Self-Regulatory Organizations; International Securities Exchange, LLC; Notice of Filing of Proposed Rule Change, as Modified by Amendment No. 1 Thereto, Relating to a Corporate Transaction Involving Its Indirect Parent, 67224-67229 [2014-26690]

Download as PDF 67224 Federal Register / Vol. 79, No. 218 / Wednesday, November 12, 2014 / Notices SECURITIES AND EXCHANGE COMMISSION [Release No. 34–73530; File No. SR–ISE– 2014–44] Self-Regulatory Organizations; International Securities Exchange, LLC; Notice of Filing of Proposed Rule Change, as Modified by Amendment No. 1 Thereto, Relating to a Corporate Transaction Involving Its Indirect Parent November 5, 2014. 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 October 22, 2014, the International Securities Exchange, LLC (the ‘‘Exchange’’ or the ‘‘ISE’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change, as described in Items I and II below, which items have been prepared by the selfregulatory organization. On October 31, 2014, the Exchange filed Amendment No. 1 to the proposal.3 The Commission is publishing this notice to solicit comments on the proposed rule change, as modified by Amendment No. 1, from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of the Substance of the Proposed Rule Change TKELLEY on DSK3SPTVN1PROD with NOTICES The Exchange proposes to make changes to its indirect, non-U.S. upstream ownership structure (the ‘‘Transactions’’), in connection with which the Series A Preferred Stock of the Exchange’s sole, direct parent, International Securities Exchange Holdings, Inc. (‘‘ISE Holdings’’), will be converted to shares of ISE Holdings common stock (the ‘‘Conversion’’). In order to consummate the Transactions, including the Conversion, the Exchange proposes to: (i) Amend and restate the Certificate of Designations of Series A Preferred Stock of ISE Holdings (the ‘‘COD’’); (ii) amend and restate the Amended and Restated Certificate of Incorporation of ISE Holdings (the ‘‘COI’’); and (iii) amend and restate the Second Amended and Restated Trust Agreement (the ‘‘Trust Agreement’’) that exists among ISE Holdings, U.S. Exchange Holdings, Inc. (‘‘U.S. 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 In Amendment No. 1, the Exchange proposed non-substantive changes to amend Exhibits 5D (Form of Swiss Parent Corporate Resolutions) and 5G (Form of Swiss Parent Association Resolutions) so that the text the Exchange proposes to delete accurately reflects the existing text of the resolutions previously submitted to, and approved by, the Commission. 2 17 VerDate Sep<11>2014 17:55 Nov 10, 2014 Jkt 235001 Exchange Holdings’’), and the Trustees (as defined therein). The Exchange also proposes that certain corporate resolutions and agreements that were previously established or entered into by entities that will cease to be upstream owners of ISE after the Transactions will no longer be rules of the Exchange. In addition, the Exchange proposes to amend and restate the Second Amended and Restated Limited Liability Company Agreement of ISE (‘‘ISE LLC Agreement’’) with respect to distributions. Finally, the Exchange proposes to make a non-substantive, administrative change to the Second Amended and Restated Certificate of Incorporation of U.S. Exchange Holdings (‘‘U.S. Exchange Holdings COI’’), the direct U.S. upstream owner of ISE Holdings, to update a reference therein to the Trust Agreement. The text of the proposed rule change is available at the Commission’s Public Reference Room and on the Exchange’s Internet Web site at http://www.ise.com. II. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the self-regulatory organization 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 self-regulatory organization 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 the Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of the proposal is to make changes to the Exchange’s indirect, non-U.S. upstream ownership structure, in connection with which the Series A Preferred Stock of the Exchange’s sole, direct parent, ISE Holdings, will be converted to shares of ISE Holdings common stock.4 Background On December 17, 2007, ISE Holdings, the sole, direct parent of the Exchange, became a direct, wholly-owned subsidiary of U.S. Exchange Holdings.5 4 The Exchange’s affiliate, ISE Gemini, LLC (‘‘ISE Gemini’’), has submitted a nearly identical proposed rule change. See SR–ISEGemini–2014–24. 5 See Securities Exchange Act Release No. 56955 (December 13, 2007), 72 FR 71979 (December 19, 2007) (SR–ISE–2007–101). PO 00000 Frm 00069 Fmt 4703 Sfmt 4703 U.S. Exchange Holdings is a whollyowned, direct subsidiary of Eurex Frankfurt AG (‘‘Eurex Frankfurt’’). Eurex Frankfurt is a wholly-owned, direct ¨ subsidiary of Eurex Zurich AG (‘‘Eurex ¨ ¨ Zurich’’). Eurex Zurich is jointly-owned ¨ (50%/50%) by Deutsche Borse AG ¨ (‘‘Deutsche Borse’’) and Eurex Global Derivatives AG (‘‘EGD’’). EGD is a wholly-owned, direct subsidiary of ¨ Deutsche Borse.6 Contemporaneous with becoming a direct, wholly-owned subsidiary of U.S. Exchange Holdings, ISE Holdings issued 100,000 shares of Series A Preferred Stock (‘‘ISE Holdings Preferred’’) to Eurex Services GmbH (‘‘ESG’’).7 ESG is a wholly-owned, direct subsidiary of Eurex Frankfurt. ISE Holdings Stock Two classes of ISE Holdings stock are currently issued and outstanding: (i) 1,000 shares of common stock (‘‘ISE Holdings Common’’), which are held exclusively by U.S. Exchange Holdings—the sole, direct owner of ISE Holdings; and (ii) 100,000 shares of ISE Holdings Preferred, which are held exclusively by ESG. Both U.S. Exchange Holdings and ESG are wholly-owned, direct subsidiaries of Eurex Frankfurt. The ISE Holdings Preferred is provided for in the COD, which was adopted on December 19, 2007.8 Unlike the ISE Holdings Common, ISE Holdings Preferred generally does not have the right by its terms to vote in the election of the ISE Holdings Board of Directors or on other matters (other than matters affecting the rights, preferences, or privileges of ISE Holdings Preferred or as required by law or as set forth in the COD).9 These rights generally reside exclusively with the ISE Holdings Common. The Transactions The Transactions are designed to: (i) Simplify the indirect ownership structure of the Exchange among the various entities described above; and (ii) 6 See Securities Exchange Act Release No. 66834 (April 19, 2012), 77 FR 24752 (April 25, 2012) (SR– ¨ ISE–2012–21). Each of Deutsche Borse, Eurex ¨ Frankfurt, Eurex Zurich, and EGD is referred to as a ‘‘Non-U.S. Upstream Owner’’ and collectively as the ‘‘Non-U.S. Upstream Owners.’’ 7 The ISE Holdings Preferred was issued with a par value of $.01 per share to finance, and thereby facilitate the completion of, the 2007 transaction described in SR–ISE–2007–101, supra note 5. 8 See supra note 5. 9 See COD, Section 5(a). ISE Holdings Preferred would have certain of such rights, if, for example, ISE Holdings were to (i) file a petition, application, answer or consent seeking reorganization or relief under any applicable bankruptcy law, (ii) formally approve a plan to dissolve or wind up, or (iii) fail to pay all accrued and unpaid ISE Holdings Preferred dividends in any two consecutive calendar years. See COD, Section 5(b). E:\FR\FM\12NON1.SGM 12NON1 Federal Register / Vol. 79, No. 218 / Wednesday, November 12, 2014 / Notices create a more efficient capital structure with respect to U.S., German and Swiss laws. The Transactions will not have any effect on ISE Holdings’ direct ownership of the Exchange or the operations of the Exchange. Consummation of the Transactions is subject to approval of this proposed rule change by the Commission.10 In order to effectuate the Transactions, including the Conversion, the following steps are anticipated to occur sequentially: 1. On or about December 19, 2014, ¨ Eurex Zurich will sell its 100% ownership in Eurex Frankfurt to ¨ Deutsche Borse, whereby Eurex Frankfurt will become a wholly-owned, ¨ direct subsidiary of Deutsche Borse;11 2. On or about December 21, 2014, Eurex Frankfurt will transfer its 100% ownership in ESG, the sole holder of the ISE Holdings Preferred, to U.S. Exchange Holdings; 3. On or about December 21, 2014, and after completion of Step 2 above, U.S. Exchange Holdings, as the sole, direct owner of ESG, will cause ESG to distribute the ISE Holdings Preferred to U.S. Exchange Holdings; 4. On or about December 22, 2014, Eurex Frankfurt, the sole, direct owner of U.S. Exchange Holdings, will cause U.S. Exchange Holdings to convert the ISE Holdings Preferred into ISE Holdings Common. Each of the 100,000 shares of ISE Holdings Preferred will be converted to one share of ISE Holdings Common. After the Conversion, U.S. Exchange Holdings will continue to hold all of the issued and outstanding shares of ISE Holdings Common (1,000 shares before and 101,000 shares after the Conversion); and 5. On or about December 31, 2014, Eurex Frankfurt will transfer 15% of its ownership in U.S. Exchange Holdings to ¨ Deutsche Borse. As a result of the Transactions, Eurex ¨ Zurich and EGD will cease to be NonU.S. Upstream Owners of the Exchange, ¨ as Deutsche Borse will be the sole, direct owner of Eurex Frankfurt, which will directly own 85% of U.S. Exchange ¨ Holdings.12 Deutsche Borse will directly 10 See infra notes 13, 14 and 23. ¨ referenced above, Deutsche Borse is already the 100% indirect owner of Eurex Frankfurt. In ¨ addition, Deutsche Borse also is already an approved Non-U.S. Upstream Owner of the Exchange. See supra note 6. 12 In connection with each of their ownership ¨ interests in the Exchange, Eurex Zurich and EGD, ¨ along with Deutsche Borse, Eurex Frankfurt, U.S. Exchange Holdings, ISE Holdings, and the Exchange, became parties to an agreement to provide for adequate funding for the Exchange’s regulatory responsibilities. ISE Gemini subsequently became a party to the agreement. Following the completion of the Transactions, each ¨ of Eurex Zurich and EGD will cease to be a Non- TKELLEY on DSK3SPTVN1PROD with NOTICES 11 As VerDate Sep<11>2014 17:55 Nov 10, 2014 Jkt 235001 own the remaining 15% of U.S. Exchange Holdings. U.S. Exchange Holdings will remain the sole, direct owner of ISE Holdings. ISE Holdings will also remain the sole, direct owner of the Exchange. The Transactions will not result in any additional person or entity acquiring direct or indirect ownership in the Exchange. In order to consummate the Transactions in the manner described above, certain administrative amendments will need to be made to the COD, COI and Trust Agreement. The proposed amendments to such documents are as follows: COD In order to effect the Conversion, the Exchange proposes to amend certain provisions of the COD, as Section 6(b) of the COD currently provides that the ISE Holdings Preferred is not convertible. Specifically, the Exchange proposes to amend Section 6(b) to provide that each share of ISE Holdings Preferred may, at the option of the holder thereof, be converted into one fully paid and non-assessable share of ISE Holdings Common on the date on which such holder delivers a duly executed notice of conversion to ISE Holdings substantially in the form of a new Annex A attached to the COD.13 COI Article FOURTH of the COI currently provides that the total number of shares of all classes of capital stock that ISE Holdings shall have authority to issue is one hundred one thousand (101,000) shares, which shall be divided as follows: one thousand (1,000) shares of ISE Holdings Common, par value $.01 per share, and one hundred thousand (100,000) shares of ISE Holdings Preferred, par value $.01 per share. In connection with the proposed amendments to the COD, certain U.S. Upstream Owner of the Exchange, and as such, will no longer be a party to such agreement. 