[Federal Register Volume 78, Number 162 (Wednesday, August 21, 2013)]
[Notices]
[Pages 51758-51765]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-20338]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-70210; File Nos. SR-NYSE-2013-42; SR-NYSEMKT-2013-50;
SR-NYSEArca-2013-62)
Self-Regulatory Organizations; New York Stock Exchange LLC; NYSE
MKT LLC; NYSE Arca, Inc.; Order Granting Approval of Proposed Rule
Change Relating to a Corporate Transaction in Which NYSE Euronext Will
Become a Wholly-Owned Subsidiary of IntercontinentalExchange Group,
Inc.
August 15, 2013.
I. Introduction
On June 14, 2013, each of New York Stock Exchange LLC
(``Exchange''), NYSE MKT LLC (``NYSE MKT''), and NYSE Arca, Inc.
(``NYSE Arca'' and, with the Exchange and NYSE MKT, the ``NYSE
Exchanges''), filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) \1\ of the Securities
Exchange Act of 1934 (``Act''),\2\ and Rule 19b-4 thereunder,\3\
proposed rule changes in which NYSE Euronext Holdings LLC (``NYX
Holdings''), the successor entity to the NYSE Exchanges' indirect
parent, NYSE Euronext (``NYSE Euronext''), will become a wholly-owned
subsidiary of IntercontinentalExchange Group, Inc. (``ICE Group'') The
proposed rule changes were published for comment in the Federal
Register on July 1, 2013.\4\ The Commission received one comment letter
on the NYSE proposal.\5\ The Exchange filed a response to these
comments on August 8, 2013.\6\
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
\4\ See Securities Exchange Act Release Nos. 69851 (June 25,
2013), 78 FR 39407 (July 1, 2013) (SR-NYSE-2013-42) (``Notice'');
69849 (June 25, 2013), 78 FR 39369 (July 1, 2013)(SR-NYSEMKT-2013-
50) (``NYSEMKT Notice''); 69850 (June 25, 2013), 78 FR 39352 (July
1, 2013) (SR-NYSEArca-2013-62) (``NYSE Arca Notice'').
\5\ See Letter to Commission, from Andrew Rothlein, dated July
11, 2013 (``Rothlein Letter'').
\6\ See letter from Janet McGinness, NYSE, to Elizabeth M.
Murphy, Secretary, Commission, dated August 8, 2013 (``NYSE Response
to Comment''). On August 12, 2013, the Commission received a
rebuttal letter to the NYSE Response to Comments (the ``Rothlein
Rebuttal Letter'').
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The Commission has reviewed carefully the proposed rule changes,
the comment letter, and finds that the proposed rule changes are
consistent with the requirements of the Act and the rules and
regulations thereunder applicable to a national securities exchange.\7\
In particular, the Commission finds that the proposed rule changes are
consistent with Section 6(b) of the Act,\8\ which, among other things,
requires a national securities exchange to be so organized and have the
capacity to be able to carry out the purposes of the Act and to enforce
compliance by its members and persons associated with its members with
the provisions of the Act, the rules and regulations thereunder, and
the rules of the exchange, and assure the fair representation of its
members in the selection of its directors and administration of its
affairs, and provide that one or more directors shall be representative
of issuers and investors and not be associated with a member of the
exchange, broker, or dealer. Section 6(b) of the Act \9\ also requires
that the rules of the exchange be designed to promote just and
equitable principles of trade, to remove impediments to and perfect the
mechanism of a free and open market and a national market system, and,
in general, to protect investors and the public interest.
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\7\ In approving the proposed rule changes, the Commission has
considered their impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
\8\ 15 U.S.C. 78f(b).
\9\ Id.
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II. Discussion
The Exchange, NYSE MKT and NYSE Arca have submitted their proposed
rule changes in connection with the proposed business combination (the
``Combination'') pursuant to which NYSE Euronext's successor entity,
NYSE Euronext Holdings LLC (``NYX Holdings''), will become a wholly-
owned subsidiary of ICE Group.
NYSE Euronext owns 100% of the equity interest of NYSE Group, Inc.,
a Delaware corporation (``NYSE Group''), which in turn directly or
indirectly owns (1) 100% of the equity interest of the NYSE Exchanges
and, (2) 100% of the equity interest of NYSE Market (DE), Inc. (``NYSE
Market''), NYSE Regulation, Inc. (``NYSE Regulation''), NYSE Arca
L.L.C., NYSE Arca Equities, Inc. (``NYSE Arca Equities'') and NYSE Amex
Options LLC (``NYSE Amex Options'') (the NYSE Exchanges, together with
NYSE Market, NYSE Regulation, NYSE Arca L.L.C., NYSE Arca Equities,
NYSE Amex Options and any similar U.S. regulated entity acquired, owned
or created after the date hereof, the ``U.S. Regulated Subsidiaries''
and each, a ``U.S. Regulated Subsidiary'').
IntercontinentalExchange, Inc. (``ICE'') is an operator of
regulated exchanges and clearing houses serving the risk management
needs of global markets for agricultural, credit, currency, emissions,
energy and equity index products. ICE owns ICE Futures Europe, ICE
Futures U.S., Inc., ICE Futures Canada, Inc., ICE U.S. OTC Commodity
Markets, LLC, and five central counterparty clearing houses, including
ICE Clear Europe Limited and ICE Clear Credit LLC, each of which is
registered as a clearing agency under Section 17A of the Exchange
Act,\10\ ICE Clear U.S., Inc., ICE Clear Canada, Inc., and The Clearing
Corporation, and owns 100% of the equity in Creditex Group Inc., which
in turn indirectly owns Creditex Securities Corporation. Neither ICE
Group nor any company owned by it directly or indirectly, including,
but not limited to, those referenced in this paragraph, is a registered
national securities exchange or a member of any U.S. Regulated
Subsidiary.
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\10\ 15 U.S.C. 78q-1.
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As a result of the Combination, the businesses of ICE and NYSE
Euronext, including the U.S. Regulated Subsidiaries, will be held under
ICE Group as a single publicly traded holding company that will be
listed on the Exchange. The proposed rule changes are necessary to
effectuate the consummation of the Combination and will not be
operative until the date of the consummation of the Combination (the
``Closing Date''). The proposed rule changes and exhibits thereto
contain modifications to the underlying corporate governance documents
of the U.S. Regulated Subsidiaries and their respective direct and
indirect owners that reflect the current structure of the Combination.
The Commission notes that any changes to the structure of the
Combination that are made subsequent to the date of this approval order
but
[[Page 51759]]
prior to the Closing Date may be considered additional proposed rule
changes required to be filed with and approved by the Commission
pursuant to Section 19 of the Act.\11\ In addition, the Commission
notes that, if the Combination is not consummated, the proposed rule
changes will not become effective.
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\11\ 15 U.S.C. 78s.
