Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Its Certificate of Incorporation, Bylaws and Rule 3.3, 61692-61699 [2018-25998]
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Federal Register / Vol. 83, No. 231 / Friday, November 30, 2018 / Notices
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an associated person, as its custodian.
Therefore, the expansion of the
categories of eligible custodians should
impose no new burdens on firms that
continue to designate associated persons
as their custodians. Introducing firms
that designate their clearing firms as
custodians, subject to their consent, may
incur additional costs associated with
clearing services.
Firms that designate members as their
custodians, subject to their consent, may
incur costs associated with recordkeeping services provided by such
members. For instance, a member that
agrees to act as custodian is likely to
incur operational and technology costs
associated with integrating the former
member’s books and records into its
record-keeping systems. Moreover, the
proposed rule change could result in a
change in how custodianship of books
and records by firms leaving the
industry is paid for and managed. For
instance, clearing firms might adapt
their business models to integrate the
costs of custodial services into clearing
agreements at the outset of the clearing
relationship. This would potentially
lead to an industry-wide increase in the
costs of clearing agreements, regardless
of any custodial undertaking by the
clearing firms. However, considering the
small number of firms that file Form
BDW per year, FINRA believes that this
is a low probability outcome.13 Further,
the competitive dynamics of procuring
clearing services may preclude this
outcome, as firms that raise their fees
may lose clients.
The clarification of a custodian’s
obligations does not add any new direct
burdens, but it could make it harder for
firms to identify a custodian willing to
agree to the obligations. Likewise, the
affirmative consent requirement and the
requirement to provide a representation
to FINRA may make it more difficult for
firms to find a willing custodian.
However, given the importance to
FINRA and investors of proper custody
of books and records, FINRA believes
that these additional burdens are
warranted.
Alternatives Considered
FINRA considered whether to amend
Rule 4570 to require a firm that is going
out of business to be only able to
designate another member as its
custodian. While such a requirement
would further enhance FINRA’s ability
to obtain the books and records of
former firms, FINRA determined that a
firm that is leaving the industry and that
13 On
average, 220 firms have filed a Form BDW
each year over the last five years. This represents
about five percent of all active firms.
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is experiencing financial or operational
difficulties may find it difficult to find
another member that is willing to act as
custodian. Further, FINRA continues to
evaluate the viability that FINRA make
itself available as an alternative
custodian for members’ records after
withdrawal.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
Written comments were neither
solicited nor received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period (i)
as the Commission may designate up to
90 days of such date if it finds such
longer period to be appropriate and
publishes its reasons for so finding or
(ii) 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 is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
FINRA–2018–039 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–FINRA–2018–039. 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 website (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
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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 website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549, on official
business days between the hours of 10
a.m. and 3 p.m. Copies of such filing
also will be available for inspection and
copying at the principal office of
FINRA. All comments received will be
posted without change.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–FINRA–2018–039 and
should be submitted on or before
December 21, 2018.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.14
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–26000 Filed 11–29–18; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–84648; File No. SR–
NYSEArca–2018–85]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend Its Certificate
of Incorporation, Bylaws and Rule 3.3
November 26, 2018.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934
(‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on
November 20, 2018, NYSE Arca, Inc.
(‘‘Exchange’’ or ‘‘NYSE Arca’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I, II, and III below, which Items
have been prepared by the Exchange.
The Commission is publishing this
notice to solicit comments on the
14 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
1 15
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Federal Register / Vol. 83, No. 231 / Friday, November 30, 2018 / Notices
proposed rule change from interested
persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend its
certificate of incorporation, bylaws and
Rule 3.3(a)(1)(B) to (1) harmonize
certain provisions thereunder with
similar provisions in the governing
documents of the Exchange’s national
securities exchange affiliates and parent
companies; and (2) make clarifying and
updating changes. The proposed rule
change is available on the Exchange’s
website at www.nyse.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
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 those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
set forth in sections A, B, and C below,
of the most significant parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
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1. Purpose
The Exchange proposes to amend the
Certificate of Incorporation of the
Exchange (‘‘Exchange Certificate’’),
Amended and Restated Bylaws of the
Exchange (‘‘Exchange Bylaws’’), and
Rule 3.3(a)(1)(B) to (1) harmonize
certain provisions thereunder with
similar provisions in the governing
documents of the Exchange’s national
securities exchange affiliates 4 and
4 The Exchange has four registered national
securities exchange affiliates: NYSE National, Inc.
(‘‘NYSE National’’), New York Stock Exchange LLC
(‘‘NYSE’’), NYSE America [sic] LLC (‘‘NYSE
American’’), and Chicago Stock Exchange, Inc.
(‘‘CHX’’ and together with the Exchange, NYSE
National, NYSE American, and NYSE, the ‘‘NYSE
Group Exchanges’’). CHX has filed to change its
name to NYSE Chicago, Inc. See Exchange Act
Release No. 84494 (October 26, 2018), 83 FR 54953
(November 1, 2018) (SR–CHX–2018–05) (‘‘NYSE
Chicago Release’’) (notice of filing and immediate
effectiveness of proposal to reflect name changes of
the Exchange and its direct parent company and to
amend certain corporate governance provisions).
The rule changes set forth in the NYSE Chicago
Release will become operative upon the Second
Amended and Restated Certificate of Incorporation
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parent companies; and (2) make
clarifying and updating changes.
The Exchange is owned by the
Holding Member, which in turn is
indirectly wholly owned by NYSE
Holdings LLC (‘‘NYSE Holdings’’).
NYSE Holdings is a wholly owned
subsidiary of Intercontinental Holdings,
Inc. (‘‘ICE Holdings’’), which is in turn
wholly owned by the Intercontinental
Exchange, Inc. (‘‘ICE’’).5
The Exchange operates as a separate
self-regulatory organization and has
rules, membership rosters and listings
distinct from the rules, membership
rosters and listings of the other NYSE
Group Exchanges. At the same time,
however, the Exchange believes it is
important for each of the NYSE Group
Exchanges to have a consistent
approach to corporate governance in
certain matters, to simplify complexity
and create greater consistency among
the NYSE Group Exchanges.6
Because the Exchange is a Delaware
non-stock corporation, most of the
proposed changes are based on the
governing documents of CHX and NYSE
National, which are Delaware
corporations, as the most comparable
NYSE Group Exchanges.7 The proposed
Exchange Certificate and Exchange
Bylaws reflect the expectation that the
Exchange will continue to be operated
with a governance structure
substantially similar to that of other
NYSE Group Exchanges, primarily CHX
and NYSE National.
The changes described herein would
become operative upon the Exchange
Certificate becoming effective pursuant
to its filing with the Secretary of State
of the State of Delaware.
The proposed amendments described
below are primarily based on the
Second Amended and Restated
Certificate of Incorporation of Chicago
Stock Exchange, Inc. (‘‘NYSE Chicago
Certificate’’); Second Amended and
Restated By-Laws of NYSE Chicago, Inc.
(‘‘NYSE Chicago Bylaws’’) 8; Amended
of Chicago Stock Exchange, Inc. (‘‘NYSE Chicago
Certificate’’) becoming effective pursuant to its
filing with the Secretary of State of the State of
Delaware.
5 See Exchange Act Release No. 82638 (February
6, 2018), 83 FR 6072 (February 12, 2018) (SR–NYSE
Arca–2018–09) (notice of filing and immediate
effectiveness of proposed rule change to amend
certain of the governing documents of the
Exchange’s intermediate parent companies).
6 See NYSE Chicago Release, supra note 4, at
54953.
7 The other NYSE Group Exchanges, NYSE and
NYSE American, are limited liability companies
organized under New York and Delaware limited
liability company law, respectively.
8 The NYSE Chicago Certificate and NYSE
Chicago Bylaws will become operative when the
NYSE Chicago Certificate becomes effective
pursuant to its filing with the Secretary of State of
the State of Delaware. Id.
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and Restated Certificate of Incorporation
of NYSE National, Inc. (‘‘NYSE National
Certificate’’); Fifth Amended and
Restated Bylaws of NYSE National, Inc.
(‘‘NYSE National Bylaws’’) 9; and Sixth
Amended and Restated Certificate of
Incorporation of NYSE Group, Inc.
(‘‘NYSE Group Certificate). In addition,
the amendments to the indemnification
provisions are based on the Eighth
Amended and Restated Bylaws of
Intercontinental Exchange, Inc. (‘‘ICE
Bylaws’’) and the Sixth Amended and
Restated Bylaws of Intercontinental
Exchange Holdings, Inc. (‘‘ICE Holdings
Bylaws’’).
Proposed Amendments to the Exchange
Certificate
The Exchange proposes to amend the
Exchange Certificate as follows.
Title and Introductory Paragraphs
The Exchange proposes to amend the
title to reflect that the proposed
Exchange Certificate is the ‘‘Amended
and Restated Certificate of Incorporation
of NYSE Arca, Inc.’’ 10 In addition, it
proposes to adopt introductory
paragraphs stating the Exchange’s name
and stating that the Exchange Certificate
was adopted and amended in
accordance with specific provisions of
the General Corporation Law of the
State of Delaware (‘‘DGCL’’). The
introductory paragraphs are
substantially similar to the introductory
paragraphs of the NYSE Chicago
Certificate.
Article 1
In a non-substantive change, the
Exchange proposes to replace ‘‘NYSE
ARCA, INC.’’ with ‘‘NYSE Arca, Inc.’’ in
Article 1, to reflect that the legal name
of the Exchange is not entirely in capital
letters. Proposed Article 1 is
substantially similar to Article 1 of the
NYSE Chicago Certificate and Article
9 The Exchange notes that, concurrent with this
filing, NYSE National is filing changes to the NYSE
National Certificate and Bylaws. See SR–NYSENat–
2018–24. References to such documents in this
filing are to the NYSE National Certificate and
Bylaws currently in effect. The Exchange governing
documents use ‘‘member,’’ ‘‘Exchange’’ and
‘‘Board’’ instead of ‘‘stockholder,’’ ‘‘Corporation,’’
and ‘‘Board of Directors,’’ which are used by CHX
and NYSE National in their governing documents.
When comparing a proposed change to the
provision it is based on, the below descriptions do
not note when such terms differ, as they are not
substantive differences.
10 See Exhibit B [sic] to Amendment No. 2, SR–
PCX–2006–24 (March 6, 2006); see also Exchange
Act Release No. 53615 (April 7, 2006), 71 FR 19226
(April 13, 2006) (SR–PCX–2006–24) (notice of filing
and immediate effectiveness of proposed rule
change and Amendments No. 1 and 2 thereto to
change the names of the Pacific Exchange, Inc., PCX
Equities, Inc., PCX Holdings, Inc., and the
Archipelago Exchange, L.L.C.).
