Document ID: SEC-2017-0710-0001
Agency: sec
Document Type: Notice
Title: Exemption Applications: New York Stock Exchange LLC, NYSE MKT LLC, NYSE Arca, Inc., and NYSE National, Inc.
Posted Date: 2017-05-03T04:00Z

[Federal Register Volume 82, Number 84 (Wednesday, May 3, 2017)]
[Notices]
[Pages 20671-20673]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-08891]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80536

Order Granting Application by New York Stock Exchange LLC, NYSE 
MKT LLC, NYSE Arca, Inc., and NYSE National, Inc., Respectively, for a 
Conditional Exemption Pursuant to Section 36(a) of the Exchange Act 
From Certain Requirements of Rule 6a-2 Under the Exchange Act

April 27, 2017.

I. Introduction

    On February 1, 2017, The New York Stock Exchange LLC (``NYSE''), 
NYSE MKT LLC (``NYSE MKT''), NYSE Arca, Inc. (``NYSE Arca''), and NYSE 
National, Inc. (``NYSE National'') (each an ``Exchange'', collectively, 
``Exchanges'') each has requested, pursuant to Rule 0-12 \1\ under the 
Securities Exchange Act of 1934 (``Exchange Act''),\2\ that the 
Securities and Exchange Commission (``Commission'') grant an exemption 
pursuant to Section 36(a)(1) \3\ of the Exchange Act from certain 
requirements under Rule 6a-2(b)(1) under the Exchange Act.\4\ Each 
Exchange is registered with the Commission as a national securities 
exchange under Section 6 of the Exchange Act. This order grants each 
Exchange's request for exemptive relief, subject to the satisfaction of 
certain conditions, which are outlined below.
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    \1\ 17 CFR 240.0-12.
    \2\ 15 U.S.C. 78a et seq.
    \3\ 15 U.S.C. 78mm(a)(1).
    \4\ 17 CFR 240.6a-2(b)(1). See letters dated February 1, 2017, 
from Elizabeth King, General Counsel and Corporate Secretary, NYSE, 
to Brent J. Fields, Secretary, Commission, regarding Application for 
Exemption from Certain Form 1 Requirements under Section 6 of the 
Securities Exchange Act of 1934, submitted on behalf of NYSE, NYSE 
MKT, NYSE Arca, and NYSE National, respectively (collectively, the 
``Exemption Requests'').
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II. Application for Conditional Exemption From Certain Requirements of 
Exchange Act Rule 6a-2

    Rule 6a-2(b)(1) under the Exchange Act \5\ requires a national 
securities exchange to file, on or before June 30 of each year, an 
updated Exhibit D as an amendment to its Form 1.\6\ Exhibit D to Form 1 
requires an exchange to provide, for each subsidiary or affiliate of 
the exchange, unconsolidated financial statements for the latest fiscal 
year of the exchange.\7\
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    \5\ 17 CFR 240.6a-2(b)(1).
    \6\ 17 CFR 249.1 (Form 1, ``Application for, and Amendments to 
Application for, Registration as a National Securities Exchange or 
Exemption from Registration Pursuant to Section 5 of the Exchange 
Act.'')
    \7\ Exhibit D to Form 1 requires that such financial statements 
consist, at a minimum, of a balance sheet and an income statement 
with such footnotes and other disclosures necessary to avoid 
rendering the financial statements misleading. Exhibit D further 
provides that, if any affiliate or subsidiary is required by another 
Commission rule to submit annual financial statements, the exchange 
may provide a statement to that effect, with a citation to the other 
Commission rule, in lieu of the financial statements required by 
Exhibit D.
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    The Instructions to Form 1 define an ``affiliate'' as ``[a]ny 
person that, directly or indirectly, controls, is under common control 
with, or is controlled by, the national securities exchange . . ., 
including any employees.'' \8\ The Instructions to Form 1 define 
``control'' as
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    \8\ Form 1 Instructions Section B., Explanation of Terms.

    The power, directly or indirectly, to direct the management or 
policies of a company, whether through ownership of securities, by 
contract or otherwise. Any person that . . . directly or indirectly 
has the right to vote 25% or more of a class of voting securities or 
has the power to sell or direct the sale of 25% or more of a class 
of voting securities . . . is presumed to control that entity.\9\
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    \9\ Id.

