[Federal Register Volume 77, Number 152 (Tuesday, August 7, 2012)]
[Notices]
[Pages 47138-47140]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-19294]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-67569; File No. SR-NYSEMKT-2012-23]


Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing of 
Proposed Rule Change Amending the Members' Schedule of NYSE Amex 
Options LLC in Order To Reflect Changes to the Capital Structure of the 
Company

August 1, 2012.
    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 July 25, 2012, NYSE MKT LLC (``NYSE MKT'' 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 self-regulatory organization. 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 proposes to amend the Members' Schedule (as defined in 
the Limited Liability Company Agreement of NYSE Amex Options LLC (the 
``Company'') dated as of June 29, 2011 (the ``LLC Agreement'')) in 
order to reflect changes to the capital structure of the Company based 
on three transactions (such amendment, the ``Proposed Rule Change''). 
The first transaction involved the admission of NYSE Market, Inc. 
(``NYSE Market'') as a Member (as defined below) of the Company on 
September 19, 2011 pursuant to Sections 10.4 and 11.1 of the LLC 
Agreement and Section 3.2 of that certain Members Agreement, dated as 
of June 29, 2011, by and among the Company, NYSE MKT, NYSE Euronext, 
Banc of America Strategic Investments Corporation (``BAML''), Barclays 
Electronic Commerce Holdings Inc. (``Barclays''), Citadel Securities 
LLC (``Citadel''), Citigroup Financial Strategies, Inc. 
(``Citigroup''), Goldman, Sachs & Co. (``Goldman Sachs''), Datek Online 
Management Corp. (``TD Ameritrade'') and UBS Americas Inc. (``UBS'') 
(collectively, excluding the Company, NYSE MKT and NYSE Euronext, the 
``Founding Firms'') (the ``Members Agreement''). The second transaction 
involved the issuance of Annual Incentive Shares (as defined in the 
Members Agreement) to the Founding Firms pursuant to Section 2.1 of the 
Members Agreement. The third transaction will involve the transfer of 
Interests (as defined below) by the Founding Firms to NYSE Market on or 
around September 25, 2012 pursuant to Article XI of the LLC Agreement 
and Section 3.1 of the Members Agreement. 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, on the Commission's Web site at 
www.sec.gov, 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
    The Exchange proposes to amend the Members' Schedule as set forth 
herein. The amendment reflects changes to the capital structure of the 
Company due to (i) The admission of NYSE Market as a Member of the 
Company on September 19, 2011 pursuant to Sections 10.4 and 11.1 of the 
LLC Agreement and Section 3.2 of the Members Agreement, (ii) the 
issuance of Annual Incentive Shares to the Founding Firms on February 
29, 2012 pursuant to Section 2.1 of the Members Agreement and (iii) the 
upcoming transfer of Interests by the Founding Firms to NYSE Market on 
or around September 25, 2012 pursuant to Article XI of the LLC 
Agreement and Section 3.1 of the Members Agreement.
Admission of NYSE Market
    Pursuant to Section 3.2 of the Members Agreement, each Founding 
Firm has the right, subject to certain conditions and limitations, to 
cause NYSE MKT (or an affiliate thereof that NYSE MKT designates) to 
purchase a portion of such Founding Firm's equity interest in the 
Company (such right, the ``Founding Firm Right''). On September 19, 
2011, each of the Founding Firms exercised its Founding Firm Right and

[[Page 47139]]

