```

[Federal Register Volume 72, Number 35 (Thursday, February 22, 2007)]
[Notices]
[Pages 8033-8045]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-2909]

=======================================================================
-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55293; File No. SR-NYSE-2006-120]

Self-Regulatory Organizations; New York Stock Exchange LLC; Order 
Granting Approval of Proposed Rule Change and Notice of Filing and 
Order Granting Accelerated Approval to Amendment No. 1 Regarding the 
Proposed Combination Between NYSE Group, Inc. and Euronext N.V.

February 14, 2007.

I. Introduction

    On December 29, 2006, New York Stock Exchange LLC (``NYSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934, as amended, (``Exchange Act'') \1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change regarding the proposed business 
combination (``Combination'') between NYSE Group, Inc. (``NYSE Group'') 
and Euronext N.V. (``Euronext''). The proposed rule change was 
published for comment in the Federal Register on January 8, 2007.\3\ 
The Commission has received two comments on the proposal.\4\ The 
Exchange filed a response to comments on February 14, 2007.\5\
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(l).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 55026 (December 29, 
2006), 72 FR 814 (``Notice'').
    \4\ See letter from Andrew Rothlein, to Nancy Morris, Secretary, 
Commission, dated January 17, 2007 (``OTR Investors Letter''); and 
letter from Professor J. Robert Brown, Jr., University of Denver 
Sturm College of Law, to Nancy Morris, Secretary, Commission, 
received by the Commission, February 13, 2007 (``Brown Letter'').
    \5\ See letter from Mary Yeager, Assistant Secretary, NYSE, to 
Nancy M. Morris, Secretary, Commission, dated February 14, 2007 
(``NYSE Response to Comments'').
---------------------------------------------------------------------------

    On February 13, 2007, the Exchange filed Amendment No. 1 to the 
proposed rule change.\6\ This order approves the proposed rule change, 
grants accelerated approval to Amendment No. 1, and solicits comments 
from interested persons on Amendment No. 1.
---------------------------------------------------------------------------

    \6\ See Partial Amendment dated February 13, 2007 (``Amendment 
No. 1''). The text of Amendment No. 1 and Exhibits 5C, 5D, 5F, 5G, 
5H, 5I, 5J, and 5M, which set forth certain governing documents as 
proposed to be amended, are available on the Commission's Web site 
(http://www.sec.gov/rules/sro.shtml), at the Commission's Public 
Reference Room, at the NYSE, and on the NYSE's Web site (http://www.nyse.com).
---------------------------------------------------------------------------

    The Commission has reviewed carefully the proposed rule change, the 
comment letters, and the NYSE Response to Comments, and finds that the 
proposed rule change is consistent with the requirements of the 
Exchange Act and the rules and regulations thereunder applicable to a 
national securities exchange.\7\ In particular, the Commission finds 
that the proposed rule change is consistent with Section 6(b) of the 
Exchange Act,\8\ which, among other things, requires a national 
securities exchange to be so organized and have the capacity to be able 
to carry out the purposes of the Exchange Act and to enforce compliance 
by its members and persons associated with its members with the 
provisions of the Exchange Act, the rules and regulations thereunder, 
and the rules of the exchange, and assure the fair representation of 
its members in the selection of its directors and administration of its 
affairs, and provide that one or more directors shall be representative 
of issuers and investors and not be associated with a member of the 
exchange, broker, or dealer. Section 6(b) of the Exchange Act \9\ also 
requires that the rules of the exchange be designed to promote just and 
equitable principles of trade, to remove impediments to and perfect the 
mechanism of a free and open market and a national market system, and, 
in general, to protect investors and the public interest.
---------------------------------------------------------------------------

    \7\ In approving the proposed rule change, the Commission has 
considered its impact on efficiency, competition, and capital 
formation. See 15 U.S.C. 78c(f).
    \8\ 15 U.S.C. 78f(b).
    \9\ Id.

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

[[Page 8034]]

A. Accelerated Approval of Amendment No. 1

    As set forth below, the Commission finds good cause for approving 
Amendment No. 1 prior to the thirtieth day after publishing notice of 
Amendment No. 1 in the Federal Register pursuant to Section 19(b)(2) of 
the Exchange Act.\10\
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78s(b)(2). Pursuant to Section 19(b)(2) of the 
Exchange Act, 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. 1, NYSE made changes to the Purpose Section of 
Form 19b-4 to (1) provide an explanation of the purpose of the proposed 
change from the current independence policy of NYSE Group to no longer 
provide as a categorical matter that a person fails to be independent 
if he or she is a director of an affiliate of a member organization; 
(2) specify that the Exchange has proposed to make a change to the 
ownership limitation in the NYSE Group Certificate of Incorporation to 
match the voting limitation, and add that the board of directors must 
determine that share ownership in excess of the concentration 
limitation will not impair the ability of NYSE Group to discharge its 
responsibilities under the Exchange Act and the rules and regulations 
thereunder; (3) clarify the process for nominating directors for the 
NYSE Euronext (``NYSE Euronext'') board of directors; (4) clarify that 
it is requesting that the Commission allow NYSE Euronext alone to 
wholly own and vote all of the outstanding common stock of NYSE Group; 
and (5) clarify that the organizational documents of the Exchange, NYSE 
Market, Inc. (``NYSE Market''), and NYSE Regulation, Inc. (``NYSE 
Regulation'') provide that any person not meeting the board 
qualifications in the relevant organizational documents will not be 
qualified to serve, and therefore will not be eligible to serve as a 
director. The Exchange made a corresponding clarifying change to the 
proposed Second Amended and Restated Operating Agreement of the 
Exchange (``proposed NYSE Operating Agreement'') and the proposed 
Amended and Restated Bylaws of NYSE Market (``proposed NYSE Market 
Bylaws''). Additionally, the Exchange made a change to the proposed 
Second Amended and Restated Bylaws of NYSE Regulation (``proposed NYSE 
Regulation Bylaws'') to add that any person who is not elected or 
appointed in accordance with the qualifications set forth in Section 
1(A) of Article III of the proposed NYSE Regulation Bylaws shall not be 
qualified to serve as a director and therefore shall not be elected to 
serve as a director. This proposed change was described in the 
Notice,\11\ but was inadvertently omitted from the proposed NYSE 
Regulation Bylaws. The Exchange also made technical revisions to 
proposed Article VII, Section 2 of the proposed Amended and Restated 
Certificate of Incorporation of NYSE Group (``proposed NYSE Group 
Certificate of Incorporation'') relating to quorum requirements for 
each meeting of stockholders.\12\ The Exchange also is amending the 
Trust Agreement (as defined below) to specify that the shares of 
Archipelago Holdings, Inc. (``Archipelago'') may also be held directly 
by the Trust (as defined below). These changes are necessary to clarify 
the proposal. The Commission finds good cause to accelerate approval of 
these changes prior to the thirtieth day after publication in the 
Federal Register because they clarify the Exchange's rules, which 
should facilitate the Exchange's compliance with its rules and the 
Commission's ability to ensure compliance with such rules, and assist 
members and investors in understanding the application and scope of the 
rules.
---------------------------------------------------------------------------

    \11\ See Notice, supra note 3, at 831.
    \12\ In the Notice, the Exchange mistakenly showed proposed 
deletions to the current quorum requirements. The Exchange is not 
proposing to change the quorum requirements that exist in the 
current NYSE Group Certificate of Incorporation.
---------------------------------------------------------------------------

    In addition, the Exchange made certain clarifying, conforming, 
technical, non-material, and non-substantive changes to the Purpose 
Section of Form 19b-4, the Independence Policy of the NYSE Euronext 
Board of Directors (``Independence Policy''), the proposed NYSE Group 
Certificate of Incorporation, the proposed Second Amended and Restated 
Certificate of Incorporation of NYSE Market (``proposed NYSE Market 
Certificate of Incorporation''), the proposed Restated Certificate of 
Incorporation of NYSE Regulation \13\ (``proposed NYSE Regulation 
Certificate of Incorporation''), and the Trust Agreement, which raise 
no new or novel issues. These changes are non-substantive and technical 
in nature and are necessary to reflect the changes from the current 
rules of the Exchange and clarify the proposal. The Commission finds 
good cause exists to accelerate approval of these changes prior to the 
thirtieth day after publication in the Federal Register because they 
clarify the Exchange's rules, which should facilitate the Exchange's 
compliance with its rules, the Commission's ability to ensure 
compliance with such rules, and assist members and investors in 
understanding the application and scope of the rules.
---------------------------------------------------------------------------

    \13\ In Amendment No. 1, the Exchange proposed to change the 
name of this document to conform to New York State law. See 
Amendment No. 1, supra note 6.
---------------------------------------------------------------------------

    The Commission finds that the changes proposed in Amendment No. 1 
are consistent with the Exchange Act and therefore finds good cause to 
accelerate approval of Amendment No. 1, pursuant to Section 19(b)(2) of 
the Exchange Act.\14\
---------------------------------------------------------------------------

    \14\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------

B. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning Amendment No. 1, including whether Amendment No. 1 
is consistent with the Exchange 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 protected]. Please include 
File Number SR-NYSE-2006-120 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.
    All submissions should refer to File Number SR-NYSE-2006-120. 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. Copies of such 
filing also will be available for inspection and copying at the 
principal office of NYSE. All

[[Page 8035]]

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 Amendment No. 1 of File Number SR-NYSE-
2006-120 and should be submitted on or before March 15, 2007.

II. Discussion

    The Exchange has submitted the proposed rule change in connection 
with the Combination of NYSE Group with Euronext. As a result of the 
Combination, the businesses of NYSE Group (including the businesses of 
the Exchange and NYSE Arca, Inc. (a Delaware corporation, registered 
national securities exchange and self-regulatory organization (``NYSE 
Arca'')), and Euronext will be held under a single, publicly traded 
holding company named NYSE Euronext, a Delaware corporation. Following 
the Combination, each of NYSE Group and Euronext will be a separate 
subsidiary of NYSE Euronext, and their respective businesses and assets 
will continue to be held as they are currently held (subject to any 
post-closing corporate reorganization of Euronext). The proposed rule 
change is necessary to effectuate the consummation of the Combination 
and will not be operative until the consummation of the Combination.

A. Corporate Structure

    After the Combination, the Exchange will remain a wholly owned 
subsidiary of NYSE Group. NYSE Market, a Delaware corporation, will 
remain a wholly owned subsidiary of the Exchange and conduct the 
Exchange's business. NYSE Regulation, a New York Type A not-for-profit 
corporation, will remain a wholly owned subsidiary of the Exchange, and 
continue to perform the regulatory responsibilities for the Exchange 
pursuant to a delegation agreement with the Exchange and many of the 
regulatory functions of NYSE Arca pursuant to a services agreement with 
NYSE Arca.
    Archipelago, a Delaware corporation, will remain a wholly owned 
subsidiary of NYSE Group. NYSE Arca Holdings, Inc., a Delaware 
corporation (``NYSE Arca Holdings''), and NYSE Arca L.L.C., a Delaware 
limited liability company (``NYSE Arca LLC''), will remain wholly owned 
subsidiaries of Archipelago. NYSE Arca will remain a wholly owned 
subsidiary of NYSE Arca Holdings, and NYSE Arca Equities, Inc. (``NYSE 
Arca Equities''), a Delaware corporation formerly known as PCX 
Equities, Inc., will remain a wholly owned subsidiary of NYSE Arca. 