    Each Exchange has requested that the Commission grant it an 
exemption pursuant to Section 36(a)(1) of the Exchange Act, subject to 
the conditions set forth below, with respect to its ``Foreign Indirect 
Affiliates,'' as defined below, from the requirement under Rule 6a-
2(b)(1) under the Exchange Act to file the financial information 
required by Exhibit D.
    Each Exemption Request states that the respective Exchange is a 
wholly-owned subsidiary of NYSE Group, Inc. (``NYSE Group''), a 
Delaware corporation. Each Exemption Request further states that NYSE 
Group is wholly owned by NYSE Holdings LLC (``NYSE Holdings''), a 
Delaware limited liability company, which is wholly owned by 
Intercontinental Exchange Holdings, Inc. (``ICE Holdings''), a Delaware 
corporation. In turn, ICE Holdings is wholly owned by Intercontinental 
Exchange, Inc. (``Parent Company''), a Delaware corporation. The Parent 
Company, through its wholly-owned subsidiaries, owns a large number of 
foreign entities, some of which also own interests in other foreign 
entities in excess of 25%.\10\ The foreign entity affiliates and 
subsidiaries of the Parent Company are referred to, collectively, as 
the ``Foreign Indirect Affiliates.''
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    \10\ See Exemption Requests, supra note 4, at 2.
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    Each Exchange states that, because of the limited and indirect 
nature of its

[[Page 20672]]

connection to the Foreign Indirect Affiliates, the Exchange believes 
that the respective financial information of the Foreign Indirect 
Affiliates required by Exhibit D of Form 1 would have little relevance 
to the Commission's ongoing oversight of the Exchange as a national 
securities exchange.\11\ Each Exchange also states that the Foreign 
Indirect Affiliates have no ability to influence the management, 
policies, or finances of the Exchange and have no obligation to provide 
funding to, or ability to materially affect the funding of, the 
Exchange.\12\ Each Exchange further states that the Foreign Indirect 
Affiliates have no ownership interest in the Exchange or in any of the 
controlling shareholders of the Exchange and that there are no 
commercial dealings between the Exchange and the Foreign Indirect 
Affiliates.\13\
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    \11\ See Exemption Requests, supra note 4, at 2-3.
    \12\ See Exemption Requests, supra note 4, at 3.
    \13\ See Exemption Requests, supra note 4, at 3. Each Exchange 
states that ``commercial dealings'' means any direct or indirect 
arrangement, agreement, or understanding or any other relationship 
including, but not limited to, the providing of hardware, software, 
technology services or any other goods or services that support the 
operation of the Exchange or any facility of the Exchange. See 
Exemption Requests at 3, n. 6.
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    Furthermore, each Exchange states its opinion that its obtaining 
detailed financial information with respect to the Foreign Indirect 
Affiliates is unnecessary for the protection of investors and the 
public interest, and would be unduly burdensome and inefficient because 
the Foreign Indirect Affiliates are located in foreign jurisdictions 
and the disclosure of such information could implicate foreign 
information sharing restrictions in such jurisdictions.\14\ Each 
Exchange notes that the Commission has granted similar exemptions to 
several other national securities exchanges.\15\ In connection with its 
Exemption Request, each Exchange has provided an organizational chart 
setting forth the Parent Company's corporate structure, including its 
subsidiaries, and noting the affiliation of the Foreign Indirect 
Affiliates and the Exchange.\16\ In addition, each Exchange represents 
that it will provide, on or before June 30th of each year, amendments 
to the information provided on the organizational chart setting forth 
the affiliation of the Foreign Indirect Affiliates and the 
Exchange.\17\
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    \14\ See Exemption Requests, supra note 4, at 3.
    \15\ As examples, each Exchange cites to Securities Exchange Act 
Release Nos. 60650 (September 11, 2009), 74 FR 47828 (September 17, 
2009) (granting application by EDGX Exchange, Inc. (n/k/a Bats EDGX 
Exchange, Inc.) and EDGA Exchange, Inc. (n/k/a Bats EDGA Exchange, 
Inc.) for a conditional exemption pursuant to Section 36(a) of the 
Exchange Act from certain requirements of Rules 6a-1 and 6a-2 under 
the Exchange Act); 66241 (January 26, 2012), 77 FR 4845 (January 31, 
2012) (granting application by BOX Options Exchange LLC for a 
conditional exemption pursuant to Section 36(a) of the Exchange Act 
from certain requirements of Rules 6a-1 and 6a-2 under the Exchange 
Act); and 69011 (March 1, 2013), 78 FR 14844 (March 7, 2013) 
(granting application by Topaz Exchange, LLC (n/k/a ISE Gemini, LLC) 
for a conditional exemption pursuant to Section 36(a) of the 
Exchange Act from certain requirements of Rules 6a-1 and 6a-2 under 
the Exchange Act). See Exemption Requests at 3. The Commission also 
granted a similar exemption to ISE Mercury, LLC. See Securities 
Exchange Act Release No. 75867 (September 9, 2015), 80 FR 55395 
(September 15, 2015) (granting application by ISE Mercury, LLC for a 
conditional exemption pursuant to Section 36(a) of the Exchange Act 
from certain requirements of Rules 6a-1 and 6a-2 under the Exchange 
Act).
    \16\ See Exhibit A to the Exemption Requests, supra note 4.
    \17\ See Exemption Requests, supra note 4, at 2.
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III. Order Granting Conditional Section 36 Exemption

