Order Granting Application by New York Stock Exchange LLC, NYSE MKT LLC, NYSE Arca, Inc., and NYSE National, Inc., Respectively, for a Conditional Exemption Pursuant to Section 36(a) of the Exchange Act From Certain Requirements of Rule 6a-2 Under the Exchange Act, 20671-20673 [2017-08891]
Download as PDF
Federal Register / Vol. 82, No. 84 / Wednesday, May 3, 2017 / Notices
above. In addition, the Section 26
Applicants will also deliver to affected
Contract owners, at least thirty days
before the Substitution Date, a
prospectus for each applicable
Replacement Portfolio.
9. The Section 26 Applicants will
deliver to each affected Contract owner
within five business days of the
Substitution Date a written confirmation
which will include: (i) A confirmation
that the Substitutions were carried out
as previously notified; (ii) a restatement
of the information set forth in the PreSubstitution Notice; and (iii) values of
the Contract owner’s positions in the
Existing Portfolio before the
Substitution and the Replacement
Portfolio after the Substitution.
10. For a period of two years
following the Substitution Date, for
Contract owners who were Contract
owners as of the Substitution Date,
Commonwealth or an affiliate thereof
(other than the Trust) will reimburse, on
the last business day of each fiscal
quarter, the Contract owners whose
subaccounts invest in the applicable
Replacement Portfolio to the extent that
the Replacement Portfolio’s net annual
operating expenses (taking into account
fee waivers and expense
reimbursements) for such period
exceeds, on an annualized basis, the net
annual operating expenses of the
Existing Portfolio for the most recent
fiscal year preceding the date of the
application. In addition, the Section 26
Applicants will not increase the
Contract fees and charges that would
otherwise be assessed under the terms
of the Contracts for a period of at least
two years following the Substitution
Date.
For the Commission, by the Division of
Investment Management, under delegated
authority.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017–08904 Filed 5–2–17; 8:45 am]
nlaroche on DSK30NT082PROD with NOTICES
18:00 May 02, 2017
[Release No. 34–80536
Order Granting Application by New
York Stock Exchange LLC, NYSE MKT
LLC, NYSE Arca, Inc., and NYSE
National, Inc., Respectively, for a
Conditional Exemption Pursuant to
Section 36(a) of the Exchange Act
From Certain Requirements of Rule
6a–2 Under the Exchange Act
April 27, 2017.
I. Introduction
On February 1, 2017, The New York
Stock Exchange LLC (‘‘NYSE’’), NYSE
MKT LLC (‘‘NYSE MKT’’), NYSE Arca,
Inc. (‘‘NYSE Arca’’), and NYSE
National, Inc. (‘‘NYSE National’’) (each
an ‘‘Exchange’’, collectively,
‘‘Exchanges’’) each has requested,
pursuant to Rule 0–12 1 under the
Securities Exchange Act of 1934
(‘‘Exchange Act’’),2 that the Securities
and Exchange Commission
(‘‘Commission’’) grant an exemption
pursuant to Section 36(a)(1) 3 of the
Exchange Act from certain requirements
under Rule 6a–2(b)(1) under the
Exchange Act.4 Each Exchange is
registered with the Commission as a
national securities exchange under
Section 6 of the Exchange Act. This
order grants each Exchange’s request for
exemptive relief, subject to the
satisfaction of certain conditions, which
are outlined below.
II. Application for Conditional
Exemption From Certain Requirements
of Exchange Act Rule 6a–2
Rule 6a–2(b)(1) under the Exchange
Act 5 requires a national securities
exchange to file, on or before June 30 of
each year, an updated Exhibit D as an
amendment to its Form 1.6 Exhibit D to
Form 1 requires an exchange to provide,
for each subsidiary or affiliate of the
exchange, unconsolidated financial
1 17
CFR 240.0–12.
U.S.C. 78a et seq.
3 15 U.S.C. 78mm(a)(1).
4 17 CFR 240.6a–2(b)(1). See letters dated
February 1, 2017, from Elizabeth King, General
Counsel and Corporate Secretary, NYSE, to Brent J.
Fields, Secretary, Commission, regarding
Application for Exemption from Certain Form 1
Requirements under Section 6 of the Securities
Exchange Act of 1934, submitted on behalf of
NYSE, NYSE MKT, NYSE Arca, and NYSE
National, respectively (collectively, the ‘‘Exemption
Requests’’).
5 17 CFR 240.6a–2(b)(1).
6 17 CFR 249.1 (Form 1, ‘‘Application for, and
Amendments to Application for, Registration as a
National Securities Exchange or Exemption from
Registration Pursuant to Section 5 of the Exchange
Act.’’)
