[Federal Register Volume 77, Number 14 (Monday, January 23, 2012)]
[Notices]
[Pages 3297-3307]
[FR Doc No: 2012-1177]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66171; File Nos. SR-EDGA-2011-34; SR-EDGX-2011-33; SR-
ISE-2011-69; SR-NYSE-2011-51; SR-NYSEAmex-2011-78; SR-NYSEArca-2011-72]

Self-Regulatory Organizations; EDGA Exchange, Inc.; EDGX
Exchange, Inc.; International Securities Exchange, LLC; New York Stock
Exchange LLC; NYSE Amex LLC; NYSE Arca, Inc.; Order Granting Approval
of Proposed Rule Change Relating to a Corporate Transaction in Which
Deutsche B[ouml]rse AG and NYSE Euronext Would Become Subsidiaries of
Alpha Beta Netherlands Holding N.V.

January 17, 2012.

I. Introduction

    On October 12, 2011, each of EDGA Exchange, Inc (``EDGA''), EDGX
Exchange, Inc. (``EDGX''), International Securities Exchange LLC
(``ISE''), New York Stock Exchange LLC (``Exchange''), NYSE Amex LLC
(``NYSE Amex''), and NYSE Arca, Inc. (``NYSE Arca''), 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\ proposed rule changes in
which their respective indirect parent owners will become subsidiaries
of Alpha Beta Netherlands Holding N.V (``Holdco''). The proposed rule
changes were published for comment in the Federal Register on October
20, 2011.\4\ The Commission received three comment letters, one each on
the NYSE, NYSE Amex, and NYSE Arca proposals, from one commenter.\5\
The Exchange filed a response to these comments on January 5, 2012.\6\
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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 Nos. 65562 (October 14,
2011), 76 FR 65288 (October 20, 2011) (SR-NYSE-2011-51)
(``Notice''); 65563 (October 14, 2011), 76 FR 65272 (October 20,
2011) (SR-NYSEAmex-2011-78) (``NYSE Amex Notice''); 65564 (October
14, 2011), 76 FR 65264 (October 20, 2011) (SR-EDGA-2011-34) (``EDGA
Notice''); 65565 (October 14, 2011), 76 FR 65255 (October 20, 2011)
(SR-EDGX-2011-33) (``EDGX Notice''); 65566 (October 14, 2011), 76 FR
65247 (October 20, 2011) (SR-ISE-2011-69) (``ISE Notice''); 65567
(October 14, 2011), 76 FR 65230 (October 20, 2011) (SR-NYSEArca-
2011-72) (``NYSE Arca Notice'').
    \5\ See Letters to Commission, from Andrew Rothlein, dated
November 2, 2011 (``Rothlein Letters'').
    \6\ See letter from Janet McGinniss, Senior Vice President,
Legal & Corporate Secretary, NYSE, to Elizabeth M. Murphy,
Secretary, Commission, dated January 5, 2012 (``NYSE Response to
Comments''). On January 9, 2012, the Commission received three
rebuttal letters to the NYSE Response to Comments (the ``Rothlein
Rebuttal Letters'').

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    The Commission has reviewed carefully the proposed rule change, the
comment letters, and finds that the proposed rule change is consistent
with the requirements of the Act and the rules and regulations
thereunder applicable to a national securities exchange.\7\ In
particular, the Commission finds that the proposed rule changes are
consistent with Section 6(b) of the Act,\8\ which, among other things,
requires a national securities exchange to be so organized and have the
capacity to be able to carry out the purposes of the Act and to enforce
compliance by its members and persons associated with its members with
the provisions of the Act, the rules and regulations thereunder, and
the rules of the exchange, and assure the 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. Section 6(b) of the Act \9\ also requires
that the rules of the exchange be designed to promote just and
equitable principles of trade, to remove impediments to and perfect the
mechanism of a free and open market and a national market system, and,
in general, to protect investors and the public interest.
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    \7\ In approving the proposed rule changes, the Commission has
considered their impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
    \8\ 15 U.S.C. 78f(b).
    \9\ Id.
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II. Discussion

    The Exchange, NYSE Amex and NYSE Arca (each a ``NYSE Exchange'')
and ISE, EDGA and EDGX (each a ``DB Exchange'' or a ``DB U.S. Regulated
Subsidiary'') have submitted their proposed rule changes in connection
with the proposed business combination (the ``Combination'') of NYSE
Euronext, a Delaware corporation (``NYSE Euronext''), and Deutsche
B[ouml]rse AG, an Aktiengesellschaft organized under the laws of the
Federal Republic of Germany (``Deutsche B[ouml]rse'').
    NYSE Euronext owns 100% of the equity interest of NYSE Group, Inc.,
a Delaware corporation (``NYSE Group''), which in turn directly or
indirectly owns (1) 100% of the equity interest of the NYSE Exchanges
and (2) 100% of the equity interest of NYSE Market, Inc. (``NYSE
Market''), NYSE Regulation, Inc. (``NYSE Regulation''), NYSE Arca
L.L.C. (``NYSE Arca LLC'') and NYSE Arca Equities, Inc. (``NYSE Arca
Equities'') (the NYSE Exchanges, together with NYSE Market, NYSE
Regulation, NYSE Arca LLC and NYSE Arca Equities, the ``NYSE U.S.
Regulated Subsidiaries'' and each, a ``NYSE U.S. Regulated
Subsidiary'').
    Deutsche B[ouml]rse indirectly owns 50% of the equity interest of
International Securities Exchange Holdings, Inc. (``ISE Holdings''),
which in turn holds 100% of the equity interest of ISE. ISE Holdings
also holds 31.54% of the equity interest of Direct Edge Holdings LLC
(``Direct Edge Holdings''), which in turn indirectly holds 100% of the
equity interest of EDGA and EDGX.\10\
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    \10\ Following a corporate transaction in 2007 (the ``2007
Transaction''), ISE Holdings became a wholly-owned subsidiary of
U.S. Exchange Holdings, Inc. (``U.S. Exchange Holdings''), which is
wholly-owned by Eurex Frankfurt AG (``Eurex Frankfurt,'' and, with
Deutsche B[ouml]rse, the ``German Upstream Owners''). Eurex
Frankfurt is a wholly-owned subsidiary of Eurex Z[uuml]rich AG
(``Eurex Z[uuml]rich''), which, in turn, is jointly owned by
Deutsche B[ouml]rse and SIX Swiss Exchange AG (``SWX''), a wholly-
owned subsidiary of SIX Group AG (SIX Group AG, SWX, and Eurex
Z[uuml]rich are referred to collectively as the ``Swiss Upstream
Owners,'' and the Swiss Upstream Owners and the German Upstream
Owners are referred to collectively as the ``non-U.S. Upstream
Owners''). As a result of ISE Holdings' purchase of an equity
interest in Direct Edge Holdings, the non-U.S. Upstream Owners, U.S.
Exchange Holdings (together with the non-U.S. Upstream Owners, the
``Upstream Owners''), and ISE Holdings acquired indirect ownership
and voting interests in EDGX and EDGA. See Securities Exchange Act
Release No. 59135 (December 22, 2008), 73 FR 79954 (December 30,
2008) (File No. SR-ISE-2008-85) (order relating to ISE Holdings'
purchase of an ownership interest in Direct Edge Holdings); see
also, Securities Exchange Act Release No. 56955 (December 13, 2007),
72 FR 71979 (December 19, 2007) (SR-ISE-2007-101) (order relating to
Eurex Frankfurt's acquisition of an indirect interest in ISE
Holdings) (``Eurex Order'').
    In connection with the 2007 Transaction, each of the non-U.S.
Upstream Owners adopted corporate resolutions (collectively, the
``2007 Resolutions'') designed to maintain the independence of the
regulatory functions of ISE. See Eurex Order. In 2007, the non-U.S.
Upstream Owners were Eurex Frankfurt, Deutsche B[ouml]rse AG, Eurex
Z[uuml]rich, SWX, SWX Group, and Verein SWX Swiss Exchange. The 2007
Resolutions and the corporate governing documents of U.S. Exchange
Holdings and ISE Holdings related to ISE and, by their terms, did
not apply to additional national securities exchanges, such as EDGX
and EDGA, that the Upstream Owners and ISE Holdings might control,
directly or indirectly, as a result of a subsequent transaction. To
maintain the independence of the regulatory function of EDGX and
EDGA, in connection with EDGX's and EDGA's Form 1 Applications, each
of the non-U.S. Upstream Owners adopted supplemental resolutions
(the ``Supplemental Resolutions'') that apply the 2007 Resolutions
to EDGX and EDGA in the same manner and to the same extent as the
2007 Resolutions apply to ISE. Accordingly, the Supplemental
Resolutions extend to EDGX and EDGA the commitments that the non-
U.S. Upstream Owners made in the 2007 Resolutions with respect to
ISE. See Securities Exchange Act Release No. 61698 (March 12, 2010),
75 FR 13151 (March 18, 2010) (File Nos. 10-194 and 10-196).
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    As a result of the Combination, the businesses of NYSE Euronext and
Deutsche B[ouml]rse, including the NYSE U.S. Regulated Subsidiaries and
the DB U.S. Regulated Subsidiaries (together, the ``U.S. Regulated
Subsidiaries'' and each, a ``U.S. Regulated Subsidiary''), would be
held under a single, publicly traded holding company organized under
the laws of the Netherlands (``Holdco'').\11\ The proposed rule changes
are necessary to effectuate the consummation of the Combination and
will not be operative until the date of the consummation of the
Combination (the ``Closing Date''). The proposed rule changes and
exhibits thereto contain modifications to the underlying corporate
governance documents of the U.S. Regulated Subsidiaries and their
respective direct and indirect owners that reflect the current
structure of the Combination. The Commission notes that any changes to
the structure of the Combination that are made subsequent to the date
of this approval order but prior to the Closing Date may be considered
additional proposed rule changes required to be filed with and approved
by the Commission pursuant to Section 19 of the Act.\12\ In addition,
the Commission notes that, if the Combination is not consummated, the
proposed rule changes will not become effective.
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    \11\ Holdco is currently named ``Alpha Beta Netherlands Holding
N.V.,'' but it is expected that Holdco will be renamed prior to the
completion of the Combination to a name agreed between NYSE Euronext
and Deutsche B[ouml]rse. Each of EDGA, EDGX, ISE, NYSE, NYSE Amex
and NYSE Arca would amend their respective rules and corporate
documents to reflect Holdco's new name.
    \12\ 15 U.S.C. 78s.
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A. Corporate Structure

