ensuring the narrowest spreads, superior liquidity and depth,
and the best price for investors. Our listing standards will remain stringent.
Specialists and floor brokers will continue to play their essential roles in bring-
ing together buyers and sellers, ensuring liquidity, offering the opportunity
for price improvement, and dampening volatility. Most importantly, we will
not sacrifice our commitment to the small investor in the marketplace. Our
task is to serve and protect the interests of all investors, whatever their size or
sophistication. Guiding every decision and action will be the highest ethical
and professional standards. As the acknowledged leader of global equity
markets, this is our solemn obligation.
I am deeply honored to have been chosen to lead an institution
that serves such a vital public purpose. The NYSE is a key part of America’s
and the world’s financial system. Investors and issuers in the United States
and across the globe rely on the NYSE for the capital critical to fuel
economic growth, foster personal opportunity and the creation of wealth.
The NYSE will meet its broader responsibility as a leader of global financial
markets and a powerful agent for positive change. As CEO, I will do
my utmost to ensure that the NYSE remains the largest and most efficient
securities market in the world.
Sincerely,
O U R T A S K I S T O S E R V E A N D
P R O T E C T T H E I N T E R E S T S O F A L L
I N V E S T O R S , W H A T E V E R T H E I R
S I Z E O R S O P H I S T I C A T I O N .
John A. ThainChief Executive Officer
The NYSE Board of Directors appointed John A. ThainChief Executive Officer, effective January 15, 2004.
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his was a challenging as well as normal year for regulation. In the normal
sense, the NYSE dealt with a wide array of regulatory issues. Significant activities
included:
• The NYSE Division of Enforcement’s prosecution of 231 cases in 2003. Actions
against individuals numbered 172, and 59 actions against member firms
exceeded the record of 35 actions in 2002. The NYSE collected a record $12.6
million in disciplinary fines.
• Referrals by the NYSE Market Surveillance Division that resulted in six enforce-
ment actions by the SEC for insider trading against nine individuals and firms,
resulting in asset freezes, fines and penalties totaling $5 million.
• NYSE Regulation’s key role in the global settlement among regulators and 10 of
the nation’s top investment firms involving research analysts’ conflict of interest.
• The Exchange and the SEC reaching a settlement of enforcement actions with
SG Cowen and Lehman Brothers for supervisory failures in the Frank
Gruttadauria case.
• The NYSE disciplining Citigroup Global Markets for supervisory violations
in its role as primary service provider for the employee stock option plans of
WorldCom, Inc.
The greater challenges of the year stemmed from the specialist investigation,
which NYSE regulation initiated last year, and which was joined by the SEC.
This raised important issues for us because it involved the trading floor, the
integrity of which is central to our mission. A settlement was reached in March
2004. The SEC also notified the NYSE that it was investigating why the NYSE did
not detect the activity sooner.
The evident scope of the violative activity raised questions about the
independence and effectiveness of self regulation. These questions, together with
concerns about the Exchange’s governance arising from the compensation con-
troversy, prompted dramatic reform of our governance and regulation. Under the
new structure, Regulation is headed by Chief Regulatory Officer Richard G.
Ketchum, who reports to the Regulatory Oversight & Regulatory Budget
Committee. The committee, which I chair, includes Shirley A. Jackson and Dennis
Weatherstone. Each of us is a member of the Board of Directors, independent
from NYSE management, members and listed companies. This model creates a
regulatory apparatus that is functionally separate from the market, yet has an
immediacy to the marketplace necessary for effective regulation.
Sincerely,
Marshall N. Carter
Chairman, NYSE Regulatory Oversight & Regulatory Budget Committee
TN Y S ER E G U L A T I O NR E P O R T
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On March 8, 2004, Richard G. Ketchum assumed the role of Chief Regulatory Officer(CRO), reporting to the Regulatory Oversight & Regulatory Budget Committee.
What are your thoughts on the CRO role? NYSE Regulation is populated by
dedicated professionals. The CRO role is unique in that it reports directly to the
Board of Directors and is independent from the business and marketing side of the
institution. That helps to ensure that the regulatory function fulfills its public
purpose and remains free of conflict while exercising its duties and responsibilities.
Believing passionately in self-regulation and market integrity, I look forward to
contributing to the Exchange’s role in serving investors.
What is your view of the role of the NYSE as a self-regulator? Self-
regulation is at the core of our nation’s securities laws and infrastructure. The
close proximity of a self-regulatory body to those it regulates, coupled with
institutional knowledge and experience, makes self-regulation — if applied
and executed properly — the best mechanism to oversee a market. I’ve seen it
and seen it work well.
Your career as a regulator spans three decades. What are your objectives
for NYSE Regulation? We have ambitious goals. My aspiration is for NYSE
Regulation to be viewed as an extremely capable and effective organization. My
colleagues and I must abide by the highest standards of professionalism and
ethics and ensure a sound and collaborative working relationship with the SEC
and other self-regulatory bodies. It’s important that we do all we can to ensure
integrity and to protect the investing public.
V I E W S O F
R I C H A R D G . K E T C H U M , C H I E FR E G U L A T O R Y O F F I C E R
“In Rick Ketchum we have found an outstanding leader for the NYSE Regulation function. In addition to his integrity, intelligence and managerial experience, Rick has an unparalleled understanding of securities markets. We welcome his commitment to a regulatory environment that assures confidence in those markets by all participants,from individual investors to the regulated broker-dealers.”
Marshall N. Carter Chairman, NYSE Regulatory Oversight & Regulatory Budget Committee
MARKET ACTIVITY
• The NYSE’s global market capitalization increased from $13.4 trillion in 2002 to $17.3 trillion in 2003,including $5.8 trillion for non-U.S. companies.
• The NYSE continued to provide the most competitive quotes, creating the National Best Bid and Offer (NBBO) 93% of the time in listed stocks.
• Market share in listed stocks during NYSE trading hours was 81.5%, compared with 83.6% the previous year.Full-day market share (including hours when the NYSE is closed) declined to 79.3% from 82.1%.
• Average daily volume (ADV) stood at 1.4 billion shares valued at $38.5 billion.
■ ADV for non-U.S. NYSE-listed companies increased to 138 million shares, up from 134 million shares in 2002, and accounted for 10% of total NYSE volume.
• By year-end, 359.7 billion shares were available for trading.
• The NYSE Composite Index® (NYA), which was relaunched at the beginning of the year, increased 29%,outperforming the DJIA and the S&P 500. The NYA reached its high for the year on Dec. 31, closing at 6,440.30.
LISTINGS
• 107 new companies, including 90 domestic U.S. listings, of which 17 were Nasdaq transfers, joined the Exchange for a total of 2,750 listed companies.
■ The 16 non-U.S. additions bring the total number of non-U.S. companies to 467 from 50 countries.
• The 107 new listings represented a decline from 152 in 2002. Among other components, domestic Nasdaq transfersdeclined to 17 in 2003 from 35 in 2002; total IPOs decline to 65 from 76; and non-U.S. companies, to 16 from 33.
• The NYSE again garnered the dominant share of the IPO market, with 65 initial public offerings.
■ Every non-U.S. IPO eligible to list on the NYSE did so.
■ Domestic IPOs (including funds) raised $28.8 billion in proceeds.
• Two exchange-traded funds (ETFs) listed on the NYSE in 2003: the iShares Dow Jones Select Dividend Index FundSM (DVY), the only ETF investing solely in dividend-yielding investments; and the iShares Lehman TIPS Bond FundSM (TIP), designed to track the performance of the U.S. Treasury Inflation Notes Index.
• On Oct. 30, the SEC approved the NYSE’s proposal to eliminate NYSE rule 500, which regulated voluntary de-listings.
TECHNOLOGY, PRODUCTS & SERVICES
• System capacity expanded from 3,000 messages per second to 5,000 by year end (and in early 2004 expanded further to 6,000). This ensures reliable customer order throughput even during periods of peak demand.
• Delivery time for round-trip automatic executions on NYSE Direct+® was reduced to 1 second from 2.7 seconds, a 60% improvement in delivery speed.
• A new generation of NYSE e-Broker® handheld devices was introduced, adding several improvements, including enhanced execution reporting; handheld use tripled from year-end 2002.
• The introduction of “auto-quoting” for all NYSE-listed stocks resulted in even tighter spreads,more timely quotes, and the elimination of 10 million keystrokes per day.
• The NYSE introduced NYSE Broker VolumeWeb® and NYSE LiquidityQuote®.
• Customer use of Institutional XPress® and NYSE Direct+ increased sharply, while the updating cycle for NYSE OpenBook® was reduced 50% from every 10 seconds to every five seconds to enable customers to make better-informed trading decisions.
2003O P E R AT I N G R E P O RT
Catherine KinneyPresident and Co-COO
Robert Britz President and Co-COO
On November 18, NYSE members voted overwhelmingly in favor of
governance reforms proposed by interim Chairman and CEO John S. Reed.
Of the 1,136 proxies and ballots received, 1,112 — almost 98 percent — voted for
the proposal. On December 17, the Securities and Exchange Commission unan-
imously approved the new governance architecture. In summary, the structure:
1 Places responsibility for governance, compensation, internal controls and for
supervision of regulation in the hands of a Board of Directors that is
independent from NYSE management, members, member organizations and
listed companies.
2 Separately preserves the existing engagement of the broker-dealer community,
listed company community and public investors with the NYSE by creating
a Board of Executives that also includes executives of major public and
private buy-side entities as well as lessor members and representatives of
individual investors.
3 Makes transparent the NYSE’s governance process, its participants, their com-
pensation, and the Exchange’s charitable donations and political contributions.
This new architecture positions the NYSE at the forefront of corporate
governance. It meets and in certain ways exceeds the standards to which our
listed companies must adhere. And it addresses the special challenge of
serving both as a marketplace and the vehicle by which Exchange members
regulate themselves.
T H E N Y S E W I L L E X E R C I S E S T A N D A R D S O F I N D E P E N D E N C E ,
T R A N S P A R E N C Y A N D D I S C L O S U R E B A S E D O N T H E
S T R I N G E N T C R I T E R I A I T E X P E C T S O F L I S T E D C O M P A N I E S .
G O V E R N A N C E R E F O R M S I N C R E A S EI N D E P E N D E N C E , T R A N S P A R E N C YA N D A C C O U N T A B I L I T Y
The NYSE Board of Directors (BOD)
Independent Directors (except the CEO)
who meet as needed, but at least quarterly.
Responsibility:
• Accountable to member owners and the public
• The fiduciary
• Regulatory oversight
• Ultimate responsibility for NYSE
The NYSE Board of Executives (BOE)
Representative constituent body appointed by
the BOD, who meet at least 6 times annually.
Responsibility:• Engagement with BOD and management
• Advisory on NYSE operations
• Advisory on NYSE evolution within context of market structure and performance discussion
• Advisory on public spokesman role of the NYSE and its Chair and CEO
• Recommends the non-regulatory operatingbudget to the BOD
T H E M A R K E T
0
400
200
300
100
Total Share Volume (billions)
99 00 01 02 03
203.9
262.5
307.5
363.1 352.4
600
1500
1050
1275
825
Average Daily Share Volume (millions)
99 00 01 02 03
809.2
1041.6
1240.0
1441.01398.4
0
20
10
15
5
Global Market Capitalizationof Listed Companies ($ trillions)
99 00 01 02 03
16.8 17.116.0
13.4
17.3
The NYSE’s unique ability to blend small investor and
large institutional order flow creates superior liquidity
and the most effective price-discovery dynamic.
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F
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or decades, investors have confidently turned to the NYSE to buy and sell
stock in the world’s best companies at the best possible price. Over time, the
Exchange has delivered even lower transaction costs and more innovative ways
for investors to access the highest-quality order executions.
Even in the face of formidable competition, the NYSE remains the most
reliable and cost-effective equities market. The proof is in the numbers: on
average, the NYSE provides the best quoted prices for its listed stock 93 percent
of the time. Price improvement occurs on nearly one-third of all investor orders.
The NYSE’s fill rate is 81 percent, by far the highest degree of certainty in filling
investor orders of any U.S. market.
Independent researcher Elkins/McSherry reported that execution costs
were 27 percent lower on the NYSE than Nasdaq, and the Plexus Group found
the NYSE 24 percent lower than Nasdaq in institutional trading. A recent NYSE
study revealed that after transferring to the NYSE, 39 former Nasdaq-listed
companies experienced significantly lower trading costs and volatility when
their stock began trading on the Exchange.
Market Professionals Serving Market Participants The NYSE’s unique ability to blend small investor and large institutional
order flow creates superior liquidity and the most effective price-discovery
dynamic. Opening and closing prices on the Exchange are more accurate and
reliable, and more stable and better priced, than those of competing markets.
Specialists, who stand at the center of the auction market, work
to ensure a continuous and
orderly market for investors.
Approximately 90 percent
of price discovery consists
of customers meeting cus-
tomers, while specialists
commit capital and participate
approximately 10 percent of
the time. Specialists act as catalysts to bring buyers and sellers together and to
maximize public order interaction. They dampen volatility and furnish
liquidity, filling voids in the market in the absence of natural buyers and sellers.
In fact, more than 80 percent of specialist trades are against the trend — trades
that most other market participants choose not to make. In this way, special-
ists cushion price movements and stabilize the market. They also serve as a
source of accountability for investors and issuers as well as a valuable conduit
of information for listed companies.
A T T H E N Y S E ,B E S T P R I C E P R E V A I L S
O N A V E R A G E , T H E N Y S E P R O V I D E S
T H E B E S T Q U O T E D P R I C E S F O R I T S
L I S T E D S T O C K 9 3 % O F T H E T I M E .
