[Federal Register: October 3, 2008 (Volume 73, Number 193)]
[Notices]
[Page 57707-57719]
[DOCID:fr03oc08-117]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58673; File Nos. SR-Amex-2008-62 and SR-NYSE-2008-60]

Self-Regulatory Organizations; American Stock Exchange LLC;
Notice of Filing of Amendment No. 4 and Order Granting Accelerated
Approval to a Proposed Rule Change, as Modified by Amendments No. 1 and
4 Thereto, Relating to the Acquisition of the Amex by NYSE Euronext;
Self-Regulatory Organizations; New York Stock Exchange LLC; Order
Granting Approval to a Proposed Rule Change, as Modified by Amendment
No. 1 Thereto, Relating to the Acquisition of the Amex by NYSE Euronext

September 29, 2008.

I. Introduction

    On July 23, 2008, American Stock Exchange LLC, a Delaware limited
liability company (``Amex''), filed with the Securities and Exchange
Commission (``Commission''), pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4
thereunder,\2\ a proposed rule change in connection with the
acquisition of Amex by NYSE Euronext, a Delaware Corporation (``NYSE
Euronext''). On July 30, 2008, Amex filed Amendment No. 1 to the
proposed rule change. On August 7, 2008, the proposed rule change, as
amended, was published for comment in the Federal Register.\3\ Amex
filed Amendment No. 2 to the proposed rule change on September 3, 2008,
and withdrew Amendment No. 2 on September 4, 2008. Amex filed Amendment
No. 3 on September 4, 2008, and withdrew Amendment No. 3 on September
5, 2008. Amex filed Amendment No. 4 on September 5, 2008.\4\ The
Commission received no comments on the proposed rule change. This order
provides notice of filing of Amendment No. 4 to the proposed rule
change, and grants accelerated approval to the proposed rule change, as
modified by Amendments No. 1 and 4.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 58284 (August 1,
2008), 73 FR 46086 (``Amex Notice'').
    \4\ In Amendment No. 4, Amex: (1) Made several technical, non-
substantive clarifying changes to the proposed NYSE Alternext US LLC
rules; (2) amended the proposed NYSE Alternext US LLC rules to
provide for other Amex proposed rule changes that have been approved
since this proposal was filed; (3) modified the description of Arca
Securities, LLC (``Arca Securities) to include, among other things,
a representation that, with respect to its oversight of Arca
Securities, which will be an affiliated member of NYSE Alternext US
LLC after the Mergers and Related Transactions (as described
herein), NYSE Regulation, Inc. (``NYSE Regulation'') has agreed with
Amex that it will provide a report to NYSE Alternext US LLC's Chief
Regulatory Officer on a quarterly basis that: (a) Quantifies all
open alerts (of which NYSE Regulation is aware) that identify Arca
Securities as a participant that has potentially violated NYSE
Alternext US LLC or Commission rules and (b) quantifies the number
of all open investigations that identify Arca Securities as a
participant that has potentially violated NYSE Alternext US LLC or
Commission rules; (4) revised the rule filing to reflect that the
parties to a multi-party regulatory services agreement (as described
herein) have been modified to include NYSE Alternext US LLC, NYSE
Group, Inc., NYSE Regulation, and Financial Industry Regulatory
Authority (``FINRA''); (5) revised the rule filing to reflect a
change to the Mergers and Related Transactions, which will not
affect the final outcome of the Mergers and Related Transactions (as
described herein) through which NYSE Alternext US LLC will become a
subsidiary of NYSE Euronext; and (6) clarified that Arca Securities
will not provide ``outbound'' routing services for NYSE Alternext US
LLC until the relocation of the NYSE Alternext US LLC equities and
options trading facilities to the NYSE trading floor or the
electronic trading platform of NYSE or NYSE Arca, Inc., as
applicable, and that, at a later time, NYSE Alternext US LLC will
submit a separate rule filing to the Commission seeking approval to
provide such outbound routing services to NYSE Alternext US LLC.
---------------------------------------------------------------------------

    On July 23, 2008, the New York Stock Exchange LLC (``NYSE''), a New
York limited liability company, filed with the Commission, pursuant to
Section 19(b)(1) of the Act \5\ and Rule 19b-4 thereunder,\6\ a
proposed rule change in connection with the acquisition of Amex by NYSE
Euronext. On July 30, 2008, the NYSE filed Amendment No. 1 to the
proposed rule change. On August 7, 2008, the proposed rule change, as
amended, was published for comment in the Federal Register.\7\ The
Commission received no comments on the proposed rule change. This order
grants approval to the proposed rule change, as modified by Amendment
No. 1.
---------------------------------------------------------------------------

    \5\ 15 U.S.C. 78s(b)(1).
    \6\ 17 CFR 240.19b-4.
    \7\ See Securities Exchange Act Release No. 58285 (August 1,
2008,) 73 FR 46117 (SR-NYSE-2008-60) (``NYSE Notice'').
---------------------------------------------------------------------------

II. Background

    On January 17, 2008, NYSE Euronext, Amex, Amex's parent companies
(The Amex Membership Corporation (``MC'') and its direct wholly-owned
subsidiary, AMC Acquisition Sub, Inc.), and several other entities
created by NYSE Euronext and Amex in connection with the Mergers
entered into an agreement (``Merger Agreement'') to effect a series of
mergers (``Mergers'') as a result of which the successor to Amex, to be
renamed ``NYSE Alternext US LLC'' (``NYSE Alternext US''), will become
a

U.S. Regulated Subsidiary \8\ of NYSE Euronext. The Board of Governors
of Amex (``Amex Board'') approved the proposed rule change on May 21,
2008. In addition, the Mergers were approved by the requisite vote of
MC members at the special meeting of MC members held on June 17, 2008.
Immediately following the Mergers, NYSE Euronext plans to effectuate
certain related transactions, as a result of which NYSE Alternext US
will become a direct wholly-owned subsidiary of NYSE Group, Inc.
(``NYSE Group''), the wholly-owned subsidiary of NYSE Euronext
(``Related Transactions'').\9\
---------------------------------------------------------------------------

    \8\ The term ``U.S. Regulated Subsidiary'' is defined in Article
VII, Section 7.3(G) of the NYSE Euronext Bylaws.
    \9\ See Amex Notice, supra note 3, and Amendment No. 4 to the
Amex Notice, supra note 4, for a more detailed description of the
Mergers and the Related Transactions.
---------------------------------------------------------------------------

    Upon completion of the Mergers and the Related Transactions, NYSE
Alternext US will continue operating as a national securities exchange
registered under Section 6 of the Act.\10\ Following the Mergers and
the Related Transactions, NYSE Euronext (and NYSE Group) will be the
owner of three self-regulatory organizations (``SROs''): the NYSE; NYSE
Arca, Inc. (``NYSE Arca''); and NYSE Alternext US.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78f.
---------------------------------------------------------------------------

    Currently, all Regular Members and Options Principal Members \11\
of Amex also have a membership interest in MC, a New York not-for-
profit members-owned corporation which owns directly or indirectly 100%
of Amex. The Mergers will have the effect of separating the right to
trade on NYSE Alternext US from ownership in MC. Pursuant to the terms
of the Merger Agreement, persons owning MC memberships prior to the
Mergers will receive shares of the common stock of NYSE Euronext and
cash in lieu of fractional shares, if applicable.\12\ As described more
fully below, following the Mergers, all trading rights on Amex
appurtenant to MC memberships existing prior to the Mergers will be
cancelled and physical and electronic access to NYSE Alternext US
trading facilities will be made available to individuals and
organizations through temporary trading permits (``86 Trinity
Permits'') offered by NYSE Alternext US.\13\
---------------------------------------------------------------------------

    \11\ Amex allied members and associate members are not members
of MC and therefore have trading rights on Amex but not voting
rights in MC.
    \12\ See Amex Notice, supra note 3, for a more detailed
description of the consideration that persons owning MC memberships
will receive in connection with the Mergers.
    \13\ See infra Section III.C.2. for discussion of these
temporary trading permits. At a later time, NYSE Alternext US
anticipates replacing 86 Trinity Permits with equity trading
licenses and options trading permits. NYSE Alternext US would have
to file a proposed rule change to replace the 86 Trinity Permits
with equity trading licenses and options trading permits.
---------------------------------------------------------------------------

    Amex filed a proposed rule change to permit the Mergers and the
Related Transactions and to accommodate the transformation of Amex from
a wholly-owned subsidiary of MC \14\ into an indirect wholly-owned
subsidiary of NYSE Euronext and a direct wholly-owned subsidiary of
NYSE Group. Amex proposes to adopt the NYSE Alternext US Operating
Agreement, to eliminate the Amex Constitution,\15\ and to amend the
Amex Rules, which would become the NYSE Alternext US Rules, as
described more fully below.\16\ In general, the proposed changes are
designed to facilitate the Mergers and Related Transactions and to
conform the governance of NYSE Alternext US to that of the NYSE. Amex
also is using this opportunity to make several other changes to its
governing documents and rules to update language and make other minor
changes that are not directly related to the proposed Mergers or
Related Transactions.\17\ The proposed rule change will become
operative upon completion of the Mergers and the Related Transactions.
---------------------------------------------------------------------------

    \14\ For a discussion of the current governance structure of MC
and Amex, see Securities Exchange Act Release Nos. 50057 (July 22,
2004), 69 FR 45091 (July 28, 2004) (SR-Amex-2004-50) (notice of
filing of proposed rule change relating to the NASD's sale of its
interest in Amex to MC) and 50927 (December 23, 2004), 69 FR 78486
(December 30, 2004) (SR-Amex-2004-50) (order approving proposed rule
change relating to the NASD's sale of its interest in Amex to MC)
(``Amex Order'').
    \15\ Amex proposes to include relevant provisions of the Amex
Constitution in the NYSE Alternext US Operating Agreement or the
NYSE Alternext US Rules, as applicable.
    \16\ Amex also proposes, in connection with the Mergers, to
eliminate the undertakings made by Amex to the Commission in
connection with a proposed rule change in 2004. See Amex Order,
supra note 14.
    \17\ For example, certain obsolete rules, including the rules
relating the Intermarket Trading System Plan and certain rules which
have been replaced by Auction and Electronic Market Integration
Rules are proposed to be deleted. See Amex Notice, supra note 3, 73
FR at 46095.
---------------------------------------------------------------------------

    In addition, the NYSE filed a proposed rule change to amend certain
organizational documents of NYSE Euronext, NYSE Group, and NYSE
Regulation; the Trust Agreement of the NYSE Group Trust I (``Trust
Agreement''); \18\ the Independence Policy of NYSE Euronext (``NYSE
Euronext Independence Policy''); and the NYSE Rules. The proposed
changes, among other things, will make applicable to NYSE Alternext
U.S. certain provisions of the organizational documents, the Trust
Agreement, and the NYSE Euronext Independence Policy that are designed
to maintain the independence of each NYSE Euronext SRO subsidiary's
self-regulatory function, enable each such SRO to operate in a manner
that complies with the federal securities laws, and facilitate each
such SRO's ability and the ability of the Commission to fulfill their
regulatory and oversight obligations under the Act.\19\
---------------------------------------------------------------------------

    \18\ See Securities Exchange Act Release No. 55293 (February 14,
2007), 72 FR 8033 (February 22, 2007) (SR-NYSE-2006-120) (order
approving combination between NYSE Group, Inc. and Euronext N.V.)
(``NYSE/Euronext Order'') for a description of the Trust Agreement.
    \19\ See NYSE Notice, supra note 7. In addition, the NYSE also
is making certain other changes to the NYSE Euronext Independence
Policy, as discussed below in Section III.G.
---------------------------------------------------------------------------