NYSE Arca will continue to maintain its status as a registered national 
securities exchange and self-regulatory organization. Archipelago's 
businesses and assets will continue to be held by it and its 
subsidiaries. Pursuant to a regulatory services agreement, NYSE 
Regulation will continue to perform many of the regulatory functions of 
NYSE Arca. The governing documents of Archipelago will remain unchanged 
other than amendments to the Certificate of Incorporation of 
Archipelago to allow the Trust (as defined below) to exceed the voting 
limitation and ownership concentration limitation as provided for in 
the Trust Agreement.\15\
---------------------------------------------------------------------------

    \15\ These amendments are the subject of a proposed rule change 
filed by NYSE Arca, which proposed rule change the Commission is 
approving today. See Securities Exchange Act Release No. 55294 
(February 14, 2007) (approval order). See also Securities Exchange 
Act Release No. 55109 (January 16, 2007), 72 FR 2578 (January 19, 
2007) (notice of proposed rule change of NYSE Arca). The Combination 
involves certain modifications to the organizational documents of 
NYSE Group and of NYSE Euronext, which upon consummation of the 
Combination will be the new indirect parent company of NYSE Arca. 
The organizational documents and independence policies of NYSE Group 
and NYSE Euronext and the Trust Agreement constitute rules of NYSE 
Arca. The resolutions of the board of directors of NYSE Group are 
also rules of NYSE Arca requiring Commission approval. Accordingly, 
NYSE Arca has submitted a proposed rule change to reflect the rule 
changes to be implemented in connection with the Combination.
---------------------------------------------------------------------------

    The Exchange represents that the Combination will have no effect on 
the ability of any party to trade securities on NYSE Market, NYSE Arca, 
or NYSE Arca Equities. Euronext and its subsidiaries will continue to 
operate their business and operations in substantially the same manner 
as they are conducted currently, with any changes subject to the 
approval of the European Regulators to the extent required.
    A core aspect of the structure of the Combination is local 
regulation of the marketplace, members, and issuers. Therefore, 
securities exchanges, members, and issuers of NYSE Group and Euronext 
will continue to be regulated in the same manner as they are currently 
regulated. The Commission notes that this conclusion (i.e., that 
securities exchanges, members, and issuers of NYSE Group and Euronext 
will continue to be regulated in the same manner as they are currently 
regulated) is based on the structure of the Combination as described in 
this proposal.
1. NYSE Euronext
    Following the Combination, NYSE Euronext will be a for-profit, 
publicly traded stock corporation and will act as a holding company for 
the businesses of the NYSE Group and Euronext. NYSE Euronext will own 
all of the equity interests in NYSE Group and its subsidiaries, 
including the Exchange and NYSE Arca, and a majority (if not all) of 
the equity interests in Euronext and its respective subsidiaries. 
Section 19(b) of the Exchange Act and Rule 19b-4 thereunder require a 
self-regulatory organization (``SRO'') to file proposed rule changes 
with the Commission. Although NYSE Euronext is not an SRO, certain 
provisions of its proposed Amended and Restated Certificate of 
Incorporation (``proposed NYSE Euronext Certificate of Incorporation'') 
and proposed Amended and Restated Bylaws (``proposed NYSE Euronext 
Bylaws'') are rules of an exchange \16\ if they are stated policies, 
practices, or interpretations, as defined in Rule 19b-4 under the 
Exchange Act, of the exchange, and must be filed with the Commission 
pursuant to Section 19(b)(4) of the Exchange Act and Rule 19b-4 
thereunder. Accordingly, the Exchange has filed the proposed NYSE 
Euronext Certificate of Incorporation and the proposed NYSE Euronext 
Bylaws with the Commission.
---------------------------------------------------------------------------

    \16\ See Section 3(a)(27) of the Exchange Act, 15 U.S.C. 
78c(a)(27). If NYSE Euronext decides to change its Certificate of 
Incorporation or Bylaws, NYSE Euronext must submit such change to 
the board of directors of the Exchange, NYSE Market, NYSE 
Regulation, NYSE Arca, and NYSE Arca Equities, and if any or all of 
such board of directors shall determine that such amendment or 
repeal must be filed with or filed with and approved by the 
Commission pursuant to Section 19 of the Exchange Act and the rules 
thereunder, such change shall not be effective until filed with or 
filed with and approved by the Commission, as applicable. See 
proposed NYSE Euronext Certificate of Incorporation, Article X and 
proposed NYSE Euronext Bylaws, Article X, Section 10.10(C).
---------------------------------------------------------------------------

a. Board of Directors

    Because directors of NYSE Euronext will also serve on the boards of 
the Exchange, NYSE Market, and NYSE Regulation, the composition of, and 
selection process for, the NYSE Euronext's board of directors is 
described below. It is currently contemplated that immediately after 
the Combination, the NYSE Euronext board of directors will consist of 
twenty-two directors. The initial NYSE Euronext board of directors will 
have an equal number of U.S. Persons \17\ and European

[[Page 8036]]

Persons.\18\ Eleven directors will be the directors of NYSE Group as of 
immediately prior to the consummation of the Combination (including the 
chief executive officer and chairman of the board of NYSE Group). Nine 
directors will be members of the supervisory board of Euronext \19\ as 
of immediately prior to the consummation of the Combination (including 
the chairman of the Euronext supervisory board). One director will be 
the chief executive officer of Euronext as of immediately prior to the 
consummation of the Combination, and the remaining director will be a 
European Person approved by both the NYSE Group board of directors and 
the Euronext supervisory board. The term of the initial directors of 
NYSE Euronext will end with the first annual meeting of stockholders to 
be held by NYSE Euronext, at which meeting the existing directors of 
NYSE Euronext will be nominated as directors of NYSE Euronext by the 
nominating and governance committee of the NYSE Euronext board of 
directors. Thereafter, the directors elected will serve one-year terms.
---------------------------------------------------------------------------

    \17\ A ``U.S. 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 proposed NYSE Euronext 
Bylaws, Article III, Section 3.2(A).
    \18\ A ``European 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 a country in Europe. See proposed NYSE 
Euronext Bylaws, Article III, Section 3.2(A).
    \19\ The supervisory board of a Dutch company such as Euronext, 
is the functional equivalent of a board of directors of a U.S. 
company but is not permitted to include members of management.
---------------------------------------------------------------------------

    Beginning with the first annual meeting of stockholders,\20\ 
nominees to the NYSE Euronext board of directors will be nominated by 
the nominating and governance committee of the NYSE Euronext board of 
directors, which committee shall be comprised of an equal number of 
European Persons and U.S. Persons. The proposed NYSE Euronext Bylaws 
provide that in any election of directors, the nominees who shall be 
elected to the NYSE Euronext board of directors shall be nominees who 
receive the highest number of votes such that, immediately after such 
election: (1) U.S. Persons as of such election shall constitute at 
least half of, but no more than the smallest number of directors, that 
will constitute a majority of the directors on the NYSE Euronext board 
of directors; and (2) European Persons as of such election shall 
constitute the remainder of the directors on the NYSE Euronext board of 
directors.\21\
---------------------------------------------------------------------------

    \20\ See Amendment No. 1, supra note 6.
    \21\ See proposed NYSE Euronext Bylaws, Article III, Section 
3.2(A).
---------------------------------------------------------------------------

    The proposed NYSE Euronext Bylaws also provide that either the 
chairman of the board shall be a U.S. Person and the chief executive 
officer shall be a European Person, or the chairman of the board shall 
be a European Person and the chief executive officer shall be a U.S. 
Person.\22\ The chief executive officer and deputy chief executive 
officer may be, but are not required to be, members of the board of 
directors of NYSE Euronext.
---------------------------------------------------------------------------

    \22\ See proposed NYSE Euronext Bylaws, Article III, Section 
3.3.
---------------------------------------------------------------------------

    Each member of the NYSE Euronext board of directors (other than the 
chief executive officer and deputy chief executive officer of NYSE 
Euronext if they are members of the board of directors) must satisfy 
the independence requirements set forth in the Independence Policy, as 
amended from time to time.\23\
---------------------------------------------------------------------------

    \23\ The chief executive officer and deputy chief executive 
officer, if they are members of the board of directors, will be 
recused from any act of the board of directors, whether it is acting 
as the board of directors or as a committee of the board, with 
respect to any act of any board committee that is required to be 
comprised solely of independent directors. See proposed NYSE 
Euronext Bylaws, Article III, Section 3.4. To clarify and continue 
NYSE Group board's current practice of soliciting the input of NYSE 
Group management for certain board and committee matters, the 
Exchange proposes to use the word ``acts'' instead of the word 
``deliberations'' and ``acts'' instead of the word ``activities'' in 
the proposed NYSE Euronext Bylaws (See Amendment No. 1, supra note 
6), each of which are currently used in the Amended and Restated 
Bylaws of NYSE Group (``current NYSE Group Bylaws'') but will be 
deleted as part of the proposed changes to the Amended and Restated 
Certificate of Incorporation of NYSE Group (``current NYSE Group 
Certificate of Incorporation''). (See Amendment No. 1, supra note 
6.) This same clarification to board practice will also be made to 
the Bylaws of NYSE Market (``current NYSE Market Bylaws'') and the 
Amended and Restated Bylaws of NYSE Regulation (``current NYSE 
Regulation Bylaws'').
---------------------------------------------------------------------------

    The NYSE Euronext board of directors may create one or more 
committees. It is expected that upon consummation of the Combination, 
the NYSE Euronext board of directors will have an audit committee, a 
human resource and compensation committee, and a nominating and 
governance committee. Each of the audit committee, human resource and 
compensation committee, and nominating and governance committee of the 
NYSE Euronext board of directors will consist solely of directors 
meeting the independence requirements of NYSE Euronext. These 
committees also will perform relevant functions for NYSE Group, the 
Exchange, NYSE Market, NYSE Regulation, Archipelago, NYSE Arca, and 
NYSE Arca Equities, as well as other subsidiaries of NYSE Euronext, 
except that the board of directors of NYSE Regulation will continue to 
have its own compensation committee and nominating and governance 
committee.
b. Voting and Ownership Limitations; Changes in Control of the Exchange
    The proposed NYSE Euronext Certificate of Incorporation includes 
restrictions on the ability to vote and own shares of stock of NYSE 
Euronext. Under the proposed NYSE Euronext Certificate of 
Incorporation, no person (either alone or together with its related 
persons) \24\ will be 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. NYSE Euronext shall disregard any 
such votes purported to be cast in excess of these limitations.\25\
---------------------------------------------------------------------------

    \24\ See proposed NYSE Euronext Certificate of Incorporation, 
Article V, Section 1(L) and note 19 of the Notice for the definition 
of ``related person.''
    \25\ See proposed NYSE Euronext Certificate of Incorporation, 
Article V, Section 1(A).
---------------------------------------------------------------------------

    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.\26\ 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.\27\
---------------------------------------------------------------------------

    \26\ See proposed NYSE Euronext Certificate of Incorporation, 
Article V, Section 2(A).
    \27\ See proposed NYSE Euronext Certificate of Incorporation, 
Article V, Section 2(D).

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

[[Page 8037]]

    NYSE also has proposed to permit the NYSE Euronext board of 
directors to require any stockholder that the NYSE Euronext board of 
directors reasonably believes to be subject to the voting or ownership 
limitations summarized above, and any person (either alone or together 
with its related persons) that at any time beneficially owns 5% or more 
of NYSE Euronext's outstanding capital stock (which ownership has not 
been reported to NYSE Euronext), to provide to NYSE Euronext 
information regarding such ownership upon the request of the NYSE 
Euronext board of directors.\28\ This requirement will allow NYSE 
Euronext to monitor potential changes in control to ensure that none of 
the limits are reached.
