Document ID: SEC-2015-1930-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: International Securities Exchange, LLC
Posted Date: 2015-11-17T05:00Z

[Federal Register Volume 80, Number 221 (Tuesday, November 17, 2015)]
[Notices]
[Pages 71864-71866]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-29214]

[[Page 71864]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76415; File No. SR-ISE-2015-36]

Self-Regulatory Organizations; International Securities Exchange, 
LLC; Notice of Filing of Proposed Rule Change Relating to a Corporate 
Transaction Involving Its Indirect Parent

November 10, 2015.
    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 October 30, 2015, the International Securities Exchange, LLC 
(the ``Exchange'' or the ``ISE'') 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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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    The Exchange proposes to remove Eurex Frankfurt AG (``Eurex 
Frankfurt'') as an indirect, non-U.S. upstream owner of the Exchange 
(the ``Transaction''). In order to consummate the Transaction, the 
Exchange proposes to: (i) Amend and restate the Third Amended and 
Restated Trust Agreement (the ``Trust Agreement'') that exists among 
International Securities Exchange Holdings, Inc. (``ISE Holdings''), 
U.S. Exchange Holdings, Inc. (``U.S. Exchange Holdings''), and the 
Trustees (as defined therein) in order to remove references to Eurex 
Frankfurt; and (ii) amend and restate the Third Amended and Restated 
Certificate of Incorporation of U.S. Exchange Holdings (``U.S. Exchange 
Holdings COI'') to update a reference therein to the Trust Agreement.
    The text of the proposed rule change is available at the 
Commission's Public Reference Room and on the Exchange's Internet Web 
site at http://www.ise.com.

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

1. Purpose
    The purpose of the proposal is to remove Eurex Frankfurt as an 
indirect, non-U.S. upstream owner of the Exchange.\3\
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    \3\ The Exchange's affiliate, ISE Gemini, LLC (``ISE Gemini''), 
has submitted a nearly identical proposed rule change. See SR-
ISEGemini-2015-24.
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Background
    On December 17, 2007, ISE Holdings, the sole, direct parent of the 
Exchange, became a direct, wholly-owned subsidiary of U.S. Exchange 
Holdings.\4\ U.S. Exchange Holdings is 85% directly owned by Eurex 
Frankfurt and 15% directly owned by Deutsche B[ouml]rse AG (``Deutsche 
B[ouml]rse''). Eurex Frankfurt is a wholly-owned, direct subsidiary of 
Deutsche B[ouml]rse.\5\ Deutsche B[ouml]rse therefore owns 100% of U.S. 
Exchange Holdings through its aggregate direct and indirect ownership.
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    \4\ See Securities Exchange Act Release No. 56955 (December 13, 
2007), 72 FR 71979 (December 19, 2007) (SR-ISE-2007-101).
    \5\ See Securities Exchange Act Release No. 66834 (April 19, 
2012), 77 FR 24752 (April 25, 2012) (SR-ISE-2012-21). Each of 
Deutsche B[ouml]rse and Eurex Frankfurt is referred to as a ``Non-
U.S. Upstream Owner'' and collectively as the ``Non-U.S. Upstream 
Owners.'' Each of the Non-U.S. Upstream Owners has previously taken 
appropriate steps to incorporate provisions regarding ownership, 
jurisdiction, books and records, and other issues related to their 
control of the Exchange. Specifically, each of the Non-U.S. Upstream 
Owners has adopted resolutions, which were previously approved by 
the Commission, to incorporate these concepts with respect to 
itself, as well as its board members, officers, employees, and 
agents (as applicable), to the extent that they are involved in the 
activities of the Exchange. See also SR-ISE-2007-101, supra note 4.
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The Transaction
    The Transaction is designed to simplify the indirect ownership 
structure of the Exchange.\6\ The Transaction will not have any effect 
on ISE Holdings' direct ownership of the Exchange or the operations of 
the Exchange. Consummation of the Transaction is subject to approval of 
this proposed rule change by the Commission.\7\ In order to effectuate 
the Transaction, on or about December 31, 2015, Eurex Frankfurt will 
transfer its 85% ownership in U.S. Exchange Holdings to Deutsche 
B[ouml]rse.\8\ As a result of the Transaction, Eurex Frankfurt will 
cease to be a Non-U.S. Upstream Owner of the Exchange, as Deutsche 
B[ouml]rse will be the sole, direct owner of U.S. Exchange Holdings.\9\ 
U.S. Exchange Holdings will remain the sole, direct owner of ISE 
Holdings. ISE Holdings will also remain the sole, direct owner of the 
Exchange. The Transaction will not result in any additional person or 
entity acquiring direct or indirect ownership in the Exchange.
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    \6\ In 2014 the Exchange submitted a proposed rule change with 
the Commission to similarly simplify the indirect ownership 
structure of the Exchange. See Securities Exchange Act Release No. 
73860 (December 17, 2014), 79 FR 77066 (December 23, 2014) (SR-ISE-
2014-44).
    \7\ See infra notes 15 and 16.
    \8\ As referenced above, Deutsche B[ouml]rse is already the 100% 
indirect owner of Eurex Frankfurt. In addition, Deutsche B[ouml]rse 
also is already an approved Non-U.S. Upstream Owner of the Exchange. 
See supra note 5.
    \9\ In connection with each of their ownership interests in the 
Exchange, Deutsche B[ouml]rse, Eurex Frankfurt, U.S. Exchange 
Holdings, ISE Holdings and the Exchange became parties to an 
agreement to provide for adequate funding for the Exchange's 
regulatory responsibilities. ISE Gemini subsequently became a party 
to the agreement. Following the completion of the Transaction, Eurex 
Frankfurt will cease to be a Non-U.S. Upstream Owner of the 
Exchange, and as such, will no longer be a party to such agreement.
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    In order to consummate the Transaction in the manner described 
above, certain administrative amendments will need to be made to the 
Trust Agreement and the U.S. Exchange Holdings COI. The proposed 
amendments to such documents are described below.
Trust Agreement \10\
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    \10\ The Trust Agreement exists among ISE Holdings, U.S. 
Exchange Holdings, and the Trustees (as defined therein).
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    The Trust Agreement serves four general purposes: (i) To accept, 
hold and dispose of Trust Shares \11\ on the terms and subject to the 
conditions set forth therein; (ii) to determine whether a Material 
Compliance Event \12\ has