2 15
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20671
statements for the latest fiscal year of
the exchange.7
The Instructions to Form 1 define an
‘‘affiliate’’ as ‘‘[a]ny person that, directly
or indirectly, controls, is under common
control with, or is controlled by, the
national securities exchange . . .,
including any employees.’’ 8 The
Instructions to Form 1 define ‘‘control’’
as
The power, directly or indirectly, to direct
the management or policies of a company,
whether through ownership of securities, by
contract or otherwise. Any person that . . .
directly or indirectly has the right to vote
25% or more of a class of voting securities
or has the power to sell or direct the sale of
25% or more of a class of voting securities
. . . is presumed to control that entity.9
Each Exchange has requested that the
Commission grant it an exemption
pursuant to Section 36(a)(1) of the
Exchange Act, subject to the conditions
set forth below, with respect to its
‘‘Foreign Indirect Affiliates,’’ as defined
below, from the requirement under Rule
6a–2(b)(1) under the Exchange Act to
file the financial information required
by Exhibit D.
Each Exemption Request states that
the respective Exchange is a whollyowned subsidiary of NYSE Group, Inc.
(‘‘NYSE Group’’), a Delaware
corporation. Each Exemption Request
further states that NYSE Group is
wholly owned by NYSE Holdings LLC
(‘‘NYSE Holdings’’), a Delaware limited
liability company, which is wholly
owned by Intercontinental Exchange
Holdings, Inc. (‘‘ICE Holdings’’), a
Delaware corporation. In turn, ICE
Holdings is wholly owned by
Intercontinental Exchange, Inc. (‘‘Parent
Company’’), a Delaware corporation.
The Parent Company, through its
wholly-owned subsidiaries, owns a
large number of foreign entities, some of
which also own interests in other
foreign entities in excess of 25%.10 The
foreign entity affiliates and subsidiaries
of the Parent Company are referred to,
collectively, as the ‘‘Foreign Indirect
Affiliates.’’
Each Exchange states that, because of
the limited and indirect nature of its
7 Exhibit D to Form 1 requires that such financial
statements consist, at a minimum, of a balance
sheet and an income statement with such footnotes
and other disclosures necessary to avoid rendering
the financial statements misleading. Exhibit D
further provides that, if any affiliate or subsidiary
is required by another Commission rule to submit
annual financial statements, the exchange may
provide a statement to that effect, with a citation to
the other Commission rule, in lieu of the financial
statements required by Exhibit D.
8 Form 1 Instructions Section B., Explanation of
Terms.
9 Id.
10 See Exemption Requests, supra note 4, at 2.
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Federal Register / Vol. 82, No. 84 / Wednesday, May 3, 2017 / Notices
connection to the Foreign Indirect
Affiliates, the Exchange believes that the
respective financial information of the
Foreign Indirect Affiliates required by
Exhibit D of Form 1 would have little
relevance to the Commission’s ongoing
oversight of the Exchange as a national
securities exchange.11 Each Exchange
also states that the Foreign Indirect
Affiliates have no ability to influence
the management, policies, or finances of
the Exchange and have no obligation to
provide funding to, or ability to
materially affect the funding of, the
Exchange.12 Each Exchange further
states that the Foreign Indirect Affiliates
have no ownership interest in the
Exchange or in any of the controlling
shareholders of the Exchange and that
there are no commercial dealings
between the Exchange and the Foreign
Indirect Affiliates.13
Furthermore, each Exchange states its
opinion that its obtaining detailed
financial information with respect to the
Foreign Indirect Affiliates is
unnecessary for the protection of
investors and the public interest, and
would be unduly burdensome and
inefficient because the Foreign Indirect
Affiliates are located in foreign
jurisdictions and the disclosure of such
information could implicate foreign
information sharing restrictions in such
jurisdictions.14 Each Exchange notes
that the Commission has granted similar
exemptions to several other national
securities exchanges.15 In connection
11 See
Exemption Requests, supra note 4, at 2–3.
Exemption Requests, supra note 4, at 3.
13 See Exemption Requests, supra note 4, at 3.
Each Exchange states that ‘‘commercial dealings’’
means any direct or indirect arrangement,
agreement, or understanding or any other
relationship including, but not limited to, the
providing of hardware, software, technology
services or any other goods or services that support
the operation of the Exchange or any facility of the
Exchange. See Exemption Requests at 3, n. 6.
