Document ID: SEC-2014-0182-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE MKT LLC
Posted Date: 2014-01-31T05:00Z

[Federal Register Volume 79, Number 21 (Friday, January 31, 2014)]
[Notices]
[Pages 5481-5491]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-01969]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71408; File No. SR-NYSEMKT-2014-08]

Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing of 
Proposed Rule Change Amending Various Sections of Both the Limited 
Liability Company Agreement of NYSE Amex Options LLC Dated as of June 
29, 2011 and the Members Agreement Dated as of June 29, 2011 By and 
Among the Company, NYSE MKT, NYSE Euronext, Banc of America Strategic 
Investments Corporation, Barclays Electronic Commerce Holdings Inc., 
Citadel Securities LLC, Citigroup Financial Strategies, Inc., Goldman, 
Sachs & Co., Datek Online Management Corp. and UBS Americas Inc. In 
Order To Make Certain Technical Changes Within the Aforementioned 
Agreements

January 27, 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 January 14, 2014, NYSE MKT LLC (``NYSE MKT'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I, II, and III below, which 
Items have been prepared by the self-regulatory organization. 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 240.19-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to various sections of both the Limited 
Liability Company Agreement of NYSE Amex Options LLC (the ``Company'') 
dated as of June 29, 2011 (as amended,\3\ the ``LLC Agreement'') and 
the Members Agreement dated as of June 29, 2011 by and among the 
Company, NYSE MKT, NYSE Euronext, Banc of America Strategic Investments 
Corporation, Barclays Electronic Commerce Holdings Inc., Citadel 
Securities LLC, Citigroup Financial Strategies, Inc., Goldman, Sachs & 
Co., Datek Online Management Corp. and UBS Americas Inc. (collectively, 
excluding the Company, NYSE MKT and NYSE Euronext, the ``Founding 
Firms'') (as amended,\4\ the ``Members Agreement'') in order to make 
certain technical changes within the aforementioned agreements (the 
``Proposed Rule Change''). 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.
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    \3\ See Securities Exchange Act Release No. 34-69388 (April 17, 
2013), 78 FR 23963 (Notice of filing and immediate effectiveness of 
a proposed rule change amending the Members' Schedule of NYSE Amex 
Options LLC in order to reflect changes to the capital structure of 
the Company); Securities Exchange Act Release No. 34-67702 (August 
21, 2012), 77 FR 51837 (Notice of filing and immediate effectiveness 
of a proposed rule change amending the NYSE Amex Options LLC Limited 
Liability Company Agreement to eliminate certain restrictions 
relating to the qualification of Founding Firm Advisory Committee 
Members); Securities Exchange Act Release No. 34-67902 (September 
21, 2012), 77 FR 59423 (Order granting approval of a proposed rule 
change amending the Members' Schedule of NYSE Amex Options LLC in 
order to reflect changes to the capital structure of the Company); 
Securities Exchange Act Release No. 34-67569 (August 1, 2012), 77 FR 
47138 (Notice of filing of a proposed rule change amending the 
Members' Schedule of NYSE Amex Options LLC in order to reflect 
changes to the capital structure of the Company).
    \4\ See Securities Exchange Act Release No. 34-69247 (March 27, 
2013), 78 FR 19777 (Notice of filing and immediate effectiveness of 
a proposed rule change to modify the NYSE Amex Options LLC fee 
schedule to establish fees for mini-options contracts). Certain 
provisions of the Members Agreement related to the Volume-Based 
Equity Plan were duly amended by the Board on August 30, 2012. 
Changes to the Volume-Based Equity Plan do not constitute proposed 
rule changes within the meaning of Section 19(b)(1) of the Act and 
Rule 19b-4 thereunder. See Securities Exchange Act Release No. 34-
64742 (June 24, 2011), 76 FR 38436, 38443.
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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 those statements may be examined at 
the places specified in Item IV below.

[[Page 5482]]

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
    On June 29, 2011, the Exchange, its ultimate parent NYSE Euronext 
and the Founding Firms formed the Company. The Company operates an 
electronic trading facility (the ``Options Exchange'') that engages in 
the business of listing for trading options contracts permitted to be 
listed on a national securities exchange (or facility thereof) and 
related activities. The Company operates pursuant to the LLC Agreement 
and the Members Agreement. The Exchange proposes to make technical 
amendments to various sections of both the LLC Agreement and the 
Members Agreement as further described herein.\5\
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    \5\ All capitalized terms used in this Proposed Rule Change that 
are not otherwise defined in this Proposed Rule Change shall have 
the meanings specified in the Amended LLC Agreement or Amended 
Members Agreement, as applicable.
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Summary
    The Exchange proposes to make certain technical modifications and 
clarifications to certain provisions of the LLC Agreement and the 
Members Agreement. Specifically, the Exchange proposes to make 
amendments that clarify:
    (1) Differences between voting entitlements and economic 
entitlements associated with Common Interests, where appropriate;
    (2) provisions of the LLC Agreement and the Members Agreement 
related to the capital structure of the Company;
    (3) provisions of the LLC Agreement related to capital calls to 
provide greater specificity as to the matters to be decided by the 
board of directors of the Company (the ``Board'') in connection with a 
capital call and as to matters surrounding oversubscription and the 
issuance of Common Interests in connection with capital calls;
    (4) provisions of the LLC Agreement related to ownership 
limitations to clarify the mechanism for maintaining compliance with 
applicable laws and regulations;
    (5) provisions of the LLC Agreement related to royalty payments to 
clarify the effect of such payments on the Capital Account of NYSE MKT;
    (6) provisions of the LLC Agreement related to distributions with 
respect to equity interests to clarify how the amounts of annual 
distributions to Members are determined;
    (7) provisions of the LLC Agreement related to restricted member 
elections to clarify the circumstances under which a Member may become 
a Restricted Member;
    (8) provisions of the LLC Agreement related to the composition of 
the Board to clarify the mechanism by which the Board may increase in 
size;
    (9) provisions of the LLC Agreement related to the Founding Firm 
Advisory Committee to clarify the mechanism by which the Founding Firm 
Advisory Committee may increase in size;
    (10) provisions of the LLC Agreement governing a Member's 
obligations with respect to the treatment of Confidential Information 
in order to clarify the scope of such policies and procedures;
    (11) provisions of the LLC Agreement and Members Agreement related 
to transfers of Common Interests to clarify the mechanics by which 
Common Interests may be transferred, including the mechanics by which 
Common Interests may be converted into Non-voting Common Interests (and 
then converted back to Common Interests, when and as applicable) and 
applicable time periods for effecting transfers;
    (12) provisions of the Members Agreement related to the Volume-
Based Equity Plan to clarify (i) the mechanism by which the Volume 
Dispute Committee may increase in size and (ii) the calculation of 
Industry Volume and the determination whether a Founding Firm has 
achieved its Individual Target; \6\ and
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    \6\ Changes to the Volume-Based Equity Plan do not constitute 
proposed rule changes within the meaning of Section 19(b)(1) of the 
Act and Rule 19b-4 thereunder. See Securities Exchange Act Release 
No. 34-64742 (June 24, 2011), 76 FR 38436, 38443. The changes to 
these provisions are being made simultaneously with the other 
changes described herein for convenience and are described here in 
the interest of completeness.
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    (13) provisions of the Members Agreement related to the 
determination of fair market value of a Member's Common Interests and 
of the Company to clarify how such fair market value is determined 
under various circumstances.
    In addition, the Exchange proposes to make several typographical 
corrections.
    The technical modifications described herein are not intended to 
substantively change the relevant provisions set forth in either the 
LLC Agreement or the Members Agreement, but only to ensure that, from a 
technical perspective, the LLC Agreement and Members Agreement clearly 
reflect the original intentions of the parties to those agreements.
Economic and Voting Common Interests
    As a limited liability company, ownership of the Company is 
represented by limited liability company interests in the Company 
(``Interests''). The Interests represent equity interests in the 
Company and entitle the holders thereof to participate in the Company's 
allocations and distributions. The Interests are divided into preferred 
non-voting interests (``Preferred Interests''), Class A Common 
Interests and Class B Common Interests.
    The holders of Interests are referred to as members of the Company 
(``Members''). The LLC Agreement designates Members as either Class A 
Members or Class B Members. Generally, Class A Members and Class B 
Members are distinguishable in that Class A Members hold Class A Common 
Interests and Class B Members hold Class B Common Interests.
    Class A Common Interests and Class B Common Interests are not 
intended to be directly fungible (meaning that one Class A Common 
Interest does not represent the equivalent entitlements of one Class B 
Common Interest). This dissimilarity results from the operation of the 
Volume-Based Equity Plan, as set forth in Article II of the Members 
Agreement, pursuant to which, each year (until 2015, unless extended by 
the Board) the Company may issue additional Class B Common Interests as 
Incentive Shares without at the same time issuing new Class A Common 
Interests. These Incentive Shares would be allocated among the Class B 
Members based on each Class B Member's contribution to the volume of 
the Exchange relative to an Individual Target, which would have the 
effect of changing the relative economic and voting rights among the 
Class B Members. However, Incentive Shares have no effect on the 
relative economic and voting rights as between Class A Members (in the 
aggregate) and Class B Members (in the aggregate). As a result, the 
aggregate number of Class B Common Interests may increase while the 
relative economic or voting rights of Class B Members (in the 
aggregate) vis-[agrave]-vis Class A Members (in the aggregate) remain 
unchanged. The overall impact of the issuance of Incentive Shares, 
then, is to dilute the value of each Class B Common Interest relative 
to each Class A Common Interest.