13 The proposed amended COD is attached hereto as Exhibit 5A. Section 8 of the COD provides that, with respect to amendments and waivers thereof, except as expressly provided for in the COD, no provision of the COD may be amended, except in a written instrument signed by ISE Holdings and holders of a majority of the ISE Holdings Preferred. Notwithstanding the foregoing, before any amendment to or repeal of any provision of the COD shall be effective, the same shall be submitted to the board of directors of the Exchange, and if the same must be filed with, or filed with and approved by, the Commission before the same may be effective, under Section 19 of the Act and the rules promulgated thereunder, then the same shall not be effective until filed with, or filed with and approved by, the Commission, as the case may be. In addition to the substantive changes, the Exchange proposes to retitle the COD as the ‘‘Amended and Restated’’ Certificate of Designations of Series A Preferred Stock of ISE Holdings. PO 00000 Frm 00070 Fmt 4703 Sfmt 4703 67225 provisions of the COI will need to be amended to account for the increase in the authorized number of ISE Holdings Common that will result from the Conversion. Specifically, the Exchange proposes that the number of authorized shares of ISE Holdings Common be increased from 1,000 shares to 101,000 shares (i.e., the existing, issued and outstanding 1,000 shares of ISE Holdings Common plus the additional 100,000 shares of ISE Holdings Common resulting from the Conversion).14 In addition, the Exchange proposes to maintain the number of authorized ISE Holdings Preferred at 100,000 shares, in the event that ISE Holdings determines to issue ISE Holdings Preferred in the future. As such, the Exchange therefore proposes to increase the total number of authorized ISE Holdings Common and ISE Holdings Preferred from 101,000 shares to 201,000 shares. For the avoidance of doubt, zero shares of ISE Holdings Preferred would be outstanding post-Conversion. The COI restricts any person, either alone or together with its related persons, from having voting control, either directly or indirectly, over more than 20% of the outstanding capital stock of ISE Holdings (the ‘‘Voting Limit’’) and from directly or indirectly owning of record or beneficially more than 40% of the outstanding capital stock of ISE Holdings (or in the case of any Exchange member, acting alone or together with its related persons, from directly or indirectly owning of record or beneficially more than 20% of the outstanding capital stock of ISE Holdings) (the ‘‘Ownership Limit’’).15 For the avoidance of doubt, the Conversion will not implicate the Voting Limit or Ownership Limit, as U.S. Exchange Holdings will continue to own 100% of the ISE Holdings Common before and after the Conversion. Similarly, no new direct or indirect upstream owners of the Exchange or ISE 14 The proposed amended COI is attached hereto as Exhibit 5B. Article FOURTEENTH of the COI provides that, for so long as ISE Holdings shall control, directly or indirectly, the Exchange, or facility thereof, before any amendment to or repeal of any provision of COI shall be effective, the same shall be submitted to the board of directors of the Exchange, and if the same must be filed with, or filed with and approved by, the Commission before the same may be effective, under Section 19 of the Act and the rules promulgated thereunder, then the same shall not be effective until filed with, or filed with and approved by, the Commission, as the case may be. In addition to the substantive changes, the Exchange proposes to retitle the COI as the ‘‘Second’’ Amended and Restated Certificate of Incorporation of ISE Holdings and update the date thereof. 15 See COI, Article FOURTH, Section III. E:\FR\FM\12NON1.SGM 12NON1 67226 Federal Register / Vol. 79, No. 218 / Wednesday, November 12, 2014 / Notices Holdings will result from the Transactions.16 TKELLEY on DSK3SPTVN1PROD with NOTICES Trust Agreement 17 The Trust Agreement serves four general purposes: (i) To accept, hold and dispose of Trust Shares 18 on the terms and subject to the conditions set forth therein; (ii) to determine whether a Material Compliance Event 19 has occurred or is continuing; (iii) to determine whether the occurrence and continuation of a Material Compliance Event requires the exercise of the Call Option; 20 and (iv) to transfer Deposited Shares from the Trust to the Trust Beneficiary 21 as provided in Section 4.2(h) therein. The Exchange proposes to amend certain provisions of the Trust Agreement in connection with the Transactions. Specifically, the Exchange proposes to: (i) Update the recitals of the Trust Agreement with respect to the Transactions; (ii) remove references to ¨ Eurex Zurich and EGD from the definition of ‘‘Affected Affiliate’’ in Section 1.1 of the Trust Agreement; (iii) remove references to EDGA Exchange, Inc. (‘‘EDGA Exchange’’) and EDGX Exchange, Inc. (‘‘EDGX Exchange’’) from the definition of ‘‘Controlled National 16 Each of the Non-U.S. Upstream Owners has previously taken appropriate steps to incorporate provisions regarding ownership, jurisdiction, books and records, and other issues related to their control of the Exchange. Specifically, each of the Non-U.S. Upstream Owners has adopted resolutions, which were previously approved by the Commission, to incorporate these concepts with respect to itself, as well as its board members, officers, employees, and agents (as applicable), to the extent that they are involved in the activities of the Exchange. See SR– ISE–2007–101, supra note 5; SR–ISE–2012–21, supra note 6. See also discussion below under ‘‘Certain Resolutions and Agreements.’’ 17 The Trust Agreement exists among ISE Holdings, U.S. Exchange Holdings, and the Trustees (as defined therein). 18 Under the Trust Agreement, the term ‘‘Trust Shares’’ means either Excess Shares or Deposited Shares, or both, as the case may be. The term ‘‘Excess Shares’’ means that a Person obtained an ownership or voting interest in ISE Holdings in excess of certain ownership and voting restrictions pursuant to Article FOURTH of the COI, through, for example, ownership of one of the Non-U.S. Upstream Owners or U.S. Exchange Holdings, without obtaining the approval of the Commission. The term ‘‘Deposited Shares’’ means shares that are transferred to the Trust pursuant to the Trust’s exercise of the Call Option. 19 Under the Trust Agreement, the term ‘‘Material Compliance Event’’ means, with respect to a NonU.S. Upstream Owner, any state of facts, development, event, circumstance, condition, occurrence or effect that results in the failure of any of the Non-U.S. Upstream Owners to adhere to their respective commitments under the resolutions (i.e., as referenced in note 16) in any material respect. 20 Under the Trust Agreement, the term ‘‘Call Option’’ means the option granted by the Trust Beneficiary to the Trust to call the Voting Shares as set forth in Section 4.2 therein. 21 Under the Trust Agreement, the term ‘‘Trust Beneficiary’’ means U.S. Exchange Holdings. VerDate Sep<11>2014 17:55 Nov 10, 2014 Jkt 235001 Securities Exchange’’ in Section 1.1 and update the recitals of the Trust Agreement accordingly; 22 and (iv) remove EGD’s address from the notice provisions in Section 8.8 of the Trust Agreement.23 The proposed amendments to the Trust Agreement are strictly administrative changes to reflect the updated corporate structure resulting from the Transactions (and from legacy transactions as related to EDGA Exchange and EDGX Exchange) and will not affect the mechanisms established by the Trust Agreement for the benefit of the Trust Beneficiary. Certain Resolutions and Agreements As described above, each of the NonU.S. Upstream Owners, including EGD ¨ and Eurex Zurich, has previously taken appropriate steps to incorporate provisions regarding ownership, jurisdiction, books and records, and other issues related to their control of the Exchange. Specifically, each of such Non-U.S. Upstream Owners has adopted resolutions, which were previously approved by the Commission, to incorporate these concepts with respect to itself, as well as its board members, officers, employees, and agents (as applicable), to the extent that they are involved in the activities of the Exchange.24 For example, the resolution of each of such Non-U.S. Upstream Owners provides that it shall comply with the U.S. federal securities laws and the rules and regulations thereunder and shall cooperate with the 22 EDGA Exchange and EDGX Exchange previously were ‘‘Controlled National Securities Exchanges.’’ However, on January 30, 2014 the Commission approved a proposed rule change of EDGA Exchange and EDGX Exchange in connection with the proposed business combination involving their indirect parent company, Direct Edge Holdings LLC, and BATS Global Markets, Inc., the parent company of BATS Exchange, Inc. (‘‘BATS’’) and BATS–Y Exchange, Inc. (‘‘BYX’’). See Securities Exchange Act Release No. 71449 (January 30, 2014), 79 FR 6961 (February 5, 2014) (SR– EDGA–2014–34; SR–EDGX–2014–43). As a result, EDGA Exchange and EDGX Exchange ceased to be ‘‘Controlled National Securities Exchanges.’’ 23 The Trust Agreement is attached hereto as Exhibit 5C. Section 8.2 of the Trust Agreement provides, in part, that, for so long as ISE Holdings controls, directly or indirectly, the Exchange, before any amendment or repeal of any provision of the Trust Agreement shall be effective, such amendment or repeal shall be submitted to the board of directors of the Exchange, as applicable, and if such amendment or repeal must be filed with or filed with and approved by the Commission under Section 19 of the Act and the rules promulgated thereunder before such amendment or repeal may be effectuated, then such amendment or repeal shall not be effectuated until filed with or filed with and approved by the Commission, as the case may be. In addition to the substantive changes, the Exchange proposes to retitle the Trust Agreement as the ‘‘Third’’ Amended and Restated Trust Agreement and update the date thereof. 