[Federal Register Volume 77, Number 199 (Monday, October 15, 2012)]
[Notices]
[Pages 62541-62547]
[FR Doc No: 2012-25278]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68011; File No. SR-NYSE-2012-49]

Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing of Proposed Rule Change, as Modified by Amendment
No.1, Amending Sections 303A.00, 303A.02(a) and 303A.05 of the
Exchange's Listed Company Manual To Comply With the Requirements of
Securities and Exchange Commission Rule 10C-1

October 9, 2012.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that on September 25, 2012, New York Stock Exchange LLC (``NYSE''
or the ``Exchange'') filed with the Securities and Exchange Commission
(``SEC'' or ``Commission'') the proposed rule change as described in
Items I, II and III below, which filing was amended and replaced in its
entirety by Amendment No. 1 thereto on October 1, 2012, and which Items
have been prepared by the Exchange. The Commission is publishing this
notice to solicit comments on the proposed rule change from interested
persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of the
Substance of the Proposed Rule Change

    The Exchange proposes to amend Sections 303A.00, 303A.02(a) and
303A.05 of the Exchange's Listed Company Manual (the ``Manual'') to
comply with the requirements of Securities and Exchange Commission
(``Commission'' or ``SEC'') Rule 10C-1.\4\ The text of the proposed
rule change is available on the Exchange's Web site at www.nyse.com, at
the principal office of the Exchange, and at the Commission's Public
Reference Room.
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    \4\ 17 CFR 240.10C-1.
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II. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change

1. Purpose
    This Amendment No. 1 to SR-NYSE-2012-49 (the ``filing'') amends and
replaces in its entirety the Filing as originally submitted on
September 25, 2012. Amendment No. 1 corrects a single error in the rule
text in Exhibit 5 as originally filed. The error was in Section 303A.00
under the heading ``Transition Periods for Compensation Committee
Requirements.''
    The Exchange proposes to amend Sections 303A.00, 303A.02(a) and
303A.05 of the Manual to comply with the requirements of SEC Rule 10C-
1.
    The proposed changes to Sections 303A.00, 303A.02(a) and 303A.05
will not become operative until July 1, 2013. Consequently, the
existing text of these sections will remain in the Manual until June
30, 2013 and will be removed immediately thereafter.\5\ Upon approval
of this filing, the amended provisions of those sections will be
included in the Manual with introductory text indicating that the
revised text does not become operative until July 1, 2013.
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    \5\ The Commission notes that the Exchange will have to comply
with Section 19(b) of the Act.
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    Section 952 of the Dodd-Frank Wall Street Reform and Consumer
Protection Act of 2010 (the ``Dodd-Frank Act'') \6\ added Section 10C
to the Securities Exchange Act of 1934.\7\ Section 10C

requires the Commission to adopt rules directing the national
securities exchanges and national securities associations to prohibit
the listing of any equity security of an issuer that is not in
compliance with Section 10C's compensation committee and compensation
adviser requirements. On June 20, 2012, to comply with the requirements
of Section 10C, the Commission adopted new Rule 10C-1, which directs
the national securities exchanges to adopt listing rules effectuating
the compensation committee and compensation adviser requirements of
Section 10C.
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    \6\ Public Law 111-203, 124 Stat. 1900 (2010).
    \7\ 15 U.S.C. 78j-3.
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Compensation Committee Director Independence Requirement
    In adopting independence requirements for compensation committee
members, Rule 10C-1(b)(1)(ii) \8\ requires the exchanges to consider
relevant factors including, but not limited to: (i) The source of the
director's compensation, including any consulting, advisory or other
compensatory fees paid by the listed company; and (ii) whether the
director has an affiliate relationship with the company, a subsidiary
of the company or an affiliate of a subsidiary of the company. Rule
10C-1(a)(4) \9\ requires that the rule filing submitted to the SEC by
each exchange in connection with the adoption of the rules required by
Rule 10C-1 must include a review of whether and how the proposed
listing standards satisfy the requirements of the final rule; a
discussion of the exchange's consideration of factors relevant to
compensation committee independence; and the definition of independence
applicable to compensation committee members that the exchange proposes
to adopt or retain in light of such review.
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    \8\ 17 CFR 240.10C-1(b)(1)(ii).
    \9\ 17 CFR 240.10C-1(a)(4).
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    The Exchange's director independence standards are set forth in
Section 303A.02. Section 303A.02(a) provides that no director qualifies
as ``independent'' unless the board of directors affirmatively
determines that the director has no material relationship with the
listed company (directly or as a partner, shareholder or officer of an
organization that has a relationship with the company).\10\ In
addition, Section 303A.02(b) provides that a director may not be deemed
to be independent if such director has a relationship with the listed
company which violates any one of five ``bright line'' tests.\11\
Section 303A.02(b) will continue to be applicable to independence
determinations in relation to compensation committee service, as
compensation committee members will be required to be independent under
the Exchange's general board independence standards set forth in
Section 303A.02, in addition to the independence requirements proposed
specifically for compensation committee service.
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    \10\ Commentary to Section 303A.02(a) notes that it is not
possible to anticipate, or explicitly to provide for, all
circumstances that might signal potential conflicts of interest, or
that might bear on the materiality of a director's relationship to a
listed company (references to ``listed company'' would include any
parent or subsidiary in a consolidated group with the listed
company). Accordingly, the commentary states that it is best that
boards making ``independence'' determinations broadly consider all
relevant facts and circumstances. In particular, the Exchange
believes that, when assessing the materiality of a director's
relationship with the listed company, the board should consider the
issue not merely from the standpoint of the director, but also from
that of persons or organizations with which the director has an
affiliation. The Exchange does not view the ownership of even a
significant amount of stock, by itself, as a bar to an independence
finding.
    \11\ The following are the ``bright line'' tests set forth in
Section 303A.02(b): (i) The director is, or has been within the last
three years, an employee of the listed company, or an immediate
family member is, or has been within the last three years, an
executive officer, of the listed company; (ii) The director has
received, or has an immediate family member who has received, during
any twelve-month period within the last three years, more than
$120,000 in direct compensation from the listed company, other than
director and committee fees and pension or other forms of deferred
compensation for prior service (provided such compensation is not
contingent in any way on continued service); (iii) (A) The director
is a current partner or employee of a firm that is the listed
company's internal or external auditor; (B) the director has an
immediate family member who is a current partner of such a firm; (C)
the director has an immediate family member who is a current
employee of such a firm and personally works on the listed company's
audit; or (D) the director or an immediate family member was within
the last three years a partner or employee of such a firm and
personally worked on the listed company's audit within that time;
(iv) The director or an immediate family member is, or has been
within the last three years, employed as an executive officer of
another company where any of the listed company's present executive
officers at the same time serves or served on that company's
compensation committee; (v) The director is a current employee, or
an immediate family member is a current executive officer, of a
company that has made payments to, or received payments from, the
listed company for property or services in an amount which, in any
of the last three fiscal years, exceeds the greater of $1 million,
or 2% of such other company's consolidated gross revenues. For
purposes of Sections 303A.01, 303A.03, 303A.04, 303A.05 and 303A.09,
a director of a business development company is considered to be
independent if he or she is not an ``interested person'' of the
company, as defined in Section 2(a)(19) of the Investment Company
Act of 1940.
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    The Exchange proposes to amend Section 303A.02(a) of the Manual to
adopt proposed Section 303A.02(a)(ii),\12\ which would require that, in
affirmatively determining the independence of any director who will
serve on the compensation committee of the listed company's board of
directors, the board of directors must consider all factors
specifically relevant to determining whether a director has a
relationship to the listed company which is material to that director's
ability to be independent from management in connection with the duties
of a compensation committee member, including, but not limited to, the
two factors explicitly enumerated in Rule 10C-1(b)(ii). When
considering the sources of a director's compensation in determining his
independence for purposes of compensation committee service, commentary
to proposed Section 303A.02(a)(ii) provides that the board should
consider whether the director receives compensation from any person or
entity that would impair his ability to make independent judgments
about the listed company's executive compensation. Similarly, when
considering any affiliate relationship a director has with the company,
a subsidiary of the company, or an affiliate of a subsidiary of the
company, in determining his independence for purposes of compensation
committee service, the proposed commentary provides that the board
should consider whether the affiliate relationship places the director
under the direct or indirect control of the listed company or its
senior management, or creates a direct relationship between the
director and members of senior management, in each case of a nature
that would impair his ability to make independent judgments about the
listed company's executive compensation.
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    \12\ As proposed, the current text of Section 303.02(a) would
become Section 303A.02(a)(i).
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    The Exchange does not propose to adopt any specific numerical tests
with respect to the factors specified in proposed Section
303A.02(a)(ii) or to adopt a requirement to consider any other specific
factors. In particular, the Exchange does not intend to adopt an
absolute prohibition on a board making an affirmative finding that a
director is independent solely on the basis that the director or any of
the director's affiliates are shareholders owning more than some
specified percentage of the listed company. In the adopting release for
Rule 10C-1 (the ``Adopting Release''),\13\ the SEC recognized that the
exchanges might determine that not all affiliate relationships would
adversely affect a director's ability to be independent from
management.\14\ Consistent with the views of commenters on the SEC's
rules as originally proposed, the Exchange believes that--rather than
adversely

