34182 Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Notices 

board of directors or the equivalent of 

such board, together with any response 

by senior management, within 60 

calendar days after its submission to 

senior management. These reports are 

required to be submitted on Form SCI. 

The Commission staff estimates that the 

total annual ongoing burden for all 

respondents will be, on average, 44 

hours (1 hour per respondent × 44 

respondents). The Commission staff 

estimates that all respondents will 

incur, on average, an estimated ongoing 

annual internal cost of compliance of 

$18,128 ($412 per respondent × 44 

respondents). 

In addition, the Commission staff 

estimates that all respondents will 

incur, on average, annual costs of 

$2,200,000 ($50,000 × 44 respondents) 

for outside legal advice in preparation of 

certain notifications required by Rule 

1003(b). 

Rule 1006 requires each SCI entity, 

with a few exceptions, to file any 

notification, review, description, 

analysis, or report to the Commission 

required under Regulation SCI 

electronically on Form SCI through the 

EFFS. An SCI entity will submit to the 

Commission an EAUF to register each 

individual at the SCI entity who will 

access the EFFS system on behalf of the 

SCI entity. The Commission staff 

estimates that the total annual initial 

burden for 2 new respondents will be 

0.6 hours (0.3 hours per respondent × 2 

respondents), and the annual ongoing 

burden for all respondents will be, on 

average, 6.6 hours (0.15 hours per 

respondent × 44 respondents). The 

Commission staff estimates that the 2 

new respondents would incur an initial 

internal cost of compliance of $248 

($124 per respondent × 2 respondents), 

as well as outside costs to obtain a 

digital ID of $100 ($50 per respondent 

× 2 respondents). In addition, all 

respondents will incur, on average, an 

estimated ongoing annual internal cost 

of compliance of $2,728 ($62 per 

respondent × 44 respondents), as well as 

outside costs to obtain a digital ID of 

$2,200 ($50 per respondent × 44 

respondents). 

Rule 1002(a) requires each SCI entity, 

upon any responsible SCI personnel 

having a reasonable basis to conclude 

that an SCI event has occurred, to begin 

to take appropriate corrective action. 

The Commission staff estimates that the 

total annual initial recordkeeping 

burden for 2 new respondents will be 

228 hours (114 hours per respondent × 

2 respondents), and the annual ongoing 

recordkeeping burden for all 

respondents will be, on average, 1,716 

hours (39 hours per respondent × 44 

respondents). The Commission staff 

estimates that the 2 new respondents 

would incur an initial internal cost of 

compliance of $85,056 ($42,528 per 

respondent × 2 respondents). In 

addition, all respondents will incur, on 

average, an estimated ongoing annual 

internal cost of compliance of $677,468 

($15,397 per respondent × 44 

respondents). 

Rule 1003(a)(1) requires each SCI 

entity to establish reasonable written 

criteria for identifying a change to its 

SCI systems and the security of indirect 

SCI systems as material. The 

Commission staff estimates that the total 

annual initial recordkeeping burden for 

2 new respondents will be 228 hours 

(114 hours per respondent × 2 

respondents), and the annual ongoing 

recordkeeping burden for all 

respondents will be, on average, 1,188 

hours (27 hours per respondent × 44 

respondents). The Commission staff 

estimates that the 2 new respondents 

would incur an initial internal cost of 

compliance of $85,056 ($42,528 per 

respondent × 2 respondents). In 

addition, all respondents will incur, on 

average, an estimated ongoing annual 

internal cost of compliance of $507,584 

($11,536 per respondent × 44 

respondents). 

Regulation SCI also requires SCI 

entities to identify certain types of 

events and systems. The Commission 

staff estimates that the total annual 

initial recordkeeping burden for 2 new 

respondents will be 396 hours (198 

hours per respondent × 2 respondents), 

and the annual ongoing recordkeeping 

burden for all respondents will be, on 

average, 1,716 hours (39 hours per 

respondent × 44 respondents). The 

Commission staff estimates that the 2 

new respondents would incur an initial 

internal cost of compliance of $139,412 

($69,706 per respondent × 2 

respondents). In addition, all 

respondents will incur, on average, an 

estimated ongoing annual internal cost 

of compliance of $677,468 ($15,397 per 

respondent × 44 respondents). 

Rules 1005 and 1007 establish 

recordkeeping requirements for SCI 

entities other than SROs. The 

Commission staff estimates that for a 

new respondent that is not an SRO the 

average annual initial burden would be 

170 hours (170 hours × 1 respondent), 

and the annual ongoing burden for all 

respondents will be, on average, 275 

hours (25 hours × 11 respondents). The 

Commission staff estimates that a new 

respondent would incur an estimated 

internal initial internal cost of 

compliance of $11,370, as well as a onetime cost of $900 to modify existing 

recordkeeping systems. In addition, all 

respondents will incur, on average, an 

estimated ongoing internal cost of 

compliance of $18,975 ($1,725 × 11 

respondents). 

Written comments are invited on: (a) 

Whether the proposed collection of 

information is necessary for the proper 

performance of the functions of the 

Commission, including whether the 

information shall have practical utility; 

(b) the accuracy of the Commission’s 

estimates of the burden of the proposed 

collection of information; (c) ways to 

enhance the quality, utility, and clarity 

of the information to be collected; and 

(d) ways to minimize the burden of the 

collection of information on 

respondents, including through the use 

of automated collection techniques or 

other forms of information technology. 

Consideration will be given to 

comments and suggestions submitted in 

writing within 60 days of this 

publication. 

An agency may not conduct or 

sponsor, and a person is not required to 

respond to, a collection of information 

under the PRA unless it displays a 

currently valid OMB control number. 

Please direct your written comments 

to: Pamela Dyson, Director/Chief 

Information Officer, Securities and 

Exchange Commission, c/o Candace 

Kenner, 100 F Street NE, Washington, 

DC 20549, or send an email to: PRA_

Mailbox@sec.gov. 

Dated: July 13, 2018. 

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2018–15381 Filed 7–18–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–83635; File No. SR–CHX– 

2018–004] 

Self-Regulatory Organizations; 

Chicago Stock Exchange, Inc.; Notice 

of Filing of Amendment Nos. 2 and 3 

and Order Granting Accelerated 

Approval of a Proposed Rule Change, 

as Modified by Amendments Nos. 1, 2, 

and 3 Thereto, in Connection With a 

Proposed Transaction Involving CHX 

Holdings, Inc. and the Intercontinental 

Exchange, Inc. 

July 13, 2018. 

I. Introduction 

On May 8, 2018, the Chicago Stock 

Exchange, Inc. (‘‘CHX’’ or ‘‘Exchange’’) 

filed with the Securities and Exchange 

Commission (‘‘Commission’’), pursuant 

to Section 19(b)(1) of the Securities 

Exchange Act of 1934 (‘‘Exchange 


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1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3 In Amendment No. 1, the Exchange proposed to: 

(1) Add new CHX Article 22, Rule 28, relating to 

requirements for trading securities issued by ICE or 

its affiliates; and (2) amend proposed CHX Article 

19, Rule 2(b), relating to certain requirements with 

respect to a wholly-owned subsidiary of NYSE 

Group that would act as an inbound router to the 

Exchange. Amendment No. 1 was reflected in the 

notice of filing of proposed rule change that was 

published in the Federal Register. See infra note 4. 

4See Securities Exchange Act Release No. 83303 

(May 22, 2018), 83 FR 24517 (‘‘Notice’’). 

5 In Amendment No. 2, the Exchange proposed to 

amend Article FIFTH, Paragraph (g) of the CHX 

certificate of incorporation (‘‘CHX Certificate’’) and 

Article II, Section 6 of the CHX bylaws (‘‘CHX 

Bylaws’’) to provide that a vacancy in the CHX 

board of directors would be filled either by the 

remaining director(s) or stockholder action. 

Amendment No. 2 is available at: https://

www.sec.gov/comments/sr-chx-2018-004/ 

chx2018004-3818683-162751.pdf. 

