[Federal Register Volume 77, Number 117 (Monday, June 18, 2012)]
[Notices]
[Pages 36324-36327]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-14756]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-67184; File No. SR-NYSEMKT-2012-07]


Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing of 
Proposed Rule Change Amending Independence Policy of the Board of 
Directors of NYSE Euronext and Creating New Independence Policy for 
Boards of Directors of the New York Stock Exchange LLC, NYSE MKT LLC, 
NYSE Regulation, Inc. and NYSE Market, Inc.

June 12, 2012.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on June 8, 2012, NYSE MKT LLC (``NYSE MKT'') filed with the Securities 
and Exchange Commission (``Commission'') the proposed rule change as 
described in Items I and II below, which Items have been prepared by 
the NYSE MKT. 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

    NYSE MKT proposes to amend the Independence Policy of the Board of 
Directors of NYSE Euronext (the ``NYSE Euronext Director Independence 
Policy'') and create a new independence policy (the ``Subsidiary 
Director Independence Policy'') for the boards of directors of NYSE 
MKT, New York Stock Exchange LLC (``the Exchange''), NYSE Market, Inc. 
(``NYSE Market'') and NYSE Regulation, Inc. (``NYSE Regulation'' and, 
together, the ``Regulated Subsidiaries'').\3\ In addition, NYSE MKT 
proposes to amend the Amended and Restated Bylaws of NYSE Euronext, the 
Amended and Restated Bylaws of NYSE Market, Inc., Third Amended and 
Restated Bylaws of NYSE Regulation, Inc., the Third Amended and 
Restated Operating Agreement of New York Stock Exchange LLC and the

[[Page 36325]]

