Self-Regulatory Organizations; NYSE Arca, Inc.; Order Approving Proposed Rule Change To Amend NYSE Arca Rule 3.3(a) and Section 401(a) of the Exchange's Bylaws To Eliminate the Exchange's Audit Committee, Compensation Committee, and Regulatory Oversight Committee, 36136-36138 [2010-15285]
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36136
Federal Register / Vol. 75, No. 121 / Thursday, June 24, 2010 / Notices
allocation of reasonable dues, fees and
other charges among its members and
other persons using its facilities. The
impact of the proposal upon the net fees
paid by a particular market participant
will depend on a number of variables,
the most important of which will be its
propensity to add or remove liquidity in
QQQQ, BAC, C, SPY, IWM, XLF, AAPL,
GE, JPM, INTC, GS, RIMM, T, VZ, UNG,
FCX, CSCO, DIA, AMZN, X, AA, AIG,
AXP, BBY, CAT, CHK, DNDN, EEM,
EFA, EWZ, F, FAS, FAZ, FSLR, GDX,
GLD, IYR, MGM, MS, MSFT, MU,
PALM, PBR, PG, POT, RIG, SDS, SLV,
XLE, and XOM options. The Exchange
operates in a highly competitive market
in which market participants can
readily direct order flow to another
exchange if they deem fee levels at a
particular exchange to be excessive. The
Exchange believes that the proposed
fees it charges for options overlying
QQQQ, BAC, C, SPY, IWM, XLF, AAPL,
GE, JPM, INTC, GS, RIMM, T, VZ, UNG,
FCX, CSCO, DIA, AMZN, X, AA, AIG,
AXP, BBY, CAT, CHK, DNDN, EEM,
EFA, EWZ, F, FAS, FAZ, FSLR, GDX,
GLD, IYR, MGM, MS, MSFT, MU,
PALM, PBR, PG, POT, RIG, SDS, SLV,
XLE, and XOM remain competitive with
fees charged by other exchanges and
therefore continue to be reasonable and
equitably allocated to those members
that opt to direct orders to the Exchange
rather than to a competing exchange.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The proposed rule change does not
impose any burden on competition that
is not necessary or appropriate in
furtherance of the purposes of the Act.
emcdonald on DSK2BSOYB1PROD with NOTICES
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants or Others
The Exchange has not solicited, and
does not intend to solicit, comments on
this proposed rule change. The
Exchange has not received any
unsolicited written comments from
members or other interested parties.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to Section 19(b)(3) of
the Act 15 and Rule 19b–4(f)(2) 16
thereunder. At any time within 60 days
of the filing of such proposed rule
change, the Commission may summarily
abrogate such rule change if it appears
to the Commission that such action is
15 15
16 17
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(2).
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necessary or appropriate in the public
interest, for the protection of investors,
or otherwise in furtherance of the
purposes of the Act.
IV. Solicitation of Comments
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.17
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010–15280 Filed 6–23–10; 8:45 am]
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
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–62304; File No. SR–
NYSEArca–2010–31]
• 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–2010–57 on the subject
line.
Self-Regulatory Organizations; NYSE
Arca, Inc.; Order Approving Proposed
Rule Change To Amend NYSE Arca
Rule 3.3(a) and Section 401(a) of the
Exchange’s Bylaws To Eliminate the
Exchange’s Audit Committee,
Compensation Committee, and
Regulatory Oversight Committee
Paper Comments
June 16, 2010.
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, Station Place, 100 F Street,
NE., Washington, DC 20549–1090.
On April 20, 2010, NYSE Arca, Inc.
(‘‘NYSE Arca’’ or ‘‘Exchange’’) filed with
the Securities and Exchange
Commission (‘‘Commission’’) pursuant
to Section 19(b)(1) of the Securities
All submissions should refer to File
Exchange Act of 1934 (‘‘Act’’),1 and Rule
Number SR–ISE–2010–57. This file
19b–4 thereunder,2 a proposed rule
number should be included on the
subject line if e-mail is used. To help the change to amend NYSE Arca Rule 3.3(a)
and Section 401(a) of the Exchange’s
Commission process and review your
Bylaws to eliminate the Exchange’s
comments more efficiently, please use
only one method. The Commission will Audit Committee, Compensation
post all comments on the Commission’s Committee, and Regulatory Oversight
Committee. The proposed rule change
Internet Web site (https://www.sec.gov/
was published for comment in the
rules/sro.shtml). Copies of the
Federal Register on May 11, 2010.3 The
submission, all subsequent
Commission received no comments
amendments, all written statements
regarding the proposal. This order
with respect to the proposed rule
approves the proposed rule change.
