Self-Regulatory Organizations; NYSE MKT LLC; Order Granting Approval of a Proposed Rule Change Amending the Members' Schedule of NYSE Amex Options LLC in Order To Reflect Changes to the Capital Structure of the Company, 59423-59425 [2012-23763]
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Federal Register / Vol. 77, No. 188 / Thursday, September 27, 2012 / Notices
quarter may be submitted separately in
a final VETS 402 report due the
following quarter.
(4) Title: Jobs for Veterans State Grant
Staffing Directory (VETS 501).
ICR numbers: VETS ICR No. 1293–
0009, OMB Control No. 1293–0009.
ICR status: This ICR is for a continued
information collection activity. An
Agency may not conduct or sponsor,
and a person is not required to respond
to, a collection of information unless it
displays a currently valid OMB control
number. The OMB control numbers for
VETS information collections are
displayed on the applicable data
collection instrument.
Abstract: Jobs for Veterans State Grant
applicants and grantees use the Jobs for
Veterans State Grant Staffing Directory
(VETS 501) to satisfy two grant
requirements. First, grant applicants
satisfy an assurance required by the
Drug-Free Workplace Act of 1988, and
implemented at 34 CFR Part 85,
§§ 85.605 and 85.610 by listing the
locations where grant-funded staff will
be assigned. Second, grantees fulfill a
requirement set forth in 38 U.S.C.
Chapter 41 as amended by Section
103(a) of Public Law 111–275 by
providing the name, assignment as a
DVOP specialist or LVER, assignment as
half-time or full-time, and date
appointed to current position for all
staff funded in whole or in part by the
Jobs for Veterans State Grant. As
amended, the statute requires each
DVOP specialist and LVER to complete
specialized training provided by the
National Veterans’ Training Institute
(NVTI) within 18 months of assignment
if appointed on or after October 13,
2010.
The proposed data collection
instrument is designed to streamline the
requirement for staffing information and
to minimize the reporting burden on
grantees. The information is required to
be submitted once per Federal fiscal
year as a condition of receiving Jobs for
Veterans State Grant funds. Grantees
will identify changes to staff
assignments, if applicable, for each of
the four Federal fiscal quarters and
when requesting a modification to their
existing grant if the modification affects
staffing assignments.
Affected Public: Jobs for Veterans
State Grant Applicants/Recipients (54);
DVOP specialists and LVER staff (2,034)
Estimated Annual Burden:
(a) VETS 201: 16,000 Hours
(b) VETS 401: 79.5 Hours
(c) VETS 402A/B: 1,168 Hours
(d) VETS 501: 106 Hours
Estimated Average Burden per
Respondent:
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(a) VETS 201 (Proposed): 2 Hours,
Range 1–3 Hours
(b) VETS 401 (Proposed): 1.5 Hours,
Range 1–2 Hours
(c) VETS 402A or B (Proposed): 2 Hours,
Range 1–3 Hours
(d) VETS 501 (Proposed): 2 Hours,
Range 1–3 Hours
Frequency of Response: Annually
and/or Quarterly.
Estimated Number of Respondents:
(a) VETS 201: 57
(b) VETS 401: 54
(c) VETS 402A or B: 54
(d) VETS 501: 54
Total Annualized Capital/startup
costs: $0.
Total Initial Annual Costs: $0.
Comments submitted in response to
this notice will be summarized and
included in the agency’s request for
OMB approval of the information
collection request. Comments will
become a matter of public record.
Dated in Washington, DC, this 24th day of
September 2012.
Ruth M. Samardick,
Director of National Programs.
[FR Doc. 2012–23836 Filed 9–26–12; 8:45 am]
BILLING CODE 4510–79–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–67902; File No. SR–
NYSEMKT–2012–23]
Self-Regulatory Organizations; NYSE
MKT LLC; Order Granting Approval of
a Proposed Rule Change Amending
the Members’ Schedule of NYSE Amex
Options LLC in Order To Reflect
Changes to the Capital Structure of the
Company
September 21, 2012.
