[Federal Register Volume 80, Number 191 (Friday, October 2, 2015)]
[Notices]
[Pages 59837-59843]
[FR Doc No: 2015-24971]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-75991; File No. SR-NYSE-2015-27]

Self-Regulatory Organizations; New York Stock Exchange LLC; Order
Approving Proposed Rule Change Amending the Eighth Amended and Restated
Operating Agreement of the Exchange To Establish a Regulatory Oversight
Committee as a Committee of the Board of Directors of the Exchange and
Amending Other Rules of the Exchange

September 28, 2015.

I. Introduction

    On June 12, 2015, New York Stock Exchange LLC (``NYSE'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) \1\ of the Securities
Exchange Act of 1934 (``Act''),\2\ and Rule 19b-4 thereunder,\3\ a
proposed rule change to amend the Eighth Amended and Restated Operating
Agreement (``Operating Agreement'') of the Exchange and to amend other
rules of the Exchange, as described below. The

proposed rule change was published for comment in the Federal Register
on June 30, 2015.\4\ The Commission received one comment letter on the
proposed rule change \5\ and a response to the comment letter from the
Exchange.\6\ On August 11, 2015, the Commission extended the time
period in which to approve the proposed rule change, disapprove the
proposed rule change, or institute proceedings to determine whether to
disapprove the proposed rule change, to September 28, 2015.\7\ This
order approves the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
    \4\ See Securities Exchange Act Release No. 75288 (June 24,
2015), 80 FR 37316 (``Notice'').
    \5\ See letter from J. Robert Brown, Jr., Professor of Law &
Director, Corporate & Commercial Law Program, University of Denver
Sturm College of Law, to Brent J. Fields, Secretary, Commission,
dated September 8, 2015 and received by the Commission on September
21, 2015 (``Professor Brown Letter'').
    \6\ See letter from Martha Redding, Senior Counsel and Assistant
Secretary, NYSE, to Brent J. Fields, Secretary, Commission, dated
September 24, 2015 and received by the Commission on September 24,
2015 (``NYSE Response Letter'').
    \7\ See Securities Exchange Act Release No. 75659, 80 FR 49285
(August 17, 2015).
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II. Description of the Proposal

    NYSE proposes to: (i) Amend the Exchange's Operating Agreement to
establish a Regulatory Oversight Committee (``ROC'') as a committee of
the Exchange's Board of Directors (``Board'') and make conforming
amendments to Exchange Rules 1, 46, 46A, and 497; (ii) terminate the
Delegation Agreement (``Delegation Agreement'') among the Exchange,
NYSE Market (DE), Inc. (``NYSE Market (DE)''), and NYSE Regulation,
Inc. (``NYSE Regulation''), delete Exchange Rule 20, which sets forth
the terms of the delegation, and make conforming amendments to Section
4.05 of the Operating Agreement and Exchange Rules 0, 1, 22, 36, 37,
46, 48, 49, 54, 70, 103, 103A, 103B, 104, 422 476A, and 497; (iii)
remove from the Exchange Rules certain organizational documents of NYSE
Market (DE) and NYSE Regulation in connection with the proposed
termination of the Delegation Agreement; (iv) amend the Operating
Agreement to establish a Director Candidate Recommendation Committee
(``DCRC'') as a committee of the Board and set forth the process by
which Non-Affiliated Director Candidates are named to the new DCRC; (v)
amend the Operating Agreement to establish a Committee for Review
(``CFR'') as a subcommittee of the ROC and make conforming changes to
Exchange Rules 308, 475, 476, 476A, and 9310; and (vi) replace
references to the Chief Executive Officer of NYSE Regulation in
Exchange Rules 48, 49, and 89 with references to the Chief Regulatory
Officer of the Exchange.

A. Establishing a ROC and Making Conforming Amendments to Exchange
Rules

    The Exchange proposes to add subsection (ii) to Section 2.03(h) of
the Operating Agreement to establish a ROC and to delineate its
composition and functions. The Exchange states that new Section
2.03(h)(ii) of the Operating Agreement would be substantially similar
to the recently approved changes by the Exchange's affiliates, NYSE
Arca, Inc. (``NYSE Arca'') and NYSE MKT LLC (``NYSE MKT''), to
establish ROCs,\8\ as well as Article III, Section 5(c) of the By-Laws
of the NASDAQ Stock Market LLC (``NASDAQ'') (``NASDAQ By-Laws'').\9\
The ROC would be appointed annually and would have the following
responsibilities:
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    \8\ See Securities Exchange Act Release Nos. 75148 (June 11,
2015), 80 FR 34751 (June 17, 2015) (approving NYSE MKT's
establishment of a ROC of the exchange's Board of Directors) (``NYSE
MKT Approval Order'') and 75155 (June 11, 2015), 80 FR 34744 (June
17, 2015) (approving NYSE Arca's establishment of a ROC of the
exchange's Board of Directors) (``NYSE Arca Approval Order'').
    \9\ See Securities Exchange Act Release No. 53128 (January 13,
2006), 71 FR 3550 (January 23, 2006) (order granting application of
NASDAQ for registration as a national securities exchange) (``NASDAQ
Approval Order'').
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     Oversee the Exchange's regulatory and self-regulatory
organization responsibilities and evaluate the adequacy and
effectiveness of the Exchange's regulatory and self-regulatory
organization responsibilities;
     assess the Exchange's regulatory performance; and
     advise and make recommendations to the Board or other
committees of the Board about the Exchange's regulatory compliance,
effectiveness and plans.\10\
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    \10\ See Notice, supra note 4, at 37317.
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    In furtherance of these functions, the Exchange proposes that the
ROC shall have the authority and obligation to: (i) Review the
regulatory budget of the Exchange and specifically inquire into the
adequacy of resources available in the budget for regulatory
activities; (ii) meet regularly with the Chief Regulatory Officer
(``CRO'') in executive session; (iii) in consultation with the
Exchange's Chief Executive Officer, establish the goals, assess the
performance, and recommend the CRO's compensation; and (iv) keep the
Board informed with respect to the foregoing matters.
    With respect to the ROC's composition, Section 2.03(h)(ii) would
provide that the ROC shall consist of at least three members, each of
whom shall be a Director of the Exchange who satisfies the independence
requirements of the Exchange.\11\ The Exchange states that a ROC
comprised of at least three independent members has been recognized as
one of several measures that can help ensure the independence of the
regulatory function from the market operations and commercial interests
of a national securities exchange.\12\
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    \11\ The Exchange's independence requirements are set forth in
the Company Director Independence Policy of the Exchange. See
Securities Exchange Act Release No. 67564 (August 1, 2012), 77 FR
47161 (August 7, 2012) (SR-NYSE-2012-17) (approving, among other
things, the Exchange's Company Director Independence Policy).
    \12\ See Notice, supra note 4, at 37317.
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    In addition, Section 2.03(h)(ii) of the Operating Agreement would
provide that the Board, on affirmative vote of a majority of Directors,
at any time may remove a member of the ROC for cause, and also would
provide that a failure of the ROC member to qualify as independent
under the Company Director Independence Policy would constitute a basis
to remove a member of the ROC for cause. If the term of office of a ROC
member terminates, and the remaining term of office of such member at
the time of termination is not more than three months, Section
2.03(h)(ii) would provide that during the period of vacancy, the ROC
would not be deemed to be in violation of its compositional
requirements by virtue of the vacancy. To clarify the process for
filling vacancies on any committee of the Exchange, including the ROC,
the Exchange also proposes to amend Section 2.03(h) of the Operating
Agreement to provide that vacancies in the membership of any committee
shall be filled by the Board. The Exchange believes that the proposed
rule change creating an independent Board committee to oversee the
adequacy and effectiveness of the performance of its self-regulatory
responsibilities is consistent with previously approved rule changes
for other SROs and would enable the Exchange to undertake its
regulatory responsibilities under a corporate governance structure that
is consistent with its industry peers.\13\ Moreover, the Exchange
believes that the proposed ROC would ensure the continued independence
of the regulatory process.\14\ The Exchange states that oversight of
the Exchange's self-regulatory responsibilities and regulatory
performance, including review of the regulatory plan, programs, budget
and staffing by a ROC composed of individuals independent of Exchange

