Self-Regulatory Organizations; New York Stock Exchange LLC; Order Approving a Proposed Rule Change Amending Its Limited Liability Company Operating Agreement and the Bylaws of Its Wholly-Owned Subsidiary NYSE Market, Inc. To Eliminate, in Each Case, a Requirement That Not Less Than Two Members of the Board of Directors Must Qualify as “Non-Affiliated Directors” and a Related Requirement That Not Less Than Two Members of the Board of Directors Must Qualify as “Fair Representation Candidates”, 15799-15800 [E9-7834]

Download as PDF Federal Register / Vol. 74, No. 65 / Tuesday, April 7, 2009 / Notices trade differently than singly-listed securities that do not require a license? Does it matter whether any such required license must be obtained from ISE or a third party? ISE represents that it would license its proprietary index products to any other exchange on commercially reasonable terms. How should this representation be factored into the Commission’s evaluation? What impact, if any, would the trading volume represented by such singlylisted securities have on the analysis? Are there any factors with respect to singly-listed securities that would impact an analysis of whether ISE’s proposed fees are consistent with the Act? Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an e-mail to rulecomments@sec.gov. Please include File Number SR–ISE–2007–97 on the subject line. Paper Comments • Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549. All submissions should refer to File Number SR–ISE–2007–97. This file number should be included on the subject line if e-mail 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 (https://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 inspection and copying in the Commission’s Public Reference Room, 100 F Street, NE., Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. Copies of such 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 VerDate Nov<24>2008 17:13 Apr 06, 2009 Jkt 217001 should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–ISE–2007–97 and should be submitted on or before April 28, 2009. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.20 Florence E. Harmon, Deputy Secretary. [FR Doc. E9–7836 Filed 4–6–09; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–59683; File No. SR–NYSE– 2009–12] Self-Regulatory Organizations; New York Stock Exchange LLC; Order Approving a Proposed Rule Change Amending Its Limited Liability Company Operating Agreement and the Bylaws of Its Wholly-Owned Subsidiary NYSE Market, Inc. To Eliminate, in Each Case, a Requirement That Not Less Than Two Members of the Board of Directors Must Qualify as ‘‘Non-Affiliated Directors’’ and a Related Requirement That Not Less Than Two Members of the Board of Directors Must Qualify as ‘‘Fair Representation Candidates’’ April 1, 2009. I. Introduction On February 2, 2009, the New York Stock Exchange LLC (‘‘NYSE’’ or the ‘‘Exchange’’) 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 a proposed rule change to amend: (i) its Second Amended and Restated Operating Agreement (‘‘NYSE Operating Agreement’’); and (ii) the bylaws of its wholly-owned subsidiary NYSE Market, Inc. (‘‘NYSE Market’’) (‘‘NYSE Market Bylaws’’), to eliminate the requirement that not less than two members of the board of directors of NYSE (‘‘NYSE Board’’) and of NYSE Market (‘‘NYSE Market Board’’), respectively, must qualify as ‘‘nonaffiliated directors’’ and the requirement that not less than two members of such boards must qualify as ‘‘fair representation candidates’’ (as each of those terms is defined in the NYSE Operating Agreement and NYSE Market Bylaws, respectively). The requirements that at least 20% of NYSE Board’s 20 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 PO 00000 Frm 00111 Fmt 4703 Sfmt 4703 15799 directors and NYSE Market Board’s directors must be ‘‘non-affiliated directors’’ and ‘‘fair representation candidates’’ would remain in place. The proposed rule change was published for comment in the Federal Register on February 20, 2009.3 The Commission received no comments on the proposal. II. Description of the Proposal The Exchange proposes that its parent company, NYSE Group, Inc., as the sole member of the Exchange, amend the NYSE Operating Agreement to eliminate the requirements that: (i) not less than two members of NYSE Board must be persons who are not members of the board of directors of NYSE Euronext (‘‘NYSE Euronext Board’’), and who qualify as independent under the independence policy of the NYSE Euronext Board (‘‘NYSE non-affiliated directors’’); and (ii) not less than two members of the NYSE Board must be ‘‘fair representation candidates’’ (as defined in the NYSE Operating Agreement). In each case, however, the current requirements that a minimum of 20% of NYSE Board’s directors must be NYSE non-affiliated directors and that a minimum of 20% of NYSE Board’s directors must be fair representation candidates would continue to apply.4 The Exchange also proposes that the Exchange, as the sole stockholder of NYSE Market, amend the NYSE Market Bylaws to eliminate the requirements that: (i) not less than two members of the NYSE Market Board must be persons who are not members of the NYSE Euronext Board, although such directors need not be independent (‘‘NYSE Market non-affiliated directors’’); and (ii) not less than two members of the NYSE Market Board must be ‘‘fair representation candidates’’ (as defined in the NYSE Market Bylaws). In each case, however, the current requirements that a minimum of 20% of NYSE Market Board’s directors must be NYSE Market non-affiliated directors and that a minimum of 20% of NYSE Market Board’s directors must be fair representation candidates would continue to apply.5 The Exchange also proposes to specify in the NYSE Operating Agreement and the NYSE Market Bylaws that, for purposes of calculating the minimum number of non-affiliated directors and 3 See Securities Exchange Act Release No. 59400 (February 12, 2009), 74 FR 7945. 4 The Exchange has represented that fair representation candidates on the NYSE Board qualify as NYSE non-affiliated directors. 