change that are filed with the
Commission, and all written
I. Description of the Proposed Rule
communications relating to the
Change
proposed rule change between the
Currently, the Board of Directors of
Commission and any person, other than
the Exchange and its ultimate parent
those that may be withheld from the
company, NYSE Euronext, each
public in accordance with the
maintain its own Audit Committee and
provisions of 5 U.S.C. 552, will be
Compensation Committee. As more
available for Web site viewing and
fully discussed in the Notice, the
printing in the Commission’s Public
Exchange states that it has found that
Reference Room, 100 F Street, NE.,
the work of these committees overlaps
Washington, DC 20549, on official
substantially.4 As a result, the Exchange
business days between the hours of 10
has proposed to revise its Bylaws to
a.m. and 3 p.m. Copies of such filing
also will be available for inspection and allow for the elimination of its Audit
and Compensation Committees. In
copying at the principal office of the
addition, the Exchange has proposed to
Exchange. All comments received will
eliminate its Regulatory Oversight
be posted without change; the
Committee (‘‘ROC’’), and in lieu thereof,
Commission does not edit personal
provide that the Board of NYSE
identifying information from
submissions. You should submit only
17 17 CFR 200.30–3(a)(12).
information that you wish to make
1 15 U.S.C. 78s(b)(1).
publicly available. All submissions
2 17 CFR 240.19b–4.
should refer to File Number SR–ISE–
3 See Securities Exchange Act Release No. 62032
2010–57 and should be submitted on or (May 4, 2010), 75 FR 26304 (‘‘Notice’’).
before July 15, 2010.
4 See Notice, supra note 3.
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Federal Register / Vol. 75, No. 121 / Thursday, June 24, 2010 / Notices
Regulation, Inc. (‘‘NYSER’’) 5 and the
Board of the Exchange each will
exercise a portion of the current
responsibilities of the ROC, with the
Board of the Exchange retaining
ultimate legal responsibility for the
regulation of its permit holders 6 and its
market.7
emcdonald on DSK2BSOYB1PROD with NOTICES
II. Discussion and Commission
Findings
After careful review, the Commission
finds that the proposed rule change is
consistent with the requirements of the
Act and the rules and regulations
thereunder applicable to a national
securities exchange.8 In particular, the
Commission finds that the proposed
rule change is consistent with Section
6(b)(1) of the Act,9 which requires a
national securities exchange to be so
organized and have the capacity to carry
out the purposes of the Act and to
comply, and to enforce compliance by
its members and persons associated
with its members, with the provisions of
the Act. The Commission also finds that
the proposed rule change is consistent
with Section 6(b)(5) of the Act,10 in that
it is designed, among other things, to
prevent fraudulent and manipulative
acts and practices, 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. The Commission has
previously approved a structure in
which certain committees of the Board
of NYSE Euronext, including its Audit
and Compensation Committees, were
authorized to perform functions for
subsidiaries of NYSE Euronext,
including the New York Stock
Exchange, LLC (‘‘NYSE’’),11 and NYSE
Amex, Inc. (‘‘NYSE Amex’’).12 The
Commission has also previously
approved a structure for NYSE Amex in
which the Board of NYSER and the
5 NYSER is a not-for-profit indirect subsidiary of
NYSE Euronext.
6 Permit holders at the Exchange are ‘‘members’’
of the Exchange as that term is defined in Section
3 of the Act.
7 These arrangements are set forth in various
regulatory services agreements. See infra note 16
and accompanying text.
8 In approving this proposed rule change, the
Commission notes that it has considered the
proposed rule’s impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
9 15 U.S.C. 78f(b)(1).
10 15 U.S.C. 78f(b)(5).
11 See Securities Exchange Act Release No. 55293
(February 14, 2007), 72 FR 8033 (February 22, 2007)
(SR–NYSE–2006–120).
12 See Securities Exchange Act Release No. 58673
(September 29, 2008), 73 FR 57707 (October 3,
2008) (SR–Amex–2008–62, SR–NYSE–2008–60)
(‘‘NYSE Amex Approval Order’’).