affecting a director's ability to be independent from management as a
compensation committee member--share ownership in the listed company
aligns the director's interests with those of unaffiliated
shareholders, as their stock ownership gives them the same economic
interest in ensuring that the listed company's executive compensation
is not excessive.
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    \13\ Release Nos. 33-9330; 34-67220 (June 20, 2012); 77 FR 38422
(June 27, 2012).
    \14\ See Adopting Release at 38428.
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    The Exchange believes that its existing ``bright line''
independence standards as set forth in Section 303A.02(b) of the Manual
are sufficiently broad to encompass the types of relationships which
would generally be material to a director's independence for
compensation committee service. In addition, Section 303A.02(a) already
requires the board to consider any other material relationships between
the director and the listed company or its management that are not the
subject of ``bright line'' tests in Section 303A.02(b). The Exchange
believes that these requirements with respect to general director
independence, when combined with the specific considerations required
by proposed Section 303A.02(a)(ii), represent an appropriate standard
for compensation committee independence that is consistent with the
requirements of Rule 10C-1.
Compensation Committee Advisers
    Rule 10C-1(b)(2) \15\ requires exchange rules to mandate that
compensation committees must have broad authority to engage advisers to
assist in their performance of the committee's functions. Specifically,
exchange rules must mandate that:
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    \15\ 17 CFR 240.10C-1(b)(2).
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    (i) The compensation committee may, in its sole discretion, retain
or obtain the advice of a compensation consultant, independent legal
counsel or other adviser; and
    (ii) The compensation committee shall be directly responsible for
the appointment, compensation and oversight of the work of any
compensation consultant, independent legal counsel and other adviser
retained by the compensation committee.
    Rule 10C-1(b)(3) \16\ requires exchange rules to mandate that the
listed company must provide for appropriate funding, as determined by
the compensation committee, for payment of reasonable compensation to a
compensation consultant, independent legal counsel or any other adviser
retained by the compensation committee.
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    \16\ 17 CFR 240.10C-1(b)(3).
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    The required powers of the compensation committee under Rule 10C-
1(b)(2) and (3) as set forth above are in significant part already
required by the NYSE's existing compensation committee listing
standard, as they are required elements of the compensation committee
charter as set forth in Section 303A.05(b). In the interests of clarity
and emphasis, the Exchange proposes to adopt the requirements specified
in Rule 10C-1(b)(2) and (3) verbatim as a proposed new subsection (c)
of Section 303A.05. The Exchange proposes to remove the comparable
requirements currently in Section 303A.05(b) commentary and replace
them with a provision stating that the compensation committee charter
must provide that the committee has all of the powers specified in new
subsection (c).
Compensation Adviser Independence Factors
    Rule 10C-1(b)(4) \17\ provides that the compensation committee of a
listed issuer may select a compensation consultant, legal counsel or
other adviser to the compensation committee only after taking into
consideration the following factors, as well as any other factors
identified by the relevant national securities exchange or national
securities association in its listing standards:
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    \17\ 17 CFR 240.10C-1(b)(4).
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    (i) The provision of other services to the listed company by the
person that employs the compensation consultant, legal counsel or other
adviser;
    (ii) The amount of fees received from the listed company by the
person that employs the compensation consultant, legal counsel or other
adviser, as a percentage of the total revenue of the person that
employs the compensation consultant, legal counsel or other adviser;
    (iii) The policies and procedures of the person that employs the
compensation consultant, legal counsel or other adviser that are
designed to prevent conflicts of interest;
    (iv) Any business or personal relationship of the compensation
consultant, legal counsel or other adviser with a member of the
compensation committee;
    (v) Any stock of the listed company owned by the compensation
consultant, legal counsel or other adviser; and
    (vi) Any business or personal relationship of the compensation
consultant, legal counsel, other adviser or the person employing the
adviser with an executive officer of the listed company.
    Accordingly, the Exchange proposes to include in proposed Section
303A.05(c) a provision specifying that, before engaging an adviser, the
compensation committee must consider the factors enumerated above. As
proposed, Section 303A.05(c) would not include any specific additional
factors for consideration, as the Exchange believes that the list
included in Rule 10C-1(b)(4) is very comprehensive and the proposed
listing standard would also require the compensation committee to
consider any other factors that would be relevant to the adviser's
independence from management.
    Consistent with Rule 10C-1(b)(2)(iii),\18\ the Exchange proposes to
include in Section 303A.05(c) an explicit statement that nothing in
Section 303A.05(c) shall be construed: (A) To require the Compensation
Committee to implement or act consistently with the advice or
recommendations of the compensation consultant, independent legal
counsel or other adviser to the compensation committee; or (B) to
affect the ability or obligation of the Compensation Committee to
exercise its own judgment in fulfillment of the duties of the
Compensation Committee (or, if applicable, the independent directors).
In addition, as provided by Rule 10C-1(b)(4), proposed in [sic] Section
303A.05(c) would specify that the compensation committee need not
engage in an analysis of the independence factors before consulting
with or obtaining advice from in-house legal counsel.
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    \18\ 17 CFR 240.10C-1(b)(2)(iii).
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Cure Periods
    Rule 10C-1(a)(3) \19\ requires that exchange rules must include
appropriate procedures for a listed issuer to have a reasonable
opportunity to cure any non-compliance with the provisions of exchange
rules adopted as required by Rule 10C-1. In addition, Rule 10C-1(a)(3)
states that such rules may provide that if a member of a compensation
committee ceases to be independent in accordance with the requirements
of Rule 10C-1 for reasons outside the member's reasonable control, that
person, with notice by the issuer to the exchange, may remain a
compensation committee member of the listed issuer until the earlier of
the next annual meeting or one year from the occurrence of the event
that caused the member to be no longer independent. The Exchange
proposes to amend Section 303A.00 to adopt this cure provision period
for events of non-

