Self-Regulatory Organizations; the Boston Stock Exchange Clearing Corporation; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Related to an Amendment to the By-Laws of The NASDAQ OMX Group, Inc., 42711-42714 [E9-20193]

Download as PDF Federal Register / Vol. 74, No. 162 / Monday, August 24, 2009 / Notices Paper Comments • Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549–1090. SECURITIES AND EXCHANGE COMMISSION [Release No. 34–60493; File No. SR– BSECC–2009–04] Self-Regulatory Organizations; the Boston Stock Exchange Clearing All submissions should refer to File Corporation; Notice of Filing and Number SR–NYSEArca–2009–76. This Immediate Effectiveness of Proposed file number should be included on the Rule Change Related to an subject line if e-mail is used. To help the Amendment to the By-Laws of The Commission process and review your NASDAQ OMX Group, Inc. comments more efficiently, please use only one method. The Commission will August 12, 2009. post all comments on the Commission’s Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 Internet Web site (https://www.sec.gov/ (‘‘Act’’),1 notice is hereby given that on rules/sro.shtml). Copies of the July 22, 2009, Boston Stock Exchange submission, all subsequent Clearing Corporation (‘‘BSECC’’) filed amendments, all written statements with the Securities and Exchange with respect to the proposed rule Commission (‘‘Commission or SEC’’) the change that are filed with the proposed rule change described in Items Commission, and all written I and II below, which items have been communications relating to the prepared primarily by BSECC. BSECC proposed rule change between the under Commission and any person, other than filed the proposed rule change 2 Rule 19b–4(f)(6) under the Act so that those that may be withheld from the the proposal was effective upon filing public in accordance with the with the Commission. The Commission provisions of 5 U.S.C.552, will be is publishing this notice to solicit available for inspection and copying in comments on the rule change from the Commission’s Public Reference interested parties. Room, on official business days between I. Self-Regulatory Organization’s the hours of 10 a.m. and 3 p.m. Copies Statement of the Terms of Substance of of the filing also will be available for the Proposed Rule Change inspection and copying at the principal office of the Exchange. All comments BSECC is filing this proposed rule received will be posted without change; change with regard to proposed changes the Commission does not edit personal to the bylaws of its parent corporation, The NASDAQ OMX Group, Inc. identifying information from (‘‘NASDAQ OMX’’). The proposed rule submissions. You should submit only change will be implemented as soon as information that you wish to make practicable following submission of this available publicly. All submissions filing. The text of the proposed rule should refer to File Number SR– change is available at https:// NYSEArca–2009–76 and should be nasdaqomxbx.cchwallstreet.com, at submitted on or before September 14, BSECC’s principal office, and at the 2009. Commission’s Public Reference Room. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.11 Florence E. Harmon, Deputy Secretary. [FR Doc. E9–20240 Filed 8–21–09; 8:45 am] erowe on DSK5CLS3C1PROD with NOTICES BILLING CODE 8010–01–P II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, BSECC 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 these statements may be examined at the places specified in Item IV below. BSECC has prepared summaries, set forth in sections (A), (B), and (C) below, of the most significant aspects of these statements.3 1 15 11 17 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4(f)(6). 3 The Commission has modified the text of the summaries prepared by DTC. CFR 200.30–3(a)(12). VerDate Nov<24>2008 15:04 Aug 21, 2009 Jkt 217001 PO 00000 Frm 00068 Fmt 4703 Sfmt 4703 42711 (A) Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose NASDAQ OMX made certain amendments to its by-laws to update its by-laws and to make improvements in its governance. In SR–NASDAQ–2009– 039, The NASDAQ Stock Market LLC (‘‘NASDAQ Exchange’’) sought and received Commission approval to adopt these by-law changes as part of the rules of the NASDAQ Exchange.4 BSECC is submitting this filing to adopt the same by-law changes as rules of BSECC. The proposed changes to the by-laws are as follows: • Article I is being amended to reflect the recent name changes of the Philadelphia Stock Exchange and the Boston Stock Exchange to NASDAQ OMX PHLX, Inc. and NASDAQ OMX BX, Inc., respectively. • Article III is being amended to modify the procedures governing proposals by stockholders, including proposals by stockholders to nominate directors. Specifically, the amendment will require a stockholder making a proposal to supply more complete information about the stockholder’s background, including a description of any agreement, arrangement, or understanding between the stockholder, the beneficial owner of the stock, and any other persons acting in concert with them; a description of any agreement, arrangement or understanding (including any derivative or short positions, profit interests, options, warrants, convertible securities, stock appreciation or similar rights, hedging transactions, and borrowed or loaned shares), the effect or intent of which is to mitigate loss to, manage risk or benefit of share price changes for, or increase or decrease the voting power of, such stockholder or such beneficial owner, with respect to shares of stock of NASDAQ OMX; and any other information regarding the stockholder and beneficial owner that would be required to be disclosed in a proxy statement under Section 14(a) of the Act. These changes are designed to provide the NASDAQ OMX Board of Directors and its stockholders with greater insight into the identity and intentions of persons presenting stockholder proposals to allow more thorough consideration of the merits of such proposals. These requirements are 4 Securities Exchange Act Release No. 59858 (May 4, 2009), 74 FR 22191 (May 12, 2009) (SR– NASDAQ–2009–039); Securities