Document ID: SEC-2014-0777-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: National Stock Exchange, Inc.
Posted Date: 2014-05-12T04:00Z

[Federal Register Volume 79, Number 91 (Monday, May 12, 2014)]
[Notices]
[Pages 27017-27020]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-10785]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72107; File No. SR-NSX-2014-14]

Self-Regulatory Organizations; National Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Cease Trading on Its Trading System

May 6, 2014.
    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 May 1, 2014, National Stock Exchange, Inc. (``NSX'' or the 
``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 prepared by the Exchange. 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 Substance 
of the Proposed Rule Change

    The Exchange is proposing to amend Exchange Rule 11.1 to add new 
section .01 under Interpretations and Policies to permit NSX to cease 
trading activity on the Exchange's Trading System (the

[[Page 27018]]

``System'') \3\ as of the close of business on May 30, 2014 (the 
``Closing Date'').
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    \3\ Exchange Rule 1.5S.(4) defines the ``System'' as the 
electronic securities communications and trading facility designated 
by the Board through which orders of Users are consolidated for 
ranking and execution.
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    The text of the proposed rule change is also available on the 
Exchange's Web site at www.nsx.com, at the principal office of the 
Exchange, and at the Commission's Public Reference Room.

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 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 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
    NSX, a corporation organized under the laws of the State of 
Delaware, is a registered national securities exchange under Section 6 
of the Exchange Act \4\ and operates as a self-regulatory organization 
governed by the requirements of Section 19 of the Exchange Act.\5\ 
Pursuant to a transaction approved by the Commission on December 29, 
2011, NSX has operated as a wholly-owned subsidiary of CBOE Stock 
Exchange, LLC (``CBSX'').\6\ This rule filing is not proposing any 
change to the ownership structure of the Exchange and is not intended 
to alter any of the existing obligations of CBSX or its owners, 
directors, officers, employees or agents with respect to CBSX's 
ownership of NSX, or with respect to the self-regulatory 
responsibilities of NSX, as described, inter alia, in Sections 5.7(b) 
and 6.15 of the Third Amended and Restated Operating Agreement of CBOE 
Stock Exchange, LLC, dated December 30, 2011 (the ``Operating 
Agreement'').\7\
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    \4\ 15 U.S.C. 78f.
    \5\ 15 U.S.C. 78s.
    \6\ See Exchange Act Release No. 66071 (December 29, 2011), 77 
FR 521 (January 5, 2012)(SR-CBOE-2011-107 and SR-NSX-2011-14) (Order 
Granting Accelerated Approval to Proposed Rule Changes in Connection 
with the Proposed Acquisition of the National Stock Exchange, Inc. 
by the CBOE Stock Exchange, LLC).
    \7\ Section 5.7(b) of the Operating Agreement generally provides 
that for so long as CBSX shall control NSX, and only to the extent 
related to the activities of NSX, the Owners, Board of Directors, 
officers and employees of CBSX shall give due regard to the 
preservation of the independence of the self-regulatory function of 
NSX and its obligations to investors and the general public and 
shall not take actions that any such person knows or reasonably 
should have known would interfere with the decisions of NSX relating 
to its regulatory functions (including disciplinary matters) or 
which would interfere with NSX's ability to fulfill its obligations 
under the Act. Section 5.7(b) further requires CBSX, its officers, 
directors and employees to cooperate with the Commission and NSX 
with respect to the Commission's oversight responsibilities 
regarding NSX. Section 6.15 of the Operating Agreement (Books, 
Records and Jurisdiction), subsections (a) and (b) generally provide 
that the books, records, premises, officers, directors, agents and 
employees of CBSX are deemed to be those of NSX, to the extent they 
relate to the activities of NSX, for the purpose of and subject to 
oversight pursuant to the Act. Section 6.15(c) of the Operating 
Agreement provides that CBSX, its Owners and their respective 
officers, directors, agents, and employees irrevocably submit to the 
jurisdiction of the U.S. federal courts, the SEC, CBOE, and NSX, for 
the purposes of any suit, action or proceeding pursuant to U.S. 
federal securities laws or the rules or regulations thereunder, 
commenced or initiated by the SEC arising out of, or relating to, 
CBSX or the Company's control of NSX, as applicable (and shall be 