compliance with the proposed compensation committee independence
requirements that are outside of the director's reasonable control.
However, the Exchange proposes to modify this cure provision by
limiting its use to circumstances where the committee continues to have
a majority of independent directors, as this would ensure that the
applicable committee could not take any action without the agreement of
one or more independent directors. The Exchange believes that this
requirement addresses any actual or apparent conflict of interest which
may arise due to the continued service of a non-independent director on
the compensation committee.
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    \19\ 17 CFR 240.10C-1(a)(3).
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Transition Periods
    The Adopting Release contemplates that exchanges may provide
transition periods through the exemptive authority provided to the
exchanges under Rule 10C-1(b)(1)(iii).\20\ Consistent with the
transition periods approved by the SEC for inclusion in Section 303A at
the time of its original adoption,\21\ the Exchange proposes to amend
Section 303A.00 to provide that listed companies would have until the
earlier of their first annual meeting after January 15, 2014, or
October 31, 2014, to comply with the new Section 303A.02(a)(ii)
compensation committees independence standards . Existing compensation
committee independence standards would continue to apply pending the
transition to the new independence standards. The Exchange believes
that its prior use of a similar transition period was satisfactory and
that it is reasonable to follow the same approach in connection with
the proposed changes to the compensation committee independence
standards.
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    \20\ See Adopting Release at 38444.
    \21\ See Securities Exchange Act Release No. 48745 (November 4,
2003), 68 FR 64154 (November 12, 2003) (SR-NYSE-2002-33).
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    In addition, the Exchange proposes to continue to apply to the
proposed new compensation committee requirements the existing
transition periods available to newly-listed companies under Section
303A.00. Transition periods are available to: Companies listing in
connection with their initial public offerings (``IPOs'') or which did
not have a class of common stock registered under the Exchange Act
prior to the listing date; \22\ companies listing in connection with a
spin-off or carve-out; companies listing upon emergence from
bankruptcy; companies previously registered under Section 12(g) of the
Exchange Act; and companies previously registered under Section 12(b)
of the Exchange Act to the extent the national securities exchange on
which they were listed did not have the same requirement; and companies
that cease to qualify as a controlled company or a foreign private
issuer. All of the foregoing categories of issuers (other than
companies previously registered under Section 12(b) of the Exchange
Act) would continue to be entitled to a transition under which the
company must have: At least one independent member on its compensation
committee by the listing date (or (i) in the case of an IPO, the
earlier of the closing date of the IPO or five business days from the
listing date, or (ii) in the case of a spin-off or carve-out, by the
date the transaction closes); at least a majority of independent
members on the compensation committee within 90 days of the listing
date; and a fully independent compensation committee within one year of
the listing date. A company that ceases to qualify as a controlled
company would continue to have a transition under which it must have at
least one independent member on its compensation committee by the date
its status changed, at least a majority of independent members on the
compensation committee within 90 days of the date its status changed
and a fully independent compensation committee within one year of the
date its status changed. A company that ceases to be a foreign private
issuer would continue to have a transition under which it must have a
fully independent compensation committee within six months of the
Foreign Private Issuer Determination Date.\23\ A company previously
registered under Section 12(b) of the Exchange Act must satisfy the
requirements of Section 303A within one year of the listing date to the
extent the national securities exchange on which it was listed did not
have the same requirements; and if the other exchange had a
substantially similar requirement and the company was afforded a
transition period that had not expired, the company has the same
transition period as would have been available to it on the other
exchange.
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    \22\ For purposes of Section 303A other than Sections 303A.06
and 303A.12(b), a company is considered to be listing in conjunction
with an initial public offering if, immediately prior to listing, it
does not have a class of common stock registered under the Exchange
Act.
    \23\ Section 303A.00 currently defines the ``Determination
Date'' as the date at the end of a company's second fiscal quarter
on which it is required by SEC Rule 240.3b-4 to test its foreign
private issuer status on an annual basis. The Exchange proposes to
change this to the ``Foreign Private Issuer Determination Date'' so
it is distinguished from the new ``Smaller Reporting Company
Determination Date''.
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    The Exchange proposes to exempt smaller reporting companies \24\
from compliance with the proposed new independence requirements with
respect to compensation committee service. Under SEC Rule 12b-2, a
smaller reporting company is required to test whether it continues to
qualify for that status as of the last business day of its second
quarter of each fiscal year (the ``Smaller Reporting Company
Determination Date'') and ceases as of the first day of the next fiscal
year to be able to avail itself of the benefits under SEC rules
applicable to smaller reporting companies. Consequently, the Exchange
proposes to adopt a new transition provision applicable to companies
that cease to be smaller reporting companies and become subject to the
compensation committee independence requirements of proposed Section
303A.02(a)(ii).\25\ As proposed, a company that ceases to be a smaller
reporting company would be required, if applicable, (I) to have a
committee composed entirely of members that meet the independence
requirements of proposed Section 303A.02(a)(ii) within six months of
the Smaller Reporting Company Determination Date and (II) to comply
with Section 303A.05(c)(iv) as of the Smaller Reporting Company
Determination Date. The Exchange also proposes to include a new
subsection in Section 303A.00 specifying that smaller reporting
companies are subject to proposed Section 303A.05(c) with the exception
of proposed Section 303A.05(c)(iv) requirements with respect to the
Compensation Committee's consideration of compensation consultant's
independence from management. Under this approach, smaller reporting
companies will effectively be subject to precisely the same
requirements as is currently the case.
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    \24\ As defined in SEC Rule 12b-2 and Item 10(f) of Regulation
S-K.
    \25\ A company that is otherwise exempt from the requirement to
have an independent compensation committee when it ceases to be a
smaller reporting company would not, of course, be subject to a
transition period. See discussion infra.
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General Exemptions
    Rule 10C-1(b)(5) \26\ provides an automatic exemption from the
application of the entirety of Rule 10C-1 for controlled companies and
smaller reporting companies, and Rule 10C-1(b)(1)(iii)(A) \27\ provides
an automatic exemption from the compensation committee independence
requirements

