Topaz Exchange, LLC; Order Granting Application for a Conditional Exemption Pursuant to Section 36(a) of the Exchange Act From Certain Requirements of Rules 6a-1 and 6a-2 Under the Exchange Act, 14844-14847 [2013-05241]
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14844
Federal Register / Vol. 78, No. 45 / Thursday, March 7, 2013 / Notices
third party, either from within the
agency or from outside the agency, and
are voluntary processes in terms of the
decision to participate, the type of
process used, and the content of the
final agreement. Federal agency
experience with ADR has demonstrated
that the use of these techniques can
result in more efficient resolution of
issues, more effective outcomes, and
improved relationships between the
agency and the other party.
On August 14, 1992 (57 FR 36678),
the NRC issued a general policy
statement which supports and
encourages the use of ADR in NRC
activities. On September 8, 2003, the
Commission approved an NRC staff
proposal to develop and implement a
pilot ADR Program to evaluate the use
of ADR in handling allegations or
findings of discrimination and other
wrongdoing. (see the staff requirements
memorandum (SRM) for SECY–03–
0115, ‘‘Alternative Dispute Resolution
Review Team (ART) Pilot Program
Recommendations for Using Alternative
Dispute Resolution (ADR) Techniques
in the Handling of Discrimination and
Other External Wrongdoing Issues’’
(ADAMS Accession No. ML030170277).
In response to the SRM, the NRC staff
proposed a pilot ADR Program to
evaluate the use of ADR in the
Enforcement Program in SECY–04–
0044, ‘‘Proposed Pilot Program for the
Use of Alternative Dispute Resolution in
the Enforcement Program,’’ dated March
12, 2004 (ADAMS Accession No.
ML040550473). The Commission
approved the pilot ADR Program
(August 13, 2004; 69 FR 50219), and the
NRC staff began implementing it in
September 2004.
In SECY–06–0102, ‘‘Evaluation of the
Pilot Program on the Use of Alternative
Dispute Resolution in the Allegation
and Enforcement Programs,’’ dated May
5, 2006 (ADAMS Accession No.
ML061110254), the NRC staff provided
the Commission with the results of the
evaluation of the pilot ADR Program.
The NRC staff concluded that
implementation of the pilot ADR
Program was successful. The Program
was effective, timely, and generally
viewed positively by both internal and
external stakeholders. Accordingly, the
staff indicated its intent to continue to
use ADR in both the Allegation and
Enforcement Programs while obtaining
Commission approval for the changes
necessary to formalize the use of ADR
in the Allegation and Enforcement
Policy documents. Since ADR program
implementation, the NRC has reached
settlement agreements with licensees (or
contractors) and individuals, and has
issued subsequent ADR confirmatory
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orders in more than 90 enforcement
cases.
On December 16, 2010, the NRC
Chairman issued a memorandum, ‘‘ADR
Implementation and Assessment’’
(ADAMS Accession No. ML12030A228)
tasking the NRC staff to conduct a
comprehensive review of the ADR
program, including determining if it
should be expanded. On September 6,
2011 (76 FR 55136), the NRC solicited
nominations of individuals to
participate on a panel to discuss ADR
program implementation and whether
changes could be made to make it more
effective, transparent, and efficient. On
October 17, 2011 (76 FR 64124), the
NRC announced its intention to hold a
public meeting to solicit feedback from
its stakeholders on the ADR Program.
During the November 8, 2011 public
meeting, the NRC external stakeholders
expressed support for the expansion of
the ADR Program to the extent possible.
For purposes of discussing the
expansion of the ADR program, it is
necessary to distinguish between the
two types of programs, early ADR and
post-investigation ADR. These programs
differ because of the parties involved. In
early ADR, a licensee or contractor
engages in mediation with its employee;
where as in post-investigation ADR, the
NRC engages in mediation with the
subject of a potential enforcement
action.
In SECY–12–0161, ‘‘Status Update,
Tasks Related to Alternative Dispute
Resolution in the Allegation and
Enforcement Programs,’’ dated
November 28, 2012 (ADAMS Accession
No. ML12321A145), the NRC staff
notified the Commission of its intent to
expand the scope of post-investigation
ADR and offer it as an option for
escalated non-willful (traditional)
enforcement cases with proposed civil
penalties for a 1-year pilot period. The
expansion of the Program does not
include violations associated with
findings assessed through the ROP. The
current program for post-investigation
ADR is limited to discrimination and
other wrongdoing cases.
At the completion of the 1-year
period, the NRC staff will evaluate the
results of the pilot ADR Program and
seek Commission approval for the
permanent inclusion in the Enforcement
Policy if the expanded scope is deemed
beneficial to the advancement of the
agency’s mission.
Paperwork Reduction Act Statement
This Notification does not contain any
information collections and, therefore,
is not subject to the requirements of the
Paperwork Reduction Act of 1995 (44
U.S.C. 3501 et seq.).
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Public Protection Notification
The NRC may not conduct or sponsor,
and a person is not required to respond
to, a request for information or an
information collection requirement
unless the requesting document
displays a currently valid OMB control
number.
Congressional Review Act
In accordance with the Congressional
Review Act of 1996, the NRC has
determined that this action is not a
major rule and has verified this
determination with the OMB Office of
Information and Regulatory Affairs.
Dated at Rockville, Maryland, this 25th day
of February 2013.
For the Nuclear Regulatory Commission.
Roy P. Zimmerman,
Director, Office of Enforcement.
[FR Doc. 2013–05306 Filed 3–6–13; 8:45 am]
BILLING CODE 7590–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–69011]
Topaz Exchange, LLC; Order Granting
Application for a Conditional
Exemption Pursuant to Section 36(a) of
the Exchange Act From Certain
Requirements of Rules 6a–1 and 6a–2
Under the Exchange Act
March 1, 2013.
I. Introduction
On July 3, 2012, Topaz Exchange, LLC
(‘‘Applicant’’) submitted to the
Securities and Exchange Commission
(‘‘Commission’’) an application on Form
1 under the Securities Exchange Act of
1934 (‘‘Exchange Act’’), to register as a
national securities exchange.1 In
1 On December 19, 2012, the Applicant submitted
Amendment No. 1 to its Form 1 application.
