Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing of Proposed Rule Change Amending Independence Policy of the Board of Directors of NYSE Euronext and Creating New Independence Policy for Boards of Directors of the New York Stock Exchange LLC, NYSE MKT LLC, NYSE Regulation, Inc. and NYSE Market, Inc., 36324-36327 [2012-14756]
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36324
Federal Register / Vol. 77, No. 117 / Monday, June 18, 2012 / Notices
will help to ensure that the boards of
directors of NYSE Euronext and the
Regulated Subsidiaries consist of
individuals with independent, objective
perspectives, while at the same time
affording them sufficient flexibility to
include persons with expertise and
qualifications that will contribute
meaningfully to these boards’
performance of their oversight and other
functions. For example, some
responsibilities of these boards call for
in-depth industry knowledge and
expertise on the Board, such as the
requirement that NYSE Euronext
directors take into consideration the
effect that NYSE Euronext’s actions
would have on the ability of its U.S.
regulated subsidiaries to (i) foster
cooperation and coordination with
persons engaging in regulating, clearing,
settling and processing information with
respect to, and facilitating transactions
in securities, and (ii) remove
impediments to and perfect the
mechanisms of a free and open market
in securities and a U.S. national
securities market system. The Exchange
also believes that adopting a separate
director independence policy for the
Regulated Subsidiaries that is more
tailored to their specific requirements—
rather than applying the NYSE Euronext
Director Independence Policy with
various carve-outs and exceptions noted
therein for the Regulated Subsidiaries—
will add clarity to the Exchange’s rules.
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.
mstockstill on DSK4VPTVN1PROD with NOTICES
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 self-regulatory
organization consents, the Commission
will:
A. By order approve or disapprove
such proposed rule change; or
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B. institute proceedings to determine
whether the proposed rule change
should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rulecomments@sec.gov. Please include File
Number SR–NYSE–2012–17 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–NYSE–2012–17. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (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
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–NYSE–
2012–17 and should be submitted on or
before July 9, 2012.
PO 00000
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For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority. 9
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2012–14757 Filed 6–15–12; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–67184; File No. SR–
NYSEMKT–2012–07]
Self-Regulatory Organizations; NYSE
MKT LLC; Notice of Filing of Proposed
Rule Change Amending Independence
Policy of the Board of Directors of
NYSE Euronext and Creating New
Independence Policy for Boards of
Directors of the New York Stock
Exchange LLC, NYSE MKT LLC, NYSE
Regulation, Inc. and NYSE Market, Inc.
June 12, 2012.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that on June 8,
2012, NYSE MKT LLC (‘‘NYSE MKT’’)
filed with the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I and II below, which Items have
been prepared by the NYSE MKT. 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
NYSE MKT proposes to amend the
Independence Policy of the Board of
Directors of NYSE Euronext (the ‘‘NYSE
Euronext Director Independence
Policy’’) and create a new independence
policy (the ‘‘Subsidiary Director
Independence Policy’’) for the boards of
directors of NYSE MKT, New York
Stock Exchange LLC (‘‘the Exchange’’),
NYSE Market, Inc. (‘‘NYSE Market’’)
and NYSE Regulation, Inc. (‘‘NYSE
Regulation’’ and, together, the
‘‘Regulated Subsidiaries’’).3 In addition,
NYSE MKT proposes to amend the
Amended and Restated Bylaws of NYSE
Euronext, the Amended and Restated
Bylaws of NYSE Market, Inc., Third
Amended and Restated Bylaws of NYSE
Regulation, Inc., the Third Amended
and Restated Operating Agreement of
New York Stock Exchange LLC and the
9 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 The Exchange and NYSE Arca, Inc. (‘‘NYSE
Arca’’) are filing substantially the same proposed
rule change.
1 15
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Federal Register / Vol. 77, No. 117 / Monday, June 18, 2012 / Notices
Second Amended and Restated
Operating Agreement of NYSE MKT
LLC (collectively the ‘‘Organizational
Documents’’) to make certain
conforming changes described below.
