Document ID: SEC-2014-0496-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: EDGX Exchange, Inc.
Posted Date: 2014-03-28T04:00Z

[Federal Register Volume 79, Number 60 (Friday, March 28, 2014)]
[Notices]
[Pages 17613-17615]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-06965]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71777; File No. SR-EDGX-2014-06]

Self-Regulatory Organizations; EDGX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Add a 
Reference to Rule 10C-1 Under the Exchange Act in EDGX Rule 14.1 
Concerning Unlisted Trading Privileges

March 24, 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 March 12, 2014, EDGX Exchange, Inc. (the ``Exchange'' or 
``EDGX'') 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 240.19b 4.

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[[Page 17614]]

I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    The Exchange is filing with the Commission a proposal to amend 
Exchange Rule 14.1 to make clear that the Exchange will not list equity 
securities without first ensuring that its rules comply with Rule 10C-1 
under the Act (``Rule 10C-1''). The text of the proposed rule change is 
available on the Exchange's Internet Web site at www.directedge.com, at 
the Exchange's principal office, and at the Public Reference Room of 
the Commission.

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

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of these statements may be examined at 
the places specified in Item IV below. The self-regulatory organization 
has prepared summaries, set forth in sections A, B and C below, of the 
most significant aspects of such statements.

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

1. Purpose
    The Exchange proposes to amend Exchange Rule 14.1 to make clear 
that the Exchange will not list equity securities without first 
ensuring that its rules comply with Rule 10C-1.
    On March 30, 2011, to implement Section 10C of the Act, as added by 
Section 952 of the Dodd-Frank Wall Street Reform and Consumer 
Protection Act of 2010,\3\ the Commission proposed Rule 10C-1 under the 
Act,\4\ which directs each national securities exchange to prohibit the 
listing of any equity security of any issuer, with certain exceptions, 
that does not comply with the rule's requirements regarding 
compensation committees of listed issuers and related requirements 
regarding compensation advisers. On June 20, 2012, the Commission 
adopted Rule 10C-1.\5\
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    \3\ Public Law 111-203, 124 Stat. 1900 (2010).
    \4\ See Securities Act Release No. 9199, Securities Exchange Act 
Release No. 64149 (March 30, 2011), 76 FR 18966 (April 6, 2011) 
(``Rule 10C-1 Proposing Release'').
    \5\ See 17 CFR 240.10C-1 and Securities Exchange Act Release No. 
67220 (June 20, 2012), 77 FR 38422 (June 27, 2012) (``Rule 10C-1 
Adopting Release'').
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    Exchange Rule 14.1 states that the Exchange extends unlisted 
trading privileges (``UTP'') to equity securities listed on another 
national securities exchange.\6\ Rule 14.1 further states that, should 
the Exchange wish to permit the listing of equity securities, pursuant 
to Rules 14.2 through 14.9, it must first file a proposed rule change 
with the Commission amending its rules to comply with Rule 10A-3 under 
the Act, among other requirements.\7\ Accordingly, the Exchange 
proposes to add a reference to Rule 10C-1 under the Act, which requires 
securities exchanges that list equity securities to adopt rules 
relating to the independence of compensation committees and their 
advisers.\8\ In particular, the following change will be made to the 
text of Rule 14.1(a) (proposed text to be added is underlined):

