[Federal Register Volume 74, Number 225 (Tuesday, November 24, 2009)]
[Notices]
[Pages 61398-61400]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-28196]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-61005; File No. SR-ISE-2009-90]
Self-Regulatory Organizations; International Securities Exchange,
LLC; Notice of Filing of Proposed Rule Change by International
Securities Exchange, LLC Relating to Changes to the U.S. Exchange
Holdings, Inc. Corporate Documents and International Securities
Exchange Trust Agreement in Connection With the Form 1 Applications of
EDGA Exchange, Inc. and EDGX Exchange, Inc.
November 16, 2009.
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 November 9, 2009, the International Securities Exchange, LLC
(``ISE'' or ``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
In connection with a transaction \3\ which closed on December 23,
2008, the International Securities Exchange, LLC (``Exchange'' or
``ISE'') merged the ISE Stock Exchange, LLC, a Delaware limited
liability company, with and into Maple Merger Sub, LLC, a Delaware
limited liability company and a wholly-owned subsidiary of Direct Edge
Holdings LLC (``Direct Edge''). As part of the same transaction, the
parent company of the Exchange, International Securities Exchange
Holdings, Inc. (``ISE Holdings''), purchased a 31.54% equity interest
in Direct Edge. ISE Holdings is a direct wholly-owned subsidiary of
[[Page 61399]]
U.S. Exchange Holdings, Inc., a Delaware corporation (``U.S. Exchange
Holdings''), which in turn is a wholly-owned subsidiary of 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'').
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\3\ See Securities and Exchange Act Release No. 59135 (December
22, 2008); 73 FR 79954 (December 30, 2008) (SR-ISE-2008-85).
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On May 7, 2009, Direct Edge's direct subsidiaries, EDGA Exchange,
Inc. (``EDGA'') and EDGX Exchange, Inc. (``EDGX,'' and together with
EDGA, the ``DE Exchanges''), each filed a Form 1 Application \4\ (the
``Form 1 Applications'') with the Securities and Exchange Commission
(the ``Commission''), to own and operate a registered national
securities exchanges. Each of the Upstream Owners will take appropriate
steps to incorporate provisions regarding ownership, jurisdiction,
books and records, and other issues related to their control of EDGA
and EDGX. Specifically, each of the non-U.S. Upstream Owners (i.e.,
Deutsche B[ouml]rse, Eurex Frankfurt, Eurex Z[uuml]rich, SIX, and SIX
Group,) will adopt resolutions to incorporate those concepts with
respect to itself, as well as its board members, officers, employees,
and agents (as applicable). The U.S. Upstream Owner, U.S. Exchange
Holdings, will include appropriate provisions in its governing
documents to incorporate those concepts with respect to itself, as well
as its directors, officers, employees, and agents (as applicable).
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\4\ See Securities and Exchange Act Release No. 60651 (September
11, 2009); 74 FR 179 (September 17, 2009) (File No. 10-193 and 10-
194).
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In this filing, the Exchange is submitting to the Commission: (i)
Amendments to the Certificate of Incorporation and Bylaws of U.S.
Exchange Holdings (the ``Corporate Documents''); and (ii) amendments to
the Trust Agreement dated as of December 19, 2007, among ISE Holdings,
U.S. Exchange Holdings, Wilmington Trust Company, as Delaware trustee,
and Sharon Brown-Hruska, Robert Schwartz and Heinz Zimmermann, as
trustees (the ``ISE Trust Agreement''). The text of the proposed rule
change is available on the Exchange's Web site http://www.ise.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 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 those 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 parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
In this filing, the Exchange is submitting to the Commission: (i)
Amendments to the Certificate of Incorporation and Bylaws of U.S.
Exchange Holdings (the ``Corporate Documents''); and (ii) amendments to
the Trust Agreement dated as of December 19, 2007, among ISE Holdings,
U.S. Exchange Holdings, Wilmington Trust Company, as Delaware trustee,
and Sharon Brown-Hruska, Robert Schwartz and Heinz Zimmermann, as
trustees (the ``ISE Trust Agreement'').
