Document ID: SEC-2013-0966-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: New York Stock Exchange, LLC
Posted Date: 2013-05-22T04:00Z

[Federal Register Volume 78, Number 99 (Wednesday, May 22, 2013)]
[Notices]
[Pages 30378-30380]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-12159]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69590; File No. SR-NYSE-2013-32]

Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing of a Proposed Rule Change Proposing an Amendment to 
the Bylaws of Its Wholly-Owned Subsidiary, NYSE Regulation, Inc. 
(``NYSE Regulation''), To Eliminate a Requirement That Not Less Than 
Two Members of the Board of Directors of NYSE Regulation Must Qualify 
as ``Fair Representation Candidates''

May 16, 2013.
    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 May 8, 2013, New York Stock Exchange LLC (``NYSE'' or the 
``Exchange'') filed with the Securities and Exchange Commission (the 
``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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    The Exchange proposes to amend an amendment to the bylaws of its 
wholly-owned subsidiary NYSE Regulation, Inc. (``NYSE Regulation'') to 
eliminate a requirement that not less than two members of the board of 
directors of NYSE Regulation must qualify as ``fair representation 
candidates'' (as that term is defined in those bylaws). A requirement 
that such directors constitute a minimum of 20% of the board would 
remain in place. The text of the proposed rule change is available on 
the Exchange's Web site at www.nyse.com, at the principal office of the 
Exchange, and at the Commission's Public Reference Room.

[[Page 30379]]

