Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing of a Proposed Rule Change Relating to Bylaw and Related Rule Changes, 7610-7614 [2011-2971]

Download as PDF 7610 Federal Register / Vol. 76, No. 28 / Thursday, February 10, 2011 / Notices 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 the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–EDGA– 2011–02 and should be submitted on or before March 3, 2011. provide that the Board of Directors may establish an Advisory Board, (iii) amend its Bylaws to eliminate its Audit Committee, and (iv) amend its Bylaws to conform the composition requirements of its Board of Directors and Executive Committee to the composition requirements of the Board of Directors and Executive Committee of its affiliate C2 Options Exchange, Incorporated (‘‘C2’’). The text of the proposed amendments to CBOE’s Bylaws and the proposed amendments to CBOE’s rules is available on CBOE’s Web site (http:// www.cboe.org/Legal), at CBOE’s Office of the Secretary, on the Commission’s Web site at http://www.sec.gov., and at the Commission’s Public Reference Room. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.11 Cathy H. Ahn, Deputy Secretary. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change [FR Doc. 2011–2923 Filed 2–9–11; 8:45 am] In its filing with the Commission, CBOE 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. CBOE has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–63844; File No. SR–CBOE– 2011–010] Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing of a Proposed Rule Change Relating to Bylaw and Related Rule Changes A. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change February 4, 2011. jdjones on DSK8KYBLC1PROD with NOTICES Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the ‘‘Act’’ or ‘‘Exchange Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on January 27, 2011, Chicago Board Options Exchange, Incorporated (‘‘CBOE’’) filed with the Securities and Exchange Commission (‘‘Commission’’ or ‘‘SEC’’) the proposed rule change as described in Items I, and II below, which Items have been prepared by CBOE. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 1. Purpose I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change CBOE proposes to (i) Amend its Bylaws and rules to eliminate its office of Vice Chairman of the Board, (ii) amend its Bylaws to eliminate its Trading Advisory Committee and In light of CBOE’s demutualization and conversion from a membership organization to a stock corporation owned by a public holding company in June 2010, and based on the Exchange’s experience since that time in operating in that form, the Exchange believes that it is no longer necessary to provide for an office of Vice Chairman of the Board (which is an office held by one of the Exchange’s Industry Directors). Historically, the Vice Chairman’s 11 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 VerDate Mar<15>2010 15:10 Feb 09, 2011 Jkt 223001 The purpose of this proposed rule change is to eliminate the office of CBOE Vice Chairman of the Board, to eliminate the CBOE Trading Advisory Committee and allow for a CBOE Advisory Board, to eliminate the CBOE Audit Committee, and to conform the composition requirements for the CBOE Board of Directors and CBOE Executive Committee to the corollary C2 composition requirements. (a) Elimination of Office of Vice Chairman of the Board PO 00000 Frm 00080 Fmt 4703 Sfmt 4703 primary functions were to take a lead role in facilitating communication between the Exchange and its membership, including lessor members that owned memberships and leased them to trading members, and in coordinating the activities of member committees. The role of the Vice Chairman has been significantly reduced since the Exchange has changed its structure. For example, the Exchange no longer has lessor members (as they became stockholders of CBOE’s holding company, CBOE Holdings, Inc. (‘‘CBOE Holdings’’), in CBOE’s restructuring), the Exchange’s trading members are now Trading Permit Holders, and there are far fewer Trading Permit Holder committees than in the past. Additionally, the Exchange believes that it will continue to be able to obtain input from Trading Permit Holders through, among other things, direct communication with individual Trading Permit Holders and the ability to establish Trading Permit Holder committees (even if fewer than in the past) and an Advisory Board (as proposed by this rule filing). The Exchange Bylaws will also continue to require that at least 30% of the directors on the CBOE Board of Directors must be Industry Directors and that at least 20% of CBOE’s directors must be Representative Directors. Representative Directors are Industry Directors nominated (or otherwise