---------------------------------------------------------------------------

    \28\ See proposed NYSE Euronext Certificate of Incorporation, 
Article V, Section 4.
---------------------------------------------------------------------------

    The NYSE Euronext board of directors may waive the provisions 
regarding voting and ownership limits, subject to a determination by 
the NYSE Euronext board of directors that the exercise of such voting 
rights (or the entering into of a voting agreement) or ownership, as 
applicable:
     Will not impair the ability of any of the Exchange, NYSE 
Market, NYSE Regulation, NYSE Arca LLC, NYSE Arca, and NYSE Arca 
Equities (each a ``U.S. Regulated Subsidiary'' and together, ``U.S. 
Regulated Subsidiaries''), NYSE Euronext or NYSE Group to discharge 
their respective responsibilities under the Exchange Act and the rules 
and regulations thereunder;
     Will not impair the ability of any of the European Market 
Subsidiaries or NYSE Euronext or Euronext to discharge their respective 
responsibilities under the European Exchange Regulations; \29\
---------------------------------------------------------------------------

    \29\ See proposed NYSE Euronext Bylaws, Article VII, Section 
7.3(A), (B), and (E) and note 23 of the Notice for the definitions 
of ``European Exchange Regulations,'' ``European Market 
Subsidiary,'' and ``Euronext College of Regulators.''
---------------------------------------------------------------------------

     Is otherwise in the best interest of NYSE Euronext, its 
stockholders, the U.S. Regulated Subsidiaries and the European Market 
Subsidiaries; and
     Will not impair the Commission's ability to enforce the 
Exchange Act or the European Regulators' ability to enforce the 
European Exchange Regulations.
    Such resolution expressly permitting such voting or ownership must 
be filed with and approved by the Commission under Section 19 of the 
Exchange Act \30\ and filed with and approved by each European 
Regulator having appropriate jurisdiction and authority.
---------------------------------------------------------------------------

    \30\ 15 U.S.C. 78s.
---------------------------------------------------------------------------

    In addition, for so long as NYSE Euronext directly or indirectly 
controls the Exchange or NYSE Market, 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 Exchange (as defined in 
Exchange Rules). In addition, for so long as NYSE Euronext directly or 
indirectly controls NYSE Arca, 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 if such person or its 
related persons is an ETP Holder of NYSE Arca Equities, or an OTP 
Holder or an OTP Firm of NYSE Arca.\31\ Further, the NYSE Euronext 
board of directors also cannot waive the voting and ownership limits 
above the 20% threshold if such person or its related persons is 
subject to any statutory disqualification (as defined in Section 
3(a)(39) of the Exchange Act) (a ``U.S. Disqualified Person'') or has 
been determined by a European Regulator to be in violation of laws or 
regulations adopted in accordance with the European Directive on 
Markets in Financial Instruments applicable to any European Market 
Subsidiary requiring such person to act fairly, honestly and 
professionally (a ``European Disqualified Person'').
---------------------------------------------------------------------------

    \31\ ETP Holder is defined in the NYSE Arca Equities rules of 
NYSE Arca. OTP Holder and OTP Firm are defined in the rules of NYSE 
Arca.
---------------------------------------------------------------------------

    Members that trade on an exchange traditionally have ownership 
interests in such exchange. As the Commission has noted in the past, 
however, a member's interest in an exchange could become so large as to 
cast doubt on whether the exchange can fairly and objectively exercise 
its self-regulatory responsibilities with respect to that member.\32\ A 
member that is a controlling shareholder of an exchange might be 
tempted to exercise that controlling influence by directing the 
exchange to refrain from, or the exchange may hesitate to, diligently 
monitor and surveil the member's conduct or diligently enforce its 
rules and the federal securities laws with respect to conduct by the 
member that violates such provisions.
---------------------------------------------------------------------------

    \32\ See Securities Exchange Act Release Nos. 53382 (February 
27, 2006), 71 FR 11251 (March 6, 2006) (SR-NYSE-2005-77) (order 
approving merger of New York Stock Exchange, Inc. and Archipelago, 
and demutualization of New York Stock Exchange, Inc. (``NYSE Inc.--
Archipelago Merger Order'')); 53128 (January 13, 2006), 71 FR 3550 
(January 23, 2006) (File No. 10-131); 51149 (February 8, 2005), 70 
FR 7531 (February 14, 2005) (SR-CHX-2004-26); 49718 (May 17, 2004), 
69 FR 29611 (May 24, 2004) (SR-PCX-2004-08); 49098 (January 16, 
2004), 69 FR 3974 (January 27, 2004) (SR-Phlx-2003-73); and 49067 
(January 13, 2004), 69 FR 2761 (January 20, 2004) (SR-BSE-2003-19).
---------------------------------------------------------------------------

    The Commission finds the ownership and voting restrictions in the 
proposed NYSE Euronext Certificate of Incorporation are consistent with 
the Exchange Act. These requirements should minimize the potential that 
a person could improperly interfere with or restrict the ability of the 
Commission, the Exchange, or its subsidiaries to effectively carry out 
their regulatory oversight responsibilities under the Exchange Act.
2. NYSE Group
    Following the Combination, NYSE Group will merge with a wholly 
owned subsidiary of NYSE Euronext and the surviving corporation will be 
a wholly owned subsidiary of NYSE Euronext.\33\ Section 19(b) of the 
Exchange Act and Rule 19b-4 thereunder require an SRO to file proposed 
rule changes with the Commission. Although NYSE Group is not an SRO, 
certain provisions of the current NYSE Group Certificate of 
Incorporation and current NYSE Group Bylaws are rules of an exchange 
\34\ if they are stated policies, practices, or interpretations, as 
defined in Rule 19b-4 of the Exchange Act, of the exchange,

[[Page 8038]]

and must be filed with the Commission pursuant to Section 19(b)(4) of 
the Exchange Act and Rule 19b-4 thereunder. Accordingly, the Exchange 
has filed the proposed NYSE Group Certificate of Incorporation and 
proposed NYSE Group Bylaws with the Commission.
---------------------------------------------------------------------------

    \33\ NYSE proposes to amend certain provisions of NYSE Group's 
organizational documents to reflect that, after the Combination, 
NYSE Group will be an intermediate holding company. The number of 
authorized shares of NYSE Group will be decreased. Provisions 
requiring a supermajority vote of shareholders to amend or repeal 
certain sections of the NYSE Group certificate of incorporation will 
be deleted. Also, provisions prohibiting NYSE Group shareholders 
from calling shareholder meetings, taking shareholder action by 
written consent and postponing shareholder meetings will be deleted. 
Provisions requiring advance notice from shareholders of shareholder 
director nominations or shareholder proposals will be eliminated. 
Finally, provisions relating to the mechanics of shareholders' 
meetings, such as the appointment of an inspector of elections, 
inspection of shareholder lists and opening and closing of polls 
will be deleted.
    \34\ See Section 3(a)(27) of the Exchange Act, 15 U.S.C. 
78c(a)(27). As under the current NYSE Group Certificate of 
Incorporation and current NYSE Group Bylaws, under the proposed NYSE 
Group Certificate of Incorporation and proposed NYSE Group Bylaws, 
if NYSE Group decides to change the proposed NYSE Group Certificate 
of Incorporation or proposed NYSE Group Bylaws, NYSE Group must 
submit such change to the board of directors of the Exchange, NYSE 
Market, NYSE Regulation, NYSE Arca, and NYSE Arca Equities, and if 
any or all of such board of directors shall determine that such 
amendment or repeal is required by law or regulation to be filed 
with or filed with and approved by the Commission pursuant to 
Section 19 of the Exchange Act and the rules thereunder, such change 
shall not be effective until filed with or filed with and approved 
by the Commission, as applicable. See current NYSE Group Certificate 
of Incorporation, Article XIII, current NYSE Group Bylaws, Article 
VIII, Section 7.9(b), proposed NYSE Group Certificate of 
Incorporation, Article XII, and proposed NYSE Group Bylaws, Article 
VII, Section 7.9(b).
---------------------------------------------------------------------------

    The Exchange has proposed to change the voting and ownership 
limitations of NYSE Group to include a statement that such limitations 
will not be applicable so long as NYSE Euronext and the Trust 
collectively own all of the capital stock of NYSE Group. Instead, while 
NYSE Group is a wholly owned subsidiary of NYSE Euronext, or as 
provided for in the Trust Agreement, there shall be no transfer of the 
shares of NYSE Group held by NYSE Euronext without the approval of the 
Commission.\35\ If NYSE Group ceases to be wholly owned by NYSE 
Euronext or the Trust, the current voting and ownership limitations 
will apply.\36\
---------------------------------------------------------------------------

    \35\ See proposed NYSE Group Certificate of Incorporation, 
Article IV, Section 4(a).
    \36\ See proposed NYSE Group Certificate of Incorporation, 
Article IV, Section 4(b). The Exchange also proposed to eliminate 
transfer restrictions on the common stock of NYSE Group issued to 
persons in connection with the merger of New York Stock Exchange, 
Inc. and Archipelago that exist in the current NYSE Group 
Certificate of Incorporation, as unnecessary, since upon the 
consummation of the Combination, all common stock will be wholly 
owned by NYSE Euronext.
---------------------------------------------------------------------------

    In addition, pursuant to the proposed NYSE Operating Agreement, 
except as otherwise provided for in the Trust Agreement, NYSE Group may 
not transfer or assign its interest in the Exchange, in whole or part, 
to any person or entity, unless such transfer or assignment is filed 
with and approved by the Commission under Section 19 of the Exchange 
Act.\37\
---------------------------------------------------------------------------

    \37\ See proposed NYSE Operating Agreement, Article III, Section 
3.03.
---------------------------------------------------------------------------

    The Commission finds the changes to the ownership and voting 
restrictions in the proposed NYSE Group Certificate of Incorporation 
and the change in control provisions in the proposed NYSE Operating 
Agreement are consistent with the Exchange Act. These requirements 
should minimize the potential that a person could improperly interfere 
with or restrict the ability of the Commission, the Exchange, or its 
subsidiaries to effectively carry out their regulatory oversight 
responsibilities under the Exchange Act.
    In addition, to allow NYSE Euronext to wholly own and vote all of 
NYSE Group stock upon consummation of the Combination, NYSE Euronext 
delivered a written notice to the board of directors of NYSE Group 
pursuant to the procedures set forth in the current NYSE Group 
Certificate of Incorporation requesting approval of its ownership and 
voting of NYSE Group stock in excess of the NYSE Group ownership 
limitation and NYSE Group voting limitation.\38\ The board of directors 
of NYSE Group must resolve to expressly permit ownership or voting in 
excess of the NYSE Group ownership limitation and NYSE Group voting 
limitation. Such resolution of the NYSE Group board of directors must 
be filed with and approved by the Commission under Section 19(b) of the 
Exchange Act, and become effective thereunder. Further, the board of 
directors may not approve any voting or ownership in excess of the 
limitations unless it determines that such ownership or exercise of 
voting rights will not impair the ability of the Exchange, NYSE Market, 
NYSE Regulation, NYSE Arca LLC, NYSE Arca, or NYSE Arca Equities to 
discharge their respective responsibilities under the Exchange Act and 
the rules and regulations thereunder and is otherwise in the best 
interests of NYSE Group, its stockholders, and the U.S. Regulated 
Subsidiaries, and will not impair the Commission's ability to enforce 
the Exchange Act.\39\ For so long as NYSE Group directly or indirectly 
controls the Exchange or NYSE Market, the NYSE Group board of directors 
cannot waive the voting and ownership limits above the 20% threshold if 
such person or its related persons is a ``member'' or ``member 
organization'' of the Exchange (as defined in Exchange Rules).\40\ In 
addition, for so long as NYSE Group directly or indirectly controls 
NYSE Arca, NYSE Arca Equities, or any facility of NYSE Arca, the NYSE 
Group board of directors cannot waive the voting and ownership limits 
above the 20% threshold if such person or its related persons is an ETP 
Holder of NYSE Arca Equities, or an OTP Holder or an OTP Firm of NYSE 
Arca.\41\ Further, the NYSE Group board of directors cannot waive the 
voting and ownership limits above the 20% threshold if such person or 
its related persons is a U.S. Disqualified Person.