Exchange Act Release No. 60183 (June 26, 2009), 74 FR 32207 (July 7, 2009) (SR–NASDAQ–2009–039). E:\FR\FM\24AUN1.SGM 24AUN1 42712 Federal Register / Vol. 74, No. 162 / Monday, August 24, 2009 / Notices erowe on DSK5CLS3C1PROD with NOTICES deemed satisfied, however, in the case of a proposal that is validly submitted under the rules and regulations promulgated under the Act (i.e. , SEC Rule 14a–8) and included in NASDAQ OMX’s proxy. However, compliance with the By-Laws or with SEC Rule 14a– 8 provides the exclusive means for stockholders to make proposals. The amendments also provide that a representative of a stockholder qualified to appear at an annual meeting must be an officer, manager, or partner of the stockholder or must have written authorization from the stockholder. The amendments also make several minor clarifying changes to the text of Article III. • Article IV is being amended to state explicitly that the Management Compensation Committee and the Audit Committee must be composed exclusively of independent directors within the meaning of the rules of the NASDAQ Stock Market that govern NASDAQ OMX’s listing (and in the case of the Audit Committee, Section 10A of the Act).5 Although NASDAQ OMX adheres scrupulously to the independence requirements imposed by the NASDAQ Stock Market and the Act, it believes that these requirements should be explicitly stated in the ByLaws as well. NASDAQ OMX is also removing language making its Chief Executive Officer an ex-officio, nonvoting member of the Management Compensation Committee. In this regard, listing standards of the NASDAQ Stock Market require management compensation determinations regarding executive officers to be made by vote of the Board’s independent directors or by vote of or upon the recommendation of a committee composed solely of independent directors.6 NASDAQ OMX has satisfied this requirement by submitting compensation decisions to the vote of all of NASDAQ OMX’s independent directors, but removing the Chief Executive Officer as an ex-officio director will provide it with flexibility to act upon the vote or upon the recommendation of the committee. • Currently, NASDAQ OMX’s Nominating Committee is required to be composed of persons who are not directors or who are directors not standing for reelection. This compositional requirement, which 5 15 U.S.C. 78j–1(m). Notably, ‘‘Staff Directors,’’ who are officers of NASDAQ OMX serving on the NASDAQ OMX Board, are not considered independent under these provisions, and are therefore ineligible for service on the Audit Committee or Management Compensation Committee or, as discussed below, the newly constituted Nominating Committee. 6 NASDAQ Exchange Rule 4350(c)(3). VerDate Nov<24>2008 15:04 Aug 21, 2009 Jkt 217001 NASDAQ OMX’s predecessor, The Nasdaq Stock Market, Inc., originally adopted while it was a wholly owned subsidiary of the National Association of Securities Dealers (‘‘NASD’’), is highly unusual for a public company such as NASDAQ OMX. In light of NASDAQ OMX’s continued evolution into a public company with global operations, NASDAQ OMX believes that it is appropriate to adopt a standard nominating committee structure in which the committee is composed exclusively of independent directors. Under the amended bylaw, the nominating committee shall consist of four or five directors, each of whom shall be an independent director within the meaning the rules of the NASDAQ Exchange. In addition, the number of Non-Industry Directors (i.e., Directors without material ties to the securities industry) must equal or exceed the number of Industry Directors, and at least two members of the committee must be Public Directors (i.e., directors who have no material business relationship with a broker or dealer, NASDAQ OMX, or its affiliates, or FINRA). • Article VIII is being amended to provide that NASDAQ OMX shall provide indemnification against liability, advancement of expenses, and the power to purchase and maintain insurance on behalf of persons serving as a director, officer, or employee of any wholly owned subsidiary of NASDAQ OMX to the same extent as indemnification, advancement of expenses, and the power to maintain insurance is provided for directors, officers, or employees of NASDAQ OMX. Thus, for example, a director of one of NASDAQ OMX’s U.S. or Nordic exchanges would be entitled to indemnification (and advancement of expenses) by NASDAQ OMX if made a party to a lawsuit to the same extent as a director of NASDAQ OMX. Similarly, the discretionary authority of NASDAQ OMX under Section 8.1(c) of the ByLaws to provide indemnification to persons serving as an agent of NASDAQ OMX is being extended to persons serving as an agent of any wholly owned subsidiary of NASDAQ OMX. Article VIII is also being amended to clarify that any repeal, modification, or amendment of, or adoption of any provision inconsistent with the indemnification and advancement of expenses provided for in Article VIII will not adversely affect the right of any person covered by the provision if the act or omission that any proceeding arises out of or is related to had occurred prior to the time for the PO 00000 Frm 00069 Fmt 4703 Sfmt 4703 repeal, amendment, adoption, or modification. • Article IX is being amended to modernize the language of the provisions dealing with capital stock to reflect possible participation in the Direct Registration System (‘‘DRS’’). DRS provides for the electronic registration of eligible securities in an investor’s name on the books of the transfer agent or corporation eliminating the need for physical stock certificates or shares held in book-entry form by the beneficial owner’s broker. Although under the Delaware General Corporation Law, NASDAQ OMX can authorize participation in the program through a resolution, the various amendments to Article IX track more closely the language of Section 158 of the Delaware General Corporation Law, as recently revised, to explicitly reference the possibility of capital stock in uncertificated form. The amendments, however, do not require NASDAQ OMX to participate in DRS or to eliminate stock certificates. • Article