[Federal Register Volume 79, Number 91 (Monday, May 12, 2014)]
[Notices]
[Pages 27017-27020]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-10785]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-72107; File No. SR-NSX-2014-14]
Self-Regulatory Organizations; National Stock Exchange, Inc.;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Cease Trading on Its Trading System
May 6, 2014.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder, \2\ notice is hereby given
that on May 1, 2014, National Stock Exchange, Inc. (``NSX'' or the
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the Exchange. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange is proposing to amend Exchange Rule 11.1 to add new
section .01 under Interpretations and Policies to permit NSX to cease
trading activity on the Exchange's Trading System (the
[[Page 27018]]
``System'') \3\ as of the close of business on May 30, 2014 (the
``Closing Date'').
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\3\ Exchange Rule 1.5S.(4) defines the ``System'' as the
electronic securities communications and trading facility designated
by the Board through which orders of Users are consolidated for
ranking and execution.
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The text of the proposed rule change is also available on the
Exchange's Web site at www.nsx.com, at the principal office of the
Exchange, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
NSX, a corporation organized under the laws of the State of
Delaware, is a registered national securities exchange under Section 6
of the Exchange Act \4\ and operates as a self-regulatory organization
governed by the requirements of Section 19 of the Exchange Act.\5\
Pursuant to a transaction approved by the Commission on December 29,
2011, NSX has operated as a wholly-owned subsidiary of CBOE Stock
Exchange, LLC (``CBSX'').\6\ This rule filing is not proposing any
change to the ownership structure of the Exchange and is not intended
to alter any of the existing obligations of CBSX or its owners,
directors, officers, employees or agents with respect to CBSX's
ownership of NSX, or with respect to the self-regulatory
responsibilities of NSX, as described, inter alia, in Sections 5.7(b)
and 6.15 of the Third Amended and Restated Operating Agreement of CBOE
Stock Exchange, LLC, dated December 30, 2011 (the ``Operating
Agreement'').\7\
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\4\ 15 U.S.C. 78f.
\5\ 15 U.S.C. 78s.
\6\ See Exchange Act Release No. 66071 (December 29, 2011), 77
FR 521 (January 5, 2012)(SR-CBOE-2011-107 and SR-NSX-2011-14) (Order
Granting Accelerated Approval to Proposed Rule Changes in Connection
with the Proposed Acquisition of the National Stock Exchange, Inc.
by the CBOE Stock Exchange, LLC).
\7\ Section 5.7(b) of the Operating Agreement generally provides
that for so long as CBSX shall control NSX, and only to the extent
related to the activities of NSX, the Owners, Board of Directors,
officers and employees of CBSX shall give due regard to the
preservation of the independence of the self-regulatory function of
NSX and its obligations to investors and the general public and
shall not take actions that any such person knows or reasonably
should have known would interfere with the decisions of NSX relating
to its regulatory functions (including disciplinary matters) or
which would interfere with NSX's ability to fulfill its obligations
under the Act. Section 5.7(b) further requires CBSX, its officers,
directors and employees to cooperate with the Commission and NSX
with respect to the Commission's oversight responsibilities
regarding NSX. Section 6.15 of the Operating Agreement (Books,
Records and Jurisdiction), subsections (a) and (b) generally provide
that the books, records, premises, officers, directors, agents and
employees of CBSX are deemed to be those of NSX, to the extent they
relate to the activities of NSX, for the purpose of and subject to
oversight pursuant to the Act. Section 6.15(c) of the Operating
Agreement provides that CBSX, its Owners and their respective
officers, directors, agents, and employees irrevocably submit to the
jurisdiction of the U.S. federal courts, the SEC, CBOE, and NSX, for
the purposes of any suit, action or proceeding pursuant to U.S.
federal securities laws or the rules or regulations thereunder,
commenced or initiated by the SEC arising out of, or relating to,
CBSX or the Company's control of NSX, as applicable (and shall be
deemed to agree that CBSX may serve as the U.S. agent for purposes
of service of process in such suit, action or proceeding), and that
they waive, and agree not to assert by way of motion, as a defense
or otherwise in any such suit, action or proceeding, any claims that
they are not personally subject to the jurisdiction of the SEC, that
the suit, action or proceeding is an inconvenient forum or that the
venue of the suit, action or proceeding is improper, or that the
subject matter thereof may not be enforced in or by such courts or
agency.
