[Federal Register Volume 79, Number 204 (Wednesday, October 22, 2014)]
[Notices]
[Pages 63201-63204]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-25078]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-73372; File No. SR-NYSEMKT-2014-83]
Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing of
Proposed Rule Change in Connection With the Proposed Termination of the
Amended and Restated Trust Agreement, Dated as of November 13, 2013 and
Amended on June 2, 2014 By and Among NYSE Holdings LLC, a Delaware
Limited Liability Company, NYSE Group, Inc., a Delaware Corporation,
Wilmington Trust Company, as Delaware Trustee, and Each of Jacques de
Larosi[egrave]re de Champfeu, Alan Trager and John Shepard Reed, as
Trustees
October 16, 2014.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that, on October 8, 2014, NYSE MKT LLC (the ``Exchange'' or
``NYSE MKT'') 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 self-regulatory
organization. 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\ 15 U.S.C. 78a.
\3\ 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 this rule filing in connection with the
proposed
[[Page 63202]]
termination of the Amended and Restated Trust Agreement, dated as of
November 13, 2013 and amended on June 2, 2014 (the ``Trust
Agreement''), by and among NYSE Holdings LLC, a Delaware limited
liability company (``NYSE Holdings''), NYSE Group, Inc., a Delaware
corporation (``NYSE Group''), Wilmington Trust Company, as Delaware
Trustee, and each of Jacques de Larosi[egrave]re de Champfeu, Alan
Trager and John Shepard Reed, as Trustees. 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
Statutory Basis for, the Proposed Rule Change
1. Purpose
NYSE MKT seeks approval for its 100% direct parent, NYSE Group, and
its 100% indirect parent, NYSE Holdings, to terminate the Trust
Agreement.\4\ NYSE MKT believes that the regulatory considerations that
led to the implementation of the Trust Agreement in 2007 are now moot
as a result of the sale by Intercontinental Exchange, Inc., a Delaware
corporation (``ICE''), of Euronext N.V. (``Euronext'') in June 2014 and
certain changes in the corporate governance of ICE, ICE Holdings and
NYSE Holdings that occurred upon such sale.\5\
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\4\ ICE, a public company listed on the New York Stock Exchange,
LLC (the ``NYSE''), owns 100% of Intercontinental Exchange Holdings,
Inc., a Delaware corporation (``ICE Holdings''), which in turn owns
100% of NYSE Holdings. Through ICE Holdings, NYSE Holdings and NYSE
Group, ICE indirectly owns (1) 100% of the equity interest of three
registered national securities exchanges and self-regulatory
organizations (together, the ``NYSE Exchanges'')--the Exchange, NYSE
Arca, Inc. (``NYSE Arca'') and the NYSE--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. and NYSE Amex Options LLC. See Exchange Act Release
No. 70210 (August 15, 2013) (SR-NYSEMKT-2013-50), 78 FR 51758
(August 21, 2013) (approving proposed rule change relating to a
corporate transaction in which NYSE Euronext will become a wholly
owned subsidiary of IntercontinentalExchange Group, Inc.).
\5\ The Exchange's affiliates, the NYSE and NYSE Arca, have also
submitted the same proposed rule change to terminate the Trust
Agreement. See SR-NYSEArca-2014-112 and SR-NYSE-2014-53.
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Background
In 2007, NYSE Group, which is the 100% owner of NYSE MKT, combined
with Euronext (the ``Combination''). The new parent company formed in
the Combination, NYSE Euronext, operated several regulated entities in
the United States and various jurisdictions in Europe. In the
Commission's notice relating to the proposed Combination, NYSE MKT
emphasized the importance of continuing to regulate marketplaces
locally:
A core aspect of the structure of the Combination is continued
local regulation of the marketplaces. Accordingly, the Combination
is premised on the notion that . . . [c]ompanies listing their
securities only on markets operated by Euronext and its subsidiaries
will not become newly subject to U.S. laws or regulation by the SEC
as a result of the Combination, and companies listing their
securities only on the Exchange or NYSE Arca, will not become newly
subject to European rules or regulation as a result of the
Combination.\6\
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\6\ See Exchange Act Release No. 55026 (Dec. 29, 2006) (SR-NYSE-
2006-120), 72 FR 814, 816-817 (January 8, 2007) (the ``NYSE Euronext
Notice''). NYSE Euronext acquired NYSE MKT in 2008.