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FIRST of the NYSE National Certificate,
provided that the Exchange Certificate
provision defines ‘‘Exchange.’’
Article 2 and Certificate of Change of
Registered Agent and/or Registered
Office
In a non-substantive change, the
Exchange proposes to update the
address of the registered office and
name of the registered agent, as
previously filed. The Exchange also
proposes to delete the ‘‘Certificate of
Change of Registered Agent and/or
Registered Office.’’ 11
Article 9
Article 9 permits the Exchange to
enter into a compromise with its
creditors in certain circumstances. The
Exchange proposes to amend current
Article 9 to be consistent with the
relevant provision of the DGCL,
including the use of ‘‘corporation’’
instead of ‘‘Exchange.’’ 12 The proposed
article would be substantially similar to
Article TENTH of the NYSE Chicago
Certificate and Article TENTH of the
NYSE National Certificate.
Article 10
In a non-substantive change, the
Exchange proposes to correct a reference
to ‘‘this Article 11’’ to reference Article
10.
Article 12
Article 12 addresses indemnification.
The Exchange proposes to delete Article
12 in its entirety, as the indemnification
provision is set forth in Article VII,
Section 7.01 of the Exchange Bylaws,
making this provision redundant.
Subsequent articles would be
renumbered accordingly. NYSE Chicago
made a similar change, deleting Article
EIGHTH(a) of its Certificate.13
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Article 13
Current Article 13 (proposed Article
12) states that the approval of a majority
of the members of the Board and a
majority of the existing Corporate
Members shall be required to amend or
repeal any provision of the Exchange
Certificate, and that any change to the
Exchange Certificate or Bylaws that is
required to be approved by or filed with
the Commission before it may become
effective shall not become effective until
the required Commission procedures
have been satisfied.
11 See Exchange Act Release No. 82924 (March
22, 2018), 83 FR 13163 (March 27, 2018) (SR–
NYSEArca–2018–18).
12 See Del. Code tit. 8, § 102(b)(2)(ii).
13 See NYSE Chicago Release, supra note 4, at
54956.
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The Exchange proposes to amend the
provision to state that the Exchange
reserves the right to amend the
Exchange Certificate and to change or
repeal any provision thereof, provided
that any amendment must be approved
by a majority of the members of the
Board present at the relevant meeting
and by a majority of the existing
Corporate Members. In addition, the
Exchange proposes to add a sentence
providing that before any amendment
to, alteration or repeal of any provision
of the Exchange Certificate shall be
effective, those changes shall be
submitted to the Board and, if required,
the proposed changes shall not become
effective until filed with or filed with
and approved by the Commission, as the
case may be. The revised provision
would read as follows (deletions
bracketed; new text italicized):
The approval of either a majority of
the Board of Directors or the affirmative
vote of a majority of the existing
Corporate Members, shall be required to
adopt, amend or repeal any provision of
the bylaws of the Exchange. The
[approval of ]Exchange reserves the
right to amend this certificate of
incorporation, and to change or repeal
any provision of the certificate of
incorporation, and all rights conferred
upon Corporate Members by such
certificate of incorporation are granted
subject to this reservation; provided,
however, that any amendment to this
certificate of incorporation must be
approved by a majority of the members
of the Board of Directors who are
present at the meeting at which the
amendment is proposed and by a
majority of the existing Corporate
Members [shall be required to amend or
repeal any provision of this Certificate
of Incorporation]. Any change to the
Certificate of Incorporation or bylaws
that is required to be approved by or
filed with the United States Securities
and Exchange Commission (the
‘‘Commission’’) before it may become
effective shall not become effective until
the procedures of the Commission
necessary to make it effective shall have
been satisfied. Before any amendment
to, or repeal of, any provision of this
Certificate of Incorporation shall be
effective, those changes shall be
submitted to the Board of Directors of
the Exchange and if such amendment or
repeal must be filed with or filed with
and approved by the Commission, then
the proposed changes to this Certificate
of Incorporation shall not become
effective until filed with or filed with
and approved by the Commission, as
the case may be.
The proposed new text would be
substantially similar to Article
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ELEVENTH of the NYSE Chicago
Certificate. In addition, the proposed
final sentence is consistent with the
final sentence of Article ELEVENTH of
the NYSE National Certificate.
Article 14
Article 14 sets forth the name and
mailing address of each of the
incorporators. In a non-substantive
change, the Exchange proposes to delete
current Article 14 in its entirety, as it is
obsolete.14 Neither NYSE Chicago nor
NYSE National have a similar provision
in their respective certificates.15
Proposed Article 13 and Signature Block
In an administrative change, the
Exchange proposes to add a statement in
proposed Article 13 setting forth the
date and time that the Exchange
Certificate shall be effective, as well as
to add a signature block with the date
of execution. The proposed change
would be consistent with Article XIV
and signature block of the NYSE Group
Certificate.
Proposed Amendments to the Exchange
Bylaws
The Exchange proposes to amend the
Exchange Bylaws as follows.
Article I (Offices)
Article I contains a provision stating
that the Exchange shall have a registered
office in Delaware as required by law,
and elsewhere as determined by the
Board. The Exchange proposes to (a)
amend the title and number to the
provision in Article I, and (b) add a
sentence that states that the Exchange’s
Delaware registered agent shall be such
person or entity determined by the
Board. The proposed title and final
sentence would be consistent with the
final sentence of Article I, Section 1 of
the NYSE Chicago Bylaws and of Article
II, Section 2.1 of the NYSE National
Bylaws.16
Article II (Members)
The Exchange proposes to delete
Sections 2.02, 2.04, and 2.05, which are
marked ‘‘Reserved,’’ and renumber the
remaining sections of Article II
accordingly.
Proposed Article 2.03 (Dividends;
Regulatory Fees and Penalties: Current
Section 2.06 states that ‘‘revenues
received by the Exchange from
regulatory fees or regulatory penalties
will be applied to fund the legal,
14 See
Del. Code tit. 8, § 242(a)(7)(a).
Exchange notes that the certificates of
incorporation of NYSE Group, ICE Holdings and
ICE also do not have similar provisions.
16 See NYSE Chicago Release, supra note 4, at
54957.
15 The
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regulatory and surveillance operations
of the Exchange and will not be used to
pay dividends.’’
The Exchange proposes to maintain
the substance of current Section 2.06,
renumbering it as Article 2.03, but
substantially conforming the provision
to the governing documents of the other
NYSE Group Exchanges.17 The
proposed language would expand the
scope of the provision to include
regulatory assets and fines as well as
fees or penalties collected by the
Exchange’s regulatory staff, and would
add a prohibition on the payment of
distributions to other entities. The
Exchange would also revise the title and
add subparagraphs. Proposed Section
2.03 provides as follows (deletions
bracketed; new text italicized):
(b) Any [revenues received by the
Exchange from]regulatory assets or any
regulatory fees, fines or [regulatory]
penalties collected by the Exchange’s
regulatory staff will be applied to fund
the legal, regulatory and surveillance
operations of the Exchange, and the
Exchange shall not distribute such
assets, fees, fines or penalties [and will
not be used] to pay dividends or be
distributed to any other entity. For
purposes of this Section, regulatory
penalties shall include restitution and
disgorgement of funds intended for
customers.
Article III (Board of Directors)
Section 3.03 (Vacancies): Section 3.03
provides that any vacancy on the Board
may be filled by the Chairman of the
Board, subject to the approval by a
majority of the directors.
In an administrative change, the
Exchange proposes to add text stating
that (a) such approval must be made by
a majority of the directors then in office,
as opposed to total number of seats on
the Board; and (b) the Holding Member
may also fill any vacancy, and those
vacancies resulting from removal from
office by a vote of the Holding Member
for cause may be filled by a vote of the
Holding Member at the same meeting at
which such removal occurs. The first
sentence of the amended paragraph
would be as follows (additions
italicized):
Whenever between meetings of the
Exchange any vacancy exists on the
Board of Directors by reason of death,
resignation, removal or increase in the
authorized number of directors or
otherwise, it may be filled (i) by the
Chairman of the Board, subject to
17 See
NYSE Chicago Bylaws, Article IX, Section
5; NYSE National Bylaws, Article X, Section 10.4;
NYSE Operating Agreement, Article IV, Section
4.05; and NYSE American Operating Agreement,
Article IV, Section 4.05.
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approval by a majority of the Board of
Directors then in office, or (ii) by action
taken by the Holding Member, and those
vacancies resulting from removal from
office by a vote of the Holding Member
for cause may be filled by a vote of the
Holding Member at the same meeting at
which such removal occurs.
The change would be consistent with
clause (ii) of Article II, Section 5 of the
NYSE Chicago Bylaws, which was
amended at the time of its acquisition
by ICE.18
Section 3.04 (Place of Meetings):
Section 3.04 provides that any meeting
of the Board may be held within or
without the State of Delaware.
In an administrative change, the
Exchange proposes to amend the
provision to state that the meeting shall
be at the place designated in the notice
of the meeting, but that if no designation
is made, the meeting will be at the
principal office of the Exchange. The
change would be consistent with the
first sentence of NYSE National Bylaws
Article III, Section 3.8 and NYSE
Chicago Bylaws, Article II, Section 7.19
Sections 3.07 (Quorum): Section 3.07
(Quorum) provides that the presence of
a majority of the number of directors on
the Board is necessary to constitute a
quorum, and adds that, if less than a
quorum is present at a Board meeting,
the directors present may adjourn the
meeting to another time or place until
a quorum is present.
The Exchange proposes to revise the
quorum requirement to state that
‘‘Except as otherwise required by law, at
all meetings of the Board, the presence
of a majority of the number of directors
then in office shall constitute a quorum
for the transaction of business.’’ In
addition, it proposes to replace the
sentence regarding procedures if less
than a quorum is present with the
statement that, if a quorum is not
present, ‘‘a majority of the directors
present at the meeting may adjourn the
meeting, without notice other than
announcement at the meeting, until a
quorum shall be present.’’
Changing the quorum requirement to
a majority of the directors then in office
would be consistent with the quorum
provisions of the other NYSE Group
Exchanges.20 The proposed text is
18 See Exchange Act Release No. 83635 (July 13,
2018), 83 FR 34182 (July 19, 2018) (SR–CHX–2018–
004), and Partial Amendment No. 2 to SR–CHX–
2018–004 (June 11, 2018).
19 The remaining text of the NYSE National and
NYSE Chicago provisions address conference call
meetings, which are covered in Article III, Section
3.10 of the Exchange Bylaws.