Second Amended and Restated Operating Agreement of NYSE MKT LLC 
(collectively the ``Organizational Documents'') to make certain 
conforming changes described below. The text of the proposed rule 
change is available on the Exchange's Web site at www.nyse.com, at the 
principal office of the Exchange, and at the Commission's Public 
Reference Room.
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    \3\ The Exchange and NYSE Arca, Inc. (``NYSE Arca'') are filing 
substantially the same proposed rule change.
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II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, NYSE MKT 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. NYSE MKT 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
    The purpose of this rule filing is to amend the NYSE Euronext 
Director Independence Policy, create the Subsidiary Director 
Independence Policy for the boards of directors of the Regulated 
Subsidiaries, and make certain conforming changes to the Organizational 
Documents, as set forth below.
NYSE Euronext Director Independence Policy
    Under the Proposed Rule Change, the NYSE Euronext Director 
Independence Policy would be amended to reflect the following changes 
(the ``Proposed Amendments''):
    (i) A majority (as opposed to 75%) of the board of directors of 
NYSE Euronext (the ``Board'') would be required to be independent;
    (ii) Executive officers of listed companies would no longer be 
prohibited from being considered independent for purposes of the Board;
    (iii) The ``additional independence requirements'' at the end of 
the current NYSE Euronext Director Independence Policy--which provide 
that executive officers of foreign private issuers, executive officers 
of NYSE Euronext and directors of affiliates of member organizations 
must together comprise no more than a minority of the total Board--
would be eliminated;
    (iv) References to certain European regulatory authorities would be 
updated, because their names have changed;
    (v) References to NYSE Alternext US LLC and NYSE Amex LLC would 
refer instead to NYSE MKT LLC, because of this entity's previous name 
changes; and
    (vi) Footnote 2 would be deleted because the NYSE Euronext Director 
Independence Policy would not be applicable to the Regulated 
Subsidiaries, each of which is proposed to have its own director 
independence policy.
    The Commission previously considered and approved these aspects of 
the director independence policy in connection with the previously 
proposed combination of NYSE Euronext and Deutsche B[ouml]rse AG (the 
``Combination'').\4\ Under the rule change approved in connection with 
the Combination, Alpha Beta Netherlands Holding N.V. (``Holdco'')--
which was the holding company formed in connection with the Combination 
that would have become the parent company of NYSE Euronext--would have 
adopted a director independence policy that was substantially similar 
to the current NYSE Euronext Director Independence Policy, except for 
the Proposed Amendments noted above and except for certain references 
to the independence standards and criteria in the Dutch Corporate 
Governance Code that would be added, given that Holdco was formed under 
and subject to the laws of the Netherlands. Upon consummation of the 
Combination, the NYSE Euronext Director Independence Policy would have 
ceased to apply. On February 2, 2012, following the European 
Commission's decision to prohibit the Combination, NYSE Euronext and 
Deutsche B[ouml]rse agreed to terminate the agreement to combine their 
businesses.
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    \4\ See Securities Exchange Act Release No. 34-66171 (January 
17, 2012) File Nos. SR-EDGA-2011-34; SR-EDGX-2011-33; SR-ISE-2011-
69; SR-NYSE-2011-51; SR-NYSEAmex-2011-78; SR-NYSEArca-2011-72), 77 
FR 3297.
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    NYSE MKT explained the reasons for incorporating the Proposed 
Amendments in Holdco's director independence policy and believes the 
rationale for making these amendments is substantially applicable with 
equal force to the NYSE Euronext Director Independence Policy.
    Summarized below are the principal reasons for the Proposed 
Amendments listed in items (i), (ii) and (iii) above. NYSE MKT believes 
that the Proposed Amendments listed in items (iv), (v) and (vi) above 
are self-explanatory and technical in nature.
Majority Independence Requirement
    NYSE MKT believes that a majority independence standard is 
appropriate to ensure that the Board as a whole consists of individuals 
with independent, objective perspectives, while at the same time 
affording NYSE Euronext sufficient flexibility to include persons with 
expertise and qualifications that will contribute meaningfully to the 
Board's performance of its oversight function. The importance of 
allowing highly qualified individuals to serve on the Board is 
underscored by the fact that NYSE Euronext serves as the holding 
company for a complex, global business with highly specialized 
operations and regulatory functions.
    Although NYSE Euronext has unique responsibilities and functions as 
the holding company for several regulated subsidiaries, it is subject 
to various corporate governance and regulatory obligations that are 
addressed by means of ownership and voting limitations on its 
shareholders, commitments to provide access to its books and records 
and to submit to the jurisdiction of the Commission, director 
qualification requirements and other undertakings.
    NYSE MKT submits that some of these undertakings call for in-depth 
industry knowledge and expertise on the Board, such as the requirement 
that NYSE Euronext directors take into consideration the effect that 
NYSE Euronext's actions would have on the ability of its U.S. regulated 
subsidiaries to (i) foster cooperation and coordination with persons 
engaging in regulating, clearing, settling and processing information 
with respect to, and facilitating transactions in securities, and (ii) 
remove impediments to and perfect the mechanisms of a free and open 
market in securities and a U.S. national securities market system.
Executives of Listed Companies
    NYSE MKT believes that a per se disqualification of listed company 
executives from being deemed independent should not be applicable to 
NYSE Euronext. The per se disqualification was initially adopted by the 
New York Stock Exchange, Inc. in early 2005 in the context of its 
unique circumstances and history and its management structure and board 
composition at that time.\5\ NYSE MKT submits that those circumstances 
are no longer applicable, and the disqualification of listed company 
executives tends to undermine rather

[[Page 36326]]