I. Introduction
On July 25, 2012, NYSE MKT LLC
(‘‘NYSE MKT’’ or ‘‘Exchange’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’), pursuant
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (the ‘‘Act’’) 1 and
Rule 19b–4 thereunder,2 a proposed rule
change to amend the Members’
Schedule (as defined herein) of NYSE
Amex Options LLC to reflect changes to
the capital structure of the company.
The proposed rule change was
published for comment in the Federal
Register on August 7, 2012.3 The
Commission received no comments on
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 67569
(August 1, 2012), 77 FR 47138.
2 17
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59423
the proposal. This order approves the
proposed rule change.
II. Description of the Proposal
NYSE Amex Options LLC
(‘‘Company’’) was formed as a joint
venture between NYSE MKT 4 and its
corporate parent NYSE Euronext, and
seven firms, for the purpose of operating
an options platform as a facility of
NYSE MKT. The seven firms, which are
referred to in the joint venture’s
operating documents as ‘‘Founding
Firms,’’ are: Banc of America Strategic
Investments Corporation (‘‘BAML’’),
Barclays Electronic Commerce Holdings
Inc. (‘‘Barclays’’), Citadel Securities LLC
(‘‘Citadel’’), Citigroup Financial
Strategies, Inc. (‘‘Citigroup’’), Goldman,
Sachs & Co. (‘‘Goldman Sachs’’), Datek
Online Management Corp. (‘‘TD
Ameritrade’’) and UBS Americas Inc.
(‘‘UBS’’).
Collectively, NYSE MKT and the
Founding Firms are ‘‘Members’’ of the
Company. Their respective ownership
interests are set forth in a schedule
(‘‘Members’ Schedule’’) to the
Company’s LLC Agreement, dated as of
June 29, 2011.5 The amount of each
Member’s ownership is represented by
limited liability interests in the
Company (‘‘Common Interests’’). The
LLC Agreement designates two types of
Member, Class A Member and Class B
Member, and the different classes of
Members hold corresponding classes of
Interests, i.e., Class A Common Interests
and Class B Common Interests.
Although both classes of Common
Interests entitle Members to some
measure of voting and economic
entitlements, the two classes of
Common Interests are not fungible.
Members’ voting and economic
entitlements are determined by
reference to: (1) Each Member’s
holdings of Common Interests, and (2)
the aggregate economic and voting
power of the Class A Members relative
to the Class B Members.
Under the Members’ Schedule
attached to the LLC Agreement dated as
of June 29, 2011, NYSE MKT was the
only Class A Member and therefore the
only Member that held Class A Common
Interests. The Founding Firms were
designated Class B Members, each
4 At the time it entered into the joint venture,
NYSE MKT was referred to as NYSE Amex LLC. On
May 14, 2012, NYSE Amex LLC filed a proposed
rule change under Section 19(b)(3)(A) of the Act, 15
U.S.C. 78s(b)(3)(A), to change its name to NYSE
MKT LLC. See Securities Exchange Act Release No.
67037 (May 21, 2012), 77 FR 31415 (May 25, 2012)
(SR–NYSEAmex–2012–32).
5 In addition to the LLC Agreement, the Company
is governed by an agreement among the Members,
the Company and NYSE Euronext (‘‘Members
Agreement’’), also dated as of June 29, 2011.
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holding Class B Common Interests.
According to this schedule, NYSE MKT
owned Class A Common Interests
amounting to an equity interest of
47.20% in the Company, while the
Founding Firms collectively owned
Class B Common Interests amounting to
an equity interest of the remaining
52.80% in the Company.
The Exchange proposes to amend the
Members’ Schedule to reflect changes to
the capital structure of the Company
based on three transactions that have
occurred or will occur since the
Commission approved the Exchange’s
proposal relating to the formation of the
Company.6 The first transaction relates
to the admission of NYSE Market, Inc.