The text of the proposed rule change is
available on the Exchange’s Web site at
www.nyse.com, at the principal office of
the Exchange, and at the Commission’s
Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission,
NYSE MKT included statements
concerning the purpose of, and basis for,
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of those
statements may be examined at the
places specified in Item IV below. NYSE
MKT has prepared summaries, set forth
in sections A, B and C below, of the
most significant parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The purpose of this rule filing is to
amend the NYSE Euronext Director
Independence Policy, create the
Subsidiary Director Independence
Policy for the boards of directors of the
Regulated Subsidiaries, and make
certain conforming changes to the
Organizational Documents, as set forth
below.
mstockstill on DSK4VPTVN1PROD with NOTICES
NYSE Euronext Director Independence
Policy
Under the Proposed Rule Change, the
NYSE Euronext Director Independence
Policy would be amended to reflect the
following changes (the ‘‘Proposed
Amendments’’):
(i) A majority (as opposed to 75%) of
the board of directors of NYSE Euronext
(the ‘‘Board’’) would be required to be
independent;
(ii) Executive officers of listed
companies would no longer be
prohibited from being considered
independent for purposes of the Board;
(iii) The ‘‘additional independence
requirements’’ at the end of the current
NYSE Euronext Director Independence
Policy—which provide that executive
officers of foreign private issuers,
executive officers of NYSE Euronext and
directors of affiliates of member
organizations must together comprise no
more than a minority of the total
Board—would be eliminated;
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(iv) References to certain European
regulatory authorities would be
updated, because their names have
changed;
(v) References to NYSE Alternext US
LLC and NYSE Amex LLC would refer
instead to NYSE MKT LLC, because of
this entity’s previous name changes; and
(vi) Footnote 2 would be deleted
because the NYSE Euronext Director
Independence Policy would not be
applicable to the Regulated
Subsidiaries, each of which is proposed
to have its own director independence
policy.
The Commission previously
considered and approved these aspects
of the director independence policy in
connection with the previously
proposed combination of NYSE
¨
Euronext and Deutsche Borse AG (the
‘‘Combination’’).4 Under the rule change
approved in connection with the
Combination, Alpha Beta Netherlands
Holding N.V. (‘‘Holdco’’)—which was
the holding company formed in
connection with the Combination that
would have become the parent company
of NYSE Euronext—would have
adopted a director independence policy
that was substantially similar to the
current NYSE Euronext Director
Independence Policy, except for the
Proposed Amendments noted above and
except for certain references to the
independence standards and criteria in
the Dutch Corporate Governance Code
that would be added, given that Holdco
was formed under and subject to the
laws of the Netherlands. Upon
consummation of the Combination, the
NYSE Euronext Director Independence
Policy would have ceased to apply. On
February 2, 2012, following the
European Commission’s decision to
prohibit the Combination, NYSE
¨
Euronext and Deutsche Borse agreed to
terminate the agreement to combine
their businesses.
NYSE MKT explained the reasons for
incorporating the Proposed
Amendments in Holdco’s director
independence policy and believes the
rationale for making these amendments
is substantially applicable with equal
force to the NYSE Euronext Director
Independence Policy.
Summarized below are the principal
reasons for the Proposed Amendments
listed in items (i), (ii) and (iii) above.
NYSE MKT believes that the Proposed
Amendments listed in items (iv), (v) and
(vi) above are self-explanatory and
technical in nature.
4 See Securities Exchange Act Release No. 34–
66171 (January 17, 2012) File Nos. SR–EDGA–
2011–34; SR–EDGX–2011–33; SR–ISE–2011–69;
SR–NYSE–2011–51; SR–NYSEAmex-2011–78; SR–
NYSEArca-2011–72), 77 FR 3297.
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36325
Majority Independence Requirement
NYSE MKT believes that a majority
independence standard is appropriate to
ensure that the Board as a whole
consists of individuals with
independent, objective perspectives,
while at the same time affording NYSE
Euronext sufficient flexibility to include
persons with expertise and
qualifications that will contribute
meaningfully to the Board’s
performance of its oversight function.
The importance of allowing highly
qualified individuals to serve on the
Board is underscored by the fact that
NYSE Euronext serves as the holding
company for a complex, global business
with highly specialized operations and
regulatory functions.
Although NYSE Euronext has unique
responsibilities and functions as the
holding company for several regulated
subsidiaries, it is subject to various
corporate governance and regulatory
obligations that are addressed by means
of ownership and voting limitations on
its shareholders, commitments to
provide access to its books and records
and to submit to the jurisdiction of the
Commission, director qualification
requirements and other undertakings.
NYSE MKT submits that some of
these undertakings call for in-depth
industry knowledge and expertise on
the Board, such as the requirement that
NYSE Euronext directors take into
consideration the effect that NYSE
Euronext’s actions would have on the
ability of its U.S. regulated subsidiaries
to (i) foster cooperation and
coordination with persons engaging in
regulating, clearing, settling and
processing information with respect to,
and facilitating transactions in
securities, and (ii) remove impediments
to and perfect the mechanisms of a free
and open market in securities and a U.S.
national securities market system.