5 The Exchange has represented that fair representation candidates on the NYSE Market Board qualify as NYSE Market non-affiliated directors. E:\FR\FM\07APN1.SGM 07APN1 15800 Federal Register / Vol. 74, No. 65 / Tuesday, April 7, 2009 / Notices fair representation candidates for each the NYSE Board and the NYSE Market Board, if the number that is equal to 20% of the total number of directors on their respective boards is not a whole number, such number would be rounded up to the next whole number.6 The Exchange has stated that the practical effect of the proposed rule change would be to enable the size of both the NYSE Board and the NYSE Market Board to be reduced from ten members to five members. The Exchange has represented that the initial implementation of the proposed changes immediately following approval by the Commission would be accomplished through the voluntary resignation of five of the ten directors from the NYSE Board and NYSE Market Board, respectively, including one ‘‘fair representation’’ director from each of the boards, in connection with a reduction in the size of each board to five directors. The Exchange’s proposal would not revise the current fair representation candidate selection and petition process for, or the appointment or election of a fair representation candidate to, the NYSE Board and the NYSE Market Board.7 The Exchange has stated that its proposal is consistent with the governance structures of other national securities exchanges that have been approved by the Commission. The Exchange has noted, for example, that The NASDAQ Stock Market LLC (‘‘Nasdaq’’) has a 20% fair representation requirement, without specifying a minimum number of fair representation directors,8 and that Nasdaq has complete discretion as to the number of board members.9 The Exchange also has noted that in the approval order relating to the 6 See Section 2.03(a)(i) and (iii) of the NYSE Operating Agreement and Article III, Section 1(A) and (B) of the NYSE Market Bylaws. 7 As defined in the NYSE Operating Agreement, fair representation candidates are NYSE Board members that are determined by member organizations of the Exchange through a specified petition process (‘‘Petition Candidates’’) or, in the absence of Petition Candidates, candidates recommended jointly by the Director Candidate Recommendation Committee (‘‘DCRC’’) of NYSE Market and of NYSE Regulation, Inc. In the case of NYSE Market, fair representation candidates on the Market Board are determined similarly except that, in the absence of Petition Candidates, they are individuals recommended by the DCRC of NYSE Market. 8 See Article I, paragraph (q) of the By-Laws of the NASDAQ Stock Market LLC, which states that, ‘‘ ‘Membership Representative Director’ means a Director who has been elected or appointed after having been nominated by the Member Nominating Committee or by a Nasdaq Member pursuant to these By-Laws.’’ 9 See Section 9(a) of the NASDAQ Stock Market LLC Agreement. VerDate Nov<24>2008 17:13 Apr 06, 2009 Jkt 217001 acquisition of the American Stock Exchange LLC by NYSE Euronext, the Commission similarly approved a discretionary board size (noting that Amex intended to have a five-member board), a 20% fair representation requirement, and no minimum number of fair representation directors.10 The Exchange indicated that, by eliminating, for itself and NYSE Market, the current requirements for a minimum of two non-affiliated directors and two fair representation candidates, it will be able to improve administrative efficiency and effectiveness by operating with a smaller number of directors, while continuing to fulfill its statutory obligations regarding the fair representation of its members. III. Discussion and Commission Findings 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.11 In particular, the Commission finds that the proposal is consistent with the requirements of Section 6(b)(3) of the Act, which provides that the rules of an exchange must assure a 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 issues and investors and not be associated with a member of the exchange, broker, or dealer.12 The fair representation requirement in Section 6(b)(3) of the Act is intended to give members a voice in the selection of the exchange’s directors and the administration of its affairs. Moreover, the Section 6(b)(3) requirement helps to ensure that members are protected from unfair, unfettered actions by an exchange and that, in general, an exchange is administered in a way that is equitable to all those who trade on its market or through its facilities. The Commission notes that the requirement that at least 20% of the directors on the NYSE and NYSE Market boards be nonaffiliated directors and fair representation candidates is designed to ensure the fair representation of NYSE members on the NYSE Board and the NYSE Market Board.13 The Commission notes that, while the proposal eliminates the requirement regarding a 10 See Securities Exchange Act Release No. 58673 (September 29, 2008), 73 FR 57707 (October 3, 2008) (SR–Amex–2008–62). 11 In approving this proposed rule change, the Commission notes that it has considered the proposed rule’s impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). 12 15 U.S.C. 78f(b)(3). 13 See supra notes 4 and 5. PO 00000 Frm 00112 Fmt 4703 Sfmt 4703 specific minimum number of nonaffiliated directors and fair representation candidates on the boards, it does not alter the minimum 20% requirement for non-affiliated directors or fair representation candidates or the process by which members can directly petition and vote for representatives on the boards. Moreover, the proposal adds to the NYSE Operating Agreement and NYSE Market Bylaws a provision that: whenever 20% of the board would not result in a whole number, such number would in all cases be rounded up to the nearest whole number, thus ensuring that the non-affiliated directors and fair representation candidates never constitute less than 20% of the board. The Commission further notes that the proposed changes to the NYSE Operating Agreement and NYSE Market Bylaws are consistent with previous proposals approved by the Commission for other exchanges, which also do not specify the number of fair representation directors and which allow discretion as to the size of their boards.14 The Commission therefore finds that the Exchange’s proposal is consistent with Section 6(b)(3) of the Act.15 IV. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act,16 that the proposed rule change (SR–NYSE–2009– 12) is approved. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.17 Florence E. Harmon, Deputy Secretary. [FR Doc. E9–7834 Filed 4–6–09; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–59677; File No. SR–NYSE– 2009–38] Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Revise Transaction Fees for the New York Block Exchange April 1, 2009. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 14 See, e.g., Section 9(a) of the NASDAQ Stock Market LLC Agreement and Article IV, Section 4– 1 of the NASDAQ OMX PHLX, Inc. By-Laws. 15 15 U.S.C. 78f(b)(3). 16 15 U.S.C. 78s(b)(2). 17 17 CFR 200.30–3(a)(12). E:\FR\FM\07APN1.SGM 07APN1

