
[Federal Register: September 17, 2009 (Volume 74, Number 179)]
[Notices]
[Page 47840-47842]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr17se09-81]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60646; File No. SR-NYSEArca-2009-82]


Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of a Proposed Rule Change by NYSE Arca, Inc. in
Connection With the Proposal of NYSE Euronext To Require That at Least
Three-Fourths of Its Directors Satisfy Independence Requirements

September 10, 2009.
    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 September 4, 2009, 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, 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\ 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 is submitting this rule filing in connection with the
proposal of its ultimate parent, NYSE Euronext (the
``Corporation''),\4\ to amend its bylaws and Director Independence
Policy to require that at least three-fourths of the members of its
Board of Directors shall satisfy the independence requirements for
directors of the Corporation. Currently the bylaws and Director
Independence Policy require that all members of the Board of Directors,
other than the Chief Executive Officer and the Deputy Chief Executive
Officer, shall satisfy the independence requirements.\5\ The proposed
rule change is identical to a rule change filed by the New York Stock
Exchange LLC (``NYSE'') that was recently approved by the
Commission.\6\ The text of the proposed rule change is attached hereto
as Exhibit 5,\7\ and is available on the Exchange's Web site at http://
www.nyse.com, at the Exchange's principal office, and at the Public
Reference Room of the Commission.
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    \4\ NYSE Arca, a Delaware corporation, is an indirect wholly-
owned subsidiary of NYSE Euronext.
    \5\ See Section 3.4 of the ``Amended and Restated Bylaws of NYSE
Euronext.'' The provisions of any other internal policy documents of
the Corporation containing substantially equivalent language will be
modified to conform with the proposed Bylaw and Director
Independence Policy changes.
    \6\ Securities Exchange Act Release No. 60542 (August 19, 2009),
74 FR 43193 (August 26, 2009) (SR-NYSE-2009-60).
    \7\ The Commission notes that Exhibit 5 is attached to the rule
filing filed with the Commission, but not to this release.
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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, 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.

[[Page 47841]]