14 See Exemption Requests, supra note 4, at 3.
15 As examples, each Exchange cites to Securities
Exchange Act Release Nos. 60650 (September 11,
2009), 74 FR 47828 (September 17, 2009) (granting
application by EDGX Exchange, Inc. (n/k/a Bats
EDGX Exchange, Inc.) and EDGA Exchange, Inc. (n/
k/a Bats EDGA Exchange, Inc.) for a conditional
exemption pursuant to Section 36(a) of the
Exchange Act from certain requirements of Rules
6a–1 and 6a–2 under the Exchange Act); 66241
(January 26, 2012), 77 FR 4845 (January 31, 2012)
(granting application by BOX Options Exchange
LLC for a conditional exemption pursuant to
Section 36(a) of the Exchange Act from certain
requirements of Rules 6a–1 and 6a–2 under the
Exchange Act); and 69011 (March 1, 2013), 78 FR
14844 (March 7, 2013) (granting application by
Topaz Exchange, LLC (n/k/a ISE Gemini, LLC) for
a conditional exemption pursuant to Section 36(a)
of the Exchange Act from certain requirements of
Rules 6a–1 and 6a–2 under the Exchange Act). See
Exemption Requests at 3. The Commission also
granted a similar exemption to ISE Mercury, LLC.
See Securities Exchange Act Release No. 75867
(September 9, 2015), 80 FR 55395 (September 15,
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with its Exemption Request, each
Exchange has provided an
organizational chart setting forth the
Parent Company’s corporate structure,
including its subsidiaries, and noting
the affiliation of the Foreign Indirect
Affiliates and the Exchange.16 In
addition, each Exchange represents that
it will provide, on or before June 30th
of each year, amendments to the
information provided on the
organizational chart setting forth the
affiliation of the Foreign Indirect
Affiliates and the Exchange.17
III. Order Granting Conditional Section
36 Exemption
Section 6 of the Exchange Act 18 sets
forth a procedure for an exchange to
register as a national securities
exchange.19 Rule 6a–1(a) under the
Exchange Act 20 requires an application
for registration as a national securities
exchange to be filed on Form 1 in
accordance with the instructions in
Form 1. Rule 6a–2 under the Exchange
Act establishes ongoing requirements
for a national securities exchange to file
certain amendments to Form 1.
Section 36(a)(1) of the Exchange Act
provides that ‘‘the Commission, by rule,
regulation, or order, may conditionally
or unconditionally exempt any person,
security, or transaction, or any class or
classes of persons, securities, or
transactions, from any provision or
provisions of [the Exchange Act] or of
any rule or regulation thereunder, to the
extent that such exemption is necessary
or appropriate in the public interest,
and is consistent with the protection of
investors.’’ 21
For the reasons discussed below, the
Commission believes that it is
appropriate in the public interest and
consistent with the protection of
investors to exempt the Exchanges from
the requirement under Rule 6a–2(b)(1)
under the Exchange Act to provide the
2015) (granting application by ISE Mercury, LLC for
a conditional exemption pursuant to Section 36(a)
of the Exchange Act from certain requirements of
Rules 6a–1 and 6a–2 under the Exchange Act).
16 See Exhibit A to the Exemption Requests, supra
note 4.
17 See Exemption Requests, supra note 4, at 2.
18 15 U.S.C. 78f.
19 Specifically, Section 6(a) of the Exchange Act
states that ‘‘[a]n exchange may be registered as a
national securities exchange . . . by filing with the
Commission an application for registration in such
form as the Commission, by rule, may prescribe
containing the rules of the exchange and such other
information and documents as the Commission, by
rule, may prescribe as necessary or appropriate in
the public interest or for the protection of
investors.’’ Section 6 of the Exchange Act also sets
forth various requirements to which a national
securities exchange is subject.
20 17 CFR 240.6a–1(a).
21 15 U.S.C. 78mm(a)(1).
PO 00000
Frm 00114
Fmt 4703
Sfmt 4703
information required in Exhibit D to
Form 1 with respect to the Foreign
Indirect Affiliates, subject to the
following conditions:
(1) Each Exchange must provide, as
part of its annual Form 1 amendment
due on or before June 30th of each year,
a list of the names of the Foreign
Indirect Affiliates for which the
Exchange is relying on exemptive relief;
and
(2) Each Exchange must provide, as
part of its annual Form 1 amendment
due on or before June 30th of each year,
an organizational chart setting forth the
affiliation of all affiliates, including
those Foreign Indirect Affiliates for
which the Exchange is relying on
exemptive relief.
The information included in a
national securities exchange’s annual
amendment to Exhibit D to Form 1
under Rule 6a–2(b)(1) under the
Exchange Act is designed to help the
Commission exercise its oversight
responsibilities with respect to national
securities exchanges. Specifically,
Exhibit D is designed to provide the
Commission with information
concerning the financial status of the
affiliates and subsidiaries of a national
securities exchange.22 Such information
is intended to help the Commission to
assess the financial health of the
affiliates and subsidiaries of a national
securities exchange and thus to
determine whether a national securities
exchange has the ability to carry out its
obligations under the Exchange Act.