(‘‘NYSE Market’’), an affiliate of NYSE
MKT, on September 19, 2011, as a
Member with an equity ownership
interest in the Company. The second
transaction relates to the issuance of
additional Common Interests to Class B
Members of the Company on February
29, 2012, pursuant to an annual
incentive program as set forth in the
Members Agreement. The third
transaction relates to the expected
transfer of Common Interests on or
around September 25, 2012, from the
Founding Firms to NYSE Market. These
transactions are described in greater
detail below.
Admission of NYSE Market as a
Member
Each Founding Firm has the right,
pursuant to Section 3.2 of the Members
Agreement and subject to certain
conditions and limitations, to cause
NYSE MKT (or an affiliate designated by
NYSE MKT) to purchase a portion of the
Founding Firm’s Common Interests. All
of the Founding Firms exercised this
right on September 19, 2011, thereby
causing an aggregate equity interest of
5.28% in the Company to be transferred
from the Founding Firms to NYSE
Market, the NYSE MKT affiliate that
NYSE MKT designated to receive the
ownership interest. As a result of the
transaction, NYSE MKT continued to
own an equity interest of 47.20% in the
Company, NYSE Market owned an
equity interest of 5.28% in the
Company, and the Founding Firms
collectively owned the remaining equity
interest of 47.52% in the Company.
Several provisions of the LLC
Agreement impact the terms of this
transfer. Because NYSE Market is an
affiliate of NYSE MKT, pursuant to
Section 11.2(c) of the LLC Agreement,
Common Interests transferred from
Founding Firms to NYSE Market
6 See Securities Exchange Act Release No. 64742
(June 24, 2011), 76 FR 38436 (June 30, 2011).
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automatically convert from Class B
Common Interests to Class A Common
Interests. Also, under Sections 10.4 and
11.1, upon receiving the transfer of
Common Interests and satisfying certain
other conditions, and subject to
amendment of the Member’s Schedule,
NYSE Market became a Class A Member
of the Company.
NYSE MKT represented that,
notwithstanding the transfer of Common
Interests to NYSE Market, the
Company’s governance structure did not
change. NYSE MKT continues to
appoint a majority (7 of 13) of the
Company’s Board of Directors, and
NYSE Market has no right to appoint a
separate director. According to NYSE
MKT, this transaction was structured as
a transfer of Common Interests to NYSE
Market, rather than NYSE MKT, for nonsubstantive business reasons relating to
the corporate structure of NYSE MKT.
NYSE MKT also noted that, as a
Member, NYSE Market is bound by all
of the provisions of the LLC Agreement
and the Members Agreement.
Issuance of Annual Incentive Shares
The Members Agreement provides
that each year, until 2015, unless
extended by the Company’s Board of
Directors, the Company must issue a
specified amount of Annual Incentive
Shares to be allocated among eligible
Class B Members. Pursuant to Section
2.1 of the Members Agreement, the
Company must issue a number of Class
B Common Interests equal to 30% of the
then-outstanding Class B Common
Interests as Annual Incentive Shares,
and such shares are to be allocated
among Class B Members based on each
Class B Member’s contribution to the
volume of the Exchange relative to
volume targets specified for the
Members. While the issuance of Annual
Incentive Shares may change the
relative economic and voting rights of
and among Class B Members, by its
terms it cannot impact the aggregate
economic and voting rights of Class B
Members in relation to Class A
Members.
On February 29, 2012, the Company
issued a total of 14.2560 Annual
Incentive Shares to the Founding Firms.
Because each Founding Firm achieved
or exceeded its specified volume target,
each Founding Firm’s economic and
voting interests remained the same in
relation to the other Class B Members.
The Exchange proposes to amend the
Members’ Schedule to reflect this
issuance of Class B Common Interests.