Agencies

[Federal Register Volume 74, Number 65 (Tuesday, April 7, 2009)]
[Notices]
[Pages 15799-15800]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-7834]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59683; File No. SR-NYSE-2009-12]


Self-Regulatory Organizations; New York Stock Exchange LLC; Order 
Approving a Proposed Rule Change Amending Its Limited Liability Company 
Operating Agreement and the Bylaws of Its Wholly-Owned Subsidiary NYSE 
Market, Inc. To Eliminate, in Each Case, a Requirement That Not Less 
Than Two Members of the Board of Directors Must Qualify as ``Non-
Affiliated Directors'' and a Related Requirement That Not Less Than Two 
Members of the Board of Directors Must Qualify as ``Fair Representation 
Candidates''

April 1, 2009.

I. Introduction

    On February 2, 2009, the New York Stock Exchange LLC (``NYSE'' or 
the ``Exchange'') 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\ a 
proposed rule change to amend: (i) its Second Amended and Restated 
Operating Agreement (``NYSE Operating Agreement''); and (ii) the bylaws 
of its wholly-owned subsidiary NYSE Market, Inc. (``NYSE Market'') 
(``NYSE Market Bylaws''), to eliminate the requirement that not less 
than two members of the board of directors of NYSE (``NYSE Board'') and 
of NYSE Market (``NYSE Market Board''), respectively, must qualify as 
``non-affiliated directors'' and the requirement that not less than two 
members of such boards must qualify as ``fair representation 
candidates'' (as each of those terms is defined in the NYSE Operating 
Agreement and NYSE Market Bylaws, respectively). The requirements that 
at least 20% of NYSE Board's directors and NYSE Market Board's 
directors must be ``non-affiliated directors'' and ``fair 
representation candidates'' would remain in place. The proposed rule 
change was published for comment in the Federal Register on February 
20, 2009.\3\ The Commission received no comments on the proposal.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 59400 (February 12, 
2009), 74 FR 7945.
---------------------------------------------------------------------------