---------------------------------------------------------------------------

    \38\ Prior to permitting any person to exceed the ownership 
limitation and voting limitation, such person must deliver notice of 
such person's intention to own or vote shares in excess of the 
ownership limitation or voting limitation to the NYSE Group board of 
directors. See current NYSE Group Certificate of Incorporation, 
Article V, Sections 1(A) and 2(B).
    \39\ See current NYSE Group Certificate of Incorporation, 
Article V, Section 1(A)(x).
    \40\ See current NYSE Group Certificate of Incorporation, 
Article V, Section 1(A)(y).
    \41\ Id.
---------------------------------------------------------------------------

    The notice from NYSE Euronext included representations of NYSE 
Euronext that neither it, nor any of its related persons, are: (1) ETP 
Holders of NYSE Arca Equities, OTP Holders or OTP Firms of NYSE Arca: 
(2) members or member organizations of the Exchange; or (3) subject to 
any statutory disqualification (as defined in Section 3(a)(39) of the 
Exchange Act). The NYSE Group board of directors adopted a resolution 
approving NYSE Euronext's request that it be permitted, either alone or 
with its related persons, to exceed the NYSE Group ownership limitation 
and the NYSE Group voting limitation.\42\ The Exchange proposed that 
NYSE Euronext wholly own and vote all of the outstanding common stock 
of NYSE Group upon the consummation of the Combination.\43\
---------------------------------------------------------------------------

    \42\ Such resolutions of the NYSE Group board of directors were 
filed as part of the proposed rule change. See Exhibit K to the 
Notice, which exhibit is available on the Commission's Web site 
(http://www.sec.gov/rules/sro.shtml), at the Commission's Public 
Reference Room, at the NYSE, and on the NYSE's Web site (http://www.nyse.com).
    \43\ See Amendment No. 1, supra note 6.
---------------------------------------------------------------------------

    The Commission believes it is consistent with the Exchange Act to 
allow NYSE Euronext to wholly own and vote all of the outstanding 
common stock of NYSE Group. The Commission notes that NYSE Euronext and 
the Exchange represents that neither NYSE Euronext nor any of its 
related persons is subject to any statutory disqualification (as 
defined in Section 3(a)(39) of the Exchange Act), or is an ETP Holder 
of NYSE Arca Equities, OTP Holder or OTP Firm of NYSE Arca or member or 
member organization of the Exchange. Moreover, NYSE Euronext has 
comparable voting and ownership limitations to NYSE Group.\44\ NYSE 
Euronext has also included in its corporate documents certain 
provisions designed to maintain the independence of the U.S. Regulated 
Subsidiaries' self-regulatory functions from NYSE Euronext and NYSE 
Group.\45\ Accordingly, the Commission believes that the acquisition of 
ownership and exercise of voting rights of NYSE Group common stock by 
NYSE Euronext will not impair the ability of the Commission or any of 
the U.S. Regulated Subsidiaries to discharge their respective 
responsibilities under the Exchange Act.
---------------------------------------------------------------------------

    \44\ See supra notes 24-32 and accompanying text.
    \45\ See infra notes 65-85 and accompanying text.
---------------------------------------------------------------------------

3. The Exchange, NYSE Market and NYSE Regulation
    Following the Combination, the Exchange, which is registered as a 
national securities exchange and is an SRO, will remain a wholly owned

[[Page 8039]]

subsidiary of NYSE Group.\46\ NYSE Market will remain a wholly owned 
subsidiary of the Exchange and conduct the Exchange's business. The 
Combination will have no effect on the ability of any party to trade 
securities on the NYSE Market. NYSE Regulation will remain a wholly 
owned subsidiary of the Exchange, and will continue to perform the 
regulatory responsibilities for the Exchange pursuant to a delegation 
agreement with the Exchange and many of the regulatory functions of 
NYSE Arca pursuant to a regulatory services agreement with NYSE Arca.
---------------------------------------------------------------------------

    \46\ The Exchange proposes to amend various rules to delete all 
references to ``NYSE Group, Inc.'' or ``NYSE Group'' in the Exchange 
Rules and replace those references with ``NYSE Euronext,'' which 
will be the indirect parent company of the Exchange following the 
Combination.
---------------------------------------------------------------------------

    Currently, directors of NYSE Group serve on the boards of the 
Exchange, NYSE Market, and NYSE Regulation, and the organizational 
documents of these entities refer to the independence requirements of 
NYSE Group. The Exchange has proposed to amend the organizational 
documents of the Exchange, NYSE Market, and NYSE Regulation to replace 
all references to NYSE Group with NYSE Euronext. Thus, a majority of 
the directors of each of the Exchange and NYSE Market must be U.S. 
Persons who are directors of NYSE Euronext that satisfy the 
independence requirements of the board of directors of NYSE Euronext. 
In addition, the Exchange's non-affiliated directors \47\ must qualify 
as independent under the Independence Policy. All of the directors of 
NYSE Regulation (other than the chief executive officer of NYSE 
Regulation) must satisfy the independence requirements of the board of 
directors of NYSE Euronext. For this reason, the independence 
requirements of the board of directors of NYSE Euronext are relevant to 
the Commission's consideration of whether the boards of directors of 
the Exchange, NYSE Market, and NYSE Regulation are consistent with the 
Exchange Act.
---------------------------------------------------------------------------

    \47\ The Exchange's non-affiliated directors are persons who are 
not members of the board of directors of NYSE Euronext, but qualify 
as independent under the independence policy of the board of 
directors of NYSE Euronext. See proposed NYSE Operating Agreement, 
Article II, Section 2.03.
---------------------------------------------------------------------------

    Under the Independence Policy, the NYSE Euronext board of directors 
must make a determination that each director, other than the chief 
executive officer and deputy chief executive officer of NYSE Euronext, 
does not have any material relationships with NYSE Euronext and its 
subsidiaries.\48\ In addition, the Independence Policy requires each 
member of the NYSE Euronext board of directors, other than the chief 
executive officer and deputy chief executive officer of NYSE Euronext, 
to be independent from: (1) NYSE Euronext and its subsidiaries 
(including NYSE Group, Euronext and their respective subsidiaries); (2) 
any member or member organization of the Exchange, NYSE Arca, or NYSE 
Arca Equities; \49\ (3) any non-member broker-dealer that is registered 
under the Exchange Act and engages in business involving substantial 
direct contact with securities customers; and (4) any issuer of 
securities listed on the Exchange or NYSE Arca, unless such issuer is a 
``foreign private issuer'' as defined under Rule 3b-4 promulgated under 
the Exchange Act.\50\
---------------------------------------------------------------------------

    \48\ The Commission also notes that as a company listed on the 
Exchange, NYSE Euronext's board of directors must also meet the 
independence requirements applicable to a listed company's board of 
directors, as contained in Section 303A of the Exchange's Listed 
Company Manual.
    \49\ This will include members, allied members (each as defined 
in the Exchange Rules) and allied persons (as defined in the NYSE 
Arca and NYSE Arca Equities Rules), member organizations of the 
Exchange, OTP Firms and OTP Holders of NYSE Arca (each as defined in 
the Exchange Rules and the rules of NYSE Arca, respectively, as may 
be in effect from time to time) and ETP Holders of NYSE Arca 
Equities (as defined in the rules of NYSE Arca Equities, as may be 
in effect from time to time).
    \50\ 17 CFR 240.3b-4. The Exchange also has proposed that there 
be a transition period so that the Independence Policy will not 
apply to the European Persons on the NYSE Euronext board of 
directors until the annual meeting of NYSE Euronext stockholders in 
2008.
---------------------------------------------------------------------------

    In contrast to the current independence policy of NYSE Group, the 
Independence Policy will not provide that a person fails to be 
independent: (1) If he or she is an executive officer of a foreign 
private issuer of securities listed on the Exchange or NYSE Arca; (2) 
is a director of an affiliate of a member organization of the Exchange, 
NYSE Arca, or NYSE Arca Equities; \51\ or (3) is a European Person on 
the board of directors of NYSE Euronext prior to the annual meeting of 
NYSE Euronext stockholders in 2008. However, the Independence Policy 
states an executive officer of an issuer whose securities are listed on 
the Exchange or NYSE Arca (regardless of whether such issuer is a 
foreign private issuer) and a director of an affiliate of a member 
organization of the Exchange, NYSE Arca, or NYSE Arca Equities cannot 
qualify as an independent director of the Exchange, NYSE Market, or 
NYSE Regulation. In addition, a European Person on the NYSE Euronext 
board of directors who would not satisfy the independence requirements 
in the Independence Policy, but for the transition period, cannot 
qualify as an independent director of the Exchange, NYSE Market, or 
NYSE Regulation. The prohibition on these persons serving as 
independent directors of the Exchange, NYSE Market, and NYSE Regulation 
should help assure that the boards of directors of the Exchange, NYSE 
Market, and NYSE Regulation are controlled by persons not subject to 
potential conflicts of interest, and thereby further the goals of 
Section 6(b)(1) of the Exchange Act.\52\
---------------------------------------------------------------------------

    \51\ NYSE further proposes to amend Exchange Rule 2B to clarify 
that, if a director of an affiliate of a member organization serves 
as a director of NYSE Euronext, this fact shall not cause such 
member organization to be an affiliate of the Exchange, or an 
affiliate of an affiliate of the Exchange. The Commission finds that 
the Exchange Rule 2B as proposed to be changed, is consistent with 
the Exchange Act.
    \52\ 15 U.S.C. 78f(b)(1).
---------------------------------------------------------------------------

    One commenter \53\ expressed concerns that the Independence Policy 
reflected a weaker independence standard than the current independence 
policy of NYSE Group. The commenter notes the transition period for 
European Persons on the NYSE Euronext board of directors as an example 
of such weakening, among other things. Further, the commenter asserts 
that the changes will impact the board of directors of NYSE Regulation. 