Since the most recent amendments to
Form 1 in 1998,23 many national
securities exchanges that previously
were member-owned organizations with
few affiliated entities have
demutualized. Some of these
demutualized exchanges have been
consolidated under holding companies
with numerous affiliates that, in some
cases, have only a limited and indirect
connection to the national securities
exchange, with no ability to influence
the management or policies of the
national securities exchange and no
obligation to fund, or to materially affect
the funding of, the national securities
exchange. The Commission believes
that, with respect to these Foreign
Indirect Affiliates, the information
required under Exhibit D would have
limited relevance to the Commission’s
22 See Securities Exchange Act Release No. 18843
(June 25, 1982), 47 FR 29259 (July 6, 1982)
(proposing amendments to Form 1); see also Form
1, 17 CFR 249.1, and supra Section II.
23 See Securities Exchange Act Release No. 40760
(December 8, 1998), 63 FR 70844 (December 22,
1998) (Regulation ATS Adopting Release).
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nlaroche on DSK30NT082PROD with NOTICES
Federal Register / Vol. 82, No. 84 / Wednesday, May 3, 2017 / Notices
oversight of a registered national
securities exchange.
Based on the Exchanges’
representations, the limited and indirect
nature of the relationship between the
Exchanges and the Foreign Indirect
Affiliates, and the information that the
Exchanges will provide with respect to
all other affiliates, including the foreign
direct affiliates and domestic direct and
indirect affiliates, the Commission
believes that it will have sufficient
information necessary to oversee the
Exchanges’ activities as national
securities exchanges under the
Exchange Act.24 In particular, the
Commission notes that each Exchange
has represented that the nature of the
connection between it and the Foreign
Indirect Affiliates is limited and
indirect, that the Foreign Indirect
Affiliates would have no ability to
influence the management, policies, or
finances of the Exchanges, and that the
Foreign Indirect Affiliates would have
no obligation to provide funding to, or
ability to materially affect the funding
of, the Exchanges.
In addition, the Commission notes
that the Exchanges have represented
that the Foreign Indirect Affiliates have
no ownership interest in the Exchanges
or in any of the controlling shareholders
of the Exchanges and that there are no
commercial dealings between any of the
Exchanges and the Foreign Indirect
Affiliates.25
For the reasons discussed above, the
Commission finds that it is appropriate
in the public interest and consistent
with the protection of investors to grant
the conditional exemptive relief
requested by the Exchanges.
The Commission may modify by order
the terms, scope or conditions of the
exemption from Rule 6a–2(b)(1) under
the Exchange Act granted to each
Exchange if it determines that such
modification is necessary or appropriate
in the public interest, or is consistent
with the protection of investors.
Furthermore, the Commission may
limit, suspend, or revoke the exemption
granted to each Exchange if it finds that
the Exchange has failed to comply with,
or is unable to comply with, any of the
conditions set forth in this order, if such
action is necessary or appropriate in the
public interest, or is consistent with the
protection of investors.
It is ordered, pursuant to Section 36
of the Exchange Act,26 that the
Exchanges are exempt from the
requirement under Rule 6a–2(b)(1)
under the Exchange Act, with respect to
U.S.C. 78f(b) and 78s(a).
Exemption Requests, supra note 4.
26 15 U.S.C. 78mm.
the Foreign Indirect Affiliates, to update
the information in Exhibit D to Form 1
on or before June 30th of each year
subject to the following conditions:
(1) Each Exchange must provide, as
part of its annual Form 1 amendment
due on or before June 30th of each year,
a list of the names of the Foreign
Indirect Affiliates for which the
Exchange is relying on exemptive relief;
and
(2) Each Exchange must provide, as
part of its annual Form 1 amendment
due on or before June 30th of each year,
an organizational chart setting forth the
affiliation of all affiliates, including
those Foreign Indirect Affiliates for
which the Exchange is relying on
exemptive relief.
By the Commission.
Brent J. Fields,
Secretary.
[FR Doc. 2017–08891 Filed 5–2–17; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–80540; File No. SR–
NASDAQ–2017–039]
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Notice of
Filing of Proposed Rule Change To
List and Trade the Guggenheim
Limited Duration ETF
April 27, 2017.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (‘‘Act’’
or ‘‘Exchange Act’’),1 and Rule 19b–4
thereunder,2 notice is hereby given that
on April 13, 2017, The NASDAQ Stock
Market LLC (‘‘Nasdaq’’ or ‘‘Exchange’’)
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 Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to list and
trade the common shares of beneficial
interest of the Guggenheim Limited
Duration ETF (the ‘‘Fund’’), a series of
Claymore Exchange-Traded Fund Trust
(the ‘‘Trust’’), under Nasdaq Rule 5735
(‘‘Rule 5735’’). The common shares of
beneficial interest of the Fund are
referred to herein as the ‘‘Shares.’’