24 See supra note 16. See also SR–ISE–2007–101, supra note 5; SR–ISE–2012–21, supra note 6. PO 00000 Frm 00071 Fmt 4703 Sfmt 4703 Commission and with the Exchange. In addition, the resolution of each of such Non-U.S. Upstream Owners provides that the board members, including each person who becomes a board member, would so consent to comply and cooperate and the particular Non-U.S. Upstream Owner would take reasonable steps to cause its officers, employees, and agents to also comply and cooperate, to the extent that he or she is involved in the activities of the Exchange. In addition to these resolutions, and due to concerns about the ability of EGD to provide the Commission with direct access to information under Swiss law, ¨ EGD and Eurex Zurich previously entered into an ‘‘Agreement and Consent,’’ in which EGD agreed to provide information related to the activities of the Exchange, including books and records of EGD related to the activities of the Exchange, to the ¨ Commission, through Eurex Zurich. ¨ Eurex Zurich in turn, would provide such information to the Swiss Financial Market Supervisory Authority FINMA (‘‘FINMA’’), which agreed to serve as a conduit for unfiltered delivery of books and records of EGD related to the activities of the Exchange to the Commission (the ‘‘FINMA Procedure’’). The FINMA Procedure was designed to ensure that EGD would (1) cooperate with the Commission and the Exchange; (2) comply with U.S. federal securities laws; (3) comply with the inspection and copying of EGD’s books and records; (4) agree that EGD’s books, records, officers, directors and employees be deemed to be those of the Exchange; (5) maintain confidentiality of information pertaining to the selfregulatory function of the Exchange; (6) preserve the independence of the selfregulatory function of the Exchange; (7) take reasonable steps to cause EGD’s officers, directors and employees to consent to the applicability to him or her of the resolutions described immediately above; and (8) take reasonable steps to cause EGD’s agents to cooperate with the Commission and the Exchange.25 ¨ As EGD and Eurex Zurich will cease to be Non-U.S. Upstream Owners of the Exchange after the Transactions, the Exchange proposes administrative changes, such that the resolutions of these entities, as referenced above, along with the Agreement and Consent, will no longer be rules of the Exchange as of a date in December 2014 that corresponds to the effective closing date of the applicable step in the 25 See E:\FR\FM\12NON1.SGM SR–ISE–2012–21, supra note 6. 12NON1 Federal Register / Vol. 79, No. 218 / Wednesday, November 12, 2014 / Notices Transactions.26 The Exchange proposes further administrative changes related to similar resolutions of entities that had previously been Non-U.S. Upstream Owners of the Exchange, but whose status as such has since ceased, such that these resolutions would similarly cease to be rules of the Exchange.27 TKELLEY on DSK3SPTVN1PROD with NOTICES ISE LLC Agreement In addition to the changes described above, the Exchange proposes to amend the ISE LLC Agreement with respect to distributions. Section 3.1 of the ISE LLC Agreement currently provides, in part, that the Exchange is authorized to issue a single class of Limited Liability Company Interest, as defined in the Delaware Limited Liability Company Act,28 to ISE Holdings, its sole direct parent, which shall convey all rights to the profits and losses of the Exchange and the right to receive distributions of the assets of the Exchange. Currently, however, Article III of the ISE LLC Agreement does not specifically address any restrictions on such distributions. Proposed new Section 3.3 to the ISE LLC Agreement would provide that, notwithstanding any provision to the contrary contained in the ISE LLC Agreement, (i) the Exchange would not be required to make a distribution to ISE Holdings if such distribution would violate the Delaware Limited Liability Company Act, any other applicable law, or is otherwise required to fulfill the regulatory functions or responsibilities of the Exchange, and (ii) Regulatory Funds will not be used for nonregulatory purposes, but rather shall be used to fund the legal, regulatory and 26 The ‘‘Form of Swiss Parent Corporate Resolutions’’ is attached hereto as Exhibit 5D in ¨ relation to Eurex Zurich. The ‘‘Form of EGD Corporate Resolution’’ is attached hereto as Exhibit 5E. The ‘‘Form of Agreement and Consent between ¨ EGD and Eurex Zurich’’ is attached hereto as Exhibit 5F. As referenced above, resolutions in relation to board members, officers, employees, and ¨ agents (as applicable) of EGD and Eurex Zurich also would cease accordingly. 27 Specifically, SIX Swiss Exchange AG (‘‘SIX Swiss Exchange,’’ which was f/k/a SWX Swiss Exchange AG), SIX Group AG (‘‘SIX Group,’’ which was f/k/a SWX Group AG) and Verein SWX Swiss Exchange AG (‘‘Verein SWX’’) previously were Non-U.S. Upstream Owners of the Exchange. Their status as such ceased on April 30, 2012 when EGD became a Non-U.S. Upstream Owner of the Exchange. See SR–ISE–2012–21, supra note 6. The ‘‘Form of Swiss Parent Corporate Resolutions’’ attached hereto as Exhibit 5D in relation to Eurex ¨ Zurich also serves to eliminate the respective resolutions for SIX Swiss Exchange and SIX Group as rules of the Exchange. The ‘‘Form of Swiss Parent Association Resolutions’’ attached hereto as Exhibit 5G serves to eliminate the respective resolutions for Verein SWX as rules of the Exchange. Additionally, and as described in note 26, resolutions in relation to board members, officers, employees, and agents (as applicable) of SIX Swiss Exchange, SIX Group and Verein SWX also would cease accordingly. 28 6 Del.C. § 18–101, et seq. VerDate Sep<11>2014 17:55 Nov 10, 2014 Jkt 235001 surveillance operations of the Exchange and the Exchange will not make any distribution to ISE Holdings using Regulatory Funds.29 The addition of proposed new Section 3.3 to the ISE LLC Agreement would ensure that any distributions by the Exchange to ISE Holdings, and subsequently to its indirect upstream owners, including U.S. Exchange Holdings and the NonU.S. Upstream Owners, would not be made: (i) In violation of the xchange’s legal and regulatory responsibilities; or (ii) with Regulatory Funds.30 U.S. Exchange Holdings COI Lastly, the Exchange proposes to make a non-substantive, administrative change to the U.S. Exchange Holdings COI to update a reference therein to the Trust Agreement. Article THIRTEENTH of the U.S. Exchange Holdings COI contains outdated references to (i) the ‘‘Amended and Restated’’ Trust Agreement, which is currently the ‘‘Second Amended and Restated’’ Trust Agreement and, as discussed herein, will become the ‘‘Third Amended and Restated’’ Trust Agreement; and (ii) the effective date of the Trust Agreement, which previously changed from February 4, 2010 to April 30, 2012 31 and, as discussed herein, will further change to a date in December 2014 that corresponds to the effective closing date of the applicable step in the Transactions. The Exchange proposes to update these references. The Exchange also proposes to add language specifying that the Trust Agreement 29 Existing Section 3.3 of the ISE LLC Agreement would be renumbered accordingly as Section 3.4. For purposes of proposed new Section 3.3, the term ‘‘Regulatory Funds’’ means fees, fines or penalties derived from the regulatory operations of the Exchange, provided that Regulatory Funds does not include revenues derived from listing fees, market data revenues, transaction revenues or any other aspect of the commercial operations of the Exchange or a facility of the Exchange, even if a portion of such revenues are used to pay costs associated with the regulatory operations of the Exchange. As a result of the change, the ISE LLC Agreement and the ISE Gemini limited liability company agreement would address distributions in the same manner. See Securities Exchange Act Release No. 73196 (September 23, 2014), 79 FR 58387 (September 29, 2014) (SR–ISEGemini-2014– 23). ISE Gemini is proposing a related change to its respective limited liability company agreement in SR–ISEGemini-2014–24. As a result, the language would be identical for both the Exchange and ISE Gemini. 30 The proposed amended ISE LLC Agreement is attached hereto as Exhibit 5H. In addition to these substantive changes, the Exchange proposes to retitle the ISE LLC Agreement as the ‘‘Third’’ Amended and Restated Limited Liability Company Agreement, update the date thereof, update the table of contents, update the name of the Exchange’s President and Chief Executive Officer and update the address of the Registered Agent in Section 1.5. 31 See supra note 6. PO 00000 Frm 00072 Fmt 4703 Sfmt 4703 67227 may be amended, restated or replaced from time to time, retitle the document as the ‘‘Third’’ Amended and Restated Certificate of Incorporation of U.S. Exchange Holdings, and update the effective date thereof.32 Finally, the Exchange proposes to remove references to EDGA Exchange and EDGX Exchange from the definition of ‘‘Controlled National Securities Exchange’’ in Article TENTH.33 Summary Upon the consummation of the Transactions, including the proposed changes to the COD, COI, Trust Agreement, ISE LLC Agreement, and U.S. Exchange Holdings COI (and related resolutions and agreements ceasing to be rules of the Exchange), the Exchange will continue to operate and regulate its market and members in the same exact manner as it did prior to the Transactions. The Transactions will not impair the ability of ISE Holdings, the Exchange, or any facility thereof, to carry out their respective functions and responsibilities under the Act. Moreover, the Transactions will not impair the ability of the Commission to enforce the Act with respect to the Exchange and its Non-U.S. Upstream Owners, including each of their directors, officers, employees and agents, to the extent they are involved in the activities of the Exchange. As such, the Commission’s plenary regulatory authority over the Exchange will not be affected by the approval of this proposed rule change. 2. Statutory Basis The Exchange believes that this proposal is consistent with Section 6(b)of the Act,34 in general, and furthers the objectives of Section 6(b)(1) of the Act,35 in particular, in that it enables the Exchange to be so organized as to have the capacity to be able to carry out the purposes of the Act and to comply, and to enforce compliance by its exchange members and persons associated with 32 The proposed amended U.S. Exchange Holdings COI is attached hereto as Exhibit 5I. Article SIXTEENTH of the U.S. Exchange Holdings COI provides that, for so long as U.S. Exchange Holdings shall control, directly or indirectly, the Exchange, or facility thereof, before any amendment to or repeal of any provision of the U.S. Exchange Holdings COI shall be effective, the same shall be submitted to the board of directors of the Exchange, and if the same must be filed with, or filed with and approved by, the Commission before the same may be effective, under Section 19 of the Act and the rules promulgated thereunder, then the same shall not be effective until filed with, or filed with and approved by, the Commission, as the case may be. 33 See supra note 22. 