Self-Regulatory Organizations; New York Stock Exchange LLC; NYSE MKT LLC; NYSE Arca, Inc.; Order Approving a Proposed Rule Change, as Modified by Amendment No. 1 Thereto, in Connection With the Proposed Termination of the Amended and Restated Trust Agreement, Dated as of November 13, 2013 and Amended on June 2, 2014 By and Among NYSE Holdings LLC, a Delaware Limited Liability Company, NYSE Group, Inc., a Delaware Corporation, Wilmington Trust Company, as Delaware Trustee, and Each of Jacques de Larosière de Champfeu, Alan Trager and John Shepard Reed, as Trustees, 73362-73364 [2014-28878]
Download as PDF
<![CDATA[
73362
Federal Register / Vol. 79, No. 237 / Wednesday, December 10, 2014 / Notices
SECURITIES AND EXCHANGE
COMMISSION
proposed rule changes as modified by
Amendment No. 1 thereto.
[Release No. 34–73740; File Nos. SR–NYSE–
2014–53; SR–NYSEMKT–2014–83; SR–
NYSEArca–2014–112]
II. Description of the Proposal
Self-Regulatory Organizations; New
York Stock Exchange LLC; NYSE MKT
LLC; NYSE Arca, Inc.; Order Approving
a Proposed Rule Change, as Modified
by Amendment No. 1 Thereto, in
Connection With the Proposed
Termination of the Amended and
Restated Trust Agreement, Dated as of
November 13, 2013 and Amended on
June 2, 2014 By and Among NYSE
Holdings LLC, a Delaware Limited
Liability Company, NYSE Group, Inc., a
Delaware Corporation, Wilmington
Trust Company, as Delaware Trustee,
`
and Each of Jacques de Larosiere de
Champfeu, Alan Trager and John
Shepard Reed, as Trustees
December 4, 2014.
I. Introduction
mstockstill on DSK4VPTVN1PROD with NOTICES
On October 8, 2014, each of New York
Stock Exchange LLC (‘‘Exchange’’),
NYSE MKT LLC (‘‘NYSE MKT’’), and
NYSE Arca, Inc. (‘‘NYSE Arca’’ and,
with the Exchange and NYSE MKT, the
‘‘NYSE Exchanges’’), filed with the
Securities and Exchange Commission
(‘‘Commission’’), pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’) 1 and Rule 19b–4
thereunder,2 proposed rule changes in
connection with the proposed
termination of the Amended and
Restated Trust Agreement, dated as of
November 13, 2013 and amended on
June 2, 2014 (the ‘‘Trust Agreement’’),
by and among NYSE Holdings LLC, a
Delaware limited liability company
(‘‘NYSE Holdings’’), NYSE Group, Inc.,
a Delaware corporation (‘‘NYSE
Group’’), Wilmington Trust Company,
as Delaware Trustee, and each of
`
Jacques de Larosiere de Champfeu, Alan
Trager and John Shepard Reed, as
Trustees. The proposed rule changes
were published for comment in the
Federal Register on October 22, 2014.3
The Commission did not receive any
comment letters on the proposal. On
October 21, 2014, the NYSE Exchanges
filed Amendment No. 1 to the proposed
rule changes.4 This order approves the
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 Securities Exchange Act Release Nos. 73373
(October 16, 2014), 79 FR 63191 (SR–NYSE–2014–
53); 73372 (October 16, 2014), 79 FR 63201 (SR–
NYSEMKT–2014–83); 73374 (October 16, 2014), 79
FR 63188 (SR–NYSEArca–2014–112).
4 In Amendment No. 1, the NYSE Exchanges
made a technical and non-material correction to a
statement in each filing regarding the ownership of
2 17
VerDate Sep<11>2014
17:48 Dec 09, 2014
Jkt 235001
The NYSE Exchanges seek approval
for their 100% direct parent, NYSE
Group, and its 100% indirect parent,
NYSE Holdings, to terminate the Trust
Agreement.5 The NYSE Exchanges
believe that the regulatory
considerations that led to the
implementation of the Trust Agreement
in 2007 are now moot as a result of the
sale by Intercontinental Exchange, Inc.,
a Delaware corporation (‘‘ICE’’), of
Euronext N.V. (‘‘Euronext’’) in June
2014 and certain changes in the
corporate governance of ICE, ICE
Holdings and NYSE Holdings that
occurred upon such sale.
In 2007, NYSE Group, which is the
100% owner of the NYSE Exchanges,
combined with Euronext (the
‘‘Combination’’). The new parent
company formed in the Combination,
NYSE Euronext, operated several
regulated entities in the United States
and various jurisdictions in Europe. In
the Commission’s notice relating to the
proposed Combination, the NYSE
Exchanges emphasized the importance
of continuing to regulate marketplaces
locally:
A core aspect of the structure of the
Combination is continued local regulation of
the marketplaces. Accordingly, the
Combination is premised on the notion that
. . . [c]ompanies listing their securities only
on markets operated by Euronext and its
subsidiaries will not become newly subject to
U.S. laws or regulation by the SEC as a result
of the Combination, and companies listing
NYSE Amex Options LLC by ICE. The Commission
notes that the NYSE Exchanges submitted a
comment letter to each filing on October 24, 2014
attaching Amendment No. 1, and, consequently,
Amendment No. 1 is available in the public
comment files for SR–NYSE–2014–53, SR–
NYSEMKT–2014–83, and SR–NYSEArca–2014–112
on the Commission’s Web site. Because
Amendment No. 1 is technical in nature, the
Commission is not required to publish it for public
comment.