XII is being amended to conform certain of its provisions more closely to corresponding provisions in the Amended and Restated By-Laws of NYSE Euronext (‘‘NYSE Euronext ByLaws’’). Article XII contains provisions that govern the relationship between NASDAQ OMX and each of its subsidiaries that is a self-regulatory organization. First, the article requires NASDAQ OMX’s ‘‘[d]irectors, officers, employees, and agents’’ (emphasis added) to give due regard to the preservation of the independence of each self-regulatory subsidiary, not to take any actions that would interfere with each self-regulatory subsidiary’s regulatory functions, to cooperate with the Commission, to consent to U.S. jurisdiction, and to consent in writing to the applicability of these provisions. Corresponding provisions of Articles VII, VIII, and IX of the NYSE Euronext By-Laws, however, do not include the ambiguous and potentially expansive word ‘‘agent.’’ NASDAQ OMX is concerned that a broad construction of the term to include not only parties with which it establishes an explicit contractual agency relationship but also other service providers such as law firms and financial advisors that may act on NASDAQ OMX’s behalf on certain occasions may deter some parties from providing services to NASDAQ OMX. However, in lieu of the requirement to obtain specific consents from agents, NASDAQ OMX proposes to adopt a provision from the NYSE Euronext By-Laws providing that NASDAQ OMX shall comply with the U.S. Federal securities laws and the E:\FR\FM\24AUN1.SGM 24AUN1 Federal Register / Vol. 74, No. 162 / Monday, August 24, 2009 / Notices rules and regulations thereunder and shall cooperate with the Commission and the self-regulatory subsidiaries pursuant to and to the extent of their respective regulatory authority and shall take reasonable steps necessary to cause its agents to cooperate with the Commission and where applicable with the self-regulatory subsidiaries pursuant to their regulatory authority. Second, Article XII provides that NASDAQ OMX and its officers, directors, and employees 7 agree to maintain an agent for service of process in the U.S. By contrast, Article VII of the NYSE Euronext By-Laws includes a statement that officers, directors and employees shall be deemed to agree that the Corporation may serve as the U.S. agent for service of process. Accordingly, NASDAQ OMX proposes to adopt this more self-executing version. Finally, while the NASDAQ OMX By-Laws provide that NASDAQ OMX shall take such action as is necessary to insure that officers, directors and employees consent in writing to the applicability of these provisions, Article IX of the NYSE Euronext By-Laws requires only that NYSE Euronext take reasonable steps necessary to cause officers, directors, and employees to consent. Although NASDAQ OMX has begun the process of collecting written consents from current officers, directors, and employees, it believes that the current language may be unreasonably demanding as applied to a multinational exchange operator with over 2,000 employees in over 20 countries. Accordingly, NASDAQ OMX proposes to adopt a version of NYSE Euronext’s language, which will require reasonable steps to obtain consent from both current officers, directors, and employees, as well as prospective officers, directors, and employees prior to their acceptance of a position. erowe on DSK5CLS3C1PROD with NOTICES 2. Statutory Basis The proposed rule change is consistent with provisions of Section 17A of the Act 8 in general and with Section 17A(b)(3)(A) of the Act,9 in particular, because it is designed to ensure that BSECC is so organized and has the capacity to be able to facilitate the prompt and accurate clearance and settlement of securities transactions and to enforce compliance by its participants with the rules of the clearing agency. The proposed changes will enhance the clarity of NASDAQ 7 The existing reference to ‘‘agents’’ in the sentence is proposed to be deleted. 8 15 U.S.C. 78q–1. 9 15 U.S.C. 78q–1(b)(3)(A). VerDate Nov<24>2008 15:04 Aug 21, 2009 Jkt 217001 OMX’s governance documents and improve its Board committee structures. (B) Self-Regulatory Organization’s Statement on Burden on Competition BSECC does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act, as amended. (C) Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others Written comments were neither solicited nor received. 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) becomes 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 10 and Rule 19b–4(f)(6) thereunder.11 A proposed rule change filed under Rule 19b–4(f)(6) normally does not become operative for 30 days after the date of filing. However, Rule 19b– 4(f)(6)(iii) permits the Commission to designate a shorter time if such action is consistent with the protection of investors and the public interest. BSECC requests that the Commission waive the 30-day pre-operative waiting period contained in Rule 19b–4(f)(6)(iii).12 Waiver of the waiting period will ensure that NASDAQ OMX is able to implement the proposed rule change, which has already been approved as a rule of the NASDAQ Exchange, without undue delay. The Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest.13 The Commission notes the proposal is substantively identical to proposals that were recently approved by the Commission and does not raise any new regulatory issues.14 For these reasons, the Commission designates the 10 15 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(6). 12 17 CFR 240.19b–4(f)(6)(iii). 13 For purposes only of waiving the 30-day operative delay, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 14 See infra note 3. 11 17 PO 00000 Frm 00070 Fmt 4703 Sfmt 4703 42713 proposed rule change as operative upon filing. At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an e-mail to rulecomments@sec.gov. Please include File Number SR–BSECC-2009–04 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–BSECC–2009–04. 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 (https://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 such filings also will be available for inspection and copying at the principal office of BSECC. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You E:\FR\FM\24AUN1.SGM 24AUN1 42714 Federal Register / Vol. 74, No. 162 / Monday, August 24, 2009 / Notices should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–BSECC-2009-04 and should be submitted on or before September 14, 2009. For the Commission by the Division of Trading and Markets, pursuant to delegated authority.15 Florence E. Harmon, Deputy Secretary. [FR Doc. E9–20193 Filed 8–21–09; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–60511; File No. SR– NYSEAMEX–2009–51] Self-Regulatory Organizations; NYSE Amex LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change by NYSE Amex LLC Adopting Rule 406—NYSE Amex Equities as New Rule 3250—NYSE Amex Equities To Conform to a Proposed Rule Change Submitted in a Companion Filing by the New York Stock Exchange LLC August 17, 2009. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the ‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on July 28, 2009, NYSE Amex LLC (the ‘‘Exchange’’ or ‘‘NYSE Amex’’) 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 substantially prepared by the selfregulatory organization. The Exchange has designated this proposal eligible for immediate effectiveness pursuant to Section 19(b)(3)(A) of the Act 3 and Rule 19b–4(f)(6) thereunder.4 The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. erowe on DSK5CLS3C1PROD with NOTICES I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to adopt Rule 406—NYSE Amex Equities (Designation of Accounts) as new Rule 3250—NYSE Amex Equities to conform to a proposed rule change submitted in a companion filing by the New York Stock Exchange 15 17 CFR 200.30–3(a)(12). U.S.C.78s(b)(1). 2 17 CFR 240.19b–4. 3 15 U.S.C. 78s(b)(3)(A). 4 17 CFR 240.19b–4(f)(6). 1 15 VerDate Nov<24>2008 15:04 Aug 21, 2009 Jkt 217001 LLC (‘‘NYSE’’).5 The text of the proposed rule change is available at the Exchange, the Commission’s Public Reference Room, and https:// www.nyse.com. 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 purpose of the proposed rule change is to adopt Rule 406 NYSE Amex Equities (Designation of Accounts) as new Rule 3250 NYSE Amex Equities to conform to a proposed rule change submitted in a companion filing by the NYSE.6 Background As described more fully in a related rule filing,7 NYSE Euronext acquired The Amex Membership Corporation (‘‘AMC’’) pursuant to an Agreement and Plan of Merger, dated January 17, 2008 (the ‘‘Merger’’). In connection with the Merger, the Exchange’s predecessor, the American Stock Exchange LLC, a subsidiary of AMC, became a subsidiary of NYSE Euronext called NYSE Alternext U.S. LLC, and continues to operate as a national securities exchange registered under Section 6 of the Act.8 The effective date of the Merger was October 1, 2008. In connection with the Merger, on December 1, 2008, the Exchange relocated all equities trading conducted 5 See SR–NYSE–2009–75, formally submitted on July 28, 2009. 6 The Commission notes that this proposed rule change would also conform NYSE Amex Rules with a rule change recently filed by the Financial Industry Regulatory Authority, Inc. (‘‘FINRA’’) and approved by the Commission. See Securities Exchange Act Release No. 59947 (May 20, 2009), 74 FR 25293 (May 27, 2009) (order approving FINRA 2009–017). 7 See Securities Exchange Act Release No. 58673 (September 29, 2008), 73 FR 57707 (October 3, 2008) (SR–NYSE–2008–60 and SR–Amex 2008–62) (approving the Merger). 8 15 U.S.C. 78f. PO 00000 Frm 00071 Fmt 4703 Sfmt 4703 on the Exchange legacy trading systems and facilities located at 86 Trinity Place, New York, New York, to trading systems and facilities located at 11 Wall Street, New York, New York (the ‘‘Equities Relocation’’). The Exchange’s equity trading systems and facilities at 11 Wall Street (the ‘‘NYSE Amex Trading Systems’’) are operated by the NYSE on behalf of the Exchange.9 As part of the Equities Relocation, NYSE Amex adopted NYSE Rules 1– 1004, subject to such changes as necessary to apply the Rules to the Exchange, as the NYSE Amex Equities Rules to govern trading on the NYSE Amex Trading Systems.10 The NYSE Amex Equities Rules, which became operative on December 1, 2008, are substantially identical to the current NYSE Rules 1–1004 and the Exchange continues to update the NYSE Amex Equities Rules as necessary to conform with rule changes to corresponding NYSE Rules filed by the NYSE. Proposed Conforming Amendment to NYSE Amex Equities Rules As noted above, the Exchange proposes to adopt Rule 406—NYSE Amex Equities as new Rule 3250— NYSE Amex Equities to conform to a proposed rule change submitted in a companion filing by the NYSE. As discussed in more detail below, the NYSE is filing the proposed rule change to harmonize the NYSE Rules with a change to corresponding Incorporated NYSE Rules filed by FINRA and approved by the Commission.11 Unless specifically noted, the Exchange is proposing to adopt the NYSE’s proposed rule change in the form that it has been approved for filing by the Commission, subject to such technical changes as are necessary to apply the NYSE’s proposed rule change to the Exchange. The Exchange further proposes that the operative date of the rule change be the same as the operative date of the NYSE’s proposed rule change on which this filing is based. Specifically, FINRA adopted FINRA Incorporated NYSE Rule 406 9 See Securities Exchange Act Release No. 58705 (October 1, 2008), 73 FR 58995 (October 8, 2008) (SR–Amex 2008–63) (approving the Equities Relocation). 10 See Securities Exchange Act Release Nos. 58705 (October 1, 2008), 73 FR 58995 (October 8, 2008) (SR–Amex 2008–63); 58833 (October 22, 2008), 73 FR 64642 (October 30, 2008) (SR–NYSE– 2008–106); 58839 (October 23, 2008), 73 FR 64645 (October 30, 2008) (SR–NYSEALTR–2008–03); 59022 (November 26, 2008), 73 FR 73683 (December 3, 2008) (SR–NYSEALTR–2008–10); and 59027 (November 28, 2008), 73 FR 73681 (December 3, 2008) (SR–NYSEALTR–2008–11). 11 See Securities Exchange Act Release No. 59947 (May 20, 2009), 74 FR 25293 (May 27, 2009) (order approving FINRA 2009–017). E:\FR\FM\24AUN1.SGM 24AUN1