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A. Corporate Structure
Following the Combination, the successor to NYSE Euronext, the NYSE
Exchanges' indirect parent, NYX Holdings, will be a wholly-owned
subsidiary of ICE Group.\12\ ICE Group will hold all of the equity
interests in ICE, which will continue its current operations, and in
NYX Holdings, which will hold (1) 100% of the equity interests of NYSE
Group (which, in turn, would continue to directly or indirectly hold
100% of the equity interests of the U.S. Regulated Subsidiaries) and
(2) 100% of the equity interest of Euronext N.V. (``Euronext'') (which,
in turn, directly or indirectly holds 100% of the equity interests of
trading markets in Belgium, France, the Netherlands, Portugal and the
United Kingdom). ICE's common stock is listed on the Exchange under the
symbol ``ICE,'' and following the completion of the Combination, ICE
Group common stock is expected to be listed for trading on the Exchange
under the same symbol.
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\12\ ICE Group is currently a wholly-owned subsidiary of ICE.
ICE Group in turn has two wholly-owned subsidiaries, ICE Merger Sub,
a Delaware corporation, and NYSE Euronext Merger Sub, a Delaware
limited liability company. To effect the Combination, (1) ICE Merger
Sub will be merged with and into ICE (the ``ICE Merger''), with ICE
as the surviving corporation and a wholly-owned subsidiary of ICE
Group, and (2) immediately following the ICE Merger, NYSE Euronext
shall be merged with and into NYSE Euronext Merger Sub, with NYSE
Euronext Merger Sub as the surviving company and a wholly-owned
subsidiary of ICE Group (the ``NYSE Euronext Merger''). NYSE
Euronext Merger Sub, as the surviving entity in the NYSE Euronext
Merger, will change its name to ``NYX Holdings'' from and after the
closing of the Combination.
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The NYSE Exchanges represent that the Combination will have no
effect on the ability of any party to trade securities on the NYSE
Exchanges. Other than as described herein, the NYSE Exchanges also
represent that ICE Group will not make any changes to the regulated
activities of the U.S. Regulated Subsidiaries in connection with the
Combination. If ICE Group determines to make any such changes to the
regulated activities of any U.S. Regulated Subsidiary, it will seek the
approval of the Commission.
A core aspect of the structure of the Combination is that it would
maintain local regulation of the marketplace, members, and issuers.
Therefore, securities exchanges, members, and issuers of the U.S.
Regulated Subsidiaries will continue to be regulated in the same manner
as they are currently regulated. The Commission notes that this
conclusion (i.e., that securities exchanges, members, and issuers of
the U.S. Regulated Subsidiaries will continue to be regulated in the
same manner as they are currently regulated) is based on the structure
of the Combination as described in this proposal.
1. ICE Group
Following the Combination, ICE Group will be a for-profit, publicly
traded corporation that will act as a holding company for the
businesses of NYX Holdings and ICE. ICE Group will hold (i) all of the
equity interests in NYX Holdings, which in turn, directly or indirectly
holds 100 percent of the equity interests of the U.S. Regulated
Subsidiaries, and (ii) all of the equity interests in ICE. Section
19(b) of the Act and Rule 19b-4 thereunder require a self-regulatory
organization (``SRO'') to file proposed rule changes with the
Commission. Although ICE Group is not an SRO, certain provisions of its
amended and restated Certificate of Incorporation (``ICE Group
Certificate'') and amended and restated Bylaws (``ICE Group Bylaws'',
and together with the ICE Group Certificate, ``the ICE Group
Articles''), along with other corporate documents, are rules of an
exchange \13\ if they are stated policies, practices, or
interpretations, as defined in Rule 19b-4 under the Act, of the
exchange, and must be filed with the Commission pursuant to Section
19(b)(4) of the Act and Rule 19b-4 thereunder. Accordingly, the NYSE
Exchanges have filed the proposed ICE Group Articles, along with other
corporate documents, with the Commission.
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\13\ See Section 3(a)(27) of the Act, 15 U.S.C. 78c(a)(27). If
ICE Group decides to change the ICE Group Articles, ICE Group must
submit such change to the board of directors of the U.S. Regulated
Subsidiaries, and if any or all of such board of directors shall
determine that such amendment must be filed with or filed with and
approved by the Commission pursuant to Section 19 of the Act and the
rules thereunder, such change shall not be effective until filed
with or filed with and approved by the Commission, as applicable.
See proposed ICE Group Certificate, Article X; proposed ICE Group
Bylaws, Section 11.3.
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Voting and Ownership Limitations
The proposed ICE Group Articles include restrictions on the ability
to vote and own shares of stock of ICE Group. Under the proposed ICE
Group Certificate (1) no person, either alone or together with its
related persons,\14\ may be entitled to vote or cause the voting of
shares of stock of ICE Group beneficially owned by such person or its
related persons, in person or by proxy or through any voting agreement
or other arrangement, to the extent that such shares represent in the
aggregate more than 10% of the then outstanding votes entitled to be
cast on such matter, and (2) no person, either alone or together with
its related persons, may acquire the ability to vote more than 10% of
the then outstanding votes entitled to be cast on any such matter by
virtue of agreements or arrangements entered into with other persons to
refrain from voting shares of stock of ICE Group (the ``ICE Group
Voting Restriction'').\15\ The ICE Group Certificate will require ICE
Group to disregard any votes purported to be cast in excess of the ICE
Group Voting Restriction.
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\14\ See proposed ICE Group Certificate, Article V, Section
A(13).
\15\ See proposed ICE Group Certificate, Article V, Section A.
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In addition, the ownership restrictions in the ICE Group
Certificate would provide that no person, either alone or together with
its related persons, may at any time own beneficially shares of ICE
Group representing in the aggregate more than 20% of the then
outstanding votes entitled to be cast on any matter (the ``ICE Group
Ownership Restrictions'').\16\ If any person, either alone or together
with its related persons, owns shares of ICE Group in excess of the ICE
Group Ownership Restriction, then such person and its related persons
are obligated to sell promptly, and ICE Group is obligated to purchase
promptly, at a price equal to the par value of such shares and to the
extent funds are legally available for such purchase, the number of
shares of ICE Group necessary so that such person, together with its
related persons, will beneficially own shares of ICE Group representing
in the aggregate no more than 20% of the then outstanding votes
entitled to be cast on any matter, after taking into account that such
repurchased shares will become treasury shares and will no longer be
deemed to be outstanding.\17\
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\16\ See proposed ICE Group Certificate, Article V, Section B.
\17\ See proposed ICE Group Certificate, Article V, Section B.4.
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The ICE Group Certificate would provide that the ICE Group Voting
Restriction and the ICE Group Ownership Restriction would apply only
for so long as ICE Group directly or indirectly controls a U.S.
Regulated
[[Page 51760]]
Subsidiary or a European Market Subsidiary.\18\
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\18\ See proposed ICE Group Certificate, Article V, Section A.1.
and B.1.