5 ICE, a public company listed on the Exchange,
owns 100% of Intercontinental Exchange Holdings,
Inc., a Delaware corporation (‘‘ICE Holdings’’),
which in turn owns 100% of NYSE Holdings.
Through ICE Holdings, NYSE Holdings and NYSE
Group, ICE indirectly owns (1) 100% of the equity
interest of three registered national securities
exchanges and self-regulatory organizations, the
NYSE Exchanges and (2) 100% of the equity
interest of NYSE Market (DE), Inc. (‘‘NYSE
Market’’), NYSE Regulation, Inc. (‘‘NYSE
Regulation’’), NYSE Arca L.L.C. and NYSE Arca
Equities, Inc. ICE also indirectly owns a majority
interest in NYSE Amex Options LLC. See Exchange
Act Release No. 70210 (August 15, 2013), 78 FR
51758 (August 21, 2013) (SR–NYSE–2013–42; SR–
NYSEMKT–2013–50; SR–NYSEArca–2013–62)
(approving proposed rule change relating to a
corporate transaction in which NYSE Euronext will
become a wholly owned subsidiary of
IntercontinentalExchange Group, Inc.).
PO 00000
Frm 00086
Fmt 4703
Sfmt 4703
their securities only on the Exchange or
NYSE Arca, will not become newly subject
to European rules or regulation as a result of
the Combination.6
In connection with obtaining
regulatory approval of the Combination,
NYSE Euronext implemented certain
special arrangements consisting of two
standby structures, one involving a
Dutch foundation (Stichting) and one
involving a Delaware trust. The Dutch
foundation was empowered to take
actions to mitigate the effects of any
material adverse change in U.S. law that
had an ‘‘extraterritorial’’ impact on nonU.S. issuers listed on Euronext markets,
non-U.S. financial services firms that
were members of Euronext markets or
holders of exchange licenses with
respect to the Euronext markets. The
Delaware trust was empowered to take
actions to mitigate the effects of any
material adverse change in European
law that had an ‘‘extraterritorial’’ impact
on the non-European issuers listed on
NYSE Group securities exchanges, nonEuropean financial services firms that
were members of any NYSE Group
securities market or holders of exchange
licenses with respect to the NYSE Group
securities exchanges.7
The Dutch foundation and the
Delaware trust remained in effect after
the merger of ICE Holdings (then known
as IntercontinentalExchange, Inc.) and
NYSE Euronext in 2013 under ICE (then
known as IntercontinentalExchange
Group, Inc.) as a new public holding
company. However, in connection with
ICE’s announced plan to sell the
Euronext securities exchanges in an
initial public offering, the Dutch
Ministry of Finance permitted
modifications of the terms of the
governing document of the Dutch
foundation under which the powers of
the Dutch foundation would cease to
apply to ICE and its affiliates at such
time as ICE ceased to hold a
‘‘controlling interest’’ in Euronext, with
‘‘controlling interest’’ defined by
reference to the definition of ‘‘control’’
under Rule 10 of the International
Financial Reporting Standards (‘‘IFRS
10’’).8 In June 2014, ICE announced that
6 See Exchange Act Release No. 55026 (Dec. 29,
2006) (SR–NYSE–2006–120), 72 FR 814, 816–17
(January 8, 2007) (the ‘‘NYSE Euronext Notice’’).
NYSE Euronext acquired NYSE MKT, the third of
the NYSE Exchanges, in 2008.
7 An explanation of the terms of the Dutch
foundation and the Delaware trust is included in
the NYSE Euronext Notice. Subsequent
modifications to the arrangements, to the extent
relevant to the proposed rule change, are described
in the Notices.
8 Excerpts from the Further Amended and
Restated Governance and Option Agreement, dated
March 21, 2014, among the Dutch foundation,
Euronext Group N.V. and ICE are attached to the
Notices as Exhibit 5C.
E:\FR\FM\10DEN1.SGM
10DEN1
Federal Register / Vol. 79, No. 237 / Wednesday, December 10, 2014 / Notices
mstockstill on DSK4VPTVN1PROD with NOTICES
it had sold all but approximately 6% of
the ownership interest in Euronext in an
underwritten public offering outside the
United States.9 As stated in the Notices,
upon ICE’s application, the Dutch
Ministry of Finance confirmed on July
16, 2014 that the conditions to the
cessation of the application of the Dutch
foundation to ICE had been satisfied or
waived.10 As a result, the NYSE
Exchanges represent that ICE and its
subsidiaries are no longer subject to the
provisions of the Dutch foundation.