20 See NYSE Chicago Bylaws Article II, Section
10; NYSE National Bylaws Article III, Section 3.11;
NYSE Operating Agreement, Article II, Section
2.03(d); and NYSE American Operating Agreement,
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substantially similar to the second and
fourth sentences of NYSE Chicago
Bylaws Article II, Section 10. 21
Section 3.08 (Vote): Pursuant to
Section 3.08, the act of a majority of the
directors present at any meeting at
which there is a quorum shall be the act
of the Board, except as may be
otherwise specifically provided by law,
the Exchange Certificate, the Exchange
Bylaws or the Rules.
The Exchange proposes to add a
sentence stating that each director shall
be entitled to one vote. The revised
provision is substantially similar to the
first and third sentences of NYSE
Chicago Bylaws Article II, Section 10. 22
Section 3.09 (Action in Lieu of a
Meeting): Section 3.09 provides that,
unless otherwise restricted by the
Exchange Certificate, Exchange ByLaws, or Exchange Rules, action may be
taken without a meeting if certain
procedural requirements are met.
In an administrative change, the
Exchange proposes to replace ‘‘Unless
otherwise restricted by’’ with ‘‘Unless
otherwise provided by law.’’ The
proposed change would allow the
provision to be consistent with both
applicable law and the Exchange
governing documents and rules, should
applicable law set forth specific
requirements that differ from such
documents. The change would be
consistent with NYSE Chicago Bylaws
Article II, Section 13.
Article V (Officers)
Section 5.01 (General): Section 5.01
provides that officers of the Exchange
must include a Secretary and may
include a President, Chief Executive
Officer (‘‘CEO’’) and, upon the CEO’s
recommendation, any other officers
deemed desirable for the conduct of
business. In addition, it states that any
two or more offices may be held by the
same person.
In an administrative change, the
Exchange proposes to amend Section
5.01 to provide that the Board shall elect
officers of the Exchange as it deems
appropriate. The statement that two or
more offices may be held by the same
person would be revised to exclude the
Chief Regulatory Officer and the
Secretary from holding the office of CEO
or President. The revised provision
would be substantially similar to Article
VI, Section 6.1 of the NYSE National
Article II, Section 2.03(d). See also DCGL Section
141(b).
21 See NYSE Chicago Release, supra note 4, at
54958–54959.
22 See id. See also NYSE National Bylaws Article
III, Section 3.11.
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Bylaws and Article V, Section 1 of the
NYSE Chicago Bylaws.23
Section 5.02 (Privileges): In a nonsubstantive change, the Exchange
proposes to revise the name of Section
5.02 to ‘‘Powers and Duties,’’ as it is
more indicative of the content of the
Section, which sets forth the powers
and duties of officers. The Exchange
does not propose to amend the text of
Section 5.02. The revised title would be
the same as the title of Article VI,
Section 6.4 of the NYSE National
Bylaws and Article V, Section 3 of the
NYSE Chicago Bylaws.
Section 5.03 (Term of Office; Removal
and Vacancy): The first sentence of
Section 5.03 provides that ‘‘[e]ach
officer shall hold office until his or her
successor is elected and qualified or
until his or her earlier resignation or
removal.’’
The Exchange proposes to add death
and retirement as events that would
cause an officer to no longer hold office.
The proposed change would be
consistent with Article V, Section 2(a) of
the NYSE Chicago Bylaws.24
Section 5.04 (Chief Executive Officer):
The second sentence of Section 5.04
states that ‘‘[s]ubject to the control of the
Board of Directors, the Chief Executive
Officer, or such other officer or officers
as may be designated by the Board, shall
have general executive charge,
management and control of the
properties, business and operations of
the Exchange with all such powers as
may be reasonably incident to such
responsibilities; may agree upon and
execute all leases, contracts, evidences
of indebtedness and other obligations in
the name of the Exchange; and shall
have such other powers and duties as
designated in accordance with these
Bylaws and as from time to time may be
assigned by the Board of Directors.’’
The Exchange proposes to delete the
second sentence of Section 5.04, as
Section 5.02 already provides that the
any officer of the Exchange, including
the CEO, shall, unless otherwise ordered
by the Board, have such powers and
duties as generally pertain to their office
as well as such powers and duties as
from time to time may be conferred by
the Board. The Exchange notes that
Article VI of the NYSE National Bylaws
similarly does not have a separate
provision regarding the powers of its
chief executive officer.25
23 See NYSE Chicago Release, supra note 4, at
54962.
24 See id.
25 See also NYSE Operating Agreement, Article II,
Section 2.04(c); and NYSE American Operating
Agreement, Article II, Section 2.04(c);
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Article VI (Miscellaneous)
Section 6.05 (Affiliate Transaction):
Section 6.05 sets forth a list of
transactions that the Exchange may not
enter into with any affiliate of the
Exchange unless such transaction shall
have been first approved by a majority
vote of the disinterested directors of the
Exchange who are also public directors,
and sets our related definitions and
requirements.
The Exchange proposes to delete
Section 6.05 in its entirety. Section 6.05
of the Exchange Bylaws dates to the
demutualization of the Exchange (then
‘‘Pacific Exchange, Inc.’’), when its
ownership structure was materially
different.26 The Exchange believes that
Section 6.05 is no longer necessary
given the corporate structure of ICE and
the Exchange, as reflected by the fact
that no other NYSE Group Exchange has
a similar provision in its governing
documents.27
Article VII (Indemnification)
Section 7.01 (Indemnification):
Section 7.01 sets forth provisions
related to indemnification by the
Exchange. As a wholly-owned
subsidiary of ICE, the Exchange believes
it appropriate to harmonize the
Exchange’s indemnification provisions
with those of ICE and the Exchange’s
intermediate holding company, ICE
Holdings.28 The same change was made
to Article VI of the NYSE Chicago
Bylaws.29
Accordingly, the Exchange proposes
to delete the text of Section 7.01
(Indemnification) in its entirety and
replace it with proposed text that is
substantially similar to the CHX, ICE
and ICE Holdings provisions, with the
exception of changes to be consistent
26 See Exchange Act Release No. 49718 (May 17,
2004), 69 FR 29611 (May 24, 2004) (SR–PCX–2004–
08) (order approving proposed rule change and
notice of filing and order granting accelerated
approval of Amendment No. 1 thereto relating to
the demutualization of the Pacific Exchange, Inc.);
see also Article VI, Section 6.05 of Exhibit E to SR–
PCX–2004–08 (February 10, 2004).
27 The Exchange notes that it has not found a
similar provision in the bylaws of other
incorporated self-regulatory organizations. See
Tenth Amended and Restated Bylaws of CBOE
Exchange, Inc. [sic]; Ninth Amended and Restated
Bylaws of CBOE EDGA Exchange, Inc.; Ninth
Amended and Restated Bylaws of CBOE EDGX
Exchange, Inc.; Eighth Amended And Restated
Bylaws of CBOE BYX Exchange, Inc.; and By-Laws
Of Nasdaq BX, Inc. See also By-Laws of The Nasdaq
Stock Market LLC; By-Laws Of Nasdaq ISE, LLC;
and the Second Amended and Restated Operating
Agreement of Investors’ Exchange LLC.
28 See ICE Bylaws, Article X, Section 10.6, and
ICE Holdings Bylaws, Article X, Section 10.6.
29 See NYSE Chicago Release, supra note 4, at
54962–54963. The Exchange understands that
NYSE, NYSE American, and NYSE National
propose to file similar changes to their respective
indemnification provisions.
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with the Exchange Bylaws’
terminology.30 The proposed text
follows:
(a) The Exchange shall, to the fullest
extent permitted by law, as those laws
may be amended and supplemented
from time to time, indemnify any
director or officer made, or threatened to
be made, a party to any action, suit or
proceeding, whether criminal, civil,
administrative or investigative, by
reason of being a director or officer of
the Exchange or a predecessor
corporation or, at the Exchange’s
request, a director, officer, partner,
member, employee or agent of another
corporation or other entity; provided,
however, that the Exchange shall
indemnify any director or officer in
connection with a proceeding initiated
by such person only if such proceeding
was authorized in advance by the Board
of Directors of the Exchange. The
indemnification provided for in this
Section 7.01 shall: (i) Not be deemed
exclusive of any other rights to which
those indemnified may be entitled
under any bylaw, agreement or vote of
stockholders or disinterested directors
or otherwise, both as to action in their
official capacities and as to action in
another capacity while holding such
office; (ii) continue as to a person who
has ceased to be a director or officer;
and (iii) inure to the benefit of the heirs,
executors and administrators of an
indemnified person.
(b) Expenses incurred by any such
person in defending a civil or criminal
action, suit or proceeding by reason of
the fact that he is or was a director or
officer of the Exchange (or was serving
at the Exchange’s request as a director,
officer, partner, member, employee or
agent of another corporation or other
entity) shall be paid by the Exchange in
advance of the final disposition of such
action, suit or proceeding upon receipt
of an undertaking by or on behalf of
such director or officer to repay such
amount if it shall ultimately be
determined that he or she is not entitled
to be indemnified by the Exchange as
authorized by law. Notwithstanding the
foregoing, the Exchange shall not be
required to advance such expenses to a
person who is a party to an action, suit
or proceeding brought by the Exchange
and approved by a majority of the Board
of Directors of the Exchange that alleges
willful misappropriation of corporate
assets by such person, disclosure of
confidential information in violation of
such person’s fiduciary or contractual
30 For example, proposed Section 7.01 uses
‘‘officer’’ instead of ‘‘Senior Officers,’’ ‘‘Exchange’’
instead of ‘‘Corporation,’’ and ‘‘Section 7.01’’
instead of ‘‘Section 10.6.’’
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obligations to the Exchange or any other
willful and deliberate breach in bad
faith of such person’s duty to the
Exchange or its stockholders.
(c) The foregoing provisions of this
Section 7.01 shall be deemed to be a
contract between the Exchange and each
director or officer who serves in such
capacity at any time while this bylaw is
in effect, and any repeal or modification
thereof shall not affect any rights or
obligations then existing with respect to
any state of facts then or theretofore
existing or any action, suit or
proceeding theretofore or thereafter
brought based in whole or in part upon
any such state of facts. The rights
provided to any person by this bylaw
shall be enforceable against the
Exchange by such person, who shall be
presumed to have relied upon it in
serving or continuing to serve as a
director or officer or in such other
capacity as provided above.
