[Federal Register Volume 88, Number 49 (Tuesday, March 14, 2023)]
[Notices]
[Pages 15822-15825]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-05123]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-97065; File No. SR-NYSEARCA-2023-18]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Amend Its
Certificate of Incorporation
March 8, 2023.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that, on February 23, 2023, NYSE Arca, Inc. (``NYSE Arca'' or the
``Exchange'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I and II
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\ 15 U.S.C. 78a.
\3\ 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 its certificate of incorporation to
provide that the board of directors of its ultimate parent or that
board's compensation committee may fix the compensation of the board of
directors of the Exchange, and make certain clarifying, technical and
conforming changes to the certificate of incorporation. The proposed
rule change is available on the Exchange's website at www.nyse.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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend the Amended and Restated Certificate
of Incorporation of the Exchange (``Certificate'') to (a) provide that
the board of directors of its ultimate parent, Intercontinental
Exchange, Inc. (``ICE,'' and its board of directors, the ``ICE
Board''), or the compensation committee of the ICE Board (the ``ICE
Compensation Committee'') may fix the compensation of the board of
directors of the Exchange (the ``Exchange Board''), and (b) make
certain clarifying, technical and conforming changes to the
Certificate.
The changes described herein would become operative upon the
Certificate becoming effective pursuant to its filing with the
Secretary of State of the State of Delaware.
Proposed Amendment to Article 6
Currently, the Exchange Board sets its own compensation. Through an
amendment to Article 6 of the Certificate, the Exchange proposes to
[[Page 15823]]
have the ICE Board or the ICE Compensation Committee set director
compensation instead.
The Exchange is wholly owned by NYSE Group, which in turn is wholly
owned by NYSE Holdings LLC, a wholly owned subsidiary of
Intercontinental Exchange Holdings, Inc. Intercontinental Exchange
Holdings, Inc. is wholly owned by ICE, a public company listed on the
New York Stock Exchange LLC (``NYSE'').\4\
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\4\ See Exchange Act Release No. 72157 (May 13, 2014), 79 FR
28792 (May 19, 2014) (SR-NYSEArca-2014-52) (Notice of Filing and
Immediate Effectiveness of Proposed Rule Change Relating to Name
Changes of Its Ultimate Parent, IntercontinentalExchange Group,
Inc., and Its Indirect Parents, IntercontinentalExchange, Inc. and
NYSE Euronext Holdings LLC).
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To make the change, the Exchange proposes to amend Article 6 of the
Certificate as follows (proposed additions italicized):
6. Except as set forth in this Article 6 and Article 9 of this
Amended and Restated Certificate of Incorporation, the Exchange
shall be managed by or under the direction of the Board of Directors
which shall exercise all powers conferred under the laws of the
State of Delaware. The Board of Directors of Intercontinental
Exchange, Inc. or the compensation committee thereof shall have the
authority to fix the compensation of directors of the Exchange. The
directors of the Exchange may be paid their expenses, if any, of
attendance at each meeting of the Board of Directors of the Exchange
and may be paid a fixed sum for attendance at each meeting of the
Board of Directors of the Exchange or a stated salary as director
(which amounts may be paid in cash or such other form as the Board
of Directors of Intercontinental Exchange, Inc. or the compensation
committee thereof may from time to time authorize). No such payment
shall preclude any director from serving the Exchange in any other
capacity and receiving compensation therefor.
If the ICE Board fixed the compensation of the Exchange Board, the
decision would be made by a body that was required to have at least a
majority of its members be independent.\5\ The requirement is in
accordance with NYSE listing requirements, which require that listed
companies have a majority of independent directors.\6\
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\5\ See Securities Exchange Act Release No. 70210 (August 15,
2013), 78 FR 51758 (August 21, 2013) (SR-NYSE-2013-42; SR-NYSEMKT-
2013-50; SR-NYSEArca-2013-62) (Order Granting Approval of Proposed
Rule Change Relating to a Corporate Transaction in which NYSE
Euronext Will Become a Wholly-Owned Subsidiary of
IntercontinentalExchange Group, Inc.). IntercontinentalExchange
Group, Inc., subsequently changed its name to
IntercontinentalExchange, Inc. See 79 FR 28792, supra note 4. The
ICE Board is subject to the requirements of the Independence Policy
of the Board of Directors of Intercontinental Exchange, Inc.,
available at https://s2.q4cdn.com/154085107/files/doc_downloads/governance_docs/ICE-Independence-Policy.pdf. The bylaws of ICE
require that the members of the ICE Board take into consideration
the effect that ICE's actions would have on the ability of the
Exchange to carry out its responsibility under Exchange Act. See the
Ninth Amended and Restated Bylaws of Intercontinental Exchange, Inc.