34 15 U.S.C. 78s(b). 35 15 U.S.C. 78s(b)(1). E:\FR\FM\12NON1.SGM 12NON1 TKELLEY on DSK3SPTVN1PROD with NOTICES 67228 Federal Register / Vol. 79, No. 218 / Wednesday, November 12, 2014 / Notices its exchange members, with the provisions of the Act, the rules and regulations thereunder, and the rules of the Exchange. The Exchange will operate in the same manner following the Transactions as it operates today. Thus, the Commission will continue to have plenary regulatory authority over the Exchange, as is the case currently with the Exchange. The proposed rule change is consistent with and will facilitate an ownership structure that will continue to provide the Commission with appropriate oversight tools to ensure that the Commission will have the ability to enforce the Act with respect to the Exchange and its direct and indirect Non-U.S. Upstream Owners, including each of their directors, officers, employees and agents, to the extent they are involved in the activities of the Exchange. The Exchange also believes that this filing furthers the objectives of Section 6(b)(5) 36 of the Act because the proposed rule change would be consistent with and facilitate a governance and regulatory structure that is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities, to remove impediments to, and perfect the mechanism of a free and open market and a national market system and, in general, to protect investors and the public interest. Specifically, the Exchange believes that the proposed rule change will continue to provide the Commission and the Exchange with access to necessary information that will allow the Exchange to efficiently and effectively enforce compliance with the Act, as well as allow the Commission to provide proper oversight, which will ultimately promote just and equitable principles of trade and protect investors. In addition, the Exchange believes that the proposed rule change will continue to preserve the independence of the Exchange’s self-regulatory function and ensure that the Exchange will be able to obtain any information it needs in order to detect and deter any fraudulent and manipulative acts in its marketplace and carry out its regulatory responsibilities under the Act. Approval of this proposed rule change will enable ISE Holdings to continue its operations and the Exchange to continue its orderly discharge of regulatory duties to prevent fraudulent and manipulative acts and practices, to 36 15 U.S.C. 78f(b)(5). VerDate Sep<11>2014 17:55 Nov 10, 2014 promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. Finally, the Exchange is not proposing any significant or novel regulatory issues, nor is it proposing any changes to the Exchange’s operational or trading structure in connection with the Transactions. Instead, the Exchange represents that the proposed rule change consists of administrative amendments to ISE Holdings’ COI, COD and the Trust Agreement (along with changes to the ISE LLC Agreement related to distributions; a non-substantive, administrative change to the U.S. Exchange Holdings COI; and administrative changes with respect to certain resolutions and agreements in relation to entities that are or were NonU.S. Upstream Owners of the Exchange, but whose status as such has already ceased, or that will cease as a result of the Transactions, such that the resolutions and agreements will cease to be rules of the Exchange), and that no changes will be made to other aspects of the Exchange’s organizational documents that were previously approved by the Commission. B. Self-Regulatory Organization’s Statement on Burden on Competition In accordance with Section 6(b)(8) of the Act,37 the Exchange believes that the proposed rule change would not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The Exchange does not believe that the proposed rule change implicates any competitive issues. Rather, the Transactions merely represent a restructuring of indirect ownership interests of the Exchange, and will not involve the introduction of any new direct or indirect owners or any entity or individual that would have the right to direct the actions of the Exchange or vote the shares of the Exchange. As such, the Exchange believes that the proposal is consistent with the Act. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The Exchange has not solicited, and does not intend to solicit, comments on 37 15 Jkt 235001 PO 00000 U.S.C. 78f(b)(8). Frm 00073 Fmt 4703 Sfmt 4703 this proposed rule change. The Exchange has not received any unsolicited written comments from members or other interested parties. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 45 days of the publication date of this notice or within such longer period (1) as the Commission may designate up to 45 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or (2) as to which the selfregulatory organization consents, the Commission will: (A) By order approve or disapprove such Proposed Rule Change; or (B) institute proceedings to determine whether the Proposed Rule Change should be disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change, as modified by Amendment No. 1, is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– ISE–2014–44 on the subject line. Paper Comments • Send paper comments in triplicate to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–ISE–2014–44. 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 (http://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 E:\FR\FM\12NON1.SGM 12NON1 Federal Register / Vol. 79, No. 218 / Wednesday, November 12, 2014 / Notices Reference Room on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of such filing also will be available for inspection and copying at the principal offices 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–ISE– 2014–44, and should be submitted on or before December 3, 2014. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.38 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2014–26690 Filed 11–10–14; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–73535; File No. SR–Phlx– 2014–70] Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Exchange’s Pricing Schedule Under Section VIII With Respect to Execution and Routing of Orders in Securities Priced at $1 or More Per Share and the Excess Order Fee November 5, 2014 TKELLEY on DSK3SPTVN1PROD 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 October 24, 2014, 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 the Substance of the Proposed Rule Change The Exchange proposes to amend the Exchange’s Pricing Schedule under Section VIII, entitled ‘‘NASDAQ OMX PSX FEES,’’ with respect to execution and routing of orders in securities priced at $1 or more per share and to eliminate the Excess Order Fee. 38 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 VerDate Sep<11>2014 17:55 Nov 10, 2014 Jkt 235001 While changes to the Pricing Schedule pursuant to this proposal are effective upon filing, the Exchange has designated that they become operative on November 3, 2014. The text of the proposed rule change is available on the Exchange’s Web site at http:// nasdaqomxphlx.cchwallstreet.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 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 purpose of the proposed changes to Chapter VIII of the Exchange’s Pricing Schedule is to reduce the fee assessed for shares executed on the NASDAQ OMX PSX System (‘‘PSX’’) in securities listed on the Nasdaq Stock Market (‘‘Nasdaq’’) and traded at $1 or more per share, to modify the eligibility requirements of two credits provided for providing displayed liquidity in securities traded at $1 or more per share, and to eliminate the Excess Order Fee under the rule. Chapter VIII(a)(1) of the PSX Pricing Schedule concerns fees assessed for execution of quotes/orders on PSX in securities priced at $1 or more per share that are Nasdaq-listed, are listed on the New York Stock Exchange (‘‘NYSE’’) and listed on exchanges other than Nasdaq and NYSE. The Exchange currently assesses three separate fees for execution of securities based on the venue on which the security is listed. Specifically, the Exchange assesses a charge of $0.0024 per share executed in securities listed on NYSE, $0.0024 per share executed in securities listed on an exchange other than Nasdaq or NYSE, and $0.0026 per share executed in securities listed on Nasdaq. The Exchange is proposing to reduce the fee assessed for execution of Nasdaq-listed securities on PSX to $0.0024 per share PO 00000 Frm 00074 Fmt 4703 Sfmt 4703 67229 executed. Reducing the fee will harmonize the fees currently assessed member organizations that are participants on PSX for removing liquidity from PSX and may attract more volume to PSX in Nasdaq-listed securities. The Exchange is also proposing to amend the eligibility requirements of two credits provided under the rule to member organizations that provide displayed liquidity on PSX. First, the Exchange currently provides a credit of $0.0025 per share executed for Quotes/ Orders entered by a member organization that provides an average daily volume of 6 million or more shares of liquidity during the month; provided that (i) the Quote/Order is entered through a PSX MPID through which the member organization displays, on average over the course of the month, 100 shares or more at the national best bid and/or national best offer at least 25% of the time during regular market hours in the security that is the subject of the Quote/Order, or (ii) the member organization displays, on average over the course of the month, 100 shares or more at the national best bid and/or national best offer at least 25% of the time during regular market hours in 500 or more securities. The Exchange is proposing to eliminate the 6 million average daily volume requirement and replace it with a requirement to have average daily volume in shares of liquidity during the month that represents at least 0.12% of Consolidated Volume, which the Exchange defines as the total consolidated volume reported to all consolidated transaction reporting plans by all exchanges and trade reporting facilities during a month, excluding executed orders with a size of less than one round lot.3 Replacing the current average daily volume requirement with an average daily volume requirement based on Consolidated Volume will cause the required level of liquidity provision to vary depending on overall market volumes during the month. As such, the change is expected to increase the number of member organizations that qualify for this credit tier during months when overall trading volumes are lower, by allowing the required level of liquidity provision to vary with overall trading volumes, and conversely reduce the number of member organizations eligible for the credit when market volumes are high, for firms 3 In lieu of marking each individual fee level with the definition of Consolidated Volume, where applicable, the Exchange is inserting the definition prior to the schedule of fees under subparagraph (a)(1) of the rule. E:\FR\FM\12NON1.SGM 12NON1