In the 2013 merger, NYSE Euronext
was succeeded by the entity now known
as NYSE Holdings, which is currently a
party to the Trust Agreement. At that
time, references to the nominating and
governance committee of the board of
directors of NYSE Euronext, which
selected the Trustees of the Delaware
trust, were replaced by references to the
nominating and governance committee
of the board of directors of ICE.11 Other
provisions of the Trust Agreement are
substantially unchanged.12
In connection with the Combination
of NYSE Group and Euronext in 2007
and the establishment of the Dutch
foundation and the Delaware trust, the
Certificate of Incorporation and Bylaws
of NYSE Euronext included several
provisions relating to representation of
European interests on the board of
directors and other provisions requiring
the board to give due consideration to
European regulatory requirements and
the interests of identified categories of
European stakeholders. These
provisions are summarized in the NYSE
Euronext Notice. Each such provision
was subject to automatic revocation in
the event that NYSE Euronext no longer
held a controlling interest in Euronext
or certain of its subsidiaries. For this
purpose, ‘‘controlling interest’’ was
defined to mean 50% or more of the
outstanding shares of each class of
voting securities and of the combined
voting power of outstanding voting
securities entitled to vote generally in
9 ICE’s press release dated June 24, 2014 is
available at the following link: https://ir.theice.com/
investors-and-media/press/press-releases/pressrelease-details/2014/Intercontinental-ExchangeAnnounces-Closing-of-Euronext-Initial-PublicOffering/default.aspx.
10 An English translation provided by the NYSE
Exchanges of the Dutch Ministry of Finance’s letter
is attached to the Notices as Exhibit 5D.
11 See Exchange Act Release No. 70210 (August
15, 2013), 78 FR 51758 (August 21, 2013) (SR–
NYSE–2013–42; SR–NYSEMKT–2013–50; SR–
NYSEArca–2013–62).
12 See Exchange Act Release No. 72158 (May 13,
2014) (SR–NYSE–2014–23), 79 FR 28784 (May 19,
2014) (notice of filing and immediate effectiveness
of proposed rule change relating to name changes
of the Exchange’s ultimate parent and revising Trust
Agreement to reflect name changes of ICE and ICE
Holdings).
VerDate Sep<11>2014
17:48 Dec 09, 2014
Jkt 235001
the election of directors. Substantially
identical provisions were added to the
Certificate of Incorporation and Bylaws
of ICE and ICE Holdings, and were
retained in the Operating Agreement of
NYSE Holdings, when ICE acquired
NYSE Euronext in 2013, except that the
‘‘controlling interest’’ test was modified
to become a ‘‘control’’ test under IFRS
10, as described above with respect to
the Dutch foundation. As a result of the
initial public offering of Euronext, ICE
has established that it no longer controls
Euronext within the meaning of IFRS
10, and the provisions of the constituent
documents of ICE, ICE Holdings and
NYSE Holdings have automatically and
without further action become void and
are of no further force and effect.
Termination of the Delaware trust
would be implemented through a
unanimous written consent of all parties
to, or otherwise bound by, the Trust
Agreement.13 The proposed rule
changes and exhibits thereto contain
modifications to the corporate
governance documents of NYSE
Holdings, NYSE Group, the Exchange,
NYSE MKT, NYSE Market and NYSE
Regulation that delete references to the
Delaware trust and make related
conforming changes thereto.14
III. Discussion and Commission’s
Findings
After careful review, the Commission
finds that the proposed rule changes are
consistent with the requirements of
Section 6 of the Act 15 and the rules and
regulations thereunder applicable to a
national securities exchange.16 The
Commission finds that the proposed
rule changes are consistent with Section
13 A form of unanimous written consent of all
parties to, or otherwise bound by, the Trust
Agreement resolving that the Delaware trust be
terminated is attached to the Notices as Exhibit 5B.
14 In particular, the NYSE Exchanges propose to
amend: (1) The Fifth Amended and Restated
Limited Liability Company Agreement of NYSE
Holdings to eliminate the definition of the term
‘‘Trust’’ in Section 1.1 and the references to the
Delaware trust in Section 7.2; (2) the Third
Amended and Restated Certificate of Incorporation
of NYSE Group to eliminate references to the
Delaware trust in Article IV, Section 4(a) and (b);
(3) the Sixth Amended and Restated Operating
Agreement of the Exchange to eliminate references
to the Delaware trust in Section 3.03; (4) the Fifth
Amended and Restated Operating Agreement of
NYSE MKT to eliminate references to the Delaware
trust in Section 3.03; (5) the Second Amended and
Restated Certificate of Incorporation of NYSE
Market to eliminate references to the Delaware trust
in Article IV, Section 2; and (6) the Restated
Certificate of Incorporation of NYSE Regulation to
eliminate references to the Delaware trust in Article
V.
15 15 U.S.C. 78f.
16 Additionally, in approving these proposed rule
changes, the Commission has considered the
proposed rules’ impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
PO 00000
Frm 00087
Fmt 4703
Sfmt 4703
73363
6(b)(5) of the Act,17 which requires,
among other things, that the exchanges’
rules be designed to promote just and
equitable principles of trade, 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.