Executives of Listed Companies
NYSE MKT believes that a per se
disqualification of listed company
executives from being deemed
independent should not be applicable to
NYSE Euronext. The per se
disqualification was initially adopted by
the New York Stock Exchange, Inc. in
early 2005 in the context of its unique
circumstances and history and its
management structure and board
composition at that time.5 NYSE MKT
submits that those circumstances are no
longer applicable, and the
disqualification of listed company
executives tends to undermine rather
5 See Securities Exchange Act Release No. 34–
51217 (February 16, 2005) (File No. SR–NYSE–
2004–54), 70 FR 9688.
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36326
Federal Register / Vol. 77, No. 117 / Monday, June 18, 2012 / Notices
mstockstill on DSK4VPTVN1PROD with NOTICES
than facilitate NYSE Euronext’s efforts
to ensure a qualified and balanced board
composition and promote various other
important corporate governance
objectives, such as ensuring appropriate
expertise and experience on the Board,
as well as representation of the interests
of a diverse range of market
constituencies and local European and
U.S. interests. A per se disqualification
narrows the pool of potential NYSE
Euronext director candidates and
arbitrarily eliminates from consideration
a large number of highly qualified,
experienced individuals who have
proven track records as business
leaders. Under the NYSE Euronext
Director Independence Policy, the Board
would still need to assess whether a
listed company executive meets the
various independence criteria,
including whether he or she has any
‘‘material relationship’’ with NYSE
Euronext and its subsidiaries.
Furthermore, NYSE MKT believes
that the objectivity of Board members is
adequately protected by the various
other independence criteria in the NYSE
Euronext Director Independence Policy,
such as the requirement that
independent directors may not be or
have been within the last year, and may
not have an immediate family member
who is or within the last year was, a
member of NYSE MKT, the Exchange or
NYSE Arca. In addition, if and to the
extent that a matter concerning a listed
company whose executive is a NYSE
Euronext director were ever to come
before the Board for consideration, such
director would be required to be recused
from acting on such matter pursuant to
the Board’s conflicts of interest policy.
Additional Independence Requirements
Finally, the NYSE Euronext Director
Independence Policy provides that the
sum of (i) Executive officers of foreign
private issuers, (ii) executive officers of
NYSE Euronext and (iii) directors of
affiliates of ‘‘members’’ (as defined in
Sections 3(a)(A)(3)(ii), 3(a)(A)(3)(iii) and
3(a)(A)(3)(iv) of the Exchange Act 6) of
NYSE MKT, the Exchange or NYSE
Arca, may not constitute more than a
minority of the total number of directors
of NYSE Euronext. The purpose of this
requirement is to ensure that, although
executives of listed companies who are
foreign private issuers are not
disqualified from serving on the Board,
such executives may not, together with
NYSE Euronext executives and directors
of affiliates of members, constitute more
than a minority of the Board. In light of
NYSE MKT’s proposal to eliminate the
disqualification of listed company
6 15
U.S.C. 78c.
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executives from the NYSE Euronext
Director Independence Policy, this
requirement would serve no purpose
because the exception to such
disqualification for foreign private
issuer executives would also be
eliminated. NYSE MKT further notes
that under the proposed NYSE Euronext
Director Independence Policy,
executives of NYSE Euronext and
directors of affiliates of exchange
members would not be deemed
independent and, accordingly, could
not in any event constitute more than a
minority of the Board.
Subsidiary Director Independence
Policy
Currently, the independent directors
of the Regulated Subsidiaries must
satisfy the requirements of the NYSE
Euronext Director Independence Policy.
Under the Proposed Rule Change, each
of the Regulated Subsidiaries would
have its own independence policy in
the form of the Subsidiary Director
Independence Policy attached as Exhibit
5B to the Proposed Rule Change, in lieu
of the NYSE Euronext Director
Independence Policy.
The Commission previously
considered and approved this form of
Subsidiary Director Independence
Policy to be adopted by the Regulated
Subsidiaries in connection with the
previously proposed Combination
(except that the prior form contained
certain references to Holdco that have
been replaced in Exhibit 5B with
references to NYSE Euronext). NYSE
MKT explained the reasons for creating
the Subsidiary Director Independence
Policy to determine the independence of
directors of the Regulated Subsidiaries,
and believes these reasons (as set forth
below) continue to be applicable.