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Floor brokers, too, are a single point of accountability and information for
large customers. They play a vital role in the price-discovery process and
apply their vast knowledge and judgment to the most complex and sophisti-
cated orders. Approximately one-third of volume, which comprises a sub-
stantial portion of large institutional orders that might impact the market, is
delivered directly to brokers on the floor. Like specialists, floor brokers employ
the most advanced trading and information technology to best serve their
customers, who benefit from the best of both worlds — the power of the most
advanced technology and the value of experienced human judgment.
Leveraging Technology Benefits All InvestorsEnabled by technology that accommodates virtually any investor order and
trading strategy, participants in the NYSE’s integrated auction market enjoy the
superior pricing, transparency, depth and liquidity that remain NYSE hallmarks.
Today, 99 percent of investor orders are delivered electronically to the
NYSE’s central point of sale. More than 6 percent of those orders gain an
automatic execution through NYSE Direct+, which has a 1 second average
turnaround speed for orders of 1,099 shares or less.
Expanding the NYSE Direct+ platform will broaden its electronic order-
routing and execution capabilities. This promises an even more diverse and
Daily National Best Bid and Offer Spread Between NYSE and Nasdaq
NYSE
Nasdaq
Trading Days Relative to the Switching Date
NBB
O S
prea
d ($
0.01
)
.04
.06
.08
.10
.12
-60 -51 -42 -33 -24 -15 -6 3 12 21 30 39 48 57
Intraday National Best Bid and Offer Quoted Spread
NYSE
Nasdaq
1 9 17 25 33 41 49 57 65 73
Intraday 5-Minute Interval
NBB
O S
prea
d ($
0.01
)
.05
.10
.15
.20
1 2 1. Daily NBBO Quoted Spread NBBO Quoted Spread represents market liquidity and trading cost. Compared to Nasdaq, NYSE market quality is superior.
2. Intraday NBBO Quoted Spread The lower spread on the NYSE is robust across the trading day. In particular,the NYSE has more liquidity during the opening and closing to support heavy trading.
Volatility and Spread Performance of 39 Companies that Moved to the NYSE from Nasdaq
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Daily 5-Minute Interval Price Range (High-Low)
NYSE = 4.0 c
Nasdaq = 8.3 c
2
4
6
8
10
12
-60 -51 -42 -33 -24 -15 -6 3 12 21 30 39 48 57
Trading Days Relative to the Switching Date
Pric
e Ra
nge
($0.
01)
Intraday 5-Minute Interval Price Range (High-Low)
NYSE
Nasdaq
1 9 17 25 33 41 49 57 65 73
Intraday 5-Minute Interval
Pric
e Ra
nge
($0.
01)
0
5
10
15
20
25
30
3 4 3. Daily 5-Minute Interval Price Range (High-Low) Short-term volatility, such as five-minute intervals, reveal more of the impact of market structure on price change. The NYSE’s auction mechanism and liquidity consolidationhelp to mitigate price fluctuation.
4. Intraday 5-Minute Interval Price Range(High-Low) The lower volatility on the NYSE is robust across the trading day.In particular, the NYSE’s auction market atopening brings market liquidity togetherand significantly reduces price fluctuation.
Data from the NYSE research paper Market Structure, Fragmentation and Market Quality: Evidence from Recent Listing Switches, which can be found at www.nyse.com/pdfs/marketqualitystudy03.pdf.The study was conducted on the stocks of 39 companies that voluntarily transferred from January 2002 to March 2003.
capable array of market access choices for investors, including institutional
investors who seek faster trade execution and greater certainty for large orders.
Effectively blending the best of the floor-based auction and automatic,
electronic execution speaks to the NYSE’s focus on customer satisfaction,
timely innovation and continuous market evolution.
As the market evolves, it becomes more competitive, as the developments
of 2003 clearly demonstrated. The NYSE’s full-day share of trading in its listed
stocks fell from 82.1 percent in January to 79.3 percent at year end, as other
markets honed their offerings.
In 2004, the competition for new listings—domestically and internationally—
and market share of trading will intensify. The SEC intends to propose a broad
set of market structure changes, including modifications to the trade-through
or “best-price” rule, which provides assurance that investors and their broker
representatives get the best price when buying and selling stock of NYSE-listed
companies. Moving forward, the Exchange’s focus will be on responding to cus-
tomers’ needs and interests and strengthening its competitive position, especially
with respect to its technology infrastructure and order-execution platform.
The Exchange is committed to positive change and growth in order to
remain the leader in this increasingly competitive environment. We are also deter-
mined to provide investors with the highest levels of market quality and the best
possible price when buying and selling stock in the world’s leading companies.
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Examining 39 recent transfers to the NYSE from Nasdaq,
price volatility was reduced by half, quotes narrowed
by more than a third, and execution costs were cut in half.
According to the NYSE research paper Market Structure, Fragmentation and Market Quality:
Evidence from Recent Listing Switches, which can be found at www.nyse.com/pdfs/marketqualitystudy03.pdf.
N E W L I S T I N G S
TEN MOST ACTIVE
STOCKS, 2003(round lots) (millions of shares)
NYSE Symbol Volume
Lucent Technologies Inc. (LU) 6,147.8
Nortel Networks (NT) 3,943.0
Pfizer Inc. (PFE) 3,816.8
General Electric (GE) 3,789.1
Time Warner (TWX) 3,537.9
EMC Corp. (EMC) 2,807.4
Citigroup (C) 2,742.5
Motorola Inc. (MOT) 2,607.1
Hewlett-Packard (HPQ) 2,471.8
Texas Instruments (TXN) 2,423.6
TEN MOST ACTIVE STOCKS BY
DOLLAR VOLUME, 2003(millions of dollars)
NYSE Symbol Volume
Pfizer Inc. (PFE) 121,742.4
International Business Machines (IBM) 118,537.3
Citigroup (C) 113,211.7
General Electric (GE) 105,729.4
Bank of America (BAC) 97,217.3
Wal-Mart Stores (WMT) 90,488.3
Exxon Mobil (XOM) 85,419.5
Johnson & Johnson (JNJ) 85,185.4
American International Group Inc. (AIG) 75,530.9
Merck & Co. (MRK) 74,763.8
Advent Claymore Convertible Securities and Income Fund AVK IPO
Alaris Medical Systems, Inc. AMI Amex
American Equity Investment Life Holding Company AEL IPO
American Financial Realty Trust AFR IPO
American Home Mortgage Investment Corp. AHH Nasdaq
AMERIGROUP Corporation AGP Nasdaq
Anworth Mortgage Asset Corporation ANH Amex
Ashford Hospitality Trust, Inc. AHT IPO
Aspen Insurance Holdings Limited AHL IPO/Bermuda
Axis Capital Holdings Limited AXS IPO/Bermuda
BHP Billiton plc BBL Other/United Kingdom
BlackRock Dividend Achievers Trust BDV IPO
BlackRock Florida Municipal 2020 Term Trust BFO IPO
BlackRock Limited Duration Income Trust BLW IPO
BlackRock Municipal 2020 Term Trust BKK IPO
BlackRock Preferred Opportunity Trust BPP IPO
Bradley Pharmaceuticals, Inc. BDY Nasdaq
Brookfield Homes Corporation BHS Spin-Off
Calamos Convertible and High Income Fund CHY IPO
Prior Market or Company Name Symbol Country of Origin
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Regis Corporation (RGS), the owner andoperator of hair products and retail salons worldwide, transferred from Nasdaq on March 27. To celebrate the NYSE listing, President and CEO Paul D. Finkelstein,center, is joined by his sons Mike, left, and Brad on the NYSE trading floor.
On July 2, the NYSE welcomed Axis Capital Holdings Limited (AXS) Chairman Michael Butt, left;President, CEO and Deputy ChairmanJohn R. Charman, center; and DirectorCharles A. Davis, right, to celebrate the company’s July 1 IPO.
Telkom SA Limited (TKG) launched its IPO on the NYSE on March 4. In honor of the occasion,Sizwe Nxasana, CEO of Telkom South Africa, and Jeff T. Radebe,Minister of Public Enterprises,ring The Opening BellSM on March 6.
E V E N T S O F 2 0 0 3
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CapitalSource Inc. CSE IPO
Capitol Bancorp Limited CBC Nasdaq
Carter’s Inc. CRI IPO
Cedar Shopping Centers, Inc. CDR Nasdaq
Centene Corporation CNC Nasdaq
China Life Insurance Company Limited LFC IPO/China
Chunghwa Telecom Co., Ltd CHT IPO/Taiwan
Citadel Broadcasting Corporation CDL IPO
Cohen & Steers REIT and Preferred Income Fund, Inc. RNP IPO
Compass Minerals International, Inc. CMP IPO
Conseco, Inc. CNO Other
Corporate High Yield Income Fund VI, Inc. HYT IPO
Doral Financial Corporation DRL Nasdaq/Puerto Rico
Drew Industries Incorporated DW Amex
Eaton Vance Senior Floating-Rate Trust EFR IPO
Eaton Vance Tax-Advantaged Dividend Income Fund EVT IPO
Endurance Specialty Holdings Ltd. ENH IPO/Bermuda
First National Bankshares of Florida, Inc. FLB Spin-Off
First Potomac Realty Trust FPO IPO
Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated FFC IPO
Flaherty & Crumrine/Claymore Total Return Fund Incorporated FLC IPO
Floating Rate Income Strategies Fund, Inc. FRA IPO
F.N.B. Corporation FNB Nasdaq
Friedman’s Inc. FRM Nasdaq
Graphic Packaging Corporation GPK Other
Highland Hospitality Corporation HIH IPO
Prior Market or Company Name Symbol Country of Origin
T H E N Y S E A D D E D 1 0 7 N E W L I S T E D C O M P A N I E S I N 2 0 0 3 ,
B R I N G I N G T H E T O T A L T O 2 , 7 5 0 C O M P A N I E S .
Hughes Electronics Corporation HS Spin-Off
Impac Mortgage Holdings, Inc. IMH Amex
International Steel Group Inc. ISG IPO
John Hancock Preferred Income Fund III HPS IPO
Journal Communications, Inc. JRN IPO
Kadant Inc. KAI Amex
Keane, Inc. KEA Amex
Kinross Gold Corporation KGC Amex/Canada
Kronos Worldwide, Inc. KRO Spin-Off
Lehman Brothers/First Trust Income Opportunity Fund LBC IPO
Levitt Corporation LEV Spin-Off
Luminent Mortgage Capital, Inc. LUM IPO
Maguire Properties, Inc. MPG IPO
MBIA Capital/Claymore Managed Duration Investment Grade Municipal Fund MZF IPO
Medco Health Solutions, Inc. MHS Spin-Off
Mentor Corporation MNT Nasdaq
MI Developments Inc. MIM Spin-Off/Canada
Mitchells & Butlers plc MLB Spin-Off/United Kingdom
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Prior Market or Company Name Symbol Country of Origin
Medco Health Solutions, Inc. (MHS)Chairman, President and CEO David Snow, joined by his wifeLynette, visits the trading floor onAug. 19, after ringing The OpeningBell. The company listed on Aug. 8.
President Vladimir Putin of Russia, center,stands at the bell podium with NYSE Presidents and Co-COOs Robert Britz andCatherine Kinney. The Russian leader participated in a roundtable discussion withchief executives at the NYSE on Sept. 26.
Carter’s Inc. (CRI) Chairman and CEO Fred Rowan, third from right,and other Carter’s officials applaud the first trade of the company’s Oct. 24 IPO.
E V E N T S O F 2 0 0 3
Molina Healthcare, Inc. MOH IPO
Muni Intermediate Duration Fund, Inc. MUI IPO
Muni New York Intermediate Duration Fund, Inc. MNE IPO
Nam Tai Electronics, Inc. NTE Nasdaq/Hong Kong
National Financial Partners Corp. NFP IPO
NBTY, Inc. NTY Nasdaq
Nelnet, Inc. NNI IPO
Neuberger Berman Realty Income Fund, Inc. NRI IPO
Nicholas-Applegate Convertible and Income Fund NCV IPO
Nicholas-Applegate Convertible and Income Fund II NCZ IPO
Nuveen Diversified Dividend and Income Fund JDD IPO
Nuveen Preferred and Convertible Income Fund JPC IPO
Nuveen Preferred and Convertible Income Fund 2 JQC IPO
Offshore Logistics, Inc. OLG Nasdaq
PacifiCare Health Systems, Inc. PHS Nasdaq
PIMCO Floating Rate Income Fund PFL IPO
PIMCO High Income Fund PHK IPO
Pioneer Municipal High Income Advantage Trust MAV IPO
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Prior Market or Company Name Symbol Country of Origin
China’s Premier Wen Jiabao, center, visited theNYSE and rang The Opening Bell on Dec. 8 duringhis first official visit to the United States. Joininghim on the bell podium are Mr. Britz, second fromleft, Mrs. Kinney and NYSE Interim Chairman John S. Reed, third from right.
Mr. Reed congratulates ChinaLife Insurance CompanyLimited (LFC) Chairman andPresident Xianzhang Wang onthe company’s Dec. 17 IPO.
Keane, Inc. (KEA) President and CEO Brian Keane, left, is joined by John Leahy,Senior VP of Finance and CFO, center, andLarry Vale, VP of Investor Relations, right,on the NYSE trading floor to witness thecompany’s first executed trade on the Big Board. Keane Inc. transferred from theAmerican Stock Exchange on Oct. 30.