In connection with obtaining regulatory approval of the
Combination, NYSE Euronext implemented certain special arrangements
consisting of two standby structures, one involving a Dutch foundation
(Stichting) and one involving a Delaware trust. The Dutch foundation
was empowered to take actions to mitigate the effects of any material
adverse change in U.S. law that had an ``extraterritorial'' impact on
non-U.S. issuers listed on Euronext markets, non-U.S. financial
services firms that were members of Euronext markets or holders of
exchange licenses with respect to the Euronext markets. The Delaware
trust was empowered to take actions to mitigate the effects of any
material adverse change in European law that had an
``extraterritorial'' impact on the non-European issuers listed on NYSE
Group securities exchanges, non-European financial services firms that
were members of any NYSE Group securities market or holders of exchange
licenses with respect to the NYSE Group securities exchanges.
The current form of the Trust Agreement is attached as Exhibit 5A,
and a form of unanimous written consent of all parties to, or otherwise
bound by, the Trust Agreement resolving that the Delaware trust be
terminated is attached as Exhibit 5B. The terms of the Dutch foundation
and the Delaware trust are complex. An explanation of the terms is
included in the NYSE Euronext Notice. Subsequent modifications to the
arrangements, to the extent relevant to the proposed rule change, are
described herein. The Dutch foundation and the Delaware trust remained
in effect after the merger of ICE Holdings (then known as
IntercontinentalExchange, Inc.) and NYSE Euronext in 2013 under ICE
(then known as IntercontinentalExchange Group, Inc.) as a new public
holding company. However, in connection with ICE's announced plan to
sell the Euronext securities exchanges in an initial public offering,
the Dutch Ministry of Finance permitted modifications of the terms of
the governing document of the Dutch foundation under which the powers
of the Dutch foundation would cease to apply to ICE and its affiliates
at such time as ICE ceased to hold a ``controlling interest'' in
Euronext, with ``controlling interest'' defined by reference to the
definition of ``control'' under Rule 10 of the International Financial
Reporting Standards (``IFRS 10'').\7\ In June 2014 ICE announced that
it had sold all but approximately 6% of the ownership interest in
Euronext in an underwritten public offering outside the United
States.\8\ Upon application by ICE, the Dutch Ministry of Finance
confirmed on July 16, 2014 that the conditions to the cessation of the
application of the Dutch foundation to ICE had been satisfied or
waived.\9\ As a result, ICE and its subsidiaries are no longer subject
to the provisions of the Dutch foundation.
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\7\ Excerpts from the Further Amended and Restated Governance
and Option Agreement, dated March 21, 2014, among the Dutch
foundation, Euronext Group N.V. and ICE are attached as Exhibit 5C.
\8\ ICE's press release dated June 24, 2014 is available at the
following link: http://ir.theice.com/investors-and-media/press/press-releases/press-release-details/2014/Intercontinental-Exchange-Announces-Closing-of-Euronext-Initial-Public-Offering/default.aspx.
\9\ An English translation of the Dutch Ministry of Finance's
letter is attached as Exhibit 5D.
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In the 2013 merger, NYSE Euronext was succeeded by the entity now
known as NYSE Holdings, which is currently a party to the Trust
Agreement. At that time, references to the nominating and governance
committee of the board of directors of NYSE Euronext, which selected
the Trustees of the Delaware trust, were replaced by references to the
[[Page 63203]]
nominating and governance committee of the board of directors of
ICE.\10\ Other provisions of the Trust Agreement are substantially
unchanged.\11\
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\10\ See note 4, supra.
\11\ See Exchange Act Release No. 72158 (May 13, 2014) (SR-NYSE-
2014-23), 79 FR 28784 (May 19, 2014) (notice of filing and immediate
effectiveness of proposed rule change relating to name changes of
the Exchange's ultimate parent) (revising Trust Agreement to reflect
name changes of ICE and ICE Holdings).
