82 FR 6669 - Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change in Connection With the Proposed Transaction Involving CHX Holdings, Inc. and North America Casin Holdings, Inc.
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 82, Issue 12 (January 19, 2017)
Federal Register Volume 82, Issue 12 (January 19, 2017)
| Page Range | 6669-6673 | |
| FR Document | 2017-01152 |
[Federal Register Volume 82, Number 12 (Thursday, January 19, 2017)] [Notices] [Pages 6669-6673] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2017-01152] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-79781; File No. SR-CHX-2016-20] Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change in Connection With the Proposed Transaction Involving CHX Holdings, Inc. and North America Casin Holdings, Inc. January 12, 2017. I. Introduction On December 2, 2016, the Chicago Stock Exchange, Inc. (``CHX'' or ``Exchange'') filed with the Securities and Exchange Commission (``Commission''), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change in connection with the proposed transaction (``Transaction'') involving CHX Holdings, Inc. (``CHX Holdings'') and North America Casin Holdings, Inc. (``N.A. Casin Holdings''). The proposed rule change was published for comment in the Federal Register on December 12, 2016.\3\ The Commission received five comment letters on the proposed rule change \4\ and two letters from the [[Page 6670]] Exchange in response to certain comments.\5\ This order institutes proceedings under Section 19(b)(2)(B) of the Exchange Act \6\ to determine whether to approve or disapprove the proposed rule change. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. \3\ See Securities Exchange Act Release No. 79474 (December 12, 2016), 81 FR 89543 (``Notice''). \4\ See letters from: Representative Robert Pittenger, Representative Earl L. ``Buddy'' Carter, Representative Peter DeFazio, Representative Collin Peterson, and Representative David Joyce, dated December 22, 2016 (``Pittenger Letter''); James N. Hill, dated December 23, 2016 (``Hill Letter''); John Ciccarelli, dated January 2, 2017 (``Ciccarelli Letter''); Anonymous, dated January 3, 2017 (``Anonymous Letter''); and David E. Kaplan, Executive Director, Global Investigative Journalism Network, dated January 4, 2017 (``GIJN Letter''). All of the comments are available at https://www.sec.gov/comments/sr-chx-2016-20/chx201620.shtml. \5\ See letters from John K. Kerin, President and Chief Executive Officer, CHX, dated January 5, 2016 (``CHX Response Letter 1'') and Albert J. Kim, Vice President and Associate General Counsel, CHX, dated January 6, 2016 (``CHX Response Letter 2'') (responding specifically to the Ciccarelli Letter). Both of these letters are available at https://www.sec.gov/comments/sr-chx-2016-20/chx201620.shtml. \6\ 15 U.S.C. 78s(b)(2)(B). --------------------------------------------------------------------------- II. Summary of the Proposal The Exchange is a wholly-owned subsidiary of CHX Holdings. According to the Exchange, CHX Holdings is currently beneficially owned by 193 firms or individuals, including Exchange Participants or affiliates of Exchange Participants.\7\ Under the terms of the Transaction, CHX Holdings would become a wholly-owned subsidiary of N.A. Casin Holdings. According to the Exchange, current CHX Holdings stockholders would receive the right to receive cash in exchange for their shares under the terms of the Transaction.\8\ The Exchange states that consummation of the Transaction is subject to the satisfaction of certain conditions precedent, which include approval of the proposed rule change by the Commission.\9\ --------------------------------------------------------------------------- \7\ See Notice, supra note 3 at 89544. See also CHX Article 1, Rule 1(s) defining ``Participant.'' \8\ See Notice, supra note 3 at 89544. \9\ See id. --------------------------------------------------------------------------- Upon the closing of the Transaction, the Exchange represents that all of the outstanding and issued shares of N.A. Casin Holdings would be held by the following firms and individuals (the ``upstream owners'') in the following percentages:Non-U.S. Upstream Owners: [cir] N.A. Casin Group, Inc. (``N.A. Casin Group''), a corporation incorporated under the laws of the State of Delaware and wholly-owned by Chongqing Casin Enterprise Group (``Chongqing Casin'')--20% [cir] Chongqing Jintian Industrial Co., Ltd., a corporation incorporated under the laws of the People's Republic of China--15% [cir] Chongqing Longshang Decoration Co., Ltd., a corporation incorporated under the laws of the People's Republic of China--14.5% U.S. Upstream Owners: [cir] Castle YAC Enterprises, LLC (``Castle YAC''), a limited liability company organized under the laws of the State of New York, the sole member of which is Jay Lu,\10\ a U.S. citizen and Vice President of N.A. Casin Group--19% --------------------------------------------------------------------------- \10\ According to the Exchange, Jay Lu, the sole member of Castle YAC, is associated with an affiliate of Chongqing Casin and is also the son of Shengju Lu, the Chairman of Chongqing Casin. See Notice, supra note 3 at 89545 n.18. --------------------------------------------------------------------------- [cir] Raptor Holdco LLC (``Raptor''), a limited liability company organized under the laws of the State of Delaware--11.75% [cir] Saliba Ventures Holdings, LLC (``Saliba''), a limited liability company organized under the laws of the State of Illinois--11.75% [cir] Xian Tong Enterprises, Inc., a corporation incorporated under the laws of the State of New York--6.94% [cir] Equity incentive shares to five members of the CHX Holdings management team, all U.S. citizens--0.88% [cir] Cheevers & Co., Inc., a corporation incorporated under the laws of the State of Illinois--0.18%\11\ --------------------------------------------------------------------------- \11\ See id. at 89544-55. Following the closing of the Transaction, CHX would remain registered as a national securities exchange under Section 6 of the Act \12\ and a self-regulatory organization (``SRO'') as defined in Section 3(a)(26) of the Act.\13\ According to the Exchange, CHX rules would remain in full force and effect as of the date of the proposed rule filing, would continue to govern the activities of CHX up to and after the closing of the Transaction, and CHX would continue to discharge its SRO responsibilities pursuant to CHX's registration under Section 6 of the Act.