for limited partnerships, companies in bankruptcy, open-end management
investment companies registered under the Investment Company Act of
1940 (``1940 Act''). Rule 10C-1(b)(1)(iii)(A) also exempts from the
compensation committee independence requirements any foreign private
issuer that discloses in its annual report filed with the SEC the
reasons that the foreign private issuer does not have an independent
compensation committee.
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    \26\ 17 CFR 240.10C-1(b)(5).
    \27\ 17 CFR 240.10C-1(b)(1)(iii)(A).
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    Pursuant to the general exemptive authority granted in Rule 10C-
1(b)(5)(i), the Exchange proposes to exempt from all of the proposed
requirements each category of issuer that qualifies for a general or
specific exemption under Rule 10C-1(b)(1)(iii)(A). The Exchange also
proposes to provide a general exemption from all of the requirements to
all of the other categories of issuers that are currently exempt from
the NYSE's existing compensation committee requirements. Thus, as
proposed, controlled companies, limited partnerships and companies in
bankruptcy, closed-end and open-end funds registered under the 1940
Act, passive business organizations in the form of trusts (such as
royalty trusts), derivatives and special purpose securities (such as
those described in Sections 703.19 and 703.20 of the Manual), and
issuers whose only listed equity security is a preferred stock, would
be exempt. The Exchange notes that these categories of issuers
typically: (i) Are externally managed and do not directly employ
executives (e.g., limited partnerships that are managed by their
general partner or closed-end funds managed by an external investment
adviser); (ii) do not by their nature have employees (e.g., passive
business organizations in the form of trusts or issuers of derivative
or special purpose securities); or (iii) have executive compensation
policy set by a body other than the board (e.g., bankrupt companies
have their executive compensation determined by the bankruptcy court).
In light of these structural reasons why these categories of issuers
generally do not have compensation committees, the Exchange believes
that it would be a significant and unnecessarily burdensome alteration
in their governance structures to require them to comply with the
proposed new requirements and that it is appropriate to grant them an
exemption.
    Section 303A.00 currently provides that foreign private issuers are
permitted to follow home country practice in lieu of compliance with
the Exchange's compensation committee listing standard. The Exchange
proposes to follow this approach by granting a general exemption,
pursuant to the discretion granted to the Exchange by Rule 10C-
1(b)(5)(i),\28\ from the proposed new compensation committee
requirements to foreign private issuers that follow home country
practice. The Exchange notes that Section 303A.11 requires foreign
private issuers to disclose any significant ways in which their
corporate governance practices differ from those followed by domestic
companies under NYSE listing standards. Foreign private issuers that
are required to file an annual report on Form 20-F with the SEC must
include their statement of significant differences in that annual
report. All other foreign private issuers may either (i) include the
statement of significant differences in an annual report filed with the
SEC or (ii) make the statement of significant differences available on
or through the listed company's Web site. As any foreign private issuer
availing itself of the proposed exemption would have to disclose that
fact in its statement of significant differences, the Exchange does not
propose to require those companies to comply with the disclosure
requirement of Rule 10C-1(b)(1)(iii)(A). While Section 303A.11 does not
require a statement as to why a company does not comply with an
applicable requirement in the manner provided by Rule 10C-
1(b)(1)(iii)(A), the Exchange does not believe that this is a
significant difference, as the explanation companies would likely
provide for not having an independent compensation committee would
simply be that they were not required to do so by home country law.
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    \28\ 17 CFR 240.10C-1(b)(5)(i).
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    The Exchange currently does not require issuers whose only listed
security is a preferred stock to comply with Section 303A.05(c). The
Exchange proposes to grant these issuers a general exemption from
compliance with the proposed amended rule. The Exchange believes this
approach is appropriate because holders of listed preferred stock have
significantly greater protections with respect to their rights to
receive dividends and a liquidation preference upon dissolution of the
issuer, and preferred stocks are typically regarded by investors as a
fixed income investment comparable to debt securities, the issuers of
which are exempt from compliance with Rule 10C-1.
2. Statutory Basis
    The Exchange believes that the proposed rule change in relation to
the Exchange's compensation committee requirements and the proposed
compensation consultant independence requirements are consistent with
Section 10C of the Exchange Act and Rule 10C-1 thereunder in that they
comply with the requirements of Rule 10C-1 with respect to the adoption
by national securities exchanges of compensation committee listing
standards. The Exchange believes that the proposed rule change is
consistent with Section 6(b) \29\ of the Exchange Act in general, and
furthers the objectives of Section 6(b)(5) of the Exchange Act,\30\ in
particular in that it is designed to promote just and equitable
principles of trade, to foster cooperation and coordination with
persons engaged in regulating, clearing, settling, processing
information with respect to, and facilitating transactions in
securities, to remove impediments to and perfect the mechanism of a
free and open market and a national market system, and, in general, to
protect investors and the public interest.
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    \29\ 15 U.S.C. 78f(b).
    \30\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed amendments to its
compensation committee listing standards are consistent with the
protection of investors and the public interest in that they strengthen
the independence requirements for compensation committee membership,
provide additional authority to compensation committees and require
compensation committees to consider the independence of compensation
consultants.
    The Exchange believes that the general exemptions from the proposed
requirements that it is granting to foreign private issuers and smaller
reporting companies are consistent with Section 10C and Rule 10C-1, for
the reasons stated above in the ``Purpose'' section, including because
(i) Rule 10C-1(b)(5)(ii) explicitly exempts smaller reporting companies
and (ii) foreign private issuers will comply with their home country
law and, if they avail themselves of the exemption, will be required to
disclose that fact under existing NYSE listing requirements. The
Exchange believes it is an appropriate use of its exemptive authority
under Rule 10C-1(b)(5)(i), and that it is not unfairly discriminatory
under Section 6(b)(5) of the Act, to provide general exemptions under
the proposed rules to issuers whose only listed class of equity
securities on the Exchange is a preferred stock, as holders of listed
preferred stock have significantly greater protections with respect to
their rights to receive dividends and a liquidation

preference upon dissolution of the issuer, and preferred stocks are
typically regarded by investors as a fixed income investment comparable
to debt securities, the issuers of which are exempt from compliance
with Rule 10C-1. The Exchange believes that it is an appropriate use of
its exemptive authority under Rule 10C-1(b)(5)(i), and that it is not
unfairly discriminatory under Section 6(b)(5) of the Act, to provide
general exemptions under the proposed rules for all of the other
categories of issuers that are not currently subject to the Exchange's
compensation committee requirement, for the structural reasons
discussed in the ``Purpose'' section and because it would be a
significant and unnecessarily burdensome alteration in their governance
structures to require them to comply with the proposed new
requirements.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others

    The Exchange has not solicited written comments on the proposed
rule change. The Exchange has received two comment letters on the
proposed rule change.\31\ One commenter made the following points: (i)
The Exchange should specify that the relevant factors for consideration
with respect to compensation committee independence should include a
consideration of fees received for service on the board itself; (ii)
the relevant factors should explicitly include consideration of the
personal and business relationships between directors and officers;
(iii) the additional factors to be considered for compensation
committee independence should be considered as a part of general board
independence determinations; and (iv) the listing standards should
specify that, while the factors must be considered in their totality, a
single factor can result in the loss of board independence.
---------------------------------------------------------------------------

    \31\ Both of these letters were addressed to NYSE Regulation,
Inc. Neither author indicated that the comments related to just one
of the three national securities exchanges owned by NYSE Euronext.
Therefore, the Exchange is addressing those comments to the extent
they are applicable to its existing rules and the proposed
amendments.
---------------------------------------------------------------------------

    The Exchange does not believe that it is appropriate to consider
board compensation as part of the compensation committee independence
determination with respect to individual directors. Non-executive
directors devote considerable time to the affairs of the companies on
whose boards they sit and eligible candidates would be difficult to
find if board and committee service were unpaid in nature.
Consequently, independent directors of listed companies are almost
invariably paid for their board and committee service. As all
independent directors are almost certainly going to receive board
compensation from the company and do so on terms determined by the
board as a whole, the Exchange does not believe that an analysis of the
board compensation of individual directors is a meaningful
consideration in determining their independence for purposes of
compensation committee service.
    The Exchange's existing director independence requirements require
the board to consider relationships between the director and any member
of management in making its affirmative independence determinations.
Commentary included in Section 303A.02(a) makes this explicit by
stating that when the board is making an affirmative independence
determination ``the concern is independence from management.''
Consequently, the Exchange does not believe that any further
clarification of this requirement is necessary.
    The Exchange does not believe that it is necessary to explicitly
require that the additional independence considerations for
compensation committee service should be a part of the board's general
independence determinations for all independent directors. Section
303A.02(a) notes that ``[I]t is not possible to anticipate, or
explicitly to provide for, all circumstances that might signal
potential conflicts of interest, or that might bear on the materiality
of a director's relationship to a listed company'' and that the board
should therefore ``broadly consider all relevant facts and
circumstances'' when making affirmative independence determinations. As
such, the Exchange believes that, where appropriate, listed company
boards should already be including in their general independence
determinations factors including those being added to the compensation
committee independence determination.
    The Exchange does not believe it is necessary to include in the
listing standards a statement that a single factor may be sufficiently
material to render a director non-independent, as this is clearly the
intention of the listing standards as drafted. Section 303A.02(a) in
its current form and in its proposed amended form requires the board to
consider the materiality of each separate relationship between the
director and the listed company or its management.
    The second commenter proposed that the Exchange should require
companies to make a public disclosure with respect to the factors
considered by the compensation committee in reviewing the independence
of compensation consultants, legal counsel and other compensation
advisers. This commenter also proposed that the Exchange should require
with respect to outside counsel hired by the compensation committee the
same disclosure as is required by Item 407(e)(3)(iv) of Regulation S-K
with respect to the nature of any conflict that arises from the
engagement of a compensation consultant identified in the proxy
statement. The Exchange does not believe that it is necessary to
establish additional disclosure requirements of this nature. Item 407
of Regulation S-K contains extensive disclosure requirements with
respect to a listed company's corporate governance and the Exchange's
own rules generally incorporate those requirements by reference where
applicable. Moreover, with respect to disclosure of any conflicts of
interest that may arise with respect to outside counsel hired by the
compensation committee, the Exchange believes that the rigorous
conflict of interest requirements applicable to attorneys adequately
address such concerns. And the Exchange is mindful that requiring
additional public disclosures regarding outside counsel could require a
listed company to disclose information that otherwise may be protected
by attorney-client privilege.