selected through a petition process) by the Industry-Director Subcommittee of the CBOE Nominating and Governance Committee. The Industry-Director Subcommittee is composed of all of the Industry Directors serving on the Nominating and Governance Committee. CBOE Trading Permit Holders may nominate alternative Representative Director candidates to those nominated by the Industry Director Subcommittee, in which case a Run-off Election is held in which CBOE’s Trading Permit Holders vote to determine which candidates will be elected to the CBOE Board of Directors to serve as Representative Directors. Thus, the Exchange will continue to provide for the fair representation of CBOE Trading Permit Holders in the selection of directors and the administration of the Exchange consistent with Section 6(b)(3) of the Act.3 The specific proposed CBOE Bylaw and rule changes related to the elimination of the office of Vice Chairman of Board include the following changes: 3 15 E:\FR\FM\10FEN1.SGM U.S.C. 78f(b)(3). 10FEN1 jdjones on DSK8KYBLC1PROD with NOTICES Federal Register / Vol. 76, No. 28 / Thursday, February 10, 2011 / Notices Section 3.7 of the Bylaws, which describes the selection, the term, and roles of the Vice Chairman, is proposed to be deleted. The current roles of the Vice Chairman listed in Section 3.7 of the Bylaws (and how those roles will be performed going forward) are (i) Presiding over meetings of the Board of Directors in the event that the Chairman of the Board is absent or unable to do so (which will be addressed by Section 3.8(a) of the Bylaws to be re-numbered from Section 3.9(a), which is proposed to be amended to eliminate references to the Vice Chairman and which will continue to allow the Board to designate an Acting Chairman of the Board in the absence or inability to act of the Chairman, which could be the Lead Director or another director); (ii) serving as chair of the Trading Advisory Committee (which Committee is proposed to be eliminated by this rule filing); (iii) unless otherwise provided in the rules or by Board resolution, appointing, subject to Board approval, the individuals to serve on Trading Permit Holder committees (which will be addressed by Section 4.1(b) of the Bylaws, which is proposed to be amended to vest this appointment authority, also subject to Board approval of such appointments, in the Chief Executive Officer or his or her designee); and (iv) exercising such other powers and performing such other duties as are delegated to the Vice Chairman by the Board (which is not an item that needs to be addressed since there are no such other powers of duties that the Board has delegated to the Vice Chairman). Two additional current roles of the Vice Chairman are set forth in Section 5.3 of the Bylaws, which is also proposed to be deleted. Those roles are presiding at meetings of Trading Permit Holders and coordinating the activities of all Trading Permit Holder committees. The Exchange’s expectation is that CBOE management will perform these functions. Section 2.3 of the Bylaws is proposed to be amended to delete the Vice Chairman as one of the parties that can call a special meeting of the stockholders. This Section will continue to permit special meetings of the stockholders to be called by either the Chairman of the Board or a majority of the Board. Section 3.9(b) of the Bylaws is proposed to be re-numbered as Section 3.8(b) and to be amended to delete how the office of Vice Chairman is filled in the event of a vacancy in that office. Section 3.12 of the Bylaws is proposed to be re-numbered as Section 3.11 and to be amended to delete the VerDate Mar<15>2010 15:10 Feb 09, 2011 Jkt 223001 Vice Chairman as one of the parties that can call a special meeting of the Board of Directors. This Section will continue to permit special meetings of the Board to be called by either the Chairman of the Board or the Secretary upon the written request of any four directors. In a related change, Section 4.1(b) of the Bylaws is proposed to be amended to vest the authority to remove a member of an Exchange committee (i.e., a non-Board committee) in the Chief Executive Officer or his or her designee, subject to the approval of the Board. This authority was previously vested with the Board itself. The Exchange is proposing to vest this authority with the Chief Executive Officer or his or her designee in order to have consistency with the proposed Exchange committee appointment authority which, as is described above, is also proposed to be vested in the Chief Executive Officer or his or her designee, subject to the approval of the Board. Section 4.2 of the Bylaws is proposed to be amended to delete the Vice Chairman as one of the required members of the CBOE Executive