Federal Register / Vol. 73, No. 193 / Friday, October 3, 2008 / Notices 57707 

14 In approving the proposal, the Commission has 

considered the proposed rules’ impact on 

efficiency, competition, and capital formation. See 

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

15 15 U.S.C. 78f(b)(6) and 15 U.S.C. 78f(b)(7). 

16 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 58284 

(August 1, 2008), 73 FR 46086 (‘‘Amex Notice’’). 

4 In Amendment No. 4, Amex: (1) Made several 

technical, non-substantive clarifying changes to the 

proposed NYSE Alternext US LLC rules; (2) 

amended the proposed NYSE Alternext US LLC 

rules to provide for other Amex proposed rule 

changes that have been approved since this 

proposal was filed; (3) modified the description of 

Arca Securities, LLC (‘‘Arca Securities) to include, 

among other things, a representation that, with 

respect to its oversight of Arca Securities, which 

will be an affiliated member of NYSE Alternext US 

LLC after the Mergers and Related Transactions (as 

described herein), NYSE Regulation, Inc. (‘‘NYSE 

Regulation’’) has agreed with Amex that it will 

provide a report to NYSE Alternext US LLC’s Chief 

Regulatory Officer on a quarterly basis that: (a) 

Quantifies all open alerts (of which NYSE 

Regulation is aware) that identify Arca Securities as 

a participant that has potentially violated NYSE 

Alternext US LLC or Commission rules and (b) 

quantifies the number of all open investigations that 

identify Arca Securities as a participant that has 

potentially violated NYSE Alternext US LLC or 

Commission rules; (4) revised the rule filing to 

reflect that the parties to a multi-party regulatory 

services agreement (as described herein) have been 

modified to include NYSE Alternext US LLC, NYSE 

Group, Inc., NYSE Regulation, and Financial 

Industry Regulatory Authority (‘‘FINRA’’); (5) 

revised the rule filing to reflect a change to the 

Mergers and Related Transactions, which will not 

affect the final outcome of the Mergers and Related 

Transactions (as described herein) through which 

NYSE Alternext US LLC will become a subsidiary 

of NYSE Euronext; and (6) clarified that Arca 

Securities will not provide ‘‘outbound’’ routing 

services for NYSE Alternext US LLC until the 

relocation of the NYSE Alternext US LLC equities 

and options trading facilities to the NYSE trading 

floor or the electronic trading platform of NYSE or 

NYSE Arca, Inc., as applicable, and that, at a later 

time, NYSE Alternext US LLC will submit a 

separate rule filing to the Commission seeking 

approval to provide such outbound routing services 

to NYSE Alternext US LLC. 

5 15 U.S.C. 78s(b)(1). 

6 17 CFR 240.19b–4. 

7See Securities Exchange Act Release No. 58285 

(August 1, 2008,) 73 FR 46117 (SR–NYSE–2008–60) 

(‘‘NYSE Notice’’). 

After careful review, the Commission 

finds that the proposed rule change is 

consistent with the requirements of the 

Act and the rules and regulation 

thereunder applicable to a national 

securities exchange.14 In particular, the 

Commission finds that the proposed 

rule change is consistent with Sections 

6(b)(6) and 6(b)(7) of the Act 15 in that 

it provides a fair procedure for the 

discipline of members and persons 

associated with members. The 

Commission further finds that the 

proposed rule change provides NYSE 

Alternext US with the ability to comply, 

and with the authority to enforce 

compliance by its members and persons 

associated with its members, with the 

provisions of the Act, the rules or 

regulations thereunder, or the rules of 

NYSE Alternext US. 

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, that the 

proposed rule change (SR–Amex–2008– 

64), be and hereby is approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.16

Florence E. Harmon, 

Acting Secretary. 

[FR Doc. E8–23314 Filed 10–2–08; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–58673; File Nos. SR–Amex– 

2008–62 and SR–NYSE–2008–60] 

Self-Regulatory Organizations; 

American Stock Exchange LLC; Notice 

of Filing of Amendment No. 4 and 

Order Granting Accelerated Approval 

to a Proposed Rule Change, as 

Modified by Amendments No. 1 and 4 

Thereto, Relating to the Acquisition of 

the Amex by NYSE Euronext; SelfRegulatory Organizations; New York 

Stock Exchange LLC; Order Granting 

Approval to a Proposed Rule Change, 

as Modified by Amendment No. 1 

Thereto, Relating to the Acquisition of 

the Amex by NYSE Euronext 

September 29, 2008. 

I. Introduction 

On July 23, 2008, American Stock 

Exchange LLC, a Delaware limited 

liability company (‘‘Amex’’), filed with 

the Securities and Exchange 

Commission (‘‘Commission’’), pursuant 

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

Exchange Act of 1934 (‘‘Act’’) 1 and Rule 

19b–4 thereunder,2 a proposed rule 

change in connection with the 

acquisition of Amex by NYSE Euronext, 

a Delaware Corporation (‘‘NYSE 

Euronext’’). On July 30, 2008, Amex 

filed Amendment No. 1 to the proposed 

rule change. On August 7, 2008, the 

proposed rule change, as amended, was 

published for comment in the Federal 

Register.3 Amex filed Amendment No. 2 

to the proposed rule change on 

September 3, 2008, and withdrew 

Amendment No. 2 on September 4, 

2008. Amex filed Amendment No. 3 on 

September 4, 2008, and withdrew 

Amendment No. 3 on September 5, 

2008. Amex filed Amendment No. 4 on 

September 5, 2008.4 The Commission 

received no comments on the proposed 

rule change. This order provides notice 

of filing of Amendment No. 4 to the 

proposed rule change, and grants 

accelerated approval to the proposed 

rule change, as modified by 

Amendments No. 1 and 4. 

On July 23, 2008, the New York Stock 

Exchange LLC (‘‘NYSE’’), a New York 

limited liability company, filed with the 

Commission, pursuant to Section 

19(b)(1) of the Act 5 and Rule 19b–4 

thereunder,6 a proposed rule change in 

connection with the acquisition of 

Amex by NYSE Euronext. On July 30, 

2008, the NYSE filed Amendment No. 1 

to the proposed rule change. On August 

7, 2008, the proposed rule change, as 

amended, was published for comment 

in the Federal Register.7 The 

Commission received no comments on 

the proposed rule change. This order 

grants approval to the proposed rule 

change, as modified by Amendment No. 

1. 

II. Background 

On January 17, 2008, NYSE Euronext, 

Amex, Amex’s parent companies (The 

Amex Membership Corporation (‘‘MC’’) 

and its direct wholly-owned subsidiary, 

AMC Acquisition Sub, Inc.), and several 

other entities created by NYSE Euronext 

and Amex in connection with the 

Mergers entered into an agreement 

(‘‘Merger Agreement’’) to effect a series 

of mergers (‘‘Mergers’’) as a result of 

which the successor to Amex, to be 

renamed ‘‘NYSE Alternext US LLC’’ 

(‘‘NYSE Alternext US’’), will become a 

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8The term ‘‘U.S. Regulated Subsidiary’’ is defined 

in Article VII, Section 7.3(G) of the NYSE Euronext 

Bylaws. 

9See Amex Notice, supra note 3, and 

Amendment No. 4 to the Amex Notice, supra note 

4, for a more detailed description of the Mergers 

and the Related Transactions. 

10 15 U.S.C. 78f. 

11Amex allied members and associate members 

are not members of MC and therefore have trading 

rights on Amex but not voting rights in MC. 

12See Amex Notice, supra note 3, for a more 

detailed description of the consideration that 

persons owning MC memberships will receive in 

connection with the Mergers. 

13See infra Section III.C.2. for discussion of these 

temporary trading permits. At a later time, NYSE 

Alternext US anticipates replacing 86 Trinity 

Permits with equity trading licenses and options 

trading permits. NYSE Alternext US would have to 

file a proposed rule change to replace the 86 Trinity 

Permits with equity trading licenses and options 

trading permits. 

14For a discussion of the current governance 

structure of MC and Amex, see Securities Exchange 

Act Release Nos. 50057 (July 22, 2004), 69 FR 45091 

(July 28, 2004) (SR–Amex–2004–50) (notice of filing 

of proposed rule change relating to the NASD’s sale 

of its interest in Amex to MC) and 50927 (December 

23, 2004), 69 FR 78486 (December 30, 2004) (SR– 

Amex–2004–50) (order approving proposed rule 

change relating to the NASD’s sale of its interest in 

Amex to MC) (‘‘Amex Order’’). 

15Amex proposes to include relevant provisions 

of the Amex Constitution in the NYSE Alternext US 

Operating Agreement or the NYSE Alternext US 

Rules, as applicable. 

16Amex also proposes, in connection with the 

Mergers, to eliminate the undertakings made by 

Amex to the Commission in connection with a 

proposed rule change in 2004. See Amex Order, 

supra note 14. 

17For example, certain obsolete rules, including 

the rules relating the Intermarket Trading System 

Plan and certain rules which have been replaced by 

Auction and Electronic Market Integration Rules are 

proposed to be deleted. See Amex Notice, supra 

note 3, 73 FR at 46095. 

18See Securities Exchange Act Release No. 55293 

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

(SR–NYSE–2006–120) (order approving 

combination between NYSE Group, Inc. and 

Euronext N.V.) (‘‘NYSE/Euronext Order’’) for a 

description of the Trust Agreement. 

19See NYSE Notice, supra note 7. In addition, the 

NYSE also is making certain other changes to the 

NYSE Euronext Independence Policy, as discussed 

below in Section III.G. 

20 In approving these proposed rule changes, the 

Commission has considered the proposed rules’ 

impact on efficiency, competition, and capital 

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

21 15 U.S.C. 78f(b)(1). 

22 15 U.S.C. 78f(b)(3). 

23 15 U.S.C. 78f(b)(5). 

U.S. Regulated Subsidiary 8 of NYSE 

Euronext. The Board of Governors of 

Amex (‘‘Amex Board’’) approved the 

proposed rule change on May 21, 2008. 

In addition, the Mergers were approved 

by the requisite vote of MC members at 

the special meeting of MC members 

held on June 17, 2008. Immediately 

following the Mergers, NYSE Euronext 

plans to effectuate certain related 

transactions, as a result of which NYSE 

Alternext US will become a direct 

wholly-owned subsidiary of NYSE 

Group, Inc. (‘‘NYSE Group’’), the 

wholly-owned subsidiary of NYSE 

Euronext (‘‘Related Transactions’’).9

Upon completion of the Mergers and 

the Related Transactions, NYSE 

Alternext US will continue operating as 

a national securities exchange registered 

under Section 6 of the Act.10 Following 

the Mergers and the Related 

Transactions, NYSE Euronext (and 

NYSE Group) will be the owner of three 

self-regulatory organizations (‘‘SROs’’): 

the NYSE; NYSE Arca, Inc. (‘‘NYSE 

Arca’’); and NYSE Alternext US. 

Currently, all Regular Members and 

Options Principal Members 11 of Amex 

also have a membership interest in MC, 

a New York not-for-profit membersowned corporation which owns directly 

or indirectly 100% of Amex. The 

Mergers will have the effect of 

separating the right to trade on NYSE 

Alternext US from ownership in MC. 

Pursuant to the terms of the Merger 

Agreement, persons owning MC 

memberships prior to the Mergers will 

receive shares of the common stock of 

NYSE Euronext and cash in lieu of 

fractional shares, if applicable.12 As 

described more fully below, following 

the Mergers, all trading rights on Amex 

appurtenant to MC memberships 

existing prior to the Mergers will be 

cancelled and physical and electronic 

access to NYSE Alternext US trading 

facilities will be made available to 

individuals and organizations through 

temporary trading permits (‘‘86 Trinity 

Permits’’) offered by NYSE Alternext 

US.13

Amex filed a proposed rule change to 

permit the Mergers and the Related 

Transactions and to accommodate the 

transformation of Amex from a whollyowned subsidiary of MC14 into an 

indirect wholly-owned subsidiary of 

NYSE Euronext and a direct whollyowned subsidiary of NYSE Group. 

Amex proposes to adopt the NYSE 

Alternext US Operating Agreement, to 

eliminate the Amex Constitution,15 and 

to amend the Amex Rules, which would 

become the NYSE Alternext US Rules, 

as described more fully below.16 In 

general, the proposed changes are 

designed to facilitate the Mergers and 

Related Transactions and to conform the 

governance of NYSE Alternext US to 

that of the NYSE. Amex also is using 

this opportunity to make several other 

changes to its governing documents and 

rules to update language and make other 

minor changes that are not directly 

related to the proposed Mergers or 

Related Transactions.17 The proposed 

rule change will become operative upon 

completion of the Mergers and the 

Related Transactions. 

