[Federal Register Volume 88, Number 48 (Monday, March 13, 2023)]
[Notices]
[Pages 15470-15473]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-05038]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-97058; File No. SR-NYSE-2023-13]


Self-Regulatory Organizations; New York Stock Exchange LLC; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend Article II, Section 2.03(b) of Its Operating Agreement

March 7, 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, New York Stock Exchange LLC (``NYSE'' 
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 (a) amend Article II, Section 2.03(b) of 
its operating agreement 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 (b) make 
certain clarifying, technical and conforming changes to the operating 
agreement. 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 (a) amend Article II, Section 2.03(b) 
(Board) of the Thirteenth Amended and Restated Operating Agreement of 
the Exchange (``Operating Agreement'') to 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 Operating Agreement.
Proposed Amendment to Section 2.03(b)
    Currently, Exchange directors are not entitled to compensation 
unless, and to the extent, approved by the sole member of the Exchange, 
NYSE Group, Inc. (``NYSE Group'').\4\ NYSE Group is wholly owned by 
NYSE Holdings LLC, which is a wholly owned subsidiary of

[[Page 15471]]

Intercontinental Exchange Holdings, Inc. Intercontinental Exchange 
Holdings, Inc. is in turn wholly owned by ICE, a public company listed 
on the NYSE.\5\
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    \4\ See the first paragraph & Section 2.03(b) of the Operating 
Agreement.
    \5\ See Exchange Act Release No. 72158 (May 13, 2014), 79 FR 
28784 (May 19, 2014) (SR-NYSE-2014-23) (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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    The proposed change would move the responsibility to fix Exchange 
director compensation from NYSE Group to the ICE Board or the ICE 
Compensation Committee. To do so, the Exchange proposes amending 
Article II, Section 2.03(b) of the Operating Agreement as follows 
(proposed deletions bracketed, proposed additions italicized):

    Compensation. [Directors of the Company, in their capacity as 
such, shall not be entitled to compensation, unless, and to the 
extent, approved by the Member.]Notwithstanding any provision of 
this Agreement to the contrary, 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 Company. The Directors of the Company may be paid 
their expenses, if any, of attendance at each meeting of the Board 
and may be paid a fixed sum for attendance at each meeting of the 
Board 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 Company in any other capacity 
and receiving compensation therefor.

    As a result of the proposed change, compensation for the Exchange 
Board members would be fixed by a body that is required to have at 
least a majority of its members be independent.
    Currently, the board of directors of NYSE Group is not required to 
be independent. This was not always true: 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.\6\ 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.\7\
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    \6\ 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.
    \7\ See Securities Exchange Act Release No. 55293 (February 14, 
2007), 72 FR 8033 (February 22, 2007) (SR-NYSE-2006-120) (Order 
Granting Approval of Proposed Rule Change and Notice of Filing and 
Order Granting Accelerated Approval to Amendment No. 1 Regarding the 
Proposed Combination Between NYSE Group, Inc. and Euronext N.V.). 
See also Exhibit 5E to SR-NYSE-2006-120, Section 3.2 (deleting the 
independence requirements for the NYSE Group board of directors).
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    When ICE acquired NYSE Euronext, the requirement to have a majority 
of independent directors moved to ICE.\8\ The requirement is in 
accordance with NYSE listing requirements, which require that listed 
companies have a majority of independent directors.\9\ Accordingly, if 
the ICE Board fixed the compensation of the Exchange Board, the 
decision would be made by a body that required to have at least a 
majority of its members be independent.
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    \8\ 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 28784, supra note 5. 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 
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.
    \9\ 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,\10\ 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.\11\
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    \10\ 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).
    \11\ 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 more comprehensive than the provision it 
would replace since, unlike the Operating Agreement, 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 
NYSE American LLC, NYSE Arca, Inc., 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.\12\ To that end, each of the NYSE Group Exchanges is 
proposing a substantially similar change to its governing 
documents.\13\
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    \12\ See Exchange Act Release No. 84635 (November 20, 2018), 83 
FR 60924 (November 27, 2018) (SR-NYSE-2018-56).
    \13\ See SR-NYSEAmer-2023-15, SR-NYSEArca-2023-18, 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, Inc. 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.\14\
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    \14\ 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 title, recitals

[[Page 15472]]

and signature page of the Operating Agreement: \15\
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    \15\ See 83 FR 60924, supra note 12, at 60926 (proposing to make 
technical and conforming changes to the title, recitals, and 
signature page of the Eleventh Amended and Restated Operating 
Agreement of the Exchange).
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     Update references to the ``Thirteenth Amended and Restated 
Operating Agreement'' to the ``Fourteenth Amended and Restated 
Operating Agreement.''
     Update the date in the signature line.
     Update the recitals.
     Correct a typographical error in the recital regarding 
changes to the Twelfth Amended and Restated Operating Agreement by 
replacing a reference to Section 2.05 with a reference to Section 
2.03(a).\16\
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    \16\ There is no Section 2.05 to the Operating Agreement.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Exchange Act,\17\ in general, and furthers the 
objectives of Section 6(b)(1) \18\ 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,\19\ 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 general, to 
protect investors and the public interest.
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    \17\ 15 U.S.C. 78f(b).
    \18\ 15 U.S.C. 78f(b)(1).
    \19\ 15 U.S.C. 78f(b)(5).
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    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, 
because the Exchange Board would no longer have its compensation fixed 
by a body whose members are not subject to independence requirements. 
The Exchange believes that it is more advisable to have compensation 
determinations made by a body that is required to have at least a 
majority of its members be independent, like the ICE Board or ICE 
Compensation Committee. Otherwise, the compensation could be fixed by a 
body that is made up of employees or persons related to the Exchange. 
Indeed, the change would be consistent with prior practice, as 
immediately after the combination between New York Stock Exchange, Inc. 
and Archipelago Holdings, Inc., the members of the board of directors 
of NYSE Group were both subject to independence requirements and 
expected to fix the compensation of the Exchange Board through a 
compensation committee.\20\ For the same reason, the Exchange believes 
that the change 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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    \20\ 71 FR 11251, supra note 6, 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'').
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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 
fixing of compensation by an entity that is not subject to any 
independence requirements. 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.'' \21\ 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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    \21\ See ICE Bylaws, Article III, Section 3.14(a). The NYSE 
Rules set forth additional review and reporting requirements for 
listed ICE affiliate securities. See Rule 497 (Additional 
Requirements for Listed Securities Issued by Intercontinental 
Exchange, Inc. or its Affiliates).
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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.\22\
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    \22\ See Operating Agreement, Article II, Section 2.03(k); the 
Twelfth Amended and Restated Operating Agreement of NYSE American, 
Inc., Article II, Section 2.03(k) (Board); Bylaws of NYSE Arca, 
Inc., Article III, Section 3.01 (Powers); 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 believes that the more 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 more comprehensive and transparent for market 
participants, making it so that they can more easily navigate and 
understand the governing documents. As noted, the proposed text is more

[[Page 15473]]

comprehensive than the provision it would replace and would set forth 
additional 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 greater 
additional 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 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 \23\ and Rule 19b-
4(f)(6) thereunder.\24\
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    \23\ 15 U.S.C. 78s(b)(3)(A).
    \24\ 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) \25\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \25\ 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-NYSE-2023-13 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-NYSE-2023-13. 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-NYSE-2023-13, and should be submitted on 
or before April 3, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\26\
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    \26\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-05038 Filed 3-10-23; 8:45 am]
BILLING CODE 8011-01-P