(d) The Board of Directors in its
discretion shall have power on behalf of
the Exchange to indemnify any person,
other than a director or officer, made or
threatened to be made a party to any
action, suit or proceeding, whether
criminal, civil, administrative or
investigative, by reason of the fact that
such person, or his or her testator or
intestate, is or was an officer, employee
or agent of the Exchange or, at the
Exchange’s request, is or was serving as
a director, officer, partner, member,
employee or agent of another
corporation or other entity.
(e) To assure indemnification under
this Section 7.01 of all directors,
officers, employees and agents who are
determined by the Exchange or
otherwise to be or to have been
‘‘fiduciaries’’ of any employee benefit
plan of the Exchange that may exist
from time to time, Section 145 of the
Delaware General Corporation Law
shall, for the purposes of this Section
7.01, be interpreted as follows: An
‘‘other enterprise’’ shall be deemed to
include such an employee benefit plan,
including without limitation, any plan
of the Exchange that is governed by the
Act of Congress entitled ‘‘Employee
Retirement Income Security Act of
1974,’’ as amended from time to time;
the Exchange shall be deemed to have
requested a person to serve an employee
benefit plan where the performance by
such person of his duties to the
Exchange also imposes duties on, or
otherwise involves services by, such
person to the plan or participants or
beneficiaries of the plan; excise taxes
assessed on a person with respect to an
employee benefit plan pursuant to such
Act of Congress shall be deemed
‘‘fines.’’
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Article IX (Amendment)
In a conforming change, the Exchange
proposes to add a section number before
the word ‘‘Amendment.’’
Proposed Amendments to Rule
3.3(a)(1)(B)
Rule 3.3(a)(1)(B) establishes the
composition of the Exchange Regulatory
Oversight Committee (‘‘ROC’’), and is
substantially the same as the related
provisions in the governing documents
of the other NYSE Group Exchanges.31
Among other things, the provision states
that ‘‘[t]he Board may, on affirmative
vote of a majority of directors, at any
time remove a member of the ROC for
cause.’’ The Exchange proposes to add
language clarifying that the majority
affirmative vote requirement is based on
the ‘‘directors then in office,’’ as
opposed to total number of seats on the
Board. The change would be consistent
with Article IV, Section 6 of the NYSE
Chicago Bylaws.32
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
Section 6(b) of the Exchange Act,33 in
general, and furthers the objectives of
Section 6(b)(1) 34 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 Exchange
Act and to comply, and to enforce
compliance by its exchange members
and persons associated with its
exchange members, with the provisions
of the Exchange Act, the rules and
regulations thereunder, and the rules of
the Exchange. The Exchange also
believes that the proposed rule change
is consistent with Section 6(b)(5) of the
Exchange Act,35 in that it 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 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.
The Exchange believes that the
proposed amendments to the Exchange
31 See NYSE National Bylaws, Article V, Section
5.6; NYSE Operating Agreement, Article II, Section
2.03(h)(ii); NYSE American Operating Agreement,
Article II, Section 2.03(h)(ii); and NYSE Chicago
Bylaws, Article IV, Section 6.
32 See NYSE Chicago Release, supra note 4, at
54961. The Exchange understands that NYSE,
NYSE American, and NYSE National propose to file
similar changes to their respective ROC provisions.
33 15 U.S.C. 78f(b).
34 15 U.S.C. 78f(b)(1).
35 15 U.S.C. 78f(b)(5).
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61697
Bylaws, Certificate and Rule 3.3(a)
would enable the Exchange to be so
organized as to have the capacity to be
able to carry out the purposes of the
Exchange Act and to comply, and to
enforce compliance by its exchange
members and persons associated with
its exchange members, with the
provisions of the Exchange Act, the
rules and regulations thereunder, and
the rules of the Exchange, because such
amendments would add or expand upon
existing provisions to protect and
maintain the independence and
integrity of the Exchange and its
regulatory function and reinforce the
notion that the Exchange is not solely a
commercial enterprise, but a national
securities exchange subject to the
obligations imposed by the Exchange
Act. Such provisions include ensuring
that regulatory assets, fees, fines, and
penalties may only be used to fund
legal, regulatory and surveillance
operations; and providing that any
amendments to the Exchange Certificate
must be submitted to the Board and, as
applicable, shall not be effective until
filed with or filed with and approved by
the Commission. The Exchange believes
that such provisions are consistent with
and will facilitate a governance
structure that will provide the
Commission with appropriate oversight
tools to ensure that the Commission will
have the ability to enforce the Exchange
Act with respect to the Exchange. The
Exchange also believes that such
amendments would act to insulate the
Exchange’s regulatory functions from its
market and other commercial interests
so that the Exchange can carry out its
regulatory obligations and that, in
general, the Exchange is administered in
a way that is equitable to all those who
trade on its market or through its
facilities. Therefore, the Exchange
believes that the proposed rule change
would prevent fraudulent and
manipulative acts and practices,
promote just and equitable principles of
trade, foster cooperation and
coordination with persons engaged in
facilitating transactions in securities,
remove impediments to and perfect the
mechanism of a free and open market
and a national market system and, in
general, protect investors and the public
interest.
The Exchange believes that the
proposed amendments to harmonize
certain provisions of the Exchange
Bylaws, Certificate and Rule 3.3(a) with
similar provisions of the governing
documents of other NYSE Group
Exchanges, ICE and ICE Holdings would
contribute to the orderly operation of
the Exchange and would enable the
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Exchange to be so organized as to have
the capacity to carry out the purposes of
the Exchange Act and comply with the
provisions of the Exchange Act by its
members and persons associated with
members. For example, the proposed
changes would create greater conformity
between the Exchange’s provisions
relating to officers, committees, and
indemnification and those of its
affiliates, particularly NYSE National
and CHX. The Exchange believes that
such conformity would streamline the
NYSE Group Exchanges’ corporate
processes, create more equivalent
governance processes among them, and
also provide clarity to the Exchange’s
members, which is beneficial to both
investors and the public interest. At the
same time, the Exchange will continue
to operate as a separate self-regulatory
organization and to have rules,
membership rosters and listings distinct
from the rules, membership rosters and
listings of the other NYSE Group
Exchanges.
The Exchange also believes that the
greater consistency among the governing
documents of the NYSE Group
Exchanges, ICE and ICE Holdings would
promote the maintenance of a fair and
orderly market, the protection of
investors and the protection of the
public interest. Indeed, the proposed
amendments would make the corporate
requirements and administrative
processes relating to the Board, Board
committees, officers, and other
corporate matters more similar to those
of the NYSE Group Exchanges, in
particular NYSE National and CHX,
which have been established as fair and
designed to protect investors and the
public interest.36
The Exchange believes that the
deletion of Article VI, Section 6.05 of
the Exchange Bylaws would be
consistent with the orderly operation of
the Exchange and would enable the
Exchange to be so organized as to have
the capacity to carry out the purposes of
the Exchange Act and comply with the
provisions of the Exchange Act by its
members and persons associated with
members. Section 6.05 does not relate to
the operations of the Exchange’s
markets, but rather to potential
transactions with affiliates of the
Exchange. Section 6.05 dates to the
demutualization of the Exchange, when
its ownership structure was materially
36 See NYSE Chicago Release, supra note 4;
Exchange Act Release Nos. 83303 (May 22, 2018),
83 FR 24517 (May 29, 2018) (SR–CHX–2018–004);
and 79902 (January 30, 2017), 82 FR 9258 (February
3, 2017) (SR–NSX–2016–16) (order approving
proposed rule change in connection with proposed
acquisition of the Exchange by NYSE Group, Inc.).
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different.37 The Exchange believes that
Section 6.05 is no longer necessary
given the corporate structure of ICE and
the Exchange, as reflected by the fact
that no other NYSE Group Exchange has
a similar provision in its governing
documents.38 For the same reasons, the
Exchange believes that the proposed
deletion would be consistent with the
promotion of the maintenance of a fair
and orderly market, the protection of
investors and the protection of the
public interest.
The proposed amendments to clarify
the meaning of certain provisions of the
Exchange Bylaws, Certificate and Rule
3.3(a), to better comport certain
provisions with the DGCL and to effect
non-substantive changes would
facilitate the Exchange’s continued
compliance with the Exchange
Certificate and Bylaws and applicable
law, which would further enable the
Exchange to be so organized as to have
the capacity to be able to carry out the
purposes of the Exchange Act and to
comply, and to enforce compliance by
its exchange members and persons
associated with its exchange members,
with the provisions of the Exchange Act,
the rules and regulations thereunder,
and the rules of the Exchange. Such
amendments would also remove
impediments to and perfects the
mechanism of a free and open market by
removing confusion that may result
from corporate governance provisions
that are either unclear or inconsistent
with the governing law.
The Exchange also believes that the
proposed amendments would remove
impediments to and perfect the
mechanism of a free and open market by
ensuring that persons subject to the
Exchange’s jurisdiction, regulators, and
the investing public can more easily
navigate and understand the governing
documents. The Exchange further
believes that the proposed amendments
would not be inconsistent with the
public interest and the protection of
investors because investors will not be
harmed and in fact would benefit from
increased transparency and clarity,
thereby reducing potential confusion.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Exchange Act.
The proposed rule change is not
intended to address competitive issues
but rather is concerned solely with the
corporate governance and
administration of the Exchange.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were solicited
or received with respect to the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The Exchange has filed the proposed
rule change pursuant to Section
19(b)(3)(A)(iii) of the Act 39 and Rule
19b–4(f)(6) thereunder.40 Because the
proposed rule change does not: (i)
Significantly affect the protection of
investors or the public interest; (ii)
impose any significant burden on
competition; and (iii) become operative
prior to 30 days from the date on which
it was filed, or such shorter time as the
Commission may designate, if
consistent with the protection of
investors and the public interest, the
proposed rule change has become
effective pursuant to Section 19(b)(3)(A)
of the Act and Rule 19b–4(f)(6)(iii)
thereunder.
At any time within 60 days of the
filing of such proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
under Section 19(b)(2)(B) 41 of the Act to
determine whether the proposed rule
change should be approved or
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 is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NYSEArca–2018–85 on the subject line.
39 15
U.S.C. 78s(b)(3)(A)(iii).
CFR 240.19b–4(f)(6).
41 15 U.S.C. 78s(b)(2)(B).
37 See
note 26, supra.
38 See note 27, supra.
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Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–NYSEArca–2018–85. 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 website (https://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 website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
ubmissions should refer to File Number
SR–NYSEArca–2018–85 and should be
submitted on or before December 21,
2018.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.42
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–25998 Filed 11–29–18; 8:45 am]
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BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–84653; File No. SR–
CboeBZX–2018–083]
Self-Regulatory Organizations; Cboe
BZX Exchange, Inc.; Notice of Filing
and Immediate Effectiveness of a
Proposed Rule Change Relating To the
Modification of Certain Routing Fees
November 26, 2018.