II. Description of the Proposal

    The Exchange proposes that its parent company, NYSE Group, Inc., as 
the sole member of the Exchange, amend the NYSE Operating Agreement to 
eliminate the requirements that: (i) not less than two members of NYSE 
Board must be persons who are not members of the board of directors of 
NYSE Euronext (``NYSE Euronext Board''), and who qualify as independent 
under the independence policy of the NYSE Euronext Board (``NYSE non-
affiliated directors''); and (ii) not less than two members of the NYSE 
Board must be ``fair representation candidates'' (as defined in the 
NYSE Operating Agreement). In each case, however, the current 
requirements that a minimum of 20% of NYSE Board's directors must be 
NYSE non-affiliated directors and that a minimum of 20% of NYSE Board's 
directors must be fair representation candidates would continue to 
apply.\4\
---------------------------------------------------------------------------

    \4\ The Exchange has represented that fair representation 
candidates on the NYSE Board qualify as NYSE non-affiliated 
directors.
---------------------------------------------------------------------------

    The Exchange also proposes that the Exchange, as the sole 
stockholder of NYSE Market, amend the NYSE Market Bylaws to eliminate 
the requirements that: (i) not less than two members of the NYSE Market 
Board must be persons who are not members of the NYSE Euronext Board, 
although such directors need not be independent (``NYSE Market non-
affiliated directors''); and (ii) not less than two members of the NYSE 
Market Board must be ``fair representation candidates'' (as defined in 
the NYSE Market Bylaws). In each case, however, the current 
requirements that a minimum of 20% of NYSE Market Board's directors 
must be NYSE Market non-affiliated directors and that a minimum of 20% 
of NYSE Market Board's directors must be fair representation candidates 
would continue to apply.\5\
---------------------------------------------------------------------------

    \5\ The Exchange has represented that fair representation 
candidates on the NYSE Market Board qualify as NYSE Market non-
affiliated directors.
---------------------------------------------------------------------------

    The Exchange also proposes to specify in the NYSE Operating 
Agreement and the NYSE Market Bylaws that, for purposes of calculating 
the minimum number of non-affiliated directors and

[[Page 15800]]

fair representation candidates for each the NYSE Board and the NYSE 
Market Board, if the number that is equal to 20% of the total number of 
directors on their respective boards is not a whole number, such number 
would be rounded up to the next whole number.\6\
---------------------------------------------------------------------------

    \6\ See Section 2.03(a)(i) and (iii) of the NYSE Operating 
Agreement and Article III, Section 1(A) and (B) of the NYSE Market 
Bylaws.
---------------------------------------------------------------------------

    The Exchange has stated that the practical effect of the proposed 
rule change would be to enable the size of both the NYSE Board and the 
NYSE Market Board to be reduced from ten members to five members. The 
Exchange has represented that the initial implementation of the 
proposed changes immediately following approval by the Commission would 
be accomplished through the voluntary resignation of five of the ten 
directors from the NYSE Board and NYSE Market Board, respectively, 
including one ``fair representation'' director from each of the boards, 
in connection with a reduction in the size of each board to five 
directors. The Exchange's proposal would not revise the current fair 
representation candidate selection and petition process for, or the 
appointment or election of a fair representation candidate to, the NYSE 
Board and the NYSE Market Board.\7\
---------------------------------------------------------------------------

    \7\ As defined in the NYSE Operating Agreement, fair 
representation candidates are NYSE Board members that are determined 
by member organizations of the Exchange through a specified petition 
process (``Petition Candidates'') or, in the absence of Petition 
Candidates, candidates recommended jointly by the Director Candidate 
Recommendation Committee (``DCRC'') of NYSE Market and of NYSE 
Regulation, Inc. In the case of NYSE Market, fair representation 
candidates on the Market Board are determined similarly except that, 
in the absence of Petition Candidates, they are individuals 
recommended by the DCRC of NYSE Market.
---------------------------------------------------------------------------