6 In Amendment No. 3, the Exchange proposed 

technical changes to the CHX Certificate so that the 

date the original certificate of incorporation was 

filed and the original name of the Exchange appear 

in the preamble instead of Article FIRST, and to 

delete ‘‘the’’ from the title of the CHX Certificate. 

Amendment No. 3 is available at: https://

www.sec.gov/comments/sr-chx-2018-004/ 

chx2018004-3918683-166986.pdf. 

7 In approving the proposed rule changes, the 

Commission has considered their impact on 

efficiency, competition and capital formation. See 

15 U.S.C. 78c(f). 

8 15 U.S.C. 78f(b)(1) and (b)(3). 

9 15 U.S.C. 78f(b)(5). 

10A ‘‘Participant’’ is considered a ‘‘member’’ of 

the Exchange for purposes of the Exchange Act. See 

CHX Article 1, Rule 1(s) (Definitions). 11 ICE is a public company listed on the NYSE. 

ICE, ICE Holdings, and NYSE Group are Delaware 

corporations and NYSE Holdings is a Delaware 

limited liability corporation. 

12See Section 3(a)(27) of the Exchange Act, 15 

U.S.C. 78c(a)(27). 

Act’’) 1 and Rule 19b–4 thereunder,2 a 

proposed rule change in connection 

with a transaction (‘‘Transaction’’) 

whereby a wholly-owned subsidiary of 

NYSE Group, Inc. (‘‘NYSE Group’’) 

would merge with and into the 

Exchange’s parent, CHX Holdings, Inc. 

(‘‘CHX Holdings’’), with CHX Holdings 

continuing as the surviving corporation. 

Pursuant to the Transaction, the 

Exchange and CHX Holdings would 

become indirect subsidiaries of 

Intercontinental Exchange, Inc. (‘‘ICE’’). 

On May 17, 2018, the Exchange filed 

Amendment No. 1 to the proposal.3 The 

proposed rule change, as modified by 

Amendment No. 1, was published for 

comment in the Federal Register on 

May 29, 2018.4 On June 11, 2018, the 

Exchange filed Amendment No. 2 to the 

proposal.5 On June 26, 2018, the 

Exchange filed Amendment No. 3 to the 

proposal.6 The Commission received no 

comments on the proposal. 

After careful review, the Commission 

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 Sections 6(b)(1) and (3) of the 

Exchange Act,8 which, among other 

things, require 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. The Commission also finds that 

the proposal is consistent with Section 

6(b)(5) of the Exchange Act,9 which 

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. 

II. Discussion 

A. Current and Proposed Ownership of 

the Exchange 

Currently, the Exchange is a whollyowned subsidiary of CHX Holdings, and 

CHX Holdings is beneficially owned by 

197 firms or individuals, including 

Participants 10 or affiliates of 

Participants. 

Pursuant to the terms of a Merger 

Agreement, dated April 4, 2018, by and 

among CHX Holdings, ICE, and Kondor 

Merger Sub, Inc., a wholly-owned 

subsidiary of NYSE Group (‘‘Merger 

Sub’’), Merger Sub would merge with 

and into CHX Holdings, and CHX 

Holdings would be the entity surviving 

the merger. Current holders of the 

common and preferred stock of CHX 

Holdings would receive cash in 

exchange for their shares. 

Upon closing of the Transaction 

(‘‘Closing’’), NYSE Group would hold 

all of the outstanding and issued shares 

of CHX Holdings. NYSE Group is a 

wholly-owned subsidiary of NYSE 

Holdings, which is in turn wholly 

owned by ICE Holdings. ICE Holdings is 

wholly-owned by ICE (together, with 

NYSE Group, NYSE Holdings, and ICE, 

the ‘‘ICE Holding Companies’’).11 CHX 

Holdings would continue to be the 

record and beneficial owner of all of the 

issued and outstanding shares of capital 

stock of CHX and the sole member of 

the Exchange’s affiliated routing broker 

dealer, CHXBD, LLC (‘‘CHXBD’’). 

Closing is subject to satisfaction of 

customary conditions for a transaction 

of this nature, including approval of this 

proposed rule change by the 

Commission. 

Following the Transaction, the 

Exchange would continue to be 

registered as a national securities 

exchange and as a separate selfregulatory organization (‘‘SRO’’). As 

such, the Exchange would continue to 

have separate rules, membership rosters, 

and listings that would be distinct from 

the rules, membership rosters, and 

listings of the four other registered 

national securities exchanges and SROs 

owned by NYSE Group, namely, the 

New York Stock Exchange LLC 

(‘‘NYSE’’), NYSE American LLC (‘‘NYSE 

American’’), NYSE Arca, Inc. (‘‘NYSE 

Arca’’), and NYSE National, Inc. 

(‘‘NYSE National’’ and together with 

NYSE, NYSE American and NYSE Arca, 

the ‘‘NYSE Exchanges’’). 

B. Proposed Rule Changes 

Section 19(b) of the Exchange Act and 

Rule 19b–4 thereunder require an SRO 

to file proposed rule changes with the 

Commission. To effectuate the change in 

the ownership structure in connection 

with the proposed Transaction, the 

Exchange has proposed to amend the 

CHX Certificate, the CHX Bylaws, the 

CHX Holdings certificate of 

incorporation (‘‘CHX Holdings 

Certificate’’), CHX Holdings bylaws 

(‘‘CHX Holdings Bylaws’’), and the 

Exchange’s rules. Although CHX 

Holdings, NYSE Group, NYSE Holdings, 

ICE Holdings, and ICE are not SROs, 

certain provisions of their proposed 

certificates of incorporation and bylaws, 

along with other corporate documents, 

are rules of the Exchange, if they are 

stated policies, practices, or 

interpretations, as defined in Rule 19b– 

4 under the Exchange Act, and must be 

filed with the Commission pursuant to 

Section 19(b)(1) of the Exchange Act 

and Rule 19b–4 thereunder.12

Accordingly, the Exchange has filed, 

and has proposed to adopt, as rules of 

the Exchange: (1) The certificate of 

incorporation of NYSE Group (‘‘NYSE 

Group Certificate’’); (2) the bylaws of 

NYSE Group (‘‘NYSE Group Bylaws’’); 

(3) the limited liability company 

agreement of NYSE Holdings LLC 

(‘‘NYSE Holdings Agreement’’); (4) the 

certificate of incorporation of ICE 

Holdings (‘‘ICE Holdings Certificate’’); 

(5) the bylaws of ICE Holdings (‘‘ICE 

Holdings Bylaws’’); (6) the certificate of 


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13Current CHX Holdings Certificate, Article 

FIFTH, Paragraph (a)(i) defines ‘‘Person’’ as ‘‘an 

individual, partnership (general or limited), joint 

stock company, corporation, limited liability 

company, trust or unincorporated organization, or 

any governmental entity or agency or political 

subdivision thereof.’’ 

14Current CHX Holdings Certificate, Article 

FIFTH, Paragraph (a)(ii) defines ‘‘Related Persons’’ 

as ‘‘(A) with respect to any Person, all ‘affiliates’ 

and ‘associates’ of such Person (as such terms are 

defined in Rule 12b–2 under the . . . Act . . .); (B) 

with respect to any Person that holds a permit 

issued by the . . . Exchange . . . to trade securities 

on the . . . Exchange (a ‘Participant’), any broker 

or dealer with which a Participant is associated; 

and (C) any two or more Persons that have any 

agreement, arrangement or understanding (whether 

or not in writing) to act together for the purpose of 

acquiring, voting, holding or disposing of shares of 

the capital stock of’’ CHX Holdings. 

15Article FIFTH, Paragraph (b)(ii) of the Current 

CHX Holdings Certificate. Article FIFTH includes 

provisions to address violations of the current 

ownership and voting limitations. See Article 

FIFTH, Paragraphs (d) and (e) of the Current CHX 

Holdings Certificate. 

16Article FIFTH, Paragraph (b)(iii)(B) of the 

Current CHX Holdings Certificate, which provides 

that any such resolution must state that the board 

of director’s determination is that such amendment 

(a) will not impair the ability of the Exchange to 

carry out its functions and responsibilities as an 

‘‘exchange’’ under the Exchange Act, and the rules 

under the Exchange Act; (b) is otherwise in the best 

interests of CHX Holdings and its stockholders and 

the Exchange; (c) will not impair the ability of the 

Commission to enforce the Exchange Act, and (d) 

such amendment shall not be effective until 

approved by the Commission. 