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Expected Transfer From Founding Firms
to NYSE Market
Article XI of the LLC Agreement and
Section 3.1 of the Members Agreement
provide that a Member may transfer
Common Interests to another Member or
to a third party in accordance with the
conditions and limitations set forth
therein. In its proposal, NYSE MKT
noted that the Founding Firms
collectively intend to transfer an
aggregate equity interest of 5.28% in the
Company to NYSE Market. As with the
first transaction noted above, the
Founding Firms’ Class B Common
Interests will automatically convert to
Class A Common Interests upon their
transfer to NYSE Market. As a result of
this transfer, NYSE MKT will continue
to own an equity interest of 47.20% in
the Company, NYSE Market will own an
equity interest of 10.56% in the
Company, and the Founding Firms,
collectively, will own the remaining
equity interest of 42.24% in the
Company. The Exchange proposes,
upon consummation of this transfer by
the Founding Firms, to amend the
Members’ Schedule to reflect this
transfer.
III. Discussion and Commission
Findings
After careful consideration, the
Commission finds that the proposed
rule change is consistent with the
requirements of the Act and the rules
and regulations thereunder applicable to
a national securities exchange.7 In
particular, the Commission finds that
the proposed rule change is consistent
with Section 6(b)(1) of the Act,8 which
requires, among other things, that a
national securities exchange be so
organized and have the capacity to carry
out the purposes of the Act and to
comply, and to enforce compliance by
its members and persons associated
with its members, with the provisions of
the Act, the rules and regulations
promulgated thereunder, and the rules
of the Exchange.
The Commission also finds that the
proposed rule change is consistent with
Section 6(b)(5) of the Act,9 which
requires, among other things, that the
rules of a national securities exchange
be designed to prevent fraudulent and
manipulative acts and practices; to
promote just and equitable principles of
trade; to foster cooperation and
coordination with persons engaged in
7 In approving the proposal, the Commission has
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
8 15 U.S.C. 78(f)(b)(1).
9 15 U.S.C. 78(f)(b)(5).
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Federal Register / Vol. 77, No. 188 / Thursday, September 27, 2012 / Notices
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regulating, clearing, settling, and
processing information with respect to,
and facilitating transactions in
securities; to remove impediments to
and perfect the mechanism of a free and
open market and a national market
system; and, in general, to protect
investors and the public interest.
As the Commission noted when it
approved the Exchange’s proposal
relating to the formation of the
Company, while the Company does not
carry out any regulatory functions, all of
its activities must be consistent with the
Act.10 The Company’s LLC Agreement
and Members Agreement must be
reasonably designed to enable the
Company to operate in a manner that is
consistent with the principle that the
Company is not solely a commercial
enterprise, but rather an integral part of
an SRO that is registered pursuant to the
Act and therefore subject to obligations
imposed by the Act.11 In addition,
under Section 4.9 of the LLC
Agreement, because the transactions
described in the proposal result in
NYSE Market, a ‘‘Permitted Transferee’’
of NYSE MKT,12 together with NYSE
MKT, owning more than 19.9% of
outstanding Common Interests, the
transfer and corresponding amendment
to the Member’s Schedule are subject to
receipt of Commission approval
pursuant to the rule filing process under
Section 19(b) of the Exchange Act.
The Commission notes that the
addition of NYSE Market as a Member
of the Company, and the proposed
amendments to the Members’ Schedule
to reflect the changes in ownership
interest percentages as a result of the
three transactions described above, do
not significantly alter the governance
structure of the Company. The result of
the three transactions is to increase the
equity ownership interest in the
Company of NYSE MKT, together with
its affiliate NYSE Market, from 47.20%
of the Company to 57.76% of the
Company and add NYSE Market as a
Member of the Company. The
Commission notes that, NYSE Market,
as a new Member of the Company, is
subject to, and bound by, all provisions
of the LLC Agreement and Members
Agreement. The Commission notes
further that the provisions in the LLC
Agreement and Members Agreement
that are designed to preserve the
independence of the Exchange’s
regulatory functions and its ability to
fulfill the Exchange’s regulatory
10 See
supra note 6, 76 FR at 38439.
id.