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 November
13, 2018, Cboe BZX Exchange, Inc. (the
‘‘Exchange’’ or ‘‘BZX’’) filed with the
Securities and Exchange Commission
(the ‘‘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 Substance of
the Proposed Rule Change
Cboe BZX Exchange, Inc. (the
‘‘Exchange’’ or ‘‘BZX’’) is filing with the
Securities and Exchange Commission
(‘‘Commission’’) a proposed rule change
to modify certain Routing Fees.
The text of the proposed rule change
is also available on the Exchange’s
website (https://www.cboe.com/
AboutCBOE/CBOELegal
RegulatoryHome.aspx), at the
Exchange’s Office of the Secretary, 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.
1 15
42 17
CFR 200.30–3(a)(12).
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U.S.C. 78s(b)(1).
CFR 240.19b–4.
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A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend its
fee schedule to amend pricing for orders
routed to Cboe EDGA Exchange, Inc.,
(‘‘EDGA’’), which yield fee codes AA,
BJ, and RA.3 Particularly, as of
November 1, 2018, EDGA implemented
pricing changes for transactions that add
and remove liquidity.4 The filing
generally proposes that orders that add
liquidity will be assessed a fee of
$0.00300 per share and orders that
remove liquidity will be provided a
rebate of $0.00240 per share. Based on
the changes in pricing at EDGA, the
Exchange proposes the pricing changes
described below.
First, the Exchange notes that orders
routed to EDGA using ALLB routing
strategy (which yield fee code AA) and
orders routed to EDGA using a TRIM or
TRIM2 routing strategy (which yield fee
code BJ) are currently assessed $0.00030
per share. The Exchange proposes to
eliminate this fee and instead provide a
rebate of $0.00240 per share for these
orders. Next, the Exchange notes that
orders routed to EDGA that add
liquidity (which yield fee code RA) are
assessed $0.00030 per share. The
Exchange proposes to increase the rate
from $0.00030 per share to $0.00300 per
share.
2. Statutory Basis
The Exchange also believes the
proposed rule change is consistent with
Section 6(b)(4) of the Act, which
requires that Exchange rules provide for
the equitable allocation of reasonable
dues, fees, and other charges among its
members and other persons using its
facilities.
The Exchange believes the proposed
changes are reasonable because they
reflect a pass-through of the pricing
changes by EDGA described above. The
Exchange further believes the proposed
fee change is non-discriminatory
because it applies uniformly to all
Members. The Exchange lastly notes
that routing through the Exchange is
voluntary and that it operates in a
highly competitive market in which
market participants can readily direct
order flow to competing venues or
providers of routing services if they
deem fee levels to be excessive.
3 The Exchange initially filed the proposed fee
changes on November 1, 2018 (SR-CboeBZX–2018–
080). On business date November 13, 2018, the
Exchange withdrew that filing and submitted this
filing.
4 See SR-CboeEDGA–2018–017.
E:\FR\FM\30NON1.SGM
30NON1
]]>Agencies
[Federal Register Volume 83, Number 231 (Friday, November 30, 2018)]
[Notices]
[Pages 61692-61699]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-25998]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-84648; File No. SR-NYSEArca-2018-85]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend Its
Certificate of Incorporation, Bylaws and Rule 3.3
November 26, 2018.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given
that, on November 20, 2018, NYSE Arca, Inc. (``Exchange'' or ``NYSE
Arca'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the Exchange. The
Commission is publishing this notice to solicit comments on the
[[Page 61693]]
proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend its certificate of incorporation,
bylaws and Rule 3.3(a)(1)(B) to (1) harmonize certain provisions
thereunder with similar provisions in the governing documents of the
Exchange's national securities exchange affiliates and parent
companies; and (2) make clarifying and updating changes. The proposed
rule change is available on the Exchange's website at www.nyse.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 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 those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend the Certificate of Incorporation of
the Exchange (``Exchange Certificate''), Amended and Restated Bylaws of
the Exchange (``Exchange Bylaws''), and Rule 3.3(a)(1)(B) to (1)
harmonize certain provisions thereunder with similar provisions in the
governing documents of the Exchange's national securities exchange
affiliates \4\ and parent companies; and (2) make clarifying and
updating changes.
---------------------------------------------------------------------------
\4\ The Exchange has four registered national securities
exchange affiliates: NYSE National, Inc. (``NYSE National''), New
York Stock Exchange LLC (``NYSE''), NYSE America [sic] LLC (``NYSE
American''), and Chicago Stock Exchange, Inc. (``CHX'' and together
with the Exchange, NYSE National, NYSE American, and NYSE, the
``NYSE Group Exchanges''). CHX has filed to change its name to NYSE
Chicago, Inc. See Exchange Act Release No. 84494 (October 26, 2018),
83 FR 54953 (November 1, 2018) (SR-CHX-2018-05) (``NYSE Chicago
Release'') (notice of filing and immediate effectiveness of proposal
to reflect name changes of the Exchange and its direct parent
company and to amend certain corporate governance provisions). The
rule changes set forth in the NYSE Chicago Release will become
operative upon the Second Amended and Restated Certificate of
Incorporation of Chicago Stock Exchange, Inc. (``NYSE Chicago
Certificate'') becoming effective pursuant to its filing with the
Secretary of State of the State of Delaware.
---------------------------------------------------------------------------
The Exchange is owned by the Holding Member, which in turn is
indirectly wholly owned by NYSE Holdings LLC (``NYSE Holdings''). NYSE
Holdings is a wholly owned subsidiary of Intercontinental Holdings,
Inc. (``ICE Holdings''), which is in turn wholly owned by the
Intercontinental Exchange, Inc. (``ICE'').\5\
---------------------------------------------------------------------------
\5\ See Exchange Act Release No. 82638 (February 6, 2018), 83 FR
6072 (February 12, 2018) (SR-NYSE Arca-2018-09) (notice of filing
and immediate effectiveness of proposed rule change to amend certain
of the governing documents of the Exchange's intermediate parent
companies).
---------------------------------------------------------------------------
The Exchange operates as a separate self-regulatory organization
and has rules, membership rosters and listings distinct from the rules,
membership rosters and listings of the other NYSE Group Exchanges. At
the same time, however, the Exchange believes it is important for each
of the NYSE Group Exchanges to have a consistent approach to corporate
governance in certain matters, to simplify complexity and create
greater consistency among the NYSE Group Exchanges.\6\
---------------------------------------------------------------------------
\6\ See NYSE Chicago Release, supra note 4, at 54953.
---------------------------------------------------------------------------
Because the Exchange is a Delaware non-stock corporation, most of
the proposed changes are based on the governing documents of CHX and
NYSE National, which are Delaware corporations, as the most comparable
NYSE Group Exchanges.\7\ The proposed Exchange Certificate and Exchange
Bylaws reflect the expectation that the Exchange will continue to be
operated with a governance structure substantially similar to that of
other NYSE Group Exchanges, primarily CHX and NYSE National.
---------------------------------------------------------------------------
\7\ The other NYSE Group Exchanges, NYSE and NYSE American, are
limited liability companies organized under New York and Delaware
limited liability company law, respectively.
---------------------------------------------------------------------------
The changes described herein would become operative upon the
Exchange Certificate becoming effective pursuant to its filing with the
Secretary of State of the State of Delaware.
The proposed amendments described below are primarily based on the
Second Amended and Restated Certificate of Incorporation of Chicago
Stock Exchange, Inc. (``NYSE Chicago Certificate''); Second Amended and
Restated By-Laws of NYSE Chicago, Inc. (``NYSE Chicago Bylaws'') \8\;
Amended and Restated Certificate of Incorporation of NYSE National,
Inc. (``NYSE National Certificate''); Fifth Amended and Restated Bylaws
of NYSE National, Inc. (``NYSE National Bylaws'') \9\; and Sixth
Amended and Restated Certificate of Incorporation of NYSE Group, Inc.
(``NYSE Group Certificate). In addition, the amendments to the
indemnification provisions are based on the Eighth Amended and Restated
Bylaws of Intercontinental Exchange, Inc. (``ICE Bylaws'') and the
Sixth Amended and Restated Bylaws of Intercontinental Exchange
Holdings, Inc. (``ICE Holdings Bylaws'').
---------------------------------------------------------------------------
\8\ The NYSE Chicago Certificate and NYSE Chicago Bylaws will
become operative when the NYSE Chicago Certificate becomes effective
pursuant to its filing with the Secretary of State of the State of
Delaware. Id.
\9\ The Exchange notes that, concurrent with this filing, NYSE
National is filing changes to the NYSE National Certificate and
Bylaws. See SR-NYSENat-2018-24. References to such documents in this
filing are to the NYSE National Certificate and Bylaws currently in
effect. The Exchange governing documents use ``member,''
``Exchange'' and ``Board'' instead of ``stockholder,''
``Corporation,'' and ``Board of Directors,'' which are used by CHX
and NYSE National in their governing documents. When comparing a
proposed change to the provision it is based on, the below
descriptions do not note when such terms differ, as they are not
substantive differences.
---------------------------------------------------------------------------
Proposed Amendments to the Exchange Certificate
The Exchange proposes to amend the Exchange Certificate as follows.
Title and Introductory Paragraphs
The Exchange proposes to amend the title to reflect that the
proposed Exchange Certificate is the ``Amended and Restated Certificate
of Incorporation of NYSE Arca, Inc.'' \10\ In addition, it proposes to
adopt introductory paragraphs stating the Exchange's name and stating
that the Exchange Certificate was adopted and amended in accordance
with specific provisions of the General Corporation Law of the State of
Delaware (``DGCL''). The introductory paragraphs are substantially
similar to the introductory paragraphs of the NYSE Chicago Certificate.
---------------------------------------------------------------------------
\10\ See Exhibit B [sic] to Amendment No. 2, SR-PCX-2006-24
(March 6, 2006); see also Exchange Act Release No. 53615 (April 7,
2006), 71 FR 19226 (April 13, 2006) (SR-PCX-2006-24) (notice of
filing and immediate effectiveness of proposed rule change and
Amendments No. 1 and 2 thereto to change the names of the Pacific
Exchange, Inc., PCX Equities, Inc., PCX Holdings, Inc., and the
Archipelago Exchange, L.L.C.).
---------------------------------------------------------------------------
Article 1
In a non-substantive change, the Exchange proposes to replace
``NYSE ARCA, INC.'' with ``NYSE Arca, Inc.'' in Article 1, to reflect
that the legal name of the Exchange is not entirely in capital letters.
