Self-Regulatory Organizations; EDGA Exchange, Inc.; Notice of Filing of Proposed Rule Change Relating to a Corporate Transaction in Which Its Indirect Parent, Deutsche Börse AG, Will Become a Wholly Owned Subsidiary of Alpha Beta Netherlands Holding N.V., 65264-65272 [2011-27193]
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Federal Register / Vol. 76, No. 203 / Thursday, October 20, 2011 / Notices
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–65564; File No. SR–EDGA–
2011–34]
Self-Regulatory Organizations; EDGA
Exchange, Inc.; Notice of Filing of
Proposed Rule Change Relating to a
Corporate Transaction in Which Its
¨
Indirect Parent, Deutsche Borse AG,
Will Become a Wholly Owned
Subsidiary of Alpha Beta Netherlands
Holding N.V.
October 14, 2011.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Exchange Act’’), and Rule 19b-4
thereunder,2 notice is hereby given that
on October 12, 2011, EDGA Exchange,
Inc. (the ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(the ‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which items have been prepared
by the Exchange. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
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A. Overview of the Proposed
Combination
The Exchange, a Delaware
corporation, registered national
securities exchange and self-regulatory
organization, is submitting this rule
filing (the ‘‘Proposed Rule Change’’) to
the Commission in connection with the
proposed business combination (the
‘‘Combination’’) of NYSE Euronext, a
Delaware corporation, and Deutsche
¨
Borse AG, an Aktiengesellschaft
organized under the laws of the Federal
Republic of Germany (‘‘Deutsche
¨
Borse’’).
NYSE Euronext owns 100% of the
equity interest of NYSE Group, Inc., a
Delaware corporation (‘‘NYSE Group’’),
which in turn directly or indirectly
owns (1) 100% of the equity interest of
three registered national securities
exchanges and self-regulatory
organizations (together, the ‘‘NYSE
Exchanges’’)—the New York Stock
Exchange, LLC (‘‘NYSE’’), NYSE Arca,
Inc. (‘‘NYSE Arca’’) and NYSE Amex
LLC (‘‘NYSE Amex’’)—and (2) 100% of
the equity interest of NYSE Market, Inc.
(‘‘NYSE Market’’), NYSE Regulation,
Inc. (‘‘NYSE Regulation’’), NYSE Arca
L.L.C. (‘‘NYSE Arca LLC’’) and NYSE
Arca Equities, Inc. (‘‘NYSE Arca
1 15
2 17
U.S.C. 78s(b)(1).
CFR 240.19b-4.
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Equities’’) (the NYSE Exchanges,
together with NYSE Market, NYSE
Regulation, NYSE Arca LLC and NYSE
Arca Equities, the ‘‘NYSE U.S.
Regulated Subsidiaries’’ and each, a
‘‘NYSE U.S. Regulated Subsidiary’’).
NYSE, NYSE Arca and NYSE Amex will
be separately filing a proposed rule
change in connection with the
Combination.
¨
Deutsche Borse indirectly owns 50%
of the equity interest of International
Securities Exchange Holdings, Inc. (‘‘ISE
Holdings’’), which in turn holds 100%
of the equity interest of International
Securities Exchange, LLC (‘‘ISE’’). ISE
Holdings also holds 31.54% of the
equity interest of Direct Edge Holdings,
LLC (‘‘Direct Edge Holdings’’), which in
turn indirectly holds 100% of the equity
interest of two registered national
securities exchanges and self-regulatory
organizations—the Exchange and EDGX
Exchange, Inc. (‘‘EDGX’’) (each of the
Exchange, ISE and EDGX, a ‘‘DB
Exchange’’ and a ‘‘DB U.S. Regulated
Subsidiary’’ and together, the ‘‘DB
Exchanges’’ and the ‘‘DB U.S. Regulated
Subsidiaries’’). ISE and EDGX will be
separately filing a proposed rule change
in connection with the Combination
that will be the substantially the same
as the Proposed Rule Change.
If the Combination is completed, the
businesses of NYSE Euronext and
¨
Deutsche Borse, including the NYSE
U.S. Regulated Subsidiaries and the DB
U.S. Regulated Subsidiaries (together,
the ‘‘U.S. Regulated Subsidiaries’’ and
each, a ‘‘U.S. Regulated Subsidiary’’),
will be held under a single, publicly
traded holding company organized
under the laws of the Netherlands
(‘‘Holdco’’).3 The Proposed Rule
Change, if approved by the Commission,
will not be operative until the
consummation of the Combination.
B. Summary of Proposed Rule Change
The Exchange is proposing that,
pursuant to the Combination, its
¨
indirect parent, Deutsche Borse, will
become a wholly owned subsidiary of
Holdco. In addition, the Exchange is
proposing that, in connection with the
Combination, the Commission approve
certain amendments to the
organizational and other governance
documents of Holdco and ISE Holdings.
The Proposed Rule Change is
summarized as follows:
• Proposed Approval of Waiver of
Ownership and Voting Restrictions of
ISE Holdings. The Amended and
3 Holdco is currently named ‘‘Alpha Beta
Netherlands Holding N.V.,’’ but it is expected that
Holdco will be renamed prior to the completion of
the Combination to a name agreed between NYSE
¨
Euronext and Deutsche Borse.
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Restated Certificate of Incorporation of
ISE Holdings (the ‘‘ISE Holdings
Certificate’’) currently restricts any
person, either alone or together with its
related persons, from having voting
control over more than 20% of the
outstanding capital stock of ISE
Holdings and from owning of record or
beneficially more than 40% of the
outstanding capital stock of ISE
Holdings (or in the case of any Exchange
member, acting alone or together with
its related persons, from owning of
record or beneficially more than 20% of
the outstanding capital stock of ISE
Holdings). If a person were to obtain a
voting or ownership interest in excess of
the voting or ownership restrictions
without obtaining the approval of the
Commission, the shares of ISE Holdings
would automatically transfer to a
statutory trust established under and
pursuant to the provisions of the
Delaware Statutory Trust Act, 12 Del. C.
§§ 3801 et seq. (‘‘ISE Trust’’). The ISE
Holdings Certificate and the Amended
and Restated Bylaws of ISE Holdings
(the ‘‘ISE Holdings Bylaws’’) provide
that the board of directors of ISE
Holdings may waive these voting and
ownership restrictions in an amendment
to the ISE Holdings Bylaws if it makes
certain findings and the amendment to
the ISE Holdings Bylaws has been filed
with, and approved by, the Commission
under Section 19(b) of the Exchange
Act. Acting pursuant to this waiver
provision, the board of directors of ISE
Holdings has approved the amendment
to the ISE Holdings Bylaws set forth in
Exhibit 5A (the ‘‘ISE Holdings Bylaws
Amendment’’) in order to permit Holdco
to indirectly own 50% of the
outstanding common stock of ISE
Holdings as of and after the
Combination. The Exchange is
requesting approval by the Commission
of the ISE Holdings Bylaws Amendment
in order to allow the Combination to
take place.
Under the Proposed Rule Change,
Holdco would take appropriate steps to
incorporate voting and ownership
restrictions, requirements relating to
submission to jurisdiction, access to
books and records and other
requirements related to its control of the
U.S. Regulated Subsidiaries.
Specifically, the Articles of Association
of Holdco in effect as of the completion
of the Combination (the ‘‘Holdco
Articles’’) would contain provisions 4 to
incorporate these concepts with respect
to itself, as well as its directors, officers,
employees and agents (as applicable):
4 The text of the proposed Holdco Articles is
attached to the Proposed Rule Change as Exhibit 5B.
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• Voting and Ownership Restrictions
in the Holdco Articles. The Holdco
Articles would contain voting and
ownership restrictions that will restrict
any person, either alone or together with
its related persons, from having voting
control over Holdco shares entitling the
holder thereof to cast more than 20% of
the then outstanding votes entitled to be
cast on a matter or beneficially owning
Holdco shares representing more than
40% of the outstanding votes entitled to
be cast on a matter (except that a 20%
ownership restriction would apply to
any person who is a Member of NYSE 5
(a ‘‘NYSE Member’’), a Member 6 of
NYSE Amex (including any person who
is a related person of such member, an
‘‘Amex Member’’), an ETP Holder of
NYSE Arca Equities 7 (an ‘‘ETP Holder’’)
an OTP Holder or OTP Firm of NYSE
Arca 8 (an ‘‘OTP Holder’’ and ‘‘OTP
Firm,’’ respectively), a Member (as such
term is defined in Section 3(a)(3)(A) of
the Exchange Act) of ISE (an ‘‘ISE
Member’’), or a member of EDGA or
EDGX (as such terms are defined in the
rules of EDGA and EDGX, respectively,
an ‘‘EDGA Member’’ and ‘‘EDGX
Member,’’ respectively)). The Holdco
Articles would provide that Holdco will
be required to disregard any votes
purported to be cast in excess of the
voting restriction. In the event that any
such person(s) exceeds the ownership
restriction, it will be required to offer for
sale and transfer the number of Holdco
shares required to comply with the
ownership restriction, and the rights to
vote, attend general meetings of Holdco
shareholders and receive dividends or
other distributions attached to shares
held in excess of the 40% threshold (or
20% threshold, if applicable) will be
suspended for so long as such threshold
is exceeded. If such person(s) fails to
comply with the transfer obligation
within two weeks, then the Holdco
Articles would provide that Holdco will
be irrevocably authorized to take actions
on behalf of such person(s) in order to
cause it to comply with such
obligations. The Holdco board of
directors may waive the voting and
ownership restrictions if it makes
certain determinations (which will be
subject to the same requirements which
are currently required to be made by the
board of directors of NYSE Euronext
and ISE Holdings in order to waive the
voting and ownership restrictions in the
current NYSE Euronext Certificate and
the ISE Holdings Certificate, as
applicable) and resolves to expressly
permit the voting and ownership that is
subject to such restrictions, and such
resolutions have been filed with, and
approved by, the Commission under
Section 19(b) of the Exchange Act and
filed with, and approved by, the
relevant European Regulators 9 having
appropriate jurisdiction and authority.
• Jurisdiction. The Holdco Articles
will provide that Holdco and its
directors, and to the extent they are
involved in the activities of the U.S.
Regulated Subsidiaries, (x) Holdco’s
officers, and (y) those of its employees
whose principal place of business and
residence is outside the United States,
will be deemed to irrevocably submit to
the jurisdiction of the U.S. Federal
courts and the Commission for the
purposes of any suit, action or
proceeding pursuant to the U.S. Federal
securities laws and the rules or
regulations thereunder, arising out of, or
relating to, the activities of the U.S.
Regulated Subsidiaries. In addition, the
Holdco Articles would provide that so
long as Holdco directly or indirectly
controls any U.S. Regulated Subsidiary,
the directors, officers and employees
will be deemed to be directors, officers
and employees of such U.S. Regulated
Subsidiaries for purposes of, and subject
to oversight pursuant to, the Exchange
Act. The Holdco Articles would provide
that Holdco will take reasonable steps
necessary to cause its officers, directors
and employees, prior to accepting a
position as an officer, director or
employee, as applicable, to agree and
consent in writing to the applicability to
them of these jurisdictional and
oversight provisions with respect to
their activities related to any U.S.
Regulated Subsidiary. Furthermore, the
Holdco Articles would provide that no
person may be a director of Holdco
unless he or she has agreed and
consented in writing to the applicability
to him or her of these jurisdictional and
oversight provisions with respect to his
or her activities related to any U.S.
Regulated Subsidiary. Holdco would
sign an irrevocable agreement and
consent for the benefit of each U.S.
Regulated Subsidiary 10 that it will
comply with these provisions of the
Holdco Articles.
• Books and Records. The Holdco
Articles would provide that for so long
as Holdco directly or indirectly controls
any U.S. Regulated Subsidiary, the
books, records and premises of Holdco
5 See Form of Deed of Amendment to Holdco
Articles of Association, Article 34.3(c).
6 See id.
7 See id.
8 See id.
9 See Form of Deed of Amendment to Holdco
Articles of Association, Article 1.1.
10 The form of Holdco’s agreement and consent is
attached as Exhibit 5C to this Proposed Rule
Change.
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65265
will be deemed to be the books, records
and premises of such U.S. Regulated
Subsidiaries for purposes of, and subject
to oversight pursuant to, the Exchange
Act, and that Holdco’s books and
records will at all times be made
available for inspection and copying by
the Commission, and by any U.S.
Regulated Subsidiary to the extent they
are related to the activities of such U.S.
Regulated Subsidiary or any other U.S.
Regulated Subsidiary over which such
U.S. Regulated Subsidiary has
regulatory authority or oversight. In
addition, Holdco’s books and records
related to the U.S. Regulated
Subsidiaries will be maintained within
the United States, except that to the
extent that books and records may relate
to both European subsidiaries and U.S.
Regulated Subsidiaries, Holdco may
maintain such books and records either
in the home jurisdiction of one or more
European subsidiaries or in the United
States.
• Amendments to Holdco Articles.
The Holdco Articles would provide that
before any amendment to the Holdco
Articles may be effectuated by execution
of a notarial deed of amendment, such
amendment would need to be submitted
to the board of directors of each U.S.
Regulated Subsidiary and, if so
determined by any such board, would
need to be filed with, or filed with and
approved by, the Commission before
such amendment may become effective.
• Additional Matters. The Holdco
Articles would include provisions
regarding cooperation with the
Commission and the U.S. Regulated
Subsidiaries, compliance with U.S.
federal securities laws, confidentiality
of information regarding the U.S.
Regulated Subsidiaries’ self-regulatory
function, preservation of the
independence of the U.S. Regulated
Subsidiaries’ self-regulatory function,
and directors’ consideration of the effect
of Holdco’s actions on the U.S.