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The Exchange is proposing to cease trading activity on the System
as of the close of business on the Closing Date. In that regard, the
Exchange proposes to add new .01, Interpretations and Policies under
Rule 11.1 (Hours of Trading). The new text will provide that, as of the
close of business on May 30, 2014, NSX shall cease trading activity on
the System; that all NSX Rules will remain in full force and effect
through and after the Closing Date; and that the Exchange shall file a
proposed rule change pursuant to Rule 19b-4 of the Exchange Act prior
to any resumption of trading on the Exchange pursuant to Chapter XI
(Trading Rules).
After trading ceases on the System as of the close of business on
the Closing Date, the Exchange will continue to be registered as a
national securities exchange and will continue to retain its status as
a self-regulatory organization. The Exchange represents that it will
fully discharge all of its obligations as a self-regulatory
organization pursuant to the Act through and after the Closing Date,
and will assure that it maintains adequate funding for this purpose.
The Exchange is not the Designated Examining Authority (``DEA'') for
any of its ETP Holders and there are no ``NSX only'' ETP Holders (i.e.,
all NSX ETP Holders are members of other self-regulatory
organizations).\8\
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\8\ The Exchange represents that it will move to amend or cancel
its participation in any existing Exchange Act Rule 17d-2 Plans for
Allocation of Regulatory Responsibilities for NSX as appropriate in
connection with the conclusion of all open matters relating to the
Exchange's regulatory responsibilities with respect to NSX.
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Further, all NSX rules shall remain in full force and effect
through and after the Closing Date and the Exchange will retain
disciplinary jurisdiction over all ETP Holders and persons associated
with ETP Holders \9\ pursuant to Chapter VIII. of the Exchange's Rules
and, specifically, Rule 8.1(b). That rule generally provides that any
ETP Holder or person associated with an ETP Holder shall continue to be
subject to the disciplinary jurisdiction of the Exchange following the
termination of such person's ETP status or association with an ETP
Holder with respect to matters that occurred prior to such termination;
provided that written notice of the commencement of an inquiry into
such matters is given by the Exchange to such former ETP Holder or
former associated person within one year of receipt by the Exchange of
the latest written notice of the termination of such person's status as
an ETP Holder or person associated with an ETP Holder. Such notice
requirement does not apply to a person who at any time after a
termination again becomes subject to the disciplinary jurisdiction of
the Exchange by becoming an ETP Holder or a person associated with an
ETP Holder.\10\ Pursuant to this rule, after the Closing Date, the
Exchange will enforce any rule violation that occurred prior to the
close of business on the System on the Closing Date.
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\9\ Exchange Rule 1.5P.(1) provides that ``[t]he terms ``person
associated with an ETP Holder'' or ``associated person of an ETP
Holder'' mean any partner, officer, director, or branch manager of
an ETP Holder (or any person occupying a similar status or
performing similar functions), any person directly or indirectly
controlling, controlled by, or under common control with an ETP
Holder, or any employee of such ETP Holder, except that any person
associated with an ETP Holder whose functions are solely clerical or
ministerial shall not be included in the meaning of such terms.''
\10\ The Exchange notes that, because all NSX rules will remain
in effect after the Closing Date, NSX Rule 11.18, which limits the
liability of the Exchange, will also remain in effect.
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Upon the filing of the instant rule proposal with the Commission,
the Exchange will inform all ETP Holders by Information Circular that
NSX will end trading operations as of the close of business on the
Closing Date. The Information Circular will also inform all
[[Page 27019]]
ETP Holders that the Exchange will terminate the ETP status of any
remaining ETP Holders as of May 30, 2014. Once the proposed rule change
is operative, NSX will no longer accept new ETP applications or further
consider any pending ETP applications.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Exchange Act and the rules and regulations thereunder applicable to
the Exchange and, in particular, the requirements of Section 6(b) \11\
of the Exchange Act. Specifically, the Exchange believes that the
proposed rule change is consistent with the requirement of Section
6(b)(5) \12\ that the rules of an exchange be designed to prevent
fraudulent and manipulative acts and practices, to promote just and
equitable principles of trade, to foster cooperation and coordination
with persons engaged in regulating, clearing, settling, processing
information with respect to, and facilitating transactions in
securities, 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. Additionally, the Exchange
believes the proposed rule change is consistent with the Section
6(b)(5) requirement that the rules of an exchange not be designed to
permit unfair discrimination between customers, issuers, brokers, or
dealers.