In addition, the NYSE filed a 

proposed rule change to amend certain 

organizational documents of NYSE 

Euronext, NYSE Group, and NYSE 

Regulation; the Trust Agreement of the 

NYSE Group Trust I (‘‘Trust 

Agreement’’); 18 the Independence 

Policy of NYSE Euronext (‘‘NYSE 

Euronext Independence Policy’’); and 

the NYSE Rules. The proposed changes, 

among other things, will make 

applicable to NYSE Alternext U.S. 

certain provisions of the organizational 

documents, the Trust Agreement, and 

the NYSE Euronext Independence 

Policy that are designed to maintain the 

independence of each NYSE Euronext 

SRO subsidiary’s self-regulatory 

function, enable each such SRO to 

operate in a manner that complies with 

the federal securities laws, and facilitate 

each such SRO’s ability and the ability 

of the Commission to fulfill their 

regulatory and oversight obligations 

under the Act.19

III. Discussion and Commission 

Findings 

After careful review, the Commission 

finds that the proposed rule changes are 

consistent with the requirements of the 

Act and the rules and regulations 

thereunder applicable to a national 

securities exchange.20 In particular, the 

Commission finds that the proposed 

rule changes are consistent with: (1) 

Section 6(b)(1) of the Act,21 which 

requires a national securities exchange 

to be so organized and have the capacity 

to carry out the purposes of the Act and 

to enforce compliance by its members 

and persons associated with its 

members with the provisions of the Act; 

(2) Section 6(b)(3) of the Act,22 which 

requires that the rules of a national 

securities exchange assure the fair 

representation of its members in the 

selection of its directors and 

administration of its affairs, and provide 

that one or more directors shall be 

representative of issuers and investors 

and not be associated with a member of 

the exchange, broker, or dealer (the ‘‘fair 

representation requirement’’); and (3) 

Section 6(b)(5) of the Act,23 in that it is 

designed, among other things, to 

prevent fraudulent and manipulative 

acts and practices; to promote just and 

equitable principles of trade; to remove 

impediments to and perfect the 

mechanism of a free and open market 

and a national market system; and, in 

general, to protect investors and the 

public interest. 

As noted above, the Mergers and the 

Related Transactions will result in 

NYSE Euronext (and NYSE Group) 

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24 15 U.S.C. 78f(b)(8). 

25See, e.g., Securities Exchange Act Release No. 

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

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

combination of the New York Stock Exchange, Inc. 

and Archipelago Holdings, Inc.) (‘‘NYSE/Arca 

Order’’). See also Securities Exchange Act Release 

Nos. 58324 (August 7, 2008) (SR–BSE–2008–02; 

SR–BSE–2008–23; SR–BSE–2008–25; SR–BSECC– 

2008–01) (approving the acquisition of Boston 

Stock Exchange, Inc. by The NASDAQ OMX Group, 

Inc.) (‘‘BSE Order’’), and 58179 (July 17, 2008), 73 

FR 42874 (July 23, 2008) (SR–Phlx–2008–31) 

(approving the acquisition of Philadelphia Stock 

Exchange, Inc. by The NASDAQ OMX Group, Inc.) 

(‘‘Phlx Order’’). 

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

58092 (July 3, 2008), 73 FR 40144, 40144 (July 11, 

2008) (where the Commission recognized that 

‘‘[n]ational securities exchanges registered under 

Section 6(a) of the Act face increased competitive 

pressures from entities that trade the same or 

similar financial instruments * * *’’). 

27See Securities Exchange Act Release Nos. 

57478 (March 12, 2008), 73 FR 14521 (March 18, 

2008) (SR–NASDAQ–2007–004 and SR–NASDAQ– 

2007–080) (order approving a proposed rule change 

relating to, among other things, the establishment 

and operation of the NADAQ Options Market) 

(‘‘NOM Approval Order’’); 49068 (January 13, 

2004), 69 FR 2775 (January 20, 2004) (SR–BSE– 

2002–15) (order approving trading rules for BOX); 

49067 (January 13, 2004), 69 FR 2761 (January 20, 

2004) (SR–BSE–2003–19) (order approving the 

Operating Agreement for BOX); and 42455 

(February 24, 2000), 65 FR 11388 (March 2, 2000) 

(File No. 10–127) (order approving the International 

Securities Exchange LLC’s application for 

registration as a national securities exchange) (‘‘ISE 

Exchange Registration Order’’). 

28See Securities Exchange Act Release Nos. 

55389 (March 2, 2007), 72 FR 10575 (March 8, 

2007) (order approving the establishment of CBOE 

Stock Exchange, LLC); 55392 (March 2, 2007), 72 

FR 10572 (March 8, 2007) (order approving trading 

rules for non-option securities trading on CBOE 

Stock Exchange, LLC); 54528 (September 28, 2006), 

71 FR 58650 (October 4, 2006) (order approving 

rules governing ISE’s electronic trading system for 

equities). 

29See Securities Exchange Act Release Nos. 

57322 (February 13, 2008), 73 FR 9370 (February 

20, 2008) (File No. 10–182) (notice of filing of 

application and Amendment No. 1 thereto by BATS 

Exchange, Inc. for registration as a national 

securities exchange) and 58375 (August 18, 2008), 

73 FR 49498 (August 21, 2008) (Findings, Opinion, 

and Order of the Commission approving BATS 

Exchange, Inc.’s application for registration as a 

national securities exchange) (‘‘BATS Order’’). 

30See Section 3.03 of the proposed NYSE 

Alternext US Operating Agreement. Under current 

Amex rules, any sale, issuance, transfer or other 

disposition of any equity security of Amex, 

including any LLC interest, is subject to prior 

approval by the Commission pursuant to the rule 

filing procedure under Section 19 of the Act and the 

rules promulgated thereunder. See Section 9.3 of 

the Amended and Restated Amex Limited Liability 

Company Agreement and Amex Order, supra note 

14. In addition, any sale, issuance, transfer or other 

disposition of any equity interest in MC or AMC 

Acquisition Sub, Inc. other than the sale or transfer 

of seats or membership interests in MC, is subject 

to prior approval by the Commission pursuant to 

the rule filing procedure under Section 19 of the 

Act and the rules promulgated thereunder. See 

Section 7(c) of the Second Restated Certificate of 

Incorporation of MC and Amex Order, supra note 

14. 

31See Article IV, Section 4 of the proposed NYSE 

Group Charter. 

32See Article V of the NYSE Euronext Charter 

and NYSE/Euronext Order, supra note 18. The 

Commission notes that the NYSE Group Charter 

also includes similar ownership and voting limits. 

However, such limitations are not applicable so 

long as NYSE Euronext and NYSE Group Trust I 

collectively own all of the capital stock of NYSE 

Group. Instead, for so long as NYSE Group is a 

wholly owned subsidiary of NYSE Euronext, or as 

provided for in the Trust Agreement, there will be 

no transfer of the shares of NYSE Group held by 

NYSE Euronext without the approval of the 

Commission. If NYSE Group ceases to be wholly 

owned by NYSE Euronext or the Trust, the voting 

and ownership limitations in the NYSE Group 

Charter will apply. Id. 

owning another SRO, NYSE Alternext 

US. The Commission believes that the 

ownership of NYSE Alternext US by the 

same public holding company that owns 

the NYSE and NYSE Arca would not 

impose any burden on competition not 

necessary or appropriate in furtherance 

of the purposes of the Act.24 Further, the 

Commission does not believe that the 

ownership by one holding company of 

three U.S. exchanges presents any 

adverse competitive implications in the 

current marketplace. The Commission 

notes that it has previously approved 

proposals in which a holding company 

owns multiple SROs.25 The 

Commission’s experience to date with 

the issues raised by the ownership by a 

holding company of one or more SROs 

has not presented any concerns that 

have not been addressed, for example, 

by Commission approved measures at 

the holding company level that are 

designed to protect the independence of 

each SRO. 

The Commission believes that the 

current market for cash equity and 

standardized options trading venues is 

highly competitive. Existing exchanges 

face significant competition from other 

exchanges and non-exchange entities, 

such as alternative trading systems, that 

trade the same or similar financial 

instruments.26 In addition, there have 

been new entrants to the market. In this 

regard, the Nasdaq Options Market 

recently commenced the trading of 

standardized options contracts, the 

Commission in 2004 approved proposed 

rule changes to establish the Boston 

Options Exchange Facility of the Boston 

Stock Exchange, Inc, and the 

Commission in 2000 approved the 

registration of the International 

Securities Exchange, LLC (‘‘ISE’’) to 

trade standardized options contracts.27

Further, the Chicago Board Options 

Exchange, Incorporated and ISE a few 

years ago commenced trading of cash 

equity securities.28 In addition, another 

entity has recently applied and received 

approval for exchange registration, 

which provides evidence that such 

entity determined there are benefits in 

starting a new exchange to compete in 

the marketplace.29 Accordingly, the 

Commission finds that Amex’s and 

NYSE’s proposed rule changes are 

consistent with Section 6(b)(8), which 

requires that the rules of an exchange 

not impose any burden on competition 

not necessary or appropriate in 

furtherance of the purposes of the Act. 

Finally, the Commission will continue 

to monitor holding companies’ 

ownership of multiple SROs for 

compliance with the Act, the rules and 

regulations thereunder, as well as the 

SROs’ own rules. 

A. Changes in Control of NYSE 

Alternext US; Ownership and Voting 

Limits 

The NYSE Alternext US Operating 

Agreement will provide that NYSE 

Group, which will be the sole member 

of NYSE Alternext US, may not transfer 

or assign its limited liability company 

interest in NYSE Alternext US in whole 

or in part, to any person or entity, 

unless such transfer or assignment shall 

be filed with and approved by the 

Commission under Section 19 of the Act 

and the rules promulgated thereunder.30

In addition, the Second Amended and 

Restated Certificate of Incorporation of 

NYSE Group (‘‘NYSE Group Charter’’) 

provides that NYSE Euronext, as the 

owner of all the issued and outstanding 

shares of stock of NYSE Group, may not 

transfer or assign its ownership interest 

in NYSE Group, in whole or in part, to 

any person or entity, unless such 

transfer or assignment shall be filed 

with and approved by the Commission 

under Section 19 of the Exchange Act 

and the rules promulgated thereunder.31

The Amended and Restated 

Certificate of Incorporation of NYSE 

Euronext (‘‘NYSE Euronext Charter’’), in 

turn, imposes limits on direct and 

indirect changes in control, which are 

designed to prevent any shareholder 

from exercising undue control over the 

operation of its SRO subsidiaries and to 

ensure that its SRO subsidiaries and the 

Commission are able to carry out their 

regulatory responsibilities under the 

Act.32 Specifically, no person (either 

alone or together with its related 

persons) is entitled to vote or cause the 

voting of shares of stock of NYSE 

Euronext beneficially owned by such 

person or its related persons, in person 

or by proxy or through any voting 

agreement or other arrangement, to the 

extent that such shares represent in the 

aggregate more than 10% of the then 

outstanding votes entitled to be cast on 

such matter. No person (either alone or 

together with its related persons) may 

acquire the ability to vote more than 

10% of the then outstanding votes 

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33See NYSE/Euronext Order, supra note 18 and 

NYSE Euronext Charter, Article V, Section 1(A). 

Pursuant to the NYSE Euronext Charter, NYSE 

Euronext shall disregard any such votes purported 

to be cast in excess of these limitations. 

34See NYSE/Euronext Order, supra note 18, and 

NYSE Euronext Charter, Article V, Section 2(A). In 

the event that a person, either alone or together 

with its related persons, beneficially owns shares of 

stock of NYSE Euronext in excess of the 20% 

threshold, such person and its related persons will 

be obligated to sell promptly, and NYSE Euronext 

will be obligated to purchase promptly, to the 

extent that funds are legally available for such 

purchase, that number of shares necessary to reduce 

the ownership level of such person and its related 

persons to below the permitted threshold, after 

taking into account that such repurchased shares 

will become treasury shares and will no longer be 

deemed to be outstanding. See NYSE Euronext 

Charter, Article V, Section 2(D). 

35Further, solely for the purposes of the 

definition of ‘‘related person’’ in the NYSE 

Euronext Charter, which incorporates in certain 

respects the definition of ‘‘member’’ and ‘‘member 

organization’’ as defined in the rules of the NYSE, 

the NYSE is amending (1) the definition of 

‘‘member’’ in its rules to include any ‘‘member’’ (as 

defined in Section 3(a)(3)(A)(i) of the Act) of NYSE 

Alternext US, and (2) the definition of ‘‘Member 

Organization’’ in its rules to include any ‘‘member’’ 

(as defined in Section 3(a)(3)(A)(ii), 3(a)(3)(A)(iii) 

and 3(a)(3)(A)(iv) of the Act) of NYSE Alternext US. 