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Board of NYSE Amex each exercise a
portion of the Regulatory Oversight
Committee responsibilities for NYSE
Amex, with NYSE Amex retaining
ultimate legal responsibility for the
regulation of its permit holders and its
market.13
The NYSE Arca Audit Committee.
Under current Exchange Rule
3.3(a)(3)(B), the primary functions of the
NYSE Arca Audit Committee are (i) to
conduct an annual review with the
independent auditors, to determine the
scope of their examination and the cost
thereof; (ii) to periodically review with
the independent auditors and the
internal auditor the Exchange’s internal
controls and the adequacy of the
internal audit program; (iii) to review
the annual reports submitted both
internally and externally, and take such
action with respect thereto as it may
deem appropriate, and (iv) to
recommend to the Board of NYSE Arca
independent public accountants as
auditors of the Exchange and its
subsidiaries.
The NYSE Euronext Audit Committee
is responsible under its charter for
assessing the effectiveness of the
internal audit function and reviewing
with management and the independent
auditor any major issues as to the
adequacy of NYSE Euronext’s internal
risk management and internal controls,
as well as meeting to review and discuss
with management and the independent
auditor NYSE Euronext’s annual
audited financial statements, quarterly
financial statements prior to the filing of
Form 10–Q, and significant financial
reporting issues and judgments made in
connection with the preparation of the
financial statements.
In connection with this proposal, the
Exchange represents that: (i) The
specific responsibilities of the NYSE
Euronext Audit Committee, as well as
numerous others in its charter relating
to oversight of both the independent
and internal auditors, financial
statement and disclosure matters, and
corporate oversight, result in the
responsibilities of the NYSE Arca Audit
Committee being fully duplicated by the
responsibilities of the NYSE Euronext
Audit Committee; (ii) the NYSE
Euronext Audit Committee will
continue to be composed at all times of
independent directors and will continue
to review the financial condition of the
Exchange as part of its oversight of the
financial processes of NYSE Euronext
and of each of its consolidated
subsidiaries; (iii) NYSER has broad
authority to oversee the regulatory
activities of the Exchange and the other
13 See
PO 00000
id.
Frm 00080
self-regulatory organizations whose
ultimate parent is NYSE Euronext,
through delegated authority and
regulatory services agreements; (iv) it is
the practice of NYSE Euronext’s Global
Risk and Audit Services Department
(‘‘RAS’’), which performs internal audit
functions, to report to the NYSER Board
on all internal audit matters relating to
the Exchange’s regulatory
responsibilities, and to ensure that
NYSER has the appropriate authority to
oversee RAS’s activities with respect to
the Exchange’s regulatory
responsibilities pursuant to the
provisions of the RSA between the
Exchange and NYSER; (v) RAS’s written
procedures will be amended to stipulate
that the NYSER Board of Directors may,
at any time, request that RAS conduct
an audit of a matter of concern to it and
report the results of the audit both to the
NYSER Board of Directors and the
NYSE Euronext Audit Committee; (vi)
the chief regulatory officer of the
Exchange would be in attendance at any
meeting of the NYSER Board of
Directors at which the results of any
such audit would be reported by RAS;
and (vii) the Exchange retains the
authority to direct NYSER to request
that RAS conduct such an audit of a
matter of concern to it.
The Commission notes that the
proposed elimination of the NYSE Arca
Audit Committee is comparable to a
structure for NYSE and NYSE Amex
that the Commission has previously
considered and approved.14 The
Commission finds that the proposed
elimination of the NYSE Arca Audit and
Compensation committees is consistent
with the Act.
NYSE Arca Compensation Committee.
The Exchange also proposes to
eliminate its Compensation Committee,
and to prescribe that the functions of
that committee be performed by the
NYSE Euronext Human Resources and
Compensation Committee. Pursuant to
current Exchange Rule 3.3(a)(4)(B), the
NYSE Arca Compensation Committee is
required to (i) review and approve
corporate goals and objectives relevant
to the Exchange CEO’s compensation;
(ii) evaluate the CEO’s performance in
light of those goals and objectives; (iii)
set the CEO’s compensation level based
on this evaluation; and (iv) make
recommendations to the Exchange’s
Board of Directors with respect to the
design of incentive compensation and
equity-based plans. As more fully set
forth in the Notice, the Exchange
represents that the NYSE Arca
Compensation Committee’s assigned
responsibilities with respect to
14 See
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36137
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supra notes 11 and 12.
