Document ID: SEC-2007-0089-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: NYSE Arca, Inc.
Posted Date: 2007-01-19T05:00Z

[Federal Register: January 19, 2007 (Volume 72, Number 12)]
[Notices]               
[Page 2578-2581]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr19ja07-101]                         

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55109; File No. SR-NYSEArca-2007-05]

 
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change Regarding a Proposed Combination Between NYSE 
Group, Inc. and Euronext N.V.

January 16, 2007.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 
1934, as amended, (``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ 
notice is hereby given that on January 12, 2007, NYSE Arca, Inc. 
(``NYSE Arca'' 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 substantially 
prepared by the Exchange. The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(l).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

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

    NYSE Arca is submitting the proposed rule change to the Commission 
in connection with the proposed business combination (the 
``Combination'') of NYSE Group, Inc., a Delaware corporation (``NYSE 
Group''), with Euronext N.V., a company organized under the laws of The 
Netherlands (``Euronext''). As a result of the Combination, the 
businesses of NYSE Group (including that of NYSE Arca) and Euronext 
will be held under a single, publicly traded holding company named NYSE 
Euronext, a Delaware corporation (``NYSE Euronext''). The Combination 
involves certain modifications to the organizational documents of NYSE 
Group,\3\ the current indirect parent

[[Page 2579]]

company of NYSE Arca, and of NYSE Euronext, which upon completion of 
the Combination will be the new indirect parent company of NYSE Arca. 
The organizational documents and independence policies of NYSE Group 
and NYSE Euronext and the trust documents constitute rules of the 
Exchange. The resolutions of the board of directors of NYSE Group and 
the changes to the Certificate of Incorporation of Archipelago 
Holdings, Inc., current direct parent of NYSE Arca are also rules of 
the Exchange requiring Commission approval. Accordingly, NYSE Arca 
submits this proposed rule change to reflect the rule changes to be 
implemented in connection with the Combination.
---------------------------------------------------------------------------

    \3\ Upon the consummation of the Combination, NYSE Group will be 
merged with and into Jefferson Merger Sub, Inc. and the name of 
Jefferson Merger Sub, Inc. will be changed to NYSE Group, Inc. The 
changes to the NYSE Group organizational documents refer to changes 
from the current NYSE Group organizational documents. Technically, 
however, the Amended and Restated Certificate of Incorporation and 
Amended and Restated Bylaws of NYSE Group that will be operative 
upon the consummation of the Combination will be amended and 
restated forms of the Certificate of Incorporation and Bylaws of 
Jefferson Merger Sub, Inc.
---------------------------------------------------------------------------

    The text of the proposed rule change and Exhibits 5A through 5H \4\ 
are available at the Exchange, the Commission's Public Reference Room, 
and http://www.nysearca.com.

---------------------------------------------------------------------------

    \4\ The proposed Amended and Restated Certificate of 
Incorporation of NYSE Euronext is Exhibit 5A; the proposed Amended 
and Restated Bylaws of NYSE Euronext are Exhibit 5B; the proposed 
NYSE Euronext Director Independence Policy, which policy will 
replace the current NYSE Group Director Independence Policy, is 
Exhibit 5C; the proposed Amended and Restated Certificate of 
Incorporation of NYSE Group is Exhibit 5D; the proposed Amended and 
Restated Bylaws of NYSE Group are Exhibit 5E; the resolutions of the 
board of directors of NYSE Group are Exhibit 5F; the proposed 
Amended and Restated Certificate of Incorporation of Archipelago 
Holdings, Inc. (``Arca Holdings'') is Exhibit 5G and the proposed 
Trust Agreement for the Delaware Trust is Exhibit 5H. Each of these 
Exhibits will be operative as of the consummation of the 
Combination.
---------------------------------------------------------------------------

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

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of, and basis for, the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
Sections A, B, and C below, of the most significant aspects of such 
statements.

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

1. Purpose
    NYSE Arca is submitting the proposed rule change to the Commission 
in connection with the Combination of NYSE Group with Euronext. As a 
result of the Combination, the businesses of NYSE Group (including that 
of NYSE Arca) and Euronext will be held under a single, publicly traded 
holding company named NYSE Euronext. The Combination involves certain 
modifications to the organizational documents of NYSE Group, the 
current indirect parent company of NYSE Arca, and of NYSE Euronext, 
which upon completion of the Combination will be the new indirect 
parent company of NYSE Arca. The organizational documents and 
independence policies of NYSE Group and NYSE Euronext and the trust 
documents constitute rules of the Exchange. The resolutions of the 
board of directors of NYSE Group and the changes to the Certificate of 
Incorporation of Archipelago Holdings, Inc., current direct parent of 
NYSE Arca are also rules of the Exchange requiring Commission approval. 
Accordingly, NYSE Arca submits this proposed rule change to reflect the 
rule changes to be implemented in connection with the Combination.
    For a description of the Combination and related rule changes 
regarding NYSE Euronext, NYSE Group, and the Delaware Trust, see the 
rule filing submitted by the New York Stock Exchange LLC (``NYSE'') 
relating to the Combination (File Number SR-NYSE-2006-120) (the ``NYSE 
Rule Filing'').\5\
---------------------------------------------------------------------------