12 ‘‘Permitted Transferee’’ is defined in Sections
1.1 and 11.4(a) of the LLC Agreement.
11 See
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oversight obligations are unaffected by
the proposed rule change.
For the reasons discussed above, the
Commission finds that the proposed
rule change is consistent with the Act.
IV. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,13 that the
proposed rule change (SR–NYSEMKT–
2012–23) be, and hereby is, approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.14
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2012–23763 Filed 9–26–12; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–67905; File No. SR–BATS–
2012–038]
Self-Regulatory Organizations; BATS
Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change Related to Fees for Use
of BATS Exchange, Inc.
September 21, 2012.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on
September 10, 2012, BATS Exchange,
Inc. (the ‘‘Exchange’’ or ‘‘BATS’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I, II, and III below, which Items
have been prepared by the Exchange.
The Exchange has designated the
proposed rule change as one
establishing or changing a member due,
fee, or other charge imposed by the
Exchange under Section 19(b)(3)(A)(ii)
of the Act 3 and Rule 19b–4(f)(2)
thereunder,4 which renders the
proposed rule change effective upon
filing with the Commission. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend the
fee schedule applicable to Members 5
13 15
U.S.C. 78s(b)(2).
CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A)(ii).
4 17 CFR 240.19b–4(f)(2).
5 A Member is any registered broker or dealer that
has been admitted to membership in the Exchange.
14 17
PO 00000
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59425
and non-members of the Exchange
pursuant to BATS Rules 15.1(a) and (c).
Changes to the fee schedule pursuant to
this proposal are effective upon filing.
The text of the proposed rule change
is available at the Exchange’s Web site
at https://www.batstrading.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, 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 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 Exchange proposes to modify the
‘‘Options Pricing’’ section of its fee
schedule effective September 10, 2012,
in order to modify pricing related to
executions that occur on the NASDAQ
Options Market (‘‘NOM’’). NOM
implemented certain pricing changes
effective September 4, 2012,6 including:
(i) Modification of the fee charged to
participants classified by NOM as
professionals, customers and market
makers to remove liquidity in penny
pilot options, and (ii) the adoption of
specific fees for NOM ‘‘Specified
Symbols,’’ as described below. In order
to maintain routing fees that
approximate the routing costs to NOM,
the Exchange proposes to modify
pricing for Professional,7 Firm, and
Market Maker 8 orders routed to NOM in
non-Specified Symbols and to adopt
pricing for orders routed to NOM in
6 See Nasdaq Options Trader Alert #2012–54,
NOM and PHLX Update Pricing, Effective
September 4, 2012 (August 31, 2012) (the ‘‘NOM
Notice’’).
7 The term ‘‘Professional’’ is defined in Exchange
Rule 16.1 to mean any person or entity that (A) is
not a broker or dealer in securities, and (B) places
more than 390 orders in listed options per day on
average during a calendar month for its own
beneficial account(s).
8 As defined on the Exchange’s fee schedule, the
terms ‘‘Firm’’ and ‘‘Market Maker’’ apply to any
transaction identified by a member for clearing in
the Firm or Market Maker range, respectively, at the
Options Clearing Corporation (‘‘OCC’’).
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]]>Agencies
[Federal Register Volume 77, Number 188 (Thursday, September 27, 2012)]
[Notices]
[Pages 59423-59425]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-23763]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-67902; File No. SR-NYSEMKT-2012-23]
Self-Regulatory Organizations; NYSE MKT LLC; Order Granting
Approval of a Proposed Rule Change Amending the Members' Schedule of
NYSE Amex Options LLC in Order To Reflect Changes to the Capital
Structure of the Company
September 21, 2012.