Committee. Section 5.1 of the Bylaws is proposed to be amended to delete the Vice Chairman as one of the required officers of the Exchange. CBOE Rule 2.1(a) is proposed to be amended to vest the appointment and removal authority with respect to Exchange committees in the Chief Executive Officer or his or her designee, subject to the approval of the Board, consistent with the proposed Bylaw changes described above. Currently, Rule 2.1(a) provides that the Vice Chairman possesses this appointment authority, subject to the approval of the Board (except with respect to the Business Conduct Committee (‘‘BCC’’)); that the President possesses this appointment authority, subject to the approval of the Board, with respect to the BCC; and that the Board possesses the removal authority. The President was vested with the appointment authority for the BCC, subject to the approval of the Board, so that this authority would be exercised by an individual that is not subject to the disciplinary jurisdiction of the BCC. The Chief Executive Officer, like the President, is part of Exchange management and is not a Trading Permit Holder or an associated person of a Trading Permit Holder and is not subject to the disciplinary jurisdiction of the BCC. The Exchange represents that any designee of the Chief Executive Officer designated to appoint the members of the BCC, subject to the approval of the Board, would also not be PO 00000 Frm 00081 Fmt 4703 Sfmt 4703 7611 a Trading Permit Holder or an associated person of a Trading Permit Holder and would also not be subject to the disciplinary jurisdiction of the BCC. CBOE Rule 16.1 is proposed to be amended to vest the President with summary suspension authority under the Rule instead of the Vice Chairman. The Chairman of the Board would also continue to retain that authority. Also, the title of Chapter XVI of the Exchange’s rules is proposed to be shortened from ‘‘Summary Suspension by Chairman of the Board or Vice Chairman of the Board’’ to ‘‘Summary Suspension’’ in order to eliminate the reference to the Vice Chairman. (b) Elimination of Trading Advisory Committee and Addition of Advisory Board Provision Section 4.7 of the Bylaws currently provides for a Trading Advisory Committee to advise CBOE’s Office of the Chairman regarding matters of interest to Trading Permit Holders. Section 4.7 provides that the Board of Directors sets the number of members on the Trading Advisory Committee, that the majority of the members of the Committee shall be involved in trading either directly or through their firms, that the Chairman of the Committee is the Vice Chairman of the Board, and that the Vice Chairman appoints the other members of the Committee with the approval of the Board. In place of a Trading Advisory Committee, the Exchange proposes to amend the Bylaws to delete Section 4.7 of the Bylaws as well as a reference to the Trading Advisory Committee in Section 4.1(b) of the Bylaws and to provide in new proposed Section 6.1 of the Bylaws that the Board of Directors may establish an Advisory Board which shall advise the Office of the Chairman regarding matters of interest to Trading Permit Holders. The Exchange believes that the term ‘‘Advisory Board’’ better reflects the important function served by such a body in providing a vehicle for Exchange management to receive advice from the perspective of Trading Permit Holders and regarding matters that impact Trading Permit Holders. Under proposed Section 6.1 of the Bylaws, it is proposed that the Board of Directors shall determine the number of members of an Advisory Board, that the Chief Executive Officer or his or her designee shall serve as the Chairman of an Advisory Board, and that the CBOE Nominating and Governance Committee shall recommend the members of an Advisory Board for approval by the Board of Directors. The Advisory Board would be completely advisory in nature and not E:\FR\FM\10FEN1.SGM 10FEN1 7612 Federal Register / Vol. 76, No. 28 / Thursday, February 10, 2011 / Notices jdjones on DSK8KYBLC1PROD with NOTICES be vested with any Exchange decisionmaking authority or other authority to act on behalf of the Exchange. Although proposed Section 6.1 of the Bylaws provides the Board of Directors with the discretion of whether or not to put in place an Advisory Board, it is the current intention of the Board of Directors to establish an Advisory Board. (c) Elimination of Exchange Audit Committee The Exchange proposes to eliminate its Audit Committee because its functions are duplicative of the functions of the Audit Committee of its parent company, CBOE Holdings. Under its charter, the CBOE Holdings Audit Committee has broad authority to assist the CBOE Holdings Board of Directors in discharging its