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\11\ 15 U.S.C. 78(f)(b) [sic].
\12\ 15 U.S.C. 78(f)(b)(5) [sic].
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In particular, the proposed rule change will allow NSX to cease
trading activity on the System as of the close of business on the
Closing Date and continue to maintain adequate funding to fulfill its
regulatory obligations under the Exchange Act, including enforcing any
rule violations that occurred through the close of trading on the
Closing Date. Because all ETP Holders are members of other exchanges,
after the Closing Date they will to be able to direct their orders to
other national securities exchanges and other trading venues, including
alternative trading systems and the over-the-counter market generally.
Under the proposal, in addition to this rule filing being made
available on the NSX Web site, www.nsx.com, ETP Holders will receive
written notice by Information Circular, issued upon the instant rule
filing being filed with the Commission, advising them of the Exchange's
intention to cease trading activity on the System as of the close of
business on the Closing Date. Accordingly, the Exchange believes that
ETP Holders will have sufficient time prior to the Closing Date to
determine the exchanges and trading venues to which they will direct
their orders after the Closing Date and make any necessary adjustments
in their respective trading systems. Moreover, all ETP Holders will
receive prior notice that NSX will terminate their ETP Status as of May
30, 2014, unless the ETP Holder voluntarily terminates its status as
such prior to such date in accordance with Exchange rules.
The Exchange submits that proposed rule change is therefore
consistent with the requirements of Section 6(b)(5) of the Exchange Act
that rules of an exchange be designed to facilitate transactions in
securities, 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.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Exchange Act. The NSX's decision
to cease trading activity on the System as of the close of business on
the Closing Date will result in one less operational trading venue for
equity securities. The Exchange notes that there are numerous stock
exchanges and trading platforms on which market participants may trade
equity securities. NSX currently has approximately .20% of market share
among national stock exchanges. In light of the trading volume on NSX
and the ability of ETP Holders to trade equity securities on other
trading venues, the Exchange does not believe that its proposal will
have any substantial competitive impact.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange has not solicited or received written comments on the
proposed rule change from ETP Holders or others.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the proposed rule change does not: (i) Significantly affect
the protection of investors or the public interest; (ii) impose any
significant burden on competition; and (iii) become operative for 30
days from the date on which it was filed, or such shorter time as the
Commission may designate if consistent with the protection of investors
and the public interest, the proposed rule change has become effective
pursuant to Section 19(b)(3)(A) of the Act \13\ and Rule 19b-
4(f)(6)(iii) thereunder.\14\
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\13\ 15 U.S.C. 78s(b)(3)(A).
\14\ 17 CFR 240.19b-4(f)(6)(iii). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written
notice of its intent to file the proposed rule change, along with a
brief description and the text of the proposed rule change, at least
five business days prior to the date of filing of the proposed rule
change, or such shorter time as designated by the Commission.
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is: (i)
Necessary or appropriate in the public interest; (ii) for the
protection of investors; or (iii) otherwise in furtherance of the
purposes of the Act. If the Commission takes such action, the
Commission shall institute proceedings to determine whether the
proposed rule should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-NSX-2014-14 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-NSX-2014-14. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than
[[Page 27020]]
those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549, on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such filing also will be available
for inspection and copying at the principal offices of the Exchange.
All comments received will be posted without change; the Commission
does not edit personal identifying information from submissions. You
should submit only information that you wish to make available
publicly. All submissions should refer to File Number SR-NSX-2014-14,
and should be submitted on or before June 2, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
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\15\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-10785 Filed 5-9-14; 8:45 am]
BILLING CODE 8011-01-P