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The ICE Group board of directors may waive the provisions regarding
voting and ownership limits, subject to a determination by the ICE
Group board of directors that the exercise of such voting rights (or
the entering into of a voting agreement) or ownership, as applicable:
Will not impair the ability of any of the U.S. Regulated
Subsidiaries, ICE Group, or NYSE Group to discharge their respective
responsibilities under the Act and the rules and regulations
thereunder;
Will not impair the ability of any of the European Market
Subsidiaries, ICE Group, or Euronext to discharge their respective
responsibilities under the European Exchange Regulations; \19\
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\19\ See proposed ICE Group Bylaws, Article III, Section 3.15(b)
and (e) for the definitions of ``European Exchange Regulations'' and
``European Market Subsidiary'', respectively.
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Is otherwise in the best interest of ICE Group, its
shareholders, the U.S. Regulated Subsidiaries and the European Market
Subsidiaries; and
Will not impair the Commission's ability to enforce the
Act or the European Regulators' ability to enforce the European
Exchange Regulations.\20\
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\20\ See proposed ICE Group Certificate, Article V, Section
A.11. for the definition of ``European Regulator.''
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Such resolution expressly permitting such voting or ownership must be
filed with and approved by the Commission under Section 19 of the Act
\21\ and filed with and approved by each European Regulator having
appropriate jurisdiction and authority.
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\21\ 15 U.S.C. 78s.
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In addition, for so long as ICE Group directly or indirectly
controls the Exchange, NYSE Market (DE), Inc., NYSE MKT, NYSE Arca,
NYSE Arca Equities Inc. or any facility of NYSE Arca or NYSE MKT, the
ICE Group board of directors cannot waive the voting and ownership
limits above the 20% threshold for any person if such person or its
related persons is a member of NYSE or NYSE MKT, an ETP Holder of NYSE
Arca Equities,\22\ or an OTP Holder or an OTP Firm of NYSE Arca.\23\
Further, the ICE Group board of directors also cannot waive the voting
and ownership limits above the 20% threshold if such person or its
related persons is subject to any statutory disqualification (as
defined in Section 3(a)(39) of the Act) (a ``U.S. Disqualified
Person'') or has been determined by a European Regulator to be in
violation of laws or regulations adopted in accordance with the
European Directive on Markets in Financial Instruments applicable to
any European Market Subsidiary requiring such person to act fairly,
honestly and professionally (a ``European Disqualified Person'').\24\
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\22\ ``ETP Holder'' is defined in NYSE Arca Equities Rule
1.1(m). ``OTP Holder'' and ``OTP Firm'' are defined, respectively,
in NYSE Arca Rule 1.1(q) and 1.1(r).
\23\ See proposed ICE Group Certificate, Article V, Section A.3.
\24\ Id.
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Members that trade on an exchange traditionally have had ownership
interests in such exchange. As the Commission has noted in the past,
however, a member's interest in an exchange could become so large as to
cast doubt on whether the exchange can fairly and objectively exercise
its self-regulatory responsibilities with respect to that member.\25\ A
member that is a controlling shareholder of an exchange might be
tempted to exercise that controlling influence by directing the
exchange to refrain from, or the exchange may hesitate to, diligently
monitor and surveil the member's conduct or diligently enforce its
rules and the federal securities laws with respect to conduct by the
member that violates such provisions.\26\
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\25\ See, e.g., Securities Exchange Act Release Nos. 62716
(August 13, 2010), 75 FR 51295
(August 19, 2010) (File No. 10-198) (order approving
registration application of BATS Y-Exchange, Inc. as a national
securities exchange); 61698 (March 12, 2010), 75 FR 13151 (March 18,
2010) (File Nos. 10-194 and 10-196) (order approving registration
applications of EDGX Exchange, Inc. and EDGA Exchange, Inc. as
national securities exchanges); 58375 (August 18, 2008), 73 FR 49498
(August 21, 2008) (File No. 10-182) (order approving registration
application of BATS Exchange, Inc. as a national securities
exchange); 55293 (February 14, 2007), 72 FR 8033 (February 22, 2007)
(SR-NYSE-2006-120) (order approving proposed combination between
NYSE Group, Inc. and Euronext N.V. (``NYSE-Euronext Merger Order'');
53382 (February 27, 2006), 71 FR 11251 (March 6, 2006) (SR-NYSE-
2005-77) (order approving merger of New York Stock Exchange, Inc.
and Archipelago, and demutualization of New York Stock Exchange,
Inc.) (``NYSE Inc.-Archipelago Merger Order'')); 53128 (January 13,
2006), 71 FR 3550 (January 23, 2006) (File No. 10-131); 51149
(February 8, 2005), 70 FR 7531 (February 14, 2005) (SR-CHX-2004-26);
49718 (May 17, 2004), 69 FR 29611 (May 24, 2004) (SR-PCX-2004-08);
49098 (January 16, 2004), 69 FR 3974 (January 27, 2004) (SR-Phlx-
2003-73); and 49067 (January 13, 2004), 69 FR 2761 (January 20,
2004) (SR-BSE-2003-19).
\26\ See, e.g., id.
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The Commission finds the ownership and voting restrictions in the
proposed ICE Group Articles are consistent with the Act. These
requirements should minimize the potential that a person could
improperly interfere with or restrict the ability of the Commission,
the Exchange, or its subsidiaries to effectively carry out their
regulatory oversight responsibilities under the Act.\27\
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\27\ See, e.g., NYSE-Euronext Merger Order, 72 FR at 8037.
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2. NYX Holdings and NYSE Group
Following the Combination, NYX Holdings will be a wholly-owned
subsidiary of ICE Group. Furthermore, NYX Holdings will not be a
publicly-held company. The NYSE Exchanges have proposed certain changes
to reflect that NYX Holdings will become a wholly-owned subsidiary and
will not be publicly held. NYX Holdings will act as a holding company
for the businesses of the NYSE Group and Euronext. NYX Holdings will
own all of the equity interests in NYSE Group and its subsidiaries,
including the Exchange, NYSE Arca, and NYSE MKT, and all of the equity
interests in Euronext and its respective subsidiaries.\28\ Section
19(b)
[[Page 51761]]
of the Act and Rule 19b-4 thereunder require a SRO to file proposed
rule changes with the Commission. Although NYX Holdings and NYSE Group
are not SROs, certain provisions of the proposed NYX Holdings Operating
Agreement and NYSE Group's Third Amended and Restated Certificate of
Incorporation (``NYSE Group Certificate of Incorporation'') \29\ are
rules of an exchange \30\ if they are stated policies, practices, or
interpretations, as defined in Rule 19b-4 under the Act, of the
exchange, and must be filed with the Commission pursuant to Section
19(b)(4) of the Act and Rule 19b-4 thereunder. Accordingly, the NYSE
Exchanges have filed the proposed NYX Holdings Operating Agreement and
the proposed NYSE Group Certificate of Incorporation with the
Commission.