In its response to the comments, the Exchange notes that the 
Independence Policy specifically prohibits: (1) An executive officer of 
an issuer whose securities are listed on the Exchange or NYSE Arca 
(regardless of whether such issuer is a foreign private issuer); (2) a 
European Person on the NYSE Euronext board of directors who would not 
satisfy the independence requirements in the independence policy but 
for the transition period; or (3) any director of an affiliate of a 
member organization from qualifying as an independent director of the 
Exchange, NYSE Market, or NYSE Regulation.\54\ The Exchange also notes 
that the modifications to the current independence policy of NYSE Group 
relate only to categorical prohibitions; the NYSE Euronext board of 
directors will still be required to determine that such persons do not 
have any material relationship with NYSE Euronext and its subsidiaries 
in order for them to qualify as independent directors.\55\ Further, the 
Exchange notes that the Independence Policy does not change the 
independence requirements for NYSE Regulation directors.\56\ The 
Exchange also notes that the Independence Policy was drafted to ensure 
that it still adequately ensures the independence of the directors of a

[[Page 8040]]

company controlling U.S. securities exchanges. The Commission believes 
that the Independence Policy maintains a level of independence that 
should help to minimize conflicts of interest at the Exchange, NYSE 
Market, and NYSE Regulation. The Commission finds that these proposals, 
taken together, are consistent with the Exchange Act, particularly with 
Section 6(b)(1),\57\ which requires an exchange to be so organized and 
have the capacity to carry out the purposes of the Exchange Act.
---------------------------------------------------------------------------

    \53\ See Brown Letter, supra note 4.
    \54\ See NYSE Response to Comments, supra note 5.
    \55\ Id.
    \56\ Id.
    \57\ 15 U.S.C. 78f(b)(1).
---------------------------------------------------------------------------

    The organizational documents of the Exchange, NYSE Market, and NYSE 
Regulation will be modified to require that a majority of the directors 
of the boards of each of the Exchange, NYSE Market, and NYSE Regulation 
be U.S. Persons and any vacancies on such boards created by the 
departure of a U.S. Person must be filled with a U.S. Person. 
Additionally, the organizational documents of the Exchange, NYSE Market 
and NYSE Regulation \58\ will be amended to state that any person not 
meeting the board qualifications of the relevant organizational 
documents will not be qualified to serve, and therefore will not be 
eligible to serve, as a director.\59\ The Nominating and Governance 
Committee of NYSE Euronext will be responsible for nominating the 
candidates to the boards of directors of the Exchange and NYSE Market, 
and for determining the eligibility of such candidates to serve on such 
boards (including whether such person qualifies as independent under 
the Independence Policy, and whether such person is not a U.S. 
Disqualified Person). The Commission finds that these proposals, taken 
together, are consistent with the Exchange Act, particularly Section 
6(b)(1),\60\ which requires an exchange to be so organized and have the 
capacity to carry out the purposes of the Exchange Act.
---------------------------------------------------------------------------

    \58\ See supra note 11 and related text.
    \59\ See proposed NYSE Operating Agreement, Article II, Section 
2.03, and proposed NYSE Market Bylaws, Article III, Section 1.
    \60\ 15 U.S.C. 78f(b)(1).
---------------------------------------------------------------------------

    Immediately following the consummation of the Combination, none of 
the directors of the Exchange, NYSE Market or NYSE Regulation who will 
serve on such boards will have been elected or appointed by the 
Nominating and Governance Committee of NYSE Euronext as prescribed in 
the proposed governing documents of the Exchange, NYSE Market, and NYSE 
Regulation. However, the Exchange represented that the board members of 
the Exchange, NYSE Market, and NYSE Regulation immediately preceding 
the consummation of the Combination--including the directors selected 
to meet the fair representation requirements of the Exchange Act \61\ 
(``fair representation'' directors or candidates)--will be qualified to 
serve on, and will remain on, the boards of each of the Exchange, NYSE 
Market, and NYSE Regulation, respectively, following the consummation 
of the Combination. In light of these circumstances, the Commission 
believes that the composition of the boards of directors of the 
Exchange, NYSE Market, and NYSE Regulation is consistent with the 
Exchange Act.
---------------------------------------------------------------------------

    \61\ See proposed NYSE Operating Agreement, Article II, Section 
2.03, proposed NYSE Market Bylaws, Article III, Section 1, and 
proposed NYSE Regulation Bylaws, Article III, Section 1.
---------------------------------------------------------------------------

    The NYSE Market Bylaws will be amended to delete the requirement 
that the chief executive officer of NYSE Group be the chief executive 
officer of NYSE Market, and to require instead that the chief executive 
officer of NYSE Market be a U.S. Person.
    The amended organizational documents of the Exchange, NYSE Market, 
and NYSE Regulation will change the time period for member 
organizations to vote for ``fair representation'' candidates to 20 
calendar days. Currently, if the number of ``fair representation'' 
candidates nominated for election to the boards of directors of each of 
the Exchange, NYSE Market and NYSE Regulation exceeds the number of 
available ``fair representation'' positions on such boards, member 
organizations of the Exchange have 20 business days to submit their 
votes for the ``fair representation'' candidates.\62\ The Commission 
believes that the proposed amendment is consistent with Section 6(b)(3) 
of the Exchange Act,\63\ which requires that the rules of an exchange 
assure fair representation of its members in the selection of its 
directors and administration of its affairs. Reducing the period for 
submission of votes from 20 business days to 20 calendar days should 
still afford members adequate time to consider and submit their votes. 
The Commission finds that these proposals, taken together, are 
consistent with the Exchange Act, particularly with Section 
6(b)(1),\64\ which requires an exchange to be so organized and have the 
capacity to carry out the purposes of the Exchange Act.
---------------------------------------------------------------------------

    \62\ The Commission notes that other than the changes specified 
in this Section IIA3, the Exchange is not proposing to change any of 
the provisions relating to (i) assure the fair representation of the 
members of the Exchange in the selection of its directors and 
administration of its affairs or (ii) one or more directors of the 
exchange being representative of issuers and investors and not being 
associated with a member of the exchange or with a broker dealer, 
each as required under Section 6(b)(3) of the Exchange Act. 15 
U.S.C. 78f(b)(3).
    \63\ 15 U.S.C. 78f(b)(3).
    \64\ 15 U.S.C. 78f(b)(1).
---------------------------------------------------------------------------

B. Relationship of NYSE Euronext, NYSE Group, and the U.S. Regulated 
Subsidiaries; Jurisdiction over NYSE Euronext

    Although NYSE Euronext itself will not carry out regulatory 
functions, its activities with respect to the operation of any of the 
U.S. Regulated Subsidiaries must be consistent with, and not interfere 
with, the U.S. Regulated Subsidiaries' self-regulatory obligations. The 
proposed NYSE Euronext corporate documents include certain provisions 
that are designed to maintain the independence of the U.S. Regulated 
Subsidiaries' self-regulatory functions from NYSE Euronext and NYSE 
Group, enable the U.S. Regulated Subsidiaries to operate in a manner 
that complies with the U.S. federal securities laws, including the 
objectives and requirements of Sections 6(b) and 19(g) of the Exchange 
Act,\65\ and facilitate the ability of the U.S. Regulated Subsidiaries 
and the Commission to fulfill their regulatory and oversight 
obligations under the Exchange Act.\66\
---------------------------------------------------------------------------

    \65\ 15 U.S.C. 78f(b) and 15 U.S.C. 78s(g).
    \66\ See proposed NYSE Euronext Certificate of Incorporation, 
Article XIII, and proposed NYSE Euronext Bylaws, Article III, 
Section 3.15, Article VII, Article VIII, Article IX, and Article X, 
Section 10.10.
---------------------------------------------------------------------------

    For example, under the proposed NYSE Euronext Bylaws, NYSE Euronext 
shall comply with the U.S. federal securities laws, the European 
Exchange Regulations, and the respective rules and regulations 
thereunder; shall cooperate with the Commission, the European 
Regulators, and the U.S. Regulated Subsidiaries.\67\ Also, each 
director, officer, and employee of NYSE Euronext, in discharging his or 
her responsibilities shall comply with the U.S. federal securities laws 
and the rules and regulations thereunder, cooperate with the 
Commission, and cooperate with the U.S. Regulated Subsidiaries.\68\ In 
addition, in discharging his or her responsibilities as a member of the 
board, each director of NYSE Euronext must, to the fullest extent 
permitted by applicable law, take into consideration the effect that 
NYSE Euronext's actions would have on the ability of the U.S. Regulated 
Subsidiaries to carry out their responsibilities under the Exchange 
Act,

[[Page 8041]]

on the ability of the European Market Subsidiaries to carry out their 
responsibilities under the European Exchange Regulations as operators 
of European Regulated Markets, and on the ability of NYSE Group and 
NYSE Euronext to carry out their responsibilities under the Exchange 
Act.\69\ NYSE Euronext, its directors, officers and employees shall 
give due regard to the preservation of the independence of the self-
regulatory function of the U.S. Regulated Subsidiaries (to the extent 
of each U.S. Regulated Subsidiary's self-regulatory function) and the 
European Market Subsidiaries (to the extent of each European Market 
Subsidiaries' self-regulatory function).\70\ Further, NYSE Euronext 
agrees to keep confidential, to the fullest extent permitted by 
applicable law, all confidential information pertaining to: (1) The 
self-regulatory function of the Exchange, NYSE Market, NYSE Regulation, 
NYSE Arca and NYSE Arca Equities (including but not limited to 
disciplinary matters, trading data, trading practices and audit 
information) contained in the books and records of any of the U.S. 
Regulated Subsidiaries; and (2) the self-regulatory function of the 
European Market Subsidiaries under the European Exchange Regulations as 
operator of a European Regulated Market (including but not limited to 
disciplinary matters, trading data, trading practices and audit 
information) contained in the books and records of the European Market 
Subsidiaries, and not use such information for any commercial \71\ 
purposes.\72\
---------------------------------------------------------------------------

    \67\ See proposed NYSE Euronext Bylaws, Article IX, Sections 9.1 
and 9.2.
    \68\ See proposed NYSE Euronext Bylaws, Article III, Section 
3.15.
    \69\ See proposed NYSE Euronext Bylaws, Article III, Section 
3.15.
    \70\ See proposed NYSE Euronext Bylaws, Article IX, Sections 9.4 
and 9.5.
    \71\ The Commission believes that any non-regulatory use of such 
information would be for a commercial purpose.
    \72\ See proposed NYSE Euronext Bylaws, Article VIII, Section 
8.1.
---------------------------------------------------------------------------

    In addition, NYSE Euronext's books and records shall be subject at 
all times to inspection and copying by the Commission, the European 
Regulators, any U.S. Regulated Subsidiary (provided that such books and 
records are related to the operation or administration of such U.S. 
Regulated Subsidiary or any other U.S. Regulated Subsidiary over which 
such U.S. Regulated Subsidiary has regulatory authority or oversight) 
and any European Market Subsidiary (provided that such books and 
records are related to the operation or administration of such European 
Market Subsidiary or any European Regulated Market over which such 
European Market Subsidiary has regulatory authority or oversight).\73\ 
NYSE Euronext's books and records related to U.S. Regulated 
Subsidiaries shall be maintained within the United States, and NYSE 
Euronext's books and records related to European Market Subsidiaries 
shall be maintained in the home jurisdiction of one or more of the 
European Market Subsidiaries.\74\ To the extent that any of NYSE 
Euronext's books and records relate to both the U.S. Regulated 
Subsidiaries and the European Market Subsidiaries (each such book and 
record, an ``Overlapping Record''), NYSE Euronext shall be entitled to 
maintain such books and records in either the United States or the home 
jurisdiction of one or more of the European Market Subsidiaries.\75\ To 
facilitate compliance with the requirements of Rule 17a-1(b) under the 
Exchange Act, NYSE Euronext shall maintain in the United States 
originals or copies of Overlapping Records covered by Rule 17a-1(b) 
promptly after creation of such Overlapping Records. The Commission 
notes that NYSE Euronext is liable for any books and records it is 
required to produce for inspection and copying by the Commission that 
are created outside the United States and where the law of a foreign 
jurisdiction prohibits NYSE Euronext from providing such books and 
records to the Commission for inspection and copying.