See NYSE Notice, supra note 7. 

36See NYSE Euronext Charter, Article V, Sections 

1(C)(3) and 2(C)(4). 

37Similar changes are being made to the NYSE 

Group Charter. See NYSE Notice, supra note 7. 

38 15 U.S.C. 78c(a)(3)(A). 

39Any such person that is a ‘‘related person’’ (as 

defined in the NYSE Euronext Charter) of such 

NYSE Alternext Member will also deemed to be a 

‘‘NYSE Alternext Member’’ for the purposes of the 

NYSE Euronext Bylaws, as the context may require. 

See NYSE Euronext Bylaws, Section 10.12(A)(1). 

40The definitions of U.S. Regulated Subsidiaries 

in the NYSE Euronext Bylaws and Regulated 

Subsidiaries in the NYSE Group Charter will be 

amended to include NYSE Alternext US. 

41Provisions of the organizational documents of 

NYSE Euronext, NYSE Group, and NYSE 

Regulation, the Trust Agreement, and the NYSE 

Euronext Independence Policy will be rules of 

NYSE Alternext U.S. because they are stated 

policies, practice, or interpretations of NYSE 

Alternext US, as defined in Rule 19b–4 under the 

entitled to be cast on any such matter 

by virtue of agreements or arrangements 

entered into with other persons not to 

vote shares of NYSE Euronext’s 

outstanding capital stock.33 In addition, 

no person (either alone or together with 

its related persons) may at any time 

beneficially own shares of stock of 

NYSE Euronext representing in the 

aggregate more than 20% of the then 

outstanding votes entitled to be cast on 

any matter.34 These limits will flow 

through to NYSE Alternext US . by 

virtue of the fact that NYSE Alternext 

US will be a wholly-owned subsidiary 

of NYSE Group, which in turn is 

wholly-owned by NYSE Euronext.35

Further, the current NYSE Euronext 

Charter provides that for so long as 

NYSE Euronext directly or indirectly 

controls the NYSE, NYSE Market Inc. 

(‘‘NYSE Market’’), NYSE Arca, NYSE 

Arca Equities, Inc. (‘‘NYSE Arca 

Equities’’) or any facility of NYSE Arca, 

the NYSE Euronext board of directors 

cannot waive the voting and ownership 

limits above the 20% threshold for any 

person if such person or its related 

persons is a member or member 

organization of the NYSE, an ETP 

Holder of NYSE Arca Equities, or an 

OTP Holder or an OTP Firm of NYSE 

Arca.36 These ownership and voting 

limits as they apply to members of the 

NYSE and NYSE Arca will be extended 

to include members of NYSE Alternext 

US through changes to the Amended 

and Restated Bylaws of NYSE Euronext 

(‘‘NYSE Euronext Bylaws’’).37

Specifically, the NYSE Euronext Bylaws 

will provide that, subject to its fiduciary 

obligations under applicable law, for so 

long as NYSE Euronext directly or 

indirectly controls NYSE Alternext US, 

the board of directors of NYSE Euronext 

shall not adopt any resolution to: (1) 

Approve the exercise of voting rights in 

excess of 20% of the then outstanding 

votes entitled to be cast on such matter 

unless the Board of Directors of NYSE 

Euronext determines that neither such 

person nor any of its related persons (as 

defined in the NYSE Euronext Charter) 

is a member (as defined in Section 

3(a)(3)(A) of the Exchange Act) 38 of 

NYSE Alternext US (a ‘‘NYSE Alternext 

US Member’’);39 and (2) approve the 

entering into of an agreement, plan or 

other arrangement under circumstances 

that would result in shares of stock of 

NYSE Euronext that would be subject to 

such agreement, plan or other 

arrangement not being voted on any 

matter, or the withholding of any proxy 

relating thereto, where the effect of such 

agreement, plan or other arrangement 

would be to enable any person, either 

alone or together with its related 

persons, to vote, possess the right to 

vote or cause the voting of shares of 

stock of NYSE Euronext that would 

exceed 20% of the then outstanding 

votes entitled to be cast on such matter 

(assuming that all shares of stock of 

NYSE Euronext that are subject to such 

agreement, plan or other arrangement 

are not outstanding votes entitled to be 

cast on such matter), unless the Board 

of Directors of NYSE Euronext 

determines that neither such person nor 

any of its related persons is an NYSE 

Alternext US Member. Further, the 

NYSE Euronext Bylaws will provide 

that, for so long as NYSE Euronext 

directly or indirectly controls NYSE 

Alternext US, the Board of Directors of 

NYSE Euronext will not approve 

ownership of NYSE Euronext capital 

stock in excess of 20%, unless the Board 

of Directors of NYSE Euronext 

determines that neither such person, nor 

any of its related persons, is a NYSE 

Alternext US Member. 

The Commission finds that the 

proposed changes to NYSE Euronext 

Bylaws and the proposed restrictions on 

transfer and assignment of NYSE 

Group’s limited liability company 

interest in NYSE Alternext US, together 

with the existing restrictions on transfer 

and assignment of NYSE Euronext’s 

ownership interest in NYSE Group and 

the existing ownership and voting 

limitations in NYSE Euronext’s 

Certificate, are designed to prevent any 

person or entity from exercising undue 

control over the operation of NYSE 

Alternext US. These proposed changes 

are also designed to ensure that NYSE 

Alternext US and the Commission are 

able to carry out their regulatory 

obligations under the Act and thereby 

minimize the potential that a person or 

entity could improperly interfere with 

or restrict the ability of the Commission 

or NYSE Alternext US to effectively 

carry out their respective regulatory 

oversight responsibilities under the Act. 

B. Management of NYSE Alternext US 

1. Relationship Between NYSE 

Alternext US, NYSE Euronext and 

NYSE Group; Jurisdiction Over NYSE 

Euronext and NYSE Group 

After the Mergers and the Related 

Transactions, NYSE Alternext US will 

become an indirect wholly-owned 

subsidiary of NYSE Euronext and a 

direct wholly-owned subsidiary of 

NYSE Group. Although these entities 

are not SROs and, therefore, will not 

themselves carry out regulatory 

functions, their activities with respect to 

the operation of NYSE Alternext US 

must be consistent with, and not 

interfere with, NYSE Alternext US’s 

self-regulatory obligations. Proposed 

changes to the NYSE Euronext Bylaws, 

the NYSE Group Charter, the Second 

Amended and Restated Bylaws of NYSE 

Group (‘‘NYSE Group Bylaws’’), and the 

Trust Agreement will make applicable 

to NYSE Alternext US 40 certain 

provisions of NYSE Euronext and NYSE 

Group organizational documents, and 

provisions of the Trust Agreement, that 

are designed to maintain the 

independence of NYSE Alternext US’s 

self-regulatory function, enable NYSE 

Alternext US to operate in a manner that 

complies with the federal securities 

laws, and facilitate NYSE Alternext US’s 

ability and the ability of the 

Commission to fulfill their regulatory 

and oversight obligations under the 

Act.41

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Act. Accordingly, Amex filed with the Commission 

the NYSE Euronext Charter, the NYSE Euronext 

Bylaws, the NYSE Group Charter, the NYSE Group 

Bylaws, the NYSE Euronext Independence Policy, 

the Third Amended and Restated Bylaws of NYSE 

Regulation (‘‘NYSE Regulation Bylaws’’), and the 

Trust Agreement and Amendment No. 1 to the 

Trust Agreement. 

42See Section 7.1 of proposed NYSE Euronext 

Bylaws and Article IX of proposed NYSE Group 

Charter. See also Section 5.4 of the Trust 

Agreement. 

43See Sections 8.3 and 8.4 of proposed NYSE 

Euronext Bylaws and Article X of proposed NYSE 

Group Charter. For so long as the NYSE Euronext 

(or NYSE Group, as applicable) directly or 

indirectly control NYSE Alternext US, their books, 

records, premises, officers, directors and employees 

shall be deemed to be those of NYSE Alternext US 

for purposes of and subject to oversight pursuant to 

the Act. See Section 8.4 of proposed NYSE 

Euronext Bylaws and Article X of proposed NYSE 

Group Charter. See also Section 6.2(a) of the Trust 

Agreement. 

44This requirement to keep confidential nonpublic information relating to the self-regulatory 

function shall not limit the Commission’s ability to 

access and examine such information or limit the 

ability of directors, officers, or employees of NYSE 

Euronext and NYSE Group from disclosing such 

information to the Commission. See Section 8.1(A) 

of proposed NYSE Euronext Bylaws and Article X 

of the proposed NYSE Group Charter. Holding 

companies with SRO subsidiaries have undertaken 

similar commitments. See, e.g., Securities Exchange 

Act Release No. 56955 (December 13, 2007), 72 FR 

71979, 71983 (December 19, 2007) (SR–ISE–2007– 

101) (order approving the acquisition of 

International Securities Exchange, LLC’s parent, 

International Securities Exchange Holdings, Inc., by 

Eurex Frankfurt AG) and Phlx Order, supra note 24 

at 73 FR 42878. See also Section 6.1(a) of the Trust 

Agreement and Amendment No. 1 to the Trust 

Agreement. 

45See Section 8.1 of the proposed NYSE Euronext 

Bylaws and Article X of the proposed NYSE Group 

Charter. See also Section 6.1(a) of the Trust 

Agreement and Amendment No. 1 to the Trust 

Agreement. 

46See Section 9.4 of the proposed NYSE Euronext 

Bylaws and Article XI of the proposed NYSE Group 

Charter. See also Section 5.1(b) of the Trust 

Agreement. 

47See Section 3.15 of the proposed NYSE 

Euronext Bylaws and Article V of the proposed 

NYSE Group Charter. See also Section 5.1(a)(i) of 

the Trust Agreement. 

48 15 U.S.C. 78s. 

49 Id. 

50See Sections 10.10 and 10.13 of the proposed 

NYSE Euronext Bylaws, Article XII of the proposed 

NYSE Group Charter, and Section 7.9 of the 

proposed NYSE Group Bylaws. See also Section 8.2 

of the Trust Agreement and Amendment No. 1 to 

the Trust Agreement. 

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

52 15 U.S.C. 78t(a). 

53 15 U.S.C. 78t(e). 

54 15 U.S.C. 78u–3. 

55A ‘‘US Person’’ shall mean, as of the date of his 

or her most recent election or appointment as a 

director any person whose domicile as of such date 

is and for the immediately preceding 24 months 

shall have been the United States. See Section 2.03 

of the proposed NYSE Alternext US Operating 

Agreement. 

56See the proposed NYSE Euronext 

Independence Policy. See also Section 3.4 of the 

proposed NYSE Euronext Bylaws for the 

independence requirements of the board of 

directors of NYSE Euronext. Generally, a director 

will not be independent if the director has a 

relationship with or an interest in NYSE Euronext 

or its subsidiaries; a member of the NYSE or NYSE 

Continued 

In particular, the NYSE Euronext 

Bylaws and NYSE Group Charter will 

specify, as applicable, that NYSE 

Euronext and NYSE Group and their 

respective officers, directors and 

employees whose principal place of 

business and residence is outside of the 

United States shall be deemed to 

irrevocably submit to the jurisdiction of 

the United States federal courts and the 

Commission for the purposes of any 

suit, action, or proceeding pursuant to 

the United States federal securities laws 

and the rules and regulations 

thereunder, commenced or initiated by 

the Commission arising out of, or 

relating to, the activities of the NYSE 

Alternext US.42 Further, NYSE Euronext 

and NYSE Group have agreed to provide 

the Commission with access to their 

books and records.43 NYSE Euronext 

and NYSE Group also agreed to keep 

confidential non-public information 

relating to the self-regulatory function 44

of NYSE Alternext US and not to use 

such information for any commercial 

purposes.45 In addition, the NYSE 

Euronext and NYSE Group Boards, as 

well as their officers and employees are 

required to give due regard to the 

preservation of the independence of 

NYSE Alternext US’s self-regulatory 

function.46 Similarly, the NYSE 

Euronext and NYSE Group Boards 

would be required to take into 

consideration the ability of NYSE 

Alternext U.S. to carry out its 

responsibilities under the Act.47 Finally, 

the NYSE Euronext Bylaws, NYSE 

Group Charter, and NYSE Group Bylaws 

require that for so long as NYSE 

Euronext (and NYSE Group, as 

applicable) controls NYSE Alternext US, 

any amendment to or repeal of the 

NYSE Euronext Charter or NYSE 

Euronext Bylaws (and NYSE Group 

Charter or NYSE Group Bylaws, as 

applicable) must either be (i) filed with 

or filed with and approved by the 

Commission under Section 19 of the 

Act 48 and the rules promulgated 

thereunder, or (ii) submitted to the 

boards of directors of the NYSE, NYSE 

Market, NYSE Regulation, NYSE Arca, 

NYSE Arca Equities and NYSE 

Alternext US or the boards of directors 

of their successors, and if any or all of 

such boards of directors shall determine 

that such amendment or repeal must be 

filed with or filed with and approved by 

the Commission under Section 19 of the 

Act 49 and the rules promulgated 

thereunder before such amendment or 

repeal may be effectuated, then such 

amendment or repeal shall not be 

effectuated until filed with or filed with 

and approved by the Commission, as the 

case may be.50

The Commission believes that the 

NYSE Euronext Bylaws, the NYSE 

Group Charter, the NYSE Group Bylaws, 

and the Trust Agreement as amended to 

accommodate the Mergers and Related 

Transactions, are designed to facilitate 

NYSE Alternext US’s ability to fulfill its 

self-regulatory obligations and are, 

therefore, consistent with the Act. In 

particular, the Commission believes 

these changes are consistent with 

Section 6(b)(1) of the Act,51 which 

requires, among other things, that a 

national securities exchange be so 

organized and have the capacity to carry 

out the purposes of the Act, and to 

comply and enforce compliance by its 

members and persons associated with 

its members, with the provisions of the 

Act, the rules and regulations 

thereunder, and the rules of the 

exchange. 