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\28\ NYX Holdings, as a Delaware limited liability company, will
operate pursuant to an operating agreement (the ``NYX Holdings
Operating Agreement''). The NYX Holdings Operating Agreement is
largely based on the organizational documents of NYSE Euronext,
which would cease to be in effect. The NYX Holdings Operating
Agreement would modify the current NYSE Euronext's organizational
documents to (1) simplify and provide for a more efficient
governance and capital structure that is appropriate for a wholly-
owned subsidiary; (2) conform certain provisions to analogous
provisions of the organizational documents of NYSE Group, which will
likewise be an indirect wholly-owned subsidiary of ICE Group
following completion of the Combination; and (3) make certain
clarification and technical edits (for example, to conform the use
of defined terms and other provisions, and to update cross-
references to sections). In addition, the current Independence
Policy of the NYSE Euronext board of directors would cease to be in
effect.
More specifically, the NYX Holdings Operating Agreement would
reflect, in part, the following modifications to the NYSE Euronext
Certificate and Bylaws: (i) removing the provision for preferred
membership interests, (ii) allowing a majority of the membership
interests outstanding to call special meetings, take shareholder
action by written consent, and to postpone such meetings, (iii)
allowing shareholders to fill board vacancies, (iv) deleting
provisions requiring a supermajority vote of shareholders to amend
or repeal certain sections of the NYX Holdings Operating Agreement,
(v) clarifying that notice of shareholder meetings is not required
if waived, (vi) deleting the requirement that directors be elected
by a majority of the votes cast, (vii) deleting provisions requiring
advance notice from shareholders of shareholder director nominations
or shareholder proposals, (viii) deleting provisions relating to the
mechanics of shareholders' meetings, such as the appointment of an
inspector of elections, (ix) clarifying that NYX Holdings may not
have a Nominating and Governance Committee, (x) deleting the
requirement that 75% of the Euronext board must be independent, (xi)
providing that the Corporation Trust Company would be the registered
office and agent of NYX Holdings in Delaware, (xii) removing certain
residency requirements applicable to directors and officers and
references to U.S. and European director domiciles, (xiii) deleting
that board meetings be held with equal frequency in the United
States and Europe, (xiv) removing provisions related to
participation requirements when the chairman or deputy chairman of
the board of directors is also the chief executive officer or deputy
chief executive officer, and (xv) simplifying certain aspects of the
indemnification and expense advancement provisions in light of the
fact that there are not expected to be any independent, non-
executive directors of NYX Holdings.
\29\ Generally, the NYSE Exchanges propose, in part, the
following changes to NYSE Group's Certificate of Incorporation: (i)
clarifying the ability to fix the number of directors and making the
board's ability to remove directors subject to the rights of holder
of preferred stock; (ii) amending to contemplate successors to NYSE
Euronext as the holder of all of the issued and outstanding shares
of NYSE Group for purposes of the NYSE Trust Agreement, (iii)
clarifying that the voting and ownership concentration limits would
be effective ``for so long as the Corporation shall control,
directly or indirectly'' a U.S. Regulated Subsidiary, (iv) amending
the definition of ``Regulated Subsidiary'' in the NYSE Group Bylaws,
and (v) making certain clarifications and technical edits.
\30\ See Section 3(a)(27) of the Act, 15 U.S.C. 78c(a)(27). If
NYX Holdings decides to change its Certificate of Incorporation or
Bylaws, NYX Holdings must submit such change to the board of
directors of the Exchange, NYSE Market, NYSE Regulation, NYSE MKT,
NYSE Arca Equities and NYSE Arca, and if any or all of such board of
directors shall determine that such amendment or repeal must be
filed with or filed with and approved by the Commission pursuant to
Section 19 of the Act and the rules thereunder, such change shall
not be effective until filed with or filed with and approved by the
Commission, as applicable. See proposed NYX Holdings Operating
Agreement, Section 16. If NYSE Group decides to change its
Certificate of Incorporation or Bylaws, NYSE Group must submit such
change to the board of directors of the Exchange, NYSE Market, NYSE
Regulation, NYSE MKT, NYSE Arca Equities and NYSE Arca, and if any
or all of such board of directors shall determine that such
amendment or repeal must be filed with or filed with and approved by
the Commission pursuant to Section 19 of the Act and the rules
thereunder, such change shall not be effective until filed with or
filed with and approved by the Commission, as applicable. See
proposed NYSE Group Certificate of Incorporation, Article XII.
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Voting and Ownership Limitations; Changes in Control
The NYSE Exchanges have proposed changing the voting and ownership
limitations of NYX Holdings to include a statement that such
limitations would not be applicable as long as ICE Group owned all of
the issued and outstanding shares of NYX Holdings \31\ and only for so
long as NYX Holdings directly or indirectly controls any U.S. Regulated
Subsidiary or any European Market Subsidiary.\32\ Instead, while NYX
Holdings is a wholly-owned subsidiary of ICE Group, there shall be no
transfer of the shares of NYX Holdings without the approval of the
Commission.\33\ If NYX Holdings ceases to be wholly-owned by ICE Group,
but directly or indirectly controls any U.S. Regulated Subsidiary or
any European Market Subsidiary, the voting and ownership limitations
would apply.\34\ The voting restrictions contained in the current NYSE
Group Certificate of Incorporation are substantially the same as those
in the current NYSE Euronext Certificate (except that the current NYSE
Group Certificate of Incorporation does not contain any references to
European subsidiaries, markets or regulators.) The Exchange proposes to
update the NYSE Group Certificate of Incorporation to provide that its
voting and ownership restrictions would apply in the event that NYX
Holdings and the trust established pursuant to the NYSE Euronext Trust
Agreement do not collectively own all of the issued and outstanding
shares of stock of NYSE Group and only for so long as NYSE Group
directly or indirectly controls any U.S. Regulated Subsidiary.\35\
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\31\ See proposed NYX Holdings Operating Agreement, Article IX,
Section 9.1.
\32\ See proposed NYX Holdings Operating Agreement, Article IX,
Sections 9.1(a)(voting restrictions) and 9.2(b)(ownership
restrictions).
\33\ See proposed NYX Holdings Operating Agreement, Article VII,
Section 7.2.
\34\ The proposed NYX Holdings Operating Agreement would make
two additional changes as compared to the current NYSE Euronext
Certificate and Bylaws:
First, it would expand the definition of ``Related Persons'' to
provide that (1) in the case of a person that is a ``member'' (as
defined in Section 3(a)(3)(A)(i) of the Exchange Act) of NYSE MKT,
such person's ``Related Persons'' would include the ``member'' (as
defined in Section 3(a)(3)(A)(ii), (iii) or (iv) of the Exchange
Act) with which such person is associated; and (2) in the case of
any person that is a ``member'' (as defined in 3(a)(3)(A)(ii), (iii)
or (iv) of the Exchange Act) of NYSE MKT, such person's ``Related
Persons'' would include any ``member'' (as defined in Section
3(a)(3)(A)(i) of the Exchange Act) that is associated with such
person. See proposed NYX Holdings Operating Agreement, Article I,
Section 1.1, xi and xii.
Second, the mandatory repurchase of membership interests from a
Person whose ownership represents in the aggregate more than 20% in
interest of the interests entitled to vote on any matter would be at
a price determined by reference to each incremental percentage
ownership over 20% rather than at par value, specifically $1,000 for
each percent. See proposed NYX Holdings Operating Agreement, Article
IX, Section 9.1(b)(4).