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occurred or is continuing; (iii) to determine whether the occurrence 
and continuation of a Material Compliance Event requires the exercise 
of the Call Option; \13\ and (iv) to transfer Deposited Shares from the 
Trust to the Trust Beneficiary \14\ as provided in Section 4.2(h) 
therein.
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    \11\ Under the Trust Agreement, the term ``Trust Shares'' means 
either Excess Shares or Deposited Shares, or both, as the case may 
be. The term ``Excess Shares'' means that a Person obtained an 
ownership or voting interest in ISE Holdings in excess of certain 
ownership and voting restrictions pursuant to Article FOURTH of the 
ISE Holdings COI, through, for example, ownership of one of the Non-
U.S. Upstream Owners or U.S. Exchange Holdings, without obtaining 
the approval of the Commission. The term ``Deposited Shares'' means 
shares that are transferred to the Trust pursuant to the Trust's 
exercise of the Call Option.
    \12\ Under the Trust Agreement, the term ``Material Compliance 
Event'' means, with respect to a Non-U.S. Upstream Owner, any state 
of facts, development, event, circumstance, condition, occurrence or 
effect that results in the failure of any of the Non-U.S. Upstream 
Owners to adhere to their respective commitments under the 
resolutions (i.e., as referenced in note 5) in any material respect.
    \13\ Under the Trust Agreement, the term ``Call Option'' means 
the option granted by the Trust Beneficiary to the Trust to call the 
Voting Shares as set forth in Section 4.2 therein.
    \14\ Under the Trust Agreement, the term ``Trust Beneficiary'' 
means U.S. Exchange Holdings.
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    The Exchange proposes to amend certain provisions of the Trust 
Agreement in connection with the Transaction. Specifically, the 
Exchange proposes to: (i) Update the recitals of the Trust Agreement 
with respect to the Transaction; and (ii) remove references to Eurex 
Frankfurt from the definition of ``Affected Affiliate'' in Section 1.1 
of the Trust Agreement.\15\ The proposed amendments to the Trust 
Agreement are strictly administrative changes to reflect the updated 
corporate structure resulting from the Transaction and will not affect 
the mechanisms established by the Trust Agreement for the benefit of 
the Trust Beneficiary.
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    \15\ The proposed, amended Trust Agreement is attached hereto as 
Exhibit 5A. Section 8.2 of the Trust Agreement provides, in part, 
that, for so long as ISE Holdings controls, directly or indirectly, 
the Exchange, before any amendment or repeal of any provision of the 
Trust Agreement shall be effective, such amendment or repeal shall 
be submitted to the board of directors of the Exchange, as 
applicable, and if such amendment or repeal must be filed with or 
filed with and approved by the Commission under Section 19 of the 
Securities Exchange Act of 1934 (the ``Act'') and the rules 
promulgated thereunder before such amendment or repeal may be 
effectuated, then such amendment or repeal shall not be effectuated 
until filed with or filed with and approved by the Commission, as 
the case may be. The Exchange also proposes to retitle the Trust 
Agreement as the ``Fourth'' Amended and Restated Trust Agreement and 
update the date thereof.
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U.S. Exchange Holdings COI
    The Exchange proposes to make a non-substantive, administrative 
change to the U.S. Exchange Holdings COI to update a reference therein 
to the Trust Agreement. Article THIRTEENTH of the U.S. Exchange 
Holdings COI contains references to (i) the ``Third Amended and 
Restated'' Trust Agreement, which, as discussed herein, will become the 
``Fourth Amended and Restated'' Trust Agreement; and (ii) the effective 
date of the Trust Agreement, which, as discussed herein, will change to 
a date in December 2015 that corresponds to the effective closing date 
of the Transaction. The Exchange proposes to update these references. 
The Exchange also proposes to retitle the document as the ``Fourth'' 
Amended and Restated Certificate of Incorporation of U.S. Exchange 
Holdings and update the effective date thereof.\16\
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    \16\ The proposed, amended U.S. Exchange Holdings COI is 
attached hereto as Exhibit 5B. Article SIXTEENTH of the U.S. 
Exchange Holdings COI provides that, for so long as U.S. Exchange 
Holdings shall control, directly or indirectly, the Exchange, or 
facility thereof, before any amendment to or repeal of any provision 
of the U.S. Exchange Holdings COI shall be effective, the same shall 
be submitted to the board of directors of the Exchange, and if the 
same must be filed with, or filed with and approved by, the 
Commission before the same may be effective, under Section 19 of the 
Act and the rules promulgated thereunder, then the same shall not be 
effective until filed with, or filed with and approved by, the 
Commission, as the case may be.
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Certain Resolutions
    As described above, each of the Non-U.S. Upstream Owners, including 
Eurex Frankfurt, has previously taken appropriate steps to incorporate 
provisions regarding ownership, jurisdiction, books and records, and 
other issues related to their control of the Exchange. Specifically, 
each of such Non-U.S. Upstream Owners has adopted resolutions, which 
were previously approved by the Commission, to incorporate these 
concepts with respect to itself, as well as its board members, 
officers, employees, and agents (as applicable), to the extent that 
they are involved in the activities of the Exchange.\17\ For example, 
the resolution of each of such Non-U.S. Upstream Owners provides that 
it shall comply with the U.S. federal securities laws and the rules and 
regulations thereunder and shall cooperate with the Commission and with 
the Exchange. In addition, the resolution of each of such Non-U.S. 
Upstream Owners provides that the board members, including each person 
who becomes a board member, would so consent to comply and cooperate 
and the particular Non-U.S. Upstream Owner would take reasonable steps 
to cause its officers, employees, and agents to also comply and 
cooperate, to the extent that he or she is involved in the activities 
of the Exchange.
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    \17\ See supra notes 4 and 5. See also SR-ISE-2007-101, supra 
note 4; SR-ISE-2012-21, supra note 5.
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    As Eurex Frankfurt will cease to be a Non-U.S. Upstream Owner of 
the Exchange after the Transaction, the Exchange proposes that the 
resolutions of Eurex Frankfurt, as referenced above, will cease to be 
rules of the Exchange as of a date in December 2015 that corresponds to 
the effective closing date of the Transaction.\18\
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    \18\ As referenced above, resolutions in relation to board 
members, officers, employees, and agents (as applicable) of Eurex 
Frankfurt also would cease accordingly. This proposed change would 
have no impact on the resolutions of Deutsche B[ouml]rse or its 
board members, officers, employees, and agents (as applicable).
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Summary
    Upon the consummation of the Transaction the Exchange will continue 
to operate and regulate its market and members in the same exact manner 
as it did prior to the Transactions. The Transaction will not impair 
the ability of ISE Holdings, the Exchange, or any facility thereof, to 
carry out their respective functions and responsibilities under the 
Act. Moreover, the Transaction will not impair the ability of the 
Commission to enforce the Act with respect to the Exchange and its Non-
U.S. Upstream Owners (which will solely be Deutsche B[ouml]rse after 
the Transaction), including each of their directors, officers, 
employees and agents, to the extent they are involved in the activities 
of the Exchange. As such, the Commission's plenary regulatory authority 
over the Exchange will not be affected by the approval of this proposed 
rule change.
2. Statutory Basis
    The Exchange believes that this proposal is consistent with Section 
6(b)of the Act,\19\ in general, and furthers the objectives of Section 
6(b)(1) of the Act,\20\ 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 Act and to comply, and to enforce compliance by its 
exchange members and persons associated with its exchange members, with 
the provisions of the Act, the rules and regulations thereunder, and 
the rules of the Exchange. The Exchange will operate in the same manner 
following the Transaction as it operates today. Thus, the Commission 
will continue to have plenary regulatory authority over the Exchange, 
as is the case currently with the Exchange. The proposed rule change is 
consistent with and will facilitate an ownership structure that will 
continue to provide the Commission with appropriate oversight tools to 
ensure that the Commission will have the ability to enforce the Act 
with respect to the Exchange and its Non-U.S. Upstream Owners, 
including their directors, officers, employees and agents, to the 
extent they are involved in the activities of the Exchange.
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    \19\ 15 U.S.C. 78s(b).
    \20\ 15 U.S.C. 78s(b)(1).
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    The Exchange also believes that this filing furthers the objectives 
of Section 6(b)(5) \21\ of the Act because the proposed rule change 
would be consistent with and facilitate a governance and regulatory 
structure that