\14\ In addition, the Exchange states that following the closing, CHX's affiliated routing broker, CHXBD, would remain a Delaware limited liability corporation of which CHX Holdings would remain the sole member. --------------------------------------------------------------------------- \12\ 15 U.S.C. 78f. \13\ 15 U.S.C. 78c(a)(26). \14\ See Notice, supra note 3 at 89545-46. --------------------------------------------------------------------------- In order to facilitate the Transaction, the Exchange is proposing to amend its certificate of incorporation and bylaws,\15\ the certificate of incorporation and bylaws of CHX Holdings,\16\ and its rules.\17\ CHX has also filed the following documents in connection with the Transaction: (i) The certificate of incorporation and bylaws of N.A. Casin Holdings; \18\ (ii) text of a proposed resolution of the CHX Holdings Board of Directors to waive certain ownership and voting limitations to permit the Transaction; \19\ (iii) the proposed N.A. Casin Holdings Stockholders Agreement,\20\ which includes transfer-of- share provisions for the upstream owners that provide a right of first offer, a right to acquire interest upon change of control, and a right to purchase new securities; (iv) proposed put agreements between Saliba, N.A. Casin Group, and N.A. Casin Holdings,\21\ and Raptor, N.A. Casin Group, and N.A. Casin Holdings,\22\ respectively, which would grant Saliba and Raptor the right to compel N.A. Casin Holdings to purchase or arrange for an unspecified third-party to purchase a specified amount of Saliba's or Raptors's equity interest in N.A. Casin Holdings, respectively. --------------------------------------------------------------------------- \15\ See Exhibits 5C and 5D. \16\ See Exhibits 5A and 5B. \17\ See Exhibit 5E. \18\ See Exhibits 5F and 5G. \19\ See Exhibit 5H. See infra note 23. \20\ See Exhibit 5I. \21\ See Exhibit 5J. \22\ See Exhibit 5K. --------------------------------------------------------------------------- The Exchange proposes several substantive and technical amendments to its corporate governance documents, rules, and the governing documents of CHX Holdings. The amendments include revised provisions addressing, among other items, board and committee composition and procedures, procedures regarding stockholder meetings, consent to U.S. and Commission jurisdiction, and Commission access to corporate books and records. The proposed amendments also would revise provisions in the certificate of incorporation of CHX Holdings relating to ownership and voting limitations. Additionally, the proposed certificate of incorporation of N.A. Casin Holdings would contain identical ownership concentration and voting limitations and other provisions substantially similar to those contained in the CHX Holdings documents, which would apply directly to the upstream owners.\23\ These provisions specify that no person, either alone or with its Related Persons,\24\ shall be permitted at [[Page 6671]] any time to own beneficially shares of stock of CHX Holdings or N.A. Casin Holdings representing in the aggregate more than 40% of the then outstanding votes entitled to be cast on any matter unless specific procedures are followed prior to acquiring shares in excess of the ownership limitation.\25\ Furthermore, as proposed, no Exchange Participant, either alone or with its Related Persons, shall be permitted at any time to own beneficially shares of stock of CHX Holdings or N.A. Casin Holdings representing in the aggregate more than 20% of the then outstanding votes entitled to be cast on any matter.\26\ In addition, no person that is subject to any statutory disqualification as defined in Section 3(a)(39) of the Exchange Act shall be permitted at any time to own beneficially, either alone or with its Related Persons, shares of stock of CHX Holdings or N.A. Casin Holdings representing in the aggregate more than 20% of the then outstanding votes entitled to be cast on any matter.\27\ CHX also proposes cure provisions that would require CHX Holdings or N.A. Casin Holdings, as applicable, to call shares held in excess of these ownership limitations and to not register any shares transferred in violation of these ownership limitations.\28\ --------------------------------------------------------------------------- \23\ The current CHX Holdings Certificate contains ownership concentration and voting concentration limitations that are similar to those being proposed by the Exchange. In order to effect the Transaction, the CHX Holdings Board of Directors has waived the applicability of those limitations so that CHX Holdings can become a wholly owned subsidiary of N.A. Casin Holdings. See Exhibit 5H. \24\ As set forth in the proposed certificates of incorporation of N.A. Casin Holdings and CHX Holdings, the term ``Related Persons'' shall mean: ``(1) with respect to any Person, any executive officer (as such term is defined in Rule 3b-7 under the Securities Exchange Act of 1934 (``Exchange Act'')) director, general partner, manager or managing member, as applicable, and all ``affiliates'' and ``associates'' of such Person (as those terms are defined in Rule 12b-2 under the Exchange Act), and other Person(s) whose beneficial ownership of shares of stock of the Corporation with the power to vote on any matter would be aggregated with such first Person's beneficial ownership of such stock or deemed to be beneficially owned by such first Person pursuant to Rules 13d-3 and 13d-5 under the Exchange Act; and (2) in the case of any Person constituting a member (as that term is defined in Section 3(a)(3)(A) of the Exchange Act) of CHX (defined in the Rules of the Chicago Stock Exchange, Inc. (``CHX Rules''), as such rules may be amended from time to time, as a ``Participant'') for so long as CHX remains a registered national securities exchange, such Person and any broker or dealer with which such Person is associated; and (3) any other Person(s) with which such Person has any agreement, an arrangement or understanding (whether or not in writing) to act together for the purpose of acquiring, voting, holding or disposing of shares of the stock of the Corporation; and (4) in the case of a Person that is a natural person, any relative or spouse of such Person, or any relative of such spouse, who has the same home as such Person or who is a director or officer of the Corporation or any of its parents or subsidiaries.'' \25\ See Notice, supra note 3, at 89552. \26\ See id. at 89552-53. \27\ See id. at 89553. \28\ See id. --------------------------------------------------------------------------- Additionally, both the certificates of incorporation of CHX Holdings and N.A. Casin Holdings would preclude any stockholder, either alone or with its Related Persons, from voting more than 20% of the then outstanding shares entitled to be cast on any matter unless specific procedures are followed prior to voting in excess of the limitation.