Under Section 20(a) of the Act52 any 

person with a controlling interest in 

NYSE Alternext US would be jointly 

and severally liable with and to the 

same extent that NYSE Alternext US is 

liable under any provision of the Act, 

unless the controlling person acted in 

good faith and did not directly or 

indirectly induce the act or acts 

constituting the violation or cause of 

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

Act 53 creates aiding and abetting 

liability for any person who knowingly 

provides substantial assistance to 

another person in violation of any 

provision of the Act or rule thereunder. 

Further, Section 21C of the Act 54

authorizes the Commission to enter a 

cease-and-desist order against any 

person who has been ‘‘a cause of’’ a 

violation of any provision of the Act 

through an act or omission that the 

person knew or should have known 

would contribute to the violation. 

2. Governance of NYSE Alternext US 

Following the Mergers and the 

Related Transactions, the governance 

structure of NYSE Alternext US will be 

substantially similar to that of the 

NYSE. The Board of Directors of NYSE 

Alternext US (‘‘NYSE Alternext US 

Board’’) will be composed of a number 

of directors as determined by NYSE 

Group from time to time, as sole owner 

of NYSE Alternext US. In addition, the 

NYSE Alternext US Board will be 

composed as follows: (i) a majority of 

the directors of the NYSE Alternext US 

Board will be US Persons 55 who are 

members of the NYSE Euronext board 

and who are independent under the 

NYSE Euronext Independence Policy 56

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Arca; or an issuer listed on the NYSE or NYSE Arca. 

These independence policy provisions are being 

expanded to equally apply to NYSE Alternext US 

and its members and issuers. See NYSE Notice, 

supra note 7. 

57For purposes of calculation of the minimum 

number of Non-Affiliated Directors, if twenty 

percent of the directors is not a whole number, such 

number of directors to be nominated and selected 

by NYSE Alternext US members will be rounded up 

to the next whole number. See Section 2.03 of the 

proposed NYSE Alternext US Operating Agreement. 

Directors of NYSE Alternext US will serve for 

one-year terms and will hold office until their 

successors are elected. There will be no limit on the 

number of terms a director may serve on the NYSE 

Alternext US Board. The Commission finds oneyear terms consistent with the Act and notes that 

establishing one-year terms for directors is 

consistent with other proposals previously 

approved by the Commission. See Phlx Order supra 

note 25. Further, the Commission notes that the 

Commission approved one-year terms for both 

NYSE Euronext and NYSE Group boards. See 

NYSE/Euronext Order, supra note 18, and NYSE/ 

Arca Order, supra note 25. 

58See Section 2.03(a)(iii) of the proposed NYSE 

Alternext US Operating Agreement. 

59 Id. On an annual basis, the NYSE Alternext US 

Board will appoint the NYSE Alternext US DCRC 

composed of individuals who are: (i) associated 

with a member organization that engages in a 

business involving substantial direct contact with 

securities customers, (ii) associated with a member 

organization and registered as a specialist and 

spend a substantial part of their time on the NYSE 

Alternext US trading floor, (iii) associated with a 

member organization and spend a majority of their 

time on the NYSE Alternext US trading floor and 

have as a substantial part of their business the 

execution of transactions on the NYSE Alternext US 

trading floor for other than their own account or the 

account of their member organization, but are not 

registered as a specialist, or (iv) associated with a 

member organization and spend a majority of their 

time on the NYSE Alternext US trading floor and 

have as a substantial part of their business the 

execution of transactions on the NYSE Alternext US 

trading floor for their own account or the account 

of their member organization, but are not registered 

as a specialist. The NYSE Alternext US Board will 

appoint such individuals after appropriate 

consultation with representatives of member 

organizations. See Section 2.03 of the proposed 

NYSE Alternext US Operating Agreement. 

60See Sections 2.03(a)(iii)–(v) of the proposed 

NYSE Alternext US Operating Agreement. 

61Each member organization in good standing 

shall be entitled to one signature for each trading 

license or permit held by it. No trading license or 

permit holder, either alone or together with its 

affiliates may account for more than 50 percent of 

the signatures endorsing a particular candidate, and 

any signatures of such trading license or permit 

holder, either alone or together with its affiliates, 

in excess of such 50 percent limitation shall be 

disregarded. See Section 2.03 of the proposed NYSE 

Alternext US Operating Agreement. 

62No trading license or permit holder, either 

alone or together with its affiliates, may account for 

more than 20 percent of the votes cast for a 

particular candidate, and any votes cast by such 

trading license or permit holder, either alone or 

together with its affiliates, in excess of such 20 

percent limitation will be disregarded. See Section 

2.03(a)(5) of the NYSE Alternext US Operating 

Agreement. See Section 2.03(a)(V) of the proposed 

NYSE Alternext US Operating Agreement. 

63See Amex Notice, supra note 3, 73 FR at 46090. 

64See Amex Notice, supra note 3, 73 FR at 46080. 

65See Section 2.03(h) of the proposed NYSE 

Alternext US Operating Agreement. 

66Each of these NYSE Euronext committees is 

composed solely of directors meeting the 

independence requirements of NYSE Euronext. See 

NYSE/Euronext Order, supra note 32. 

67For example, Amex notes that it currently 

anticipates that NYSE Alternext US will retain the 

Committee on Securities, but will not retain the 

Committee for Appointment and Approval of 

Supplemental Registered Options Traders and 

Remote Registered Options Traders, each a nonboard committee of Amex. The Exchange, along 

with NYSE Euronext, is currently evaluating 

whether other non-board committees of Amex 

should be retained by NYSE Alternext US and what 

changes to the NYSE Alternext US rules such 

decision may require. See Amex Notice, supra note 

3, 73 FR at 46091. 

68See Amex Notice, supra note 3, 73 FR 46091. 

69 Id. 

70See Section 2.04 of the proposed NYSE 

Alternext US Operating Agreement. 

(each a ‘‘NYSE Euronext Independent 

Director’’); and (ii) at least twenty 

percent of the directors will be persons 

who are not members of the board of 

directors of NYSE Euronext and who do 

not need to be independent under the 

NYSE Euronext Independence Policy 

(‘‘Non-Affiliated Directors’’).57

NYSE Group will appoint or elect as 

Non-Affiliated Directors the candidates 

nominated by the nominating and 

governance committee of NYSE 

Euronext (‘‘NYSE Euronext NGC’’) (such 

candidates the ‘‘Non-Affiliated Director 

candidates’’).58 The NYSE Euronext 

NGC will be obligated to designate as 

Non-Affiliated Director candidates the 

persons recommended by the newly 

established Director Candidate 

Recommendation Committee of NYSE 

Alternext US (‘‘NYSE Alternext US 

DCRC’’);59 provided, however, if there 

are candidates who have received a 

plurality of the votes cast by the NYSE 

Alternext US members pursuant to the 

petition process described below in this 

section, the NYSE Euronext NGC will be 

obligated to designate such candidates 

as Non-Affiliated Director candidates.60

The Non-Affiliated Director 

candidates that the NYSE Alternext US 

DCRC recommends to the NYSE 

Euronext NGC will be announced to 

NYSE Alternext US member 

organizations. Within two weeks after 

the announcement, NYSE Alternext US 

members may nominate candidates for 

Non-Affiliated Director by written 

petition filed with NYSE Alternext US. 

A valid petition must be, among other 

things, endorsed by at least 10 percent 

of the signatures eligible to endorse a 

candidate.61 The eligibility of any NonAffiliated Director candidate nominated 

in any such petition will be determined 

by the NYSE Euronext NGC, in its sole 

discretion. 

If no petitions are submitted within 

two weeks after the dissemination of the 

report of the NYSE Euronext NGC, the 

NYSE Euronext NGC will nominate the 

candidates for Non-Affiliated Directors 

that the NYSE Alternext US DCRC 

initially recommended. If one or more 

valid petitions are submitted, NYSE 

Alternext US members will be allowed 

to vote on the entire group of potential 

candidates. Each member organization 

will have one vote per trading license or 

permit held by it.62 The persons with 

the highest number of votes will be the 

candidates recommended to the NYSE 

Euronext NGC. 

Amex has represented that 

immediately following the Mergers and 

the Related Transactions, the NYSE 

Alternext US Board will have five 

directors, one of which will be a NonAffiliated Director selected by NYSE 

Group from among the six Industry 

Governors serving on the Amex Board 

immediately prior to the Mergers.63 The 

initial directors on the NYSE Alternext 

US Board will serve one-year terms 

until their successors are duly elected.64

The NYSE Alternext US Board may 

create one or more committees 

composed of NYSE Alternext US 

directors.65 As with the NYSE and 

NYSE Arca (as well as other NYSE 

Euronext subsidiaries except NYSE 

Regulation), Amex expects that the 

committees of the NYSE Euronext board 

of directors will perform for NYSE 

Alternext US the board committee 

functions relating to audit, governance, 

and compensation.66 The NYSE 

Alternext US Board also may create 

committees composed in whole or part 

of individuals who are not directors.67

Amex proposes that the day-to-day 

business of NYSE Alternext US be 

managed by the officers of NYSE 

Alternext US, appointed by, and subject 

to the direction of, the NYSE Alternext 

US Board.68 NYSE Alternext US will 

have such officers as its Board may 

deem advisable.69 For so long as NYSE 

Euronext directly or indirectly owns all 

of the equity interest of NYSE Group 

and NYSE Group holds 100 percent of 

the limited liability company interest of 

NYSE Alternext US, the Chief Executive 

Officer (‘‘CEO’’) of NYSE Alternext US 

will be a US Person.70

The Commission finds that the 

proposed governance structure of NYSE 

Alternext US is consistent with the Act, 

and in particular that the proposed 

composition of the NYSE Alternext US 

Board is consistent with Section 6(b)(1) 

of the Act, which requires, among other 

things, that a national securities 

exchange be organized to carry out the 

purposes of the Act and comply with 

the requirements of the Act. The 

Commission previously has stated its 

belief that the inclusion of public, nonmstockstill on PROD1PC66 with NOTICES

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71See Regulation of Exchanges and Alternative 

Trading Systems, Securities Exchange Act Release 

No. 40760 (December 8, 1998), 63 FR 70844 

(December 22, 1998). See also BATS Order, supra 

note 28, 73 FR at 49498; NYSE/Arca Order, supra 

note 25, 71 FR at 11261, n.121 and accompanying 

text; Securities Exchange Act Release Nos. 53128 

(January 13, 2006), 71 FR 3550 (January 23, 2006) 

(File No. 10–131) (‘‘Nasdaq Exchange Registration 

Order’’) at 3553, n.54 and accompanying text; and 

44442 (June 18, 2001), 66 FR 33733, n.13 and 

accompanying text (June 25, 2001) (SR–PCX–01– 

03). 

72 15 U.S.C. 78f(b)(3). 

73 Id. 

74See Sec. 2.03 of the Second Amended and 

Restated Agreement of New York Stock Exchange 

LLC (‘‘NYSE Operating Agreement’’). See also 

NYSE/Arca Order, supra note 25, and NYSE/ 

Euronext Order, supra note 18. 

75Amex Rule 22 describes the authority and 

responsibilities of Floor Officials, Senior Floor 

Officials, and the Senior Supervisory Officer, which 

responsibilities are to generally promote fair and 

orderly operations on the floor of Amex. 