(``ICE Bylaws''), Article III, Section 3.14. The ICE Bylaws are
available at https://s2.q4cdn.com/154085107/files/doc_downloads/governance_docs/2022/ICE-Ninth-Amended-and-Restated-Bylaws.pdf.
\6\ See NYSE Listed Company Manual Sections 303A.01 (Independent
Directors) and 303A.02(a)(ii) (Independence Tests), and ICE Bylaws,
Article III, Section 3.4.
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If the ICE Compensation Committee fixed the Exchange Board
compensation,\7\ compensation decisions would be made by a body that is
made up of independent members. As a company listed on the NYSE, ICE is
required to have a compensation committee that is composed entirely of
independent directors that satisfy the additional independence
requirements specific to compensation committee members.\8\
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\7\ Pursuant to its Charter, the Compensation Committee of the
ICE Board is charged with, among other things, reviewing and
approving compensation for the members of the board of directors of
any ICE subsidiary, which includes the Exchange. See Charter of the
Compensation Committee of the Board of Directors of ICE, at https://s2.q4cdn.com/154085107/files/doc_downloads/governance_docs/2022/Intercontinental-Exchange-Inc.-Compensation-Committee-Charter-March-3-2022.pdf. See also NYSE Listed Company Manual Section 303A.05(b).
\8\ See NYSE Listed Company Manual Section 303A.05(a)
(Compensation Committee). See also NYSE Listed Company Manual
Section 303A.02(a)(ii) and ICE annual report on Form 10-K for the
fiscal year ended December 31, 2021, at 19, available at https://www.sec.gov/ix?doc=/Archives/edgar/data/1571949/000157194922000006/ice-20211231.htm.
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The proposed rule text is comprehensive. Rather than just setting
forth what body fixes director compensation, it would provide that
directors may be paid their expenses for attending board meetings and
that they may receive compensation on a per-meeting basis or as a
salary, clarify the form of compensation that may be granted, and note
that the payment does not preclude a director from serving the Exchange
in another capacity.
The Exchange operates as a separate self-regulatory organization
and has rules, membership rosters and listings distinct from the rules,
membership rosters and, where applicable, listings of its affiliates
the NYSE, NYSE American LLC, NYSE Chicago, Inc., and NYSE National,
Inc. (collectively with the Exchange, the ``NYSE Group Exchanges''). At
the same time, however, the Exchange believes it is important for each
of the NYSE Group Exchanges to have a consistent approach to corporate
governance in certain matters, to simplify complexity and create
greater consistency among the NYSE Group Exchanges.\9\ To that end,
each of the NYSE Group Exchanges is proposing a substantially similar
change to its governing documents.\10\
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\9\ See Exchange Act Release No. 84648 (November 26, 2018), 83
FR 61692 (November 30, 2018) (SR-NYSEArca-2018-85).
\10\ See SR-NYSE-2023-13; SR-NYSEAmer-2023-15, SR-NYSECHX-2023-
10, and SR-NYSENat-2023-08. Presently, three different entities fix
the compensation of the boards of directors of the NYSE Group
Exchanges: NYSE Group fixes the compensation of the directors of the
NYSE, NYSE American LLC, and NYSE National, Inc.; NYSE Chicago
Holdings, Inc. fixes the compensation of the directors of NYSE
Chicago, Inc.; and the board of directors of NYSE Arca fixes its own
compensation.
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The proposed amendment is based on Article III, Section 3.13
(Compensation of Directors) of the ICE Bylaws.\11\
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\11\ See ICE Bylaws, Article III, Section 3.13.
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Additional Proposed Amendments
The Exchange proposes to make the following non-substantive
technical and conforming changes to the Certificate: \12\
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\12\ See 83 FR 61692, supra note 9, at 61693-61694 (proposing to
make technical and conforming changes to the Certificate of
Incorporation of the Exchange).
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Move the definition of ``Corporation'' from the second
paragraph to the first paragraph.
Throughout the Certificate, add ``Amended and Restated''
before ``Certificate of Incorporation'' or ``certificate of
incorporation'' and capitalize the latter.