\29\ Similarly, no person, either alone or with its Related Persons, would be permitted to enter into an agreement, plan, or other arrangement that would result in an aggregate of more than 20% of the then outstanding votes entitled to be cast on a matter to not be voted unless specific procedures are followed prior to entering into such an agreement, plan, or arrangement in violation.\30\ The certificates of incorporation would require that CHX Holdings or N.A. Casin Holdings, as applicable, disregard any votes cast in excess of the voting limitations.\31\ --------------------------------------------------------------------------- \29\ See id. \30\ See id. \31\ See id. --------------------------------------------------------------------------- III. Summary of the Comments The Commission received four comments regarding the proposed rule change.\32\ The Commission also received one comment letter stating that, contrary to what the Ciccarelli Letter stated, the Ciccarelli Letter was not submitted by or on behalf of the Global Investigative Journalism Network.\33\ The Exchange submitted a letter responding to the comments generally and a letter responding to the Ciccarelli Letter.\34\ --------------------------------------------------------------------------- \32\ See supra note 4. \33\ See GIJN Letter, supra note 4; see also CHX Response Letter 2, supra note 5. \34\ See supra note 5. --------------------------------------------------------------------------- In general, three of the commenters express concern over the proposed upstream ownership of CHX.\35\ One commenter questions whether the Chinese government may influence Chongqing Casin, stating that Chongqing Casin is involved in a number of Chinese market sectors that require close ties to the state, particularly in state-sensitive environmental protection areas, that its financial assets were originally state-controlled, and that its chairman sits on an industry council overseen directly by the mayor of the Chongqing Municipality.\36\ The commenter states that, in particular, Chinese ownership or involvement presents risks as Chinese government-sponsored cyber-attacks have been conducted to devalue foreign businesses and steal intellectual property and proprietary data.\37\ This commenter asserts that the United States government has been unable to adequately address transparency concerns with regard to the operations of Chinese businesses.\38\ In its first response to comments, CHX affirms that no prospective investor controls, or is controlled by, or is under common control with, a governmental entity or any political subdivision thereof, including the Chinese government.\39\ --------------------------------------------------------------------------- \35\ See generally Pittinger Letter, supra note 4; Ciccarelli Letter, supra note 4; Anonymous Letter, supra note 4. \36\ See Pittinger Letter, supra note 4, at 1. \37\ See id. \38\ See id. at 2. \39\ See CHX Response Letter 1, supra note 5, at 2. --------------------------------------------------------------------------- Another commenter argues that due to jurisdiction limitations and transparency concerns, the Commission cannot exercise proper regulatory oversight under the current proposal.\40\ In response, CHX states that it believes that its rules are consistent with the requirements of the Exchange Act, and that the CHX rules and Exchange Act contain various provisions that would facilitate the ability of U.S. regulators, including the Commission, to monitor, compel and enforce compliance by each of the upstream owners, particularly in that upstream owners would be required to adhere to the ownership and voting limitations; submit to U.S. regulatory jurisdiction and maintain agents in the U.S. for the service of process; maintain open books and records related to their ownership of CHX and keep such books and records in the U.S.; and refrain from interfering with, and give due consideration to, the SRO function of CHX.\41\ CHX also asserts that, pursuant to the Exchange Act, the Exchange is subject to direct and rigorous oversight by the Commission, which includes, among other things, frequent examinations of various aspects of CHX operations by Commission staff, including security and trading protocols, as well as Commission approval of certain regulatory, operational, and strategic initiatives prior to implementation by CHX.\42\ --------------------------------------------------------------------------- \40\ See Ciccarelli Letter, supra note 4, at 1-2. \41\ See CHX Response Letter 1, supra note 5, at 4; CHX Response Letter 2, supra note 5, at 3. \42\ See CHX Response Letter 2, supra note 5, at 3-4. --------------------------------------------------------------------------- This commenter also questions the identity of the proposed upstream owners and the validity of CHX's representation that there are no Related Persons among the proposed upstream owners other than Castle YAC and N.A. Casin Group.\43\ The commenter asserts that contrary to CHX's representations in the Notice, several of the proposed upstream owners may be affiliated.\44\ In addition, the commenter argues that Chongqing Casin has virtual control over Raptor and Saliba due to the put agreements.\45\ The commenter therefore concludes that after the proposed transaction, approximately 99% of the voting stock in CHX would be controlled by Chinese entities or affiliated shell nominees.\46\ In response, CHX asserts that 50.5% of CHX will be indirectly owned by U.S. citizens, and [[Page 6672]] that it has not misrepresented any facts regarding the Transaction.\47\ CHX reaffirms the representations that it made in the Notice that the only Related Persons among the prospective owners are Castle YAC and N.A. Casin Group, there are no other Related Persons among the prospective owners, and that none of the prospective owners directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, a governmental entity or subdivision thereof.