    Following the Combination, Holdco would be a for-profit, publicly
traded corporation formed under the laws of the Netherlands and would
act as the holding company for the businesses of NYSE Euronext and
Deutsche B[ouml]rse, with NYSE Euronext and Deutsche B[ouml]rse each
being a separate subsidiary of Holdco. Holdco would hold all of the
equity interests in NYSE Euronext, which would hold (1) 100% of the
equity interest of NYSE Group (which, in turn, would continue to
directly or indirectly hold 100% of the equity interests of the NYSE
U.S. Regulated Subsidiaries) and (2) 100% of the equity interest of
Euronext N.V. (which, in turn, directly or indirectly holds 100% of the
equity interests of trading markets in Belgium, France, the
Netherlands, Portugal, and the United Kingdom). Holdco would also hold
a majority of the equity interests in Deutsche B[ouml]rse,

which would indirectly hold 50% of the equity interest of ISE Holdings
(which, in turn, would continue to hold (1) 100% of the equity interest
of ISE and (2) 31.54% of the equity interest of Direct Edge Holdings).
Direct Edge Holdings would continue to indirectly hold 100% of the
equity interest of EDGA and EDGX. Holdco intends to list its ordinary
shares on the New York Stock Exchange, the regulated market of the
Frankfurt Stock Exchange, and the regulated market segment of Euronext
Paris. Holdco and its subsidiaries will have dual headquarters in
Frankfurt and New York.
    In Europe, NYSE Euronext, Deutsche B[ouml]rse and their respective
subsidiaries own several European exchanges, including trading
operations on regulated and non-regulated markets for cash products in
Germany, France, Belgium, the Netherlands, and Portugal and derivatives
in the United Kingdom and in the five above-mentioned locations. As a
result, the activities of the NYSE Euronext and Deutsche B[ouml]rse
European markets are or may be subject to the jurisdiction and
authority of a number of European regulators, including the German
Federal Financial Supervisory Authority (Bundesanstalt f[uuml]r
Finanzdienstleistungsaufsicht), the Hessian Exchange Supervisory
Authority, the Dutch Minister of Finance, the French Minister of the
Economy, the French Financial Market Authority (Autorit[eacute] des
March[eacute]s Financiers), the French Prudential Supervisory Authority
(Autorit[eacute] de Contr[ocirc]le Prudentiel), the Netherlands
Authority for the Financial Markets (Autoriteit Financi[euml]le
Markten), the Belgian Financial Services and Markets Authority
(Autorit[eacute] des Services et March[eacute]s Financiers), the
Portuguese Securities Market Commission (Comiss[atilde]o do Mercado de
Valores Mobili[aacute]rios--CMVM), and the U.K. Financial Services
Authority (FSA).
    The NYSE Exchanges and DB Exchanges represent that the Combination
will have no effect on the ability of any party to trade securities on
the NYSE Exchanges or DB Exchanges. Other than as described herein, the
NYSE Exchanges and the DB Exchanges also represent that Holdco will not
make any changes to the regulated activities of the U.S. Regulated
Subsidiaries in connection with the Combination. If Holdco determines
to make any such changes to the regulated activities of any U.S.
Regulated Subsidiary, it will seek the approval of the Commission.
    A core aspect of the structure of the Combination is local
regulation of the marketplace, members, and issuers. Therefore,
securities exchanges, members, and issuers of the U.S. Regulated
Subsidiaries will continue to be regulated in the same manner as they
are currently regulated. The Commission notes that this conclusion
(i.e., that securities exchanges, members, and issuers of the U.S.
Regulated Subsidiaries will continue to be regulated in the same manner
as they are currently regulated) is based on the structure of the
Combination as described in this proposal.
1. Holdco
    Following the Combination, Holdco will be a for-profit, publicly
traded corporation that will act as a holding company for the
businesses of NYSE Euronext and Deutsche B[ouml]rse. Holdco will hold
(i) all of the equity interests in NYSE Euronext, which in turn,
directly or indirectly holds 100 percent of the equity interests of the
NYSE U.S. Regulated Subsidiaries, and (ii) a majority of the equity
interests in Deutsche B[ouml]rse, which indirectly holds interests in
ISE, EDGA, and EDGX. Section 19(b) of the Act and Rule 19b-4 thereunder
require a self-regulatory organization (``SRO'') to file proposed rule
changes with the Commission. Although Holdco is not an SRO, certain
provisions of its proposed Deed of Amendment of Articles of Association
(the ``Holdco Articles''), along with other corporate documents, are
rules of an exchange \13\ if they are stated policies, practices, or
interpretations, as defined in Rule 19b-4 under the Act, of the
exchange, and must be filed with the Commission pursuant to Section
19(b)(4) of the Act and Rule 19b-4 thereunder. Accordingly, the NYSE
Exchanges and DB Exchanges have filed the proposed Holdco Articles,
along with other corporate documents, with the Commission.
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    \13\ See Section 3(a)(27) of the Act, 15 U.S.C. 78c(a)(27). If
Holdco decides to change the Holdco Articles, Holdco must submit
such change to the board of directors of the U.S. Regulated
Subsidiaries, and if any or all of such board of directors shall
determine that such amendment must be filed with or filed with and
approved by the Commission pursuant to Section 19 of the Act and the
rules thereunder, such change shall not be effective until filed
with or filed with and approved by the Commission, as applicable.
See proposed Holdco Articles, Section 36.2.
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Voting and Ownership Limitations
    The proposed Holdco Articles include restrictions on the ability to
vote and own shares of stock of Holdco. Under the proposed Holdco
Articles, no person (either alone or together with its related persons)
\14\ will be entitled to vote or cause the voting of shares of stock of
Holdco beneficially owned by such person or its related persons, in
person or by proxy or through any voting agreement or other
arrangement, to the extent that such shares represent in the aggregate
more than 20% of the then outstanding votes entitled to be cast on such
matter. No person (either alone or together with its related persons)
may acquire the ability to vote more than 20% of the then outstanding
votes entitled to be cast on any such matter by virtue of agreements or
arrangements entered into with other persons not to vote shares of
Holdco's outstanding capital stock. Holdco shall disregard any such
votes purported to be cast in excess of these limitations.\15\
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    \14\ See proposed Holdco Articles, Section 34.1 and Section 34.8
for the definition of ``related person.''
    \15\ See proposed Holdco Articles, Section 34.1.
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    In addition, no person (either alone or together with its related
persons) may at any time beneficially own shares of stock of Holdco
representing in the aggregate more than 40% of the then outstanding
votes entitled to be cast on any matter, except that a 20% restriction
would apply to any person, either alone or with its related person,
that is a member of an NYSE Exchange or DB Exchange.\16\ In the event
that a person, either alone or together with its related persons,
beneficially owns shares of stock of Holdco in excess of the 40%
threshold, such person and its related persons will be obligated to
offer for sale and to transfer that number of shares necessary so that
such person shall beneficially own a number of shares entitling the
holder thereof to cast votes on any matter which is in the aggregate no
more than 40% of the then outstanding votes entitled to be cast on any
matter.\17\ If such person(s) fails to comply within two weeks, Holdco
will be irrevocably authorized to act on behalf of such person(s) in
order to ensure compliance with the Holdco transfer obligation.\18\
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    \16\ See proposed Holdco Articles, Section 35.1.
    \17\ See proposed Holdco Articles, Sections 35.1, 35.4.
    \18\ See proposed Holdco Articles of Association, Section 35.7.
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    Furthermore, the Holdco Articles would provide that in the event
any person, either alone or together with its related persons, exceeds
the Holdco ownership restriction (any such person(s), a ``Non-Compliant
Owner''), the Non-Compliant Owner would cease to have certain rights to
the extent that its shareholding exceeds the Holdco ownership
restriction. Specifically, the Non-Compliant Owner's rights to vote, to
attend general meetings of Holdco shareholders and to receive dividends
or other distributions attached to such shares in excess of the Holdco