    \6\ See Exchange Rule 14.1.
    \7\ Id.
    \8\ 17 CFR 240.10C-1.
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    Therefore, the provisions of Rules 14.2 through 14.9 that permit 
the listing of Equity Securities other than common stock, secondary 
classes of common stock, preferred stock and similar issues, shares 
or certificates of beneficial interest of trusts, notes, limited 
partnership interests, warrants, certificates of deposit for common 
stock, convertible debt securities, American Depositary Receipts 
(``ADRs''), and contingent value rights (``CVRs'') will not be 
effective until the Exchange files a proposed rule change under 
Section 19(b)(2) under the Exchange Act to amend its rules to comply 
with Rules 10A-3 and 10C-1 under the Exchange Act and to incorporate 
qualitative listing criteria, and such proposed rule change is 
approved by the Commission.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\9\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\10\ in particular, in that it is designed to 
promote just and equitable principles of trade, to remove impediments 
to and perfect the mechanism of a free and open market and a national 
market system, and, in general to protect investors and the public 
interest, and is not designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers. The rule change will promote 
these goals by clarifying further the intent of Rule 14.1, which exists 
to permit the Exchange to extend UTP to stocks that are listed on 
another national securities exchange pursuant to Section 12(f) of the 
Act.\11\ The proposed amendments to Rule 14.1 emphasize that the 
Exchange will not list securities pursuant to Rules 14.2 through 14.9 
until it proposes certain rule changes and those changes are approved 
by the Commission. The Exchange believes the proposed rule change is 
consistent with the protection of investors because it clarifies the 
fact that the Exchange will not list equity securities without first 
ensuring that its rules comply with Rule 10C-1, which implements 
Section 10C of the Act. These clarifications will also serve to protect 
investors and the public interest by preventing confusion about the 
intent of Rule 14.1.
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    \9\15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
    \11\ 15 U.S.C. 78l(f).
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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, as amended. The proposed 
rule change simply requires the codification of standards to which 
compensation committees of listed companies will be held should such 
companies choose to list their securities on the Exchange if the 
Exchange were to become a relevant listing exchange.

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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)\12\ of the Act and Rule 19b-4(f)(6)\13\ thereunder. The 
proposed rule change effects a change that (A) does not significantly 
affect the protection of investors or the public interest; (B) does not 
impose any significant burden on competition; and (C) by its terms, 
does not become operative for 30 days after the date of the filing, or 
such shorter time as the Commission may designate if consistent with 
the protection of investors and the public interest; provided that the 
self-regulatory organization has given the Commission written notice of 
its intent to file the proposed rule change, along with a brief 
description and text of the proposed rule change, at least five 
business days prior to the date of filing of the

[[Page 17615]]

proposed rule change, or such shorter time as designated by the 
Commission.
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(6).
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    The Exchange provided the Commission with written notice of its 
intent to file the proposed rule change, along with a brief description 
and text of the proposed rule change, at least five (5) business days 
prior to the date of filing.\14\ The Exchange has satisfied this 
requirement [sic].
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    \14\ 17 CFR 240.19b-4(f)(6)(iii).
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    The Exchange believes that the proposed rule change meets the 
requirements of Rule 19b-4(f)(6).\15\ Specifically, the proposal does 
not significantly affect the protection of investors or the public 
interest because it simply requires the codification of standards to 
which compensation committees of listed companies will be held if the 
Exchange were to become a listing market. Further, it does not involve 
any novel or complex issue and is substantially similar to the UTP 
listing rules of the BATS-Y Exchange, Inc. (``BYX'').\16\ Furthermore, 
the proposed rule change benefits investors in that it increases 
transparency for investors and promotes responsible corporate 
governance by requiring the codification of standards for compensation 
committees of listed companies should the Exchange become a primary 
listing exchange. Accordingly, the Exchange has designated this rule 
filing as non-controversial under Section 19(b)(3)(A) of the Act\17\ 
and paragraph (f)(6) of Rule 19b-4 thereunder.\18\
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    \15\ 17 CFR 240.19b-4(f)(6).
    \16\ See BYX Rule 14.1. Securities Exchange Act Release No. 
70623 (October 8, 2013), 78 FR 6277 (October 22, 2013).
    \17\ 15 U.S.C. 78s(b)(3)(A).
    \18\ 17 CFR 240.19b-4(f)(6).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act.

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-EDGX-2014-06 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-EDGX-2014-06. 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 available publicly. All 
submissions should refer to File Number SR-EDGX-2014-06, and should be 
submitted on or before April 18, 2014.
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    \19\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-06965 Filed 3-27-14; 8:45 am]
BILLING CODE 8011-01-P