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36138
Federal Register / Vol. 75, No. 121 / Thursday, June 24, 2010 / Notices
compensation and personnel matters
overlap with the broader mandate of the
NYSE Euronext Human Resources and
Compensation Committee. The
Commission notes that the proposed
elimination of the NYSE Arca
Compensation Committee is comparable
to a structure for NYSE and NYSE Amex
that the Commission has previously
considered and approved.15 The
Commission finds that the proposed
elimination of the NYSE Arca
Compensation Committees is consistent
with the Act.
Elimination of NYSE Arca Regulatory
Oversight Committee
The Exchange also proposes to
eliminate its ROC, and in lieu thereof,
provide for the exercise of the current
formal responsibilities of the ROC to be
divided between the NYSER Board and
the Exchange’s Board. Currently, the
ROC is responsible for ensuring (i) the
independence of Exchange regulation;
(ii) adequate resources for the Exchange
to properly fulfill its self-regulatory
obligations; and (iii) that Exchange
management fully supports the
execution of the regulatory process.
In support of its proposal to eliminate
the ROC, the Exchange represents that it
has previously entered into an RSA with
NYSER to perform all of the Exchange’s
regulatory functions on the Exchange’s
behalf; that the Financial Industry
Regulatory Authority (‘‘FINRA’’)
performs some of the regulatory
functions contracted out to NYSER
pursuant to a separate multi-party
regulatory services agreement with
FINRA; 16 and that these regulatory
contractual arrangements closely
parallel the regulatory arrangements for
NYSE Amex that the Commission
reviewed and approved in the NYSE
Amex Approval Order.17 The Exchange
states that the proposed elimination of
its ROC will result in regulatory
arrangements similar to those approved
for NYSE Amex. In addition to the
foregoing, the Exchange specifically
represents that (i) NYSER will provide
a comparable level of independence as
that of a ROC; (ii) NYSE Euronext has
agreed to provide adequate funding to
15 See
supra note 12.
Commission notes that on June 14, 2010,
NYSE, NYSER, NYSE Amex, and NYSE Arca
(‘‘NYSE Parties’’) entered into a new multi-party
regulatory services agreement with FINRA,
pursuant to which FINRA will perform additional
regulatory functions on behalf of the NYSE Parties,
including market surveillance and enforcement
activities. See https://www.nyse.com/press/
1276509404802.html. See also June 16, 2010 e-mail
correspondence from William Love, Chief Counsel,
NYSE Euronext, to Heidi Pilpel, Special Counsel,
Commission.
17 See supra note 12.
emcdonald on DSK2BSOYB1PROD with NOTICES
16 The
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16:47 Jun 23, 2010
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NYSE Regulation to conduct its
regulatory activities with respect to the
Exchange; and (iii) notwithstanding its
regulatory agreements, the Exchange
retains ultimate legal responsibility for
the regulation of its permit holders and
its market and has full authority to take
action to assure that its regulatory
responsibilities are met. Acknowledging
that it retains ultimate legal
responsibility, the Exchange has further
stated that its Board of Directors will
directly assume the ROC’s current
formal responsibility to ensure that
Exchange management fully supports
the execution of the regulatory process
and that it retains the authority to direct
NYSER and FINRA to take any action
necessary to fulfill the Exchange’s
statutory and self-regulatory obligations.
The Commission notes that the
proposed elimination of the NYSE Arca
ROC is comparable to the structure that
the Commission approved in the NYSE
Amex Approval Order.18 The
Commission finds that the proposed
elimination of the NYSE Arca ROC is
consistent with the Act.
III. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,19 that the
proposed rule change (SR–NYSEArca–
2010–31) be, and it hereby is, approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.20
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010–15285 Filed 6–23–10; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–62312; File No. SR–NYSE–
2010–20]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Notice of
Filing of Proposed Rule Change
Amending NYSE Rule 123C To Allow
Exchange Systems To Provide Order
Imbalance Information With Respect to
Market At-The-Close and Marketable
Limit At-the-Close Interest to Floor
Brokers Beginning Two Hours and
Until Fifteen Minutes Prior to the
Scheduled Close of Trading on Every
Trading Day
June 17, 2010.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
18 See
supra note 12.
U.S.C. 78s(b)(2).
20 17 CFR 200.30–3(a)(12).
