67224 Federal Register / Vol. 79, No. 218 / Wednesday, November 12, 2014 / Notices 

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

2 17 CFR 240.19b–4. 

3 In Amendment No. 1, the Exchange proposed 

non-substantive changes to amend Exhibits 5D 

(Form of Swiss Parent Corporate Resolutions) and 

5G (Form of Swiss Parent Association Resolutions) 

so that the text the Exchange proposes to delete 

accurately reflects the existing text of the 

resolutions previously submitted to, and approved 

by, the Commission. 

4The Exchange’s affiliate, ISE Gemini, LLC (‘‘ISE 

Gemini’’), has submitted a nearly identical 

proposed rule change. See SR–ISEGemini–2014–24. 5See Securities Exchange Act Release No. 56955 

(December 13, 2007), 72 FR 71979 (December 19, 

2007) (SR–ISE–2007–101). 

6See Securities Exchange Act Release No. 66834 

(April 19, 2012), 77 FR 24752 (April 25, 2012) (SR– 

ISE–2012–21). Each of Deutsche Bo ̈rse, Eurex 

Frankfurt, Eurex Zu ̈rich, and EGD is referred to as 

a ‘‘Non-U.S. Upstream Owner’’ and collectively as 

the ‘‘Non-U.S. Upstream Owners.’’ 

7The ISE Holdings Preferred was issued with a 

par value of $.01 per share to finance, and thereby 

facilitate the completion of, the 2007 transaction 

described in SR–ISE–2007–101, supra note 5. 

8See supra note 5. 

9See COD, Section 5(a). ISE Holdings Preferred 

would have certain of such rights, if, for example, 

ISE Holdings were to (i) file a petition, application, 

answer or consent seeking reorganization or relief 

under any applicable bankruptcy law, (ii) formally 

approve a plan to dissolve or wind up, or (iii) fail 

to pay all accrued and unpaid ISE Holdings 

Preferred dividends in any two consecutive 

calendar years. See COD, Section 5(b). 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–73530; File No. SR–ISE– 

2014–44] 

Self-Regulatory Organizations; 

International Securities Exchange, 

LLC; Notice of Filing of Proposed Rule 

Change, as Modified by Amendment 

No. 1 Thereto, Relating to a Corporate 

Transaction Involving Its Indirect 

Parent 

November 5, 2014. 

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 October 

22, 2014, the International Securities 

Exchange, LLC (the ‘‘Exchange’’ or the 

‘‘ISE’’) filed with the Securities and 

Exchange Commission (‘‘Commission’’) 

the proposed rule change, as described 

in Items I and II below, which items 

have been prepared by the selfregulatory organization. On October 31, 

2014, the Exchange filed Amendment 

No. 1 to the proposal.3 The Commission 

is publishing this notice to solicit 

comments on the proposed rule change, 

as modified by Amendment No. 1, from 

interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of the Substance 

of the Proposed Rule Change 

The Exchange proposes to make 

changes to its indirect, non-U.S. 

upstream ownership structure (the 

‘‘Transactions’’), in connection with 

which the Series A Preferred Stock of 

the Exchange’s sole, direct parent, 

International Securities Exchange 

Holdings, Inc. (‘‘ISE Holdings’’), will be 

converted to shares of ISE Holdings 

common stock (the ‘‘Conversion’’). In 

order to consummate the Transactions, 

including the Conversion, the Exchange 

proposes to: (i) Amend and restate the 

Certificate of Designations of Series A 

Preferred Stock of ISE Holdings (the 

‘‘COD’’); (ii) amend and restate the 

Amended and Restated Certificate of 

Incorporation of ISE Holdings (the 

‘‘COI’’); and (iii) amend and restate the 

Second Amended and Restated Trust 

Agreement (the ‘‘Trust Agreement’’) that 

exists among ISE Holdings, U.S. 

Exchange Holdings, Inc. (‘‘U.S. 

Exchange Holdings’’), and the Trustees 

(as defined therein). The Exchange also 

proposes that certain corporate 

resolutions and agreements that were 

previously established or entered into 

by entities that will cease to be 

upstream owners of ISE after the 

Transactions will no longer be rules of 

the Exchange. In addition, the Exchange 

proposes to amend and restate the 

Second Amended and Restated Limited 

Liability Company Agreement of ISE 

(‘‘ISE LLC Agreement’’) with respect to 

distributions. Finally, the Exchange 

proposes to make a non-substantive, 

administrative change to the Second 

Amended and Restated Certificate of 

Incorporation of U.S. Exchange 

Holdings (‘‘U.S. Exchange Holdings 

COI’’), the direct U.S. upstream owner 

of ISE Holdings, to update a reference 

therein to the Trust Agreement. 

The text of the proposed rule change 

is available at the Commission’s Public 

Reference Room and on the Exchange’s 

Internet Web site at http://www.ise.com. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and the 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

self-regulatory organization included 

statements concerning the purpose of, 

and basis for, the proposed rule change 

and discussed any comments it received 

on the proposed rule change. The text 

of 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 the 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The purpose of the proposal is to 

make changes to the Exchange’s 

indirect, non-U.S. upstream ownership 

structure, in connection with which the 

Series A Preferred Stock of the 

Exchange’s sole, direct parent, ISE 

Holdings, will be converted to shares of 

ISE Holdings common stock.4

Background 

On December 17, 2007, ISE Holdings, 

the sole, direct parent of the Exchange, 

became a direct, wholly-owned 

subsidiary of U.S. Exchange Holdings.5

U.S. Exchange Holdings is a whollyowned, direct subsidiary of Eurex 

Frankfurt AG (‘‘Eurex Frankfurt’’). Eurex 

Frankfurt is a wholly-owned, direct 

subsidiary of Eurex Zu ̈rich AG (‘‘Eurex 

Zu ̈rich’’). Eurex Zu ̈rich is jointly-owned 

(50%/50%) by Deutsche Bo ̈rse AG 

(‘‘Deutsche Bo ̈rse’’) and Eurex Global 

Derivatives AG (‘‘EGD’’). EGD is a 

wholly-owned, direct subsidiary of 

Deutsche Bo ̈rse.6 Contemporaneous 

with becoming a direct, wholly-owned 

subsidiary of U.S. Exchange Holdings, 

ISE Holdings issued 100,000 shares of 

Series A Preferred Stock (‘‘ISE Holdings 

Preferred’’) to Eurex Services GmbH 

(‘‘ESG’’).7 ESG is a wholly-owned, direct 

subsidiary of Eurex Frankfurt. 