Amendment No. 1, among other things, includes
changes to the Limited Liability Company
Agreement and the Constitution of Topaz Exchange
concerning board composition and size, the initial
director election process, and the use of regulatory
funds. Amendment No. 1 also includes revisions to
proposed rules of Topaz Exchange to remove rules
relating to complex orders; to respond to comments
on the Form 1 application from Commission staff;
and to reflect recent changes to comparable rules of
International Securities Exchange, LLC (‘‘ISE’’).
Amendment No. 1 further provides additional
descriptions in the Form 1 application regarding
proposed allocation procedures, auction
mechanisms, execution of qualified contingent
crosses, and the initial director election process,
and removes references to complex orders. On
December 31, 2012, the Applicant submitted
Amendment No. 2 to its Form 1 application.
Amendment No. 2, among other things, provides
updated information regarding the board of
directors of ISE and the Corporate Governance
Committee of ISE and includes information
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addition, the Applicant, pursuant to
Rule 0–12 2 under the Exchange Act, has
requested an exemption under Section
36(a)(1) of the Exchange Act 3 from
certain requirements of Rules 6a–1(a)
and 6a–2 under the Exchange Act
(‘‘Exemption Request’’).4 This order
grants the Applicant’s request for
exemptive relief, subject to the
satisfaction of certain conditions, which
are outlined below.
II. Application for Conditional
Exemption From Certain Requirements
of Exchange Act Rules 6a–1 and 6a–2
A. Filing Requirements Under Exchange
Act Rule 6a–1(a)
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Exchange Act Rule 6a–1(a) requires an
applicant for registration as a national
securities exchange to file an
application with the Commission on
Form 1. Exhibit C to Form 1 requires the
applicant to provide certain information
with respect to each of its subsidiaries
and affiliates.5 For purposes of Form 1,
an ‘‘affiliate’’ is ‘‘[a]ny person that,
directly or indirectly, controls, is under
common control with, or is controlled
by, the national securities exchange
* * * including any employees.’’ 6
Form 1 defines ‘‘control’’ as ‘‘[t]he
power, directly or indirectly, to direct
the management or policies of a
company, whether through ownership
of securities, by contract, or otherwise
regarding Longitude S.A., a newly incorporated
affiliate of Topaz Exchange, which information
includes the Articles of Incorporation of Longitude
S.A. Amendment No. 2 also provides financial
information for Longitude S.A. Finally, Amendment
No. 2 provides an updated organizational chart that
reflects the affiliates of Topaz Exchange.
2 17 CFR 240.0–12.
3 15 U.S.C. 78mm(a)(1).
4 17 CFR 240.6a–1(a) and 6a–2. See letter from
Michael Simon, General Counsel, Secretary and
Chief Regulatory Officer, Topaz Exchange, LLC, to
Elizabeth Murphy, Secretary, Commission, dated
December 14, 2012.
5 Specifically, Exhibit C requires the applicant to
provide, for each subsidiary or affiliate, and for any
entity that operates an electronic trading system
used to effect transactions on the exchange: (1) The
name and address of the organization; (2) the form
of organization; (3) the name of the state and statute
citation under which it is organized, and the date
of its incorporation in its present form; (4) a brief
description of the nature and extent of the
affiliation; (5) a brief description of the
organization’s business or function; (6) a copy of the
organization’s constitution; (7) a copy of the
organization’s articles of incorporation or
association, including all amendments; (8) a copy
of the organization’s by-laws or corresponding rules
or instruments; (9) the name and title of the
organization’s present officers, governors, members
of all standing committees, or persons performing
similar functions; and (10) an indication of whether
the business or organization ceased to be associated
with the applicant during the previous year, and a
brief statement of the reasons for termination of the
association.
6 Form 1 Instructions, Explanation of Terms, 17
CFR 249.1.
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* * *’’ 7 Form 1 provides, further, that
any person that directly or indirectly
has the right to vote 25% or more of a
class of voting securities, or has the
power to sell or direct the sale of 25%
or more of a class of voting securities,
is presumed to control the entity.8
Exhibit D to Form 1 requires an
applicant for exchange registration to
provide unconsolidated financial
statements for the latest fiscal year for
each subsidiary or affiliate. Exhibit D
requires the financial statements to
include, at a minimum, a balance sheet
and an income statement with such
footnotes and other disclosures as are
necessary to avoid rendering the
financial statements misleading. Exhibit
D provides, in addition, that if any
affiliate or subsidiary of the applicant is
required by another Commission rule to
submit annual financial statements, a
statement to that effect, with a citation
to the other Commission rule, may be
provided in lieu of the financial
statements required in Exhibit D.
A Form 1 application is not
considered filed until all necessary
information, including financial
statements and other required
documents, have been furnished in the
proper form.9
B. Filing Requirements Under Exchange
Act Rule 6a–2
Exchange Act Rule 6a–2(a)(2) requires
a national securities exchange to update
the information provided in Exhibit C
within 10 days of any action that causes
the information provided in Exhibit C to
become inaccurate or incomplete. In
addition, Exchange Act Rule 6a–2(b)(1)
requires a national securities exchange
to file Exhibit D on or before June 30 of
each year, and Exchange Act Rule 6a–
2(c) requires a national securities
exchange to file Exhibit C every three
years.
C. Exemption Request
On December 14, 2012, the Applicant
requested that the Commission grant an
exemption under Section 36 of the
Exchange Act, subject to the conditions
set forth below, from the requirement
under Exchange Act Rule 6a–1 to file
the information requested in Exhibits C
and D to Form 1 for the ‘‘Foreign
Indirect Affiliates,’’ as defined below, of
7 Id.
8 Id.
9 17 CFR 202.3(b)(2). See also 17 CFR 240.0–3(a).
Defective Form 1 applications ‘‘may be returned
with a request for correction or held until corrected
before being accepted as a filing.’’ See 17 CFR
202.3(b)(2). See also Securities Exchange Act
Release No. 40760 (Dec. 8, 1998), 63 FR 70844,
70881 (Dec. 22, 1998) (‘‘Regulation ATS Adopting
Release’’) at note 329 and accompanying text.