Proposed Article 1 is substantially similar to Article 1 of the NYSE
Chicago Certificate and Article
[[Page 61694]]
FIRST of the NYSE National Certificate, provided that the Exchange
Certificate provision defines ``Exchange.''
Article 2 and Certificate of Change of Registered Agent and/or
Registered Office
In a non-substantive change, the Exchange proposes to update the
address of the registered office and name of the registered agent, as
previously filed. The Exchange also proposes to delete the
``Certificate of Change of Registered Agent and/or Registered Office.''
\11\
---------------------------------------------------------------------------
\11\ See Exchange Act Release No. 82924 (March 22, 2018), 83 FR
13163 (March 27, 2018) (SR-NYSEArca-2018-18).
---------------------------------------------------------------------------
Article 9
Article 9 permits the Exchange to enter into a compromise with its
creditors in certain circumstances. The Exchange proposes to amend
current Article 9 to be consistent with the relevant provision of the
DGCL, including the use of ``corporation'' instead of ``Exchange.''
\12\ The proposed article would be substantially similar to Article
TENTH of the NYSE Chicago Certificate and Article TENTH of the NYSE
National Certificate.
---------------------------------------------------------------------------
\12\ See Del. Code tit. 8, Sec. 102(b)(2)(ii).
---------------------------------------------------------------------------
Article 10
In a non-substantive change, the Exchange proposes to correct a
reference to ``this Article 11'' to reference Article 10.
Article 12
Article 12 addresses indemnification. The Exchange proposes to
delete Article 12 in its entirety, as the indemnification provision is
set forth in Article VII, Section 7.01 of the Exchange Bylaws, making
this provision redundant. Subsequent articles would be renumbered
accordingly. NYSE Chicago made a similar change, deleting Article
EIGHTH(a) of its Certificate.\13\
---------------------------------------------------------------------------
\13\ See NYSE Chicago Release, supra note 4, at 54956.
---------------------------------------------------------------------------
Article 13
Current Article 13 (proposed Article 12) states that the approval
of a majority of the members of the Board and a majority of the
existing Corporate Members shall be required to amend or repeal any
provision of the Exchange Certificate, and that any change to the
Exchange Certificate or Bylaws that is required to be approved by or
filed with the Commission before it may become effective shall not
become effective until the required Commission procedures have been
satisfied.
The Exchange proposes to amend the provision to state that the
Exchange reserves the right to amend the Exchange Certificate and to
change or repeal any provision thereof, provided that any amendment
must be approved by a majority of the members of the Board present at
the relevant meeting and by a majority of the existing Corporate
Members. In addition, the Exchange proposes to add a sentence providing
that before any amendment to, alteration or repeal of any provision of
the Exchange Certificate shall be effective, those changes shall be
submitted to the Board and, if required, the proposed changes shall not
become effective until filed with or filed with and approved by the
Commission, as the case may be. The revised provision would read as
follows (deletions bracketed; new text italicized):
The approval of either a majority of the Board of Directors or the
affirmative vote of a majority of the existing Corporate Members, shall
be required to adopt, amend or repeal any provision of the bylaws of
the Exchange. The [approval of ]Exchange reserves the right to amend
this certificate of incorporation, and to change or repeal any
provision of the certificate of incorporation, and all rights conferred
upon Corporate Members by such certificate of incorporation are granted
subject to this reservation; provided, however, that any amendment to
this certificate of incorporation must be approved by a majority of the
members of the Board of Directors who are present at the meeting at
which the amendment is proposed and by a majority of the existing
Corporate Members [shall be required to amend or repeal any provision
of this Certificate of Incorporation]. Any change to the Certificate of
Incorporation or bylaws that is required to be approved by or filed
with the United States Securities and Exchange Commission (the
``Commission'') before it may become effective shall not become
effective until the procedures of the Commission necessary to make it
effective shall have been satisfied. Before any amendment to, or repeal
of, any provision of this Certificate of Incorporation shall be
effective, those changes shall be submitted to the Board of Directors
of the Exchange and if such amendment or repeal must be filed with or
filed with and approved by the Commission, then the proposed changes to
this Certificate of Incorporation shall not become effective until
filed with or filed with and approved by the Commission, as the case
may be.
The proposed new text would be substantially similar to Article
ELEVENTH of the NYSE Chicago Certificate. In addition, the proposed
final sentence is consistent with the final sentence of Article
ELEVENTH of the NYSE National Certificate.
Article 14
Article 14 sets forth the name and mailing address of each of the
incorporators. In a non-substantive change, the Exchange proposes to
delete current Article 14 in its entirety, as it is obsolete.\14\
Neither NYSE Chicago nor NYSE National have a similar provision in
their respective certificates.\15\
---------------------------------------------------------------------------
\14\ See Del. Code tit. 8, Sec. 242(a)(7)(a).
\15\ The Exchange notes that the certificates of incorporation
of NYSE Group, ICE Holdings and ICE also do not have similar
provisions.
---------------------------------------------------------------------------
Proposed Article 13 and Signature Block
In an administrative change, the Exchange proposes to add a
statement in proposed Article 13 setting forth the date and time that
the Exchange Certificate shall be effective, as well as to add a
signature block with the date of execution. The proposed change would
be consistent with Article XIV and signature block of the NYSE Group
Certificate.
Proposed Amendments to the Exchange Bylaws
The Exchange proposes to amend the Exchange Bylaws as follows.
Article I (Offices)
Article I contains a provision stating that the Exchange shall have
a registered office in Delaware as required by law, and elsewhere as
determined by the Board. The Exchange proposes to (a) amend the title
and number to the provision in Article I, and (b) add a sentence that
states that the Exchange's Delaware registered agent shall be such
person or entity determined by the Board. The proposed title and final
sentence would be consistent with the final sentence of Article I,
Section 1 of the NYSE Chicago Bylaws and of Article II, Section 2.1 of
the NYSE National Bylaws.\16\
---------------------------------------------------------------------------
\16\ See NYSE Chicago Release, supra note 4, at 54957.
---------------------------------------------------------------------------
Article II (Members)
The Exchange proposes to delete Sections 2.02, 2.04, and 2.05,
which are marked ``Reserved,'' and renumber the remaining sections of
Article II accordingly.
Proposed Article 2.03 (Dividends; Regulatory Fees and Penalties:
Current Section 2.06 states that ``revenues received by the Exchange
from regulatory fees or regulatory penalties will be applied to fund
the legal,
[[Page 61695]]
regulatory and surveillance operations of the Exchange and will not be
used to pay dividends.''
The Exchange proposes to maintain the substance of current Section
2.06, renumbering it as Article 2.03, but substantially conforming the
provision to the governing documents of the other NYSE Group
Exchanges.\17\ The proposed language would expand the scope of the
provision to include regulatory assets and fines as well as fees or
penalties collected by the Exchange's regulatory staff, and would add a
prohibition on the payment of distributions to other entities. The
Exchange would also revise the title and add subparagraphs. Proposed
Section 2.03 provides as follows (deletions bracketed; new text
italicized):
---------------------------------------------------------------------------
\17\ See NYSE Chicago Bylaws, Article IX, Section 5; NYSE
National Bylaws, Article X, Section 10.4; NYSE Operating Agreement,
Article IV, Section 4.05; and NYSE American Operating Agreement,
Article IV, Section 4.05.
---------------------------------------------------------------------------
(b) Any [revenues received by the Exchange from]regulatory assets
or any regulatory fees, fines or [regulatory] penalties collected by
the Exchange's regulatory staff will be applied to fund the legal,
regulatory and surveillance operations of the Exchange, and the
Exchange shall not distribute such assets, fees, fines or penalties
[and will not be used] to pay dividends or be distributed to any other
entity. For purposes of this Section, regulatory penalties shall
include restitution and disgorgement of funds intended for customers.
Article III (Board of Directors)
Section 3.03 (Vacancies): Section 3.03 provides that any vacancy on
the Board may be filled by the Chairman of the Board, subject to the
approval by a majority of the directors.
In an administrative change, the Exchange proposes to add text
stating that (a) such approval must be made by a majority of the
directors then in office, as opposed to total number of seats on the
Board; and (b) the Holding Member may also fill any vacancy, and those
vacancies resulting from removal from office by a vote of the Holding
Member for cause may be filled by a vote of the Holding Member at the
same meeting at which such removal occurs. The first sentence of the
amended paragraph would be as follows (additions italicized):
Whenever between meetings of the Exchange any vacancy exists on the
Board of Directors by reason of death, resignation, removal or increase
in the authorized number of directors or otherwise, it may be filled
(i) by the Chairman of the Board, subject to approval by a majority of
the Board of Directors then in office, or (ii) by action taken by the
Holding Member, and those vacancies resulting from removal from office
by a vote of the Holding Member for cause may be filled by a vote of
the Holding Member at the same meeting at which such removal occurs.
The change would be consistent with clause (ii) of Article II,
Section 5 of the NYSE Chicago Bylaws, which was amended at the time of
its acquisition by ICE.\18\
---------------------------------------------------------------------------
\18\ See Exchange Act Release No. 83635 (July 13, 2018), 83 FR
34182 (July 19, 2018) (SR-CHX-2018-004), and Partial Amendment No. 2
to SR-CHX-2018-004 (June 11, 2018).
---------------------------------------------------------------------------
Section 3.04 (Place of Meetings): Section 3.04 provides that any
meeting of the Board may be held within or without the State of
Delaware.
In an administrative change, the Exchange proposes to amend the
provision to state that the meeting shall be at the place designated in
the notice of the meeting, but that if no designation is made, the
meeting will be at the principal office of the Exchange. The change
would be consistent with the first sentence of NYSE National Bylaws
Article III, Section 3.8 and NYSE Chicago Bylaws, Article II, Section
7.\19\
---------------------------------------------------------------------------
\19\ The remaining text of the NYSE National and NYSE Chicago
provisions address conference call meetings, which are covered in
Article III, Section 3.10 of the Exchange Bylaws.
---------------------------------------------------------------------------
Sections 3.07 (Quorum): Section 3.07 (Quorum) provides that the
presence of a majority of the number of directors on the Board is
necessary to constitute a quorum, and adds that, if less than a quorum
is present at a Board meeting, the directors present may adjourn the
meeting to another time or place until a quorum is present.