76NYSE Alternext US intends to relocate the 

NYSE Alternext US cash equities and options 

trading facilities to the NYSE trading floor or the 

electronic trading platform of NYSE or NYSE Arca, 

as applicable. The Exchange has filed a proposed 

rule change to implement the relocation of the 

trading of cash equities to the facilities of the NYSE. 

See Securities Exchange Act Release No. 58265 

(July 30, 2008), 73 FR 46075 (August 7, 2008) (SR– 

Amex–2008–63). NYSE Alternext US will file a 

separate proposed rule change with the 

Commission relating to the relocation of the trading 

of standardized options. 

77Such appointment is made by the Chairman of 

the Board (or the CEO, if delegated by the 

Chairman), subject to the approval of the Board, and 

in consultation with the Senior Supervisory Officer. 

78Exchange Officials are members of Amex, and 

individuals employed by or associated with a 

member organization in a senior capacity, that are 

appointed by the Chairman of Amex (or the CEO, 

if delegated by the Chairman), subject to the 

approval of the Board and after seeking the advice 

of members. See Section 3 of Article II of the Amex 

Constitution. This provision is proposed to be 

added to Rule 21, except that the CEO (or his 

designee), or the Chief Regulatory Officer (or his 

designee), will appoint the Exchange Officials, 

subject to the approval of the Board and after 

consultation with members. See proposed NYSE 

Alternext US Rule 21(d). 

79Such appointments are made by the Chairman 

(or the CEO, if delegated by the Chairman), subject 

to the approval of the Board. 

industry representatives on exchange 

oversight bodies is critical to an 

exchange’s ability to protect the public 

interest.71 Further, public 

representatives help to ensure that no 

single group of market participants has 

the ability to systematically 

disadvantage other market participants 

through the exchange governance 

process. The Commission believes that 

public directors can provide unique, 

unbiased perspectives, which should 

enhance the ability of the NYSE 

Alternext US Board to address issues in 

a non-discriminatory fashion and foster 

the integrity of NYSE Alternext US. The 

Commission also finds that the 

composition of the NYSE Alternext US 

Board will satisfy Section 6(b)(3) of the 

Act,72 which requires that one or more 

directors be representative of issuers 

and investors and not be associated with 

a member of the exchange or with a 

broker or dealer. 

The fair representation requirement in 

Section 6(b)(3) of the Act is intended to 

give members a voice in the selection of 

the exchange’s directors and the 

administration of its affairs. The 

Commission finds that the requirement 

that at least twenty percent of the NYSE 

Alternext US Directors be NonAffiliated Directors, and the process for 

selecting such Non-Affiliated Directors, 

are designed to ensure the fair 

representation of NYSE Alternext US 

members on the NYSE Alternext US 

Board. The Commission believes that 

the method for selecting the NonAffiliated Directors allows members to 

have a voice in NYSE Alternext US’s 

use of its self-regulatory authority. As 

detailed above, the NYSE Alternext US 

DCRC is composed solely of persons 

associated with NYSE Alternext US 

members and is selected after 

appropriate consultation with NYSE 

Alternext US members. In addition, the 

proposed NYSE Alternext US Operating 

Agreement includes a process by which 

members can directly petition and vote 

for representation on the NYSE 

Alternext US Board. The Commission 

therefore finds that the process for 

selecting the Non-Affiliated Directors to 

the NYSE Alternext US Board is 

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

Act.73 The Commission notes that this 

approach is also consistent with the 

NYSE’s processes for nomination and 

election of directors on the NYSE 

board.74

C. NYSE Alternext US Rules 

1. Floor Officials, Senior Floor Officials, 

Exchange Officials and Senior 

Supervisory Officer 

The Floor Officials, Senior Floor 

Officials, and Exchange Officials in 

place at Amex immediately prior to the 

Mergers 75 will continue in such 

capacity for the period prior to the 

planned relocation of the NYSE 

Alternext US equities and options 

trading facilities to the NYSE trading 

floor or the electronic trading platform 

of the NYSE or NYSE Arca, as 

applicable.76 Currently, Rule 21 

provides that each governor of Amex 

that spends a substantial part of his time 

on the floor of Amex shall serve as a 

Senior Floor Official, and that 

additional Senior Floor Officials may be 

appointed 77 from among the Exchange 

Officials that spend a substantial part of 

their time on the floor.78 In addition, the 

Vice Chairman of the Board currently 

serves as the Senior Supervisory Officer 

on the floor of Amex (if the Vice 

Chairman does not spend a substantial 

part of his time on the floor, one of the 

governors serving as a Senior Floor 

Official shall be designated as the 

Senior Supervisory Officer by the 

Chairman of the Board, subject to the 

approval of the Board). Rule 21 also 

provides that Exchange Officials that 

spend a substantial part of their time on 

the floor shall be appointed as Floor 

Officials; further, such other persons 

that are familiar with the floor may be 

appointed as Floor Officials.79

Amex proposes to amend Rule 21 to 

reflect the fact that the NYSE Alternext 

US Board will not have a category of 

directors who are required to spend a 

substantial portion of their time on the 

trading floor. Any director that spends 

a substantial part of his time on the floor 

shall still serve as a Senior Floor 

Official, and one of these directors will 

be appointed as the Senior Supervisory 

Officer (rather than the Vice-Chairman 

of Amex). However, if there is no 

director that spends a substantial part of 

his time on the floor, one of the Senior 

Floor Officials will be appointed as the 

Senior Supervisory Officer (thus, an 

Exchange Official that spends a 

substantial part of his time on the floor 

will be appointed as the Senior 

Supervisory Officer). Rule 21, as 

amended, also will allow qualified 

NYSE Alternext US employees who 

spend a substantial portion of their time 

on the trading floor to be appointed to 

serve as Floor Officials. Further, the 

CEO or Chief Regulatory Officer 

(‘‘CRO’’) (or their respective designee), 

rather than the Chairman of Amex, will 

be responsible for appointing such 

officials and making other appointments 

under the rule (subject to the other 

requirements of the rule). 

Amex also is proposing to amend 

Rule 21 and other rules referencing 

Floor Governors to reflect the 

elimination of that category of member 

on the Amex Board. Amex proposes that 

Senior Floor Officials replace the Floor 

Governors in most cases when the 

reference to Floor Governor relates to 

the approval or review of activities on 

the trading floor and the chairing of 

certain committees (e.g., the 

Performance and Allocation 

committees). In situations where a rule 

calls upon the Floor Governors to advise 

the CEO of Amex in connection with 

floor facilities and administration, 

Amex proposes that the Senior 

Supervisory Officer replace the Floor 

Governors. 

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57714 Federal Register / Vol. 73, No. 193 / Friday, October 3, 2008 / Notices 

80 15 U.S.C. 78f(b)(1). 

81See current Amex Rule 21(a). 

82See Securities Exchange Act Release No. 57627 

(April 4, 2008), 73 FR 19919 (April 11, 2008) (SRNYSE–2008–19). Under the NYSE rules, Floor 

Governors are more senior than Floor Officials, and 

are authorized to take any action that a Floor 

Official can take. See id. and NYSE Rule 46. 

83See Amex Notice, supra note 3, 73 FR at 46088 

and 46094. In addition, the lessees will cease to 

have any trading rights under any applicable leases. 

Id. 

84NYSE Alternext US anticipates replacing 86 

Trinity Permits with equity trading licenses and 

options trading permits at a later date following a 

proposed rule change filed with the Commission. 

See Amex Notice, supra note 3, 73 FR at 46088, and 

proposed NYSE Alternext US Rules 350 and 353. 

85The requirements for 86 Trinity Permits will be 

the same as the current requirements for 

memberships in the Amex Rules and such 

requirements may be satisfied by persons or entities 

that were not previously authorized to trade on 

Amex immediately prior to the Mergers.See Amex 

Notice, supra note 3, 73 FR 46088, and proposed 

NYSE Alternext US Rule 353. 

86 Id. At a later time, NYSE Alternext US 

anticipates replacing 86 Trinity Permits with equity 

trading licenses and options trading permits. See 

Amex Notice, supra note 3, 73 FR 46088. NYSE 

Alternext US intends to relocate the NYSE 

Alternext US equities and options trading facilities 

to the NYSE trading floor or the electronic trading 

platform of NYSE or NYSE Arca, as applicable. Id. 

Amex has filed a proposed rule change to 

implement the relocation of the trading of equities 

to the facilities of the NYSE. See Securities 

Exchange Act Release No. 58265 (July 30, 2008), 73 

FR 46075 (August 7, 2008) (SR–Amex–2008–63). 

NYSE Alternext US will file a separate proposed 

rule change with the Commission relating to the 

relocation of the trading of standardized options. 

See Amex Notice, supra note 3, 73 FR at 46088. 

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

88Amex Rule 345, the Rules of Procedure in 

Disciplinary Matters and the disciplinary rules in 

the current Amex Constitution (‘‘Legacy 

Disciplinary Procedural Rules’’) will continue to 

apply to pending disciplinary cases which have 

been formally commenced at or prior to the time 

of the consummation of the Mergers and Related 

Transactions. See Securities Exchange Act Release 

No. 58286 (August 1, 2008), 73 FR 46097 (August 

7, 2008) (notice of SR–Amex–2008–64), which 

proposed rule change the Commission is approving 

today. See Securities Exchange Release No. 58678. 

89The Chairman of NYSE Alternext US, subject 

to the approval of the NYSE Alternext US Board, 

shall designate a Chief Hearing Officer and one or 

more other Hearing Officers who shall have no 

duties or functions relating to the investigation or 

preparation of disciplinary matters and who shall 

be appointed annually and shall serve as Hearing 

Officers at the pleasure of the NYSE Alternext US 

Board. An individual cannot be a Hearing Officer 

(including the Chief Hearing Officer) if he or she is, 

or within the last three years was, a member, allied 

member, or registered or non-registered employee of 

a member or member organization. See Amex 

Notice, supra note 3, and proposed NYSE Alternext 

US Rule 475(b). 

90The members of the Hearing Board will be 

appointed by the Chairman of NYSE Alternext US 

subject to the approval of the NYSE Alternext US 

Board. The Hearing Board will be composed of such 

number of members and allied members of NYSE 

Alternext US who are not members of the NYSE 

Alternext US Board, and registered employees and 

non-registered employees of members and member 

organizations, and such other persons as set forth 

in the rules as the Chairman shall deem necessary. 

Former members, allied members, or registered and 

non-registered employees of members and member 

organizations who have retired from the securities 

industry can be appointed to the Hearing Board 

within five years of their retirement. The members 

of the Hearing Board shall be appointed annually 

and shall serve at the pleasure of the NYSE 

Alternext US Board. Id. 

The Commission finds that these 

changes are consistent with the Act, 

including Section 6(b)(1) of the Act,80

which requires, among other things, that 

a national securities exchange be 

organized to carry out the purposes of 

the Act and comply with the 

requirements of the Act. Amex stated 

that a Senior Floor Official has the same 

authority and responsibilities as a Floor 

Governor with respect to matters that 

arise on the Floor and require review or 

action by a Floor Governor or Senior 

Floor Official,81 and that therefore, these 

changes do not expand the authority or 

responsibilities of Senior Floor Officials. 

Moreover, allowing qualified NYSE 

Alternext US employees to serve as 

Floor Officials would broaden the pool 

of experienced individuals who can 

participate in and supervise unusual 

trading situations on the floor. The 

Commission notes that recently the 

NYSE has filed an immediately effective 

rule change permitting the appointment 

of qualified NYSE employees to act as 

Floor Governors.82

2. 86 Trinity Permits; Access to NYSE 

Alternext US 

Following the Mergers, all trading 

rights appurtenant to either Regular 

Memberships or Options Principal 

Members existing immediately prior to 

the Mergers will be cancelled.83

Physical and electronic access to NYSE 

Alternext US’s trading facilities will be 

made available to individuals and 

organizations that obtain an 86 Trinity 

Permit.84 86 Trinity Permits will be 

made available by NYSE Alternext US 

to persons and entities that apply and 

meet certain specified requirements.85

86 Trinity Permits will allow the 

holders to trade products currently 

traded on Amex, including cash equities 

and options.86

To ensure continuity of trading 

following the Mergers, persons and 

entities who were authorized to trade on 

Amex prior to the Mergers, including (i) 

owners, lessees or nominees of Regular 

Memberships or OPMs, (ii) limited 

trading permit holders, and (iii) 

associate members, will be deemed to 

have satisfied applicable requirements 

necessary to receive an 86 Trinity 

Permit. 86 Trinity Permits will 

authorize owners, lessees or nominees 

of Regular Memberships or OPMs, 

limited trading permit holders and 

associate members who were authorized 

to trade on Amex prior to the Mergers, 

to trade the products which they were 

previously authorized to trade and, 

subject to meeting the qualifications 

currently in place for trading products 

which they previously were not 

authorized to trade, to trade such other 

products. 