ISE Holdings Stock 

Two classes of ISE Holdings stock are 

currently issued and outstanding: (i) 

1,000 shares of common stock (‘‘ISE 

Holdings Common’’), which are held 

exclusively by U.S. Exchange 

Holdings—the sole, direct owner of ISE 

Holdings; and (ii) 100,000 shares of ISE 

Holdings Preferred, which are held 

exclusively by ESG. Both U.S. Exchange 

Holdings and ESG are wholly-owned, 

direct subsidiaries of Eurex Frankfurt. 

The ISE Holdings Preferred is provided 

for in the COD, which was adopted on 

December 19, 2007.8 Unlike the ISE 

Holdings Common, ISE Holdings 

Preferred generally does not have the 

right by its terms to vote in the election 

of the ISE Holdings Board of Directors 

or on other matters (other than matters 

affecting the rights, preferences, or 

privileges of ISE Holdings Preferred or 

as required by law or as set forth in the 

COD).9 These rights generally reside 

exclusively with the ISE Holdings 

Common. 

The Transactions 

The Transactions are designed to: (i) 

Simplify the indirect ownership 

structure of the Exchange among the 

various entities described above; and (ii) 


TKELLEY on DSK3SPTVN1PROD with NOTICES
Federal Register / Vol. 79, No. 218 / Wednesday, November 12, 2014 / Notices 67225 

10See infra notes 13, 14 and 23. 

11As referenced above, Deutsche Bo ̈rse is already 

the 100% indirect owner of Eurex Frankfurt. In 

addition, Deutsche Bo ̈rse also is already an 

approved Non-U.S. Upstream Owner of the 

Exchange. See supra note 6. 

12 In connection with each of their ownership 

interests in the Exchange, Eurex Zu ̈rich and EGD, 

along with Deutsche Bo ̈rse, Eurex Frankfurt, U.S. 

Exchange Holdings, ISE Holdings, and the 

Exchange, became parties to an agreement to 

provide for adequate funding for the Exchange’s 

regulatory responsibilities. ISE Gemini 

subsequently became a party to the agreement. 

Following the completion of the Transactions, each 

of Eurex Zu ̈rich and EGD will cease to be a NonU.S. Upstream Owner of the Exchange, and as such, 

will no longer be a party to such agreement. 13The proposed amended COD is attached hereto 

as Exhibit 5A. Section 8 of the COD provides that, 

with respect to amendments and waivers thereof, 

except as expressly provided for in the COD, no 

provision of the COD may be amended, except in 

a written instrument signed by ISE Holdings and 

holders of a majority of the ISE Holdings Preferred. 

Notwithstanding the foregoing, before any 

amendment to or repeal of any provision of the 

COD shall be effective, the same shall be submitted 

to the board of directors of the Exchange, and if the 

same must be filed with, or filed with and approved 

by, the Commission before the same may be 

effective, under Section 19 of the Act and the rules 

promulgated thereunder, then the same shall not be 

effective until filed with, or filed with and 

approved by, the Commission, as the case may be. 

In addition to the substantive changes, the 

Exchange proposes to retitle the COD as the 

‘‘Amended and Restated’’ Certificate of 

Designations of Series A Preferred Stock of ISE 

Holdings. 

14The proposed amended COI is attached hereto 

as Exhibit 5B. Article FOURTEENTH of the COI 

provides that, for so long as ISE Holdings shall 

control, directly or indirectly, the Exchange, or 

facility thereof, before any amendment to or repeal 

of any provision of COI shall be effective, the same 

shall be submitted to the board of directors of the 

Exchange, and if the same must be filed with, or 

filed with and approved by, the Commission before 

the same may be effective, under Section 19 of the 

Act and the rules promulgated thereunder, then the 

same shall not be effective until filed with, or filed 

with and approved by, the Commission, as the case 

may be. In addition to the substantive changes, the 

Exchange proposes to retitle the COI as the 

‘‘Second’’ Amended and Restated Certificate of 

Incorporation of ISE Holdings and update the date 

thereof. 

15See COI, Article FOURTH, Section III. 

create a more efficient capital structure 

with respect to U.S., German and Swiss 

laws. The Transactions will not have 

any effect on ISE Holdings’ direct 

ownership of the Exchange or the 

operations of the Exchange. 

Consummation of the Transactions is 

subject to approval of this proposed rule 

change by the Commission.10 In order to 

effectuate the Transactions, including 

the Conversion, the following steps are 

anticipated to occur sequentially: 

1. On or about December 19, 2014, 

Eurex Zu ̈rich will sell its 100% 

ownership in Eurex Frankfurt to 

Deutsche Bo ̈rse, whereby Eurex 

Frankfurt will become a wholly-owned, 

direct subsidiary of Deutsche Bo ̈rse;11

2. On or about December 21, 2014, 

Eurex Frankfurt will transfer its 100% 

ownership in ESG, the sole holder of the 

ISE Holdings Preferred, to U.S. 