The Subsidiary Director
Independence Policy is substantially
similar to the current NYSE Euronext
Director Independence Policy, except
for the following changes:
(i) References to NYSE Euronext
would refer instead to the relevant
Regulated Subsidiary;
(ii) The requirement that at least
three-fourths of the directors must be
independent would be deleted, since
the organizational documents of the
Regulated Subsidiaries contain the
independence and other qualification
requirements for directors;
(iii) The requirement in the NYSE
Euronext Director Independence Policy
that the board consider the special
responsibilities of a director in light of
NYSE Euronext’s ownership of U.S.
regulated subsidiaries and European
regulated entities would be deleted,
because unlike NYSE Euronext, the
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Frm 00077
Fmt 4703
Sfmt 4703
Regulated Subsidiaries are not holding
companies;
(iv) The requirement for directors to
inform the Chairman of the Nominating
and Governance Committee of certain
relationships and interests would be
deleted, since the boards of the
Regulated Subsidiaries do not have a
Nominating and Governance
Committee, except that in the
Subsidiary Director Independence
Policy to be adopted by NYSE
Regulation, this provision would
reference the Nominating and
Governance Committee of NYSE
Regulation;
(v) References to NYSE Alternext US
LLC and NYSE Amex LLC would refer
instead to NYSE MKT LLC, because of
this entity’s previous name changes;
(vi) Because the NYSE Euronext
Director Independence Policy provides
that a director of an affiliate of a
‘‘Member Organization’’ cannot qualify
as an independent director of these
Regulated Subsidiaries, the conflicting
language stating that a director of an
affiliate of a ‘‘Member Organization’’
shall not per se fail to be independent
would be deleted;
(vii) Because language in the NYSE
Euronext Director Independence Policy
provides that an executive officer of an
issuer whose securities are listed on a
NYSE Exchange cannot qualify as an
independent director of these Regulated
Subsidiaries, the conflicting language
providing an exception applicable only
to NYSE Euronext directors would be
deleted; and
(viii) The ‘‘additional independence
requirements’’ at the end of the current
Independence Policy of NYSE Euronext,
which provides that executive officers
of foreign private issuers, executive
officers of NYSE Euronext and directors
of affiliates of member organizations
must together comprise no more than a
minority of the total board, would be
eliminated. This provision is designed
to ensure that although persons who are
directors of an affiliate of a Member
Organization or who are executive
officers of a ‘‘foreign private issuer’’
listed on a NYSE Exchange may in some
circumstances qualify as independent
for purposes of NYSE Euronext board
membership, such persons may not,
together with executive officers of NYSE
Euronext, constitute more than a
minority of the total NYSE Euronext
directors. Under the proposed
Subsidiary Director Independence
Policy, such persons could not be
deemed to be independent directors of
the relevant Regulated Subsidiary and,
accordingly, this limitation on the
number of such persons who may serve
on the board is unnecessary.
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Federal Register / Vol. 77, No. 117 / Monday, June 18, 2012 / Notices
NYSE MKT believes that adopting a
separate director independence policy
for the Regulated Subsidiaries that is
more tailored to their specific
requirements—rather than applying the
NYSE Euronext Director Independence
Policy with various carve-outs and
exceptions noted therein for the
Regulated Subsidiaries—will add clarity
to NYSE MKT’s rules.
mstockstill on DSK4VPTVN1PROD with NOTICES
Proposed Conforming Modifications to
Organizational Documents
The Organizational Documents would
be modified to reflect the changes
indicated in Exhibits 5C through 5G,
which are summarized as follows:
(i) References in the Amended and
Restated Bylaws of NYSE Market, Inc.,
the Third Amended and Restated
Bylaws of NYSE Regulation, Inc., the
Third Amended and Restated Operating
Agreement of New York Stock Exchange
LLC and the Second Amended and
Restated Operating Agreement of NYSE
MKT LLC would be modified to refer to
the applicable Subsidiary Director
Independence Policy rather than to the
NYSE Euronext Director Independence
Policy;
(ii) References to NYSE Alternext US
LLC and NYSE Amex LLC in such
Organizational Documents would be
amended to refer instead to NYSE MKT
LLC, because of this entity’s previous
name changes; and
(iii) Section 3.4 of the Amended and
Restated Bylaws of NYSE Euronext
would be modified to provide that a
majority (rather than three-fourths) of
the Board members would be required
to be independent.
2. Statutory Basis
NYSE Euronext believes that this
filing is consistent with Section 6(b) 7 of
the Exchange Act in general, and
furthers the objectives of Section
6(b)(1) 8 in particular, in that it enables
NYSE MKT to be so organized as to
have the capacity to be able to carry out
the purposes of the Exchange Act and to
comply with the provisions of the
Exchange Act, the rules and regulations
thereunder, and the rules of NYSE MKT.
The Proposed Rule Change will help to
ensure that the boards of directors of
NYSE Euronext and the Regulated
Subsidiaries consist of individuals with
independent, objective perspectives,
while at the same time affording them
sufficient flexibility to include persons
with expertise and qualifications that
will contribute meaningfully to these
boards’ performance of their oversight
and other functions. For example, some
7 15
U.S.C. 78(f)(b).