\35\ See proposed NYSE Group Certificate of Incorporation,
Article IV, Section 4(b). In addition, the definition of ``Related
Persons'' in the NYSE Group Certificate of Incorporation would be
expanded to provide that (1) in the case of a person that is a
``member'' (as defined in Section 3(a)(3)(A)(i) of the Exchange Act)
of NYSE MKT, such person's ``Related Persons'' would include the
``member'' (as defined in Section 3(a)(3)(A)(iv) of the Exchange
Act, in addition to Sections 3(a)(3)(A)(ii) and (iii) of the
Exchange Act, which are currently referenced in this provision of
the NYSE Group Certificate) with which such person is associated;
and (2) in the case of any person that is a ``member'' (as defined
in Section 3(a)(3)(A)(iv) of the Exchange Act, in addition to
Sections 3(a)(3)(A)(ii) and (iii) of the Exchange Act, which are
currently referenced in this provision of the NYSE Group
Certificate) of NYSE MKT, such person's ``Related Persons'' would
include any ``member'' (as defined in Section 3(a)(3)(A)(i) of the
Exchange Act) that is associated with such person. This conforms the
definition of Related Person to that in the ICE Group Certificate
and the proposed NYX Holdings Operating Agreement. See proposed NYSE
Group Certificate of Incorporation, Article IV, Sections
4(b)(1)(E)(vi) and (xii).
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The Commission finds that the changes to the ownership and voting
restrictions in the proposed NYX Holdings Operating Agreement and the
proposed NYSE Group Certificate of Incorporation, as well as the change
in control provisions in the NYSE Euronext Certificate of Incorporation
are consistent with the Act. The transfer, ownership and voting
restrictions should minimize the potential that a person could
improperly interfere with or restrict the ability of the Commission and
the U.S. Regulated Subsidiaries to effectively carry out their
regulatory oversight responsibilities under the Act.
In addition, to allow ICE Group to wholly-own and vote all of NYSE
Euronext stock upon consummation of the Combination, ICE Group
delivered a written notice to the board of directors of NYSE Euronext
pursuant to the procedures set forth in the current NYSE Euronext
Certificate of Incorporation requesting approval of its ownership and
voting of NYSE Euronext stock in excess of the NYSE Euronext voting
restriction and NYSE Euronext ownership restriction.\36\ The board of
directors of NYSE Euronext must resolve to expressly permit ownership
or voting in excess of the NYSE Euronext voting restriction limitation
and NYSE Euronext ownership restriction. Such resolution of the NYSE
Euronext board of directors must be filed with and approved by the
[[Page 51762]]
Commission under Section 19(b) of the Act, and become effective
thereunder. Further, the board of directors may not approve any voting
or ownership in excess of the limitations unless it determines that
such ownership or exercise of voting rights (i) Will not impair the
ability of the U.S. Regulated Subsidiaries, NYSE Euronext, and NYSE
Group to discharge their respective responsibilities under the Act and
the rules and regulations thereunder, (ii) will not impair the ability
of any European Market Subsidiary, NYSE Euronext, or Euronext to
discharge their respective responsibilities under the European Exchange
Regulations, (iii) is otherwise in the best interests of NYSE Euronext,
its shareholders, the U.S. Regulated Subsidiaries, and the European
Market Subsidiaries, and (iv) will not impair the Commission's ability
to enforce the Act or the European Regulators' ability to enforce the
European Exchange Regulations.\37\ For so long as NYSE Euronext
directly or indirectly controls the Exchange or NYSE Market, NYSE Arca,
NYSE Arca Equities, any facility of NYSE Arca, or NYSE MKT, the NYSE
Euronext board of directors cannot waive the voting and ownership
limits above the 20% threshold if such person or its related persons is
a member of the Exchange or NYSE MKT, or an ETP Holder, an OTP Holder
or an OTP Firm.\38\ Further, the NYSE Euronext board of directors
cannot waive the voting and ownership limits above the 20% threshold if
such person or its related persons is a U.S. Disqualified Person or a
European Disqualified Person.\39\ On June 5, 2013, the board of
directors of NYSE Euronext adopted by written consent the NYSE Euronext
Resolutions to permit ICE Group, either alone or with its related
persons, to exceed the NYSE Euronext ownership restriction and the NYSE
Euronext voting restriction. In adopting such resolutions, the board of
directors of NYSE Euronext made the necessary determinations set forth
above and approved the submission of the proposed rule changes to the
Commission. Among other things, in this notice, ICE Group represented
to the board of directors of NYSE Euronext that neither ICE Group, nor
any of its related persons, is (1) An NYSE Member; (2) an NYSE MKT
Member; (3) an ETP Holder; (4) an OTP Holder or OTP Firm; or (5) a U.S.
Disqualified Person or a European Disqualified Person. The NYSE
Euronext board of directors adopted a resolution approving ICE Group's
request that it be permitted, either alone or with its related persons,
to exceed the NYSE Euronext voting restriction and the NYSE Euronext
ownership restriction. The NYSE Euronext board of directors also
determined that ownership of NYSE Euronext by ICE Group is in the best
interests of NYSE Euronext, its stockholders and the U.S. Regulated
Subsidiaries.\40\
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\36\ Prior to permitting any person to exceed the ownership
limitation and voting limitation, such person must deliver notice of
such person's intention to own or vote shares in excess of the
ownership limitation or voting limitation to the NYSE Euronext board
of directors. See current NYSE Euronext Certificate of
Incorporation, Article V, Sections 1(C) and 2(C).
\37\ See current NYSE Euronext Certificate of Incorporation,
Article V, Sections 1(C) and 2(C).
\38\ See current NYSE Euronext Certificate of Incorporation,
Article V, Sections 1(C) and 2(C).
\39\ See current NYSE Euronext Certificate of Incorporation,
Article V, Sections 1(C) and 2(C).
\40\ Such resolution of the NYSE Euronext board of directors was
filed as part of the proposed rule changes. See Exhibit D to each of
the proposed rule changes, which exhibit is available on the
Commission's Web site (http://www.sec.gov/rules/sro.shtml), at the
Commission's Public Reference Room, at the NYSE, and on the NYSE's
Web site (http://www.nyse.com).
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The Commission believes it is consistent with the Act to allow ICE
Group to wholly-own and vote all of the outstanding common stock of
NYSE Euronext. The Commission notes that ICE Group represents that
neither ICE Group nor any of its related persons is subject to any
statutory disqualification (as defined in Section 3(a)(39) of the Act),
or is a member of the Exchange or NYSE MKT, an ETP Holder, an OTP
Holder or an OTP Firm, or a European Disqualified Person. ICE Group has
also included in its corporate documents certain provisions designed to
maintain the independence of the U.S. Regulated Subsidiaries' self-
regulatory functions from ICE Group, NYX Holdings and NYSE Group.\41\
Accordingly, the Commission believes that the acquisition of ownership
and exercise of voting rights of NYSE Euronext common stock by ICE
Group will not impair the ability of the Commission or any of the U.S.