responsibilities relating to, among other things, (i) The qualifications, engagement, and oversight of CBOE Holdings’ independent auditor, (ii) CBOE Holdings’ financial statements and disclosure matters, (iii) CBOE Holdings’ internal audit function and internal controls, and (iv) CBOE Holdings’ oversight and risk management, including compliance with legal and regulatory requirements. Because CBOE Holdings’ financial statements are prepared on a consolidated basis that includes the financial results of CBOE Holdings’ subsidiaries, including CBOE, the CBOE Holdings Audit Committee’s purview necessarily includes CBOE. The CBOE Holdings Audit Committee is composed of at least three CBOE Holdings directors, all of whom must be independent within the meaning given to that term in the CBOE Holdings Bylaws and Corporate Governance Guidelines and Rule 10A–3 under the Act.4 All CBOE Holdings Audit Committee members must be financially literate (or become financially literate within a reasonable period of time after appointment to the Committee), and at least one member of the Committee must be an ‘‘audit committee financial expert’’ as defined by the SEC. By contrast, the CBOE Audit Committee has a more limited role, focused solely on CBOE. Under its charter, the primary functions of the CBOE Audit Committee are focused on (i) CBOE’s financial statements and disclosure matters and (ii) CBOE’s oversight and risk management, including compliance with legal and regulatory requirements, in each case, only to the extent required in connection with CBOE’s discharge of its 4 17 obligations as a self-regulatory organization. However, to the extent that the CBOE Audit Committee reviews financial statements and disclosure matters, its activities are duplicative of the activities of the CBOE Holdings Audit Committee, which is also charged with review of financial statements and disclosure matters. Similarly, the CBOE Holdings Audit Committee has general responsibility for oversight and risk management, including compliance with legal and regulatory requirements, for CBOE Holdings and all of its subsidiaries, including CBOE. Thus, the responsibilities of the CBOE Audit Committee are fully duplicated by the responsibilities of the CBOE Holdings Audit Committee. Accordingly, CBOE is proposing to delete Section 4.3 of the CBOE Bylaws which provides for the CBOE Audit Committee and to delete a reference to the CBOE Audit Committee in Section 4.1(a) of the CBOE Bylaws (which lists the required CBOE Board committees). Although the CBOE Holdings Audit Committee has and will continue to have overall responsibilities with respect to the internal audit function, the CBOE Board of Directors will still maintain its own independent oversight over the internal audit function with respect to CBOE regulatory functions through the CBOE Regulatory Oversight Committee. Specifically, upon elimination of the CBOE Audit Committee, the charter of the CBOE Regulatory Oversight Committee will be amended to provide that the Regulatory Oversight Committee will review all internal audits relating to CBOE’s regulatory functions and that the Regulatory Oversight Committee will have the authority to review the internal audit plan with respect to CBOE’s regulatory functions and to request at any time that CBOE’s internal auditor conduct an audit relating to those functions. These changes are in addition to the current CBOE Regulatory Oversight Committee charter provision which provides that the Regulatory Oversight Committee shall meet regularly with CBOE’s internal auditor regarding regulatory functions and are consistent with the Regulatory Oversight Committee’s existing practice of reviewing internal audits of CBOE’s regulatory functions. CBOE believes that its proposal to eliminate its Audit Committee is substantially similar to prior actions by other securities exchanges with parent CFR 240.10A–3. VerDate Mar<15>2010 15:10 Feb 09, 2011 Jkt 223001 PO 00000 Frm 00082 Fmt 4703 Sfmt 4703 company audit committees to eliminate their exchange-level audit committees.5 (d) Composition Requirements for Board of Directors and Executive Committee CBOE proposes to amend its Bylaws to conform the composition requirements of its Board of Directors and Executive Committee to the composition requirements of the Board of Directors and Executive Committee of C2. Section 3.1 of the CBOE Bylaws currently provides, in pertinent part, that in no event shall the number of Non-Industry Directors on the CBOE Board of Directors constitute less than a majority of the members of the Board. Consistent with Section 3.1 of the C2 Bylaws, CBOE proposes to change this provision to provide that in no event shall the number of Non-Industry Directors on the CBOE Board