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14845
the Applicant.10 In addition, the
Applicant requested an exemption,
subject to certain conditions, with
respect to the Foreign Indirect Affiliates
from the requirements under: (1)
Exchange Act Rule 6a–2(a)(2) to amend
Exhibit C within 10 days if the
information in Exhibit C becomes
inaccurate or incomplete; and (2)
Exchange Act Rules 6a–2(b)(1) and (c) to
file periodic updates to Exhibits C and
D.
The Applicant is a wholly-owned
subsidiary of International Securities
Exchange Holdings, Inc. (‘‘ISE
Holdings’’).11 ISE Holdings is a whollyowned subsidiary of U.S. Exchange
Holdings, Inc., which is wholly-owned
by a German stock corporation, Eurex
Frankfurt AG (‘‘Eurex Frankfurt’’). Eurex
Frankfurt is wholly-owned by a Swiss
stock corporation, Eurex Zurich AG
(‘‘Eurex Zurich’’), which, in turn, is fifty
¨
percent (50%) owned by Deutsche Borse
¨
AG (‘‘Deutsche Borse’’) and fifty percent
(50%) owned by Eurex Global
¨
Derivatives AG (‘‘EGD’’). Deutsche Borse
has one hundred percent (100%) direct
ownership interest in EGD. According to
the Applicant, the parent ownership
structure of U.S. Exchange Holdings,
Inc. is comprised entirely of foreign
entities, Eurex Frankfurt, Eurex Zurich,
¨
Deutsche Borse and EGD (collectively,
the ‘‘Foreign Direct Affiliates’’), which
in turn hold ownership interests, either
directly or indirectly, in excess of 25
percent (25%) in a large number of other
foreign entities, some of which also own
interests in other entities in excess of 25
percent (25%) as well (such Foreign
Direct Affiliate-owned entities are
referred to, collectively, as the ‘‘Foreign
Indirect Affiliates’’).12
Because of the limited and indirect
nature of its connection to the Foreign
Indirect Affiliates, the Applicant
believes that the corporate and financial
information of the Foreign Indirect
Affiliates required by Exhibits C and D
of Form 1 would have little relevance to
the Commission’s review of the
Applicant’s Form 1 application or to the
Commission’s ongoing oversight of the
Applicant as a national securities
exchange if the Commission were to
approve the Applicant’s Form 1
application, as amended.13 In this
regard, the Exemption Request states
that the Foreign Indirect Affiliates have
no ability to influence the management,
policies, or finances of the Applicant
and no obligation to provide funding to,
or ability to materially affect the funding
10 See
Exemption Request, supra note 4.
Exemption Request, supra note 4, at 2.
12 See id.
13 See id.
11 See
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of, the Applicant.14 The Exemption
Request also states that: (1) The Foreign
Indirect Affiliates have no ownership
interest in the Applicant or in any of the
controlling shareholders of the
Applicant; and (2) there are no
commercial dealings between the
Applicant and the Foreign Indirect
Affiliates.15 Further, the Exemption
Request states that obtaining detailed
corporate and financial information
with respect to the Foreign Indirect
Affiliates (1) is unnecessary for the
protection of investors and the public
interest and (2) would be unduly
burdensome and inefficient because
these affiliates are located in foreign
jurisdictions and the disclosure of such
information could implicate foreign
information sharing restrictions in such
jurisdictions.16
As a condition to the granting of
exemptive relief, the Applicant has
agreed to provide: (i) A listing of the
names of the Foreign Indirect Affiliates;
(ii) an organizational chart setting forth
the affiliation of the Foreign Indirect
Affiliates and the Foreign Direct
Affiliates and the Applicant; and (iii) in
Exhibit C of the Applicant’s Form 1
application, a description of the nature
of the Foreign Indirect Affiliates’
affiliation with the Foreign Direct
Affiliates and the Applicant. In
addition, as a condition to the granting
of exemptive relief from the
requirements of Exchange Act Rule 6a–
2(a)(2), 6a–2(b)(1), and 6a–2(c), as
described above, the Applicant has
agreed to provide amendments to the
information required under conditions
(i) through (iii) above on or before June
30th of each year. Further, the
Applicant notes that it will provide the
information required by Exhibits C and
D for all of its affiliates other than the
Foreign Indirect Affiliates, including the
Foreign Direct Affiliates.17
III. Order Granting Conditional Section
36 Exemption
Section 6 of the Exchange Act 18 sets
forth a procedure for an exchange to
register as a national securities
exchange.19 Exchange Act Rule 6a–
14 See
Exemption Request, supra note 4, at 2–3.
Exemption Request, supra note 4, at 3.
16 See id. The Applicant also believes that
providing the information required by Exhibits C
and D with respect to the Foreign Indirect Affiliates
could raise confidentiality concerns because many
of the Foreign Indirect Affiliates are not public
companies. Id.
17 See Exemption Request, supra note 4, at 3.
18 15 U.S.C. 78f.
19 Specifically, Section 6(a) of the Exchange Act
states that ‘‘[a]n exchange may be registered as a
national securities exchange * * * by filing with
the Commission an application for registration in
such form as the Commission, by rule, may
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15 See
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1(a) 20 requires an application for
registration as a national securities
exchange to be filed on Form 1 in
accordance with the instructions in
Form 1. A Form 1 application is not
considered filed until all necessary
information, including financial
statements and other required
documents, has been furnished in the
proper form.21 Exchange Act Rule 6a–2
establishes ongoing requirements to file
certain amendments to Form 1.