The NYSE Exchanges believe that the
regulatory considerations that led to the
implementation of the Trust Agreement
in 2007 have been mooted by the sale
of Euronext in June 2014, the automatic
revocation of corporate governance
provisions applicable to ICE, ICE
Holdings and NYSE Holdings that
occurred upon such sale, and the NYSE
Exchanges’ representation that the
Dutch foundation which functioned as a
European analog to the Delaware trust,
ceased to have any authority over ICE
and its subsidiaries upon the closing of
the sale of Euronext. In addition, the
NYSE Exchanges represent that
continuance of the Trust Agreement
imposes administrative burdens and
costs upon the exchanges and their
affiliates that create impediments to a
free and open market, and may cause
investor uncertainty. In particular,
according to the NYSE Exchanges, the
Trust Agreement imposes
administrative burdens on ICE and the
nominating and governance committee
of its board of directors, such as the
need to periodically consider and vote
on trustees; the need to consider
whether any proposed action requires
approval under the Trust Agreement
and, if so, the obligation to prepare
materials for consideration and vote by
the Trustees; and the need to consider
whether any proposed action requires
an amendment to the Trust Agreement
and, if so, the additional obligation to
submit such amendment to the
Commission for approval under Rule
19b–4.18 According to the NYSE
Exchanges, the Trust Agreement also
results in out-of-pocket costs to the
exchanges and their affiliates including
the fees of the individual Trustees and
the Delaware Trustee as well as fees of
counsel incurred in connection with
review of proposed amendments and
assistance with the Commission
approval process.
The Commission believes that the
NYSE Exchanges’ proposal to terminate
the Trust Agreement is consistent with
the requirements of Section 6(b)(5) of
the Act 19 because the proposed rule
changes would be consistent with and
facilitate a corporate governance
17 15
U.S.C. 78f(b)(5).
CFR 240.19b–4.
19 15 U.S.C. 78f(b)(5).
18 17
E:\FR\FM\10DEN1.SGM
10DEN1
73364
Federal Register / Vol. 79, No. 237 / Wednesday, December 10, 2014 / Notices
structure for the NYSE Exchanges that is
designed to promote just and equitable
principles of trade, 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. Furthermore, the
termination of the Delaware trust may
remove impediments to the operation of
the NYSE exchanges by eliminating
certain expenses and administrative
burdens as well as the potential for
uncertainty among analysts and
investors as to the practical implications
of the Delaware trust on the exchanges.
IV. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,20 that the
proposed rule changes (SR–NYSE–
2014–53; SR–NYSEMKT–2014–83; SR–
NYSEArca–2014–112), as modified by
Amendment No. 1, be, and hereby are,
approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.21
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–28878 Filed 12–9–14; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–73735; File No. SR–FICC–
2014–07]
Self-Regulatory Organizations; Fixed
Income Clearing Corporation; Order
Approving Proposed Rule Change To
Amend the Clearing Rules of the
Mortgage-Backed Securities Division
To Establish a Membership Category
and Minimum Financial Requirements
for Insured Credit Unions
mstockstill on DSK4VPTVN1PROD with NOTICES
December 4, 2014.
I. Introduction
On October 15, 2014, the Fixed
Income Clearing Corporation (‘‘FICC’’)
filed with the Securities and Exchange
Commission (‘‘Commission’’) proposed
rule change SR–FICC–2014–07 pursuant
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’) 1 and Rule
19b–4 thereunder.2 The proposed rule
change was published for comment in
the Federal Register on October 24,
2014.3 The Commission received no
20 15
U.S.C. 78s(b)(2).
CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 Securities Exchange Act Release No. 73391
(October 20, 2014), 79 FR 63657 (October 24, 2014)
(SR–FICC–2014–07).
21 17
VerDate Sep<11>2014
17:48 Dec 09, 2014
Jkt 235001
comment letters in response to the
proposed rule change. For the reasons
discussed below, the Commission is
approving the proposed rule change.
II. Description
Pursuant to this filing, FICC proposed
to amend the clearing rules of the
Mortgage-Backed Securities Division
(‘‘MBSD’’) of FICC in order to establish
a membership category and minimum
financial requirements for ‘‘insured
credit unions,’’ as such term is defined
in the Federal Credit Union Act
(‘‘FCUA’’).4 Specifically, FICC proposed
to revise MBSD Rule 2A, Section 1, to
create a membership category for
insured credit unions that are in good
standing with their primary regulators
(‘‘Insured Credit Union Clearing
Member’’). For loss allocation purposes,
Insured Credit Union Clearing Members
would be designated as ‘‘Tier One
Clearing Members’’ in accordance with
MBSD Rule 4, Section 7. In addition,
FICC has proposed to add a provision to
MBSD Rule 2A, Section 2, which would
require an applicant applying to become
an Insured Credit Union Clearing
Member to have a level of equity capital
as of the end of the month prior to the
effective date of their membership of at
least $100 million and achieve the ‘‘well
capitalized’’ statutory net worth
category classification defined by the
National Credit Union Administration
(‘‘NCUA’’) under 12 CFR part 702.