Exchange Holdings; 

3. On or about December 21, 2014, 

and after completion of Step 2 above, 

U.S. Exchange Holdings, as the sole, 

direct owner of ESG, will cause ESG to 

distribute the ISE Holdings Preferred to 

U.S. Exchange Holdings; 

4. On or about December 22, 2014, 

Eurex Frankfurt, the sole, direct owner 

of U.S. Exchange Holdings, will cause 

U.S. Exchange Holdings to convert the 

ISE Holdings Preferred into ISE 

Holdings Common. Each of the 100,000 

shares of ISE Holdings Preferred will be 

converted to one share of ISE Holdings 

Common. After the Conversion, U.S. 

Exchange Holdings will continue to 

hold all of the issued and outstanding 

shares of ISE Holdings Common (1,000 

shares before and 101,000 shares after 

the Conversion); and 

5. On or about December 31, 2014, 

Eurex Frankfurt will transfer 15% of its 

ownership in U.S. Exchange Holdings to 

Deutsche Bo ̈rse. 

As a result of the Transactions, Eurex 

Zu ̈rich and EGD will cease to be NonU.S. Upstream Owners of the Exchange, 

as Deutsche Bo ̈rse will be the sole, 

direct owner of Eurex Frankfurt, which 

will directly own 85% of U.S. Exchange 

Holdings.12 Deutsche Bo ̈rse will directly 

own the remaining 15% of U.S. 

Exchange Holdings. U.S. Exchange 

Holdings will remain the sole, direct 

owner of ISE Holdings. ISE Holdings 

will also remain the sole, direct owner 

of the Exchange. The Transactions will 

not result in any additional person or 

entity acquiring direct or indirect 

ownership in the Exchange. 

In order to consummate the 

Transactions in the manner described 

above, certain administrative 

amendments will need to be made to the 

COD, COI and Trust Agreement. The 

proposed amendments to such 

documents are as follows: 

COD 

In order to effect the Conversion, the 

Exchange proposes to amend certain 

provisions of the COD, as Section 6(b) 

of the COD currently provides that the 

ISE Holdings Preferred is not 

convertible. Specifically, the Exchange 

proposes to amend Section 6(b) to 

provide that each share of ISE Holdings 

Preferred may, at the option of the 

holder thereof, be converted into one 

fully paid and non-assessable share of 

ISE Holdings Common on the date on 

which such holder delivers a duly 

executed notice of conversion to ISE 

Holdings substantially in the form of a 

new Annex A attached to the COD.13

COI 

Article FOURTH of the COI currently 

provides that the total number of shares 

of all classes of capital stock that ISE 

Holdings shall have authority to issue is 

one hundred one thousand (101,000) 

shares, which shall be divided as 

follows: one thousand (1,000) shares of 

ISE Holdings Common, par value $.01 

per share, and one hundred thousand 

(100,000) shares of ISE Holdings 

Preferred, par value $.01 per share. 

In connection with the proposed 

amendments to the COD, certain 

provisions of the COI will need to be 

amended to account for the increase in 

the authorized number of ISE Holdings 

Common that will result from the 

Conversion. Specifically, the Exchange 

proposes that the number of authorized 

shares of ISE Holdings Common be 

increased from 1,000 shares to 101,000 

shares (i.e., the existing, issued and 

outstanding 1,000 shares of ISE 

Holdings Common plus the additional 

100,000 shares of ISE Holdings Common 

resulting from the Conversion).14 In 

addition, the Exchange proposes to 

maintain the number of authorized ISE 

Holdings Preferred at 100,000 shares, in 

the event that ISE Holdings determines 

to issue ISE Holdings Preferred in the 

future. As such, the Exchange therefore 

proposes to increase the total number of 

authorized ISE Holdings Common and 

ISE Holdings Preferred from 101,000 

shares to 201,000 shares. For the 

avoidance of doubt, zero shares of ISE 

Holdings Preferred would be 

outstanding post-Conversion. 

The COI restricts any person, either 

alone or together with its related 

persons, from having voting control, 

either directly or indirectly, over more 

than 20% of the outstanding capital 

stock of ISE Holdings (the ‘‘Voting 

Limit’’) and from directly or indirectly 

owning of record or beneficially more 

than 40% of the outstanding capital 

stock of ISE Holdings (or in the case of 

any Exchange member, acting alone or 

together with its related persons, from 

directly or indirectly owning of record 

or beneficially more than 20% of the 

outstanding capital stock of ISE 

Holdings) (the ‘‘Ownership Limit’’).15

For the avoidance of doubt, the 

Conversion will not implicate the 

Voting Limit or Ownership Limit, as 

U.S. Exchange Holdings will continue to 

own 100% of the ISE Holdings Common 

before and after the Conversion. 

Similarly, no new direct or indirect 

upstream owners of the Exchange or ISE 


TKELLEY on DSK3SPTVN1PROD with NOTICES
67226 Federal Register / Vol. 79, No. 218 / Wednesday, November 12, 2014 / Notices 

16Each of the Non-U.S. Upstream Owners has 

previously taken appropriate steps to incorporate 

provisions regarding ownership, jurisdiction, books 

and records, and other issues related to their control 

of the Exchange. Specifically, each of the Non-U.S. 

Upstream Owners has adopted resolutions, which 

were previously approved by the Commission, to 

incorporate these concepts with respect to itself, as 

well as its board members, officers, employees, and 

agents (as applicable), to the extent that they are 

involved in the activities of the Exchange. See SR– 

ISE–2007–101, supra note 5; SR–ISE–2012–21, 

supra note 6. See also discussion below under 

‘‘Certain Resolutions and Agreements.’’ 