Agencies

[Federal Register Volume 79, Number 218 (Wednesday, November 12, 2014)]
[Notices]
[Pages 67224-67229]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-26690]



[[Page 67224]]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-73530; File No. SR-ISE-2014-44]


Self-Regulatory Organizations; International Securities Exchange, 
LLC; Notice of Filing of Proposed Rule Change, as Modified by Amendment 
No. 1 Thereto, Relating to a Corporate Transaction Involving Its 
Indirect Parent

November 5, 2014.
    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 October 22, 2014, the International Securities Exchange, LLC 
(the ``Exchange'' or the ``ISE'') filed with the Securities and 
Exchange Commission (``Commission'') the proposed rule change, as 
described in Items I and II below, which items have been prepared by 
the self-regulatory organization. On October 31, 2014, the Exchange 
filed Amendment No. 1 to the proposal.\3\ The Commission is publishing 
this notice to solicit comments on the proposed rule change, as 
modified by Amendment No. 1, from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ In Amendment No. 1, the Exchange proposed non-substantive 
changes to amend Exhibits 5D (Form of Swiss Parent Corporate 
Resolutions) and 5G (Form of Swiss Parent Association Resolutions) 
so that the text the Exchange proposes to delete accurately reflects 
the existing text of the resolutions previously submitted to, and 
approved by, the Commission.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    The Exchange proposes to make changes to its indirect, non-U.S. 
upstream ownership structure (the ``Transactions''), in connection with 
which the Series A Preferred Stock of the Exchange's sole, direct 
parent, International Securities Exchange Holdings, Inc. (``ISE 
Holdings''), will be converted to shares of ISE Holdings common stock 
(the ``Conversion''). In order to consummate the Transactions, 
including the Conversion, the Exchange proposes to: (i) Amend and 
restate the Certificate of Designations of Series A Preferred Stock of 
ISE Holdings (the ``COD''); (ii) amend and restate the Amended and 
Restated Certificate of Incorporation of ISE Holdings (the ``COI''); 
and (iii) amend and restate the Second Amended and Restated Trust 
Agreement (the ``Trust Agreement'') that exists among ISE Holdings, 
U.S. Exchange Holdings, Inc. (``U.S. Exchange Holdings''), and the 
Trustees (as defined therein). The Exchange also proposes that certain 
corporate resolutions and agreements that were previously established 
or entered into by entities that will cease to be upstream owners of 
ISE after the Transactions will no longer be rules of the Exchange. In 
addition, the Exchange proposes to amend and restate the Second Amended 
and Restated Limited Liability Company Agreement of ISE (``ISE LLC 
Agreement'') with respect to distributions. Finally, the Exchange 
proposes to make a non-substantive, administrative change to the Second 
Amended and Restated Certificate of Incorporation of U.S. Exchange 
Holdings (``U.S. Exchange Holdings COI''), the direct U.S. upstream 
owner of ISE Holdings, to update a reference therein to the Trust 
Agreement.
    The text of the proposed rule change is available at the 
Commission's Public Reference Room and on the Exchange's Internet Web 
site at http://www.ise.com.

II. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
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 self-regulatory organization 
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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of the proposal is to make changes to the Exchange's 
indirect, non-U.S. upstream ownership structure, in connection with 
which the Series A Preferred Stock of the Exchange's sole, direct 
parent, ISE Holdings, will be converted to shares of ISE Holdings 
common stock.\4\
---------------------------------------------------------------------------

    \4\ The Exchange's affiliate, ISE Gemini, LLC (``ISE Gemini''), 
has submitted a nearly identical proposed rule change. See SR-
ISEGemini-2014-24.
---------------------------------------------------------------------------

Background
    On December 17, 2007, ISE Holdings, the sole, direct parent of the 
Exchange, became a direct, wholly-owned subsidiary of U.S. Exchange 
Holdings.\5\ U.S. Exchange Holdings is a wholly-owned, direct 
subsidiary of Eurex Frankfurt AG (``Eurex Frankfurt''). Eurex Frankfurt 
is a wholly-owned, direct subsidiary of Eurex Z[uuml]rich AG (``Eurex 
Z[uuml]rich''). Eurex Z[uuml]rich is jointly-owned (50%/50%) by 
Deutsche B[ouml]rse AG (``Deutsche B[ouml]rse'') and Eurex Global 
Derivatives AG (``EGD''). EGD is a wholly-owned, direct subsidiary of 
Deutsche B[ouml]rse.\6\ Contemporaneous with becoming a direct, wholly-
owned subsidiary of U.S. Exchange Holdings, ISE Holdings issued 100,000 
shares of Series A Preferred Stock (``ISE Holdings Preferred'') to 
Eurex Services GmbH (``ESG'').\7\ ESG is a wholly-owned, direct 
subsidiary of Eurex Frankfurt.
---------------------------------------------------------------------------

    \5\ See Securities Exchange Act Release No. 56955 (December 13, 
2007), 72 FR 71979 (December 19, 2007) (SR-ISE-2007-101).
    \6\ See Securities Exchange Act Release No. 66834 (April 19, 
2012), 77 FR 24752 (April 25, 2012) (SR-ISE-2012-21). Each of 
Deutsche B[ouml]rse, Eurex Frankfurt, Eurex Z[uuml]rich, and EGD is 
referred to as a ``Non-U.S. Upstream Owner'' and collectively as the 
``Non-U.S. Upstream Owners.''
    \7\ The ISE Holdings Preferred was issued with a par value of 
$.01 per share to finance, and thereby facilitate the completion of, 
the 2007 transaction described in SR-ISE-2007-101, supra note 5.
---------------------------------------------------------------------------

ISE Holdings Stock
    Two classes of ISE Holdings stock are currently issued and 
outstanding: (i) 1,000 shares of common stock (``ISE Holdings 
Common''), which are held exclusively by U.S. Exchange Holdings--the 
sole, direct owner of ISE Holdings; and (ii) 100,000 shares of ISE 
Holdings Preferred, which are held exclusively by ESG. Both U.S. 
Exchange Holdings and ESG are wholly-owned, direct subsidiaries of 
Eurex Frankfurt. The ISE Holdings Preferred is provided for in the COD, 
which was adopted on December 19, 2007.\8\ Unlike the ISE Holdings 
Common, ISE Holdings Preferred generally does not have the right by its 
terms to vote in the election of the ISE Holdings Board of Directors or 
on other matters (other than matters affecting the rights, preferences, 
or privileges of ISE Holdings Preferred or as required by law or as set 
forth in the COD).\9\ These rights generally reside exclusively with 
the ISE Holdings Common.
---------------------------------------------------------------------------

    \8\ See supra note 5.
    \9\ See COD, Section 5(a). ISE Holdings Preferred would have 
certain of such rights, if, for example, ISE Holdings were to (i) 
file a petition, application, answer or consent seeking 
reorganization or relief under any applicable bankruptcy law, (ii) 
formally approve a plan to dissolve or wind up, or (iii) fail to pay 
all accrued and unpaid ISE Holdings Preferred dividends in any two 
consecutive calendar years. See COD, Section 5(b).
---------------------------------------------------------------------------

The Transactions
    The Transactions are designed to: (i) Simplify the indirect 
ownership structure of the Exchange among the various entities 
described above; and (ii)

[[Page 67225]]

create a more efficient capital structure with respect to U.S., German 
and Swiss laws. The Transactions will not have any effect on ISE 
Holdings' direct ownership of the Exchange or the operations of the 
Exchange. Consummation of the Transactions is subject to approval of 
this proposed rule change by the Commission.\10\ In order to effectuate 
the Transactions, including the Conversion, the following steps are 
anticipated to occur sequentially:
---------------------------------------------------------------------------

    \10\ See infra notes 13, 14 and 23.
---------------------------------------------------------------------------

    1. On or about December 19, 2014, Eurex Z[uuml]rich will sell its 
100% ownership in Eurex Frankfurt to Deutsche B[ouml]rse, whereby Eurex 
Frankfurt will become a wholly-owned, direct subsidiary of Deutsche 
B[ouml]rse;\11\
---------------------------------------------------------------------------

    \11\ As referenced above, Deutsche B[ouml]rse is already the 
100% indirect owner of Eurex Frankfurt. In addition, Deutsche 
B[ouml]rse also is already an approved Non-U.S. Upstream Owner of 
the Exchange. See supra note 6.
---------------------------------------------------------------------------