The Exchange proposes to revise the quorum requirement to state
that ``Except as otherwise required by law, at all meetings of the
Board, the presence of a majority of the number of directors then in
office shall constitute a quorum for the transaction of business.'' In
addition, it proposes to replace the sentence regarding procedures if
less than a quorum is present with the statement that, if a quorum is
not present, ``a majority of the directors present at the meeting may
adjourn the meeting, without notice other than announcement at the
meeting, until a quorum shall be present.''
Changing the quorum requirement to a majority of the directors then
in office would be consistent with the quorum provisions of the other
NYSE Group Exchanges.\20\ The proposed text is substantially similar to
the second and fourth sentences of NYSE Chicago Bylaws Article II,
Section 10. \21\
---------------------------------------------------------------------------
\20\ See NYSE Chicago Bylaws Article II, Section 10; NYSE
National Bylaws Article III, Section 3.11; NYSE Operating Agreement,
Article II, Section 2.03(d); and NYSE American Operating Agreement,
Article II, Section 2.03(d). See also DCGL Section 141(b).
\21\ See NYSE Chicago Release, supra note 4, at 54958-54959.
---------------------------------------------------------------------------
Section 3.08 (Vote): Pursuant to Section 3.08, the act of a
majority of the directors present at any meeting at which there is a
quorum shall be the act of the Board, except as may be otherwise
specifically provided by law, the Exchange Certificate, the Exchange
Bylaws or the Rules.
The Exchange proposes to add a sentence stating that each director
shall be entitled to one vote. The revised provision is substantially
similar to the first and third sentences of NYSE Chicago Bylaws Article
II, Section 10. \22\
---------------------------------------------------------------------------
\22\ See id. See also NYSE National Bylaws Article III, Section
3.11.
---------------------------------------------------------------------------
Section 3.09 (Action in Lieu of a Meeting): Section 3.09 provides
that, unless otherwise restricted by the Exchange Certificate, Exchange
By-Laws, or Exchange Rules, action may be taken without a meeting if
certain procedural requirements are met.
In an administrative change, the Exchange proposes to replace
``Unless otherwise restricted by'' with ``Unless otherwise provided by
law.'' The proposed change would allow the provision to be consistent
with both applicable law and the Exchange governing documents and
rules, should applicable law set forth specific requirements that
differ from such documents. The change would be consistent with NYSE
Chicago Bylaws Article II, Section 13.
Article V (Officers)
Section 5.01 (General): Section 5.01 provides that officers of the
Exchange must include a Secretary and may include a President, Chief
Executive Officer (``CEO'') and, upon the CEO's recommendation, any
other officers deemed desirable for the conduct of business. In
addition, it states that any two or more offices may be held by the
same person.
In an administrative change, the Exchange proposes to amend Section
5.01 to provide that the Board shall elect officers of the Exchange as
it deems appropriate. The statement that two or more offices may be
held by the same person would be revised to exclude the Chief
Regulatory Officer and the Secretary from holding the office of CEO or
President. The revised provision would be substantially similar to
Article VI, Section 6.1 of the NYSE National
[[Page 61696]]
Bylaws and Article V, Section 1 of the NYSE Chicago Bylaws.\23\
---------------------------------------------------------------------------
\23\ See NYSE Chicago Release, supra note 4, at 54962.
---------------------------------------------------------------------------
Section 5.02 (Privileges): In a non-substantive change, the
Exchange proposes to revise the name of Section 5.02 to ``Powers and
Duties,'' as it is more indicative of the content of the Section, which
sets forth the powers and duties of officers. The Exchange does not
propose to amend the text of Section 5.02. The revised title would be
the same as the title of Article VI, Section 6.4 of the NYSE National
Bylaws and Article V, Section 3 of the NYSE Chicago Bylaws.
Section 5.03 (Term of Office; Removal and Vacancy): The first
sentence of Section 5.03 provides that ``[e]ach officer shall hold
office until his or her successor is elected and qualified or until his
or her earlier resignation or removal.''
The Exchange proposes to add death and retirement as events that
would cause an officer to no longer hold office. The proposed change
would be consistent with Article V, Section 2(a) of the NYSE Chicago
Bylaws.\24\
---------------------------------------------------------------------------
\24\ See id.
---------------------------------------------------------------------------
Section 5.04 (Chief Executive Officer): The second sentence of
Section 5.04 states that ``[s]ubject to the control of the Board of
Directors, the Chief Executive Officer, or such other officer or
officers as may be designated by the Board, shall have general
executive charge, management and control of the properties, business
and operations of the Exchange with all such powers as may be
reasonably incident to such responsibilities; may agree upon and
execute all leases, contracts, evidences of indebtedness and other
obligations in the name of the Exchange; and shall have such other
powers and duties as designated in accordance with these Bylaws and as
from time to time may be assigned by the Board of Directors.''
The Exchange proposes to delete the second sentence of Section
5.04, as Section 5.02 already provides that the any officer of the
Exchange, including the CEO, shall, unless otherwise ordered by the
Board, have such powers and duties as generally pertain to their office
as well as such powers and duties as from time to time may be conferred
by the Board. The Exchange notes that Article VI of the NYSE National
Bylaws similarly does not have a separate provision regarding the
powers of its chief executive officer.\25\
---------------------------------------------------------------------------
\25\ See also NYSE Operating Agreement, Article II, Section
2.04(c); and NYSE American Operating Agreement, Article II, Section
2.04(c);
---------------------------------------------------------------------------
Article VI (Miscellaneous)
Section 6.05 (Affiliate Transaction): Section 6.05 sets forth a
list of transactions that the Exchange may not enter into with any
affiliate of the Exchange unless such transaction shall have been first
approved by a majority vote of the disinterested directors of the
Exchange who are also public directors, and sets our related
definitions and requirements.
The Exchange proposes to delete Section 6.05 in its entirety.
Section 6.05 of the Exchange Bylaws dates to the demutualization of the
Exchange (then ``Pacific Exchange, Inc.''), when its ownership
structure was materially different.\26\ The Exchange believes that
Section 6.05 is no longer necessary given the corporate structure of
ICE and the Exchange, as reflected by the fact that no other NYSE Group
Exchange has a similar provision in its governing documents.\27\
---------------------------------------------------------------------------
\26\ See Exchange Act Release No. 49718 (May 17, 2004), 69 FR
29611 (May 24, 2004) (SR-PCX-2004-08) (order approving proposed rule
change and notice of filing and order granting accelerated approval
of Amendment No. 1 thereto relating to the demutualization of the
Pacific Exchange, Inc.); see also Article VI, Section 6.05 of
Exhibit E to SR-PCX-2004-08 (February 10, 2004).
\27\ The Exchange notes that it has not found a similar
provision in the bylaws of other incorporated self-regulatory
organizations. See Tenth Amended and Restated Bylaws of CBOE
Exchange, Inc. [sic]; Ninth Amended and Restated Bylaws of CBOE EDGA
Exchange, Inc.; Ninth Amended and Restated Bylaws of CBOE EDGX
Exchange, Inc.; Eighth Amended And Restated Bylaws of CBOE BYX
Exchange, Inc.; and By-Laws Of Nasdaq BX, Inc. See also By-Laws of
The Nasdaq Stock Market LLC; By-Laws Of Nasdaq ISE, LLC; and the
Second Amended and Restated Operating Agreement of Investors'
Exchange LLC.
---------------------------------------------------------------------------
Article VII (Indemnification)
Section 7.01 (Indemnification): Section 7.01 sets forth provisions
related to indemnification by the Exchange. As a wholly-owned
subsidiary of ICE, the Exchange believes it appropriate to harmonize
the Exchange's indemnification provisions with those of ICE and the
Exchange's intermediate holding company, ICE Holdings.\28\ The same
change was made to Article VI of the NYSE Chicago Bylaws.\29\
---------------------------------------------------------------------------
\28\ See ICE Bylaws, Article X, Section 10.6, and ICE Holdings
Bylaws, Article X, Section 10.6.
\29\ See NYSE Chicago Release, supra note 4, at 54962-54963. The
Exchange understands that NYSE, NYSE American, and NYSE National
propose to file similar changes to their respective indemnification
provisions.
---------------------------------------------------------------------------
Accordingly, the Exchange proposes to delete the text of Section
7.01 (Indemnification) in its entirety and replace it with proposed
text that is substantially similar to the CHX, ICE and ICE Holdings
provisions, with the exception of changes to be consistent with the
Exchange Bylaws' terminology.\30\ The proposed text follows:
---------------------------------------------------------------------------
\30\ For example, proposed Section 7.01 uses ``officer'' instead
of ``Senior Officers,'' ``Exchange'' instead of ``Corporation,'' and
``Section 7.01'' instead of ``Section 10.6.''
---------------------------------------------------------------------------
(a) The Exchange shall, to the fullest extent permitted by law, as
those laws may be amended and supplemented from time to time, indemnify
any director or officer made, or threatened to be made, a party to any
action, suit or proceeding, whether criminal, civil, administrative or
investigative, by reason of being a director or officer of the Exchange
or a predecessor corporation or, at the Exchange's request, a director,
officer, partner, member, employee or agent of another corporation or
other entity; provided, however, that the Exchange shall indemnify any
director or officer in connection with a proceeding initiated by such
person only if such proceeding was authorized in advance by the Board
of Directors of the Exchange. The indemnification provided for in this
Section 7.01 shall: (i) Not be deemed exclusive of any other rights to
which those indemnified may be entitled under any bylaw, agreement or
vote of stockholders or disinterested directors or otherwise, both as
to action in their official capacities and as to action in another
capacity while holding such office; (ii) continue as to a person who
has ceased to be a director or officer; and (iii) inure to the benefit
of the heirs, executors and administrators of an indemnified person.
(b) Expenses incurred by any such person in defending a civil or
criminal action, suit or proceeding by reason of the fact that he is or
was a director or officer of the Exchange (or was serving at the
Exchange's request as a director, officer, partner, member, employee or
agent of another corporation or other entity) shall be paid by the
Exchange in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such
director or officer to repay such amount if it shall ultimately be
determined that he or she is not entitled to be indemnified by the
Exchange as authorized by law. Notwithstanding the foregoing, the
Exchange shall not be required to advance such expenses to a person who
is a party to an action, suit or proceeding brought by the Exchange and
approved by a majority of the Board of Directors of the Exchange that
alleges willful misappropriation of corporate assets by such person,
disclosure of confidential information in violation of such person's
fiduciary or contractual
[[Page 61697]]
obligations to the Exchange or any other willful and deliberate breach
in bad faith of such person's duty to the Exchange or its stockholders.