17The Trust Agreement exists among ISE 

Holdings, U.S. Exchange Holdings, and the Trustees 

(as defined therein). 

18Under the Trust Agreement, the term ‘‘Trust 

Shares’’ means either Excess Shares or Deposited 

Shares, or both, as the case may be. The term 

‘‘Excess Shares’’ means that a Person obtained an 

ownership or voting interest in ISE Holdings in 

excess of certain ownership and voting restrictions 

pursuant to Article FOURTH of the COI, through, 

for example, ownership of one of the Non-U.S. 

Upstream Owners or U.S. Exchange Holdings, 

without obtaining the approval of the Commission. 

The term ‘‘Deposited Shares’’ means shares that are 

transferred to the Trust pursuant to the Trust’s 

exercise of the Call Option. 

19Under the Trust Agreement, the term ‘‘Material 

Compliance Event’’ means, with respect to a NonU.S. Upstream Owner, any state of facts, 

development, event, circumstance, condition, 

occurrence or effect that results in the failure of any 

of the Non-U.S. Upstream Owners to adhere to their 

respective commitments under the resolutions (i.e., 

as referenced in note 16) in any material respect. 

20Under the Trust Agreement, the term ‘‘Call 

Option’’ means the option granted by the Trust 

Beneficiary to the Trust to call the Voting Shares 

as set forth in Section 4.2 therein. 

21Under the Trust Agreement, the term ‘‘Trust 

Beneficiary’’ means U.S. Exchange Holdings. 

22EDGA Exchange and EDGX Exchange 

previously were ‘‘Controlled National Securities 

Exchanges.’’ However, on January 30, 2014 the 

Commission approved a proposed rule change of 

EDGA Exchange and EDGX Exchange in connection 

with the proposed business combination involving 

their indirect parent company, Direct Edge 

Holdings LLC, and BATS Global Markets, Inc., the 

parent company of BATS Exchange, Inc. (‘‘BATS’’) 

and BATS–Y Exchange, Inc. (‘‘BYX’’). See 

Securities Exchange Act Release No. 71449 (January 

30, 2014), 79 FR 6961 (February 5, 2014) (SR– 

EDGA–2014–34; SR–EDGX–2014–43). As a result, 

EDGA Exchange and EDGX Exchange ceased to be 

‘‘Controlled National Securities Exchanges.’’ 

23The Trust Agreement is attached hereto as 

Exhibit 5C. Section 8.2 of the Trust Agreement 

provides, in part, that, for so long as ISE Holdings 

controls, directly or indirectly, the Exchange, before 

any amendment or repeal of any provision of the 

Trust Agreement shall be effective, such 

amendment or repeal shall be submitted to the 

board of directors of the Exchange, as applicable, 

and if such amendment or repeal must be filed with 

or filed with and approved by the Commission 

under Section 19 of the Act 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. In addition to the substantive changes, 

the Exchange proposes to retitle the Trust 

Agreement as the ‘‘Third’’ Amended and Restated 

Trust Agreement and update the date thereof. 

24See supra note 16. See also SR–ISE–2007–101, 

supra note 5; SR–ISE–2012–21, supra note 6. 25See SR–ISE–2012–21, supra note 6. 

Holdings will result from the 

Transactions.16

Trust Agreement 17

The Trust Agreement serves four 

general purposes: (i) To accept, hold 

and dispose of Trust Shares 18 on the 

terms and subject to the conditions set 

forth therein; (ii) to determine whether 

a Material Compliance Event 19 has 

occurred or is continuing; (iii) to 

determine whether the occurrence and 

continuation of a Material Compliance 

Event requires the exercise of the Call 

Option; 20 and (iv) to transfer Deposited 

Shares from the Trust to the Trust 

Beneficiary 21 as provided in Section 

4.2(h) therein. 

The Exchange proposes to amend 

certain provisions of the Trust 

Agreement in connection with the 

Transactions. Specifically, the Exchange 

proposes to: (i) Update the recitals of the 

Trust Agreement with respect to the 

Transactions; (ii) remove references to 

Eurex Zu ̈rich and EGD from the 

definition of ‘‘Affected Affiliate’’ in 

Section 1.1 of the Trust Agreement; (iii) 

remove references to EDGA Exchange, 

Inc. (‘‘EDGA Exchange’’) and EDGX 

Exchange, Inc. (‘‘EDGX Exchange’’) from 

the definition of ‘‘Controlled National 

Securities Exchange’’ in Section 1.1 and 

update the recitals of the Trust 

Agreement accordingly; 22 and (iv) 

remove EGD’s address from the notice 

provisions in Section 8.8 of the Trust 

Agreement.23 The proposed 

amendments to the Trust Agreement are 

strictly administrative changes to reflect 

the updated corporate structure 

resulting from the Transactions (and 

from legacy transactions as related to 

EDGA Exchange and EDGX Exchange) 

and will not affect the mechanisms 

established by the Trust Agreement for 

the benefit of the Trust Beneficiary. 

Certain Resolutions and Agreements 

As described above, each of the NonU.S. Upstream Owners, including EGD 

and Eurex Zu ̈rich, has previously taken 

appropriate steps to incorporate 

provisions regarding ownership, 

jurisdiction, books and records, and 

other issues related to their control of 

the Exchange. Specifically, each of such 

Non-U.S. Upstream Owners has adopted 

resolutions, which were previously 

approved by the Commission, to 

incorporate these concepts with respect 

to itself, as well as its board members, 

officers, employees, and agents (as 

applicable), to the extent that they are 

involved in the activities of the 

Exchange.24 For example, the resolution 

of each of such Non-U.S. Upstream 

Owners provides that it shall comply 

with the U.S. federal securities laws and 

the rules and regulations thereunder 

and shall cooperate with the 

Commission and with the Exchange. In 

addition, the resolution of each of such 

Non-U.S. Upstream Owners provides 

that the board members, including each 

person who becomes a board member, 

would so consent to comply and 

cooperate and the particular Non-U.S. 