Regulated Subsidiaries’ ability to carry
out their respective responsibilities
under the Exchange Act. In addition, the
Holdco Articles would provide that
Holdco will take reasonable steps
necessary to cause its officers, directors
and employees, prior to accepting a
position as an officer, director or
employee, as applicable, of Holdco to
agree and consent in writing to the
applicability to them of these provisions
of the Holdco Articles with respect to
their activities related to any U.S.
Regulated Subsidiary. The Holdco
Articles would also provide that no
person may be a director of Holdco
unless he or she has agreed and
consented in writing to the applicability
to him or her of these provisions with
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respect to his or her activities related to
any U.S. Regulated Subsidiary. Holdco
will sign an irrevocable agreement and
consent for the benefit of each U.S.
Regulated Subsidiary 11 that it will
comply with these provisions of the
Holdco Articles.12
In addition, Holdco would adopt a
Director Independence Policy in the
form attached hereto as Exhibit 5D (the
‘‘Holdco Independence Policy’’), which
would be substantially similar to the
current Independence Policy of the
NYSE Euronext board of directors. The
Proposed Rule Change filed by the
NYSE in connection with the
combination describes the Holdco
Independence Policy as it relates to the
current Independence Policy of the
NYSE Euronext board of directors.13
The text of the Proposed Rule Change
is available at the Exchange, the
Commission’s Public Reference Room,
and on the Web site of the Exchange
(https://www.directedge.com). The text of
Exhibits 5A through 5D of the Proposed
Rule Change are also available on the
Exchange’s Web site and on the
Commission’s Web site (https://
www.sec.gov/rules/sro.shtml).
Other than as described herein and set
forth in the attached Exhibits 5A
through 5D, the Exchange will continue
to conduct its regulated activities in the
manner currently conducted and will
not make any changes to its regulated
activities in connection with the
Combination. If the Exchange
determines to make any such changes,
it will seek approval of the Commission.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
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In its filing with the Commission, the
Exchange has included statements
concerning the purpose of, and basis for,
the Proposed Rule Change. The text of
these 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 aspects of such
statements.
11 The form of Holdco’s agreement and consent is
attached as Exhibit 5C to this Proposed Rule
Change.
12 The Holdco Articles will also set forth certain
restrictions and requirements relating to Holdco’s
European subsidiaries and applicable European
regulatory matters, which will be substantially
consistent with the analogous restrictions and
requirements applicable with respect to Holdco’s
U.S. Regulated Subsidiaries and U.S. regulatory
matters.
13 See File No. SR–NYSE–2011–51.
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A. Purpose [sic]
The purpose of this rule filing is to
adopt the rules necessary to permit
¨
Deutsche Borse to effect the
Combination and to amend certain
provisions of the organizational and
other governance documents of Holdco.
1. Overview of the Combination
The Exchange is submitting this
Proposed Rule Change to the
Commission in connection with the
Combination of NYSE Euronext and
¨
Deutsche Borse. The Combination will
create a holding company, Holdco,
which will hold the businesses of NYSE
¨
Euronext and Deutsche Borse.
Following the Combination, each of
¨
NYSE Euronext and Deutsche Borse will
be a separate subsidiary of Holdco.
Holdco expects the Combination will
create a group that will be both a world
leader in derivatives and risk
management and the premier global
venue for capital raising, with a truly
global franchise and presence in many
of the world’s financial centers
including New York, London, Frankfurt,
Paris and Luxembourg. This global
presence should facilitate providing
world-class services to global and local
customers worldwide.
Other than as described herein,
Holdco and the Exchange will not make
any changes to the regulated activities of
the DB Exchanges in connection with
the Combination, and, other than as
described in the separate proposed rule
changes filed by each of the NYSE
Exchanges in connection with the
Combination, Holdco and the NYSE
Exchanges will not make any changes to
the regulated activities of the NYSE U.S.
Regulated Subsidiaries in connection
with the Combination. If Holdco
determines to make any such changes to
the regulated activities of any U.S.
Regulated Subsidiary, it will seek the
approval of the Commission. The
Proposed Rule Change, if approved by
the Commission, will not be operative
until the consummation of the
Combination.
The Combination will occur pursuant
to the terms of the Business
Combination Agreement, dated as of
February 15, 2011, as amended by
Amendment No. 1 dated as of May 2,
2011 and by Amendment No. 2 dated as
of June 16, 2011 (as it may be further
amended from time to time, the
‘‘Combination Agreement’’), by and
¨
among NYSE Euronext, Deutsche Borse,
Holdco and Pomme Merger Corporation,
a Delaware corporation and newly
formed wholly owned subsidiary of
Holdco (‘‘Merger Sub’’). Subject to the
terms and conditions set forth in the
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Frm 00109
Fmt 4703
Sfmt 4703
Combination Agreement and in
compliance with applicable law, Holdco
has conducted a public exchange offer
(the ‘‘Exchange Offer’’), in which
¨
shareholders of Deutsche Borse have
been afforded the opportunity to tender
¨
each share of Deutsche Borse for one
ordinary share of Holdco (each, a
‘‘Holdco Share’’).
Immediately after the time that
Holdco accepts for exchange, and
¨
exchanges, the Deutsche Borse shares
that are validly tendered and not
withdrawn in the Exchange Offer,
Merger Sub will merge with and into
NYSE Euronext, as a result of which
NYSE Euronext will become a wholly
owned subsidiary of Holdco (the
‘‘Merger’’). In the Merger, each
outstanding share of NYSE Euronext
common stock will be converted into
the right to receive 0.47 of a fully paid
and non-assessable Holdco Share. NYSE
Euronext’s obligation to complete the
Merger is subject to the completion of
the Exchange Offer and the acquisition
¨
by Holdco of all of the Deutsche Borse
shares validly tendered and not
withdrawn in the Exchange Offer. The
completion of the Exchange Offer (and,
therefore, the completion of the Merger)
is subject to the satisfaction of a number
of conditions, including that Deutsche
¨
Borse shares representing at least 75%
¨
of the Deutsche Borse shares
outstanding, on a fully diluted basis,
must be validly tendered and not
withdrawn in the Exchange Offer, and
that holders of a majority of the
outstanding shares of NYSE Euronext
shall have adopted the Combination
Agreement. Both of these conditions
have been satisfied.
Following the completion of the
Exchange Offer, and depending on the
¨
percentage of Deutsche Borse shares
acquired by Holdco in the Exchange
¨
Offer, Deutsche Borse and Holdco
intend to complete a post-completion
reorganization pursuant to which
Holdco will enter into a domination
agreement or a combination of a
domination agreement and a profit and
loss transfer agreement, pursuant to
which the remaining shareholders of
¨
Deutsche Borse will have limited rights,
including a limited ability to participate
¨
in the profits of Deutsche Borse.
Holdco expects the Combination will
create a group that will be both a world
leader in derivatives and risk
management and the premier global
venue for capital raising, with a truly
global franchise and presence in many
of the world’s financial centers
including New York, London, Frankfurt,
Paris and Luxembourg. This global
presence should facilitate providing
world-class services to global and local
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customers worldwide. Following the
Combination, Holdco and its
subsidiaries (together, the ‘‘Holdco
Group’’) expect to serve as a benchmark
regulatory model, facilitating
transparency and harmonization of
capital markets globally, while
continuing to operate all national
exchanges under local regulatory
frameworks and their respective brand
names.
sroberts on DSK5SPTVN1PROD with NOTICES
2. Overview of the Holdco Group
Following the Combination
Following the Combination, Holdco
will be a for-profit, publicly traded
corporation formed under the laws of
The Netherlands and will act as the
holding company for the businesses of
¨
NYSE Euronext and Deutsche Borse.
Holdco will hold all of the equity
interests in NYSE Euronext, which
holds (1) 100% of the equity interest of
NYSE Group (which, in turn, directly or
indirectly holds 100% of the equity
interests of the NYSE U.S. Regulated
Subsidiaries) and (2) 100% of the equity
interest of Euronext N.V. (which, in
turn, directly or indirectly holds 100%
of the equity interests of trading markets
in Belgium, France, the Netherlands,
Portugal and the United Kingdom).
Holdco will also hold a majority of the
¨
equity interests in Deutsche Borse,
which indirectly holds 50% of the
equity interest of ISE Holdings (which,
in turn, holds (1) 100% of the equity
interest of ISE and (2) 31.54% of the
equity interest of Direct Edge Holdings).
Direct Edge Holdings indirectly holds
100% of the equity interest of the
Exchange and EDGX. Holdco intends to
list its ordinary shares on the New York
Stock Exchange, the Frankfurt Stock
Exchange and Euronext Paris. The
Holdco Group will have dual
headquarters in Frankfurt and New
York.
After the Combination, NYSE Group
will continue to be directly wholly
owned by NYSE Euronext and will
continue to directly or indirectly own
the three NYSE Exchanges—NYSE,
NYSE Arca and NYSE Amex—which
provide marketplaces where investors
buy and sell listed companies’ common
stock and other securities as well as
equity options and securities traded on
the basis of unlisted trading privileges.
NYSE Regulation, Inc., an indirect notfor-profit subsidiary of NYSE Group,
oversees FINRA’s performance of
certain market surveillance and
enforcement functions for NYSE
Euronext’s U.S. securities exchanges,
enforces listed company compliance
with applicable standards, and oversees
regulatory policy determinations, rule
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18:59 Oct 19, 2011
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interpretation and regulation related
rule development.
In Europe, NYSE Euronext, Deutsche
¨
Borse and their respective subsidiaries
own several European exchanges,
including trading operations on
regulated and non-regulated markets for
cash products in Germany, France,
Belgium, The Netherlands, and Portugal
and derivatives in the United Kingdom
and in the five above-mentioned
locations. As a result, the activities of
¨
the NYSE Euronext and Deutsche Borse
European markets are or may be subject
to the jurisdiction and authority of a
number of European regulators,
including the German Federal Financial
Supervisory Authority (Bundesanstalt
¨
fur Finanzdienstleistungsaufsicht), the
Hessian Exchange Supervisory
Authority, the Dutch Minister of
Finance, the French Minister of the
Economy, the French Financial Market
´
´
Authority (Autorite des Marches
Financiers), the French Prudential
´
Supervisory Authority (Autorite de
ˆ
Controle Prudentiel), the Netherlands
Authority for the Financial Markets
¨
(Autoriteit Financiele Markten), the
Belgian Financial Services and Markets
´
Authority (Autorite des Services et
´
Marches Financiers), the Portuguese
Securities Market Commission
˜
(Comissao do Mercado de Valores
´
Mobiliarios—CMVM) and the U.K.
Financial Services Authority (FSA).
Other than certain modifications
described herein, the current corporate
structure, governance and selfregulatory independence and separation
of the Exchange will be preserved.
Specifically, after the Combination,
Direct Edge Holdings’ businesses and
assets will continue to be structured as
follows:
• The Exchange will remain an
indirect wholly owned subsidiary of
Direct Edge Holdings, with ISE Holdings
¨
and Deutsche Borse holding equity
interests of 31.54% and 15.77%,
respectively.
• The Combination will have no
effect on the ability of any party to trade
securities on the Exchange, ISE or
EDGX.
¨
Similarly, Deutsche Borse and its
subsidiaries, and NYSE Euronext and its
subsidiaries, will continue to conduct
their regulated activities in the same
manner as they are currently conducted,
with any changes subject to the relevant
approvals of their respective European
regulators and, in the case of the U.S.
Regulated Subsidiaries, with any
changes subject to the approval of the
Commission.
Holdco acknowledges that to the
extent it becomes aware of possible
violations of the rules of the Exchange,
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65267
it will be responsible for referring such
possible violations to the Exchange.
3. Proposed Approval of Waiver of
Voting and Ownership Restrictions of
ISE Holdings
Article FOURTH, Section III of the
current ISE Holdings Certificate
provides that (1) No person, either alone
or together with its ‘‘related persons’’ (as
defined in the ISE Holdings Certificate),
may be entitled to vote or cause the
voting of shares of ISE Holdings at any
time, directly, indirectly or pursuant to
any voting trust, agreement, plan or
other arrangement, to the extent that
such shares represent more than 20% of
the voting power of the then
outstanding votes entitled to be cast on
such matter; and (2) no person, either
alone or together with its related
persons, at any time, directly, indirectly
or pursuant to any voting trust, may
enter into any agreement, plan or other
arrangement with any other person,
either alone or together with its related
persons, under circumstances which
would result in the voting shares that
shall be subject to such agreement, plan
or other arrangement not being voted on
any matter or matters or the withholding
of any proxy relating thereto, where the
effect of such agreement, plan or
arrangement would be to enable any
person, either alone or together with its
related persons, to possess more than
20% of the voting power of the then
outstanding votes entitled to be cast on
any such matter (the ‘‘ISE Holdings
Voting Restriction’’).14 If any person,
either alone or together with its related
persons, acquires voting power in
excess of the ISE Holdings Voting
Restriction, the ISE Holdings board of
directors must notify the ISE Trust and
such ISE Holdings Voting Restriction
shall result in the automatic transfer to
the ISE Trust of a majority of the voting
shares then outstanding pro rata from
the holders thereof.
In addition, the ISE Holdings
Certificate provides that no person,
either alone or together with its related
persons, may at any time of record or
beneficially own, directly or indirectly,
shares of ISE Holdings representing
more than 40% of the then outstanding
votes entitled to be cast on any matter
and no person who is a member of the
Exchange, either alone or together with
its related person, may at any time of
record or beneficially own, directly or
indirectly, shares of ISE Holdings
representing in the more than 20% of
the then outstanding votes entitled to be
14 See Amended and Restated Certificate of
Incorporation of ISE Holdings, Article FOURTH,
Section III.