ownership restriction would be suspended for so long as the Holdco
ownership restriction is exceeded.\19\
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    \19\ See proposed Holdco Articles, Section 35.6.
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    Further, the Holdco Articles would permit the Holdco board of
directors to require any person and its related persons that the board
reasonably believes to be subject to the voting or ownership
limitations summarized above, or owning in the aggregate 5% or more of
the then issued and outstanding shares of Holdco entitled to vote on
any matter, which ownership has not been reported to Holdco, to provide
Holdco information regarding such ownership upon the request of the
Holdco board of directors.\20\
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    \20\ See proposed Holdco Articles, Section 35.9.
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    The Holdco board of directors may waive the provisions regarding
voting and ownership limits, subject to a determination by the Holdco
board of directors that the exercise of such voting rights (or the
entering into of a voting agreement) or ownership, as applicable:
     Will not impair the ability of any of the U.S. Regulated
Subsidiaries, Holdco, NYSE Group, or ISE Holdings to discharge their
respective responsibilities under the Act and the rules and regulations
thereunder;
     Will not impair the ability of any of the European Market
Subsidiaries, Holdco, or Euronext to discharge their respective
responsibilities under the European Exchange Regulations; \21\
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    \21\ See proposed Holdco Articles, Sections 34.3, 35.3, and
Section 1.1 for the definitions of ``European Exchange Regulations''
and ``European Market Subsidiary.''
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     Is otherwise in the best interest of Holdco, its
shareholders, the U.S. Regulated Subsidiaries, and the European Market
Subsidiaries; and
     Will not impair the Commission's ability to enforce the
Act or the European Regulators' ability to enforce the European
Exchange Regulations.\22\
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    \22\ See Proposed Holdco Articles, Section 1.1, for the
definition of ``European Regulator.''
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    Such resolution expressly permitting such voting or ownership must
be filed with and approved by the Commission under Section 19 of the
Act \23\ and filed with and approved by each European Regulator having
appropriate jurisdiction and authority.
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    \23\ 15 U.S.C. 78s.
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    In addition, for so long as Holdco directly or indirectly controls
the Exchange, NYSE Market, NYSE Arca, or NYSE Arca Equities or any
facility of NYSE Arca, NYSE Amex, ISE, EDGA, or EDGX, the Holdco board
of directors cannot waive the voting and ownership limits above the 20%
threshold for any person if such person or its related persons is a
member of NYSE, an ETP Holder of NYSE Arca Equities, or an OTP Holder
or an OTP Firm of NYSE Arca,\24\ a member of Amex, a member of ISE, a
member of EDGA, or a member of EDGX.\25\ Further, the Holdco board of
directors also cannot waive the voting and ownership limits above the
20% threshold if such person or its related persons is subject to any
statutory disqualification (as defined in Section 3(a)(39) of the Act)
(a ``U.S. Disqualified Person'') or has been determined by a European
Regulator to be in violation of laws or regulations adopted in
accordance with the European Directive on Markets in Financial
Instruments applicable to any European Market Subsidiary requiring such
person to act fairly, honestly and professionally (a ``European
Disqualified Person'').\26\
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    \24\ ``ETP Holder'' is defined in the NYSE Arca Equities rules
of NYSE Arca. ``OTP Holder'' and ``OTP Firm'' are defined in the
rules of NYSE Arca.
    \25\ See Holdco Articles at 34.3 and 35.3.
    \26\ See id.
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    Members that trade on an exchange traditionally have had ownership
interests in such exchange. As the Commission has noted in the past,
however, a member's interest in an exchange could become so large as to
cast doubt on whether the exchange can fairly and objectively exercise
its self-regulatory responsibilities with respect to that member.\27\ A
member that is a controlling shareholder of an exchange might be
tempted to exercise that controlling influence by directing the
exchange to refrain from, or the exchange may hesitate to, diligently
monitor and surveil the member's conduct or diligently enforce its
rules and the federal securities laws with respect to conduct by the
member that violates such provisions.
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    \27\ See, e.g., Securities Exchange Act Release Nos. 62716
(August 13, 2010), 75 FR 51295 (August 19, 2010) (File No. 10-198)
(order approving registration application of BATS Y-Exchange, Inc.
as a national securities exchange); 61698 (March 12, 2010), 75 FR
13151 (March 18, 2010) (File Nos. 10-194 and 10-196) (order
approving registration applications of EDGX Exchange, Inc. and EDGA
Exchange, Inc. as national securities exchanges); 58375 (August 18,
2008), 73 FR 49498 (August 21, 2008) (File No. 10-182) (order
approving registration application of BATS Exchange, Inc. as a
national securities exchange); 55293 (February 14, 2007), 72 FR 8033
(February 22, 2007) (SR-NYSE-2006-120) (order approving proposed
combination between NYSE Group, Inc. and Euronext N.V.); 53382
(February 27, 2006), 71 FR 11251 (March 6, 2006) (SR-NYSE-2005-77)
(order approving merger of New York Stock Exchange, Inc. and
Archipelago, and demutualization of New York Stock Exchange, Inc.
(``NYSE Inc.-Archipelago Merger Order'')); 53128 (January 13, 2006),
71 FR 3550 (January 23, 2006) (File No. 10-131); 51149 (February 8,
2005), 70 FR 7531 (February 14, 2005) (SR-CHX-2004-26); 49718 (May
17, 2004), 69 FR 29611 (May 24, 2004) (SR-PCX-2004-08); 49098
(January 16, 2004), 69 FR 3974 (January 27, 2004) (SR-Phlx-2003-73);
and 49067 (January 13, 2004), 69 FR 2761 (January 20, 2004) (SR-BSE-
2003-19).
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    The Commission finds the ownership and voting restrictions in the
proposed Holdco Articles are consistent with the Act. These
requirements should minimize the potential that a person could
improperly interfere with or restrict the ability of the Commission,
the Exchange, or its subsidiaries to effectively carry out their
regulatory oversight responsibilities under the Act.
2. NYSE Euronext and NYSE Group
    Following the Combination, NYSE Euronext will be a wholly-owned
subsidiary of Holdco. Furthermore, NYSE Euronext will no longer be a
publicly-held company and the NYSE Exchanges have proposed certain
changes to reflect that NYSE Euronext will become a wholly owned
subsidiary and will no longer be publicly held.\28\

NYSE Euronext will act as a holding company for the businesses of the
NYSE Group and Euronext. NYSE Euronext will own all of the equity
interests in NYSE Group and its subsidiaries, including the Exchange,
NYSE Arca, and NYSE Amex and all of the equity interests in Euronext
and its respective subsidiaries. Section 19(b) of the Act and Rule 19b-
4 thereunder require a SRO to file proposed rule changes with the
Commission. Although NYSE Euronext and NYSE Group are not SROs, certain
provisions of the current NYSE Euronext's Amended and Restated
Certificate of Incorporation (``NYSE Euronext Certificate of
Incorporation''), NYSE Euronext's Amended and Restated Bylaws (``NYSE
Euronext Bylaws''), NYSE Group's Amended and Restated Certificate of
Incorporation (``NYSE Group Certificate of Incorporation''), and NYSE
Group's Amended and Restated Bylaws (``NYSE Bylaws'') are rules of an
exchange \29\ if they are stated policies, practices, or
interpretations, as defined in Rule 19b-4 under the Act, of the
exchange, and must be filed with the Commission pursuant to Section
19(b)(4) of the Act and Rule 19b-4 thereunder. Accordingly, the NYSE
Exchanges have filed the proposed NYSE Euronext Certificate of
Incorporation, the proposed NYSE Euronext Bylaws, the proposed NYSE
Group Certificate of Incorporation, and the proposed NYSE Group Bylaws
with the Commission.
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    \28\ The NYSE Exchanges propose to amend certain provisions of
NYSE Euronext's organizational documents to reflect that, after the
Combination, NYSE Euronext will be an intermediate holding company
and will no longer be a publicly-held company. The NYSE Euronext
Certificate and the NYSE Euronext Bylaws would be amended to (1)
simplify and provide for a more efficient governance and capital
structure that is appropriate for a wholly-owned subsidiary; (2)
conform certain provisions to analogous provisions of the
organizational documents of NYSE Group, which will likewise be an
indirect wholly-owned subsidiary of Holdco following completion of
the Combination; and (3) make certain clarification and technical
edits (for example, to conform the use of defined terms and other
provisions, and to update cross-references to sections, consistent
with the other amendments to the NYSE Euronext Certificate and the
NYSE Euronext Bylaws set forth in this Proposed Rule Change). In
addition, the current Independence Policy of the NYSE Euronext board
of directors would cease to be in effect.
    Generally, the NYSE Exchanges propose, in part, the following
changes to the NYSE Euronext Certificate and Bylaws: (i) decreasing
the number of authorized shares of NYSE Euronext, (ii) allowing
shareholders to call special meetings, take shareholder action by
written consent, and to postpone such meetings, (iii) allowing
shareholders to fill board vacancies, (iv) deleting provisions
requiring a supermajority vote of shareholders to amend or repeal
certain sections of the NYSE Euronext certificate of incorporation,
(v) clarifying that notice of shareholder meetings is not required
if waived, (vi) deleting the requirement that directors be elected
by a majority of the votes cast, (vii) deleting provisions requiring
advance notice from shareholders of shareholder director nominations
or shareholder proposals, (viii) deleting provisions relating to the
mechanics of shareholders' meetings, such as the appointment of an
inspector of elections, (ix) clarifying that NYSE Euronext may not
have a Nominating and Governance Committee, and (x) deleting the
requirement that 75% of the Euronext board must be independent.
    Generally, the NYSE Exchanges propose, in part, the following
changes to NYSE Group's Certificate and Bylaws: (i) Amending the
issuance and certificate of designations for preferred stock; (ii)
clarifying the ability to fix the number of directors and making the
board's ability to remove directors subject to the rights of holder
of preferred stock; (iii) clarifying that notice of shareholder
meetings is not required if waived in accordance with the NYSE Group
Bylaws; (iv) clarifying that a list of shareholders would be
deleted; (v) deleting a reference to a special meeting of
shareholders; (vi) clarifying that notice of any special meeting of
directors is not required if waived and updating methods of delivery
of notice; (vii) deleting restrictions on telephonic participation
in meetings; (viii) revising the persons authorized to execute
contracts; (ix) simplifying certain aspects of the indemnification
and expense advancement provisions in light of the fact that there
are not expected to be any independent, non-executive directors of
NYSE Group; (x) amending and clarifying the manner in which the NYSE
Group Bylaws may be amended, repealed, or adopted; and (xi) amending
the definition of ``Regulated Subsidiary'' in the NYSE Group Bylaws.
    \29\ See Section 3(a)(27) of the Act, 15 U.S.C. 78c(a)(27). If
NYSE Euronext decides to change its Certificate of Incorporation or
Bylaws, NYSE Euronext must submit such change to the board of
directors of the Exchange, NYSE Market, NYSE Regulation, NYSE Amex,
NYSE Arca Equities, and NYSE Arca, and if any or all of such board
of directors shall determine that such amendment or repeal must be
filed with or filed with and approved by the Commission pursuant to
Section 19 of the Act and the rules thereunder, such change shall
not be effective until filed with or filed with and approved by the
Commission, as applicable. See current NYSE Euronext Certificate of
Incorporation, Article X and current NYSE Euronext Bylaws, Article
X, Section 10.10(C); see also, proposed NYSE Euronext Certificate of
Incorporation, Article X and proposed NYSE Euronext Bylaws,
10.10(C). If NYSE Group decides to change its Certificate of
Incorporation or Bylaws, NYSE Group must submit such change to the
board of directors of the Exchange, NYSE Market, NYSE Regulation,
NYSE Amex, NYSE Arca Equities, and NYSE Arca, and if any or all of
such board of directors shall determine that such amendment or
repeal must be filed with or filed with and approved by the
Commission pursuant to Section 19 of the Act and the rules
thereunder, such change shall not be effective until filed with or
filed with and approved by the Commission, as applicable. See
current NYSE Group Certificate of Incorporation, Article XII and
current NYSE Group Bylaws, Section 7.9(A); see also proposed NYSE
Group Certificate of Incorporation, Article XII and proposed NYSE
Group Bylaws, Section 7.9(b).
---------------------------------------------------------------------------