---------------------------------------------------------------------------

    \73\ See proposed NYSE Euronext Bylaws, Article VIII, Section 
8.3.
    \74\ See proposed NYSE Euronext Bylaws, Article VIII, Sections 
8.4 and 8.5.
    \75\ See proposed NYSE Euronext Bylaws, Article VIII, Section 
8.6.
---------------------------------------------------------------------------

    In addition, for so long as NYSE Euronext directly or indirectly 
controls any U.S. Regulated Subsidiary, the books, records, premises, 
officers, directors, and employees of NYSE Euronext shall be deemed to 
be the books, records, premises, officers, directors, and employees of 
the U.S. Regulated Subsidiaries for purposes of and subject to 
oversight pursuant to the Exchange Act, and for so long as NYSE 
Euronext directly or indirectly controls any European Market 
Subsidiary, the books, records, premises, officers, directors, and 
employees of NYSE Euronext shall be deemed to be the books, records, 
premises, officers, directors, and employees of such European Market 
Subsidiaries for purposes of and subject to oversight pursuant to the 
European Exchange Regulations.\76\
---------------------------------------------------------------------------

    \76\ See proposed NYSE Euronext Bylaws, Article VIII, Sections 
8.4 and 8.5.
---------------------------------------------------------------------------

    NYSE Euronext, its directors and officers, and those of its 
employees whose principal place of business and residence is outside of 
the United States irrevocably submit to the jurisdiction of the U.S. 
federal courts and the Commission with respect to activities relating 
to the U.S. Regulated Subsidiaries, and to the jurisdiction of the 
European Regulators and European courts with respect to activities 
relating to the European Market Subsidiaries.\77\
---------------------------------------------------------------------------

    \77\ See proposed NYSE Euronext Bylaws, Article VII, Sections 
7.1 and 7.2.
---------------------------------------------------------------------------

    Each of NYSE Euronext, NYSE Group, the Exchange and NYSE Market 
acknowledges that it is responsible for referring possible rule 
violations to NYSE Regulation. In addition, there will be an explicit 
agreement among NYSE Euronext, NYSE Group, the Exchange, NYSE Market 
and NYSE Regulation to provide adequate funding for NYSE Regulation, as 
is currently the case among the NYSE Group entities.
    Finally, the proposed NYSE Euronext Certificate of Incorporation 
and proposed NYSE Euronext Bylaws require that, for so long as NYSE 
Euronext controls, directly or indirectly, any of the U.S. Regulated 
Subsidiaries, any changes to the proposed NYSE Euronext Certificate of 
Incorporation and proposed NYSE Euronext Bylaws be submitted to the 
board of directors of the Exchange, NYSE Market, NYSE Regulation, NYSE 
Arca, and NYSE Arca Equities, and if any such boards of directors 
determines that such amendment is required to be filed with or filed 
with and approved by the Commission pursuant to Section 19 of the 
Exchange Act \78\ and the rules thereunder, such change shall not be 
effective until filed with or filed with and approved by, the 
Commission.\79\
---------------------------------------------------------------------------

    \78\ 15 U.S.C. 78s.
    \79\ See proposed NYSE Group Certificate of Incorporation, 
Article XII and proposed NYSE Group Bylaws, Article VII, Section 
7.9.
---------------------------------------------------------------------------

    The Commission finds that these provisions are consistent with the 
Exchange Act, and that they are intended to assist the Exchange in 
fulfilling its self-regulatory obligations and in administering and 
complying with the requirements of the Exchange Act. With respect to 
the maintenance of books and records of NYSE Euronext, the Commission 
notes that while NYSE Euronext has the discretion to maintain 
Overlapping Records in either the United States or the home 
jurisdiction of one or more of the European Market Subsidiaries, NYSE 
Euronext has represented to the Commission that it will maintain in the 
United States originals or copies of Overlapping Records covered by 
Rule 17a-1(b) under the Exchange Act \80\ promptly after

[[Page 8042]]

creation of such Overlapping Records. The Commission believes that such 
actions by NYSE Euronext with respect to its books and records are 
necessary to ensure that the U.S. Regulated Subsidiaries comply with 
the requirements of Section 17 of the Exchange Act \81\ and Rule 17a-
1(b) thereunder.\82\
---------------------------------------------------------------------------

    \80\ 17 CFR 240.17a-1(b).
    \81\ 15 U.S.C. 78q.
    \82\ 17 CFR 240.17a-1(b).
---------------------------------------------------------------------------

    Under Section 20(a) of the Exchange Act,\83\ any person with a 
controlling interest in the Exchange or NYSE Arca shall be jointly and 
severally liable with and to the same extent that the Exchange and NYSE 
Arca are liable under any provision of the Exchange 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 Exchange Act \84\ creates 
aiding and abetting liability for any person who knowingly provides 
substantial assistance to another person in violation of any provision 
of the Exchange Act or rule thereunder. Further, Section 21C of the 
Exchange Act \85\ 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 Exchange Act through an act or omission that the 
person knew or should have known would contribute to the violation. 
These provisions are applicable to NYSE Euronext's and NYSE Group's 
dealings with the U.S. Regulated Subsidiaries.
---------------------------------------------------------------------------

    \83\ 15 U.S.C. 78t(a).
    \84\ 15 U.S.C. 78t(e).
    \85\ 15 U.S.C. 78u-3.
---------------------------------------------------------------------------

C. Trust

    NYSE Euronext will operate several regulated entities located in 
the United States and in various jurisdictions in Europe. As described 
in the Notice, in connection with obtaining regulatory approval of the 
Combination, NYSE Euronext proposed to implement two standby 
structures, one involving a Delaware trust and one involving a Dutch 
foundation (``Dutch Foundation''). Pursuant to the terms of the Trust 
Agreement,\86\ the Delaware trust (``Trust'') will be empowered to take 
actions to mitigate the effects of any material adverse change in 
European law that has an ``extraterritorial'' impact on the non-
European issuers listed on NYSE Group securities exchanges, non-
European financial services firms that are members of any NYSE Group 
securities exchange, or any NYSE Group securities exchange.\87\
---------------------------------------------------------------------------

    \86\ See proposed Trust Agreement, by and among NYSE Euronext, 
NYSE Group, the Delaware trustee, and the trustees, attached as 
Exhibit 5M to Amendment No. 1 (``Trust Agreement'').
    \87\ The Dutch Foundation will be empowered to take actions 
intended to mitigate the effects of any material adverse change in 
U.S. law that has an ``extraterritorial'' impact on non-U.S. issuers 
listed on Euronext markets, non-U.S. financial services firms that 
are members of Euronext markets or holders of exchange licenses with 
respect to the Euronext markets. The Exchange described the proposed 
Dutch Foundation in the Notice, supra note 3.
---------------------------------------------------------------------------

    Upon the occurrence of a material adverse change of law \88\ that 
continues after the cure periods described below, the Trust may 
exercise certain remedies that result in a total or partial loss by 
NYSE Euronext of operating control over some of its securities 
exchanges. The Trust may require that NYSE Euronext transfer control 
over a substantial portion of its business and assets to the direction 
of the Trust. As a result, control of NYSE Group or any NYSE Group 
securities exchange may be assumed by the Trust. As discussed above, 
Section 19(b) of the Exchange Act and Rule 19b-4 thereunder require an 
SRO to file a proposed rule change with the Commission. Although the 
Trust is not an SRO, certain provisions of the Trust Agreement are 
rules of an exchange \89\ if they are stated policies, practice, or 
interpretations, as defined in Rule 19b-4 under the Exchange Act,\90\ 
of the exchange, and must be filed with the Commission pursuant to 
Section 19(b)(4) of the Exchange Act \91\ and Rule 19b-4 thereunder. 
Accordingly, the Exchange has filed the Trust Agreement with the 
Commission.
---------------------------------------------------------------------------

    \88\ What constitutes a material adverse change of law is 
described in the Notice, supra note 3, at 824-825.
    \89\ See Section 3(a)(27) of the Exchange Act, 15 U.S.C. 
78c(a)(27). If NYSE Euronext decides to change its Amended and 
Restated Certificate of Incorporation or Amended and Restated 
Bylaws, NYSE Euronext must submit such change to the board of 
directors of the Exchange, NYSE Market, NYSE Regulation, NYSE Arca, 
and NYSE Arca Equities, and if any or all of such board of directors 
shall determine that such amendment or repeal must be filed with or 
filed with and approved by the Commission pursuant to Section 19 of 
the Exchange Act and the rules thereunder, such change shall not be 
effective until filed with or filed with and approved by the 
Commission, as applicable. See proposed NYSE Euronext Certificate of 
Incorporation, Article X and proposed NYSE Euronext Bylaws, Article 
X, Section 10.10(C).
    \90\ 17 CFR 240.19b-4.
    \91\ 15 U.S.C. 78s(b).
---------------------------------------------------------------------------

1. Governance of the Trust
    The Trust will be administered by a board of three trustees.\92\ 
The initial trustees of the Trust will be selected jointly by NYSE 
Group and Euronext prior to the Combination, with successor members to 
be selected by the nominating and governance committee of the NYSE 
Euronext board of directors.\93\
---------------------------------------------------------------------------

    \92\ See Trust Agreement, Article III, Section 3.2.
    \93\ See Trust Agreement, Article III, Section 3.4. The initial 
term of the Trust will be ten years from the date of the 
consummation of the Combination, renewable for successive one-year 
terms; provided, however, that any extension that would cause the 
term of the Trust to continue past the 20th anniversary of the date 
of the consummation of the Combination shall require the prior 
written consent of NYSE Euronext. See Trust Agreement, Article II, 
Section 2.5.
---------------------------------------------------------------------------

    Pursuant to the Trust Agreement, actions of the Trust will require 
majority approval of the members of the board of trustees, following 
reasonable consultation and good-faith cooperation with NYSE 
Euronext.\94\ In determining whether a material adverse change of law 
has occurred and the exercise of the remedies, and in exercising its 
rights and powers during the pendency of a material adverse change of 
law, the duty of the Trust and its trustees shall be to act in the 
public interests of the markets operated by NYSE Group and its 
subsidiaries if and only to the extent necessary to avoid or eliminate 
the impact or effect of a material adverse change of law. In all other 
circumstances, the duty of the Trust and its trustees shall be to act 
in the best interests of NYSE Euronext.\95\ In addition, the Trust and 
trustees shall comply with the U.S. federal securities laws and the 
rules and regulations thereunder and shall cooperate (and take 
reasonable steps necessary to cause its agents to cooperate) with the 
Commission and the U.S. Regulated Subsidiaries pursuant to and to the 
extent of their respective regulatory authority.\96\
---------------------------------------------------------------------------

    \94\ See Trust Agreement, Article III, Sections 3.5 and 3.6.
    \95\ See Trust Agreement, Article II, Section 2.3 and Article 
III, Section 3.6.
    \96\ See Trust Agreement, Article V, Sections 5.2 and 5.3.
---------------------------------------------------------------------------

    Under the Trust Agreement, if a material adverse change in law 
occurs with respect to a NYSE Group securities exchange (an ``affected 
subsidiary'') and shall continue after the cure periods specified 
below, the board of trustees of the Trust may exercise several remedies 
following prior notice to, and, if required under then applicable laws, 
prior approval by, the Commission.