\48\ CHX notes that each of these representations is supported by an opinion of counsel provided to the Commission by outside counsel for CHX.\49\ CHX asserts that, as described in the Notice, Xian Tong Enterprises, Inc. and Castle YAC are controlled by U.S. citizens, Quiling Luo and Jay Lu, respectively.\50\ CHX also states that under the terms of the Saliba and Raptor put agreements, N.A. Casin Holdings could not compel Saliba or Raptor to exercise their put options, and that in the event that either the Saliba or Raptor put agreement is exercised, the CHX rules would require the resulting ownership structure to comport with the ownership and voting limitations.\51\ In addition, CHX states that it ``provided [the Committee for Foreign Investment in the United States (``CFIUS'')] with detailed information regarding the [p]rospective [o]wners, which recently concluded its investigation into the [p]roposed Transaction and found no unresolved national security concerns.'' \52\ --------------------------------------------------------------------------- \43\ See generally Ciccarelli Letter, supra note 4. \44\ See id. at 2-3. \45\ See id. at 3. \46\ See id. at 2. \47\ See CHX Response Letter 2, supra note 5, at 2. \48\ See id. at 5. \49\ See id. \50\ See id. at 5-6. \51\ See id. at 6. \52\ See id. at 5. --------------------------------------------------------------------------- This commenter also asserts that there are few or no controls in place at the upstream corporate ownership level that would prevent the upstream owners from transferring their voting power in CHX to what the commenter opines could be more opaque owners, including those that involve the Chinese government.\53\ In response, CHX represents that no prospective owner and its Related Persons would maintain an equity interest in N.A. Casin Holdings in excess of the 40% ownership limitation, and that no prospective owner and its Related Persons would be permitted to exercise voting power in excess of the 20% voting limitation.\54\ CHX also responds that the proposed governance documents for N.A. Casin Holdings and CHX Holdings provide robust enforcement mechanisms for the ownership and voting limitations, and that the CHX board's composition would be required to meet certain independence requirements.\55\ As described above, CHX notes that the CHX rules and Exchange Act contain various provisions that would facilitate the ability of U.S. regulators, including the Commission, to monitor, compel and enforce compliance by each of the upstream owners.\56\ CHX states that in the event that a prospective owner does not comply with the ownership or voting limitations, the proposed governance documents enable the relevant holding companies to cure non- compliance.\57\ --------------------------------------------------------------------------- \53\ See Ciccarelli Letter, supra note 4, at 2. \54\ See CHX Response Letter 1, supra note 5, at 3; CHX Response Letter 2, supra note 5, at 2. \55\ See CHX Response Letter 1, supra note 5, at 3; CHX Response Letter 2, supra note 5, at 3. \56\ See supra note 41 and accompanying text. \57\ See CHX Response Letter 2, supra note 5, at 3. --------------------------------------------------------------------------- Two commenters assert that the proposed acquisition may present financial security risks to investors and the U.S. marketplace.\58\ One of these commenters raises concerns that a bad actor with access to a national stock exchange's data could use information available through brokerage records and the Consolidated Audit Trail to engage in spear phishing, blackmail attempts, and other similar attacks.\59\ In its response, CHX states that CFIUS investigated the Transaction and ``CFIUS determined that there were no unresolved national security concerns with respect to the [p]roposed Transaction. . . .'' \60\ --------------------------------------------------------------------------- \58\ See Pittinger Letter, supra note 4, at 1; Anonymous Letter, supra note 4. \59\ See Anonymous Letter, supra note 4. \60\ See CHX Response Letter 1, supra note 5, at 5. --------------------------------------------------------------------------- Finally, three commenters express concern regarding the length of the comment period and the timing of the filing over the holiday season.\61\ Two of the commenters request that the Commission extend the comment period.\62\ In response, CHX states that it has been in regular contact with the Commission's staff since the merger agreement was executed, and that the timing of the filing was not intended to circumvent thorough Commission review of the proposed rule change.\63\ --------------------------------------------------------------------------- \61\ See Pittinger Letter, supra note 4, at 1; Hill Letter, supra note 4; Ciccarelli Letter, supra note 4, at 4. \62\ See Pittinger Letter, supra note 4, at 1; Hill Letter, supra note 4. \63\ See CHX Response Letter 1, supra note 5, at 4-5. --------------------------------------------------------------------------- IV. Proceedings To Determine Whether To Approve or Disapprove SR-CHX- 2016-20 and Grounds for Disapproval Under Consideration The Commission is instituting proceedings pursuant to Section 19(b)(2)(B) of the Exchange Act \64\ to determine whether the proposed rule change should be approved or disapproved. Institution of such proceedings is appropriate at this time in view of the legal and policy issues raised by the proposed rule change. Institution of proceedings does not indicate that the Commission has reached any conclusions with respect to any of the issues involved. Rather, as stated below, the Commission seeks and encourages interested persons to provide comments on the proposed rule change. --------------------------------------------------------------------------- \64\ 15 U.S.C. 78s(b)(2)(B). --------------------------------------------------------------------------- Pursuant to Section 19(b)(2)(B) of the Exchange Act,\65\ the Commission is providing notice of the grounds for disapproval under consideration. The Commission is instituting proceedings to allow for additional analysis of the proposed rule change's consistency with Section 6(b)(1) of the Exchange Act, which requires that a national securities exchange is so organized and has the capacity to be able to carry out the purposes of the Exchange Act and to comply, and to enforce compliance by its members and persons associated with its members, with