I. Introduction
On July 25, 2012, NYSE MKT LLC (``NYSE MKT'' or ``Exchange'') filed
with the Securities and Exchange Commission (``Commission''), pursuant
to Section 19(b)(1) of the Securities Exchange Act of 1934 (the
``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to
amend the Members' Schedule (as defined herein) of NYSE Amex Options
LLC to reflect changes to the capital structure of the company. The
proposed rule change was published for comment in the Federal Register
on August 7, 2012.\3\ The Commission received no comments on the
proposal. This order approves the proposed rule change.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 67569 (August 1,
2012), 77 FR 47138.
---------------------------------------------------------------------------
II. Description of the Proposal
NYSE Amex Options LLC (``Company'') was formed as a joint venture
between NYSE MKT \4\ and its corporate parent NYSE Euronext, and seven
firms, for the purpose of operating an options platform as a facility
of NYSE MKT. The seven firms, which are referred to in the joint
venture's operating documents as ``Founding Firms,'' are: Banc of
America Strategic Investments Corporation (``BAML''), Barclays
Electronic Commerce Holdings Inc. (``Barclays''), Citadel Securities
LLC (``Citadel''), Citigroup Financial Strategies, Inc.
(``Citigroup''), Goldman, Sachs & Co. (``Goldman Sachs''), Datek Online
Management Corp. (``TD Ameritrade'') and UBS Americas Inc. (``UBS'').
---------------------------------------------------------------------------
\4\ At the time it entered into the joint venture, NYSE MKT was
referred to as NYSE Amex LLC. On May 14, 2012, NYSE Amex LLC filed a
proposed rule change under Section 19(b)(3)(A) of the Act, 15 U.S.C.
78s(b)(3)(A), to change its name to NYSE MKT LLC. See Securities
Exchange Act Release No. 67037 (May 21, 2012), 77 FR 31415 (May 25,
2012) (SR-NYSEAmex-2012-32).
---------------------------------------------------------------------------
Collectively, NYSE MKT and the Founding Firms are ``Members'' of
the Company. Their respective ownership interests are set forth in a
schedule (``Members' Schedule'') to the Company's LLC Agreement, dated
as of June 29, 2011.\5\ The amount of each Member's ownership is
represented by limited liability interests in the Company (``Common
Interests''). The LLC Agreement designates two types of Member, Class A
Member and Class B Member, and the different classes of Members hold
corresponding classes of Interests, i.e., Class A Common Interests and
Class B Common Interests. Although both classes of Common Interests
entitle Members to some measure of voting and economic entitlements,
the two classes of Common Interests are not fungible. Members' voting
and economic entitlements are determined by reference to: (1) Each
Member's holdings of Common Interests, and (2) the aggregate economic
and voting power of the Class A Members relative to the Class B
Members.
---------------------------------------------------------------------------
\5\ In addition to the LLC Agreement, the Company is governed by
an agreement among the Members, the Company and NYSE Euronext
(``Members Agreement''), also dated as of June 29, 2011.
---------------------------------------------------------------------------
Under the Members' Schedule attached to the LLC Agreement dated as
of June 29, 2011, NYSE MKT was the only Class A Member and therefore
the only Member that held Class A Common Interests. The Founding Firms
were designated Class B Members, each
[[Page 59424]]
holding Class B Common Interests. According to this schedule, NYSE MKT
owned Class A Common Interests amounting to an equity interest of
47.20% in the Company, while the Founding Firms collectively owned
Class B Common Interests amounting to an equity interest of the
remaining 52.80% in the Company.
The Exchange proposes to amend the Members' Schedule to reflect
changes to the capital structure of the Company based on three
transactions that have occurred or will occur since the Commission
approved the Exchange's proposal relating to the formation of the
Company.\6\ The first transaction relates to the admission of NYSE
Market, Inc. (``NYSE Market''), an affiliate of NYSE MKT, on September
19, 2011, as a Member with an equity ownership interest in the Company.
The second transaction relates to the issuance of additional Common
Interests to Class B Members of the Company on February 29, 2012,
pursuant to an annual incentive program as set forth in the Members
Agreement. The third transaction relates to the expected transfer of
Common Interests on or around September 25, 2012, from the Founding
Firms to NYSE Market. These transactions are described in greater
detail below.