E V E N T S O F 2 0 0 3
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Pioneer Municipal High Income Trust MHI IPO
Piper Jaffray Companies PJC Spin-Off
Preferred and Corporate Income Strategics Fund, Inc. PSW IPO
Preferred Income Strategies Fund, Inc. PSY IPO
Provident Financial Services, Inc. PFS IPO
Regis Corporation RGS Nasdaq
Rinker Group Limited RIN Other/Australia
RMK High Income Fund, Inc. RMH IPO
Royce Micro-Cap Trust, Inc. RMT Nasdaq
Salomon Brothers Emerging Markets Debt Fund, Inc. ESD IPO
Salomon Brothers Global High Income Fund Inc. EHI IPO
Sasol Limited SSL Nasdaq/South Africa
Shinhan Financial Group Co., Ltd. SHG Other/Korea
SIRVA, Inc. SIR IPO
SpectraSite, Inc. SSI Nasdaq
SYNNEX Corporation SNX IPO
Telkom SA Limited TKG IPO/South Africa
Tempur-Pedic International, Inc. TPX IPO
The First Marblehead Corporation FMD IPO
The Gabelli Dividend & Income Trust GDV IPO
The Sports Authority, Inc. TSA Nasdaq
Universal Technical Institute, Inc. UTI IPO
Western Asset/Claymore U.S. Treasury Inflation Protected Securities Fund WIA IPO
W-H Energy Services, Inc. WHQ Nasdaq
Whiting Petroleum Corporation WLL IPO/Carveout
Woori Finance Holdings Co., Ltd. WF Other/Korea
Prior Market or Company Name Symbol Country of Origin
T H E N Y S E G A R N E R E D T H E D O M I N A N T S H A R E O F T H E I P O
M A R K E T , W I T H 6 5 I N I T I A L P U B L I C O F F E R I N G S I N 2 0 0 3 .
The New York Stock Exchange is the most active and visible symbol
of private enterprise in America. As the nation’s leading public
marketplace for corporate securities, the Exchange has an inviolable
responsibility to ensure that its activities are conducted in accordance
with the highest standards of business and personal integrity. All policies
and practices of the Exchange and all Exchange-related conduct
and activities of Exchange employees must be in absolute accord with
protecting and preserving the integrity of the Exchange.
S T A T E M E N T O N E T H I C S
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F I N A N C I A L A N D
S T A T I S T I C A L H I G H L I G H T S
Years ended December 31, 2003 2002
Revenues (millions) $ 1,074.1 $ 1,065.8
Expenses (millions) $ 986.9 $ 1,023.7
Income Before Taxes and Minority Interest (millions) $ 87.3 $ 42.1
Provision for Income Taxes (millions) $ 36.4 $ 11.7
Minority Interest (millions) $ 1.3 $ 2.3
Net Income (millions) $ 49.6 $ 28.1
Members’ Equity (millions) $ 951.7 $ 895.5
Reported Share Volume (billions) 352.4 363.1
Average Daily Share Volume (millions) 1,398.4 1,441.0
Reported Dollar Volume (trillions) $ 9.7 $ 10.3
Average Daily Dollar Volume (billions) $ 38.5 $ 40.9
NYSE Composite Index (year-end close)* 6,440.3 472.87
Member Organizations 330 337
Specialist Units 7 7
Individual Specialists 450 464
New Listed Companies 107 152
Total Listed Companies 2,750 2,783
Total Shares Listed (billions) 359.7 349.9
NYSE Global Market Capitalization (trillions) $ 16.8 $ 13.4
* The NYSE Composite Index was re-launched at the beginning of the year
using a revised methodology and a new base value of 5,000.
“As the world’s premier equities market, the Exchange requires the most
sophisticated and capable financial processes and systems. Our goal
is to ensure that, moving forward, finance serves as a strategic resource
to the NYSE and our constituents. We will do this by identifying
the growing and changing needs of our customers and providing the
resources required to ensure the NYSE’s competitive position in this
rapidly evolving marketplace.”
On February 19, 2004, Amy S. Buttejoined the NYSE as Executive VicePresident, Corporate Finance, reportingto NYSE CEO John A. Thain.
On April 12, 2004 she assumed the role of Chief Financial Officer.
Amy S. Butte Chief Financial Officer
F I N A N C I A L R E V I E W
Management Report on Financial Operations
The New York Stock Exchange (NYSE or Exchange) is the world’s
leading equities market. A broad spectrum of market participants,
including individual and institutional investors, listed companies,
and member firms create the NYSE agency auction market. The
NYSE creates an open and orderly market for buying and selling
equity securities.
Companies listed on the NYSE range from the largest, well-
known “blue-chips” to smaller mid-sized enterprises. The NYSE is
also a self-regulatory organization, with strict rules and codes of
conduct and responsibility for the oversight of members and mem-
ber organizations.
The Securities Industry Automation Corporation (SIAC) is a
two-thirds owned subsidiary. The remaining one-third is owned by
the American Stock Exchange LLC (AMEX).
SIAC is a central securities industry resource providing key sup-
port to the NYSE, the AMEX, the National Securities Clearing Cor-
poration and the securities industry nationwide. SIAC plans,
develops, implements and manages a variety of automated informa-
tion-handling and communications systems that support order pro-
cessing, trading, and market information reporting, as well as trade
comparison, clearance and settlement for a broad range of securities.
SIAC also provides systems support for essential regulatory and
administrative activities. In addition, SIAC provides telecommunica-
tion and managed services through its wholly owned subsidiary, Sec-
tor, Inc. (Sector), to subscribers primarily in the securities industry.
Set forth below is an analysis of the results of the NYSE’s oper-
ations for the year ended December 31, 2003.
Revenues
Revenues of the New York Stock Exchange, Inc. and subsidiary com-
panies (NYSE and subsidiaries) in 2003 were slightly higher than in
2002, totaling $1,074.1 million compared with $1,065.8 million.
Revenues from listing fees in 2003 of $294.6 million increased
$8.5 million or 3% over 2002. These fees are paid by companies when
they initially list on the NYSE and annually thereafter. In addition,
listed companies pay fees for corporate transactions involving the
issuance of additional shares, such as splits, rights or additional
public sales of securities, and mergers and acquisitions. In 2003 the
increase was primarily due to rate increases in annual equity listing
fees. This was offset by declines in original and other listing fees in
line with the general market environment for new listings.
Data processing fees of $224.8 million were relatively
unchanged from the prior year. These fees are charged by SIAC to its
customers other than the NYSE. Fees charged to the NYSE are elim-
inated in consolidation.
Market information fees of $172.4 million in 2003 increased 2%
from $168.8 million in 2002. These fees are driven by the number of
devices, trades and use of proprietary products by our customers.
The increase in usage of proprietary products drove the increase year
over year.
Trading fees increased 3% in 2003 to $157.2 million. Trading fees
are paid by NYSE members and member organizations based on
trades executed on the Exchange. The increase in trading fees is a
result of certain pricing actions taken at the beginning of 2003, par-
tially offset by a 3.9% decrease in average daily volume.
Regulatory fees declined $7.3 million or 6% to $113.5 million in
2003. Regulatory fees are assessed to NYSE members and member
organizations based on their gross revenues, number of branch
offices, number of registered personnel and related items. The change
was primarily due to a decrease in member firms’ gross revenue.
Facility and equipment fees increased $7.9 million, from $52.6
million to $60.5 million. Facility and equipment fees are paid to the
NYSE for services provided on the trading floor. New fees for broker
and specialist technology were introduced at the beginning of 2003
but were suspended after six months. These new fees were offset by
declines in a variety of miscellaneous facility fees.
Annual membership fees paid by NYSE members declined 14%
to $11.0 million in 2003. This decline is due to a decrease in electronic
access membership renewals during the year.
Investment and other income declined $7.1 million or 15% to
$40.2 million. The decline in investment income is primarily a result
of a decrease in the realized interest rate from 3.26% in 2002 to 1.95%
in 2003. Remaining changes included an increase in hearing panel
fines of $5.2 million offset by a $4.1 million decrease in insurance
recoveries relating to World Trade Center claims.
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Expenses
Total expenses for 2003 decreased to $986.8 million from $1,023.7
million in 2002, a decline of $36.8 million or 3.6%. The sustainabil-
ity of the decline in our expense base remains uncertain. Longer-
term changes in our expenses will be based on our level of rev-
enues, client needs, regulatory requirements, capital investments
and the general competitive landscape for people and market share.
Management intends to initiate a careful review of the current
expense structure and to actively manage the expenses and invest-
ments required to support the business of the NYSE.
Compensation expense of $522.5 million was relatively
unchanged from year to year exclusive of a required accrual for our
financial statements related to the former Chairman and CEO. A
significant decline in year-end incentive compensation and benefits
was offset slightly by increases in salaries and the use of temporary
staff, primarily for security.
Systems and related support costs of $146.0 million remained
relatively unchanged from year to year. These costs include develop-
ment, ongoing support and maintenance of various trading and reg-
ulatory systems and hardware.
Professional services in 2003 totaled $114.8 million, a decrease
of $21.5 million or 16% over 2002. The decline was a result of an
ongoing effort to reduce the use of external consultants, in some
cases replaced by permanent staff, and of the reduction of projects in
2003 and completion of projects from 2002. This was offset by an
increase in legal expenses during the year.
Depreciation and amortization increased to $67.6 million for
2003 from $61.9 million in 2002. The increase of $5.7 million or 9%
was due to the completion of various projects resulting in an increase
in the depreciable base of fixed assets in 2003.
Occupancy costs of $65.3 million in 2003 were relatively
unchanged year over year. Utilities and real estate taxes increased
slightly.
General and administrative expenses declined $13.2 million or
19% for 2003 to $56.2 million. A decrease in a majority of the other
general and administrative expenses was offset by increases in
annual insurance premiums.
Advertising costs for 2003 declined 47% to $14.6 million. The
decision to reduce spending reflected global events and the gover-
nance and compensation controversy at the NYSE during the second
half of the year.
Risk Factors
In order to ensure effectiveness, efficiency and investor confidence in
the Exchange, we identify and manage our key risks on a proactive
basis. The NYSE is exposed to a number of risks that can be broadly
categorized as market related, operational and regulatory related.
Each of these broad categories is discussed below.
Market Related Risks
The domestic and global economic environment influences the
Exchange’s business directly and indirectly. Directly, the economic
environment impacts the securities markets as a whole. Indirectly,
it affects the operations of the NYSE’s member firms, listed com-
panies and prospective new listing candidates. The NYSE’s financial
condition depends on the needs, activity levels and financial condi-
tion of these constituents. The health and structure of the securi-
ties industry and our constituents may affect our revenues from
regulatory, listings, market information and trading fees. In addi-
tion, industry conditions may dictate future needs for services and
related infrastructure to support those requirements.
The NYSE’s listing revenues depend on the ability of companies
to list and remain listed on the Exchange. Barriers to enter the pub-
lic capital markets, whether due to economic, regulatory or other
reasons, could affect companies’ desire and ability to list or remain
listed and as a result impact the Exchange’s revenue base.
The NYSE operates in a highly competitive marketplace. Our
competitors include both traditional and nontraditional execution
venues. We compete with other exchanges, electronic communica-
tion networks, market makers and other execution venues. The
NYSE competes based on best price, liquidity, cost, anonymity, speed
and certainty of execution. Failure to execute in an efficient and
cost-effective manner, to grow existing products, or to develop new
products and services that address customer demand and interests
may result in lower market share and revenues. The NYSE also com-
petes in the market information arena. A loss of NYSE market share
of trading would result in a reduced revenue allocation from the
inter-market data consortia and, potentially, negatively impact the
growth, importance and viability of various NYSE market informa-
tion products.
In the normal course of business the NYSE makes judgments
and assumptions as they relate to critical accounting policies and
estimates. These include, but are not limited to, employee pensions
and benefits, receivables, and income taxes. A change in market con-
ditions or other external factors could affect management’s estimates
and assumptions, as well as the financial condition and operations of
the NYSE.
Operational Risks
Our business is dependent on continuous access to and evolution of
our trading facilities and information resources. The NYSE’s opera-
tional infrastructure is designed to support optimal throughput and
reliability and to accommodate future growth. We have developed
business continuity plans to permit the NYSE to continue operations
in the event of significant damage to our primary trading facility.
New management is actively reviewing our back-up and recovery
plans and is committed to making the necessary capital investments
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to ensure the required continuity is available to our constituents. An
event that renders the Exchange’s primary trading facility inoperable
could have an impact on the level of trading activity directed to and
processed by the NYSE as well as on our reputation and the capital
markets overall.
The NYSE is highly dependent on our extensive trading systems
and the related infrastructure. We must provide and continue to
invest appropriately in systems for customer order execution and
have sufficient excess capacity to process peak volume and transac-
tion flow at any point in time. Updates to the various trading systems
are required from time to time to ensure we can address the demands
that are placed on the trading systems. Additionally, our ability to
manage the regulatory requirements placed on the NYSE to ensure a
fair market is dependent on technology. As a result, the focus on the
appropriate infrastructure and support systems is critical to ensure
our success in maintaining public trust. Failure to maintain the
appropriate systems and keep pace with systems needs, improve-
ments and capacity may result in a temporary inability to trade, reg-
ulate, and report as well as create a loss of confidence in the NYSE by
its customers, constituents and regulators.
Regulatory Related Risks
The NYSE, as a self-regulatory organization, is subject to extensive
regulation resulting in demands for the highest level of integrity and
trust from and for our constituents. Such regulation may affect our
ability to act quickly in light of changes in the competitive market-
place. The Securities and Exchange Commission (SEC) is responsi-
ble for reviewing, publishing for public comment and ultimately
approving any changes to the NYSE’s Constitution or rules. Regula-
tions applicable to the Exchange may have the effect of limiting activ-
ities, including activities that might be profitable, or causing us to
modify our business model in ways that may adversely affect our
revenues or cost structure.
In addition, the SEC regularly conducts oversight examinations
of the Exchange’s regulatory programs. In response to these oversight
examinations, the Exchange has recently increased its funding of
Regulatory staff and technology resources.