the provisions of the Exchange Act, the rules and regulations thereunder, and the rules of the exchange. In addition, the Commission is instituting proceedings to allow for additional analysis of the proposed rule change's consistency with Section 6(b)(5) of the Exchange Act, which requires, among other things, that the rules of a national securities exchange are designed to protect investors and the public interest. --------------------------------------------------------------------------- \65\ Id. --------------------------------------------------------------------------- IV. Procedure: Request for Written Comments The Commission requests that interested persons provide written submissions of their views, data, and arguments with respect to the issues identified above, as well as any other concerns they may have with the proposal. In particular, the Commission invites the written views of interested persons concerning whether the proposal is consistent with Sections 6(b)(1), 6(b)(5), or any other provision of the Exchange Act, or the rules and regulations thereunder. Although there do not appear to be any issues relevant to approval or disapproval that would be facilitated by an oral presentation of [[Page 6673]] views, data, and arguments, the Commission will consider, pursuant to Rule 19b-4, any request for an opportunity to make an oral presentation.\66\ --------------------------------------------------------------------------- \66\ Section 19(b)(2) of the Exchange Act, as amended by the Securities Act Amendments of 1975, Public Law 94-29 (June 4, 1975), grants the Commission flexibility to determine what type of proceeding--either oral or notice and opportunity for written comments--is appropriate for consideration of a particular proposal by a self-regulatory organization. See Securities Act Amendments of 1975, Senate Comm. on Banking, Housing & Urban Affairs, S. Rep. No. 75, 94th Cong., 1st Sess. 30 (1975). --------------------------------------------------------------------------- Interested persons are invited to submit written data, views, and arguments regarding whether the proposal should be approved or disapproved by February 21, 2017. Any person who wishes to file a rebuttal to any other person's submission must file that rebuttal by March 6, 2017. The Commission asks that commenters address the sufficiency of the Exchange's statements in support of the proposal, in addition to any other comments they may wish to submit about the proposed rule change. 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-CHX-2016-20 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 Numbers SR-CHX-2016-20. 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 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 Web site 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 these filings 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-CHX-2016-20 and should be submitted on or before February 21, 2017. Rebuttal comments should be submitted by March 6, 2017. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\67\ --------------------------------------------------------------------------- \67\ 17 CFR 200.30-3(a)(57). --------------------------------------------------------------------------- Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017-01152 Filed 1-18-17; 8:45 am] BILLING CODE 8011-01-P
![Federal Register / Vol. 82, No. 12 / Thursday, January 19, 2017 / Notices 6669
any burden on competition that is not At any time within 60 days of the received will be posted without change;
necessary or appropriate in furtherance filing of the proposed rule change, the the Commission does not edit personal
of the purposes of the Act, as amended. Commission summarily may identifying information from
The proposal does not raise any issues temporarily suspend such rule change if submissions. You should submit only
of intra-market competition because it it appears to the Commission that such information that you wish to make
applies to all options participants in the action is: (i) Necessary or appropriate in available publicly. All submissions
same manner. the public interest; (ii) for the protection should refer to File Number SR–Phlx–
of investors; or (iii) otherwise in 2017–01 and should be submitted on or
C. Self-Regulatory Organization’s
furtherance of the purposes of the Act. before February 9, 2017.
Statement on Comments on the
If the Commission takes such action, the For the Commission, by the Division of
Proposed Rule Change Received From
Commission shall institute proceedings Trading and Markets, pursuant to delegated
Members, Participants, or Others
to determine whether the proposed rule authority.23
No written comments were either should be approved or disapproved. Eduardo A. Aleman,
solicited or received.
IV. Solicitation of Comments Assistant Secretary.
III. Date of Effectiveness of the [FR Doc. 2017–01153 Filed 1–18–17; 8:45 am]
Interested persons are invited to
Proposed Rule Change and Timing for BILLING CODE 8011–01–P
submit written data, views, and
Commission Action
arguments concerning the foregoing,
Because the foregoing proposed rule including whether the proposed rule
change does not: (i) Significantly affect SECURITIES AND EXCHANGE
change is consistent with the Act.
the protection of investors or the public COMMISSION
Comments may be submitted by any of
interest; (ii) impose any significant the following methods: [Release No. 34–79781; File No. SR–CHX–
burden on competition; and (iii) become 2016–20]
operative for 30 days from the date on Electronic Comments
which it was filed, or such shorter time • Use the Commission’s Internet Self-Regulatory Organizations;
as the Commission may designate, it has comment form (http://www.sec.gov/ Chicago Stock Exchange, Inc.; Order
become effective pursuant to Section rules/sro.shtml); or Instituting Proceedings To Determine
19(b)(3)(A)(iii) of the Act 18 and • Send an email to rule-comments@ Whether To Approve or Disapprove a
subparagraph (f)(6) of Rule 19b–4 sec.gov. Please include File Number SR– Proposed Rule Change in Connection
thereunder.19 Phlx–2017–01 on the subject line. With the Proposed Transaction
A proposed rule change filed under Involving CHX Holdings, Inc. and North
Paper Comments
Rule 19b–4(f)(6) 20 normally does not America Casin Holdings, Inc.
become operative for 30 days after the • Send paper comments in triplicate
date of filing. However, Rule 19b– to Secretary, Securities and Exchange January 12, 2017.