24 15
25 See
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14:29 May 02, 2017
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1 15
2 17
PO 00000
U.S.C. 78s(b)(1).
CFR 240.19b–4.
Frm 00115
Fmt 4703
20673
The text of the proposed rule change
is available on the Exchange’s Web site
at https://nasdaq.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 the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to list and
trade the Shares of the Fund under Rule
5735, which rule governs the listing and
trading of Managed Fund Shares 3 on
the Exchange.4 The Shares will be
3 A ‘‘Managed Fund Share’’ is a security that
represents an interest in an investment company
registered under the Investment Company Act of
1940 (15 U.S.C. 80a–1) (the ‘‘1940 Act’’) organized
as an open-end investment company or similar
entity that invests in a portfolio of securities
selected by its investment adviser consistent with
its investment objectives and policies. In contrast,
an open-end investment company that issues Index
Fund Shares, listed and traded on the Exchange
under Nasdaq Rule 5705, seeks to provide
investment results that correspond generally to the
price and yield performance of a specific foreign or
domestic stock index, fixed income securities index
or combination thereof.
4 The Commission approved Nasdaq Rule 5735
(formerly Nasdaq Rule 4420(o)) in Securities
Exchange Act Release No. 57962 (June 13, 2008), 73
FR 35175 (June 20, 2008) (SR–NASDAQ–2008–039).
There are already multiple actively managed funds
listed on the Exchange; see, e.g., Securities
Exchange Act Release Nos. 69464 (April 26, 2013),
78 FR 25774 (May 2, 2013) (SR–NASDAQ–2013–
036) (order approving listing and trading of First
Trust Senior Loan Fund); 66489 (February 29,
2012), 77 FR 13379 (March 6, 2012) (SR–NASDAQ–
2012–004) (order approving listing and trading of
WisdomTree Emerging Markets Corporate Bond
Fund); and 78533 (August 10, 2016), 81 FR 54634
(August 16, 2016) (SR–NASDAQ–2016–086) (order
approving listing and trading of VanEck Vectors
Long/Flat Commodity ETF). Additionally, the
Commission has previously approved the listing
and trading of a number of actively-managed funds
on NYSE Arca, Inc. pursuant to Rule 8.600 of that
exchange. See, e.g., Securities Exchange Act Release
No. 68870 (February 8, 2013), 78 FR 11245
(February 15, 2013) (SR–NYSEArca–2012–139)
(order approving listing and trading of First Trust
Preferred Securities and Income ETF). Moreover,
Continued
Sfmt 4703
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Agencies
[Federal Register Volume 82, Number 84 (Wednesday, May 3, 2017)]
[Notices]
[Pages 20671-20673]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-08891]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-80536
Order Granting Application by New York Stock Exchange LLC, NYSE
MKT LLC, NYSE Arca, Inc., and NYSE National, Inc., Respectively, for a
Conditional Exemption Pursuant to Section 36(a) of the Exchange Act
From Certain Requirements of Rule 6a-2 Under the Exchange Act
April 27, 2017.
I. Introduction
On February 1, 2017, The New York Stock Exchange LLC (``NYSE''),
NYSE MKT LLC (``NYSE MKT''), NYSE Arca, Inc. (``NYSE Arca''), and NYSE
National, Inc. (``NYSE National'') (each an ``Exchange'', collectively,
``Exchanges'') each has requested, pursuant to Rule 0-12 \1\ under the
Securities Exchange Act of 1934 (``Exchange Act''),\2\ that the
Securities and Exchange Commission (``Commission'') grant an exemption
pursuant to Section 36(a)(1) \3\ of the Exchange Act from certain
requirements under Rule 6a-2(b)(1) under the Exchange Act.\4\ Each
Exchange is registered with the Commission as a national securities
exchange under Section 6 of the Exchange Act. This order grants each
Exchange's request for exemptive relief, subject to the satisfaction of
certain conditions, which are outlined below.
---------------------------------------------------------------------------
\1\ 17 CFR 240.0-12.
\2\ 15 U.S.C. 78a et seq.
\3\ 15 U.S.C. 78mm(a)(1).
\4\ 17 CFR 240.6a-2(b)(1). See letters dated February 1, 2017,
from Elizabeth King, General Counsel and Corporate Secretary, NYSE,
to Brent J. Fields, Secretary, Commission, regarding Application for
Exemption from Certain Form 1 Requirements under Section 6 of the
Securities Exchange Act of 1934, submitted on behalf of NYSE, NYSE
MKT, NYSE Arca, and NYSE National, respectively (collectively, the
``Exemption Requests'').
