Self-Regulatory Organizations; NYSE Arca, Inc.; 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., 36307-36310 [2012-14758]

Download as PDF Federal Register / Vol. 77, No. 117 / Monday, June 18, 2012 / Notices 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– NYSEArca–2012–60 and should be submitted on or before July 9, 2012. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.11 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2012–14739 Filed 6–15–12; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–67186; File No. SR– NYSEArca–2012–59] Self-Regulatory Organizations; NYSE Arca, Inc.; 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. mstockstill on DSK4VPTVN1PROD with NOTICES 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 Arca, Inc. (‘‘NYSE Arca’’) 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 NYSE Arca. 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 Arca 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 LLC (‘‘NYSE MKT’’), New York Stock Exchange LLC (‘‘the Exchange’’), NYSE Market, Inc. (‘‘NYSE Market’’) and NYSE Regulation, Inc. (‘‘NYSE Regulation’’ and, together, CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 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 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 Arca 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 Arca 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 11 17 1 15 VerDate Mar<15>2010 17:02 Jun 15, 2012 3 The Exchange and NYSE MKT are filing substantially the same proposed rule change. Jkt 226001 PO 00000 Frm 00058 Fmt 4703 Sfmt 4703 36307 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 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 Arca explained the reasons for incorporating the Proposed Amendments in Holdco’s director 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. E:\FR\FM\18JNN1.SGM 18JNN1 36308 Federal Register / Vol. 77, No. 117 / Monday, June 18, 2012 / Notices mstockstill on DSK4VPTVN1PROD with NOTICES 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 Arca believes that the Proposed Amendments listed in items (iv), (v) and (vi) above are self-explanatory and technical in nature. Majority Independence Requirement NYSE Arca 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 Arca 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 Arca 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 VerDate Mar<15>2010 17:02 Jun 15, 2012 Jkt 226001 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 Arca submits that those circumstances are no longer applicable, and the disqualification of listed company executives tends to undermine rather 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 Arca 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 Arca, the Exchange or NYSE MKT. 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 Arca, the Exchange or NYSE MKT, may not constitute more than a 5 See Securities Exchange Act Release No. 34– 51217 (February 16, 2005) (File No. SR–NYSE– 2004–54), 70 FR 9688. 6 15 U.S.C. 78c. PO 00000 Frm 00059 Fmt 4703 Sfmt 4703 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 Arca’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 Arca 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 Arca 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 E:\FR\FM\18JNN1.SGM 18JNN1 mstockstill on DSK4VPTVN1PROD with NOTICES Federal Register / Vol. 77, No. 117 / Monday, June 18, 2012 / Notices 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 VerDate Mar<15>2010 17:02 Jun 15, 2012 Jkt 226001 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. NYSE Arca 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 Arca’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 Arca 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 7 15 8 15 PO 00000 U.S.C. 78(f)(b). U.S.C. 78(f)(b)(1). Frm 00060 Fmt 4703 Sfmt 4703 36309 thereunder, and the rules of NYSE Arca. 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 Arca 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 Arca’s rules. B. Self-Regulatory Organization’s Statement on Burden on Competition NYSE Arca 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 Arca 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: E:\FR\FM\18JNN1.SGM 18JNN1 36310 Federal Register / Vol. 77, No. 117 / Monday, June 18, 2012 / Notices For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.9 Kevin M. O’Neill, Deputy Secretary. 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: [FR Doc. 2012–14758 Filed 6–15–12; 8:45 am] 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–NYSEArca–2012–59 on the subject line. mstockstill on DSK4VPTVN1PROD with NOTICES A. By order approve or disapprove such proposed rule change; or B. Institute proceedings to determine whether the proposed rule change should be disapproved. Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Market Participant Categories, Rebates and Fees for Adding and Removing Liquidity in Select Symbols and Multiply Listed Options 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–NYSEArca–2012–59. 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 NYSE Arca. 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– NYSEArca–2012–59 and should be submitted on or before July 9, 2012. June 12, 2012. VerDate Mar<15>2010 17:02 Jun 15, 2012 Jkt 226001 BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–67189; File No. SR–Phlx– 2012–77] Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 19b–4 2 thereunder, notice is hereby given that, on May 31, 2012, NASDAQ OMX PHLX LLC (‘‘Phlx’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) the proposed rule change as described in Items I, II and III 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 The Exchange proposes to: (i) Amend certain definitions in the Preface Section, including certain categories of market participants; (ii) delete the Directed Participant category in Section I of the Pricing Schedule and add a Specialist category in Sections I, II and III; (iii) amend the title of Section II fees to ‘‘Multiply Listed Options’’ and amend Firm fees; and (iv) make other technical modifications to the Pricing Schedule. While the changes proposed herein are effective upon filing, the Exchange has designated these changes to be operative on June 1, 2012. The text of the proposed rule change is available on the Exchange’s Web site at https://www.nasdaqtrader.com/ micro.aspx?id=PHLXfilings, at the principal office of the Exchange, and at the Commission’s Public Reference Room. 9 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 PO 00000 Frm 00061 Fmt 4703 Sfmt 4703 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 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 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. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend the Pricing Schedule, specifically the Preface, Section I, entitled ‘‘Rebates and Fees for Adding and Removing Liquidity in Select Symbols’’ and Section II, entitled ‘‘Equity Options Fees.’’ 3 The Exchange also proposes to make other conforming and technical amendments to other sections of the Pricing Schedule. The Exchange will describe the purpose of each amendment to the Pricing Schedule in greater detail below. Preface and Market Participant Categories The Exchange is proposing to amend its categories of market participants to specifically define a Specialist 4 separate and apart from other Market Makers. Today, the Exchange defines a Market Maker in the Preface to the Pricing Schedule to include Specialists and Registered Options Traders.5 The Exchange is proposing to redefine a Market Maker to include ROTs, SQTs and RSQTs. The Exchange will eliminate the category ‘‘Directed Participant’’ 6 from the categories of 3 Equity options fees include options overlying equities, ETFs, ETNs, indexes and HOLDRS which are Multiply Listed, except SOX, HGX and OSX. 4 A Specialist is an Exchange member who is registered as an options specialist pursuant to Rule 1020(a). 5 A Registered Options Trader (‘‘ROT’’) includes a Streaming Quote Trader (‘‘SQT’’), a Remote Streaming Quote Trader (‘‘RSQT’’) and a Non-SQT, which by definition is neither a SQT or a RSQT. A ROT is defined in Exchange Rule 1014(b) as a regular member of the Exchange located on the trading floor who has received permission from the Exchange to trade in options for his own account. See Exchange Rule 1014 (b)(i) and (ii). 6 The term ‘‘Directed Participant’’ applies to transactions for the account of a Specialist, Streaming Quote Trader or Remote Streaming Quote Trader resulting from a Customer order that is (1) E:\FR\FM\18JNN1.SGM 18JNN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 77, Number 117 (Monday, June 18, 2012)]
[Notices]
[Pages 36307-36310]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-14758]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-67186; File No. SR-NYSEArca-2012-59]