[[Page 5483]]

    Certain provisions of the LLC Agreement prohibit Members from 
owning or voting Interests in excess of applicable regulatory 
thresholds (as discussed in Sections 4.9 and 7.5 of the LLC Agreement). 
If a Member exceeds such thresholds, it may be necessary to separate 
the economic and voting entitlements associated with such Member's 
Interests (in addition to limiting entitlements to the relevant 
thresholds). To account for such situations, a Member's Common 
Interests represent separate entitlements to net profits, net losses 
and distributions (an ``Economic Common Interest Percentage'' \7\) and 
entitlements to vote (a ``Voting Common Interest Percentage'' \8\).
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    \7\ ``Economic Common Interest Percentage'' is defined in the 
Amended LLC Agreement to mean, at any time, (A) with respect to the 
Common Interests owned by one or more Class A Member(s), the product 
of (w) the Aggregate Class A Economic Allocation multiplied by (x) a 
fraction, (1) the numerator of which shall be the number of Class A 
Common Interests then held by such Class A Member(s) (including any 
Class A Non-voting Common Interests) and (2) the denominator of 
which shall be the number of Class A Common Interests then owned by 
all Class A Members (including any Class A Non-voting Common 
Interests), and (B) with respect to the Common Interests owned by 
one or more Class B Member(s), the product of (y) the Aggregate 
Class B Economic Allocation multiplied by (z) a fraction, (1) the 
numerator of which shall be the number of Class B Common Interests 
then owned by such Class B Member(s) (including any Class B Non-
voting Common Interests) and (2) the denominator of which shall be 
the number of Class B Common Interests then owned by all Class B 
Members (including any Class B Non-voting Common Interests).
    \8\ ``Voting Common Interest Percentage'' is defined in the 
Amended LLC Agreement to mean, at any time, (A) with respect to the 
Common Interests owned by one or more Class A Member(s), the product 
of (w) the Aggregate Class A Voting Allocation multiplied by (x) a 
fraction, (1) the numerator of which shall be the number of Class A 
Common Interests then owned by such Class A Member(s) excluding any 
Class A Non-voting Common Interests and (2) the denominator of which 
shall be the number of Class A Common Interests then owned by all 
Class A Members excluding all Class A Non-voting Common Interests, 
and (B) with respect to Common Interests owned by one or more Class 
B Member(s), the product of (y) the Aggregate Class B Voting 
Allocation multiplied by (z) a fraction, (1) the numerator of which 
shall be the number of Class B Common Interests then owned by such 
Class B Member(s) excluding any Class B Non-voting Common Interests 
and (2) the denominator of which shall be the number of Class B 
Common Interests then owned by all Class B Members excluding all 
Class B Non-voting Common Interests.
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    By way of example, consider a Class B Member that is subject to a 
hypothetical regulatory restriction that prevents it from holding 
greater than a 15% voting interest in the Company. If such Class B 
Member earned Incentive Shares by operation of the Volume-Based Equity 
Plan that would bring its Economic Common Interest Percentage and 
Voting Common Interest Percentage to 18%, it would need to convert some 
of its Class B Common Interests into Non-voting Common Interests.\9\ 
Following such a conversion, the Class B Member would hold Class B 
Common Interests (some of which would be Non-voting Common Interests) 
representing a Voting Common Interest Percentage of 15% and an Economic 
Common Interest Percentage of 18%.
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    \9\ The mechanics for how Common Interests may be converted into 
Non-voting Common Interests are included in proposed Section 11.2(c) 
of the Amended LLC Agreement and are discussed in greater detail 
under the heading ``Transfers of Interests--Converting Common 
Interests to Non-voting Common Interests.''
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    As a result of this potential deviation between a Member's economic 
entitlement and its voting entitlement, it is appropriate, in certain 
circumstances, to refer to either a Member's Voting Common Interest 
Percentage or its Economic Common Interest Percentage. For example, a 
Member's participation in a capital call would be based on its Economic 
Common Interest Percentage rather than its Voting Common Interest 
Percentage. As further discussed below, however, the restriction on a 
Member's ability to own or vote Common Interests representing an 
Economic Common Interest Percentage or a Voting Common Interest 
Percentage in excess of nineteen and nine-tenths percent (19.9%) will 
continue to apply (other than to NYSE MKT alone, or, subject to 
appropriate SEC approval, together with its Permitted Transferees), so 
that no such Member's Economic Common Interest Percentage or Voting 
Common Interest Percentage will be permitted to exceed nineteen and 
nine-tenths percent (19.9%).
    Under the existing agreements, various provisions refer to a 
Member's ``Common Interest Percentage'' to denote a Member's ownership 
interest in the Company. The term is meant to capture the percentage of 
economic or voting rights represented by the absolute number of Common 
Interests held by such Member. However, because (i) the term ``Common 
Interest Percentage'' does not, in all cases, properly convey the 
distinction between a Member's voting entitlement and its economic 
entitlement and (ii) various sections refer to an absolute number of 
Common Interests rather than a relative percentage, the Exchange 
proposes to amend the references to a Member's Common Interests or 
Common Interest Percentage in Sections 1.1, 4.3, 4.4, 4.5, 4.9, 5.1, 
5.2, 5.3, 5.4, 6.1, 7.5, 8.1, 9.1, 9.2, 10.3, 11.2, 11.3, 11.5, 11.8, 
12.2, 12.4, 12.5, 13.2, 16.10 and Schedule 8.1(i)(v) of the LLC 
Agreement and Sections 1.1, 2.1, 3.2, 3.3, 3.4, 4.1 and 5.10 of the 
Members Agreement to more directly specify when the entitlement being 
referred to is the Member's economic entitlement rather than its voting 
entitlement and vice versa.
Capital Structure
    Sections 4.1 and 10.1 of the LLC Agreement describe the capital 
structure of the Company. Since the formation of the Company, the 
Company has entered into five transactions that have altered its 
capital structure: (i) The admission of NYSE Market, Inc. (``NYSE 
Market'') as a Member of the Company in conjunction with the transfer 
of Common Interests by the Founding Firms to NYSE Market on September 
19, 2011 pursuant to Sections 10.4 and 11.1 of the LLC Agreement and 
Section 3.2 of the Members Agreement, (ii) the issuance of Annual 
Incentive Shares to the Founding Firms on February 29, 2012 pursuant to 
Section 2.1 of the Members Agreement (iii) the transfer of Common 
Interests by the Founding Firms to NYSE Market on October 1, 2012 
pursuant to Article XI of the LLC Agreement and Section 3.1 of the 
Members Agreement, (iv) the issuance of Annual Incentive Shares to the 
Founding Firms on February 28, 2013 pursuant to Section 2.1 of the 
Members Agreement and (v) the transfer of Common Interests by the 
Founding Firms to NYSE Market on April 2, 2013 pursuant to Article XI 
of the LLC Agreement and Section 3.1 of the Members Agreement. All five 
transactions, along with the resultant changes to the Company's 
Members' Schedule, have been approved by the SEC.\10\
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    \10\ See Securities Exchange Act Release No. 34-69388 (April 17, 
2013), 78 FR 23963 (Notice of filing and immediate effectiveness of 
a proposed rule change amending the Members' Schedule of NYSE Amex 
Options LLC in order to reflect changes to the capital structure of 
the Company) (``Release No. 34-69388''); Securities Exchange Act 
Release No. 34-67902 (September 21, 2012), 77 FR 59423 (Order 
granting approval of a proposed rule change amending the Members' 
Schedule of NYSE Amex Options LLC in order to reflect changes to the 
capital structure of the Company); see also Securities Exchange Act 
Release No. 34-67569 (August 1, 2012), 77 FR 47138 (Notice of filing 
of a proposed rule change amending the Members' Schedule of NYSE 
Amex Options LLC in order to reflect changes to the capital 
structure of the Company).
     The Commission notes that the transactions and corresponding 
changes to the Company's governing documents that were the subject 
of Release No. 34-69388 (April 17, 2013) were filed pursuant to 
Section 19(b)(3)(A)(iii) of the Exchange Act (15 U.S.C. 
78s(b)(3)(A)(iii)) and Rule 19b-4(f)(6) thereunder (17 CFR 240.19b-
4(f)(6)). As a result, that filing was not approved by the 
Commission; rather, it became immediately effective upon filing.
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    The Exchange proposes to amend the preamble, Sections 4.1, 10.1, 
10.2 and