Agencies

[Federal Register Volume 74, Number 162 (Monday, August 24, 2009)]
[Notices]
[Pages 42711-42714]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-20193]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60493; File No. SR-BSECC-2009-04]


Self-Regulatory Organizations; the Boston Stock Exchange Clearing 
Corporation; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change Related to an Amendment to the By-Laws of The NASDAQ OMX 
Group, Inc.

August 12, 2009.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on July 22, 2009, Boston 
Stock Exchange Clearing Corporation (``BSECC'') filed with the 
Securities and Exchange Commission (``Commission or SEC'') the proposed 
rule change described in Items I and II below, which items have been 
prepared primarily by BSECC. BSECC filed the proposed rule change under 
Rule 19b-4(f)(6) under the Act \2\ so that the proposal was effective 
upon filing with the Commission. The Commission is publishing this 
notice to solicit comments on the rule change from interested parties.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    BSECC is filing this proposed rule change with regard to proposed 
changes to the bylaws of its parent corporation, The NASDAQ OMX Group, 
Inc. (``NASDAQ OMX''). The proposed rule change will be implemented as 
soon as practicable following submission of this filing. The text of 
the proposed rule change is available at https://nasdaqomxbx.cchwallstreet.com, at BSECC's principal office, 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, BSECC 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 these statements may be examined at the places specified in 
Item IV below. BSECC has prepared summaries, set forth in sections (A), 
(B), and (C) below, of the most significant aspects of these 
statements.\3\
---------------------------------------------------------------------------