Self-Regulatory Organizations; NYSE Arca, Inc.; 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 Arca, Inc. (``NYSE Arca'') 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 NYSE Arca. 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

    NYSE Arca 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 
LLC (``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 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.
---------------------------------------------------------------------------

    \3\ The Exchange and NYSE MKT are filing substantially the same 
proposed rule change.
---------------------------------------------------------------------------

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 Arca 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 Arca 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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    NYSE Arca explained the reasons for incorporating the Proposed 
Amendments in Holdco's director

[[Page 36308]]

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 Arca 
believes that the Proposed Amendments listed in items (iv), (v) and 
(vi) above are self-explanatory and technical in nature.
Majority Independence Requirement
    NYSE Arca 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 Arca 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 Arca 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 Arca submits that those circumstances 
are no longer applicable, and the disqualification of listed company 
executives tends to undermine rather 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.
---------------------------------------------------------------------------

    \5\ See Securities Exchange Act Release No. 34-51217 (February 
16, 2005) (File No. SR-NYSE-2004-54), 70 FR 9688.
---------------------------------------------------------------------------

    Furthermore, NYSE Arca 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 Arca, the Exchange or NYSE 
MKT. 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 Arca, the Exchange 
or NYSE MKT, 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 Arca'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 Arca 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.
---------------------------------------------------------------------------

    \6\ 15 U.S.C. 78c.
---------------------------------------------------------------------------

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 Arca 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

[[Page 36309]]

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.
    NYSE Arca 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 Arca'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 Arca 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 Arca. 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 
Arca 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 Arca's 
rules.
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78(f)(b).
    \8\ 15 U.S.C. 78(f)(b)(1).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    NYSE Arca 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 Arca 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:

[[Page 36310]]

    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-NYSEArca-2012-59 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-NYSEArca-2012-59. 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 NYSE Arca. 
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-NYSEArca-2012-
59 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\
---------------------------------------------------------------------------

    \9\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-14758 Filed 6-15-12; 8:45 am]
BILLING CODE 8011-01-P

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