management and a CRO having general supervision of the regulatory
operations of the Exchange that meets regularly with the ROC is
integral to the proposal.\15\
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    \13\ See id. See also NASDAQ Approval Order, NYSE MKT Approval
Order and NYSE Arca Approval Order, supra notes 8 and 9.
    \14\ See Notice, supra note 4, at 37317.
    \15\ See id.
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    The Exchange also proposes to make conforming amendments to
Exchange Rules 1, 46, 46A and 497 by replacing references to ``Board of
Directors of NYSER'' and ``NYSE Regulation Board of Directors'' with
references to the ROC.

B. Terminating the Delegation Agreement, Deleting Exchange Rule 20, and
Conforming the Operating Agreement and Other Exchange Rules

    The Exchange proposes to terminate the Delegation Agreement and
delete Exchange Rule 20, which sets forth the delegation of the
Exchange's regulatory functions to NYSE Regulation and the Exchange's
market functions to NYSE Market (DE),\16\ each of which is a subsidiary
of the Exchange created in 2006 following the merger of New York Stock
Exchange, Inc. with Archipelago Holdings, Inc.\17\ In connection with
that transaction, NYSE Regulation became a separate not-for-profit
entity, and its Board of Directors assumed the regulatory oversight
functions and responsibilities of the Exchange that are proposed to be
assumed by the ROC. The Exchange notes that, although the Delegation
Agreement sets forth the terms under which the Exchange delegated its
functions to NYSE Regulation and NYSE Market (DE), the Exchange
retained ultimate responsibility for the operations, rules and
regulations developed by NYSE Regulation and NYSE Market (DE) and for
their enforcement.\18\
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    \16\ See Exchange Rule 20(a). Exchange Rule 20(b) requires that
NYSE Market (DE) establish a Market Performance Committee and that
NYSE Regulation establish a Regulatory Advisory Committee, each to
include persons associated with member organizations and
representatives of both those member organizations doing business on
the Floor of the Exchange and those who do not do business on the
Floor. The Exchange does not propose to retain these committees.
Rather, the Exchange proposes that the Committee for Review, which
would include persons associated with member organizations and
representatives of both those member organizations doing business on
the Floor of the Exchange and those who do not do business on the
Floor, assume the advisory roles of these committees. See Section
II.E., infra.
    \17\ See Notice, supra note 4, at 37318.
    \18\ The Exchange notes that functions delegated to NYSE Market
(DE) included, among other things, operating the NYSE marketplace,
including the automated systems supporting it; providing and
maintaining a communications network infrastructure linking market
participants for the efficient process and handling of quotations,
orders, transaction reports and comparisons of transactions; acting
as a Securities Information Processor for quotations and transaction
information related to securities traded on NYSE and other trading
facilities operated by NYSE Market (DE); administering the
Exchange's participation in National Market System Plans; and
collecting, processing, consolidating and providing to NYSE
Regulation accurate information requisite to operation of the
surveillance audit trail. See id. at 37318 n.21.
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    With the termination of the Delegation Agreement, the Exchange
proposes to re-integrate its regulatory and market functions.\19\ The
Exchange believes that its proposal to establish a ROC to undertake the
independent oversight of the Exchange's regulatory responsibilities
would ensure independent oversight of the regulatory process and would
have the additional benefit of aligning the Exchange's corporate
governance practices with its industry peers.\20\
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    \19\ See Notice, supra note 4, at 37322.
    \20\ See id. at 37318.
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    The Exchange proposes to functionally separate its regulatory
functions from its business lines.\21\ The Exchange's CRO would head
the Exchange's regulatory department and continue to manage the
Exchange's regulatory functions, under the oversight of the proposed
ROC. The regulatory staff supporting the regulatory functions of NYSE
would report to the CRO. The Exchange believes that a CRO reporting to
an independent ROC should add a ``significant degree of independence''
and should ``insulate'' regulatory activity from economic pressures and
potential conflicts of interest.\22\
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    \21\ See id.
    \22\ See id. (citing Securities Exchange Act Release No. 48946
(December 17, 2003), 68 FR 74678, 74687 (December 24, 2003)).
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    The Exchange proposes to make certain conforming amendments to its
Rules to reflect the termination of the Delegation Agreement and the
re-integration of its regulatory and market operations. As further
described in the Notice,\23\ the Exchange proposes conforming
amendments in Section 4.05 of the Exchange's Operating Agreement, and
Exchange Rules 0, 1, 22, 36 (Supplementary Material .30), 37, 46, 48,
49, 54(b), 70 (subparts (1) and (7) of Supplementary Material .40),
103, 103A, 103B, 104, 422, 476A and 497, by removing references to NYSE
Regulation and NYSE Market \24\ and, where applicable, replacing such
deletions with references to the Exchange or to the applicable Exchange
personnel, as appropriate, who will be carrying out the regulatory
responsibilities on behalf of the Exchange following the termination of
the Delegation Agreement.
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    \23\ See id. at 37318-19.
    \24\ The Exchange notes that NYSE Market (DE) was formerly known
as ``NYSE Market, Inc.'' Accordingly, references to ``NYSE Market''
in the Exchange Rules and Operating Agreement are references to NYSE
Market (DE).
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C. Deleting NYSE Market (DE) and NYSE Regulation's Organizational
Documents as Rules of the Exchange

