9286 Federal Register / Vol. 80, No. 34 / Friday, February 20, 2015 / Notices 

10Section 18 of the Securities Act of 1933 

(‘‘Securities Act’’) provides federal preemption of 

state blue sky laws for securities listed on certain 

national securities exchanges. 15 U.S.C. 77r. See 

also 17 CFR 230.146. 

11These appeal provisions have been adopted in 

accordance with section 6(b)(7) of the Act. 15 U.S.C. 

78f(b)(7). 

12Section 19(d) of the Act provides, among other 

things, for Commission review of any action selfregulatory organization that, among other things, 

prohibits or limits any person in respect to access 

to service offered by such organization. See U.S.C. 

78s(d). 

13See Notice, supra note 3. 

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

15 17 CFR 200.30–3(a)(12). 

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

2 15 U.S.C. 78a. 

3 17 CFR 240.19b–4. 

4See Securities Exchange Act Release No. 73944 

(December 24, 2014), 80 FR 85 (SR–NSX–2014–017) 

(‘‘Notice’’). 

5 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). 

6 15 U.S.C. 78f(b)(1) and (b)(3). 

7 15 U.S.C. 78f(b)(5). 

investors and the public interest and are 

not designed to permit unfair 

discrimination between customers, 

issuers, brokers, or dealers. 

The Commission notes that full and 

fair disclosure of information by 

companies is of critical importance to 

financial markets and the investing 

public. According to the Exchange, 

investors view a company’s decision to 

seek initial listing on the Exchange as a 

positive development, and companies 

often publicize their intention to apply 

for listing. The listing of a company on 

a national securities exchange such as 

Nasdaq provides benefits including, 

among others, potential for increased 

stock liquidity and capital raising 

benefits.10 However, there appears to be 

no Exchange requirement for the 

company to publicize when its listing 

application has been denied and 

therefore that the company will not be 

receiving the benefits of an exchange 

listing. 

The Commission believes that the 

public, including potential future 

investors, would find a denial of a 

company’s listing application, just as 

important as the decision to seek an 

exchange listing which, as noted by 

Nasdaq, is often publicized. The 

significance of a denial of listing is also 

underscored by the existence of both the 

right to appeal the denial on Nasdaq and 

the right to obtain Commission review 

of such appeals. Nasdaq rules provide, 

as noted above, for due process to 

appeal a denial of listing.11 Denial of 

listings have also been subject to 

Commission review under section 19(d) 

of the Exchange Act.12

The Commission therefore believes 

that the proposed rule change will help 

provide transparency to future, as well 

as existing, investors about the status of 

a company’s listing application. The 

Commission also believes that Nasdaq’s 

proposal to require that such disclosure 

be made by press release, or other 

Regulation FD compliant manner, will 

permit companies to disseminate this 

important information to the public in 

a broad and inclusive manner and 

should help to ensure for broad public 

access to the denial of listing 

determination and the reasons for the 

denial. 

As described above, the proposal will 

also clarify in Nasdaq’s rules that a 

company may withdraw its application 

for initial listing at any time during the 

review process.13 The decision to seek 

listing and submit a listing application 

is generally a voluntary decision by a 

company. Consistent with this, it is our 

understanding that companies seeking 

listing on Nasdaq are allowed to 

withdraw their voluntary application at 

any time during the process. The 

clarification in Nasdaq’s proposal 

codifies this concept in Nasdaq’s rules. 

The Commission also believes that for, 

the same reasons noted above, 

companies should consider any 

applicable disclosure requirements 

under the federal securities laws if a 

company withdraws its listing 

application with Nasdaq for any reason. 

IV. Conclusion 

It is therefore ordered pursuant to 

section 19(b)(2) of the Act,14 that the 

proposed rule change (SR–NASDAQ– 

2014–102) be, and it hereby is, 

approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.15

Jill M. Peterson, 

Assistant Secretary. 

[FR Doc. 2015–03518 Filed 2–19–15; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–74270; File No. SR–NSX– 

2014–017] 

Self-Regulatory Organizations; 

National Stock Exchange, Inc.; Order 

Granting Approval of Proposed Rule 

Change in Connection With a 

Proposed Transaction in Which 

National Stock Exchange Holdings, 

Inc. Will Acquire Ownership of the 

Exchange From the CBOE Stock 

Exchange, LLC 

February 13, 2015. 

I. Introduction 

On December 16, 2014, National 

Stock Exchange, Inc. (‘‘NSX’’ or the 

‘‘Exchange’’) filed with the Securities 

and Exchange Commission 

(‘‘Commission’’), pursuant to section 

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

of 1934 (‘‘Act’’),2 and Rule 19b–4 

thereunder,3 a proposed rule change to 

make certain amendments to its 

corporate governance documents in 

order to effectuate a proposed 

transaction (the ‘‘Transaction’’) in 

which the Exchange will become a 

wholly-owned subsidiary of National 

Stock Exchange Holdings, Inc., a 

Delaware corporation (‘‘NSX 

Holdings’’). The proposed rule change 

was published for comment in the 

Federal Register on January 2, 2015.4

The Commission received no comments 

on the proposal. 