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is designed 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 regulating, 
clearing, settling, processing information with respect to, and 
facilitating transactions in securities, 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. 
Specifically, the Exchange believes that the proposed rule change will 
continue to provide the Commission and the Exchange with access to 
necessary information that will allow the Exchange to efficiently and 
effectively enforce compliance with the Act, as well as allow the 
Commission to provide proper oversight, which will ultimately promote 
just and equitable principles of trade and protect investors. In 
addition, the Exchange believes that the proposed rule change will 
continue to preserve the independence of the Exchange's self-regulatory 
function and ensure that the Exchange will be able to obtain any 
information it needs in order to detect and deter any fraudulent and 
manipulative acts in its marketplace and carry out its regulatory 
responsibilities under the Act.
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    \21\ 15 U.S.C. 78f(b)(5).
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    Approval of this proposed rule change will enable ISE Holdings to 
continue its operations and the Exchange to continue its orderly 
discharge of regulatory duties 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 
regulating, clearing, settling, processing information with respect to, 
and facilitating transactions in securities, 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.
    Finally, the Exchange is not proposing any significant or novel 
regulatory issues, nor is it proposing any changes to the Exchange's 
operational or trading structure in connection with the Transaction. 
Instead, the Exchange represents that the proposed rule change consists 
of administrative amendments to the Trust Agreement and the U.S. 
Exchange Holdings COI and addresses certain resolutions in relation to 
Eurex Frankfurt, which currently is a Non-U.S. Upstream Owner of the 
Exchange, but whose status as such will cease as a result of the 
Transaction, such that the resolutions will cease to be rules of the 
Exchange as they relate to Eurex Frankfurt, and that no changes will be 
made to other aspects of the Exchange's organizational documents that 
were previously approved by the Commission.