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 those 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 parts of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange is proposing to amend the Fourth Amended and Restated 
Bylaws of NYSE Regulation (``NYSE Regulation Bylaws'') to eliminate the 
requirement that not less than two members of the NYSE Regulation board 
of directors must be ``fair representation candidates'' (as defined in 
the NYSE Regulation Bylaws).\3\ However, the current requirement that 
such directors constitute a minimum of 20% of the board will continue 
to apply. If the number that is equal to 20% of the entire board of 
directors is not a whole number, such number will be rounded up to the 
next whole number, and a provision so stating would be added to the 
NYSE Regulation Bylaws.
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    \3\ Section 6(b)(3) of the Act requires, as a condition for 
registration of a national securities exchange, the Commission to 
determine that, ``[t]he rules of the exchange assure a fair 
representation of its members in the selection of its directors and 
administration of its affairs . . . .'' See 15 U.S.C. 78f(b)(3).
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    As defined in the NYSE Regulation Bylaws, fair representation 
candidates are Board members who are determined by member organizations 
of the Exchange through a specified petition process (``Petition 
Candidates'') or, in the absence of a sufficient number of Petition 
Candidates, candidates recommended by the Director Candidate 
Recommendation Committee (the ``DCRC'') of NYSE Regulation. In 
addition, fair representation candidates for the NYSE Regulation Board 
must qualify as ``non-affiliated directors'' (as such term is defined 
in the NYSE Regulation Bylaws), i.e., U.S. Persons who are not members 
of the board of directors of NYSE Euronext and qualify as independent 
under the director independence policy of NYSE Regulation.\4\ Finally, 
like all members of the NYSE Regulation Board except for the Chief 
Executive Officer, fair representation candidates must qualify as 
independent under the director independence policy of NYSE 
Regulation.\5\
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    \4\ See Securities Act Release No. 67564 (August 1, 2012), 77 FR 
47161 (August 7, 2012) (SR-NYSE-2012-17) (approving the creation of 
the director independence policy of NYSE Regulation).
    \5\ The Bylaws of NYSE Regulation require that a majority of its 
Board consist of non-affiliated directors. The remaining directors 
are comprised of the Chief Executive Officer of NYSE Regulation and 
members of the board of directors of NYSE Euronext that qualify as 
independent under the NYSE Euronext independence policy. The Bylaws 
do not require any affiliated directors other than the Chief 
Executive Officer of NYSE Regulation.
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    The NYSE Regulation Bylaws also provide that the Board shall 
consist of not less than three persons and that the number of directors 
shall be fixed from time to time by the Exchange, as sole equity member 
of NYSE Regulation. The size of the NYSE Regulation Board is currently 
fixed at five members, of which four positions are currently filled and 
one is open.\6\ The Exchange and NYSE Regulation believe that a Board 
consisting of five members is sufficiently large to effectively perform 
the Board's oversight responsibilities. In addition, with a Board size 
of five directors, the Exchange believes that retaining the requirement 
that at least two directors must be ``fair representation candidates'' 
is now unwarranted since such directors would constitute 40% of the 
Board rather than 20% as was the case when the number of directors was 
ten. The Exchange believes that the current process for selecting the 
20% of directors who meet the fair representation requirement in 
Section 6(b)(3), is consistent with the Act.\7\ The Exchange is not 
proposing to change the NYSE Regulation independence requirements.
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    \6\ The number of directors on the NYSE Regulation board was 
reduced from ten to five in early 2013 in connection with the 
Financial Industry Regulatory Authority's (``FINRA'') completion of 
specified milestones in the regulatory services agreement by and 
among FINRA, NYSE Group, Inc., NYSE, NYSE Regulation, NYSE Arca, 
Inc., and NYSE MKT LLC pursuant to which FINRA assumed 
responsibility for performing the market surveillance and 
enforcement functions previously conducted by NYSE Regulation.
    \7\ The Exchange represents that the DCRC of NYSE Regulation is 
aware of and is in agreement with the proposed plan of 
implementation. There is otherwise no change to the ``fair 
representation'' candidate selection and petition process.
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    The Exchange believes that elimination of the two-director minimum 
requirement for fair representation candidates is consistent with the 
governance structures of other national securities exchanges that have 
been approved by the Securities and Exchange Commission (the 
``Commission''). For example, Article III, Section 5(e) of the By-Laws 
of the NASDAQ Stock Market LLC (``NASDAQ'') requires that the 
Regulatory Oversight Committee of the NASDAQ Board of Directors (the 
``NASDAQ ROC''), which has an oversight role comparable to that of the 
NYSE Regulation Board, must consist of three members, each of whom must 
be a Public Director (i.e., ``a Director who has no material business 
relationship with a broker or dealer, [NASDAQ] or its affiliates, or 
FINRA'') and ``independent director'' as defined by NASDAQ Marketplace 
Rule 4200. There is no requirement that the NASDAQ ROC have any members 
who would be the equivalent of a fair representation candidate on the 
NYSE Regulation Board.
    More recently, the Commission has approved a similar change to that 
proposed herein to the Operating Agreement of the Exchange and to the 
Bylaws of the Exchange's wholly owned subsidiary, NYSE Market, Inc.\8\ 
These changes were approved subsequent to the Commission's approval of 
a structure for the board of NYSE Alternext US LLC (what is now NYSE 
MKT LLC), an affiliate of the Exchange, that included a requirement 
that at least 20% of the board of that organization constitute fair 
representation directors, but without the requirement that there be no 
less than two such directors.\9\
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    \8\ Securities Exchange Act Release No. 59683 (April 1, 2009), 
74 FR 15799-01 (April 7, 2009 (SR-NYSE-2009-12).
    \9\ See Securities Exchange Act Release No. 58673 (September 29, 
2008), 73 FR 57707, at 57711-12 (October 3, 2008) (SR-Amex-2008-62).
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    Accordingly, approval of the change to the NYSE Regulation Bylaws 
proposed herein will leave NYSE Regulation with a governance structure 
that is completely consistent with similar structures that the 
Commission has approved for the Exchange, for other subsidiaries and 
affiliates of the Exchange and for other national securities exchanges.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) \10\ of the Act, in general, and furthers the 
objectives of Section 6(b)(3) of the Act \11\ in particular in that it 
will assure a fair representation of the members of the Exchange in the 
selection of NYSE Regulation directors and in the administration of the 
affairs of the Exchange and NYSE Regulation. More specifically, the 
NYSE believes

[[Page 30380]]

that, by eliminating the current NYSE Regulation Bylaw requirement for 
a minimum of two fair representation candidates on the NYSE Regulation 
Board, it will be able to improve administrative efficiency and 
effectiveness by operating with a smaller number of directors while 
continuing to fulfill its statutory obligations regarding the fair 
representation of members of the Exchange. The Exchange believes that 
the proposed rule change will also further the objectives of Section 
6(b)(5) of the Act \12\ as it will contribute to perfecting the 
mechanism of a free and open market and a national market system, in a 
manner that is consistent with the protection of investors and the 
public interest.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(3).
    \12\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The proposed rule change 
relates solely to the implementation of a more efficient and effective 
governance structure for NYSE Regulation and will have no effect on the 
NYSE's business operations or competitive position.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove the 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 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-NYSE-2013-32 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSE-2013-32. 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 Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of 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-NYSE-2013-32, 
and should be submitted on or before June 12, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-12159 Filed 5-21-13; 8:45 am]
BILLING CODE 8011-01-P