The Commission has reviewed 

carefully the proposed rule change and 

finds that the proposed rule change is 

consistent with the requirements of the 

Act and the rules and regulations 

thereunder applicable to a national 

securities exchange.5 In particular, the 

Commission finds that the proposed 

rule change is consistent with sections 

6(b)(1) and (3) of the Act,6 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 Act, and to 

enforce compliance by its members and 

persons associated with its members 

with the provisions of the Act, the rules 

and regulations thereunder, and the 

rules of the exchange, and assure the 

fair representation of its members in the 

selection of its directors and 

administration of its affairs, and provide 

that one or more directors shall be 

representative of issuers and investors 

and not be associated with a member of 

the exchange, broker, or dealer. The 

Commission also finds that the proposal 

is consistent with section 6(b)(5) of the 

Act,7 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. Corporate Structure and Proposed 

Transaction 

Currently, the Exchange is a whollyowned subsidiary of the CBOE Stock 


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8CBSX is the record and beneficial owner of 100 

shares of the Exchange, par value $.01 per share, 

which represents all of the issued and outstanding 

shares of capital stock of the Exchange. See Notice, 

supra note 4, at 86. 

9For a more detailed explanation of the 

conditions necessary to effectuate the Closing, see 

Notice, supra note 4, at 86, n.8. 

10 15 U.S.C. 78f. 

11 15 U.S.C. 78c(a)(26). 

12See Notice, supra note 4, at 86. 

13See Notice, supra note 4, at 86. The Exchange 

ceased trading operations as of the close of business 

on May 30, 2014. See Exchange Act Release No. 

72107 (May 6, 2014), 79 FR 27017 (May 12, 2014) 

(SR–NSX–2014–14) (‘‘Cessation of Operations 

Filing’’). 

14See Notice, supra note 4, at 86. The Cessation 

of Operations Filing stated that the Exchange shall 

file a proposed rule change pursuant to Rule 19b– 

4 of the Act prior to any resumption of trading on 

the Exchange pursuant to Chapter XI (Trading 

Rules) of the Exchange Rules. See Notice, supra 

note 4, at 86, n.11. 

15See Notice, supra note 4, at 86. 

16See Notice, supra note 4, at 86. 

17See Notice, supra note 4, at 87. 

18The Exchange has represented that, pursuant to 

Rule 6a–2 under the Act, within 10 days of the 

Closing, the Exchange will amend its Form 1 filed 

with the Commission. Exhibit K of Form 1, which 

is applicable only to ‘‘exchanges that have one or 

more owners, shareholders, or partners that are not 

also members of the exchange . . .’’, requires the 

Exchange to provide a list of each shareholder that 

directly owns 5% or more of a class of a voting 

security of the Exchange. As discussed above, the 

Exchange has proposed that 100% of the issued and 

outstanding shares of NSX be directly owned by 

NSX Holdings. See Notice, supra note 4, at 87, n.16. 

19See discussion infra at 8 regarding exemption 

from the Concentration Limitation. 

20See Notice, supra note 4, at 87. 

21See Notice, supra note 4, at 87. 

22See Notice, supra note 4, at 87, n.17. 

23See Notice, supra note 4, at 87. 

24See Notice, supra note 4, at 87. Thor will also 

have an ownership interest in TIP–1 and will act 

as its managing member. Thor’s management will 

be vested in a managing member, Thor Managing 

Member LLC (‘‘Thor MM’’), which will have no 

ownership interest in either Thor or TIP–1. There 

are three individual members of Thor MM, all of 

whom are also members of Thor. There are also 

currently nine individuals who are members of 

Thor. The Exchange anticipates there will be six 

members of TIP–1, including Thor. Each such 

member thereby has an ownership interest in the 

respective entities’ share of the outstanding equity 

of NSX Holdings. See Notice, supra note 4, at 87. 

25See Notice, supra note 4, at 87. 

26See Notice, supra note 4, at 87. 

27See Notice, supra note 4, at 87. 

28See Notice, supra note 4, at 87. 

29See Notice, supra note 4, at 87. 

30 15 U.S.C. 78(c)(a)(2). 

31See Notice, supra note 4, at 86. The Exchange 

further represented that it, on behalf of NSX 

Securities, will provide notice to and obtain any 

Continued 

Exchange, LLC (‘‘CBSX’’).8 Pursuant to 

the terms of a Stock Purchase 

Agreement, dated September 8, 2014, by 

and among CBSX, NSX Holdings and 

the Exchange (the ‘‘SPA’’), NSX 

Holdings has agreed to acquire all of the 

outstanding capital stock of NSX upon 

the closing of the Transaction (the 

‘‘Closing’’) in return for cash 

consideration paid to CBSX.9 Following 

the completion of the Transaction, the 

Exchange will remain a Delaware forprofit stock corporation with authority 

to issue 1,000 shares of common stock 

and, at all times, all of the outstanding 

stock of the Exchange will be owned by 

NSX Holdings. 