    Section 6 of the Exchange Act \18\ sets forth a procedure for an 
exchange to register as a national securities exchange.\19\ Rule 6a-
1(a) under the Exchange Act \20\ requires an application for 
registration as a national securities exchange to be filed on Form 1 in 
accordance with the instructions in Form 1. Rule 6a-2 under the 
Exchange Act establishes ongoing requirements for a national securities 
exchange to file certain amendments to Form 1.
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    \18\ 15 U.S.C. 78f.
    \19\ Specifically, Section 6(a) of the Exchange Act states that 
``[a]n exchange may be registered as a national securities exchange 
. . . by filing with the Commission an application for registration 
in such form as the Commission, by rule, may prescribe containing 
the rules of the exchange and such other information and documents 
as the Commission, by rule, may prescribe as necessary or 
appropriate in the public interest or for the protection of 
investors.'' Section 6 of the Exchange Act also sets forth various 
requirements to which a national securities exchange is subject.
    \20\ 17 CFR 240.6a-1(a).
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    Section 36(a)(1) of the Exchange Act provides that ``the 
Commission, by rule, regulation, or order, may conditionally or 
unconditionally exempt any person, security, or transaction, or any 
class or classes of persons, securities, or transactions, from any 
provision or provisions of [the Exchange Act] or of any rule or 
regulation thereunder, to the extent that such exemption is necessary 
or appropriate in the public interest, and is consistent with the 
protection of investors.'' \21\
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    \21\ 15 U.S.C. 78mm(a)(1).
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    For the reasons discussed below, the Commission believes that it is 
appropriate in the public interest and consistent with the protection 
of investors to exempt the Exchanges from the requirement under Rule 
6a-2(b)(1) under the Exchange Act to provide the information required 
in Exhibit D to Form 1 with respect to the Foreign Indirect Affiliates, 
subject to the following conditions:
    (1) Each Exchange must provide, as part of its annual Form 1 
amendment due on or before June 30th of each year, a list of the names 
of the Foreign Indirect Affiliates for which the Exchange is relying on 
exemptive relief; and
    (2) Each Exchange must provide, as part of its annual Form 1 
amendment due on or before June 30th of each year, an organizational 
chart setting forth the affiliation of all affiliates, including those 
Foreign Indirect Affiliates for which the Exchange is relying on 
exemptive relief.
    The information included in a national securities exchange's annual 
amendment to Exhibit D to Form 1 under Rule 6a-2(b)(1) under the 
Exchange Act is designed to help the Commission exercise its oversight 
responsibilities with respect to national securities exchanges. 
Specifically, Exhibit D is designed to provide the Commission with 
information concerning the financial status of the affiliates and 
subsidiaries of a national securities exchange.\22\ Such information is 
intended to help the Commission to assess the financial health of the 
affiliates and subsidiaries of a national securities exchange and thus 
to determine whether a national securities exchange has the ability to 
carry out its obligations under the Exchange Act.
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    \22\ See Securities Exchange Act Release No. 18843 (June 25, 
1982), 47 FR 29259 (July 6, 1982) (proposing amendments to Form 1); 
see also Form 1, 17 CFR 249.1, and supra Section II.
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    Since the most recent amendments to Form 1 in 1998,\23\ many 
national securities exchanges that previously were member-owned 
organizations with few affiliated entities have demutualized. Some of 
these demutualized exchanges have been consolidated under holding 
companies with numerous affiliates that, in some cases, have only a 
limited and indirect connection to the national securities exchange, 
with no ability to influence the management or policies of the national 
securities exchange and no obligation to fund, or to materially affect 
the funding of, the national securities exchange. The Commission 
believes that, with respect to these Foreign Indirect Affiliates, the 
information required under Exhibit D would have limited relevance to 
the Commission's