    \3\ The Commission has modified the text of the summaries 
prepared by DTC.
---------------------------------------------------------------------------

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

1. Purpose
    NASDAQ OMX made certain amendments to its by-laws to update its by-
laws and to make improvements in its governance. In SR-NASDAQ-2009-039, 
The NASDAQ Stock Market LLC (``NASDAQ Exchange'') sought and received 
Commission approval to adopt these by-law changes as part of the rules 
of the NASDAQ Exchange.\4\ BSECC is submitting this filing to adopt the 
same by-law changes as rules of BSECC.
---------------------------------------------------------------------------

    \4\ Securities Exchange Act Release No. 59858 (May 4, 2009), 74 
FR 22191 (May 12, 2009) (SR-NASDAQ-2009-039); Securities Exchange 
Act Release No. 60183 (June 26, 2009), 74 FR 32207 (July 7, 2009) 
(SR-NASDAQ-2009-039).
---------------------------------------------------------------------------

    The proposed changes to the by-laws are as follows:
     Article I is being amended to reflect the recent name 
changes of the Philadelphia Stock Exchange and the Boston Stock 
Exchange to NASDAQ OMX PHLX, Inc. and NASDAQ OMX BX, Inc., 
respectively.
     Article III is being amended to modify the procedures 
governing proposals by stockholders, including proposals by 
stockholders to nominate directors. Specifically, the amendment will 
require a stockholder making a proposal to supply more complete 
information about the stockholder's background, including a description 
of any agreement, arrangement, or understanding between the 
stockholder, the beneficial owner of the stock, and any other persons 
acting in concert with them; a description of any agreement, 
arrangement or understanding (including any derivative or short 
positions, profit interests, options, warrants, convertible securities, 
stock appreciation or similar rights, hedging transactions, and 
borrowed or loaned shares), the effect or intent of which is to 
mitigate loss to, manage risk or benefit of share price changes for, or 
increase or decrease the voting power of, such stockholder or such 
beneficial owner, with respect to shares of stock of NASDAQ OMX; and 
any other information regarding the stockholder and beneficial owner 
that would be required to be disclosed in a proxy statement under 
Section 14(a) of the Act. These changes are designed to provide the 
NASDAQ OMX Board of Directors and its stockholders with greater insight 
into the identity and intentions of persons presenting stockholder 
proposals to allow more thorough consideration of the merits of such 
proposals. These requirements are

[[Page 42712]]

deemed satisfied, however, in the case of a proposal that is validly 
submitted under the rules and regulations promulgated under the Act 
(i.e. , SEC Rule 14a-8) and included in NASDAQ OMX's proxy. However, 
compliance with the By-Laws or with SEC Rule 14a-8 provides the 
exclusive means for stockholders to make proposals. The amendments also 
provide that a representative of a stockholder qualified to appear at 
an annual meeting must be an officer, manager, or partner of the 
stockholder or must have written authorization from the stockholder. 
The amendments also make several minor clarifying changes to the text 
of Article III.
     Article IV is being amended to state explicitly that the 
Management Compensation Committee and the Audit Committee must be 
composed exclusively of independent directors within the meaning of the 
rules of the NASDAQ Stock Market that govern NASDAQ OMX's listing (and 
in the case of the Audit Committee, Section 10A of the Act).\5\ 
Although NASDAQ OMX adheres scrupulously to the independence 
requirements imposed by the NASDAQ Stock Market and the Act, it 
believes that these requirements should be explicitly stated in the By-
Laws as well. NASDAQ OMX is also removing language making its Chief 
Executive Officer an ex-officio, non-voting member of the Management 
Compensation Committee. In this regard, listing standards of the NASDAQ 
Stock Market require management compensation determinations regarding 
executive officers to be made by vote of the Board's independent 
directors or by vote of or upon the recommendation of a committee 
composed solely of independent directors.\6\ NASDAQ OMX has satisfied 
this requirement by submitting compensation decisions to the vote of 
all of NASDAQ OMX's independent directors, but removing the Chief 
Executive Officer as an ex-officio director will provide it with 
flexibility to act upon the vote or upon the recommendation of the 
committee.
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    \5\ 15 U.S.C. 78j-1(m). Notably, ``Staff Directors,'' who are 
officers of NASDAQ OMX serving on the NASDAQ OMX Board, are not 
considered independent under these provisions, and are therefore 
ineligible for service on the Audit Committee or Management 
Compensation Committee or, as discussed below, the newly constituted 
Nominating Committee.
    \6\ NASDAQ Exchange Rule 4350(c)(3).
---------------------------------------------------------------------------