Section 36(a)(1) of the Exchange Act
provides that ‘‘the Commission, by rule,
regulation, or order, may conditionally
or unconditionally exempt any person,
security, or transaction, or any class or
classes of persons, securities, or
transactions, from any provision or
provisions of [the Exchange Act] or of
any rule or regulation thereunder, to the
extent that such exemption is necessary
or appropriate in the public interest,
and is consistent with the protection of
investors.’’ 22
For the reasons discussed below, the
Commission believes that it is
appropriate in the public interest and
consistent with the protection of
investors to exempt the Applicant from
the requirement under Exchange Act
Rule 6a–1 to provide the information
required in Exhibits C and D to Form 1
with respect to the Foreign Indirect
Affiliates, subject to the following
conditions:
(1) The Applicant must provide a list
of the names of the Foreign Indirect
Affiliates;
(2) the Applicant must provide an
organizational chart setting forth the
affiliation of the Foreign Indirect
Affiliates and the Foreign Direct
Affiliates and the Applicant; and
(3) as part of Exhibit C to the
Applicant’s Form 1 Application, the
Applicant must provide a description of
the nature of the affiliation between the
Foreign Indirect Affiliates and the
Foreign Direct Affiliates and the
Applicant.
The Commission believes, further,
that it is appropriate in the public
interest and consistent with the
protection of investors to exempt the
Applicant, with respect to the Foreign
Indirect Affiliates, from the
requirements under: (a) Exchange Act
Rule 6a–2(a)(2) to amend Exhibit C
prescribe containing the rules of the exchange and
such other information and documents as the
Commission, by rule, may prescribe as necessary or
appropriate in the public interest or for the
protection of investors.’’ Section 6 of the Exchange
Act also sets forth various requirements to which
a national securities exchange is subject.
20 17 CFR 240.6a–1(a).
21 17 CFR 202.3(b)(2). See also supra note 9.
22 15 U.S.C. 78mm(a)(1).
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within 10 days of any action that
renders the information in Exhibit C
inaccurate or incomplete; (b) Exchange
Act Rules 6a–2(c) to provide periodic
updates of Exhibit C; and (c) Exchange
Act Rules 6a–2(b)(1) to provide periodic
updates of Exhibit D, subject to the
condition that the Applicant provide
amendments to the information required
under conditions (1) through (3) above
on or before June 30th of each year.
As part of an application for exchange
registration, the information included in
Exhibits C and D is designed to help the
Commission make the determinations
required under Sections 6(b) and 19(a)
of the Exchange Act 23 with respect to
the application. The updated Exhibit C
and D information required under
Exchange Act Rule 6a–2 is designed to
help the Commission exercise its
oversight responsibilities with respect to
national securities exchanges.
Specifically, Exhibit D is designed to
provide the Commission with
information concerning the financial
status of an exchange and its affiliates
and subsidiaries,24 and Exhibit C
provides the Commission with the
names and organizational documents of
these affiliates and subsidiaries.25 Such
information is designed to help the
Commission determine whether an
applicant for exchange registration
would have the ability to carry out its
obligations under the Exchange Act, and
whether a national securities exchange
continues to have the ability to carry out
its obligations under the Exchange Act.
Since the most recent amendments to
Form 1 in 1998,26 many national
securities exchanges that previously
were member-owned organizations with
few affiliated entities have
demutualized. Some of these
demutualized exchanges have been
consolidated under holding companies
with numerous affiliates that, in some
cases, have only a limited and indirect
connection to the national securities
exchange, with no ability to influence
the management or policies of the
registered exchange and no obligation to
fund, or to materially affect the funding
of, the registered exchange. The
Commission believes that, for these
affiliated entities, the information
required under Exhibits C and D would
have limited relevance to the
Commission’s review of an application
23 15
U.S.C. 78f(b) and 78s(a).
Securities Exchange Act Release No. 18843
(June 25, 1982), 47 FR 29259 (July 6, 1982)
(proposing amendments to Form 1); see also Form
1, 17 CFR 249.1, and supra Section II.A.
25 Form 1, 17 CFR 249.1. See also supra note 5.
26 See Regulation ATS Adopting Release, supra
note 9.
24 See
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for exchange registration or to its
oversight of a registered exchange.
Based on the Applicant’s
representations, the indirect nature of
the relationship between the Applicant
and the Foreign Indirect Affiliates, and
the information that the Applicant will
provide with respect to the Foreign
Direct Affiliates and the Foreign Indirect
Affiliates, the Commission believes that
it will have sufficient information to
review the Applicant’s Form 1
application and to make the
determinations required under Sections
6(b) and 19(a) of the Exchange Act with
respect to its application for registration
as a national securities exchange.27 The
Commission believes, further, that it
will have the information necessary to
oversee the Applicant’s activities as a
national securities exchange if the
Commission were to approve the
Applicant’s Form 1 application. In
particular, the Commission notes that
the Applicant has represented that it
would have no direct connection to the
Foreign Indirect Affiliates, that the
Foreign Indirect Affiliates would have
no ability to influence the management
or policies of the Applicant, and that the
Foreign Indirect Affiliates would have
no obligation to fund, or ability to
materially affect the funding of, the
Applicant. In addition, the Commission
notes that the Applicant represented
that: (1) The Foreign Indirect Affiliates
have no ownership interest in the
Applicant or in any of the controlling
equity holders of the Applicant; and (2)
there are no commercial dealings
between the Applicant and the Foreign
Indirect Affiliates.28
Given the limited and indirect
relationship between the Applicant and
the Foreign Indirect Affiliates, as
described above, the Commission
believes that the detailed corporate and
financial information required in
Exhibits C and D with respect to the
Foreign Indirect Affiliates is
unnecessary for the Commission’s
review of the Applicant’s Form 1
application and would be unnecessary
for the Commission’s oversight of the
Applicant as a registered national
securities exchange following any
Commission approval of its Form 1
application.
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27 15
U.S.C. 78f(b) and 78s(a). Section 6(b) of the
Exchange Act enumerates certain determinations
that the Commission must make with respect to an
exchange before granting the registration of the
exchange as a national securities exchange. The
Commission will not grant an exchange registration
as a national securities exchange unless the
Commission determines that the exchange meets
these requirements. See Regulation ATS Adopting
Release, supra note 9, at IV.B.
28 See Exemption Request, supra note 4, at 3.
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For the reasons discussed above, the
Commission finds that the conditional
exemptive relief requested by the
Applicant is appropriate in the public
interest and is consistent with the
protection of investors.