19 15
PO 00000
Frm 00081
Fmt 4703
Sfmt 4703
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that, on June 9,
2010, New York Stock Exchange LLC
(‘‘NYSE’’ or ‘‘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 self-regulatory
organization. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
proposes to amend [sic] NYSE Rule
123C (‘‘The Closing Procedures’’) to
describe the manner in which Exchange
systems provide order imbalance
information to Floor brokers. The text of
the proposed rule change is available at
the Exchange, the Commission’s Public
Reference Room, and https://
www.nyse.com.
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 New York Stock Exchange LLC
(‘‘NYSE’’ or ‘‘Exchange’’) proposes to
amend NYSE Rule 123C(6) to specify
that, beginning at 2:00 p.m. on every
trading day,3 Floor brokers will receive
an electronic communication from
Exchange systems that provides the
amount of, and any imbalance between,
Market ‘‘At-The-Close’’ (‘‘MOC’’) interest
and marketable Limit ‘‘At-The-Close’’
(‘‘LOC’’) interest to buy and MOC
interest and marketable LOC interest to
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 On any day that the scheduled close of trading
on the Exchange is earlier than 4:00 p.m., the
information will be disseminated beginning two
hours prior to the scheduled close of trading.
2 17
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]]>Agencies
[Federal Register Volume 75, Number 121 (Thursday, June 24, 2010)]
[Notices]
[Pages 36136-36138]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-15285]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-62304; File No. SR-NYSEArca-2010-31]
Self-Regulatory Organizations; NYSE Arca, Inc.; Order Approving
Proposed Rule Change To Amend NYSE Arca Rule 3.3(a) and Section 401(a)
of the Exchange's Bylaws To Eliminate the Exchange's Audit Committee,
Compensation Committee, and Regulatory Oversight Committee
June 16, 2010.
On April 20, 2010, NYSE Arca, Inc. (``NYSE Arca'' or ``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 NYSE Arca Rule 3.3(a) and Section 401(a) of the Exchange's Bylaws
to eliminate the Exchange's Audit Committee, Compensation Committee,
and Regulatory Oversight Committee. The proposed rule change was
published for comment in the Federal Register on May 11, 2010.\3\ The
Commission received no comments regarding the proposal. This order
approves the proposed rule change.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 62032 (May 4, 2010),
75 FR 26304 (``Notice'').
---------------------------------------------------------------------------
I. Description of the Proposed Rule Change
Currently, the Board of Directors of the Exchange and its ultimate
parent company, NYSE Euronext, each maintain its own Audit Committee
and Compensation Committee. As more fully discussed in the Notice, the
Exchange states that it has found that the work of these committees
overlaps substantially.\4\ As a result, the Exchange has proposed to
revise its Bylaws to allow for the elimination of its Audit and
Compensation Committees. In addition, the Exchange has proposed to
eliminate its Regulatory Oversight Committee (``ROC''), and in lieu
thereof, provide that the Board of NYSE
[[Page 36137]]
Regulation, Inc. (``NYSER'') \5\ and the Board of the Exchange each
will exercise a portion of the current responsibilities of the ROC,
with the Board of the Exchange retaining ultimate legal responsibility
for the regulation of its permit holders \6\ and its market.\7\
---------------------------------------------------------------------------
\4\ See Notice, supra note 3.
\5\ NYSER is a not-for-profit indirect subsidiary of NYSE
Euronext.
\6\ Permit holders at the Exchange are ``members'' of the
Exchange as that term is defined in Section 3 of the Act.
\7\ These arrangements are set forth in various regulatory
services agreements. See infra note 16 and accompanying text.
---------------------------------------------------------------------------
II. Discussion and Commission Findings
After careful review, the Commission finds that the proposed rule
change is consistent with the requirements of the Act and the rules and
regulations thereunder applicable to a national securities exchange.\8\
In particular, the Commission finds that the proposed rule change is
consistent with Section 6(b)(1) of the Act,\9\ which requires a
national securities exchange to be so organized and have the capacity
to carry out the purposes of the Act and to comply, and to enforce
compliance by its members and persons associated with its members, with
the provisions of the Act. The Commission also finds that the proposed
rule change is consistent with Section 6(b)(5) of the Act,\10\ in that
it is designed, among other things, to prevent fraudulent and
manipulative acts and practices, 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. The Commission
has previously approved a structure in which certain committees of the
Board of NYSE Euronext, including its Audit and Compensation
Committees, were authorized to perform functions for subsidiaries of
NYSE Euronext, including the New York Stock Exchange, LLC
(``NYSE''),\11\ and NYSE Amex, Inc. (``NYSE Amex'').\12\ The Commission
has also previously approved a structure for NYSE Amex in which the
Board of NYSER and the Board of NYSE Amex each exercise a portion of
the Regulatory Oversight Committee responsibilities for NYSE Amex, with
NYSE Amex retaining ultimate legal responsibility for the regulation of
its permit holders and its market.\13\
---------------------------------------------------------------------------
\8\ In approving this proposed rule change, the Commission notes
that it has considered the proposed rule's impact on efficiency,
competition, and capital formation. See 15 U.S.C. 78c(f).