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

    In accordance with Section 6(b)(8) of the Act,\22\ the Exchange 
believes that the proposed rule change would not impose any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act. The Exchange does not believe that the proposed 
rule change implicates any competitive issues. Rather, the Transaction 
merely represents a restructuring of indirect ownership interests of 
the Exchange, and will not involve the introduction of any new direct 
or indirect owners or any entity or individual that would have the 
right to direct the actions of the Exchange or vote the shares of the 
Exchange. As such, the Exchange believes that the proposal is 
consistent with the Act.
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    \22\ 15 U.S.C. 78f(b)(8).
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C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange has not solicited, and does not intend to solicit, 
comments on this proposed rule change. The Exchange has not received 
any unsolicited written comments from members or other interested 
parties.

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 up to 90 days (i) as the 
Commission may designate 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 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 email to rule-comments@sec.gov. Please include 
File Number SR-ISE-2015-36 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-ISE-2015-36. 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 on 
official business days between the hours of 10:00 a.m. and 3:00 p.m. 
Copies of such filing also will be available for inspection and copying 
at the principal offices of the Exchange. All comments received will be 
posted without change; the Commission does not edit personal 
identifying information from submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-ISE-2015-36, and should be submitted on 
or before December 8, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\23\
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    \23\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-29214 Filed 11-16-15; 8:45 am]
 BILLING CODE 8011-01-P