The SEC has recently identified several pressing issues regard-
ing equity market structure (including specific rule proposals revis-
ing the trade through rule and the formula for allocating market
information revenues among the exchanges and the NASD). Action
by the SEC on any or all of these market-structure issues could have
a significant impact on the NYSE’s revenues, business model and
competitive position.
The NYSE has actively managed the issues described above and others
by constantly monitoring constituent needs, and adopting policies
and procedures to identify, monitor and manage the related risks.
Responsibility for Financial Statements
NYSE management has prepared the accompanying consolidated
financial statements of the New York Stock Exchange, Inc. and its
subsidiaries for the years ended December 31, 2003 and 2002 in accor-
dance with accounting principles generally accepted in the United
States of America. Management is responsible for the fair presenta-
tion in these financial statements of the NYSE’s financial position,
results of operations and cash flows. The accounts of all majority-
owned subsidiary companies have been included in the NYSE’s
consolidated financial statements; The Special Trust Fund and The
Gratuity Fund are reported separately and are not included in such
consolidated financial statements. Financial controls over NYSE
operations include a system of internal controls designed to provide
assurance that the assets of the NYSE are safeguarded against loss
from unauthorized use or disposition and that the books and
records, from which the consolidated financial statements were pre-
pared, properly reflect the transactions of the NYSE and its sub-
sidiaries. Important elements of the internal control system include
budgets and financial plans which are subjected to continuous review
throughout the year, manuals on established policies and procedures,
an organizational structure providing division and delegation of
responsibilities, careful selection and training of qualified financial
personnel, an annual attestation by all employees of adherence to the
NYSE’s Statement of Business Conduct and Ethics, and a program of
ongoing internal audits. These internal audit programs are coordi-
nated with the NYSE’s independent accountants. Having the appro-
priate systems and people in our finance and other corporate
functions is critical to ensure we maintain a control structure to
manage the risks embedded in the NYSE. Management believes that
insufficient investments have been made historically in the financial
systems. Investments in these systems and processes are viewed as
critical to improving the control structure at the NYSE. Financial
controls and related support will continue to be reviewed to ensure
they are appropriate to meet the needs of the NYSE and the com-
mitments that have been made.
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F I V E - Y E A R F I N A N C I A L R E V I E W(Dollars in Millions)
For the year ended December 31, 2003 2002 2001 2000 1999
Revenues from:
Operations $1,050.6 $1,036.2 $1,054.4 $ 986.0 874.3
Investments 23.5 29.6 59.6 58.8 44.3
1,074.1 1,065.8 1,114.0 1,044.8 918.6
Expenses 986.8 1,023.7 1,061.2 912.6 782.9
Income before taxes and minority interest 87.3 42.1 52.8 132.2 135.7
Provision for income taxes 36.4 11.7 17.7 54.4 57.3
Minority interest 1.3 2.3 3.3 4.9 3.2
Net income $ 49.6 $ 28.1 $ 31.8 $ 72.9 $ 75.2
Current assets $1,223.3 $1,155.9 $1,168.3 $1,095.2 $959.9
Current liabilities 416.1 340.3 389.6 366.2 331.9
Working capital 807.2 815.6 778.7 729.0 628.0
Non-current assets and liabilities, net 144.5 79.9 102.9 120.8 148.9
Equity of members $ 951.7 $ 895.5 $ 881.6 $ 849.8 $776.9
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C O N S O L I D A T E D S T A T E M E N T S O F I N C O M E(Dollars in Thousands)
For the year ended December 31, 2003 2002
Revenues:
Listing fees $ 294,612 $ 286,071
Data processing fees 224,774 224,575
Market information fees 172,369 168,844
Trading fees 157,171 152,806
Regulatory fees 113,506 120,813
Facility and equipment fees 60,494 52,575
Membership fees 10,990 12,816
Investment and other income 40,224 47,359
1,074,140 1,065,859
Expenses:
Compensation 522,461 521,506
Systems and related support 146,019 143,573
Professional services 114,795 136,258
Depreciation and amortization 67,559 61,856
Occupancy 65,323 63,871
General, administrative and other 56,155 69,388
Advertising 14,568 27,293
986,880 1,023,745
Income before taxes and minority interest 87,260 42,114
Provision for income taxes 36,367 11,721
Minority interest in income of consolidated subsidiary 1,274 2,330
Net income $ 49,619 $ 28,063
The accompanying notes are an integral part of these consolidated financial statements.
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C O N S O L I D A T E D B A L A N C E S H E E T S(Dollars in Thousands)
December 31, 2003 2002
Assets:
Current assets:
Cash and cash equivalents $ 11,004 $ 12,539
Securities purchased under agreements to resell 121,920 298,121
Investment securities, at fair value 868,562 652,141
Accounts receivable, net 105,469 127,039
Taxes receivable 52,543 952
Deferred income taxes 43,763 51,548
Other assets 20,074 13,535
Total current assets 1,223,335 1,155,875
Property and equipment, at cost, less accumulated depreciation
and amortization 316,445 322,200
Investments in affiliates, at cost 2,584 2,355
Non-current deferred income taxes 122,362 180,826
Other non-current assets 112,395 95,474
Total assets $1,777,121 $1,756,730
Liabilities and equity of members:
Current liabilities:
Accounts payable $ 76,542 $ 87,839
Accrued expenses 209,651 172,552
SEC transaction fee 129,878 79,909
Total current liabilities 416,071 340,300
Liabilities due after one year:
Accrued employee benefits 338,525 452,636
Other long-term liabilities 39,363 42,654
Total liabilities 793,959 835,590
Minority interest 31,452 25,636
Commitments and contingencies
Members’ equity:
Equity of members 959,277 909,658
Accumulated other comprehensive loss (7,567) (14,154)
Total equity of 1,366 members* 951,710 895,504
Total liabilities and members’ equity $1,777,121 $1,756,730
Equity per member having distributive rights* $ 697 $ 656
*At December 31, 2003, the NYSE had 1,366 members with distributive rights in the NYSE’s net assets, and is unchanged from 2002.
A list of names of all current members is available in the Office of the Secretary of the NYSE.
The accompanying notes are an integral part of these consolidated financial statements.
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C O N S O L I D A T E D S T A T E M E N T S O F
C H A N G E S I N M E M B E R S ’ E Q U I T Y A N D
C O M P R E H E N S I V E I N C O M E(Dollars in Thousands)
AccumulatedOther Total Total
Equity of Comprehensive Members’ ComprehensiveMembers Income/(Loss) Equity Income
Balance as of January 1, 2002 $881,595 $ — $881,595 $ —
Net income 28,063 — 28,063 28,063
Unrealized loss on investment securities, net of tax — (5,928) (5,928) (5,928)
Change in minimum pension liability, net of tax — (8,226) (8,226) (8,226)
Balance as of December 31, 2002 909,658 (14,154) 895,504 $13,909
Net income 49,619 — 49,619 $49,619
Unrealized gain on investment securities, net of tax — 9,018 9,018 9,018
Change in minimum pension liability, net of tax — (2,431) (2,431) (2,431)
Balance as of December 31, 2003 $959,277 $ (7,567) $951,710 $56,206
The accompanying notes are an integral part of these consolidated financial statements.
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C O N S O L I D A T E D S T A T E M E N T S O F
C A S H F L O W S(Dollars in Thousands)
For the year ended December 31, 2003 2002
Cash flows from operating activities:
Net income $ 49,619 $ 28,063
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 67,559 61,856
Loss on disposition of assets 6,615 25,264
Increase (decrease) in minority interest 5,816 (2,487)
Decrease (increase) in deferred income taxes 63,234 (22,300)
(Increase) decrease in taxes receivable (51,591) 190
Provision for losses on accounts receivable (776) (888)
(Decrease) increase in accrued employee benefits (114,111) 57,162
Change in operating assets and liabilities:
Decrease in accounts receivable, net 22,346 8,845
(Increase) decrease in other assets (24,429) 7,103
Decrease in accounts payable (10,065) (3,482)
Increase (decrease) in accrued expenses 37,099 (42,265)
Increase (decrease) in SEC transaction fee payable 49,969 (4,519)
(Decrease) increase in other long term liabilities (2,323) 6,719
Net cash provided by operating activities 98,962 119,261
Cash flows from investing activities:
Net (purchases) sales of investment securities (205,798) 63,715
Net sales (purchases) of securities purchased under agreements to resell 176,201 (93,386)
Purchases of property and equipment (68,471) (113,382)
Increase in investment in affiliates (229) (235)
Net cash used in investing activities (98,297) (143,288)
Cash flows from financing activities:
Net (payment) increase of capitalized lease obligations (2,200) 1,827
Cash and cash equivalents:
Net decrease for year (1,535) (22,200)
Beginning of year 12,539 34,739
End of year $ 11,004 $ 12,539
Supplemental disclosure:
Cash paid for income taxes $ 30,199 $ 33,633
The accompanying notes are an integral part of these consolidated financial statements.
N O T E S T O T H E C O N S O L I D A T E D
F I N A N C I A L S T A T E M E N T S
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The New York Stock Exchange (NYSE or Exchange) is the world’s
leading equities market. A broad spectrum of market participants,
including individual and institutional investors, listed companies,
and member firms create the NYSE agency auction market. The
NYSE creates an open and orderly market for buying and selling
equity securities.
Companies listed on the NYSE range from the largest, well-
known “blue-chips” to smaller mid-sized enterprises. The NYSE is
also a self-regulatory organization, with strict rules and codes of
conduct and responsibility for the oversight of members and mem-
ber organizations.
The Securities Industry Automation Corporation (SIAC) is a
two-thirds owned subsidiary and is fully consolidated into the
financial statements of the NYSE and subsidiaries. The remaining
one-third is owned by the American Stock Exchange LLC (AMEX).
SIAC is a central securities industry resource providing key sup-
port to the NYSE, the AMEX, the National Securities Clearing Cor-
poration and the securities industry nationwide. SIAC plans,
develops, implements and manages a variety of automated informa-
tion-handling and communications systems that support order pro-
cessing, trading, and market information reporting, as well as trade
comparison, clearance and settlement for a broad range of securities.
SIAC also provides systems support for essential regulatory and
administrative activities. In addition, SIAC provides telecommunica-
tion and managed services through its wholly owned subsidiary, Sec-
tor, Inc. (Sector), to subscribers primarily in the securities industry.
Note 1 Description of Business:
The preparation of these financial statements, in conformity with
accounting principles generally accepted in the United States of
America, requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date
of the financial statements and the reported amounts of revenues
and expenses during the reported period. Actual results could differ
from these estimates. Certain prior year amounts have been
reclassified to conform with the current year’s presentation.
(a) Principles of Consolidation The consolidated financial state-
ments include the New York Stock Exchange, Inc. and all wholly
owned subsidiaries, and SIAC, which is two-thirds owned by the
NYSE.All intercompany transactions are eliminated in consolidation.
The NYSE’s investment in The Depository Trust & Clearing
Corporation (DTCC), which is operated by separate management
and has a separate board of directors, is carried at cost since the
NYSE has less than majority ownership and does not exercise
significant influence over the operating and financial policies of this
company, and the carrying balance is reflected in the Balance Sheet
in Investments in affiliates.
The financial results of The Special Trust Fund and The Gra-
tuity Fund, which are reported separately, are not included in the
consolidated financial statements.
(b) Cash and Cash Equivalents Cash and cash equivalents are
composed of cash and highly liquid investments with an original
maturity of three months or less.
(c) Securities Purchased Under Agreements to Resell The
NYSE invests funds in overnight reverse repurchase agreements,
which provide for the delivery of cash in exchange for securities hav-
ing a market value of approximately 102% of the amount of the
agreements. Independent custodians take possession of the securi-
ties. Overnight reverse repurchase agreements are recorded at trade
date at the contractual amount and totaled $121.9 million and $298.1
million at December 31, 2003 and 2002, respectively.
(d) Investment Securities The NYSE accounts for investment
securities in accordance with Statement of Financial Accounting
Standards (SFAS) No. 115, “Accounting for Certain Investments in
Debt and Equity Securities.” The NYSE has determined that its
investments should be classified as available-for-sale securities.
Available-for-sale securities are carried at fair value as of trade date
with the unrealized gains and losses, net of tax, reported as a com-
ponent of other comprehensive income. Interest income on invest-
ment securities, including amortization of premiums and accretion
of discounts, is accrued and recognized over the life of the invest-
ment. The specific identification method is used to determine real-
ized gains and losses on sales of investment securities, which are
reported in investment and other income.
(e) Accounts Receivable, Net The NYSE’s receivables are primar-
ily from members, member organizations, listed companies and
market information subscribers. The concentration of risk on
accounts receivable is mitigated by the large number of entities com-
prising the NYSE’s customer base. The NYSE records an allowance
for uncollectible accounts when it’s deemed probable and estimable
that a loss has been incurred in the portfolio. It is estimated based on
historical experience, the composition of outstanding balances and
other relevant information. The total allowance, netted against
receivables, was $15.0 million at December 31, 2003 and $15.7 million
at December 31, 2002. Provisions were $0.7 million and $3.6 million
for 2003 and 2002, respectively, while write-offs were $1.4 million and
$4.5 million, respectively.
Note 2 Summary of Significant Accounting Policies:
(f) Property and Equipment and Depreciation Property and
equipment is recorded at cost on the closing date while depreciation
of property and equipment, including assets categorized as capital-
ized leases, is provided over the estimated useful lives of the assets.
An accelerated method is used for furniture and fixtures. The
straight-line method is used for substantially all other assets. Lease-
hold improvements are depreciated over the shorter of either the
term of their respective leases or their estimated useful lives.
Expenses for maintenance, repairs and renewals are charged to
operations as incurred; betterments are capitalized and depreciated
over their useful lives. The cost and accumulated depreciation of
property and equipment retired or otherwise disposed of are
removed from the accounts upon disposal and any gain or loss is
reflected in operations.