4(f)(6)(iii) 21 permits the Commission to Commission, 100 F Street NE., I. Introduction
designate a shorter time if such action Washington, DC 20549–1090.
is consistent with the protection of All submissions should refer to File On December 2, 2016, the Chicago
investors and the public interest. The Number SR–Phlx–2017–01. This file Stock Exchange, Inc. (‘‘CHX’’ or
Exchange has requested a waiver of the number should be included on the ‘‘Exchange’’) filed with the Securities
30-day operative delay so that the pilot subject line if email is used. To help the and Exchange Commission
program may continue without Commission process and review your (‘‘Commission’’), pursuant to Section
interruption. The Commission believes comments more efficiently, please use 19(b)(1) of the Securities Exchange Act
that waiver of the 30-day operative only one method. The Commission will of 1934 (‘‘Act’’) 1 and Rule 19b–4
delay is consistent with the protection post all comments on the Commission’s thereunder,2 a proposed rule change in
of investors and the public interest Internet Web site (http://www.sec.gov/ connection with the proposed
because it will allow the pilot to rules/sro.shtml). Copies of the transaction (‘‘Transaction’’) involving
continue uninterrupted, thereby submission, all subsequent CHX Holdings, Inc. (‘‘CHX Holdings’’)
avoiding any potential investor amendments, all written statements and North America Casin Holdings, Inc.
confusion that could result from a with respect to the proposed rule (‘‘N.A. Casin Holdings’’). The proposed
temporary interruption in the pilot and change that are filed with the rule change was published for comment
allowing members to continue to benefit Commission, and all written in the Federal Register on December 12,
from the program. Therefore, the communications relating to the 2016.3 The Commission received five
Commission waives the 30-day proposed rule change between the comment letters on the proposed rule
operative delay and designates the Commission and any person, other than change 4 and two letters from the
proposed rule change operative upon those that may be withheld from the 23 17 CFR 200.30–3(a)(12).
filing.22 public in accordance with the 1 15 U.S.C. 78s(b)(1).
provisions of 5 U.S.C. 552, will be 2 17 CFR 240.19b–4.
18 15 U.S.C. 78s(b)(3)(A)(iii). available for Web site viewing and 3 See Securities Exchange Act Release No. 79474
19 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– printing in the Commission’s Public (December 12, 2016), 81 FR 89543 (‘‘Notice’’).
4(f)(6) requires a self-regulatory organization to give
the Commission written notice of its intent to file
Reference Room, 100 F Street NE., 4 See letters from: Representative Robert
Washington, DC 20549, on official Pittenger, Representative Earl L. ‘‘Buddy’’ Carter,
the proposed rule change at least five business days Representative Peter DeFazio, Representative Collin
mstockstill on DSK3G9T082PROD with NOTICES
prior to the date of filing of the proposed rule business days between the hours of Peterson, and Representative David Joyce, dated
change, or such shorter time as designated by the 10:00 a.m. and 3:00 p.m. Copies of the December 22, 2016 (‘‘Pittenger Letter’’); James N.
Commission. The Exchange has satisfied this
requirement.
filing also will be available for Hill, dated December 23, 2016 (‘‘Hill Letter’’); John
inspection and copying at the principal Ciccarelli, dated January 2, 2017 (‘‘Ciccarelli
20 17 CFR 240.19b–4(f)(6).
Letter’’); Anonymous, dated January 3, 2017
21 17 CFR 240.19b–4(f)(6)(iii). office of the Exchange. All comments (‘‘Anonymous Letter’’); and David E. Kaplan,
22 For purposes only of waiving the 30-day Executive Director, Global Investigative Journalism
operative delay, the Commission also has efficiency, competition, and capital formation. See Network, dated January 4, 2017 (‘‘GIJN Letter’’). All
considered the proposed rule’s impact on 15 U.S.C. 78c(f). Continued
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![6672 Federal Register / Vol. 82, No. 12 / Thursday, January 19, 2017 / Notices
that it has not misrepresented any facts CHX Holdings provide robust IV. Proceedings To Determine Whether
regarding the Transaction.47 CHX enforcement mechanisms for the To Approve or Disapprove SR–CHX–
reaffirms the representations that it ownership and voting limitations, and 2016–20 and Grounds for Disapproval
made in the Notice that the only Related that the CHX board’s composition Under Consideration
Persons among the prospective owners would be required to meet certain The Commission is instituting
are Castle YAC and N.A. Casin Group, independence requirements.55 As proceedings pursuant to Section
there are no other Related Persons described above, CHX notes that the 19(b)(2)(B) of the Exchange Act 64 to
among the prospective owners, and that CHX rules and Exchange Act contain determine whether the proposed rule
none of the prospective owners directly, various provisions that would facilitate change should be approved or
or indirectly through one or more the ability of U.S. regulators, including disapproved. Institution of such
intermediaries, controls, or is controlled proceedings is appropriate at this time
the Commission, to monitor, compel
by, or is under common control with, a in view of the legal and policy issues
governmental entity or subdivision and enforce compliance by each of the
upstream owners.56 CHX states that in raised by the proposed rule change.
thereof.48 CHX notes that each of these Institution of proceedings does not
representations is supported by an the event that a prospective owner does
not comply with the ownership or indicate that the Commission has
opinion of counsel provided to the reached any conclusions with respect to
Commission by outside counsel for voting limitations, the proposed
any of the issues involved. Rather, as
CHX.49 CHX asserts that, as described in governance documents enable the
stated below, the Commission seeks and
the Notice, Xian Tong Enterprises, Inc. relevant holding companies to cure non-
encourages interested persons to
and Castle YAC are controlled by U.S. compliance.57 provide comments on the proposed rule
citizens, Quiling Luo and Jay Lu, Two commenters assert that the change.