than facilitate NYSE Euronext's efforts to ensure a qualified and 
balanced board composition and promote various other important 
corporate governance objectives, such as ensuring appropriate expertise 
and experience on the Board, as well as representation of the interests 
of a diverse range of market constituencies and local European and U.S. 
interests. A per se disqualification narrows the pool of potential NYSE 
Euronext director candidates and arbitrarily eliminates from 
consideration a large number of highly qualified, experienced 
individuals who have proven track records as business leaders. Under 
the NYSE Euronext Director Independence Policy, the Board would still 
need to assess whether a listed company executive meets the various 
independence criteria, including whether he or she has any ``material 
relationship'' with NYSE Euronext and its subsidiaries.
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    \5\ See Securities Exchange Act Release No. 34-51217 (February 
16, 2005) (File No. SR-NYSE-2004-54), 70 FR 9688.
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    Furthermore, NYSE MKT believes that the objectivity of Board 
members is adequately protected by the various other independence 
criteria in the NYSE Euronext Director Independence Policy, such as the 
requirement that independent directors may not be or have been within 
the last year, and may not have an immediate family member who is or 
within the last year was, a member of NYSE MKT, the Exchange or NYSE 
Arca. In addition, if and to the extent that a matter concerning a 
listed company whose executive is a NYSE Euronext director were ever to 
come before the Board for consideration, such director would be 
required to be recused from acting on such matter pursuant to the 
Board's conflicts of interest policy.
Additional Independence Requirements
    Finally, the NYSE Euronext Director Independence Policy provides 
that the sum of (i) Executive officers of foreign private issuers, (ii) 
executive officers of NYSE Euronext and (iii) directors of affiliates 
of ``members'' (as defined in Sections 3(a)(A)(3)(ii), 3(a)(A)(3)(iii) 
and 3(a)(A)(3)(iv) of the Exchange Act \6\) of NYSE MKT, the Exchange 
or NYSE Arca, may not constitute more than a minority of the total 
number of directors of NYSE Euronext. The purpose of this requirement 
is to ensure that, although executives of listed companies who are 
foreign private issuers are not disqualified from serving on the Board, 
such executives may not, together with NYSE Euronext executives and 
directors of affiliates of members, constitute more than a minority of 
the Board. In light of NYSE MKT's proposal to eliminate the 
disqualification of listed company executives from the NYSE Euronext 
Director Independence Policy, this requirement would serve no purpose 
because the exception to such disqualification for foreign private 
issuer executives would also be eliminated. NYSE MKT further notes that 
under the proposed NYSE Euronext Director Independence Policy, 
executives of NYSE Euronext and directors of affiliates of exchange 
members would not be deemed independent and, accordingly, could not in 
any event constitute more than a minority of the Board.
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    \6\ 15 U.S.C. 78c.
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Subsidiary Director Independence Policy
    Currently, the independent directors of the Regulated Subsidiaries 
must satisfy the requirements of the NYSE Euronext Director 
Independence Policy. Under the Proposed Rule Change, each of the 
Regulated Subsidiaries would have its own independence policy in the 
form of the Subsidiary Director Independence Policy attached as Exhibit 
5B to the Proposed Rule Change, in lieu of the NYSE Euronext Director 
Independence Policy.
    The Commission previously considered and approved this form of 
Subsidiary Director Independence Policy to be adopted by the Regulated 
Subsidiaries in connection with the previously proposed Combination 
(except that the prior form contained certain references to Holdco that 
have been replaced in Exhibit 5B with references to NYSE Euronext). 
NYSE MKT explained the reasons for creating the Subsidiary Director 
Independence Policy to determine the independence of directors of the 
Regulated Subsidiaries, and believes these reasons (as set forth below) 
continue to be applicable.
    The Subsidiary Director Independence Policy is substantially 
similar to the current NYSE Euronext Director Independence Policy, 
except for the following changes:
    (i) References to NYSE Euronext would refer instead to the relevant 
Regulated Subsidiary;
    (ii) The requirement that at least three-fourths of the directors 
must be independent would be deleted, since the organizational 
documents of the Regulated Subsidiaries contain the independence and 
other qualification requirements for directors;
    (iii) The requirement in the NYSE Euronext Director Independence 
Policy that the board consider the special responsibilities of a 
director in light of NYSE Euronext's ownership of U.S. regulated 
subsidiaries and European regulated entities would be deleted, because 
unlike NYSE Euronext, the Regulated Subsidiaries are not holding 
companies;
    (iv) The requirement for directors to inform the Chairman of the 
Nominating and Governance Committee of certain relationships and 
interests would be deleted, since the boards of the Regulated 
Subsidiaries do not have a Nominating and Governance Committee, except 
that in the Subsidiary Director Independence Policy to be adopted by 
NYSE Regulation, this provision would reference the Nominating and 
Governance Committee of NYSE Regulation;
    (v) References to NYSE Alternext US LLC and NYSE Amex LLC would 
refer instead to NYSE MKT LLC, because of this entity's previous name 
changes;
    (vi) Because the NYSE Euronext Director Independence Policy 
provides that a director of an affiliate of a ``Member Organization'' 
cannot qualify as an independent director of these Regulated 
Subsidiaries, the conflicting language stating that a director of an 
affiliate of a ``Member Organization'' shall not per se fail to be 
independent would be deleted;
    (vii) Because language in the NYSE Euronext Director Independence 
Policy provides that an executive officer of an issuer whose securities 
are listed on a NYSE Exchange cannot qualify as an independent director 
of these Regulated Subsidiaries, the conflicting language providing an 
exception applicable only to NYSE Euronext directors would be deleted; 
and
    (viii) The ``additional independence requirements'' at the end of 
the current Independence Policy of NYSE Euronext, which provides that 
executive officers of foreign private issuers, executive officers of 
NYSE Euronext and directors of affiliates of member organizations must 
together comprise no more than a minority of the total board, would be 
eliminated. This provision is designed to ensure that although persons 
who are directors of an affiliate of a Member Organization or who are 
executive officers of a ``foreign private issuer'' listed on a NYSE 
Exchange may in some circumstances qualify as independent for purposes 
of NYSE Euronext board membership, such persons may not, together with 
executive officers of NYSE Euronext, constitute more than a minority of 
the total NYSE Euronext directors. Under the proposed Subsidiary 
Director Independence Policy, such persons could not be deemed to be 
independent directors of the relevant Regulated Subsidiary and, 
accordingly, this limitation on the number of such persons who may 
serve on the board is unnecessary.