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In connection with the Combination of NYSE Group and Euronext in
2007 and the establishment of the Dutch foundation and the Delaware
trust, the Certificate of Incorporation and Bylaws of NYSE Euronext
included several provisions relating to representation of European
interests on the board of directors and other provisions requiring the
board to give due consideration to European regulatory requirements and
the interests of identified categories of European stakeholders. These
provisions are summarized in the NYSE Euronext Notice. Each such
provision was subject to automatic revocation in the event that NYSE
Euronext no longer held a controlling interest in Euronext or certain
of its subsidiaries. For this purpose, ``controlling interest'' was
defined to mean 50% or more of the outstanding shares of each class of
voting securities and of the combined voting power of outstanding
voting securities entitled to vote generally in the election of
directors. Substantially identical provisions were added to the
Certificate of Incorporation and Bylaws of ICE and ICE Holdings, and
were retained in the Operating Agreement of NYSE Holdings, when ICE
acquired NYSE Euronext in 2013, except that the ``controlling
interest'' test was modified to become a ``control'' test under IFRS
10, as described above with respect to the Dutch foundation. As a
result of the initial public offering of Euronext, ICE has established
that it no longer controls Euronext within the meaning of IFRS 10, and
the provisions of the constituent documents of ICE, ICE Holdings and
NYSE Holdings have automatically and without further action become void
and are of no further force and effect.
Proposed Rule Change
NYSE MKT requests approval to terminate the Delaware trust because
it believes that the regulatory considerations that led to the
implementation of the Trust Agreement in 2007 have been mooted by the
sale of Euronext in June 2014, the automatic revocation of corporate
governance provisions applicable to ICE, ICE Holdings and NYSE Holdings
that occurred upon such sale, and the fact that the Dutch which
functioned as a European analog to the Delaware trust, ceased to have
any authority over ICE and its subsidiaries upon the closing of the
sale of Euronext.\12\ NYSE MKT believes that the prospect for any
material adverse change in European law that would have 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 market or holders of exchange
licenses with respect to the NYSE Group securities exchanges is now
remote.
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\12\ As noted above, this has been confirmed by the Dutch
Ministry of Finance.
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Continuance of the Trust Agreement when it no longer furthers the
purposes of Section 6(b) of the Exchange Act \13\ also imposes certain
administrative burdens and costs upon NYSE MKT and its affiliates, and
may cause investor uncertainty, that create impediments to a free and
open market. Specifically, the Trust Agreement imposes administrative
burdens on ICE and the nominating and governance committee of its board
of directors, such as the need to periodically consider and vote on
Trustees; the need to consider whether any proposed action requires
approval under the Trust Agreement and, if so, the obligation to
prepare materials for consideration and vote by the Trustees; and the
need to consider whether any proposed action requires an amendment to
the Trust Agreement and, if so, the additional obligation to submit
such amendment to the Commission for approval under Rule 19b-4.\14\ The
Trust Agreement results in out-of-pocket costs to NYSE MKT and its
affiliates including the fees of the individual Trustees and the
Delaware Trustee as well as fees of counsel incurred in connection with
review of proposed amendments and assistance with the SEC approval
process. NYSE MKT also believes that some analysts and institutional
investors may not fully understand the purpose of the Delaware trust
and may not have appreciated that, even when ICE controlled Euronext
and European regulatory considerations played a substantial role in
ICE's corporate governance, the likelihood of the Delaware trust's
substantive provisions ever being invoked was, by design, extremely
remote. In light of the sale of Euronext, the revocation of the
governance provisions relating to European considerations, and the
cessation of application of the Dutch foundation to ICE and its
affiliates, ICE believes it is appropriate to terminate the Delaware
trust in order to avoid any future need to reassure analysts and
investors that the trust does not impact the daily operations or
valuations of ICE's national securities exchanges.
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\13\ 15 U.S.C. 78f(b).
\14\ 17 CFR 240.19b-4.
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Termination of the Delaware trust would be implemented through a
unanimous written consent of all parties to, or otherwise bound by, the
Trust Agreement in the form attached as Exhibit 5B.