Voting and Ownership Limitations; Changes in Control
    The NYSE Exchanges have proposed changing the voting and ownership
limitations of NYSE Euronext to include a statement that such
limitations would not be applicable as long as Holdco owned all of the
issued and outstanding shares of NYSE Euronext and only for so long as
NYSE Euronext directly or indirectly controls any NYSE U.S. Regulated
Subsidiary or any European Market Subsidiary.\30\ Instead, while NYSE
Euronext is a wholly-owned subsidiary of Holdco, there shall be no
transfer of the shares of NYSE Euronext without the approval of the
Commission.\31\ If NYSE Euronext ceases to be wholly owned by Holdco,
but directly or indirectly controls any NYSE U.S. Regulated Subsidiary
or any European Market Subsidiary, the voting and ownership limitations
would apply.
---------------------------------------------------------------------------

    \30\ See proposed NYSE Euronext Certificate of Incorporation,
Article V, Introduction.
    \31\ See proposed NYSE Euronext Certificate of Incorporation,
Article IV, Section 4.
---------------------------------------------------------------------------

    In addition, the NYSE Exchanges propose amending the voting and
ownership restrictions in the proposed NYSE Euronext Certificate. The
NYSE Exchanges propose amending the NYSE Euronext Certificate to: (i)
Change the 10% percent threshold for the voting restriction to a 20%
threshold, (ii) change the 20% percent threshold for the ownership
restriction to a 40% restriction, except that the 20% threshold would
continue to apply to any person who is (or with respect to whom a
related person is) \32\ a member of the Exchange or NYSE Amex, an ETP
Holder, or an OTP Holder or OTP Firm; and (iii) incorporate NYSE Amex
into certain provisions. The NYSE Euronext board of directors would be
unable to waive the voting and ownership limits above the 20% threshold
if such person or its related persons is a member of the Exchange or
NYSE Amex, an ETP Holder, an OTP Holder or an OTP Firm.\33\ Similar
changes have been proposed for NYSE Group.\34\ Moreover, the NYSE
Exchanges have proposed changing the voting and ownership limitations
of NYSE Group so that such limitations would apply only for so long as
NYSE Group directly or indirectly controls any NYSE U.S. Regulated
Subsidiary or any European Market Subsidiary.\35\
---------------------------------------------------------------------------

    \32\ See proposed NYSE Euronext Certificate of Incorporation,
Article V, Section 1(L) for the definition of ``related person.''
    \33\ See proposed NYSE Euronext Certificate of Incorporation,
Article V, Section 2(A).
    \34\ See proposed NYSE Group Certificate of Incorporation,
Article IV, Sections 4(b)(1)(A)(y) and 2(C).
    \35\ See proposed NYSE Group Certificate of Incorporation,
Article IV, Section 4(b).
---------------------------------------------------------------------------

    The Commission finds that the changes to the ownership and voting
restrictions in the proposed NYSE Euronext Certificate and the proposed
NYSE Group Certificate, as well as the change in control provisions in
the NYSE Euronext Certificate are consistent with the Act. The
Commission notes that the proposed ownership and voting percentage
restrictions are consistent with thresholds previously approved by the
Commission.\36\ Moreover, the transfer, ownership and voting
restrictions should minimize the potential that a person could
improperly interfere with or restrict the ability of the Commission,
the NYSE U.S. Regulated Subsidiaries to effectively carry out their
regulatory oversight responsibilities under the Act.
---------------------------------------------------------------------------

    \36\ See e.g., Securities Exchange Release Nos. 34-49718 (May
17, 2004) (File No. SR-PCX-2004-08), 69 FR 29611 (approval of rule
change proposed by the Pacific Exchange, Inc.); 49098 (January 16,
2004) (File No. SR-PHLX-2003-73), 69 FR 3974 (approval of rule
change proposed by the Philadelphia Stock Exchange, Inc.); and 50170
(August 9, 2004) (File No. SR-PCX-2004-56), 69 FR 50419 (approval of
rule change proposed by the Pacific Exchange, Inc. relating to
initial public offering of parent of Archipelago Exchange, L.L.C.).
---------------------------------------------------------------------------

    In addition, to allow Holdco to wholly own and vote all of NYSE
Euronext stock upon consummation of the Combination, Holdco delivered a
written notice to the board of directors of NYSE Euronext pursuant to
the procedures set forth in the current NYSE Euronext Certificate of
Incorporation requesting approval of its ownership and voting of NYSE
Euronext stock in excess of the NYSE Euronext voting restriction and
NYSE Euronext ownership restriction.\37\ The board of directors of NYSE
Euronext must resolve to expressly permit ownership or voting in excess
of the NYSE

Euronext voting restriction limitation and NYSE Euronext ownership
restriction. Such resolution of the NYSE Euronext board of directors
must be filed with and approved by the Commission under Section 19(b)
of the Act, and become effective thereunder. Further, the board of
directors may not approve any voting or ownership in excess of the
limitations unless it determines that such ownership or exercise of
voting rights (i) will not impair the ability of the NYSE U.S.
Regulated Subsidiaries, NYSE Euronext, and NYSE Group to discharge
their respective responsibilities under the Act and the rules and
regulations thereunder, (ii) will not impair the ability of any
European Market Subsidiary, NYSE Euronext, or Euronext to discharge
their respective responsibilities under the European Exchange
Regulations, (iii) is otherwise in the best interests of NYSE Euronext,
its shareholders, and the NYSE U.S. Regulated Subsidiaries, and (iv)
will not impair the Commission's ability to enforce the Act or the
European Regulators' ability to enforce the European Exchange
Regulations.\38\ For so long as NYSE Euronext directly or indirectly
controls the Exchange or NYSE Market, NYSE Arca, NYSE Arca Equities,
any facility of NYSE Arca, or NYSE Amex, the NYSE Group board of
directors cannot waive the voting and ownership limits above the 20%
threshold if such person or its related persons is a member
Exchange,\39\ an ETP Holder, an OTP Holder or an OTP Firm,\40\ or
member of NYSE Amex.\41\ Further, the NYSE Euronext board of directors
cannot waive the voting and ownership limits above the 20% threshold if
such person or its related persons is a U.S. Disqualified Person or a
European Disqualified Person.
---------------------------------------------------------------------------

    \37\ Prior to permitting any person to exceed the ownership
limitation and voting limitation, such person must deliver notice of
such person's intention to own or vote shares in excess of the
ownership limitation or voting limitation to the NYSE Euronext board
of directors. See current NYSE Euronext Certificate of
Incorporation, Article V, Sections 1(C) and 2(C).
    \38\ See proposed NYSE Euronext Certificate of Incorporation,
Article V, Sections 1(C) and 2(C).
    \39\ See proposed NYSE Group Certificate of Incorporation,
Article IV, Sections 4(b)(1)(A)(y) and 4(b)(2)(C)(v).
    \40\ See proposed NYSE Group Certificate of Incorporation,
Article IV, Sections 4(b)(1)(A)(y) and 4(b)(2)(C)(iv).
    \41\ See proposed NYSE Group Certificate of Incorporation,
Article IV, Sections 4(b)(1)(A)(y) and 4(b)(2)(C)(vi).
---------------------------------------------------------------------------

    The notice from Holdco included representations that neither
Holdco, nor any of its related persons, is: (1) A NYSE Member; (2) an
Amex Member; (3) an ETP Holder, an OTP Holder or an OTP Firm; or (4) a
U.S Disqualified Person or a European Disqualified Person. The NYSE
Euronext board of directors adopted a resolution approving Holdco's
request that it be permitted, either alone or with its related persons,
to exceed the NYSE Euronext voting restriction and the NYSE Euronext
ownership restriction.\42\
---------------------------------------------------------------------------

    \42\ Such resolutions of the NYSE Euronext board of directors
were filed as part of the proposed rule change. See e.g., Exhibit A
to the Notice, which exhibit is available on the Commission's Web
site (http://www.sec.gov/rules/sro.shtml), at the Commission's
Public Reference Room, at the NYSE, and on the NYSE's Web site
(http://www.nyse.com).
---------------------------------------------------------------------------

    The Commission believes it is consistent with the Act to allow
Holdco to wholly own and vote all of the outstanding common stock of
NYSE Euronext. The Commission notes that Holdco represents that neither
Holdco nor any of its related persons is subject to any statutory
disqualification (as defined in Section 3(a)(39) of the Act), or is a
member of the Exchange or NYSE Amex, an ETP Holder, an OTP Holder or an
OTP Firm, or a European Disqualified Person. Moreover, Holdco has
comparable voting and ownership limitations to ISE Holdings.\43\ Holdco
has also included in its corporate documents certain provisions
designed to maintain the independence of the NYSE U.S. Regulated
Subsidiaries' self-regulatory functions from Holdco, NYSE Euronext and
NYSE Group.\44\ Accordingly, the Commission believes that the
acquisition of ownership and exercise of voting rights of NYSE Euronext
common stock by Holdco will not impair the ability of the Commission or
any of the NYSE U.S. Regulated Subsidiaries to discharge their
respective responsibilities under the Act.
---------------------------------------------------------------------------

    \43\ See supra notes 12-18 and accompanying text.
    \44\ See infra notes 58-69 and accompanying text.
---------------------------------------------------------------------------

3. Proposed Amendments to Board Composition Requirements for the
Exchange, NYSE Amex, NYSE Market and NYSE Regulation
    The Third Amended and Restated Operating Agreement, dated as of
April 1, 2009, of the Exchange (the ``Exchange Operating Agreement''),
currently provides that (1) a majority of the members of the Exchange's
board of directors must be U.S. persons and members of the board of
directors of NYSE Euronext who satisfy the independence requirements of
the NYSE Euronext board, and (2) at least 20% of the Exchange's board
members must be persons who are not board members of NYSE Euronext but
who qualify as independent under the independence policy of the NYSE
Euronext board of directors (the ``Non-Affiliated Exchange
Directors'').\45\ The nominating and governance committee of the NYSE
Euronext board of directors is required to designate as Non-Affiliated
Exchange Directors the candidates recommended jointly by the Director
Candidate Recommendation Committees of each of NYSE Market and NYSE
Regulation or, in the event there are Petition Candidates (as such term
is defined in the Exchange Operating Agreement), the candidates that
emerge from a specified process will be designated as the Non-
Affiliated Exchange Directors.\46\
---------------------------------------------------------------------------

    \45\ See Third Amended and Restated Operating Agreement of New
York Stock Exchange LLC, Section 2.03(a).
    \46\ See id.
---------------------------------------------------------------------------