---------------------------------------------------------------------------
II. Application for Conditional Exemption From Certain Requirements of
Exchange Act Rule 6a-2
Rule 6a-2(b)(1) under the Exchange Act \5\ requires a national
securities exchange to file, on or before June 30 of each year, an
updated Exhibit D as an amendment to its Form 1.\6\ Exhibit D to Form 1
requires an exchange to provide, for each subsidiary or affiliate of
the exchange, unconsolidated financial statements for the latest fiscal
year of the exchange.\7\
---------------------------------------------------------------------------
\5\ 17 CFR 240.6a-2(b)(1).
\6\ 17 CFR 249.1 (Form 1, ``Application for, and Amendments to
Application for, Registration as a National Securities Exchange or
Exemption from Registration Pursuant to Section 5 of the Exchange
Act.'')
\7\ Exhibit D to Form 1 requires that such financial statements
consist, at a minimum, of a balance sheet and an income statement
with such footnotes and other disclosures necessary to avoid
rendering the financial statements misleading. Exhibit D further
provides that, if any affiliate or subsidiary is required by another
Commission rule to submit annual financial statements, the exchange
may provide a statement to that effect, with a citation to the other
Commission rule, in lieu of the financial statements required by
Exhibit D.
---------------------------------------------------------------------------
The Instructions to Form 1 define an ``affiliate'' as ``[a]ny
person that, directly or indirectly, controls, is under common control
with, or is controlled by, the national securities exchange . . .,
including any employees.'' \8\ The Instructions to Form 1 define
``control'' as
---------------------------------------------------------------------------
\8\ Form 1 Instructions Section B., Explanation of Terms.
The power, directly or indirectly, to direct the management or
policies of a company, whether through ownership of securities, by
contract or otherwise. Any person that . . . directly or indirectly
has the right to vote 25% or more of a class of voting securities or
has the power to sell or direct the sale of 25% or more of a class
of voting securities . . . is presumed to control that entity.\9\
---------------------------------------------------------------------------
\9\ Id.
Each Exchange has requested that the Commission grant it an
exemption pursuant to Section 36(a)(1) of the Exchange Act, subject to
the conditions set forth below, with respect to its ``Foreign Indirect
Affiliates,'' as defined below, from the requirement under Rule 6a-
2(b)(1) under the Exchange Act to file the financial information
required by Exhibit D.
Each Exemption Request states that the respective Exchange is a
wholly-owned subsidiary of NYSE Group, Inc. (``NYSE Group''), a
Delaware corporation. Each Exemption Request further states that NYSE
Group is wholly owned by NYSE Holdings LLC (``NYSE Holdings''), a
Delaware limited liability company, which is wholly owned by
Intercontinental Exchange Holdings, Inc. (``ICE Holdings''), a Delaware
corporation. In turn, ICE Holdings is wholly owned by Intercontinental
Exchange, Inc. (``Parent Company''), a Delaware corporation. The Parent
Company, through its wholly-owned subsidiaries, owns a large number of
foreign entities, some of which also own interests in other foreign
entities in excess of 25%.\10\ The foreign entity affiliates and
subsidiaries of the Parent Company are referred to, collectively, as
the ``Foreign Indirect Affiliates.''
---------------------------------------------------------------------------
\10\ See Exemption Requests, supra note 4, at 2.
---------------------------------------------------------------------------
Each Exchange states that, because of the limited and indirect
nature of its
[[Page 20672]]
connection to the Foreign Indirect Affiliates, the Exchange believes
that the respective financial information of the Foreign Indirect
Affiliates required by Exhibit D of Form 1 would have little relevance
to the Commission's ongoing oversight of the Exchange as a national
securities exchange.\11\ Each Exchange also states that the Foreign
Indirect Affiliates have no ability to influence the management,
policies, or finances of the Exchange and have no obligation to provide
funding to, or ability to materially affect the funding of, the
Exchange.\12\ Each Exchange further states that the Foreign Indirect
Affiliates have no ownership interest in the Exchange or in any of the
controlling shareholders of the Exchange and that there are no
commercial dealings between the Exchange and the Foreign Indirect
Affiliates.\13\
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\11\ See Exemption Requests, supra note 4, at 2-3.
\12\ See Exemption Requests, supra note 4, at 3.
\13\ See Exemption Requests, supra note 4, at 3. Each Exchange
states that ``commercial dealings'' means any direct or indirect
arrangement, agreement, or understanding or any other relationship
including, but not limited to, the providing of hardware, software,
technology services or any other goods or services that support the
operation of the Exchange or any facility of the Exchange. See
Exemption Requests at 3, n. 6.