transferred Common Interests (as defined below) representing an 
aggregate equity interest of 5.28% in the Company to NYSE Market, an 
affiliate of NYSE MKT (the ``Transaction''). NYSE Market, rather than 
NYSE MKT, acquired the Common Interests for non-substantive business 
reasons related to the corporate structure of NYSE MKT. As a result of 
the Transaction, pursuant to Sections 10.4 and 11.1 of the LLC 
Agreement, NYSE Market was admitted as a Member of the Company on 
September 19, 2011. Notwithstanding NYSE Market's acquisition of Common 
Interests, the governance structure of the Company following the 
Transaction did not change: The number of directors on the Company's 
board has not changed; NYSE MKT continues to appoint a majority (7 of 
13) of these directors; and, NYSE Market does not have the right to 
appoint a separate director to the board.
    Initially, the Exchange intended to file this amendment to the 
Members' Schedule as part of a longer, forthcoming technical filing. 
Due to the Founding Firm Transfer (as defined below), however, the 
Exchange deems it appropriate, at present, to amend the Members' 
Schedule in order to reflect NYSE Market's membership in the Company.
    As a limited liability company, ownership of the Company is 
represented by limited liability company interests in the Company 
(``Interests''). The holders of Interests are referred to as the 
members of the Company (the ``Members''). The LLC Agreement designates 
Members as either Class A Members or Class B Members. Currently, the 
Class A Members are NYSE MKT and NYSE Market, and the Class B Members 
are Citadel, Goldman Sachs, BAML, Citigroup, TD Ameritrade, UBS and 
Barclays. Generally, Class A Members and Class B Members are 
distinguishable in that Class A Members hold Class A Common Interests 
and Class B Members hold Class B Common Interests.\3\ Although both 
classes of Common Interests entitle Members to some measure of voting 
and economic entitlements, the two classes of Common Interests are not 
fungible. In fact, a Member's voting and economic entitlements are 
determined by reference to both that Member's holdings of Common 
Interests and the aggregate economic and voting power of the Class A 
Members relative to the Class B Members. Prior to the Transaction, NYSE 
MKT owned an equity interest of 47.20% in the Company, while the 
Founding Firms collectively owned the remaining equity interest of 
52.80%. Immediately following the Transaction, NYSE MKT owned an equity 
interest of 47.20% in the Company, NYSE Market owned an equity interest 
of 5.28%, and the Founding Firms collectively owned the remaining 
equity interest of 47.52%.
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    \3\ Common Interests consist of Class A Common Interests and 
Class B Common Interests.
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    Because NYSE Market is an Affiliate of NYSE MKT, pursuant to 
Section 11.2(c) of the LLC Agreement, the Class B Common Interests 
transferred by the Founding Firms to NYSE Market automatically 
converted into Class A Common Interests upon their acquisition by NYSE 
Market. In connection with this transfer, NYSE Market became a Member 
of the Company holding Class A Common Interests representing an equity 
interest of 5.28% in the Company. As a Member, NYSE Market is bound by 
all of the provisions of the LLC Agreement (including Article XVI) and 
the Members Agreement. The Exchange proposes to amend the Members' 
Schedule as set forth in Exhibit 5-A attached hereto \4\ (marked 
against Schedule A to the LLC Agreement) to reflect NYSE Market's 
membership and the concomitant reduction in the Interests held by the 
Founding Firms.
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    \4\ The Commission notes that the Exhibit 5 is attached to the 
filing, not to this Notice.
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Issuance of Annual Incentive Shares
    Pursuant to Section 2.1 of the Members Agreement, each year (until 
2015, unless extended by the Board) the Company must issue a number of 
Class B Common Interests equal to thirty percent (30%) of the then-
outstanding Class B Common Interests as Annual Incentive Shares. These 
Annual Incentive Shares are allocated among the Class B Members based 
on each Class B Member's contribution to the volume of the Exchange 
relative to such Class B Member's Individual Target. The Annual 
Incentive Shares may change the relative economic and voting rights 
among the Class B Members but have no affect on the relative economic 
and voting rights as between Class A Members and Class B Members.
    On February 29, 2012, the Company issued 14.2560 Annual Incentive 
Shares in the aggregate to the Founding Firms (the ``Issuance of Annual 
Incentive Shares''). Because each Founding Firm achieved or exceeded 
its Individual Target, the Issuance of Annual Incentive Shares did not 
result in any change to any Member's economic or voting interest in the 
Company. The Exchange proposes to amend the Members' Schedule as set 
forth in Exhibit 5-B attached hereto \5\ (marked against the Members' 
Schedule following the Transaction) to reflect the Issuance of Annual 
Incentive Shares.
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    \5\ See supra note 4.
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Founding Firm Transfer
    Pursuant to Article XI of the LLC Agreement and Section 3.1 of the 
Members Agreement, a Member may transfer Interests to a third party or 
to another Member in accordance with the conditions and limitations set 
forth therein. The Exchange is filing this amendment, in part, to 
provide notice that all of the Founding Firms collectively intend to 
transfer an aggregate equity interest of 5.28% in the Company to NYSE 
Market (the ``Founding Firm Transfer''). Upon consummation of the 
Founding Firm Transfer and the acquisition by NYSE Market of the Class 
B Common Interests transferred by the Founding Firms, such Class B 
Common Interests will automatically convert into an appropriate number 
of Class A Common Interests. Immediately following the Founding Firm 
Transfer, NYSE MKT will own an equity interest of 47.20% in the 
Company, NYSE Market will own an equity interest of 10.56%, and the 
Founding Firms, collectively, will own the remaining equity interest of 
42.24%. The Exchange proposes, upon consummation of the Founding Firm 
Transfer, to amend the Members' Schedule as set forth in Exhibit 5-C 
attached hereto \6\ (marked against the Members' Schedule following the 
Issuance of Annual Incentive Shares) to reflect the Founding Firm 
Transfer.
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    \6\ See supra note 4.
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2. Statutory Basis
    The Proposed Rule Change is consistent with Section 6(b) \7\ of the 
Securities Exchange Act,\8\ as amended (the ``Act''), in general, and 
furthers the objectives of Section 6(b)(1) \9\ of the Act, which 
requires a national securities exchange to be so organized and have the 
capacity to carry out the purposes of the Act and to comply, and to 
enforce compliance by its members and persons associated with its 
members, with the provisions of the Act, the rules and regulations 
promulgated thereunder and the rules of the Exchange. The Proposed Rule 
Change does not modify the Company's trading or compliance rules and 
preserves the existing mechanisms for ensuring the Exchange's and the 
Company's compliance with the Act, the rules and regulations 
promulgated

[[Page 47140]]

thereunder and the rules of the Exchange. The proposed amendments do 
not change the structure of the joint venture which retains NYSE MKT's 
regulatory control over the Company or the provisions specifically 
designed to ensure the independence of its self-regulatory function and 
to ensure that any regulatory determinations by NYSE MKT, as the 
Company's SRO, are controlling with respect to the actions and 
decisions of the Company.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78.
    \9\ 15 U.S.C. 78f(b)(1).
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    Additionally, the Proposed Rule Change continues to require the 
Company, its Members and its directors to comply with the federal 
securities laws and the rules and regulations promulgated thereunder 
and to engage in conduct that fosters and does not interfere with the 
Exchange's or the Company's ability to carry out its respective 
responsibilities under the Act.
    The Proposed Rule Change is also consistent with, and furthers the 
objectives of Section 6(b)(5) \10\ of the Act, in that it preserves all 
of NYSE MKT's existing rules and mechanisms 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 mechanisms 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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    \10\ 15 U.S.C. 78f(b)(5).
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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

    No written comments were solicited or received with respect to 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 up to 90 days as the 
Commission may designate if it finds such longer period to be 
appropriate and publishes its reasons for so finding or 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-2012-23 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-2012-23. 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 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 publicly available. All 
submissions should refer to File Number SR-NYSEMKT-2012-23 and should 
be submitted on or before August 28, 2012.

    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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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-19294 Filed 8-6-12; 8:45 am]
BILLING CODE 8011-01-P