    With the termination of the Delegation Agreement, NYSE Regulation
and NYSE Market (DE) no longer would be performing the Exchange's
regulatory and market functions, respectively. According to the
Exchange, the previously filed constituent documents of NYSE Regulation
and NYSE Market (DE) therefore no longer would constitute ``rules of
[the] exchange'' under Section 3(a)(27) of the Act.\25\ As a result,
the Exchange proposes to remove the following NYSE Regulation and NYSE
Market (DE) constituent documents as rules of the Exchange upon
termination of the Delegation Agreement:
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    \25\ 15 U.S.C. 78c(a)(27).
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     Restated Certificate of Incorporation of NYSE Regulation,
Inc.;
     Seventh Amended and Restated Bylaws of NYSE Regulation,
Inc.;
     Independence Policy of NYSE Regulation, Inc.;
     Third Amended and Restated Certificate of Incorporation of
NYSE Market (DE), Inc.;
     Fourth Amended and Restated Bylaws of NYSE Market (DE),
Inc.; and
     Independence Policy of NYSE Market (DE), Inc.\26\
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    \26\ The Commission notes that on September 22, 2015, NYSE MKT
LLC filed a proposed rule change to add the Third Amended and
Restated Certificate of Incorporation of NYSE Market (DE), Inc. and
the Eighth Amended and Restated Operating Agreement of New York
Stock Exchange LLC as ``rules of [the] exchange'' of NYSE MKT in
light of NYSE Market (DE), Inc.'s majority ownership interest in a
facility of NYSE MKT. See Securities Exchange Act Release No. 75984
(September 25, 2015) (SR-NYSEMKT-2015-71).
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D. Establishing a DCRC and Naming Non-Affiliated Director Candidates

    Section 2.03(a)(iii) of the Operating Agreement provides that Non-
Affiliated Director Candidates (also known as ``Fair Representation
Candidates'') are nominated by the nominating and governance committee
(``NGC'') of the Intercontinental Exchange, Inc. (``ICE'') Board of
Directors, which must designate as Non-Affiliated Director Candidates
the candidates recommended jointly by the NYSE Market (DE) DCRC and the
NYSE Regulation DCRC. Section 2.03(a)(iv) of the Operating Agreement
describes the process whereby member organizations can nominate
alternate candidates to those candidates selected by the NYSE Market
(DE) DCRC and the NYSE Regulation DCRC.

    The Exchange proposes to establish a NYSE DCRC as a committee of
the Board by adding new subsection (h)(i) to Section 2.03 of the
Operating Agreement, and making conforming changes to Section
2.03(a)(iii) and Section 2.03(a)(iv) by substituting the proposed NYSE
DCRC for the NYSE Market (DE) DCRC and NYSE Regulation DCRC in the
nominating process for Non-Affiliated Director Candidates. The Exchange
states that, once the Delegation Agreement is terminated, neither the
NYSE Market (DE) DCRC nor the NYSE Regulation DCRC should have a role
in the nomination of Non-Affiliated Director Candidates process, as the
Exchange no longer would be delegating any market or regulatory
responsibilities to either entity.\27\
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    \27\ See Notice, supra note 4, at 37320.
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    Proposed Section 2.03(h)(i) of the Operating Agreement provides
that the Board would appoint the members of the NYSE DCRC on an annual
basis and that the NYSE DCRC would be responsible for recommending Non-
Affiliated Director Candidates to the ICE NGC. Proposed Section
2.03(h)(i) also sets forth the compositional requirements for the NYSE
DCRC.\28\ Specifically, the NYSE DCRC would include individuals who are
associated with a member organization, and would include at least one
individual from each of the following categories, that:
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    \28\ The proposed requirements are substantially similar to the
requirements for the DCRCs of NYSE Regulation, NYSE Market (DE), and
NYSE MKT. See Seventh Amended and Restated Bylaws of NYSE
Regulation, Inc., Article III, Section 5; Fourth Amended and
Restated Bylaws of NYSE Market (DE), Inc., Article III, Section 5;
and Sixth Amended and Restated Operating Agreement of NYSE MKT LLC,
Section 2.03(h). The Exchange notes that NYSE MKT has a fourth
category of requirements similar to the third category noted above
but it includes an individual that engages in the execution of
transactions on NYSE MKT's trading floor for the associate person's
own account. Because neither the NYSE Market (DE) DCRC nor the NYSE
Regulation DCRC, which the NYSE DCRC is replacing, has this fourth
category, the Exchange does not propose to include it in the revised
Operating Agreement. See Notice, supra note 4, at 37320 n.37.
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     Engages in a business involving substantial direct contact
with securities customers;
     is registered as a Designated Market Maker (``DMM'') and
spends a substantial part of their time on the trading floor; and
     spends a majority of their time on the trading floor of
the Exchange and has as a substantial part of their business the
execution of transactions on the trading floor of the Exchange for
other than their own account or the account of his or her Member
Organization, but is not registered as a DMM.
    As proposed, Section 2.03(h)(i) would provide that the Board
appoint such individuals after appropriate consultation with
representatives of member organizations. Furthermore, the Exchange
proposes to replace references to ``NYSE Market DCRC'' and ``NYSE
Regulation DCRC'' with ``NYSE DCRC'' in Section 2.03(a)(iii) and
Section 2.03(a)(iv) of the Operating Agreement.
    According to the Exchange, one benefit of the proposed rule change
is that the Exchange's process for selecting Non-Affiliated Director
Candidates would be harmonized with a similar process in place at NYSE
MKT, an affiliate of the Exchange.\29\ Further, the Exchange believes
that the proposed rule change would allow the Board to have a more
direct role in the appointment of Non-Affiliated Director Candidates
while complying with the fair representation requirement under Section
6(b)(3) of the Act,\30\ which is intended to give members a voice in
the selection of an exchange's directors and the administration of its
affairs.\31\ In particular, the Exchange notes that, as is the case
with the NYSE Regulation DCRC and NYSE Market (DE) DCRC, the proposed
NYSE DCRC would be comprised of persons associated with Exchange member
organizations and selected after appropriate consultation with those
member organizations. The proposed Operating Agreement also retains a
process by which members could directly petition and vote for
representation on the Board.\32\ The Exchange therefore believes that
the proposal would continue to allow members to have a voice in the
Exchange's use of its self-regulatory authority, consistent with
Section 6(b)(3) of the Act.\33\
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    \29\ See Notice, supra note 4, at 37316.
    \30\ See 15 U.S.C. 78f(b)(3).
    \31\ See Notice, supra note 4, at 37320.
    \32\ NYSE's Operating Agreement, Section 2.03(a)(iv).
    \33\ See Notice, supra note 4, at 37320 and 15 U.S.C. 78f(b)(3).
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E. Establishing a Committee for Review and Conforming Exchange Rules