    2. On or about December 21, 2014, Eurex Frankfurt will transfer its 
100% ownership in ESG, the sole holder of the ISE Holdings Preferred, 
to U.S. Exchange Holdings;
    3. On or about December 21, 2014, and after completion of Step 2 
above, U.S. Exchange Holdings, as the sole, direct owner of ESG, will 
cause ESG to distribute the ISE Holdings Preferred to U.S. Exchange 
Holdings;
    4. On or about December 22, 2014, Eurex Frankfurt, the sole, direct 
owner of U.S. Exchange Holdings, will cause U.S. Exchange Holdings to 
convert the ISE Holdings Preferred into ISE Holdings Common. Each of 
the 100,000 shares of ISE Holdings Preferred will be converted to one 
share of ISE Holdings Common. After the Conversion, U.S. Exchange 
Holdings will continue to hold all of the issued and outstanding shares 
of ISE Holdings Common (1,000 shares before and 101,000 shares after 
the Conversion); and
    5. On or about December 31, 2014, Eurex Frankfurt will transfer 15% 
of its ownership in U.S. Exchange Holdings to Deutsche B[ouml]rse.
    As a result of the Transactions, Eurex Z[uuml]rich and EGD will 
cease to be Non-U.S. Upstream Owners of the Exchange, as Deutsche 
B[ouml]rse will be the sole, direct owner of Eurex Frankfurt, which 
will directly own 85% of U.S. Exchange Holdings.\12\ Deutsche 
B[ouml]rse will directly own the remaining 15% of U.S. Exchange 
Holdings. U.S. Exchange Holdings will remain the sole, direct owner of 
ISE Holdings. ISE Holdings will also remain the sole, direct owner of 
the Exchange. The Transactions will not result in any additional person 
or entity acquiring direct or indirect ownership in the Exchange.
---------------------------------------------------------------------------

    \12\ In connection with each of their ownership interests in the 
Exchange, Eurex Z[uuml]rich and EGD, along with Deutsche B[ouml]rse, 
Eurex Frankfurt, U.S. Exchange Holdings, ISE Holdings, and the 
Exchange, became parties to an agreement to provide for adequate 
funding for the Exchange's regulatory responsibilities. ISE Gemini 
subsequently became a party to the agreement. Following the 
completion of the Transactions, each of Eurex Z[uuml]rich and EGD 
will cease to be a Non-U.S. Upstream Owner of the Exchange, and as 
such, will no longer be a party to such agreement.
---------------------------------------------------------------------------

    In order to consummate the Transactions in the manner described 
above, certain administrative amendments will need to be made to the 
COD, COI and Trust Agreement. The proposed amendments to such documents 
are as follows:
COD
    In order to effect the Conversion, the Exchange proposes to amend 
certain provisions of the COD, as Section 6(b) of the COD currently 
provides that the ISE Holdings Preferred is not convertible. 
Specifically, the Exchange proposes to amend Section 6(b) to provide 
that each share of ISE Holdings Preferred may, at the option of the 
holder thereof, be converted into one fully paid and non-assessable 
share of ISE Holdings Common on the date on which such holder delivers 
a duly executed notice of conversion to ISE Holdings substantially in 
the form of a new Annex A attached to the COD.\13\
---------------------------------------------------------------------------

    \13\ The proposed amended COD is attached hereto as Exhibit 5A. 
Section 8 of the COD provides that, with respect to amendments and 
waivers thereof, except as expressly provided for in the COD, no 
provision of the COD may be amended, except in a written instrument 
signed by ISE Holdings and holders of a majority of the ISE Holdings 
Preferred. Notwithstanding the foregoing, before any amendment to or 
repeal of any provision of the COD shall be effective, the same 
shall be submitted to the board of directors of the Exchange, and if 
the same must be filed with, or filed with and approved by, the 
Commission before the same may be effective, under Section 19 of the 
Act and the rules promulgated thereunder, then the same shall not be 
effective until filed with, or filed with and approved by, the 
Commission, as the case may be. In addition to the substantive 
changes, the Exchange proposes to retitle the COD as the ``Amended 
and Restated'' Certificate of Designations of Series A Preferred 
Stock of ISE Holdings.
---------------------------------------------------------------------------

COI
    Article FOURTH of the COI currently provides that the total number 
of shares of all classes of capital stock that ISE Holdings shall have 
authority to issue is one hundred one thousand (101,000) shares, which 
shall be divided as follows: one thousand (1,000) shares of ISE 
Holdings Common, par value $.01 per share, and one hundred thousand 
(100,000) shares of ISE Holdings Preferred, par value $.01 per share.
    In connection with the proposed amendments to the COD, certain 
provisions of the COI will need to be amended to account for the 
increase in the authorized number of ISE Holdings Common that will 
result from the Conversion. Specifically, the Exchange proposes that 
the number of authorized shares of ISE Holdings Common be increased 
from 1,000 shares to 101,000 shares (i.e., the existing, issued and 
outstanding 1,000 shares of ISE Holdings Common plus the additional 
100,000 shares of ISE Holdings Common resulting from the 
Conversion).\14\ In addition, the Exchange proposes to maintain the 
number of authorized ISE Holdings Preferred at 100,000 shares, in the 
event that ISE Holdings determines to issue ISE Holdings Preferred in 
the future. As such, the Exchange therefore proposes to increase the 
total number of authorized ISE Holdings Common and ISE Holdings 
Preferred from 101,000 shares to 201,000 shares. For the avoidance of 
doubt, zero shares of ISE Holdings Preferred would be outstanding post-
Conversion.
---------------------------------------------------------------------------

    \14\ The proposed amended COI is attached hereto as Exhibit 5B. 
Article FOURTEENTH of the COI provides that, for so long as ISE 
Holdings shall control, directly or indirectly, the Exchange, or 
facility thereof, before any amendment to or repeal of any provision 
of COI shall be effective, the same shall be submitted to the board 
of directors of the Exchange, and if the same must be filed with, or 
filed with and approved by, the Commission before the same may be 
effective, under Section 19 of the Act and the rules promulgated 
thereunder, then the same shall not be effective until filed with, 
or filed with and approved by, the Commission, as the case may be. 
In addition to the substantive changes, the Exchange proposes to 
retitle the COI as the ``Second'' Amended and Restated Certificate 
of Incorporation of ISE Holdings and update the date thereof.
---------------------------------------------------------------------------

    The COI restricts any person, either alone or together with its 
related persons, from having voting control, either directly or 
indirectly, over more than 20% of the outstanding capital stock of ISE 
Holdings (the ``Voting Limit'') and from directly or indirectly owning 
of record or beneficially more than 40% of the outstanding capital 
stock of ISE Holdings (or in the case of any Exchange member, acting 
alone or together with its related persons, from directly or indirectly 
owning of record or beneficially more than 20% of the outstanding 
capital stock of ISE Holdings) (the ``Ownership Limit'').\15\ For the 
avoidance of doubt, the Conversion will not implicate the Voting Limit 
or Ownership Limit, as U.S. Exchange Holdings will continue to own 100% 
of the ISE Holdings Common before and after the Conversion. Similarly, 
no new direct or indirect upstream owners of the Exchange or ISE

[[Page 67226]]

Holdings will result from the Transactions.\16\
---------------------------------------------------------------------------

    \15\ See COI, Article FOURTH, Section III.
    \16\ Each of the Non-U.S. Upstream Owners has previously taken 
appropriate steps to incorporate provisions regarding ownership, 
jurisdiction, books and records, and other issues related to their 
control of the Exchange. Specifically, each of the Non-U.S. Upstream 
Owners has adopted resolutions, which were previously approved by 
the Commission, to incorporate these concepts with respect to 
itself, as well as its board members, officers, employees, and 
agents (as applicable), to the extent that they are involved in the 
activities of the Exchange. See SR-ISE-2007-101, supra note 5; SR-
ISE-2012-21, supra note 6. See also discussion below under ``Certain 
Resolutions and Agreements.''
---------------------------------------------------------------------------

Trust Agreement \17\
---------------------------------------------------------------------------

    \17\ The Trust Agreement exists among ISE Holdings, U.S. 
Exchange Holdings, and the Trustees (as defined therein).
---------------------------------------------------------------------------

    The Trust Agreement serves four general purposes: (i) To accept, 
hold and dispose of Trust Shares \18\ on the terms and subject to the 
conditions set forth therein; (ii) to determine whether a Material 
Compliance Event \19\ has occurred or is continuing; (iii) to determine 
whether the occurrence and continuation of a Material Compliance Event 
requires the exercise of the Call Option; \20\ and (iv) to transfer 
Deposited Shares from the Trust to the Trust Beneficiary \21\ as 
provided in Section 4.2(h) therein.
---------------------------------------------------------------------------

    \18\ Under the Trust Agreement, the term ``Trust Shares'' means 
either Excess Shares or Deposited Shares, or both, as the case may 
be. The term ``Excess Shares'' means that a Person obtained an 
ownership or voting interest in ISE Holdings in excess of certain 
ownership and voting restrictions pursuant to Article FOURTH of the 
COI, through, for example, ownership of one of the Non-U.S. Upstream 
Owners or U.S. Exchange Holdings, without obtaining the approval of 
the Commission. The term ``Deposited Shares'' means shares that are 
transferred to the Trust pursuant to the Trust's exercise of the 
Call Option.
    \19\ Under the Trust Agreement, the term ``Material Compliance 
Event'' means, with respect to a Non-U.S. Upstream Owner, any state 
of facts, development, event, circumstance, condition, occurrence or 
effect that results in the failure of any of the Non-U.S. Upstream 
Owners to adhere to their respective commitments under the 
resolutions (i.e., as referenced in note 16) in any material 
respect.
    \20\ Under the Trust Agreement, the term ``Call Option'' means 
the option granted by the Trust Beneficiary to the Trust to call the 
Voting Shares as set forth in Section 4.2 therein.
    \21\ Under the Trust Agreement, the term ``Trust Beneficiary'' 
means U.S. Exchange Holdings.
---------------------------------------------------------------------------