17See Article FIFTH, Paragraph (b)(iv) of the 

Current CHX Holdings Certificate, which provides 

that, notwithstanding the first and second 

ownership and voting limitations, ‘‘in any case 

where a Person, either alone or together with its 

Related Persons, would own or vote more than the 

above percentage limitations upon consummation 

of any proposed sale, assignment or transfer of’’ 

CHX Holdings’ stock, ‘‘such sale, assignment or 

transfer shall not become effective until the Board 

of Directors’’ of CHX Holdings ‘‘shall have 

determined, by resolution, that such Person and its 

Related Persons are not subject to any applicable 

‘statutory disqualification’ (within the meaning of 

Section 3(a)(39)’’ of the Exchange Act. 

18See Article FIFTH, Paragraph (b)(v) of the 

Current CHX Holdings Certificate. 

19 Id. 

20 15 U.S.C. 78s(b)(1). 

21See NYSE Group Certificate Article IV, Section 

4(a), NYSE Holdings Agreement Article VII, Section 

7.2, and ICE Holdings Certificate Article IV.C. 

22See NYSE Group Certificate Article XII, NYSE 

Holdings Agreement Article XVI, Section 16.1, and 

ICE Holdings Certificate Article X. 

incorporation of ICE (‘‘ICE Certificate’’); 

(7) the bylaws of ICE (‘‘ICE Bylaws’’); 

and (8) the independence policy of the 

board of directors of ICE. In addition, 

the Exchange has filed with the 

Commission the text of a proposed 

resolution of CHX Holdings’ board of 

directors to waive certain ownership 

and voting limitations to permit the 

Transaction. 

1. Proposed Rule Changes To Waive the 

Ownership and Voting Limitations 

The current CHX Holdings certificate 

of incorporation (‘‘Current CHX 

Holdings Certificate’’) provides that that 

no Person,13 either alone or together 

with its Related Persons,14 may, directly 

or indirectly: (1) Own shares of stock of 

CHX Holdings representing more than 

40 percent of the then outstanding votes 

entitled to be cast on any matter; (2) if 

it is a Participant, own shares of stock 

of CHX Holdings representing more 

than 20 percent of the then outstanding 

votes entitled to be cast on any matter; 

or (3) pursuant to any voting trust, 

agreement, plan or other arrangement, 

vote or cause the voting of shares of the 

stock of CHX Holdings or give any 

consent or proxy with respect to shares 

representing more than 20 percent of the 

voting power of the then issued and 

outstanding capital stock of CHX 

Holdings; or enter into any agreement, 

plan or other arrangement 

(‘‘Arrangement’’) with any other Person, 

either alone or together with its Related 

Persons, under circumstances that 

would result in the subject shares of 

CHX Holdings not being voted on any 

matter or matters or any proxy relating 

thereto being withheld, where the effect 

of such Arrangement would be to enable 

any Person, either alone or together with 

its Related Persons, to vote, possess the 

right to vote or cause the voting of 

shares of CHX Holdings which would 

represent more than 20 percent of such 

voting power.15

The CHX Holdings Certificate 

provides that the first and third 

ownership and voting limitations set 

forth above may be waived by the CHX 

Holdings board of directors by adopting 

an amendment to the bylaws, if, in 

connection with the adoption of such 

amendment, the board of directors also 

adopts certain resolutions.16 In 

addition, the CHX Holdings Certificate 

provides that, notwithstanding the first 

and second ownership and voting 

limitations, a proposed sale, assignment 

or transfer of CHX Holdings stock above 

the percentage limitations shall not 

become effective until the board of 

directors of CHX Holdings has 

determined, by resolution, that such 

purchaser and its Related Persons are 

not subject to any applicable statutory 

disqualification.17

Waiver of the ownership and voting 

limitations must be filed with and 

approved by the Commission pursuant 

to Section 19 of the Exchange Act.18

Furthermore, such Person seeking the 

waiver must deliver to the CHX 

Holdings board of directors not less than 

45 days prior to any vote or acquisition, 

as appropriate, a notice of the intent to 

exceed the ownership and voting 

restrictions.19

Because NYSE Group’s acquisition of 

all of the shares of CHX Holdings at 

Closing would violate these ownership 

and voting limitations, the CHX 

Holdings board of directors determined 

that in order to effect the Transaction, 

a waiver of the ownership and voting 

limitations with respect to the ICE 

Holding Companies would be required. 

To do so, the board of directors adopted 

resolutions (‘‘Resolutions’’), making 

certain determinations with respect to 

the ICE Holding Companies and the 

Transaction that are necessary to waive 

the ownership and voting limits. 

Specifically, the board of directors of 

CHX Holdings made the following 

determinations: (1) The acquisition of 

the proposed ownership by the ICE 

Holdings Companies will not impair the 

ability of the Exchange to carry out its 

functions and responsibilities as an 

‘‘exchange’’ under the Exchange Act and 

the rules thereunder; are otherwise in 

the best interests of CHX Holdings and 

its stockholders and the Exchange; and 

will not impair the ability of the 

Commission to enforce the Exchange 

Act; and (2) none of the ICE Holding 

Companies, nor any of its Related 

Persons, is subject to ‘‘statutory 

disqualification’’ within the meaning of 

Section 3(a)(39) of the Exchange Act. 

Article IV, Section 2(a) of the 

proposed CHX Holdings Certificate 

would ensure that any change in 

ownership of CHX Holdings would be 

subject to Commission approval, by 

providing that NYSE Group may not 

transfer or assign any stock unless such 

transfer or assignment is filed with and 

approved by the Commission under 

Section 19 of the Exchange Act.20 The 

governing documents of NYSE Group, 

NYSE Holdings, and ICE Holdings also 

provide that any transfer or assignment 

of stock must be filed with or approved 

by the Commission under Section 19 of 

the Exchange Act.21 Each of the NYSE 

Group Certificate, NYSE Holdings 

Agreement, and ICE Holdings Certificate 

provides that any changes to the 

provisions of such agreement must 

either be filed with and approved by the 

Commission pursuant to Section 19 of 

the Exchange Act or must be submitted 

to the Exchange’s board of directors, and 

if the board so decides, the changes 

must be filed with and approved by the 

Commission.22

The Commission believes that it is 

consistent with the Exchange Act to 

allow the ICE Holding Companies to 

wholly-own and vote all of the 

outstanding common stock of CHX 

Holdings. The Commission notes that 


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23See Article V of the ICE Certificate. See infra 

Section II.B.2. 

24See Article XI of the proposed CHX Holdings 

Certificate and Article III of the proposed CHX 

Holdings Bylaws. 

25Because the governing documents of CHX 

Holdings, NYSE Group, NYSE Holdings, and ICE 

Holdings provide that any transfer or assignment of 

stock must be filed with or approved by the 

Commission under Section 19 of the Exchange Act, 

any change in control of such ICE Holding 

Companies would be subject to Commission 

approval. See supra notes 19–22 and accompanying 

text. 

26See, e.g., Securities Exchange Act Release No. 

71721 (March 13, 2014), 79 FR 15367 (March 19, 

2014) (SR–NYSE–2014–04; SR–NYSEMKT–2014– 

10; SR–NYSEArca–2014–08). 

27See, e.g., Securities Exchange Act Release Nos. 