Regulated Subsidiaries to discharge their respective responsibilities
under the Act.
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\41\ See infra note 47.
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3. Proposed Amendments to Board Composition Requirements for the
Exchange, NYSE MKT, NYSE Market and NYSE Regulation
The Fourth Amended and Restated Operating Agreement, dated as of
August 23, 2012, of the Exchange (the ``Exchange Operating
Agreement''), currently provides that (1) a majority of the members of
the Exchange's board of directors must be U.S. persons and members of
the board of directors of NYSE Euronext who satisfy the independence
requirements of the NYSE Euronext board, and (2) at least 20% of the
Exchange's board members must be persons who are not board members of
NYSE Euronext but who qualify as independent under the independence
policy of the NYSE Euronext board of directors (the ``Non-Affiliated
Exchange Directors'').\42\ The nominating and governance committee of
the NYSE Euronext board of directors is required to designate as Non-
Affiliated Exchange Directors the candidates recommended jointly by the
Director Candidate Recommendation Committees of each of NYSE Market and
NYSE Regulation or, in the event there are Petition Candidates (as such
term is defined in the Exchange Operating Agreement), the candidates
that emerge from a specified process will be designated as the Non-
Affiliated Exchange Directors.\43\
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\42\ See Exchange Operating Agreement, Section 2.03(a).
\43\ See id.
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Under the Proposed Rule Change, these provisions would be amended
to refer to ICE Group instead of NYSE Euronext. Also, references
throughout to the Exchange's ``Corporation Independence Policy'' would
be changed to ``Company Independence Policy'' in recognition of the
form of organization of the Exchange. Substantially the same revisions
would be made to the analogous provisions of the Third Amended and
Restated Operating Agreement of NYSE MKT.
In addition, references to NYSE Euronext in the Director
Independence Policy of each of the Exchange, NYSE Market, NYSE
Regulation, NYSE Arca and NYSE MKT would be revised to refer to ICE
Group.\44\
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\44\ Generally, the NYSE Exchanges propose, in part, the
following changes to the constituent documents of the Exchange, NYSE
MKT, NYSE Market and NYSE Regulation: (i) replacing NYSE Euronext
with ICE Group as appropriate, (ii) updating the address of the
registered office and agent for NYSE Market, and (ii) correcting
certain typographical errors and making certain technical changes.
The NYSE Exchanges propose, in part, the following changes to
the Exchange Rules, NYSE MKT Rules and NYSE Arca Equities Rules: (i)
replacing NYSE Euronext with ICE Group or NYX Holdings, as
appropriate, (ii) revising the Exchange Rules to delete the
definitions of ``member'' and ``member organization'' relating to
NYSE MKT due to the incorporation of such provisions into the
proposed ICE Group Certificate, and (iii) eliminating certain
provisions in NYSE MKT Rule 104T relating to restrictions on
transfer in the NYSE Euronext Certificate because the referenced
restrictions are no longer in effect and there will be no analogous
provision in the ICE Group Certificate.
---------------------------------------------------------------------------
The Commission finds that these proposals are consistent with the
Act, particularly Section 6(b)(1),\45\ which requires an exchange to be
so organized and have the capacity to carry out the purposes of the
Act. Further, the Commission notes that the NYSE Exchanges are not
proposing to change any of the provisions relating to (i) the
[[Page 51763]]
fair representation of the members of each of the NYSE Exchanges in the
selection of its directors and administration of its affairs or (ii)
one or more of the directors of each of the NYSE Exchanges being
representative of issuers and investors and not being associated with a
member of the exchange or with a broker dealer, each as required under
Section 6(b)(3) of the Act.\46\
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\45\ 15 U.S.C. 78f(b)(1).
\46\ 15 U.S.C. 78f(b)(3).
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B. Relationship of ICE Group, NYX Holdings, NYSE Group, and the U.S.
Regulated Subsidiaries; Jurisdiction Over ICE Group
Although ICE Group itself will not carry out regulatory functions,
its activities with respect to the operation of any of the U.S.
Regulated Subsidiaries must be consistent with, and not interfere with,
the U.S. Regulated Subsidiaries' self-regulatory obligations. The
proposed ICE Group corporate documents include certain provisions that
are designed to maintain the independence of the U.S. Regulated
Subsidiaries' self-regulatory functions from ICE Group, NYX Holdings,
and NYSE Group, enable the U.S. Regulated Subsidiaries to operate in a
manner that complies with the U.S. federal securities laws, including
the objectives and requirements of Sections 6(b) and 19(g) of the
Act,\47\ and facilitate the ability of the U.S. Regulated Subsidiaries
and the Commission to fulfill their regulatory and oversight
obligations under the Act.\48\
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\47\ 15 U.S.C. 78f(b) and 15 U.S.C. 78s(g).
\48\ See proposed ICE Group Bylaws Article IX.
---------------------------------------------------------------------------
For example, under the proposed ICE Group Bylaws, ICE Group shall
comply with the U.S. federal securities laws, the European Exchange
Regulations, and the respective rules and regulations thereunder; shall
cooperate with the Commission, the European Regulators, and the U.S.
Regulated Subsidiaries.\49\ Also, each director, officer, and employee
of ICE Group, to the extent in discharging his or her responsibilities
shall comply with the U.S. federal securities laws and the rules and
regulations thereunder, cooperate with the Commission, and cooperate
with the U.S. Regulated Subsidiaries.\50\ In addition, in discharging
his or her responsibilities as a member of the board, each director of
ICE Group must, to the fullest extent permitted by applicable law, take
into consideration the effect that ICE Group's actions would have on
the ability of the U.S. Regulated Subsidiaries to carry out their
responsibilities under the Act, on the ability of the European Market
Subsidiaries to carry out their responsibilities under the European
Exchange Regulations as operators of European Regulated Markets, and on
the ability of the U.S. Regulated Subsidiaries, NYSE Group, and ICE
Group (i) to engage in conduct that fosters and does not interfere with
the ability of the U.S. Regulated Subsidiaries, NYSE Group, NYX
Holdings and ICE Group to prevent fraudulent and manipulative acts and
practices in the securities markets; (ii) to promote just and equitable
principles of trade in the securities markets; (iii) to foster
cooperation and coordination with persons engaged in regulating,
clearing, settling, processing information with respect to, and
facilitating transactions in securities; (iv) to remove impediments to
and perfect the mechanisms of a free and open market in securities and
a U.S. national securities market system; and (v) in general, to
protect investors and the public interest.\51\ For so long as ICE Group
directly or indirectly controls any U.S. Regulated Subsidiary, ICE
Group, its directors, officers and employees shall give due regard to
the preservation of the independence of the self-regulatory function of
the U.S. Regulated Subsidiaries (to the extent of each U.S. Regulated
Subsidiary's self-regulatory function) and the European Market
Subsidiaries (to the extent of each European Market Subsidiaries' self-
regulatory function).\52\ Further, ICE Group agrees to keep
confidential all confidential information pertaining to: (1) the self-
regulatory function of the any U.S. Regulated Subsidiary (including but
not limited to disciplinary matters, trading data, trading practices
and audit information) contained in the books and records of any of the
U.S. Regulated Subsidiaries; and (2) the self-regulatory function of
the European Market Subsidiaries under the European Exchange
Regulations as operator of a European Regulated Market (including but
not limited to disciplinary matters, trading data, trading practices
and audit information) contained in the books and records of the
European Market Subsidiaries, and not use such information for any
commercial \53\ purposes.\54\
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\49\ See proposed ICE Group Bylaws, Article IX, Section 9.1 and
9.2.