U.S. Exchange Holdings' Corporate Documents
The Exchange proposes to amend certain provisions of the Corporate
Documents of U.S. Exchange Holdings in connection with the contemplated
ownership and operation of the DE Exchanges. As a result of ISE
Holdings owning a 31.54 percent equity interest in Direct Edge and
possessing certain contractual rights and obligations with respect to
Direct Edge, ISE Holdings' parent company, U.S. Exchange Holdings, will
control, indirectly, EDGA and EDGX. Accordingly, the Exchange proposes
to broaden certain references that are currently limited to ISE (the
sole registered national securities exchange indirectly controlled by
U.S. Exchange Holdings) to also reflect ISE Holdings' indirect
ownership of EDGA and EDGX. Thus, the Exchange proposes to replace
certain references to ISE with 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.
ISE Trust Agreement
The Exchange proposes to amend certain provisions of the ISE Trust
Agreement in connection with the contemplated ownership and operation
of the DE Exchanges. The ISE Trust serves four general purposes: (i) To
accept, hold and dispose of Trust Shares \5\ on the terms and subject
to the conditions set forth therein, (ii) determine whether a Material
Compliance Event \6\ has occurred or is continuing; (iii) determine
whether the occurrence and continuation of a Material Compliance Event
requires the exercise of the Call Option; \7\ and (iv) transfer
Deposited Shares from the Trust to the Trust Beneficiary \8\ as
provided in Section 4.2(h) therein. Accordingly, the Exchange proposes
to broaden certain references that are currently limited to ISE (the
sole registered national securities exchange controlled by ISE
Holdings) to also reflect ISE Holdings' indirect ownership of the EDGA
and EDGX. Thus, the Exchange proposes to replace certain references to
ISE with each ``Controlled National Securities Exchange.'' These
references appear in Article II through Article VIII, inclusive.
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\5\ Under the ISE Trust Agreement, the term ``Trust Shares''
means either Excess Shares or Deposited Shares, or both, as the case
may be.
Under the ISE Trust Agreement, 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 Four of the Certificate of Incorporation of ISE
Holdings, through ownership of one of the Upstream Owners, without
obtaining the approval of the Commission.
Under the ISE Trust Agreement, the term ``Deposited Shares''
means shares that are transferred to the Trust pursuant to the
Trust's exercise of the Call Option.
\6\ Under the ISE Trust Agreement, the term ``Material
Compliance Event'' means, with respect to a non-U.S. Upstream Owner,
as 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 in any material respect.
\7\ Under the ISE 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.
\8\ Under the ISE Trust Agreement, the term ``Trust
Beneficiary'' means U.S. Exchange Holdings, Inc.
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6 of the Exchange Act,\9\ in general,
and with Sections 6(b)(1) and (b)(5),\10\ in particular, in that the
proposal enables
[[Page 61400]]
the Exchange to be so organized as to have the capacity to be able to
carry out the purposes of the Exchange Act and to comply with and
enforce compliance by members and persons associated with members with
provisions of the Exchange Act, the rules and regulations thereunder,
and SRO rules, and is designed to prevent fraudulent and manipulative
acts and practices, to promote just and equitable principles of trade,
to remove impediments to and perfect the mechanism for a free and open
market and a national market system, and, in general, to protect
investors and the public interest. Moreover, the proposed rule change
will ensure that U.S. Exchange Holdings, the direct parent company of
ISE Holdings and indirect affiliate of the DE Exchanges, will not act
in a way that is inconsistent with the DE Exchanges' obligations under
the Exchange Act.
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\9\ See 15 U.S.C. 78f.
\10\ See 15 U.S.C. 78f(b)(3), (5) [sic].
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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 Act.
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 35 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the Exchange consents, the Commission will:
(A) By order approve the 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 e-mail to [email protected]. Please include
File No. SR-ISE-2009-90 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, Station Place, 100 F
Street, NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-ISE-2009-90. This file
number should be included on the subject line if e-mail 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 inspection and
copying in the Commission's Public Reference Room, on official business
days between the hours of 10 a.m. and 3 p.m. Copies of such filing also
will be available for inspection and copying at the principal office 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-
2009-90 and should be submitted on or before December 15, 2009.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-28196 Filed 11-23-09; 8:45 am]
BILLING CODE 8011-01-P