The Exchange is, and will remain, 

registered as a national securities 

exchange under section 6 of the Act 10

and a self-regulatory organization 

(‘‘SRO’’) as defined in section 3(a)(26) of 

the Act 11 after the Closing.12 The 

Exchange states that it plans to reopen 

its trading operations as soon as 

practicable after the Closing and plans 

to operate the Exchange using its 

existing trading system pursuant to the 

rules of the Exchange currently in effect 

(the ‘‘Exchange Rules’’).13 However, the 

Exchange states that the re-opening of 

its marketplace will be subject to 

additional proposed rule changes filed 

by the Exchange with the Commission 

and such proposed rule changes being 

approved by the Commission.14 In 

addition, the Exchange states that the 

Exchange Rules, all of which remain in 

full force and effect as of the date of the 

instant rule filing, will continue to 

govern the activities of the Exchange up 

to and after the Closing, and the 

Exchange will continue to discharge its 

SRO responsibilities pursuant to the 

Exchange’s registration under section 6 

of the Act.15 Furthermore, assuming 

consummation of the Transaction, the 

Exchange noted that NSX Holdings has 

represented that, at all times, it will 

ensure that the Exchange has access to 

sufficient financial resources for it to 

discharge its SRO responsibilities after 

the date of the Closing.16

The ownership of NSX Holdings, as 

the new holding company of the 

Exchange, will be divided among two 

categories of shareholders.17 The first 

category of shareholders will be 

comprised of 12 individual investors 

who, in the aggregate, will own 

approximately 64% of the outstanding 

shares of NSX Holdings.18 At the time 

of the closing of the Transaction, the 

Exchange has represented that one 

individual investor may own in the 

aggregate more than 40% of the 

outstanding shares of NSX Holdings.19

According to the Exchange, four of the 

12 individual investors in NSX 

Holdings, owning in the aggregate 

approximately 60% of the outstanding 

shares, are securities industry and 

technology professionals with senior 

executive managerial experience in 

areas including capital markets and 

investment management, exchange 

operations, electronic trading, and 

systems architecture and 

development.20 The Exchange 

anticipates that these four individuals 

will assume senior executive roles in 

the Exchange’s management upon 

completion of the Transaction.21 The 

remaining eight individual shareholders 

of NSX Holdings own shares in amounts 

ranging from approximately 0.063% to 

1.269%.22

The second category of shareholders 

of NSX Holdings consists of two 

affiliated entities: Thor Investment 

Holdings LLC (‘‘Thor’’) and TIP–1 LLC 

(‘‘TIP–1’’), each a Delaware limited 

liability company.23 Thor will own 

approximately 16% of the outstanding 

equity of NSX Holdings, and TIP–1 will 

own approximately 20% of the 

outstanding equity of NSX Holdings.24

The Exchange notes that there is no 

commonality or overlap between the 12 

individual investors owning 

approximately 64% of the outstanding 

shares of NSX Holdings and the 

individual members of Thor and TIP–1 

which own the remaining 

approximately 36% of the outstanding 

equity of NSX Holdings.25 No 

individual has an ownership interest in 

both Thor and TIP–1.26 Furthermore, 

none of the individual members of Thor 

or TIP–1 will become an employee of 

the Exchange, and none of these 

individual members will have any role 

in the day-to-day management or 

operation of the Exchange.27

With respect to voting rights, Thor 

will have the ability to exercise TIP–1’s 

voting rights in NSX Holdings, such that 

Thor will have the ability to exercise an 

approximately 36% voting interest of 

NSX Holdings (Thor’s approximately 

16% plus TIP–1’s approximately 

20%).28 However, Thor will not be able 

to exercise its voting interest in excess 

of the 20% voting limitation because of 

voting limitations contained in the NSX 

Holdings A&R Certificate.29

The Exchange currently has one 

affiliated entity, NSX Securities LLC 

(‘‘NSX Securities’’). Pursuant to 

Exchange Rule 2.11(a), NSX Securities 

provides the outbound routing of orders 

from the Exchange to other trading 

centers. NSX Securities operates as a 

facility (as defined in section 3(a)(2) of 

the Act) 30 of the Exchange. The 

Exchange represents that upon the 

Closing, Exchange Rule 2.11 will remain 

in full force and effect and the sole 

change impacting NSX Securities will 

be the change of ownership of the 

Exchange (from CBSX to NSX Holdings) 

as NSX Securities’ sole affiliate.31


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required consents from FINRA for the NSX change 

of ownership. See Notice, supra note 4, at 86. 

32These provisions are generally consistent with 

ownership and voting limits approved by the 

Commission for other SROs. See e.g., Securities 

Exchange Act Release Nos. 71375 (January 23, 2014) 

79 FR 4771 (January 29, 2014) (SR–BATS–2013– 

059; SR–BYX–2013–039) (order approving 

proposed business combination involving BATS 

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

70210 (August 15, 2013), 78 FR 51758 (August 21, 

2013) (SR–NYSE–2013–42, SRNYSEMKT–2013–50 

and SR–NYSEArca–2013–62) (order approving 

proposed transaction in which NYSE Euronext will 

become a wholly owned subsidiary of 

Intercontinental Exchange Group, Inc.); 62716 

(August 13, 2010), 75 FR 51295 (August 19, 2010) 

(File No. 10–198) (order approving registration 

application of BYX as a national securities 

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

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

(order approving registration application of EDGX 

Exchange, Inc. and EDGA Exchange, Inc.); 58375 

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

(File No. 10–182) (order approving registration of 

BATS as a national securities exchange); 55293 

(February 14, 2007), 72 FR 8033 (February 22, 2007) 

(SR–NYSE–2006–120) (order approving proposed 

combination between NYSE Group, Inc. and 

Euronext N.V.); 53382 (February 27, 2006), 71 FR 

11251 (March 6, 2006) (SR–NYSE–2005–77) (order 

approving merger of New York Stock Exchange, Inc. 

and Archipelago, and demutualization of New York 

Stock Exchange, Inc.); 53963 (June 8, 2006), 71 FR 

34660 (June 15, 2006) (File No. SR–NSX–2006–03); 

53128 (January 13, 2006), 71 FR 3550 (File No. 10– 

131) (order approving registration application of 

NASDAQ as a national securities exchange); 51149 

(February 8, 2005), 70 FR 7531 (February 14, 2005) 

(SR–CHX–2004–26); and 49098 (January 16, 2004), 

69 FR 3974 (January 27, 2004) (SR–Phlx–2003–73). 

33See NSX Holdings A&R Certificate, Article 

Fourth, section B (defining ‘‘Person’’). 

34See NSX Holdings A&R Certificate, Article 

Fourth, section B (defining ‘‘Related Persons’’). 