\50\ See proposed ICE Group Bylaws, Article III, Section
3.14(b).
\51\ See proposed ICE Group Bylaws, Article III, Section
3.14(a).
\52\ See proposed ICE Group Bylaws, Article IX, Section 9.4 and
9.5.
\53\ The Commission believes that any non-regulatory use of such
information would be for a commercial purpose. See, e.g., NYSE-
Euronext Merger Order, supra note 25, 72 FR at 8041 n. 71.
\54\ See proposed ICE Group Bylaws, Article VIII, Section 8.1.
---------------------------------------------------------------------------
In addition, ICE Group's books and records shall be subject at all
times to inspection and copying by the Commission, the European
Regulators, any U.S. Regulated Subsidiary (provided that such books and
records are related to the activities of such U.S. Regulated Subsidiary
or any other U.S. Regulated Subsidiary over which such U.S. Regulated
Subsidiary has regulatory authority or oversight) and any European
Market Subsidiary (provided that such books and records are related to
the operation or administration of such European Market Subsidiary or
any European Regulated Market over which such European Market
Subsidiary has regulatory authority or oversight).\55\ The ICE Group
Bylaws would provide that these obligations regarding such confidential
information will not be interpreted so as to limit or impede (i) the
rights of the Commission or the relevant U.S. Regulated Subsidiary to
have access to and examine such confidential information pursuant to
the U.S. federal securities laws and the rules and regulations
thereunder; or (ii) the ability of any officers, directors, employees
or agents of ICE Group to disclose such confidential information to the
Commission or any U.S. Regulated Subsidiary.\56\ ICE Group's books and
records related to U.S. Regulated Subsidiaries shall be maintained
within the United States, and ICE Group's books and records related to
European Market Subsidiaries shall be maintained in the home
jurisdiction of one or more of the European Market Subsidiaries or of
any subsidiary of ICE Group in Europe.\57\ The ICE Group Bylaws also
provide that if and to the extent than any of ICE Group's books and
records may relate to both European Market Subsidiaries and U.S.
Regulated Subsidiaries (each such book and record an ``Overlapping
Record''), ICE Group shall be entitled to maintain such books and
records either in the home jurisdiction of one or more European
[[Page 51764]]
Market Subsidiaries or in the United States.\58\
---------------------------------------------------------------------------
\55\ See proposed ICE Group Bylaws, Article VIII, Section 8.3.
\56\ See proposed ICE Group Bylaws, Article VIII, Section 8.2.
\57\ See proposed ICE Group Bylaws, Article VIII, Sections 8.4
and 8.5.
\58\ See proposed ICE Group Bylaws, Article VIII, Section 8.6.
---------------------------------------------------------------------------
In addition, for so long as ICE Group directly or indirectly
controls any U.S. Regulated Subsidiary, the books, records, premises,
officers, directors, and employees of ICE Group shall be deemed to be
the books, records, premises, officers, directors, and employees of the
U.S. Regulated Subsidiaries for purposes of and subject to oversight
pursuant to the Act, and for so long as ICE Group directly or
indirectly controls any European Market Subsidiary, the books, records,
premises, officers, directors, and employees of ICE Group shall be
deemed to be the books, records, premises, officers, directors, and
employees of such European Market Subsidiaries for purposes of and
subject to oversight pursuant to the European Exchange Regulations.\59\
---------------------------------------------------------------------------
\59\ See proposed ICE Group Bylaws, Article VIII, Sections 8.4
and 8.5.
---------------------------------------------------------------------------
ICE Group and its directors and, to the extent they are involved in
the activities of the U.S. Regulated Subsidiaries, ICE Group's officers
and employees whose principal place of business and residence is
outside of the United States irrevocably submit to the jurisdiction of
the U.S. federal courts and the Commission with respect to activities
relating to the U.S. Regulated Subsidiaries, and to the jurisdiction of
the European Regulators and European courts with respect to activities
relating to the European Market Subsidiaries.\60\
---------------------------------------------------------------------------
\60\ See proposed ICE Group Bylaws, Article VII, Sections 7.1
and 7.2.
---------------------------------------------------------------------------
The ICE Group Bylaws would provide that ICE Group will take
reasonable steps necessary to cause its directors, officers and
employees, prior to accepting a position as an officer, director or
employee, as applicable, of ICE Group to agree and consent in writing
to the applicability to them of these jurisdictional and oversight
provisions with respect to their activities related to any U.S.
Regulated Subsidiary.\61\
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\61\ See proposed ICE Group Bylaws, Article IX, Section 9.3.
---------------------------------------------------------------------------
Further, ICE Group acknowledges that it is responsible for
referring possible rule violations to the NYSE Exchanges. In addition,
ICE Group will enter into an agreement with NYSE Regulation
acknowledging that each of the Exchange, NYSE MKT and NYSE Arca has
contracted to have NYSE Regulation perform its self-regulatory
obligations, in each case with the self-regulatory organization
retaining its responsibility for the adequate performance of those
regulatory obligations, and agreeing to provide adequate funding to
NYSE Regulation. \62\
---------------------------------------------------------------------------
\62\ See, e.g., Notice at 39412.
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Finally, the proposed ICE Group Articles require that, for so long
as ICE Group controls, directly or indirectly, any of the U.S.
Regulated Subsidiaries, any changes to the proposed ICE Group Articles
be submitted to the board of directors of such U.S. Regulated
Subsidiaries, and if any such boards of directors determines that such
amendment is required to be filed with or filed with and approved by
the Commission pursuant to Section 19 of the Act \63\ and the rules
thereunder, such change shall not be effective until filed with or
filed with and approved by, the Commission.\64\
---------------------------------------------------------------------------
\63\ 15 U.S.C. 78s.
\64\ See proposed ICE Group Bylaws, Article XI, Section 11.3;
proposed ICE Group Certificate, Article X(C).