III. Discussion and Commission Findings

    After careful review, the Commission finds that the proposed rule
changes are consistent with the requirements of the Act and the rules
and regulations thereunder applicable to a national securities
exchange.\20\ In particular, the Commission finds that the proposed
rule changes are consistent with: (1) Section 6(b)(1) of the Act,\21\
which requires a national securities exchange to be so organized and
have the capacity 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; (2) Section 6(b)(3) of the Act,\22\ which
requires that the rules of a national securities exchange 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 (the ``fair
representation requirement''); and (3) Section 6(b)(5) of the Act,\23\
in that it is designed, among other things, to prevent fraudulent and
manipulative acts and practices; to promote just and equitable
principles of trade; to remove impediments to and perfect the mechanism
of a free and open market and a national market system; and, in
general, to protect investors and the public interest.
---------------------------------------------------------------------------

    \20\ In approving these proposed rule changes, the Commission
has considered the proposed rules' impact on efficiency,
competition, and capital formation. 15 U.S.C. 78c(f).
    \21\ 15 U.S.C. 78f(b)(1).
    \22\ 15 U.S.C. 78f(b)(3).
    \23\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    As noted above, the Mergers and the Related Transactions will
result in NYSE Euronext (and NYSE Group)

owning another SRO, NYSE Alternext US. The Commission believes that the
ownership of NYSE Alternext US by the same public holding company that
owns the NYSE and NYSE Arca would not impose any burden on competition
not necessary or appropriate in furtherance of the purposes of the
Act.\24\ Further, the Commission does not believe that the ownership by
one holding company of three U.S. exchanges presents any adverse
competitive implications in the current marketplace. The Commission
notes that it has previously approved proposals in which a holding
company owns multiple SROs.\25\ The Commission's experience to date
with the issues raised by the ownership by a holding company of one or
more SROs has not presented any concerns that have not been addressed,
for example, by Commission approved measures at the holding company
level that are designed to protect the independence of each SRO.
---------------------------------------------------------------------------

    \24\ 15 U.S.C. 78f(b)(8).
    \25\ See, e.g., Securities Exchange Act Release No. 53382
(February 27, 2006), 71 FR 11251 (March 6, 2006) (SR-NYSE-2005-77)
(approving the combination of the New York Stock Exchange, Inc. and
Archipelago Holdings, Inc.) (``NYSE/Arca Order''). See also
Securities Exchange Act Release Nos. 58324 (August 7, 2008) (SR-BSE-
2008-02; SR-BSE-2008-23; SR-BSE-2008-25; SR-BSECC-2008-01)
(approving the acquisition of Boston Stock Exchange, Inc. by The
NASDAQ OMX Group, Inc.) (``BSE Order''), and 58179 (July 17, 2008),
73 FR 42874 (July 23, 2008) (SR-Phlx-2008-31) (approving the
acquisition of Philadelphia Stock Exchange, Inc. by The NASDAQ OMX
Group, Inc.) (``Phlx Order'').
---------------------------------------------------------------------------

    The Commission believes that the current market for cash equity and
standardized options trading venues is highly competitive. Existing
exchanges face significant competition from other exchanges and non-
exchange entities, such as alternative trading systems, that trade the
same or similar financial instruments.\26\ In addition, there have been
new entrants to the market. In this regard, the Nasdaq Options Market
recently commenced the trading of standardized options contracts, the
Commission in 2004 approved proposed rule changes to establish the
Boston Options Exchange Facility of the Boston Stock Exchange, Inc, and
the Commission in 2000 approved the registration of the International
Securities Exchange, LLC (``ISE'') to trade standardized options
contracts.\27\ Further, the Chicago Board Options Exchange,
Incorporated and ISE a few years ago commenced trading of cash equity
securities.\28\ In addition, another entity has recently applied and
received approval for exchange registration, which provides evidence
that such entity determined there are benefits in starting a new
exchange to compete in the marketplace.\29\ Accordingly, the Commission
finds that Amex's and NYSE's proposed rule changes are consistent with
Section 6(b)(8), which requires that the rules of an exchange not
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. Finally, the Commission will
continue to monitor holding companies' ownership of multiple SROs for
compliance with the Act, the rules and regulations thereunder, as well
as the SROs' own rules.
---------------------------------------------------------------------------

    \26\ See, e.g., Securities Exchange Act Release No. 58092 (July
3, 2008), 73 FR 40144, 40144 (July 11, 2008) (where the Commission
recognized that ``[n]ational securities exchanges registered under
Section 6(a) of the Act face increased competitive pressures from
entities that trade the same or similar financial instruments * *
*'').
    \27\ See Securities Exchange Act Release Nos. 57478 (March 12,
2008), 73 FR 14521 (March 18, 2008) (SR-NASDAQ-2007-004 and SR-
NASDAQ-2007-080) (order approving a proposed rule change relating
to, among other things, the establishment and operation of the NADAQ
Options Market) (``NOM Approval Order''); 49068 (January 13, 2004),
69 FR 2775 (January 20, 2004) (SR-BSE-2002-15) (order approving
trading rules for BOX); 49067 (January 13, 2004), 69 FR 2761
(January 20, 2004) (SR-BSE-2003-19) (order approving the Operating
Agreement for BOX); and 42455 (February 24, 2000), 65 FR 11388
(March 2, 2000) (File No. 10-127) (order approving the International
Securities Exchange LLC's application for registration as a national
securities exchange) (``ISE Exchange Registration Order'').
    \28\ See Securities Exchange Act Release Nos. 55389 (March 2,
2007), 72 FR 10575 (March 8, 2007) (order approving the
establishment of CBOE Stock Exchange, LLC); 55392 (March 2, 2007),
72 FR 10572 (March 8, 2007) (order approving trading rules for non-
option securities trading on CBOE Stock Exchange, LLC); 54528
(September 28, 2006), 71 FR 58650 (October 4, 2006) (order approving
rules governing ISE's electronic trading system for equities).
    \29\ See Securities Exchange Act Release Nos. 57322 (February
13, 2008), 73 FR 9370 (February 20, 2008) (File No. 10-182) (notice
of filing of application and Amendment No. 1 thereto by BATS
Exchange, Inc. for registration as a national securities exchange)
and 58375 (August 18, 2008), 73 FR 49498 (August 21, 2008)
(Findings, Opinion, and Order of the Commission approving BATS
Exchange, Inc.'s application for registration as a national
securities exchange) (``BATS Order'').
---------------------------------------------------------------------------

A. Changes in Control of NYSE Alternext US; Ownership and Voting Limits

    The NYSE Alternext US Operating Agreement will provide that NYSE
Group, which will be the sole member of NYSE Alternext US, may not
transfer or assign its limited liability company interest in NYSE
Alternext US in whole or in part, to any person or entity, unless such
transfer or assignment shall be filed with and approved by the
Commission under Section 19 of the Act and the rules promulgated
thereunder.\30\ In addition, the Second Amended and Restated
Certificate of Incorporation of NYSE Group (``NYSE Group Charter'')
provides that NYSE Euronext, as the owner of all the issued and
outstanding shares of stock of NYSE Group, may not transfer or assign
its ownership interest in NYSE Group, in whole or in part, to any
person or entity, unless such transfer or assignment shall be filed
with and approved by the Commission under Section 19 of the Exchange
Act and the rules promulgated thereunder.\31\
---------------------------------------------------------------------------

    \30\ See Section 3.03 of the proposed NYSE Alternext US
Operating Agreement. Under current Amex rules, any sale, issuance,
transfer or other disposition of any equity security of Amex,
including any LLC interest, is subject to prior approval by the
Commission pursuant to the rule filing procedure under Section 19 of
the Act and the rules promulgated thereunder. See Section 9.3 of the
Amended and Restated Amex Limited Liability Company Agreement and
Amex Order, supra note 14. In addition, any sale, issuance, transfer
or other disposition of any equity interest in MC or AMC Acquisition
Sub, Inc. other than the sale or transfer of seats or membership
interests in MC, is subject to prior approval by the Commission
pursuant to the rule filing procedure under Section 19 of the Act
and the rules promulgated thereunder. See Section 7(c) of the Second
Restated Certificate of Incorporation of MC and Amex Order, supra
note 14.
    \31\ See Article IV, Section 4 of the proposed NYSE Group
Charter.
---------------------------------------------------------------------------

    The Amended and Restated Certificate of Incorporation of NYSE
Euronext (``NYSE Euronext Charter''), in turn, imposes limits on direct
and indirect changes in control, which are designed to prevent any
shareholder from exercising undue control over the operation of its SRO
subsidiaries and to ensure that its SRO subsidiaries and the Commission
are able to carry out their regulatory responsibilities under the
Act.\32\ Specifically, no person (either alone or together with its
related persons) is entitled to vote or cause the voting of shares of
stock of NYSE Euronext 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 10% 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 10% 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 NYSE
Euronext's outstanding capital stock.\33\ In addition, no person
(either alone or together with its related persons) may at any time
beneficially own shares of stock of NYSE Euronext representing in the
aggregate more than 20% of the then outstanding votes entitled to be
cast on any matter.\34\ These limits will flow through to NYSE
Alternext US . by virtue of the fact that NYSE Alternext US will be a
wholly-owned subsidiary of NYSE Group, which in turn is wholly-owned by
NYSE Euronext.\35\
---------------------------------------------------------------------------

    \32\ See Article V of the NYSE Euronext Charter and NYSE/
Euronext Order, supra note 18. The Commission notes that the NYSE
Group Charter also includes similar ownership and voting limits.
However, such limitations are not applicable so long as NYSE
Euronext and NYSE Group Trust I collectively own all of the capital
stock of NYSE Group. Instead, for so long as NYSE Group is a wholly
owned subsidiary of NYSE Euronext, or as provided for in the Trust
Agreement, there will be no transfer of the shares of NYSE Group
held by NYSE Euronext without the approval of the Commission. If
NYSE Group ceases to be wholly owned by NYSE Euronext or the Trust,
the voting and ownership limitations in the NYSE Group Charter will
apply. Id.
    \33\ See NYSE/Euronext Order, supra note 18 and NYSE Euronext
Charter, Article V, Section 1(A). Pursuant to the NYSE Euronext
Charter, NYSE Euronext shall disregard any such votes purported to
be cast in excess of these limitations.
    \34\ See NYSE/Euronext Order, supra note 18, and NYSE Euronext
Charter, Article V, Section 2(A). In the event that a person, either
alone or together with its related persons, beneficially owns shares
of stock of NYSE Euronext in excess of the 20% threshold, such
person and its related persons will be obligated to sell promptly,
and NYSE Euronext will be obligated to purchase promptly, to the
extent that funds are legally available for such purchase, that
number of shares necessary to reduce the ownership level of such
person and its related persons to below the permitted threshold,
after taking into account that such repurchased shares will become
treasury shares and will no longer be deemed to be outstanding. See
NYSE Euronext Charter, Article V, Section 2(D).
    \35\ Further, solely for the purposes of the definition of
``related person'' in the NYSE Euronext Charter, which incorporates
in certain respects the definition of ``member'' and ``member
organization'' as defined in the rules of the NYSE, the NYSE is
amending (1) the definition of ``member'' in its rules to include
any ``member'' (as defined in Section 3(a)(3)(A)(i) of the Act) of
NYSE Alternext US, and (2) the definition of ``Member Organization''
in its rules to include any ``member'' (as defined in Section
3(a)(3)(A)(ii), 3(a)(3)(A)(iii) and 3(a)(3)(A)(iv) of the Act) of
NYSE Alternext US. See NYSE Notice, supra note 7.
---------------------------------------------------------------------------