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cast on any matter (the ‘‘ISE Holdings
Ownership Restriction’’).15 If any
person, either alone or together with its
related persons, owns shares of ISE
Holdings in excess of the ISE Holdings
Ownership Restriction, then the ISE
Holdings board of directors must notify
the ISE Trust and such ISE Holdings
Ownership Restriction shall result in
the automatic transfer to the ISE Trust
of a majority of the voting shares then
outstanding pro rata from the holders
thereof.16
The ISE Holdings board of directors
may waive the ISE Holdings Voting
Restriction and the ISE Holdings
Ownership Restriction pursuant to an
amendment to the ISE Holdings Bylaws
adopted by the ISE Holdings board of
directors, if in connection with the
adoption of such amendment, the board
of directors in its sole discretion adopts
a resolution stating that it is the
determination of the board of directors
that such amendment:
• Will not impair the ability of ISE
Holdings and any of the DB U.S.
Regulated Subsidiaries, or facility
thereof, to carry out their respective
responsibilities under the Exchange Act
and the rules and regulations
thereunder;
• Is otherwise in the best interest of
ISE Holdings, its stockholders and the
DB U.S. Regulated Subsidiaries;
• Will not impair the Commission’s
ability to enforce the Exchange Act;
• For so long as ISE Holdings directly
or indirectly controls the Exchange,
neither such person nor any of its
related persons is an ISE Member,
EDGA Member or EDGX Member; and
• Neither such person nor any of its
related persons is subject to any
‘‘statutory disqualification’’ (as such
term is defined in Section 3(a)(39) of the
Exchange Act).17
Such amendment shall not be
effective unless it has been filed with
and approved by the Commission under
Section 19(b) of the Exchange Act 18 and
has become effective thereunder.
In order to allow Holdco to indirectly
own 50% of the outstanding common
stock of ISE Holdings upon
consummation of the Combination,
Holdco has delivered written notice to
the board of directors of ISE Holdings
15 See Amended and Restated Certificate of
Incorporation of ISE Holdings, Article FOURTH,
Section III.
16 See Amended and Restated Certificate of
Incorporation of ISE Holdings, Article FOURTH,
Section III.
17 See Amended and Restated Certificate of
Incorporation of ISE Holdings, Article FOURTH,
Section III, and Amended and Restated Bylaws of
ISE Holdings, Article XI.
18 15 U.S.C. 78s(b).
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pursuant to the procedures set forth in
the ISE Holdings Certificate requesting
approval of its voting and ownership of
ISE Holdings shares in excess of the ISE
Holdings Voting Restriction and the ISE
Holdings Ownership Restriction.
Among other things, in this notice,
Holdco represented to the board of
directors of ISE Holdings that neither it,
nor any of its related persons, is (1) An
ISE Member; (2) EDGA Member; (3)
EDGX Member; or (4) subject to any
‘‘statutory disqualification.’’
At a meeting duly convened on
September 16, 2011, the board of
directors of ISE Holdings adopted the
ISE Holdings Bylaws Amendment to
permit Holdco, either alone or together
with its related persons, to exceed the
ISE Holdings Ownership Restriction and
the ISE Holdings Voting Restriction. In
adopting such amendment, the board of
directors of ISE Holdings made the
necessary determinations set forth above
and approved the submission of this
Proposed Rule Change to the
Commission. The Exchange will
continue to operate and regulate its
market and members exactly as it has
done prior to the Combination. Except
as set forth in this Proposed Rule
Change, the Exchange is not proposing
any amendments to its trading or
regulatory rules.
With respect to the ability of the
Commission to enforce the Exchange
Act as it applies to the Exchange after
the Combination, the Exchange will
operate in the same manner following
the Combination as it operates today.19
Thus, the Commission will continue to
have plenary regulatory authority over
the Exchange, as is the case currently
with the Exchange. As described in the
following sections of this filing, the
Exchange is proposing certain
provisions of the Holdco Articles that
will create an ownership structure that
will provide the Commission with
appropriate oversight tools to ensure
that the Commission will have the
ability to enforce the Exchange Act with
respect to each U.S. Regulated
Subsidiary, its direct and indirect parent
entities and its directors, officers,
employees and agents to the extent they
are involved in the activities of such
U.S. Regulated Subsidiary. The ISE
Holdings board of directors also
determined that ownership of ISE
Holdings by Holdco is in the best
19 The Exchange has been informed by NYSE
Euronext, EDGA [sic] and EDGX that the NYSE U.S.
Regulated Subsidiaries, EDGA [sic] and EDGX,
respectively, are also expected to operate in the
same manner following the Combination as they
operate today. This is addressed in the separate
proposed rule change filed by each of the NYSE
Exchanges, EDGA [sic] and EDGX.
PO 00000
Frm 00111
Fmt 4703
Sfmt 4703
interests of ISE Holdings, its
shareholders and the DB U.S. Regulated
Subsidiaries.
In addition, neither Holdco, nor any
of its related persons, is (1) An ISE
Member; (2) an EDGA Member; (3) an
EDGX Member; or (4) subject to any
‘‘statutory disqualification.’’
An extract with the relevant
provisions of the ISE Holdings Bylaws
Amendment is attached as Exhibit 5A to
the Proposed Rule Change and can be
found on the Exchange’s Web site and
the Commission’s Web site.
The Exchange hereby requests that the
Commission approve the ISE Holdings
Bylaws Amendment and allow Holdco,
either alone or with its related persons,
to indirectly own 50% of the
outstanding common stock of ISE
Holdings upon and following the
consummation of the Combination.
4. Proposed Amendments to Ownership
and Voting Restrictions After the
Combination
Overview
The Exchange is proposing that,
effective as of the completion of the
Combination, the Holdco Articles would
contain voting and ownership
restrictions that restrict any person,
either alone or together with its related
persons, from having voting control over
Holdco shares entitling the holder
thereof to cast more than 20% of the
votes entitled to be cast on any matter
or beneficially owning Holdco shares
representing more than 40% of the
outstanding votes that may be cast on
any matter (except that a 20%
ownership restriction would apply to
any person who is a NYSE Member, an
Amex Member, an ETP Holder, an OTP
Holder, an OTP Firm, an ISE Member,
an EDGA Member or an EDGX Member).
In addition, the Exchange is
proposing that, effective as of the
Combination, the voting and ownership
restrictions currently in the Amended
and Restated Limited Liability Company
Operating Agreement of Direct Edge
Holdings (‘‘Direct Edge Holdings
Operating Agreement’’) would remain in
effect.20
Voting and Ownership Restrictions in
Holdco Articles
Under the Proposed Rule Change, the
Holdco Articles would provide that no
20 The current voting and ownership restrictions
contained in the Direct Edge Holdings Operating
Agreement and the ISE Holdings Certificate, as well
as the related provisions contained in the amended
and restated bylaws of U.S. Exchange Holdings and
¨
the board resolutions of Deutsche Borse, Eurex
Frankfurt AG and other indirect parent entities of
the Exchange, would remain in effect. The ISE Trust
would also remain unaltered and would continue
to have rights to enforce these restrictions.
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person, either alone or together with its
related persons, will be entitled to vote
or cause the voting of a number of
shares of Holdco, in person or by proxy
or through any voting agreement or
other arrangement, which represent in
the aggregate (1) More than 20% of the
then outstanding votes entitled to be
cast on such matter; or (2) more than
20% of the then outstanding votes
entitled to be cast on any such matter
by virtue of agreements or arrangements
entered into with other persons to
refrain from voting shares of Holdco (the
‘‘Holdco Voting Restriction’’).21 The
Holdco Articles would provide that
Holdco will be required to disregard any
votes purported to be cast in excess of
the Holdco Voting Restriction.
In addition, the Holdco Articles
would provide that any person who,
either alone or together with its related
persons, beneficially owns Holdco
shares which represent in the aggregate
more than 40% of the outstanding votes
entitled to be cast on any matter (except
that a 20% restriction would apply to
any person who is a NYSE Member, an
Amex Member, an ETP Holder, an OTP
Holder, an OTP Firm, an ISE Member,
an EDGA Member or an EDGX Member)
(the ‘‘Holdco Ownership Restriction’’),
will be obligated to offer for sale and to
transfer a number of Holdco shares
necessary so that such person, together
with its related persons, beneficially
owns a number of Holdco shares that
complies with the Holdco Ownership
Restriction (the ‘‘Holdco Transfer
Obligation’’).22 If such person(s) fails to
comply with the Holdco Transfer
Obligation within two weeks, Holdco
will be irrevocably authorized to act on
behalf of such person(s) in order to
ensure compliance with the Holdco
Transfer Obligation.23
Furthermore, the Holdco Articles
would provide that in the event any
person, either alone or together with its
related persons, exceeds the Holdco
Ownership Restriction (any such
person(s), a ‘‘Non-Compliant Owner’’),
the Non-Compliant Owner would cease
to have certain rights to the extent that
its shareholding exceeds the Holdco
Ownership Restriction. Specifically, the
Non-Compliant Owner’s rights to vote,
to attend general meetings of Holdco
shareholders and to receive dividends
or other distributions attached to such
shares in excess of the Holdco
Ownership Restriction would be
21 See Form of Deed of Amendment to Holdco
Articles of Association, Article 34.1.
22 See Form of Deed of Amendment to Holdco
Articles of Association, Articles 35.1 and 35.4.
23 See Form of Deed of Amendment to Holdco
Articles of Association, Article 35.7.
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suspended for so long as the Holdco
Ownership Restriction is exceeded.24
Pursuant to Section 2:87a of the Dutch
Civil Code, the Non-Compliant Owner
may request that an independent expert
be appointed to determine the value of
the Holdco shares, but such expert will
have discretion to determine that the
value of the shares is equal to the price
received for the shares by the NonCompliant Owner on any stock
exchange where the Holdco shares are
listed.25
The voting and ownership restrictions
will apply to each person unless it (1)
Delivers to the Holdco board of directors
a written notice of its intention to
acquire voting power or ownership in
excess of the relevant limitation, and
such notice is delivered at least 45 days
(or such shorter period as the Holdco
board or directors expressly consents to)
prior to acquiring Holdco shares in
excess of the Holdco Voting Restriction
or Holdco Ownership Restriction, and
(2) obtains a written confirmation from
the Holdco board of directors that the
board has expressly resolved to permit
such voting or ownership, and (3) such
resolution has been filed with, and
approved by, the Commission under
Section 19(b) of the Exchange Act and
filed with, and approved by, the
relevant European regulators having
appropriate jurisdiction and authority.26
The Holdco board of directors may
waive the Holdco Voting Restriction and
Holdco Ownership Restriction if it
makes certain determinations, which
will be consistent with the
determinations currently required to be
made by the board of directors of NYSE
Euronext and ISE Holdings in order to
waive the voting and ownership
restrictions in the NYSE Euronext
Certificate and the ISE Holdings
Certificate, respectively.27
5. Additional Matters To Be Addressed
in the Holdco Articles 28
Jurisdiction Over Individuals
Under the Proposed Rule Change, the
Holdco Articles would provide that
Holdco and its directors, and to the
24 See Form of Deed of Amendment to Holdco
Articles of Association, Article 35.6.
25 See Form of Deed of Amendment to Holdco
Articles of Association, Article 35.5.
26 See Form of Deed of Amendment to Holdco
Articles of Association, Articles 34.2 and 35.2.
27 See Form of Deed of Amendment to Holdco
Articles of Association, Articles 34.3 and 35.3.
28 The Holdco Articles will set forth certain
restrictions and requirements relating to Holdco’s
European subsidiaries and applicable European
regulatory matters, which will be substantially
consistent with the analogous restrictions and
requirements applicable with respect to Holdco’s
U.S. Regulated Subsidiaries and U.S. regulatory
matters.
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65269
extent that they are involved in the
activities of the U.S. Regulated
Subsidiaries, (x) Holdco’s officers, and
(y) those of its employees whose
principal place of business and
residence is outside the United States,
would be deemed to irrevocably submit
to the jurisdiction of the U.S. federal
courts and the Commission for the
purposes of any suit, action or
proceeding pursuant to the U.S. federal
securities laws, and the rules and
regulations thereunder, commenced or
initiated by the Commission arising out
of, or relating to, the activities of the
U.S. Regulated Subsidiaries.29 The
Holdco Articles would also provide
that, with respect to any such suit,
action, or proceeding brought by the
Commission, Holdco and its directors,
officers and employees would (1) Be
deemed to agree that NYSE Group may
serve as U.S. agent for purposes of
service of process in such suit, action,
or proceeding relating to NYSE Group or
any of its subsidiaries, and ISE Holdings
may serve as the U.S. agent for
proceedings relating to ISE Holdings or
any of its subsidiaries; and (2) be
deemed to waive, and agree not to assert
by way of motion, as a defense or
otherwise, in any such suit, action, or
proceeding, any claims that it or they
are not personally subject to the
jurisdiction of the Commission, that the
suit, action, or proceeding is an
inconvenient forum or that the venue of
the suit, action, or proceeding is
improper, or that the subject matter
thereof may not be enforced in or by the
U.S. federal courts or the Commission.30
In addition, the Holdco Articles
would provide that, so long as Holdco
directly or indirectly controls any U.S.
Regulated Subsidiary, the directors,
officers and employees of Holdco will
be deemed to be directors, officers and
employees of such U.S. Regulated
Subsidiaries for purposes of, and subject
to oversight pursuant to, the Exchange
Act.31
The Holdco Articles would provide
that Holdco will take reasonable steps
necessary to cause its directors, officers
and employees, prior to accepting a
position as an officer, director or
employee, as applicable, of Holdco to
agree and consent in writing to the
applicability to them of these
jurisdictional and oversight provisions
with respect to their activities related to
29 See Form of Deed of Amendment to Holdco
Articles of Association, Article 3.2(c).