(g) SEC Transaction Fee The NYSE collects this fee pursuant to
Section 31 of the Securities Exchange Act of 1934 as amended and
records amounts as received. These fees are designed to recover the
costs to the government of the supervision and regulation of securi-
ties markets and securities professionals. The NYSE collects these
fees from those member organizations clearing or settling trades on
the NYSE. As required by law, the amount collected is remitted to the
United States Treasury semiannually.
(h) Accrued Employee Benefits The NYSE and SIAC have sepa-
rate qualified defined benefit pension plans covering substantially all
employees meeting age and service requirements. Each also has a
Supplemental Executive Retirement Plan. All of these plans are
accounted for under SFAS No. 87 “Employers Accounting for Pen-
sions.” In addition, the NYSE and SIAC maintain defined benefit
plans to provide certain health care and life insurance benefits for
eligible retired employees. These plans are accounted for under SFAS
106 “Employers Accounting for Postretirement Benefits Other
than Pensions.”
(i) Revenue Recognition Listing fees include original fees, which
are paid whenever a company initially lists on the NYSE and when-
ever it effects a corporate transaction that results in the listing of
additional shares. Companies also pay annual fees to remain listed on
the NYSE. Original fees are recognized in the month that the trans-
action occurs; annual fees are recognized ratably over the course of
the related period.
Data processing fees represent revenue generated by SIAC, other
than from the NYSE. SIAC’s revenue from the NYSE is eliminated in
consolidation. It is SIAC’s policy to charge affiliates and other cus-
tomers, other than Sector’s customers, at approximate cost. Sector’s
customers are billed at competitive rates for the services provided.
Fees are accrued and recognized as earned.
Market information fees are paid by members, member organi-
zations, institutional investors and other subscribers to access last
sale and bid/ask information. The fees are primarily based upon the
number of interrogation devices receiving the market information.
Fees are accrued and recognized as earned.
Trading Fees are self-reported and paid monthly by member
firms and are calculated based upon trading activity brought to the
floor of the NYSE. Fees are recognized as paid.
Regulatory fees are paid by members and member organiza-
tions and are primarily based upon the revenues and other measures
of activity. They are recognized ratably over the period to which they
apply.
Facility and equipment fees are paid to the NYSE for services
provided on the trading floor. They are accrued and recognized when
services are rendered.
(j) Comprehensive Income SFAS No. 130, “Reporting Compre-
hensive Income,” establishes guidelines for reporting and display of
comprehensive income and its components in the financial state-
ments. Other comprehensive income includes unrealized gains and
losses on investment securities classified as available-for-sale and
minimum pension liabilities, net of tax. Accumulated other com-
prehensive loss is included as a component of Members’ Equity.
(k) Income Taxes The NYSE uses the asset and liability method to
account for income taxes, including recognition of deferred tax
assets for the anticipated future tax consequences attributable to
differences between financial statements amounts and their respec-
tive tax bases. The NYSE reviews its deferred tax assets for recovery.
A valuation allowance is established when the NYSE believes that
it is more likely than not that a portion of its deferred tax assets
will not be realized. Changes in the valuation allowances from
period to period are included in the NYSE’s tax provision for the
period of change.
The NYSE files a consolidated tax return with its subsidiaries
except SIAC, which is required to file its tax return on a stand-alone
basis. The amounts recorded for financial reporting purposes aggre-
gate the stand-alone provisions.
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SIAC is a two-thirds owned subsidiary and is fully consolidated into
the financial statements of the NYSE and subsidiaries. The remain-
ing one-third is owned by the AMEX.
SIAC provides certain communications, clearing and data
processing operations and systems development functions to the
NYSE, the AMEX and others. In addition, SIAC provides telecom-
munication and outsourcing services through Sector, to subscribers
primarily in the securities industry. Under a service agreement, SIAC
charges the users of its services, other than customers of Sector, their
respective share of its costs.
A summary of operations of SIAC is presented below:
Note 3 Securities Industry Automation Corporation:
Summary of Income
(Dollars in Thousands)For the year ended December 31, 2003 2002
Revenues:Data processing fees from:
New York Stock Exchange, Inc. $253,050 $273,328American Stock Exchange LLC 93,949 97,144National Securities Clearing Corp. 52,132 55,268Sector, Inc. 61,777 63,827Investment and other income 22,873 10,615
483,781 500,182
Expenses:Compensation 240,721 236,784Systems and related support 111,621 106,682Professional services 54,873 74,392Occupancy 29,034 29,593Depreciation and amortization 30,744 27,775General and administrative 10,512 16,949
477,505 492,175
Income before taxes 6,276 8,007Provision for income taxes 2,455 1,016
Net income $ 3,821 $ 6,991
The Depository Trust Company (DTC) and the National Securities
Clearing Corporation (NSCC) are wholly owned subsidiaries of
DTCC. DTC is a central certificate depository and NSCC operates the
clearing systems for its participants.
Under a stockholders’ agreement, entitlement to own the com-
mon stock of DTCC is redetermined each year, based on usage, with
shares to be transferred as appropriate at the adjusted net worth per
share at December 31 of the preceding year. The NYSE acquires/sells
any shares not purchased or sold by the users of DTC’s services. As
of December 31, 2003 the NYSE held 34.73% interest in the common
stock of DTCC which was an increase from the percentage held as of
December 31, 2002, of 34.17%. The 2004 entitlement is yet to be deter-
mined.
The NYSE also owns 50% of the preferred stock of DTCC,
which percentage was the same at December 31, 2002.
Accounts receivables, due from affiliates at December 31 are (in
thousands):
2003 2002
Depository Trust Company $ 1 $ 71National Securities Clearing Corp 4,069 3,051
$4,070 $3,122
Note 4 Affiliates:
Note 5 Investment Securities at Fair Value:
Investment securities consist primarily of U.S. Government and federal agency obligations, certificates of deposit, bankers’ acceptances, and
mutual funds.
Investment securities at December 31, 2003 consist of (Dollars in Thousands):
Amortized Estimated Gross GrossCost Fair Unrealized Unrealized
Security Type or Cost Value Gains Losses
Certificates of deposit $157,419 $157,396 $ 17 $ (40)U.S. Government and agencies 569,526 569,888 472 (110)Bankers acceptances 55,694 55,947 265 (12)Mutual funds 41,411 42,475 1,064 —Other 39,254 42,856 3,672 (70)
$863,304 $868,562 $5,490 $(232)
And at December 31, 2002:
Amortized Estimated Gross GrossCost Fair Unrealized Unrealized
Security Type or Cost Value Gains Losses
Certificates of deposit $125,776 $126,073 $ 297 $ —U.S. Government and agencies 350,990 355,250 4,304 (44)Bankers acceptances 35,230 36,330 1,108 (8)Mutual funds 119,771 107,807 — (11,964)Other 28,760 26,681 249 (2,328)
$660,527 $652,141 $5,958 $(14,344)
The contractual maturities of fixed income securities at December 31, 2003 are as follows (Dollars in Thousands):
Cost Fair Value
Due within one year $431,251 $431,273Due after one year through five years 322,762 323,334
$754,013 $754,607
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For 2003 the company realized proceeds from the sale of securities of
$3,480,128. Gross realized gains for the year amounted to $12,645 and
gross realized losses amounted to $6,884. In 2002 the company real-
ized proceeds from the sale of securities of $2,283,692 with gross
realized gains for the year amounting to $8,522 and gross realized
losses of $3,463.
(Dollars in Thousands)December 31, 2003 2002
Land $ 11,162 $ 11,162Buildings 178,627 160,317Leasehold improvements 152,592 140,966Equipment, including capitalized leases of $40,192 in 2003 and $41,926 in 2002 394,606 417,848Furniture and fixtures 29,649 27,654
766,636 757,947Less: accumulated depreciation and amortization 466,495 465,106
300,141 292,841Construction-in-progress 16,304 29,359
Total property and equipment $316,445 $322,200
Note 6 Property and Equipment:
Construction in progress primarily relates to capitalized construc-
tion and equipment costs associated with the continuing effort to
improve technology on the trading floor, modernization of elevators
and renovation projects in various departments of the NYSE.
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The income tax provisions for the years ended December 31 consist of the following (Dollars in Thousands):
2003 2002
Federal
Current $(18,927) $ 28,685
Current deferred 2,922 272Non-current deferred 41,210 (14,219)
44,132 (13,947)
State and local
Current (12,286) 2,902
Current deferred 1,576 150Non-current deferred 21,872 (6,069)
23,448 (5,919)
Total provision for income taxes $ 36,367 $ 11,721
Note 7 Income Taxes:
The current tax benefits for 2003 are largely attributable to previ-
ously deferred compensation paid in 2003.
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax
purposes. Temporary differences relate primarily to employee
benefits, deferred compensation, depreciation, and unrealized gains
or losses on marketable securities.
2003 2002
Current net deferred tax assets arising from:
Employee benefits $ 3,376 $ 7,191Deferred compensation 36,344 38,452Bad debt and other 4,043 5,905
$ 43,763 $ 51,548
Non-current net deferred tax assets arising from:
Depreciation $ 13,051 $ 16,378Deferred compensation 88,220 131,810Employee benefits 2,048 10,737Other 19,043 21,901
$122,362 $180,826
Effective Tax Rate 2003 2002
Federal statutory rate 35.0% 35.0%State and local taxes (net of federal benefit) 7.2% 1.1%WTC insurance proceeds — (6.9%)Benefit from prior year tax returns — (3.6%)Other (0.5%) 2.2%
41.7% 27.8%
No valuation allowance for the deferred tax asset is necessary in either
2003 or 2002, based on the weight of available evidence. Management
believes it is more likely than not that the assets will be utilized.
The 2003 effective tax rate of 41.7% differs from the federal rate
primarily due to state and local taxes, net of federal benefit. The 2002
effective tax rate of 27.8% is less than the federal rate due to tax
benefits received from prior years and permanent differences attrib-
utable to the receipt of insurance proceeds from the World Trade
Center (WTC) claim. A reconciliation between the statutory and
effective tax rates is presented below:
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The following is a summary of relevant legal matters:
The NYSE was a defendant in a consolidated, purported class
action filed in 1999 in the United States District Court for the South-
ern District of New York (Southern District). The complaint also
named current options exchanges (NYSE transferred its options
business to another exchange in 1997), specialists, market makers,
and others, and sought an unspecified amount of damages (trebled
under antitrust laws), injunctive relief, and attorneys’ fees, on behalf
of a purported class of persons who bought or sold certain equity
options between 1994 and 1999. The complaint alleged, among other
things, a conspiracy to refrain from multiply-listing certain equity
options in violation of Section 1 of the Sherman Act. In 2003, the U.S.
Court of Appeals for the Second Circuit (Second Circuit) entered a
judgment affirming the district court’s 2001 decision, which granted
defendants’ motion for summary judgment dismissing the com-
plaint on the basis of implied repeal of the antitrust laws. Plaintiffs
did not seek Supreme Court review of the Second Circuit’s decision,
which thus became a final dismissal of plaintiffs’ claims against
the NYSE.
On or about December 15, 2003, the California Public Employ-
ees’ Retirement System (CalPERS) filed a purported class action
complaint in the Southern District against the NYSE, NYSE special-
ist firms, and others. The complaint alleges, among other things, var-
ious violations of the Securities Exchange Act of 1934 and breach of
defendants’ fiduciary duty, on behalf of a purported class of persons
who bought or sold unspecified NYSE-listed stocks between 1998
and 2003. The complaint alleges that, with the NYSE’s knowledge and
active participation, specialist firms engaged in manipulative and
deceptive conduct, including interpositioning, front-running and
“freezing” the specialist’s book. The CalPERS suit, which seeks
unspecified compensatory damages against defendants, jointly and
severally, has been consolidated with three other purported class
action suits brought against the specialist firms and others (but not
the NYSE). The NYSE’s time to respond has been extended until after
the appointment of a lead plaintiff and the filing of an amended,
consolidated complaint.
On January 27, 2004, Papyrus Technology Corporation
(Papyrus) filed a complaint in the Southern District against the
NYSE, alleging that the NYSE’s Wireless Data System and Broker
Booth Support System infringe patents allegedly issued to Papyrus
and that the NYSE breached a license agreement with Papyrus. On
March 18, 2004, the NYSE filed its Answer (including Affirmative
Defenses) and Counterclaim, and the discovery phase of the litiga-
tion has commenced.
The NYSE intends to vigorously defend against the above-ref-
erenced lawsuits, the outcomes of which cannot reasonably be deter-
mined at this time.
The NYSE is a defendant in a number of other actions. In the
opinion of management and legal counsel, the aggregate of all possi-
ble losses from all such actions should not have a material adverse
effect on the consolidated financial condition of the NYSE.
In or about October 2003, the U.S. Securities and Exchange
Commission commenced an investigation relating to the Exchange’s
enforcement of compliance by its members or member organizations
and persons associated with its member organizations with the
antifraud provisions and provisions governing the conduct of spe-
cialists under the federal securities laws and the Exchange’s rules.
The outcome of this investigation cannot reasonably be determined
at this time.
In December 2003, the NYSE received a report from the law
firm of Winston & Strawn, which the Exchange had engaged to
investigate and review certain matters relating to the compensation
of the former Chairman and CEO and the process by which that
compensation was determined. The Exchange provided this report
to the SEC and New York State Attorney General’s Office, which
commenced investigations relating to those matters in or about Jan-
uary 2004. The outcome of these investigations cannot reasonably be
determined at this time.
The board is seeking to recover compensation and benefits pre-
viously made to the former Chairman and CEO under his most
recent and previous employment contracts, as well as to negate
any remaining payments that the former Chairman and CEO may
claim are required under the terms of the contracts. Generally
accepted accounting principles preclude the NYSE from accruing
any recovery for its own claims until the dispute is resolved
but require the NYSE to accrue compensation expense related to
the former Chairman and CEO based upon the most recent contract.