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Furthermore, each Exchange states its opinion that its obtaining
detailed financial information with respect to the Foreign Indirect
Affiliates is unnecessary for the protection of investors and the
public interest, and would be unduly burdensome and inefficient because
the Foreign Indirect Affiliates are located in foreign jurisdictions
and the disclosure of such information could implicate foreign
information sharing restrictions in such jurisdictions.\14\ Each
Exchange notes that the Commission has granted similar exemptions to
several other national securities exchanges.\15\ In connection with its
Exemption Request, each Exchange has provided an organizational chart
setting forth the Parent Company's corporate structure, including its
subsidiaries, and noting the affiliation of the Foreign Indirect
Affiliates and the Exchange.\16\ In addition, each Exchange represents
that it will provide, on or before June 30th of each year, amendments
to the information provided on the organizational chart setting forth
the affiliation of the Foreign Indirect Affiliates and the
Exchange.\17\
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\14\ See Exemption Requests, supra note 4, at 3.
\15\ As examples, each Exchange cites to Securities Exchange Act
Release Nos. 60650 (September 11, 2009), 74 FR 47828 (September 17,
2009) (granting application by EDGX Exchange, Inc. (n/k/a Bats EDGX
Exchange, Inc.) and EDGA Exchange, Inc. (n/k/a Bats EDGA Exchange,
Inc.) for a conditional exemption pursuant to Section 36(a) of the
Exchange Act from certain requirements of Rules 6a-1 and 6a-2 under
the Exchange Act); 66241 (January 26, 2012), 77 FR 4845 (January 31,
2012) (granting application by BOX Options Exchange LLC for a
conditional exemption pursuant to Section 36(a) of the Exchange Act
from certain requirements of Rules 6a-1 and 6a-2 under the Exchange
Act); and 69011 (March 1, 2013), 78 FR 14844 (March 7, 2013)
(granting application by Topaz Exchange, LLC (n/k/a ISE Gemini, LLC)
for a conditional exemption pursuant to Section 36(a) of the
Exchange Act from certain requirements of Rules 6a-1 and 6a-2 under
the Exchange Act). See Exemption Requests at 3. The Commission also
granted a similar exemption to ISE Mercury, LLC. See Securities
Exchange Act Release No. 75867 (September 9, 2015), 80 FR 55395
(September 15, 2015) (granting application by ISE Mercury, LLC for a
conditional exemption pursuant to Section 36(a) of the Exchange Act
from certain requirements of Rules 6a-1 and 6a-2 under the Exchange
Act).
\16\ See Exhibit A to the Exemption Requests, supra note 4.
\17\ See Exemption Requests, supra note 4, at 2.
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III. Order Granting Conditional Section 36 Exemption
Section 6 of the Exchange Act \18\ sets forth a procedure for an
exchange to register as a national securities exchange.\19\ Rule 6a-
1(a) under the Exchange Act \20\ requires an application for
registration as a national securities exchange to be filed on Form 1 in
accordance with the instructions in Form 1. Rule 6a-2 under the
Exchange Act establishes ongoing requirements for a national securities
exchange to file certain amendments to Form 1.
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\18\ 15 U.S.C. 78f.
\19\ Specifically, Section 6(a) of the Exchange Act states that
``[a]n exchange may be registered as a national securities exchange
. . . by filing with the Commission an application for registration
in such form as the Commission, by rule, may prescribe containing
the rules of the exchange and such other information and documents
as the Commission, by rule, may prescribe as necessary or
appropriate in the public interest or for the protection of
investors.'' Section 6 of the Exchange Act also sets forth various
requirements to which a national securities exchange is subject.
\20\ 17 CFR 240.6a-1(a).
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Section 36(a)(1) of the Exchange Act provides that ``the
Commission, by rule, regulation, or order, may conditionally or
unconditionally exempt any person, security, or transaction, or any
class or classes of persons, securities, or transactions, from any
provision or provisions of [the Exchange Act] or of any rule or
regulation thereunder, to the extent that such exemption is necessary
or appropriate in the public interest, and is consistent with the
protection of investors.'' \21\
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\21\ 15 U.S.C. 78mm(a)(1).
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For the reasons discussed below, the Commission believes that it is
appropriate in the public interest and consistent with the protection
of investors to exempt the Exchanges from the requirement under Rule
6a-2(b)(1) under the Exchange Act to provide the information required
in Exhibit D to Form 1 with respect to the Foreign Indirect Affiliates,
subject to the following conditions:
(1) Each Exchange must provide, as part of its annual Form 1
amendment due on or before June 30th of each year, a list of the names
of the Foreign Indirect Affiliates for which the Exchange is relying on
exemptive relief; and
(2) Each Exchange must provide, as part of its annual Form 1
amendment due on or before June 30th of each year, an organizational
chart setting forth the affiliation of all affiliates, including those
Foreign Indirect Affiliates for which the Exchange is relying on
exemptive relief.