---------------------------------------------------------------------------
\6\ See Securities Exchange Act Release No. 64742 (June 24,
2011), 76 FR 38436 (June 30, 2011).
---------------------------------------------------------------------------
Admission of NYSE Market as a Member
Each Founding Firm has the right, pursuant to Section 3.2 of the
Members Agreement and subject to certain conditions and limitations, to
cause NYSE MKT (or an affiliate designated by NYSE MKT) to purchase a
portion of the Founding Firm's Common Interests. All of the Founding
Firms exercised this right on September 19, 2011, thereby causing an
aggregate equity interest of 5.28% in the Company to be transferred
from the Founding Firms to NYSE Market, the NYSE MKT affiliate that
NYSE MKT designated to receive the ownership interest. As a result of
the transaction, NYSE MKT continued to own an equity interest of 47.20%
in the Company, NYSE Market owned an equity interest of 5.28% in the
Company, and the Founding Firms collectively owned the remaining equity
interest of 47.52% in the Company.
Several provisions of the LLC Agreement impact the terms of this
transfer. Because NYSE Market is an affiliate of NYSE MKT, pursuant to
Section 11.2(c) of the LLC Agreement, Common Interests transferred from
Founding Firms to NYSE Market automatically convert from Class B Common
Interests to Class A Common Interests. Also, under Sections 10.4 and
11.1, upon receiving the transfer of Common Interests and satisfying
certain other conditions, and subject to amendment of the Member's
Schedule, NYSE Market became a Class A Member of the Company.
NYSE MKT represented that, notwithstanding the transfer of Common
Interests to NYSE Market, the Company's governance structure did not
change. NYSE MKT continues to appoint a majority (7 of 13) of the
Company's Board of Directors, and NYSE Market has no right to appoint a
separate director. According to NYSE MKT, this transaction was
structured as a transfer of Common Interests to NYSE Market, rather
than NYSE MKT, for non-substantive business reasons relating to the
corporate structure of NYSE MKT. NYSE MKT also noted that, as a Member,
NYSE Market is bound by all of the provisions of the LLC Agreement and
the Members Agreement.
Issuance of Annual Incentive Shares
The Members Agreement provides that each year, until 2015, unless
extended by the Company's Board of Directors, the Company must issue a
specified amount of Annual Incentive Shares to be allocated among
eligible Class B Members. Pursuant to Section 2.1 of the Members
Agreement, the Company must issue a number of Class B Common Interests
equal to 30% of the then-outstanding Class B Common Interests as Annual
Incentive Shares, and such shares are to be allocated among Class B
Members based on each Class B Member's contribution to the volume of
the Exchange relative to volume targets specified for the Members.
While the issuance of Annual Incentive Shares may change the relative
economic and voting rights of and among Class B Members, by its terms
it cannot impact the aggregate economic and voting rights of Class B
Members in relation to Class A Members.
On February 29, 2012, the Company issued a total of 14.2560 Annual
Incentive Shares to the Founding Firms. Because each Founding Firm
achieved or exceeded its specified volume target, each Founding Firm's
economic and voting interests remained the same in relation to the
other Class B Members. The Exchange proposes to amend the Members'
Schedule to reflect this issuance of Class B Common Interests.
Expected Transfer From Founding Firms to NYSE Market
Article XI of the LLC Agreement and Section 3.1 of the Members
Agreement provide that a Member may transfer Common Interests to
another Member or to a third party in accordance with the conditions
and limitations set forth therein. In its proposal, NYSE MKT noted that
the Founding Firms collectively intend to transfer an aggregate equity
interest of 5.28% in the Company to NYSE Market. As with the first
transaction noted above, the Founding Firms' Class B Common Interests
will automatically convert to Class A Common Interests upon their
transfer to NYSE Market. As a result of this transfer, NYSE MKT will
continue to own an equity interest of 47.20% in the Company, NYSE
Market will own an equity interest of 10.56% in the Company, and the
Founding Firms, collectively, will own the remaining equity interest of
42.24% in the Company. The Exchange proposes, upon consummation of this
transfer by the Founding Firms, to amend the Members' Schedule to
reflect this transfer.