     Currently, NASDAQ OMX's Nominating Committee is required 
to be composed of persons who are not directors or who are directors 
not standing for reelection. This compositional requirement, which 
NASDAQ OMX's predecessor, The Nasdaq Stock Market, Inc., originally 
adopted while it was a wholly owned subsidiary of the National 
Association of Securities Dealers (``NASD''), is highly unusual for a 
public company such as NASDAQ OMX. In light of NASDAQ OMX's continued 
evolution into a public company with global operations, NASDAQ OMX 
believes that it is appropriate to adopt a standard nominating 
committee structure in which the committee is composed exclusively of 
independent directors. Under the amended bylaw, the nominating 
committee shall consist of four or five directors, each of whom shall 
be an independent director within the meaning the rules of the NASDAQ 
Exchange. In addition, the number of Non-Industry Directors (i.e., 
Directors without material ties to the securities industry) must equal 
or exceed the number of Industry Directors, and at least two members of 
the committee must be Public Directors (i.e., directors who have no 
material business relationship with a broker or dealer, NASDAQ OMX, or 
its affiliates, or FINRA).
     Article VIII is being amended to provide that NASDAQ OMX 
shall provide indemnification against liability, advancement of 
expenses, and the power to purchase and maintain insurance on behalf of 
persons serving as a director, officer, or employee of any wholly owned 
subsidiary of NASDAQ OMX to the same extent as indemnification, 
advancement of expenses, and the power to maintain insurance is 
provided for directors, officers, or employees of NASDAQ OMX. Thus, for 
example, a director of one of NASDAQ OMX's U.S. or Nordic exchanges 
would be entitled to indemnification (and advancement of expenses) by 
NASDAQ OMX if made a party to a lawsuit to the same extent as a 
director of NASDAQ OMX. Similarly, the discretionary authority of 
NASDAQ OMX under Section 8.1(c) of the By-Laws to provide 
indemnification to persons serving as an agent of NASDAQ OMX is being 
extended to persons serving as an agent of any wholly owned subsidiary 
of NASDAQ OMX. Article VIII is also being amended to clarify that any 
repeal, modification, or amendment of, or adoption of any provision 
inconsistent with the indemnification and advancement of expenses 
provided for in Article VIII will not adversely affect the right of any 
person covered by the provision if the act or omission that any 
proceeding arises out of or is related to had occurred prior to the 
time for the repeal, amendment, adoption, or modification.
     Article IX is being amended to modernize the language of 
the provisions dealing with capital stock to reflect possible 
participation in the Direct Registration System (``DRS''). DRS provides 
for the electronic registration of eligible securities in an investor's 
name on the books of the transfer agent or corporation eliminating the 
need for physical stock certificates or shares held in book-entry form 
by the beneficial owner's broker. Although under the Delaware General 
Corporation Law, NASDAQ OMX can authorize participation in the program 
through a resolution, the various amendments to Article IX track more 
closely the language of Section 158 of the Delaware General Corporation 
Law, as recently revised, to explicitly reference the possibility of 
capital stock in uncertificated form. The amendments, however, do not 
require NASDAQ OMX to participate in DRS or to eliminate stock 
certificates.
     Article XII is being amended to conform certain of its 
provisions more closely to corresponding provisions in the Amended and 
Restated By-Laws of NYSE Euronext (``NYSE Euronext By-Laws''). Article 
XII contains provisions that govern the relationship between NASDAQ OMX 
and each of its subsidiaries that is a self-regulatory organization. 
First, the article requires NASDAQ OMX's ``[d]irectors, officers, 
employees, and agents'' (emphasis added) to give due regard to the 
preservation of the independence of each self-regulatory subsidiary, 
not to take any actions that would interfere with each self-regulatory 
subsidiary's regulatory functions, to cooperate with the Commission, to 
consent to U.S. jurisdiction, and to consent in writing to the 
applicability of these provisions. Corresponding provisions of Articles 
VII, VIII, and IX of the NYSE Euronext By-Laws, however, do not include 
the ambiguous and potentially expansive word ``agent.'' NASDAQ OMX is 
concerned that a broad construction of the term to include not only 
parties with which it establishes an explicit contractual agency 
relationship but also other service providers such as law firms and 
financial advisors that may act on NASDAQ OMX's behalf on certain 
occasions may deter some parties from providing services to NASDAQ OMX. 
However, in lieu of the requirement to obtain specific consents from 
agents, NASDAQ OMX proposes to adopt a provision from the NYSE Euronext 
By-Laws providing that NASDAQ OMX shall comply with the U.S. Federal 
securities laws and the