References to the Delaware trust also would be deleted from, and
related conforming changes would be made to, the constituent documents
of NYSE Holdings, NYSE Group, NYSE MKT, the Exchange, NYSE Market and
NYSE Regulation. In particular:
NYSE Holdings. The Fifth Amended and Restated Limited Liability
Company Agreement of NYSE Holdings would be further amended and
restated to eliminate the definition of the term ``Trust'' in Section
1.1 and the references to the Delaware trust in Section 7.2. See
Exhibit 5E.
NYSE Group. The Third Amended and Restated Certificate of
Incorporation of NYSE Group would be further amended and restated to
eliminate references to the Delaware trust in Article IV, Section 4(a)
and (b). See Exhibit 5F.
The Exchange. The Sixth Amended and Restated Operating Agreement of
the Exchange would be further amended and restated to eliminate
references to the Delaware trust in Section 3.03. See Exhibit 5G.
NYSE MKT. The Fifth Amended and Restated Operating Agreement of
NYSE MKT would be further amended and restated to eliminate references
to the Delaware trust in Section 3.03. See Exhibit 5H.
NYSE Market. The Second Amended and Restated Certificate of
Incorporation of NYSE Market would be further amended and restated to
eliminate references to the Delaware trust in Article IV, Section 2.
See Exhibit 5I.
NYSE Regulation. The Restated Certificate of Incorporation of NYSE
Regulation would be further amended and restated to eliminate
references to the Delaware trust in Article V. See Exhibit 5J.
2. Statutory Basis
NYSE MKT believes that the proposed rule change is consistent with
Section 6(b) of the Exchange Act \15\ in general, and with Section
6(b)(1) \16\ in particular, in that it enables NYSE MKT to be so
organized as to have the capacity to be
[[Page 63204]]
able to carry out the purposes of the Exchange Act and to comply, and
to enforce compliance by its exchange members and persons associated
with its exchange members, with the provisions of the Exchange Act, the
rules and regulations thereunder, and the rules of NYSE MKT. The
Delaware trust was implemented in response to potential concerns
arising under non-U.S. law and regulation at a time when NYSE MKT was
owned by a company with substantial holdings of non-U.S. securities
exchanges, substantial non-U.S. board representation, and explicit
obligations on the part of its board to give due consideration to
matters of non-U.S. law and the interests of non-U.S. stakeholders. In
light of the elimination of these concerns as discussed above, NYSE MKT
believes that termination of the Delaware trust is consistent with
Section 6(b)(1).
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\15\ 15 U.S.C. 78f(b).
\16\ 15 U.S.C. 78f(b)(1).
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NYSE MKT also believes that this filing furthers the objectives of
Section 6(b)(5) of the Exchange Act \17\ because the proposed rule
change would be consistent with and facilitate a governance and
regulatory structure that is 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. As discussed above, the
Exchange believes that termination of the Delaware trust will remove
impediments to the operation of NYSE MKT by eliminating certain
expenses and administrative burdens as well as the potential for
uncertainty among analysts and investors as to the practical
implications of the Delaware trust on NYSE MKT as a marketplace and as
a significant asset of ICE. For the same reasons, the proposed rule
change is also designed to protect investors as well as the public
interest.
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\17\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
NYSE MKT 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. Indeed, the proposed
rule change would eliminate an earlier arrangement intended in part to
address potential competitive issues in the European securities markets
that have abated as a result of ICE's sale of the Euronext securities
exchanges in June 2014. The proposed rule change results in no
concentration or other changes of ownership of exchanges.
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
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days after
publication (i) as the Commission may designate if it finds such longer
period to be appropriate and publishes its reasons for so finding or
(ii) as to which the self-regulatory organization consents, the
Commission will:
(A) by order approve or disapprove the proposed rule change, or
(B) institute proceedings to determine whether the proposed rule
change should be 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-NYSEMKT-2014-83 on the subject line.
Paper Comments
Send paper comments in triplicate to Brent J. Fields,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSEMKT-2014-83. 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 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 the filing also will be available
for inspection and copying at the principal office 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-NYSEMKT-2014-83 and should
be submitted on or before November 12, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
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\18\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-25078 Filed 10-21-14; 8:45 am]
BILLING CODE 8011-01-P