    The Exchange proposes to amend certain provisions of the Trust 
Agreement in connection with the Transactions. Specifically, the 
Exchange proposes to: (i) Update the recitals of the Trust Agreement 
with respect to the Transactions; (ii) remove references to Eurex 
Z[uuml]rich and EGD from the definition of ``Affected Affiliate'' in 
Section 1.1 of the Trust Agreement; (iii) remove references to EDGA 
Exchange, Inc. (``EDGA Exchange'') and EDGX Exchange, Inc. (``EDGX 
Exchange'') from the definition of ``Controlled National Securities 
Exchange'' in Section 1.1 and update the recitals of the Trust 
Agreement accordingly; \22\ and (iv) remove EGD's address from the 
notice provisions in Section 8.8 of the Trust Agreement.\23\ The 
proposed amendments to the Trust Agreement are strictly administrative 
changes to reflect the updated corporate structure resulting from the 
Transactions (and from legacy transactions as related to EDGA Exchange 
and EDGX Exchange) and will not affect the mechanisms established by 
the Trust Agreement for the benefit of the Trust Beneficiary.
---------------------------------------------------------------------------

    \22\ EDGA Exchange and EDGX Exchange previously were 
``Controlled National Securities Exchanges.'' However, on January 
30, 2014 the Commission approved a proposed rule change of EDGA 
Exchange and EDGX Exchange in connection with the proposed business 
combination involving their indirect parent company, Direct Edge 
Holdings LLC, and BATS Global Markets, Inc., the parent company of 
BATS Exchange, Inc. (``BATS'') and BATS-Y Exchange, Inc. (``BYX''). 
See Securities Exchange Act Release No. 71449 (January 30, 2014), 79 
FR 6961 (February 5, 2014) (SR-EDGA-2014-34; SR-EDGX-2014-43). As a 
result, EDGA Exchange and EDGX Exchange ceased to be ``Controlled 
National Securities Exchanges.''
    \23\ The Trust Agreement is attached hereto as Exhibit 5C. 
Section 8.2 of the Trust Agreement provides, in part, that, for so 
long as ISE Holdings controls, directly or indirectly, the Exchange, 
before any amendment or repeal of any provision of the Trust 
Agreement shall be effective, such amendment or repeal shall be 
submitted to the board of directors of the Exchange, as applicable, 
and if such amendment or repeal must be filed with or filed with and 
approved by the Commission under Section 19 of the Act and the rules 
promulgated thereunder before such amendment or repeal may be 
effectuated, then such amendment or repeal shall not be effectuated 
until filed with or filed with and approved by the Commission, as 
the case may be. In addition to the substantive changes, the 
Exchange proposes to retitle the Trust Agreement as the ``Third'' 
Amended and Restated Trust Agreement and update the date thereof.
---------------------------------------------------------------------------

Certain Resolutions and Agreements
    As described above, each of the Non-U.S. Upstream Owners, including 
EGD and Eurex Z[uuml]rich, has previously taken appropriate steps to 
incorporate provisions regarding ownership, jurisdiction, books and 
records, and other issues related to their control of the Exchange. 
Specifically, each of such Non-U.S. Upstream Owners has adopted 
resolutions, which were previously approved by the Commission, to 
incorporate these concepts with respect to itself, as well as its board 
members, officers, employees, and agents (as applicable), to the extent 
that they are involved in the activities of the Exchange.\24\ For 
example, the resolution of each of such Non-U.S. Upstream Owners 
provides that it shall comply with the U.S. federal securities laws and 
the rules and regulations thereunder and shall cooperate with the 
Commission and with the Exchange. In addition, the resolution of each 
of such Non-U.S. Upstream Owners provides that the board members, 
including each person who becomes a board member, would so consent to 
comply and cooperate and the particular Non-U.S. Upstream Owner would 
take reasonable steps to cause its officers, employees, and agents to 
also comply and cooperate, to the extent that he or she is involved in 
the activities of the Exchange.
---------------------------------------------------------------------------

    \24\ See supra note 16. See also SR-ISE-2007-101, supra note 5; 
SR-ISE-2012-21, supra note 6.
---------------------------------------------------------------------------

    In addition to these resolutions, and due to concerns about the 
ability of EGD to provide the Commission with direct access to 
information under Swiss law, EGD and Eurex Z[uuml]rich previously 
entered into an ``Agreement and Consent,'' in which EGD agreed to 
provide information related to the activities of the Exchange, 
including books and records of EGD related to the activities of the 
Exchange, to the Commission, through Eurex Z[uuml]rich. Eurex 
Z[uuml]rich in turn, would provide such information to the Swiss 
Financial Market Supervisory Authority FINMA (``FINMA''), which agreed 
to serve as a conduit for unfiltered delivery of books and records of 
EGD related to the activities of the Exchange to the Commission (the 
``FINMA Procedure''). The FINMA Procedure was designed to ensure that 
EGD would (1) cooperate with the Commission and the Exchange; (2) 
comply with U.S. federal securities laws; (3) comply with the 
inspection and copying of EGD's books and records; (4) agree that EGD's 
books, records, officers, directors and employees be deemed to be those 
of the Exchange; (5) maintain confidentiality of information pertaining 
to the self-regulatory function of the Exchange; (6) preserve the 
independence of the self-regulatory function of the Exchange; (7) take 
reasonable steps to cause EGD's officers, directors and employees to 
consent to the applicability to him or her of the resolutions described 
immediately above; and (8) take reasonable steps to cause EGD's agents 
to cooperate with the Commission and the Exchange.\25\
---------------------------------------------------------------------------

    \25\ See SR-ISE-2012-21, supra note 6.
---------------------------------------------------------------------------

    As EGD and Eurex Z[uuml]rich will cease to be Non-U.S. Upstream 
Owners of the Exchange after the Transactions, the Exchange proposes 
administrative changes, such that the resolutions of these entities, as 
referenced above, along with the Agreement and Consent, will no longer 
be rules of the Exchange as of a date in December 2014 that corresponds 
to the effective closing date of the applicable step in the

[[Page 67227]]

Transactions.\26\ The Exchange proposes further administrative changes 
related to similar resolutions of entities that had previously been 
Non-U.S. Upstream Owners of the Exchange, but whose status as such has 
since ceased, such that these resolutions would similarly cease to be 
rules of the Exchange.\27\
---------------------------------------------------------------------------

    \26\ The ``Form of Swiss Parent Corporate Resolutions'' is 
attached hereto as Exhibit 5D in relation to Eurex Z[uuml]rich. The 
``Form of EGD Corporate Resolution'' is attached hereto as Exhibit 
5E. The ``Form of Agreement and Consent between EGD and Eurex 
Z[uuml]rich'' is attached hereto as Exhibit 5F. As referenced above, 
resolutions in relation to board members, officers, employees, and 
agents (as applicable) of EGD and Eurex Z[uuml]rich also would cease 
accordingly.
    \27\ Specifically, SIX Swiss Exchange AG (``SIX Swiss 
Exchange,'' which was f/k/a SWX Swiss Exchange AG), SIX Group AG 
(``SIX Group,'' which was f/k/a SWX Group AG) and Verein SWX Swiss 
Exchange AG (``Verein SWX'') previously were Non-U.S. Upstream 
Owners of the Exchange. Their status as such ceased on April 30, 
2012 when EGD became a Non-U.S. Upstream Owner of the Exchange. See 
SR-ISE-2012-21, supra note 6. The ``Form of Swiss Parent Corporate 
Resolutions'' attached hereto as Exhibit 5D in relation to Eurex 
Z[uuml]rich also serves to eliminate the respective resolutions for 
SIX Swiss Exchange and SIX Group as rules of the Exchange. The 
``Form of Swiss Parent Association Resolutions'' attached hereto as 
Exhibit 5G serves to eliminate the respective resolutions for Verein 
SWX as rules of the Exchange. Additionally, and as described in note 
26, resolutions in relation to board members, officers, employees, 
and agents (as applicable) of SIX Swiss Exchange, SIX Group and 
Verein SWX also would cease accordingly.
---------------------------------------------------------------------------

ISE LLC Agreement
    In addition to the changes described above, the Exchange proposes 
to amend the ISE LLC Agreement with respect to distributions. Section 
3.1 of the ISE LLC Agreement currently provides, in part, that the 
Exchange is authorized to issue a single class of Limited Liability 
Company Interest, as defined in the Delaware Limited Liability Company 
Act,\28\ to ISE Holdings, its sole direct parent, which shall convey 
all rights to the profits and losses of the Exchange and the right to 
receive distributions of the assets of the Exchange. Currently, 
however, Article III of the ISE LLC Agreement does not specifically 
address any restrictions on such distributions. Proposed new Section 
3.3 to the ISE LLC Agreement would provide that, notwithstanding any 
provision to the contrary contained in the ISE LLC Agreement, (i) the 
Exchange would not be required to make a distribution to ISE Holdings 
if such distribution would violate the Delaware Limited Liability 
Company Act, any other applicable law, or is otherwise required to 
fulfill the regulatory functions or responsibilities of the Exchange, 
and (ii) Regulatory Funds will not be used for non-regulatory purposes, 
but rather shall be used to fund the legal, regulatory and surveillance 
operations of the Exchange and the Exchange will not make any 
distribution to ISE Holdings using Regulatory Funds.\29\ The addition 
of proposed new Section 3.3 to the ISE LLC Agreement would ensure that 
any distributions by the Exchange to ISE Holdings, and subsequently to 
its indirect upstream owners, including U.S. Exchange Holdings and the 
Non-U.S. Upstream Owners, would not be made: (i) In violation of the 
xchange's legal and regulatory responsibilities; or (ii) with 
Regulatory Funds.\30\
---------------------------------------------------------------------------