It is ordered, pursuant to Section 36
of the Exchange Act,29 that the
Applicant is exempt from the
requirements to: (1) Include in its Form
1 application the information required
in Exhibits C and D to Form 1 with
respect to the Foreign Indirect Affiliates;
and (2) with respect to the Foreign
Indirect Affiliates, update the
information in Exhibits C and D to Form
1 as required by Exchange Act Rules 6a–
2(a)(2), 6a–2(b)(1), and 6a–2(c) subject to
the following conditions:
(i) The Applicant must provide a list
of the names of the Foreign Indirect
Affiliates;
(ii) the Applicant must provide an
organizational chart setting forth the
affiliation of the Foreign Indirect
Affiliates and the Foreign Direct
Affiliates and the Applicant; and
(iii) as part of Exhibit C to the
Applicant’s Form 1 Application, the
Applicant must provide a description of
the nature of the affiliation between the
Foreign Indirect Affiliates and the
Foreign Direct Affiliates and the
Applicant.
In addition, the Applicant must
provide amendments to the information
required under conditions (i) through
(iii) above on or before June 30th of each
year.
By the Commission.
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–05241 Filed 3–6–13; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–69012; File No. 10–209]
Topaz Exchange, LLC; Notice of Filing
of Application for Registration as a
National Securities Exchange Under
Section 6 of the Securities Exchange
Act of 1934
March 1, 2013.
On July 3, 2012, Topaz Exchange, LLC
(‘‘Topaz Exchange’’ or ‘‘Applicant’’)
submitted to the Securities and
Exchange Commission (‘‘Commission’’)
a Form 1 application under the
Securities Exchange Act of 1934
(‘‘Exchange Act’’), seeking registration
as a national securities exchange under
29 15
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14847
Section 6 of the Exchange Act.1 On
December 19, 2012, Topaz Exchange
submitted Amendment No. 1 to its Form
1 application.2 On December 31, 2012,
Topaz Exchange submitted Amendment
No. 2 to its Form 1 application.3
The Commission is publishing this
notice to solicit comments on Topaz
Exchange’s Form 1 application, as
amended. The Commission will take
any comments it receives into
consideration in making its
determination about whether to grant
Topaz Exchange’s request to be
registered as a national securities
exchange. The Commission will grant
the registration if it finds that the
requirements of the Exchange Act and
the rules and regulations thereunder
with respect to Topaz Exchange are
satisfied.4
The Applicant’s Form 1 application,
as amended, provides detailed
information on how Topaz Exchange
proposes to satisfy the requirements of
the Exchange Act. Topaz Exchange
would be wholly-owned by its parent
company, International Securities
Exchange Holdings, Inc. (‘‘ISE
Holdings’’), which also is the parent
company of an existing national
securities exchange, ISE. Topaz
Exchange would operate a fully
automated electronic trading platform
for the trading of listed options and
would not maintain a physical trading
floor. Liquidity would be derived from
orders to buy and orders to sell
1 On March 1, 2013, the Commission issued an
order granting Topaz Exchange exemptive relief,
subject to certain conditions, in connection with the
filing of its Form 1 application. See Securities
Exchange Act Release No. 69011. Because the
Applicant’s Form 1 application was incomplete
without the exemptive relief, the date of filing of
such application is March 1, 2013.
2 Amendment No. 1, among other things, includes
changes to the Limited Liability Company
Agreement and the Constitution of Topaz Exchange
concerning board composition and size, the initial
director election process, and the use of regulatory
funds. Amendment No. 1 also includes revisions to
proposed rules of Topaz Exchange to remove rules
relating to complex orders; to respond to comments
on the Form 1 application from Commission staff;
and to reflect recent changes to comparable rules of
International Securities Exchange, LLC (‘‘ISE’’).
Amendment No. 1 further provides additional
descriptions in the Form 1 application regarding
proposed allocation procedures, auction
mechanisms, execution of qualified contingent
crosses, and the initial director election process,
and removes references to complex orders.
3 Amendment No. 2, among other things, provides
updated information regarding the board of
directors of ISE and the Corporate Governance
Committee of ISE and includes information
regarding Longitude S.A., a newly incorporated
affiliate of Topaz Exchange, which information
includes the Articles of Incorporation of Longitude
S.A. Amendment No. 2 also provides financial
information for Longitude S.A. Finally, Amendment
No. 2 provides an updated organizational chart that
reflects the affiliates of Topaz Exchange.
4 15 U.S.C. 78s(a).
E:\FR\FM\07MRN1.SGM
07MRN1
]]>Agencies
[Federal Register Volume 78, Number 45 (Thursday, March 7, 2013)]
[Notices]
[Pages 14844-14847]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-05241]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-69011]
Topaz Exchange, LLC; Order Granting Application for a Conditional
Exemption Pursuant to Section 36(a) of the Exchange Act From Certain
Requirements of Rules 6a-1 and 6a-2 Under the Exchange Act
March 1, 2013.
I. Introduction
On July 3, 2012, Topaz Exchange, LLC (``Applicant'') submitted to
the Securities and Exchange Commission (``Commission'') an application
on Form 1 under the Securities Exchange Act of 1934 (``Exchange Act''),
to register as a national securities exchange.\1\ In
[[Page 14845]]
addition, the Applicant, pursuant to Rule 0-12 \2\ under the Exchange
Act, has requested an exemption under Section 36(a)(1) of the Exchange
Act \3\ from certain requirements of Rules 6a-1(a) and 6a-2 under the
Exchange Act (``Exemption Request'').\4\ This order grants the
Applicant's request for exemptive relief, subject to the satisfaction
of certain conditions, which are outlined below.
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\1\ On December 19, 2012, the Applicant submitted Amendment No.