constitute less than the number of Industry Directors on the Board (excluding the Chief Executive Officer from the calculation of Industry Directors for such purpose). Similarly, Section 4.2 of the CBOE Bylaws currently provides, in pertinent part, that at all times the majority of the directors serving on the CBOE Executive Committee must be Non-Industry Directors. Like with the proposed change to the composition requirements for the CBOE Board of Directors and consistent with Section 4.2 of the C2 Bylaws, CBOE proposes to change this provision to provide that in no event shall the number of Non-Industry Directors constitute less than the number of Industry Directors serving on the CBOE Executive Committee (excluding the Chief Executive Officer from the calculation of Industry Directors for such purpose). Accordingly, following this proposed change to the CBOE Executive Committee composition requirements and the proposed elimination of the Vice Chairman, Section 4.2 of the CBOE Bylaws will require that the Executive Committee include the Chairman of the Board, the Chief Executive Officer (if a director), the Lead Director (if any), at least one Representative Director, and such other number of directors that the Board deems appropriate, provided that in no event shall the number of NonIndustry Directors constitute less than the number of Industry Directors serving on the Executive Committee (excluding the Chief Executive Officer from the 5 See, e.g., Exchange Act Release No. 60276 (July 9, 2009), 74 FR 34840 (July 17, 2009) (File No. NASDAQ–2009–042). E:\FR\FM\10FEN1.SGM 10FEN1 Federal Register / Vol. 76, No. 28 / Thursday, February 10, 2011 / Notices calculation of Industry Directors for such purpose).6 CBOE believes that having the same composition requirements for CBOE Holdings’ two affiliated securities exchange subsidiaries (CBOE and C2) will promote consistency and efficiency. CBOE and C2 currently have the same individuals serving on the CBOE and C2 Boards and the CBOE and C2 Executive Committees. This approach simplifies the process of scheduling and conducting meetings and allows the Boards and Executive Committees of both exchanges to operate most efficiently. To the extent that CBOE and C2 desire to continue this approach in the future, these proposed changes better enable CBOE and C2 to do so. Also, in addition to being consistent with C2’s corollary composition requirements for its Board and Executive Committee, CBOE believes that the proposed CBOE Board and Executive Committee composition requirement changes are consistent with the composition requirements of the Board of Directors and Executive Committee of NASDAQ Stock Market LLC.7 (e) Miscellaneous Non-Substantive Bylaw and Rule Changes jdjones on DSK8KYBLC1PROD with NOTICES In addition to the changes set forth above, the Exchange proposes to make the following non-substantive changes to its Bylaws and rules. First, the Exchange proposes to amend the title of the Bylaws from ‘‘Amended and Restated Bylaws of Chicago Board Options Exchange, Incorporated’’ to ‘‘Second Amended and Restated Bylaws of Chicago Board Options Exchange, Incorporated’’ since the Exchange is making the Bylaw changes proposed by this rule filing 6 CBOE’s Executive Committee generally does not make a decision unless there is a need for a CBOE Board-level decision between CBOE Board meetings due to the time sensitivity of the matter. In addition, in situations when the Executive Committee does make a decision between CBOE Board meetings, the CBOE Board is generally aware ahead of time of the potential that the Executive Committee may need to make the decision. The CBOE Board is fully informed of any decision made by the Executive Committee at its next meeting and can always decide to review that decision and take a different action. CBOE previously noted the foregoing to the Commission (see Footnote 87 of Exchange Act Release No. 62158 (May 24, 2010), 75 FR 30082 (May 28, 2010) (SR–CBOE–2008–88)) and it continues to be the case. 7 See Article I(l), Section 2(a) of Article III, and Section 5(a) of Article III of the By-Laws of the NASDAQ Stock Market LLC. See also Exchange Act Release No. 44280 (May 8, 2001), 66 FR 26892 (May 15, 2001) (SR–NASD–2001–06) (approving amendment to NASD By-Laws to allow for the treatment of staff Governors as ‘‘neutral’’ for purposes of Industry/Non-Industry balancing on the NASD Board of Governors). VerDate Mar<15>2010 15:10 Feb 09, 2011 Jkt 223001 through as second amendment and restatement of its Bylaws. Second, the Exchange is proposing to re-number various sections of the Bylaws to eliminate gaps in the numbering of the Bylaw sections resulting from the proposed deletion of certain of the Bylaw sections as described above. Third, the Exchange proposes to make a clarifying change to Section 3.2 of the Bylaws to change a reference to the Industry-Director Subcommittee of the Nominating and Governance Committee from ‘‘committee’’ to ‘‘Subcommittee.’’ Fourth, the Exchange is proposing to make a clarifying change to CBOE Rule 2.1 in addition to the changes to Rule 2.1 discussed above to make clear that the term of an Exchange committee member’s appointment continues until the first regular meeting of the Board of Directors of the next calendar year and until that committee member’s successor is appointed or that committee member’s earlier death, resignation, or removal. In other words, if the Board of Directors does not appoint a successor to the committee member at the first regular Board meeting of the year, the committee member would continue in office until a successor is appointed or the person’s earlier death, resignation, or removal. (f) Effectiveness of Changes The Exchange proposes to make effective the proposed Bylaw and rule changes related to the elimination of the Vice Chairman of the Board that are described in subsection (a)(1) of Item 3 of this rule filing on the date of the annual election of CBOE directors in 2011 (which is anticipated to occur in May 2011). The Exchange proposes to make effective these changes at that time because the current term of the Vice Chairman expires on that date and this will permit the current Vice Chairman to serve out his current term of office. The Exchange proposes to make effective all of the other changes proposed by this rule filing at the time that the Commission approves this rule filing. These changes include those relating to the elimination of the Trading Advisory Committee and the addition of an Advisory Board provision, to the elimination of the CBOE Audit Committee, and to the composition requirements for the Board of Directors and Executive Committee and they also include the miscellaneous non-substantive Bylaw changes (all of which are described in subsections (a)(2)–(a)(5) of Item 3 of this rule filing). PO 00000 Frm 00083 Fmt 4703 Sfmt 4703 7613 2. Statutory Basis For the reasons set forth above, CBOE believes that this filing is consistent with Section 6(b) of the Act,8 in general, and furthers the objectives of Section 6(b)(1) of the Act 9 and Section 6(b)(5) of the Act 10 in particular, in that (i) it enables CBOE to be so organized as to have the capacity to be able to carry out the purposes of the Act and to comply, and to enforce compliance by its Trading Permit Holders and persons associated with its Trading Permit Holders, with the provisions of the Act, the rules and regulations thereunder, and the rules of CBOE and (ii) to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to remove impediments to, and perfect the mechanism of, a free and open market and, in general, to protect investors and the public interest. Specifically, the proposed changes will streamline, make more efficient, and improve CBOE’s governance structure (i) By eliminating the position of Vice Chairman of the Board which CBOE no longer believes is necessary; (ii) by eliminating the Trading Advisory Committee and adding a Bylaw provision that the Board of Directors may establish an Advisory Board, which CBOE views as a useful vehicle that the Board may utilize to receive input from the perspective of Trading Permit Holders and with respect to matters of interest to Trading Permit Holders; (iii) by eliminating the CBOE Audit Committee, which CBOE believes is duplicative of the CBOE Holdings Audit Committee and which change will allow CBOE directors to focus their attention on matters falling directly within the purview of the CBOE Board of Directors; and (iv) by conforming the composition requirements of the CBOE Board of Directors and CBOE Executive Committee to the corollary C2 composition requirements, which CBOE believes will promote consistency and efficiency and better enable CBOE and C2 to have the same Board compositions if desired. B. Self-Regulatory Organization’s Statement on Burden on Competition CBOE does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. 8 15 U.S.C. 78f(b). U.S.C. 78f(b)(1). 10 15 U.S.C. 78f(b)(5). 9 15 E:\FR\FM\10FEN1.SGM 10FEN1 7614 Federal Register / Vol. 76, No. 28 / Thursday, February 10, 2011 / Notices C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were solicited or received with respect to the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 45 days of the date of publication of this notice in the Federal Register or within such longer period (i) as the Commission may designate up to 90 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the self-regulatory organization consents, the Commission will: (A) By order approve or disapprove such proposed rule change, or (B) Institute proceedings to determine whether the proposed rule change should be disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an e-mail to rulecomments@sec.gov. Please include File Number SR–CBOE–2011–010 on the subject line. 