79585 (December 16, 2016), 81 FR 93988 (December 

22, 2016) (SR–BatsBZX–2016–68) (approving 

similar restrictions in connection with the merger 

of Bats Global Markets, Inc. and CBOE Holdings, 

Inc.) (‘‘BATS–CBOE Approval Order’’); 78119 (June 

21, 2016), 81 FR 41611 (June 27, 2016) (SR–ISE– 

2016–11, SR–ISE Gemini–2016–05, SR–ISE 

Mercury–2016–10) (approving similar restrictions 

proposed in connection with Nasdaq, Inc. becoming 

the indirect parent of International Securities 

Exchange, ISE Gemini, LLC, and ISE Mercury, LLC); 

74270 (February 13, 2015), 80 FR 9286 (February 

20, 2015) (SR–NSX–2014–017) (approving similar 

restrictions in connection with National Stock 

Exchange, Inc. becoming a wholly-owned 

subsidiary of National Stock Exchange Holdings, 

Inc.); 71449 (January 30, 2014), 79 FR 6961 

(February 5, 2014) (SR–EDGA–2013–34; SR–EDGX– 

2013–43) (approving similar restrictions in 

connection with the merger of BATS Global 

Markets, Inc. and Direct Edge Holdings LLC); 71375 

(January 23, 2014), 79 FR 4771 (January 29, 2014) 

(SR–BATS–2013–059, SR–BYX–2013–039) 

(approving similar restrictions in connection with 

the merger of BATS Global Markets, Inc. and Direct 

Edge Holdings LLC); 70210 (August 15, 2013), 78 

FR 62716 (August 13, 2010), 75 FR 51295 (August 

19, 2010) (File No. 10–198) (approving similar 

restrictions in connection with the registration Bats 

BYX Exchange, Inc. as a national securities 

exchange); 61698 (March 12, 2010), 75 FR 13151 

(March 18, 2010) (File Nos. 10–194 and 10–196) 

(approving similar restrictions in connection with 

the registrations of EDGX Exchange, Inc. and EDGA 

Exchange, Inc. as national securities exchanges); 

58375 (August 18, 2008), 73 FR 49498 (August 21, 

2008) (File No. 10–182) (approving similar 

restrictions in connection with the registration of 

BATS Exchange, Inc. as a national securities 

exchange); 56955 (December 13, 2007), 72 FR 

71979, 71982–84 (December 19, 2007) (SR–ISE– 

2007–101) (approving similar restrictions in 

connection with International Securities Exchange 

Holdings, Inc. becoming a wholly-owned indirect 

subsidiary of Eurex Frankfurt AG); 55293 (February 

14, 2007); 53382 (February 27, 2006), 71 FR 11251 

(March 6, 2006) (SR–NYSE–2005–77) (approving 

similar restrictions in connection with the merger 

of New York Stock Exchange, Inc. and 

Archipelago); 53963 (June 8, 2006), 71 FR 34660 

(June 15, 2006) (File No. SR–NSX–2006–03) 

(approving similar restrictions in connection with 

the demutualization of the National Stock 

Exchange); 53128 (January 13, 2006), 71 FR 3550 

(January 23, 2006) (File No. 10–131) (approving 

similar restrictions in connection with the 

registration the Nasdaq Stock Market LLC as a 

national securities exchange); 51149 (February 8, 

2005), 70 FR 7531 (February 14, 2005) (SR–CHX– 

2004–26) (approving similar restrictions in 

connection with the demutualization of CHX); and 

49098 (January 16, 2004), 69 FR 3974 (January 27, 

2004) (SR–Phlx–2003–73) (approving similar 

restrictions in connection with the demutualization 

of the Philadelphia Stock Exchange, Inc.). 

ICE, the new top-level holding company 

for the Exchanges, currently owns other 

national securities exchanges and is 

subject to governance documents that 

restrict concentration of ownership and 

voting rights.23 As discussed below, 

CHX Holdings has also included in its 

corporate documents certain provisions 

designed to maintain the independence 

of the Exchange’s regulatory 

functions.24 Accordingly, the 

Commission does not believe that the 

Transaction will impair the ability of 

the Exchange to carry out its functions 

and responsibilities as an ‘‘exchange’’ 

under the Exchange Act and the rules 

and regulations promulgated 

thereunder, or the ability of the 

Commission to enforce the Exchange 

Act and the rules and regulations 

promulgated thereunder. 

2. Ownership and Voting Limitations 

In connection with the Transaction, 

upon Closing, ICE will become the 

indirect owner (through ICE Holdings, 

NYSE Holdings, NYSE Group, and CHX 

Holdings) of the Exchange.25 The ICE 

Certificate includes restrictions on the 

ability to own and vote shares of capital 

stock of ICE. These limitations are 

designed to prevent any stockholder 

from exercising undue control over the 

operation of the Exchange and to assure 

that the Exchange and the Commission 

are able to carry out their regulatory 

obligations under the Exchange Act. 

Specifically, the ICE Certificate 

includes restrictions on the ability to 

vote and own shares of stock of ICE. For 

so long as ICE directly or indirectly 

controls a national securities exchange, 

the ICE Certificate provides that no 

person, either alone or together with its 

related persons, shall be: (1) Entitled to 

vote or cause the voting of more than 10 

percent of the then outstanding votes 

entitled to be cast on a matter, or (2) 

permitted to own shares of stock of ICE 

representing in the aggregate more than 

20 percent of the then outstanding votes 

entitled to be cast on any matter. The 

ICE Certificate provides that ICE will be 

required to disregard any votes 

purported to be cast in excess of the 

voting restriction. The ICE Certificate 

also provides that in the event that any 

person(s) exceeds the ownership 

restrictions, it will be obligated to sell 

promptly, and ICE will be obligated to 

purchase promptly, at a price equal to 

the par value of such shares and to the 

extent funds are legally available for 

such purchase, the number of shares of 

ICE necessary so that such person, 

together with its related persons, will 

beneficially own shares of ICE 

representing in the aggregate no more 

than 20 percent of the then outstanding 

votes entitled to be cast on any matter, 

after taking into account that such 

repurchased shares will become 

treasury shares and will no longer be 

deemed to be outstanding. The ICE 

board of directors may waive the 

ownership and voting restrictions if it 

makes certain determinations and 

expressly resolves to permit the 

ownership and voting that is subject to 

such restrictions, and such resolutions 

have been filed with, and approved by, 

the Commission under Section 19(b) of 

the Exchange Act. The ICE Certificate 

further provides that the board of 

directors may not approve either voting 

or ownership rights in excess of a 20 

percent threshold with respect to any 

person that is a member of an exchange 

controlled by ICE or who is subject to 

any statutory disqualification. 

The Commission believes that ICE’s 

ownership and voting limitations are 

reasonably designed to prevent any 

stockholder from exercising undue 

control over the operation of ICE, and in 

turn, over the operation of the 

Exchange. The Commission also notes 

that these ownership and voting 

limitations have previously been 

approved by the Commission 26 and are 

consistent with those approved by the 

Commission for other SROs 27 and 

believes that they are reasonably 

designed to assure that the Exchange 

and the Commission are able to carry 

out their regulatory obligations under 

the Exchange Act and in administering 

and complying with the requirements of 

the Exchange Act. Moreover, the 

Commission believes that the ownership 

and voting limits are reasonably 

designed to eliminate the potential that 

the control of the Exchange by one or 

few stockholders would improperly 

interfere with or impair the ability of the 

Commission or the Exchange to 

effectively carry out their regulatory 

oversight responsibilities under the 

Exchange Act. 

In addition to being designed to 

eliminate the potential of any 

stockholder from exercising undue 

control over the Exchange, the 

Commission also notes that the 

restrictions applicable to members of an 

exchange are designed to address the 

conflicts of interests that might result 

from a member of a national securities 

exchange owning interests in the 

exchange. As the Commission has noted 

in the past, a member’s interest in an 

exchange could become so large as to 

cast doubts on whether the exchange 

may fairly and objectively exercise its 

self-regulatory responsibilities with 


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28See, e.g., BATS–CBOE Order, supra note 27, at 

93990. 

29See Articles VII, VIII, IX, and IX of the ICE 

Bylaws. 

30See Articles VII, VIII, IX, and XI of the ICE 

Holdings Bylaws. 

31See Articles XII, XIII, XIV, and Article XVI, 

Section 16.1 of the NYSE Holdings Agreement. 

32See Articles IX, X, XI, and XII of the NYSE 

Group Certificate. 

33See Articles IX, X, XI, and XII of the proposed 

CHX Holdings Certificate. 

34 15 U.S.C. 78f(b). 

35 15 U.S.C. 78s(g). 

36Article XI, Section 3 of the proposed CHX 

Holdings Certificate. 