(c) The foregoing provisions of this Section 7.01 shall be deemed
to be a contract between the Exchange and each director or officer who
serves in such capacity at any time while this bylaw is in effect, and
any repeal or modification thereof shall not affect any rights or
obligations then existing with respect to any state of facts then or
theretofore existing or any action, suit or proceeding theretofore or
thereafter brought based in whole or in part upon any such state of
facts. The rights provided to any person by this bylaw shall be
enforceable against the Exchange by such person, who shall be presumed
to have relied upon it in serving or continuing to serve as a director
or officer or in such other capacity as provided above.
(d) The Board of Directors in its discretion shall have power on
behalf of the Exchange to indemnify any person, other than a director
or officer, made or threatened to be made a party to any action, suit
or proceeding, whether criminal, civil, administrative or
investigative, by reason of the fact that such person, or his or her
testator or intestate, is or was an officer, employee or agent of the
Exchange or, at the Exchange's request, is or was serving as a
director, officer, partner, member, employee or agent of another
corporation or other entity.
(e) To assure indemnification under this Section 7.01 of all
directors, officers, employees and agents who are determined by the
Exchange or otherwise to be or to have been ``fiduciaries'' of any
employee benefit plan of the Exchange that may exist from time to time,
Section 145 of the Delaware General Corporation Law shall, for the
purposes of this Section 7.01, be interpreted as follows: An ``other
enterprise'' shall be deemed to include such an employee benefit plan,
including without limitation, any plan of the Exchange that is governed
by the Act of Congress entitled ``Employee Retirement Income Security
Act of 1974,'' as amended from time to time; the Exchange shall be
deemed to have requested a person to serve an employee benefit plan
where the performance by such person of his duties to the Exchange also
imposes duties on, or otherwise involves services by, such person to
the plan or participants or beneficiaries of the plan; excise taxes
assessed on a person with respect to an employee benefit plan pursuant
to such Act of Congress shall be deemed ``fines.''
Article IX (Amendment)
In a conforming change, the Exchange proposes to add a section
number before the word ``Amendment.''
Proposed Amendments to Rule 3.3(a)(1)(B)
Rule 3.3(a)(1)(B) establishes the composition of the Exchange
Regulatory Oversight Committee (``ROC''), and is substantially the same
as the related provisions in the governing documents of the other NYSE
Group Exchanges.\31\ Among other things, the provision states that
``[t]he Board may, on affirmative vote of a majority of directors, at
any time remove a member of the ROC for cause.'' The Exchange proposes
to add language clarifying that the majority affirmative vote
requirement is based on the ``directors then in office,'' as opposed to
total number of seats on the Board. The change would be consistent with
Article IV, Section 6 of the NYSE Chicago Bylaws.\32\
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\31\ See NYSE National Bylaws, Article V, Section 5.6; NYSE
Operating Agreement, Article II, Section 2.03(h)(ii); NYSE American
Operating Agreement, Article II, Section 2.03(h)(ii); and NYSE
Chicago Bylaws, Article IV, Section 6.
\32\ See NYSE Chicago Release, supra note 4, at 54961. The
Exchange understands that NYSE, NYSE American, and NYSE National
propose to file similar changes to their respective ROC provisions.
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Exchange Act,\33\ in general, and furthers the
objectives of Section 6(b)(1) \34\ 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 Exchange Act and to comply, and to
enforce compliance by its exchange members and persons associated with
its exchange members, with the provisions of the Exchange Act, the
rules and regulations thereunder, and the rules of the Exchange. The
Exchange also believes that the proposed rule change is consistent with
Section 6(b)(5) of the Exchange Act,\35\ in that it 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 facilitating transactions in
securities, to remove impediments to and perfect the mechanism of a
free and open market and a national market system and, in general, to
protect investors and the public interest.
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\33\ 15 U.S.C. 78f(b).
\34\ 15 U.S.C. 78f(b)(1).
\35\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that the proposed amendments to the Exchange
Bylaws, Certificate and Rule 3.3(a) would enable the Exchange to be so
organized as to have the capacity to be able to carry out the purposes
of the Exchange Act and to comply, and to enforce compliance by its
exchange members and persons associated with its exchange members, with
the provisions of the Exchange Act, the rules and regulations
thereunder, and the rules of the Exchange, because such amendments
would add or expand upon existing provisions to protect and maintain
the independence and integrity of the Exchange and its regulatory
function and reinforce the notion that the Exchange is not solely a
commercial enterprise, but a national securities exchange subject to
the obligations imposed by the Exchange Act. Such provisions include
ensuring that regulatory assets, fees, fines, and penalties may only be
used to fund legal, regulatory and surveillance operations; and
providing that any amendments to the Exchange Certificate must be
submitted to the Board and, as applicable, shall not be effective until
filed with or filed with and approved by the Commission. The Exchange
believes that such provisions are consistent with and will facilitate a
governance structure that will provide the Commission with appropriate
oversight tools to ensure that the Commission will have the ability to
enforce the Exchange Act with respect to the Exchange. The Exchange
also believes that such amendments would act to insulate the Exchange's
regulatory functions from its market and other commercial interests so
that the Exchange can carry out its regulatory obligations and that, in
general, the Exchange is administered in a way that is equitable to all
those who trade on its market or through its facilities. Therefore, the
Exchange believes that the proposed rule change would prevent
fraudulent and manipulative acts and practices, promote just and
equitable principles of trade, foster cooperation and coordination with
persons engaged in facilitating transactions in securities, remove
impediments to and perfect the mechanism of a free and open market and
a national market system and, in general, protect investors and the
public interest.
The Exchange believes that the proposed amendments to harmonize
certain provisions of the Exchange Bylaws, Certificate and Rule 3.3(a)
with similar provisions of the governing documents of other NYSE Group
Exchanges, ICE and ICE Holdings would contribute to the orderly
operation of the Exchange and would enable the
[[Page 61698]]
Exchange to be so organized as to have the capacity to carry out the
purposes of the Exchange Act and comply with the provisions of the
Exchange Act by its members and persons associated with members. For
example, the proposed changes would create greater conformity between
the Exchange's provisions relating to officers, committees, and
indemnification and those of its affiliates, particularly NYSE National
and CHX. The Exchange believes that such conformity would streamline
the NYSE Group Exchanges' corporate processes, create more equivalent
governance processes among them, and also provide clarity to the
Exchange's members, which is beneficial to both investors and the
public interest. At the same time, the Exchange will continue to
operate as a separate self-regulatory organization and to have rules,
membership rosters and listings distinct from the rules, membership
rosters and listings of the other NYSE Group Exchanges.
The Exchange also believes that the greater consistency among the
governing documents of the NYSE Group Exchanges, ICE and ICE Holdings
would promote the maintenance of a fair and orderly market, the
protection of investors and the protection of the public interest.
Indeed, the proposed amendments would make the corporate requirements
and administrative processes relating to the Board, Board committees,
officers, and other corporate matters more similar to those of the NYSE
Group Exchanges, in particular NYSE National and CHX, which have been
established as fair and designed to protect investors and the public
interest.\36\
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\36\ See NYSE Chicago Release, supra note 4; Exchange Act
Release Nos. 83303 (May 22, 2018), 83 FR 24517 (May 29, 2018) (SR-
CHX-2018-004); and 79902 (January 30, 2017), 82 FR 9258 (February 3,
2017) (SR-NSX-2016-16) (order approving proposed rule change in
connection with proposed acquisition of the Exchange by NYSE Group,
Inc.).
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The Exchange believes that the deletion of Article VI, Section 6.05
of the Exchange Bylaws would be consistent with the orderly operation
of the Exchange and would enable the Exchange to be so organized as to
have the capacity to carry out the purposes of the Exchange Act and
comply with the provisions of the Exchange Act by its members and
persons associated with members. Section 6.05 does not relate to the
operations of the Exchange's markets, but rather to potential
transactions with affiliates of the Exchange. Section 6.05 dates to the
demutualization of the Exchange, when its ownership structure was
materially different.\37\ The Exchange believes that Section 6.05 is no
longer necessary given the corporate structure of ICE and the Exchange,
as reflected by the fact that no other NYSE Group Exchange has a
similar provision in its governing documents.\38\ For the same reasons,
the Exchange believes that the proposed deletion would be consistent
with the promotion of the maintenance of a fair and orderly market, the
protection of investors and the protection of the public interest.
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\37\ See note 26, supra.
\38\ See note 27, supra.
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The proposed amendments to clarify the meaning of certain
provisions of the Exchange Bylaws, Certificate and Rule 3.3(a), to
better comport certain provisions with the DGCL and to effect non-
substantive changes would facilitate the Exchange's continued
compliance with the Exchange Certificate and Bylaws and applicable law,
which would further enable the Exchange to be so organized as to have
the capacity to be able to carry out the purposes of the Exchange Act
and to comply, and to enforce compliance by its exchange members and
persons associated with its exchange members, with the provisions of
the Exchange Act, the rules and regulations thereunder, and the rules
of the Exchange. Such amendments would also remove impediments to and
perfects the mechanism of a free and open market by removing confusion
that may result from corporate governance provisions that are either
unclear or inconsistent with the governing law.
The Exchange also believes that the proposed amendments would
remove impediments to and perfect the mechanism of a free and open
market by ensuring that persons subject to the Exchange's jurisdiction,
regulators, and the investing public can more easily navigate and
understand the governing documents. The Exchange further believes that
the proposed amendments would not be inconsistent with the public
interest and the protection of investors because investors will not be
harmed and in fact would benefit from increased transparency and
clarity, thereby reducing potential confusion.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Exchange Act. The proposed rule
change is not intended to address competitive issues but rather is
concerned solely with the corporate governance and administration of
the Exchange.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \39\ and Rule 19b-4(f)(6) thereunder.\40\
Because the proposed rule change does not: (i) Significantly affect the
protection of investors or the public interest; (ii) impose any
significant burden on competition; and (iii) become operative prior to
30 days from the date on which it was filed, or such shorter time as
the Commission may designate, if consistent with the protection of
investors and the public interest, the proposed rule change has become
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6)(iii) thereunder.
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\39\ 15 U.S.C. 78s(b)(3)(A)(iii).
\40\ 17 CFR 240.19b-4(f)(6).
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At any time within 60 days of the filing of such proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings under
Section 19(b)(2)(B) \41\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\41\ 15 U.S.C. 78s(b)(2)(B).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-NYSEArca-2018-85 on the subject line.
[[Page 61699]]
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSEArca-2018-85. 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 website (https://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 website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549, on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All ubmissions
should refer to File Number SR-NYSEArca-2018-85 and should be submitted
on or before December 21, 2018.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\42\
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\42\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-25998 Filed 11-29-18; 8:45 am]
BILLING CODE 8011-01-P