[[Page 5484]]

10.4 and Schedule A of the LLC Agreement to eliminate references to 
historical capital contributions and to provide, instead, a description 
of the Company's capitalization as it currently stands. The Exchange 
also proposes to amend the cover page and the preamble of the Members 
Agreement to provide context for the execution of the Amended Members 
Agreement.
    In addition, the Exchange proposes to amend the definition of the 
term ``Effective Date'' in Section 1.1 of the LLC Agreement to provide 
that the LLC Agreement and Members Agreement are only effective with 
respect to a Person as of the time such Person becomes a Member of the 
Company. Relatedly, the Exchange proposes to replace the term 
``Effective Date'' with the term ``Initial Effective Date'' in the 
preamble, Sections 1.1, 4.3, 4.4, 4.8, 8.1, 8.3, 8.6, 11.8, 14.1, 14.2, 
16.2, 16.3 and Schedule 8.1(i)(v) of the Amended LLC Agreement and 
Sections 3.4, 5.3, 5.13 and Schedule 5.3 of the Amended Members 
Agreement in order to clarify that time periods in the Amended LLC 
Agreement and the Amended Members Agreement that are based on the date 
the LLC Agreement and Members Agreement were originally executed remain 
unchanged.
    Because the admission of NYSE Market results in there now being 
more than one Class A Member, the Exchange proposes to amend Section 
3.3 of the Members Agreement to clarify that it applies to transfers by 
NYSE MKT as well as any other Person that is or becomes a Class A 
Member. Similarly, to account for there being more than one Class A 
Member, the Exchange proposes to amend Section 10.2(b) of the LLC 
Agreement to clarify that Class A Common Interests will be owned only 
by NYSE MKT and its Permitted Transferees such as NYSE Market, its 
affiliate. Furthermore, to account for the possibility of more than one 
Person holding Preferred Interests, the Exchange proposes to amend the 
definition of ``Priority Claim'' in Section 1.1 of the LLC Agreement to 
clarify that distributions to owners of Preferred Interests shall be 
accomplished on a pro rata basis in accordance with the number of 
Preferred Interests owned by each such owner.\11\
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    \11\ Note that NYSE MKT is currently the only holder of 
Preferred Interests and it is not currently anticipated that any 
Preferred Interests will be issued to any other Person.
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    In addition, as NYSE Market is an affiliate of NYSE MKT, the 
Exchange proposes to amend Sections 1.1, 8.1 and 11.2 of the LLC 
Agreement and Sections 3.3 and 3.4 of the Members Agreement to clarify 
that these provisions apply to NYSE MKT as well as NYSE MKT's 
Affiliates.
    Finally, the Exchange proposes to amend the LLC Agreement and the 
Members Agreement in their entirety to change references to NYSE Amex 
to NYSE MKT.
Capital Calls
    Pursuant to Sections 4.3, 4.4 and 4.5 of the LLC Agreement, Members 
may be subject to both regulatory and voluntary capital calls. 
Generally, capital calls may be issued by the Board from time to time 
subject to certain limitations. In connection with a voluntary capital 
call, participating Members are entitled to have their respective 
Economic Common Interest Percentages and Voting Common Interest 
Percentages increased in respect of their capital contributions, while 
the Economic Common Interest Percentages and Voting Common Interest 
Percentages of non-participating Members are accordingly reduced.
    To further specify the mechanics of a capital call and related 
capital contributions, the Exchange proposes to amend Sections 4.3, 4.4 
and 4.5 of the LLC Agreement. First, the Exchange proposes to amend 
Sections 4.3 and 4.4 to require the Board to specify certain items in 
connection with a capital call. Specifically, the Exchange proposes to 
require that the Board specify: the aggregate amount of the capital 
call, the date by which a capital contribution in respect of the 
capital call must be made, the fair market value of the Company with 
respect to such capital call (without giving effect to any capital 
contributions in respect of such capital call), the Per Common Interest 
FMV \12\ with respect to such capital call (without giving effect to 
any capital contributions in respect of such capital call) and such 
other matters as the Board may determine.
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    \12\ ``Per Common Interest FMV'' is proposed to be defined in 
the Amended LLC Agreement to mean, with respect to any regulatory or 
voluntary capital call, (A) with respect to a Class A Common 
Interest, the quotient of (I) the product of (x) the FMV of the 
Company with respect to such Regulatory Capital Call or Voluntary 
Capital Call, as applicable, multiplied by (y) the Aggregate Class A 
Economic Allocation divided by (II) the total number of issued and 
outstanding Class A Common Interests at such time; (B) with respect 
to a Class B Common Interest, the quotient of (I) the product of (x) 
the FMV of the Company with respect to such Regulatory Capital Call 
or Voluntary Capital Call, as applicable, multiplied by (y) the 
Aggregate Class B Economic Allocation divided by (II) the total 
number of issued and outstanding Class B Common Interests at such 
time.
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    The Exchange also proposes to amend Section 4.4 of the LLC 
Agreement in order to clarify that, should a participating Member (or 
class of Members) oversubscribe to a voluntary capital call, 
appropriate adjustments will be made to the Economic Common Interest 
Percentages and Voting Common Interest Percentages of the affected 
Members. To effect these adjustments, Section 4.4 of the Amended LLC 
Agreement provides that: (1) Appropriate adjustments shall be made to 
the Aggregate Class A Economic Allocation, Aggregate Class A Voting 
Allocation, Aggregate Class B Economic Allocation and Aggregate Class B 
Voting Allocation, (2) the Company shall issue Class A Common Interests 
or Class B Common Interests as necessary to the relevant Members, and 
(3) the Members' Schedule shall be adjusted accordingly. Any such 
adjustments will be subject to regulatory limitations including those 
contained in Section 4.9 of the Amended LLC Agreement. The Exchange 
proposes to further clarify that if each Member contributes its pro 
rata share of a voluntary capital call, such that no adjustments need 
be made to any Member's Economic Common Interest Percentage or Voting 
Common Interest Percentage, no new Common Interests shall be issued to 
any Member in connection with such voluntary capital call.
    In addition, the Exchange proposes to amend Section 4.5(b) of the 
LLC Agreement to clarify the consequences of a Member failing to fund 
either (x) its pro rata portion of a regulatory capital call or (y) if 
the Member has committed to participate in a voluntary capital call, 
its portion of the voluntary capital call (such Member, a ``Non-Funding 
Member'' and the amount it fails to contribute, its ``Requested 
Amount''). Generally, the Board has the right to transfer the Common 
Interests a Non-Funding Member would have received had it participated 
in a regulatory or voluntary capital call (``Non-Funded Interests'') to 
the existing Members of the Company or, should the Members not purchase 
all of the Non-Funded Interests, to a Person who is not a Member.
    The Exchange proposes to amend the proviso to Section 4.5(b) of the 
LLC Agreement by adding three provisions. First, clause (C) of the 
proviso to Section 4.5(b) of the Amended LLC Agreement provides that 
the aggregate number of Non-Funded Interests shall be equal to the 
quotient of (i) the Requested Amount divided by (ii) the relevant Per 
Common Interest FMV.
    In addition, the Exchange proposes to add clause (D) of the proviso 
to Section 4.5(b) of the Amended LLC Agreement to clarify that, with 
respect to a