Insured credit unions applying for
membership under this new category
would be required to meet all other
applicable financial, credit, and
operational membership qualifications
and standards for clearing members that
are contained in MBSD Rule 2A, Section
2. In particular, such applicants would
have to demonstrate an established
profitable business history of a
minimum of 6 months or personnel
with sufficient operational background
and business experience for the firm to
conduct its business and to be a member
(as is required of all other membership
categories). Insured credit unions
seeking membership would have to
4 The FCUA defines ‘‘Insured credit unions’’ as
‘‘any credit union the member accounts of which
are insured in accordance with the provisions of
Title II of [FCUA] . . .’’ According to FICC, the term
‘‘insured credit union’’ includes all credit unions
chartered by the National Credit Union
Administration (‘‘NCUA’’), the independent federal
agency that regulates charters and supervises
federal credit unions, because Title II of the FCUA
requires all credit unions that are chartered by the
NCUA to have insured accounts. Furthermore, FICC
has stated that the term ‘‘insured credit unions’’
also includes both federally-insured state credit
unions and federally-insured credit unions
operating under the jurisdiction of the Department
of Defense because Title II of the FCUA permits the
NCUA Board to insure those types of credit unions.
PO 00000
Frm 00088
Fmt 4703
Sfmt 4703
demonstrate an ability to communicate
with FICC, fulfill anticipated
commitments to and meet the
operational requirements of FICC with
necessary promptness and accuracy,
and conform to any condition and
requirement that FICC reasonably deems
necessary for its protection or that of its
Members.
FICC believes the participation of
insured credit unions as guaranteed
service members will contribute to the
safety, efficiency, and transparency of
the market by allowing FICC to capture
a greater part of the activity of its
existing members and by introducing
activity of current non-members to
FICC. FICC also believes that insured
credit unions will benefit from the
MBSD clearing service and the
associated operational efficiencies of a
central counterparty service.
III. Discussion
Section 19(b)(2)(C) of the Act 5 directs
the Commission to approve a selfregulatory organization’s proposed rule
change if the Commission finds that
such proposed rule change is consistent
with the requirements of the Act and the
rules and regulations thereunder
applicable to such organization. Section
17A(b)(3)(F) of the Act 6 requires, among
other things, that the rules of a clearing
agency are designed to promote the
prompt and accurate clearance and
settlement of securities transactions.
The Commission finds that, as
proposed, FICC’s rule change to
establish a membership category and
minimum financial, credit, and
operational requirements and standards
for insured credit unions, as defined in
FICC’s proposal, is consistent with
Section 17A(b)(3)(F) of the Act.7 The
Commissions believes that the proposed
rule change should promote the prompt
and accurate clearance and settlement of
securities transactions, because by
allowing insured credit unions to
participate as MBSD members, these
firms will be able to avail themselves of
the benefits of central counterparty
service including, among other things,
trade comparison, to-be-announced
netting, electronic pool notification
allocation, pool comparison, pool
netting, settlement, and risk
management for eligible securities.
Furthermore, the rule change will also
allow existing FICC members to submit
eligible trading activity with qualified
insured credit unions directly to the
MBSD of FICC, thereby also extending
5 15
U.S.C. 78s(b)(2)(C).
U.S.C. 78q–1(b)(3)(F).
7 15 U.S.C. 78q–1(b)(3)(F).
6 15
E:\FR\FM\10DEN1.SGM
10DEN1
]]>Agencies
[Federal Register Volume 79, Number 237 (Wednesday, December 10, 2014)]
[Notices]
[Pages 73362-73364]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-28878]
[[Page 73362]]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-73740; File Nos. SR-NYSE-2014-53; SR-NYSEMKT-2014-83;
SR-NYSEArca-2014-112]
Self-Regulatory Organizations; New York Stock Exchange LLC; NYSE
MKT LLC; NYSE Arca, Inc.; Order Approving a Proposed Rule Change, as
Modified by Amendment No. 1 Thereto, in Connection With the Proposed
Termination of the Amended and Restated Trust Agreement, Dated as of
November 13, 2013 and Amended on June 2, 2014 By and Among NYSE
Holdings LLC, a Delaware Limited Liability Company, NYSE Group, Inc., a
Delaware Corporation, Wilmington Trust Company, as Delaware Trustee,
and Each of Jacques de Larosi[egrave]re de Champfeu, Alan Trager and
John Shepard Reed, as Trustees
December 4, 2014.
I. Introduction
On October 8, 2014, each of New York Stock Exchange LLC
(``Exchange''), NYSE MKT LLC (``NYSE MKT''), and NYSE Arca, Inc.