Upstream Owner would take reasonable 

steps to cause its officers, employees, 

and agents to also comply and 

cooperate, to the extent that he or she 

is involved in the activities of the 

Exchange. 

In addition to these resolutions, and 

due to concerns about the ability of EGD 

to provide the Commission with direct 

access to information under Swiss law, 

EGD and Eurex Zu ̈rich previously 

entered into an ‘‘Agreement and 

Consent,’’ in which EGD agreed to 

provide information related to the 

activities of the Exchange, including 

books and records of EGD related to the 

activities of the Exchange, to the 

Commission, through Eurex Zu ̈rich. 

Eurex Zu ̈rich in turn, would provide 

such information to the Swiss Financial 

Market Supervisory Authority FINMA 

(‘‘FINMA’’), which agreed to serve as a 

conduit for unfiltered delivery of books 

and records of EGD related to the 

activities of the Exchange to the 

Commission (the ‘‘FINMA Procedure’’). 

The FINMA Procedure was designed to 

ensure that EGD would (1) cooperate 

with the Commission and the Exchange; 

(2) comply with U.S. federal securities 

laws; (3) comply with the inspection 

and copying of EGD’s books and 

records; (4) agree that EGD’s books, 

records, officers, directors and 

employees be deemed to be those of the 

Exchange; (5) maintain confidentiality 

of information pertaining to the selfregulatory function of the Exchange; (6) 

preserve the independence of the selfregulatory function of the Exchange; (7) 

take reasonable steps to cause EGD’s 

officers, directors and employees to 

consent to the applicability to him or 

her of the resolutions described 

immediately above; and (8) take 

reasonable steps to cause EGD’s agents 

to cooperate with the Commission and 

the Exchange.25

As EGD and Eurex Zu ̈rich will cease 

to be Non-U.S. Upstream Owners of the 

Exchange after the Transactions, the 

Exchange proposes administrative 

changes, such that the resolutions of 

these entities, as referenced above, along 

with the Agreement and Consent, will 

no longer be rules of the Exchange as of 

a date in December 2014 that 

corresponds to the effective closing date 

of the applicable step in the 


TKELLEY on DSK3SPTVN1PROD with NOTICES
Federal Register / Vol. 79, No. 218 / Wednesday, November 12, 2014 / Notices 67227 

26The ‘‘Form of Swiss Parent Corporate 

Resolutions’’ is attached hereto as Exhibit 5D in 

relation to Eurex Zu ̈rich. The ‘‘Form of EGD 

Corporate Resolution’’ is attached hereto as Exhibit 

5E. The ‘‘Form of Agreement and Consent between 

EGD and Eurex Zu ̈rich’’ is attached hereto as 

Exhibit 5F. As referenced above, resolutions in 

relation to board members, officers, employees, and 

agents (as applicable) of EGD and Eurex Zu ̈rich also 

would cease accordingly. 

27Specifically, SIX Swiss Exchange AG (‘‘SIX 

Swiss Exchange,’’ which was f/k/a SWX Swiss 

Exchange AG), SIX Group AG (‘‘SIX Group,’’ which 

was f/k/a SWX Group AG) and Verein SWX Swiss 

Exchange AG (‘‘Verein SWX’’) previously were 

Non-U.S. Upstream Owners of the Exchange. Their 

status as such ceased on April 30, 2012 when EGD 

became a Non-U.S. Upstream Owner of the 

Exchange. See SR–ISE–2012–21, supra note 6. The 

‘‘Form of Swiss Parent Corporate Resolutions’’ 

attached hereto as Exhibit 5D in relation to Eurex 

Zu ̈rich also serves to eliminate the respective 

resolutions for SIX Swiss Exchange and SIX Group 

as rules of the Exchange. The ‘‘Form of Swiss Parent 

Association Resolutions’’ attached hereto as Exhibit 

5G serves to eliminate the respective resolutions for 

Verein SWX as rules of the Exchange. Additionally, 

and as described in note 26, resolutions in relation 

to board members, officers, employees, and agents 

(as applicable) of SIX Swiss Exchange, SIX Group 

and Verein SWX also would cease accordingly. 

28 6 Del.C. § 18–101, et seq. 

29Existing Section 3.3 of the ISE LLC Agreement 

would be renumbered accordingly as Section 3.4. 

For purposes of proposed new Section 3.3, the term 

‘‘Regulatory Funds’’ means fees, fines or penalties 

derived from the regulatory operations of the 

Exchange, provided that Regulatory Funds does not 

include revenues derived from listing fees, market 

data revenues, transaction revenues or any other 

aspect of the commercial operations of the 

Exchange or a facility of the Exchange, even if a 

portion of such revenues are used to pay costs 

associated with the regulatory operations of the 

Exchange. As a result of the change, the ISE LLC 

Agreement and the ISE Gemini limited liability 

company agreement would address distributions in 

the same manner. See Securities Exchange Act 

Release No. 73196 (September 23, 2014), 79 FR 

58387 (September 29, 2014) (SR–ISEGemini-2014– 

23). ISE Gemini is proposing a related change to its 

respective limited liability company agreement in 

SR–ISEGemini-2014–24. As a result, the language 

would be identical for both the Exchange and ISE 

Gemini. 

30The proposed amended ISE LLC Agreement is 

attached hereto as Exhibit 5H. In addition to these 

substantive changes, the Exchange proposes to 

retitle the ISE LLC Agreement as the ‘‘Third’’ 

Amended and Restated Limited Liability Company 

Agreement, update the date thereof, update the 

table of contents, update the name of the 

Exchange’s President and Chief Executive Officer 

and update the address of the Registered Agent in 

Section 1.5. 