    \5\ See Securities Exchange Act Release No. 55026 (December 29, 
2006), 72 FR 814 (January 8, 2007).
---------------------------------------------------------------------------

    As a self-regulatory organization also owned by NYSE Group, the 
Exchange is making reference in this proposed rule change to the 
applicable matters described in the NYSE Rule Filing. In particular, 
the NYSE Rule Filing describes the following matters:
     Corporate structure of NYSE Euronext following the 
Combination. In particular, Arca Holdings will remain a wholly owned 
subsidiary of NYSE Group. NYSE Arca Holdings, Inc., a Delaware 
corporation (``NYSE Arca Holdings''), and NYSE Arca L.L.C., a Delaware 
limited liability company (``NYSE Arca LLC''), will remain wholly owned 
subsidiaries of Arca Holdings. NYSE Arca will remain a wholly owned 
subsidiary of NYSE Arca Holdings and NYSE Arca Equities, Inc., a 
Delaware corporation formerly known as PCX Equities, Inc. (``NYSE Arca 
Equities''), will remain a wholly owned subsidiary of NYSE Arca. NYSE 
Arca will continue to maintain its status as a registered national 
securities exchange and self-regulatory organization. Arca Holdings' 
businesses and assets will continue to be held by it and its 
subsidiaries. Pursuant to a services agreement, NYSE Regulation will 
perform many of the regulatory functions of NYSE Arca.
    There will be no change to the current manner of election or 
appointment of the directors and officers of Arca Holdings, NYSE Arca 
Holdings, NYSE Arca LLC, NYSE Arca or NYSE Arca Equities (or of the 
Euronext exchanges) as a result of the Combination. The Combination 
will have no effect on the ability of any party to trade securities on 
NYSE Arca or NYSE Arca Equities.
     Board of directors and board committees of NYSE Euronext. 
Specifically, in contrast to the current independence policy of NYSE 
Group, the independence policy of NYSE Euronext will not provide as a 
categorical matter that a person fails to be independent if he or she 
is an executive officer of a foreign private issuer of securities 
listed on the NYSE or NYSE Arca. The Exchange believes that this change 
is important because NYSE Euronext will be a multinational company, 
with European Persons comprising half of its initial directors, most of 
whom will initially be former directors of Euronext. Euronext does not 
prohibit executive officers of companies listed on Euronext exchanges 
from serving as directors of Euronext because Euronext does not (and 
NYSE Euronext will not) regulate these companies in the way that the 
Exchange regulates its listed companies. The Exchange therefore 
believes that a categorical requirement prohibiting all executive 
officers of foreign private issuers listed on the NYSE on NYSE Arca 
could preclude a large pool of otherwise highly qualified director 
candidates from serving on the NYSE Euronext board of directors and is 
not necessary.
    In addition, the director independence policy will contain a 
transition period so that the independence requirements will not apply 
to the European Persons on the NYSE Euronext board of directors until 
the annual meeting of NYSE Euronext stockholders in 2008.
    Finally, in contrast to the current independence policy of NYSE 
Group, the independence policy of NYSE Euronext will not provide as a 
categorical matter that a person fails to be independent if he or she 
is a director of an affiliate of a member organization

[[Page 2580]]

(which includes member organizations of NYSE (as defined in paragraph 
(b) of Rule 2 of NYSE), OTP Firms of NYSE Arca (as defined in Rules 
1.1(r) of NYSE Arca) and ETP Holders of NYSE Arca Equities, Inc. (as 
defined in Rule 1.1(n) of NYSE Arca Equities, Inc.)).
    The independence policy of NYSE Euronext will require, however, 
that (1) Executive officers of foreign private issuers (including, for 
the avoidance of doubt, companies whose securities are listed on a 
Euronext exchange), (2) executive officers of NYSE Euronext, (3) any 
European Person on the NYSE Euronext board of directors who would not 
satisfy the independence requirements in the independence policy but 
for the transition period, and (4) any director of an affiliate of a 
member organization, taken together, shall constitute no more than a 
minority of the total number of directors of NYSE Euronext. In 
addition, none of (1) An executive officer of an issuer whose 
securities are listed on the NYSE or NYSE Arca (regardless of whether 
such issuer is a foreign private issuer), (2) a European Person on the 
NYSE Euronext board of directors who would not satisfy the independence 
requirements in the independence policy but for the transition period, 
or (3) any director of an affiliate of a member organization can 
qualify as an independent director of the NYSE, NYSE Market or NYSE 
Regulation. Consequently, the Exchange believes that the proposed 
changes, when taken together, do not present significant concerns 
regarding the independence of the board of NYSE Euronext.
     Management of NYSE Euronext.
     Voting and ownership limitations on the shares of NYSE 
Euronext.
     Protection of the self-regulatory functions and 
oversight.\6\
---------------------------------------------------------------------------