(``NYSE Arca'' and, with the Exchange and NYSE MKT, the ``NYSE
Exchanges''), filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\
proposed rule changes in connection with the proposed termination of
the Amended and Restated Trust Agreement, dated as of November 13, 2013
and amended on June 2, 2014 (the ``Trust Agreement''), by and among
NYSE Holdings LLC, a Delaware limited liability company (``NYSE
Holdings''), NYSE Group, Inc., a Delaware corporation (``NYSE Group''),
Wilmington Trust Company, as Delaware Trustee, and each of Jacques de
Larosi[egrave]re de Champfeu, Alan Trager and John Shepard Reed, as
Trustees. The proposed rule changes were published for comment in the
Federal Register on October 22, 2014.\3\ The Commission did not receive
any comment letters on the proposal. On October 21, 2014, the NYSE
Exchanges filed Amendment No. 1 to the proposed rule changes.\4\ This
order approves the proposed rule changes as modified by Amendment No. 1
thereto.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Securities Exchange Act Release Nos. 73373 (October 16,
2014), 79 FR 63191 (SR-NYSE-2014-53); 73372 (October 16, 2014), 79
FR 63201 (SR-NYSEMKT-2014-83); 73374 (October 16, 2014), 79 FR 63188
(SR-NYSEArca-2014-112).
\4\ In Amendment No. 1, the NYSE Exchanges made a technical and
non-material correction to a statement in each filing regarding the
ownership of NYSE Amex Options LLC by ICE. The Commission notes that
the NYSE Exchanges submitted a comment letter to each filing on
October 24, 2014 attaching Amendment No. 1, and, consequently,
Amendment No. 1 is available in the public comment files for SR-
NYSE-2014-53, SR-NYSEMKT-2014-83, and SR-NYSEArca-2014-112 on the
Commission's Web site. Because Amendment No. 1 is technical in
nature, the Commission is not required to publish it for public
comment.
---------------------------------------------------------------------------
II. Description of the Proposal
The NYSE Exchanges seek approval for their 100% direct parent, NYSE
Group, and its 100% indirect parent, NYSE Holdings, to terminate the
Trust Agreement.\5\ The NYSE Exchanges believe that the regulatory
considerations that led to the implementation of the Trust Agreement in
2007 are now moot as a result of the sale by Intercontinental Exchange,
Inc., a Delaware corporation (``ICE''), of Euronext N.V. (``Euronext'')
in June 2014 and certain changes in the corporate governance of ICE,
ICE Holdings and NYSE Holdings that occurred upon such sale.
---------------------------------------------------------------------------
\5\ ICE, a public company listed on the Exchange, owns 100% of
Intercontinental Exchange Holdings, Inc., a Delaware corporation
(``ICE Holdings''), which in turn owns 100% of NYSE Holdings.
Through ICE Holdings, NYSE Holdings and NYSE Group, ICE indirectly
owns (1) 100% of the equity interest of three registered national
securities exchanges and self-regulatory organizations, the NYSE
Exchanges and (2) 100% of the equity interest of NYSE Market (DE),
Inc. (``NYSE Market''), NYSE Regulation, Inc. (``NYSE Regulation''),
NYSE Arca L.L.C. and NYSE Arca Equities, Inc. ICE also indirectly
owns a majority interest in NYSE Amex Options LLC. See Exchange Act
Release No. 70210 (August 15, 2013), 78 FR 51758 (August 21, 2013)
(SR-NYSE-2013-42; SR-NYSEMKT-2013-50; SR-NYSEArca-2013-62)
(approving proposed rule change relating to a corporate transaction
in which NYSE Euronext will become a wholly owned subsidiary of
IntercontinentalExchange Group, Inc.).
---------------------------------------------------------------------------
In 2007, NYSE Group, which is the 100% owner of the NYSE Exchanges,
combined with Euronext (the ``Combination''). The new parent company
formed in the Combination, NYSE Euronext, operated several regulated
entities in the United States and various jurisdictions in Europe. In
the Commission's notice relating to the proposed Combination, the NYSE
Exchanges emphasized the importance of continuing to regulate
marketplaces locally:
A core aspect of the structure of the Combination is continued
local regulation of the marketplaces. Accordingly, the Combination
is premised on the notion that . . . [c]ompanies listing their
securities only on markets operated by Euronext and its subsidiaries
will not become newly subject to U.S. laws or regulation by the SEC
as a result of the Combination, and companies listing their
securities only on the Exchange or NYSE Arca, will not become newly
subject to European rules or regulation as a result of the
Combination.\6\
---------------------------------------------------------------------------
\6\ See Exchange Act Release No. 55026 (Dec. 29, 2006) (SR-NYSE-
2006-120), 72 FR 814, 816-17 (January 8, 2007) (the ``NYSE Euronext
Notice''). NYSE Euronext acquired NYSE MKT, the third of the NYSE
Exchanges, in 2008.