31See supra note 6. 

32The proposed amended U.S. Exchange 

Holdings COI is attached hereto as Exhibit 5I. 

Article SIXTEENTH of the U.S. Exchange Holdings 

COI provides that, for so long as U.S. Exchange 

Holdings shall control, directly or indirectly, the 

Exchange, or facility thereof, before any amendment 

to or repeal of any provision of the U.S. Exchange 

Holdings COI shall be effective, the same shall be 

submitted to the board of directors of the Exchange, 

and if the same must be filed with, or filed with 

and approved by, the Commission before the same 

may be effective, under Section 19 of the Act and 

the rules promulgated thereunder, then the same 

shall not be effective until filed with, or filed with 

and approved by, the Commission, as the case may 

be. 

33See supra note 22. 

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

35 15 U.S.C. 78s(b)(1). 

Transactions.26 The Exchange proposes 

further administrative changes related to 

similar resolutions of entities that had 

previously been Non-U.S. Upstream 

Owners of the Exchange, but whose 

status as such has since ceased, such 

that these resolutions would similarly 

cease to be rules of the Exchange.27

ISE LLC Agreement 

In addition to the changes described 

above, the Exchange proposes to amend 

the ISE LLC Agreement with respect to 

distributions. Section 3.1 of the ISE LLC 

Agreement currently provides, in part, 

that the Exchange is authorized to issue 

a single class of Limited Liability 

Company Interest, as defined in the 

Delaware Limited Liability Company 

Act,28 to ISE Holdings, its sole direct 

parent, which shall convey all rights to 

the profits and losses of the Exchange 

and the right to receive distributions of 

the assets of the Exchange. Currently, 

however, Article III of the ISE LLC 

Agreement does not specifically address 

any restrictions on such distributions. 

Proposed new Section 3.3 to the ISE 

LLC Agreement would provide that, 

notwithstanding any provision to the 

contrary contained in the ISE LLC 

Agreement, (i) the Exchange would not 

be required to make a distribution to ISE 

Holdings if such distribution would 

violate the Delaware Limited Liability 

Company Act, any other applicable law, 

or is otherwise required to fulfill the 

regulatory functions or responsibilities 

of the Exchange, and (ii) Regulatory 

Funds will not be used for nonregulatory purposes, but rather shall be 

used to fund the legal, regulatory and 

surveillance operations of the Exchange 

and the Exchange will not make any 

distribution to ISE Holdings using 

Regulatory Funds.29 The addition of 

proposed new Section 3.3 to the ISE 

LLC Agreement would ensure that any 

distributions by the Exchange to ISE 

Holdings, and subsequently to its 

indirect upstream owners, including 

U.S. Exchange Holdings and the NonU.S. Upstream Owners, would not be 

made: (i) In violation of the xchange’s 

legal and regulatory responsibilities; or 

(ii) with Regulatory Funds.30

U.S. Exchange Holdings COI 

Lastly, the Exchange proposes to 

make a non-substantive, administrative 

change to the U.S. Exchange Holdings 

COI to update a reference therein to the 

Trust Agreement. Article THIRTEENTH 

of the U.S. Exchange Holdings COI 

contains outdated references to (i) the 

‘‘Amended and Restated’’ Trust 

Agreement, which is currently the 

‘‘Second Amended and Restated’’ Trust 

Agreement and, as discussed herein, 

will become the ‘‘Third Amended and 

Restated’’ Trust Agreement; and (ii) the 

effective date of the Trust Agreement, 

which previously changed from 

February 4, 2010 to April 30, 2012 31

and, as discussed herein, will further 

change to a date in December 2014 that 

corresponds to the effective closing date 

of the applicable step in the 

Transactions. The Exchange proposes to 

update these references. The Exchange 

also proposes to add language 

specifying that the Trust Agreement 

may be amended, restated or replaced 

from time to time, retitle the document 

as the ‘‘Third’’ Amended and Restated 

Certificate of Incorporation of U.S. 

Exchange Holdings, and update the 

effective date thereof.32 Finally, the 

Exchange proposes to remove references 

to EDGA Exchange and EDGX Exchange 

from the definition of ‘‘Controlled 

National Securities Exchange’’ in Article 

TENTH.33

Summary 

Upon the consummation of the 

Transactions, including the proposed 

changes to the COD, COI, Trust 

Agreement, ISE LLC Agreement, and 

U.S. Exchange Holdings COI (and 

related resolutions and agreements 

ceasing to be rules of the Exchange), the 

Exchange will continue to operate and 

regulate its market and members in the 

same exact manner as it did prior to the 

Transactions. The Transactions will not 

impair the ability of ISE Holdings, the 

Exchange, or any facility thereof, to 

carry out their respective functions and 

responsibilities under the Act. 

Moreover, the Transactions will not 

impair the ability of the Commission to 

enforce the Act with respect to the 

Exchange and its Non-U.S. Upstream 

Owners, including each of their 

directors, officers, employees and 

agents, to the extent they are involved 

in the activities of the Exchange. As 

such, the Commission’s plenary 

regulatory authority over the Exchange 

will not be affected by the approval of 

this proposed rule change. 

2. Statutory Basis 

The Exchange believes that this 

proposal is consistent with Section 

6(b)of the Act,34 in general, and furthers 

the objectives of Section 6(b)(1) of the 

Act,35 in particular, in that it enables the 

Exchange to be so organized as to have 

the capacity to be able to carry out the 

purposes of the Act and to comply, and 

to enforce compliance by its exchange 

members and persons associated with 


TKELLEY on DSK3SPTVN1PROD with NOTICES
67228 Federal Register / Vol. 79, No. 218 / Wednesday, November 12, 2014 / Notices 

36 15 U.S.C. 78f(b)(5). 37 15 U.S.C. 78f(b)(8). 

its exchange members, with the 

provisions of the Act, the rules and 

regulations thereunder, and the rules of 

the Exchange. The Exchange will 

operate in the same manner following 

the Transactions as it operates today. 