    \6\ In particular, to facilitate compliance with the 
requirements of Rule 17a-1(b) under the Exchange Act, NYSE Euronext 
shall maintain in the United States originals or copies of 
Overlapping Records (as defined in the NYSE Rule Filing) covered by 
Rule 17a-1(b) promptly after creation of such Overlapping Records.
---------------------------------------------------------------------------

    The Exchange understands that the Commission is also concerned 
about potential unfair competition and conflicts of interest between a 
U.S. exchange's self-regulatory obligations and its commercial 
interests that could exist if such exchange were to become affiliated 
with one of its members, as well as the potential for unfair 
competitive advantage that the affiliated member could have by virtue 
of informational or operational advantages, or the ability to receive 
preferential treatment.\7\ The Exchange acknowledges that ownership of, 
or a control relationship with, a member organization by NYSE Euronext 
or any of its subsidiaries would necessitate that the foregoing 
concerns be first addressed with, and to the satisfaction of, the 
Commission \8\ and/or, as appropriate, the European Regulators.
---------------------------------------------------------------------------

    \7\ See Securities Exchange Act Release No. 52497 (September 22, 
2005), 70 FR 56949 (September 29, 2005) (File Number SR-PCX-2005-
90); and Securities Exchange Act Release No. 53382 (February 27, 
2006), 71 FR 11251 (March 6, 2006) (File Number SR-NYSE-2005-77).
    \8\ We note that the Commission has specifically approved the 
ownership and operation of the outbound router function of 
Archipelago Securities by Archipelago, subject to the conditions 
specified in Securities Exchange Act Release No. 52497.
---------------------------------------------------------------------------

     Provisions relating to the Delaware Trust and Dutch 
Foundation, including:
     Administration of the Delaware Trust and Dutch Foundation,
     Material adverse changes in law,
     Remedies of the Dutch Foundation and Delaware Trust,
     Unwinding of remedies,
     Consequences of the exercise of remedies,
     Automatic suspension and repeal of certain provisions in 
the NYSE Euronext organizational documents,
     Transfer of Foundation and Trust property,
     Submission to jurisdiction,
     Other duties,
     Initiatives by the Board of Trustees of the Delaware Trust 
and the Board of Directors of the Foundation,
     Duration of the Dutch Foundation, and
     Term of the Delaware Trust.
     NYSE Group waiver of its ownership and voting limitations.
    In this regard, an extract with the relevant resolutions is 
attached to this rule filing as Exhibit 5F.
    The Exchange hereby requests that the Commission allow NYSE 
Euronext to wholly own and vote all of the outstanding common stock of 
NYSE Group, either alone or with its related persons, except for any 
related person of NYSE Euronext which is an ETP Holder of NYSE Arca 
Equities, OTP Holder or OTP Firm of NYSE Arca, or member or member 
organization of the NYSE, upon the consummation of the Combination.
     Regulation following the Combination.
     Changes to the organizational documents of NYSE Group.
    In addition, Article Fourth of the Certificate of Incorporation of 
Arca Holdings is being amended to provide for voting or ownership of 
the shares of stock of Arca Holdings by the Delaware Trust pursuant to 
the terms and conditions of the Trust Agreement by and among NYSE 
Euronext, Inc., NYSE Group, Inc. and the trustees and Delaware trustee 
thereto.\9\
---------------------------------------------------------------------------

    \9\ See proposed Amended and Restated Certificate of 
Incorporation of Arca Holdings., Article Fourth (C)(1) and (D)(1).
---------------------------------------------------------------------------

    The proposed rule change, if approved by the Commission, will not 
be operative until the consummation of the Combination.
2. Statutory Basis
    The Exchange believes that this filing is consistent with Section 
6(b)(1) of the Exchange Act,\10\ in general, and furthers the 
objectives of Section 6(b)(1) in particular, in that it enables the 
Exchange to be so organized as to have the capacity to be able to carry 
out the purposes of the Exchange Act and to comply, and to enforce 
compliance by its exchange members and persons associated with its 
exchange members, with the provisions of the Exchange Act, the rules 
and regulations thereunder, and the rules of the Exchange. The Exchange 
also believes that this filing furthers the objectives of Section 
6(b)(5) of the Exchange Act \11\ because the rules summarized herein 
would create a governance and regulatory structure that is designed to 
prevent fraudulent and manipulative acts and practices, to promote just 
and equitable principles of trade, to 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.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78f(b)(1).
    \11\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change would 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Exchange Act.

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

    The Exchange has neither solicited nor received written comments on 
the proposed rule change.

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

    Within 35 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

[[Page 2581]]

organization consents, the Commission will:
    (A) By order approve such proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change 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 e-mail to rule-comments@sec.gov. Please include 

File Number SR-NYSEArca-2007-05 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street, NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSEArca-2007-05. This 
file number should be included on the subject line if e-mail 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 inspection 
and copying in the Commission's Public Reference Room. 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-NYSE-2007-05 and should be submitted on or before 
February 5, 2007.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\12\
---------------------------------------------------------------------------

    \12\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-754 Filed 1-18-07; 8:45 am]

BILLING CODE 8011-01-P