deemed to agree that CBSX may serve as the U.S. agent for purposes 
of service of process in such suit, action or proceeding), and that 
they waive, and agree not to assert by way of motion, as a defense 
or otherwise in any such suit, action or proceeding, any claims that 
they are not personally subject to the jurisdiction of the SEC, that 
the suit, action or proceeding is an inconvenient forum or that the 
venue of the suit, action or proceeding is improper, or that the 
subject matter thereof may not be enforced in or by such courts or 
agency.
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    The Exchange is proposing to cease trading activity on the System 
as of the close of business on the Closing Date. In that regard, the 
Exchange proposes to add new .01, Interpretations and Policies under 
Rule 11.1 (Hours of Trading). The new text will provide that, as of the 
close of business on May 30, 2014, NSX shall cease trading activity on 
the System; that all NSX Rules will remain in full force and effect 
through and after the Closing Date; and that the Exchange shall file a 
proposed rule change pursuant to Rule 19b-4 of the Exchange Act prior 
to any resumption of trading on the Exchange pursuant to Chapter XI 
(Trading Rules).
    After trading ceases on the System as of the close of business on 
the Closing Date, the Exchange will continue to be registered as a 
national securities exchange and will continue to retain its status as 
a self-regulatory organization. The Exchange represents that it will 
fully discharge all of its obligations as a self-regulatory 
organization pursuant to the Act through and after the Closing Date, 
and will assure that it maintains adequate funding for this purpose. 
The Exchange is not the Designated Examining Authority (``DEA'') for 
any of its ETP Holders and there are no ``NSX only'' ETP Holders (i.e., 
all NSX ETP Holders are members of other self-regulatory 
organizations).\8\
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    \8\ The Exchange represents that it will move to amend or cancel 
its participation in any existing Exchange Act Rule 17d-2 Plans for 
Allocation of Regulatory Responsibilities for NSX as appropriate in 
connection with the conclusion of all open matters relating to the 
Exchange's regulatory responsibilities with respect to NSX.
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    Further, all NSX rules shall remain in full force and effect 
through and after the Closing Date and the Exchange will retain 
disciplinary jurisdiction over all ETP Holders and persons associated 
with ETP Holders \9\ pursuant to Chapter VIII. of the Exchange's Rules 
and, specifically, Rule 8.1(b). That rule generally provides that any 
ETP Holder or person associated with an ETP Holder shall continue to be 
subject to the disciplinary jurisdiction of the Exchange following the 
termination of such person's ETP status or association with an ETP 
Holder with respect to matters that occurred prior to such termination; 
provided that written notice of the commencement of an inquiry into 
such matters is given by the Exchange to such former ETP Holder or 
former associated person within one year of receipt by the Exchange of 
the latest written notice of the termination of such person's status as 
an ETP Holder or person associated with an ETP Holder. Such notice 
requirement does not apply to a person who at any time after a 
termination again becomes subject to the disciplinary jurisdiction of 
the Exchange by becoming an ETP Holder or a person associated with an 
ETP Holder.\10\ Pursuant to this rule, after the Closing Date, the 
Exchange will enforce any rule violation that occurred prior to the 
close of business on the System on the Closing Date.
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    \9\ Exchange Rule 1.5P.(1) provides that ``[t]he terms ``person 
associated with an ETP Holder'' or ``associated person of an ETP 
Holder'' mean any partner, officer, director, or branch manager of 
an ETP Holder (or any person occupying a similar status or 
performing similar functions), any person directly or indirectly 
controlling, controlled by, or under common control with an ETP 
Holder, or any employee of such ETP Holder, except that any person 
associated with an ETP Holder whose functions are solely clerical or 
ministerial shall not be included in the meaning of such terms.''
    \10\ The Exchange notes that, because all NSX rules will remain 
in effect after the Closing Date, NSX Rule 11.18, which limits the 
liability of the Exchange, will also remain in effect.
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    Upon the filing of the instant rule proposal with the Commission, 
the Exchange will inform all ETP Holders by Information Circular that 
NSX will end trading operations as of the close of business on the 
Closing Date. The Information Circular will also inform all

[[Page 27019]]