    The Exchange proposes to establish a Committee for Review (``CFR'')
as a subcommittee of the ROC by adding a new subsection (h)(iii) to
Section 2.03 of the Operating Agreement and to make conforming changes
to Exchange Rules 308, 475, 476, 476A, and 9310.\34\ The proposed CFR
would be the successor to the current CFR, which is a committee of NYSE
Regulation's Board of Directors.\35\ Section 2.03(h)(iii) of the
Operating Agreement would provide that the Board shall annually appoint
the members of the CFR. The Exchange notes that the proposed Section
2.03(h)(iii) of the Operating Agreement incorporates member
organization association requirements of the current CFR.\36\ The
proposed CFR would be comprised of both Exchange directors who satisfy
the NYSE's independence requirements as well as non-directors.\37\ The
Exchange notes that because the majority of the Board would be
independent and any Non-Affiliated Director must be independent, as a
functional matter if the Exchange were to have a five-person Board,
four of the five directors would qualify for CFR membership.\38\ Non-
directors serving on the proposed CFR would include representatives of
member organizations that engage in a business involving substantial
direct contact with securities customers (upstairs firms), DMMs, and
floor brokers.\39\ The Exchange notes that the proposed CFR, like the
current CFR, would be selected after appropriate consultation with
those members. The Exchange notes further that for any CFR vote, a
majority of the members of the CFR casting votes would have to be
directors of the Exchange.
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    \34\ See Notice, supra note 4, at 37320-21.
    \35\ See id. at 37320.
    \36\ See id. at 37321.
    \37\ See id. at 37320-21.
    \38\ See id. at 37320-21 n.42.
    \39\ See id. at 37321.
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    The proposed CFR would be responsible for reviewing the
disciplinary decisions on behalf of the Board and reviewing
determinations to limit or prohibit the continued listing of an
issuer's securities on the Exchange.\40\ Additionally, the Exchange
proposes to incorporate the role of the Market Performance and
Regulatory Advisory Committees into the proposed CFR.\41\ As a result,
the proposed CFR would be charged with acting in an advisory capacity
to the Board with respect to disciplinary matters, the listing and
delisting of securities, regulatory

programs, rulemaking and regulatory rules, including trading rules. The
Exchange states that the proposed CFR would therefore serve in the same
advisory capacity as the Market Performance and Regulatory Advisory
Committees.\42\
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    \40\ The Exchange notes that these powers are currently set
forth in the charter of the NYSE Regulation CFR, which also states
that the CFR can provide general advice to the NYSE Regulation Board
of Directors in connection with disciplinary, listing and other
regulatory matters. The Exchange proposes to delineate the appellate
and advisory powers of the proposed CFR in Section 2.03(h)(iii) of
the Operating Agreement. Appeals of delisting determinations are
governed by Rule 804.00 of the Exchange's Listed Company Manual,
which provides that delisting determinations are to be reviewed by a
``Committee of the Board of Directors of the Exchange''. See Notice,
supra note 4, at 37321 n.44.
    \41\ Id. at 37321. The Exchange notes that the same profile of
members who historically served on these advisory committees would
be represented on the proposed CFR. Id.
    \42\ See Notice, supra note 4, at 37321.
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    According to the Exchange, member participation on the proposed CFR
would be sufficient to provide for the fair representation of members
in the administration of the affairs of the Exchange, including
rulemaking and the disciplinary process, consistent with Section
6(b)(3) of the Act.\43\
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    \43\ See id. and 15 U.S.C. 78f(b)(3).
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    Finally, the Exchange proposes to make conforming amendments to
Exchange Rules 308, 475, 476, 476A and 9310 by generally replacing
references to the current NYSE Regulation CFR with references to the
``Committee for Review.''

