[Federal Register Volume 79, Number 140 (Tuesday, July 22, 2014)]
[Notices]
[Pages 42603-42605]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-17179]
[[Page 42603]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-72632; File No. SR-NYSE-2014-36]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Proposing To Merge New York Block Exchange LLC into NYSE and, Effective
as of the Consummation of the Merger, Delete the Text of the Limited
Liability Company Agreement of New York Block Exchange LLC
July 16, 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 July 9, 2014, New York Stock Exchange LLC (``NYSE'' or the
``Exchange'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I and II
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 proposes to merge New York Block Exchange LLC (the
``Company'') into NYSE (the ``Merger'') and, effective as of the
consummation of the Merger, delete the text of the Limited Liability
Company Agreement (the ``LLC Agreement'') of the Company. The text of
the proposed rule change is available on the Exchange's Web site at
www.nyse.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 self-regulatory organization
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 those 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 parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to merge the Company into NYSE and, effective
as of the consummation of the Merger, delete the text of the LLC
Agreement.
Background
On January 22, 2009, the Securities and Exchange Commission (the
``Commission'') approved on a pilot basis the governance structure
proposed by the Exchange with respect to the New York Block Exchange
(``NYBX''), an electronic trading facility of the Exchange for NYSE-
listed securities that was established by means of the Company, as a
joint venture between the Exchange and BIDS Holdings L.P. (``BIDS
Holdings'').\3\ The Company owned and operated NYBX. The governance
structure that was approved was reflected in the LLC Agreement, which
was filed as a proposed rule with the Commission. Under that governance
structure, the Exchange and BIDS Holdings each owned a 50% economic
interest in the Company. In addition, the Exchange, through its wholly
owned subsidiary NYSE Market, Inc., owned less than 10% of the
aggregate limited partnership interest in BIDS Holdings. BIDS Holdings
is the parent company of BIDS Trading, L.P. (``BIDS Trading''), which
became a member organization of the Exchange in connection with the
establishment of NYBX.
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\3\ See Securities Exchange Act Release No. 59281 (January 22,
2009), 74 FR 5014 (January 28, 2009) (SR-NYSE-2008-120) (the
``Approval Order'').
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The foregoing ownership arrangements would have violated NYSE Rule
2B without an exception from the Commission.\4\ First, the Exchange's
indirect ownership interest in BIDS Trading would violate the
prohibition in Rule 2B against the Exchange maintaining an ownership
interest in a member organization. Second, BIDS Trading was an
affiliate of an affiliate of the Exchange,\5\ which would violate the
prohibition in Rule 2B against a member of the Exchange having such
status. In the Approval Order, the Commission permitted an exception to
these two potential violations of NYSE Rule 2B, subject to a number of
limitations and conditions, one of which was set forth in Commentary
.01 of Rule 2B.\6\ The original 12-month pilot period expired on
January 22, 2010 and was extended for four additional 12-month periods
to January 22, 2014.\7\
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\4\ NYSE Rule 2B provides, in relevant part, that ``[w]ithout
prior SEC approval, the Exchange or any entity with which it is
affiliated shall not, directly or indirectly, acquire or maintain an
ownership interest in a member organization. In addition, a member
organization shall not be or become an affiliate of the Exchange, or
an affiliate of any affiliate of the Exchange. . . . The term
affiliate shall have the meaning specified in Rule 12b-2 under the
Act.''
\5\ Specifically, NYBX is an affiliate of the Exchange, and BIDS
Trading was an affiliate of NYBX based on their common control by
BIDS Holdings. The affiliation in each case was the result of the
50% ownership interest in NYBX by each of the Exchange and BIDS
Holdings.
\6\ See Approval Order, supra note 3, at 5018.
\7\ See Securities Exchange Act Release Nos. 61409 (January 22,
2010), 75 FR 4889 (January 29, 2010) (SR-NYSE-2010-04); 63545
(December 14, 2010), 75 FR 80088 (December 21, 2010) (SR-NYSE-2010-
82); 66059 (December 27, 2011), 77 FR 145 (January 3, 2012) (SR-
NYSE-2011-67); and 68658 (January 15, 2013), 78 FR 4524 (January 22,
2013) (SR-NYSE-2013-01).
