The New York Stock Exchange LLC submitted a rule filing to the Securities and Exchange Commission in connection with the proposed business combination of NYSE Group, Inc. (NYSE Group) with Euronext N.V. (Euronext). As a result of the combination, the businesses of NYSE Group and Euronext will be held under a single, publicly traded company NYSE Euronext (NYSE Euronext). The Euronext shareholders and the NYSE Group stockholders have approved the combination.
With the exception of certain modifications described in the rule filing, NYSE Group’s current corporate structure and governance and NYSE’s current corporate structure, governance and self-regulatory independence and separation will remain intact. Euronext and its subsidiaries will continue to operate their business and operations in substantially the same manner as they are currently conducted. Following the combination, NYSE Euronext will be a for-profit, publicly traded stock corporation and will act as a holding company for the businesses of the NYSE Group and Euronext.
The rule filing addresses the following corporate governance policies of NYSE Euronext: (i) the voting and ownership limitations of NYSE Euronext stock, namely various restrictions placed on the ability to vote and own shares of common stock of NYSE Euronext; (ii) provisions of the NYSE Euronext Bylaws designed to protect the independence of the self-regulatory function of the U.S.-regulated subsidiaries and European market subsidiaries of NYSE and Euronext, respectively; (iii) implementation of special arrangements consisting of two standby structures (involving a Dutch foundation and a Delaware trust) designed to take actions to mitigate the effects of any material adverse change in U.S. or European law, as the case may be; (iv) the NYSE Group ownership limitation; (v) the NYSE Group voting limitation; and (vi) other technical amendments to certain NYSE rules to reflect the combination.
Application of Trading Activity Fee to Certain NASD Members
The NASD issued Notice to Members 06-71 to supplement guidance provided in a previously-issued Notice to Members relating to the application of the Trading Activity Fee (TAF) to members acting in the capacity of an exchange specialist or market maker. The TAF is imposed by the NASD to fund the NASD’s obligations to pay fees to the Securities and Exchange Commission under securities Exchange Act Section 31 based upon sales of over-the-counter securities. In such previously-issued Notice to Members, NASD maintained that the exemption for proprietary transactions effected on the NASDAQ Exchange in the capacity of a market maker was limited to the transactions effected through a registered market maker’s attributable quote.
NASD is now expanding the exemption for such transactions to include any transactions effected through both attributable and unattributable orders and quotes. The expansion of this exemption is retroactively effective to August 1, 2006. In this Notice to Members, NASD has also provided additional guidance regarding the application of the TAF with respect to riskless principal transactions.
Change Relating to the Time a Marketable Order is Exposed on the Box Book
The Securities and Exchange Commission approved on an accelerated basis a proposed rule change amending Section 16 (Execution and Price/Time Priority) of Chapter V of the Rules of the Boston Options Exchange (BOX), which provides for the filtering of BOX in-bound order to prevent trade-throughs. Under the previous rule, when the BOX market is not at the national best bid or offer (NBBO), an order would sit on the BOX Book for three seconds before being routed to an exchange displaying the NBBO or returned to the market participant. This rule change reduces the time period to one second.
The SEC noted that the proposed rule change does not alter the order handling and routing procedures of the Filter in any other way than to reduce the exposure time for a marketable order on the BOX Book.