Because 86 Trinity Permits will be 

made available to all persons authorized 

to trade on Amex prior to the Mergers 

(such persons will be deemed to have 

satisfied the applicable requirements), 

as well as to other persons that meet 

such requirements, and because such 

requirements will be the same as the 

current requirements for membership in 

the Amex rules, the Commission finds 

that proposed procedures for NYSE 

Alternext US making available 86 

Trinity Permits will provide fair access 

to NYSE Alternext US and are 

consistent with the Act and in particular 

with Sections 6(b)(2) and 6(b)(5) of the 

Act.87

3. Disciplinary Proceedings 

Amex is proposing to replace current 

Rule 345, the Rules of Procedures in 

Disciplinary Matters, and the 

disciplinary provisions in the Amex 

Constitution with proposed NYSE 

Alternext US Rules 475, 476 and 477.88

These new rules are substantially 

identical to the disciplinary rules of the 

NYSE with certain changes necessary to 

apply such rules to NYSE Alternext US 

and to reflect the application of the 

current American Stock Exchange 

Sanctions Guidelines. 

Under proposed NYSE Alternext US 

Rules 476 and 477, initial disciplinary 

hearings will be held before a Hearing 

Panel that will be composed of at least 

three persons: A Hearing Officer,89 and 

at least two members of the Hearing 

Board, at least one of whom shall be 

engaged in securities activities differing 

from that of the respondent or, if retired, 

was so engaged in differing activities at 

the time of retirement. In any 

disciplinary proceeding involving 

activities on the floor, no more than one 

of the persons serving on the Hearing 

Panel shall be or, if retired, shall have 

been, active on the floor. A Hearing 

Panel can include only one retired 

person.90

Any review of a disciplinary decision 

shall be conducted by the NYSE 

Alternext US Board or the NYSE 

Regulation Committee, in the sole 

discretion of the NYSE Alternext US 

Board. Upon review, and with the 

advice of the NYSE Regulation 

Committee, the NYSE Alternext US 

Board, by the affirmative vote of a 

majority of the NYSE Alternext US 

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Federal Register / Vol. 73, No. 193 / Friday, October 3, 2008 / Notices 57715 

91The Committee for Review is currently 

composed of (i) directors of NYSE Regulation and 

(ii) at least three non-director committee members 

associated with member organizations of the NYSE, 

at least one of whom is associated with a member 

organization of the NYSE that engages in a business 

involving substantial direct contact with securities 

customers, at least one of whom is associated with 

a member organization of the NYSE and registered 

as a specialist and spends a substantial part of his 

or her time on the trading floor of NYSE Market and 

at least one of whom is associated with a member 

organization of the NYSE and spends a majority of 

his time on the trading floor of NYSE Market and 

has as a substantial part of his business the 

execution of transactions on the trading floor of 

NYSE Market for other than his own account or the 

account of his member organization, but is not 

registered as a specialist. 

92Reviews of delisting determinations will be 

heard by the same NYSE Alternext US committee 

as has been reviewing such matters prior to the 

Mergers. See NYSE Notice, supra note 7. 

93 15 U.S.C. 78f(b)(6) and 15 U.S.C. 78f(b)(7). 

94See Section 6(b)(1) of the Act, 15 U.S.C. 

78f(b)(1). 

95 15 U.S.C. 78f(b)(3). 

96Proposed NYSE Alternext US General and 

Floor Rule 1(a) also provides that it does not 

prohibit a member organization from acquiring or 

holding an equity interest in NYSE Euronext that 

is permitted by the ownership limitations contained 

in the NYSE Euronext Charter. 

97See NYSE/Arca Order, supra note 25. NYSE 

Rule 2B was later amended to reflect that NYSE 

Group became a wholly-owned subsidiary of NYSE 

Euronext. See also NYSE/Euronext Order, supra 

note 18, and Amendment No. 4 to the Amex Notice, 

supra note 4. 

98See, e.g., Securities Exchange Act Release No. 

54170 (July 18, 2006), 71 FR 42149 (July 25, 2006) 

(SR–NASDAQ–2006–006) (order approving 

Nasdaq’s proposal to adopt Nasdaq Rule 2140, 

restricting affiliations between Nasdaq and its 

members) (‘‘Nasdaq/Member Affiliation Rule’’) and 

NYSE/Arca Order, supra note 25. 

99 15 U.S.C. 78f(b)(1). 

Board then in office, may sustain any 

determination or penalty imposed, or 

both, may modify or reverse any such 

determination, and may increase, 

decrease, or eliminate any such penalty, 

or impose any penalty permitted under 

the provisions of proposed NYSE 

Alternext US Rule 476. Unless the 

NYSE Alternext US Board otherwise 

specifically directs, the determination 

and penalty, if any, of the NYSE 

Alternext US Board after review shall be 

final and conclusive subject to the 

provisions for review of the Act. 

The NYSE Regulation Committee 

referenced in the proposed NYSE 

Alternext US rules is the NYSE 

Regulation Committee for Review. The 

NYSE Regulation Bylaws currently 

provide for the creation of a Committee 

for Review that is charged with 

performing certain functions with 

respect to the NYSE, including hearing 

appeals for disciplinary decisions.91

Following the Mergers and Related 

Transactions, the Committee for Review 

will also hear disciplinary appeals for 

NYSE Alternext US.92 In connection 

therewith, the NYSE Regulation Bylaws 

are being amended to provide that the 

Committee for Review will be expanded 

to include at least four individuals who 

are associated with member 

organizations of NYSE Alternext US. 

These new members of the Committee 

for Review must include at least one of 

each of the following: 

• An individual associated with a 

member organization of NYSE Alternext 

US that engages in a business involving 

substantial direct contact with securities 

customers; 

• An individual associated with a 

member organization of NYSE Alternext 

US that is registered as a specialist and 

spends a substantial part of his or her 

time on the trading floor of NYSE 

Alternext US; 

• An individual associated with a 

member organization of NYSE Alternext 

US not registered as a specialist that 

spends a majority of his or her time on 

the trading floor of NYSE Alternext US 

and has as a substantial part of his 

business the execution of transactions 

on the trading floor of NYSE Alternext 

US for other than his or her own 

account or the account of his NYSE 

Alternext US member organization; and 

• An individual associated with a 

NYSE Alternext US Member 

Organization not registered as a 

specialist that spends a majority of his 

or her time on the trading floor of NYSE 

Alternext US and has as a substantial 

part of his or her business the execution 

of transactions on the trading floor of 

NYSE Alternext US for his own account 

or the account of his or her NYSE 

Alternext US Member Organization. 

The Commission finds that the 

changes proposed to the disciplinary 

procedures are consistent with the Act, 

in particular Sections 6(b)(6) and 6(b)(7) 

of the Act.93 The Commission believes 

that NYSE Alternext US rules will 

provide due process for members and 

member organizations involved in any 

disciplinary proceeding, including 

notice of alleged wrongdoing, an 

opportunity for a hearing, and avenues 

for appeal to the NYSE Alternext Board 

in appropriate circumstances. The 

Commission therefore believes that the 

proposed rules will provide fair 

procedures for the disciplining of 

members and persons associated with 

members, and will provide NYSE 

Alternext US with the ability to comply, 

and with the authority to enforce 

compliance by its members and persons 

associated with its members, with the 

provisions of the Act, the rules and 

regulations thereunder, and the rules of 

NYSE Alternext US.94 The Commission 

also finds that NYSE Alternext US’s 

disciplinary rules are consistent with 

the fair representation requirements of 

Section 6(b)(3) of the Act 95 because 

NYSE Alternext US members will be 

represented on the disciplinary panels 

and the Committee for Review. 

D. Affiliations Between NYSE Alternext 

US and Its Members 

1. Limitations on Affiliation 

Amex proposes to adopt proposed 

NYSE Alternext US General and Floor 

Rule 1(a), which provides that, without 

prior Commission approval, NYSE 

Alternext US or any entity with which 

it is affiliated shall not, directly or 

indirectly, acquire or maintain an 

ownership interest in a member 

organization. In addition, a member 

organization shall not be or become an 

affiliate of NYSE Alternext US, or an 

affiliate of any affiliate of NYSE 

Alternext US.96 This rule is 

substantially similar to current NYSE 

Rule 2B, which was initially approved 

by the Commission in connection with 

the reorganization of the NYSE to be a 

wholly-owned subsidiary of NYSE 

Group.97

The Commission is concerned about 

potential for unfair competition and 

conflicts of interest between an 

exchange’s self-regulatory obligations 

and its commercial interests that could 

exist if an exchange were to otherwise 

become affiliated with one of its 

members, as well as the potential for 

unfair competitive advantage that the 

affiliated member could have by virtue 

of informational or operational 

advantages, or the ability to receive 

preferential treatment.98 The 

Commission believes that proposed 

NYSE Alternext US General and Floor 

Rule 1(a) is designed to mitigate these 

concerns and is consistent with the Act, 

particularly with Section 6(b)(1),99

which requires an exchange to be so 

organized and have the capacity to carry 

out the purposes of the Act. 

2. Exception to Limitation on Affiliation 

Between NYSE Alternext US and Its 

Members 

NYSE Euronext currently owns a 

broker-dealer, Arca Securities that is 

also a member organization of Amex. 

After the closing of the Mergers and 

Related Transactions, NYSE Euronext’s 

ownership of NYSE Alternext US and 

Arca Securities would cause Arca 

Securities to be an affiliate of NYSE 

Alternext US, and, absent prior 

Commission approval, would violate the 

provisions in proposed NYSE Alternext 

US General and Floor Rule 1(a) that 

prohibit: (i) NYSE Alternext US or any 

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57716 Federal Register / Vol. 73, No. 193 / Friday, October 3, 2008 / Notices 

100See Amex Notice, supra note 3, at notes 53– 

58 and accompanying text, and Amendment No. 4 

to the Amex Notice, supra note 4. 

101 Id. 

102See Amex Notice, supra note 3, at notes 59 

and 61 and accompanying text, and Amendment 

No. 4 to the Amex Notice, supra note 4. 

103The Commission notes that this 17d–2 

agreement is subject to public notice and comment 

and prior Commission approval before it can 

become effective. 

104Amex also states that Arca Securities is subject 

to independent oversight by FINRA, its Designated 

Examining Authority, for compliance with financial 

responsibility requirements. 

105See infra text accompanying note 117. 

106Specifically, NYSE Regulation ‘‘will collect 

and maintain the following information of which 

NYSE Regulation staff becomes aware—namely, all 

alerts, complaints, investigations and enforcement 

actions where Arca Securities (in its capacity as a 

facility of NYSE Arca or the NYSE, routing orders 

to NYSE Alternext US) is identified as a participant 

that has potentially violated NYSE Alternext US or 

applicable Commission rules—in an easily 

accessible manner so as to facilitate any review 

conducted by the Commission’s Office of 

Compliance Inspections and Examination.’’ See 

Amex Notice, supra note 3, at 46094. 

107See Amendment No. 4 to the Amex Notice, 

supra note 4. 

108See proposed NYSE Alternext US General and 

Floor Rule 1(b). 

109See Amex Notice, supra note 3. 

110See, e.g., Nasdaq/Member Affiliation Rule, 

supra note 98 and NYSE/Arca Order, supra note 25. 

111See supra notes 100 to 109 and accompanying 

text. 

112This oversight will accomplished either 

through the 17d–2 agreement among NYSE, FINRA 

and NYSE Alternext, see supra note 103, or through 

New Multi-Party FINRA RSA, see infra text 

accompanying note 117. 

113See supra note 108 and accompanying text. 

entity with which it is affiliated from 

maintaining an ownership interest in a 

member organization; and (ii) a NYSE 

Alternext US member organization from 

being affiliated with NYSE Alternext 

US. 