    Further, the current NYSE Euronext Charter provides that for so
long as NYSE Euronext directly or indirectly controls the NYSE, NYSE
Market Inc. (``NYSE Market''), NYSE Arca, NYSE Arca Equities, Inc.
(``NYSE Arca Equities'') or any facility of NYSE Arca, the NYSE
Euronext 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 or member organization of the NYSE, an ETP
Holder of NYSE Arca Equities, or an OTP Holder or an OTP Firm of NYSE
Arca.\36\ These ownership and voting limits as they apply to members of
the NYSE and NYSE Arca will be extended to include members of NYSE
Alternext US through changes to the Amended and Restated Bylaws of NYSE
Euronext (``NYSE Euronext Bylaws'').\37\ Specifically, the NYSE
Euronext Bylaws will provide that, subject to its fiduciary obligations
under applicable law, for so long as NYSE Euronext directly or
indirectly controls NYSE Alternext US, the board of directors of NYSE
Euronext shall not adopt any resolution to: (1) Approve the exercise of
voting rights in excess of 20% of the then outstanding votes entitled
to be cast on such matter unless the Board of Directors of NYSE
Euronext determines that neither such person nor any of its related
persons (as defined in the NYSE Euronext Charter) is a member (as
defined in Section 3(a)(3)(A) of the Exchange Act) \38\ of NYSE
Alternext US (a ``NYSE Alternext US Member'');\39\ and (2) approve the
entering into of an agreement, plan or other arrangement under
circumstances that would result in shares of stock of NYSE Euronext
that would be subject to such agreement, plan or other arrangement not
being voted on any matter, or the withholding of any proxy relating
thereto, where the effect of such agreement, plan or other arrangement
would be to enable any person, either alone or together with its
related persons, to vote, possess the right to vote or cause the voting
of shares of stock of NYSE Euronext that would exceed 20% of the then
outstanding votes entitled to be cast on such matter (assuming that all
shares of stock of NYSE Euronext that are subject to such agreement,
plan or other arrangement are not outstanding votes entitled to be cast
on such matter), unless the Board of Directors of NYSE Euronext
determines that neither such person nor any of its related persons is
an NYSE Alternext US Member. Further, the NYSE Euronext Bylaws will
provide that, for so long as NYSE Euronext directly or indirectly
controls NYSE Alternext US, the Board of Directors of NYSE Euronext
will not approve ownership of NYSE Euronext capital stock in excess of
20%, unless the Board of Directors of NYSE Euronext determines that
neither such person, nor any of its related persons, is a NYSE
Alternext US Member.
---------------------------------------------------------------------------

    \36\ See NYSE Euronext Charter, Article V, Sections 1(C)(3) and
2(C)(4).
    \37\ Similar changes are being made to the NYSE Group Charter.
See NYSE Notice, supra note 7.
    \38\ 15 U.S.C. 78c(a)(3)(A).
    \39\ Any such person that is a ``related person'' (as defined in
the NYSE Euronext Charter) of such NYSE Alternext Member will also
deemed to be a ``NYSE Alternext Member'' for the purposes of the
NYSE Euronext Bylaws, as the context may require. See NYSE Euronext
Bylaws, Section 10.12(A)(1).
---------------------------------------------------------------------------

    The Commission finds that the proposed changes to NYSE Euronext
Bylaws and the proposed restrictions on transfer and assignment of NYSE
Group's limited liability company interest in NYSE Alternext US,
together with the existing restrictions on transfer and assignment of
NYSE Euronext's ownership interest in NYSE Group and the existing
ownership and voting limitations in NYSE Euronext's Certificate, are
designed to prevent any person or entity from exercising undue control
over the operation of NYSE Alternext US. These proposed changes are
also designed to ensure that NYSE Alternext US and the Commission are
able to carry out their regulatory obligations under the Act and
thereby minimize the potential that a person or entity could improperly
interfere with or restrict the ability of the Commission or NYSE
Alternext US to effectively carry out their respective regulatory
oversight responsibilities under the Act.

B. Management of NYSE Alternext US

1. Relationship Between NYSE Alternext US, NYSE Euronext and NYSE
Group; Jurisdiction Over NYSE Euronext and NYSE Group
    After the Mergers and the Related Transactions, NYSE Alternext US
will become an indirect wholly-owned subsidiary of NYSE Euronext and a
direct wholly-owned subsidiary of NYSE Group. Although these entities
are not SROs and, therefore, will not themselves carry out regulatory
functions, their activities with respect to the operation of NYSE
Alternext US must be consistent with, and not interfere with, NYSE
Alternext US's self-regulatory obligations. Proposed changes to the
NYSE Euronext Bylaws, the NYSE Group Charter, the Second Amended and
Restated Bylaws of NYSE Group (``NYSE Group Bylaws''), and the Trust
Agreement will make applicable to NYSE Alternext US \40\ certain
provisions of NYSE Euronext and NYSE Group organizational documents,
and provisions of the Trust Agreement, that are designed to maintain
the independence of NYSE Alternext US's self-regulatory function,
enable NYSE Alternext US to operate in a manner that complies with the
federal securities laws, and facilitate NYSE Alternext US's ability and
the ability of the Commission to fulfill their regulatory and oversight
obligations under the Act.\41\
---------------------------------------------------------------------------

    \40\ The definitions of U.S. Regulated Subsidiaries in the NYSE
Euronext Bylaws and Regulated Subsidiaries in the NYSE Group Charter
will be amended to include NYSE Alternext US.
    \41\ Provisions of the organizational documents of NYSE
Euronext, NYSE Group, and NYSE Regulation, the Trust Agreement, and
the NYSE Euronext Independence Policy will be rules of NYSE
Alternext U.S. because they are stated policies, practice, or
interpretations of NYSE Alternext US, as defined in Rule 19b-4 under
the Act. Accordingly, Amex filed with the Commission the NYSE
Euronext Charter, the NYSE Euronext Bylaws, the NYSE Group Charter,
the NYSE Group Bylaws, the NYSE Euronext Independence Policy, the
Third Amended and Restated Bylaws of NYSE Regulation (``NYSE
Regulation Bylaws''), and the Trust Agreement and Amendment No. 1 to
the Trust Agreement.

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

    In particular, the NYSE Euronext Bylaws and NYSE Group Charter will
specify, as applicable, that NYSE Euronext and NYSE Group and their
respective officers, directors and employees whose principal place of
business and residence is outside of the United States shall be deemed
to irrevocably submit to the jurisdiction of the United States federal
courts and the Commission for the purposes of any suit, action, or
proceeding pursuant to the United States federal securities laws and
the rules and regulations thereunder, commenced or initiated by the
Commission arising out of, or relating to, the activities of the NYSE
Alternext US.\42\ Further, NYSE Euronext and NYSE Group have agreed to
provide the Commission with access to their books and records.\43\ NYSE
Euronext and NYSE Group also agreed to keep confidential non-public
information relating to the self-regulatory function \44\ of NYSE
Alternext US and not to use such information for any commercial
purposes.\45\ In addition, the NYSE Euronext and NYSE Group Boards, as
well as their officers and employees are required to give due regard to
the preservation of the independence of NYSE Alternext US's self-
regulatory function.\46\ Similarly, the NYSE Euronext and NYSE Group
Boards would be required to take into consideration the ability of NYSE
Alternext U.S. to carry out its responsibilities under the Act.\47\
Finally, the NYSE Euronext Bylaws, NYSE Group Charter, and NYSE Group
Bylaws require that for so long as NYSE Euronext (and NYSE Group, as
applicable) controls NYSE Alternext US, any amendment to or repeal of
the NYSE Euronext Charter or NYSE Euronext Bylaws (and NYSE Group
Charter or NYSE Group Bylaws, as applicable) must either be (i) filed
with or filed with and approved by the Commission under Section 19 of
the Act \48\ and the rules promulgated thereunder, or (ii) submitted to
the boards of directors of the NYSE, NYSE Market, NYSE Regulation, NYSE
Arca, NYSE Arca Equities and NYSE Alternext US or the boards of
directors of their successors, and if any or all of such boards of
directors shall determine that such amendment or repeal must be filed
with or filed with and approved by the Commission under Section 19 of
the Act \49\ and the rules promulgated thereunder before such amendment
or repeal may be effectuated, then such amendment or repeal shall not
be effectuated until filed with or filed with and approved by the
Commission, as the case may be.\50\
---------------------------------------------------------------------------

    \42\ See Section 7.1 of proposed NYSE Euronext Bylaws and
Article IX of proposed NYSE Group Charter. See also Section 5.4 of
the Trust Agreement.
    \43\ See Sections 8.3 and 8.4 of proposed NYSE Euronext Bylaws
and Article X of proposed NYSE Group Charter. For so long as the
NYSE Euronext (or NYSE Group, as applicable) directly or indirectly
control NYSE Alternext US, their books, records, premises, officers,
directors and employees shall be deemed to be those of NYSE
Alternext US for purposes of and subject to oversight pursuant to
the Act. See Section 8.4 of proposed NYSE Euronext Bylaws and
Article X of proposed NYSE Group Charter. See also Section 6.2(a) of
the Trust Agreement.
    \44\ This requirement to keep confidential non-public
information relating to the self-regulatory function shall not limit
the Commission's ability to access and examine such information or
limit the ability of directors, officers, or employees of NYSE
Euronext and NYSE Group from disclosing such information to the
Commission. See Section 8.1(A) of proposed NYSE Euronext Bylaws and
Article X of the proposed NYSE Group Charter. Holding companies with
SRO subsidiaries have undertaken similar commitments. See, e.g.,
Securities Exchange Act Release No. 56955 (December 13, 2007), 72 FR
71979, 71983 (December 19, 2007) (SR-ISE-2007-101) (order approving
the acquisition of International Securities Exchange, LLC's parent,
International Securities Exchange Holdings, Inc., by Eurex Frankfurt
AG) and Phlx Order, supra note 24 at 73 FR 42878. See also Section
6.1(a) of the Trust Agreement and Amendment No. 1 to the Trust
Agreement.
    \45\ See Section 8.1 of the proposed NYSE Euronext Bylaws and
Article X of the proposed NYSE Group Charter. See also Section
6.1(a) of the Trust Agreement and Amendment No. 1 to the Trust
Agreement.
    \46\ See Section 9.4 of the proposed NYSE Euronext Bylaws and
Article XI of the proposed NYSE Group Charter. See also Section
5.1(b) of the Trust Agreement.
    \47\ See Section 3.15 of the proposed NYSE Euronext Bylaws and
Article V of the proposed NYSE Group Charter. See also Section
5.1(a)(i) of the Trust Agreement.
    \48\ 15 U.S.C. 78s.
    \49\ Id.
    \50\ See Sections 10.10 and 10.13 of the proposed NYSE Euronext
Bylaws, Article XII of the proposed NYSE Group Charter, and Section
7.9 of the proposed NYSE Group Bylaws. See also Section 8.2 of the
Trust Agreement and Amendment No. 1 to the Trust Agreement.
---------------------------------------------------------------------------

    The Commission believes that the NYSE Euronext Bylaws, the NYSE
Group Charter, the NYSE Group Bylaws, and the Trust Agreement as
amended to accommodate the Mergers and Related Transactions, are
designed to facilitate NYSE Alternext US's ability to fulfill its self-
regulatory obligations and are, therefore, consistent with the Act. In
particular, the Commission believes these changes are consistent with
Section 6(b)(1) of the Act,\51\ which requires, among other things,
that a national securities exchange be so organized and have the
capacity to carry out the purposes of the Act, and to comply and
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.
---------------------------------------------------------------------------