    Under the Proposed Rule Change, these provisions would be amended
(i) to provide that the independent members of the Exchange's board of
directors, rather than the nominating and governance committee of the
NYSE Euronext board of directors, will designate the Non-Affiliated
Exchange Directors and make the other related determinations that were
previously to be made by the nominating and governance committee of the
NYSE Euronext board of directors; (ii) to provide that instead of using
the independence policy of the NYSE Euronext board of directors to
assess the independence of the Exchange's board members, the Exchange
will have its own independence policy (the ``SRO Director Independence
Policy''); (iii) in light of the fact that the board of directors of
NYSE Euronext will be decreased in size once it becomes a wholly-owned
subsidiary of Holdco, the requirement that a majority of the members of
the Exchange's board of directors must be members of the board of
directors of NYSE Euronext would be eliminated; and (iv) to provide
that at least 20% of the Exchange's directors must be persons who are
not members of the board of directors of Holdco (rather than referring
to the board of directors of NYSE Euronext). Substantially the same
revisions would be made to the analogous provisions of the Amended and
Restated Operating Agreement of NYSE Amex, the Amended and Restated
Bylaws of NYSE Market and the Third Amended and Restated Bylaws of NYSE
Regulation.
    The SRO Director Independence Policy to be adopted by each of the
Exchange, NYSE Market, NYSE Regulation and NYSE Amex under the Proposed
Rule Change would be substantially similar to the current Independence
Policy of the NYSE Euronext board of directors, except that certain
conforming changes would be made, including the deletion of provisions
that currently apply only to NYSE Euronext directors and expressly do
not apply to directors of these NYSE U.S. Regulated Subsidiaries. In

particular, (i) references to NYSE Euronext would refer instead to the
relevant NYSE U.S. Regulated Subsidiary or Holdco, as applicable; (ii)
the requirement that at least three-fourths of the directors must be
independent would be deleted, since the organizational documents of
these NYSE U.S. Regulated Subsidiaries contain the independence and
other qualification requirements for directors; (iii) the requirement
in the Independence Policy of NYSE Euronext that the board consider the
special responsibilities of a director in light of NYSE Euronext's
ownership of NYSE U.S. Regulated Subsidiaries and European regulated
entities would be deleted, because unlike NYSE Euronext, these NYSE
U.S. Regulated Subsidiaries are not holding companies; (iv) the
requirement for directors to inform the Chairman of the Nominating and
Governance Committee of certain relationships and interests would be
deleted, since the boards of these NYSE U.S. Regulated Subsidiaries do
not have a Nominating and Governance Committee, except that in the SRO
Director Independence Policy to be adopted by NYSE Regulation, this
provision would reference the Nominating and Governance Committee of
NYSE Regulation, Inc.; (v) references to NYSE Alternext, Inc. would
refer instead to NYSE Amex, because of this entity's name change; (vi)
because the current Independence Policy of NYSE Euronext provides that
a director of an affiliate of a Member Organization cannot qualify as
an independent director of these NYSE U.S Regulated Subsidiaries, the
conflicting language stating that a director of an affiliate of a
Member Organization shall not per se fail to be independent would be
deleted; and (vii) because language in the current Independence Policy
of NYSE Euronext provides that an executive officer of an issuer whose
securities are listed on a NYSE Exchange cannot qualify as an
independent director of these NYSE U.S Regulated Subsidiaries, the
conflicting language providing an exception applicable only to NYSE
Euronext directors would be deleted. In addition, the ``additional
independence requirements'' at the end of the current Independence
Policy of NYSE Euronext, which provides that executive officers of
foreign private issuers, executive officers of NYSE Euronext and
directors of affiliates of member organizations must together comprise
no more than a minority of the total board, would be eliminated. This
provision is designed to ensure that although persons who are directors
of an affiliate of a Member Organization or who are executive officers
of a ``foreign private issuer'' listed on a NYSE Exchange may in some
circumstances qualify as independent for purposes of NYSE Euronext
board membership, such persons may not, together with executive
officers of NYSE Euronext, constitute more than a minority of the total
NYSE Euronext directors. Under the proposed SRO Director Independence
Policy, such persons could not be deemed to be independent directors of
the relevant NYSE U.S. Regulated Subsidiary and, accordingly, this
limitation on the number of such persons who may serve on the board is
unnecessary.
    The Commission finds that these proposals, taken together, are
consistent with the Act, particularly Section 6(b)(1),\47\ which
requires an exchange to be so organized and have the capacity to carry
out the purposes of the Act. Further, the Commission notes that the
NYSE Exchanges are not proposing to change any of the provisions
relating to (i) the fair representation of the members of each of the
NYSE Exchanges in the selection of its directors and administration of
its affairs or (ii) one or more of the directors of each of the NYSE
Exchanges being representative of issuers and investors and not being
associated with a member of the exchange or with a broker dealer, each
as required under Section 6(b)(3) of the Act.\48\
---------------------------------------------------------------------------

    \47\ 15 U.S.C. 78f(b)(1).
    \48\ 15 U.S.C. 78f(b)(3).
---------------------------------------------------------------------------

4. Deutsche B[ouml]rse/ISE Holdings
    Following the Combination, ISE Holdings's indirect parent, Deutsche
B[ouml]rse, will become a subsidiary of Holdco. Deutsche B[ouml]rse
will own all of the equity interests in ISE and approximately 31.54%
interest in EDGA and EDGX. Section 19(b) of the Act and Rule 19b-4
thereunder require a self-regulatory organization (``SRO'') to file
proposed rule changes with the Commission. Although ISE Holdings is not
an SRO, certain provisions of its Amended and Restated Certificate of
Incorporation (the ``ISE Holdings Certificate'') and Amended and
Restated Bylaws of ISE Holdings (``the ISE Holdings Bylaws'') are rules
of an exchange \49\ if they are stated policies, practices, or
interpretations, as defined in Rule 19b-4 under the Act, of the
exchange, and must be filed with the Commission pursuant to Section
19(b)(4) of the Act and Rule 19b-4 thereunder. Accordingly, the DB U.S.
Regulated Subsidiaries have filed a proposed change to the ISE Holdings
Bylaws with the Commission.\50\
---------------------------------------------------------------------------

    \49\ See Section 3(a)(27) of the Act, 15 U.S.C. 78c(a)(27). If
ISE Holdings decides to change its Bylaws, ISE Holdings must submit
such change to the board of directors of ISE, EDGA and EDGX, and if
any or all of such board of directors shall determine that such
amendment or repeal must be filed with or filed with and approved by
the Commission pursuant to Section 19 of the Act and the rules
thereunder, such change shall not be effective until filed with or
filed with and approved by the Commission, as applicable. See ISE
Bylaws, Article X, Section 10.1.
    \50\ See proposed Second Amended and Restated Bylaws of
International Securities Holdings, Inc. attached as Exhibit A to the
EDGA Notice, EDGX Notice and ISE Notice which exhibit is available
on the Commission's Web site (http://www.sec.gov/rules/sro.shtml)
and at the Commission's Public Reference Room.
---------------------------------------------------------------------------

Voting and Ownership Limitations; Changes in Control of the Exchange
    The proposed Second Amended and Restated Bylaws of ISE Holdings
(``Proposed ISE Bylaws'') include restrictions on the ability to vote
and own shares of stock of ISE Holdings. Under the ISE Holdings
Certificate, no person (either alone or together with its related
persons) \51\ will be entitled to vote or cause the voting of shares of
stock of ISE Holdings beneficially owned by such person or its related
persons, in person or by proxy or through any voting agreement or other
arrangement, to the extent that such shares represent in the aggregate
more than 20% of the then outstanding votes entitled to be cast on such
matter. No person (either alone or together with its related persons)
may acquire the ability to vote more than 20% of the then outstanding
votes entitled to be cast on any such matter by virtue of agreements or
arrangements entered into with other persons not to vote shares of ISE
Holdings's outstanding capital stock.
---------------------------------------------------------------------------

    \51\ See ISE Holdings Certificate, Article IIB, Sections
III(a)(i) and (b)(i).
---------------------------------------------------------------------------

    In addition, no person (either alone or together with its related
persons) may at any time beneficially own shares of stock of ISE
Holdings representing in the aggregate more than 40% of the then
outstanding votes entitled to be cast on any matter.\52\ If a person
were to obtain a voting or ownership interest in excess of the voting
or ownership restrictions without obtaining the approval of the
Commission, the shares of ISE Holdings would automatically transfer to
a statutory trust established under and pursuant to the provisions of
the Delaware Statutory Trust Act, 12 Del. C. Sec. Sec.  3801 et seq.
(``ISE Trust''). The ISE Holdings Certificate and the ISE Holdings
Bylaws provide that the board of directors of ISE Holdings may waive

these voting and ownership restrictions in an amendment to the ISE
Holdings Bylaws if it makes certain findings and the amendment to the
ISE Holdings Bylaws has been filed with, and approved by, the
Commission under Section 19(b) of the Act.\53\
---------------------------------------------------------------------------

    \52\ See ISE Holdings Certificate, Article FOURTH, Section
III(a)(1)(A) and (b) and ISE Holdings Bylaws Article XI.
    \53\ 15 U.S.C. 78s(b).
---------------------------------------------------------------------------

    The ISE Holdings board of directors may waive these voting and
ownership restrictions in an amendment to the ISE Holdings Bylaws if,
in connection with the adoption of such amendment, the board of
directors in its sole discretion adopts a resolution stating that it is
the determination of the board of directors that such amendment:
     Will not impair the ability of ISE Holdings and any of the
DB U.S. Regulated Subsidiaries, or facility thereof, to carry out their
respective responsibilities under the Act and the rules and regulations
thereunder;
     Is otherwise in the best interest of ISE Holdings, its
stockholders and the DB U.S. Regulated Subsidiaries;
     Will not impair the Commission's ability to enforce the
Act;
     For so long as ISE Holdings directly or indirectly
controls the Exchange, neither such person nor any of its related
persons is an ISE Member, EDGA Member or EDGX Member; and
     Neither such person nor any of its related persons is
subject to any ``statutory disqualification'' (as such term is defined
in Section 3(a)(39) of the Act).\54\
---------------------------------------------------------------------------

    \54\ See Amended and Restated Certificate of Incorporation of
ISE Holdings, Article FOURTH, Section III, and Amended and Restated
Bylaws of ISE Holdings, Article XI.
---------------------------------------------------------------------------

