[Federal Register Volume 79, Number 237 (Wednesday, December 10, 2014)]
[Notices]
[Pages 73362-73364]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-28878]
[[Page 73362]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-73740; File Nos. SR-NYSE-2014-53; SR-NYSEMKT-2014-83;
SR-NYSEArca-2014-112]
Self-Regulatory Organizations; New York Stock Exchange LLC; NYSE
MKT LLC; NYSE Arca, Inc.; Order Approving a Proposed Rule Change, as
Modified by Amendment No. 1 Thereto, 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
December 4, 2014.
I. Introduction
On October 8, 2014, 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) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\
proposed rule changes 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 (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 proposed rule changes were published for comment in the
Federal Register on October 22, 2014.\3\ The Commission did not receive
any comment letters on the proposal. On October 21, 2014, the NYSE
Exchanges filed Amendment No. 1 to the proposed rule changes.\4\ This
order approves the proposed rule changes as modified by Amendment No. 1
thereto.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Securities Exchange Act Release Nos. 73373 (October 16,
2014), 79 FR 63191 (SR-NYSE-2014-53); 73372 (October 16, 2014), 79
FR 63201 (SR-NYSEMKT-2014-83); 73374 (October 16, 2014), 79 FR 63188
(SR-NYSEArca-2014-112).
\4\ In Amendment No. 1, the NYSE Exchanges made a technical and
non-material correction to a statement in each filing regarding the
ownership of NYSE Amex Options LLC by ICE. The Commission notes that
the NYSE Exchanges submitted a comment letter to each filing on
October 24, 2014 attaching Amendment No. 1, and, consequently,
Amendment No. 1 is available in the public comment files for SR-
NYSE-2014-53, SR-NYSEMKT-2014-83, and SR-NYSEArca-2014-112 on the
Commission's Web site. Because Amendment No. 1 is technical in
nature, the Commission is not required to publish it for public
comment.
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II. Description of the Proposal
The NYSE Exchanges seek approval for their 100% direct parent, NYSE
Group, and its 100% indirect parent, NYSE Holdings, to terminate the
Trust Agreement.\5\ The NYSE Exchanges believe 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.
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\5\ ICE, a public company listed on the Exchange, 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, 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. and NYSE Arca Equities, Inc. ICE also indirectly
owns a majority interest in NYSE Amex Options LLC. See Exchange Act
Release No. 70210 (August 15, 2013), 78 FR 51758 (August 21, 2013)
(SR-NYSE-2013-42; SR-NYSEMKT-2013-50; SR-NYSEArca-2013-62)
(approving proposed rule change relating to a corporate transaction
in which NYSE Euronext will become a wholly owned subsidiary of
IntercontinentalExchange Group, Inc.).
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In 2007, NYSE Group, which is the 100% owner of the NYSE Exchanges,
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, the NYSE
Exchanges 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, 816-17 (January 8, 2007) (the ``NYSE Euronext
Notice''). NYSE Euronext acquired NYSE MKT, the third of the NYSE
Exchanges, 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.\7\
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\7\ An explanation of the terms of the Dutch foundation and the
Delaware trust is included in the NYSE Euronext Notice. Subsequent
modifications to the arrangements, to the extent relevant to the
proposed rule change, are described in the Notices.
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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'').\8\ In June 2014, ICE announced that
[[Page 73363]]
it had sold all but approximately 6% of the ownership interest in
Euronext in an underwritten public offering outside the United
States.\9\ As stated in the Notices, upon ICE's application, 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.\10\ As a result, the NYSE Exchanges represent
that ICE and its subsidiaries are no longer subject to the provisions
of the Dutch foundation.
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\8\ 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 to the Notices
as Exhibit 5C.
\9\ 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.
\10\ An English translation provided by the NYSE Exchanges of
the Dutch Ministry of Finance's letter is attached to the Notices 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
nominating and governance committee of the board of directors of
ICE.\11\ Other provisions of the Trust Agreement are substantially
unchanged.\12\
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\11\ See Exchange Act Release No. 70210 (August 15, 2013), 78 FR
51758 (August 21, 2013) (SR-NYSE-2013-42; SR-NYSEMKT-2013-50; SR-
NYSEArca-2013-62).
\12\ 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 and 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.
Termination of the Delaware trust would be implemented through a
unanimous written consent of all parties to, or otherwise bound by, the
Trust Agreement.\13\ The proposed rule changes and exhibits thereto
contain modifications to the corporate governance documents of NYSE
Holdings, NYSE Group, the Exchange, NYSE MKT, NYSE Market and NYSE
Regulation that delete references to the Delaware trust and make
related conforming changes thereto.\14\
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\13\ 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 to the Notices as Exhibit 5B.
\14\ In particular, the NYSE Exchanges propose to amend: (1) The
Fifth Amended and Restated Limited Liability Company Agreement of
NYSE Holdings to eliminate the definition of the term ``Trust'' in
Section 1.1 and the references to the Delaware trust in Section 7.2;
(2) the Third Amended and Restated Certificate of Incorporation of
NYSE Group to eliminate references to the Delaware trust in Article
IV, Section 4(a) and (b); (3) the Sixth Amended and Restated
Operating Agreement of the Exchange to eliminate references to the
Delaware trust in Section 3.03; (4) the Fifth Amended and Restated
Operating Agreement of NYSE MKT to eliminate references to the
Delaware trust in Section 3.03; (5) the Second Amended and Restated
Certificate of Incorporation of NYSE Market to eliminate references
to the Delaware trust in Article IV, Section 2; and (6) the Restated
Certificate of Incorporation of NYSE Regulation to eliminate
references to the Delaware trust in Article V.
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III. Discussion and Commission's Findings
After careful review, the Commission finds that the proposed rule
changes are consistent with the requirements of Section 6 of the Act
\15\ and the rules and regulations thereunder applicable to a national
securities exchange.\16\ The Commission finds that the proposed rule
changes are consistent with Section 6(b)(5) of the Act,\17\ which
requires, among other things, that the exchanges' rules 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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\15\ 15 U.S.C. 78f.
\16\ Additionally, in approving these proposed rule changes, the
Commission has considered the proposed rules' impact on efficiency,
competition, and capital formation. See 15 U.S.C. 78c(f).
\17\ 15 U.S.C. 78f(b)(5).
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The NYSE Exchanges believe 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 NYSE Exchanges'
representation that the Dutch foundation 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. In addition,
the NYSE Exchanges represent that continuance of the Trust Agreement
imposes administrative burdens and costs upon the exchanges and their
affiliates that create impediments to a free and open market, and may
cause investor uncertainty. In particular, according to the NYSE
Exchanges, 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.\18\
According to the NYSE Exchanges, the Trust Agreement also results in
out-of-pocket costs to the exchanges and their 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 Commission approval process.
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\18\ 17 CFR 240.19b-4.
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The Commission believes that the NYSE Exchanges' proposal to
terminate the Trust Agreement is consistent with the requirements of
Section 6(b)(5) of the Act \19\ because the proposed rule changes would
be consistent with and facilitate a corporate governance
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structure for the NYSE Exchanges that is 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.
Furthermore, the termination of the Delaware trust may remove
impediments to the operation of the NYSE exchanges 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 the exchanges.
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\19\ 15 U.S.C. 78f(b)(5).
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IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\20\ that the proposed rule changes (SR-NYSE-2014-53; SR-NYSEMKT-
2014-83; SR-NYSEArca-2014-112), as modified by Amendment No. 1, be, and
hereby are, approved.
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\20\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\21\
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\21\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-28878 Filed 12-9-14; 8:45 am]
BILLING CODE 8011-01-P