Document ID: SEC-2017-0159-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: National Stock Exchange, Inc.
Posted Date: 2017-02-03T05:00Z

[Federal Register Volume 82, Number 22 (Friday, February 3, 2017)]
[Notices]
[Pages 9258-9259]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-02263]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79902; File No. SR-NSX-2016-16]

Self-Regulatory Organizations; National Stock Exchange, Inc.; 
Order Approving Proposed Rule Change, as Modified by Amendment No. 1, 
in Connection With a Proposed Acquisition of the Exchange by NYSE 
Group, Inc.

January 30, 2017.

I. Introduction

    On December 22, 2016, National Stock Exchange, Inc. (``NSX'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) \1\ of the Securities 
Exchange Act of 1934 (``Act''),\2\ and Rule 19b-4 thereunder,\3\ a 
proposed rule change to make certain amendments to its corporate 
governance documents and rules, and the corporate governance documents 
of NYSE Group, Inc. (``NYSE Group''), NYSE Holdings LLC (``NYSE 
Holdings''), Intercontinental Exchange Holdings, Inc. (``ICE 
Holdings''), and Intercontinental Exchange, Inc. (``ICE'') in order to 
effectuate a proposed transaction (the ``Transaction'') in which the 
Exchange will become a wholly-owned subsidiary of NYSE Group. The 
proposed rule change was published for comment in the Federal Register 
on December 30, 2016.\4\ On January 23, 2017, the Exchange submitted 
Amendment No. 1 to the proposed rule change.\5\ The Commission received 
no comments on the proposal. This order approves the proposal, as 
modified by Amendment No. 1.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
    \4\ See Securities Exchange Act Release No. 79684 (December 23, 
2016), 81 FR 96552 (SR-NSX-2016-16) (``Notice'').
    \5\ In Amendment No. 1, the Exchange corrected a technical error 
in the proposed Seventh Amended and Restated Bylaws of ICE. 
Specifically, the Exchange replaced a reference in Section 
12.1(a)(1) of Article XII of the ICE Bylaws to ``the Amended and 
Restated Certificate of Incorporation of the Corporation'' with a 
reference to ``these bylaws.'' Amendment No. 1 was technical in 
nature and therefore does not need to be published for comment.
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II. Description of the Proposal

    On December 14, 2016, ICE entered into an agreement with the 
Exchange pursuant to which its wholly-owned subsidiary, NYSE Group, 
will acquire all of the outstanding capital stock of the Exchange (the 
``Acquisition''). As a result of the Acquisition, the Exchange will be 
renamed NYSE National, Inc. (``NYSE National'') and will be operated as 
a wholly-owned subsidiary of NYSE Group. NYSE Group is a wholly-owned 
subsidiary of NYSE Holdings, which is in turn 100% owned by ICE 
Holdings. ICE is a public company listed on the New York Stock Exchange 
LLC (the ``NYSE''), and owns 100% of ICE Holdings.\6\ Following the 
Acquisition, the Exchange will continue to be registered as a national 
securities exchange.\7\ According to the Exchange, as it does today, 
the Exchange will continue to have separate rules, membership rosters, 
and listings that will be distinct from the rules, membership rosters, 
and listings of the three other registered national securities 
exchanges owned by NYSE Group, namely, the NYSE, NYSE MKT LLC (``NYSE 
MKT''), and NYSE Arca, Inc. (``NYSE Arca'') (together, the ``NYSE 
Exchanges'').\8\
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    \6\ See Notice, supra note 4, at 96552.
    \7\ See id.
    \8\ See id.
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    In connection with the Acquisition, the Exchange proposes to amend 
its Certificate of Incorporation and Third Amended and Restated Bylaws. 
In addition, the Exchange proposes to amend certain corporate 
governance documents of NYSE Group, NYSE Holdings, ICE Holdings and 
ICE,\9\ such that the conditions in those documents are equally 
applicable to the NYSE NSX.\10\ According to the Exchange, the

[[Page 9259]]

amendments would reflect the Exchange's proposed new ownership and, in 
certain cases, align the Exchange's governance provisions to those of 
other NYSE Exchanges.\11\
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    \9\ The NYSE Exchanges filed proposed rule changes, which 
propose similar amendments to their respective governance documents. 
See Securities Exchange Act Release Nos. 79671 (December 22, 2016), 
81 FR 96128 (SR-NYSE-2016-90); 79678 (December 22, 2016), 81 FR 
96102 (May 16, 2016) (SR-NYSEArca-2016-167); and 79675 (December 22, 
2016), 81 FR 96128 (May 16, 2016) (SR-NYSEMKT-2016-122).
    \10\ See Securities Exchange Act Release No. 70210 (August 15, 
2013), 78 FR 51758 (August 21, 2013) (approving rule changes related 
to NYSE Euronext becoming a wholly owned subsidiary of ICE (then 
called IntercontinentalExchange Group, Inc.)).
    \11\ See note 9. The proposed changes to the governance 
documents, NSX Rules and fee schedule are set forth in greater 
detail in the Notice. See Notice, supra note 4, at 96553-63.
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III. Discussion and Commission Findings