    \51\ 15 U.S.C. 78f(b)(1).
---------------------------------------------------------------------------

    Under Section 20(a) of the Act\52\ any person with a controlling
interest in NYSE Alternext US would be jointly and severally liable
with and to the same extent that NYSE Alternext US is 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
\53\ 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 \54\ 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.
---------------------------------------------------------------------------

    \52\ 15 U.S.C. 78t(a).
    \53\ 15 U.S.C. 78t(e).
    \54\ 15 U.S.C. 78u-3.
---------------------------------------------------------------------------

2. Governance of NYSE Alternext US
    Following the Mergers and the Related Transactions, the governance
structure of NYSE Alternext US will be substantially similar to that of
the NYSE. The Board of Directors of NYSE Alternext US (``NYSE Alternext
US Board'') will be composed of a number of directors as determined by
NYSE Group from time to time, as sole owner of NYSE Alternext US. In
addition, the NYSE Alternext US Board will be composed as follows: (i)
a majority of the directors of the NYSE Alternext US Board will be US
Persons \55\ who are members of the NYSE Euronext board and who are
independent under the NYSE Euronext Independence Policy \56\

(each a ``NYSE Euronext Independent Director''); and (ii) at least
twenty percent of the directors will be persons who are not members of
the board of directors of NYSE Euronext and who do not need to be
independent under the NYSE Euronext Independence Policy (``Non-
Affiliated Directors'').\57\
---------------------------------------------------------------------------

    \55\ A ``US Person'' shall mean, as of the date of his or her
most recent election or appointment as a director any person whose
domicile as of such date is and for the immediately preceding 24
months shall have been the United States. See Section 2.03 of the
proposed NYSE Alternext US Operating Agreement.
    \56\ See the proposed NYSE Euronext Independence Policy. See
also Section 3.4 of the proposed NYSE Euronext Bylaws for the
independence requirements of the board of directors of NYSE
Euronext. Generally, a director will not be independent if the
director has a relationship with or an interest in NYSE Euronext or
its subsidiaries; a member of the NYSE or NYSE Arca; or an issuer
listed on the NYSE or NYSE Arca. These independence policy
provisions are being expanded to equally apply to NYSE Alternext US
and its members and issuers. See NYSE Notice, supra note 7.
    \57\ For purposes of calculation of the minimum number of Non-
Affiliated Directors, if twenty percent of the directors is not a
whole number, such number of directors to be nominated and selected
by NYSE Alternext US members will be rounded up to the next whole
number. See Section 2.03 of the proposed NYSE Alternext US Operating
Agreement.
    Directors of NYSE Alternext US will serve for one-year terms and
will hold office until their successors are elected. There will be
no limit on the number of terms a director may serve on the NYSE
Alternext US Board. The Commission finds one-year terms consistent
with the Act and notes that establishing one-year terms for
directors is consistent with other proposals previously approved by
the Commission. See Phlx Order supra note 25. Further, the
Commission notes that the Commission approved one-year terms for
both NYSE Euronext and NYSE Group boards. See NYSE/Euronext Order,
supra note 18, and NYSE/Arca Order, supra note 25.
---------------------------------------------------------------------------

    NYSE Group will appoint or elect as Non-Affiliated Directors the
candidates nominated by the nominating and governance committee of NYSE
Euronext (``NYSE Euronext NGC'') (such candidates the ``Non-Affiliated
Director candidates'').\58\ The NYSE Euronext NGC will be obligated to
designate as Non-Affiliated Director candidates the persons recommended
by the newly established Director Candidate Recommendation Committee of
NYSE Alternext US (``NYSE Alternext US DCRC'');\59\ provided, however,
if there are candidates who have received a plurality of the votes cast
by the NYSE Alternext US members pursuant to the petition process
described below in this section, the NYSE Euronext NGC will be
obligated to designate such candidates as Non-Affiliated Director
candidates.\60\
---------------------------------------------------------------------------

    \58\ See Section 2.03(a)(iii) of the proposed NYSE Alternext US
Operating Agreement.
    \59\ Id. On an annual basis, the NYSE Alternext US Board will
appoint the NYSE Alternext US DCRC composed of individuals who are:
(i) associated with a member organization that engages in a business
involving substantial direct contact with securities customers, (ii)
associated with a member organization and registered as a specialist
and spend a substantial part of their time on the NYSE Alternext US
trading floor, (iii) associated with a member organization and spend
a majority of their time on the NYSE Alternext US trading floor and
have as a substantial part of their business the execution of
transactions on the NYSE Alternext US trading floor for other than
their own account or the account of their member organization, but
are not registered as a specialist, or (iv) associated with a member
organization and spend a majority of their time on the NYSE
Alternext US trading floor and have as a substantial part of their
business the execution of transactions on the NYSE Alternext US
trading floor for their own account or the account of their member
organization, but are not registered as a specialist. The NYSE
Alternext US Board will appoint such individuals after appropriate
consultation with representatives of member organizations. See
Section 2.03 of the proposed NYSE Alternext US Operating Agreement.
    \60\ See Sections 2.03(a)(iii)-(v) of the proposed NYSE
Alternext US Operating Agreement.
---------------------------------------------------------------------------

    The Non-Affiliated Director candidates that the NYSE Alternext US
DCRC recommends to the NYSE Euronext NGC will be announced to NYSE
Alternext US member organizations. Within two weeks after the
announcement, NYSE Alternext US members may nominate candidates for
Non-Affiliated Director by written petition filed with NYSE Alternext
US. A valid petition must be, among other things, endorsed by at least
10 percent of the signatures eligible to endorse a candidate.\61\ The
eligibility of any Non-Affiliated Director candidate nominated in any
such petition will be determined by the NYSE Euronext NGC, in its sole
discretion.
---------------------------------------------------------------------------

    \61\ Each member organization in good standing shall be entitled
to one signature for each trading license or permit held by it. No
trading license or permit holder, either alone or together with its
affiliates may account for more than 50 percent of the signatures
endorsing a particular candidate, and any signatures of such trading
license or permit holder, either alone or together with its
affiliates, in excess of such 50 percent limitation shall be
disregarded. See Section 2.03 of the proposed NYSE Alternext US
Operating Agreement.
---------------------------------------------------------------------------

    If no petitions are submitted within two weeks after the
dissemination of the report of the NYSE Euronext NGC, the NYSE Euronext
NGC will nominate the candidates for Non-Affiliated Directors that the
NYSE Alternext US DCRC initially recommended. If one or more valid
petitions are submitted, NYSE Alternext US members will be allowed to
vote on the entire group of potential candidates. Each member
organization will have one vote per trading license or permit held by
it.\62\ The persons with the highest number of votes will be the
candidates recommended to the NYSE Euronext NGC.
---------------------------------------------------------------------------

    \62\ No trading license or permit holder, either alone or
together with its affiliates, may account for more than 20 percent
of the votes cast for a particular candidate, and any votes cast by
such trading license or permit holder, either alone or together with
its affiliates, in excess of such 20 percent limitation will be
disregarded. See Section 2.03(a)(5) of the NYSE Alternext US
Operating Agreement. See Section 2.03(a)(V) of the proposed NYSE
Alternext US Operating Agreement.
---------------------------------------------------------------------------

    Amex has represented that immediately following the Mergers and the
Related Transactions, the NYSE Alternext US Board will have five
directors, one of which will be a Non-Affiliated Director selected by
NYSE Group from among the six Industry Governors serving on the Amex
Board immediately prior to the Mergers.\63\ The initial directors on
the NYSE Alternext US Board will serve one-year terms until their
successors are duly elected.\64\
---------------------------------------------------------------------------

    \63\ See Amex Notice, supra note 3, 73 FR at 46090.
    \64\ See Amex Notice, supra note 3, 73 FR at 46080.
---------------------------------------------------------------------------

    The NYSE Alternext US Board may create one or more committees
composed of NYSE Alternext US directors.\65\ As with the NYSE and NYSE
Arca (as well as other NYSE Euronext subsidiaries except NYSE
Regulation), Amex expects that the committees of the NYSE Euronext
board of directors will perform for NYSE Alternext US the board
committee functions relating to audit, governance, and
compensation.\66\ The NYSE Alternext US Board also may create
committees composed in whole or part of individuals who are not
directors.\67\ Amex proposes that the day-to-day business of NYSE
Alternext US be managed by the officers of NYSE Alternext US, appointed
by, and subject to the direction of, the NYSE Alternext US Board.\68\
NYSE Alternext US will have such officers as its Board may deem
advisable.\69\ For so long as NYSE Euronext directly or indirectly owns
all of the equity interest of NYSE Group and NYSE Group holds 100
percent of the limited liability company interest of NYSE Alternext US,
the Chief Executive Officer (``CEO'') of NYSE Alternext US will be a US
Person.\70\
---------------------------------------------------------------------------

    \65\ See Section 2.03(h) of the proposed NYSE Alternext US
Operating Agreement.
    \66\ Each of these NYSE Euronext committees is composed solely
of directors meeting the independence requirements of NYSE Euronext.
See NYSE/Euronext Order, supra note 32.
    \67\ For example, Amex notes that it currently anticipates that
NYSE Alternext US will retain the Committee on Securities, but will
not retain the Committee for Appointment and Approval of
Supplemental Registered Options Traders and Remote Registered
Options Traders, each a non-board committee of Amex. The Exchange,
along with NYSE Euronext, is currently evaluating whether other non-
board committees of Amex should be retained by NYSE Alternext US and
what changes to the NYSE Alternext US rules such decision may
require. See Amex Notice, supra note 3, 73 FR at 46091.
    \68\ See Amex Notice, supra note 3, 73 FR 46091.
    \69\ Id.
    \70\ See Section 2.04 of the proposed NYSE Alternext US
Operating Agreement.
---------------------------------------------------------------------------

    The Commission finds that the proposed governance structure of NYSE
Alternext US is consistent with the Act, and in particular that the
proposed composition of the NYSE Alternext US Board is consistent with
Section 6(b)(1) of the Act, which requires, among other things, that a
national securities exchange be organized to carry out the purposes of
the Act and comply with the requirements of the Act. The Commission
previously has stated its belief that the inclusion of public, non-

industry representatives on exchange oversight bodies is critical to an
exchange's ability to protect the public interest.\71\ Further, public
representatives help to ensure that no single group of market
participants has the ability to systematically disadvantage other
market participants through the exchange governance process. The
Commission believes that public directors can provide unique, unbiased
perspectives, which should enhance the ability of the NYSE Alternext US
Board to address issues in a non-discriminatory fashion and foster the
integrity of NYSE Alternext US. The Commission also finds that the
composition of the NYSE Alternext US Board will satisfy Section 6(b)(3)
of the Act,\72\ which requires that one or more directors be
representative of issuers and investors and not be associated with a
member of the exchange or with a broker or dealer.
---------------------------------------------------------------------------

    \71\ See Regulation of Exchanges and Alternative Trading
Systems, Securities Exchange Act Release No. 40760 (December 8,
1998), 63 FR 70844 (December 22, 1998). See also BATS Order, supra
note 28, 73 FR at 49498; NYSE/Arca Order, supra note 25, 71 FR at
11261, n.121 and accompanying text; Securities Exchange Act Release
Nos. 53128 (January 13, 2006), 71 FR 3550 (January 23, 2006) (File
No. 10-131) (``Nasdaq Exchange Registration Order'') at 3553, n.54
and accompanying text; and 44442 (June 18, 2001), 66 FR 33733, n.13
and accompanying text (June 25, 2001) (SR-PCX-01-03).
    \72\ 15 U.S.C. 78f(b)(3).
---------------------------------------------------------------------------