    \28\ 6 Del.C. Sec.  18-101, et seq.
    \29\ Existing Section 3.3 of the ISE LLC Agreement would be 
renumbered accordingly as Section 3.4. For purposes of proposed new 
Section 3.3, the term ``Regulatory Funds'' means fees, fines or 
penalties derived from the regulatory operations of the Exchange, 
provided that Regulatory Funds does not include revenues derived 
from listing fees, market data revenues, transaction revenues or any 
other aspect of the commercial operations of the Exchange or a 
facility of the Exchange, even if a portion of such revenues are 
used to pay costs associated with the regulatory operations of the 
Exchange. As a result of the change, the ISE LLC Agreement and the 
ISE Gemini limited liability company agreement would address 
distributions in the same manner. See Securities Exchange Act 
Release No. 73196 (September 23, 2014), 79 FR 58387 (September 29, 
2014) (SR-ISEGemini-2014-23). ISE Gemini is proposing a related 
change to its respective limited liability company agreement in SR-
ISEGemini-2014-24. As a result, the language would be identical for 
both the Exchange and ISE Gemini.
    \30\ The proposed amended ISE LLC Agreement is attached hereto 
as Exhibit 5H. In addition to these substantive changes, the 
Exchange proposes to retitle the ISE LLC Agreement as the ``Third'' 
Amended and Restated Limited Liability Company Agreement, update the 
date thereof, update the table of contents, update the name of the 
Exchange's President and Chief Executive Officer and update the 
address of the Registered Agent in Section 1.5.
---------------------------------------------------------------------------

U.S. Exchange Holdings COI
    Lastly, the Exchange proposes to make a non-substantive, 
administrative change to the U.S. Exchange Holdings COI to update a 
reference therein to the Trust Agreement. Article THIRTEENTH of the 
U.S. Exchange Holdings COI contains outdated references to (i) the 
``Amended and Restated'' Trust Agreement, which is currently the 
``Second Amended and Restated'' Trust Agreement and, as discussed 
herein, will become the ``Third Amended and Restated'' Trust Agreement; 
and (ii) the effective date of the Trust Agreement, which previously 
changed from February 4, 2010 to April 30, 2012 \31\ and, as discussed 
herein, will further change to a date in December 2014 that corresponds 
to the effective closing date of the applicable step in the 
Transactions. The Exchange proposes to update these references. The 
Exchange also proposes to add language specifying that the Trust 
Agreement may be amended, restated or replaced from time to time, 
retitle the document as the ``Third'' Amended and Restated Certificate 
of Incorporation of U.S. Exchange Holdings, and update the effective 
date thereof.\32\ Finally, the Exchange proposes to remove references 
to EDGA Exchange and EDGX Exchange from the definition of ``Controlled 
National Securities Exchange'' in Article TENTH.\33\
---------------------------------------------------------------------------

    \31\ See supra note 6.
    \32\ The proposed amended U.S. Exchange Holdings COI is attached 
hereto as Exhibit 5I. Article SIXTEENTH of the U.S. Exchange 
Holdings COI provides that, for so long as U.S. Exchange Holdings 
shall control, directly or indirectly, the Exchange, or facility 
thereof, before any amendment to or repeal of any provision of the 
U.S. Exchange Holdings COI shall be effective, the same shall be 
submitted to the board of directors of the Exchange, and if the same 
must be filed with, or filed with and approved by, the Commission 
before the same may be effective, under Section 19 of the Act and 
the rules promulgated thereunder, then the same shall not be 
effective until filed with, or filed with and approved by, the 
Commission, as the case may be.
    \33\ See supra note 22.
---------------------------------------------------------------------------

Summary
    Upon the consummation of the Transactions, including the proposed 
changes to the COD, COI, Trust Agreement, ISE LLC Agreement, and U.S. 
Exchange Holdings COI (and related resolutions and agreements ceasing 
to be rules of the Exchange), the Exchange will continue to operate and 
regulate its market and members in the same exact manner as it did 
prior to the Transactions. The Transactions will not impair the ability 
of ISE Holdings, the Exchange, or any facility thereof, to carry out 
their respective functions and responsibilities under the Act. 
Moreover, the Transactions will not impair the ability of the 
Commission to enforce the Act with respect to the Exchange and its Non-
U.S. Upstream Owners, including each of their directors, officers, 
employees and agents, to the extent they are involved in the activities 
of the Exchange. As such, the Commission's plenary regulatory authority 
over the Exchange will not be affected by the approval of this proposed 
rule change.
2. Statutory Basis
    The Exchange believes that this proposal is consistent with Section 
6(b)of the Act,\34\ in general, and furthers the objectives of Section 
6(b)(1) of the Act,\35\ in particular, in that it enables the Exchange 
to be so organized as to have the capacity to be able to carry out the 
purposes of the Act and to comply, and to enforce compliance by its 
exchange members and persons associated with

[[Page 67228]]

its exchange members, with the provisions of the Act, the rules and 
regulations thereunder, and the rules of the Exchange. The Exchange 
will operate in the same manner following the Transactions as it 
operates today. Thus, the Commission will continue to have plenary 
regulatory authority over the Exchange, as is the case currently with 
the Exchange. The proposed rule change is consistent with and will 
facilitate an ownership structure that will continue to provide the 
Commission with appropriate oversight tools to ensure that the 
Commission will have the ability to enforce the Act with respect to the 
Exchange and its direct and indirect Non-U.S. Upstream Owners, 
including each of their directors, officers, employees and agents, to 
the extent they are involved in the activities of the Exchange.
---------------------------------------------------------------------------

    \34\ 15 U.S.C. 78s(b).
    \35\ 15 U.S.C. 78s(b)(1).
---------------------------------------------------------------------------

    The Exchange also believes that this filing furthers the objectives 
of Section 6(b)(5) \36\ of the Act because the proposed rule change 
would be consistent with and facilitate a governance and regulatory 
structure that is designed to prevent fraudulent and manipulative acts 
and practices, to promote just and equitable principles of trade, to 
foster cooperation and coordination with persons engaged in regulating, 
clearing, settling, processing information with respect to, and 
facilitating transactions in securities, to remove impediments to, and 
perfect the mechanism of a free and open market and a national market 
system and, in general, to protect investors and the public interest. 
Specifically, the Exchange believes that the proposed rule change will 
continue to provide the Commission and the Exchange with access to 
necessary information that will allow the Exchange to efficiently and 
effectively enforce compliance with the Act, as well as allow the 
Commission to provide proper oversight, which will ultimately promote 
just and equitable principles of trade and protect investors. In 
addition, the Exchange believes that the proposed rule change will 
continue to preserve the independence of the Exchange's self-regulatory 
function and ensure that the Exchange will be able to obtain any 
information it needs in order to detect and deter any fraudulent and 
manipulative acts in its marketplace and carry out its regulatory 
responsibilities under the Act.
---------------------------------------------------------------------------

    \36\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    Approval of this proposed rule change will enable ISE Holdings to 
continue its operations and the Exchange to continue its orderly 
discharge of regulatory duties to prevent fraudulent and manipulative 
acts and practices, to promote just and equitable principles of trade, 
to foster cooperation and coordination with persons engaged in 
regulating, clearing, settling, processing information with respect to, 
and facilitating transactions in securities, to remove impediments to 
and perfect the mechanism of a free and open market and a national 
market system, and, in general, to protect investors and the public 
interest.
    Finally, the Exchange is not proposing any significant or novel 
regulatory issues, nor is it proposing any changes to the Exchange's 
operational or trading structure in connection with the Transactions. 
Instead, the Exchange represents that the proposed rule change consists 
of administrative amendments to ISE Holdings' COI, COD and the Trust 
Agreement (along with changes to the ISE LLC Agreement related to 
distributions; a non-substantive, administrative change to the U.S. 
Exchange Holdings COI; and administrative changes with respect to 
certain resolutions and agreements in relation to entities that are or 
were Non-U.S. Upstream Owners of the Exchange, but whose status as such 
has already ceased, or that will cease as a result of the Transactions, 
such that the resolutions and agreements will cease to be rules of the 
Exchange), and that no changes will be made to other aspects of the 
Exchange's organizational documents that were previously approved by 
the Commission.

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

    In accordance with Section 6(b)(8) of the Act,\37\ the Exchange 
believes that the proposed rule change would not impose any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act. The Exchange does not believe that the proposed 
rule change implicates any competitive issues. Rather, the Transactions 
merely represent a restructuring of indirect ownership interests of the 
Exchange, and will not involve the introduction of any new direct or 
indirect owners or any entity or individual that would have the right 
to direct the actions of the Exchange or vote the shares of the 
Exchange. As such, the Exchange believes that the proposal is 
consistent with the Act.
---------------------------------------------------------------------------

    \37\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange has not solicited, and does not intend to solicit, 
comments on this proposed rule change. The Exchange has not received 
any unsolicited written comments from members or other interested 
parties.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 45 days of the publication date of this notice or within 
such longer period (1) as the Commission may designate up to 45 days of 
such date if it finds such longer period to be appropriate and 
publishes its reasons for so finding or (2) as to which the self-
regulatory organization consents, the Commission will:
    (A) By order approve or disapprove such Proposed Rule Change; or
    (B) institute proceedings to determine whether the Proposed Rule 
Change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change, as modified by Amendment No. 1, is consistent with the Act. 
Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-ISE-2014-44 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-ISE-2014-44. 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 (http://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

[[Page 67229]]

Reference Room on official business days between the hours of 10:00 
a.m. and 3:00 p.m. Copies of such filing also will be available for 
inspection and copying at the principal offices 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-ISE-2014-44, and should be 
submitted on or before December 3, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\38\
---------------------------------------------------------------------------

    \38\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-26690 Filed 11-10-14; 8:45 am]
BILLING CODE 8011-01-P