35See NSX Holdings A&R Certificate, Article 

Fourth, section C(i). 

36See NSX Holdings A&R Certificate, Article 

Fourth, section C(i). See also Notice, supra note 4, 

at 87. 

37The Commission previously has approved a 

period of time for the reduction of share ownership 

concentration. See Securities Exchange Act Release 

No. 45803 (April 23, 2002), 67 FR 21306 (April 30, 

2002) (SR–ISE–2002–01) (allowing a temporary 

exemption, not to extend past a date certain, from 

ownership concentration limits). 

38See NSX Holdings A&R Certificate, Article 

Fourth, section C(i)(a). 39See NSX Holdings A&R Certificate, Article 

Fourth, section C(i)(b). 40See NSX Holdings A&R Certificate, Article 

Fourth, section C(i)(b). 

B. Proposed Rule Changes 

Section 19(b) of the Act and Rule 

19b–4 thereunder require an SRO to file 

proposed rule changes with the 

Commission. Although NSX Holdings is 

not an SRO, certain provisions of its 

proposed certificate of incorporation 

and bylaws, are rules of the Exchange, 

if they are stated policies, practices, or 

interpretations, as defined in Rule 19b– 

4 under the Act, and must be filed with 

the Commission pursuant to section 

19(b)(4) of the Act and Rule 19b–4 

thereunder. Accordingly, the Exchange 

filed with the Commission the following 

documents in connection with the 

Transaction: (1) The proposed Second 

Amended and Restated Certificate of 

Incorporation of NSX Holdings (the 

‘‘NSX Holdings A&R Certificate’’); (2) 

the proposed By-laws of NSX Holdings 

(the ‘‘NSX Holdings By-laws’’); (3) the 

proposed Second Amended and 

Restated Certificate of Incorporation of 

NSX (the ‘‘Exchange A&R Certificate’’); 

and (4) the proposed Third Amended 

and Restated NSX By-laws (the 

‘‘Exchange A&R By-laws’’). 

1. NSX Holdings Ownership and Voting 

Limitations 

The NSX Holdings A&R Certificate 

includes certain restrictions on the 

ability to own and vote shares of stock. 

These limitations are intended to 

prevent a stockholder from exercising 

undue control over the operation of 

NSX Holdings, and in turn, over the 

operation of the Exchange. These 

limitations are generally consistent with 

ownership and voting limits approved 

by the Commission for other SROs,32

and are designed to assure that the 

Exchange and the Commission are able 

to carry out their regulatory obligations 

under the Act. 

For example, the NSX Holdings A&R 

Certificate provides that, subject to 

certain exceptions, no Person,33 either 

alone or with its Related Persons 34 shall 

be allowed at any time to own 

beneficially shares of stock of NSX 

Holdings representing in the aggregate 

more than 40% of the then outstanding 

votes entitled to be cast on any matter 

(‘‘Concentration Limitation’’).35

Because the Exchange anticipates that 

one shareholder will own beneficially 

more than 40% of the outstanding 

shares of NSX Holdings at the Closing, 

the Exchange has proposed that a 

Person (either alone or with their 

Related Persons) who exceeds the 

Concentration Limitation as of the filing 

date of the NSX Holdings A&R 

Certificate shall be exempt from the 

Concentration Limitation. The 

exemption shall not extend beyond May 

19, 2015.36 The Commission believes 

that the proposed exemption is 

consistent with the requirements of 

section 6(b) of the Act.37 The 

Commission believes that an exemption 

for this specific period of time should 

allow a shareholder sufficient time after 

the Closing to reduce his or her 

ownership percentage in order to 

comply with the Concentration 

Limitation. 

Pursuant to NSX Holdings A&R 

Certificate, Article Fourth, section 

C(i)(a), the Concentration Limitation 

applies unless and until: (i) A Person 

(either alone or with its Related Persons) 

intending to acquire such ownership 

shall have delivered to the Board of 

Directors of NSX Holdings (the 

‘‘Holdings Board’’) a notice in writing, 

not less than 45 days (or such shorter 

period as the Holdings Board shall 

expressly consent to) prior to the 

acquisition of any shares that would 

cause such Person (either alone or with 

its Related Persons) to exceed the 

Concentration Limitation, of its 

intention to acquire such ownership; (ii) 

the Holdings Board shall have resolved 

to expressly permit such ownership; 

and (iii) such resolution shall have been 

filed with the Commission under 

section 19(b) of the Act and shall have 

become effective thereunder.38

The Exchange has provided for 

additional safeguards that must be 

satisfied in the event a Person alone or 

with their Related Persons seeks an 

exemption from the Concentration 

Limitation. For example, the Holdings 

Board shall not adopt any resolution 

permitting an exemption from the 

Concentration Limitation unless the 

Holdings Board first determines that 

such acquisition of beneficial ownership 

by such Person (either alone or with its 

Related Persons) (i) will not impair any 

of NSX Holdings’ or NSX’s ability to 

discharge its responsibilities under the 

Act and the rules and regulations 

thereunder, and is otherwise in the best 

interests of NSX Holdings and its 

stockholders; (ii) such acquisition of 

beneficial ownership by such Person 

(either alone or with its Related Persons) 

will not impair the Commission’s ability 

to enforce the Act; and (iii) neither such 

Person nor any of its Related Persons is 

subject to any statutory disqualification 

as defined in section 3(a)(39) of the 

Act.39

The NSX Holdings A&R Certificate 

further provides that, in making such 

determinations, the Holdings Board may 

impose such conditions and restrictions 

on a Person and its Related Persons 

owning any shares of stock of NSX 

Holdings entitled to vote on any matter 

as it may in its sole discretion deem 

necessary, appropriate or desirable in 

furtherance of the objectives of the Act 

and the governance of NSX Holdings.40

In the event that a Person (either alone 

or with its Related Persons) at any time 

owns beneficially shares of stock of NSX 

Holdings in excess of the Concentration 

Limitation without having first satisfied 

the requirement of providing timely 

written notice to the Holdings Board, 

and the Holdings Board expressly 

permits such ownership and files the 

resolution with the Commission 

pursuant to section 19(b) of the Act, 


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41See NSX Holdings A&R Certificate, Article 

Fourth, section C(i)(c). 