    The fair representation requirement in Section 6(b)(3) of the Act
is intended to give members a voice in the selection of the exchange's
directors and the administration of its affairs. The Commission finds
that the requirement that at least twenty percent of the NYSE Alternext
US Directors be Non-Affiliated Directors, and the process for selecting
such Non-Affiliated Directors, are designed to ensure the fair
representation of NYSE Alternext US members on the NYSE Alternext US
Board. The Commission believes that the method for selecting the Non-
Affiliated Directors allows members to have a voice in NYSE Alternext
US's use of its self-regulatory authority. As detailed above, the NYSE
Alternext US DCRC is composed solely of persons associated with NYSE
Alternext US members and is selected after appropriate consultation
with NYSE Alternext US members. In addition, the proposed NYSE
Alternext US Operating Agreement includes a process by which members
can directly petition and vote for representation on the NYSE Alternext
US Board. The Commission therefore finds that the process for selecting
the Non-Affiliated Directors to the NYSE Alternext US Board is
consistent with Section 6(b)(3) of the Act.\73\ The Commission notes
that this approach is also consistent with the NYSE's processes for
nomination and election of directors on the NYSE board.\74\
---------------------------------------------------------------------------

    \73\ Id.
    \74\ See Sec. 2.03 of the Second Amended and Restated Agreement
of New York Stock Exchange LLC (``NYSE Operating Agreement''). See
also NYSE/Arca Order, supra note 25, and NYSE/Euronext Order, supra
note 18.
---------------------------------------------------------------------------

C. NYSE Alternext US Rules

1. Floor Officials, Senior Floor Officials, Exchange Officials and
Senior Supervisory Officer
    The Floor Officials, Senior Floor Officials, and Exchange Officials
in place at Amex immediately prior to the Mergers \75\ will continue in
such capacity for the period prior to the planned relocation of the
NYSE Alternext US equities and options trading facilities to the NYSE
trading floor or the electronic trading platform of the NYSE or NYSE
Arca, as applicable.\76\ Currently, Rule 21 provides that each governor
of Amex that spends a substantial part of his time on the floor of Amex
shall serve as a Senior Floor Official, and that additional Senior
Floor Officials may be appointed \77\ from among the Exchange Officials
that spend a substantial part of their time on the floor.\78\ In
addition, the Vice Chairman of the Board currently serves as the Senior
Supervisory Officer on the floor of Amex (if the Vice Chairman does not
spend a substantial part of his time on the floor, one of the governors
serving as a Senior Floor Official shall be designated as the Senior
Supervisory Officer by the Chairman of the Board, subject to the
approval of the Board). Rule 21 also provides that Exchange Officials
that spend a substantial part of their time on the floor shall be
appointed as Floor Officials; further, such other persons that are
familiar with the floor may be appointed as Floor Officials.\79\
---------------------------------------------------------------------------

    \75\ Amex Rule 22 describes the authority and responsibilities
of Floor Officials, Senior Floor Officials, and the Senior
Supervisory Officer, which responsibilities are to generally promote
fair and orderly operations on the floor of Amex.
    \76\ NYSE Alternext US intends to relocate the NYSE Alternext US
cash equities and options trading facilities to the NYSE trading
floor or the electronic trading platform of NYSE or NYSE Arca, as
applicable. The Exchange has filed a proposed rule change to
implement the relocation of the trading of cash equities to the
facilities of the NYSE. See Securities Exchange Act Release No.
58265 (July 30, 2008), 73 FR 46075 (August 7, 2008) (SR-Amex-2008-
63). NYSE Alternext US will file a separate proposed rule change
with the Commission relating to the relocation of the trading of
standardized options.
    \77\ Such appointment is made by the Chairman of the Board (or
the CEO, if delegated by the Chairman), subject to the approval of
the Board, and in consultation with the Senior Supervisory Officer.
    \78\ Exchange Officials are members of Amex, and individuals
employed by or associated with a member organization in a senior
capacity, that are appointed by the Chairman of Amex (or the CEO, if
delegated by the Chairman), subject to the approval of the Board and
after seeking the advice of members. See Section 3 of Article II of
the Amex Constitution. This provision is proposed to be added to
Rule 21, except that the CEO (or his designee), or the Chief
Regulatory Officer (or his designee), will appoint the Exchange
Officials, subject to the approval of the Board and after
consultation with members. See proposed NYSE Alternext US Rule
21(d).
    \79\ Such appointments are made by the Chairman (or the CEO, if
delegated by the Chairman), subject to the approval of the Board.
---------------------------------------------------------------------------

    Amex proposes to amend Rule 21 to reflect the fact that the NYSE
Alternext US Board will not have a category of directors who are
required to spend a substantial portion of their time on the trading
floor. Any director that spends a substantial part of his time on the
floor shall still serve as a Senior Floor Official, and one of these
directors will be appointed as the Senior Supervisory Officer (rather
than the Vice-Chairman of Amex). However, if there is no director that
spends a substantial part of his time on the floor, one of the Senior
Floor Officials will be appointed as the Senior Supervisory Officer
(thus, an Exchange Official that spends a substantial part of his time
on the floor will be appointed as the Senior Supervisory Officer). Rule
21, as amended, also will allow qualified NYSE Alternext US employees
who spend a substantial portion of their time on the trading floor to
be appointed to serve as Floor Officials. Further, the CEO or Chief
Regulatory Officer (``CRO'') (or their respective designee), rather
than the Chairman of Amex, will be responsible for appointing such
officials and making other appointments under the rule (subject to the
other requirements of the rule).
    Amex also is proposing to amend Rule 21 and other rules referencing
Floor Governors to reflect the elimination of that category of member
on the Amex Board. Amex proposes that Senior Floor Officials replace
the Floor Governors in most cases when the reference to Floor Governor
relates to the approval or review of activities on the trading floor
and the chairing of certain committees (e.g., the Performance and
Allocation committees). In situations where a rule calls upon the Floor
Governors to advise the CEO of Amex in connection with floor facilities
and administration, Amex proposes that the Senior Supervisory Officer
replace the Floor Governors.

    The Commission finds that these changes are consistent with the
Act, including Section 6(b)(1) of the Act,\80\ which requires, among
other things, that a national securities exchange be organized to carry
out the purposes of the Act and comply with the requirements of the
Act. Amex stated that a Senior Floor Official has the same authority
and responsibilities as a Floor Governor with respect to matters that
arise on the Floor and require review or action by a Floor Governor or
Senior Floor Official,\81\ and that therefore, these changes do not
expand the authority or responsibilities of Senior Floor Officials.
Moreover, allowing qualified NYSE Alternext US employees to serve as
Floor Officials would broaden the pool of experienced individuals who
can participate in and supervise unusual trading situations on the
floor. The Commission notes that recently the NYSE has filed an
immediately effective rule change permitting the appointment of
qualified NYSE employees to act as Floor Governors.\82\
---------------------------------------------------------------------------

    \80\ 15 U.S.C. 78f(b)(1).
    \81\ See current Amex Rule 21(a).
    \82\ See Securities Exchange Act Release No. 57627 (April 4,
2008), 73 FR 19919 (April 11, 2008) (SR-NYSE-2008-19). Under the
NYSE rules, Floor Governors are more senior than Floor Officials,
and are authorized to take any action that a Floor Official can
take. See id. and NYSE Rule 46.
---------------------------------------------------------------------------

2. 86 Trinity Permits; Access to NYSE Alternext US
    Following the Mergers, all trading rights appurtenant to either
Regular Memberships or Options Principal Members existing immediately
prior to the Mergers will be cancelled.\83\ Physical and electronic
access to NYSE Alternext US's trading facilities will be made available
to individuals and organizations that obtain an 86 Trinity Permit.\84\
86 Trinity Permits will be made available by NYSE Alternext US to
persons and entities that apply and meet certain specified
requirements.\85\ 86 Trinity Permits will allow the holders to trade
products currently traded on Amex, including cash equities and
options.\86\
---------------------------------------------------------------------------

    \83\ See Amex Notice, supra note 3, 73 FR at 46088 and 46094. In
addition, the lessees will cease to have any trading rights under
any applicable leases. Id.
    \84\ NYSE Alternext US anticipates replacing 86 Trinity Permits
with equity trading licenses and options trading permits at a later
date following a proposed rule change filed with the Commission. See
Amex Notice, supra note 3, 73 FR at 46088, and proposed NYSE
Alternext US Rules 350 and 353.
    \85\ The requirements for 86 Trinity Permits will be the same as
the current requirements for memberships in the Amex Rules and such
requirements may be satisfied by persons or entities that were not
previously authorized to trade on Amex immediately prior to the
Mergers.See Amex Notice, supra note 3, 73 FR 46088, and proposed
NYSE Alternext US Rule 353.
    \86\ Id. At a later time, NYSE Alternext US anticipates
replacing 86 Trinity Permits with equity trading licenses and
options trading permits. See Amex Notice, supra note 3, 73 FR 46088.
NYSE Alternext US intends to relocate the NYSE Alternext US equities
and options trading facilities to the NYSE trading floor or the
electronic trading platform of NYSE or NYSE Arca, as applicable. Id.
Amex has filed a proposed rule change to implement the relocation of
the trading of equities to the facilities of the NYSE. See
Securities Exchange Act Release No. 58265 (July 30, 2008), 73 FR
46075 (August 7, 2008) (SR-Amex-2008-63). NYSE Alternext US will
file a separate proposed rule change with the Commission relating to
the relocation of the trading of standardized options. See Amex
Notice, supra note 3, 73 FR at 46088.
---------------------------------------------------------------------------

    To ensure continuity of trading following the Mergers, persons and
entities who were authorized to trade on Amex prior to the Mergers,
including (i) owners, lessees or nominees of Regular Memberships or
OPMs, (ii) limited trading permit holders, and (iii) associate members,
will be deemed to have satisfied applicable requirements necessary to
receive an 86 Trinity Permit. 86 Trinity Permits will authorize owners,
lessees or nominees of Regular Memberships or OPMs, limited trading
permit holders and associate members who were authorized to trade on
Amex prior to the Mergers, to trade the products which they were
previously authorized to trade and, subject to meeting the
qualifications currently in place for trading products which they
previously were not authorized to trade, to trade such other products.
    Because 86 Trinity Permits will be made available to all persons
authorized to trade on Amex prior to the Mergers (such persons will be
deemed to have satisfied the applicable requirements), as well as to
other persons that meet such requirements, and because such
requirements will be the same as the current requirements for
membership in the Amex rules, the Commission finds that proposed
procedures for NYSE Alternext US making available 86 Trinity Permits
will provide fair access to NYSE Alternext US and are consistent with
the Act and in particular with Sections 6(b)(2) and 6(b)(5) of the
Act.\87\
---------------------------------------------------------------------------

    \87\ 15 U.S.C. 78f(b)(2) and 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

3. Disciplinary Proceedings
    Amex is proposing to replace current Rule 345, the Rules of
Procedures in Disciplinary Matters, and the disciplinary provisions in
the Amex Constitution with proposed NYSE Alternext US Rules 475, 476
and 477.\88\ These new rules are substantially identical to the
disciplinary rules of the NYSE with certain changes necessary to apply
such rules to NYSE Alternext US and to reflect the application of the
current American Stock Exchange Sanctions Guidelines.
---------------------------------------------------------------------------

    \88\ Amex Rule 345, the Rules of Procedure in Disciplinary
Matters and the disciplinary rules in the current Amex Constitution
(``Legacy Disciplinary Procedural Rules'') will continue to apply to
pending disciplinary cases which have been formally commenced at or
prior to the time of the consummation of the Mergers and Related
Transactions. See Securities Exchange Act Release No. 58286 (August
1, 2008), 73 FR 46097 (August 7, 2008) (notice of SR-Amex-2008-64),
which proposed rule change the Commission is approving today. See
Securities Exchange Release No. 58678.
---------------------------------------------------------------------------