Update the dates in Article 13 and the signature line and
update the time in Article 13.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Exchange Act,\13\ in general, and furthers the
objectives of Section 6(b)(1) \14\ in particular, in that it enables
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, and to
enforce compliance by its exchange members and persons associated with
its exchange members, with the provisions of the Exchange Act, the
rules and regulations thereunder, and the rules of the Exchange. The
Exchange also believes that the proposed rule change is consistent with
Section 6(b)(5) of the Exchange Act,\15\ in that it is 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 facilitating transactions in
securities, to remove
[[Page 15824]]
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.
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\13\ 15 U.S.C. 78f(b).
\14\ 15 U.S.C. 78f(b)(1).
\15\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that, because at least a majority of the
members of the ICE Board and all of the ICE Compensation Committee must
be independent, there is no substantial likelihood of a potential
conflict of interest. Indeed, the Exchange believes that the proposal
lessens the potential for conflicts of interest by eliminating the
current practice, where the Exchange Board sets its own compensation.
The Exchange believes that it is more advisable to have compensation
determinations made by a body that is not the same as the one that will
receive the compensation. Further, the governing documents of ICE
require that the members of the ICE Board take into consideration the
effect that ICE's actions--including actions by the ICE Board or ICE
Compensation Committee--would have on the ability of the Exchange ``to
carry out [its] responsibilities under the Exchange Act'' and ``to
engage in conduct that fosters and does not interfere with the ability
of the Exchange[ ] . . . to remove impediments to and perfect the
mechanisms of a free and open market in securities and a U.S. national
securities market system; and . . . to protect investors and the public
interest.'' \16\ For the foregoing reasons, the Exchange believes that
the proposed change would allow the Exchange to be so organized as to
have the capacity to carry out the purposes of the Exchange Act and
comply with the provisions of the Exchange Act by its members and
persons associated with members, and would contribute to the orderly
operation of the Exchange and would promote the maintenance of a fair
and orderly market, the protection of investors and the protection of
the public interest.
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\16\ See ICE Bylaws, Article III, Section 3.14(a). The NYSE Arca
Rules set forth additional review and reporting requirements for
listed ICE affiliate securities. See Rule 5.1-E(c) (Listing of an
Affiliate or Entity that Operates and/or Owns a Trading System or
Facility of the Exchange).
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Indeed, the change would be consistent with prior practice, as when
the New York Stock Exchange, Inc. combined with Archipelago Holdings,
Inc. under NYSE Group in 2006, NYSE Group was publicly traded, required
to have an independent board of directors, and subject to an
independence policy.\17\ That changed when NYSE Group combined with
Euronext N.V. After that combination, NYSE Euronext, the publicly
traded parent company, had an independent board of directors subject to
an independence policy, and the board of directors of NYSE Group, which
became a subsidiary of NYSE Euronext, did not.\18\ When ICE acquired
NYSE Euronext, the requirement to have a majority of independent
directors moved to ICE.\19\
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\17\ See Securities Exchange Act Release No. 53382 (February 27,
2006), 71 FR 11251 (March 6, 2006) (SR-NYSE-2005-77) (Order Granting
Approval of Proposed Rule Change and Amendment Nos. 1, 3, and 5
Thereto and Notice of Filing and Order Granting Accelerated Approval
to Amendment Nos. 6 and 8 Relating to the NYSE's Business
Combination With Archipelago Holdings, Inc.). The NYSE Group was
expected to fix the compensation of the Exchange Board through a
compensation committee. Id. at 11256 (``It is expected that, upon
completion of the Merger, the NYSE Group board of directors will
have [a] . . . compensation committee'') and 11257 (``[T]he board of
directors of New York Stock Exchange LLC is not expected to have its
own committees and that any necessary functions with respect to . .
. compensation . . . will be performed by the relevant committee[ ]
of the NYSE Group board of directors''). Having ICE, a public
company, or the ICE Compensation Committee, which is required to be
made up of independent directors, fix Exchange Board compensation
would be consistent with this practice. See also Securities Exchange
Act Release No. 53383 (February 7, 2006), 71 FR 11271 (March 6,
2006) (SR-PCX-2005-134) (Order Approving Proposed Rule Change and
Amendment No. 1 and Notice of Filing and Order Granting Accelerated
Approval to Amendment No. 2 Relating to the Certificate of
Incorporation and Bylaws of Archipelago Holdings, Inc.).