    The Exchange has stated that its proposal is consistent with the 
governance structures of other national securities exchanges that have 
been approved by the Commission. The Exchange has noted, for example, 
that The NASDAQ Stock Market LLC (``Nasdaq'') has a 20% fair 
representation requirement, without specifying a minimum number of fair 
representation directors,\8\ and that Nasdaq has complete discretion as 
to the number of board members.\9\ The Exchange also has noted that in 
the approval order relating to the acquisition of the American Stock 
Exchange LLC by NYSE Euronext, the Commission similarly approved a 
discretionary board size (noting that Amex intended to have a five-
member board), a 20% fair representation requirement, and no minimum 
number of fair representation directors.\10\ The Exchange indicated 
that, by eliminating, for itself and NYSE Market, the current 
requirements for a minimum of two non-affiliated directors and two fair 
representation candidates, it will be able to improve administrative 
efficiency and effectiveness by operating with a smaller number of 
directors, while continuing to fulfill its statutory obligations 
regarding the fair representation of its members.
---------------------------------------------------------------------------

    \8\ See Article I, paragraph (q) of the By-Laws of the NASDAQ 
Stock Market LLC, which states that, `` `Membership Representative 
Director' means a Director who has been elected or appointed after 
having been nominated by the Member Nominating Committee or by a 
Nasdaq Member pursuant to these By-Laws.''
    \9\ See Section 9(a) of the NASDAQ Stock Market LLC Agreement.
    \10\ See Securities Exchange Act Release No. 58673 (September 
29, 2008), 73 FR 57707 (October 3, 2008) (SR-Amex-2008-62).
---------------------------------------------------------------------------

III. Discussion and Commission Findings

    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.\11\ In particular, the Commission finds 
that the proposal is consistent with the requirements of Section 
6(b)(3) of the Act, which provides that the rules of an exchange must 
assure a 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 issues and investors and not 
be associated with a member of the exchange, broker, or dealer.\12\
---------------------------------------------------------------------------

    \11\ In approving this proposed rule change, the Commission 
notes that it has considered the proposed rule's impact on 
efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
    \12\ 15 U.S.C. 78f(b)(3).
---------------------------------------------------------------------------

    The fair representation requirement in Section 6(b)(3) of the Act 
is intended to give members a voice in the selection of the exchange's 
directors and the administration of its affairs. Moreover, the Section 
6(b)(3) requirement helps to ensure that members are protected from 
unfair, unfettered actions by an exchange and that, in general, an 
exchange is administered in a way that is equitable to all those who 
trade on its market or through its facilities. The Commission notes 
that the requirement that at least 20% of the directors on the NYSE and 
NYSE Market boards be non-affiliated directors and fair representation 
candidates is designed to ensure the fair representation of NYSE 
members on the NYSE Board and the NYSE Market Board.\13\ The Commission 
notes that, while the proposal eliminates the requirement regarding a 
specific minimum number of non-affiliated directors and fair 
representation candidates on the boards, it does not alter the minimum 
20% requirement for non-affiliated directors or fair representation 
candidates or the process by which members can directly petition and 
vote for representatives on the boards. Moreover, the proposal adds to 
the NYSE Operating Agreement and NYSE Market Bylaws a provision that: 
whenever 20% of the board would not result in a whole number, such 
number would in all cases be rounded up to the nearest whole number, 
thus ensuring that the non-affiliated directors and fair representation 
candidates never constitute less than 20% of the board. The Commission 
further notes that the proposed changes to the NYSE Operating Agreement 
and NYSE Market Bylaws are consistent with previous proposals approved 
by the Commission for other exchanges, which also do not specify the 
number of fair representation directors and which allow discretion as 
to the size of their boards.\14\ The Commission therefore finds that 
the Exchange's proposal is consistent with Section 6(b)(3) of the 
Act.\15\
---------------------------------------------------------------------------

    \13\ See supra notes 4 and 5.
    \14\ See, e.g., Section 9(a) of the NASDAQ Stock Market LLC 
Agreement and Article IV, Section 4-1 of the NASDAQ OMX PHLX, Inc. 
By-Laws.
    \15\ 15 U.S.C. 78f(b)(3).
---------------------------------------------------------------------------

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\16\ that the proposed rule change (SR-NYSE-2009-12) is approved.
---------------------------------------------------------------------------

    \16\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
Florence E. Harmon,
Deputy Secretary.
---------------------------------------------------------------------------

    \17\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

 [FR Doc. E9-7834 Filed 4-6-09; 8:45 am]
BILLING CODE 8010-01-P
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