[[Page 5485]]

regulatory capital call, each Member that is not a Non-Funding Member 
shall be entitled to receive a number of new Class A Common Interests 
or Class B Common Interests, as applicable, equal to the quotient of 
(i) such Member's regulatory capital contribution divided by (ii) the 
applicable Per Common Interest FMV. In addition, the Capital Account of 
each such Member shall be increased by the sum of its regulatory 
capital contribution plus the amount of the regulatory capital 
contribution attributable to the Non-Funded Interests acquired by such 
Member. This provision is designed to mirror Section 4.4(e) of the 
Amended LLC Agreement. Thus, under the Amended LLC Agreement, a 
regulatory capital call in which not all Members fully participate (by 
making capital contributions on a pro rata basis) would be treated 
similarly to a voluntary capital call in which the Members do not all 
participate on a pro rata basis.
    Finally, the Exchange proposes to add clause (E) of the proviso to 
Section 4.5(b) of the Amended LLC Agreement to provide that a Member 
that acquires Non-Funded Interests will be entitled to receive 
additional Class A Common Interests or Class B Common Interests, as 
applicable, to supplement those Common Interests that such Member was 
entitled to receive pursuant to either Section 4.4(e) of the Amended 
LLC Agreement (in the case of a voluntary capital call) or clause (D) 
described above (in the case of a regulatory capital call) by virtue of 
having made its initial contribution to the relevant capital call.
    Example 4 in Exhibit 5C demonstrates the operation of these 
provisions.
Ownership Limitations
    Section 4.9 of the LLC Agreement provides a mechanism by which 
Members who exceed certain regulatory thresholds with respect to 
ownership or voting entitlements may come into compliance with the 
applicable regulatory framework.
    The Exchange proposes to clarify that a Member may be subject to 
the provisions of Section 4.9 (such a Member, an ``Exceeding Member'') 
either as a result of a regulatory threshold applicable directly to the 
Member's holdings of Common Interests or as a result of regulations 
applicable to the Company that operate to impose a regulatory threshold 
on each Member's holdings of Common Interests. Specifically, the 
Exchange proposes to clarify that a Member's ``Alternative Maximum 
Percentage'' is the lower of (1) the maximum Voting Common Interest 
Percentage or Economic Common Interest Percentage such Member (alone or 
together with its Affiliates) may own or vote under applicable Law or 
(2) the maximum Voting Common Interest Percentage or Economic Common 
Interest Percentage such Member (alone or together with its Affiliates) 
may own or vote without subjecting the Company to material regulatory 
obligations or material liabilities or a reasonable likelihood of 
material regulatory obligations or material liabilities arising as a 
result of the extent of such ownership or voting interest.
    In addition, the Exchange proposes to amend Section 4.9 to clarify 
the mechanics by which ordinary Common Interests may be converted into 
Non-voting Common Interests pursuant to Section 11.2(c) of the Amended 
LLC Agreement, as described below under the heading ``Transfers of 
Interests''.
    The proposed changes do not have any effect on the restrictions on 
a Member's ability to own or vote Common Interests representing an 
Economic Common Interest Percentage or a Voting Common Interest 
Percentage in excess of nineteen and nine-tenths percent (19.9%).
Royalty Payments
    Pursuant to Section 4.10 of the LLC Agreement, NYSE MKT is required 
to make a capital contribution to the Company in the event that certain 
royalty fees are invoiced to the Company pursuant to the NYSE Euronext 
Agreement. The amount of this capital contribution is required to be 
equal to the amount of this royalty fee.
    The Exchange proposes to amend Section 4.10 of the LLC Agreement to 
clarify that the amount of any such capital contribution shall increase 
the capital account of NYSE MKT and the amount of any such royalty fee 
shall decrease the capital account of NYSE MKT.
Distributions
    Pursuant to Section 6.1 of the LLC Agreement, the Board is 
obligated to distribute annually the Company's Available Cash \13\ to 
the holders of Preferred Interests and to the other Members.
---------------------------------------------------------------------------

    \13\ ``Available Cash'' is defined in the LLC Agreement to mean, 
with respect to a distribution pursuant to Section 6.1 of the LLC 
Agreement, cash (excluding cash in the redemption reserve) held by 
the Company at the time of such distribution that both (i) is not 
required for the operations of the Company based on the annual 
budget of the Company for such year, and (ii) the Board determines 
in good faith is not required for (A) the payment of liabilities or 
expenses of the Company or (B) the setting aside of reserves to meet 
the anticipated cash needs of the Company.
---------------------------------------------------------------------------

    The Exchange proposes to amend Section 6.1 of the LLC Agreement to 
clarify that the amounts of distributions of Available Cash to each 
Member shall be calculated on an ``accrual'' basis, which shall be 
measured on the basis of the calendar year period during which the 
Members actually own their respective Common Interests, in accordance 
with the Amended LLC Agreement or otherwise as the Members may 
agree.\14\
---------------------------------------------------------------------------

    \14\ By way of example, assume a Member holds Common Interests 
representing an Economic Common Interest Percentage of 10% on 
January 1, 2012. Assume further that this Member divests itself of 
10% of its Common Interests on March 31, 2012, so that its Economic 
Common Interest Percentage is reduced to 9%. At the time of the 
distribution of Available Cash, the Member shall be entitled to more 
than 9% of such distribution, to reflect the fact that the Member 
held 10% for the period from January 1, 2012 through March 31, 2012.
---------------------------------------------------------------------------

Restricted Members
    Section 7.5 of the LLC Agreement provides a mechanism by which a 
Member who owns Interests in excess of such Member's Alternative 
Maximum Percentage or who owns an Interest entitling such Member to 
distributions in excess of such Member's maximum percentage of the 
distributions (a ``Capped Distribution Amount'') then being made to all 
Members may, from time to time, make an election (a ``Restricted Member 
Election''), by written notice to the Company, to be treated for 
purposes of the LLC Agreement as a ``Restricted Member,'' solely with 
respect to its Excess Interest Percentage or Capped Distribution 
Amount.
    Any Class B Member, even one who does not own Interests in excess 
of such Member's Alternative Maximum Percentage, may make a Restricted 
Member Election. The Exchange proposes to amend Section 7.5(a) to 
clarify that the restricted member provisions only apply to Class B 
Members. The Exchange also proposes to amend Section 7.5(a) to clarify 
that, in those circumstances where a Restricted Member may reverse its 
election, it may do so in whole or in part.
    The Exchange proposes to amend Section 7.5(b) of the LLC Agreement 
and delete Section 7.5(d) of the LLC Agreement in order to clarify the 
circumstances under which a Class B Member that has not exceeded its 
Alternative Maximum Percentage may become a Restricted Member. 
Specifically, the Exchange proposes to amend Section 7.5(b) of the LLC

[[Page 5486]]