\9\ 15 U.S.C. 78f(b)(1).
\10\ 15 U.S.C. 78f(b)(5).
\11\ See Securities Exchange Act Release No. 55293 (February 14,
2007), 72 FR 8033 (February 22, 2007) (SR-NYSE-2006-120).
\12\ See Securities Exchange Act Release No. 58673 (September
29, 2008), 73 FR 57707 (October 3, 2008) (SR-Amex-2008-62, SR-NYSE-
2008-60) (``NYSE Amex Approval Order'').
\13\ See id.
---------------------------------------------------------------------------
The NYSE Arca Audit Committee. Under current Exchange Rule
3.3(a)(3)(B), the primary functions of the NYSE Arca Audit Committee
are (i) to conduct an annual review with the independent auditors, to
determine the scope of their examination and the cost thereof; (ii) to
periodically review with the independent auditors and the internal
auditor the Exchange's internal controls and the adequacy of the
internal audit program; (iii) to review the annual reports submitted
both internally and externally, and take such action with respect
thereto as it may deem appropriate, and (iv) to recommend to the Board
of NYSE Arca independent public accountants as auditors of the Exchange
and its subsidiaries.
The NYSE Euronext Audit Committee is responsible under its charter
for assessing the effectiveness of the internal audit function and
reviewing with management and the independent auditor any major issues
as to the adequacy of NYSE Euronext's internal risk management and
internal controls, as well as meeting to review and discuss with
management and the independent auditor NYSE Euronext's annual audited
financial statements, quarterly financial statements prior to the
filing of Form 10-Q, and significant financial reporting issues and
judgments made in connection with the preparation of the financial
statements.
In connection with this proposal, the Exchange represents that: (i)
The specific responsibilities of the NYSE Euronext Audit Committee, as
well as numerous others in its charter relating to oversight of both
the independent and internal auditors, financial statement and
disclosure matters, and corporate oversight, result in the
responsibilities of the NYSE Arca Audit Committee being fully
duplicated by the responsibilities of the NYSE Euronext Audit
Committee; (ii) the NYSE Euronext Audit Committee will continue to be
composed at all times of independent directors and will continue to
review the financial condition of the Exchange as part of its oversight
of the financial processes of NYSE Euronext and of each of its
consolidated subsidiaries; (iii) NYSER has broad authority to oversee
the regulatory activities of the Exchange and the other self-regulatory
organizations whose ultimate parent is NYSE Euronext, through delegated
authority and regulatory services agreements; (iv) it is the practice
of NYSE Euronext's Global Risk and Audit Services Department (``RAS''),
which performs internal audit functions, to report to the NYSER Board
on all internal audit matters relating to the Exchange's regulatory
responsibilities, and to ensure that NYSER has the appropriate
authority to oversee RAS's activities with respect to the Exchange's
regulatory responsibilities pursuant to the provisions of the RSA
between the Exchange and NYSER; (v) RAS's written procedures will be
amended to stipulate that the NYSER Board of Directors may, at any
time, request that RAS conduct an audit of a matter of concern to it
and report the results of the audit both to the NYSER Board of
Directors and the NYSE Euronext Audit Committee; (vi) the chief
regulatory officer of the Exchange would be in attendance at any
meeting of the NYSER Board of Directors at which the results of any
such audit would be reported by RAS; and (vii) the Exchange retains the
authority to direct NYSER to request that RAS conduct such an audit of
a matter of concern to it.
The Commission notes that the proposed elimination of the NYSE Arca
Audit Committee is comparable to a structure for NYSE and NYSE Amex
that the Commission has previously considered and approved.\14\ The
Commission finds that the proposed elimination of the NYSE Arca Audit
and Compensation committees is consistent with the Act.