30 See id.
31 See Form of Deed of Amendment to Holdco
Articles of Association, Article 3.2(f).
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any U.S. Regulated Subsidiary.32 The
Holdco Articles would also provide that
no person may be a director of Holdco
unless he or she has agreed and
consented in writing to the applicability
to him or her of these jurisdictional and
oversight provisions with respect to his
or her activities related to any U.S.
Regulated Subsidiary.33 Furthermore,
Holdco would sign an irrevocable
agreement and consent for the benefit of
each U.S. Regulated Subsidiary 34 that it
will comply with these provisions in the
Holdco Articles.
The Exchange anticipates that the
functions and activities of each U.S.
Regulated Subsidiary generally will be
carried out by the officers and directors
of such U.S. Regulated Subsidiary, each
of whom the Commission has direct
authority over pursuant Section 19(h)(4)
of the Exchange Act.35
Access to Books and Records
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Under the Proposed Rule Change, the
Holdco Articles would provide that for
so long as Holdco directly or indirectly
controls any U.S. Regulated Subsidiary,
the books, records and premises of
Holdco will be deemed to be the books,
records and premises of such U.S.
Regulated Subsidiaries for purposes of,
and subject to oversight pursuant to, the
Exchange Act.36 In addition, the Holdco
Articles would provide that Holdco’s
books and records will at all times be
made available for inspection and
copying by the Commission, and any
U.S. Regulated Subsidiary to the extent
they are related to the activities of such
U.S. Regulated Subsidiary or any other
U.S. Regulated Subsidiary over which
such U.S. Regulated Subsidiary has
regulatory authority or oversight.37 In
addition, Holdco’s books and records
related to the U.S. Regulated
Subsidiaries will be maintained within
the United States, except that to the
extent that books and records may relate
to both European subsidiaries and U.S.
Regulated Subsidiaries, Holdco may
maintain such books and records either
in the home jurisdiction of one or more
European subsidiaries or in the United
States.38
32 See Form of Deed of Amendment to Holdco
Articles of Association, Article 3.2(m).
33 See Form of Deed of Amendment to Holdco
Articles of Association, Article 14.11.
34 The form of Holdco’s agreement and consent is
attached as Exhibit 5C to this Proposed Rule
Change.
35 15 U.S.C. 78s(h)(4).
36 See Form of Deed of Amendment to Holdco
Articles of Association, Article 3.2(f).
37 See Form of Deed of Amendment to Holdco
Articles of Association, Article 3.2(e).
38 See Form of Deed of Amendment to Holdco
Articles of Association, Article 3.2(g).
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Additional Matters
Under the Proposed Rule Change, the
Holdco Articles would provide that
Holdco will comply with the U.S.
federal securities laws and the rules and
regulations thereunder, and will
cooperate with the Commission and
with the U.S. Regulated Subsidiaries
pursuant to and to the extent of their
respective regulatory authority.39 In
addition, Holdco would be required to
take reasonable steps necessary to cause
its agents to cooperate with the
Commission and, where applicable, the
U.S. Regulated Subsidiaries pursuant to
their regulatory authority.40 The Holdco
Articles would also provide that, in
discharging his or her responsibilities as
a member of the Holdco board of
directors or as an officer or employee of
Holdco, each such director, officer or
employee will (a) Comply with the U.S.
federal securities laws and the rules and
regulations thereunder; (b) cooperate
with the Commission; and (c) cooperate
with the U.S. Regulated Subsidiaries
pursuant to and to the extent of their
regulatory authority (but this provision
will not create any duty owed by any
director, officer or employee of Holdco
to any person to consider, or afford any
particular weight to, any such matters or
to limit his or her consideration to such
matters).41
The Holdco Articles would also
provide that all confidential information
that comes into the possession of
Holdco pertaining to the self-regulatory
function of any U.S. Regulated
Subsidiary will (a) Not be made
available to any persons other than to
those officers, directors, employees and
agents of Holdco that have a reasonable
need to know the contents thereof; (b)
be retained in confidence by Holdco and
the officers, directors, employees and
agents of Holdco; and (c) not be used for
any commercial purposes.42 In addition,
the Holdco Articles would provide that
these obligations regarding such
confidential information will not be
interpreted so as to limit or impede (i)
The rights of the Commission or the
relevant U.S. Regulated Subsidiary to
have access to and examine such
confidential information pursuant to the
U.S. federal securities laws and the
rules and regulations thereunder; or (ii)
the ability of any officers, directors,
employees or agents of Holdco to
disclose such confidential information
39 See Form of Deed of Amendment to Holdco
Articles of Association, Article 3.2(a).
40 See id.
41 See Form of Deed of Amendment to Holdco
Articles of Association, Article 3.2(l).
42 See Form of Deed of Amendment to Holdco
Articles of Association, Article 3.2(h).
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to the Commission or any U.S.
Regulated Subsidiary.43
Additionally, the Holdco Articles
would provide that, for so long as
Holdco directly or indirectly controls
any U.S. Regulated Subsidiary, Holdco
and its directors, officers and employees
will give due regard to the preservation
of the independence of the selfregulatory function of such U.S.
Regulated Subsidiary and to its
obligations to investors and the general
public, and will not take any actions
that would interfere with the
effectuation of any decisions by the
board of directors or managers of such
U.S. Regulated Subsidiary relating to its
regulatory responsibilities (including
enforcement and disciplinary matters)
or that would interfere with the ability
of such U.S. Regulated Subsidiary to
carry out its responsibilities under the
Exchange Act.44
Finally, the Holdco Articles would
provide that each director of Holdco
would, in discharging his or her
responsibilities, to the fullest extent
permitted by applicable law, take into
consideration the effect that Holdco’s
actions would have on the ability of (a)
The U.S. Regulated Subsidiaries to carry
out their responsibilities under the
Exchange Act; and (b) the U.S.
Regulated Subsidiaries, NYSE Group,
ISE Holdings and Holdco to (1) Engage
in conduct that fosters and does not
interfere with the ability of the U.S.
Regulated Subsidiaries, NYSE Group,
ISE Holdings and Holdco to prevent
fraudulent and manipulative acts and
practices in the securities markets; (2)
promote just and equitable principles of
trade in the securities markets; (3) foster
cooperation and coordination with
persons engaged in regulating, clearing,
settling, processing information with
respect to, and facilitating transactions
in securities; (4) remove impediments to
and perfect the mechanisms of a free
and open market in securities and a U.S.
national securities market system; and
(5) in general, protect investors and the
public interest.45 This requirement
would not, however, create any duty
owed by any director, officer or
employee of Holdco to any person to
consider, or afford any particular weight
to, any of the foregoing matters or to
limit his or her consideration to such
matters.46
In addition, the Holdco Articles
would provide that Holdco will take
43 See
id.
Form of Deed of Amendment to Holdco
Articles of Association, Article 3.2(i).
45 See Form of Deed of Amendment to Holdco
Articles of Association, Article 3.2(k).
46 See Form of Deed of Amendment to Holdco
Articles of Association, Article 3.2(k).
44 See
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reasonable steps necessary to cause its
officers, directors and employees, prior
to accepting a position as an officer,
director or employee, as applicable, of
Holdco to agree and consent in writing
to the applicability to them of these
provisions of the Holdco Articles with
respect to their activities related to any
U.S. Regulated Subsidiary.47 The
Holdco Articles would also provide that
no person may be a director of Holdco
unless he or she has agreed and
consented in writing to the applicability
to him or her of these provisions with
respect to his or her activities related to
any U.S. Regulated Subsidiary.48
Holdco would also sign an irrevocable
agreement and consent for the benefit of
each U.S. Regulated Subsidiary that it
will comply with provisions in the
Holdco Articles regarding (1)
Cooperation with the Commission and
such U.S. Regulated Subsidiaries; (2)
compliance with U.S. federal securities
laws; (3) inspection and copying of
Holdco’s books, records and premises;
(4) Holdco’s books, records, premises,
officers, directors and employees being
deemed to be those of U.S. Regulated
Subsidiaries; (5) maintenance of books
and records in the United States; (6)
confidentiality of information regarding
the U.S. Regulated Subsidiaries’ selfregulatory function; (7) preservation of
the independence of the self-regulatory
function of the U.S. Regulated
Subsidiaries; and (8) taking reasonable
steps to cause Holdco’s officers,
directors and employees to consent to
the applicability to them of the Holdco
Articles. The form of Holdco’s
agreement and consent is attached as
Exhibit 5C to this Proposed Rule
Change.
Amendments to the Holdco Articles
Under the Proposed Rule Change, the
Holdco Articles would provide that,
before any amendment to or repeal of
any provision of the Holdco Articles
may become effectuated by means of a
notarial deed of amendment, the same
will be submitted to the board of
directors of each U.S. Regulated
Subsidiary (or the boards of directors of
their successors) and if any or all of
such boards of directors determine that
the same must be filed with, or filed
with and approved by, the Commission
before the same may be effective under
Section 19 of the Exchange Act and the
rules promulgated thereunder, then the
same will not be effective until filed
with, or filed with and approved by, the
Commission, as the case may be. These
requirements would also apply to any
action by Holdco that would have the
effect of amending or repealing any
provision of the Holdco Articles.
Holdco Director Independence Policy
Under the Proposed Rule Change,
Holdco would adopt the Holdco
Independence Policy in the form
attached hereto as Exhibit 5D, which
would be substantially similar to the
current Independence Policy of the
NYSE Euronext board of directors. The
Proposed Rule Change filed by the
NYSE in connection with the
Combination describes the Holdco
Independence Policy as it relates to the
current Independence Policy of the
NYSE Euronext board of directors.49
6. Statutory Basis
The Exchange believes that this filing
is consistent with Section 6(b) 50 of the
Exchange Act in general, and furthers
the objectives of Section 6(b)(1) 51 in
particular, in that it enables the
Exchange to be so organized as to have
the capacity to be 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 the Exchange. With
respect to the ability of the Commission
to enforce the Exchange Act as it applies
to the Exchange after the Combination,
the Exchange will operate in the same
manner following the Combination as it
operates today. Thus, the Commission
will continue to have plenary regulatory
authority over the Exchange, as is the
case currently with the Exchange. The
Proposed Rule Change is consistent
with and will facilitate an ownership
structure that will provide the
Commission with appropriate oversight
tools to ensure that the Commission will
have the ability to enforce the Exchange
Act with respect to each U.S. Regulated
Subsidiary, its direct and indirect parent
entities and its directors, officers,
employees and agents to the extent they
are involved in the activities of such
U.S. Regulated Subsidiary.
The Exchange also believes that this
filing furthers the objectives of Section
6(b)(5) 52 of the Exchange Act because
the Proposed Rule Change summarized
herein would be consistent with and
facilitate a governance and regulatory
structure that is designed to prevent
65271
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. The
Exchange does not expect that the
Combination will impact the current
operations of the Exchange. However,
the Exchange believes that by
incorporating Holdco’s governance
documents as part of the proposed rule
filing, investors will be better apprised
of Holdco’s proposed indirect
ownership interest in the Exchange.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the Proposed Rule Change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Exchange Act.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants or Others
The Exchange has neither solicited
nor received written comments on 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 (i)
As the Commission may designate up to
90 days of such date if it finds such
longer period to be appropriate and
publishes its reasons for so finding or
(ii) as to which the Exchange consents,
the Commission shall: (a) By order
approve or disapprove such 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
47 See
Form of Deed of Amendment to Holdco
Articles of Association, Article 3.2(m).
48 See Form of Deed of Amendment to Holdco
Articles of Association, Article 14.11.
VerDate Mar<15>2010
18:59 Oct 19, 2011
Jkt 226001
49 See
File No. SR–NYSE–2011–51.
50 15 U.S.C. 78(f)(b).
51 15 U.S.C. 78(f)(b)(1).
52 15 U.S.C. 78(f)(b)(5).
PO 00000
Frm 00114
Fmt 4703
Sfmt 4703
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
E:\FR\FM\20OCN1.SGM
20OCN1
65272
Federal Register / Vol. 76, No. 203 / Thursday, October 20, 2011 / Notices
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–EDGA–2011–34 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
20549–1090.
All submissions should refer to File
Number SR–EDGA–2011–34. 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 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 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 should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–EDGA–
2011–34 and should be submitted on or
before November 10, 2011.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.53
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011–27193 Filed 10–19–11; 8:45 am]
sroberts on DSK5SPTVN1PROD with NOTICES
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–65563; File No. SR–
NYSEAMEX–2011–78]
Self-Regulatory Organizations; NYSE
Amex LLC; Notice of Filing of
Proposed Rule Change Relating to a
Corporate Transaction in Which Its
Indirect Parent, NYSE Euronext, Will
Become a Wholly Owned Subsidiary of
Alpha Beta Netherlands Holding N.V.
October 14, 2011.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Exchange Act’’), and Rule 19b–4
thereunder,2 notice is hereby given that
on October 12, 2011, NYSE Amex LLC
(the ‘‘NYSE Amex’’) 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 NYSE Amex. 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
A. Overview of the Proposed
Combination
NYSE Amex, a Delaware limited
liability company, registered national
securities exchange and self-regulatory
organization, is submitting this rule
filing (the ‘‘Proposed Rule Change’’) to
the Commission in connection with the
proposed business combination (the
‘‘Combination’’) of NYSE Euronext, a
Delaware corporation, and Deutsche
¨
Borse AG, an Aktiengesellschaft
organized under the laws of the Federal
Republic of Germany (‘‘Deutsche
¨
Borse’’).