42See Exchange Rule 1.1E.(1) for definition of the 

term ‘‘ETP.’’ 

43See NSX Holdings A&R Certificate, Article 

Fourth, section C(ii). 

44See NSX Holdings A&R Certificate, Article 

Fourth, section C(ii). 

45NSX Holdings A&R Certificate, Article Fourth, 

section B(i) prohibits ‘‘Nonvoting Agreements’’ by 

or among Persons and their Related Persons that 

would result in shares of stock that would be 

subject to such agreement not being voted on any 

matter, or the withholding of any proxy relating to 

those shares, where the effect of such an agreement 

would be to enable any Person, either alone or with 

its Related Persons, to vote or cause the voting of 

shares representing in the aggregate more than 20% 

of the then outstanding votes entitled to be cast (the 

‘‘Nonvoting Agreement Prohibition’’). Any share 

owner seeking a waiver of the Nonvoting 

Agreement Prohibition so as to be able to enter into 

such an agreement would also be required to obtain 

express permission of the Holdings Board through 

a duly authorized written resolution that is filed 

with and approved by the Commission pursuant to 

section 19(b) of the Act. See NSX Holdings A&R 

Certificate, Article Fourth, section B(i). 

46See NSX Holdings A&R Certificate, Article 

Fourth, section B(ii). 

47See note 32, supra. 

48 15 U.S.C. 78f(b). 

49 15 U.S.C. 78s(g). 

50See e.g., NSX Holdings A&R Certificate, 

Articles Twelfth through Sixteenth and NSX 

Holdings By-laws, Article VI. 

51Articles Twelfth through Sixteenth of the NSX 

Holdings A&R Certificate contain substantially the 

same provisions with respect to NSX Holdings’ 

obligations as the controlling entity for the 

Exchange. See Notice, supra note 4, at 88, n.34. 

52See NSX Holdings By-laws, Article VI, section 

6.1. 

53See NSX Holdings A&R Certificate, Article 

Fifteenth; NSX Holdings By-laws, Article VI, 

section 6.6. 

NSX Holdings must call from such 

Person and its Related Persons that 

number of shares of stock of NSX 

Holdings entitled to vote on any matter 

that exceeds the Concentration 

Limitation at a price equal to the par 

value of such shares of stock.41

The NSX Holdings A&R Certificate 

also provides for limitations on 

ownership of shares by ETP Holders of 

NSX.42 As long as NSX remains 

registered as a national securities 

exchange under section 6 of the Act, no 

ETP Holder (either alone or with its 

Related Persons) shall be permitted to 

own beneficially shares of stock of NSX 

Holdings representing in the aggregate 

more than 20% of the then outstanding 

votes of NSX Holdings stock entitled to 

be cast on any matter.43 If any ETP 

Holder (either alone or with its Related 

Persons) at any time owns beneficially 

shares of stock in excess of such 20% 

limitation, NSX Holdings shall call from 

such ETP Holder and its Related 

Persons that number of shares of stock 

of NSX Holdings entitled to vote on any 

matter that exceeds such 20% limitation 

at a price equal to the par value of such 

shares of stock.44

With respect to voting limitations, 

Article Fourth, section B(i) of the NSX 

Holdings A&R Certificate provides that, 

notwithstanding any other provisions of 

that document, no Person (either alone 

or with its Related Persons) as of any 

record date for the determination of 

stockholders entitled to vote on any 

matter, shall be entitled to vote or cause 

the voting of shares of stock of NSX 

Holdings, in person or by proxy or 

through any voting agreement or other 

arrangement, to the extent such shares 

represent in the aggregate more than 

20% of the then outstanding votes 

entitled to be cast on such matter (the 

‘‘Voting Limitation’’). If votes have been 

cast, in person or by proxy or through 

any voting agreement or other 

arrangement, by any Person (either 

alone or with its Related Persons) in 

excess of the Voting Limitation, NSX 

Holdings shall disregard such votes in 

excess of the Voting Limitation.45 The 

Voting Limitation (or Nonvoting 

Agreement Prohibition) shall apply 

unless and until a Person (and its 

Related Persons) owning any shares of 

stock of NSX Holdings entitled to vote 

on such matter shall have delivered to 

the Holdings Board a notice in writing, 

not less than 45 days (or such shorter 

period as the Holdings Board shall 

expressly consent to) prior to any vote, 

of its intention to cast more than 20% 

of the votes entitled to be cast on such 

matter or to enter into an agreement, 

plan or other arrangement that would 

violate the Nonvoting Agreement 

Prohibition, as applicable; the Holdings 

Board shall have resolved to expressly 

permit such exercise or the entering into 

of such agreement, plan or other 

arrangement, as applicable, and such 

resolution shall have been filed with the 

Commission pursuant to section 19(b) of 

the Act and shall have become effective 

thereunder.46

The Commission believes that the 

proposed restrictions on the ownership 

and voting of members are consistent 

with the requirements of section 6(b) of 

the Act. These restrictions are generally 

consistent with ownership and voting 

limits approved by the Commission for 

other SROs.47 Moreover, the 

Commission believes that the proposed 

ownership and voting limits should 

reduce the potential that the control of 

the Exchange by one or a few 

shareholders would impair the 

Exchange’s ability to carry out its selfregulatory obligations. 