1 to its Form 1 application. Amendment No. 1, among other things,
includes changes to the Limited Liability Company Agreement and the
Constitution of Topaz Exchange concerning board composition and
size, the initial director election process, and the use of
regulatory funds. Amendment No. 1 also includes revisions to
proposed rules of Topaz Exchange to remove rules relating to complex
orders; to respond to comments on the Form 1 application from
Commission staff; and to reflect recent changes to comparable rules
of International Securities Exchange, LLC (``ISE''). Amendment No. 1
further provides additional descriptions in the Form 1 application
regarding proposed allocation procedures, auction mechanisms,
execution of qualified contingent crosses, and the initial director
election process, and removes references to complex orders. On
December 31, 2012, the Applicant submitted Amendment No. 2 to its
Form 1 application. Amendment No. 2, among other things, provides
updated information regarding the board of directors of ISE and the
Corporate Governance Committee of ISE and includes information
regarding Longitude S.A., a newly incorporated affiliate of Topaz
Exchange, which information includes the Articles of Incorporation
of Longitude S.A. Amendment No. 2 also provides financial
information for Longitude S.A. Finally, Amendment No. 2 provides an
updated organizational chart that reflects the affiliates of Topaz
Exchange.
\2\ 17 CFR 240.0-12.
\3\ 15 U.S.C. 78mm(a)(1).
\4\ 17 CFR 240.6a-1(a) and 6a-2. See letter from Michael Simon,
General Counsel, Secretary and Chief Regulatory Officer, Topaz
Exchange, LLC, to Elizabeth Murphy, Secretary, Commission, dated
December 14, 2012.
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II. Application for Conditional Exemption From Certain Requirements of
Exchange Act Rules 6a-1 and 6a-2
A. Filing Requirements Under Exchange Act Rule 6a-1(a)
Exchange Act Rule 6a-1(a) requires an applicant for registration as
a national securities exchange to file an application with the
Commission on Form 1. Exhibit C to Form 1 requires the applicant to
provide certain information with respect to each of its subsidiaries
and affiliates.\5\ For purposes of Form 1, an ``affiliate'' is ``[a]ny
person that, directly or indirectly, controls, is under common control
with, or is controlled by, the national securities exchange * * *
including any employees.'' \6\ Form 1 defines ``control'' as ``[t]he
power, directly or indirectly, to direct the management or policies of
a company, whether through ownership of securities, by contract, or
otherwise * * *'' \7\ Form 1 provides, further, that any person that
directly or indirectly has the right to vote 25% or more of a class of
voting securities, or has the power to sell or direct the sale of 25%
or more of a class of voting securities, is presumed to control the
entity.\8\
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\5\ Specifically, Exhibit C requires the applicant to provide,
for each subsidiary or affiliate, and for any entity that operates
an electronic trading system used to effect transactions on the
exchange: (1) The name and address of the organization; (2) the form
of organization; (3) the name of the state and statute citation
under which it is organized, and the date of its incorporation in
its present form; (4) a brief description of the nature and extent
of the affiliation; (5) a brief description of the organization's
business or function; (6) a copy of the organization's constitution;
(7) a copy of the organization's articles of incorporation or
association, including all amendments; (8) a copy of the
organization's by-laws or corresponding rules or instruments; (9)
the name and title of the organization's present officers,
governors, members of all standing committees, or persons performing
similar functions; and (10) an indication of whether the business or
organization ceased to be associated with the applicant during the
previous year, and a brief statement of the reasons for termination
of the association.
\6\ Form 1 Instructions, Explanation of Terms, 17 CFR 249.1.
\7\ Id.
\8\ Id.
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Exhibit D to Form 1 requires an applicant for exchange registration
to provide unconsolidated financial statements for the latest fiscal
year for each subsidiary or affiliate. Exhibit D requires the financial
statements to include, at a minimum, a balance sheet and an income
statement with such footnotes and other disclosures as are necessary to
avoid rendering the financial statements misleading. Exhibit D
provides, in addition, that if any affiliate or subsidiary of the
applicant is required by another Commission rule to submit annual
financial statements, a statement to that effect, with a citation to
the other Commission rule, may be provided in lieu of the financial
statements required in Exhibit D.
A Form 1 application is not considered filed until all necessary
information, including financial statements and other required
documents, have been furnished in the proper form.\9\
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\9\ 17 CFR 202.3(b)(2). See also 17 CFR 240.0-3(a). Defective
Form 1 applications ``may be returned with a request for correction
or held until corrected before being accepted as a filing.'' See 17
CFR 202.3(b)(2). See also Securities Exchange Act Release No. 40760
(Dec. 8, 1998), 63 FR 70844, 70881 (Dec. 22, 1998) (``Regulation ATS
Adopting Release'') at note 329 and accompanying text.
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B. Filing Requirements Under Exchange Act Rule 6a-2
Exchange Act Rule 6a-2(a)(2) requires a national securities
exchange to update the information provided in Exhibit C within 10 days
of any action that causes the information provided in Exhibit C to
become inaccurate or incomplete. In addition, Exchange Act Rule 6a-
2(b)(1) requires a national securities exchange to file Exhibit D on or
before June 30 of each year, and Exchange Act Rule 6a-2(c) requires a
national securities exchange to file Exhibit C every three years.
C. Exemption Request
On December 14, 2012, the Applicant requested that the Commission
grant an exemption under Section 36 of the Exchange Act, subject to the
conditions set forth below, from the requirement under Exchange Act
Rule 6a-1 to file the information requested in Exhibits C and D to Form
1 for the ``Foreign Indirect Affiliates,'' as defined below, of the
Applicant.\10\ In addition, the Applicant requested an exemption,
subject to certain conditions, with respect to the Foreign Indirect
Affiliates from the requirements under: (1) Exchange Act Rule 6a-
2(a)(2) to amend Exhibit C within 10 days if the information in Exhibit
C becomes inaccurate or incomplete; and (2) Exchange Act Rules 6a-
2(b)(1) and (c) to file periodic updates to Exhibits C and D.
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\10\ See Exemption Request, supra note 4.
