Document ID: SEC-2010-0254-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: International Securities Exchange, LLC
Posted Date: 2010-02-18T05:00Z

[Federal Register: February 18, 2010 (Volume 75, Number 32)]
[Notices]               
[Page 7299-7301]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr18fe10-68]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61498; File No. SR-ISE-2009-90]

 
Self-Regulatory Organizations; International Securities Exchange, 
LLC; Order Approving Proposed Rule Change Relating to Changes to the 
U.S. Exchange Holdings, Inc. Corporate Documents and International 
Securities Exchange Trust Agreement

February 4, 2010.
    On November 9, 2009, the International Securities Exchange, LLC 
(``ISE'' or ``Exchange'') filed with the Securities and Exchange 
Commission (``Commission''), pursuant to Section 19(b)(1) of the 
Securities Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change relating to the U.S. Exchange 
Holdings, Inc. (``U.S. Exchange Holdings'') Corporate Documents (as 
defined below) and the ISE Trust Agreement (as defined below). The 
proposed rule change was published for comment in the Federal Register 
on November 24, 2009.\3\ The Commission received no comment letters on 
the proposed rule change. This order approves the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 61005 (November 16, 
2009), 74 FR 61398 (``Notice'').
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I. Background

    U.S. Exchange Holdings wholly owns ISE Holdings, Inc. (``ISE 
Holdings''). ISE Holdings wholly owns ISE, as well as a 31.54% interest 
in Direct Edge Holdings, LLC (``Direct Edge''). Direct Edge currently 
owns and operates a facility of the Exchange.\4\ In addition, on May 7, 
2009, Direct Edge's direct subsidiaries, EDGA Exchange, Inc. (``EDGA'') 
and EDGX Exchange, Inc. (``EDGX''), each filed a Form 1 Application \5\ 
(as amended, the ``Form 1 Applications'') with the Commission, to own 
and operate a registered national securities exchange.
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    \4\ See Securities and Exchange Act Release No. 59135 (December 
22, 2008); 73 FR 79954 (December 30, 2008) (SR-ISE-2008-85) 
(relating to a corporate transaction in which: (1) ISE Holdings 
purchased an ownership interest in Direct Edge by contributing cash 
and the marketplace then operated by ISE Stock Exchange, LLC for the 
trading of U.S. cash equity securities; and (2) Direct Edge's 
wholly-owned subsidiary, Maple Merger Sub LLC became the operator of 
the marketplace as a facility of ISE.
    \5\ The Commission published the Form 1 Applications, as 
modified by Amendment No. 1, on September 17, 2009. See Securities 
Exchange Act Release No. 60651 (September 11, 2009), 74 FR 179 (File 
No. 10-193 and 10-194).

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[[Page 7300]]

    U.S. Exchange Holdings is a wholly-owned subsidiary of Eurex 
Frankfurt AG (Eurex Frankfurt). Eurex Frankfurt is a wholly-owned 
subsidiary of Eurex Z[uuml]rich AG (``Eurex Z[uuml]rich''), which in 
turn is jointly owned by Deutsche B[ouml]rse AG (``Deutsche 
B[ouml]rse'') and SIX Swiss Exchange (``SIX''). SIX is owned by SIX 
Group (Eurex Frankfurt, Eurex Z[uuml]rich, Deutsche B[ouml]rse, SIX, 
SIX Group, and U.S. Exchange Holdings, Inc. are collectively referred 
to herein as the ``Upstream Owners'').
    In connection with the acquisition of ISE Holdings by the Upstream 
Owners in December 2007,\6\ ISE Holdings, U.S. Exchange Holdings, 
Wilmington Trust Company, as Delaware trustee, and Sharon Brown-Hruska, 
Robert Schwartz and Heinz Zimmermann, as trustees, entered into a Trust 
Agreement, dated as of December 19, 2007 (the ``ISE Trust Agreement''). 
As discussed in the Eurex Acquisition Order, the ISE Trust Agreement is 
designed to enable the Exchange to operate in a manner that complies 
with the federal securities laws, including the objectives and 
requirements of Sections 6(b) and 19(g) of the Act,\7\ and to 
facilitate the ability of the Exchange and the Commission to fulfill 
their regulatory and oversight obligations under the Act.\8\
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    \6\ See Securities Exchange Act Release No. 56955 (December 13, 
2007), 72 FR 71979 (December 19, 2007) (File No. SR-ISE-2007-101) 
(``Eurex Acquisition Order'').
    \7\ 15 U.S.C. 78f(b) and 15 U.S.C. 78s(g).
    \8\ ISE Trust Agreement, Articles V, VI, and VIII.
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II. Description of the Proposal

    In the instant filing, the Exchange, on behalf of the U.S. Exchange 
Holdings, proposed amendments to (i) the Certificate of Incorporation 
and Bylaws of U.S. Exchange Holdings (the ``Corporate Documents''); and 
(ii) the ISE Trust Agreement, to provide that the Regulatory Provisions 
(as defined below) in the Corporate Documents and the ISE Trust 
Agreement, which currently apply only to ISE, also shall apply to any 
``Controlled National Securities Exchange,'' defined to any mean 
national securities exchange, or facility thereof, that U.S. Exchange 
Holdings may control, directly or indirectly.
    Specifically, and as more fully described in the Notice, the 
Exchange proposed to replace certain references to ``ISE'' in the 
Corporate Documents with the term ``each Controlled National Securities 
Exchange.'' These references appear in the ownership and voting 
limitations sections of the Corporate Documents, as well as other 
miscellaneous sections, including, but not limited to, the 
confidentiality section, the books and records section, the compliance 
with laws section, the jurisdiction section, and the amendments section 
(the ``Regulatory Provisions''). Similarly, the Exchange proposed to 
amend certain provisions of the ISE Trust Agreement to replace certain 
references to ``ISE'' that appear in Articles II through VIII of the 
ISE Trust Agreement with references to ``each Controlled National 
Securities Exchange.''