respectively.50 CHX also states that proposed acquisition may present Pursuant to Section 19(b)(2)(B) of the
under the terms of the Saliba and Raptor financial security risks to investors and Exchange Act,65 the Commission is
put agreements, N.A. Casin Holdings the U.S. marketplace.58 One of these providing notice of the grounds for
could not compel Saliba or Raptor to commenters raises concerns that a bad disapproval under consideration. The
exercise their put options, and that in Commission is instituting proceedings
actor with access to a national stock
the event that either the Saliba or Raptor to allow for additional analysis of the
put agreement is exercised, the CHX exchange’s data could use information
available through brokerage records and proposed rule change’s consistency with
rules would require the resulting Section 6(b)(1) of the Exchange Act,
ownership structure to comport with the the Consolidated Audit Trail to engage
in spear phishing, blackmail attempts, which requires that a national securities
ownership and voting limitations.51 In exchange is so organized and has the
addition, CHX states that it ‘‘provided and other similar attacks.59 In its
capacity to be able to carry out the
[the Committee for Foreign Investment response, CHX states that CFIUS
purposes of the Exchange Act and to
in the United States (‘‘CFIUS’’)] with investigated the Transaction and comply, and to enforce compliance by
detailed information regarding the ‘‘CFIUS determined that there were no its members and persons associated
[p]rospective [o]wners, which recently unresolved national security concerns with its members, with the provisions of
concluded its investigation into the with respect to the [p]roposed the Exchange Act, the rules and
[p]roposed Transaction and found no Transaction. . . .’’ 60 regulations thereunder, and the rules of
unresolved national security Finally, three commenters express the exchange. In addition, the
concerns.’’ 52 concern regarding the length of the Commission is instituting proceedings
This commenter also asserts that there to allow for additional analysis of the
are few or no controls in place at the comment period and the timing of the
filing over the holiday season.61 Two of proposed rule change’s consistency with
upstream corporate ownership level that Section 6(b)(5) of the Exchange Act,
would prevent the upstream owners the commenters request that the
Commission extend the comment which requires, among other things, that
from transferring their voting power in the rules of a national securities
CHX to what the commenter opines period.62 In response, CHX states that it
exchange are designed to protect
could be more opaque owners, has been in regular contact with the
investors and the public interest.
including those that involve the Chinese Commission’s staff since the merger
government.53 In response, CHX agreement was executed, and that the IV. Procedure: Request for Written
represents that no prospective owner timing of the filing was not intended to Comments
and its Related Persons would maintain circumvent thorough Commission The Commission requests that
an equity interest in N.A. Casin review of the proposed rule change.63 interested persons provide written
Holdings in excess of the 40% submissions of their views, data, and
ownership limitation, and that no arguments with respect to the issues
prospective owner and its Related identified above, as well as any other
55 See CHX Response Letter 1, supra note 5, at 3;
Persons would be permitted to exercise concerns they may have with the
CHX Response Letter 2, supra note 5, at 3.
voting power in excess of the 20% 56 See supra note 41 and accompanying text. proposal. In particular, the Commission
voting limitation.54 CHX also responds 57 See CHX Response Letter 2, supra note 5, at 3. invites the written views of interested
that the proposed governance 58 See Pittinger Letter, supra note 4, at 1; persons concerning whether the
documents for N.A. Casin Holdings and Anonymous Letter, supra note 4. proposal is consistent with Sections
59 See Anonymous Letter, supra note 4. 6(b)(1), 6(b)(5), or any other provision of
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47 SeeCHX Response Letter 2, supra note 5, at 2. 60 See CHX Response Letter 1, supra note 5, at 5. the Exchange Act, or the rules and
48 Seeid. at 5.
49 See id.
61 See Pittinger Letter, supra note 4, at 1; Hill regulations thereunder. Although there
50 See id. at 5–6. Letter, supra note 4; Ciccarelli Letter, supra note 4, do not appear to be any issues relevant
51 See id. at 6. at 4. to approval or disapproval that would
52 See id. at 5. 62 See Pittinger Letter, supra note 4, at 1; Hill be facilitated by an oral presentation of
53 See Ciccarelli Letter, supra note 4, at 2. Letter, supra note 4.
54 See CHX Response Letter 1, supra note 5, at 3; 63 See CHX Response Letter 1, supra note 5, at 64 15 U.S.C. 78s(b)(2)(B).
CHX Response Letter 2, supra note 5, at 2. 4–5. 65 Id.
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![Federal Register / Vol. 82, No. 12 / Thursday, January 19, 2017 / Notices 6673
views, data, and arguments, the Washington, DC 20549, on official comments regarding the proposed rule
Commission will consider, pursuant to business days between the hours of change.
Rule 19b–4, any request for an 10:00 a.m. and 3:00 p.m. Copies of these Section 19(b)(2) of the Act 4 provides
opportunity to make an oral filings also will be available for that, within 45 days of the publication
presentation.66 inspection and copying at the principal
Interested persons are invited to of notice of the filing of a proposed rule
office of the Exchange. All comments
submit written data, views, and change, or within such longer period up
received will be posted without change;
arguments regarding whether the to 90 days as the Commission may
the Commission does not edit personal
proposal should be approved or identifying information from designate if it finds such longer period
disapproved by February 21, 2017. Any submissions. You should submit only to be appropriate and publishes its
person who wishes to file a rebuttal to information that you wish to make reasons for so finding or as to which the
any other person’s submission must file available publicly. All submissions self-regulatory organization consents,
that rebuttal by March 6, 2017. The should refer to File Number SR–CHX– the Commission shall either approve the
Commission asks that commenters 2016–20 and should be submitted on or proposed rule change, disapprove the
address the sufficiency of the before February 21, 2017. Rebuttal proposed rule change, or institute
Exchange’s statements in support of the comments should be submitted by proceedings to determine whether the
proposal, in addition to any other March 6, 2017. proposed rule change should be
comments they may wish to submit disapproved. The 45th day after
For the Commission, by the Division of
about the proposed rule change. publication of the notice for this
Comments may be submitted by any Trading and Markets, pursuant to delegated
authority.67 proposed rule change is January 16,
of the following methods: 2017.