37Article XI, Section 1 of the proposed CHX 

Holdings Certificate. 

38Article XI, Section 2 of the proposed CHX 

Holdings Certificate. 

39Article V, Section 7 of the proposed CHX 

Holdings Certificate. 

40Article IX of the proposed CHX Holdings 

Certificate. 

41Article X of the proposed CHX Holdings 

Certificate. 

42Article X of the proposed CHX Holdings 

Certificate. 

43Article X of the proposed CHX Holdings 

Certificate. 

respect to such member.28 A member 

that is a controlling stockholder of an 

exchange could seek to exercise that 

controlling influence by directing the 

exchange to refrain from, or the 

exchange may hesitate to, diligently 

monitor and conduct surveillance of the 

member’s conduct or diligently enforce 

the exchange’s rules and the federal 

securities laws with respect to conduct 

by the member that violates such 

provisions. As such, these restrictions 

on Exchange members’ ownership and 

voting of ICE stock are expected to 

minimize the potential that a person or 

entity can improperly interfere with or 

restrict the ability of CHX to effectively 

carry out its regulatory oversight 

responsibilities under the Exchange Act. 

3. Jurisdiction; Books and Records; Due 

Regard 

As described above, following the 

Closing, ICE will remain the sole 

stockholder of ICE Holdings, ICE 

Holdings will remain the sole 

stockholder of NYSE Holdings, NYSE 

Holdings will remain the sole member 

of NYSE Group, NYSE Group will 

become the sole stockholder of CHX 

Holdings, and CHX Holdings will 

remain the sole stockholder of the 

Exchange. Although ICE, ICE Holdings, 

NYSE Holdings, NYSE Group, and CHX 

Holdings will not carry out any 

regulatory functions, their activities 

with respect to the operation of the 

Exchange must be consistent with, and 

must not interfere with, the selfregulatory obligations of the Exchange. 

The ICE Bylaws,29 ICE Holdings 

Bylaws,30 NYSE Holdings Agreement,31

NYSE Group Certificate,32 and CHX 

Holdings Certificate 33 therefore include 

certain provisions that are designed to 

maintain the independence of the 

Exchange’s self-regulatory functions, 

enable the Exchange to operate in a 

manner that complies with the federal 

securities laws, including the objectives 

of Sections 6(b) 34 and 19(g) 35 of the 

Exchange Act, and facilitate the ability 

of the Exchange and the Commission to 

fulfill their regulatory and oversight 

obligations under the Exchange Act. 

For example, under the CHX Holdings 

Certificate, CHX Holdings, its directors, 

officers, and employees, must give due 

regard to the preservation of the 

independence of the self-regulatory 

function of the Exchange (to the extent 

of the Exchange’s self-regulatory 

function), as well as to its obligations to 

investors and the general public and 

must not take any actions that would 

interfere with the effectuation of any 

decisions by the board of directors of 

the Exchange relating to its regulatory 

functions (including disciplinary 

matters), or which would interfere with 

the ability of the Exchange to carry out 

its responsibilities under the Exchange 

Act.36

The CHX Holdings Certificate would 

further require that CHX Holdings 

complies with the U.S. federal securities 

laws and rules and regulations 

thereunder and shall cooperate with the 

Commission and the Exchange, 

pursuant to and to the extent of their 

respective regulatory authority, and 

shall take reasonable steps necessary to 

cause its agents to cooperate with the 

Commission and, where applicable, the 

Exchange, pursuant to their regulatory 

authority.37 The CHX Holdings 

Certificate also provides that CHX 

Holdings shall take reasonable steps 

necessary to cause its officers, directors 

and employees, prior to accepting their 

positions, to consent to the applicability 

of Section 7 of Article V 

(‘‘Considerations of the Board’’), Article 

IX (‘‘Jurisdiction’’), Article X 

(‘‘Confidential Information’’), and 

Section 3 of Article XI of the CHX 

Holdings Certificate (relating to giving 

due regard to the independence of the 

self-regulatory function of the Exchange) 

with respect to their activities related to 

the Exchange.38 In addition, the CHX 

Holdings Certificate provides that in 

discharging his or her responsibilities as 

a member of the board or as an officer 

or employee of CHX Holdings, each 

such director, officer, or employee shall 

(1) comply with the federal securities 

laws and the rules and regulations 

thereunder, (2) cooperate with the 

Commission, and (3) cooperate with the 

Exchange pursuant to and to the extent 

of its regulatory authority.39

Furthermore, CHX Holdings, its 

directors and officers, and those of its 

employees whose principal place of 

business and residence is outside of the 

United States, shall be deemed to 

irrevocably submit to the jurisdiction of 

the United States federal courts and the 

Commission for the purposes of any 

suit, action, or proceeding pursuant to 

the United States federal securities laws 

and the rules and regulations 

thereunder, commenced or initiated by 

the Commission arising out of, or 

relating to, the activities of the 

Exchange.40

The CHX Holdings Certificate also 

provides that as long as CHX Holdings 

directly or indirectly controls any 

national securities exchange, the books, 

records, premises, officers, directors, 

and employees of CHX Holdings shall 

be deemed to be the books, records, 

premises, officers, directors, and 

employees of the Exchange for purposes 

of and subject to oversight pursuant to 

the Exchange Act.41

The CHX Holdings Certificate also 

provides that all confidential 

information pertaining to the selfregulatory function of the Exchange 

(including but not limited to 

disciplinary matters, trading data, 

trading practices, and audit information) 

contained in the books and records of 

the Exchange that shall come into the 

possession of CHX Holdings, shall not 

be made available to any persons other 

than to those officers, directors, 

employees, and agents of CHX Holdings, 

that have a reasonable need to know the 

contents thereof, and shall be retained 

in confidence by CHX Holdings, and the 

officers, directors, employees, and 

agents of CHX Holdings, and not used 

for any commercial purposes.42 The 

CHX Holdings Certificate, however, 

specifies that the CHX Holdings 

Certificate (including these 

confidentiality provisions) shall not be 

interpreted so as to limit or impede the 

rights of the Commission or the 

Exchange to access and examine such 

confidential information pursuant to the 

federal securities laws and the rules and 

regulations thereunder, or to limit or 

impede the ability of any officers, 

directors, employees, or agents of CHX 

Holdings to disclose such confidential 

information to the Commission or the 

Exchange.43 In addition, the CHX 

Holdings Certificate provides that CHX 

Holdings’ books and records shall be 

subject at all times to inspection and 


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44Article X of the proposed CHX Holdings 

Certificate. 

45Article XII of the proposed CHX Holdings 

Certificate and Section 7.9(b) of the proposed CHX 

Holdings Bylaws. 

46 15 U.S.C. 78t(a). 

47 15 U.S.C. 78t(e). 

48 15 U.S.C. 78u–3. 

49See Notice, supra note 4, at 24520. 

50See proposed CHX Bylaws, Article II, Section 

2(a). 

51 Id. 

52See proposed CHX Bylaws, Article II, Section 

2(b). The Exchange noted that proposed Article II, 

Sections 2(a) and (b) would be consistent with the 

NYSE National Bylaws and NYSE Arca Bylaws. See 

Notice, supra note 4, at 24521. 

53See proposed CHX Bylaws, Article II, Section 

2(c). 

54See proposed CHX Bylaws, Article II, Section 

2(d). 

55 Id. 

56See Notice, supra note 4, at 24522. 

copying by the Commission and the 

Exchange.44

The CHX Holdings Certificate and 

CHX Holdings Bylaws provide that as 

long as CHX Holdings controls, directly 

or indirectly, a registered national 

securities exchange, before any 

amendment to, or repeal of, any 

provision of the CHX Holdings 

Certificate and CHX Holdings Bylaws, 

as the case may be, may be effective, 

those changes must be either filed with 

or filed with and approved by the 

Commission under Section 19 of the 

Exchange Act and the rules promulgated 

thereunder or submitted to the board of 

directors of each such exchange, and if 

the amendment is required to be filed 

with, or filed with and approved by the 

Commission pursuant to Section 19(b) 

of the Exchange Act, such change shall 

not be effective until filed with, or filed 

with and approved by, the 

Commission.45

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. The Commission also notes that, 

even in the absence of these provisions, 

under Section 20(a) of the Exchange 

Act,46 any person with a controlling 

interest in the Exchange shall be jointly 

and severally liable with and to the 

same extent that the Exchange is 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 47 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 48 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. 