2. Jurisdiction; Books and Records; Due 

Regard 

As described above, following the 

Closing, NSX Holdings will be the sole 

stockholder of the Exchange. Although 

NSX Holdings will not carry out any 

regulatory functions, its activities with 

respect to the operation of the Exchange 

must be consistent with, and must not 

interfere with, the self-regulatory 

obligations of the Exchange. The NSX 

Holdings A&R Certificate and the NSX 

Holdings By-laws 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) 48 and 19(g) 49 of the Act, 

and facilitate the ability of the Exchange 

and the Commission to fulfill their 

regulatory and oversight obligations 

under the Act.50

For example, Article VI of the NSX 

Holdings By-laws, entitled ‘‘SRO 

Functions of NSX,’’ governs the conduct 

of NSX Holdings as the holding 

company for the Exchange with respect 

to NSX’s status and obligations as a 

registered national securities exchange 

and an SRO.51 Among the key 

provisions are requirements that, for so 

long as NSX Holdings shall, directly or 

indirectly, control NSX, the directors, 

officers, employees and agents of NSX 

Holdings shall give due regard to the 

preservation of the independence of the 

self-regulatory function of NSX and to 

its obligations to investors and the 

general public and shall not take actions 

which would interfere with the 

effectuation of decisions by the 

Exchange Board of Directors relating to 

NSX’s regulatory functions (including 

disciplinary matters) or which would 

interfere with the Exchange’s ability to 

carry out its responsibilities under the 

Exchange Act.52

Further, NSX Holdings is required to 

comply with the federal securities laws, 

and the rules and regulations 

thereunder, and must cooperate with 

the Commission and with NSX pursuant 

to and to the extent of their respective 

regulatory authority.53 In addition, the 

NSX Holdings A&R Certificate and the 

NSX Holdings By-laws provide that the 

officers, directors, employees and agents 

of NSX Holdings, by virtue of their 

acceptance of such position, shall 

comply with the federal securities laws 

and the rules and regulations 

thereunder; and shall be deemed to 

agree to cooperate with the Commission 

and the Exchange in respect of the 

Commission’s oversight responsibilities 

regarding NSX and the self-regulatory 

functions and responsibilities of NSX, 

and NSX Holdings will take reasonable 


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54See NSX Holdings A&R Certificate, Articles 

Twelfth and Fifteenth; NSX Holdings By-laws, 

Article VI, section 6.6. 

55See NSX Holdings A&R Certificate, Article 

Twelfth; NSX Holdings By-laws, Article VI, section 

6.7. Additionally, as noted, no individual who is 

subject to any statutory disqualification as defined 

in section 3(a)(39) of the Exchange Act may serve 

as a director or officer of NSX Holdings. See Notice, 

supra note 4, at 89, n.39. 

56See NSX Holdings A&R Certificate, Article 

Twelfth; NSX Holdings By-laws, Article VI, section 

6.7. 

57See NSX Holdings A&R Certificate, Article 

Fourteenth. 

58See NSX Holdings By-laws, Article VI, sections 

6.4 and 6.5. 

59See NSX Holdings A&R Certificate, Article 

Thirteenth and NSX Holdings By-laws, section 6.2. 

60See NSX Holdings A&R Certificate, Article 

Thirteenth and NSX Holdings By-laws, section 6.3. 

61 15 U.S.C. 78s(b). 

62See NSX Holdings A&R Certificate, Article 

Sixteenth and NSX Holdings By-laws, section 

7.7(b). 

63See Notice, supra note 4, at 89. 

64See Notice, supra note 4, at 89. 

65See Notice, supra note 4, at 89. 

66 15 U.S.C. 78t(a). 

67 15 U.S.C. 78t(e). 

68 15 U.S.C. 78u–3. 