    Under proposed NYSE Alternext US Rules 476 and 477, initial
disciplinary hearings will be held before a Hearing Panel that will be
composed of at least three persons: A Hearing Officer,\89\ and at least
two members of the Hearing Board, at least one of whom shall be engaged
in securities activities differing from that of the respondent or, if
retired, was so engaged in differing activities at the time of
retirement. In any disciplinary proceeding involving activities on the
floor, no more than one of the persons serving on the Hearing Panel
shall be or, if retired, shall have been, active on the floor. A
Hearing Panel can include only one retired person.\90\
---------------------------------------------------------------------------

    \89\ The Chairman of NYSE Alternext US, subject to the approval
of the NYSE Alternext US Board, shall designate a Chief Hearing
Officer and one or more other Hearing Officers who shall have no
duties or functions relating to the investigation or preparation of
disciplinary matters and who shall be appointed annually and shall
serve as Hearing Officers at the pleasure of the NYSE Alternext US
Board. An individual cannot be a Hearing Officer (including the
Chief Hearing Officer) if he or she is, or within the last three
years was, a member, allied member, or registered or non-registered
employee of a member or member organization. See Amex Notice, supra
note 3, and proposed NYSE Alternext US Rule 475(b).
    \90\ The members of the Hearing Board will be appointed by the
Chairman of NYSE Alternext US subject to the approval of the NYSE
Alternext US Board. The Hearing Board will be composed of such
number of members and allied members of NYSE Alternext US who are
not members of the NYSE Alternext US Board, and registered employees
and non-registered employees of members and member organizations,
and such other persons as set forth in the rules as the Chairman
shall deem necessary. Former members, allied members, or registered
and non-registered employees of members and member organizations who
have retired from the securities industry can be appointed to the
Hearing Board within five years of their retirement. The members of
the Hearing Board shall be appointed annually and shall serve at the
pleasure of the NYSE Alternext US Board. Id.
---------------------------------------------------------------------------

    Any review of a disciplinary decision shall be conducted by the
NYSE Alternext US Board or the NYSE Regulation Committee, in the sole
discretion of the NYSE Alternext US Board. Upon review, and with the
advice of the NYSE Regulation Committee, the NYSE Alternext US Board,
by the affirmative vote of a majority of the NYSE Alternext US

Board then in office, may sustain any determination or penalty imposed,
or both, may modify or reverse any such determination, and may
increase, decrease, or eliminate any such penalty, or impose any
penalty permitted under the provisions of proposed NYSE Alternext US
Rule 476. Unless the NYSE Alternext US Board otherwise specifically
directs, the determination and penalty, if any, of the NYSE Alternext
US Board after review shall be final and conclusive subject to the
provisions for review of the Act.
    The NYSE Regulation Committee referenced in the proposed NYSE
Alternext US rules is the NYSE Regulation Committee for Review. The
NYSE Regulation Bylaws currently provide for the creation of a
Committee for Review that is charged with performing certain functions
with respect to the NYSE, including hearing appeals for disciplinary
decisions.\91\ Following the Mergers and Related Transactions, the
Committee for Review will also hear disciplinary appeals for NYSE
Alternext US.\92\ In connection therewith, the NYSE Regulation Bylaws
are being amended to provide that the Committee for Review will be
expanded to include at least four individuals who are associated with
member organizations of NYSE Alternext US. These new members of the
Committee for Review must include at least one of each of the
following:
---------------------------------------------------------------------------

    \91\ The Committee for Review is currently composed of (i)
directors of NYSE Regulation and (ii) at least three non-director
committee members associated with member organizations of the NYSE,
at least one of whom is associated with a member organization of the
NYSE that engages in a business involving substantial direct contact
with securities customers, at least one of whom is associated with a
member organization of the NYSE and registered as a specialist and
spends a substantial part of his or her time on the trading floor of
NYSE Market and at least one of whom is associated with a member
organization of the NYSE and spends a majority of his time on the
trading floor of NYSE Market and has as a substantial part of his
business the execution of transactions on the trading floor of NYSE
Market for other than his own account or the account of his member
organization, but is not registered as a specialist.
    \92\ Reviews of delisting determinations will be heard by the
same NYSE Alternext US committee as has been reviewing such matters
prior to the Mergers. See NYSE Notice, supra note 7.
---------------------------------------------------------------------------

     An individual associated with a member organization of
NYSE Alternext US that engages in a business involving substantial
direct contact with securities customers;
     An individual associated with a member organization of
NYSE Alternext US that is registered as a specialist and spends a
substantial part of his or her time on the trading floor of NYSE
Alternext US;
     An individual associated with a member organization of
NYSE Alternext US not registered as a specialist that spends a majority
of his or her time on the trading floor of NYSE Alternext US and has as
a substantial part of his business the execution of transactions on the
trading floor of NYSE Alternext US for other than his or her own
account or the account of his NYSE Alternext US member organization;
and
     An individual associated with a NYSE Alternext US Member
Organization not registered as a specialist that spends a majority of
his or her time on the trading floor of NYSE Alternext US and has as a
substantial part of his or her business the execution of transactions
on the trading floor of NYSE Alternext US for his own account or the
account of his or her NYSE Alternext US Member Organization.
    The Commission finds that the changes proposed to the disciplinary
procedures are consistent with the Act, in particular Sections 6(b)(6)
and 6(b)(7) of the Act.\93\ The Commission believes that NYSE Alternext
US rules will provide due process for members and member organizations
involved in any disciplinary proceeding, including notice of alleged
wrongdoing, an opportunity for a hearing, and avenues for appeal to the
NYSE Alternext Board in appropriate circumstances. The Commission
therefore believes that the proposed rules will provide fair procedures
for the disciplining of members and persons associated with members,
and will provide NYSE Alternext US with the ability to comply, and with
the authority 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 NYSE Alternext US.\94\ The
Commission also finds that NYSE Alternext US's disciplinary rules are
consistent with the fair representation requirements of Section 6(b)(3)
of the Act \95\ because NYSE Alternext US members will be represented
on the disciplinary panels and the Committee for Review.
---------------------------------------------------------------------------

    \93\ 15 U.S.C. 78f(b)(6) and 15 U.S.C. 78f(b)(7).
    \94\ See Section 6(b)(1) of the Act, 15 U.S.C. 78f(b)(1).
    \95\ 15 U.S.C. 78f(b)(3).
---------------------------------------------------------------------------

D. Affiliations Between NYSE Alternext US and Its Members

1. Limitations on Affiliation
    Amex proposes to adopt proposed NYSE Alternext US General and Floor
Rule 1(a), which provides that, without prior Commission approval, NYSE
Alternext US or any entity with which it is affiliated shall not,
directly or indirectly, acquire or maintain an ownership interest in a
member organization. In addition, a member organization shall not be or
become an affiliate of NYSE Alternext US, or an affiliate of any
affiliate of NYSE Alternext US.\96\ This rule is substantially similar
to current NYSE Rule 2B, which was initially approved by the Commission
in connection with the reorganization of the NYSE to be a wholly-owned
subsidiary of NYSE Group.\97\
    The Commission is concerned about potential for unfair competition
and conflicts of interest between an exchange's self-regulatory
obligations and its commercial interests that could exist if an
exchange were to otherwise become affiliated with one of its members,
as well as the potential for unfair competitive advantage that the
affiliated member could have by virtue of informational or operational
advantages, or the ability to receive preferential treatment.\98\ The
Commission believes that proposed NYSE Alternext US General and Floor
Rule 1(a) is designed to mitigate these concerns and is consistent with
the Act, particularly with Section 6(b)(1),\99\ which requires an
exchange to be so organized and have the capacity to carry out the
purposes of the Act.
---------------------------------------------------------------------------

    \96\ Proposed NYSE Alternext US General and Floor Rule 1(a) also
provides that it does not prohibit a member organization from
acquiring or holding an equity interest in NYSE Euronext that is
permitted by the ownership limitations contained in the NYSE
Euronext Charter.
    \97\ See NYSE/Arca Order, supra note 25. NYSE Rule 2B was later
amended to reflect that NYSE Group became a wholly-owned subsidiary
of NYSE Euronext. See also NYSE/Euronext Order, supra note 18, and
Amendment No. 4 to the Amex Notice, supra note 4.
    \98\ See, e.g., Securities Exchange Act Release No. 54170 (July
18, 2006), 71 FR 42149 (July 25, 2006) (SR-NASDAQ-2006-006) (order
approving Nasdaq's proposal to adopt Nasdaq Rule 2140, restricting
affiliations between Nasdaq and its members) (``Nasdaq/Member
Affiliation Rule'') and NYSE/Arca Order, supra note 25.
    \99\ 15 U.S.C. 78f(b)(1).
---------------------------------------------------------------------------

2. Exception to Limitation on Affiliation Between NYSE Alternext US and
Its Members
    NYSE Euronext currently owns a broker-dealer, Arca Securities that
is also a member organization of Amex. After the closing of the Mergers
and Related Transactions, NYSE Euronext's ownership of NYSE Alternext
US and Arca Securities would cause Arca Securities to be an affiliate
of NYSE Alternext US, and, absent prior Commission approval, would
violate the provisions in proposed NYSE Alternext US General and Floor
Rule 1(a) that prohibit: (i) NYSE Alternext US or any

entity with which it is affiliated from maintaining an ownership
interest in a member organization; and (ii) a NYSE Alternext US member
organization from being affiliated with NYSE Alternext US.
    Arca Securities operates as a facility of each of NYSE and NYSE
Arca that provides outbound routing from each exchange to other market
centers, including Amex, subject to certain conditions.\100\
Consequently, the operation of Arca Securities in this capacity is
subject, respectively, to NYSE and NYSE Arca oversight, as well as
Commission oversight. NYSE and NYSE Arca are each responsible for
ensuring that Arca Securities is operated consistent with Section 6 of
the Act and their respective rules. In addition, NYSE and NYSE Arca,
respectively, must file with the Commission rule changes and fees
relating to Arca Securities. Use of Arca Securities outbound routing
function is available to NYSE and NYSE Arca members, respectively. Use
of Arca Securities' routing function by such members is optional. Arca
Securities is a member of an SRO unaffiliated with NYSE or NYSE Arca,
respectively, which serves as its primary regulator.\101\
---------------------------------------------------------------------------

    \100\ See Amex Notice, supra note 3, at notes 53-58 and
accompanying text, and Amendment No. 4 to the Amex Notice, supra
note 4.
    \101\ Id.
---------------------------------------------------------------------------

    Recognizing that the Commission has previously expressed concern
regarding the potential for conflicts of interest in instances where a
member firm is affiliated with an exchange to which it is routing
orders,\102\ Amex requests that the Commission approve NYSE Alternext
US's affiliation with Arca Securities following the Mergers and Related
Transactions, subject to the following conditions and limitations:
---------------------------------------------------------------------------

    \102\ See Amex Notice, supra note 3, at notes 59 and 61 and
accompanying text, and Amendment No. 4 to the Amex Notice, supra
note 4.
---------------------------------------------------------------------------

     First, Amex states that NYSE, FINRA, and NYSE Alternext US
will enter into an agreement pursuant to Rule 17d-2 under the Act.\103\
If approved, pursuant to this agreement, FINRA will be allocated
regulatory responsibilities to review Arca Securities' compliance with
certain NYSE Alternext US Rules.\104\ Alternatively, if this agreement
has not become effective as of the time of the Mergers and Related
Transactions, FINRA will nevertheless review Arca Securities'
compliance with certain NYSE Alternext US Rules pursuant to the New
Multi-Party FINRA Regulatory Services Agreement.\105\ NYSE Alternext
US, however, would retain ultimate responsibility for enforcing its
rules with respect to Arca Securities.
---------------------------------------------------------------------------