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\14\ See supra notes 11 and 12.
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NYSE Arca Compensation Committee. The Exchange also proposes to
eliminate its Compensation Committee, and to prescribe that the
functions of that committee be performed by the NYSE Euronext Human
Resources and Compensation Committee. Pursuant to current Exchange Rule
3.3(a)(4)(B), the NYSE Arca Compensation Committee is required to (i)
review and approve corporate goals and objectives relevant to the
Exchange CEO's compensation; (ii) evaluate the CEO's performance in
light of those goals and objectives; (iii) set the CEO's compensation
level based on this evaluation; and (iv) make recommendations to the
Exchange's Board of Directors with respect to the design of incentive
compensation and equity-based plans. As more fully set forth in the
Notice, the Exchange represents that the NYSE Arca Compensation
Committee's assigned responsibilities with respect to
[[Page 36138]]
compensation and personnel matters overlap with the broader mandate of
the NYSE Euronext Human Resources and Compensation Committee. The
Commission notes that the proposed elimination of the NYSE Arca
Compensation Committee is comparable to a structure for NYSE and NYSE
Amex that the Commission has previously considered and approved.\15\
The Commission finds that the proposed elimination of the NYSE Arca
Compensation Committees is consistent with the Act.
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\15\ See supra note 12.
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Elimination of NYSE Arca Regulatory Oversight Committee
The Exchange also proposes to eliminate its ROC, and in lieu
thereof, provide for the exercise of the current formal
responsibilities of the ROC to be divided between the NYSER Board and
the Exchange's Board. Currently, the ROC is responsible for ensuring
(i) the independence of Exchange regulation; (ii) adequate resources
for the Exchange to properly fulfill its self-regulatory obligations;
and (iii) that Exchange management fully supports the execution of the
regulatory process.
In support of its proposal to eliminate the ROC, the Exchange
represents that it has previously entered into an RSA with NYSER to
perform all of the Exchange's regulatory functions on the Exchange's
behalf; that the Financial Industry Regulatory Authority (``FINRA'')
performs some of the regulatory functions contracted out to NYSER
pursuant to a separate multi-party regulatory services agreement with
FINRA; \16\ and that these regulatory contractual arrangements closely
parallel the regulatory arrangements for NYSE Amex that the Commission
reviewed and approved in the NYSE Amex Approval Order.\17\ The Exchange
states that the proposed elimination of its ROC will result in
regulatory arrangements similar to those approved for NYSE Amex. In
addition to the foregoing, the Exchange specifically represents that
(i) NYSER will provide a comparable level of independence as that of a
ROC; (ii) NYSE Euronext has agreed to provide adequate funding to NYSE
Regulation to conduct its regulatory activities with respect to the
Exchange; and (iii) notwithstanding its regulatory agreements, the
Exchange retains ultimate legal responsibility for the regulation of
its permit holders and its market and has full authority to take action
to assure that its regulatory responsibilities are met. Acknowledging
that it retains ultimate legal responsibility, the Exchange has further
stated that its Board of Directors will directly assume the ROC's
current formal responsibility to ensure that Exchange management fully
supports the execution of the regulatory process and that it retains
the authority to direct NYSER and FINRA to take any action necessary to
fulfill the Exchange's statutory and self-regulatory obligations.
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\16\ The Commission notes that on June 14, 2010, NYSE, NYSER,
NYSE Amex, and NYSE Arca (``NYSE Parties'') entered into a new
multi-party regulatory services agreement with FINRA, pursuant to
which FINRA will perform additional regulatory functions on behalf
of the NYSE Parties, including market surveillance and enforcement
activities. See https://www.nyse.com/press/1276509404802.html. See
also June 16, 2010 e-mail correspondence from William Love, Chief
Counsel, NYSE Euronext, to Heidi Pilpel, Special Counsel,
Commission.
\17\ See supra note 12.
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The Commission notes that the proposed elimination of the NYSE Arca
ROC is comparable to the structure that the Commission approved in the
NYSE Amex Approval Order.\18\ The Commission finds that the proposed
elimination of the NYSE Arca ROC is consistent with the Act.
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\18\ See supra note 12.
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III. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\19\ that the proposed rule change (SR-NYSEArca-2010-31) be, and it
hereby is, approved.
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\19\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
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\20\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-15285 Filed 6-23-10; 8:45 am]
BILLING CODE 8010-01-P
