Document ID: SEC-2012-1180-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2012-07-19T04:00Z

[Federal Register Volume 77, Number 139 (Thursday, July 19, 2012)]
[Notices]
[Pages 42533-42535]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-17549]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-67435; File No. SR-NYSEArca-2012-45]

Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting 
Approval of Proposed Rule Change Amending Its Rules To Reflect the 
Merger of Archipelago Holdings, Inc. (``Archipelago Holdings''), An 
Intermediate Holding Company, Into and With NYSE Group, Inc., Thereby 
Eliminating Archipelago Holdings From the Ownership Structure of the 
Exchange

 July 13, 2012.

I. Introduction

    On May 14, 2012, NYSE Arca, Inc. (``NYSE Arca'' 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\ proposed rule changes to 
reflect the merger of Archipelago Holdings, Inc. (``Archipelago 
Holdings''), an intermediate holding company, into and with NYSE Group, 
Inc. (``NYSE Group''), thereby eliminating Archipelago Holdings from 
the ownership structure of the Exchange (the ``Merger''). The proposed 
rule changes were published for comment in the Federal Register on May 
31, 2012.\3\ The Commission received no comment letters on the 
proposal. The Commission has reviewed carefully the proposed rule 
changes and finds that the proposed rule changes are consistent with 
the requirements of the Act and the rules and regulations thereunder 
applicable to a national securities exchange.\4\ This order approves 
the proposed rule changes.
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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. 67058 (May 31, 
2012), 77 FR 32155 (``Notice'').
    \4\ In approving the proposed rule changes, the Commission has 
considered their impact on efficiency, competition, and capital 
formation. See 15 U.S.C. 78c(f).
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II. Description

    NYSE Euronext intends to merge Archipelago Holdings with and into 
NYSE Group, effective following approval of the proposed rule 
change.\5\ According to the Exchange, the reason for the Merger is to 
eliminate an unnecessary intermediate holding company.\6\ Following the 
Merger, the Exchange would continue to be wholly-owned by NYSE Arca 
Holdings, which in turn would be wholly-owned by NYSE Group, which in 
turn would be wholly-owned by NYSE Euronext.
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    \5\ Currently, NYSE Arca Holdings, Inc. (``NYSE Arca Holdings'') 
owns all of the equity interest of the Exchange. Archipelago 
Holdings owns all of the equity interest of NYSE Arca Holdings, and 
NYSE Group owns all of the equity interest of Archipelago Holdings. 
NYSE Euronext owns all of the equity interest of NYSE Group.
    \6\ See Notice, 77 FR at 32156.
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    The Exchange has submitted its proposal to (i) Amend and restate 
the Amended and Restated Certificate of Incorporation of NYSE Arca 
Holdings, Inc. (the ``NYSE Arca Holdings Certificate''), (ii) amend and 
restate the NYSE Arca Holdings, Inc. Bylaws (``NYSE Arca Holdings 
Bylaws'') as required by the NYSE Arca Holdings Certificate, (iii) 
amend the rules of NYSE Arca and NYSE Arca Equities, Inc., (iv) delete 
in its entirety the Amended and Restated Certificate of Archipelago 
Holdings (``Archipelago

[[Page 42534]]

Holdings Certificate''), (v) delete in its entirety the Amended and 
Restated Bylaws of Archipelago Holdings (``Archipelago Holdings 
Bylaws'') and (vi) file the resolution (the ``Resolution'') of the 
Board of Directors of NYSE Arca Holdings (the ``Board'') in connection 
with the Merger.
    Section 19(b) of the Act and Rule 19b-4 thereunder require a self-
regulatory organization (``SRO'') to file proposed rule changes with 
the Commission. Although NYSE Arca Holdings and Archipelago Holdings 
are not SROs, the NYSE Arca Holdings Certificate, NYSE Arca Holdings 
Bylaws, Archipelago Holdings Certificate, and Archipelago Holdings 
Bylaws, along with other corporate documents, are rules of the Exchange 
\7\ and must be filed with the Commission pursuant to Section 19(b)(4) 
of the Act and Rule 19b-4 thereunder. Accordingly, the Exchange filed 
the NYSE Arca Holdings Certificate and NYSE Arca Holdings Bylaws with 
the Commission, along with other corporate governance documents.\8\
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    \7\ See Section 3(a)(27) of the Act, 15 U.S.C. 78c(a)(27).
    \8\ See proposed Second Amended and Restated Certificate of 
Incorporation of NYSE Arca Holdings, attached as Exhibit A to the 
Notice; proposed Amended and Restated Bylaws of NYSE Arca Holdings, 
attached as Exhibit B to the Notice. The Exchange also filed the 
proposed rule changes to its rules as well as the rules of NYSE Arca 
Equities, Inc., attached as Exhibit C to the Notice. The Exchange 
also proposes to delete the entirety of the Amended and Restated 
Certificate of Incorporation of Archipelago Holdings and the Amended 
and Restated Bylaws of Archipelago Holdings, attached as Exhibit D 
and Exhibit E, respectively, to the Notice. The Exchange also filed 
the Resolution made by the Board as Exhibit F to the Notice. These 
exhibits are available on the Commission's Web site (http://www.sec.gov/rules/sro.shtml) and at the Commission's Public 
Reference Room.
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A. Waiver of the NYSE Arca Holdings Ownership and Voting Limits