    \103\ The Commission notes that this 17d-2 agreement is subject
to public notice and comment and prior Commission approval before it
can become effective.
    \104\ Amex also states that Arca Securities is subject to
independent oversight by FINRA, its Designated Examining Authority,
for compliance with financial responsibility requirements.
    \105\ See infra text accompanying note 117.
---------------------------------------------------------------------------

     Second, NYSE Regulation will monitor Arca Securities for
compliance with NYSE Alternext US's trading rules, and will collect and
maintain certain related information.\106\
---------------------------------------------------------------------------

    \106\ Specifically, NYSE Regulation ``will collect and maintain
the following information of which NYSE Regulation staff becomes
aware--namely, all alerts, complaints, investigations and
enforcement actions where Arca Securities (in its capacity as a
facility of NYSE Arca or the NYSE, routing orders to NYSE Alternext
US) is identified as a participant that has potentially violated
NYSE Alternext US or applicable Commission rules--in an easily
accessible manner so as to facilitate any review conducted by the
Commission's Office of Compliance Inspections and Examination.'' See
Amex Notice, supra note 3, at 46094.
---------------------------------------------------------------------------

     Third, Amex states that NYSE Regulation has agreed with
Amex that it will provide a report to NYSE Alternext US's CRO, on a
quarterly basis, that: (i) Quantifies all alerts (of which NYSE
Regulation is aware) that identify Arca Securities as a participant
that has potentially violated NYSE Alternext US or Commission rules,
and (ii) quantifies the number of all investigations that identify Arca
Securities as a participant that has potentially violated NYSE
Alternext US or Commission rules.\107\
---------------------------------------------------------------------------

    \107\ See Amendment No. 4 to the Amex Notice, supra note 4.
---------------------------------------------------------------------------

     Fourth, Amex proposes a rule that will require NYSE
Euronext, as the holding company owning both NYSE Alternext US and Arca
Securities, to establish and maintain procedures and internal controls
reasonably designed to ensure that Arca Securities does not develop or
implement changes to its system, based on non-public information
obtained regarding planned changes to the NYSE Alternext US systems as
a result of its affiliation with NYSE Alternext US, until such
information is available generally to similarly situated members of
NYSE Alternext US in connection with the provision of inbound order
routing to NYSE Alternext US.\108\
---------------------------------------------------------------------------

    \108\ See proposed NYSE Alternext US General and Floor Rule
1(b).
---------------------------------------------------------------------------

     Fifth, Amex proposes that routing from Arca Securities to
NYSE Alternext US, in Arca Securities' capacity as a facility of NYSE
and NYSE Arca, be authorized for a pilot period of twelve months.\109\
---------------------------------------------------------------------------

    \109\ See Amex Notice, supra note 3.
---------------------------------------------------------------------------

    In the past, the Commission has expressed concern that the
affiliation of an exchange with one of its members raises potential
conflicts of interest, and the potential for unfair competitive
advantage.\110\ Although the Commission continues to be concerned about
potential unfair competition and conflicts of interest between an
exchange's self-regulatory obligations and its commercial interest when
the exchange is affiliated with one of its members, for the reasons
discussed below, the Commission believes that it is consistent with the
Act to permit NYSE Euronext, which will be an affiliate of NYSE
Alternext US upon the closing of the Mergers, to continue to own Arca
Securities, subject to the conditions proposed by Amex. As described
above, the Commission also believes that it is consistent with the Act
for Arca Securities to become an affiliate of NYSE Alternext US
following the closing of the Mergers and Related Transactions, for the
limited purpose of providing routing to NYSE Alternext US from the NYSE
and NYSE Arca, subject to the conditions described above.\111\
---------------------------------------------------------------------------

    \110\ See, e.g., Nasdaq/Member Affiliation Rule, supra note 98
and NYSE/Arca Order, supra note 25.
    \111\ See supra notes 100 to 109 and accompanying text.
---------------------------------------------------------------------------

    Amex has proposed five conditions applicable to Arca Securities
routing activities, which are enumerated above. The Commission believes
that these conditions mitigate its concerns about potential conflicts
of interest and unfair competitive advantage. In particular, the
Commission believes that FINRA's oversight of Arca Securities,\112\
combined with NYSE Regulation's monitoring of Arca Securities'
compliance with NYSE Alternext US's trading rules and quarterly
reporting to NYSE Alternext US's CRO, will help to protect the
independence of NYSE Alternext US's regulatory responsibilities with
respect to Arca Securities. The Commission also believes that proposed
NYSE Alternext US General and Floor Rule 1(b) \113\ is designed to
ensure that Arca Securities cannot use any information advantage it may
have because of its affiliation with NYSE Alternext US. Furthermore,
the Commission believes that Amex's proposal to use Arca Securities for
inbound routing from NYSE and NYSE Arca, on a pilot basis, will provide
NYSE Alternext US and the Commission an opportunity to assess the
impact of any conflicts of interest from allowing an affiliated member
of NYSE Alternext US to route orders

inbound to NYSE Alternext US and whether such affiliation provides an
unfair competitive advantage.\114\
---------------------------------------------------------------------------

    \112\ This oversight will accomplished either through the 17d-2
agreement among NYSE, FINRA and NYSE Alternext, see supra note 103,
or through New Multi-Party FINRA RSA, see infra text accompanying
note 117.
    \113\ See supra note 108 and accompanying text.
    \114\ This approval is only for Arca Securities to route orders
to NYSE Alternext US in its capacity as a facility of the NYSE or
NYSE Arca, subject to the conditions discussed herein. See supra
note 100 and accompanying text. This approval does not include Arca
Securities providing outbound routing functions from NYSE Alternext
US to other markets.
---------------------------------------------------------------------------

E. Regulation of NYSE Alternext US

    Under the Act, an exchange must be organized and have the capacity
to carry out the purposes of the Act.\115\ Specifically, an exchange
must be able to enforce compliance by its members and persons
associated with its members with federal securities laws and the rules
of the exchange.\116\
---------------------------------------------------------------------------

    \115\ See Section 6(b)(1) of the Act, 15 U.S.C. 78f(b)(1).
    \116\ Id.
---------------------------------------------------------------------------

    Amex has proposed several measures designed to ensure that NYSE
Alternext US can meet its obligations under the Act and that its
regulatory functions are independent of its market operations and other
commercial interests. First, NYSE Alternext US will enter into a
regulatory contract with NYSE Regulation (``NYSE Regulation RSA''),
under which NYSE Alternext US will contract with NYSE Regulation to
perform all of NYSE Alternext US's regulatory functions on NYSE
Alternext US's behalf. However, FINRA may perform some of the
regulatory functions contracted out to NYSE Regulation pursuant to a
separate multi-party regulatory services agreement by and among NYSE
Regulation, NYSE Group, FINRA, and NYSE Alternext US (``New Multi-Party
FINRA RSA'').\117\ Notwithstanding these regulatory contracts, NYSE
Alternext US will retain ultimate legal responsibility for the
regulation of its members and its market. NYSE Alternext US also will
retain the authority to direct NYSE Regulation, FINRA, or any other SRO
that provides regulatory services to take any action necessary to
fulfill NYSE Alternext US's statutory and self-regulatory
obligations.\118\ In addition, the NYSE Alternext US Board will appoint
a CRO, who will be an officer of NYSE Alternext US and will report
directly to the NYSE Alternext US Board.\119\
---------------------------------------------------------------------------

    \117\ See proposed NYSE Alternext US Rule 1(b) and Amendment No.
4 to the Amex Notice, supra note 4. In effect, FINRA will be a
``sub-contractor'' for some of the regulatory functions that would
otherwise be performed by NYSE Regulation. Pursuant to the
applicable provisions of the Freedom of Information Act, 5 U.S.C.
552, and Commission regulations thereunder, 17 CFR 200.83, Amex has
requested confidential treatment for the NYSE Regulation RSA and the
New Multi-Party FINRA RSA.
    \118\ See proposed NYSE Alternext US Rule 1B.
    \119\ See Amex Notice, supra note 3.
---------------------------------------------------------------------------

    Finally, NYSE Euronext has agreed to provide adequate funding to
NYSE Regulation to conduct its regulatory activities with respect to
NYSE, NYSE Arca and, from and after closing of the transaction, NYSE
Alternext US.\120\ In addition, NYSE Alternext US will not use any
regulatory fees, fines or penalties collected by NYSE Regulation for
commercial purposes.\121\
---------------------------------------------------------------------------

    \120\ Id., 73 FR at 46095.
    \121\ See Section 4.05 of the proposed NYSE Alternext US
Operating Agreement.
---------------------------------------------------------------------------

    The Commission finds that Amex's proposed regulatory structure is
consistent with the Act, including Section 6(b)(1) of the Act,\122\
which requires, among other things, that a national securities exchange
be organized to carry out the purposes of the Act and comply with the
requirements of the Act. The Commission believes that it is consistent
with the Act to allow NYSE Alternext US to contract with NYSE
Regulation and FINRA to perform its regulatory functions, including its
examination, enforcement, and disciplinary functions.\123\ These
functions are fundamental elements to a regulatory program, and
constitute core self-regulatory functions. It is essential to the
public interest and the protection of investors that these functions
are carried out in an exemplary manner, and the Commission believes
that NYSE Regulation and FINRA have the expertise and experience to
perform these functions on behalf of NYSE Alternext US.\124\
---------------------------------------------------------------------------

    \122\ 15 U.S.C. 78f(b)(1).
    \123\ See, e.g., Regulation of Exchanges and Alternative Trading
Systems, Securities Exchange Act Release No. 40760 (December 8,
1998), 63 FR 70844 (December 22, 1998) (``Regulation ATS Release'').
See also Securities Exchange Act Release 50122 (July 29, 2004), 69
FR 47962 (August 6, 2004) (SR-Amex-2004-32) (order approving rule
that allowed Amex to contract with another SRO for regulatory
services) (``Amex Regulatory Services Approval Order''); NOM
Approval Order, supra note 27; and Nasdaq Exchange Registration
Order, supra note 71.
    \124\ See Amex Regulatory Services Approval Order, supra note
123; NOM Approval Order, supra note 27 and Nasdaq Exchange
Registration Order, supra note 71. The Commission notes that the
NYSE Regulation RSA and the New Multi-Party FINRA RSA are not before
the Commission and, therefore, the Commission is not acting on them.
---------------------------------------------------------------------------

    At the same time, NYSE Alternext US, unless relieved by the
Commission of its responsibility,\125\ is obligated as an SRO to
enforce compliance with the securities laws and its rules and has
primary liability for self-regulatory failures. The Commission believes
that Amex's proposal to appoint a CRO reporting to the NYSE Alternext
US Board will further NYSE Alternext US's ability to satisfy these
self-regulatory obligations consistent with Section 6(b)(1) of the
Act.\126\ NYSE Regulation and FINRA will be performing regulatory
functions on NYSE Alternext US's behalf pursuant to a contract. In
performing these functions, NYSE Regulation and FINRA may bear
liability for causing or aiding and abetting the failure of NYSE
Alternext US to satisfy its regulatory obligations.\127\
---------------------------------------------------------------------------