Thus, the Commission will continue to 

have plenary regulatory authority over 

the Exchange, as is the case currently 

with the Exchange. The proposed rule 

change is consistent with and will 

facilitate an ownership structure that 

will continue to provide the 

Commission with appropriate oversight 

tools to ensure that the Commission will 

have the ability to enforce the Act with 

respect to the Exchange and its direct 

and indirect Non-U.S. Upstream 

Owners, including each of their 

directors, officers, employees and 

agents, to the extent they are involved 

in the activities of the Exchange. 

The Exchange also believes that this 

filing furthers the objectives of Section 

6(b)(5) 36 of the Act because the 

proposed rule change would be 

consistent with and facilitate a 

governance and regulatory structure that 

is designed to prevent fraudulent and 

manipulative acts and practices, to 

promote just and equitable principles of 

trade, to foster cooperation and 

coordination with persons engaged in 

regulating, clearing, settling, processing 

information with respect to, and 

facilitating transactions in securities, to 

remove impediments to, and perfect the 

mechanism of a free and open market 

and a national market system and, in 

general, to protect investors and the 

public interest. Specifically, the 

Exchange believes that the proposed 

rule change will continue to provide the 

Commission and the Exchange with 

access to necessary information that will 

allow the Exchange to efficiently and 

effectively enforce compliance with the 

Act, as well as allow the Commission to 

provide proper oversight, which will 

ultimately promote just and equitable 

principles of trade and protect investors. 

In addition, the Exchange believes that 

the proposed rule change will continue 

to preserve the independence of the 

Exchange’s self-regulatory function and 

ensure that the Exchange will be able to 

obtain any information it needs in order 

to detect and deter any fraudulent and 

manipulative acts in its marketplace and 

carry out its regulatory responsibilities 

under the Act. 

Approval of this proposed rule change 

will enable ISE Holdings to continue its 

operations and the Exchange to 

continue its orderly discharge of 

regulatory duties to prevent fraudulent 

and manipulative acts and practices, to 

promote just and equitable principles of 

trade, to foster cooperation and 

coordination with persons engaged in 

regulating, clearing, settling, processing 

information with respect to, and 

facilitating transactions in securities, to 

remove impediments to and perfect the 

mechanism of a free and open market 

and a national market system, and, in 

general, to protect investors and the 

public interest. 

Finally, the Exchange is not proposing 

any significant or novel regulatory 

issues, nor is it proposing any changes 

to the Exchange’s operational or trading 

structure in connection with the 

Transactions. Instead, the Exchange 

represents that the proposed rule change 

consists of administrative amendments 

to ISE Holdings’ COI, COD and the Trust 

Agreement (along with changes to the 

ISE LLC Agreement related to 

distributions; a non-substantive, 

administrative change to the U.S. 

Exchange Holdings COI; and 

administrative changes with respect to 

certain resolutions and agreements in 

relation to entities that are or were NonU.S. Upstream Owners of the Exchange, 

but whose status as such has already 

ceased, or that will cease as a result of 

the Transactions, such that the 

resolutions and agreements will cease to 

be rules of the Exchange), and that no 

changes will be made to other aspects of 

the Exchange’s organizational 

documents that were previously 

approved by the Commission. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

In accordance with Section 6(b)(8) of 

the Act,37 the Exchange believes that the 

proposed rule change would not impose 

any burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act. The 

Exchange does not believe that the 

proposed rule change implicates any 

competitive issues. Rather, the 

Transactions merely represent a 

restructuring of indirect ownership 

interests of the Exchange, and will not 

involve the introduction of any new 

direct or indirect owners or any entity 

or individual that would have the right 

to direct the actions of the Exchange or 

vote the shares of the Exchange. As 

such, the Exchange believes that the 

proposal is consistent with the Act. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

The Exchange has not solicited, and 

does not intend to solicit, comments on 

this proposed rule change. The 

Exchange has not received any 

unsolicited written comments from 

members or other interested parties. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Within 45 days of the publication date 

of this notice or within such longer 

period (1) as the Commission may 

designate up to 45 days of such date if 

it finds such longer period to be 

appropriate and publishes its reasons 

for so finding or (2) as to which the selfregulatory organization consents, the 

Commission will: 

(A) By order approve or disapprove 

such Proposed Rule Change; or 

(B) institute proceedings to determine 

whether the Proposed Rule Change 

should be disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change, as modified by Amendment No. 

1, is consistent with the Act. Comments 

may be submitted by any of the 

following methods: 

Electronic Comments 

• Use the Commission’s Internet 

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

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

ISE–2014–44 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Brent J. Fields, Secretary, Securities 

and Exchange Commission, 100 F Street 

NE., Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–ISE–2014–44. This file 

number should be included on the 

subject line if email is used. 

To help the Commission process and 

review your comments more efficiently, 

please use only one method. The 

Commission will post all comments on 

the Commission’s Internet Web site 

(http://www.sec.gov/rules/sro.shtml). 

Copies of the submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

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

available for Web site viewing and 

printing in the Commission’s Public 


TKELLEY on DSK3SPTVN1PROD with NOTICES
Federal Register / Vol. 79, No. 218 / Wednesday, November 12, 2014 / Notices 67229 

38 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3 In lieu of marking each individual fee level with 

the definition of Consolidated Volume, where 

applicable, the Exchange is inserting the definition 

prior to the schedule of fees under subparagraph 

(a)(1) of the rule. 