    The NYSE Arca Holdings Certificate imposes certain ownership and 
voting restrictions on the shares of NYSE Arca Holdings. Specifically, 
Article 9, Section 1(b)(i) of the NYSE Arca Holdings Certificate 
provides that for so long as NYSE Arca Holdings directly or indirectly 
controls the Exchange, no Person either alone or together with its 
Related Persons,\9\ may own, directly or indirectly, of record or 
beneficially shares of the capital stock (whether common or preferred 
stock) of NYSE Arca Holdings constituting more than 40% of the 
outstanding shares of any class of capital stock of NYSE Arca Holdings 
(the ``Ownership Limit'') unless the Board has adopted an amendment to 
the NYSE Arca Holdings Bylaws waiving such a restriction. In connection 
with such amendment, the Board must adopt resolutions stating that: 
such amendment will not impair the ability of the Exchange to carry out 
its functions and responsibilities under the Securities Exchange Act of 
1934, as amended (the ``Act''), and the rules thereunder; is otherwise 
in the best interests of NYSE Arca Holdings, its stockholders, and the 
Exchange; and will not impair the ability of the Commission to enforce 
the Act. Such amendment is not effective until approved by the 
Commission. The Board also must find that no such Person or Related 
Person is subject to a statutory disqualification under Section 
3(a)(39) of the Act. Similarly, Article 9, Section 1(c) of the NYSE 
Arca Holdings Certificate provides that no Person, either alone or 
together with its Related Persons, may directly or indirectly vote more 
than 20% of the shares of NYSE Arca Holdings (the ``Voting Limit'') 
unless the Board adopts an amendment to the NYSE Arca Holdings Bylaws 
waiving such a restriction and, in connection with such amendment, 
adopts resolutions and makes a determination with respect to statutory 
disqualification substantially the same as those described above for 
the Ownership Limit.\10\
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    \9\ The terms ``Person'' and ``Related Persons'' are defined in 
the NYSE Arca Holdings Certificate.
    \10\ Article 9, Section 4 of the NYSE Arca Holdings Certificate 
currently provides certain exceptions to these ownership and voting 
restrictions for Archipelago Holdings.
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    The Board made these findings as set forth in the Resolution. The 
Board found, in pertinent part, that (1) The Merger will not impair the 
ability of the Exchange to carry out its functions and responsibilities 
as an ``exchange'' under the Act and the rules promulgated thereunder; 
(2) the Merger will not impair the ability of the Commission to enforce 
the Act; (3) neither NYSE Group nor any of its Related Persons is 
subject to any applicable ``statutory disqualification'' within the 
meaning of Section 3(a)(39) of the Act; and (4) neither NYSE Group nor 
any of its Related Persons is an ETP Holder of NYSE Arca Equities, Inc. 
or an OTP Firm of the Exchange, except as permitted by Article 9, 
Section 4 of the NYSE Arca Holdings Certificate.
    The Exchange also proposes to amend the NYSE Arca Holdings Bylaws 
by adding a new Article 11 that sets forth the waiver of the Ownership 
and Voting Limits, as required by the NYSE Arca Holdings Certificate, 
solely for purposes of the Merger.