At December 31, 2003, the NYSE accrued compensation expense
amounting to $36 million related to the former Chairman and
CEO. This accrual reflects management’s interpretation of the provi-
sions contained in the most recent contract, which provides terms
outlining certain payments to which the former Chairman and CEO
could be entitled upon ceasing employment with the NYSE, if that
contract is found to be valid and the payments were deemed to be
allowable and appropriate under the law. This liability is recorded as
a current liability. Management is currently uncertain as to the ulti-
mate outcome and timing of the resolution of the disputes. If
significant changes relating to the ongoing dispute and the underly-
ing assumptions used by management occur, those changes could
lead to increases or decreases in the recorded liability as of Decem-
ber 31, 2003. These increases or decreases could be material to the net
income of the NYSE.
Note 8 Litigation and Other Matters:
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The NYSE and SIAC maintain separate qualified defined benefit
pension plans covering substantially all of their employees. Retire-
ment benefits are derived from a formula, which is based on length
of service and compensation. The NYSE and SIAC fund pension
costs to the extent such costs may be deducted for income tax pur-
poses. There were contributions made to the NYSE pension plan of
$36,515 in 2003 and no contributions made during 2002. SIAC con-
tributed $29,032 in 2003 and $10,000 in 2002 to its pension plan.
The NYSE bases its investment policy and objectives on a review
of the actuarial and funding characteristics of the Retirement Plan,
the demographic profile of plan participants and the business and
financial characteristics of the NYSE. Capital market risk/return
opportunities and tradeoffs also are considered as part of the deter-
mination. The primary investment objective of the NYSE plan is to
achieve a long-term rate of return that meets the actuarial funding
requirements of the plan and maintains an asset level sufficient to
meet all benefit obligations of the plan. Based on the plan’s primary
investment objective and on the NYSE’s review of relevant plan char-
acteristics, the NYSE has established 70% equity and 30% fixed
income allocation targets for the plan’s investment program.
The NYSE and SIAC also maintain a nonqualified plan, which
provides supplemental retirement benefits for certain employees. To
provide for the future payments of these benefits, the NYSE has pur-
chased insurance on the lives of the participants through company-
owned policies. At December 31, 2003 and 2002 the cash surrender
value of such policies was $27.7 million and $26.0 million, respec-
tively, and is included in other non-current assets.
The costs of the plans for 2003 and 2002 have been determined
in accordance with SFAS No. 87, “Accounting for Pensions.”
Note 9 Retirement Benefits:
Pension Plans
2003 2002NYSE SIAC NYSE SIAC
Projected benefit obligation at December 31 $359,032 $212,736 $315,609 $179,665Fair value of plan assets at December 31 $336,819 $192,399 $253,175 $138,332
Funded (unfunded) status $ (22,213) $ (20,337) $ (62,434) $ (41,333)
Accumulated benefit obligation at December 31 $319,485 $165,721 $279,253 $141,857Prepaid benefit cost recognized/(accrued benefit liability) in the
consolidated balance sheets $ 9,232 $ 39,368 $ (26,078) $ (3,525)Intangible asset — — $ 6,282 $ 2,394Other comprehensive loss attributable to minimum pension liability — — — $ 19,691Net periodic benefit cost $ 7,487 $ 8,704 $ (969) $ 4,566Employer contribution $ 36,515 $ 29,032 — $ 10,000Benefits paid $ 12,241 $ 6,584 $ 11,298 $ 5,689Effect of plan amendments on benefit obligation — — $ 3,816 $ 1,613
Pension Plans Cost
2003 2002NYSE SIAC NYSE SIAC
Cost of benefits earned during the year $ 12,497 $ 9,681 $ 9,683 $ 7,851Interest on benefits earned to date 20,535 11,655 19,220 10,584Net amortizations 941 1,145 (3,083) 251Estimated return on plan assets (26,486) (13,816) (26,789) (14,120)Additional (gain) or loss recognized due to:
Settlement — — — —Curtailment — 39 — —
Aggregate pension expense $ 7,487 $ 8,704 $ (969) $ 4,566
SERP Plans
2003 2002NYSE SIAC NYSE SIAC
Projected benefit obligation at December 31 $ 111,136 $ 33,628 $ 159,475 $ 30,106Fair value of plan assets at December 31 — — — —
Funded (unfunded) status $(111,136) $(33,628) $(159,475) $(30,106)
Accumulated benefit obligation at December 31 $ 104,445 $ 28,726 $ 135,244 $ 25,395Prepaid benefit cost recognized/(accrued benefit liability) in the
consolidated balance sheets $(104,445) $(28,726) $(135,244) $(25,395)Intangible asset $ 7,535 $ 3,413 $ 7,492 $ 4,067Other comprehensive loss attributable to minimum pension liability $ 17,277 $ 2,876 $ 8,816 $ 874Net periodic benefit cost $ 25,449 $ 4,349 $ 39,477 $ 8,378Employer contribution — — — —Benefits paid $ 64,752 $ 2,366 $ 4,352 $ 11,909Effect of plan amendments on benefit obligation $ 1,399 — $ (894) $ (903)
SERP Plan Costs
2003 2002NYSE SIAC NYSE SIAC
Cost of benefits earned during the year $ 3,986 $1,420 $28,337 $1,055Interest on benefits earned to date 6,450 1,916 6,569 2,146Plan amendments — — — —Net amortizations 5,817 918 4,571 1,048Estimated return on plan assets — — — —Additional (gain) or loss recognized due to:
Settlement 9,196 94 — 2,303Curtailment — — — 1,826
Aggregate SERP expense $25,449 $4,348 $39,477 $8,378
Weighted-average assumptions as of December 31:
Discount rate 6.00% 6.00% 6.50% 6.50%Expected long-term rate of return on plan assets 8.00% 8.50% 8.50% 9.00%Rate of compensation increase—Pension 4.00% 5.00% 5.00% 5.00%Rate of compensation increase—SERP 4.00% 6.00% 5.00% 6.00%
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To develop the expected long-term rate of return on assets assump-
tion, the company considered the historical returns and the future
expectations for returns for each asset class as well as the target asset
allocation of the pension portfolio.
In addition to providing pension benefits, the NYSE and SIAC main-
tain defined benefit plans to provide certain health care and life
insurance benefits (the “Plans”) for eligible retired employees. These
Plans, which may be modified in accordance with their terms, cover
substantially all employees.
The net periodic postretirement benefit cost for the NYSE was
$5,571 in 2003 while the comparable cost for 2002 was $4,220. SIAC’s
benefit cost was $5,580 in 2003 and $4,542 in 2002. The Plans are
unfunded.
Note 10 Other Employee Benefit Plans:
2003 2002(Dollars in Thousands) NYSE SIAC NYSE SIAC
Benefit obligation at end of year $(103,552) $(53,325) $ (80,029) $(41,693)Benefits paid $ 4,182 $ 1,765 $ 3,854 $ 1,379Accrued benefit cost $ 102,678 $ 26,696 $101,289 $ 22,881Discount rate as of December 31, 6.00% 6.00% 6.50% 6.50%
For measurement purposes, the NYSE assumed a 9% annual rate of
increase in the per capita cost of covered health care benefits for
2003. The rate is assumed to increase to 12.5% for 2004 and then
decrease gradually each year to 5% for 2014 and remain at that level
thereafter. SIAC assumed a 10% annual rate of increase in the per
capita cost of covered health care benefits for 2003 which will
decrease on a graduated basis to 5% in the year 2013 and thereafter.
In December 2003 the President signed the “Medicare Pre-
scription Drug, Improvement and Modernization Act of 2003” into
law. In accordance with a Staff Position issued by the Financial
Accounting Standards Board (FASB), the NYSE has elected to defer
reflecting the impact of this law until the FASB provides specific
authoritative guidance on the proper accounting treatment. As such,
any measure of the Accumulated Plan Benefit Obligation and the net
periodic postretirement benefit costs are not reflected in these finan-
cial statements and footnotes. The issuance of this guidance could
require the NYSE to change previously reported information, though
management believes the impact will not be material to these finan-
cial statements.
The table below shows the effect that a 100 basis point increase
or decrease in the 61⁄2% discount rate and 81⁄2% expected rate of
return on plan assets would have on the Company’s pension, SERP
and other post retirement benefits obligations and costs:
1% Increase 1% Decrease
Change in the discount rate:
Pension, SERP and OPEB
obligation (103,891,000) 126,304,000Net periodic pension, SERP
and OPEB cost (11,538,000) 11,242,000
Change in the expected rate of
return on plan assets:
Net periodic pension cost (4,742,000) 4,742,000
The NYSE also maintains savings plans for which most employees are
eligible to contribute a part of their salary within legal limits. The
NYSE will match an amount equal to 100% of the first 6% of eligible
contributions. The NYSE also provides benefits under a Supplemen-
tal Executive Savings Plan to which eligible employees may also con-
tribute and receive an appropriate company match. SIAC maintains
similar though separate plans. For 2003 the savings plans expense
was $13.7 million and $13.3 million for 2002. Included in accrued
employee benefits payable was $60.5 million and $130.1 million at
December 31, 2003 and December 31, 2002, respectively related to
these plans.
The NYSE has a Capital Accumulation Plan (CAP) for desig-
nated senior executives. Under the CAP, each year, participating exec-
utives are credited with an amount based upon a percentage of their
annual Incentive Compensation Plan award. These awards vest, for
each executive, between the ages of 55 and 60, and are transferred
into a Rabbi Trust as they vest. Unvested CAP amounts earn interest
based upon the 10-year Treasury Bond rate as of December 31st of the
prior year. Participants may elect to receive their vested account bal-
ances in a lump sum distribution or annual installments following
termination of employment. The total amount of the awards for 2003
was $1.1 million and $6.7 million for 2002. Included in accrued
employee benefits at December 31, 2003 and 2002 is $14.0 million and
$16.8 million respectively related to this plan. Awards and any related
interest are included as compensation expense in the year earned.
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NYSE and SIAC are individually parties to several leases of office
space and equipment, which expire at various dates through 2023.
Rental expense under these leases, included in the Consolidated
Statements of Income, was $79.3 million in 2003, and $76.3 million
in 2002. Minimum lease rental commitments at December 31, 2003
follow (Dollars in Thousands):
Capital LeasesYears Equipment
2004 $ 8,1432005 3,9732006 2,4002007 1,7192008 2992009 – 2013 —2014 – 2018 —
Total future minimum lease payments 16,534Less—Amount representing interest 2,311
Present value of net minimum lease payments (including
$6,648 due within one year classified as current) $14,223
Note 11 Commitments and Contingencies:
Operating LeasesYears Office Space Equipment Total
2004 $47,453 $22,347 $69,8002005 49,741 12,882 62,6232006 49,759 6,437 56,1962007 51,084 3,587 54,6712008 52,287 17 52,3042009 – 2013 154,520 — 154,5202014 – 2018 45,035 — 45,035
$495,149
In the normal course of business, the NYSE may enter into con-
tracts that require it to make certain representations and warranties
and which provide for general indemnifications. Based upon past
experience, the Exchange expects the risk of loss under these
indemnification provisions to be remote. However, given that
these would involve future claims against the NYSE that have not yet
been made, the NYSE’s potential exposure under these arrangements
is unknown.
R E P O R T O F
I N D E P E N D E N T A U D I T O R S
To the Board of Directors and Members of the
New York Stock Exchange, Inc.:
In our opinion, the accompanying consolidated balance sheets and
the related consolidated statements of income, and equity of mem-
bers and comprehensive income, and cash flows of the New York
Stock Exchange, Inc. and its subsidiaries present fairly, in all mater-
ial respects, the financial position of the New York Stock Exchange,
Inc. and its subsidiaries at December 31, 2003 and 2002 and the
results of their operations and their cash flows for the years then
ended in conformity with accounting principles generally accepted
in the United States of America. These financial statements are the
responsibility of the New York Stock Exchange, Inc.’s management;
our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally accepted
in the United States of America, which require that we plan and per-
form the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by man-
agement, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
New York, New York
April 2, 2004
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T H E S P E C I A L T R U S T F U N D
Statements of Operations and Net Assets
(Dollars in Thousands)For the year ended December 31, 2003 2002
Operations for year:Investment income, net of expenses $ 382 $ 543Net assets at beginning of year 19,725 19,182
Net assets at end of year $20,107 $19,725
At December 31, consisting of:Cash and investment securities, at cost (approximates market) $19,933 $19,523Accrued interest receivable 179 206
20,112 19,729Less: Accrued expenses 5 4
Net assets $20,107 $19,725
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Note—The Special Trust Fund was established under provisions of
the Constitution of the New York Stock Exchange, Inc. The purpose
of the Fund is to provide assistance, primarily from funds con-
tributed by the NYSE to The Special Trust Fund, to customers threat-
ened with losses due to the financial condition of certain member
organizations.
The Statements of Operations and Net Assets of The Special
Trust Fund are prepared on an accrual basis and accordingly recog-
nize interest income when earned, expenses when incurred and
recoveries when realizable. Future expenditures from the Fund are
not expected to exceed its net assets. Some recoveries of prior expen-
ditures by the Fund may be received in the future.