4. CHX Board of Directors 

As noted above, the Exchange will 

become part of a corporate family 

including five separate registered 

national securities exchanges following 

consummation of the Transaction. The 

Exchange represented that it is 

important for each of such exchanges to 

have a consistent approach to corporate 

governance in certain matters; therefore, 

to simplify complexity and create 

greater consistency among the NYSE 

Exchanges, CHX proposed to revise the 

provisions of the CHX Bylaws and CHX 

Certificate to mirror the comparable 

provisions in the certain of the NYSE 

Exchanges.49 Specifically, as discussed 

below, the Exchange proposed to make 

the number, composition, term of office 

and qualifications of the Exchange 

board of directors (‘‘Board’’) consistent 

with the make-up of the boards of 

directors of the NYSE Exchanges. 

Currently, the CHX Bylaws generally 

provide that the Board shall be 

composed of between 10 and 16 

directors, the exact number to be 

determined by the Board; the CHX 

Bylaws also set forth the compositional 

requirements for the Board. The 

Exchange proposed to amend the CHX 

Bylaws to provide that the number of 

directors would be determined from 

time to time by the stockholders subject 

to the compositional requirements for 

the Board, which require that at least 50 

percent of the directors on the 

Exchange’s Board be persons from the 

public and not be, or be affiliated with, 

a broker-dealer in securities or 

employed by, or involved in any 

material business relationship with, the 

Exchange or its affiliates (‘‘Public 

Directors’’); and at least 20 percent of 

the directors consist of individuals 

nominated by the trading permit holders 

who are permitted to trade on the 

Exchange’s facilities for the trading of 

equities that are securities as covered by 

the Exchange Act (collectively, ‘‘Permit 

Holders’’) (such directors, the ‘‘STP 

Participant Directors’’).50 The Exchange 

also proposed that for purposes of 

calculating the minimum number of 

STP Participant Directors, if 20 percent 

of the directors is not a whole number, 

such number of directors to be 

nominated and selected by the Permit 

Holders be rounded up to the next 

whole number, and that the term of 

office of a director not be affected by 

any decrease in the authorized number 

of directors.51 The revised provisions 

also would require the nominees for a 

director position to provide to the 

Secretary of the Exchange such 

information as is reasonably necessary 

to serve as the basis for a determination 

of the nominee’s qualifications as a 

director, and that the Secretary make 

such determination concerning the 

nominee’s qualifications.52

The Exchange also proposed to amend 

Article II, Section 2(c) of the CHX 

Bylaws, which sets forth the structure of 

the Board. Currently, the Board is 

divided into three classes serving threeyear terms, with the term of office of one 

class expiring each year, and directors 

continue in office after the expiration of 

their terms until their successors are 

elected or appointed and qualified, 

except in the event of early resignation, 

removal, or disqualification. The 

Exchange proposed to replace this 

provision to provide that at each annual 

meeting of the stockholders, the 

stockholders will elect directors to serve 

until the next annual meeting or until 

their successors are elected and 

qualified.53 The Exchange also proposed 

that the Board shall appoint the 

Chairman of the Board by majority vote, 

and that each director shall hold office 

for a term that expires at the annual 

meeting of the stockholders next 

following his or her election, provided 

that if he or she is not re-elected and his 

or her successor is not elected and 

qualified at the meeting and there 

remains a vacancy on the Board, he or 

she shall continue to serve until his or 

her successor is elected and qualified or 

until his or her earlier death, 

resignation, or removal.54 The CHX 

Bylaws also would provide that a 

director may serve for any number of 

terms, consecutive or otherwise.55 The 

Exchange represented that the change 

from a three-class board with staggered 

terms to a board with one class of 

directors elected annually would make 

the organization of the Board consistent 

with those of all of the NYSE 

Exchanges.56

The Exchange proposed that except as 

otherwise provided in the CHX Bylaws 

or the Exchange’s rules, the shareholder 

shall nominate directors for election at 

the annual meeting of the shareholder, 

which nominations shall comply with 


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57See proposed CHX Bylaws, Article II, Section 

2(f). According to the Exchange, this provision 

would be consistent with the NYSE National 

Bylaws and NYSE Arca Bylaws. See Notice, supra 

note 4, at 24522. 

58See Notice, supra note 4, at 24522. 

59See proposed CHX Bylaws, Article II, Section 

3(a). 

60See proposed CHX Bylaws, Article II, Section 

3(d). 

61See Amendment No. 2, supra note 5, at 4. 

62See Amendment No. 2, supra note 5, at 3. 

63See Notice, supra note 4, at 24523–24. 

the Exchange’s rules and the CHX 

Bylaws.57

The Exchange also proposed to amend 

the CHX Bylaw provisions relating to 

the nomination and election of the 

Board to make these provisions similar 

to the provisions in the NYSE Arca and 

NYSE National Bylaws, subject to 

certain terms specific to the Exchange.58

Currently, the Nominating and 

Governance Committee (‘‘NGC’’) of the 

Exchange consists of two Public 

Directors and two Original STP 

Participant Directors, one of whom must 

not be a representative of a firm that is 

a holder of Series A Preferred Stock of 

CHX Holdings. The NGC also is 

currently appointed by the Board. The 

Exchange proposed that the Nominating 

Committee be composed solely of STP 

Participant Directors and/or Permit 

Holder representatives, and proposed to 

rename the NGC to the ‘‘Nominating 

Committee.’’ 59

The Exchange also proposed to amend 

the provisions relating to the process for 

nominating candidates to the Board. 

Currently, the Bylaws provide that each 

year the NGC shall nominate persons 

who will qualify as Participant Directors 

pursuant to the procedures set forth in 

the Bylaws. The Exchange proposed to 

adopt a new process for nominating 

nominees to the Board. Specifically, 

pursuant to Article II, Section 3(b) of the 

CHX Bylaws, CHX proposed that the 

Nominating Committee shall publish 

the name(s) of one or more Participants 

as its nominee(s) for STP Participant 

Directors of the Board. The Nominating 

Committee would name sufficient 

nominees so that at least 20 percent of 

the directors consist of STP Participant 

Directors, and the names of the 

nominees shall be published on a date 

in each year sufficient to accommodate 

the process described (‘‘Announcement 

Date’’). After the name of the proposed 

nominee(s) is published, the CHX 

Bylaws allow Permit Holders in good 

standing to submit a petition to the 

Exchange in writing to nominate 

additional eligible candidate(s) to fill 

STP Participant Director position(s) 

during the next term. If a written 

petition of at least 10 percent of Permit 

Holders in good standing is submitted to 

the Nominating Committee within two 

weeks after the Announcement Date, 

such person(s) would also be nominated 

by the Nominating Committee, 

provided, however, that no Permit 

Holder, either alone or together with 

other Permit Holders that are deemed its 

affiliates, may account for more than 50 

percent of the signatories to the petition 

endorsing a particular petition nominee 

for the STP Participant Director 

position(s) on the Board. Article 2, 

Section 3(b) of the CHX Bylaws would 

stipulate that each petition for a petition 

candidate must include a completed 

questionnaire used to gather 

information concerning director 

candidates, with the form of the 

questionnaire provided by the Exchange 

upon the request of any Permit Holder. 

The same provision also provides that, 

notwithstanding anything to the 

contrary, the Nominating Committee 

shall determine whether any petition 

candidate is eligible to serve on the 

Board (including whether such person 

is free of any statutory disqualification), 

and such determination shall be final 

and conclusive. 