B. Changes in Corporate Structure and Deletion of Duplicative or 
Obsolete Text

    The proposed rule changes reflect the elimination of Archipelago 
Holdings from the Exchange's ownership structure and delete duplicative 
or obsolete text. For example, the Exchange proposes to replace 
references to Archipelago Holdings in Article 9, Section 4 of the NYSE 
Arca Holdings Certificate with references to NYSE Group. In addition, 
the Exchange proposes to delete the last sentence of that section, 
which relates to certain voting and ownership restrictions that were 
put in place when the Exchange combined with the New York Stock 
Exchange in 2005 but have been superseded by other requirements.\11\
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    \11\ See Notice, 77 FR at 32156; see also Securities Exchange 
Act Release No. 55294 (Feb. 14, 2007), 72 FR 8046 (Feb. 22, 2007) 
(SR-NYSEArca-2007-05); see also Securities Exchange Act Release No. 
55293 (Feb. 14, 2007), 72 FR 8033 (Feb. 22, 2007) (SR-NYSE-2006-
120).
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    The Exchange proposes to delete in its entirety the text of the 
Archipelago Holdings Certificate and the Archipelago Holdings Bylaws 
because Archipelago Holdings will no longer exist upon consummation of 
the Merger. Accordingly, these documents will no longer be rules of the 
Exchange.\12\
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    \12\ Other changes include amending the NYSE Arca Holdings 
Bylaws to change references to the Pacific Exchange, Inc. to NYSE 
Arca, Inc.; changing references to PCX Holdings, Inc. to NYSE Arca 
Holdings; and deleting obsolete references to trading in minimum 
lots. The Exchange also proposes to delete NYSE Arca Rule 1.1(cc) 
and (gg), which set forth the definitions for Archipelago Holdings 
and Related Person, and to delete NYSE Arca Rule 3.4, which sets 
forth ownership and voting restrictions for Archipelago Holdings. 
Upon the elimination of Archipelago Holdings, NYSE Group would be 
the next holding company, and voting and ownership restrictions are 
currently set forth in its Second Amended and Restated Certificate 
of Incorporation of NYSE Group, Inc. (``NYSE Group Certificate'') in 
Article IV, Section 4(b). NYSE Arca Equities Rule 14.3(b) provides 
that all officers and directors of Archipelago Holdings shall be 
deemed to be officers and directors of the Exchange and NYSE Arca 
Equities for purposes of, and subject to oversight pursuant to, the 
Act. NYSE Arca Equities Rule 14.3(d) provides that Archipelago 
Holdings must maintain all books and records related to the Exchange 
within the United States. The Exchange proposes to delete this text 
and make a conforming change to NYSE Arca Equities Rule 14.3(c). 
Comparable provisions are already contained in NYSE Group's 
governing documents. The Exchange notes that, under Article IX of 
the NYSE Group Certificate, NYSE Group's directors and officers 
already are subject to the jurisdiction of the Commission, and under 
Article X, NYSE Group's books and records relating to the Exchange 
must be maintained within the United States. See Notice, 77 FR at 
32156.
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Discussion

    The Commission finds that the proposed rule changes are consistent 
with the requirements of the Act and the rules and regulations 
thereunder applicable to a national securities

[[Page 42535]]

exchange.\13\ Specifically, the Commission finds that the proposal is 
consistent with Section 6(b)(5) of the Act,\14\ which requires, among 
other things, that the rules of a national securities exchange be 
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 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.
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    \13\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \14\ 15 U.S.C. 78f(b)(5).
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    The proposal would accommodate the merger of Archipelago Holdings, 
an intermediate holding company, into and with NYSE Group, thereby 
eliminating Archipelago Holdings from the ownership structure of the 
Exchange. The Commission notes that the proposed rule changes would 
otherwise have no substantive impact on other rules of the Exchange, 
including those concerning the voting and ownership restrictions that 
currently apply to the Exchange and its affiliates.\15\ The Exchange 
would continue as an indirect wholly-owned subsidiary of NYSE Euronext. 
In addition, the Commission notes that the Board made certain findings 
set forth in the Resolution that the direct ownership of NYSE Arca 
Holdings by NYSE Group as contemplated by the Merger is in the best 
interests of NYSE Arca Holdings, its shareholders, and the Exchange. In 
addition, the Board found that neither NYSE Group, nor any of its 
Related Persons, is (1) An ETP Holder of NYSE Arca Equities, Inc. 
(except as otherwise permitted by the NYSE Arca Holdings Certificate) 
(2) an OTP Holder of the Exchange (except as otherwise permitted by the 
NYSE Arca Holdings Certificate); or (3) subject to any ``statutory 
disqualification.'' \16\
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    \15\ See supra note 11.
    \16\ See Resolution.
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    In light of these representations and findings, the Commission 
believes that the proposed rule changes are consistent with the Act and 
will not impair the ability of the Commission or the Exchange to 
discharge their respective responsibilities under the Act.

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\17\ that the proposed rule change (SR-NYSEArca-2012-45) be, and it 
hereby is, approved.
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    \17\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
Kevin M. O'Neill,
Deputy Secretary.
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    \18\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2012-17549 Filed 7-18-12; 8:45 am]
BILLING CODE 8011-01-P