F. Modifying Exchange Rules To Reference the Exchange's Chief
Regulatory Officer

    The Exchange also proposes to amend Exchange Rule 48 (Exemptive
Relief--Extreme Market Volatility Condition), Exchange Rule 49
(Emergency Powers) and Exchange Rule 86 (NYSE BondsSM) by replacing
references to the Chief Executive Officer of NYSE Regulation with
references to the CRO of the Exchange.
    Exchange Rule 48 currently provides that, for purposes of the rule,
a ``qualified Exchange officer'' means the Chief Executive Officer of
ICE, or his or her designee, or the Chief Executive Officer of NYSE
Regulation, or his or her designee. Exchange Rule 48 provides that the
Exchange can invoke an extreme market volatility condition at the open
(or reopen of trading following a market-wide halt of securities)
during which time the Exchange could suspend Exchange Rules 15, 79A.30,
and 123D(1) regarding obtaining certain prior Floor Official approvals
and requirements for mandatory indications. Exchange Rule 49 addresses
the Exchange's emergency powers and defines the term ``qualified
Exchange officer'' as, inter alia, the ``NYSE Regulation, Inc. Chief
Executive Officer'' or his or her designee. Exchange Rule 86 currently
provides that Clearly Erroneous Execution panels in connection with
trades on NYSE MKT Bonds be comprised of the Chief Executive Officer of
NYSE Regulation or a designee and representatives from two members or
member organizations that are users of NYSE Bonds.\44\
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    \44\ NYSE Bonds is the Exchange's electronic bond trading
platform. Rule 86 prescribes what bonds are eligible to trade on the
NYSE Bonds platform and how bonds are traded on the platform,
including the receipt, execution and reporting of bond transactions.
See Notice, supra note 4, at 37321 n.50.
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    The Exchange notes that ``Chief Executive Officer'' of NYSE
Regulation is used in these three rules but CRO is used throughout the
Exchange's rules to designate the same person.\45\ The Exchange, thus,
proposes to replace references to ``Chief Executive Officer'' of NYSE
Regulation in Exchange Rules 48, 49 and 86 with either the term ``Chief
Regulatory Officer'' or ``CRO'', as appropriate.
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    \45\ See, e.g., Exchange Rules 13, 107B, 107C and 128.
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    As noted above, the Commission received one comment letter on the
proposed rule change.\46\ The commenter states that, with respect to
the existing system of the Exchange's governance, the proposed rule
change would replace a structural separation with a functional
separation, in particular, by terminating the Delegation Agreement and
establishing a ROC in lieu of NYSE Regulation.\47\ The commenter
expresses the concern that the Exchange's proposal would not ensure
sufficient insulation of the Exchange's regulatory function from the
commercial interests of its holding company.\48\ The commenter
enumerates the following specific concerns with the proposal: Unlike
NYSE Regulation, the Exchange is a ``for profit'' entity; NYSE
Regulation has a board consisting entirely of independent directors;
NYSE Regulation limits the number of directors from the holding company
who can sit on its board to less than a majority, while the Board could
include a super-majority of directors from the holding company; the ROC
would have little substantive authority and can only ``review'' the
regulatory budget and ``inquire'' about the adequacy of resources for
regulatory activities; the ROC would not be sufficiently insulated from
the business activities of the holding company because the ROC's
membership could be composed of persons who also are directors of the
holding company; the CRO position would not be adequately insulated
from the commercial interests of the holding company; and the CFR would
not effectively insulate the disciplinary review process from possible
commercial influences.\49\
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    \46\ See Professor Brown Letter, supra note 5.
    \47\ Id. at 4-5.
    \48\ Id. at 6.
    \49\ Id. at 6-7.
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    The commenter offers a number of suggested revisions to the
proposed rule change that in his view would strengthen the independence
of the Exchange's regulatory function: The Board should consist
entirely of independent directors, other than the Chief Executive
Officer, and should not include any holding company directors or
directors of affiliates; the ROC should consist entirely of independent
directors; the ROC should have greater substantive authority over its
budget and other critical functions and should have greater authority
with respect to the CRO and the CRO's compensation; CFR membership
should be limited to members of the ROC and persons appointed by the
ROC; and the provision regarding removal of a director ``for cause''
should be defined so as to restrict the Board from easily changing the
ROC's membership.\50\ The commenter suggests that the Delegation
Agreement could remain in place and the Exchange could seek
modifications to, rather than replace, the existing governance
system.\51\
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    \50\ Id. at 8-9.
    \51\ Id. at 8.
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    The Exchange submitted a letter responding to the commenter's
letter.\52\ The Exchange discusses each of the commenter's issues with
its proposal and the commenter's recommendations for revision.\53\ With
respect to the elimination of NYSE Regulation and the creation of a
ROC, the Exchange states that, as a self-regulatory organization
(``SRO''), it has always retained the ``ultimate responsibility for the
fulfillment of its statutory and self-regulatory obligations under the
Act.'' \54\ With respect to the composition of the ROC, the Exchange
notes that under the proposal the ROC would be required to be composed
of at least three members, each of whom would be required to be a
director of the Exchange that satisfies the independence requirements
of the Company Director Independence Policy, which, according to the
Exchange, is virtually identical to the NYSE Regulation Independence
Policy.\55\ The Exchange further states that its Operating Agreement
recently was amended to remove the requirement that the Board consist
of at least a majority of independent directors of the holding
company.\56\ In addition, the Exchange points out that its proposed ROC
was modeled on the NASDAQ

ROC and has the same powers and its responsibilities are substantially
similar to the ROCs of other SROs.\57\ The Exchange also notes that the
proposal ``clearly provides that the CRO would report to the ROC'' \58\
and, given that fact, the ROC ``clearly has the power to retain or
dismiss the CRO, only it must do so in consultation with the Exchange's
Chief Executive Officer as part of the process of establishing goals,
assessing performance, and recommending the CRO's compensation.'' \59\
---------------------------------------------------------------------------

    \52\ See NYSE Response Letter, supra note 6.
    \53\ Id.
    \54\ Id.
    \55\ Id.
    \56\ Id. at 7 (citing Securities Exchange Act Release No. 75105
(June 4, 2015), 80 FR 33005 (June 10, 2015)).
    \57\ Id. at 8.
    \58\ Id.
    \59\ Id. at 9.
---------------------------------------------------------------------------