III. Discussion and Commission Findings
After careful consideration, the Commission finds that the proposed
rule change is consistent with the requirements of the Act and the
rules and regulations thereunder applicable to a national securities
exchange.\7\ In particular, the Commission finds that the proposed rule
change is consistent with Section 6(b)(1) of the Act,\8\ which
requires, among other things, that a national securities exchange be so
organized and have the capacity to carry out the purposes of the Act
and to comply, and to enforce compliance by its members and persons
associated with its members, with the provisions of the Act, the rules
and regulations promulgated thereunder, and the rules of the Exchange.
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\7\ In approving the proposal, the Commission has considered the
proposed rule's impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
\8\ 15 U.S.C. 78(f)(b)(1).
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The Commission also finds that the proposed rule change is
consistent with Section 6(b)(5) of the Act,\9\ which requires, among
other things, that the rules of a national securities exchange be
designed to prevent fraudulent and manipulative acts and practices; to
promote just and equitable principles of trade; to foster cooperation
and coordination with persons engaged in
[[Page 59425]]
regulating, clearing, settling, and processing information with respect
to, and facilitating transactions in securities; to remove impediments
to and perfect the mechanism of a free and open market and a national
market system; and, in general, to protect investors and the public
interest.
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\9\ 15 U.S.C. 78(f)(b)(5).
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As the Commission noted when it approved the Exchange's proposal
relating to the formation of the Company, while the Company does not
carry out any regulatory functions, all of its activities must be
consistent with the Act.\10\ The Company's LLC Agreement and Members
Agreement must be reasonably designed to enable the Company to operate
in a manner that is consistent with the principle that the Company is
not solely a commercial enterprise, but rather an integral part of an
SRO that is registered pursuant to the Act and therefore subject to
obligations imposed by the Act.\11\ In addition, under Section 4.9 of
the LLC Agreement, because the transactions described in the proposal
result in NYSE Market, a ``Permitted Transferee'' of NYSE MKT,\12\
together with NYSE MKT, owning more than 19.9% of outstanding Common
Interests, the transfer and corresponding amendment to the Member's
Schedule are subject to receipt of Commission approval pursuant to the
rule filing process under Section 19(b) of the Exchange Act.
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\10\ See supra note 6, 76 FR at 38439.
\11\ See id.
\12\ ``Permitted Transferee'' is defined in Sections 1.1 and
11.4(a) of the LLC Agreement.
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The Commission notes that the addition of NYSE Market as a Member
of the Company, and the proposed amendments to the Members' Schedule to
reflect the changes in ownership interest percentages as a result of
the three transactions described above, do not significantly alter the
governance structure of the Company. The result of the three
transactions is to increase the equity ownership interest in the
Company of NYSE MKT, together with its affiliate NYSE Market, from
47.20% of the Company to 57.76% of the Company and add NYSE Market as a
Member of the Company. The Commission notes that, NYSE Market, as a new
Member of the Company, is subject to, and bound by, all provisions of
the LLC Agreement and Members Agreement. The Commission notes further
that the provisions in the LLC Agreement and Members Agreement that are
designed to preserve the independence of the Exchange's regulatory
functions and its ability to fulfill the Exchange's regulatory
oversight obligations are unaffected by the proposed rule change.
For the reasons discussed above, the Commission finds that the
proposed rule change is consistent with the Act.
IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\13\ that the proposed rule change (SR-NYSEMKT-2012-23) be, and
hereby is, approved.
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\13\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
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\14\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-23763 Filed 9-26-12; 8:45 am]
BILLING CODE 8011-01-P