---------------------------------------------------------------------------
The Commission finds that these provisions are consistent with the
Act, and that they are intended to assist the NYSE Exchanges in
fulfilling its self-regulatory obligations and in administering and
complying with the requirements of the Act. With respect to the
maintenance of books and records of ICE Group, the Commission notes
that while ICE Group has the discretion to maintain Overlapping Records
in either the United States or the home jurisdiction of one or more of
the European Market Subsidiaries, ICE Group is liable for any books and
records it is required to produce for inspection and copying by the
Commission that are created outside the United States and where the law
of a foreign jurisdiction prohibits ICE Group from providing such books
and records to the Commission for inspection and copying.\65\ Moreover,
the Commission notes that NYSE Euronext is under an existing obligation
to make its books and records available in compliance with the
requirements of Rule 17a-1(b).\66\ The Commission notes that the
obligations of NYSE Euronext established in the prior orders remains in
effect for its successors entity, i.e., NYX Holdings. \67\ The
Commission also notes that the NYSE Euronext Trust Agreement (``Trust
Agreement'') \68\ established under a prior order also remains in
effect unchanged, other than revising the reference in the Trust
Agreement from the nominating and governance committee of NYSE Euronext
to the nominating and governance committee of ICE Group.\69\
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\65\ See Securities Exchange Act Release Nos. 55293 (February
14, 2007), 72 FR 8033, 8041 (February 22, 2007) (SR-NYSE-2006-120).
\66\ Id.
\67\ NYSE Euronext is currently required to maintain in the
United States originals or copies of books and records that relate
to both the U.S. Regulated Subsidiaries and its European market
subsidiaries covered by Rule 17a-1(b) promptly after creation of
such books and records. See supra, note 65, 72 FR 8041, 8042.
\68\ The NYSE Trust was created, in part, to take actions to
mitigate the effects of any material adverse change in European law
that has an ``extraterritorial'' impact on the non-European issuers
listed on NYSE Group securities exchanges, non-European financial
services firms that are members of any NYSE Group securities
exchange, or any NYSE Group securities exchange. See supra, note 65,
72 FR at 8042.
\69\ Section 4(a) of Article IV of the NYSE Group Certificate
also would be amended to contemplate successors to NYSE Euronext as
the holder of all of the issued and outstanding shares of NYSE Group
for purposes of the Trust Agreement.
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Under Section 20(a) of the Act,\70\ any person with a controlling
interest in the U.S. Regulated Subsidiaries shall be jointly and
severally liable with and to the same extent that the U.S. Regulated
Subsidiaries are liable under any provision of the Act, unless the
controlling person acted in good faith and did not directly or
indirectly induce the act or acts constituting the violation or cause
of action. In addition, Section 20(e) of the Act \71\ creates aiding
and abetting liability for any person who knowingly provides
substantial assistance to another person in violation of any provision
of the Act or rule thereunder. Further, Section 21C of the Act \72\
authorizes the Commission to enter a cease-and-desist order against any
person who has been ``a cause of'' a violation of any provision of the
Act through an act or omission that the person knew or should have
known would contribute to the violation. These provisions are
applicable to ICE Group's dealings with the U.S. Regulated
Subsidiaries.
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\70\ 15 U.S.C. 78t(a).
\71\ 15 U.S.C. 78t(e).
\72\ 15 U.S.C. 78u-3.
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C. ICE Group Director Independence Policy
Under the Proposed Rule Change, ICE Group will adopt a Director
Independence Policy that would be substantially identical to the
current Independence Policy of the NYSE Euronext board of directors
except for the change of the entity whose board of directors adopted
the policy and nonsubstantive conforming changes.
The Commission finds that the proposed Director Independence Policy
is consistent with the Act, particularly Section 6(b)(1),\73\ which
requires an exchange to be so organized and have the capacity to carry
out the purposes of the Act. The Commission notes that a majority of
ICE Group's Board would
[[Page 51765]]
need to be independent. In addition, the Commission notes that as a
company listed on the Exchange, ICE Group's board of directors must
also satisfy the independence requirements applicable to a listed
company's board of directors as contained in the Exchange's Listed
Company Manual. Further, the Commission notes that there are
requirements in ICE Group's Independence Policy that independent
directors may not be or have been within the last year, and may not
have an immediate family member who is or within the last year was, a
member of the Exchange, NYSE Arca or NYSE MKT.
---------------------------------------------------------------------------
\73\ 15 U.S.C. 78f(b)(1).
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D. Options Trading Rights
The Commission received one comment letter \74\ on the proposed
rule changes regarding certain Option Trading Rights (``OTRs'') that
were separated from full New York Stock Exchange, Inc.\75\ seats
(``Separated OTRs''). All New York Stock Exchange seat ownership (with
or without OTRs) was extinguished in the 2006 demutualization of New
York Stock Exchange, Inc.\76\ Although the commenter takes no position
on the merits of the Combination, the commenter opposes the Combination
on the grounds that the Exchange does not fully own all of the assets
being transferred. Specifically, the commenter contends that the owners
of Separated OTRs retained their Separated OTRs, even after the New
York Stock Exchange, Inc. exited the options business in 1997, with the
expectation that their ownership of the Separated OTRs would afford
them full rights to trade options under the auspices of New York Stock
Exchange, Inc. or its successor entity. The commenter asked that the
Commission withhold approval of the Combination until the matter of
Separated OTRs is resolved.\77\ The NYSE Response to Comments states
that the issue of the rights of owners of Separated OTRs is not before
the Commission in the context of the proposed rule filing by the
Exchange and notes that the Exchange is not proposing in its filing a
change in the trading rights on the Exchange.\78\
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\74\ See Rothlein Letter, supra note 5.
\75\ New York Stock Exchange, Inc. is the predecessor entity to
NYSE. See NYSE Inc.-Archipelago Merger Order, supra note 25.
\76\ See NYSE Inc.-Archipelago Merger Order, supra note 25.
\77\ The Commission notes that the commenter continued to argue,
in part, in its rebuttal to the NYSE Response to Comments that the
Commission should withhold approval of the Combination until the
matter of Separated OTRs are resolved. See Rothlein Rebuttal Letter,
supra note 6.
\78\ See NYSE Response to Comments, supra note 6.
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The issue of the rights of owners of Separated OTRs is not before
the Commission in the context of this rule filing. Pursuant to Section
19(b)(1) of the Act,\79\ an SRO (such as NYSE) is required to file with
the Commission any proposed rule or any proposed change in, addition
to, or deletion from the rules of such SRO. Further, pursuant to
Section 19(b)(2) of the Act,\80\ the Commission shall approve a
proposed rule change filed by an SRO if the Commission finds that such
proposed rule change is consistent with the requirements of the Act and
the rules and regulations thereunder applicable to the SRO.
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\79\ 15 U.S.C. 78s(b)(1).
\80\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------
III. Conclusion
For the foregoing reasons, the Commission finds that the proposed
rule change is consistent with the Act and the rules and regulations
thereunder applicable to a national securities exchange. It is
therefore ordered, pursuant to Section 19(b)(2) of the Act \81\ that
the proposed rule changes (SR-NYSE-2013-42; SR-NYSEMKT-2013-50; SR-
NYSEArca-2013-62), are approved.
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\81\ Id.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\82\
---------------------------------------------------------------------------
\82\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-20338 Filed 8-20-13; 8:45 am]
BILLING CODE 8011-01-P