NYSE Euronext owns 100% of the
equity interest of NYSE Group, Inc., a
Delaware corporation (‘‘NYSE Group’’),
which in turn directly or indirectly
owns (1) 100% of the equity interest of
three registered national securities
exchanges and self-regulatory
organizations (together, the ‘‘NYSE
Exchanges’’)—NYSE Amex, NYSE Arca,
Inc. (‘‘NYSE Arca’’) and New York Stock
Exchange LLC (‘‘Exchange’’)—and (2)
100% of the equity interest of NYSE
Market, Inc. (‘‘NYSE Market’’), NYSE
Regulation, Inc. (‘‘NYSE Regulation’’),
NYSE Arca L.L.C. (‘‘NYSE Arca LLC’’)
and NYSE Arca Equities, Inc. (‘‘NYSE
Arca Equities’’) (the NYSE Exchanges,
together with NYSE Market, NYSE
1 15
53 17
CFR 200.30–3(a)(12).
VerDate Mar<15>2010
18:59 Oct 19, 2011
2 17
Jkt 226001
PO 00000
U.S.C. 78s(b)(1).
CFR 240.19b–4.
Frm 00115
Fmt 4703
Sfmt 4703
Regulation, NYSE Arca LLC and NYSE
Arca Equities, the ‘‘NYSE U.S.
Regulated Subsidiaries’’ and each, an
‘‘NYSE U.S. Regulated Subsidiary’’).
The Exchange and NYSE Arca will be
separately filing a proposed rule change
in connection with the Combination
that will be substantially the same as the
Proposed Rule Change.
¨
Deutsche Borse indirectly owns 50%
of the equity interest of International
Securities Exchange Holdings, Inc. (‘‘ISE
Holdings’’), which in turn holds 100%
of the equity interest of International
Securities Exchange, LLC (‘‘ISE’’), a
registered national securities exchange
and self-regulatory organization. ISE
Holdings also holds 31.54% of the
equity interest of Direct Edge Holdings,
LLC (‘‘Direct Edge Holdings’’), which in
turn indirectly holds 100% of the equity
interest of two registered national
securities exchanges and self-regulatory
organizations—EDGA Exchange, Inc.
(‘‘EDGA’’) and EDGX Exchange, Inc.
(‘‘EDGX’’) (each of ISE, EDGA and
EDGX, a ‘‘DB Exchange’’ and a ‘‘DB U.S.
Regulated Subsidiary’’ and together, the
‘‘DB Exchanges’’ and the ‘‘DB U.S.
Regulated Subsidiaries’’). The DB
Exchanges will be separately filing a
proposed rule change in connection
with the Combination.
If the Combination is completed, the
businesses of NYSE Euronext and
¨
Deutsche Borse, including the NYSE
U.S. Regulated Subsidiaries and the DB
U.S. Regulated Subsidiaries (together,
the ‘‘U.S. Regulated Subsidiaries’’ and
each, a ‘‘U.S. Regulated Subsidiary’’),
will be held under a single, publicly
traded holding company organized
under the laws of the Netherlands
(‘‘Holdco’’).3 The Proposed Rule
Change, if approved by the Commission,
will not be operative until the
consummation of the Combination.
B. Summary of Proposed Rule Change
NYSE Amex is proposing that,
pursuant to the Combination, its
indirect parent, NYSE Euronext, will
become a wholly owned subsidiary of
Holdco. In addition, NYSE Amex is
proposing that, in connection with the
Combination, the Commission approve
certain amendments to the
organizational and other governance
documents of Holdco, NYSE Euronext,
NYSE Group and certain of the NYSE
U.S. Regulated Subsidiaries as well as
certain rules of the Exchange, NYSE
3 Holdco is currently named ‘‘Alpha Beta
Netherlands Holding N.V.,’’ but it is expected that
Holdco will be renamed prior to the completion of
the Combination to a name agreen between NYSE
¨
Euronext and Deutsche Borse.
E:\FR\FM\20OCN1.SGM
20OCN1
]]>Agencies
[Federal Register Volume 76, Number 203 (Thursday, October 20, 2011)]
[Notices]
[Pages 65264-65272]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-27193]
[[Page 65264]]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-65564; File No. SR-EDGA-2011-34]
Self-Regulatory Organizations; EDGA Exchange, Inc.; Notice of
Filing of Proposed Rule Change Relating to a Corporate Transaction in
Which Its Indirect Parent, Deutsche B[ouml]rse AG, Will Become a Wholly
Owned Subsidiary of Alpha Beta Netherlands Holding N.V.
October 14, 2011.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Exchange Act''), and Rule 19b-4 thereunder,\2\ notice is
hereby given that on October 12, 2011, EDGA Exchange, Inc. (the
``Exchange'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I and II
below, which items have been prepared by the Exchange. The Commission
is publishing this notice to solicit comments on the proposed rule
change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
A. Overview of the Proposed Combination
The Exchange, a Delaware corporation, registered national
securities exchange and self-regulatory organization, is submitting
this rule filing (the ``Proposed Rule Change'') to the Commission in
connection with the proposed business combination (the ``Combination'')
of NYSE Euronext, a Delaware corporation, and Deutsche B[ouml]rse AG,
an Aktiengesellschaft organized under the laws of the Federal Republic
of Germany (``Deutsche B[ouml]rse'').
NYSE Euronext owns 100% of the equity interest of NYSE Group, Inc.,
a Delaware corporation (``NYSE Group''), which in turn directly or
indirectly owns (1) 100% of the equity interest of three registered
national securities exchanges and self-regulatory organizations
(together, the ``NYSE Exchanges'')--the New York Stock Exchange, LLC
(``NYSE''), NYSE Arca, Inc. (``NYSE Arca'') and NYSE Amex LLC (``NYSE
Amex'')--and (2) 100% of the equity interest of NYSE Market, Inc.
(``NYSE Market''), NYSE Regulation, Inc. (``NYSE Regulation''), NYSE
Arca L.L.C. (``NYSE Arca LLC'') and NYSE Arca Equities, Inc. (``NYSE
Arca Equities'') (the NYSE Exchanges, together with NYSE Market, NYSE
Regulation, NYSE Arca LLC and NYSE Arca Equities, the ``NYSE U.S.
Regulated Subsidiaries'' and each, a ``NYSE U.S. Regulated
Subsidiary''). NYSE, NYSE Arca and NYSE Amex will be separately filing
a proposed rule change in connection with the Combination.
Deutsche B[ouml]rse indirectly owns 50% of the equity interest of
International Securities Exchange Holdings, Inc. (``ISE Holdings''),
which in turn holds 100% of the equity interest of International
Securities Exchange, LLC (``ISE''). ISE Holdings also holds 31.54% of
the equity interest of Direct Edge Holdings, LLC (``Direct Edge
Holdings''), which in turn indirectly holds 100% of the equity interest
of two registered national securities exchanges and self-regulatory
organizations--the Exchange and EDGX Exchange, Inc. (``EDGX'') (each of
the Exchange, ISE and EDGX, a ``DB Exchange'' and a ``DB U.S. Regulated
Subsidiary'' and together, the ``DB Exchanges'' and the ``DB U.S.
Regulated Subsidiaries''). ISE and EDGX will be separately filing a
proposed rule change in connection with the Combination that will be
the substantially the same as the Proposed Rule Change.
If the Combination is completed, the businesses of NYSE Euronext
and Deutsche B[ouml]rse, including the NYSE U.S. Regulated Subsidiaries
and the DB U.S. Regulated Subsidiaries (together, the ``U.S. Regulated
Subsidiaries'' and each, a ``U.S. Regulated Subsidiary''), will be held
under a single, publicly traded holding company organized under the
laws of the Netherlands (``Holdco'').\3\ The Proposed Rule Change, if
approved by the Commission, will not be operative until the
consummation of the Combination.
---------------------------------------------------------------------------
\3\ Holdco is currently named ``Alpha Beta Netherlands Holding
N.V.,'' but it is expected that Holdco will be renamed prior to the
completion of the Combination to a name agreed between NYSE Euronext
and Deutsche B[ouml]rse.
---------------------------------------------------------------------------
B. Summary of Proposed Rule Change
The Exchange is proposing that, pursuant to the Combination, its
indirect parent, Deutsche B[ouml]rse, will become a wholly owned
subsidiary of Holdco. In addition, the Exchange is proposing that, in
connection with the Combination, the Commission approve certain
amendments to the organizational and other governance documents of
Holdco and ISE Holdings. The Proposed Rule Change is summarized as
follows:
Proposed Approval of Waiver of Ownership and Voting
Restrictions of ISE Holdings. The Amended and Restated Certificate of
Incorporation of ISE Holdings (the ``ISE Holdings Certificate'')
currently restricts any person, either alone or together with its
related persons, from having voting control over more than 20% of the
outstanding capital stock of ISE Holdings and from owning of record or
beneficially more than 40% of the outstanding capital stock of ISE
Holdings (or in the case of any Exchange member, acting alone or
together with its related persons, from owning of record or
beneficially more than 20% of the outstanding capital stock of ISE
Holdings). If a person were to obtain a voting or ownership interest in
excess of the voting or ownership restrictions without obtaining the
approval of the Commission, the shares of ISE Holdings would
automatically transfer to a statutory trust established under and
pursuant to the provisions of the Delaware Statutory Trust Act, 12 Del.
C. Sec. Sec. 3801 et seq. (``ISE Trust''). The ISE Holdings
Certificate and the Amended and Restated Bylaws of ISE Holdings (the
``ISE Holdings Bylaws'') provide that the board of directors of ISE
Holdings may waive these voting and ownership restrictions in an
amendment to the ISE Holdings Bylaws if it makes certain findings and
the amendment to the ISE Holdings Bylaws has been filed with, and
approved by, the Commission under Section 19(b) of the Exchange Act.
Acting pursuant to this waiver provision, the board of directors of ISE
Holdings has approved the amendment to the ISE Holdings Bylaws set
forth in Exhibit 5A (the ``ISE Holdings Bylaws Amendment'') in order to
permit Holdco to indirectly own 50% of the outstanding common stock of
ISE Holdings as of and after the Combination. The Exchange is
requesting approval by the Commission of the ISE Holdings Bylaws
Amendment in order to allow the Combination to take place.
Under the Proposed Rule Change, Holdco would take appropriate steps
to incorporate voting and ownership restrictions, requirements relating
to submission to jurisdiction, access to books and records and other
requirements related to its control of the U.S. Regulated Subsidiaries.
Specifically, the Articles of Association of Holdco in effect as of the
completion of the Combination (the ``Holdco Articles'') would contain
provisions \4\ to incorporate these concepts with respect to itself, as
well as its directors, officers, employees and agents (as applicable):
---------------------------------------------------------------------------
\4\ The text of the proposed Holdco Articles is attached to the
Proposed Rule Change as Exhibit 5B.
---------------------------------------------------------------------------
[[Page 65265]]
Voting and Ownership Restrictions in the Holdco Articles.
The Holdco Articles would contain voting and ownership restrictions
that will restrict any person, either alone or together with its
related persons, from having voting control over Holdco shares
entitling the holder thereof to cast more than 20% of the then
outstanding votes entitled to be cast on a matter or beneficially
owning Holdco shares representing more than 40% of the outstanding
votes entitled to be cast on a matter (except that a 20% ownership
restriction would apply to any person who is a Member of NYSE \5\ (a
``NYSE Member''), a Member \6\ of NYSE Amex (including any person who
is a related person of such member, an ``Amex Member''), an ETP Holder
of NYSE Arca Equities \7\ (an ``ETP Holder'') an OTP Holder or OTP Firm
of NYSE Arca \8\ (an ``OTP Holder'' and ``OTP Firm,'' respectively), a
Member (as such term is defined in Section 3(a)(3)(A) of the Exchange
Act) of ISE (an ``ISE Member''), or a member of EDGA or EDGX (as such
terms are defined in the rules of EDGA and EDGX, respectively, an
``EDGA Member'' and ``EDGX Member,'' respectively)). The Holdco
Articles would provide that Holdco will be required to disregard any
votes purported to be cast in excess of the voting restriction. In the
event that any such person(s) exceeds the ownership restriction, it
will be required to offer for sale and transfer the number of Holdco
shares required to comply with the ownership restriction, and the
rights to vote, attend general meetings of Holdco shareholders and
receive dividends or other distributions attached to shares held in
excess of the 40% threshold (or 20% threshold, if applicable) will be
suspended for so long as such threshold is exceeded. If such person(s)
fails to comply with the transfer obligation within two weeks, then the
Holdco Articles would provide that Holdco will be irrevocably
authorized to take actions on behalf of such person(s) in order to
cause it to comply with such obligations. The Holdco board of directors
may waive the voting and ownership restrictions if it makes certain
determinations (which will be subject to the same requirements which
are currently required to be made by the board of directors of NYSE
Euronext and ISE Holdings in order to waive the voting and ownership
restrictions in the current NYSE Euronext Certificate and the ISE
Holdings Certificate, as applicable) and resolves to expressly permit
the voting and ownership that is subject to such restrictions, and such
resolutions have been filed with, and approved by, the Commission under
Section 19(b) of the Exchange Act and filed with, and approved by, the
relevant European Regulators \9\ having appropriate jurisdiction and
authority.
---------------------------------------------------------------------------
\5\ See Form of Deed of Amendment to Holdco Articles of
Association, Article 34.3(c).
\6\ See id.
\7\ See id.
\8\ See id.
\9\ See Form of Deed of Amendment to Holdco Articles of
Association, Article 1.1.
---------------------------------------------------------------------------
Jurisdiction. The Holdco Articles will provide that Holdco
and its directors, and to the extent they are involved in the
activities of the U.S. Regulated Subsidiaries, (x) Holdco's officers,
and (y) those of its employees whose principal place of business and
residence is outside the United States, will be deemed to irrevocably
submit to the jurisdiction of the U.S. Federal courts and the
Commission for the purposes of any suit, action or proceeding pursuant
to the U.S. Federal securities laws and the rules or regulations
thereunder, arising out of, or relating to, the activities of the U.S.