The information included in a national securities exchange's annual
amendment to Exhibit D to Form 1 under Rule 6a-2(b)(1) under the
Exchange Act is designed to help the Commission exercise its oversight
responsibilities with respect to national securities exchanges.
Specifically, Exhibit D is designed to provide the Commission with
information concerning the financial status of the affiliates and
subsidiaries of a national securities exchange.\22\ Such information is
intended to help the Commission to assess the financial health of the
affiliates and subsidiaries of a national securities exchange and thus
to determine whether a national securities exchange has the ability to
carry out its obligations under the Exchange Act.
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\22\ See Securities Exchange Act Release No. 18843 (June 25,
1982), 47 FR 29259 (July 6, 1982) (proposing amendments to Form 1);
see also Form 1, 17 CFR 249.1, and supra Section II.
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Since the most recent amendments to Form 1 in 1998,\23\ many
national securities exchanges that previously were member-owned
organizations with few affiliated entities have demutualized. Some of
these demutualized exchanges have been consolidated under holding
companies with numerous affiliates that, in some cases, have only a
limited and indirect connection to the national securities exchange,
with no ability to influence the management or policies of the national
securities exchange and no obligation to fund, or to materially affect
the funding of, the national securities exchange. The Commission
believes that, with respect to these Foreign Indirect Affiliates, the
information required under Exhibit D would have limited relevance to
the Commission's
[[Page 20673]]
oversight of a registered national securities exchange.
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\23\ See Securities Exchange Act Release No. 40760 (December 8,
1998), 63 FR 70844 (December 22, 1998) (Regulation ATS Adopting
Release).
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Based on the Exchanges' representations, the limited and indirect
nature of the relationship between the Exchanges and the Foreign
Indirect Affiliates, and the information that the Exchanges will
provide with respect to all other affiliates, including the foreign
direct affiliates and domestic direct and indirect affiliates, the
Commission believes that it will have sufficient information necessary
to oversee the Exchanges' activities as national securities exchanges
under the Exchange Act.\24\ In particular, the Commission notes that
each Exchange has represented that the nature of the connection between
it and the Foreign Indirect Affiliates is limited and indirect, that
the Foreign Indirect Affiliates would have no ability to influence the
management, policies, or finances of the Exchanges, and that the
Foreign Indirect Affiliates would have no obligation to provide funding
to, or ability to materially affect the funding of, the Exchanges.
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\24\ 15 U.S.C. 78f(b) and 78s(a).
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In addition, the Commission notes that the Exchanges have
represented that the Foreign Indirect Affiliates have no ownership
interest in the Exchanges or in any of the controlling shareholders of
the Exchanges and that there are no commercial dealings between any of
the Exchanges and the Foreign Indirect Affiliates.\25\
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\25\ See Exemption Requests, supra note 4.
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For the reasons discussed above, the Commission finds that it is
appropriate in the public interest and consistent with the protection
of investors to grant the conditional exemptive relief requested by the
Exchanges.
The Commission may modify by order the terms, scope or conditions
of the exemption from Rule 6a-2(b)(1) under the Exchange Act granted to
each Exchange if it determines that such modification is necessary or
appropriate in the public interest, or is consistent with the
protection of investors. Furthermore, the Commission may limit,
suspend, or revoke the exemption granted to each Exchange if it finds
that the Exchange has failed to comply with, or is unable to comply
with, any of the conditions set forth in this order, if such action is
necessary or appropriate in the public interest, or is consistent with
the protection of investors.
It is ordered, pursuant to Section 36 of the Exchange Act,\26\ that
the Exchanges are exempt from the requirement under Rule 6a-2(b)(1)
under the Exchange Act, with respect to the Foreign Indirect
Affiliates, to update the information in Exhibit D to Form 1 on or
before June 30th of each year subject to the following conditions:
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\26\ 15 U.S.C. 78mm.
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(1) Each Exchange must provide, as part of its annual Form 1
amendment due on or before June 30th of each year, a list of the names
of the Foreign Indirect Affiliates for which the Exchange is relying on
exemptive relief; and
(2) Each Exchange must provide, as part of its annual Form 1
amendment due on or before June 30th of each year, an organizational
chart setting forth the affiliation of all affiliates, including those
Foreign Indirect Affiliates for which the Exchange is relying on
exemptive relief.
By the Commission.
Brent J. Fields,
Secretary.
[FR Doc. 2017-08891 Filed 5-2-17; 8:45 am]
BILLING CODE 8011-01-P