8 15 U.S.C. 78(f)(b)(1).
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Jkt 226001
responsibilities of these boards call for
in-depth industry knowledge and
expertise on the Board, such as the
requirement that NYSE Euronext
directors take into consideration the
effect that NYSE Euronext’s actions
would have on the ability of its U.S.
regulated subsidiaries to (i) foster
cooperation and coordination with
persons engaging in regulating, clearing,
settling and processing information with
respect to, and facilitating transactions
in securities, and (ii) remove
impediments to and perfect the
mechanisms of a free and open market
in securities and a U.S. national
securities market system. NYSE MKT
also believes that adopting a separate
director independence policy for the
Regulated Subsidiaries that is more
tailored to their specific requirements—
rather than applying the NYSE Euronext
Director Independence Policy with
various carve-outs and exceptions noted
therein for the Regulated Subsidiaries—
will add clarity to NYSE MKT’s rules.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
NYSE MKT does not believe that the
Proposed Rule Change will impose any
burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Exchange Act.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
NYSE MKT 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 self-regulatory
organization consents, the Commission
will:
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.
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Sfmt 9990
36327
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NYSEMKT–2012–07 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–NYSEMKT–2012–07. This
file number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (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
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of NYSE MKT. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–
NYSEMKT–2012–07 and should be
submitted on or before July 9, 2012.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority. 9
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2012–14756 Filed 6–15–12; 8:45 am]
BILLING CODE 8011–01–P
9 17
E:\FR\FM\18JNN1.SGM
CFR 200.30–3(a)(12).
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]]>Agencies
[Federal Register Volume 77, Number 117 (Monday, June 18, 2012)]
[Notices]
[Pages 36324-36327]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-14756]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-67184; File No. SR-NYSEMKT-2012-07]
Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing of
Proposed Rule Change Amending Independence Policy of the Board of
Directors of NYSE Euronext and Creating New Independence Policy for
Boards of Directors of the New York Stock Exchange LLC, NYSE MKT LLC,
NYSE Regulation, Inc. and NYSE Market, Inc.
June 12, 2012.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on June 8, 2012, NYSE MKT LLC (``NYSE MKT'') filed with the Securities
and Exchange Commission (``Commission'') the proposed rule change as
described in Items I and II below, which Items have been prepared by
the NYSE MKT. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
NYSE MKT proposes to amend the Independence Policy of the Board of
Directors of NYSE Euronext (the ``NYSE Euronext Director Independence
Policy'') and create a new independence policy (the ``Subsidiary
Director Independence Policy'') for the boards of directors of NYSE
MKT, New York Stock Exchange LLC (``the Exchange''), NYSE Market, Inc.
(``NYSE Market'') and NYSE Regulation, Inc. (``NYSE Regulation'' and,
together, the ``Regulated Subsidiaries'').\3\ In addition, NYSE MKT
proposes to amend the Amended and Restated Bylaws of NYSE Euronext, the
Amended and Restated Bylaws of NYSE Market, Inc., Third Amended and
Restated Bylaws of NYSE Regulation, Inc., the Third Amended and
Restated Operating Agreement of New York Stock Exchange LLC and the
[[Page 36325]]
Second Amended and Restated Operating Agreement of NYSE MKT LLC
(collectively the ``Organizational Documents'') to make certain
conforming changes described below. The text of the proposed rule
change is available on the Exchange's Web site at www.nyse.com, at the
principal office of the Exchange, and at the Commission's Public
Reference Room.
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\3\ The Exchange and NYSE Arca, Inc. (``NYSE Arca'') are filing
substantially the same proposed rule change.
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II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, NYSE MKT included statements
concerning the purpose of, and basis for, the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of those statements may be examined at the places specified in
Item IV below. NYSE MKT has prepared summaries, set forth in sections
A, B and C below, of the most significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of this rule filing is to amend the NYSE Euronext
Director Independence Policy, create the Subsidiary Director
Independence Policy for the boards of directors of the Regulated
Subsidiaries, and make certain conforming changes to the Organizational
Documents, as set forth below.