    Such amendment shall not be effective unless it has been filed with
and approved by the Commission under Section 19(b) of the Act.\55\
---------------------------------------------------------------------------

    \55\ 15 U.S.C. 78s(b).
---------------------------------------------------------------------------

    In addition, to allow Holdco to indirectly own 50% of the
outstanding common stock of ISE Holdings upon consummation of the
Combination, Holdco has delivered written notice to the board of
directors of ISE Holdings pursuant to the procedures set forth in the
ISE Holdings Certificate requesting approval of its voting and
ownership of ISE Holdings shares in excess of the ISE Holdings Voting
Restriction and the ISE Holdings Ownership Restriction. Among other
things, in this notice, Holdco represented to the board of directors of
ISE Holdings that neither it, nor any of its related persons, is (1) an
ISE Member; (2) EDGA Member; (3) EDGX Member; or (4) subject to any
``statutory disqualification.''
    The Commission believes it is consistent with the Act to allow
Holdco to indirectly own 50% of the outstanding common stock of ISE
Holdings. The Commission notes that Holdco represents that neither
Holdco nor any of its related persons, is (1) an ISE Member; (2) EDGA
Member; (3) EDGX Member; or (4) subject to any ``statutory
disqualification.''
    Holdco has also included in its corporate documents certain
provisions designed to maintain the independence of the DB U.S.
Regulated Subsidiaries' self-regulatory functions from Holdco and
Deutsche B[ouml]rse.\56\ Accordingly, the Commission believes that the
acquisition of ownership and exercise of voting rights of ISE Holdings
common stock by Holdco will not impair the ability of the Commission or
any of the DB U.S. Regulated Subsidiaries to discharge their respective
responsibilities under the Act.
---------------------------------------------------------------------------

    \56\ See infra notes 58-69 and accompanying text.
---------------------------------------------------------------------------

B. Relationship of Holdco, NYSE Euronext, Deutsche B[ouml]rse, SWX, ISE
Holdings, NYSE Group, and the U.S. Regulated Subsidiaries; Jurisdiction
Over Holdco

    Although Holdco itself will not carry out regulatory functions, its
activities with respect to the operation of any of the U.S. Regulated
Subsidiaries must be consistent with, and not interfere with, the U.S.
Regulated Subsidiaries' self-regulatory obligations. The proposed
Holdco corporate documents include certain provisions that are designed
to maintain the independence of the U.S. Regulated Subsidiaries' self-
regulatory functions from Holdco, NYSE Euronext, ISE Holdings and NYSE
Group, enable the U.S. Regulated Subsidiaries to operate in a manner
that complies with the U.S. federal securities laws, including the
objectives and requirements of Sections 6(b) and 19(g) of the Act,\57\
and facilitate the ability of the U.S. Regulated Subsidiaries and the
Commission to fulfill their regulatory and oversight obligations under
the Act.\58\
---------------------------------------------------------------------------

    \57\ 15 U.S.C. 78f(b) and 15 U.S.C. 78s(g).
    \58\ See proposed Holdco Articles Section 3.2.
---------------------------------------------------------------------------

    For example, under the proposed Holdco Articles, Holdco shall
comply with the U.S. federal securities laws, the European Exchange
Regulations, and the respective rules and regulations thereunder; shall
cooperate with the Commission, the European Regulators, and the U.S.
Regulated Subsidiaries.\59\ Also, each director, officer, and employee
of Holdco, to the extent in discharging his or her responsibilities
shall comply with the U.S. federal securities laws and the rules and
regulations thereunder, cooperate with the Commission, and cooperate
with the U.S. Regulated Subsidiaries.\60\ In addition, in discharging
his or her responsibilities as a member of the board, each director of
Holdco must, to the fullest extent permitted by applicable law, take
into consideration the effect that Holdco's actions would have on the
ability of the U.S. Regulated Subsidiaries to carry out their
responsibilities under the Act, on the ability of the European Market
Subsidiaries to carry out their responsibilities under the European
Exchange Regulations as operators of European Regulated Markets, and on
the ability of the U.S. Regulated Subsidiaries, NYSE Group, ISE
Holdings and Holdco (i) to engage in conduct that fosters and does not
interfere with the ability of the U.S. Regulated Subsidiaries, NYSE
Group, ISE Holdings and Holdco to prevent fraudulent and manipulative
acts and practices in the securities markets; (ii) to promote just and
equitable principles of trade in the securities markets; (iii) to
foster cooperation and coordination with persons engaged in regulating,
clearing, settling, processing information with respect to, and
facilitating transactions in securities; (iv) to remove impediments to
and perfect the mechanisms of a free and open market in securities and
a U.S. national securities market system; and (v) in general, to
protect investors and the public interest.\61\ For so long as Holdco
directly or indirectly controls any U.S. Regulated Subsidiary, Holdco,
its directors, officers and employees shall give due regard to the
preservation of the independence of the self-regulatory function of the
U.S. Regulated Subsidiaries (to the extent of each U.S. Regulated
Subsidiary's self-regulatory function) and the European Market
Subsidiaries (to the extent of each European Market Subsidiaries' self-
regulatory function).\62\ Further, Holdco agrees to keep confidential
all confidential information pertaining to: (1) The self-regulatory
function of the any U.S. Regulated Subsidiary (including but not
limited to disciplinary matters, trading data, trading practices and
audit information) contained in the books and records of any of the
U.S. Regulated Subsidiaries; and (2) the self-regulatory function of
the European Market Subsidiaries under the European Exchange
Regulations as operator of a European Regulated

Market (including but not limited to disciplinary matters, trading
data, trading practices and audit information) contained in the books
and records of the European Market Subsidiaries, and not use such
information for any commercial \63\ purposes.\64\
---------------------------------------------------------------------------

    \59\ See proposed Holdco Articles Section 3.2(a) and (b).
    \60\ See proposed Holdco Articles Section 3.2(l).
    \61\ See proposed Holdco Articles, Section 3.2(k).
    \62\ See proposed Holdco Articles, Sections 3.2(i) and 3.2(j).
    \63\ The Commission believes that any non-regulatory use of such
information would be for a commercial purpose.
    \64\ See Holdco Articles Section 3.2(h).
---------------------------------------------------------------------------

    In addition, Holdco's books and records shall be subject at all
times to inspection and copying by the Commission, the European
Regulators, any U.S. Regulated Subsidiary (provided that such books and
records are related to the activities of such U.S. Regulated Subsidiary
or any other U.S. Regulated Subsidiary over which such U.S. Regulated
Subsidiary has regulatory authority or oversight) and any European
Market Subsidiary (provided that such books and records are related to
the operation or administration of such European Market Subsidiary or
any European Regulated Market over which such European Market
Subsidiary has regulatory authority or oversight).\65\ Holdco's books
and records related to U.S. Regulated Subsidiaries shall be maintained
within the United States, and Holdco's books and records related to
European Market Subsidiaries shall be maintained in the home
jurisdiction of one or more of the European Market Subsidiaries.\66\
The Holdco Articles also provide that if and to the extent that any of
Holdco's books and records may relate to both European Market
Subsidiaries and U.S. Regulated Subsidiaries (each such book and record
an ``Overlapping Record''), Holdco shall be entitled to maintain such
books and records either in the home jurisdiction of one or more
European Market Subsidiaries or in the United States.\67\
---------------------------------------------------------------------------

    \65\ See proposed Holdco Articles Section 3.2(e).
    \66\ See proposed Holdco Articles Section 3.2(g).
    \67\ See id.
---------------------------------------------------------------------------

    In addition, for so long as Holdco directly or indirectly controls
any U.S. Regulated Subsidiary, the books, records, premises, officers,
directors, and employees of Holdco shall be deemed to be the books,
records, premises, officers, directors, and employees of the U.S.
Regulated Subsidiaries for purposes of and subject to oversight
pursuant to the Act, and for so long as Holdco directly or indirectly
controls any European Market Subsidiary, the books, records, premises,
officers, directors, and employees of Holdco shall be deemed to be the
books, records, premises, officers, directors, and employees of such
European Market Subsidiaries for purposes of and subject to oversight
pursuant to the European Exchange Regulations.\68\
---------------------------------------------------------------------------

    \68\ See proposed Holdco Articles, Section 3.2(f)(i) and (ii).
---------------------------------------------------------------------------

    Holdco and its directors and, to the extent they are involved in
the activities of the U.S. Regulated Subsidiaries, Holdco's officers
and employees whose principal place of business and residence is
outside of the United States irrevocably submit to the jurisdiction of
the U.S. federal courts and the Commission with respect to activities
relating to the U.S. Regulated Subsidiaries, and to the jurisdiction of
the European Regulators and European courts with respect to activities
relating to the European Market Subsidiaries.\69\
---------------------------------------------------------------------------

    \69\ See proposed Holdco Articles, Sections 3.2 (c) and (d).
---------------------------------------------------------------------------

    Holdco would also sign an irrevocable agreement and consent for the
benefit of each U.S. Regulated Subsidiary that it will comply with
provisions in the Holdco Articles regarding (i) cooperation with the
Commission and such U.S. Regulated Subsidiaries; (ii) compliance with
U.S. federal securities laws; (iii) inspection and copying of Holdco's
books, records and premises; (iv) Holdco's books, records, premises,
officers, directors and employees being deemed to be those of U.S.
Regulated Subsidiaries; (v) maintenance of books and records in the
United States; (vi) confidentiality of information regarding the U.S.
Regulated Subsidiaries' self-regulatory function; (vii) preservation of
the independence of the self-regulatory function of the U.S. Regulated
Subsidiaries; and (viii) taking reasonable steps to cause Holdco's
officers, directors and employees to consent to the applicability to
them of the Holdco Articles.
    Further, Holdco acknowledges that it is responsible for referring
possible rule violations to the NYSE Exchanges and the DB Exchanges.
Holdco will become a party to the agreement among NYSE Euronext, NYSE
Group, the Exchange, NYSE Market and NYSE Regulation to provide
adequate funding for NYSE Regulation.\70\ In addition, Holdco will
become a party to the agreement among Deutsche B[ouml]rse, Eurex
Frankfurt, Eurex Z[uuml]rich, SIX (formerly SWX), SIX Group (formerly
SWX Group), Verein SIX Swiss Exchange (formerly SWX Swiss Exchange),
U.S. Exchange Holdings, Inc., ISE Holdings and ISE to provide for
adequate funding for ISE's regulatory responsibilities.\71\
---------------------------------------------------------------------------