    After careful review, the Commission finds that the proposed rule 
change, as modified by Amendment No. 1, is consistent with the 
requirements of Section 6 of the Act \12\ and the rules and regulations 
thereunder applicable to a national securities exchange.\13\ In 
particular, the Commission finds that the proposed rule change is 
consistent with Sections 6(b)(1) and (3) of the Act,\14\ which, among 
other things, require a national securities exchange to be so organized 
and have the capacity to be able to carry out the purposes of the Act, 
and to enforce compliance by its members and persons associated with 
its members with the provisions of the Act, the rules and regulations 
thereunder, and the rules of the exchange, and assure the fair 
representation of its members in the selection of its directors and 
administration of its affairs, and provide that one or more directors 
shall be representative of issuers and investors and not be associated 
with a member of the exchange, broker, or dealer. The Commission also 
finds that the proposal is consistent with Section 6(b)(5) of the 
Act,\15\ which requires that the rules of an exchange be 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.\16\
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    \12\ 15 U.S.C. 78f.
    \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)(1) and (b)(3).
    \15\ 15 U.S.C. 78f(b)(5).
    \16\ The text of the proposed rule change is consistent with 
Sections 6(b)(1), (3) and (5) of the Act. However, the Commission 
notes that the Exchange must continue to comply with the provisions 
of the Commission's Cease and Desist Order. See Securities Exchange 
Act Release No. 51714 (May 19, 2005).
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    According to the Exchange, the proposed rule change consists of (i) 
non-substantive changes that will conform terminology of the Exchange 
to that of the NYSE Exchanges, and (ii) substantive and/or procedural 
changes that are designed to conform the Exchange's rules and 
procedures to those of other NYSE Exchanges.\17\ The Exchange has 
represented to the Commission that the proposed rule change presents no 
novel issues, as all of the substantive and/or procedural changes are 
derived from existing rules of other NYSE Exchanges. Furthermore, the 
Exchange has made the following representations:
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    \17\ See Notice, supra note 4, at 96563-64.
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     The proposed rule change would continue the requirement in 
the Exchange's Bylaws that an independent board committee oversees the 
adequacy and effectiveness of the performance of the Exchange's self-
regulatory responsibilities; \18\
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    \18\ See id. at 96563.
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     The Regulatory Oversight Committee would be similar in 
composition and function to committees of other self-regulatory 
organizations, and would be similarly designed to (i) ensure the 
adequacy and effectiveness of the Exchange's regulatory and self-
regulatory responsibilities; and (ii) to assist the Board and any other 
committees of the Board in reviewing the regulatory plan and the 
overall effectiveness of the Exchange's regulatory functions.\19\
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    \19\ See id.
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     The proposed rule change is not inconsistent with the 
Order Instituting Administrative and Cease-and-Desist Proceedings 
Pursuant to Sections 19(h) and 21C of the Securities Exchange Act of 
1934, Making Findings, and Imposing Remedial Sanctions and Cease-and-
Desist Order, entered by the Commission on May 19, 2005.\20\
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    \20\ See id. at 96553. See also note 16.
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     The changes to the corporate and governance structure will 
place the Exchange in a better position to improve its technology and 
engage in value-enhancing transactions that will enable the Exchange to 
more effectively participate and compete in the marketplace.\21\
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    \21\ See id. at 96554.
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     The Exchange's proposed changes to its corporate 
governance structure are designed to align its structure with that of 
the NYSE Exchanges to promote a consistent approach to corporate 
governance, and to simplify and create greater consistency with the 
organizational documents and governance practices of the NYSE 
Exchange.\22\
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    \22\ See id. at 96552-53.
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    The Exchange has represented to the Commission that it believes 
that the benefits of aligning its corporate documents to those of other 
NYSE Exchanges outweigh the costs, if any, to leaving its rules as is 
and being the sole outlier among the NYSE Exchanges. The Commission 
also notes that it received no comments on the proposed rule change. 
Finally, the Commission believes that uniformity of terminology as well 
as corporate governance structure among the wholly owned subsidiaries 
of NYSE Group, including the NYSE Exchanges and the Exchange, to the 
extent possible, should allow for a more streamlined, consistent, and 
effective approach to both compliance and surveillance in furtherance 
of the rules of the Exchange and the federal securities laws.

IV. Conclusion

    For the foregoing reasons, the Commission finds that the proposed 
rule change, as modified by Amendment No. 1, is consistent with the Act 
and the rules and regulations thereunder applicable to a national 
securities exchange.
    It is therefore ordered, pursuant to Section 19(b)(2) of the Act 
\23\ that the proposed rule change (SR-NSX-2016-16), as modified by 
Amendment No.1, be, and hereby is, approved.
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    \23\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\24\
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    \24\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-02263 Filed 2-2-17; 8:45 am]
 BILLING CODE 8011-01-P