Agreement to clarify that a Class B Member may make a Restricted Member 
Election with respect to any of its Class B Common Interests, even if 
such Class B Common Interests do not represent an Excess Interest 
Percentage; provided that (1) such Class B Member may only reverse such 
election under the circumstances described in Section 7.5(a)(iii)(C) of 
the Amended LLC Agreement and (2) the Voting Common Interest Percentage 
represented by such Class B Common Interests shall be deemed to be an 
``Excess Interest Percentage'' (and such Class B Member shall be 
treated as a Converting Member with respect thereto) unless and until 
such Class B Member reverses the Restricted Member Election under the 
circumstances described in Section 7.5(a)(iii)(C) of the Amended LLC 
Agreement.
Composition of the Board
    Pursuant to Section 8.1(d) of the LLC Agreement, subject to certain 
restrictions, each Member is entitled to appoint Directors to serve on 
the Board. Generally, each Founding Firm, subject to certain 
restrictions, is entitled to appoint one (1) Director and NYSE MKT is 
entitled to appoint up to seven (7) Directors. In addition, in the 
event that additional Founding Firms are entitled to appoint Directors 
to the Board resulting in an increase in the size of the Board, NYSE 
MKT is entitled to appoint additional Directors corresponding to the 
number of new Directors appointed by Founding Firms, so that NYSE MKT, 
subject to certain conditions, shall have the right to appoint a number 
of Directors to the Board that is equal to the number appointed by the 
Founding Firms plus one. NYSE MKT is further required to appoint a 
number of Directors (not to exceed the 7 Directors NYSE MKT is 
otherwise entitled to appoint) sufficient to ensure that no single 
Founding Firm's designees to the Board constitute twenty percent (20%) 
or a greater percentage of the Board.
    The Exchange proposes to amend Section 8.1(d)(i) of the LLC 
Agreement to clarify that, in the event that the Board increases in 
size, NYSE MKT would be entitled and required to appoint a number of 
Directors in excess of the 7 Directors it is otherwise entitled to 
appoint to ensure that no single Founding Firm's designees constitute 
twenty percent (20%) or a greater percentage of the Board.
Founding Firm Advisory Committee
    Pursuant to Section 8.3 of the LLC Agreement, the Board has 
established a Founding Firm Advisory Committee comprised of natural 
persons having the capacity to provide advice to the Board, which 
advice the Board will consider in good faith but shall not be bound by, 
with respect to subjects identified by the Board from time to time, 
including new products and market structure. Members of the Founding 
Firm Advisory Committee are appointed by the Members as follows: two 
(2) Advisory Committee Members are appointed by NYSE MKT and one (1) 
Advisory Committee Member is appointed by each Founding Firm.
    The Exchange proposes to amend Section 8.3 of the LLC Agreement to 
clarify that, upon the admission to the Company of a new Member that is 
deemed to be a Founding Firm pursuant to Section 11.1(c) of the LLC 
Agreement, the authorized number of Advisory Committee Members shall 
automatically be increased by one.
Policies Related to Confidential Information
    Section 7.4 of the LLC Agreement requires that each Member maintain 
commercially reasonable policies and procedures to prevent the 
disclosure of Confidential Information of the Company by any Director, 
alternate Director, observer to the Board or any committee of the Board 
or Advisory Committee Member to any other individual appointed by such 
Member to perform a similar role with respect to, or who is an officer 
or employee of, a Specified Entity.
    The Exchange proposes to amend Section 7.4 of the LLC Agreement to 
provide that each Member maintain policies and procedures to prevent 
the disclosure of Confidential Information to a Specified Entity 
generally, rather than to individuals performing specified roles at a 
Specified Entity.
Transfers of Interests
    Article XI of the LLC Agreement and Article III of the Members 
Agreement specify certain conditions under which Members may Transfer 
their Common Interests. Under the LLC Agreement, acquisitions of Class 
A Common Interests by Class B Members or Class B Common Interests by 
Class A Members require the recalculation of the Aggregate Class A 
Allocation and the Aggregate Class B Allocation.
    The Exchange proposes to amend Section 11.2(a) of the LLC Agreement 
and Section 3.1 of the Members Agreement to clarify that the provisions 
of Section 11.2 of the LLC Agreement and Article III of the Members 
Agreement apply to transfers among the Members as well as to transfers 
to third parties. In addition, the Exchange proposes to amend Section 
11.2 of the LLC Agreement to clarify the mechanics by which (1) Common 
Interests may be transferred among Members or redeemed, and (2) Common 
Interests may be converted into Non-voting Common Interests. These 
amendments are not intended to substantively change these mechanics, 
but rather to clarify, as a technical matter, the specific changes that 
are required to be made to the Members' Schedule to reflect such 
transactions. Exhibit 5C includes examples of how these mechanics may 
be implemented from time to time.
    The Exchange also proposes to make certain conforming changes to 
the Members Agreement to clarify that the mechanics described below are 
applicable to transfers authorized thereunder.
    In addition, the Exchange proposes to clarify that the call option 
granted to NYSE MKT pursuant to Section 3.4 of the Members Agreement is 
granted solely by the Class B Members.
    Finally, the Exchange proposes to amend provisions in the Members 
Agreement to clarify the time periods during which Members may elect to 
transfer their Common Interests and relevant deadlines with respect to 
such transfers.
Transfers Among Members; Redemptions
    The Exchange proposes to clarify that following any transfer or 
redemption of Class A Common Interests or Class B Common Interests, the 
Aggregate Class A Economic Allocation, the Aggregate Class A Voting 
Allocation, the Aggregate Class B Economic Allocation, the Aggregate 
Class B Voting Allocation and the number of Class A Common Interests 
and Class B Common Interests shall be adjusted, subject in each case to 
Section 4.9 of the Amended LLC Agreement, as follows, to reflect such 
transfers or redemptions:
    (i) In the case of an acquisition of Class B Common Interests by a 
Class A Member or any of its Affiliates,
    (A) the Aggregate Class A Economic Allocation shall be increased by 
the Economic Common Interest Percentage represented by the Class B 
Common Interests so acquired and the Aggregate Class B Economic 
Allocation shall be reduced by an equal percentage,
    (B) the Aggregate Class A Voting Allocation shall be increased by a 
percentage equal to the Voting Common Interest Percentage represented 
by the Class B Common Interests so acquired and the Aggregate Class B 
Voting Allocation shall be reduced by an equal percentage, and
    (C) the Class B Common Interests so acquired shall be converted 
into a

[[Page 5487]]

number of Class A Common Interests equal to the product of (w) a 
fraction, (1) the numerator of which shall be the Economic Common 
Interest Percentage represented by the Class B Common Interests so 
acquired and (2) the denominator of which shall be the Aggregate Class 
A Economic Allocation prior to such acquisition multiplied by (x) the 
aggregate number of Class A Common Interests issued and outstanding 
prior to such acquisition; provided that if any acquired Class B Common 
Interests are Class B Non-voting Common Interests, the number of such 
Class A Common Interests that shall be Class A Non-voting Common 
Interests shall be equal to the difference between (I) the total number 
of such Class A Common Interests less (II) the product of (y) a 
fraction, (1) the numerator of which shall be the Voting Common 
Interest Percentage represented by the Class B Common Interests so 
acquired and (2) the denominator of which shall be the Aggregate Class 
A Voting Allocation prior to such acquisition multiplied by (z) the 
total number of Class A Common Interests issued and outstanding prior 
to such acquisition that are not Class A Non-voting Common Interests.
    (ii) In the case of a redemption of Class B Common Interests by the 
Company,
    (A) the Aggregate Class A Economic Allocation shall be increased by 
a percentage equal to the product of (x) the Economic Common Interest 
Percentage represented by the Class B Common Interests so redeemed 
multiplied by (y) a fraction, (1) the numerator of which shall be equal 
to the Aggregate Class A Economic Allocation immediately prior to such 
redemption and (2) the denominator of which shall be equal to (I) one-
hundred percent (100%) minus (II) the Economic Common Interest 
Percentage so redeemed, and the Aggregate Class B Economic Allocation 
shall be reduced by an equal percentage, and
    (B) the Aggregate Class A Voting Allocation shall be increased by a 
percentage equal to (x) the total Voting Common Interest Percentage 
represented by the Class B Common Interests so redeemed multiplied by 
(y) a fraction, (1) the numerator of which shall be equal to the 
Aggregate Class A Voting Allocation immediately prior to such 
redemption and (2) the denominator of which shall be equal to (I) one-
hundred percent (100%) minus (II) the Voting Common Interest Percentage 
so redeemed, and the Aggregate Class B Voting Allocation shall be 
reduced by an equal percentage.
    (iii) In the case of an acquisition of Class A Common Interests by 
a Class B Member or any of its Affiliates,
    (A) the Aggregate Class A Economic Allocation shall be reduced by 
the Economic Common Interest Percentage represented by the Class A 
Common Interests so acquired and the Aggregate Class B Economic 
Allocation shall be concomitantly increased,
    (B) the Aggregate Class A Voting Allocation shall be reduced by the 
Voting Common Interest Percentage represented by the Class A Common 
Interests so acquired and the Aggregate Class B Voting Allocation shall 
be concomitantly increased, and
    (C) the Class A Common Interests so acquired shall be converted 
into a number of Class B Common Interests equal to the product of (w) a 
fraction, (1) the numerator of which shall be the Economic Common 
Interest Percentage represented by the Class A Common Interests so 
acquired and (2) the denominator of which shall be the Aggregate Class 
B Economic Allocation prior to such acquisition multiplied by (x) the 
aggregate number of Class B Common Interests issued and outstanding 
prior to such acquisition; provided that if any acquired Class A Common 
Interests are Non-voting Common Interests, the number of such Class B 
Common Interests that shall be Class B Non-voting Common Interests 
shall be equal to the difference between (I) the total number of such 
Class B Common Interests less (II) the product of (y) a fraction, (1) 
the numerator of which shall be the Voting Common Interest Percentage 
represented by the Class A Common Interests so acquired and (2) the 
denominator of which shall be the Aggregate Class B Voting Allocation 
prior to such acquisition multiplied by (z) the total number of Class B 
Common Interests issued and outstanding prior to such acquisition that 
are not Class B Non-voting Common Interests.
    (iv) In the case of a redemption of Class A Common Interests by the 
Company,
    (A) the Aggregate Class A Economic Allocation shall be reduced by a 
percentage equal to (x) the Economic Common Interest Percentage 
represented by the Class A Common Interests so redeemed multiplied by 
(y) a fraction, (1) the numerator of which shall be equal to the 
Aggregate Class B Economic Allocation immediately prior to such 
redemption and (2) the denominator of which shall be equal to (I) one-
hundred percent (100%) minus (II) the Economic Common Interest 
Percentage so redeemed, and the Aggregate Class B Economic Allocation 
shall be concomitantly increased, and
    (B) the Aggregate Class A Voting Allocation shall be reduced by a 
percentage equal to (x) the total Voting Common Interest Percentage 
represented by the Class A Common Interests so redeemed multiplied by 
(y) a fraction, (1) the numerator of which shall be equal to the 
Aggregate Class B Voting Allocation immediately prior to such 
redemption and (2) the denominator of which shall be equal to (I) one-
hundred percent (100%) minus (II) the Voting Common Interest Percentage 
so redeemed, and the Aggregate Class B Voting Allocation shall be 
concomitantly increased.
    Examples 1, 2 and 3 in Exhibit 5C demonstrate the operation of 
these provisions.\15\
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    \15\ Examples 1, 2 and 3 were the subject of discussions with 
the SEC staff at a meeting on August 23, 2012.
---------------------------------------------------------------------------