III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action

    Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove the proposed rule change, or
    (B) Institute proceedings to determine whether the proposed rule
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule

change is consistent with the Act. Comments may be submitted by any of
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to<EMAIL_ADDRESS>Please include
File Number SR-NYSE-2012-49 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NYSE-2012-49. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet 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 Web site viewing and
printing in the Commission's Public Reference Room on official business
days between the hours of 10:00 a.m. and 3:00 p.m. Copies of such
filing also will be available for inspection and copying at the
principal office and the Internet Web site of the Exchange. 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-NYSE-2012-49, and should be
submitted on or before November 5, 2012.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\32\
---------------------------------------------------------------------------

    \32\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-25278 Filed 10-12-12; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register Volume 86, Number 138 (Thursday, July 22, 2021)]
[Notices]
[Pages 38772-38776]
[FR Doc No: 2021-15549]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-92433; File No. SR-NASDAQ-2021-058]

Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend the Exchange's Transaction Credits at Equity 7, Section 118(a)

July 16, 2021.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on July 8, 2021, The Nasdaq Stock Market LLC (``Nasdaq'' or
``Exchange'') filed with the Securities and Exchange Commission
(``SEC'' or ``Commission'') the proposed rule change as described in
Items I, II, and III, below, which Items have been prepared by the
Exchange. The Commission is publishing this notice to solicit comments
on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The Exchange proposes to amend the Exchange's transaction credits
at Equity 7, Section 118(a), as described further below. The text of
the proposed rule change is available on the Exchange's website at
https://listingcenter.nasdaq.com/rulebook/nasdaq/rules, at the
principal office of the Exchange, and at the Commission's Public
Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of the proposed rule change is to amend the Exchange's
schedule of credits, at Equity 7, Section 118(a). Specifically, the
Exchange proposes to make the following changes with respect to its
schedule of credits for displayed quotes/orders (other than
Supplemental Orders or Designated Retail Orders) that provide
liquidity: (1) Add a new credit of $0.0028 per share executed; (2)
amend the criteria for an existing credit of $0.0029 per share
executed; and (3) eliminate an existing credit of $0.0029 per share
executed. The Exchange also proposes to add two new non-cumulative
supplemental credits to members for displayed quotes/orders (other than
Supplemental Orders) that provide liquidity, of $0.0001 and $0.00015
per share executed, respectively.
New Credit for MELO Activity and Adding Liquidity to the Exchange
    The Exchange proposes to add a new credit for displayed quotes/
orders (other than Supplemental Orders or Designated Retail Orders)
that provide liquidity of $0.0028 per share executed to a member: (i)
With shares of liquidity provided in all securities through one or more
of its Nasdaq Market Center MPIDs that represent 0.375% or more of
Consolidated Volume \3\ during the month; (ii) that executes an average
daily volume (``ADV'') of at least 500,000 shares of Midpoint Extended
Life Orders (``M-ELOs'') \4\ during the month; and (iii) that increases
the extent of its ADV of MELO orders in all securities by 100% or more
during the month relative to the month of June 2021.
---------------------------------------------------------------------------

    \3\ Equity 7, Section 118(a) defines ``Consolidated Volume'' to
mean the total consolidated volume reported to all consolidated
transaction reporting plans by all exchanges and trade reporting
facilities during a month in equity securities, excluding executed
orders with a size of less than one round lot. For purposes of
calculating Consolidated Volume and the extent of a member's trading
activity the date of the annual reconstitution of the Russell
Investments Indexes is excluded from both total Consolidated Volume
and the member's trading activity.
    \4\ Pursuant to Equity 4, Rule 4702(b)(14), a ``Midpoint
Extended Life Order'' is an Order Type with a Non-Display Order
Attribute that is priced at the midpoint between the NBBO and that
will not be eligible to execute until a minimum period of 10
milliseconds has passed after acceptance of the Order by the System.
---------------------------------------------------------------------------

    The purpose of this new credit is to provide a new means to incent
members to provide a substantial amount of liquidity to the Exchange
generally as well as to increase the extent to which they engage in
MELO activity on the Exchange and grow the extent of such activity over
time. An increase in MELO activity and overall liquidity stands to
improve the quality of the market generally, and of MELO, in
particular, to the benefit of all market participants.
Amended Displayed Credit
    The Exchange proposes to amend its existing credit of $0.0029 per
share executed to a member: (i) With shares of liquidity provided in
all securities through one or more of its Nasdaq Market Center MPIDs
that represent more than 0.50% of Consolidated Volume during the month,
including shares of liquidity provided with respect to securities that
are listed on exchanges other than Nasdaq or NYSE that represent more
than 0.10% of Consolidated Volume, and (ii) with at least a 15% ratio
of volume that sets the NBBO provided through one or more of its Nasdaq
Market Center MPIDs to all displayed volume that provides liquidity
through one or more of its Nasdaq Market Center MPIDs. The Exchange
first proposes to amend this credit by raising the threshold percentage
of Consolidated Volume needed to qualify for the credit from 0.50% to
0.60%. This proposed amendment will encourage those participants that
already qualify for the credit to increase the extent to which they add
liquidity to the Exchange in order to continue to qualify for it. From
time to time, the Exchange believes it is reasonable to recalibrate the
criteria for credits such as this one to ensure that the credits remain
appropriately challenging for participants to attain in light of
changes to their levels of activity on the Exchange.
    Second, the Exchange proposes to eliminate the criterion that a
member must have at least a 15% ratio of volume that sets the NBBO to
all displayed volume that provides liquidity to the Exchange, and to
replace it with the requirement that a member add at least 0.175% of
Consolidated Volume during the month in non-displayed orders (excluding
midpoint orders) for securities in any tape during the month. The
Exchange proposes to eliminate the existing criterion because it proved
too difficult for members to meet in combination with the other
criterion set forth in the credit, and has hindered the credit in
achieving its intended effect. The Exchange has limited resources at
its disposal to devote to incentives and

it periodically reassesses the allocation of those resources when they
prove to be ineffective. The proposed replacement criterion will be
more readily attainable for members and will also improve market
quality by incenting members to add substantial volumes of non-
displayed liquidity to the Exchange.
Elimination of MARS Credit
    The Exchange proposes to eliminate an existing $0.0029 per share
executed credit that it provides to a member (i) with shares of
liquidity provided in all securities through one or more of its Nasdaq
Market Center MPIDs that represent more than 0.30% of Consolidated
Volume during the month and (ii) which qualifies for the NOM Market
Access and Routing subsidy or ``MARS'' program.\5\
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    \5\ Under the MARS program, NOM pays a subsidy to NOM
Participants that provide certain order routing functionalities to
other NOM Participants and/or that use such functionalities
themselves. The specified MARS Payment is paid on all executed
Eligible Contracts that add liquidity, which are routed to NOM
through a participating NOM Participant's System and meet the
requisite Eligible Contracts ADV. See Securities Exchange Act
Release No. 79251 (November 7, 2016), 81 FR 79536 (November 14,
2016) (SR-NASDAQ-2016-149).
---------------------------------------------------------------------------