    \70\ See, e.g., Notice at 65293.
    \71\ See, e.g., ISE Notice at 65250.
---------------------------------------------------------------------------

    Finally, the proposed Holdco Articles require that, for so long as
Holdco controls, directly or indirectly, any of the U.S. Regulated
Subsidiaries, any changes to the proposed Holdco Articles be submitted
to the board of directors of such U.S. Regulated Subsidiaries, and if
any such boards of directors determines that such amendment is required
to be filed with or filed with and approved by the Commission pursuant
to Section 19 of the Act \72\ and the rules thereunder, such change
shall not be effective until filed with or filed with and approved by,
the Commission.\73\
---------------------------------------------------------------------------

    \72\ 15 U.S.C. 78s.
    \73\ See proposed Holdco Articles, Section 36.2.
---------------------------------------------------------------------------

    The Commission finds that these provisions are consistent with the
Act, and that they are intended to assist the Exchange in fulfilling
its self-regulatory obligations and in administering and complying with
the requirements of the Act. With respect to the maintenance of books
and records of Holdco, the Commission notes that while Holdco has the
discretion to maintain Overlapping Records in either the United States
or the home jurisdiction of one or more of the European Market
Subsidiaries, Holdco is liable for any books and records it is required
to produce for inspection and copying by the Commission that are
created outside the United States and where the law of a foreign
jurisdiction prohibits Holdco from providing such books and records to
the Commission for inspection and copying. Moreover, the Commission
notes that Deutsche B[ouml]rse and NYSE Euronext, the two indirect
entities currently controlling the U.S. Regulated Subsidiaries, are
under existing obligations to make their books and records available in
compliance with the requirements of Rule 17a-1(b).\74\ The Commission
notes that the respective obligations of NYSE Euronext and Deutsche
B[ouml]rse established in these prior orders remain in effect.\75\ The

Commission also notes that the trusts established under the prior
orders also remain in effect unchanged, other than revising the
reference in the NYSE Euronext trust agreement (``NYSE Trust'') from
the nominating and governance committee of NYSE Euronext to the
nominating and governance committee of Holdco.\76\ In addition, the
Commission also notes that the 2007 Resolutions and Supplemental
Resolutions remain in effect.
---------------------------------------------------------------------------

    \74\ See Securities Exchange Act Release Nos. 55293 (February
14, 2007), 72 FR 8033 (February 22, 2007) (SR-NYSE-2006-120) and
56955 (Dec. 13, 2007), 72 FR 71979 (December 19, 2007) (SR-ISE-2007-
101).
    \75\ NYSE Euronext is currently required to maintain in the
United States originals or copies of books and records that relate
to both the NYSE U.S. Regulated Subsidiaries and its European market
subsidiaries covered by Rule 17a-1(b) promptly after creation of
such books and records. See supra, note 74, 72 FR 8041, 8042. The
Commission notes that NYSE Euronext is liable for any books and
records it is required to produce for inspection and copying by the
Commission that are created outside the United States and where the
law of a foreign jurisdiction prohibits NYSE Euronext from providing
such books and records to the Commission for inspection and copying.
See supra, note 75, 72 FR at 8041. If Deutsche B[ouml]rse fails to
make its books and records available to the Commission, the
Commission could bring an action under, among other provisions,
Section 17 of the Act and Rule 17a-1(b) thereunder against the DB
U.S. Regulated Subsidiaries pursuant to Section 19(h) of the Act.
See supra, note 75, 72 FR at 71984.
    \76\ The ISE Trust would hold capital stock of ISE Holdings in
the event that a person obtains an ownership or voting interest in
ISE Holdings in excess of the ownership voting limits set forth in
ISE's corporate governance documents. In addition, the ISE Trust
would hold capital stock of ISE Holdings in the event of a Material
Compliance Event. A ``Material Compliance Event'' is defined under
the ISE Trust agreement as any state of facts, development, event,
circumstance, condition, occurrence, or effect that results in the
failure of any of the non-U.S. Upstream Owners to adhere to its
respective commitments under the Resolutions in any material
respect. The Trust holds a call option over Holdings capital stock,
which may be exercised if a Material Compliance Event has occurred
and continues to be in effect. See surpa, note 75, 72 FR at 71984.
    The NYSE Trust was created, in part, to take actions to mitigate
the effects of any material adverse change in European law that has
an ``extraterritorial'' impact on the non-European issuers listed on
NYSE Group securities exchanges, non-European financial services
firms that are members of any NYSE Group securities exchange, or any
NYSE Group securities exchange. See supra, note 75, 72 FR at 8042.
---------------------------------------------------------------------------

    Under Section 20(a) of the Act,\77\ any person with a controlling
interest in the U.S. Regulated Subsidiaries shall be jointly and
severally liable with and to the same extent that the U.S. Regulated
Subsidiaries are liable under any provision of the Act, unless the
controlling person acted in good faith and did not directly or
indirectly induce the act or acts constituting the violation or cause
of action. In addition, Section 20(e) of the Act \78\ creates aiding
and abetting liability for any person who knowingly provides
substantial assistance to another person in violation of any provision
of the Act or rule thereunder. Further, Section 21C of the Act \79\
authorizes the Commission to enter a cease-and-desist order against any
person who has been ``a cause of'' a violation of any provision of the
Act through an act or omission that the person knew or should have
known would contribute to the violation. These provisions are
applicable to Holdco's dealings with the U.S. Regulated Subsidiaries.
---------------------------------------------------------------------------

    \77\ 15 U.S.C. 78t(a).
    \78\ 15 U.S.C. 78t(e).
    \79\ 15 U.S.C. 78u-3.
---------------------------------------------------------------------------

C. Holdco Director Independence Policy

    Under the Proposed Rule Change, Holdco would adopt the Holdco
Independence Policy, which would be substantially similar to the
current Independence Policy of the NYSE Euronext board of directors,
except that, in part, (i) a majority (as opposed to 75%) of the board
of Holdco would be required to be independent; (ii) executive officers
of listed companies would no longer be prohibited from being considered
independent for purposes of the Holdco board; (iii) the ``additional
independence requirements'' at the end of the current Independence
Policy of NYSE Euronext, which provide that executive officers of
foreign private issuers, executive officers of NYSE Euronext and
directors of affiliates of member organizations must together comprise
no more than a minority of the total board, would be eliminated; (iv)
the Holdco Independence Policy would not be applicable to NYSE
Regulation, Inc., the Exchange, NYSE Amex or NYSE Market, which would
have their own director independence policy; and (v) references to the
independence standards and criteria in the Dutch Corporate Governance
Code would be added, because such standards and criteria would apply to
Holdco, a Dutch company, and would supplement (rather than supersede or
limit) the other independence standards and criteria set forth in the
Holdco Independence Policy.
    The Commission finds that these proposals, taken together, are
consistent with the Act, particularly Section 6(b)(1),\80\ which
requires an exchange to be so organized and have the capacity to carry
out the purposes of the Act. The Commission notes that a majority of
Holdco's Board would still need to be independent. In addition, the
Commission notes that as a company listed on the Exchange, Holdco's
board of directors must also satisfy the independence requirements
applicable to a listed company's board of directors as contained in the
Exchange's Listed Company Manual. Further, the Commission notes that
there are requirements in Holdco's Independence Policy that independent
directors may not be or have been within the last year, and may not
have an immediate family member who is or within the last year was, a
member of the Exchange, NYSE Arca or NYSE Amex.
---------------------------------------------------------------------------

    \80\ 15 U.S.C. 78f(b)(1).
---------------------------------------------------------------------------

D. Listing of Holdco's Securities

    Holdco intends to list its shares of common stock for trading on
the Exchange, and apply for admission of its shares to trading on the
regulated market of the Frankfurt Stock Exchange and the regulated
market segment of the Euronext Paris. Pursuant to NYSE Rule 497, any
security of Holdco and its affiliates shall not be approved for listing
on the Exchange unless NYSE Regulation determines that such securities
satisfy the Exchange's rules for listing, and such finding is approved
by the NYSE Regulation board of directors. The Commission finds that
the proposed procedure for the initial listing of Holdco common stock
is consistent with the Act.
    NYSE Regulation will be responsible for all Exchange listing-
compliance decisions with respect to Holdco as an issuer. NYSE
Regulation will prepare a quarterly report, as described in Rule
497(c)(1) summarizing its monitoring of Holdco's compliance with such
listing standards. This report will be provided to the NYSE Regulation
board of directors and a copy will be forwarded promptly to the
Commission. Once a year, an independent accounting firm will review
Holdco's compliance with the Exchange's listing standards and a copy of
its report will be forwarded promptly to the Commission. If NYSE
Regulation determines that Holdco is not in compliance with any
applicable listing standard of the Exchange, NYSE Regulation will
notify Holdco promptly and request a plan for compliance. Within five
business days of providing such notice to Holdco, NYSE Regulation will
file a report with the Commission identifying the date on which Holdco
is not in compliance with the listing standard at issue and any other
material information conveyed to Holdco in the notice of non-
compliance. Within five business days of receiving a plan of compliance
from the issuer, NYSE Regulation will notify the Commission of such
receipt, whether the plan was accepted by NYSE Regulation or what other
action was taken with respect to the plan, and the time period provided
to regain compliance with the Exchange's listing standard, if any. The
Commission believes that the procedures for monitoring of the listing
of and trading of Holdco's securities are consistent with the Act.