Regulated Subsidiaries. In addition, the Holdco Articles would provide
that so long as Holdco directly or indirectly controls any U.S.
Regulated Subsidiary, the directors, officers and employees will be
deemed to be directors, officers and employees of such U.S. Regulated
Subsidiaries for purposes of, and subject to oversight pursuant to, the
Exchange Act. The Holdco Articles would provide that Holdco will take
reasonable steps necessary to cause its officers, directors and
employees, prior to accepting a position as an officer, director or
employee, as applicable, to agree and consent in writing to the
applicability to them of these jurisdictional and oversight provisions
with respect to their activities related to any U.S. Regulated
Subsidiary. Furthermore, the Holdco Articles would provide that no
person may be a director of Holdco unless he or she has agreed and
consented in writing to the applicability to him or her of these
jurisdictional and oversight provisions with respect to his or her
activities related to any U.S. Regulated Subsidiary. Holdco would sign
an irrevocable agreement and consent for the benefit of each U.S.
Regulated Subsidiary \10\ that it will comply with these provisions of
the Holdco Articles.
---------------------------------------------------------------------------
\10\ The form of Holdco's agreement and consent is attached as
Exhibit 5C to this Proposed Rule Change.
---------------------------------------------------------------------------
Books and Records. The Holdco Articles would provide that
for so long as Holdco directly or indirectly controls any U.S.
Regulated Subsidiary, the books, records and premises of Holdco will be
deemed to be the books, records and premises of such U.S. Regulated
Subsidiaries for purposes of, and subject to oversight pursuant to, the
Exchange Act, and that Holdco's books and records will at all times be
made available for inspection and copying by the Commission, and by any
U.S. Regulated Subsidiary to the extent they are related to the
activities of such U.S. Regulated Subsidiary or any other U.S.
Regulated Subsidiary over which such U.S. Regulated Subsidiary has
regulatory authority or oversight. In addition, Holdco's books and
records related to the U.S. Regulated Subsidiaries will be maintained
within the United States, except that to the extent that books and
records may relate to both European subsidiaries and U.S. Regulated
Subsidiaries, Holdco may maintain such books and records either in the
home jurisdiction of one or more European subsidiaries or in the United
States.
Amendments to Holdco Articles. The Holdco Articles would
provide that before any amendment to the Holdco Articles may be
effectuated by execution of a notarial deed of amendment, such
amendment would need to be submitted to the board of directors of each
U.S. Regulated Subsidiary and, if so determined by any such board,
would need to be filed with, or filed with and approved by, the
Commission before such amendment may become effective.
Additional Matters. The Holdco Articles would include
provisions regarding cooperation with the Commission and the U.S.
Regulated Subsidiaries, compliance with U.S. federal securities laws,
confidentiality of information regarding the U.S. Regulated
Subsidiaries' self-regulatory function, preservation of the
independence of the U.S. Regulated Subsidiaries' self-regulatory
function, and directors' consideration of the effect of Holdco's
actions on the U.S. Regulated Subsidiaries' ability to carry out their
respective responsibilities under the Exchange Act. In addition, the
Holdco Articles would provide that Holdco will take reasonable steps
necessary to cause its officers, directors and employees, prior to
accepting a position as an officer, director or employee, as
applicable, of Holdco to agree and consent in writing to the
applicability to them of these provisions of the Holdco Articles with
respect to their activities related to any U.S. Regulated Subsidiary.
The Holdco Articles would also provide that no person may be a director
of Holdco unless he or she has agreed and consented in writing to the
applicability to him or her of these provisions with
[[Page 65266]]
respect to his or her activities related to any U.S. Regulated
Subsidiary. Holdco will sign an irrevocable agreement and consent for
the benefit of each U.S. Regulated Subsidiary \11\ that it will comply
with these provisions of the Holdco Articles.\12\
---------------------------------------------------------------------------
\11\ The form of Holdco's agreement and consent is attached as
Exhibit 5C to this Proposed Rule Change.
\12\ The Holdco Articles will also set forth certain
restrictions and requirements relating to Holdco's European
subsidiaries and applicable European regulatory matters, which will
be substantially consistent with the analogous restrictions and
requirements applicable with respect to Holdco's U.S. Regulated
Subsidiaries and U.S. regulatory matters.
---------------------------------------------------------------------------
In addition, Holdco would adopt a Director Independence Policy in
the form attached hereto as Exhibit 5D (the ``Holdco Independence
Policy''), which would be substantially similar to the current
Independence Policy of the NYSE Euronext board of directors. The
Proposed Rule Change filed by the NYSE in connection with the
combination describes the Holdco Independence Policy as it relates to
the current Independence Policy of the NYSE Euronext board of
directors.\13\
---------------------------------------------------------------------------
\13\ See File No. SR-NYSE-2011-51.
---------------------------------------------------------------------------
The text of the Proposed Rule Change is available at the Exchange,
the Commission's Public Reference Room, and on the Web site of the
Exchange (https://www.directedge.com). The text of Exhibits 5A through
5D of the Proposed Rule Change are also available on the Exchange's Web
site and on the Commission's Web site (https://www.sec.gov/rules/sro.shtml).
Other than as described herein and set forth in the attached
Exhibits 5A through 5D, the Exchange will continue to conduct its
regulated activities in the manner currently conducted and will not
make any changes to its regulated activities in connection with the
Combination. If the Exchange determines to make any such changes, it
will seek approval of the Commission.
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 Exchange has included
statements concerning the purpose of, and basis for, the Proposed Rule
Change. The text of these 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 aspects of
such statements.
A. Purpose [sic]
The purpose of this rule filing is to adopt the rules necessary to
permit Deutsche B[ouml]rse to effect the Combination and to amend
certain provisions of the organizational and other governance documents
of Holdco.
1. Overview of the Combination
The Exchange is submitting this Proposed Rule Change to the
Commission in connection with the Combination of NYSE Euronext and
Deutsche B[ouml]rse. The Combination will create a holding company,
Holdco, which will hold the businesses of NYSE Euronext and Deutsche
B[ouml]rse. Following the Combination, each of NYSE Euronext and
Deutsche B[ouml]rse will be a separate subsidiary of Holdco. Holdco
expects the Combination will create a group that will be both a world
leader in derivatives and risk management and the premier global venue
for capital raising, with a truly global franchise and presence in many
of the world's financial centers including New York, London, Frankfurt,
Paris and Luxembourg. This global presence should facilitate providing
world-class services to global and local customers worldwide.
Other than as described herein, Holdco and the Exchange will not
make any changes to the regulated activities of the DB Exchanges in
connection with the Combination, and, other than as described in the
separate proposed rule changes filed by each of the NYSE Exchanges in
connection with the Combination, Holdco and the NYSE Exchanges will not
make any changes to the regulated activities of the NYSE U.S. Regulated
Subsidiaries in connection with the Combination. If Holdco determines
to make any such changes to the regulated activities of any U.S.
Regulated Subsidiary, it will seek the approval of the Commission. The
Proposed Rule Change, if approved by the Commission, will not be
operative until the consummation of the Combination.
The Combination will occur pursuant to the terms of the Business
Combination Agreement, dated as of February 15, 2011, as amended by
Amendment No. 1 dated as of May 2, 2011 and by Amendment No. 2 dated as
of June 16, 2011 (as it may be further amended from time to time, the
``Combination Agreement''), by and among NYSE Euronext, Deutsche
B[ouml]rse, Holdco and Pomme Merger Corporation, a Delaware corporation
and newly formed wholly owned subsidiary of Holdco (``Merger Sub'').
Subject to the terms and conditions set forth in the Combination
Agreement and in compliance with applicable law, Holdco has conducted a
public exchange offer (the ``Exchange Offer''), in which shareholders
of Deutsche B[ouml]rse have been afforded the opportunity to tender
each share of Deutsche B[ouml]rse for one ordinary share of Holdco
(each, a ``Holdco Share'').
Immediately after the time that Holdco accepts for exchange, and
exchanges, the Deutsche B[ouml]rse shares that are validly tendered and
not withdrawn in the Exchange Offer, Merger Sub will merge with and
into NYSE Euronext, as a result of which NYSE Euronext will become a
wholly owned subsidiary of Holdco (the ``Merger''). In the Merger, each
outstanding share of NYSE Euronext common stock will be converted into
the right to receive 0.47 of a fully paid and non-assessable Holdco
Share. NYSE Euronext's obligation to complete the Merger is subject to
the completion of the Exchange Offer and the acquisition by Holdco of
all of the Deutsche B[ouml]rse shares validly tendered and not
withdrawn in the Exchange Offer. The completion of the Exchange Offer
(and, therefore, the completion of the Merger) is subject to the
satisfaction of a number of conditions, including that Deutsche
B[ouml]rse shares representing at least 75% of the Deutsche B[ouml]rse
shares outstanding, on a fully diluted basis, must be validly tendered
and not withdrawn in the Exchange Offer, and that holders of a majority
of the outstanding shares of NYSE Euronext shall have adopted the
Combination Agreement. Both of these conditions have been satisfied.
Following the completion of the Exchange Offer, and depending on
the percentage of Deutsche B[ouml]rse shares acquired by Holdco in the
Exchange Offer, Deutsche B[ouml]rse and Holdco intend to complete a
post-completion reorganization pursuant to which Holdco will enter into
a domination agreement or a combination of a domination agreement and a
profit and loss transfer agreement, pursuant to which the remaining
shareholders of Deutsche B[ouml]rse will have limited rights, including
a limited ability to participate in the profits of Deutsche B[ouml]rse.
Holdco expects the Combination will create a group that will be
both a world leader in derivatives and risk management and the premier
global venue for capital raising, with a truly global franchise and
presence in many of the world's financial centers including New York,
London, Frankfurt, Paris and Luxembourg. This global presence should
facilitate providing world-class services to global and local
[[Page 65267]]
customers worldwide. Following the Combination, Holdco and its
subsidiaries (together, the ``Holdco Group'') expect to serve as a
benchmark regulatory model, facilitating transparency and harmonization
of capital markets globally, while continuing to operate all national
exchanges under local regulatory frameworks and their respective brand
names.
2. Overview of the Holdco Group Following the Combination
Following the Combination, Holdco will be a for-profit, publicly
traded corporation formed under the laws of The Netherlands and will
act as the holding company for the businesses of NYSE Euronext and
Deutsche B[ouml]rse. Holdco will hold all of the equity interests in
NYSE Euronext, which holds (1) 100% of the equity interest of NYSE
Group (which, in turn, directly or indirectly holds 100% of the equity
interests of the NYSE U.S. Regulated Subsidiaries) and (2) 100% of the
equity interest of Euronext N.V. (which, in turn, directly or
indirectly holds 100% of the equity interests of trading markets in
Belgium, France, the Netherlands, Portugal and the United Kingdom).
Holdco will also hold a majority of the equity interests in Deutsche
B[ouml]rse, which indirectly holds 50% of the equity interest of ISE
Holdings (which, in turn, holds (1) 100% of the equity interest of ISE
and (2) 31.54% of the equity interest of Direct Edge Holdings). Direct
Edge Holdings indirectly holds 100% of the equity interest of the
Exchange and EDGX. Holdco intends to list its ordinary shares on the
New York Stock Exchange, the Frankfurt Stock Exchange and Euronext
Paris. The Holdco Group will have dual headquarters in Frankfurt and
New York.
After the Combination, NYSE Group will continue to be directly
wholly owned by NYSE Euronext and will continue to directly or
indirectly own the three NYSE Exchanges--NYSE, NYSE Arca and NYSE
Amex--which provide marketplaces where investors buy and sell listed
companies' common stock and other securities as well as equity options
and securities traded on the basis of unlisted trading privileges. NYSE
Regulation, Inc., an indirect not-for-profit subsidiary of NYSE Group,
oversees FINRA's performance of certain market surveillance and
enforcement functions for NYSE Euronext's U.S. securities exchanges,
enforces listed company compliance with applicable standards, and
oversees regulatory policy determinations, rule interpretation and
regulation related rule development.
In Europe, NYSE Euronext, Deutsche B[ouml]rse and their respective
subsidiaries own several European exchanges, including trading
operations on regulated and non-regulated markets for cash products in
Germany, France, Belgium, The Netherlands, and Portugal and derivatives
in the United Kingdom and in the five above-mentioned locations. As a
result, the activities of the NYSE Euronext and Deutsche B[ouml]rse
European markets are or may be subject to the jurisdiction and
authority of a number of European regulators, including the German
Federal Financial Supervisory Authority (Bundesanstalt f[uuml]r
Finanzdienstleistungsaufsicht), the Hessian Exchange Supervisory
Authority, the Dutch Minister of Finance, the French Minister of the
Economy, the French Financial Market Authority (Autorit[eacute] des
March[eacute]s Financiers), the French Prudential Supervisory Authority
(Autorit[eacute] de Contr[ocirc]le Prudentiel), the Netherlands
Authority for the Financial Markets (Autoriteit Financi[euml]le
Markten), the Belgian Financial Services and Markets Authority
(Autorit[eacute] des Services et March[eacute]s Financiers), the
Portuguese Securities Market Commission (Comiss[atilde]o do Mercado de
Valores Mobili[aacute]rios--CMVM) and the U.K. Financial Services
Authority (FSA).
Other than certain modifications described herein, the current
corporate structure, governance and self-regulatory independence and
separation of the Exchange will be preserved. Specifically, after the
Combination, Direct Edge Holdings' businesses and assets will continue
to be structured as follows:
The Exchange will remain an indirect wholly owned
subsidiary of Direct Edge Holdings, with ISE Holdings and Deutsche
B[ouml]rse holding equity interests of 31.54% and 15.77%, respectively.