    The Exchange also addresses the commenter's suggested revisions to
the Exchange's proposal. As an initial matter, the Exchange states that
the commenter ``has not provided any credible reason why the current
structure should remain or why the Exchange's Proposal is not
consistent with the requirements of the Act.'' \60\ The Exchange does
not believe that directors that meet its independence standards are
less independent because they also serve as directors of ICE or ICE
affiliates.\61\ The Exchange further states that it ``rejects the
proposition that directors of NYSE Regulation are inherently more
independent than independent directors of ICE that serve as independent
directors of the Exchange.'' \62\ Regarding the commenter's suggestions
about the ROC, the Exchange reiterated its position that the proposed
ROC and its authority is consistent with prior exchanges' provisions
relating to ROCs that were found by the Commission to be consistent
with the Act.\63\ Regarding the commenter's suggestion that the CFR be
limited to members of the ROC and members appointed by the ROC, the
Exchange states its view that the requirement that members of the CFR
be independent directors of the Exchange is sufficient to ensure the
integrity of the disciplinary appeals process.\64\ With respect to the
commenter's suggestion that the proposal permitting removal of a ROC
member ``for cause'' be revised to limit the Board's ability to easily
change the ROC's membership, the Exchange notes that at least one SRO
does not require ``cause'' as a basis for removing a ROC member.\65\
---------------------------------------------------------------------------

    \60\ Id. at 10.
    \61\ Id.
    \62\ Id.
    \63\ Id. at 10-11.
    \64\ Id. at 11.
    \65\ Id.
---------------------------------------------------------------------------

III. Discussion and Commission Findings

    After careful review, the Commission finds that the proposed rule
change is consistent with the Act and the rules and regulations
thereunder applicable to a national securities exchange.\66\ In
particular, the Commission finds that the proposed rule change is
consistent with Section 6(b)(1) of the Act, which requires an exchange
to be so organized and have the capacity to carry out the purposes of
the Act and to comply, and to enforce compliance by its members and
persons associated with its members, with the Act, the rules and
regulations thereunder, and the rules of the exchange.\67\ The
Commission finds that the proposal also is consistent with the
requirements of Section 6(b)(3) of the Act, which provides that the
rules of an exchange must assure a fair representation of its members
in the selection of its directors and administration of its affairs and
provide that one or more directors shall be representative of issuers
and investors and not be associated with a member of the exchange,
broker, or dealer.\68\ In addition, the Commission finds that the
proposal is consistent with Section 6(b)(5) of the Act, which requires
that the rules of the exchange be designed, among other things, to
prevent fraudulent and manipulative acts and practices, to promote just
and equitable principles of trade, to remove impediments to and perfect
the mechanism of a free and open market and a national market system,
and, in general, to protect investors and the public interest.\69\
Finally, the Commission finds that the proposal is consistent with
Section 6(b)(6) of the Act, which requires that the rules of the
exchange provide that its members and persons associated with its
members shall be appropriately disciplined for violation of the
provisions of the Act, the rules or regulations thereunder, or the
rules of the exchange.\70\
---------------------------------------------------------------------------

    \66\ In approving this proposed rule change, the Commission
notes that it has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
    \67\ 15 U.S.C. 78f(b)(1).
    \68\ 15 U.S.C. 78f(b)(3).
    \69\ 15 U.S.C. 78f(b)(5).
    \70\ 15 U.S.C. 78f(b)(6).
---------------------------------------------------------------------------

    As noted above, the commenter expresses the concern that the
Exchange's proposal would not ensure sufficient insulation of the
Exchange's regulatory function from the commercial interests of its
holding company.\71\ The commenter also questions the adequacy of the
independence of the directors of the Exchange's Board.\72\ In response,
the Exchange states that the commenter has not provided an adequate
reason why the Exchange's current structure should remain or why the
proposal is not consistent with the requirements of the Act.\73\
---------------------------------------------------------------------------

    \71\ See Professor Brown Letter, supra note 5, at 6.
    \72\ Id.
    \73\ See NYSE Response Letter, supra note 6, at 10.
---------------------------------------------------------------------------

    As a preliminary matter, the Commission notes that several concerns
raised by the commenter relate to the fact that the Exchange is part of
a holding company structure. In that regard, the commenter suggests
that the replacement of NYSE Regulation with the ROC would not provide
sufficient insulation of the Exchange's regulatory functions from the
commercial interests of the holding company.\74\ The Commission notes
that, although the Exchange may be part of a holding company structure,
the Exchange is obligated to satisfy its self-regulatory obligations
under the Act and rules and regulations thereunder.\75\ The Commission
believes that the regulatory structure proposed by the Exchange is
consistent with the Act and the rules and regulations thereunder, and
is substantially similar to regulatory structures that were approved by
the Commission for other exchanges.\76\ In addition, contrary to the
commenter's understanding that the Operating Agreement ``requires that
the Board consist of at least a majority of independent directors from
the holding company,'' \77\ the Operating Agreement no longer contains
such a requirement pursuant to amendments to the Operating Agreement
that recently were approved by the Commission.\78\ The Commission notes
that the Operating Agreement also requires that the Board consist of a
majority of directors that satisfy the Company Director Independence
Policy.\79\
---------------------------------------------------------------------------

    \74\ See Professor Brown Letter, supra note 5, at 6-7.
    \75\ The Commission previously has stated that there is no
``overriding regulatory reason to require exchanges to be not-for-
profit membership organizations.'' See Securities Exchange Act
Release No. 40760 (December 8, 1998), 63 FR 70844, 70880 (December
22, 1988) (``Regulation ATS Adopting Release''). In the Regulation
ATS Adopting Release, the Commission also noted that ``it is
possible for a for-profit exchange to meet the standards set forth
in Section 6(b) of the Exchange Act.'' Id.
    \76\ See NASDAQ Approval Order, NYSE MKT Approval Order and NYSE
Arca Approval Order, supra notes 8 and 9.
    \77\ See Professor Brown Letter, supra note 5, at 6.
    \78\ See Securities Exchange Act Release No. 75105 (June 4,
2015), 80 FR 33005 (June 10, 2015).
    \79\ NYSE's Operating Agreement, Section 2.03(a)(i).
---------------------------------------------------------------------------