    This credit has not been effective in accomplishing its intended
purpose, which is to incent members to increase their liquidity adding
activity on both Nasdaq and NOM. The Exchange has observed that
historically, few members have received this credit, and it has served
to neither meaningfully increase activity on the Exchange or NOM nor
improve the quality of those markets. The Exchange therefore proposes
to eliminate it. The Exchange notes that even after it eliminates this
credit, it will continue to offer a similarly structured credit of
$0.0030 per share executed for members that meet specified volume
requirements and qualify for the Tier 4 of the MARS program.
New Supplemental Credits for MELOs and Midpoint Orders That Execute
Against MELOs
    The Exchange proposes to offer two new supplemental credits to a
member that either (i) grows its ADV of MELO and midpoint orders (that
execute against MELO orders) during a month by a threshold amount
relative to a baseline month or (ii) that provides a threshold ADV
through midpoint orders provided and MELO Orders and also grows its ADV
in midpoint orders provided and MELO Orders by a threshold amount
relative to a baseline month. These credits will be in addition to
other credits otherwise available to members for adding displayed
liquidity to the Exchange (other than Supplemental Orders), but a
member's activity will qualify it to receive only one of the two new
supplemental credits at a time, meaning that they are not cumulative.
    The first supplemental credit, of $0.0001 per share executed, will
be available to a member that, through one or more of its Nasdaq Market
Center MPIDs, either: (i) Increases the extent to which its ADV of MELO
Orders and/or midpoint orders (that executes against MELO Orders) in
all securities by an ADV of 1 million shares or more during the month
relative to the month of June 2021; or (ii) executes a combined volume
of at least 3 million shares ADV through midpoint orders provided and
MELO Orders during the month and increases the extent of its ADV of
midpoint orders provided and MELO Orders in all securities by 100% or
more during the month relative to the month of June 2021. A second,
higher supplemental credit of $0.00015 per share executed, will be
available to a member that, through one or more of its Nasdaq Market
Center MPIDs, either: (i) increases the extent to which its ADV of MELO
Orders and/or midpoint orders (that executes against MELO Orders) in
all securities by an ADV of 2 million shares or more during the month
relative to the month of June 2021; or (ii) executes a combined volume
of at least 4 million shares ADV through midpoint orders provided and
MELO Orders during the month and increases the extent of its ADV of
midpoint orders provided and MELO Orders in all securities by 150% or
more during the month relative to the month of June 2021.
    The purpose of these new credits is to provide extra incentives to
members to be actively involved in MELO on the Exchange, as well as to
grow substantially the extent to which they submit MELO orders to the
Exchange and provide midpoint orders that execute against MELO orders
relative to a recent benchmark month. The Exchange believes that if
such incentives are effective, then any ensuing increase in MELO
activity on the Exchange will once again improve market quality, to the
benefit of all participants.
2. Statutory Basis
    The Exchange believes that its proposals are consistent with
Section 6(b) of the Act,\6\ in general, and further the objectives of
Sections 6(b)(4) and 6(b)(5) of the Act,\7\ in particular, in that they
provide for the equitable allocation of reasonable dues, fees and other
charges among members and issuers and other persons using any facility,
and are not designed to permit unfair discrimination between customers,
issuers, brokers, or dealers. The proposals are also consistent with
Section 11A of the Act relating to the establishment of the national
market system for securities.
---------------------------------------------------------------------------

    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

The Proposals Are Reasonable
    The Exchange's proposals are reasonable in several respects. As a
threshold matter, the Exchange is subject to significant competitive
forces in the market for equity securities transaction services that
constrain its pricing determinations in that market. The fact that this
market is competitive has long been recognized by the courts. In
NetCoalition v. Securities and Exchange Commission, the D.C. Circuit
stated as follows: ``[n]o one disputes that competition for order flow
is `fierce.' . . . As the SEC explained, `[i]n the U.S. national market
system, buyers and sellers of securities, and the broker-dealers that
act as their order-routing agents, have a wide range of choices of
where to route orders for execution'; [and] `no exchange can afford to
take its market share percentages for granted' because `no exchange
possesses a monopoly, regulatory or otherwise, in the execution of
order flow from broker dealers' . . . .'' \8\
---------------------------------------------------------------------------

    \8\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010)
(quoting Securities Exchange Act Release No. 59039 (December 2,
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSEArca-2006-
21)).
---------------------------------------------------------------------------

    The Commission and the courts have repeatedly expressed their
preference for competition over regulatory intervention in determining
prices, products, and services in the securities markets. In Regulation
NMS, while adopting a series of steps to improve the current market
model, the Commission highlighted the importance of market forces in
determining prices and SRO revenues and, also, recognized that current
regulation of the market system ``has been remarkably successful in
promoting market competition in its broader forms that are most
important to investors and listed companies.'' \9\
---------------------------------------------------------------------------

    \9\ Securities Exchange Act Release No. 51808 (June 9, 2005), 70
FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting
Release'').
---------------------------------------------------------------------------

    Numerous indicia demonstrate the competitive nature of this market.
For example, clear substitutes to the Exchange exist in the market for
equity security transaction services. The Exchange is only one of
several equity

venues to which market participants may direct their order flow.
Competing equity exchanges offer similar tiered pricing structures to
that of the Exchange, including schedules of rebates and fees that
apply based upon members achieving certain volume thresholds.
    Within this environment, market participants can freely and often
do shift their order flow among the Exchange and competing venues in
response to changes in their respective pricing schedules. Within the
foregoing context, the proposals represent reasonable attempts by the
Exchange to increase its liquidity and market share relative to its
competitors.
    The Exchange believes that it is reasonable to establish a new
$0.0028 per share executed transaction credit, at Equity 7, Section
118(a), for members that provide liquidity of at least 0.375% of
Consolidated Volume, execute an ADV of at least 500,000 shares of MELO
Orders during the month and increase the extent of their ADV of MELO
Orders in all securities by 100% or more during the month relative to
the month of June 2021. The new credit will encourage substantial
activity on the Exchange as well as substantial activity and growth in
MELO Orders. Any increased activity and growth will improve the quality
of the market for MELOs as well as overall market quality, to the
benefit of both MELO and other market participants.
    The Exchange also believes that it is reasonable to amend its
existing credit of $0.0029 per share executed, which applies to members
that add liquidity representing 0.50% or more of Consolidated Volume
during the month, including shares of liquidity in Tape B Securities of
0.10% or more of Consolidated Volume, and which achieve at least a 15%
ratio of volume that sets the NBBO to all displayed liquidity provided.
The proposed amendments will increase the threshold percentage of
Consolidated Volume required to qualify for the credit from 0.50% to
0.60% and replace the NBBO-setting ratio criteria with a minimum non-
displayed volume add requirement (exclusive of midpoint orders) of
0.175% of Consolidated Volume. The proposed increase in the
Consolidated Volume threshold will encourage members that currently
qualify for the credit to further increase the extent of their
liquidity adding activity on the Exchange to continue to do so. From
time to time, the Exchange believes it is reasonable to recalibrate the
criteria for credits such as this one to ensure that the credits remain
appropriately challenging for participants to attain in light of
changes to their levels of activity on the Exchange. Meanwhile, the
elimination of the NBBO-setting ratio requirement is reasonable because
it proved too difficult for members to meet in combination with the
other criterion set forth in the credit, and has hindered the credit in
achieving its intended effect. The Exchange has limited resources at
its disposal to devote to incentives and it periodically reassesses the
allocation of those resources when they prove to be ineffective. The
proposal to replace this criterion with a requirement that a member add
at least 0.175% of Consolidated Volume during the month in non-
displayed orders (excluding midpoint orders) is reasonable because the
proposed replacement criterion will be more readily attainable for
members and will also improve market quality by incenting members to
add substantial volumes of non-displayed liquidity to the Exchange.
    It is also reasonable for the Exchange to eliminate its existing
$0.0029 per share executed credit that it provides to a member that
adds liquidity representing more than 0.30% of Consolidated Volume
during the month and which qualifies for the MARS program. This credit
has not been effective in accomplishing its intended purpose, which is
to incent members to increase their liquidity adding activity on both
Nasdaq and NOM. The Exchange has observed that historically, few
members have received this credit, and it has served to neither
meaningfully increase activity on the Exchange or NOM nor improve the
quality of those markets.
    Finally, the Exchange believes it is reasonable to establish two
new supplemental credits available to a member that either (i) grows
its ADV of MELO and midpoint orders (that execute against MELO orders)
during a month by a threshold amount relative to a baseline month or
(ii) that executes during a month a threshold ADV through midpoint
orders provided and MELO orders and also grows its ADV in midpoint
orders provided and MELO Orders by a threshold amount relative to a
baseline month. These new supplemental credits will be non-cumulative,
meaning that only one of them is attainable at once. These proposals
are reasonable because they will provide extra incentives to members to
engage in substantial amounts of MELO-related activity on the Exchange
during a month, as well as to grow substantially the extent to which
they do so relative to a recent benchmark month. The Exchange believes
that if such incentives are effective, then any ensuing increase in
MELO Orders and executions on the Exchange will improve the quality of
the MELO market, and the market overall, to the benefit of MELO and all
market participants.
    The Exchange notes that those market participants that are
dissatisfied with the proposals are free to shift their order flow to
competing venues that offer more generous pricing or less stringent
qualifying criteria.
The Proposals Are Equitable Allocations of Credits
    The Exchange believes that it is an equitable allocation to
establish new transaction credits and otherwise modify the eligibility
requirements for its transaction credits because the proposals will
encourage members to increase the extent to which they add liquidity to
the Exchange. To the extent that the Exchange succeeds in increasing
the levels of liquidity and activity on the Exchange, including in
segments for which there is an observed need or demand, such as non-
displayed, MELO, and Tape B securities, then the Exchange will
experience improvements in its market quality, which stands to benefit
all market participants. The Exchange also believes it is equitable to
recalibrate or revise existing criteria for its credits to ensure that
the credits remain appropriately challenging for participants to attain
in light of changes to their levels of activity on the Exchange.
    It is also equitable to eliminate a MARS-related credit that has
not been utilized historically and which has not fulfilled its intended
purpose. The Exchange has limited resources to devote to incentive
programs and periodically reallocates those resources to programs that
are more likely to be utilized and effective.
    Any participant that is dissatisfied with the proposals is free to
shift their order flow to competing venues that provide more generous
pricing or less stringent qualifying criteria.
The Proposals Are Not Unfairly Discriminatory
    The Exchange believes that its proposals are not unfairly
discriminatory. As an initial matter, the Exchange believes that
nothing about its volume-based tiered pricing model is inherently
unfair; instead, it is a rational pricing model that is well-
established and ubiquitous in today's economy among firms in various
industries--from co-branded credit cards to grocery stores to cellular
telephone data plans--that use it to reward the loyalty of their best
customers that provide high levels of business activity and incent
other