The Combination will have no effect on the ability of any
party to trade securities on the Exchange, ISE or EDGX.
Similarly, Deutsche B[ouml]rse and its subsidiaries, and NYSE
Euronext and its subsidiaries, will continue to conduct their regulated
activities in the same manner as they are currently conducted, with any
changes subject to the relevant approvals of their respective European
regulators and, in the case of the U.S. Regulated Subsidiaries, with
any changes subject to the approval of the Commission.
Holdco acknowledges that to the extent it becomes aware of possible
violations of the rules of the Exchange, it will be responsible for
referring such possible violations to the Exchange.
3. Proposed Approval of Waiver of Voting and Ownership Restrictions of
ISE Holdings
Article FOURTH, Section III of the current ISE Holdings Certificate
provides that (1) No person, either alone or together with its
``related persons'' (as defined in the ISE Holdings Certificate), may
be entitled to vote or cause the voting of shares of ISE Holdings at
any time, directly, indirectly or pursuant to any voting trust,
agreement, plan or other arrangement, to the extent that such shares
represent more than 20% of the voting power of the then outstanding
votes entitled to be cast on such matter; and (2) no person, either
alone or together with its related persons, at any time, directly,
indirectly or pursuant to any voting trust, may enter into any
agreement, plan or other arrangement with any other person, either
alone or together with its related persons, under circumstances which
would result in the voting shares that shall be subject to such
agreement, plan or other arrangement not being voted on any matter or
matters or the withholding of any proxy relating thereto, where the
effect of such agreement, plan or arrangement would be to enable any
person, either alone or together with its related persons, to possess
more than 20% of the voting power of the then outstanding votes
entitled to be cast on any such matter (the ``ISE Holdings Voting
Restriction'').\14\ If any person, either alone or together with its
related persons, acquires voting power in excess of the ISE Holdings
Voting Restriction, the ISE Holdings board of directors must notify the
ISE Trust and such ISE Holdings Voting Restriction shall result in the
automatic transfer to the ISE Trust of a majority of the voting shares
then outstanding pro rata from the holders thereof.
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\14\ See Amended and Restated Certificate of Incorporation of
ISE Holdings, Article FOURTH, Section III.
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In addition, the ISE Holdings Certificate provides that no person,
either alone or together with its related persons, may at any time of
record or beneficially own, directly or indirectly, shares of ISE
Holdings representing more than 40% of the then outstanding votes
entitled to be cast on any matter and no person who is a member of the
Exchange, either alone or together with its related person, may at any
time of record or beneficially own, directly or indirectly, shares of
ISE Holdings representing in the more than 20% of the then outstanding
votes entitled to be
[[Page 65268]]
cast on any matter (the ``ISE Holdings Ownership Restriction'').\15\ If
any person, either alone or together with its related persons, owns
shares of ISE Holdings in excess of the ISE Holdings Ownership
Restriction, then the ISE Holdings board of directors must notify the
ISE Trust and such ISE Holdings Ownership Restriction shall result in
the automatic transfer to the ISE Trust of a majority of the voting
shares then outstanding pro rata from the holders thereof.\16\
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\15\ See Amended and Restated Certificate of Incorporation of
ISE Holdings, Article FOURTH, Section III.
\16\ See Amended and Restated Certificate of Incorporation of
ISE Holdings, Article FOURTH, Section III.
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The ISE Holdings board of directors may waive the ISE Holdings
Voting Restriction and the ISE Holdings Ownership Restriction pursuant
to an amendment to the ISE Holdings Bylaws adopted by the ISE Holdings
board of directors, if in connection with the adoption of such
amendment, the board of directors in its sole discretion adopts a
resolution stating that it is the determination of the board of
directors that such amendment:
Will not impair the ability of ISE Holdings and any of the
DB U.S. Regulated Subsidiaries, or facility thereof, to carry out their
respective responsibilities under the Exchange Act and the rules and
regulations thereunder;
Is otherwise in the best interest of ISE Holdings, its
stockholders and the DB U.S. Regulated Subsidiaries;
Will not impair the Commission's ability to enforce the
Exchange Act;
For so long as ISE Holdings directly or indirectly
controls the Exchange, neither such person nor any of its related
persons is an ISE Member, EDGA Member or EDGX Member; and
Neither such person nor any of its related persons is
subject to any ``statutory disqualification'' (as such term is defined
in Section 3(a)(39) of the Exchange Act).\17\
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\17\ See Amended and Restated Certificate of Incorporation of
ISE Holdings, Article FOURTH, Section III, and Amended and Restated
Bylaws of ISE Holdings, Article XI.
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Such amendment shall not be effective unless it has been filed with
and approved by the Commission under Section 19(b) of the Exchange Act
\18\ and has become effective thereunder.
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\18\ 15 U.S.C. 78s(b).
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In order to allow Holdco to indirectly own 50% of the outstanding
common stock of ISE Holdings upon consummation of the Combination,
Holdco has delivered written notice to the board of directors of ISE
Holdings pursuant to the procedures set forth in the ISE Holdings
Certificate requesting approval of its voting and ownership of ISE
Holdings shares in excess of the ISE Holdings Voting Restriction and
the ISE Holdings Ownership Restriction. Among other things, in this
notice, Holdco represented to the board of directors of ISE Holdings
that neither it, nor any of its related persons, is (1) An ISE Member;
(2) EDGA Member; (3) EDGX Member; or (4) subject to any ``statutory
disqualification.''
At a meeting duly convened on September 16, 2011, the board of
directors of ISE Holdings adopted the ISE Holdings Bylaws Amendment to
permit Holdco, either alone or together with its related persons, to
exceed the ISE Holdings Ownership Restriction and the ISE Holdings
Voting Restriction. In adopting such amendment, the board of directors
of ISE Holdings made the necessary determinations set forth above and
approved the submission of this Proposed Rule Change to the Commission.
The Exchange will continue to operate and regulate its market and
members exactly as it has done prior to the Combination. Except as set
forth in this Proposed Rule Change, the Exchange is not proposing any
amendments to its trading or regulatory rules.
With respect to the ability of the Commission to enforce the
Exchange Act as it applies to the Exchange after the Combination, the
Exchange will operate in the same manner following the Combination as
it operates today.\19\ Thus, the Commission will continue to have
plenary regulatory authority over the Exchange, as is the case
currently with the Exchange. As described in the following sections of
this filing, the Exchange is proposing certain provisions of the Holdco
Articles that will create an ownership structure that will provide the
Commission with appropriate oversight tools to ensure that the
Commission will have the ability to enforce the Exchange Act with
respect to each U.S. Regulated Subsidiary, its direct and indirect
parent entities and its directors, officers, employees and agents to
the extent they are involved in the activities of such U.S. Regulated
Subsidiary. The ISE Holdings board of directors also determined that
ownership of ISE Holdings by Holdco is in the best interests of ISE
Holdings, its shareholders and the DB U.S. Regulated Subsidiaries.
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\19\ The Exchange has been informed by NYSE Euronext, EDGA [sic]
and EDGX that the NYSE U.S. Regulated Subsidiaries, EDGA [sic] and
EDGX, respectively, are also expected to operate in the same manner
following the Combination as they operate today. This is addressed
in the separate proposed rule change filed by each of the NYSE
Exchanges, EDGA [sic] and EDGX.
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In addition, neither Holdco, nor any of its related persons, is (1)
An ISE Member; (2) an EDGA Member; (3) an EDGX Member; or (4) subject
to any ``statutory disqualification.''
An extract with the relevant provisions of the ISE Holdings Bylaws
Amendment is attached as Exhibit 5A to the Proposed Rule Change and can
be found on the Exchange's Web site and the Commission's Web site.
The Exchange hereby requests that the Commission approve the ISE
Holdings Bylaws Amendment and allow Holdco, either alone or with its
related persons, to indirectly own 50% of the outstanding common stock
of ISE Holdings upon and following the consummation of the Combination.
4. Proposed Amendments to Ownership and Voting Restrictions After the
Combination
Overview
The Exchange is proposing that, effective as of the completion of
the Combination, the Holdco Articles would contain voting and ownership
restrictions that restrict any person, either alone or together with
its related persons, from having voting control over Holdco shares
entitling the holder thereof to cast more than 20% of the votes
entitled to be cast on any matter or beneficially owning Holdco shares
representing more than 40% of the outstanding votes that may be cast on
any matter (except that a 20% ownership restriction would apply to any
person who is a NYSE Member, an Amex Member, an ETP Holder, an OTP
Holder, an OTP Firm, an ISE Member, an EDGA Member or an EDGX Member).
In addition, the Exchange is proposing that, effective as of the
Combination, the voting and ownership restrictions currently in the
Amended and Restated Limited Liability Company Operating Agreement of
Direct Edge Holdings (``Direct Edge Holdings Operating Agreement'')
would remain in effect.\20\
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\20\ The current voting and ownership restrictions contained in
the Direct Edge Holdings Operating Agreement and the ISE Holdings
Certificate, as well as the related provisions contained in the
amended and restated bylaws of U.S. Exchange Holdings and the board
resolutions of Deutsche B[ouml]rse, Eurex Frankfurt AG and other
indirect parent entities of the Exchange, would remain in effect.
The ISE Trust would also remain unaltered and would continue to have
rights to enforce these restrictions.
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Voting and Ownership Restrictions in Holdco Articles
Under the Proposed Rule Change, the Holdco Articles would provide
that no
[[Page 65269]]
person, either alone or together with its related persons, will be
entitled to vote or cause the voting of a number of shares of Holdco,
in person or by proxy or through any voting agreement or other
arrangement, which represent in the aggregate (1) More than 20% of the
then outstanding votes entitled to be cast on such matter; or (2) more
than 20% of the then outstanding votes entitled to be cast on any such
matter by virtue of agreements or arrangements entered into with other
persons to refrain from voting shares of Holdco (the ``Holdco Voting
Restriction'').\21\ The Holdco Articles would provide that Holdco will
be required to disregard any votes purported to be cast in excess of
the Holdco Voting Restriction.
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\21\ See Form of Deed of Amendment to Holdco Articles of
Association, Article 34.1.
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In addition, the Holdco Articles would provide that any person who,
either alone or together with its related persons, beneficially owns
Holdco shares which represent in the aggregate more than 40% of the
outstanding votes entitled to be cast on any matter (except that a 20%
restriction would apply to any person who is a NYSE Member, an Amex
Member, an ETP Holder, an OTP Holder, an OTP Firm, an ISE Member, an
EDGA Member or an EDGX Member) (the ``Holdco Ownership Restriction''),
will be obligated to offer for sale and to transfer a number of Holdco
shares necessary so that such person, together with its related
persons, beneficially owns a number of Holdco shares that complies with
the Holdco Ownership Restriction (the ``Holdco Transfer
Obligation'').\22\ If such person(s) fails to comply with the Holdco
Transfer Obligation within two weeks, Holdco will be irrevocably
authorized to act on behalf of such person(s) in order to ensure
compliance with the Holdco Transfer Obligation.\23\
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\22\ See Form of Deed of Amendment to Holdco Articles of
Association, Articles 35.1 and 35.4.
\23\ See Form of Deed of Amendment to Holdco Articles of
Association, Article 35.7.
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Furthermore, the Holdco Articles would provide that in the event
any person, either alone or together with its related persons, exceeds
the Holdco Ownership Restriction (any such person(s), a ``Non-Compliant
Owner''), the Non-Compliant Owner would cease to have certain rights to
the extent that its shareholding exceeds the Holdco Ownership
Restriction. Specifically, the Non-Compliant Owner's rights to vote, to
attend general meetings of Holdco shareholders and to receive dividends
or other distributions attached to such shares in excess of the Holdco
Ownership Restriction would be suspended for so long as the Holdco
Ownership Restriction is exceeded.\24\
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\24\ See Form of Deed of Amendment to Holdco Articles of
Association, Article 35.6.
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Pursuant to Section 2:87a of the Dutch Civil Code, the Non-
Compliant Owner may request that an independent expert be appointed to
determine the value of the Holdco shares, but such expert will have
discretion to determine that the value of the shares is equal to the
price received for the shares by the Non-Compliant Owner on any stock
exchange where the Holdco shares are listed.\25\
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\25\ See Form of Deed of Amendment to Holdco Articles of
Association, Article 35.5.
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The voting and ownership restrictions will apply to each person
unless it (1) Delivers to the Holdco board of directors a written
notice of its intention to acquire voting power or ownership in excess
of the relevant limitation, and such notice is delivered at least 45
days (or such shorter period as the Holdco board or directors expressly
consents to) prior to acquiring Holdco shares in excess of the Holdco
Voting Restriction or Holdco Ownership Restriction, and (2) obtains a
written confirmation from the Holdco board of directors that the board
has expressly resolved to permit such voting or ownership, and (3) such
resolution has been filed with, and approved by, the Commission under
Section 19(b) of the Exchange Act and filed with, and approved by, the
relevant European regulators having appropriate jurisdiction and
authority.\26\ The Holdco board of directors may waive the Holdco
Voting Restriction and Holdco Ownership Restriction if it makes certain
determinations, which will be consistent with the determinations
currently required to be made by the board of directors of NYSE
Euronext and ISE Holdings in order to waive the voting and ownership
restrictions in the NYSE Euronext Certificate and the ISE Holdings
Certificate, respectively.\27\
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\26\ See Form of Deed of Amendment to Holdco Articles of
Association, Articles 34.2 and 35.2.
\27\ See Form of Deed of Amendment to Holdco Articles of
Association, Articles 34.3 and 35.3.