    After a cure period of six months, the board of trustees of the 
Trust may deliver confidential or public and non-binding or binding 
advice to NYSE Group and NYSE Euronext with respect to the affected 
subsidiary relating to decisions regarding: (1) Changes to the rules of 
an affected subsidiary; (2) decisions to enter into (or not enter into) 
or alter the terms of listing agreements of an affected subsidiary; (3) 
decisions

[[Page 8043]]

to enter into (or not enter into) or alter the terms of contractual 
arrangements with any non-European financial services firms in relation 
to an affected subsidiary; (4) changes in information and 
communications technologies for an affected subsidiary; and (5) changes 
in clearing and settlement for an affected subsidiary ((1) through (5), 
together the ``Assumed Matters'').\97\
---------------------------------------------------------------------------

    \97\ See Trust Agreement, Article IV, Section 4.1.
---------------------------------------------------------------------------

    After a cure period of six months, the board of trustees of the 
Trust may assume management responsibilities of NYSE Group or its 
affected subsidiary with respect to some or all of the Assumed Matters. 
The board of trustees of the Trust may exercise a call option over 
priority shares issued by NYSE Group or its affected subsidiary, which 
priority shares will carry no or a limited economic right or interest 
and the right to vote on, make proposals with respect to and impose 
consent requirements to approve actions in relation to, the Assumed 
Matters.\98\
---------------------------------------------------------------------------

    \98\ See Trust Agreement, Article IV, Section 4.1.
---------------------------------------------------------------------------

    After a cure period of nine months, the board of trustees of the 
Trust may exercise a call option over the common stock or voting 
securities of NYSE Group or its affected subsidiary, in each case, with 
such common stock, ordinary shares or voting securities being the 
minimum number necessary, in the reasonable opinion of the trustees of 
the Trust, to cause all affected subsidiaries to cease to be subject to 
a material adverse change of law.\99\
---------------------------------------------------------------------------

    \99\ Id.
---------------------------------------------------------------------------

    Furthermore, subject to any required approval by the Commission, 
the Trust shall be entitled to give confidential non-binding advice to 
NYSE Euronext at any time before the end of the above-mentioned cure 
period and NYSE Euronext shall be entitled, in its sole discretion, to 
implement any remedy at any time before the end of such cure 
period.\100\
---------------------------------------------------------------------------

    \100\ Id.
---------------------------------------------------------------------------

    Any of the above remedies may be imposed only if and to the extent 
that such remedy: (1) Causes all affected subsidiaries to cease to be 
subject to a material adverse change of European law; and (2) is the 
remedy available that causes the least intrusion on the conduct of the 
business and operations of NYSE Euronext and NYSE Group, and its 
subsidiaries, including the affected subsidiaries, by their respective 
governing bodies.\101\
---------------------------------------------------------------------------

    \101\ Id. In determining whether a remedy causes the least 
intrusion, negative control by the Trust shall be preferred over 
affirmative control by the Trust, and authority of the Trust shall 
be asserted over the fewest and most narrow decisions of NYSE 
Euronext and its subsidiaries. A remedy covering fewer entities and 
subsidiary entities shall be preferred over a remedy covering more 
entities and parent entities. The call option over the priority 
shares shall be viewed as a remedy of last resort among the remedies 
that are available after the six-month cure period, and the call 
option over the common stock, ordinary shares and voting securities 
shall be viewed as a remedy of last resort among all remedies. See 
Trust Agreement, Article IV, Section 4.1.
---------------------------------------------------------------------------

    In addition, prior to the exercise of a call option, the board of 
trustees of the Trust must determine that no other remedy can cause all 
of the affected subsidiaries to cease to be subject to a material 
adverse change of law; consult with the NYSE Euronext board of 
directors; and, in the case of a material adverse change in law with 
respect to a NYSE Group securities exchange, consult with the NYSE 
Group board of directors and the Commission to consider the solutions 
available to address the situation that has arisen and would trigger 
the right of the Trust to exercise the remedies described above, taking 
into account any possible adverse consequences for NYSE Euronext or 
NYSE Group in terms of taxation or accounting treatment.\102\
---------------------------------------------------------------------------

    \102\ See Trust Agreement, Article IV, Section 4.1.
---------------------------------------------------------------------------

    If and when any of the conditions of a material adverse change of 
law cease, any and all remedies shall be immediately unwound. NYSE 
Euronext shall have the right, at any time and regardless of whether a 
change of law continues to be a material adverse change of law, to 
request and cause the unwinding of any remedy for the purpose of and to 
the extent necessary to effect a divesture or spin-off of all or part 
of its interest in NYSE Group or NYSE Euronext, as applicable, or any 
subsidiary of NYSE Euronext operating an exchange that is affected by a 
material adverse change of law, as the case may be.\103\
---------------------------------------------------------------------------

    \103\ See Trust Agreement, Article IV, Section 4.4.
---------------------------------------------------------------------------

2. Relationship of the Trust, NYSE Group, and the U.S. Regulated 
Subsidiaries; Jurisdiction Over the Trust
    Although the Trust itself will not carry out regulatory functions, 
its activities with respect to the operation of NYSE Group and any of 
the U.S. Regulated Subsidiaries must be consistent with, and not 
interfere with, the U.S. Regulated Subsidiaries' self-regulatory 
obligations. The Trust Agreement includes certain provisions that are 
designed to maintain the independence of the U.S. Regulated 
Subsidiaries' self-regulatory functions from the Trust, enable the U.S. 
Regulated Subsidiaries to operate in a manner that complies with the 
U.S. federal securities laws, including the objectives and requirements 
of Sections 6(b) and 19(g) of the Exchange Act, and facilitate the 
ability of the U.S. Regulated Subsidiaries and the Commission to 
fulfill their regulatory and oversight obligations under the Exchange 
Act.\104\
---------------------------------------------------------------------------

    \104\ See Trust Agreement, Articles V, VI, and VIII.
---------------------------------------------------------------------------

    For example, under the Trust Agreement, the Trust shall comply with 
the U.S. federal securities laws and the rules and regulations 
thereunder, and shall cooperate with the Commission and the U.S. 
Regulated Subsidiaries.\105\ Also, each trustee, officer, and employee 
of the Trust, in discharging his or her responsibilities in such 
capacity, shall comply with the U.S. federal securities laws and the 
rules and regulations thereunder, cooperate with the Commission, and 
cooperate with the U.S. Regulated Subsidiaries.\106\ In addition, in 
discharging his or her responsibilities as a trustee, each trustee 
must, to the fullest extent permitted by applicable law, take into 
consideration the effect that the Trust's actions would have on the 
ability of the U.S. Regulated Subsidiaries, NYSE Euronext and NYSE 
Group to discharge their respective responsibilities under the Exchange 
Act.\107\ The Trust, trustees, and the officers and employees of the 
Trust shall give due regard to the preservation of the independence of 
the self-regulatory function of the U.S. Regulated Subsidiaries (to the 
extent of each U.S. Regulated Subsidiary's self-regulatory function) 
and shall not take any action that would interfere with the 
effectuation of any decision by the board of directors or managers of 
the U.S. Regulated Subsidiaries relating to their regulatory 
responsibilities or that would interfere with the ability of the U.S. 
Regulated Subsidiaries to carry out their respective responsibilities 
under the Exchange Act.\108\ The Trust, the trustees, and the officers 
and employees of the Trust whose principal place of business and 
residence is outside of the United States irrevocably submit to the 
jurisdiction of the U.S. federal courts and the Commission with respect 
to activities relating to the U.S. Regulated Subsidiaries.\109\
---------------------------------------------------------------------------

    \105\ See Trust Agreement, Article V, Section 5.3(a).
    \106\ See Trust Agreement, Article V, Section 5.2(a).
    \107\ See Trust Agreement, Article V, Section 5.1(a).
    \108\ See Trust Agreement, Article V, Section 5.1(b).
    \109\ See Trust Agreement, Article V, Section 5.4.
---------------------------------------------------------------------------

    In addition, the Trust's books and records shall be subject at all 
times to inspection and copying by the Commission, NYSE Euronext, NYSE 
Group, and any U.S. Regulated Subsidiary (provided that such books and 
records are related to the operation or administration of such U.S. 
Regulated

[[Page 8044]]

Subsidiary or any other U.S. Regulated Subsidiary over which such U.S. 
Regulated Subsidiary has regulatory authority or oversight).\110\ The 
Trust's books and records related to U.S. Regulated Subsidiaries shall 
be maintained within the United States.\111\
---------------------------------------------------------------------------

    \110\ See Trust Agreement, Article VI, Section 6.3.
    \111\ See Trust Agreement, Article VI, Section 6.1(b).
---------------------------------------------------------------------------

    In addition, for so long as the Trust directly or indirectly 
controls any U.S. Regulated Subsidiary, the books, records, premises, 
officers, trustees, and employees of the Trust shall be deemed to be 
the books, records, premises, officers, trustees, and employees of the 
U.S. Regulated Subsidiaries for purposes of and subject to oversight 
pursuant to the Exchange Act.\112\ Further, the Trust agrees to keep 
confidential, to the fullest extent permitted by applicable law, all 
confidential information pertaining to the self-regulatory function of 
the Exchange, NYSE Market, NYSE Regulation, NYSE Arca and NYSE Arca 
Equities (including but not limited to disciplinary matters, trading 
data, trading practices and audit information) contained in the books 
and records of any of the U.S. Regulated Subsidiaries and not use such 
information for any commercial \113\ purposes.\114\ The Commission 
notes that the proposed governing documents of NYSE Euronext and NYSE 
Group contain similar confidentiality provisions regarding information 
pertaining to the self-regulatory function of the Exchange, NYSE 
Market, NYSE Regulation, NYSE Arca, and NYSE Arca Equities.\115\ The 
Commission believes that confidentiality provisions in the proposed 
NYSE Euronext Bylaws and proposed NYSE Group Certificate of 
Incorporation apply to any such confidential information obtained by 
NYSE Euronext or NYSE Group, including that which comes into their 
possession through the Trust.
---------------------------------------------------------------------------

    \112\ Id.
    \113\ The Commission believes that any non-regulatory use of 
such information would be for a commercial purpose.
    \114\ See Trust Agreement, Article VI, Section 6.1. The Trust 
Agreement states that none of its provisions shall be interpreted so 
as to limit or impede the rights of the Commission or any of the 
U.S. Regulated Subsidiaries to have access to and examine such 
confidential information pursuant to the U.S. federal securities 
laws and the rules and regulations thereunder, or to limit or impede 
the ability of any trustees, officers, directors, employees, or 
agents of NYSE Euronext or the Trust to disclose such confidential 
information to the Commission or the U.S. Regulated Subsidiaries. 
See Trust Agreement, Article VI, Section 6.2.
    \115\ See proposed NYSE Euronext Bylaws, Article VIII and 
proposed NYSE Group Certificate of Incorporation, Article X.
---------------------------------------------------------------------------

    The Trust Agreement provides that in no event shall the Trust sell, 
transfer, convey, assign, dispose, pledge (or agree to sell, transfer, 
convey, assign, dispose or pledge) any property of the Trust, except 
pursuant to the unwinding of the remedies, or in circumstances 
permitted by the Trust Agreement and pursuant to written instructions 
from NYSE Euronext approved by the board of directors of NYSE Euronext. 