T H E G R A T U I T Y F U N D
Statements of Operations and Net Assets
(Dollars in Thousands)For the year ended December 31, 2003 2002
Operations for year:Contributions from members $1,441 $1,035Investment income 38 66
1,479 1,101
Expenses:Gratuities to beneficiaries of deceased members 1,500 1,100Provision for income taxes and other expenses 2 7
1,502 1,107
Decrease in net assets (23) (6)Net assets at beginning of year 1,613 1,619
Net assets at end of year $1,590 $1,613
At December 31, consisting of:Cash and investment securities, at cost (approximates market) $2,264 $2,401Contributions receivable 102 —Other 182 184
2,548 2,585Less: Gratuities and other liabilities payable 958 972
Net assets $1,590 $1,613
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Note—The Gratuity Fund was established under provisions of the
Constitution of the New York Stock Exchange, Inc. The Fund pays
beneficiaries of deceased equity members $20,000 if membership
was held for a year or less, which amount increases in increments of
$20,000 per additional year of membership up to a maximum of
$100,000 or so much as may have been collected from surviving
equity members. Each surviving equity member is required to
contribute an amount from $15 to $75 upon the death of an equity
member, which contribution is dependent upon the period of time
the deceased maintained membership.
The Statements of Operations and Net Assets of The Gratuity
Fund are prepared on an accrual basis and accordingly recognize
interest income when earned and expenses when incurred.
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John S. Reed
N Y S E B O A R D
O F D I R E C T O R S
Madeleine K. AlbrightHerbert M. Allison, Jr.
D. Euan Baird
Marshall N. Carter
Shirley Ann Jackson
James S. McDonald
Robert B. Shapiro
Dennis Weatherstone
John A. Thain
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John S. ReedChairman New York Stock Exchange, Inc.
John A. ThainChief Executive OfficerNew York Stock Exchange, Inc.
Madeleine K. AlbrightPrincipalThe Albright Group LLCFormer Secretary of State
Herbert M. Allison, Jr.Chairman, President and CEO TIAA-CREF
D. Euan BairdChairman of Rolls-Royce plc and former Chairman, President and CEOSchlumberger
Marshall N. CarterChairman and CEO (Retired)State Street Bank and Trust
Shirley Ann JacksonPresident Rensselaer Polytechnic Institute
James S. McDonaldPresident and CEORockefeller & Co.
Robert B. ShapiroRetired Chairman Pharmacia Corporation andretired Chairman and CEO Monsanto Company
Dennis WeatherstoneRetired Chairman J.P. Morgan & Co.
B O A R D O F
D I R E C T O R SAs of April 2004
■ Member firms that deal with the public
James E. CayneChairman and CEOThe Bear Stearns Companies Inc.
John J. Mack Chief Executive OfficerCredit Suisse First Boston
E. Stanley O’Neal Chairman and CEOMerrill Lynch & Co., Inc.
Henry M. Paulson, Jr.Chairman and CEOThe Goldman Sachs Group, Inc.
Philip J. PurcellChairman and CEOMorgan Stanley
Thomas A. Renyi Chairman and CEOThe Bank of New York
William B. Summers, Jr.ChairmanMcDonald Investments Inc.
■ Specialists
John F.X. DolanPartnerVan der Moolen Specialists USA LLC
Peter J. MurphyChief Executive OfficerBear Wagner Specialists
■ Trading floor brokers
Robert H. McCooey, Jr.President and CEO The Griswold Company
Doreen Mogavero President and CEOMogavero, Lee & Co., Inc.
■ Lessor members
Joseph A. Mahoney
Donald Stone
■ Institutional investors
Laurence D. FinkChairman and CEOBlackRock, Inc.
Richard H. MooreState TreasurerNorth Carolina
Allen ReedPresident and CEOGeneral Motors Investment Management Corporation
■ Individual investors
Kurt P. StockerProfessorNorthwestern University
■ Listed companies
Louis C. CamilleriChairman and CEOAltria Group, Inc.
Carly FiorinaChairman and CEOHewlett-Packard Company
Jeffrey W. GreenbergChairman and CEOMarsh & McLennan Companies, Inc.
Mel KarmazinPresident and COOViacom, Inc.
B O A R D O F
E X E C U T I V E SAs of April 2004
O P E R A T I N G
C O M M I T T E E SAs of December 2003
N Y S E B O A R D C O M M I T T E E SAs of December 2003
■ Regulatory Oversight &Regulatory BudgetCommitteeMarshall N. Carter,
ChairmanShirley Ann JacksonDennis Weatherstone
■ Regulation, Enforcement& Listing StandardsCommitteeLarry W. Sonsini, ChairmanMarshall N. CarterShirley Ann JacksonDennis WeatherstoneJohn F. X. DolanA. James JacobyDoreen MogaveroWilliam B. Summers, Jr.
■ Human Resources andCompensationCommitteeD. Euan Baird, ChairmanAll Board members act as a
committee of the whole(except the CEO)
■ Nominating andGovernance CommitteeMadeleine K. Albright,
ChairmanAll Board members act as a
committee of the whole(except the CEO)
■ Audit CommitteeJames S. McDonald,
ChairmanHerbert M. Allison, Jr.Robert B. Shapiro
■ Market PerformanceCommittee
Board of Executives FloorRepresentativesJohn F. X. DolanRobert H. McCooey, Jr.Doreen M. MogaveroPeter J. Murphy
Specialist GovernorsCharles J. Bocklet IIIJoseph BongiornoStephen H. FrankKevin F.X. FeeleyMyles D. GillespieArthur Jacobson, Jr.Michael LaBranchePeter E. LaceySean McCooey
Floor Broker GovernorsJoseph M. BenantiJoseph N. CangemiRobert CunninghamRobert A. CutroRobert N. DelaneyRichard A. GennaKaren Nelson HackettRodolfo MassBernard McSherryThomas T. Thresher
Allied MemberRepresentativesRobert KarofskyAnthony D. LautoRichard LynchEdward McMahon *Robert MooreMichael O’HareWilliam Schneider
Institutional InvestorRepresentativesRichard BlockKevin Cronin **Robert FelvinciAnn C. HartwellPeter W. JenkinsSteven ListorTimothy Mahoney
* Ex-officio voting member
** Ex-officio voting member as of
December 18, 2003
■ Allocation Panel
Floor Broker MembersBradley M. BaileyPerry P. BarbJeffrey A. BushPeter S. CastelliCharles CatalanottoDermott W. ClancyPatrick J. Collins IIIRichard ComoSusan Conway
Richard DanieleChristopher P. DruckerJames C. FerrisLora GehrkeJohn P. Gilmartin, Jr.Steven G. HorowitzJames M. IngrilliThomas M. KayRobert KeenanJeffrey R. LeachWilliam V. MarsaliseJacqueline MoranJohn J. PryorEdward RodeJohn P. RuaneJames SeipMichael J. SpadaroAndrew StrobelLeigh J. Surkis
Executive Floor OfficialMembersChristopher AlbertiPeter E. KannRichard A. RosenblattDaniel W. Tandy
Senior Floor OfficialMembersJoseph A. Atanasio, Jr.Peter P. CostaAngelo DeGaetaFrank V. DeGarciaBrendan R. DowdJoseph R. JaegerJames Francis KellyDouglas F. LangeEdward T. LynchKenneth J. PolcariEdward G. SchreierBenedict P. Willis III
Allied MembersWilliam Bertsch/
Scott BacigalupoScott CohenJoseph Gervais/
Joseph ScafidiRaymond Hawkins/
Michael EagerScott Lynch/
John O’DonoghueBrian RiddleEric Weiner/Halley ZinavoyJames Whelen/
Michael Murphy
Institutional MembersMinder ChengRichard FelegyMadison GulleyLisa Marie Utasi
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A D V I S O R Y C O M M I T T E E S
T O N Y S E B O A R D O F D I R E C T O R SAs of December 2003
■ Exchange Traders Advisory Committee
Dennis SullivanCommittee ChairmanLazard Frères & Co. LLC
Angelo J. AntonucciSchwab (Charles) & Co. Inc.
Joseph A. Atanasio, Jr.BNY Brokerage Inc.
Christopher D. BurnsBear, Stearns & Co. Inc.
Arthur D. Cashin, Jr. *UBS Financial Services Inc.
Robert L. CunninghamMerrill Lynch, Pierce,Fenner & SmithIncorporated
Robert A. CutroLehman Brothers Inc.
Robert N. DelaneyCredit Suisse First Boston
Joseph L. FerrareseMorgan Stanley & Co. Inc.
Richard A. GennaGoldman Sachs & Co.
Thomas M. KayJ.P. Morgan Securities, Inc.
Douglas F. LangeUBS Securities, LLC
Edward T. LynchSuntrust Capital Markets, Inc.
William V. MarsaliseBernstein (Sanford C.) & Co., LLC
Bernard McSherryPrudential Equity Group Inc.
Michael J. NewmanEdwards (A.G.) & Sons, Inc.
Edward G. SchreierDeutsche Bank Securities Inc.
Vincent P. ShanleyCitigroup Global Markets Inc.
William J. SimpsonMcDonald Investments Inc.
Thomas T. ThresherBanc of America Securities LLC
Michael E. WhalenCIBC World Markets Corp.
* Ex-Officio Member
■ European AdvisoryCommittee
Marc Vienot Committee ChairmanSociété GénéraleFrance
Carlo De BenedettiCIR S.p.A.Italy
Gösta BystedtAB ElectroluxSweden
François CornélisTotalFinaElf S.A.Belgium
Ignacio Gomez-AceboGomez-Acebo & PomboSpain
André LeysenGevaert N.V.Belgium
Lord Marshall ofKnightsbridgeBritish Airways PlcUnited Kingdom
Sergio OrlandiniThe Netherlands
Ricardo Espirito SantoSalgadoEspirito Santo FinancialPortugal
Guido N. Schmidt-ChiariConstantia-Iso AGAustria
Jürgen StrubeBASF AGGermany
Robert StuderSwitzerland
Poul J. SvanholmDen Danske BankDenmark
Serge TchurukAlcatelFrance
Marco Tronchetti ProveraPirelli, S.p.A.Italy
Vesa VainioUPM-KymmeneCorporationFinland
Sir Iain D.T. VallanceThe Royal Bank of ScotlandEngland
Lodewijk C. van WachemZurich The Netherlands
Jarl WhistNorscan Partners S.A.Norway
■ Legal AdvisoryCommittee
Martin LiptonCommittee ChairmanWachtell, Lipton,Rosen & Katz
William T. AllenNew York University Centerfor Law & Business
Richard E.T. BennettHSBC Holdings plc
Rosemary BerkeryMerrill Lynch
Kenneth J. BialkinSkadden, Arps, Slate,Meagher & Flom
James H. Cheek III *Bass, Berry & Sims
Peter ClapmanTIAA-CREF
John C. Coates IVHarvard Law School
Thomas A. ColeSidley Austin Brown & Wood
Diana M. DanielsThe Washington Post Co.
Nicholas DeRomaNortel Networks
Frank L. FernandezThe Home Depot Inc.
Edward F. Greene *Cleary, Gottlieb,Steen & Hamilton
Linda W. Hart *The Hart Group
Dixie L. JohnsonFried, Frank, Harris,Shriver & Jacobson
Milton P. Kroll *Foley & Lardner
John M. LiftinPrudential Financial Inc.
Jonathan R. MaceyCornell Law School
Jack Nusbaum Willkie Farr & Gallagher
Kathryn A. OberlyErnst & Young LLP
Ernest T. PatrikisAmerican InternationalGroup, Inc.
Richard RoweProskauer Rose LLP
Stanley SporkinWeil, Gotshal & Manges LLC
Esta E. StecherGoldman, Sachs & Co.
Richard H. WalkerDeutsche Bank AG
Herbert S. WanderKatten Muchin Zavis Rosenman
John W. White Cravath, Swaine &Moore LLP
William J. Williams Jr.Sullivan & Cromwell
Wendell Willkie IIMeadWestvaco Corporation
■ International CapitalMarkets AdvisoryCommittee
Kurt F. ViermetzCommittee ChairmanJ.P. Morgan Chase & Co.
Richard A. DebsMorgan Stanley Dean Witter& Co.
Jeffrey EdwardsMerrill Lynch & Co.
Ambassador Richard N. GardnerMorgan, Lewis & Bockius L.L.P.
Paul B. GrosseFinTel Consultants, Inc.
Professor Trevor S. HarrisMorgan Stanley Dean Witter& Co.
Robert D. HormatsGoldman SachsInternational
Thomas E. JonesInternational AccountingStandards Board (IASB)
Ralph LaymanGE Asset Management Inc.
Martin L. LeibowitzTIAA-CREF
Edward E. MatthewsAmerican InternationalGroup, Inc.
Nassos MichasRobeco/Weiss Peck & Greer
Ikuo MoriDaiwa Securities America Inc.
Robert C. PozenHarvard Law School
S. Lawrence PrendergastLaBranche & Co. Inc.
Alan H. RappaportBank of America Private Bank
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Jeffrey R. ShaferSalomon Smith Barney International
Jeremy W. SillemBear, Stearns International Limited
Hideyuki TakahashiNomura Holding America, Inc.
Edmond D. VillaniDeutsche Asset Management
■ Institutional TradersAdvisory Committee
Kevin CroninCommittee ChairmanAIM Capital Management
Richard BlockPutnam Management Co.
Andrew M. BrooksT. Rowe Price Group
Michael H. BuekVanguard Group
Minder ChengBarclays Global Investors
Jeanne M. CostiganDavid L. Babson &Company, Inc.
Betsy CoyneColumbia ManagementAdvisors Inc.
Richard P. FelegyMorgan Stanley
Robert J. FelvinciAlliance CapitalManagement
Mark A. FlahertyWellington Management
Doreen L. GeeCapital Research &Management Company
Madison S. GulleyFranklin Templeton
Ann C. HartwellMFS InvestmentManagement
Tom HeardenStrong Capital Management
Mary McDermott-HollandFranklin PortfolioAssociates
Peter W. JenkinsDeutsche Asset Management
Jeremy LewJanus Capital Corporation
Frederic R. LexowJP Morgan Fleming Asset Management
Steven ListorBank of New York
Tim MahoneyMerrill Lynch Investment Managers
Mellany S. MoyerColorado Public EmployeesRetirement Association
Michael RyanState Street Research &Management Company
Lisa Marie UtasiSmith Barney AssetManagement
■ Upstairs TradersAdvisory Committee
Benjamin S. BramGoldman Sachs & Co.