customers to increase the extent of their business activity. It is also
a pricing model that the Exchange and its competitors have long
employed with the assent of the Commission. It is fair because it
incentivizes customer activity that increases liquidity, enhances price
discovery, and improves the overall quality of the equity markets.
    The Exchange believes that its proposals to adopt new credits or
otherwise amend the qualifying criteria for its transaction credits are
not unfairly discriminatory because these credits are available to all
members. Moreover, these proposals stand to improve the overall market
quality of the Exchange, to the benefit of all market participants, by
incentivizing members to increase the extent of their liquidity
provision or activity on the Exchange, including in segments for which
there is an observed need or demand, such as non-displayed, MELO, and
Tape B securities. The Exchange also believes it is not unfairly
discriminatory to recalibrate or revise existing criteria for its
credits to ensure that the credits remain appropriately challenging for
participants to attain in light of changes to their levels of activity
on the Exchange.
    Meanwhile, it is not unfairly discriminatory to eliminate a MARS-
related credit that has not been utilized historically and which has
not fulfilled its intended purpose. The Exchange has limited resources
to devote to incentive programs and periodically reallocates those
resources to programs that are more likely to be utilized and
effective. The Exchange notes that it will continue to offer another
similarly-structured credit to members that qualify for Tier 4 of the
MARS program.
    Any participant that is dissatisfied with the proposals is free to
shift their order flow to competing venues that provide more generous
pricing or less stringent qualifying criteria.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule changes will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act.
Intramarket Competition
    The Exchange does not believe that its proposals will place any
category of Exchange participant at a competitive disadvantage.
    As noted above, Nasdaq's proposals to add and amend transaction
credits are intended to have market-improving effects, to the benefit
of all members. Any member may elect to achieve the levels of liquidity
or activity required in order to qualify for the new or amended
credits.
    Likewise, the Exchange's proposal will not duly burden competition
to eliminate its $.0029 per share executed MARS credit as members have
not utilized the credit historically, such that its elimination will
have limited or no impact. The Exchange has limited resources to devote
to incentive programs and periodically reallocates those resources to
programs that are more likely to be utilized and effective. The
Exchange notes that it will continue to offer another similarly-
structured credit to members that qualify for Tier 4 of the MARS
program.
    The Exchange notes that its members are free to trade on other
venues to the extent they believe that the proposed qualification
criteria for or amounts of these credits are not attractive. As one can
observe by looking at any market share chart, price competition between
exchanges is fierce, with liquidity and market share moving freely
between exchanges in reaction to credit changes. The Exchange notes
that its pricing tier structure is consistent with broker-dealer fee
practices as well as the other industries, as described above.
Intermarket Competition
    In terms of inter-market competition, the Exchange notes that it
operates in a highly competitive market in which market participants
can readily favor competing venues if they deem credit levels at a
particular venue to be excessive, or rebate opportunities available at
other venues to be more favorable. In such an environment, the Exchange
must continually adjust its credits to remain competitive with other
exchanges and with alternative trading systems that have been exempted
from compliance with the statutory standards applicable to exchanges.
Because competitors are free to modify their own credits in response,
and because market participants may readily adjust their order routing
practices, the Exchange believes that the degree to which credit
changes in this market may impose any burden on competition is
extremely limited.
    The proposed new and amended credits are reflective of this
competition because, even as one of the largest U.S. equities exchanges
by volume, the Exchange has less than 20% market share, which in most
markets could hardly be categorized as having enough market power to
burden competition. Moreover, as noted above, price competition between
exchanges is fierce, with liquidity and market share moving freely
between exchanges in reaction to credit changes. This is in addition to
free flow of order flow to and among off-exchange venues which
comprises upwards of 44% of industry volume.
    The Exchange's proposals to add new and amend its transaction
credits are pro-competitive in that the Exchange intends for the
changes to increase liquidity addition and activity on the Exchange,
thereby rendering the Exchange a more attractive and vibrant venue to
market participants.
    In sum, if the changes proposed herein are unattractive to market
participants, it is likely that the Exchange will lose market share as
a result. Accordingly, the Exchange does not believe that the proposed
changes will impair the ability of members or competing order execution
venues to maintain their competitive standing in the financial markets.

C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others

    No written comments were either solicited or received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action

    The foregoing rule change has become effective pursuant to Section
19(b)(3)(A)(ii) of the Act.\10\
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    \10\ 15 U.S.C. 78s(b)(3)(A)(ii).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is: (i)
Necessary or appropriate in the public interest; (ii) for the
protection of investors; or (iii) otherwise in furtherance of the
purposes of the Act. If the Commission takes such action, the
Commission shall institute proceedings to determine whether the
proposed rule should be approved or disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to<EMAIL_ADDRESS>Please include
File Number SR-NASDAQ-2021-058 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NASDAQ-2021-058. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (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 website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549, on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to makeavailable publicly. All submissions
should refer to File Number SR-NASDAQ-2021-058 and should be submitted
on or before August 12, 2021.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
---------------------------------------------------------------------------

    \11\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-15549 Filed 7-21-21; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register Volume 81, Number 180 (Friday, September 16, 2016)]
[Rules and Regulations]
[Pages 63697-63698]
[FR Doc No: 2016-22356]

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DEPARTMENT OF HOMELAND SECURITY

Coast Guard

33 CFR Part 100

[Docket No. USCG-2016-0714]

Special Local Regulations; Ironman 70.3 Augusta Triathlon,
Savannah River

AGENCY: Coast Guard, DHS.

ACTION: Notice of enforcement of regulation.

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SUMMARY: The Coast Guard will enforce the Ironman 70.3 Augusta
Triathlon, Savannah River, Special Local Regulation from 7 a.m. through
11 a.m. on September 25, 2016. This action is necessary to ensure
safety of life on navigable waterways of the United States during this
event. During the enforcement period, and in accordance with previously
issued special local regulations, vessels may not enter, transit
through, anchor in, remain within the designated area unless authorized
by the Captain of the Port (COTP) Savannah or a designated
representative.

DATES: The regulation in 33 CFR 100.701, Table to Sec.  100.71, Item
(f)3 will be enforced from 7 a.m. through 11 a.m. on September 25,
2016.