Arca Securities operates as a facility 

of each of NYSE and NYSE Arca that 

provides outbound routing from each 

exchange to other market centers, 

including Amex, subject to certain 

conditions.100 Consequently, the 

operation of Arca Securities in this 

capacity is subject, respectively, to 

NYSE and NYSE Arca oversight, as well 

as Commission oversight. NYSE and 

NYSE Arca are each responsible for 

ensuring that Arca Securities is operated 

consistent with Section 6 of the Act and 

their respective rules. In addition, NYSE 

and NYSE Arca, respectively, must file 

with the Commission rule changes and 

fees relating to Arca Securities. Use of 

Arca Securities outbound routing 

function is available to NYSE and NYSE 

Arca members, respectively. Use of Arca 

Securities’ routing function by such 

members is optional. Arca Securities is 

a member of an SRO unaffiliated with 

NYSE or NYSE Arca, respectively, 

which serves as its primary regulator.101

Recognizing that the Commission has 

previously expressed concern regarding 

the potential for conflicts of interest in 

instances where a member firm is 

affiliated with an exchange to which it 

is routing orders,102 Amex requests that 

the Commission approve NYSE 

Alternext US’s affiliation with Arca 

Securities following the Mergers and 

Related Transactions, subject to the 

following conditions and limitations: 

• First, Amex states that NYSE, 

FINRA, and NYSE Alternext US will 

enter into an agreement pursuant to 

Rule 17d–2 under the Act.103 If 

approved, pursuant to this agreement, 

FINRA will be allocated regulatory 

responsibilities to review Arca 

Securities’ compliance with certain 

NYSE Alternext US Rules.104

Alternatively, if this agreement has not 

become effective as of the time of the 

Mergers and Related Transactions, 

FINRA will nevertheless review Arca 

Securities’ compliance with certain 

NYSE Alternext US Rules pursuant to 

the New Multi-Party FINRA Regulatory 

Services Agreement.105 NYSE Alternext 

US, however, would retain ultimate 

responsibility for enforcing its rules 

with respect to Arca Securities. 

• Second, NYSE Regulation will 

monitor Arca Securities for compliance 

with NYSE Alternext US’s trading rules, 

and will collect and maintain certain 

related information.106

• Third, Amex states that NYSE 

Regulation has agreed with Amex that it 

will provide a report to NYSE Alternext 

US’s CRO, on a quarterly basis, that: (i) 

Quantifies all alerts (of which NYSE 

Regulation is aware) that identify Arca 

Securities as a participant that has 

potentially violated NYSE Alternext US 

or Commission rules, and (ii) quantifies 

the number of all investigations that 

identify Arca Securities as a participant 

that has potentially violated NYSE 

Alternext US or Commission rules.107

• Fourth, Amex proposes a rule that 

will require NYSE Euronext, as the 

holding company owning both NYSE 

Alternext US and Arca Securities, to 

establish and maintain procedures and 

internal controls reasonably designed to 

ensure that Arca Securities does not 

develop or implement changes to its 

system, based on non-public 

information obtained regarding planned 

changes to the NYSE Alternext US 

systems as a result of its affiliation with 

NYSE Alternext US, until such 

information is available generally to 

similarly situated members of NYSE 

Alternext US in connection with the 

provision of inbound order routing to 

NYSE Alternext US.108

• Fifth, Amex proposes that routing 

from Arca Securities to NYSE Alternext 

US, in Arca Securities’ capacity as a 

facility of NYSE and NYSE Arca, be 

authorized for a pilot period of twelve 

months.109

In the past, the Commission has 

expressed concern that the affiliation of 

an exchange with one of its members 

raises potential conflicts of interest, and 

the potential for unfair competitive 

advantage.110 Although the Commission 

continues to be concerned about 

potential unfair competition and 

conflicts of interest between an 

exchange’s self-regulatory obligations 

and its commercial interest when the 

exchange is affiliated with one of its 

members, for the reasons discussed 

below, the Commission believes that it 

is consistent with the Act to permit 

NYSE Euronext, which will be an 

affiliate of NYSE Alternext US upon the 

closing of the Mergers, to continue to 

own Arca Securities, subject to the 

conditions proposed by Amex. As 

described above, the Commission also 

believes that it is consistent with the 

Act for Arca Securities to become an 

affiliate of NYSE Alternext US following 

the closing of the Mergers and Related 

Transactions, for the limited purpose of 

providing routing to NYSE Alternext US 

from the NYSE and NYSE Arca, subject 

to the conditions described above.111

Amex has proposed five conditions 

applicable to Arca Securities routing 

activities, which are enumerated above. 

The Commission believes that these 

conditions mitigate its concerns about 

potential conflicts of interest and unfair 

competitive advantage. In particular, the 

Commission believes that FINRA’s 

oversight of Arca Securities,112

combined with NYSE Regulation’s 

monitoring of Arca Securities’ 

compliance with NYSE Alternext US’s 

trading rules and quarterly reporting to 

NYSE Alternext US’s CRO, will help to 

protect the independence of NYSE 

Alternext US’s regulatory 

responsibilities with respect to Arca 

Securities. The Commission also 

believes that proposed NYSE Alternext 

US General and Floor Rule 1(b) 113 is 

designed to ensure that Arca Securities 

cannot use any information advantage it 

may have because of its affiliation with 

NYSE Alternext US. Furthermore, the 

Commission believes that Amex’s 

proposal to use Arca Securities for 

inbound routing from NYSE and NYSE 

Arca, on a pilot basis, will provide 

NYSE Alternext US and the 

Commission an opportunity to assess 

the impact of any conflicts of interest 

from allowing an affiliated member of 

NYSE Alternext US to route orders 

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114This approval is only for Arca Securities to 

route orders to NYSE Alternext US in its capacity 

as a facility of the NYSE or NYSE Arca, subject to 

the conditions discussed herein. See supra note 100 

and accompanying text. This approval does not 

include Arca Securities providing outbound routing 

functions from NYSE Alternext US to other 

markets. 

115See Section 6(b)(1) of the Act, 15 U.S.C. 

78f(b)(1). 

116 Id. 

117See proposed NYSE Alternext US Rule 1(b) 

and Amendment No. 4 to the Amex Notice, supra 

note 4. In effect, FINRA will be a ‘‘sub-contractor’’ 

for some of the regulatory functions that would 

otherwise be performed by NYSE Regulation. 

Pursuant to the applicable provisions of the 

Freedom of Information Act, 5 U.S.C. 552, and 

Commission regulations thereunder, 17 CFR 200.83, 

Amex has requested confidential treatment for the 

NYSE Regulation RSA and the New Multi-Party 

FINRA RSA. 

118See proposed NYSE Alternext US Rule 1B. 

119See Amex Notice, supra note 3. 

120 Id., 73 FR at 46095. 

121See Section 4.05 of the proposed NYSE 

Alternext US Operating Agreement. 

122 15 U.S.C. 78f(b)(1). 

123See, e.g., Regulation of Exchanges and 

Alternative Trading Systems, Securities Exchange 

Act Release No. 40760 (December 8, 1998), 63 FR 

70844 (December 22, 1998) (‘‘Regulation ATS 

Release’’). See also Securities Exchange Act Release 

50122 (July 29, 2004), 69 FR 47962 (August 6, 2004) 

(SR–Amex–2004–32) (order approving rule that 

allowed Amex to contract with another SRO for 

regulatory services) (‘‘Amex Regulatory Services 

Approval Order’’); NOM Approval Order, supra 

note 27; and Nasdaq Exchange Registration Order, 

supra note 71. 

124See Amex Regulatory Services Approval 

Order, supra note 123; NOM Approval Order, supra 

note 27 and Nasdaq Exchange Registration Order, 

supra note 71. The Commission notes that the 

NYSE Regulation RSA and the New Multi-Party 

FINRA RSA are not before the Commission and, 

therefore, the Commission is not acting on them. 

125See Section 17(d)(1) of the Act and Rule 17d– 

2 thereunder, 15 U.S.C. 78q(d)(1) and 17 CFR 

240.17d–2. 

126 15 U.S.C. 78f(b)(1). 

127For example, if failings by FINRA or NYSE 

Regulation have the effect of leaving NYSE 

Alternext US in violation of any aspect of NYSE 

Alternext US’s self-regulatory obligations, NYSE 

Alternext US would bear direct liability for the 

violation, while FINRA or NYSE Regulation may 

bear liability for causing or aiding and abetting the 

violation. See, e.g., Nasdaq Exchange Registration 

Order, supra note 71, and ISE Exchange 

Registration Order, supra note 26. 

128See Article III, Section 1 of the proposed Third 

Amended and Restated Bylaws of NYSE Regulation. 

inbound to NYSE Alternext US and 

whether such affiliation provides an 

unfair competitive advantage.114

E. Regulation of NYSE Alternext US 

Under the Act, an exchange must be 

organized and have the capacity to carry 

out the purposes of the Act.115

Specifically, an exchange must be able 

to enforce compliance by its members 

and persons associated with its 

members with federal securities laws 

and the rules of the exchange.116

Amex has proposed several measures 

designed to ensure that NYSE Alternext 

US can meet its obligations under the 

Act and that its regulatory functions are 

independent of its market operations 

and other commercial interests. First, 

NYSE Alternext US will enter into a 

regulatory contract with NYSE 

Regulation (‘‘NYSE Regulation RSA’’), 

under which NYSE Alternext US will 

contract with NYSE Regulation to 

perform all of NYSE Alternext US’s 

regulatory functions on NYSE Alternext 

US’s behalf. However, FINRA may 

perform some of the regulatory 

functions contracted out to NYSE 

Regulation pursuant to a separate multiparty regulatory services agreement by 

and among NYSE Regulation, NYSE 

Group, FINRA, and NYSE Alternext US 

(‘‘New Multi-Party FINRA RSA’’).117

Notwithstanding these regulatory 

contracts, NYSE Alternext US will 

retain ultimate legal responsibility for 

the regulation of its members and its 

market. NYSE Alternext US also will 

retain the authority to direct NYSE 

Regulation, FINRA, or any other SRO 

that provides regulatory services to take 

any action necessary to fulfill NYSE 

Alternext US’s statutory and selfregulatory obligations.118 In addition, 

the NYSE Alternext US Board will 

appoint a CRO, who will be an officer 

of NYSE Alternext US and will report 

directly to the NYSE Alternext US 

Board.119

Finally, NYSE Euronext has agreed to 

provide adequate funding to NYSE 

Regulation to conduct its regulatory 

activities with respect to NYSE, NYSE 

Arca and, from and after closing of the 

transaction, NYSE Alternext US.120 In 

addition, NYSE Alternext US will not 

use any regulatory fees, fines or 

penalties collected by NYSE Regulation 

for commercial purposes.121

The Commission finds that Amex’s 

proposed regulatory structure is 

consistent with the Act, including 

Section 6(b)(1) of the Act,122 which 

requires, among other things, that a 

national securities exchange be 

organized to carry out the purposes of 

the Act and comply with the 

requirements of the Act. The 

Commission believes that it is 

consistent with the Act to allow NYSE 

Alternext US to contract with NYSE 

Regulation and FINRA to perform its 

regulatory functions, including its 

examination, enforcement, and 

disciplinary functions.123 These 

functions are fundamental elements to a 

regulatory program, and constitute core 

self-regulatory functions. It is essential 

to the public interest and the protection 

of investors that these functions are 

carried out in an exemplary manner, 

and the Commission believes that NYSE 

Regulation and FINRA have the 

expertise and experience to perform 

these functions on behalf of NYSE 

Alternext US.124

At the same time, NYSE Alternext US, 

unless relieved by the Commission of its 

responsibility,125 is obligated as an SRO 

to enforce compliance with the 

securities laws and its rules and has 

primary liability for self-regulatory 

failures. The Commission believes that 

Amex’s proposal to appoint a CRO 

reporting to the NYSE Alternext US 

Board will further NYSE Alternext US’s 

ability to satisfy these self-regulatory 

obligations consistent with Section 

6(b)(1) of the Act.126 NYSE Regulation 

and FINRA will be performing 

regulatory functions on NYSE Alternext 

US’s behalf pursuant to a contract. In 

performing these functions, NYSE 

Regulation and FINRA may bear 

liability for causing or aiding and 

abetting the failure of NYSE Alternext 

US to satisfy its regulatory 

obligations.127

The Commission notes that upon the 

consummation of the Mergers and the 

Related Transactions, NYSE Alternext 

US will no longer have a Regulatory 

Oversight Committee (‘‘ROC’’). Instead, 

NYSE Alternext US will contract with 

NYSE Regulation to perform all of its 

regulatory functions. The Commission 

believes that it is consistent with the 

Act for NYSE Alternext US to eliminate 

its ROC and instead contract with NYSE 

Regulation to perform its regulatory 

functions because the governance of 

NYSE Regulation will provide a 

comparable level of independence that 

a ROC would provide. In particular, all 

directors on the board of NYSE 

Regulation (other than its CEO) are, and 

will be, required to be independent of 

management of NYSE Euronext and its 

subsidiaries, as well as of NYSE, NYSE 

Arca, and NYSE Alternext US members 

and listed companies. In addition, a 

majority of the members of the NYSE 

Regulation board must be directors that 

are not also directors of NYSE 

Euronext.128

Finally, the Commission believes that 

NYSE Euronext’s commitment to 

provide adequate funding to NYSE 

Regulation to conduct its regulatory 

activities is designed to ensure that 

NYSE Alternext US can perform its 

obligations under the Act. 