\18\ See Securities Exchange Act Release No. 55294 (February 14,
2007), 72 FR 8046 (February 22, 2007) (SR-NYSEArca-2007-05) (Order
Granting Accelerated Approval of Proposed Rule Change and Notice of
Filing and Order Granting Accelerated Approval to Amendment No. 1
Regarding a Proposed Combination Between NYSE Group, Inc. and
Euronext N.V.). See also Exhibit 5E to SR-NYSEArca-2007-05, Section
3.2 (deleting the independence requirements for the NYSE Group board
of directors).
\19\ See supra note 5.
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Moreover, the Exchange believes that the proposal would promote
greater consistency in the compensation philosophy and director
compensation structure across affiliated exchanges, thereby promoting
the maintenance of a fair and orderly markets, the protection of
investors and the public interest. As noted above, the other NYSE Group
Exchanges are filing similar proposed changes to their governing
documents. By locating the authority to fix compensation in the hands
of the ICE Board or the ICE Compensation Committee, the proposed change
would permit compensation for each board of directors of an NYSE Group
Exchange to be set centrally and with greater uniformity and
consistency across affiliated exchanges. The Exchange believes that
such conformity would streamline the NYSE Group Exchanges' corporate
processes and create more equivalent compensation processes among them,
to the benefit of both investors and the public interest. The proposal
also reflects the fact that, no matter the size or role of the relevant
NYSE Group Exchange, every NYSE Group Exchange board of directors must
manage its business while considering the government of the exchange as
an ``exchange'' within the meaning of the Exchange Act.\20\
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\20\ See Bylaws of NYSE Arca, Article III, Section 3.01
(Powers); Thirteenth Amended and Restated Operating Agreement of
NYSE, Article II, Section 2.03(k) (Board); Twelfth Amended and
Restated Operating Agreement of NYSE American, Inc., Article II,
Section 2.03(k) (Board); Second Amended and Restated Bylaws of NYSE
Chicago, Inc., Article II, Section 1 (Powers) and Article IX, Sec. 1
(Management of the Corporation); and Seventh Amended and Restated
By-laws of NYSE National, Inc., Article III, Section 3.1 (Powers)
and Article X, Section 10.1 (Management of the Exchange).
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The Exchange also believes that the comprehensive provision would
remove impediments to and perfect the mechanism of a free and open
market, as it would make the provision relating to director
compensation comprehensive and transparent for market participants,
making it so that they can more easily navigate and understand the
governing documents. There is currently no provision regarding
compensation other than the general statement that the Exchange Board
has all the powers conferred under the laws of the State of Delaware.
The proposed text would set forth detail regarding the compensation
that directors may receive, such as whether expenses for attending
board meetings may be paid, whether directors may receive compensation
on a per-meeting basis or as a salary, and what form of compensation
may be granted, and would clarify that payment does not preclude a
director from serving the Exchange in another capacity. The Exchange
believes that the level of detail would add transparency and clarity to
the Exchange's governing documents and would not be inconsistent with
the public interest and the protection of investors because investors
will not be harmed and in fact would benefit from increased
transparency and clarity, thereby reducing potential confusion.
Finally, the proposed non-substantive technical and conforming
changes would remove impediments to and perfect the mechanism of a free
and open market by ensuring that persons subject to the Exchange's
jurisdiction, regulators, and the investing public can more easily
navigate and understand the governing documents. The proposed non-
substantive amendments also would not be inconsistent with the public
interest and the protection of
[[Page 15825]]
investors because investors will not be harmed and in fact would
benefit from increased transparency and clarity, thereby reducing
potential confusion.
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 proposed rule
change is not intended to address competitive issues but rather is
concerned solely with the corporate governance of the Exchange.
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
Because the foregoing 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, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \21\ and Rule 19b-
4(f)(6) thereunder.\22\
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\21\ 15 U.S.C. 78s(b)(3)(A).
\22\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change, along
with a brief description and 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.
The Exchange has satisfied this requirement.
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At any time within 60 days of the filing of such proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings under
Section 19(b)(2)(B) \23\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\23\ 15 U.S.C. 78s(b)(2)(B).
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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-NYSEARCA-2023-18 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-NYSEARCA-2023-18. 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 website (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 website 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 the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-NYSEARCA-2023-18, and should be
submitted on or before April 4, 2023.
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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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-05123 Filed 3-13-23; 8:45 am]
BILLING CODE 8011-01-P