FOR FURTHER INFORMATION CONTACT: If you have questions about this
notice of enforcement, call or email MST1 Cliffton Hendry, Marine
Safety Unit Savannah Office of Waterways Management, Coast Guard;
telephone<PHONE_NUMBER>, extension 243, or email
<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION: The Coast Guard will enforce the special
local regulation for the Ironman 70.3 Augusta Triathlon, Savannah
River, in 33 CFR 100.701 from 7 a.m. through 11 a.m. on September 25,
2016.

    This action is to provide enforcement action of the regulated area
that will encompass portions of the navigable waterways. The location
of the regulated area for this 1.2 mile long swim course, as stated in
the latitude/longitude figures in 33 CFR 100.701, Table to Sec.
100.701, Item (f)3, begins at the 5th Street Marina in Augusta, GA, and
proceeds downriver to The Boathouse, 101 Riverfront Drive, Augusta, GA.
Under the provisions of 33 CFR 100.701, all persons and vessels are
prohibited from entering the regulated areas unless permission to enter
has been granted by the COTP or designated representatives.
    This notice of enforcement is issued under authority of 33 CFR
100.701 and 5 U.S.C. 552 (a). The Coast Guard will provide notice of
the regulated areas by Local Notice to Mariners, Broadcast Notice to
Mariners, and on-scene designated representatives. If the COTP Savannah
determines that the regulated area need not be enforced for the full
duration stated in this publication, he or she may use a Broadcast
Notice to Mariners to grant general permission to enter the regulated
area.

    Dated: September 1, 2016.
A.M. Beach,
Commander, U.S. Coast Guard, Captain of the Port, Savannah.
[FR Doc. 2016-22356 Filed 9-15-16; 8:45 am]
 BILLING CODE 9110-04-P


Only hand exposure was analyzed for Study 2; only about 55% (12 out of 22) of participants had non-missing exposure values for each exposure conditions for exposures other than hands.
 Additional data for total exposure was not available; therefore only hand exposure was analyzed.
 Captan was the only pesticide measured on hands in Study 4. Azinphos methy and phosmet were not found on patches worn on study participant's bodies.  Therefore, only hand residues were identified and analyzed for azinphos methyl and phosmet, not total exposures.
 No statistically significant difference for hands between adults and children, indicating current risk assessment methods are protective of children working in agriculture receiving dermal exposures via hands.
 No separate analysis was completed for hands because glove exposures were only quantified in a few samples.
 Total exposure was not statistically analyzed because monitors were found to contain non-detectable residues for back, chest, shoulders, inside back, and inside forearms.
 At the time of the study, peanuts were primarily hand harvested.  However, peanuts are now primarily mechanically harvested; greatly reducing/eliminating the concern for exposure to pesticides during hand harvesting.
 Total exposure, represented by hand, forearm, chest, back, and shoulder exposures was not analyzed since no sample collected contained any detectable residues of treflan.
 Total exposure was not statistically analyzed because there were too many missing data from forearm and leg measurements.

           Discussion

In order to properly consider the results of this analysis there are several issues which must be considered.  These include:

 The monitoring data were generated using methods that at the time were considered scientifically state of the art.  Even though current techniques differ somewhat from those used in the research considered in this analysis the results are still appropriate for purposes of comparing the post-application exposures of children and adults.  The hand sampling methods are still commonly employed and the hands represent the majority of the exposures.  Also, a number of exposure values still currently used for risk assessment purposes are based on the patch sampling method and extrapolation across monitored body locations (i.e., most PHED data).

 The agricultural activities monitored in the studies (e.g., hand harvest of berries) have remained essentially unchanged in current agriculture from the period when the studies were completed.  This supports the use of these data for evaluation of children working in current agricultural production systems. There is one notable exception - peanut harvesting was conducted by hand when the studies were conducted and in current agriculture it has become highly mechanized.  This exception also represents soil contact versus foliar contact; foliar contact is the more applicable to post-application exposure.

 The mechanistic monitoring analysis results and those from the monitoring data support each other in that similar conclusions are reached independently that there is generally no meaningful difference in the exposure of adults and children from hand-based agricultural activities.  Therefore, it is reasonable for the Agency to rely on it current exposure assessment methods, which estimate exposure to adults, to account for the exposure to children working in agriculture in field labor tasks.

 Approaches used for hazard identification and dose response analysis by the Agency are also protective of children working in agriculture.  The most sensitive endpoints are always selected for risk assessments and any special sensitivities would also be routinely identified.  Appropriate points of departure and uncertainty factors based on any special sensitivities would be selected for exposure and risk assessment.  Therefore, not only exposure assessment findings but also risk assessment findings completed for reentry workers (e.g., field labor) would be protective of children working in those types of jobs.  Given that the required data are used to evaluate sensitivity in developing children, it follows that not only the exposure assessment process but risk assessment findings account for children working in agriculture.

 There are pesticides that were included in the monitoring studies that are no longer in the market.  It is also likely that perhaps certain use conditions for the remaining pesticides may have also been altered.  These issues do not alter the utility of the data for the purposes of this analysis, since the focus was to look at the potential differences between the pesticide exposure rates between the monitored children and adults as a result of the legal uses of the pesticides involved at that time.

 In order to account for different age group configurations, the Agency re-evaluated a subset of three of the studies using ages <13 as children and >13 as adults to determine whether the overall conclusion of this analysis would change.  Using these age groups, the sensitivity analysis showed that there is no significant difference in exposures between children and adults.  Therefore, using a different age cut off for adults and children will not alter the overall conclusion that there is no difference in exposure between children and adult agricultural workers.

 It is clear from the study reports that the conduct of the monitoring studies used as the basis for this analysis involved a comprehensive quality assurance and quality control program.  Because of this and the focus of the analysis on relative differences between adults and children, no corrections were made to the exposures based on factors like field recovery.  The corrections for the same exposure condition would be relative for all participants, and so it would not impact the results.

 There is a significant amount of monitoring data that has been included in this analysis that rivals in scope all of the current exposure databases used for regulatory purposes.  This breadth of information adds to the overall rigor of the analysis.

 All the exposure monitoring data included in this analysis have been evaluated and found to be compliant with Federal requirements for involving humans in research.

           Conclusions

This document confirms the validity and applicability of current EPA pesticide exposure and risk assessment methodology to assess exposures that child farmworkers may have.   Based on multiple sources of demographic information, there are a significant number of children aged 12 through 18 that are currently actively engaged in a variety of farm labor activities, including pre-harvest hand labor and harvesting tasks, and there may be children even younger working on family farms. An analysis was completed using mechanistic information about adults and children, and concluded that using adult body size and weight in risk assessments is protective of child farmworkers.  Additionally, an evaluation of extensive exposure monitoring data gathered from child farmworkers in agriculture showed no significant difference in exposures between children and adults conducting post-application activities.  Based on current Agency policy for risk assessment, any potential toxicity sensitivities of children would be accounted for when selecting the toxicity points of departure for risk assessment.  Therefore, using this weight of the evidence approach, the Agency concludes that children and adults working in agriculture do not have significantly different levels of pesticide exposures, and current risk and exposure assessment methods for pesticides are protective of child farmworkers.

This analysis should be considered highly rigorous given the breadth of information upon which it is based.  The mechanistic analysis relies on information from the EPA Exposure Factors Handbook, a nationally representative compendium of mechanistic information used in exposure assessments.  Similarly, the exposure monitoring was conducted by multiple researchers and institutions, with the vast majority of the results supporting the Agency's conclusion, only a small percentage demonstrated that children's exposures exceeded those of adults (2.4%).  The monitoring data was statistically analyzed using comprehensive statistical models appropriate for the data collected in each study since the designs of the studies and the nature of the results of each varied.  Also, the breadth of the exposure conditions which were encountered (87) in the exposure monitoring studies and the total number of exposure days monitored which were considered (1472) underlies the rigor of the findings.