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The Applicant is a wholly-owned subsidiary of International
Securities Exchange Holdings, Inc. (``ISE Holdings'').\11\ ISE Holdings
is a wholly-owned subsidiary of U.S. Exchange Holdings, Inc., which is
wholly-owned by a German stock corporation, Eurex Frankfurt AG (``Eurex
Frankfurt''). Eurex Frankfurt is wholly-owned by a Swiss stock
corporation, Eurex Zurich AG (``Eurex Zurich''), which, in turn, is
fifty percent (50%) owned by Deutsche B[ouml]rse AG (``Deutsche
B[ouml]rse'') and fifty percent (50%) owned by Eurex Global Derivatives
AG (``EGD''). Deutsche B[ouml]rse has one hundred percent (100%) direct
ownership interest in EGD. According to the Applicant, the parent
ownership structure of U.S. Exchange Holdings, Inc. is comprised
entirely of foreign entities, Eurex Frankfurt, Eurex Zurich, Deutsche
B[ouml]rse and EGD (collectively, the ``Foreign Direct Affiliates''),
which in turn hold ownership interests, either directly or indirectly,
in excess of 25 percent (25%) in a large number of other foreign
entities, some of which also own interests in other entities in excess
of 25 percent (25%) as well (such Foreign Direct Affiliate-owned
entities are referred to, collectively, as the ``Foreign Indirect
Affiliates'').\12\
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\11\ See Exemption Request, supra note 4, at 2.
\12\ See id.
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Because of the limited and indirect nature of its connection to the
Foreign Indirect Affiliates, the Applicant believes that the corporate
and financial information of the Foreign Indirect Affiliates required
by Exhibits C and D of Form 1 would have little relevance to the
Commission's review of the Applicant's Form 1 application or to the
Commission's ongoing oversight of the Applicant as a national
securities exchange if the Commission were to approve the Applicant's
Form 1 application, as amended.\13\ In this regard, the Exemption
Request states that the Foreign Indirect Affiliates have no ability to
influence the management, policies, or finances of the Applicant and no
obligation to provide funding to, or ability to materially affect the
funding
[[Page 14846]]
of, the Applicant.\14\ The Exemption Request also states that: (1) The
Foreign Indirect Affiliates have no ownership interest in the Applicant
or in any of the controlling shareholders of the Applicant; and (2)
there are no commercial dealings between the Applicant and the Foreign
Indirect Affiliates.\15\ Further, the Exemption Request states that
obtaining detailed corporate and financial information with respect to
the Foreign Indirect Affiliates (1) is unnecessary for the protection
of investors and the public interest and (2) would be unduly burdensome
and inefficient because these affiliates are located in foreign
jurisdictions and the disclosure of such information could implicate
foreign information sharing restrictions in such jurisdictions.\16\
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\13\ See id.
\14\ See Exemption Request, supra note 4, at 2-3.
\15\ See Exemption Request, supra note 4, at 3.
\16\ See id. The Applicant also believes that providing the
information required by Exhibits C and D with respect to the Foreign
Indirect Affiliates could raise confidentiality concerns because
many of the Foreign Indirect Affiliates are not public companies.
Id.
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As a condition to the granting of exemptive relief, the Applicant
has agreed to provide: (i) A listing of the names of the Foreign
Indirect Affiliates; (ii) an organizational chart setting forth the
affiliation of the Foreign Indirect Affiliates and the Foreign Direct
Affiliates and the Applicant; and (iii) in Exhibit C of the Applicant's
Form 1 application, a description of the nature of the Foreign Indirect
Affiliates' affiliation with the Foreign Direct Affiliates and the
Applicant. In addition, as a condition to the granting of exemptive
relief from the requirements of Exchange Act Rule 6a-2(a)(2), 6a-
2(b)(1), and 6a-2(c), as described above, the Applicant has agreed to
provide amendments to the information required under conditions (i)
through (iii) above on or before June 30th of each year. Further, the
Applicant notes that it will provide the information required by
Exhibits C and D for all of its affiliates other than the Foreign
Indirect Affiliates, including the Foreign Direct Affiliates.\17\
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\17\ See Exemption Request, supra note 4, at 3.
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III. Order Granting Conditional Section 36 Exemption
Section 6 of the Exchange Act \18\ sets forth a procedure for an
exchange to register as a national securities exchange.\19\ Exchange
Act Rule 6a-1(a) \20\ requires an application for registration as a
national securities exchange to be filed on Form 1 in accordance with
the instructions in Form 1. A Form 1 application is not considered
filed until all necessary information, including financial statements
and other required documents, has been furnished in the proper
form.\21\ Exchange Act Rule 6a-2 establishes ongoing requirements to
file certain amendments to Form 1.
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\18\ 15 U.S.C. 78f.
\19\ Specifically, Section 6(a) of the Exchange Act states that
``[a]n exchange may be registered as a national securities exchange
* * * by filing with the Commission an application for registration
in such form as the Commission, by rule, may prescribe containing
the rules of the exchange and such other information and documents
as the Commission, by rule, may prescribe as necessary or
appropriate in the public interest or for the protection of
investors.'' Section 6 of the Exchange Act also sets forth various
requirements to which a national securities exchange is subject.
\20\ 17 CFR 240.6a-1(a).
\21\ 17 CFR 202.3(b)(2). See also supra note 9.
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Section 36(a)(1) of the Exchange Act provides that ``the
Commission, by rule, regulation, or order, may conditionally or
unconditionally exempt any person, security, or transaction, or any
class or classes of persons, securities, or transactions, from any
provision or provisions of [the Exchange Act] or of any rule or
regulation thereunder, to the extent that such exemption is necessary
or appropriate in the public interest, and is consistent with the
protection of investors.'' \22\
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\22\ 15 U.S.C. 78mm(a)(1).
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For the reasons discussed below, the Commission believes that it is
appropriate in the public interest and consistent with the protection
of investors to exempt the Applicant from the requirement under
Exchange Act Rule 6a-1 to provide the information required in Exhibits
C and D to Form 1 with respect to the Foreign Indirect Affiliates,
subject to the following conditions:
(1) The Applicant must provide a list of the names of the Foreign
Indirect Affiliates;
(2) the Applicant must provide an organizational chart setting
forth the affiliation of the Foreign Indirect Affiliates and the
Foreign Direct Affiliates and the Applicant; and
(3) as part of Exhibit C to the Applicant's Form 1 Application, the
Applicant must provide a description of the nature of the affiliation
between the Foreign Indirect Affiliates and the Foreign Direct
Affiliates and the Applicant.