A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Currently, the Bylaws of the Corporation, which is the ultimate
parent company of the Exchange, require that ``all members of the Board
of Directors, other than the Chief Executive Officer and the Deputy
Chief Executive Officer, shall satisfy the independence requirements
for directors of the Corporation, as modified and amended by the Board
of Directors from time to time.'' Similarly, the Director Independence
Policy of the Corporation states that ``[e]ach Director (other than the
Chief Executive Officer and the Deputy Chief Executive Officer),
including the Chairman of the Board and the Deputy Chairman of the
Board if not also the Chief Executive Officer or the Deputy Chief
Executive Officer, shall be independent within the meaning of this
Policy.'' The Corporation desires to amend both documents to strike a
more appropriate balance between the independence requirements and
other qualifications of its directors. Specifically, the Corporation
proposes to revise the independence standard in the Bylaws to provide
that, ``At least three-fourths of the members of the Board of Directors
shall satisfy the independence requirements for directors of the
Corporation, as modified and amended by the Board of Directors from
time to time.'' \8\ The three-fourths requirement will still adequately
protect the independent judgment of the Board of Directors (``Board''),
which the Corporation believes is essential to the quality of Board
oversight, while permitting the Corporation to consider a broader range
of experienced and knowledgeable individuals as directors.\9\ The
current Bylaw provision eliminates from consideration as potential
directors of the Corporation a substantial number of individuals who
could contribute significantly to the deliberations of the
Corporation's Board by virtue of their knowledge, ability and
experience. For example, an executive of a U.S. company listed on NYSE
could not serve as a member of the Board. Such a restriction deprives
the Corporation of the proven judgment and valuable insights that such
individuals might contribute to the Board's decision-making process.
There are other categories of individuals who fail the independence
requirements for other reasons, yet who nonetheless could make
significant contributions as directors of the Corporation.
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    \8\ The corresponding revised language in the Director
Independence Policy would state, ``At least three-fourths of the
Directors shall be independent within the meaning of this Policy.''
    \9\ There are currently 18 directors on the Board, including the
Chief Executive Officer and the Deputy Chief Executive Officer. The
Bylaws currently require 16 of the directors (i.e., all but the two
aforementioned employees) to be independent. The proposed amendment
to the Bylaws would require a minimum of 14 of the directors to be
independent.
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    As noted above, the proposed rule change is identical to a rule
change filed by the NYSE that was recently approved by the Commission.
    The proposed three-fourths standard for independence remains higher
than the majority standard that the Commission has accepted and
approved in comparable circumstances. For example, the ``Corporate
Governance Guidelines'' of the NASDAQ OMX Group, Inc., which is the
parent company of the NASDAQ Stock Market LLC, state, ``The Board of
NASDAQ OMX is comprised of a majority of directors, who qualify as
``independent directors'' under the Marketplace Rules of The NASDAQ
Stock Market and Securities and Exchange Commission requirements.''
\10\ The NYSE's own corporate governance standards for its listed
companies provide that, ``Listed companies must have a majority of
independent directors.'' \11\ Finally, the Commission's own 2004
release on ``Fair Administration and Governance of Self-Regulatory
Organizations'' proposed ``that the board of each exchange and
association be composed of a majority of independent directors.'' \12\
In the latter case, there would be no justification for holding the
governing board of the ultimate parent of an exchange to a higher
standard than the governing board of the exchange itself. Consequently,
there is adequate precedent with respect to the proposed rule change.
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    \10\ See ``The NASDAQ OMX Group, Inc. Corporate Governance
Guidelines,'' Section III.B. (Independence of Non-Employee
Directors).
    \11\ See ``NYSE Listed Company Manual,'' Section 303A.01
(Independent Directors).
    \12\ See Securities Exchange Act Release No. 50699 (November 18,
2004), 69 FR 71126 (December 8, 2004), Section II.B.2 (Board
Consisting of a Majority of Independent Directors).
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    The proposed amendment to the Bylaws and Director Independence
Policy will not alter or amend the standards by which the Corporation
makes a determination regarding whether an individual director is
independent. In addition, the proposed amendment will not affect in any
way the independence requirements of the Exchange with respect to its
directors or the director independence requirements of any of the other
self-regulatory organizations for which the Corporation is the ultimate
parent or of NYSE Group, Inc., the intermediate holding company,
including in each case the number of required independent
directors.\13\ The proposed amendment will also not affect in any way
the other director qualification requirements set out in the Bylaws of
the Corporation.\14\
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    \13\ In its 2006 release approving the NYSE's business
combination with Archipelago Holdings, Inc. (the ``Arca Approval
Release''), the Commission noted that it ``* * * does not believe
that there is only one method to satisfy the fair representation
requirements of Section 6(b)(3) of the Act, and reviews each SRO
proposal on its own terms to determine if it is consistent with the
Act.'' See Securities Exchange Act Release No. 53382 (February 27,
2006), 71 FR 11251 (March 6, 2006) (File No. SR-NYSE-2005-77),
11259, note 97. In this regard, the ``fair representation
candidate'' on the NYSE board is required by the NYSE's operating
agreement to be independent, and the Arca Approval Release notes
that even a fully independent board could be consistent with the Act
and the fair representation requirement, in which case ``the
candidate or candidates selected by members would have to be
independent.'' 71 FR at 11260. Among other things, the NYSE board
oversees NYSE Regulation, Inc., a not-for-profit independent
subsidiary that conducts the regulatory function of NYSE on its
behalf pursuant to contractual and other arrangements. Consequently,
the Commission stated its conclusion in the Arca Approval Release
that ``[t]he NYSE's proposed requirement that 20% of the directors
of the boards of directors of New York Stock Exchange LLC, NYSE
Market, and NYSE Regulation be chosen by members and the means by
which they will be chosen satisfies the fair representation of
members in the selection of directors and the administration of the
exchange consistent with the requirements in Section 6(b)(3) of the
Act.'' 71 FR at 11259.
    \14\ E.g., Section 3.2 (Certain Qualifications for the Board of
Directors) of the Bylaws.
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2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) \15\ of
the Act, in general, and furthers the objectives of Section 6(b)(1)
\16\ 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
proposed rule change is also consistent with, and furthers the
objectives of, Section 6(b)(5) \17\ of the Act, 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 impediments to and perfect the mechanism of a
free and open market and a national market system and, in

[[Page 47842]]

general, to protect investors and the public interest.
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    \15\ 15 U.S.C. 78f(b).
    \16\ 15 U.S.C. 78f(b)(1).
    \17\ 15 U.S.C. 78f(b)(5).
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    More specifically, the Exchange believes that, because the proposed
rule change will permit the Corporation to consider a broader range of
experienced and knowledgeable individuals to serve as directors of the
Corporation while also preserving the principle that effective boards
of directors exercise independent judgment in carrying out their
responsibilities, it will thereby contribute to perfecting the
mechanism of a free and open market and a national market system and is
also consistent with the protection of 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 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

    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 after the date of the filing, or such
shorter time as the Commission may designate, if consistent with the
protection of investors and the public interest, it has become
effective pursuant to 19(b)(3)(A) of the Act \18\ and Rule 19b-4(f)(6)
thereunder.\19\
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    \18\ 15 U.S.C. 78s(b)(3)(A).
    \19\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file 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 the proposed rule
change, the Commission may summarily abrogate 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.

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 rule-comments@sec.gov. Please include
File Number SR-NYSEArca-2009-82 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-NYSEArca-2009-82. 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, 100 F Street,
NE., Washington, DC 20549, on official business days between the hours
of 10 a.m. and 3 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; 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-NYSEArca-2009-82 and should
be submitted on or before October 8, 2009.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-22369 Filed 9-16-09; 8:45 am]

BILLING CODE 8010-01-P