In Article II, Section 3(c) of the CHX 

Bylaws, the Exchange also proposed a 

petition election process in the event 

that the number of nominees exceeds 

the number of available seats. In this 

case, the Nominating Committee shall 

submit the contested nomination to the 

Permit Holders for selection. Permit 

Holders would be afforded a 

confidential voting procedure and be 

given no less than 20 calendar days to 

submit their votes. A Permit Holder in 

good standing may select one nominee 

for the contested seat on the Board; 

provided, however that no Permit 

Holder, either alone or together with 

other Permit Holders who are deemed 

its affiliates, may account for more than 

20 percent of the votes cast for a 

particular nominee for the STP 

Participant Director position(s) on the 

Board. With respect to the contested 

position, the Exchange proposed that 

the nominee for the Board receiving the 

most votes of Permit Holders shall be 

submitted by the Nominating 

Committee to the Board and that the 

Nominating Committee shall also 

submit uncontested nominees to the 

Board, and tie votes shall be decided by 

the Board at its first meeting following 

the election. Finally, the Exchange 

proposed that the Board shall appoint 

the Nominating Committee.60

The Exchange also proposed to amend 

Article II, Section 6 of the current CHX 

Bylaws, which addresses how vacancies 

on the Board shall be filled. Currently, 

this provision provides that any vacancy 

on the Board due to ‘‘the death, 

retirement, resignation, disqualification 

or removal of a director’’ or to an 

increase in the number of directors 

between annual meetings ‘‘shall be 

filled only with a person nominated by 

the Chairman and Vice Chairman of the 

Corporation and elected by a majority of 

the directors then in office, though less 

than a quorum or by a sole remaining 

director,’’ with the caveat that, when 

stockholders remove a director from 

office for cause, the stockholders may 

fill the vacancy at the same meeting. 

The Exchange proposed to revise this 

provision to also provide that vacancies 

also may be filled by action taken by the 

stockholders of the Exchange.61

Therefore, pursuant to the CHX Bylaws, 

vacancies on the Board may be filled (i) 

with a person nominated by the 

Chairman and Vice Chairman of the 

Exchange and elected by a majority of 

the directors then in office, though less 

than a quorum or by a sole remaining 

director, or (ii) by action taken by the 

stockholders of the Exchange. As a 

result, CHX Holdings, as the stockholder 

of the Exchange, would be able to fill 

vacancies on the Board, include any that 

exist following the Transaction. The 

Exchange represented that this 

provision would be consistent with the 

bylaws of NYSE Arca and NYSE 

National, as well as the bylaws of other 

SROs, such as CBOE Exchange, Inc. and 

CBOE BYX Exchange, Inc.62

Finally, the Exchange proposed to 

restructure and amend Article FIFTH of 

the CHX Certificate governing the 

composition, nomination and election 

of its Board to more closely align with 

the proposed amended CHX Bylaws and 

the relevant provisions of the other 

NYSE Exchanges, to make certain 

administrative and conforming 

changes.63

In addition, the Exchange has 

proposed to amend CHX Article 2, Rules 

2, 3, 4, and 11, to conform with 

proposed changes to the CHX Bylaws 

and CHX Certificate related to the 

Exchange Board, which are discussed 

above, and to reduce the minimum size 

of the Board’s Executive, Finance, and 

Regulatory Oversight Committees to 

three members, conforming the 

committee size to the governing 

documents of the NYSE Exchanges, all 

of which provide that their respective 

regulatory oversight committees consist 

of three directors. 

The Commission believes that the 

proposed changes to the CHX Bylaws 

and CHX Certificate related to the 

number, composition, term of office, 

and qualifications of the Board are 


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64 15 U.S.C. 78s(b). 

65 15 U.S.C. 78c(a)(2). 

66 ‘‘Common rules’’ would be defined in the Rule 

17d–2 Plan. 

67The Exchange will ensure a Rule 17d–2 Plan 

is in place and comply with the other listed 

conditions prior to ArcaSec acting as an Inbound 

Router of the Exchange. 

68See, e.g., Securities Exchange Act Release Nos. 

53382 (February 27, 2006), 71 FR 11251 (March 6, 

2006) (SR–NYSE–2005–77) (order approving the 

combination of the New York Stock Exchange, Inc. 

and Archipelago Holdings, Inc.); 58673 (September 

29, 2008), 73 FR 57707 (October 3, 2008) (SR– 

Amex–2008–62 and SR–NYSE–2008–60) (order 

approving the combination of NYSE Euronext and 

the American Stock Exchange LLC); 59281 (January 

22, 2009), 74 FR 5014 (January 28, 2009) (SR– 

NYSE–2008–120) (order approving a joint venture 

between NYSE and BIDS Holdings L.P.); 61698 

(March 12, 2010), 75 FR 13151 (March 18, 2010) 

(File Nos. 10–194 and 10–196) (order granting the 

exchange registration of EDGX Exchange, Inc. and 

EDGA Exchange, Inc.); and 62716 (August 13, 

2010), 75 FR 51295 (August 19, 2010) (File No. 10– 

198) (order granting the exchange registration of 

BATS–Y Exchange, Inc.). 

69The Commission notes that the proposed 

conditions are similar to those of other NYSE 

Exchanges. See NYSE Arca Rule 7.45–E(c), NYSE 

Rule 17(c)(2), and NYSE American Rule 7.45E(c). 

consistent with Section 6(b)(3) of the 

Exchange Act in that they assure the fair 

representation of CHX members on the 

CHX Board, 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. In 

particular, the Commission finds that 

the requirements that at least 20 percent 

of the Board be comprised of STP 

Participant Directors and 50 percent of 

the Board be comprised of Public 

Directors are consistent with the 

requirements of Section 6(b)(3). In 

addition, the Commission finds that the 

proposed provisions of the CHX Bylaws 

and CHX Certificate relating to the 

number, term of office, and 

qualifications of the Board are 

consistent with Section 6(b)(1) of the 

Exchange Act in that they are designed 

to assist the Exchange in fulfilling its 

self-regulatory obligations and 

administering and complying with the 

requirements of the Exchange Act. 

5. Miscellaneous Changes to 

Organizational Document 

The Exchange has proposed to make 

non-substantive technical and 

conforming changes throughout the 

CHX Certificate and CHX Bylaws to 

reflect the Exchange’s new ownership, 

including updating corporate names, 

defined terms, and cross-references. In 

addition, the Exchange has proposed to 

amend the ICE Independence Policy to 

reflect the change in ownership of the 

Exchange and to provide similar 

protections to the Exchange as are 

currently provided to the NYSE 

Exchanges by the policy. In addition, 

the Exchange has proposed to remove 

outdated or obsolete references. 

The Commission believes that these 

amendments are consistent with the 

Exchange Act as they are technical in 

nature. They do not alter any of the 

restrictions contained in CHX Certificate 

or CHX Bylaws. The amendments 

merely update such governing 

documents to reflect the new ownership 

of the Exchange. 

6. Inbound Router 

The Exchange states that upon 

Closing, Archipelago Securities, LLC 

(‘‘ArcaSec’’), a Participant of the 

Exchange and wholly-owned subsidiary 

of NYSE Group, will become an affiliate 

of the Exchange. CHX Article 3, Rule 20 

provides that a Participant shall not be 

or become an affiliate of the Exchange, 

or an affiliate of any affiliate of the 

Exchange, in the absence of an effective 

filing under Section 19(b) of the 

Exchange Act.64 The Exchange 

represents that the Exchange and 

ArcaSec will each operate in essentially 

the same manner upon Closing as it 

operates today, and that therefore, upon 

the Closing, ArcaSec will not operate as 

a ‘‘facility’’ of the Exchange, as defined 

under Section 3(a)(2) of the Exchange 

Act,65 and will continue to act, and be 

regulated by the Exchange, as a 

Participant on the same terms as any 

other Participant, apart from CHXBD. 

The Exchange has proposed to add a 

new subparagraph (b) to CHX Article 19, 

Rule 2 to provide that ArcaSec may act 

as an inbound router, and to impose 

certain limitations and conditions to 

ArcaSec’s affiliation with the Exchange 

to permit the Exchange to accept 

inbound orders that ArcaSec routes. 