    The commenter expresses the view that the ROC would not have
sufficient substantive authority over the

Exchange's regulatory program.\80\ In response, the Exchange states
that the ROC was modeled on the NASDAQ ROC and has the same powers,
including the power to review the regulatory budget and inquire about
available regulatory resources.\81\ The Commission believes that the
Exchange's proposal to establish a ROC, as an independent committee of
the Exchange to oversee the adequacy and effectiveness of the
Exchange's regulatory operations, should help the Exchange to fulfill
its statutory obligation to comply, and to enforce compliance by its
members and persons associated with its members, with the Act, the
rules and regulations thereunder, and the rules of the Exchange.\82\ In
addition, the Commission believes that the composition of the ROC,
which would consist of at least three members of the Board that satisfy
the Company Director Independence Policy, should help ensure the
independence of the regulatory function of the ROC. The Commission also
believes that the Exchange's proposal to make conforming changes to
various Exchange Rules to reflect the creation of the ROC is
appropriate.\83\ The Commission therefore finds that the proposed
provisions relating to the ROC and its composition are consistent with
the Act, including Sections 6(b)(1) and 6(b)(5) of the Act.
---------------------------------------------------------------------------

    \80\ See Professor Brown Letter, supra note 5, at 7.
    \81\ See NYSE Response Letter, supra note 6, at 8.
    \82\ The Commission notes that, under proposed Section
2.03(h)(ii) of the Operating Agreement, the responsibilities,
enumerated functions, and authority of the ROC are substantially
similar to those of other exchanges. See NASDAQ Approval Order, NYSE
MKT Approval Order and NYSE Arca Approval Order, supra notes 8 and
9.
    \83\ See Notice, supra note 4, at 37317-18.
---------------------------------------------------------------------------

    The commenter also raises a concern about the proposed functional
separation, rather than the existing structural separation, between the
Exchange's regulatory and market functions that would result from the
Exchange's proposal to terminate the Delegation Agreement and delete
Exchange Rule 20.\84\ In response, the Exchange states that the
Commission's prior approval of its current regulatory structure would
not preclude alternative regulatory structures, such as a functional
separation, that also would be consistent with the Act.\85\ The
Commission believes that the Exchange's proposal to re-integrate its
regulatory and market functions into the Exchange, rather than to
continue to have certain regulatory and market duties performed by its
subsidiaries, NYSE Regulation and NYSE Market, respectively, is
consistent with the Act, and thus it is appropriate for the Exchange to
terminate the Delegation Agreement and delete Exchange Rule 20,
particularly in light of the Exchange's proposal to establish a ROC.
The Commission notes that under the Delegation Agreement, the Exchange
ultimately was responsible for fulfilling the self-regulatory
obligations delegated to NYSE Regulation and NYSE Market (DE).\86\
Thus, upon termination of the Delegation Agreement and deletion of
Exchange Rule 20, the Exchange's regulatory responsibilities would
remain unchanged; the major difference would be that the Exchange
itself would directly carry out the regulatory responsibilities and
market operations previously performed by its subsidiaries. The
Commission also finds that it is consistent with the Act for the
Exchange to make conforming changes to Exchange Rules to reflect the
termination of the Delegation Agreement and deletion of Exchange Rule
20.\87\
---------------------------------------------------------------------------

    \84\ See Professor Brown Letter, supra note 5, at 6.
    \85\ See NYSE Response Letter, supra note 6, at 4.
    \86\ See Delegation Agreement, Section I.
    \87\ See Notice, supra note 4, at 37318-19.
---------------------------------------------------------------------------

    The commenter further states that the CFR would not effectively
insulate the disciplinary review process from the possibility of
commercial influences and expresses concern about the composition of
the CFR.\88\ In response, the Exchange states that the CFR would be
appointed annually by the Board as a subcommittee of the ROC and would
be comprised of both Exchange directors who satisfy the Company
Director Independence Policy as well as member participants.\89\
According to the Exchange, the CFR's mandate would include acting in an
advisory capacity to the Board with respect to disciplinary matters,
the listing and delisting of securities, regulatory programs, and
rulemaking and regulatory rules, including trading rules.\90\ The
Commission believes that the Exchange's proposal to establish a CFR is
appropriate and would provide for the fair representation of members in
the administration of the Exchange's affairs, and also would help
enable the Exchange to ensure that members and persons associated with
its members shall be appropriately disciplined for violations of the
provisions of the Act, the rules or regulations thereunder, or the
rules of the Exchange.\91\ The Commission therefore finds that the
proposed provisions relating to the CFR are consistent with the Act,
including Sections 6(b)(3) and 6(b)(6) thereunder.\92\
---------------------------------------------------------------------------

    \88\ See Professor Brown Letter, supra note 5, at 7.
    \89\ See NYSE Response Letter, supra note 6, at 4.
    \90\ Id.
    \91\ 15 U.S.C. 78f(b)(3) and 15 U.S.C. 78(b)(6).
    \92\ Id.
---------------------------------------------------------------------------

    The Commission believes that the Exchange's proposal to create the
NYSE DCRC as a committee of the Board that would recommend to the ICE
NGC the Non-Affiliated Director candidates to serve on the Board, in
place of the NYSE Regulation DCRC and the NYSE Market DCRC, provides an
appropriate process for the nomination of Exchange members to serve on
the Board. The Commission believes that the composition of the NYSE
DCRC, along with the provision in the Operating Agreement that would
allow members to directly nominate Non-Affiliated Director candidates
through a petition process,\93\ and the requirement that NYSE Group,
Inc. must appoint or elect as the Non-Affiliated Directors those
candidates nominated by the ICE NGC (or designate as Non-Affiliated
Directors the candidates that emerge from the petition and voting
process), should help to ensure the fair representation of members in
the selection of the Exchange's directors. Thus the Commission finds
that the proposal to establish the NYSE DCRC is consistent with the
Act, including Section 6(b)(3) thereunder.\94\
---------------------------------------------------------------------------

    \93\ NYSE's Operating Agreement, Section 2.03(a)(iv).
    \94\ 15 U.S.C. 78f(b)(3).
---------------------------------------------------------------------------

    Finally, the Commission believes that it is consistent with the Act
for the Exchange to make conforming revisions to various Exchange Rules
to reflect the proposed changes to its governance structure. In this
regard, the Commission believes that it is appropriate for the Exchange
to delete the organizational documents of NYSE Regulation and NYSE
Market (DE) and to replace references to the Chief Executive Officer of
NYSE Regulation with references to the CRO in Exchange Rules 48, 49,
and 86.