James DeasyCredit Suisse First Boston
John M. DonahueFidelity Investments
Timothy J. HeekinThomas Weisel Partners, Inc.
James ManfredoniaBear Stearns & Co. Inc.
David MemmottMorgan Stanley
Michael L. MurphyWachovia Securities
Michael J. NewmanCitigroup Global Markets
Michael O’HareLehman Brothers, Inc.
Ciaran T. O’KellyBanc of America Securities
Gregory RosenbergDeutsche Bank Securities
William A. SchneiderUBS Securities
■ Listed CompanyAdvisory Committee
Brian L. HallaCommittee ChairmanNational SemiconductorCorporation
Edward W. BarnholtAgilent Technologies
Robert E. BeauchampBMC Software Inc.
Eric F. BillingsFriedman, Billings, RamseyGroup Inc.
Jack O. Bovender Jr.HCA
John S. ChenSybase Inc.
Janet DolanTennant
Ronald W. DollensGuidant Corporation
Anthony F. Earley Jr.DTE Energy Company
Michael FeuerOfficeMax, Inc.
Paul D. FinkelsteinRegis Corporation
Paul R. GarciaGlobal Payments Inc.
Kerry K. KillingerWashington Mutual Inc.
Stephen J. LuczoSeagate Technology
Jeffrey L. McWatersAMERIGROUPCorporation
William T. MonahanImation Corp.
George SamenukNetwork Associates, Inc.
Joseph V. TarantoEverest Group Ltd.
Lawrence A. WeinbachUnisys Corporation
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■ Individual InvestorsAdvisory Committee
Kurt P. StockerCommittee ChairmanNorthwestern UniversityMedill School of Journalism
Stephen Buckles *Vanderbilt University
Randall R. EleyThe Edgar Lomax Company
David GardnerThe Motley Fool Inc.
Paula L. Gavin *YMCA of Greater New York
Joe Grills
Christopher W. HansenAARP
Frederick W. HillJP Morgan Chase & Co.
Kenneth S. JankeNational Association ofInvestors Corp.
Myron KandelCNN
John J. LaFalceCanisius College
Edward J. MalloyBuilding & ConstructionTrades Council of GreaterNew York
Hervey C. Parke IIIInternational BusinessMachines
Veronica PollardToyota MotorNorth America, Inc.
James P. ProutTaylor Rafferty
Thomas E. StitzelBoise State University
■ Pension ManagersAdvisory Committee
Myra DruckerCommittee ChairpersonGM Asset Management,GM Trust Co.
Mark AnsonCalPERS
Mary CahillEmory UniversityEndowment
Donna J. DeanRockefeller Foundation
David P. Feldman *AT&T InvestmentManagement Corp.
Gary A. Glynn *U. S. Steel & CarnegiePension Fund
T. Britton HarrisVerizon InvestmentManagement Corp.
Rawdon McArthurBellSouth
John MyersGeneral Electric AssetManagement
George PhilipNew York State TeachersRetirement System
D. Ellen ShumanCarnegie Corporation
Coleman StipanovichFlorida State Board ofAdministration
Pervis ThomasShell Oil Company
William C. Thompson Jr.NYC Comptroller’s Office
■ Latin AmericaAdvisory Committee
Jorge Paulo Lemann Committee ChairmanGP Investimentos S/C Ltda.Brazil
Andronico Luksic C.Committee Vice ChairmanBanco de ChileChile
Albert J. CussenViña Concha y ToroChile
Fernando Xavier FerreiraTelefonica Group in BrazilBrazil
Carlos Ferreyros A.Ferreyros S.A.Peru
Ing. Dionisio Garza MedinaAlfaMexico
Claudio X. GonzalezKimberly-Clark de MexicoMexico
Erling S. LorentzenAracruz Celulose S.A.Brazil
Carlos Slim H.Telefonos de Mexico andGrupo CarsoMexico
Gustavo Vollmer A.CorpalmarVenezuela
Lorenzo H. ZambranoCEMEXMexico
■ Asia PacificAdvisory Committee
Washington SyCipCommittee ChairmanThe SGV GroupPhilippines
Don R. ArgusBHP BillitonAustralia
Rahul BajajBajaj Auto LimitedIndia
Morris ChangTaiwan SemiconductorManufacturing Co., Ltd.Taiwan
Hugh A. FletcherFletcher Challenge Ltd.New Zealand
Toyoo GyohtenInstitute for InternationalMonetary AffairsJapan
Douglas Tong HsuFar Eastern Textile GroupTaiwan
Nobuyuki IdeiSony CorporationJapan
K.V. KamathICICI LimitedIndia
Minoru MakiharaMitsubishi CorporationJapan
Chumpol NaLamliengThe Siam Cement PublicCompany Ltd.Thailand
Shijuro OgataJapan Development BankJapan
Azim H. PremjiWIPROIndia
John B. PrescottAustralian SubmarineCorporation Pty Ltd.Australia
Ratan N. TataTata Industries LimitedIndia
Edward Sunning TianChina NetcomCorporation Ltd.China
Marjorie YangEsquel Group of CompaniesHong Kong
Wee Cho YawUnited Overseas Bank Ltd.Singapore
Jaime Augusto Zobel deAyala, IIAyala CorporationPhilippines
* Ex-Officio Member
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N E W F I R M S
A D M I T T E D I N 2 0 0 3N E W E Q U I T Y
M E M B E R S
Christopher M. Alegre
Sharon M. Aprilante
Michelle L. Arenson
Derek Barnes
Frederick B. Bond
James C. Bossert
Thomas S. Caldwell
John R. Carty
Robert J. Chersi
Timothy M. Clorite
Peter J. Coleman, Jr.
Brian D. Conroy
Paul Corvino
James T. Crowley
David J. Cunningham
Michael A. DiCaprio
Sean F. Dillon
Robert T. Dorey
Christopher A. Dowling
Rohit M. D’Souza
Gary M. Esayian
Joseph L. Ferrarese
Shane D. Finemore
Renee R. Frank
David M. Gelber
Charles E. Grose
Robert Grubert
Richard D. Gueren
Jeffrey S. Hersch
Douglas E. Hill
David A. Horowitz
Kevin Y. Hoshino
John P. Hughes
Estelle J. Ivker
Declan P. Kelly
Mitchell J. Lieberman
Coleen E. Maguire
Simon H. Mansell
Stephen M. Martini
Mary C. McCooey
Anne F. McLaughlin
Miriam F. Meehan
Craig C. Messinger
David J. Miller
Lisa A. Minero
Carey S. Pack
Steven Paraggio
Brian F. Peters
Paul A. Pricoli
Ronald A. Purpora
John P. Ragan
Andrew Reich
Richard W. Reinemann, Jr.
Mathias K. Roberts
Shane M. Rogers
Donna A. Sabatini
Ronald A. Safir
Donna Lee Sawan
Brian A. Sears
Barbara J. Seskis
Brian T. Shea
William L. Short, III
Martin T. Sosnoff
Craig J. Spector
Michael A. Spencer
Jeffrey S. Swartz
Richard A. Thornton
Janet B. Valvano
Robert J. Virgilio
Patrick J. Whalen
The NYSE also admitted 60new Lessees, 6 newElectronic Access and 1 newPhysical Access Membersin 2003.
Number of memberships atYear End:
1,366 Equity of which 957have been leased toLessee members
29 Electronic Access4 Physical Access
1,399 Total
Intrade, LLCElectronic Access MemberNew York, NYTrading
MJQ Securities Corp.LesseeNew York, NYFloor Brokerage
Shue Securities, Inc.LesseeNew York, NYFloor Brokerage
Troy Securities, Inc.LesseeNew York, NYGeneral Brokerage
Global Direct Equities,LLCLesseeNew York, NYFloor Brokerage
Integra Securities Corp.LesseeNew York, NYFloor Brokerage
Marquis Holdings, Inc.LesseeNew York, NYFloor Brokerage
JTR Securities LLCEquityNew York, NYFloor Brokerage
Baseline Securities, Inc.LesseeNew York, NYFloor Brokerage
A.L. Sarroff, LLCEquityNew York, NYRCMM/Trading
Wachovia CapitalMarkets, LLCEquityCharlotte, NCClearing/Carrying
Keeler & Co., LLCLesseeHarrington Park, NJGeneral Brokerage
Gilt-Edged Securities, Inc.LesseeNew York, NYFloor Brokerage
Ethos Securities Corp.LesseeNew York, NYGeneral Brokerage
Joseph A. Sangimino, Inc.LesseeStaten Island, NYFloor Brokerage
Dermott W. Clancy Corp.LesseeNew York, NYGeneral Brokerage
Kellogg PartnersInstitutional Services LLCEquityNew York, NYGeneral Brokerage
DFH Equities Inc.LesseeNew York, NYFloor Brokerage
HYY Forbes, LLCLesseeNew York, NYFloor Brokerage
PMJ Securities, Inc.LesseeNew York, NYFloor Brokerage
G.P. Direct Corp.LesseeNew York, NYGeneral Brokerage
N Y S E O F F I C E R SAs of April 2004
John S. ReedChairman
John A. ThainChief Executive Officer
Richard G. Ketchum*
Chief Regulatory Officer
Robert G. BritzPresident and Co-ChiefOperating Officer
Catherine R. KinneyPresident and Co-ChiefOperating Officer
Richard P. BernardGeneral Counsel
Amy S. Butte**
Chief Financial Officer
■ Executive Vice Presidents
Noreen M. CulhaneCorporate Listings &Compliance
David P. Doherty†
Enforcement
Richard A. Edgar
Edward A. KwalwasserRegulation
Salvatore Pallante†
Member Firm Regulation
Bryant W. Seaman IIIInternational
Robert T. ZitoCommunications
■ Senior Vice Presidents
Richard C. AdamonisCommunications
Anne E. AllenFloor Operations
Paul B. BennettChief Economist
Dale B. BernsteinHuman Resources andAdministration
Roger BurkhardtChief Technology Officer
James L. Cochrane†
Strategy & Planning
James F. DuffyAssociate General Counsel
James C. EspositoSecurity
William M. FreemanAssociate General Counsel
Keith R. Helsby††
Chief Financial Officer
Robert J. McSweeneyCompetitive Position
Christopher R. MorinEurope, Africa &Middle East Region
Alain Y. MorvanInternational Relations
Regina C. MysliwiecMarket Surveillance
Louis G. PastinaNext Generation Trading Floor
Richard L. Ribbentrop††
Government Relations
Thomas E. VeitListing and Client Service
■ Vice Presidents
David W. BartgesTrading Technology
Raymond L. BellListing and Client Service
Daniel BeydaArbitration and ChiefHearing Officer
Samir BhaumikListing and Client Service
Ananias Blocker IIIGovernment Relations
Peter E. BoyleCorporate Infrastructure
Mary L. BrienzaCorporate Audit andRegulatory Quality Review
Judith A. BryngilMarket Trading Analysis I
James G. BuckleyMember Trading I
Michael C. CohenMarketing Communications
David R. GriffithsEurope, Africa &Middle East Region
Thomas E. HaleyMarket Data
Ronald JordanMarket Data Products
Susan E. LightEnforcement 1/Sales Practice
Robert A. MarchmanEnforcement 2
Aldo J. MartinezMarket Trading Analysis II
Elaine S. MichitschRegulatory Development &Services
Rex W. Mixon, Jr.Enforcement 3
Bruce J. MottoReal Estate & Facilities
Janice S. O’NeillCorporate Compliance
Richard A. PecheurEquity Sales &Client Service
Angela A. PosillicoRegulatory &Corporate Systems
Anand K. RamtahalMember Firm Regulation
Michael G. RufinoMember Firm Regulation
Daniel SaporitoMember Trading II
Milton M. SteinHearing Officer
Glenn W. TyranskiFinancial Compliance
Donald van WeezelRegulatory Affairs
Robin L. WeissInvestment BankingServices
William J. WollmanMember Firm Regulation
■ Assistant Vice President
I. Bruce DavisEnforcement
■ Chief of Staff
David L. Shuler
■ Controller
Alan Holzer
■ Corporate Secretary
Darla C. Stuckey
■ Assistant Secretary
Mary C. Yeager
* On March 8, 2004, Richard G.Ketchum assumed the role ofChief Regulatory Officer.
** On April 12, 2004, Amy S. Butteassumed the role ofChief Financial Officer.
† Retired April 1, 2004
†† Retirement effective May 1, 2004
NY
SE
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“ Our obligation and responsibility is to provide the highest-quality
and most cost-efficient equities market, one beyond reproach.
We strive to provide investors the best price when buying
and selling stock, to ensure the fairest and most open market, and
to optimize value for issuers and all constituents. No market
does more or works harder for its customers than the NYSE.”John A. Thain, Chief Executive Officer
To ensure the future success of the NYSE, the Exchange is
committed to creating and maintaining a culture that fosters an
inclusive, diverse work force and an environment in which
every employee has an opportunity to be successful to the full
extent of his or her ability.
D I V E R S I T Y S T A T E M E N T
Designed and produced by Taylor & Ives, Inc., NYC
Project management by CN Communications
Printed by tanaseybert on paper manufactured by StoraEnso
Photography credits:
David Allison: cover, inside front cover, and pages 1, 13 (right), 14,20, 50 and inside back cover
James Salzano, Salzano Studios: pages 5, 7, 8, 12, 13(left), 21 , page 42
Mel Nudelman and Tammy Gray, Media Photo Group, Inc.: pages 15, 17 and 18
Courtesy of John S. Reed: page 3
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