In connection with obtaining regulatory approval of the
Combination, NYSE Euronext implemented certain special arrangements
consisting of two standby structures, one involving a Dutch foundation
(Stichting) and one involving a Delaware trust. The Dutch foundation
was empowered to take actions to mitigate the effects of any material
adverse change in U.S. law that had an ``extraterritorial'' impact on
non-U.S. issuers listed on Euronext markets, non-U.S. financial
services firms that were members of Euronext markets or holders of
exchange licenses with respect to the Euronext markets. The Delaware
trust was empowered to take actions to mitigate the effects of any
material adverse change in European law that had an
``extraterritorial'' impact on the non-European issuers listed on NYSE
Group securities exchanges, non-European financial services firms that
were members of any NYSE Group securities market or holders of exchange
licenses with respect to the NYSE Group securities exchanges.\7\
---------------------------------------------------------------------------
\7\ An explanation of the terms of the Dutch foundation and the
Delaware trust is included in the NYSE Euronext Notice. Subsequent
modifications to the arrangements, to the extent relevant to the
proposed rule change, are described in the Notices.
---------------------------------------------------------------------------
The Dutch foundation and the Delaware trust remained in effect
after the merger of ICE Holdings (then known as
IntercontinentalExchange, Inc.) and NYSE Euronext in 2013 under ICE
(then known as IntercontinentalExchange Group, Inc.) as a new public
holding company. However, in connection with ICE's announced plan to
sell the Euronext securities exchanges in an initial public offering,
the Dutch Ministry of Finance permitted modifications of the terms of
the governing document of the Dutch foundation under which the powers
of the Dutch foundation would cease to apply to ICE and its affiliates
at such time as ICE ceased to hold a ``controlling interest'' in
Euronext, with ``controlling interest'' defined by reference to the
definition of ``control'' under Rule 10 of the International Financial
Reporting Standards (``IFRS 10'').\8\ In June 2014, ICE announced that
[[Page 73363]]
it had sold all but approximately 6% of the ownership interest in
Euronext in an underwritten public offering outside the United
States.\9\ As stated in the Notices, upon ICE's application, the Dutch
Ministry of Finance confirmed on July 16, 2014 that the conditions to
the cessation of the application of the Dutch foundation to ICE had
been satisfied or waived.\10\ As a result, the NYSE Exchanges represent
that ICE and its subsidiaries are no longer subject to the provisions
of the Dutch foundation.
---------------------------------------------------------------------------
\8\ Excerpts from the Further Amended and Restated Governance
and Option Agreement, dated March 21, 2014, among the Dutch
foundation, Euronext Group N.V. and ICE are attached to the Notices
as Exhibit 5C.
\9\ ICE's press release dated June 24, 2014 is available at the
following link: https://ir.theice.com/investors-and-media/press/press-releases/press-release-details/2014/Intercontinental-Exchange-Announces-Closing-of-Euronext-Initial-Public-Offering/default.aspx.
\10\ An English translation provided by the NYSE Exchanges of
the Dutch Ministry of Finance's letter is attached to the Notices as
Exhibit 5D.
---------------------------------------------------------------------------
In the 2013 merger, NYSE Euronext was succeeded by the entity now
known as NYSE Holdings, which is currently a party to the Trust
Agreement. At that time, references to the nominating and governance
committee of the board of directors of NYSE Euronext, which selected
the Trustees of the Delaware trust, were replaced by references to the
nominating and governance committee of the board of directors of
ICE.\11\ Other provisions of the Trust Agreement are substantially
unchanged.\12\
---------------------------------------------------------------------------
\11\ See Exchange Act Release No. 70210 (August 15, 2013), 78 FR
51758 (August 21, 2013) (SR-NYSE-2013-42; SR-NYSEMKT-2013-50; SR-
NYSEArca-2013-62).
\12\ See Exchange Act Release No. 72158 (May 13, 2014) (SR-NYSE-
2014-23), 79 FR 28784 (May 19, 2014) (notice of filing and immediate
effectiveness of proposed rule change relating to name changes of
the Exchange's ultimate parent and revising Trust Agreement to
reflect name changes of ICE and ICE Holdings).
---------------------------------------------------------------------------
In connection with the Combination of NYSE Group and Euronext in
2007 and the establishment of the Dutch foundation and the Delaware
trust, the Certificate of Incorporation and Bylaws of NYSE Euronext
included several provisions relating to representation of European
interests on the board of directors and other provisions requiring the
board to give due consideration to European regulatory requirements and
the interests of identified categories of European stakeholders. These
provisions are summarized in the NYSE Euronext Notice. Each such
provision was subject to automatic revocation in the event that NYSE
Euronext no longer held a controlling interest in Euronext or certain
of its subsidiaries. For this purpose, ``controlling interest'' was
defined to mean 50% or more of the outstanding shares of each class of
voting securities and of the combined voting power of outstanding
voting securities entitled to vote generally in the election of
directors. Substantially identical provisions were added to the
Certificate of Incorporation and Bylaws of ICE and ICE Holdings, and
were retained in the Operating Agreement of NYSE Holdings, when ICE
acquired NYSE Euronext in 2013, except that the ``controlling
interest'' test was modified to become a ``control'' test under IFRS
10, as described above with respect to the Dutch foundation. As a
result of the initial public offering of Euronext, ICE has established
that it no longer controls Euronext within the meaning of IFRS 10, and
the provisions of the constituent documents of ICE, ICE Holdings and
NYSE Holdings have automatically and without further action become void
and are of no further force and effect.