In addition to the foregoing, any transfer, conveyance, assignment, 
disposition or pledge by the Trust or any trustee of any equity 
interest in, or all or substantially all of the assets of, the 
Exchange, NYSE Market, NYSE Regulation, NYSE Arca LLC, NYSE Arca, or 
NYSE Arca Equities (other than any such transfer or disposition to NYSE 
Euronext or its subsidiaries pursuant to the unwinding of remedies) 
shall not be effected until filed with the Commission under Section 19 
of the Exchange Act.\116\
---------------------------------------------------------------------------

    \116\ See Trust Agreement, Article IV, Section 4.3. The proposed 
rule change also includes modifications to the organizational 
documents of the Exchange, NYSE Market, and NYSE Regulation so that 
the a transfer of the equity interests of the Exchange, NYSE Market, 
and NYSE Regulation pursuant to the terms of the Trust Agreement is 
permitted under such organizational documents.
---------------------------------------------------------------------------

    The Trust Agreement requires that it may only be amended with prior 
written approval of the Commission, as and to the extent required under 
the Exchange Act.\117\ Further, for so long as NYSE Euronext or the 
Trust shall control, directly or indirectly, any of the U.S. Regulated 
Subsidiaries, before any amendment or repeal of any provision of the 
Trust Agreement shall be effective, such amendment or repeal must be 
submitted to the boards of directors of the Exchange, NYSE Market, NYSE 
Regulation, NYSE Arca, and NYSE Arca Equities. If any such boards of 
directors determines that such amendment or repeal is required to be 
filed with or filed with and approved by the Commission pursuant to 
Section 19 of the Exchange Act \118\ and the rules thereunder, such 
change shall not be effective until filed with or filed with and 
approved by the Commission.\119\
---------------------------------------------------------------------------

    \117\ See Trust Agreement, Article VIII, Section 8.2.
    \118\ 15 U.S.C. 78s.
    \119\ See Trust Agreement, Article VIII, Section 8.2.
---------------------------------------------------------------------------

    The Commission finds that the Trust Agreement's provisions are 
designed to enable the U.S. Regulated Subsidiaries to operate in a 
manner that complies with the federal securities laws, including the 
objectives and requirements of Sections 6(b) and 19(g) of the Exchange 
Act,\120\ facilitate the ability of the U.S. Regulated Subsidiaries and 
the Commission to fulfill their regulatory and oversight obligations 
under the Exchange Act,\121\ and are consistent with the provisions 
other entities that directly or indirectly own or control an SRO have 
instituted and that have been approved by the Commission.\122\ The 
Commission finds that the Trust's provisions are consistent with the 
Exchange Act, and that they are intended to assist the Exchange in 
fulfilling its self-regulatory obligations and in administering and 
complying with the requirements of the Exchange Act.
---------------------------------------------------------------------------

    \120\ 15 U.S.C. 78f(b) and 15 U.S.C. 78s(g).
    \121\ See Trust Agreement, Articles V, VI, and VIII.
    \122\ See, e.g., NYSE Inc.-Archipelago Merger Order, supra note 
32.
---------------------------------------------------------------------------

    Under Section 20(a) of the Exchange Act,\123\ any person with a 
controlling interest in the Exchange or NYSE Arca shall be jointly and 
severally liable with and to the same extent that the Exchange and NYSE 
Arca are liable under any provision of the Exchange 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 Exchange Act \124\ creates 
aiding and abetting liability for any person who knowingly provides 
substantial assistance to another person in violation of any provision 
of the Exchange Act or rule thereunder. Further, Section 21C of the 
Exchange Act \125\ 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 Exchange Act through an act or omission that 
the person knew or should have known would contribute to the violation. 
These provisions are applicable to the Trust and all other entities 
controlling the U.S. Regulated Subsidiaries.
---------------------------------------------------------------------------

    \123\ 15 U.S.C. 78t(a).
    \124\ 15 U.S.C. 78t(e).
    \125\ 15 U.S.C. 78u-3.
---------------------------------------------------------------------------

D. Automatic Suspension and Repeal of Certain Provisions in the NYSE 
Euronext Organizational Documents

    Under the organizational documents of NYSE Euronext, immediately 
following the exercise of a call option over a substantial portion of 
Euronext's business (a ``Euronext call option''), whereby the priority 
shares or ordinary shares of Euronext are transferred from NYSE 
Euronext to the Dutch Foundation, and for so long as the Dutch 
Foundation shall continue to hold any priority shares or ordinary 
shares of Euronext, or the voting securities of one or more of the 
subsidiaries of Euronext that, taken together, represent a substantial 
portion of Euronext's business, then certain

[[Page 8045]]

provisions of the proposed NYSE Euronext Bylaws shall be 
suspended.\126\
---------------------------------------------------------------------------

    \126\ These include the requirement that European Persons are 
represented in a certain proportion on the NYSE Euronext board of 
directors and the nominating and governance committee of the NYSE 
Euronext board of directors; the requirement of supermajority board 
or shareholder approval for certain extraordinary transactions; the 
provisions granting jurisdiction to European regulators over certain 
actions of NYSE Euronext and the NYSE Euronext board of directors; 
and references to European regulators, European market subsidiaries 
and European disqualified persons appearing in the proposed NYSE 
Euronext Bylaws.
---------------------------------------------------------------------------

    In addition, if after a period of six months following the exercise 
of a Euronext call option, the Dutch Foundation shall continue to hold 
any ordinary or priority shares of Euronext or any ordinary or priority 
shares or similar voting securities of one or more subsidiaries of 
Euronext that, taken together, represent a substantial portion of 
Euronext's business, or if at any time, NYSE Euronext no longer holds a 
direct or indirect controlling interest in Euronext or in one or more 
subsidiaries of Euronext that, taken together, represent a substantial 
portion of Euronext's business, then certain provisions of the proposed 
NYSE Euronext Bylaws and the proposed NYSE Euronext Certificate of 
Incorporation shall be revoked.\127\ In addition, any officer or 
director of NYSE Euronext who is a European Person shall resign or be 
removed from his or her office.
---------------------------------------------------------------------------

    \127\ These include the provisions of the proposed NYSE Euronext 
Bylaws subject to suspension; the references in the proposed NYSE 
Euronext Certificate of Incorporation and proposed NYSE Euronext 
Bylaws to European regulators, European exchange regulations, 
European market subsidiaries, European regulated markets, Europe and 
European disqualified persons; the provisions in the proposed NYSE 
Euronext Certificate of Incorporation and proposed NYSE Euronext 
Bylaws requiring that amendments to such certificate of 
incorporation or bylaws be submitted to the European market 
subsidiaries and, if applicable, filed with and approved by a 
European regulator; and the provisions in the proposed NYSE Euronext 
Bylaws requiring approval of either two-thirds or more of the NYSE 
Euronext directors or 80% of the votes entitled to be cast by the 
holders of the then-outstanding shares of capital stock of NYSE 
Euronext entitled to vote generally in the election of directors to 
amend certain bylaw provisions.
---------------------------------------------------------------------------

    The Commission finds the suspension or repeal of the above 
described provisions of the proposed NYSE Euronext Bylaws and the 
proposed NYSE Euronext Certificate of Incorporation under circumstances 
in which the Dutch Foundation controls a substantial portion of 
Euronext's business, is consistent with the Exchange Act.

E. Listing of NYSE Euronext's or an Affiliate's Securities

    NYSE Euronext intends to list its shares of common stock for 
trading on the Exchange, as well as on Euronext Paris. Pursuant to the 
proposed amendments to NYSE Rule 497, any security of NYSE Euronext and 
its affiliates shall not be approved for listing on the Exchange unless 
NYSE Regulation determines that such securities satisfy the Exchange's 
rules for listing, and such finding is approved by the NYSE Regulation 
board of directors.\128\ The Commission finds that the proposed 
procedure for the initial listing of NYSE Euronext common stock is 
consistent with the Exchange Act.
---------------------------------------------------------------------------

    \128\ The Exchange proposes to delete Exchange Rule 497T 
(Transition Rules for the First Listed Security Issued by NYSE 
Group, Inc.), which is now obsolete.
---------------------------------------------------------------------------

    NYSE Regulation will be responsible for all Exchange listing-
compliance decisions with respect to NYSE Euronext as an issuer. As in 
the case of NYSE Group under current Exchange Rule 497, NYSE Regulation 
will prepare a quarterly report summarizing its monitoring of NYSE 
Euronext common stock's compliance with such listing standards and its 
monitoring of trading in such securities. This report will be provided 
to the NYSE board of directors and to the Commission. Any notification 
of lack of compliance with any applicable listing standard from NYSE 
Regulation to NYSE Euronext or an affiliate, and any corresponding plan 
of compliance, must be reported to the Commission. Once a year, an 
independent accounting firm will review NYSE Euronext's or any 
affiliated issuer's compliance with the Exchange's listing standards 
and a copy of this report will be forwarded to the Commission. The 
Commission believes that the procedures for monitoring of the listing 
of and trading of NYSE Euronext's or an affiliate's securities are 
consistent with the Act.

F. Options Trading Rights

    The Commission received a comment letter \129\ on the proposed rule 
change regarding certain Option Trading Rights (``OTRs'') that were 
separated from full New York Stock Exchange, Inc.\130\ seats 
(``Separated OTRs''). All New York Stock Exchange seat ownership (with 
or without OTRs) was extinguished in the 2006 demutualization of New 
York Stock Exchange, Inc.\131\ Although the commenter supports the 
Combination, it contends that the owners of Separated OTRs retained 
their Separated OTRs, even after the New York Stock Exchange, Inc. 
exited the options business in 1997, with the expectation that their 
ownership of the Separated OTRs would afford them full rights to trade 
options under the auspices of New York Stock Exchange, Inc. or its 
successor entity. The commenter contends that such ownership gives a 
right to trade options on NYSE Market and NYSE Arca, and after the 
Combination, Euronext. The commenter refers to its comment letters in 
connection with the demutualization of New York Stock Exchange, Inc. in 
its merger with Archipelago.\132\
---------------------------------------------------------------------------

    \129\ See OTR Investors Letter, supra note 4.
    \130\ New York Stock Exchange, Inc. is the predecessor entity to 
NYSE. See NYSE Inc.--Archipelago Merger Order, supra note 32.
    \131\ See NYSE Inc.--Archipelago Merger Order, supra note 32.
    \132\ See NYSE Inc.--Archipelago Merger Order, supra note 32, at 
note 6.
---------------------------------------------------------------------------

    The issue of the rights of owners of Separated OTRs is not before 
the Commission in the context of this rule filing. Pursuant to Section 
19(b)(1) of the Exchange Act,\133\ an SRO (such as NYSE) is required to 
file with the Commission any proposed rule or any proposed change in, 
addition to, or deletion from the rules of such SRO. Further, pursuant 
to Section 19(b)(2) of the Exchange Act,\134\ the Commission shall 
approve a proposed rule change filed by an SRO if the Commission finds 
that such proposed rule change is consistent with the requirements of 
the Exchange Act and the rules and regulations thereunder applicable to 
the SRO. The NYSE is not proposing in this filing a change in the 
trading rights on the Exchange.
---------------------------------------------------------------------------

    \133\ 15 U.S.C. 78s(b)(1).
    \134\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------

III. Conclusion

    For the foregoing reasons, the Commission finds that the proposed 
rule change is consistent with the Exchange 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 
Exchange Act \135\ that the proposed rule change (SR-NYSE-2006-120) is 
approved, and Amendment No. 1 is approved on an accelerated basis.
---------------------------------------------------------------------------

    \135\ Id.

    By the Commission.
Nancy M. Morris,
Secretary.
[FR Doc. E7-2909 Filed 2-21-07; 8:45 am]
BILLING CODE 8010-01-P
```