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the Act,
that the proposed rule change (SR-NYSE-2015-27) is approved.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\95\
---------------------------------------------------------------------------

    \95\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-24971 Filed 10-1-15; 8:45 am]
 BILLING CODE 8011-01-P


[Federal Register Volume 85, Number 102 (Wednesday, May 27, 2020)]
[Notices]
[Pages 31774-31775]
[FR Doc No: 2020-11258]

=======================================================================
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ENVIRONMENTAL PROTECTION AGENCY

[EPA-HQ-OPP-2020-0049; FRL-10009-85]

Pesticide Product Registration; Receipt of Applications for New
Active Ingredients

AGENCY: Environmental Protection Agency (EPA).

ACTION: Notice.

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

SUMMARY: EPA has received applications to register pesticide products
containing active ingredients not included in any currently registered
pesticide products. Pursuant to the Federal Insecticide, Fungicide, and
Rodenticide Act (FIFRA), EPA is hereby providing notice of receipt and
opportunity to comment on these applications.

DATES: Comments must be received on or before June 26, 2020.

ADDRESSES: Submit your comments, identified by docket identification
(ID) number and the File Symbol of interest as shown in the body of
this document, by one of the following methods:
     Federal eRulemaking Portal: http://www.regulations.gov.
Follow the online instructions for submitting comments. Do not submit
electronically any information you consider to be Confidential Business
Information (CBI) or other information whose disclosure is restricted
by statute.
     Mail: OPP Docket, Environmental Protection Agency Docket
Center (EPA/DC), (28221T), 1200 Pennsylvania Ave. NW, Washington, DC
20460-0001.
     Hand Delivery: To make special arrangements for hand
delivery or delivery of boxed information, please follow the
instructions at https://www.epa.gov/dockets/where-send-comments-epa-dockets.
    Please note that due to the public health emergency, the EPA Docket
Center (EPA/DC) and Reading Room was closed to public visitors on March
31, 2020. Our EPA/DC staff will continue to provide customer service
via email, phone, and webform. For further information on EPA/DC
services, docket contact information and the current status of the EPA/
DC and Reading Room, please visit https://www.epa.gov/dockets.

FOR FURTHER INFORMATION CONTACT: Michael Goodis, Registration Division
(7505P), main telephone number:<PHONE_NUMBER>, email address:
<EMAIL_ADDRESS>The mailing address for each contact person is:
Office of Pesticide Programs, Environmental Protection Agency, 1200
Pennsylvania Ave. NW, Washington, DC 20460-0001. As part of the mailing
address, include the contact person's name, division, and mail code.
The division to contact is listed at the end of each pesticide petition
summary.

SUPPLEMENTARY INFORMATION:

I. General Information

A. Does this action apply to me?

    You may be potentially affected by this action if you are an
agricultural producer, food manufacturer, or pesticide manufacturer.
The following list of North American Industrial Classification System
(NAICS) codes is not intended to be exhaustive, but rather provides a
guide to help readers determine whether this document applies to them.
Potentially affected entities may include:
     Crop production (NAICS code 111).
     Animal production (NAICS code 112).
     Food manufacturing (NAICS code 311).

B. What should I consider as I prepare my comments for EPA?

    1. Submitting CBI. Do not submit this information to EPA through
regulations.gov or email. Clearly mark the part or all of the
information that you claim to be CBI. For CBI information in a disk or
CD-ROM that you mail to EPA, mark the outside of the disk or CD-ROM as
CBI and then identify electronically within the disk or CD-ROM the
specific information that is claimed as CBI. In addition to one
complete version of the comment that includes information claimed as
CBI, a copy of the comment that does not contain the information
claimed as CBI must be submitted for inclusion in the public docket.
Information so marked will not be disclosed except in accordance with
procedures set forth in 40 CFR part 2.
    2. Tips for preparing your comments. When preparing and submitting
your comments, see the commenting tips at https://www.epa.gov/dockets/commenting-epa-dockets.

II. Registration Applications

    EPA has received applications to register pesticide products
containing active ingredients not included in any currently registered
pesticide products. Pursuant to the provisions of FIFRA section 3(c)(4)
(7 U.S.C. 136a(c)(4)), EPA is hereby providing notice of receipt and
opportunity to comment on these applications. Notice of receipt of
these applications does not imply a decision by the Agency on these
applications. For actions being evaluated under EPA's public
participation process for registration actions, there will be an
additional opportunity for public comment on the proposed decisions.
Please see EPA's public participation website for additional
information on this process (http://www2.epa.gov/pesticide-registration/public-participation-process-registration-actions).

Notice of Receipt--New Active Ingredients

    EPA file symbols: 8033-RUN and 8033-RGO. Docket ID number: EPA-HQ-
OPP-2020-0225. Applicant: Nippon Soda Co., Ltd., Shin-Ohtemachi Bldg.
2-1, 2-Chome Ohtemachi Chiyoda-ku, Tokyo 100-8165, Japan. Active
ingredient: Ipflufenoquin. Product type: Fungicide. Proposed use(s):
Almond and Pome Fruit (Crop Group 11-10). (RD).

    Authority:  7 U.S.C. 136 et seq.

    Dated: May 11, 2020.
Delores Barber,
Director, Information Technology and Resources Management Division,
Office of Pesticide Programs.
[FR Doc. 2020-11258 Filed 5-26-20; 8:45 am]
BILLING CODE 6560-50-P