NYSE Euronext Director Independence Policy
Under the Proposed Rule Change, the NYSE Euronext Director
Independence Policy would be amended to reflect the following changes
(the ``Proposed Amendments''):
(i) A majority (as opposed to 75%) of the board of directors of
NYSE Euronext (the ``Board'') would be required to be independent;
(ii) Executive officers of listed companies would no longer be
prohibited from being considered independent for purposes of the Board;
(iii) The ``additional independence requirements'' at the end of
the current NYSE Euronext Director Independence Policy--which provide
that executive officers of foreign private issuers, executive officers
of NYSE Euronext and directors of affiliates of member organizations
must together comprise no more than a minority of the total Board--
would be eliminated;
(iv) References to certain European regulatory authorities would be
updated, because their names have changed;
(v) References to NYSE Alternext US LLC and NYSE Amex LLC would
refer instead to NYSE MKT LLC, because of this entity's previous name
changes; and
(vi) Footnote 2 would be deleted because the NYSE Euronext Director
Independence Policy would not be applicable to the Regulated
Subsidiaries, each of which is proposed to have its own director
independence policy.
The Commission previously considered and approved these aspects of
the director independence policy in connection with the previously
proposed combination of NYSE Euronext and Deutsche B[ouml]rse AG (the
``Combination'').\4\ Under the rule change approved in connection with
the Combination, Alpha Beta Netherlands Holding N.V. (``Holdco'')--
which was the holding company formed in connection with the Combination
that would have become the parent company of NYSE Euronext--would have
adopted a director independence policy that was substantially similar
to the current NYSE Euronext Director Independence Policy, except for
the Proposed Amendments noted above and except for certain references
to the independence standards and criteria in the Dutch Corporate
Governance Code that would be added, given that Holdco was formed under
and subject to the laws of the Netherlands. Upon consummation of the
Combination, the NYSE Euronext Director Independence Policy would have
ceased to apply. On February 2, 2012, following the European
Commission's decision to prohibit the Combination, NYSE Euronext and
Deutsche B[ouml]rse agreed to terminate the agreement to combine their
businesses.
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\4\ See Securities Exchange Act Release No. 34-66171 (January
17, 2012) File Nos. SR-EDGA-2011-34; SR-EDGX-2011-33; SR-ISE-2011-
69; SR-NYSE-2011-51; SR-NYSEAmex-2011-78; SR-NYSEArca-2011-72), 77
FR 3297.
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NYSE MKT explained the reasons for incorporating the Proposed
Amendments in Holdco's director independence policy and believes the
rationale for making these amendments is substantially applicable with
equal force to the NYSE Euronext Director Independence Policy.
Summarized below are the principal reasons for the Proposed
Amendments listed in items (i), (ii) and (iii) above. NYSE MKT believes
that the Proposed Amendments listed in items (iv), (v) and (vi) above
are self-explanatory and technical in nature.
Majority Independence Requirement
NYSE MKT believes that a majority independence standard is
appropriate to ensure that the Board as a whole consists of individuals
with independent, objective perspectives, while at the same time
affording NYSE Euronext sufficient flexibility to include persons with
expertise and qualifications that will contribute meaningfully to the
Board's performance of its oversight function. The importance of
allowing highly qualified individuals to serve on the Board is
underscored by the fact that NYSE Euronext serves as the holding
company for a complex, global business with highly specialized
operations and regulatory functions.
Although NYSE Euronext has unique responsibilities and functions as
the holding company for several regulated subsidiaries, it is subject
to various corporate governance and regulatory obligations that are
addressed by means of ownership and voting limitations on its
shareholders, commitments to provide access to its books and records
and to submit to the jurisdiction of the Commission, director
qualification requirements and other undertakings.
NYSE MKT submits that some of these undertakings call for in-depth
industry knowledge and expertise on the Board, such as the requirement
that NYSE Euronext directors take into consideration the effect that
NYSE Euronext's actions would have on the ability of its U.S. regulated
subsidiaries to (i) foster cooperation and coordination with persons
engaging in regulating, clearing, settling and processing information
with respect to, and facilitating transactions in securities, and (ii)
remove impediments to and perfect the mechanisms of a free and open
market in securities and a U.S. national securities market system.
Executives of Listed Companies
NYSE MKT believes that a per se disqualification of listed company
executives from being deemed independent should not be applicable to
NYSE Euronext. The per se disqualification was initially adopted by the
New York Stock Exchange, Inc. in early 2005 in the context of its
unique circumstances and history and its management structure and board
composition at that time.\5\ NYSE MKT submits that those circumstances
are no longer applicable, and the disqualification of listed company
executives tends to undermine rather
[[Page 36326]]
than facilitate NYSE Euronext's efforts to ensure a qualified and
balanced board composition and promote various other important
corporate governance objectives, such as ensuring appropriate expertise
and experience on the Board, as well as representation of the interests
of a diverse range of market constituencies and local European and U.S.
interests. A per se disqualification narrows the pool of potential NYSE
Euronext director candidates and arbitrarily eliminates from
consideration a large number of highly qualified, experienced
individuals who have proven track records as business leaders. Under
the NYSE Euronext Director Independence Policy, the Board would still
need to assess whether a listed company executive meets the various
independence criteria, including whether he or she has any ``material
relationship'' with NYSE Euronext and its subsidiaries.