F. Undertakings 

Amex requests to be relieved from the 

undertakings adopted by the Amex 

Board on December 4, 2004 and 

approved by the Commission as part of 

an Amex proposed rule change filed 

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57718 Federal Register / Vol. 73, No. 193 / Friday, October 3, 2008 / Notices 

129See Amex Order, supra note 14. 

130Amex is currently a party to a regulatory 

services agreement with FINRA under which 

FINRA performs market and trade practice 

surveillance and analysis, financial and operational 

regulation, options sales practice regulation, 

enforcement investigations and disciplinary 

processes and dispute resolution services for Amex. 

131For more detail on Sections 1 and 2 of the 

Undertakings, see Amex Order, supra note 14. 

132For more detail on Section 3 of the 

Undertakings, see Amex Order, supra note 14. 

133See supra note 117 and accompanying text, 

and Amendment No. 4 to the Amex Notice, supra 

note 4. 

134Member is defined as set forth in Sections 

3(a)(3)(A)(i), 3(a)(3)(A)(ii), 3(a)(3)(A)(iii) and 

3(a)(3)(A)(iv) of the Act, 15 U.S.C. 78c(a)(3)(A). 

135NYSE Euronext also proposes some technical 

changes to the independence policy: (i) The 

deletion of a provision relating to a transition 

period for non-US board directors of NYSE 

Euronext because it is obsolete; and (ii) all 

references to NYSE, NYSE Arca, and NYSE 

Alternext US shall mean each of those entities or 

its successor. 

136See Independence Policy of the NYSE 

Euronext Board of Directors, Exhibit 5B to the 

NYSE Notice, supra note 7. 

137See e.g., Article II, Sections 2(b) and 3(a) of the 

bylaws and Paragraph 505 of the certificate of 

incorporation of the Chicago Stock Exchange, Inc; 

Sections 1.1 of the bylaws of the National Stock 

Exchange, Inc. 

138 15 U.S.C. 78s(b)(2). 

139Pursuant to Section 19(b)(2) of the Act, 15 

U.S.C. 78s(b)(2), the Commission may not approve 

any proposed rule change, or amendment thereto, 

prior to the thirtieth day after the date of 

publication of the notice thereof, unless the 

Commission finds good cause for so doing. 

140As noted supra in note 4, this change will not 

affect the final outcome of the Mergers through 

which NYSE Alternext US will become a subsidiary 

of NYSE Euronext. 

141See supra, notes 100 to 109 and accompanying 

text. 

142 Id. 

under Section 19 of the Act 

(‘‘Undertakings’’).129 Section 1 of the 

Undertakings, among other things, 

prohibits Amex from terminating its 

current regulatory services agreement 

with FINRA (‘‘FINRA RSA’’) 130 unless 

on or prior to the date of such 

termination, Amex has entered into an 

alternative arrangement relating to the 

provision of regulatory services that has 

been approved by the Commission. 

Section 2 of the Undertakings requires 

Amex and its CRO to use reasonable 

efforts to cause the staff of FINRA 

responsible for providing services under 

the FINRA RSA, to periodically confer 

with staff of the Division of Trading and 

Markets and the Office of Compliance 

Inspections and Examinations of the 

Commission regarding the status of 

Amex’s regulatory program.131 Finally, 

Section 3 of the Undertakings mandates 

Amex to provide to the Director of the 

Division of Trading and Markets certain 

financial statements certified by Amex’s 

chief financial officer and reviewed by 

Amex’s independent accountants, 

together with evidence of such review at 

specified intervals. Section 3 of the 

Undertaking also requires the provision 

of other financial information, including 

schedules reflecting the available 

borrowings under each of Amex’s credit 

facilities and computations of 

compliance with all financial covenants 

contained therein, projected cash and 

working capital trends, and material offbalance sheet liabilities.132

The Commission believes it is 

consistent with the Act for Amex to be 

relieved from its Undertakings. With 

respect to Sections 1 and 2 of the 

Undertakings, the Commission believes 

that NYSE Alternext US arrangements 

for contracting out regulatory services 

through the NYSE Regulation RSA and 

the New Multi-Party FINRA RSA 133 is 

comparable to the FINRA RSA and is 

designed to ensure that NYSE Alternext 

US regulatory program is conducted in 

a manner that is consistent with the Act. 

Further, the Commission finds that it is 

no longer necessary at this time for 

Amex to provide certain financial 

information on a regular basis to the 

Director of the Division of Trading and 

Markets. 

G. NYSE Euronext Independence Policy 

In its proposed rule change, the NYSE 

proposes to amend the definitions of 

‘‘member’’ and ‘‘member organization’’ 

in the NYSE Euronext Independence 

Policy to refer to relevant sections of the 

Act 134 instead of the different rules of 

the NYSE, NYSE Arca, and NYSE 

Alternext US. The NYSE also proposes 

to reduce the ‘‘look-back’’ period with 

respect to directors’ relationships with 

members of the NYSE and NYSE Arca 

(which following the Mergers will apply 

equally to NYSE Alternext US) from 

three years to one year. In addition, the 

NYSE is proposing to delete a restriction 

stating that a director is not 

independent if such director is 

employed by or affiliated with a nonmember broker-dealer, thus allowing 

independent directors of NYSE, NYSE 

Arca, and NYSE Alternext US to be 

employed by or affiliated with nonmember broker dealers.135

The Commission finds that these 

changes are consistent with the Act. The 

proposed changes to the definition of 

‘‘member’’ and ‘‘member organization’’ 

will harmonize the use of those terms 

across all three SROs owned by NYSE 

Euronext for purposes of determining 

the independence of NYSE Euronext 

directors (and the directors of its 

subsidiary SROs). The Commission 

believes that a one year ‘‘look-back’’ 

period, together with the other criteria 

for determining the independence of 

NYSE Euronext directors will continue 

to provide for director independence 

consistent with the Act.136 Further, the 

Commission believes that allowing 

directors to be affiliated with nonmember broker-dealers is consistent 

with the Act because NYSE Alternext 

US will not have regulatory oversight 

over such broker-dealers and thus the 

member conflicts that the independence 

requirements are designed to address 

are not raised.137

IV. Accelerated Approval of SR–Amex– 

2008–62 

The Commission finds good cause, 

pursuant to Section 19(b)(2) of the 

Act,138 for approving the proposal, as 

modified by Amendment Nos. 1 and 4, 

prior to the thirtieth day after the date 

of publication of notice of filing of 

Amendment No. 4 in the Federal 

Register.139

In Amendment No. 4, Amex proposes 

to reflect those changes to the Amex 

Rules that had occurred since the filing 

of the proposed rule change that are 

necessary to accurately describe the 

current Amex Rules and show the 

proposed changes, as applicable. Amex 

also proposes to make certain clarifying, 

technical and non-substantive changes 

to the text of the proposed rule change. 

Amendment No. 4 also includes a 

revised description of the parties to the 

New Multi-Party FINRA RSA, and a 

revised description of the merger 

between the current parent companies 

of Amex.140 In addition, in Amendment 

No. 4, Amex modifies its description of 

Arca Securities to state, among other 

things, that with respect to its oversight 

of Arca Securities after the Mergers and 

Related Transactions, NYSE Regulation 

has agreed to provide NYSE Alternext 

US’s CRO quarterly reports related to 

oversight of Arca Securities, which 

operates as a facility of each of NYSE 

and NYSE Arca that will provide 

outbound routing from each exchange to 

NYSE Alternext US, subject to certain 

conditions.141 As stated above,142 the 

Commission believes that such reports, 

along with other measures, will help to 

protect the independence of NYSE 

Alternext US’s regulatory 

responsibilities with respect to Arca 

Securities from conflicts of interest that 

may arise as a result of NYSE Alternext 

US’s affiliation with Arca Securities. 

The Commission does not believe that 

these changes have any substantive 

impact on the proposed changes. 

Accordingly, the Commission finds 

good cause for approving the Amex’s 

proposal, as modified by Amendment 

Nos. 1 and 4, on an accelerated basis, 

pursuant to Section 19(b)(2) of the Act. 

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Federal Register / Vol. 73, No. 193 / Friday, October 3, 2008 / Notices 57719 

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

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

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

2 17 CFR 240.19b–4. 

3See Securities and Exchange Commission 

Release No. 58147 (July 11, 2008); 73 FR 41389 

(July 18, 2008) (SR–ISE–2008–53) [sic]. 

V. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning Amendment No. 

4 to File No. SR–Amex–2008–62, 

including whether Amendment No. 4 is 

consistent with the Act. Comments may 

be submitted by any of the following 

methods: 

Electronic Comments 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an e-mail to rulecomments@sec.gov. Please include File 

Number SR–Amex–2008–62 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, and 100 F Street, NE., 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–Amex–2008–62. This file 

number should be included on the 

subject line if e-mail is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

Internet Web site (http://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

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

available for inspection and copying in 

the Commission’s Public Reference 

Room, 100 F Street, NE., Washington, 

DC 20549, on official business days 

between the hours of 10 a.m. and 3 p.m. 

Copies of such filing also will be 

available for inspection and copying at 

the principal office of Amex. All 

comments received will be posted 

without change; the Commission does 

not edit personal identifying 

information from submissions. You 

should submit only information that 

you wish to make available publicly. All 

submissions should refer to File 

Number SR–Amex–2008–62 and should 

be submitted on or before October 24, 

2008. 

VI. Conclusion 

For the foregoing reasons, the 

Commission finds that the proposed 

rule changes are consistent with the Act 

and the rules and regulations 

thereunder applicable to a national 

securities exchange. 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,143 that the 

proposed rule change (SR–Amex–2008– 

62), as modified by Amendment Nos. 1 

and 4 thereto, be and hereby is 

approved on an accelerated basis. 

It is therefore further ordered, 

pursuant to Section 19(b)(2) of the 

Act,144 that the proposed rule change 

(SR–NYSE–2008–60), as modified by 

Amendment No. 1 thereto, be and 

hereby is approved. 

Although the Commission’s approval 

of the proposed rule changes of Amex 

(SR–Amex–2008–62) and NYSE (SR– 

NYSE–2008–60) is final and the 

proposed rules are therefore effective, it 

is further ordered that the proposed rule 

changes will not become operative until 

the NYSE Regulation RSA and the New 

Multi-Party FINRA RSA are executed. 

By the Commission. 

Florence E. Harmon, 

Acting Secretary. 

[FR Doc. E8–23313 Filed 10–2–08; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–58676; File No. SR–ISE– 

2008–69] 

Self-Regulatory Organizations; Notice 

of Filing and Immediate Effectiveness 

of Proposed Rule Change by 

International Securities Exchange, LLC 

Relating to Amending the Fee 

Schedule 

September 29, 2008. 

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

Securities Exchange Act of 1934 (the 

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

notice is hereby given that on 

September 22, 2008, the International 

Securities Exchange, LLC (the 

‘‘Exchange’’ or the ‘‘ISE’’) filed with the 

Securities and Exchange Commission 

the proposed rule change as described 

in Items I, II, and III below, which items 

have been prepared by the selfregulatory organization. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The ISE is proposing to amend its 

Schedule of Fees with respect to 

transactions executed in securities 

reported to Tape B. The text of the 

proposed rule change is available on the 

Exchange’s Internet Web site at http:// 

www.ise.com. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

self-regulatory organization included 

statements concerning the purpose of, 

and basis for, the proposed rule change 

and discussed any comments it received 

on the proposed rule change. The text 

of these statements may be examined at 

the places specified in Item IV below. 

The self-regulatory organization has 

prepared summaries, set forth in 

sections A, B and C below, of the most 

significant aspects of such statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

On July 1, 2008, the Exchange 

adopted a fee structure for transactions 

in securities priced at or above $1.00 

that are reported to Tape B (hereinafter, 

referred to as Tape B securities) 

(excluding both order delivery and 

MidPoint Match orders) whereby the 

maker receives a per share rebate of 

$0.0017 and the taker fee is $0.0015 on 

all Tape B shares.3 For transactions in 

securities priced at or above $1.00 that 

are reported to Tape A and Tape C 

(hereinafter referred to as Tape A and 

Tape C securities), the Exchange applies 

a tiered rebate structure, averaged across 

an entire month, whereby the first five 

million maker shares executed on an 

average daily volume (ADV) basis 

receive a rebate of $0.0032 per share, 

with an increase in the rebate to $0.0035 

for each maker share executed above 

five million ADV. 

For order delivery orders in securities 

priced at or above $1.00, the Exchange 

provides a rebate of $0.0015 for maker 

shares executed in Tape B securities and 

a rebate of $0.0027 for maker shares 

executed in Tape A and Tape C 

securities. The Exchange is proposing to 

amend the equity fee schedule to apply 

equity fees consistently across all 

mstockstill on PROD1PC66 with NOTICES