    \125\ See Section 17(d)(1) of the Act and Rule 17d-2 thereunder,
15 U.S.C. 78q(d)(1) and 17 CFR 240.17d-2.
    \126\ 15 U.S.C. 78f(b)(1).
    \127\ For example, if failings by FINRA or NYSE Regulation have
the effect of leaving NYSE Alternext US in violation of any aspect
of NYSE Alternext US's self-regulatory obligations, NYSE Alternext
US would bear direct liability for the violation, while FINRA or
NYSE Regulation may bear liability for causing or aiding and
abetting the violation. See, e.g., Nasdaq Exchange Registration
Order, supra note 71, and ISE Exchange Registration Order, supra
note 26.
---------------------------------------------------------------------------

    The Commission notes that upon the consummation of the Mergers and
the Related Transactions, NYSE Alternext US will no longer have a
Regulatory Oversight Committee (``ROC''). Instead, NYSE Alternext US
will contract with NYSE Regulation to perform all of its regulatory
functions. The Commission believes that it is consistent with the Act
for NYSE Alternext US to eliminate its ROC and instead contract with
NYSE Regulation to perform its regulatory functions because the
governance of NYSE Regulation will provide a comparable level of
independence that a ROC would provide. In particular, all directors on
the board of NYSE Regulation (other than its CEO) are, and will be,
required to be independent of management of NYSE Euronext and its
subsidiaries, as well as of NYSE, NYSE Arca, and NYSE Alternext US
members and listed companies. In addition, a majority of the members of
the NYSE Regulation board must be directors that are not also directors
of NYSE Euronext.\128\
---------------------------------------------------------------------------

    \128\ See Article III, Section 1 of the proposed Third Amended
and Restated Bylaws of NYSE Regulation.
---------------------------------------------------------------------------

    Finally, the Commission believes that NYSE Euronext's commitment to
provide adequate funding to NYSE Regulation to conduct its regulatory
activities is designed to ensure that NYSE Alternext US can perform its
obligations under the Act.

F. Undertakings

    Amex requests to be relieved from the undertakings adopted by the
Amex Board on December 4, 2004 and approved by the Commission as part
of an Amex proposed rule change filed

under Section 19 of the Act (``Undertakings'').\129\ Section 1 of the
Undertakings, among other things, prohibits Amex from terminating its
current regulatory services agreement with FINRA (``FINRA RSA'') \130\
unless on or prior to the date of such termination, Amex has entered
into an alternative arrangement relating to the provision of regulatory
services that has been approved by the Commission. Section 2 of the
Undertakings requires Amex and its CRO to use reasonable efforts to
cause the staff of FINRA responsible for providing services under the
FINRA RSA, to periodically confer with staff of the Division of Trading
and Markets and the Office of Compliance Inspections and Examinations
of the Commission regarding the status of Amex's regulatory
program.\131\ Finally, Section 3 of the Undertakings mandates Amex to
provide to the Director of the Division of Trading and Markets certain
financial statements certified by Amex's chief financial officer and
reviewed by Amex's independent accountants, together with evidence of
such review at specified intervals. Section 3 of the Undertaking also
requires the provision of other financial information, including
schedules reflecting the available borrowings under each of Amex's
credit facilities and computations of compliance with all financial
covenants contained therein, projected cash and working capital trends,
and material off-balance sheet liabilities.\132\
---------------------------------------------------------------------------

    \129\ See Amex Order, supra note 14.
    \130\ Amex is currently a party to a regulatory services
agreement with FINRA under which FINRA performs market and trade
practice surveillance and analysis, financial and operational
regulation, options sales practice regulation, enforcement
investigations and disciplinary processes and dispute resolution
services for Amex.
    \131\ For more detail on Sections 1 and 2 of the Undertakings,
see Amex Order, supra note 14.
    \132\ For more detail on Section 3 of the Undertakings, see Amex
Order, supra note 14.
---------------------------------------------------------------------------

    The Commission believes it is consistent with the Act for Amex to
be relieved from its Undertakings. With respect to Sections 1 and 2 of
the Undertakings, the Commission believes that NYSE Alternext US
arrangements for contracting out regulatory services through the NYSE
Regulation RSA and the New Multi-Party FINRA RSA \133\ is comparable to
the FINRA RSA and is designed to ensure that NYSE Alternext US
regulatory program is conducted in a manner that is consistent with the
Act. Further, the Commission finds that it is no longer necessary at
this time for Amex to provide certain financial information on a
regular basis to the Director of the Division of Trading and Markets.
---------------------------------------------------------------------------

    \133\ See supra note 117 and accompanying text, and Amendment
No. 4 to the Amex Notice, supra note 4.
---------------------------------------------------------------------------

G. NYSE Euronext Independence Policy

    In its proposed rule change, the NYSE proposes to amend the
definitions of ``member'' and ``member organization'' in the NYSE
Euronext Independence Policy to refer to relevant sections of the Act
\134\ instead of the different rules of the NYSE, NYSE Arca, and NYSE
Alternext US. The NYSE also proposes to reduce the ``look-back'' period
with respect to directors' relationships with members of the NYSE and
NYSE Arca (which following the Mergers will apply equally to NYSE
Alternext US) from three years to one year. In addition, the NYSE is
proposing to delete a restriction stating that a director is not
independent if such director is employed by or affiliated with a non-
member broker-dealer, thus allowing independent directors of NYSE, NYSE
Arca, and NYSE Alternext US to be employed by or affiliated with non-
member broker dealers.\135\
---------------------------------------------------------------------------

    \134\ Member is defined as set forth in Sections 3(a)(3)(A)(i),
3(a)(3)(A)(ii), 3(a)(3)(A)(iii) and 3(a)(3)(A)(iv) of the Act, 15
U.S.C. 78c(a)(3)(A).
    \135\ NYSE Euronext also proposes some technical changes to the
independence policy: (i) The deletion of a provision relating to a
transition period for non-US board directors of NYSE Euronext
because it is obsolete; and (ii) all references to NYSE, NYSE Arca,
and NYSE Alternext US shall mean each of those entities or its
successor.
---------------------------------------------------------------------------

    The Commission finds that these changes are consistent with the
Act. The proposed changes to the definition of ``member'' and ``member
organization'' will harmonize the use of those terms across all three
SROs owned by NYSE Euronext for purposes of determining the
independence of NYSE Euronext directors (and the directors of its
subsidiary SROs). The Commission believes that a one year ``look-back''
period, together with the other criteria for determining the
independence of NYSE Euronext directors will continue to provide for
director independence consistent with the Act.\136\ Further, the
Commission believes that allowing directors to be affiliated with non-
member broker-dealers is consistent with the Act because NYSE Alternext
US will not have regulatory oversight over such broker-dealers and thus
the member conflicts that the independence requirements are designed to
address are not raised.\137\
---------------------------------------------------------------------------

    \136\ See Independence Policy of the NYSE Euronext Board of
Directors, Exhibit 5B to the NYSE Notice, supra note 7.
    \137\ See e.g., Article II, Sections 2(b) and 3(a) of the bylaws
and Paragraph 505 of the certificate of incorporation of the Chicago
Stock Exchange, Inc; Sections 1.1 of the bylaws of the National
Stock Exchange, Inc.
---------------------------------------------------------------------------

IV. Accelerated Approval of SR-Amex-2008-62

    The Commission finds good cause, pursuant to Section 19(b)(2) of
the Act,\138\ for approving the proposal, as modified by Amendment Nos.
1 and 4, prior to the thirtieth day after the date of publication of
notice of filing of Amendment No. 4 in the Federal Register.\139\
---------------------------------------------------------------------------

    \138\ 15 U.S.C. 78s(b)(2).
    \139\ Pursuant to Section 19(b)(2) of the Act, 15 U.S.C.
78s(b)(2), the Commission may not approve any proposed rule change,
or amendment thereto, prior to the thirtieth day after the date of
publication of the notice thereof, unless the Commission finds good
cause for so doing.
---------------------------------------------------------------------------

    In Amendment No. 4, Amex proposes to reflect those changes to the
Amex Rules that had occurred since the filing of the proposed rule
change that are necessary to accurately describe the current Amex Rules
and show the proposed changes, as applicable. Amex also proposes to
make certain clarifying, technical and non-substantive changes to the
text of the proposed rule change. Amendment No. 4 also includes a
revised description of the parties to the New Multi-Party FINRA RSA,
and a revised description of the merger between the current parent
companies of Amex.\140\ In addition, in Amendment No. 4, Amex modifies
its description of Arca Securities to state, among other things, that
with respect to its oversight of Arca Securities after the Mergers and
Related Transactions, NYSE Regulation has agreed to provide NYSE
Alternext US's CRO quarterly reports related to oversight of Arca
Securities, which operates as a facility of each of NYSE and NYSE Arca
that will provide outbound routing from each exchange to NYSE Alternext
US, subject to certain conditions.\141\ As stated above,\142\ the
Commission believes that such reports, along with other measures, will
help to protect the independence of NYSE Alternext US's regulatory
responsibilities with respect to Arca Securities from conflicts of
interest that may arise as a result of NYSE Alternext US's affiliation
with Arca Securities. The Commission does not believe that these
changes have any substantive impact on the proposed changes.
---------------------------------------------------------------------------

    \140\ As noted supra in note 4, this change will not affect the
final outcome of the Mergers through which NYSE Alternext US will
become a subsidiary of NYSE Euronext.
    \141\ See supra, notes 100 to 109 and accompanying text.
    \142\ Id.
---------------------------------------------------------------------------

    Accordingly, the Commission finds good cause for approving the
Amex's proposal, as modified by Amendment Nos. 1 and 4, on an
accelerated basis, pursuant to Section 19(b)(2) of the Act.

V. Solicitation of Comments

    Interested persons are invited to submit written data, views, and
arguments concerning Amendment No. 4 to File No. SR-Amex-2008-62,
including whether Amendment No. 4 is consistent with the Act. Comments
may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://
www.sec.gov/rules/sro.shtml); or
     Send an e-mail to<EMAIL_ADDRESS>Please include
File Number SR-Amex-2008-62 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, and 100 F Street, NE., Washington, DC 20549-
1090.

All submissions should refer to File Number SR-Amex-2008-62. This file
number should be included on the subject line if e-mail is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/
sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for inspection and
copying in the Commission's Public Reference Room, 100 F Street, NE.,
Washington, DC 20549, on official business days between the hours of 10
a.m. and 3 p.m. Copies of such filing also will be available for
inspection and copying at the principal office of Amex. All comments
received will be posted without change; the Commission does not edit
personal identifying information from submissions. You should submit
only information that you wish to make available publicly. All
submissions should refer to File Number SR-Amex-2008-62 and should be
submitted on or before October 24, 2008.

VI. Conclusion

    For the foregoing reasons, the Commission finds that the proposed
rule changes are 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,\143\ that the proposed rule change (SR-Amex-2008-62), as modified
by Amendment Nos. 1 and 4 thereto, be and hereby is approved on an
accelerated basis.
---------------------------------------------------------------------------

    \143\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------

    It is therefore further ordered, pursuant to Section 19(b)(2) of
the Act,\144\ that the proposed rule change (SR-NYSE-2008-60), as
modified by Amendment No. 1 thereto, be and hereby is approved.
---------------------------------------------------------------------------

    \144\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------

    Although the Commission's approval of the proposed rule changes of
Amex (SR-Amex-2008-62) and NYSE (SR-NYSE-2008-60) is final and the
proposed rules are therefore effective, it is further ordered that the
proposed rule changes will not become operative until the NYSE
Regulation RSA and the New Multi-Party FINRA RSA are executed.

    By the Commission.
Florence E. Harmon,
Acting Secretary.
 [FR Doc. E8-23313 Filed 10-2-08; 8:45 am]

BILLING CODE 8011-01-P