[[Page 42713]]

rules and regulations thereunder and shall cooperate with the 
Commission and the self-regulatory subsidiaries pursuant to and to the 
extent of their respective regulatory authority and shall take 
reasonable steps necessary to cause its agents to cooperate with the 
Commission and where applicable with the self-regulatory subsidiaries 
pursuant to their regulatory authority. Second, Article XII provides 
that NASDAQ OMX and its officers, directors, and employees \7\ agree to 
maintain an agent for service of process in the U.S. By contrast, 
Article VII of the NYSE Euronext By-Laws includes a statement that 
officers, directors and employees shall be deemed to agree that the 
Corporation may serve as the U.S. agent for service of process. 
Accordingly, NASDAQ OMX proposes to adopt this more self-executing 
version. Finally, while the NASDAQ OMX By-Laws provide that NASDAQ OMX 
shall take such action as is necessary to insure that officers, 
directors and employees consent in writing to the applicability of 
these provisions, Article IX of the NYSE Euronext By-Laws requires only 
that NYSE Euronext take reasonable steps necessary to cause officers, 
directors, and employees to consent. Although NASDAQ OMX has begun the 
process of collecting written consents from current officers, 
directors, and employees, it believes that the current language may be 
unreasonably demanding as applied to a multinational exchange operator 
with over 2,000 employees in over 20 countries. Accordingly, NASDAQ OMX 
proposes to adopt a version of NYSE Euronext's language, which will 
require reasonable steps to obtain consent from both current officers, 
directors, and employees, as well as prospective officers, directors, 
and employees prior to their acceptance of a position.
---------------------------------------------------------------------------

    \7\ The existing reference to ``agents'' in the sentence is 
proposed to be deleted.
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2. Statutory Basis
    The proposed rule change is consistent with provisions of Section 
17A of the Act \8\ in general and with Section 17A(b)(3)(A) of the 
Act,\9\ in particular, because it is designed to ensure that BSECC is 
so organized and has the capacity to be able to facilitate the prompt 
and accurate clearance and settlement of securities transactions and to 
enforce compliance by its participants with the rules of the clearing 
agency. The proposed changes will enhance the clarity of NASDAQ OMX's 
governance documents and improve its Board committee structures.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78q-1.
    \9\ 15 U.S.C. 78q-1(b)(3)(A).
---------------------------------------------------------------------------

(B) Self-Regulatory Organization's Statement on Burden on Competition

    BSECC does not believe that the proposed rule change will result in 
any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act, as amended.

(C) Self-Regulatory Organization's Statement on Comments on the 
Proposed Rule Change Received From Members, Participants, or Others

    Written comments were neither solicited nor received.

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) 
becomes 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 \10\ and Rule 19b-
4(f)(6) thereunder.\11\
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative for 30 days after the date of filing. However, 
Rule 19b-4(f)(6)(iii) permits the Commission to designate a shorter 
time if such action is consistent with the protection of investors and 
the public interest. BSECC requests that the Commission waive the 30-
day pre-operative waiting period contained in Rule 19b-
4(f)(6)(iii).\12\ Waiver of the waiting period will ensure that NASDAQ 
OMX is able to implement the proposed rule change, which has already 
been approved as a rule of the NASDAQ Exchange, without undue delay.
---------------------------------------------------------------------------

    \12\ 17 CFR 240.19b-4(f)(6)(iii).
---------------------------------------------------------------------------

    The Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public 
interest.\13\ The Commission notes the proposal is substantively 
identical to proposals that were recently approved by the Commission 
and does not raise any new regulatory issues.\14\ For these reasons, 
the Commission designates the proposed rule change as operative upon 
filing.
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    \13\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
    \14\ See infra note 3.
---------------------------------------------------------------------------

    At any time within 60 days of the filing of the proposed rule 
change, the Commission may summarily abrogate such rule change if it 
appears to the Commission that such action is necessary or appropriate 
in the public interest, for the protection of investors, or otherwise 
in furtherance of the purposes of the Act.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-BSECC-2009-04 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-BSECC-2009-04. 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 (https://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 such filings also will be available for 
inspection and copying at the principal office of BSECC. All comments 
received will be posted without change; the Commission does not edit 
personal identifying information from submissions. You

[[Page 42714]]

should submit only information that you wish to make available 
publicly. All submissions should refer to File Number SR-BSECC-2009-04 
and should be submitted on or before September 14, 2009.

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E9-20193 Filed 8-21-09; 8:45 am]
BILLING CODE 8010-01-P
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