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\5\ See Securities Exchange Act Release No. 34-51217 (February
16, 2005) (File No. SR-NYSE-2004-54), 70 FR 9688.
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Furthermore, NYSE MKT believes that the objectivity of Board
members is adequately protected by the various other independence
criteria in the NYSE Euronext Director Independence Policy, such as the
requirement that independent directors may not be or have been within
the last year, and may not have an immediate family member who is or
within the last year was, a member of NYSE MKT, the Exchange or NYSE
Arca. In addition, if and to the extent that a matter concerning a
listed company whose executive is a NYSE Euronext director were ever to
come before the Board for consideration, such director would be
required to be recused from acting on such matter pursuant to the
Board's conflicts of interest policy.
Additional Independence Requirements
Finally, the NYSE Euronext Director Independence Policy provides
that the sum of (i) Executive officers of foreign private issuers, (ii)
executive officers of NYSE Euronext and (iii) directors of affiliates
of ``members'' (as defined in Sections 3(a)(A)(3)(ii), 3(a)(A)(3)(iii)
and 3(a)(A)(3)(iv) of the Exchange Act \6\) of NYSE MKT, the Exchange
or NYSE Arca, may not constitute more than a minority of the total
number of directors of NYSE Euronext. The purpose of this requirement
is to ensure that, although executives of listed companies who are
foreign private issuers are not disqualified from serving on the Board,
such executives may not, together with NYSE Euronext executives and
directors of affiliates of members, constitute more than a minority of
the Board. In light of NYSE MKT's proposal to eliminate the
disqualification of listed company executives from the NYSE Euronext
Director Independence Policy, this requirement would serve no purpose
because the exception to such disqualification for foreign private
issuer executives would also be eliminated. NYSE MKT further notes that
under the proposed NYSE Euronext Director Independence Policy,
executives of NYSE Euronext and directors of affiliates of exchange
members would not be deemed independent and, accordingly, could not in
any event constitute more than a minority of the Board.
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\6\ 15 U.S.C. 78c.
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Subsidiary Director Independence Policy
Currently, the independent directors of the Regulated Subsidiaries
must satisfy the requirements of the NYSE Euronext Director
Independence Policy. Under the Proposed Rule Change, each of the
Regulated Subsidiaries would have its own independence policy in the
form of the Subsidiary Director Independence Policy attached as Exhibit
5B to the Proposed Rule Change, in lieu of the NYSE Euronext Director
Independence Policy.
The Commission previously considered and approved this form of
Subsidiary Director Independence Policy to be adopted by the Regulated
Subsidiaries in connection with the previously proposed Combination
(except that the prior form contained certain references to Holdco that
have been replaced in Exhibit 5B with references to NYSE Euronext).
NYSE MKT explained the reasons for creating the Subsidiary Director
Independence Policy to determine the independence of directors of the
Regulated Subsidiaries, and believes these reasons (as set forth below)
continue to be applicable.
The Subsidiary Director Independence Policy is substantially
similar to the current NYSE Euronext Director Independence Policy,
except for the following changes:
(i) References to NYSE Euronext would refer instead to the relevant
Regulated Subsidiary;
(ii) The requirement that at least three-fourths of the directors
must be independent would be deleted, since the organizational
documents of the Regulated Subsidiaries contain the independence and
other qualification requirements for directors;
(iii) The requirement in the NYSE Euronext Director Independence
Policy that the board consider the special responsibilities of a
director in light of NYSE Euronext's ownership of U.S. regulated
subsidiaries and European regulated entities would be deleted, because
unlike NYSE Euronext, the Regulated Subsidiaries are not holding
companies;
(iv) The requirement for directors to inform the Chairman of the
Nominating and Governance Committee of certain relationships and
interests would be deleted, since the boards of the Regulated
Subsidiaries do not have a Nominating and Governance Committee, except
that in the Subsidiary Director Independence Policy to be adopted by
NYSE Regulation, this provision would reference the Nominating and
Governance Committee of NYSE Regulation;
(v) References to NYSE Alternext US LLC and NYSE Amex LLC would
refer instead to NYSE MKT LLC, because of this entity's previous name
changes;
(vi) Because the NYSE Euronext Director Independence Policy
provides that a director of an affiliate of a ``Member Organization''
cannot qualify as an independent director of these Regulated
Subsidiaries, the conflicting language stating that a director of an
affiliate of a ``Member Organization'' shall not per se fail to be
independent would be deleted;
(vii) Because language in the NYSE Euronext Director Independence
Policy provides that an executive officer of an issuer whose securities
are listed on a NYSE Exchange cannot qualify as an independent director
of these Regulated Subsidiaries, the conflicting language providing an
exception applicable only to NYSE Euronext directors would be deleted;
and
(viii) The ``additional independence requirements'' at the end of
the current Independence Policy of NYSE Euronext, which provides that
executive officers of foreign private issuers, executive officers of
NYSE Euronext and directors of affiliates of member organizations must
together comprise no more than a minority of the total board, would be
eliminated. This provision is designed to ensure that although persons
who are directors of an affiliate of a Member Organization or who are
executive officers of a ``foreign private issuer'' listed on a NYSE
Exchange may in some circumstances qualify as independent for purposes
of NYSE Euronext board membership, such persons may not, together with
executive officers of NYSE Euronext, constitute more than a minority of
the total NYSE Euronext directors. Under the proposed Subsidiary
Director Independence Policy, such persons could not be deemed to be
independent directors of the relevant Regulated Subsidiary and,
accordingly, this limitation on the number of such persons who may
serve on the board is unnecessary.