III. Discussion

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities exchange.\9\ 
In particular, the Commission finds that the proposed rule change is 
consistent with Section 6(b)(1) of the Act,\10\ which requires, among 
other things, that a national securities exchange be so organized and 
have the capacity to carry out the purposes of the Act, and the rules 
and regulation thereunder, and Section 6(b)(5) of the Act \11\ in that 
it is designed to promote just and equitable principles of trade, to 
prevent fraudulent and manipulative acts, and, in general, to protect 
investors and the public interest.
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    \9\ In approving this proposed rule change, the Commission notes 
that it has considered the proposed rule's impact on efficiency, 
competition, and capital formation. See 15 U.S.C. 78c(f).
    \10\ 15 U.S.C. 78f(b)(1).
    \11\ 15 U.S.C. 78f(b)(5).
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    Section 19(b) \12\ of the Act and Rule 19b-4 \13\ thereunder 
require a self-regulatory organization to file proposed rule changes 
with the Commission. Although U.S. Exchange Holdings and the ISE Trust 
are not self-regulatory organizations, the Corporate Documents and 
certain provisions of the ISE Trust Agreement are rules of an exchange 
if they are stated policies, practices, or interpretations (as defined 
in Rule 19b- 4 under the Act) of the exchange, and must therefore be 
filed with the Commission pursuant to Section 19(b)(4) of the Act and 
Rule 19b-4 thereunder.\14\ Accordingly, the Exchange filed the 
Corporate Documents and the ISE Trust Agreement with the Commission.
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    \12\ 15 U.S.C. 78s(b)(1).
    \13\ 17 CFR 240.19b-4.
    \14\ See Eurex Acquisition Order, supra note 6.
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    The Corporate Documents currently include Regulatory Provisions 
designed to maintain the independence of the regulatory functions of 
the Exchange, the sole national securities exchange controlled, 
directly or indirectly, by U.S. Exchange Holdings.\15\ However, the 
Regulatory Provisions, by their terms, currently do not apply to 
additional national securities exchanges that U.S. Exchange Holdings 
might control, directly or indirectly, as a result of a subsequent 
transaction. The Exchange notes that EDGA and EDGX have filed the Form 
1 Applications with the Commission that, if approved, would result in 
U.S. Exchange Holdings, indirectly controlling two additional national 
securities exchanges.\16\ Accordingly, the Exchange proposes to amend 
the Corporate Documents to apply the Regulatory Provisions to any 
national securities exchange, or facility thereof, that U.S. Exchange 
Holdings may control, directly or indirectly. The Commission believes 
that the amended Corporate Documents are designed to assist any 
national securities exchange, or facility thereof, that U.S. Exchange 
Holdings may control, directly or indirectly, in fulfilling their self-
regulatory obligations and in administering and complying with the 
requirements of the Act.\17\
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    \15\ See Eurex Acquisition Order, supra note 6.
    \16\ See Notice, supra note 3. Approval of this proposed rule 
change in no way prejudges or determines what actions the Commission 
may take with respect to the Form 1 Applications.
    \17\ See Eurex Acquisition Order, supra note 6, for an 
additional discussion of specific provisions in the Corporate 
Documents.
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    The ISE Trust Agreement contains provisions that are designed to 
enable the Exchange to operate in a manner that complies with the 
federal securities laws, and to facilitate the ability of the Exchange 
and the Commission to fulfill their regulatory and oversight 
obligations under the Act.\18\ These provisions, however, are limited 
solely to the Exchange and not to any other national securities 
exchange that ISE Holdings might control, directly or indirectly. The 
Exchange proposes that the ISE Trust Agreement be amended and restated 
to replace references to ISE with references to any national securities 
exchange controlled, directly or indirectly, by ISE Holdings, or 
facility thereof. The Commission believes that amending and restating 
the ISE Trust Agreement to reference any national securities exchange, 
or facility thereof, that ISE Holdings may control, directly or 
indirectly, is designed to facilitate the ability of those national 
securities exchanges to comply with the requirements of the Act.\19\
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    \18\ ISE Trust Agreement, Articles V, VI, and VIII.
    \19\ See Eurex Acquisition Order, supra note 6, for an 
additional discussion of specific provisions in the ISE Trust 
Agreement.
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the Act, 
that the

[[Page 7301]]

proposed rule change (SR-ISE-2008-90), be, and it hereby is, approved.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-3076 Filed 2-17-10; 8:45 am]
BILLING CODE 8011-01-P