Specifically, proposed Rule 2(b)(1) 

would provide that, for so long as the 

Exchange is affiliated with the NYSE 

Exchanges and ArcaSec, in its capacity 

as a facility of the NYSE Exchanges, is 

utilized for the routing of any approved 

types of orders from those exchanges to 

the Exchange (such function of ArcaSec 

is referred to as the ‘‘Inbound Router’’), 

each of the Exchange and ArcaSec shall 

undertake as follows: (1) The Exchange 

shall maintain an agreement pursuant to 

Rule 17d–2 under the Exchange Act 

(‘‘Rule 17d–2 Plan’’) with a nonaffiliated SRO to relieve the Exchange of 

regulatory responsibilities for ArcaSec 

with respect to rules that are common 

rules between the Exchange and the 

non-affiliated SRO; 66 (2) the Exchange 

shall maintain a regulatory services 

agreement (‘‘RSA’’) with a non-affiliated 

SRO to perform regulatory 

responsibilities for ArcaSec for unique 

Exchange rules; (3) the RSA shall 

require the Exchange and the nonaffiliated SRO to monitor ArcaSec for 

compliance with the Exchange’s trading 

rules, and collect and maintain, in an 

easily accessible manner, all alerts, 

complaints, investigations and 

enforcement actions (collectively 

‘‘Exceptions’’) in which ArcaSec (in 

routing orders to the Exchange) is 

identified as a participant that has 

potentially violated applicable 

Exchange or Commission rules. The 

RSA shall require that the non-affiliated 

SRO provide a report, at least quarterly, 

to the Chief Regulatory Officer of the 

Exchange quantifying all Exceptions; (4) 

the Exchange, on behalf of the holding 

company owning both the Exchange and 

ArcaSec, shall establish and maintain 

procedures and internal controls 

reasonably designed to prevent ArcaSec 

from receiving any benefit, taking any 

action or engaging in any activity based 

on non-public information regarding 

planned changes to Exchange systems, 

obtained as a result of its affiliation with 

the Exchange, until such information is 

available generally to similarly situated 

Participants of the Exchange in 

connection with the provision of 

inbound order routing to the Exchange; 

and (5) the Exchange may furnish to 

ArcaSec the same information on the 

same terms that the Exchange makes 

available in the normal course of 

business to any other Participant. 

Proposed Rule 2(b)(2) would state that, 

provided the above conditions are 

complied with, ArcaSec may provide 

inbound routing services to the 

Exchange from the NYSE Exchanges.67

In the past, the Commission has 

expressed concern that the affiliation of 

an exchange with one of its members 

raises potential conflicts of interest and 

the potential for unfair competitive 

advantage.68 Although the Commission 

continues to be concerned about 

potential unfair competition and 

conflicts of interest between an 

exchange’s self-regulatory obligations 

and its commercial interest when the 

exchange is affiliated with one of its 

members, the Commission believes that 

it is consistent with the Exchange Act to 

permit ArcaSec, in its capacity as a 

facility of each of the NYSE Exchanges, 

to route orders inbound to the 

Exchange, subject to the limitations and 

conditions described above.69 The 

Commission believes that the 

limitations and conditions in CHX 

Article 19, Rule 2(b) will mitigate its 

concerns about potential conflicts of 

interest and unfair competitive 

advantage. In particular, the 


sradovich on DSK3GMQ082PROD with NOTICES
34190 Federal Register / Vol. 83, No. 139 / Thursday, July 19, 2018 / Notices 

70See supra notes 5 and 6. 

71 15 U.S.C. 78s(b)(2). 

72 15 U.S.C. 78s(b)(2). 

73 17 CFR 200.30–3(a)(12). 

1The rule requires a contract with the FCM to 

contain two provisions requiring the FCM to 

comply with existing requirements under the CEA 

Commission believes that the Rule 17d– 

2 Plan, RSA, and Exception reporting 

requirements, procedures, and internal 

controls would help protect the 

independence of the Exchange’s selfregulatory function with respect to 

ArcaSec. The Commission also believes 

that the proposed rule is designed to 

prevent ArcaSec from acting on nonpublic information obtained as a result 

of its affiliation with the Exchange, and 

that the proposed changes are consistent 

with the Exchange Act. 

III. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the Amendment Nos. 

2 and 3 to the proposed rule change 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 email to rule-comments@

sec.gov. Please include File Number SR– 

CHX–2018–004 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE, 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–CHX–2018–004. This file 

number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

internet website (http://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for website viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE, 

Washington, DC 20549, on official 

business days between the hours of 

10:00 a.m. and 3:00 p.m. Copies of the 

filing also will be available for 

inspection and copying at the principal 

office of the Exchange. All comments 

received will be posted without change. 

Persons submitting comments are 

cautioned that we do not redact or edit 

personal identifying information from 

comment submissions. You should 

submit only information that you wish 

to make available publicly. All 

submissions should refer to File 

Number SR–CHX–2018–004, and 

should be submitted on or before 

August 9, 2018. 

IV. Accelerated Approval of Proposed 

Rule Change, as Modified by 

Amendment Nos. 1, 2, and 3 

The Commission finds good cause to 

approve the proposed rule change, as 

modified by Amendment Nos. 1, 2, and 

3 prior to the 30th day after the date of 

publication of notice of Amendments 

Nos. 2 and 3 in the Federal Register. As 

noted above, Amendment Nos. 2 and 3 

do not change the structure or purpose 

of the proposed rule change as it was 

previously published for notice and 

comment.70 The Commission believes 

that an additional notice and comment 

period for Amendment Nos. 2 and 3 

before approval of the proposed rule 

change would not be in furtherance of 

the public interest or the protection of 

investors. Accordingly, the Commission 

finds good cause, pursuant to Section 

19(b)(2) of the Exchange Act,71 to 

approve the proposed rule change, as 

modified by Amendment Nos. 1, 2, and 

3, on an accelerated basis. 

V. Conclusion 

For the foregoing reasons, the 

Commission finds that the proposed 

rule change, as modified by 

Amendments Nos. 1, 2, and 3 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 72

that the proposed rule change (SR– 

CHX–2018–004), as modified by 

Amendments Nos. 1, 2, and 3, be, and 

hereby is, approved on an accelerated 

basis. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.73

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2018–15370 Filed 7–18–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

Submission for OMB Review; 

Comment Request 

Upon Written Request, Copies Available 

From: Securities and Exchange 

Commission, Office of FOIA Services, 

100 F Street NE, Washington, DC 

20549–2736 

Extension: 

Rule 17f–6; SEC File No. 270–392, OMB 

Control No. 3235–0447 

Notice is hereby given that, under the 

Paperwork Reduction Act of 1995 (44 

U.S.C. 3501–3520), the Securities and 

Exchange Commission (the 

‘‘Commission’’) has submitted to the 

Office of Management and Budget a 

request for extension of the previously 

approved collection of information 

discussed below. 

Rule 17f–6 (17 CFR 270.17f–6) under 

the Investment Company Act of 1940 

(15 U.S.C. 80a) permits registered 

investment companies (‘‘funds’’) to 

maintain assets (i.e., margin) with 

futures commission merchants 

(‘‘FCMs’’) in connection with 

commodity transactions effected on 

both domestic and foreign exchanges. 

Before the rule was adopted, funds 

generally were required to maintain 

such assets in special accounts with a 

custodian bank. 

The rule requires a written contract 

that contains certain provisions 

designed to ensure important safeguards 

and other benefits relating to the 

custody of fund assets by FCMs. To 

protect fund assets, the contract must 

require that FCMs comply with the 

segregation or secured amount 

requirements of the Commodity 

Exchange Act (‘‘CEA’’) and the rules 

under that statute. The contract also 

must contain a requirement that FCMs 

obtain an acknowledgment from any 

clearing organization that the fund’s 

assets are held on behalf of the FCM’s 

customers according to CEA provisions. 

Because rule 17f–6 does not impose 

any ongoing obligations on funds or 

FCMs, Commission staff estimates there 

are no costs related to existing contracts 

between funds and FCMs. This estimate 

does not include the time required by an 

FCM to comply with the rule’s contract 

requirements because, to the extent that 

complying with the contract provisions 

could be considered ‘‘collections of 

information,’’ the burden hours for 

compliance are already included in 

other PRA submissions.1


sradovich on DSK3GMQ082PROD with NOTICES