Termination of the Delaware trust would be implemented through a
unanimous written consent of all parties to, or otherwise bound by, the
Trust Agreement.\13\ The proposed rule changes and exhibits thereto
contain modifications to the corporate governance documents of NYSE
Holdings, NYSE Group, the Exchange, NYSE MKT, NYSE Market and NYSE
Regulation that delete references to the Delaware trust and make
related conforming changes thereto.\14\
---------------------------------------------------------------------------
\13\ A form of unanimous written consent of all parties to, or
otherwise bound by, the Trust Agreement resolving that the Delaware
trust be terminated is attached to the Notices as Exhibit 5B.
\14\ In particular, the NYSE Exchanges propose to amend: (1) The
Fifth Amended and Restated Limited Liability Company Agreement of
NYSE Holdings to eliminate the definition of the term ``Trust'' in
Section 1.1 and the references to the Delaware trust in Section 7.2;
(2) the Third Amended and Restated Certificate of Incorporation of
NYSE Group to eliminate references to the Delaware trust in Article
IV, Section 4(a) and (b); (3) the Sixth Amended and Restated
Operating Agreement of the Exchange to eliminate references to the
Delaware trust in Section 3.03; (4) the Fifth Amended and Restated
Operating Agreement of NYSE MKT to eliminate references to the
Delaware trust in Section 3.03; (5) the Second Amended and Restated
Certificate of Incorporation of NYSE Market to eliminate references
to the Delaware trust in Article IV, Section 2; and (6) the Restated
Certificate of Incorporation of NYSE Regulation to eliminate
references to the Delaware trust in Article V.
---------------------------------------------------------------------------
III. Discussion and Commission's Findings
After careful review, the Commission finds that the proposed rule
changes are consistent with the requirements of Section 6 of the Act
\15\ and the rules and regulations thereunder applicable to a national
securities exchange.\16\ The Commission finds that the proposed rule
changes are consistent with Section 6(b)(5) of the Act,\17\ which
requires, among other things, that the exchanges' rules be designed to
promote just and equitable principles of trade, 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.
---------------------------------------------------------------------------
\15\ 15 U.S.C. 78f.
\16\ Additionally, in approving these proposed rule changes, the
Commission has considered the proposed rules' impact on efficiency,
competition, and capital formation. See 15 U.S.C. 78c(f).
\17\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The NYSE Exchanges believe that the regulatory considerations that
led to the implementation of the Trust Agreement in 2007 have been
mooted by the sale of Euronext in June 2014, the automatic revocation
of corporate governance provisions applicable to ICE, ICE Holdings and
NYSE Holdings that occurred upon such sale, and the NYSE Exchanges'
representation that the Dutch foundation which functioned as a European
analog to the Delaware trust, ceased to have any authority over ICE and
its subsidiaries upon the closing of the sale of Euronext. In addition,
the NYSE Exchanges represent that continuance of the Trust Agreement
imposes administrative burdens and costs upon the exchanges and their
affiliates that create impediments to a free and open market, and may
cause investor uncertainty. In particular, according to the NYSE
Exchanges, the Trust Agreement imposes administrative burdens on ICE
and the nominating and governance committee of its board of directors,
such as the need to periodically consider and vote on trustees; the
need to consider whether any proposed action requires approval under
the Trust Agreement and, if so, the obligation to prepare materials for
consideration and vote by the Trustees; and the need to consider
whether any proposed action requires an amendment to the Trust
Agreement and, if so, the additional obligation to submit such
amendment to the Commission for approval under Rule 19b-4.\18\
According to the NYSE Exchanges, the Trust Agreement also results in
out-of-pocket costs to the exchanges and their affiliates including the
fees of the individual Trustees and the Delaware Trustee as well as
fees of counsel incurred in connection with review of proposed
amendments and assistance with the Commission approval process.
---------------------------------------------------------------------------
\18\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
The Commission believes that the NYSE Exchanges' proposal to
terminate the Trust Agreement is consistent with the requirements of
Section 6(b)(5) of the Act \19\ because the proposed rule changes would
be consistent with and facilitate a corporate governance
[[Page 73364]]
structure for the NYSE Exchanges that is designed to promote just and
equitable principles of trade, 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.
Furthermore, the termination of the Delaware trust may remove
impediments to the operation of the NYSE exchanges by eliminating
certain expenses and administrative burdens as well as the potential
for uncertainty among analysts and investors as to the practical
implications of the Delaware trust on the exchanges.
---------------------------------------------------------------------------
\19\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\20\ that the proposed rule changes (SR-NYSE-2014-53; SR-NYSEMKT-
2014-83; SR-NYSEArca-2014-112), as modified by Amendment No. 1, be, and
hereby are, approved.
---------------------------------------------------------------------------
\20\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\21\
---------------------------------------------------------------------------
\21\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-28878 Filed 12-9-14; 8:45 am]
BILLING CODE 8011-01-P