[[Page 36327]]
NYSE MKT believes that adopting a separate director independence
policy for the Regulated Subsidiaries that is more tailored to their
specific requirements--rather than applying the NYSE Euronext Director
Independence Policy with various carve-outs and exceptions noted
therein for the Regulated Subsidiaries--will add clarity to NYSE MKT's
rules.
Proposed Conforming Modifications to Organizational Documents
The Organizational Documents would be modified to reflect the
changes indicated in Exhibits 5C through 5G, which are summarized as
follows:
(i) References in the Amended and Restated Bylaws of NYSE Market,
Inc., the Third Amended and Restated Bylaws of NYSE Regulation, Inc.,
the Third Amended and Restated Operating Agreement of New York Stock
Exchange LLC and the Second Amended and Restated Operating Agreement of
NYSE MKT LLC would be modified to refer to the applicable Subsidiary
Director Independence Policy rather than to the NYSE Euronext Director
Independence Policy;
(ii) References to NYSE Alternext US LLC and NYSE Amex LLC in such
Organizational Documents would be amended to refer instead to NYSE MKT
LLC, because of this entity's previous name changes; and
(iii) Section 3.4 of the Amended and Restated Bylaws of NYSE
Euronext would be modified to provide that a majority (rather than
three-fourths) of the Board members would be required to be
independent.
2. Statutory Basis
NYSE Euronext believes that this filing is consistent with Section
6(b) \7\ of the Exchange Act in general, and furthers the objectives of
Section 6(b)(1) \8\ in particular, in that it enables NYSE MKT to be so
organized as to have the capacity to be able to carry out the purposes
of the Exchange Act and to comply with the provisions of the Exchange
Act, the rules and regulations thereunder, and the rules of NYSE MKT.
The Proposed Rule Change will help to ensure that the boards of
directors of NYSE Euronext and the Regulated Subsidiaries consist of
individuals with independent, objective perspectives, while at the same
time affording them sufficient flexibility to include persons with
expertise and qualifications that will contribute meaningfully to these
boards' performance of their oversight and other functions. For
example, some responsibilities of these boards call for in-depth
industry knowledge and expertise on the Board, such as the requirement
that NYSE Euronext directors take into consideration the effect that
NYSE Euronext's actions would have on the ability of its U.S. regulated
subsidiaries to (i) foster cooperation and coordination with persons
engaging in regulating, clearing, settling and processing information
with respect to, and facilitating transactions in securities, and (ii)
remove impediments to and perfect the mechanisms of a free and open
market in securities and a U.S. national securities market system. NYSE
MKT also believes that adopting a separate director independence policy
for the Regulated Subsidiaries that is more tailored to their specific
requirements--rather than applying the NYSE Euronext Director
Independence Policy with various carve-outs and exceptions noted
therein for the Regulated Subsidiaries--will add clarity to NYSE MKT's
rules.
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\7\ 15 U.S.C. 78(f)(b).
\8\ 15 U.S.C. 78(f)(b)(1).
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B. Self-Regulatory Organization's Statement on Burden on Competition
NYSE MKT does not believe that the Proposed Rule Change will impose
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Exchange Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
NYSE MKT 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 self-regulatory organization consents, the Commission will:
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
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-NYSEMKT-2012-07 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-NYSEMKT-2012-07. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (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
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available
for inspection and copying at the principal office of NYSE MKT. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-NYSEMKT-2012-07 and should
be submitted on or before July 9, 2012.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority. \9\
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\9\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-14756 Filed 6-15-12; 8:45 am]
BILLING CODE 8011-01-P