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5. Additional Matters To Be Addressed in the Holdco Articles \28\
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\28\ The Holdco Articles will set forth certain restrictions and
requirements relating to Holdco's European subsidiaries and
applicable European regulatory matters, which will be substantially
consistent with the analogous restrictions and requirements
applicable with respect to Holdco's U.S. Regulated Subsidiaries and
U.S. regulatory matters.
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Jurisdiction Over Individuals
Under the Proposed Rule Change, the Holdco Articles would provide
that Holdco and its directors, and to the extent that they are involved
in the activities of the U.S. Regulated Subsidiaries, (x) Holdco's
officers, and (y) those of its employees whose principal place of
business and residence is outside the United States, would be deemed to
irrevocably submit to the jurisdiction of the U.S. federal courts and
the Commission for the purposes of any suit, action or proceeding
pursuant to the U.S. federal securities laws, and the rules and
regulations thereunder, commenced or initiated by the Commission
arising out of, or relating to, the activities of the U.S. Regulated
Subsidiaries.\29\ The Holdco Articles would also provide that, with
respect to any such suit, action, or proceeding brought by the
Commission, Holdco and its directors, officers and employees would (1)
Be deemed to agree that NYSE Group may serve as U.S. agent for purposes
of service of process in such suit, action, or proceeding relating to
NYSE Group or any of its subsidiaries, and ISE Holdings may serve as
the U.S. agent for proceedings relating to ISE Holdings or any of its
subsidiaries; and (2) be deemed to waive, and agree not to assert by
way of motion, as a defense or otherwise, in any such suit, action, or
proceeding, any claims that it or they are not personally subject to
the jurisdiction of the Commission, that the suit, action, or
proceeding is an inconvenient forum or that the venue of the suit,
action, or proceeding is improper, or that the subject matter thereof
may not be enforced in or by the U.S. federal courts or the
Commission.\30\
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\29\ See Form of Deed of Amendment to Holdco Articles of
Association, Article 3.2(c).
\30\ See id.
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In addition, the Holdco Articles would provide that, so long as
Holdco directly or indirectly controls any U.S. Regulated Subsidiary,
the directors, officers and employees of Holdco will be deemed to be
directors, officers and employees of such U.S. Regulated Subsidiaries
for purposes of, and subject to oversight pursuant to, the Exchange
Act.\31\
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\31\ See Form of Deed of Amendment to Holdco Articles of
Association, Article 3.2(f).
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The Holdco Articles would provide that Holdco will take reasonable
steps necessary to cause its directors, officers and employees, prior
to accepting a position as an officer, director or employee, as
applicable, of Holdco to agree and consent in writing to the
applicability to them of these jurisdictional and oversight provisions
with respect to their activities related to
[[Page 65270]]
any U.S. Regulated Subsidiary.\32\ The Holdco Articles would also
provide that no person may be a director of Holdco unless he or she has
agreed and consented in writing to the applicability to him or her of
these jurisdictional and oversight provisions with respect to his or
her activities related to any U.S. Regulated Subsidiary.\33\
Furthermore, Holdco would sign an irrevocable agreement and consent for
the benefit of each U.S. Regulated Subsidiary \34\ that it will comply
with these provisions in the Holdco Articles.
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\32\ See Form of Deed of Amendment to Holdco Articles of
Association, Article 3.2(m).
\33\ See Form of Deed of Amendment to Holdco Articles of
Association, Article 14.11.
\34\ The form of Holdco's agreement and consent is attached as
Exhibit 5C to this Proposed Rule Change.
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The Exchange anticipates that the functions and activities of each
U.S. Regulated Subsidiary generally will be carried out by the officers
and directors of such U.S. Regulated Subsidiary, each of whom the
Commission has direct authority over pursuant Section 19(h)(4) of the
Exchange Act.\35\
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\35\ 15 U.S.C. 78s(h)(4).
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Access to Books and Records
Under the Proposed Rule Change, the Holdco Articles would provide
that for so long as Holdco directly or indirectly controls any U.S.
Regulated Subsidiary, the books, records and premises of Holdco will be
deemed to be the books, records and premises of such U.S. Regulated
Subsidiaries for purposes of, and subject to oversight pursuant to, the
Exchange Act.\36\ In addition, the Holdco Articles would provide that
Holdco's books and records will at all times be made available for
inspection and copying by the Commission, and any U.S. Regulated
Subsidiary to the extent they are related to the activities of such
U.S. Regulated Subsidiary or any other U.S. Regulated Subsidiary over
which such U.S. Regulated Subsidiary has regulatory authority or
oversight.\37\ In addition, Holdco's books and records related to the
U.S. Regulated Subsidiaries will be maintained within the United
States, except that to the extent that books and records may relate to
both European subsidiaries and U.S. Regulated Subsidiaries, Holdco may
maintain such books and records either in the home jurisdiction of one
or more European subsidiaries or in the United States.\38\
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\36\ See Form of Deed of Amendment to Holdco Articles of
Association, Article 3.2(f).
\37\ See Form of Deed of Amendment to Holdco Articles of
Association, Article 3.2(e).
\38\ See Form of Deed of Amendment to Holdco Articles of
Association, Article 3.2(g).
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Additional Matters
Under the Proposed Rule Change, the Holdco Articles would provide
that Holdco will comply with the U.S. federal securities laws and the
rules and regulations thereunder, and will cooperate with the
Commission and with the U.S. Regulated Subsidiaries pursuant to and to
the extent of their respective regulatory authority.\39\ In addition,
Holdco would be required to take reasonable steps necessary to cause
its agents to cooperate with the Commission and, where applicable, the
U.S. Regulated Subsidiaries pursuant to their regulatory authority.\40\
The Holdco Articles would also provide that, in discharging his or her
responsibilities as a member of the Holdco board of directors or as an
officer or employee of Holdco, each such director, officer or employee
will (a) Comply with the U.S. federal securities laws and the rules and
regulations thereunder; (b) cooperate with the Commission; and (c)
cooperate with the U.S. Regulated Subsidiaries pursuant to and to the
extent of their regulatory authority (but this provision will not
create any duty owed by any director, officer or employee of Holdco to
any person to consider, or afford any particular weight to, any such
matters or to limit his or her consideration to such matters).\41\
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\39\ See Form of Deed of Amendment to Holdco Articles of
Association, Article 3.2(a).
\40\ See id.
\41\ See Form of Deed of Amendment to Holdco Articles of
Association, Article 3.2(l).
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The Holdco Articles would also provide that all confidential
information that comes into the possession of Holdco pertaining to the
self-regulatory function of any U.S. Regulated Subsidiary will (a) Not
be made available to any persons other than to those officers,
directors, employees and agents of Holdco that have a reasonable need
to know the contents thereof; (b) be retained in confidence by Holdco
and the officers, directors, employees and agents of Holdco; and (c)
not be used for any commercial purposes.\42\ In addition, the Holdco
Articles would provide that these obligations regarding such
confidential information will not be interpreted so as to limit or
impede (i) The rights of the Commission or the relevant U.S. Regulated
Subsidiary to have access to and examine such confidential information
pursuant to the U.S. federal securities laws and the rules and
regulations thereunder; or (ii) the ability of any officers, directors,
employees or agents of Holdco to disclose such confidential information
to the Commission or any U.S. Regulated Subsidiary.\43\
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\42\ See Form of Deed of Amendment to Holdco Articles of
Association, Article 3.2(h).
\43\ See id.
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Additionally, the Holdco Articles would provide that, for so long
as Holdco directly or indirectly controls any U.S. Regulated
Subsidiary, Holdco and its directors, officers and employees will give
due regard to the preservation of the independence of the self-
regulatory function of such U.S. Regulated Subsidiary and to its
obligations to investors and the general public, and will not take any
actions that would interfere with the effectuation of any decisions by
the board of directors or managers of such U.S. Regulated Subsidiary
relating to its regulatory responsibilities (including enforcement and
disciplinary matters) or that would interfere with the ability of such
U.S. Regulated Subsidiary to carry out its responsibilities under the
Exchange Act.\44\
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\44\ See Form of Deed of Amendment to Holdco Articles of
Association, Article 3.2(i).
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Finally, the Holdco Articles would provide that each director of
Holdco would, in discharging his or her responsibilities, to the
fullest extent permitted by applicable law, take into consideration the
effect that Holdco's actions would have on the ability of (a) The U.S.
Regulated Subsidiaries to carry out their responsibilities under the
Exchange Act; and (b) the U.S. Regulated Subsidiaries, NYSE Group, ISE
Holdings and Holdco to (1) Engage in conduct that fosters and does not
interfere with the ability of the U.S. Regulated Subsidiaries, NYSE
Group, ISE Holdings and Holdco to prevent fraudulent and manipulative
acts and practices in the securities markets; (2) promote just and
equitable principles of trade in the securities markets; (3) foster
cooperation and coordination with persons engaged in regulating,
clearing, settling, processing information with respect to, and
facilitating transactions in securities; (4) remove impediments to and
perfect the mechanisms of a free and open market in securities and a
U.S. national securities market system; and (5) in general, protect
investors and the public interest.\45\ This requirement would not,
however, create any duty owed by any director, officer or employee of
Holdco to any person to consider, or afford any particular weight to,
any of the foregoing matters or to limit his or her consideration to
such matters.\46\
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\45\ See Form of Deed of Amendment to Holdco Articles of
Association, Article 3.2(k).
\46\ See Form of Deed of Amendment to Holdco Articles of
Association, Article 3.2(k).
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In addition, the Holdco Articles would provide that Holdco will
take
[[Page 65271]]
reasonable steps necessary to cause its officers, directors and
employees, prior to accepting a position as an officer, director or
employee, as applicable, of Holdco to agree and consent in writing to
the applicability to them of these provisions of the Holdco Articles
with respect to their activities related to any U.S. Regulated
Subsidiary.\47\ The Holdco Articles would also provide that no person
may be a director of Holdco unless he or she has agreed and consented
in writing to the applicability to him or her of these provisions with
respect to his or her activities related to any U.S. Regulated
Subsidiary.\48\
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\47\ See Form of Deed of Amendment to Holdco Articles of
Association, Article 3.2(m).
\48\ See Form of Deed of Amendment to Holdco Articles of
Association, Article 14.11.
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Holdco would also sign an irrevocable agreement and consent for the
benefit of each U.S. Regulated Subsidiary that it will comply with
provisions in the Holdco Articles regarding (1) Cooperation with the
Commission and such U.S. Regulated Subsidiaries; (2) compliance with
U.S. federal securities laws; (3) inspection and copying of Holdco's
books, records and premises; (4) Holdco's books, records, premises,
officers, directors and employees being deemed to be those of U.S.
Regulated Subsidiaries; (5) maintenance of books and records in the
United States; (6) confidentiality of information regarding the U.S.
Regulated Subsidiaries' self-regulatory function; (7) preservation of
the independence of the self-regulatory function of the U.S. Regulated
Subsidiaries; and (8) taking reasonable steps to cause Holdco's
officers, directors and employees to consent to the applicability to
them of the Holdco Articles. The form of Holdco's agreement and consent
is attached as Exhibit 5C to this Proposed Rule Change.
Amendments to the Holdco Articles
Under the Proposed Rule Change, the Holdco Articles would provide
that, before any amendment to or repeal of any provision of the Holdco
Articles may become effectuated by means of a notarial deed of
amendment, the same will be submitted to the board of directors of each
U.S. Regulated Subsidiary (or the boards of directors of their
successors) and if any or all of such boards of directors determine
that the same must be filed with, or filed with and approved by, the
Commission before the same may be effective under Section 19 of the
Exchange Act and the rules promulgated thereunder, then the same will
not be effective until filed with, or filed with and approved by, the
Commission, as the case may be. These requirements would also apply to
any action by Holdco that would have the effect of amending or
repealing any provision of the Holdco Articles.
Holdco Director Independence Policy
Under the Proposed Rule Change, Holdco would adopt the Holdco
Independence Policy in the form attached hereto as Exhibit 5D, which
would be substantially similar to the current Independence Policy of
the NYSE Euronext board of directors. The Proposed Rule Change filed by
the NYSE in connection with the Combination describes the Holdco
Independence Policy as it relates to the current Independence Policy of
the NYSE Euronext board of directors.\49\
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\49\ See File No. SR-NYSE-2011-51.
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6. Statutory Basis
The Exchange believes that this filing is consistent with Section
6(b) \50\ of the Exchange Act in general, and furthers the objectives
of Section 6(b)(1) \51\ in particular, in that it enables the Exchange
to be so organized as to have the capacity to be 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 the Exchange. With respect to
the ability of the Commission to enforce the Exchange Act as it applies
to the Exchange after the Combination, the Exchange will operate in the
same manner following the Combination as it operates today. Thus, the
Commission will continue to have plenary regulatory authority over the
Exchange, as is the case currently with the Exchange. The Proposed Rule
Change is consistent with and will facilitate an ownership structure
that will provide the Commission with appropriate oversight tools to
ensure that the Commission will have the ability to enforce the
Exchange Act with respect to each U.S. Regulated Subsidiary, its direct
and indirect parent entities and its directors, officers, employees and
agents to the extent they are involved in the activities of such U.S.
Regulated Subsidiary.
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\50\ 15 U.S.C. 78(f)(b).
\51\ 15 U.S.C. 78(f)(b)(1).
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The Exchange also believes that this filing furthers the objectives
of Section 6(b)(5) \52\ of the Exchange Act because the Proposed Rule
Change summarized herein 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. The Exchange does not expect
that the Combination will impact the current operations of the
Exchange. However, the Exchange believes that by incorporating Holdco's
governance documents as part of the proposed rule filing, investors
will be better apprised of Holdco's proposed indirect ownership
interest in the Exchange.
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\52\ 15 U.S.C. 78(f)(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the Proposed Rule Change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Exchange Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
The Exchange has neither solicited nor received written comments on
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 (i) As the Commission may
designate