steps necessary to cause its officers, 

directors, employees and agents to so 

cooperate.54 Furthermore, NSX 

Holdings and its officers, directors, 

employees and agents by virtue of their 

acceptance of such positions, shall be 

deemed to irrevocably submit to the 

jurisdiction of the United States federal 

courts, the Commission and NSX for the 

purposes of any suit, action or 

proceeding pursuant to the United 

States federal securities laws, and the 

rules or regulations thereunder, arising 

out of, or relating to, the activities of 

NSX, and by virtue of their acceptance 

of any such position, shall be deemed to 

waive, and agree not to assert by way of 

motion, as a defense or otherwise in any 

such suit, action or proceeding, any 

claims that it or they are not personally 

subject to the jurisdiction of the United 

States federal courts, the Commission or 

the Exchange, that the suit, action or 

proceeding is an inconvenient forum or 

that the venue of the suit, action or 

proceeding is improper, or that the 

subject matter of that suit, action or 

proceeding may not be enforced in or by 

such courts or agency.55 NSX Holdings 

and its officers, directors, employees 

and agents also agree that they will 

maintain an agent in the United States 

for the service of process of a claim 

arising out of, or relating to, the 

activities of the Exchange.56

In addition, for so long as NSX 

remains a registered national securities 

exchange, the books, records, premises, 

officers, directors, employees and agents 

of NSX Holdings shall be deemed to be 

the books, records, premises, officers, 

directors, employees and agents of NSX 

for purposes of and subject to oversight 

pursuant to the Act.57

The NSX Holdings By-laws further 

provide that NSX Holdings’ books and 

records shall be maintained within the 

United States and shall be at all times 

subject to inspection and copying by the 

Commission and by the Exchange, to the 

extent that such books and records are 

related to the administration and 

operation of the Exchange.58

The NSX Holdings A&R Certificate 

and the NSX Holdings By-laws provide 

that, to the extent that NSX continues to 

be controlled, directly or indirectly, by 

NSX Holdings and to the fullest extent 

permitted by applicable law, all books 

and records of the Exchange reflecting 

confidential information pertaining to 

the self-regulatory function of the 

Exchange or its successors (including 

but not limited to disciplinary matters, 

trading data, trading practices and audit 

information) that shall come into the 

possession of NSX Holdings, shall not 

be made available other than to those 

officers, directors, employees and agents 

of NSX Holdings that have a reasonable 

need to know the contents thereof, and 

shall be retained in confidence by NSX 

Holdings, and the officers, directors, 

employees and agents of NSX Holdings, 

and not used for any non-regulatory 

purposes.59 The NSX Holdings A&R 

Certificate and the NSX Holdings Bylaws, however, specify that the NSX 

Holdings A&R Certificate and NSX 

Holdings By-laws, respectively, 

(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 NSX 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 NSX 

Holdings to disclose NSX confidential 

information to the Commission or the 

Exchange.60

The NSX Holdings A&R Certificate 

and the NSX Holdings By-laws provide 

that, for so long as NSX remains a 

registered national securities exchange, 

before any amendment to or repeal of 

any provision of the NSX Holdings A&R 

Certificate or the NSX Holdings By-laws 

may be effective, those changes must be 

submitted to the Exchange Board of 

Directors, 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 Act,61

such change shall not be effective until 

filed with, or filed with and approved 

by, the Commission.62

The Exchange submits that the NSX 

Holdings A&R Certificate and the NSX 

Holdings By-laws establish an 

organizational framework that assures 

that the Commission and NSX will have 

regulatory jurisdiction and authority 

over NSX Holdings and its directors, 

officers, employees and agents, and will 

preserve the independence and 

effectiveness of the Exchange in 

discharging its self-regulatory 

responsibilities pursuant to the Act.63

Further, the Exchange represents that 

these provisions of the NSX Holdings 

corporate documents will not impair the 

ability of the Exchange to carry out its 

functions and responsibilities as a 

national securities exchange under the 

Act and the rules and regulations 

promulgated thereunder, or the ability 

of the Commission to enforce the Act 

and the rules and regulations 

promulgated thereunder.64 The 

Exchange further states that it will 

continue to enforce the Act, the 

Commission’s rules thereunder, and the 

Exchange’s own rules, in the same 

manner as prior to the Transaction, and 

notes that the Commission will continue 

to have plenary regulatory authority 

over NSX.65

The Commission finds that these 

provisions are consistent with the Act, 

and that they are intended to assist the 

Exchange in fulfilling its self-regulatory 

obligations and in administering and 

complying with the requirements of the 

Act. The Commission also notes that, 

even in the absence of these provisions, 

under section 20(a) of the Act,66 any 

person with a controlling interest in the 

Exchange shall be jointly and severally 

liable with and to the same extent the 

Exchange is liable under any provision 

of the Act, unless the controlling person 

acted in good faith and did not directly 

or indirectly induce the act or acts 

constituting the violation or cause of 

action. In addition, section 20(e) of the 

Act 67 creates aiding and abetting 

liability for any person who knowingly 

provides substantial assistance to 

another person in violation of any 

provision of the Act or rule thereunder. 

Further, section 21C of the Act 68

authorizes the Commission to enter a 

cease-and-desist order against any 

person who has been ‘‘a cause of’’ a 

violation of any provision of the Act 

through an act or omission that the 

person knew or should have known 

would contribute to the violation. 

3. Board Composition; Committees 

Following the completion of the 

Transaction, the board of directors of 

the Exchange will continue to be the 


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Federal Register / Vol. 80, No. 34 / Friday, February 20, 2015 / Notices 9291 

69See Exchange A&R By-laws, Article III, section 

3.2(a). 

70The term ‘‘Non-Industry Director’’ is defined in 

Article I, section 1.1, para. N of the Exchange A&R 

By-laws as ‘‘a member of the [NSX] Board who is 

(i) an Independent Director; or (ii) any other 

individual who would not be an Industry Director.’’ 

71The term ‘‘Independent Director’’ is defined in 

Article I, section 1.1, para. I of the Exchange A&R 

By-laws as ‘‘a member of the [NSX] Board that the 

[NSX] Board has determined to have no material 

relationship with the Exchange or any affiliate of 

the Exchange, or any ETP Holder or any affiliate of 

any such ETP Holder, other than as a member of 

the Board.’’ 

72The term ‘‘ETP Holder Director’’ is defined in 

Article I, section 1.1, para. E(2) of the Exchange 

A&R By-laws as ‘‘a director who is an ETP Holder 

or a director, officer, managing member or partner 

of an entity that is, or is an affiliate of, an ETP 

Holder.’’ 

73See Exchange A&R By-laws, Article III, section 

3.2(b). 

74See Exchange A&R By-laws, Article V, section 

5.2. 

75See Exchange A&R By-laws, Article V, section 

5.2. 

76See Notice, supra note 4, at 89. 

77See Notice, supra note 4, at 89. 

78See Notice, supra note 4, at 89. 

79See Notice, supra note 4, at 90. 

80See Notice, supra note 4, at 90. 