Converting Common Interests to Non-voting Common Interests
    The Exchange proposes to add a Section 11.2(c) that clarifies that 
if a Member holds Common Interests representing an Excess Interest 
Percentage (such Member, solely to the extent that such Member holds 
Common Interests representing an Excess Interest Percentage or Common 
Interests converted into Non-voting Common Interests by operation of 
Section 11.2(c) of the Amended LLC Agreement, a ``Converting Member''), 
such Member's Voting Common Interest Percentage shall be reduced by 
converting a number of such Member's Common Interests into Non-voting 
Common Interests as follows:
    (i) A number of such Member's Common Interests shall be converted 
into Non-voting Common Interests, which number shall be equal to the 
product of:
    (A) In the case of Class A Common Interests, (x) such Member's 
Excess Interest Percentage multiplied by (y) a fraction, (1) the 
numerator of which shall be the total number of Class A Common 
Interests that are not Class A Non-voting Common Interests prior to 
such conversion and (2) the denominator of which shall be the Aggregate 
Class A Voting Allocation; or
    (B) In the case of Class B Common Interests, (x) such Member's 
Excess Interest Percentage multiplied by (y) a fraction, (1) the 
numerator of which shall be the total number of Class B Common 
Interests that are not Class B Non-voting Common Interests prior to 
such conversion and (2) the

[[Page 5488]]

denominator of which shall be the Aggregate Class B Voting Allocation;
    (ii) Each Member's (including the Converting Member's) Voting 
Common Interest Percentage shall be recalculated, taking into account 
the applicable calculation set forth in clause (i)(A) above; provided 
that with respect to all newly-converted Non-voting Common Interests, 
the Aggregate Class A Voting Allocation and Aggregate Class B Voting 
Allocation shall be adjusted to allocate the Voting Common Interest 
Percentage represented by the Common Interests that are subject to 
conversion pursuant to clause (i)(A) above proportionally between the 
Aggregate Class A Voting Allocation and Aggregate Class B Voting 
Allocation; and
    (iii) If the calculations performed pursuant to clause (ii) result 
in any Member owning Common Interests representing an Excess Interest 
Percentage, the calculations required by Section 11.2(c)(i) of the 
Amended LLC Agreement shall be repeated until no Member owns Common 
Interests representing an Excess Interest Percentage.
    By way of example, consider a Class B Member that holds 7 of 8 
outstanding Class B Common Interests (none of which are Non-voting 
Common Interests), where the Aggregate Class B Voting Allocation is 
25%. Such Class B Member's Voting Common Interest Percentage would be 
21.875% (i.e., 7/8 of 25%) and it would, therefore, be an Exceeding 
Member with an Excess Interest Percentage of 1.875% (i.e., 21.875%--
20%).\16\ By operation of Section 4.9(c) of the Amended LLC Agreement, 
the Exceeding Member would be automatically deemed to be a Converting 
Member and would be subjected to the conversion mechanics of Section 
11.2(c)(i) of the Amended LLC Agreement. First, a number of its Common 
Interests would be converted into Non-voting Common Interests. Pursuant 
to Section 11.2(c)(i)(A)(2) of the Amended LLC Agreement, this number 
would be equal to the product of (x) 1.875% (the Member's Excess 
Interest Percentage) multiplied by (y) a fraction, (1) the numerator of 
which would be 8 (the then-outstanding number of ordinary Class B 
Common Interests) and (2) the denominator of which would be 25% (the 
Aggregate Class B Voting Allocation), or 0.6 Class B Common Interests. 
Thus, by operation of Section 11.2(c)(i)(A)(2) of the Amended LLC 
Agreement, the Member would then hold 6.4 ordinary Class B Common 
Interests and 0.6 Non-voting Common Interests.
---------------------------------------------------------------------------

    \16\ In the interests of simplicity, for this example, we round 
up the 19.9% Maximum Percentage to 20%.
---------------------------------------------------------------------------

    Next, pursuant to Section 11.2(c)(i)(B) of the Amended LLC 
Agreement, each Member's (including the Converting Member's) Voting 
Common Interest Percentage would be recalculated to reflect the 
conversion and the Aggregate Class A Voting Allocation and Aggregate 
Class B Voting Allocation would be adjusted to allocate the Voting 
Common Interest Percentage of the converted Common Interests 
proportionally between the Class A Members and the Class B Members. The 
Voting Common Interest Percentage represented by 0.6 Class B Common 
Interests is 1.875%. The proportional reallocation of this 1.875% is 
effected in the same way the Company would reallocate the Economic 
Common Interest Percentage of Common Interests that had been redeemed: 
the Aggregate Class A Voting Allocation is recalculated as 75%/98.125% 
(i.e., 100%--1.875%) and the Aggregate Class B Voting Allocation is 
recalculated as 23.125%/98.125% (i.e., 25%--1.875% and 100%--1.875%, 
respectively). Thus, the new Aggregate Class B Voting Allocation is 
23.567%. As a result of this reallocation, the Converting Member's 
Voting Common Interest Percentage would be recalculated as 6.4 
(ordinary Class B Common Interests held by it) divided by 7.4 (ordinary 
Class B Common Interests outstanding) multiplied by 23.567% (the new 
Aggregate Class B Voting Allocation), or 20.382%. Note that the 
Converting Member is still an Exceeding Member as a result of the 
proportional allocation of the Voting Common Interest Percentage 
represented by the converted Class B Common Interests. As a result, 
pursuant to Section 11.2(c)(i)(C) of the Amended LLC Agreement, the 
process described above will need to be repeated, iteratively, in 
respect of such Converting Member's ``new'' Excess Interest Percentage, 
until it is no longer an Exceeding Member. Ultimately, a total of 0.75 
of such Member's Class B Common Interests will need to be converted 
into Non-voting Common Interests, resulting in: (1) Such Member holding 
6.25 Class B Common Interests and 0.75 Non-voting Common Interests, (2) 
the Aggregate Class A Voting Allocation increasing to 76.8%, (3) the 
Aggregate Class B Voting Allocation falling to 23.2%, and (4) such 
Member's Voting Common Interest Percentage falling to 20%.\17\
---------------------------------------------------------------------------

    \17\ Note that as a consequence of the changes to the Aggregate 
Class A Voting Allocation and Aggregate Class B Voting Allocation, 
each Member's Voting Common Interest Percentage will also be 
proportionally increased. If, as a result, such a Member becomes an 
Exceeding Member, it would also be subjected to the provisions of 
amended Section 4.9 and, if applicable, proposed Section 11.2(c) of 
the Amended LLC Agreement.
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Conversion of Non-Voting Common Interests to Common Interests
    In certain circumstances (including, for example, where an 
Exceeding Member holds Non-voting Common Interests while it divests 
itself of the Common Interests representing its Excess Interest 
Percentage in accordance with Section 4.9 of the Amended LLC 
Agreement), a Member's Common Interests that were required to be 
converted to Non-voting Common Interests may be converted back into 
ordinary Common Interests upon their transfer to another Member. To 
effect this reconversion, the Exchange proposes to provide in Section 
11.2(c) of the Amended LLC Agreement that, subject to Section 7.5 of 
the Amended LLC Agreement, in the event of (x) a Transfer by a 
Converting Member of any Common Interests or (y) a redemption by the 
Company of any Common Interests owned by a Converting Member:
    (i) Simultaneously with such Transfer or redemption, as applicable, 
(A) all Non-voting Common Interests created by application of Section 
11.2(c) of the Amended LLC Agreement (other than those held or 
transferred by a Restricted Member) shall be converted back into Common 
Interests (with applicable voting and consent rights as set forth in 
the Amended LLC Agreement) and shall represent the same Voting Common 
Interest Percentage they represented prior to their conversion, (B) the 
Aggregate Class A Voting Allocation and Aggregate Class B Voting 
Allocation shall be adjusted to reverse the adjustments required by 
Section 11.2(c)(i) of the Amended LLC Agreement with respect to such 
converted Common Interests and (C) each Member's (including the 
Converting Member's) Voting Common Interest Percentage shall be 
recalculated accordingly; and
    (ii) Upon giving effect to such Transfer or redemption, as 
applicable (including giving effect to clause (i) hereof) any Member 
(including any Transferee or Transferor Member) that is or becomes an 
Exceeding Member shall be subject to the provisions of Section 4.9 of 
the Amended LLC Agreement and shall be required to be a Converting 
Member with respect to the resulting Excess Interest Percentage.
    By way of example, consider the Exceeding Member described above 
(the ``Transferring Member'') desiring to transfer the Common Interests 
representing its Excess Interest