The Commission believes, further, that it is appropriate in the
public interest and consistent with the protection of investors to
exempt the Applicant, with respect to the Foreign Indirect Affiliates,
from the requirements under: (a) Exchange Act Rule 6a-2(a)(2) to amend
Exhibit C within 10 days of any action that renders the information in
Exhibit C inaccurate or incomplete; (b) Exchange Act Rules 6a-2(c) to
provide periodic updates of Exhibit C; and (c) Exchange Act Rules 6a-
2(b)(1) to provide periodic updates of Exhibit D, subject to the
condition that the Applicant provide amendments to the information
required under conditions (1) through (3) above on or before June 30th
of each year.
As part of an application for exchange registration, the
information included in Exhibits C and D is designed to help the
Commission make the determinations required under Sections 6(b) and
19(a) of the Exchange Act \23\ with respect to the application. The
updated Exhibit C and D information required under Exchange Act Rule
6a-2 is designed to help the Commission exercise its oversight
responsibilities with respect to national securities exchanges.
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\23\ 15 U.S.C. 78f(b) and 78s(a).
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Specifically, Exhibit D is designed to provide the Commission with
information concerning the financial status of an exchange and its
affiliates and subsidiaries,\24\ and Exhibit C provides the Commission
with the names and organizational documents of these affiliates and
subsidiaries.\25\ Such information is designed to help the Commission
determine whether an applicant for exchange registration would have the
ability to carry out its obligations under the Exchange Act, and
whether a national securities exchange continues to have the ability to
carry out its obligations under the Exchange Act.
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\24\ See Securities Exchange Act Release No. 18843 (June 25,
1982), 47 FR 29259 (July 6, 1982) (proposing amendments to Form 1);
see also Form 1, 17 CFR 249.1, and supra Section II.A.
\25\ Form 1, 17 CFR 249.1. See also supra note 5.
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Since the most recent amendments to Form 1 in 1998,\26\ many
national securities exchanges that previously were member-owned
organizations with few affiliated entities have demutualized. Some of
these demutualized exchanges have been consolidated under holding
companies with numerous affiliates that, in some cases, have only a
limited and indirect connection to the national securities exchange,
with no ability to influence the management or policies of the
registered exchange and no obligation to fund, or to materially affect
the funding of, the registered exchange. The Commission believes that,
for these affiliated entities, the information required under Exhibits
C and D would have limited relevance to the Commission's review of an
application
[[Page 14847]]
for exchange registration or to its oversight of a registered exchange.
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\26\ See Regulation ATS Adopting Release, supra note 9.
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Based on the Applicant's representations, the indirect nature of
the relationship between the Applicant and the Foreign Indirect
Affiliates, and the information that the Applicant will provide with
respect to the Foreign Direct Affiliates and the Foreign Indirect
Affiliates, the Commission believes that it will have sufficient
information to review the Applicant's Form 1 application and to make
the determinations required under Sections 6(b) and 19(a) of the
Exchange Act with respect to its application for registration as a
national securities exchange.\27\ The Commission believes, further,
that it will have the information necessary to oversee the Applicant's
activities as a national securities exchange if the Commission were to
approve the Applicant's Form 1 application. In particular, the
Commission notes that the Applicant has represented that it would have
no direct connection to the Foreign Indirect Affiliates, that the
Foreign Indirect Affiliates would have no ability to influence the
management or policies of the Applicant, and that the Foreign Indirect
Affiliates would have no obligation to fund, or ability to materially
affect the funding of, the Applicant. In addition, the Commission notes
that the Applicant represented that: (1) The Foreign Indirect
Affiliates have no ownership interest in the Applicant or in any of the
controlling equity holders of the Applicant; and (2) there are no
commercial dealings between the Applicant and the Foreign Indirect
Affiliates.\28\
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\27\ 15 U.S.C. 78f(b) and 78s(a). Section 6(b) of the Exchange
Act enumerates certain determinations that the Commission must make
with respect to an exchange before granting the registration of the
exchange as a national securities exchange. The Commission will not
grant an exchange registration as a national securities exchange
unless the Commission determines that the exchange meets these
requirements. See Regulation ATS Adopting Release, supra note 9, at
IV.B.
\28\ See Exemption Request, supra note 4, at 3.
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Given the limited and indirect relationship between the Applicant
and the Foreign Indirect Affiliates, as described above, the Commission
believes that the detailed corporate and financial information required
in Exhibits C and D with respect to the Foreign Indirect Affiliates is
unnecessary for the Commission's review of the Applicant's Form 1
application and would be unnecessary for the Commission's oversight of
the Applicant as a registered national securities exchange following
any Commission approval of its Form 1 application.
For the reasons discussed above, the Commission finds that the
conditional exemptive relief requested by the Applicant is appropriate
in the public interest and is consistent with the protection of
investors.
It is ordered, pursuant to Section 36 of the Exchange Act,\29\ that
the Applicant is exempt from the requirements to: (1) Include in its
Form 1 application the information required in Exhibits C and D to Form
1 with respect to the Foreign Indirect Affiliates; and (2) with respect
to the Foreign Indirect Affiliates, update the information in Exhibits
C and D to Form 1 as required by Exchange Act Rules 6a-2(a)(2), 6a-
2(b)(1), and 6a-2(c) subject to the following conditions:
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\29\ 15 U.S.C. 78mm.
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(i) The Applicant must provide a list of the names of the Foreign
Indirect Affiliates;
(ii) the Applicant must provide an organizational chart setting
forth the affiliation of the Foreign Indirect Affiliates and the
Foreign Direct Affiliates and the Applicant; and
(iii) as part of Exhibit C to the Applicant's Form 1 Application,
the Applicant must provide a description of the nature of the
affiliation between the Foreign Indirect Affiliates and the Foreign
Direct Affiliates and the Applicant.
In addition, the Applicant must provide amendments to the
information required under conditions (i) through (iii) above on or
before June 30th of each year.
By the Commission.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-05241 Filed 3-6-13; 8:45 am]
BILLING CODE 8011-01-P