Reference Room on official business 

days between the hours of 10:00 a.m. 

and 3:00 p.m. Copies of such filing also 

will be available for inspection and 

copying at the principal offices of the 

Exchange. All comments received will 

be posted without change; the 

Commission does not edit personal 

identifying information from 

submissions. You should submit only 

information that you wish to make 

available publicly. All submissions 

should refer to File Number SR–ISE– 

2014–44, and should be submitted on or 

before December 3, 2014. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.38

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2014–26690 Filed 11–10–14; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–73535; File No. SR–Phlx– 

2014–70] 

Self-Regulatory Organizations; 

NASDAQ OMX PHLX LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change To Amend the 

Exchange’s Pricing Schedule Under 

Section VIII With Respect to Execution 

and Routing of Orders in Securities 

Priced at $1 or More Per Share and the 

Excess Order Fee 

November 5, 2014 

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

Securities Exchange Act of 1934 

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

notice is hereby given that on October 

24, 2014, NASDAQ OMX PHLX LLC 

(‘‘Phlx’’ or ‘‘Exchange’’) filed with the 

Securities and Exchange Commission 

(‘‘SEC’’ or ‘‘Commission’’) the proposed 

rule change as described in Items I, II, 

and III below, which Items have been 

prepared by the Exchange. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of the Substance 

of the Proposed Rule Change 

The Exchange proposes to amend the 

Exchange’s Pricing Schedule under 

Section VIII, entitled ‘‘NASDAQ OMX 

PSX FEES,’’ with respect to execution 

and routing of orders in securities 

priced at $1 or more per share and to 

eliminate the Excess Order Fee. 

While changes to the Pricing 

Schedule pursuant to this proposal are 

effective upon filing, the Exchange has 

designated that they become operative 

on November 3, 2014. The text of the 

proposed rule change is available on the 

Exchange’s Web site at http://

nasdaqomxphlx.cchwallstreet.com/, at 

the principal office of the Exchange, and 

at the Commission’s Public Reference 

Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

Exchange included statements 

concerning the purpose of and basis for 

the proposed rule change and discussed 

any comments it received on the 

proposed rule change. The text of these 

statements may be examined at the 

places specified in Item IV below. The 

Exchange has prepared summaries, set 

forth in sections A, B, and C below, of 

the most significant aspects of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The purpose of the proposed changes 

to Chapter VIII of the Exchange’s Pricing 

Schedule is to reduce the fee assessed 

for shares executed on the NASDAQ 

OMX PSX System (‘‘PSX’’) in securities 

listed on the Nasdaq Stock Market 

(‘‘Nasdaq’’) and traded at $1 or more per 

share, to modify the eligibility 

requirements of two credits provided for 

providing displayed liquidity in 

securities traded at $1 or more per 

share, and to eliminate the Excess Order 

Fee under the rule. 

Chapter VIII(a)(1) of the PSX Pricing 

Schedule concerns fees assessed for 

execution of quotes/orders on PSX in 

securities priced at $1 or more per share 

that are Nasdaq-listed, are listed on the 

New York Stock Exchange (‘‘NYSE’’) 

and listed on exchanges other than 

Nasdaq and NYSE. The Exchange 

currently assesses three separate fees for 

execution of securities based on the 

venue on which the security is listed. 

Specifically, the Exchange assesses a 

charge of $0.0024 per share executed in 

securities listed on NYSE, $0.0024 per 

share executed in securities listed on an 

exchange other than Nasdaq or NYSE, 

and $0.0026 per share executed in 

securities listed on Nasdaq. The 

Exchange is proposing to reduce the fee 

assessed for execution of Nasdaq-listed 

securities on PSX to $0.0024 per share 

executed. Reducing the fee will 

harmonize the fees currently assessed 

member organizations that are 

participants on PSX for removing 

liquidity from PSX and may attract more 

volume to PSX in Nasdaq-listed 

securities. 

The Exchange is also proposing to 

amend the eligibility requirements of 

two credits provided under the rule to 

member organizations that provide 

displayed liquidity on PSX. First, the 

Exchange currently provides a credit of 

$0.0025 per share executed for Quotes/ 

Orders entered by a member 

organization that provides an average 

daily volume of 6 million or more 

shares of liquidity during the month; 

provided that (i) the Quote/Order is 

entered through a PSX MPID through 

which the member organization 

displays, on average over the course of 

the month, 100 shares or more at the 

national best bid and/or national best 

offer at least 25% of the time during 

regular market hours in the security that 

is the subject of the Quote/Order, or (ii) 

the member organization displays, on 

average over the course of the month, 

100 shares or more at the national best 

bid and/or national best offer at least 

25% of the time during regular market 

hours in 500 or more securities. The 

Exchange is proposing to eliminate the 

6 million average daily volume 

requirement and replace it with a 

requirement to have average daily 

volume in shares of liquidity during the 

month that represents at least 0.12% of 

Consolidated Volume, which the 

Exchange defines as the total 

consolidated volume reported to all 

consolidated transaction reporting plans 

by all exchanges and trade reporting 

facilities during a month, excluding 

executed orders with a size of less than 

one round lot.3 Replacing the current 

average daily volume requirement with 

an average daily volume requirement 

based on Consolidated Volume will 

cause the required level of liquidity 

provision to vary depending on overall 

market volumes during the month. As 

such, the change is expected to increase 

the number of member organizations 

that qualify for this credit tier during 

months when overall trading volumes 

are lower, by allowing the required level 

of liquidity provision to vary with 

overall trading volumes, and conversely 

reduce the number of member 

organizations eligible for the credit 

when market volumes are high, for firms 


TKELLEY on DSK3SPTVN1PROD with NOTICES