Eduardo A. Aleman,
Electronic Comments Assistant Secretary. The Commission is extending the 45-
• Use the Commission’s Internet [FR Doc. 2017–01152 Filed 1–18–17; 8:45 am] day time period for Commission action
comment form (http://www.sec.gov/ BILLING CODE 8011–01–P on the proposed rule change. The
rules/sro.shtml); or Commission finds that it is appropriate
• Send an email to rule-comments@ to designate a longer period within
sec.gov. Please include File Number SR– SECURITIES AND EXCHANGE which to take action on the proposed
CHX–2016–20 on the subject line. COMMISSION rule change so that it has sufficient time
Paper Comments to consider and take action on the
[Release No. 34–79783; File No. SR–CBOE– proposed rule change, as modified by
• Send paper comments in triplicate
to Secretary, Securities and Exchange 2016–080] Amendment No. 1. Accordingly,
Commission, 100 F Street NE., pursuant to Section 19(b)(2)(A)(ii)(I) of
Self-Regulatory Organizations; the Act,5 the Commission designates
Washington, DC 20549–1090. Chicago Board Options Exchange,
All submissions should refer to File March 2, 2017, as the date by which the
Incorporated; Notice of Designation of Commission should either approve or
Numbers SR–CHX–2016–20. This file a Longer Period for Commission
number should be included on the disapprove, or institute proceedings to
Action on a Proposed Rule Change, as determine whether to disapprove, the
subject line if email is used. To help the Modified by Amendment No. 1, To
Commission process and review your proposed rule change (File Number SR–
Amend CBOE Rule 6.53C
comments more efficiently, please use CBOE–2016–080), as modified by
only one method. The Commission will January 12, 2017. Amendment No. 1.
post all comments on the Commission’s On November 17, 2016, Chicago For the Commission, by the Division
Internet Web site (http://www.sec.gov/ Board Options Exchange, Incorporated of Trading and Markets, pursuant to
rules/sro.shtml). Copies of the (‘‘CBOE’’ or ‘‘Exchange’’) filed with the delegated authority.6
submission, all subsequent Securities and Exchange Commission
amendments, all written statements Eduardo A. Aleman,
(‘‘Commission’’), pursuant to Section
with respect to the proposed rule 19(b)(1) of the Securities Exchange Act Assistant Secretary.
change that are filed with the of 1934 (‘‘Act’’) 1 and Rule 19b–4 [FR Doc. 2017–01154 Filed 1–18–17; 8:45 am]
Commission, and all written thereunder,2 a proposed rule change to BILLING CODE 8011–01–P
communications relating to the amend CBOE Rule 6.53C to allow
proposed rule change between the complex orders in Hybrid 3.0 classes
Commission and any person, other than consisting of series in the group
those that may be withheld from the authorized for trading on the Hybrid 3.0
public in accordance with the Platform and series in the group
provisions of 5 U.S.C. 552, will be authorized for trading on the Hybrid
available for Web site viewing and Trading System to be executed
printing in the Commission’s Public electronically. The proposed rule
Reference Room, 100 F Street NE., change was published for comment in
66 Section 19(b)(2) of the Exchange Act, as
the Federal Register on December 2,
amended by the Securities Act Amendments of
2016.3 On December 30, 2016, CBOE
mstockstill on DSK3G9T082PROD with NOTICES
1975, Public Law 94–29 (June 4, 1975), grants the filed Amendment No. 1 to the proposal.
Commission flexibility to determine what type of The Commission has received no
proceeding—either oral or notice and opportunity
for written comments—is appropriate for 67 17
consideration of a particular proposal by a self- CFR 200.30–3(a)(57).
1 15 U.S.C. 78s(b)(1).
regulatory organization. See Securities Act 4 15
2 17 CFR 240.19b–4. U.S.C. 78s(b)(2).
Amendments of 1975, Senate Comm. on Banking,
5 15 U.S.C. 78s(b)(2)(A)(ii)(I).
Housing & Urban Affairs, S. Rep. No. 75, 94th 3 See Securities Exchange Act Release No. 79406
Cong., 1st Sess. 30 (1975). (November 28, 2016), 81 FR 87102. 6 17 CFR 200.30–3(a)(31).
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Document Created: 2018-02-01 15:15:19
Document Modified: 2018-02-01 15:15:19
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration | |
| Section | Notices | |
| Action | (i) The certificate of incorporation and bylaws of N.A. Casin Holdings; \18\ (ii) text of a proposed resolution of the CHX Holdings Board of Directors to waive certain ownership and voting limitations to permit the Transaction; \19\ (iii) the proposed N.A. Casin Holdings Stockholders Agreement,\20\ which includes transfer-of- share provisions for the upstream owners that provide a right of first offer, a right to acquire interest upon change of control, and a right to purchase new securities; (iv) proposed put agreements between Saliba, N.A. Casin Group, and N.A. Casin Holdings,\21\ and Raptor, N.A. Casin Group, and N.A. Casin Holdings,\22\ respectively, which would grant Saliba and Raptor the right to compel N.A. Casin Holdings to purchase or arrange for an unspecified third-party to purchase a specified amount of Saliba's or Raptors's equity interest in N.A. Casin Holdings, respectively. | |
| FR Citation | 82 FR 6669 |
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