[[Page 5489]]

Percentage. Prior to the application of the conversion mechanics 
described in Section 11.2(c)(i) of the Amended LLC Agreement, its 
Excess Interest Percentage was 1.875%.\18\ Assume there is only one 
other Class B Member (the ``Acquiring Member''), holding 1 Class B 
Common Interest (of the 8 total Interests outstanding). The Acquiring 
Member's Voting Common Interest Percentage is only 3.125% and it is not 
at risk of becoming an Exceeding Member. It, therefore, wishes to 
acquire Common Interests from the Transferring Member representing the 
entirety of the Transferring Member's Excess Interest Percentage. In 
the hands of the Acquiring Member, such Common Interests will no longer 
need to be Non-voting Common Interests, so they will need to be 
converted back into ordinary Class B Common Interests.
---------------------------------------------------------------------------

    \18\ In the interests of simplicity, for this example, we again 
round up the 19.9% Maximum Percentage to 20%.
---------------------------------------------------------------------------

    To effect this transfer, pursuant to Section 11.2(c)(ii)(A) of the 
Amended LLC Agreement, all Non-voting Common Interests that had been 
previously created by operation of Section 11.2(c)(i) of the Amended 
LLC Agreement (other than those held or transferred by Restricted 
Members) will be temporarily converted back to ordinary Common 
Interests and the conversion described above will be temporarily 
reversed, so that (1) the Transferring Member will be deemed to hold 7 
(and not 6.25) ordinary Class B Common Interests and no Non-voting 
Common Interests, (2) the Aggregate Class A Voting Allocation will be 
deemed to be 75% and the Aggregate Class B Voting Allocation will be 
deemed to be 25%, and (3) the Voting Common Interest Percentages of all 
other Members will be deemed to have returned to their values prior to 
the conversion. The Acquiring Member, then, will acquire Class B Common 
Interests representing a Voting Common Interest Percentage (and an 
Economic Common Interest Percentage) of 1.875%, or 0.6 Class B Common 
Interests.
    Upon giving effect to this Transfer, (1) the Transferring Member 
will hold 6.4 (i.e., 7--0.6) Class B Common Interests, representing a 
Voting Common Interest Percentage (and Economic Common Interest 
Percentage) of 20% and (2) the Acquiring Member will hold 1.6 (i.e., 1 
+ 0.6) Class B Common Interests, representing a Voting Common Interest 
Percentage (and Economic Common Interest Percentage) of 5%.\19\ Neither 
will hold any Non-voting Common Interests and neither will be an 
Exceeding Member.
---------------------------------------------------------------------------

    \19\ Because the transfer is between Class B Members, no 
aggregate allocations would need to be adjusted.
---------------------------------------------------------------------------

Conforming Changes
    The Exchange further proposes to amend Sections 3.2(i) and 3.3(e) 
of the Members Agreement to clarify that (A) any redemption of Class B 
Common Interests pursuant to Section 3.2(b)(iii) or Section 3.2(c)(ii) 
of the Members Agreement and (B) any acquisition of Class A Common 
Interests by Class B Members pursuant to Section 3.3 of the Members 
Agreement or redemption of Class A Common Interests shall be, in all 
cases, subject to the mechanics described above and shall result in 
appropriate adjustments to the Aggregate Class A Economic Allocation, 
the Aggregate Class B Economic Allocation, Aggregate Class A Voting 
Allocation, the Aggregate Class B Voting Allocation, and the number of 
Class A Common Interests and Class B Common Interests, in each case, 
resulting from such transfer or redemption pursuant to Section 11.2(b) 
of the Amended LLC Agreement, and resulting adjustments, if any, to 
each Member's Economic Common Interest Percentage and Voting Common 
Interest Percentage.
Call Option of NYSE MKT
    Section 3.4 of the Members Agreement provides for a ``call option'' 
that is exercisable by NYSE MKT under certain circumstances. The 
Exchange proposes to amend Section 3.4 of the Members Agreement to 
clarify that the call option described therein is granted by the Class 
B Members rather than the Members (other than NYSE MKT) and gives NYSE 
MKT the right and the option to require the Class B Members (and any 
transferee of a Class B Member or transferee of a transferee) 
collectively to transfer to NYSE MKT any or all of the aggregate Class 
B Common Interests held by all Class B Members.
Sale and Transfer Periods
    The Exchange proposes to amend the definition of ``Sale Period'' in 
Section 1.1 of the Members Agreement in order to clarify that the 
period of time during which a Founding Firm may elect to transfer its 
Common Interests pursuant to Section 3.2 of the Amended Members 
Agreement is, in all cases, the 21 day period beginning on the first 
Business Day after the later of (x) the deadline for NYSE Euronext to 
file its Form 10-K with the SEC and (y) the date NYSE Euronext actually 
files such Form 10-K. The Exchange also proposes to add the term 
``Transfer Period'' in Section 1.1 of the Members Agreement, to mean, 
with respect to a Sale Period, the period of time starting on the first 
day of such Sale Period and ending on the earlier of (x) the day 
immediately preceding the first day of the following Sale Period and 
(y) with respect to a Member, if applicable, the date on which a 
transfer by such Member pursuant to Section 3.2 of the Amended Members 
Agreement is actually consummated. Relatedly, the Exchange proposes to 
amend Section 3.2 and Schedule 3.2(a) of the Members Agreement to 
clarify that transfers pursuant to Section 3.2 of the Amended Members 
Agreement must be consummated during the applicable Transfer Period 
rather than the applicable Sale Period.
    In addition, the Exchange proposes to delete Section 3.2(j) of the 
Members Agreement related to the determination of the first Sale 
Period, as that provision is no longer applicable by its terms.
Volume-Based Equity Plan
Volume Dispute Committee
    Section 2.4 of the Members Agreement establishes a Volume Dispute 
Committee empowered to take certain actions related to the Volume-Based 
Equity Plan. The Volume Dispute Committee is composed of fifteen 
natural persons, one of whom is appointed by each Founding Firm and the 
remainder of whom are appointed by NYSE MKT.
    Under the Amended Members Agreement, Section 2.4 is clarified to 
provide that upon the admission to the Company of a new Member that is 
deemed a Founding Firm pursuant to Section 11.1(c) of the Amended LLC 
Agreement, the number of representatives on the Volume Dispute 
Committee shall automatically be increased by two (2), one of whom 
shall be appointed by such new Member and one of whom shall be 
appointed by NYSE MKT.
Volume Calculations
    The definition of ``Industry Volume'' in the Members Agreement 
provides a mechanism for determining the aggregate industry-wide volume 
in certain products for purposes of determining a Founding Firm's 
Individual Target. Section 2.3 of the Members Agreement provides a 
mechanism for the determination of whether a Founding Firm has achieved 
its Individual Target.
    The Exchange proposes to amend the definition of ``Industry 
Volume'' to specify that Industry Volume shall include one-tenth of the 
volume in certain mini-options contracts that may be listed on the 
Exchange pursuant to NYSE MKT Rule 903. The Exchange also proposes to 
amend Section 2.3 of