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The Exchange ceased operating NYBX on February 28, 2013 because,
after years of operations, the facility did not garner enough volume to
achieve critical mass and did not have strong customer support.\8\
Effective the same day, NYSE deleted Rule 1600, which governed NYBX
functionality.\9\ Thereafter, on March 1, 2013, BIDS Trading terminated
its membership with the Exchange and its affiliate NYSE MKT LLC. Once
BIDS Trading was no longer a member organization of the Exchange or any
of the Exchange's affiliates, the Exchange deleted Commentary .01 to
NYSE Rule 2B.\10\
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\8\ See Securities Exchange Act Release No. 68861 (February 7,
2013), 78 FR 10226 (February 13, 2013) (SR-NYSE-2013-12).
\9\ Id.
\10\ See Securities Exchange Act Release No. 69225 (March 25,
2013), 78 FR 19340 (March 29, 2013) (SR-NYSE-2013-22).
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On June 17, 2014, the Company redeemed the membership interest of
BIDS Holdings for consideration of $1.00. As a result, NYSE is now the
sole member of the Company.
Proposed Rule Change
Because NYBX is no longer operating, NYSE proposes to merge the
Company into NYSE in the Merger and repeal the text of the LLC
Agreement in its entirety, effective as of the consummation of the
Merger.
The Company is a limited liability company formed and validly
existing under the laws of the State of Delaware. NYSE is a limited
liability company organized and validly existing under the laws of the
State of New York. The Delaware Limited Liability Company Act (the
``DLLCA'') and the New York Limited Liability Company Law (the
``NYLLCL'') each permits a limited liability company formed and
existing under the DLLCA to merge with and
[[Page 42604]]
into a limited liability company organized and existing under the
NYLLCL.
Following the effective date of this rule filing, the parties will
execute the merger agreement. The certificates of merger will be filed
in the State of Delaware and the State of New York, at which time the
Company will cease to exist and NYSE will be the sole surviving
company.
Article 13, Section 13.1 of the LLC Agreement requires any
amendment to or repeal of the LLC Agreement to be either filed with, or
filed with and approved by, the Commission under Section 19 of the Act
before it is effective. Because NYBX has already ceased operating and
the Exchange has already submitted two immediately effective proposed
rule changes in connection therewith, and because the Company will no
longer exist upon consummation of the Merger, the Exchange believes
that the deletion of the text of the LLC Agreement should be
immediately effective as of the consummation of the Merger.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\11\ in general, and furthers the
objectives of Section 6(b)(5) of the Act,\12\ in particular, because it
promotes just and equitable principles of trade, removes impediments to
and perfects the mechanism of a free and open market and a national
market system, and, in general, helps to protect investors and the
public interest. The Exchange believes that the proposal removes
impediments to and perfects the mechanism of a free and open market by
eliminating an obsolete governing document for a corporate entity that
no longer has an operational purpose and thus will be eliminated via
the Merger.
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\11\ 15 U.S.C. 78f(b).
\12\ 5 U.S.C. 78f(b)(5).
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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 Act. The proposed change is not
designed to address any competitive issue, but rather would eliminate
an obsolete governing document for a corporate entity that no longer
has an operational purpose and thus will be eliminated via the Merger.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
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). 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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The Exchange has asked the Commission to waive the 30-day operative
delay so that the proposal may become operative immediately upon
filing. The Exchange stated that the proposed rule change will not
affect investors or the public interest because NYBX already ceased
operating in February 2013 and no public comments have been received
about the cessation. In addition, the Exchange stated that permitting
the proposed rule change will help the Exchange avoid unnecessary
expenses for a corporate entity that is no longer operating. The
Commission believes that the proposed rule change raises no novel
issues. Moreover, the Commission believes that the proposed rule change
is consistent with the protection of investors and the public interest,
because it helps avoid investor confusion by eliminating an obsolete
governing document for a corporation that no longer has an operational
purpose and will be eliminated via the Merger. The Commission,
therefore, waives the 30-day operative delay requirement and designates
the proposed rule change to be operative upon filing.\15\
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\15\ For purposes only of waiving the 30-day operative delay,
the Commission has also considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of such proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
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 change 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-NYSE-2014-36 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-NYSE-2014-36. 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 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 Section, 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 the filing will also be available
for inspection and copying at the NYSE's principal office. All comments
received will be posted without change; the Commission does not edit
personal
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identifying information from submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-NYSE-2014-36 and should be submitted on
or before August 12, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
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\16\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-17179 Filed 7-21-14; 8:45 am]
BILLING CODE 8011-01-P