[[Page 20673]]

oversight of a registered national securities exchange.
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    \23\ See Securities Exchange Act Release No. 40760 (December 8, 
1998), 63 FR 70844 (December 22, 1998) (Regulation ATS Adopting 
Release).
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    Based on the Exchanges' representations, the limited and indirect 
nature of the relationship between the Exchanges and the Foreign 
Indirect Affiliates, and the information that the Exchanges will 
provide with respect to all other affiliates, including the foreign 
direct affiliates and domestic direct and indirect affiliates, the 
Commission believes that it will have sufficient information necessary 
to oversee the Exchanges' activities as national securities exchanges 
under the Exchange Act.\24\ In particular, the Commission notes that 
each Exchange has represented that the nature of the connection between 
it and the Foreign Indirect Affiliates is limited and indirect, that 
the Foreign Indirect Affiliates would have no ability to influence the 
management, policies, or finances of the Exchanges, and that the 
Foreign Indirect Affiliates would have no obligation to provide funding 
to, or ability to materially affect the funding of, the Exchanges.
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    \24\ 15 U.S.C. 78f(b) and 78s(a).
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    In addition, the Commission notes that the Exchanges have 
represented that the Foreign Indirect Affiliates have no ownership 
interest in the Exchanges or in any of the controlling shareholders of 
the Exchanges and that there are no commercial dealings between any of 
the Exchanges and the Foreign Indirect Affiliates.\25\
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    \25\ See Exemption Requests, supra note 4.
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    For the reasons discussed above, the Commission finds that it is 
appropriate in the public interest and consistent with the protection 
of investors to grant the conditional exemptive relief requested by the 
Exchanges.
    The Commission may modify by order the terms, scope or conditions 
of the exemption from Rule 6a-2(b)(1) under the Exchange Act granted to 
each Exchange if it determines that such modification is necessary or 
appropriate in the public interest, or is consistent with the 
protection of investors. Furthermore, the Commission may limit, 
suspend, or revoke the exemption granted to each Exchange if it finds 
that the Exchange has failed to comply with, or is unable to comply 
with, any of the conditions set forth in this order, if such action is 
necessary or appropriate in the public interest, or is consistent with 
the protection of investors.
    It is ordered, pursuant to Section 36 of the Exchange Act,\26\ that 
the Exchanges are exempt from the requirement under Rule 6a-2(b)(1) 
under the Exchange Act, with respect to the Foreign Indirect 
Affiliates, to update the information in Exhibit D to Form 1 on or 
before June 30th of each year subject to the following conditions:
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    \26\ 15 U.S.C. 78mm.
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    (1) Each Exchange must provide, as part of its annual Form 1 
amendment due on or before June 30th of each year, a list of the names 
of the Foreign Indirect Affiliates for which the Exchange is relying on 
exemptive relief; and
    (2) Each Exchange must provide, as part of its annual Form 1 
amendment due on or before June 30th of each year, an organizational 
chart setting forth the affiliation of all affiliates, including those 
Foreign Indirect Affiliates for which the Exchange is relying on 
exemptive relief.

    By the Commission.
Brent J. Fields,
Secretary.
[FR Doc. 2017-08891 Filed 5-2-17; 8:45 am]
BILLING CODE 8011-01-P