E. Options Trading Rights

    The Commission received three similar comment letters \81\ on the
proposed rule changes regarding certain

Option Trading Rights (``OTRs'') that were separated from full New York
Stock Exchange, Inc. \82\ seats (``Separated OTRs''). All New York
Stock Exchange seat ownership (with or without OTRs) was extinguished
in the 2006 demutualization of New York Stock Exchange, Inc.\83\
Although the commenter takes no position on the merits of the
Combination, the commenter opposes the Combination on the grounds that
the Exchange does not fully own all of the assets being transferred.
Specifically, the commenter contends that the owners of Separated OTRs
retained their Separated OTRs, even after the New York Stock Exchange,
Inc. exited the options business in 1997, with the expectation that
their ownership of the Separated OTRs would afford them full rights to
trade options under the auspices of New York Stock Exchange, Inc. or
its successor entity. The commenter contends that such ownership gives
a right to trade options on NYSE Market and NYSE Arca, and after the
Combination, Euronext. The commenter refers to its comment letters in
connection with the demutualization of New York Stock Exchange, Inc. in
its merger with Archipelago as well as the combination of NYSE Group
and Euronext N.V.\84\ The commenter asked that reserves be put aside
for the Exchange to meet its obligations to Separated OTR holders. The
NYSE Response to Comments states that the issue of the rights of owners
of Separated OTRs is not before the Commission in the context of the
NYSE Exchanges' proposed rule filings and notes that the NYSE Exchanges
are not proposing in their respective filings a change in the trading
rights on the Exchange, NYSE Amex or NYSE Arca, respectively.\85\
---------------------------------------------------------------------------

    \81\ See Rothlein Letters, supra note 5.
    \82\ New York Stock Exchange, Inc. is the predecessor entity to
NYSE. See NYSE Inc.-Archipelago Merger Order, supra note 27.
    \83\ See NYSE Inc.-Archipelago Merger Order, supra note 27.
    \84\ See Rothlein Letters, supra note 5. The Commission notes
that the commenter reiterated these points in its rebuttal to the
NYSE Response to Comments, continuing to argue, in part, that it
still retains an interest in certain trading rights and that the
proposed rule changes do not comport with fair and equitable
principles of trade. See Rothlein Rebuttal Letters, supra note 6.
    \85\ See NYSE Response to Comments, supra note 6.
---------------------------------------------------------------------------

    The issue of the rights of owners of Separated OTRs is not before
the Commission in the context of this rule filing. Pursuant to Section
19(b)(1) of the Act,\86\ an SRO (such as NYSE) is required to file with
the Commission any proposed rule or any proposed change in, addition
to, or deletion from the rules of such SRO. Further, pursuant to
Section 19(b)(2) of the Act,\87\ the Commission shall approve a
proposed rule change filed by an SRO if the Commission finds that such
proposed rule change is consistent with the requirements of the Act and
the rules and regulations thereunder applicable to the SRO.
---------------------------------------------------------------------------

    \86\ 15 U.S.C. 78s(b)(1).
    \87\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------

III. Conclusion

    For the foregoing reasons, 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.
    It is therefore ordered, pursuant to Section 19(b)(2) of the Act
\88\ that the proposed rule changes (SR-EDGA-2011-34; SR-EDGX-2011-33;
SR-ISE-2011-69; SR-NYSE-2011-51; SR-NYSEAmex-2011-78; SR-NYSEArca-2011-
72), are approved.
---------------------------------------------------------------------------

    \88\ Id.
    \89\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\89\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-1177 Filed 1-20-12; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register Volume 86, Number 222 (Monday, November 22, 2021)]
[Notices]
[Pages 66382-66383]
[FR Doc No: 2021-25348]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-93581; File No. SR-ICC-2021-019]

Self-Regulatory Organizations; ICE Clear Credit LLC; Order
Approving Proposed Rule Change Relating to the ICC CDS Instrument On-
Boarding Policies and Procedures

November 16, 2021.

I. Introduction

    On September 22, 2021, ICE Clear Credit LLC (``ICC'') filed with
the Securities and Exchange Commission (``Commission''), pursuant to
Section 19(b)(1) of the Securities Exchange Act of 1934 (the
``Act''),\1\ and Rule 19b-4,\2\ a proposed rule change to revise the
ICC CDS Instrument On-boarding Policies and Procedures (``Instrument
On-boarding Policy''). The proposed rule change was published for
comment in the Federal Register on October 5, 2021.\3\ The Commission
did not receive comments regarding the proposed rule change. For the
reasons discussed below, the Commission is approving the proposed rule
change.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Self-Regulatory Organizations; ICE Clear Credit LLC; Notice
of Filing of Proposed Rule Change Relating to the ICC CDS Instrument
On-boarding Policies and Procedures; Exchange Act Release No. 93177
(Sept. 29, 2021); 86 FR 55037 (Oct. 5, 2021) (SR-ICC-2021-019)
(``Notice'').
---------------------------------------------------------------------------

II. Description of the Proposed Rule Change

    The proposed rule change would revise Subsection III.A of the
Instrument On-boarding Policy.\4\ Subsection III.A discusses the
guiding principles that ICC maintains for considering instruments for
clearing. Such principles are designed to ensure that ICC proceeds in a
prudent manner with respect to instrument selection while also
providing the best opportunity for Clearing Participants to minimize
their risk.
---------------------------------------------------------------------------

    \4\ Capitalized terms not otherwise defined herein have the
meanings assigned to them in the Instrument On-boarding Policy or
the ICC Rules, as applicable.
---------------------------------------------------------------------------

    The proposed rule change would incorporate an additional guiding
principle--ICC should consider selecting for clearing instruments that
are constituents of the currently clearable On-The-Run (``OTR'')
indices in order to provide additional instruments for Clearing
Participants to hedge and mitigate indirect risk exposure from the OTR
indices. For other instruments that are not constituents of currently
clearable OTR indices, the proposed rule change would not alter the
current guiding principles, which direct ICC to consider instrument
open interest and volume when selecting instruments for clearing.
Moreover, the proposed rule change would not alter the overall current
guiding principles for all instruments, which direct ICC to consider
selecting for clearing instruments that can be cleared through ICC's
systems and processes and that support industry-wide initiatives and
protocols.

III. Discussion and Commission Findings

    Section 19(b)(2)(C) of the Act directs the Commission to approve a
proposed rule change of a self-regulatory organization if it finds that
such proposed rule change is consistent with the requirements of the
Act and the rules and regulations thereunder applicable to such
organization.\5\ For the reasons given below, the Commission finds that
the proposed rule change is consistent with Section 17A(b)(3)(F) of the
Act and Rule 17Ad-22(e)(21).\6\
---------------------------------------------------------------------------

    \5\ 15 U.S.C. 78s(b)(2)(C).
    \6\ 15 U.S.C. 78q-1(b)(3)(F) and 17 CFR 240.17Ad-22(e)(21).
---------------------------------------------------------------------------

A. Consistency With Section 17A(b)(3)(F) of the Act

    Section 17A(b)(3)(F) of the Act requires, among other things, that
the rules of ICC be designed to promote the prompt and accurate
clearance and settlement of securities transactions and, to the extent
applicable, derivative agreements, contracts, and transactions, as well
as to assure the safeguarding of securities and funds which are in the
custody or control of ICC or for which it is responsible.\7\ As
discussed above, the proposed rule change would add to the Instrument
On-boarding Policy, as a further guiding principle, that ICC should
consider selecting for clearing instruments that are constituents of
the currently clearable OTR indices in order to provide Clearing
Participants additional instruments to hedge and mitigate indirect risk
exposure from the OTR indices. The Commission believes that this
additional guiding principle should encourage ICC to select for
clearing instruments that, as constituents of the currently clearable
OTR indices, could help ICC's Clearing Participants mitigate indirect
risk exposure from the OTR indices. The Commission believes that such
potential risk mitigation would encourage Clearing Participants to
centrally clear additional transactions, which, in turn, should promote
the prompt and accurate clearance and settlement of those instruments.
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------

    Moreover, as set forth in the new guiding principle, the Commission
believes that clearing instruments that are constituents of the
currently clearable OTR indices could allow ICC's Clearing Participants
to hedge and mitigate indirect risk exposure from the OTR indices.
Thus, assuming that ICC selects such instruments for clearing, the
Commission believes that the new guiding principle could result in
ICC's Clearing Participants mitigating their overall indirect risk
exposure to OTR indices, and thereby could reduce the overall risks to
ICC in clearing and settling transactions in OTR indices. The
Commission further believes that

these risks, if not adequately managed, could disrupt ICC's ability to
clear and settle transactions in other products and safeguard
securities and funds in its custody and control. Thus the Commission
believes that, in directing ICC to select for clearing instruments that
could allow Clearing Participants to hedge and mitigate their overall
risk exposure, the proposed rule change could, in turn, result in a
reduction of risk to ICC and thereby could help promote the prompt and
accurate clearance and settlement of securities transactions and help
assure the safeguarding of securities and funds in ICC's custody and
control.
    Therefore, the Commission finds that the proposed rule change would
promote the prompt and accurate clearance and settlement of securities
transactions and assure the safeguarding of securities and funds in
ICC's custody and control, consistent with the Section 17A(b)(3)(F) of
the Act.\8\
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------

B. Consistency With Rule 17Ad-22(e)(21)

    Rule 17Ad-22(e)(21) requires that ICC establish, implement,
maintain and enforce written policies and procedures reasonably
designed to, among other things, be efficient and effective in meeting
the requirements of its participants and the markets it serves.\9\ As
discussed above, the proposed rule change would add to the Instrument
On-boarding Policy, as a further guiding principle, that ICC should
consider selecting for clearing instruments that are constituents of
the currently clearable OTR indices in order to provide Clearing
Participants additional instruments to hedge and mitigate indirect risk
exposure from the OTR indices. The Commission believes that this
additional guiding principle should encourage ICC to select for
clearing additional instruments that would serve the needs of its
Clearing Participants in hedging and mitigating indirect risk exposure
from the OTR indices. The Commission therefore believes this new
guiding principle could help ICC to be effective in meeting the
requirements of its participants, consistent with Rule 17Ad-
22(e)(21).\10\
---------------------------------------------------------------------------

    \9\ 17 CFR 240.17Ad-22(e)(21).
    \10\ 17 CFR 240.17Ad-22(e)(21).
---------------------------------------------------------------------------

IV. Conclusion

    On the basis of the foregoing, the Commission finds that the
proposed rule change is consistent with the requirements of the Act,
and in particular, with the requirements of Section 17A(b)(3)(F) of the
Act \11\ and Rule 17Ad-22(e)(21).\12\
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78q-1(b)(3)(F).
    \12\ 17 CFR 240.17Ad-22(e)(21).
---------------------------------------------------------------------------

    It is therefore ordered pursuant to Section 19(b)(2) of the Act
\13\ that the proposed rule change (SR-ICC-2021-019) be, and hereby is,
approved.\14\
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78s(b)(2).
    \14\ In approving the proposed rule change, the Commission
considered the proposal's impact on efficiency, competition, and
capital formation. 15 U.S.C. 78c(f).
    \15\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-25348 Filed 11-19-21; 8:45 am]
BILLING CODE 8011-01-P