81See Notice, supra note 4, at 89. 

82See Notice, supra note 4, at 89–90. 

83For a more detailed description of the nonsubstantive conforming amendments, see Notice, 

supra note 4, at 90 and Exhibit 5D to SR–NSX– 

2014–017. 

84 15 U.S.C. 78s(b)(2). 

85 17 CFR 200.30–3(a)(12). 

governing body of the Exchange and 

possess all of the powers necessary for 

the management of its business and 

affairs and the execution of its 

responsibilities as an SRO. In particular, 

the Exchange A&R By-laws will 

continue to provide that the Exchange 

Board shall consist of no fewer than 

seven or more than 25 directors.69 In 

addition, the Exchange Board’s 

composition at all times shall include 

the Chief Executive Officer of the 

Exchange, at least 50% Non-Industry 

Directors 70 (at least one of whom shall 

be an Independent Director 71) and such 

number of ETP Holder Directors 72 as is 

necessary to comprise at least 20% of 

the Exchange Board.73

In connection with the Closing, the 

steps to transition the membership on 

the Exchange Board from the current 

directors to the post-Closing directors 

will conform to the requirements set 

forth in Article III, section 3.7 of the 

Exchange A&R By-laws. Furthermore, 

the Exchange A&R By-laws provides 

that any vacancy occurring in a 

committee shall be filled by the 

Chairman of the Board for the remainder 

of the term, with the approval of the 

Exchange Board.74 Each committee shall 

be comprised of at least three people 

and may include persons who are not 

members of the Board; provided, 

however, that such committee members 

who are not also members of the Board 

shall only participate in committee 

actions to the extent permitted by law.75

The Commission finds that these 

provisions are consistent with the Act, 

and that they are intended to assist the 

Exchange in fulfilling its self-regulatory 

obligations and in administering and 

complying with the requirements of the 

Act. 

4. Changes to the Exchange 

Organizational Documents 

In connection with the completion of 

the Transaction, the Exchange proposes 

certain amendments in the Exchange 

A&R Certificate and the Exchange A&R 

By-laws. In particular, the Exchange 

proposes to delete the language in 

Paragraph Fourth of the Exchange A&R 

Certificate that provides that the 

Exchange shall at all times be wholly 

owned by CBSX and replace that 

provision with one requiring that the 

Exchange at all times be wholly owned 

by NSX Holdings.76

In addition, with respect to the 

Exchange A&R By-laws, the Exchange 

proposes to replace all references to 

‘‘CBSX’’ with references to ‘‘NSX 

Holdings.’’ 77 Specifically, Article III, 

section 3.2(c) of the Exchange A&R Bylaws will be amended to eliminate any 

requirements relating to CBSX and will 

provide that no two or more directors of 

the Exchange may be partners, officers 

or directors of the same person or be 

affiliated with the same person (or 

affiliated with the same person), unless 

such affiliation is with a national 

securities exchange or NSX Holdings.78

In addition, the Exchange proposes to 

replace references to CBSX with 

references to NSX Holdings in section 

10.2 of the Exchange A&R By-laws. The 

provision would provide that no 

members of the Holdings Board who are 

not also members of the Exchange 

Board, or any officers, staff, counsel or 

advisors of NSX Holdings who are not 

also officers, staff, counsel or advisors of 

the Exchange (or any committees of the 

Exchange), shall be allowed to 

participate in any meetings of the 

Exchange Board or any Exchange 

committee pertaining to the selfregulatory function of the Exchange, 

including disciplinary matters.79 The 

Exchange states that these amendments 

are intended to prevent any undue 

influence or any perception of undue 

influence over the Exchange’s selfregulatory functions by NSX Holdings.80

In addition, the Exchange proposes to 

delete section 10.1(b) in the Exchange 

A&R By-laws, which requires that for so 

long as CBSX controls the Exchange, the 

Exchange shall promptly inform the 

CBSX board of directors, in writing, in 

the event that the Exchange has, or 

experiences, a deficiency related to its 

ability to carry out its obligations as a 

national securities exchange under the 

Act, including if the Exchange does not 

have or is not appropriately allocating 

such financial, technological, technical 

and personnel resources as may be 

necessary or appropriate for the 

Exchange to meet its obligations under 

the Act.81 According to the Exchange, 

upon the completion of the Transaction, 

such requirements will no longer apply 

because CBSX will have no ownership 

interest in the Exchange.82

Finally, the Exchange is proposing 

certain clarifying amendments, and 

other non-substantive conforming 

amendments to the Exchange A&R Bylaws that are consistent with the 

changes described above.83

The Commission believes that the 

proposed changes to the organizational 

documents of the Exchange are 

consistent with the Act, and that they 

are intended to align the Exchange’s 

governance and organizational structure 

with the proposed ownership by NSX 

Holdings. 

III. Conclusion 

For the foregoing reasons, the 

Commission finds that the proposed 

rule change is consistent with the Act 

and the rules and regulations 

thereunder applicable to a national 

securities exchange. 

It is therefore ordered, pursuant to 

section 19(b)(2) of the Act 84 that the 

proposed rule change (SR–NSX–2014– 

017), be, and hereby is, approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.85

Jill M. Peterson, 

Assistant Secretary. 

[FR Doc. 2015–03515 Filed 2–19–15; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–74272; File No. SR–Phlx– 

2015–15] 

Self-Regulatory Organizations; 

NASDAQ OMX PHLX LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change Relating to 

Remote Streaming Quote Traders 

February 13, 2015. 

Pursuant to section 19(b)(1) of the 

Securities Exchange Act of 1934 (the 


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