ETP Holders that the Exchange will terminate the ETP status of any 
remaining ETP Holders as of May 30, 2014. Once the proposed rule change 
is operative, NSX will no longer accept new ETP applications or further 
consider any pending ETP applications.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Exchange Act and the rules and regulations thereunder applicable to 
the Exchange and, in particular, the requirements of Section 6(b) \11\ 
of the Exchange Act. Specifically, the Exchange believes that the 
proposed rule change is consistent with the requirement of Section 
6(b)(5) \12\ that the rules of an 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 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. Additionally, the Exchange 
believes the proposed rule change is consistent with the Section 
6(b)(5) requirement that the rules of an exchange not be designed to 
permit unfair discrimination between customers, issuers, brokers, or 
dealers.
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    \11\ 15 U.S.C. 78(f)(b) [sic].
    \12\ 15 U.S.C. 78(f)(b)(5) [sic].
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    In particular, the proposed rule change will allow NSX to cease 
trading activity on the System as of the close of business on the 
Closing Date and continue to maintain adequate funding to fulfill its 
regulatory obligations under the Exchange Act, including enforcing any 
rule violations that occurred through the close of trading on the 
Closing Date. Because all ETP Holders are members of other exchanges, 
after the Closing Date they will to be able to direct their orders to 
other national securities exchanges and other trading venues, including 
alternative trading systems and the over-the-counter market generally.
    Under the proposal, in addition to this rule filing being made 
available on the NSX Web site, www.nsx.com, ETP Holders will receive 
written notice by Information Circular, issued upon the instant rule 
filing being filed with the Commission, advising them of the Exchange's 
intention to cease trading activity on the System as of the close of 
business on the Closing Date. Accordingly, the Exchange believes that 
ETP Holders will have sufficient time prior to the Closing Date to 
determine the exchanges and trading venues to which they will direct 
their orders after the Closing Date and make any necessary adjustments 
in their respective trading systems. Moreover, all ETP Holders will 
receive prior notice that NSX will terminate their ETP Status as of May 
30, 2014, unless the ETP Holder voluntarily terminates its status as 
such prior to such date in accordance with Exchange rules.
    The Exchange submits that proposed rule change is therefore 
consistent with the requirements of Section 6(b)(5) of the Exchange Act 
that rules of an exchange be designed to facilitate 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.

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Exchange Act. The NSX's decision 
to cease trading activity on the System as of the close of business on 
the Closing Date will result in one less operational trading venue for 
equity securities. The Exchange notes that there are numerous stock 
exchanges and trading platforms on which market participants may trade 
equity securities. NSX currently has approximately .20% of market share 
among national stock exchanges. In light of the trading volume on NSX 
and the ability of ETP Holders to trade equity securities on other 
trading venues, the Exchange does not believe that its proposal will 
have any substantial competitive impact.

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

    The Exchange has not solicited or received written comments on the 
proposed rule change from ETP Holders or others.

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

    Because the proposed rule change does not: (i) Significantly affect 
the protection of investors or the public interest; (ii) impose any 
significant burden on competition; and (iii) become operative for 30 
days from the date on which it was filed, or such shorter time as the 
Commission may designate if consistent with the protection of investors 
and the public interest, the proposed rule change has become effective 
pursuant to Section 19(b)(3)(A) of the Act \13\ and Rule 19b-
4(f)(6)(iii) thereunder.\14\
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    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 17 CFR 240.19b-4(f)(6)(iii). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written 
notice of its intent to file the proposed rule change, along with a 
brief description and the text of the proposed rule change, at least 
five business days prior to the date of filing of the proposed rule 
change, or such shorter time as designated by the Commission.
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is: (i) 
Necessary or appropriate in the public interest; (ii) for the 
protection of investors; or (iii) otherwise in furtherance of the 
purposes of the Act. If the Commission takes such action, the 
Commission shall institute proceedings to determine whether the 
proposed rule should be approved or 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-NSX-2014-14 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-NSX-2014-14. 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

[[Page 27020]]

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, 100 F Street NE., 
Washington, DC 20549, 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-NSX-2014-14, 
and should be submitted on or before June 2, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-10785 Filed 5-9-14; 8:45 am]
BILLING CODE 8011-01-P