[[Page 36327]]

    NYSE MKT believes that adopting a separate director independence 
policy for the Regulated Subsidiaries that is more tailored to their 
specific requirements--rather than applying the NYSE Euronext Director 
Independence Policy with various carve-outs and exceptions noted 
therein for the Regulated Subsidiaries--will add clarity to NYSE MKT's 
rules.
Proposed Conforming Modifications to Organizational Documents
    The Organizational Documents would be modified to reflect the 
changes indicated in Exhibits 5C through 5G, which are summarized as 
follows:
    (i) References in the Amended and Restated Bylaws of NYSE Market, 
Inc., the Third Amended and Restated Bylaws of NYSE Regulation, Inc., 
the Third Amended and Restated Operating Agreement of New York Stock 
Exchange LLC and the Second Amended and Restated Operating Agreement of 
NYSE MKT LLC would be modified to refer to the applicable Subsidiary 
Director Independence Policy rather than to the NYSE Euronext Director 
Independence Policy;
    (ii) References to NYSE Alternext US LLC and NYSE Amex LLC in such 
Organizational Documents would be amended to refer instead to NYSE MKT 
LLC, because of this entity's previous name changes; and
    (iii) Section 3.4 of the Amended and Restated Bylaws of NYSE 
Euronext would be modified to provide that a majority (rather than 
three-fourths) of the Board members would be required to be 
independent.
2. Statutory Basis
    NYSE Euronext believes that this filing is consistent with Section 
6(b) \7\ of the Exchange Act in general, and furthers the objectives of 
Section 6(b)(1) \8\ in particular, in that it enables NYSE MKT 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 the provisions of the Exchange 
Act, the rules and regulations thereunder, and the rules of NYSE MKT. 
The Proposed Rule Change will help to ensure that the boards of 
directors of NYSE Euronext and the Regulated Subsidiaries consist of 
individuals with independent, objective perspectives, while at the same 
time affording them sufficient flexibility to include persons with 
expertise and qualifications that will contribute meaningfully to these 
boards' performance of their oversight and other functions. For 
example, some responsibilities of these boards call for in-depth 
industry knowledge and expertise on the Board, such as the requirement 
that NYSE Euronext directors take into consideration the effect that 
NYSE Euronext's actions would have on the ability of its U.S. regulated 
subsidiaries to (i) foster cooperation and coordination with persons 
engaging in regulating, clearing, settling and processing information 
with respect to, and facilitating transactions in securities, and (ii) 
remove impediments to and perfect the mechanisms of a free and open 
market in securities and a U.S. national securities market system. NYSE 
MKT also believes that adopting a separate director independence policy 
for the Regulated Subsidiaries that is more tailored to their specific 
requirements--rather than applying the NYSE Euronext Director 
Independence Policy with various carve-outs and exceptions noted 
therein for the Regulated Subsidiaries--will add clarity to NYSE MKT's 
rules.
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    \7\ 15 U.S.C. 78(f)(b).
    \8\ 15 U.S.C. 78(f)(b)(1).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    NYSE MKT 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.

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

    NYSE MKT has neither solicited nor received written comments on the 
Proposed Rule Change.

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 (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 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 [email protected]. Please include 
File Number SR-NYSEMKT-2012-07 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSEMKT-2012-07. 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, 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 the filing also will be available 
for inspection and copying at the principal office of NYSE MKT. 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-NYSEMKT-2012-07 and should 
be submitted on or before July 9, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority. \9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-14756 Filed 6-15-12; 8:45 am]
BILLING CODE 8011-01-P