[[Page 5490]]

the Members Agreement to provide that for purposes of determining 
whether a Founding Firm has achieved its Individual Target, a Founding 
Firm will receive one-tenth of a credit for each transaction in any 
such mini-options contract.
Fair Market Value
    The Exchange proposes to amend various provisions of the LLC 
Agreement and the Members Agreement to provide greater specificity with 
respect to the determination of fair market value. In addition, the 
Exchange proposes to amend certain provisions of the Members Agreement 
to remove references to provisions that are no longer applicable by 
their terms. Specifically, the Exchange proposes to amend:
     Section 4.9(c) of the LLC Agreement to provide that, in 
connection with a transfer of Common Interests representing an Excess 
Interest Percentage, the fair market value of such Common Interests 
will be determined as the product of (x) the fair market value of the 
Company, determined as of the date such Member is determined to be an 
Exceeding Member, multiplied by (y) the Excess Interest Percentage 
represented by such Common Interests;
     Section 11.5(b) of the LLC Agreement to provide that, in 
connection with certain redemptions of a Member's Common Interests, the 
fair market value of the redeemed Common Interests will be determined 
as the product of (x) the fair market value of the Company, determined 
as of the end of the calendar month immediately preceding the date the 
Company determines to redeem such Common Interests, multiplied by (y) 
the Economic Common Interest Percentage represented by such Common 
Interests;
     Section 11.5(c) of the LLC Agreement to provide that, in 
connection with certain redemptions of a Member's Common Interests, the 
fair market value of the redeemed Common Interests will be determined 
as the product of (x) the fair market value of the Company, determined 
as of the date the Company determines to redeem such Common Interests, 
multiplied by (y) the Economic Common Interest Percentage represented 
by such Common Interests;
     Section 11.5(g) of the LLC Agreement to provide that, in 
connection with a transfer of Class B Common Interests to NYSE MKT 
pursuant to Section 11.5(g) of the LLC Agreement, the fair market value 
of such transferred Class B Common Interests will be determined as the 
product of (x) the fair market value of the Company, determined as of 
the end of the calendar month immediately preceding the date NYSE MKT 
determines to exercise its right to require a Founding Firm to transfer 
its Class B Common Interests to NYSE MKT multiplied by (y) the Economic 
Common Interest Percentage represented by such Class B Common 
Interests;
     the definition of ``EBITDA'' in Section 1.1 of the Members 
Agreement to remove provisions regarding the calculation of fair market 
value that are no longer applicable;
     Section 2.1(i) of the Members Agreement (proposed to be 
renumbered as Section 2.1(h) in the Amended Members Agreement) to 
provide that, in connection with the redemption of a Founding Firm's 
Class B Common Interests pursuant to Section 2.1(i) of the Members 
Agreement, fair market value of the Company will be determined as of 
the final day of the calendar month immediately preceding the relevant 
quarterly determination date; and
     Section 3.4 of the Members Agreement to provide that, in 
connection with NYSE MKT's call option, fair market value of the 
Company will be determined as of the final day of the calendar month 
immediately preceding the exercise by NYSE MKT of its call option.
Typographical and Other Technical Corrections
    The Exchange proposes to amend various provisions of the LLC 
Agreement and the Members Agreement in order to make certain 
typographical corrections. Specifically, the Exchange proposes to:
     Replace the term ``and'' with ``or'' in the definition of 
``Initial Member'' in Section 1.1 of the LLC Agreement;
     Replace the term ``hold(s)'' with ``own(s)'' in Sections 
1.1 and 11.8 of the LLC Agreement;
     Replace the term ``held'' with ``owned'' in Sections 8.1, 
10.1, 11.3, 11.4 and 11.8 of the LLC Agreement;
     Replace the term ``holding'' with ``owning'' in Sections 
1.1, 9.1 and 13.2 of the LLC Agreement;
     Replace the term ``holder(s)'' with ``owner(s)'' in 
Sections 6.1, 9.1, 11.3 and 12.2 of the LLC Agreement;
     Delete the phrase ``or hold'' in Section 9.5 of the LLC 
Agreement;
     Replace the term ``Shares'' with ``Common Interests or 
Preferred Interests'' in Sections 1.1 and 11.1 of the LLC Agreement;
     Replace the term ``subsection'' with ``clause'' in Section 
11.8 of the LLC Agreement;
     Delete the term ``ownership'' in describing certain 
regulatory thresholds in Section 11.8 of the LLC Agreement;
     Replace the term ``for'' with the phrase ``with respect 
to'' in the definition of ``EBITDA'' in Section 1.1 of the Members 
Agreement; and
     Add the terms ``Agreement'', ``Company'' and ``NYSE 
Euronext'' to Section 1.1 of the Members Agreement.
Redactions to the Members Agreement
    Certain provisions in the Members Agreement have been redacted in 
order to preserve the confidentiality of commercially sensitive 
information. The redacted provisions are limited to (i) numerical 
dollar amounts and percentage thresholds, (ii) commercially sensitive 
terms and provisions related to the calculation of ``fair market 
value'' and (iii) certain competitive information. In connection with 
the revisions described herein, the Exchange proposes to amend certain 
of the redacted provisions in the Members Agreement related to the 
calculation of fair market value.
2. Statutory Basis
    The Proposed Rule Change is consistent with Section 6(b) \20\ of 
the Act,\21\ in general, and, in particular, furthers the objectives of 
Sections 6(b)(1) \22\, 6(b)(5) \23\ and 6(b)(8) \24\ of the Act.
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    \20\ 15 U.S.C. 78f(b).
    \21\ 15 U.S.C. 78.
    \22\ 15 U.S.C. 78f(b)(1).
    \23\ 15 U.S.C. 78f(b)(5).
    \24\ 15 U.S.C. 78f(b)(8).
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    The Proposed Rule Change is consistent with, and furthers the 
objectives of, Section 6(b)(1) of the Act because it enforces 
compliance by its members and persons associated with its members, with 
the provisions of the Act, the rules and regulations promulgated 
thereunder and the rules of the Exchange. It is also consistent with, 
and furthers the objectives of, Section 6(b)(5) of the Act in that it 
preserves all of NYSE MKT's existing rules and mechanisms 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 facilitating transactions in securities, to 
remove impediments to and perfect the mechanisms of a free and open 
market and a national market system and, in general, to protect 
investors and the public interest. The Proposed Rule Change does not 
modify, in any material respect, any of the provisions of the LLC 
Agreement or Members Agreement, that the SEC has found to be consistent 
with

[[Page 5491]]

Section 6(b) of the Act. Finally, the Proposed Rule Change is 
consistent with Section 6(b)(8) of the Act because it will not impose 
any burden on competition, as discussed in Section 4 below.
    The Proposed Rule Change does not modify the Options Exchange's 
trading or compliance rules and preserves the existing mechanisms for 
ensuring the Exchange's compliance with the Act, the rules and 
regulations promulgated thereunder and the rules of the Exchange. 
Furthermore, the proposed amendments to the provisions of the LLC 
Agreement related to ownership limitations in the Proposed Rule Change 
clarify the mechanisms by which Members may maintain compliance with 
applicable laws and regulations, enabling and ensuring continued 
compliance with such laws and regulations by both the Exchange and its 
Members. Finally, the proposed amendments do not change the structure 
of the joint venture which retains NYSE MKT's regulatory control over 
the Options Exchange or the provisions specifically designed to ensure 
the independence of its self-regulatory function and to ensure that any 
regulatory determinations by NYSE MKT, as the self-regulatory 
organization for the Options Exchange, are controlling with respect to 
the actions and decisions of the Options Exchange.
    Additionally, the Amended LLC Agreement continues to require the 
Company, its Members and its directors to comply with the federal 
securities laws and the rules and regulations promulgated thereunder 
and to engage in conduct that fosters and does not interfere with the 
Exchange's or the Company's ability to carry out its respective 
responsibilities under the Act.

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 
does not substantively change the LLC Agreement and Members Agreement, 
and instead provides clarifications to address certain ambiguities in 
those documents. Furthermore, the proposed amendments to the provisions 
of the LLC Agreement related to ownership limitations in the Proposed 
Rule Change clarify the mechanisms by which Members may maintain 
compliance with applicable laws and regulations, including the 
Commission's policies with respect to permissible equity ownership 
limitations, enabling and ensuring continued compliance with applicable 
equity ownership limits by Members of the Exchange. In addition, the 
Proposed Rule Change does not affect the availability or pricing of any 
goods or services and, as a result, will not affect competition either 
between the Exchange and others that provide the same goods and 
services as the Exchange or among market participants.

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-NYSEMKT-2014-08 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-NYSEMKT-2014-08. 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 office 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 publicly available. All 
submissions should refer to File Number SR- NYSEMKT-2014-08 and should 
be submitted on or before February 21, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\25\
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    \25\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-01969 Filed 1-30-14; 8:45 am]
BILLING CODE 8011-01-P