Self-Regulatory Organizations; Proposed Rule Changes: NYSE Amex LLC
Federal Register: September 17, 2009 (Volume 74, Number 179)
Notices
Page 47838-47840
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
DOCID:fr17se09-80
SECURITIES AND EXCHANGE COMMISSION
Release No. 34-60647; File No. SR-NYSEAmex-2009-60
Self-Regulatory Organizations; Notice of Filing and Immediate
Effectiveness of a Proposed Rule Change by NYSE Amex LLC 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 Amex LLC (``NYSE Amex'' 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.
\1\ 15 U.S.C.78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
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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.
\4\ NYSE Amex, a Delaware limited liability company, 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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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.
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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
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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.
\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.
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 that the governing board of the exchange itself. Consequently, there is adequate precedent with respect to the proposed rule change.
\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).
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\
\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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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 general, to protect investors and the public interest.
\15\ 15 U.S.C. 78f(b).
\16\ 15 U.S.C. 78f(b)(1).
\17\ 15 U.S.C. 78f(b)(5).
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.
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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.
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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.
Page 47840
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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\
\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.
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.
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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-NYSEAmex-2009-60 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-NYSEAmex-2009-60. 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-NYSEAmex-2009-60 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\
\20\ 17 CFR 200.30-3(a)(12).
Florence E. Harmon,
Deputy Secretary.
FR Doc. E9-22370 Filed 9-16-09; 8:45 am
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