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 a.m. and 3 p.m. Copies of such filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File No. SR–CBOE– 2011–010 and should be submitted on or before March 3, 2011. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.11 Cathy H. Ahn, Deputy Secretary. [FR Doc. 2011–2971 Filed 2–9–11; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–63842; File No. SR–CBOE– 2011–009] Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Related to Stock-Option Orders February 4, 2011. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the • Send paper comments in triplicate ‘‘Act’’),1 and Rule 19b-4 thereunder,2 to Elizabeth M. Murphy, Secretary, notice is hereby given that on January Securities and Exchange Commission, 27, 2011, the Chicago Board Options 100 F Street, NE., Washington, DC Exchange, Incorporated (‘‘Exchange’’ or 20549–1090. ‘‘CBOE’’) filed with the Securities and All submissions should refer to File Exchange Commission (the Number SR–CBOE–2011–010. This file ‘‘Commission’’) the proposed rule number should be included on the change as described in Items I and II subject line if e-mail is used. To help the below, which Items have been prepared Commission process and review your by the Exchange. CBOE has submitted comments more efficiently, please use the proposed rule change under Section only one method. The Commission will 19(b)(3)(A) of the Act 3 and Rule 19b– post all comments on the Commission’s 4(f)(6) thereunder,4 which renders the Internet Web site (http://www.sec.gov/ proposal effective upon filing with the rules/sro.shtml). Copies of the Commission. The Commission is submission, all subsequent publishing this notice to solicit amendments, all written statements with respect to the proposed rule 11 17 CFR 200.30–3(a)(12). change that are filed with the 1 15 U.S.C. 78s(b)(1). Commission, and all written 2 17 CFR 240.19b–4. 3 15 U.S.C. 78s(b)(3)(A). communications relating to the 4 17 CFR 240.19b–4(f)(6). proposed rule change between the jdjones on DSK8KYBLC1PROD with NOTICES Paper Comments VerDate Mar<15>2010 15:10 Feb 09, 2011 Jkt 223001 PO 00000 Frm 00084 Fmt 4703 Sfmt 4703 comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange is proposing to amend its complex order request for response (‘‘RFR’’) auction (‘‘COA’’) as it applies to stock-option orders to incorporate certain order eligibility parameters. The text of the proposed rule change is available on the Exchange’s Web site (http://www.cboe.org/Legal), at the Exchange’s Office of the Secretary, and at the Commission. 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 Exchange 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 Prior to routing to the complex order book or once on PAR, eligible complex orders may be subjected to an automated COA process where orders are exposed for price improvement under Rule 6.53C(d), Process for Complex Order RFR Auction. Generally, if a market order cannot be filled in whole or in a permissible ratio at the conclusion of COA, then the order (or any remaining balance) will route to PAR for manual handling. However, the Exchange has the ability to vary this process for market stock-option orders that contain one or more option leg(s) under Rule 6.53C.06(d). Specifically, instead of routing to PAR for manual handling, the Exchange may determine on a class-by-class basis that any remaining balance of the option leg(s) of a market stock-option order will automatically route to CBOE’s Hybrid System for processing as a simple market order(s) consistent with CBOE’s order execution rules and any remaining balance of the stock leg will automatically route to the CBOE Stock Exchange (‘‘CBSX’’), CBOE’s stock facility, for processing as a simple E:\FR\FM\10FEN1.SGM 10FEN1

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[Federal Register Volume 76, Number 28 (Thursday, February 10, 2011)]
[Notices]
[Pages 7610-7614]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-2971]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-63844; File No. SR-CBOE-2011-010]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing of a Proposed Rule Change Relating to 
Bylaw and Related Rule Changes

February 4, 2011.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act'' or ``Exchange Act''),\1\ and Rule 19b-4 thereunder,\2\ 
notice is hereby given that on January 27, 2011, Chicago Board Options 
Exchange, Incorporated (``CBOE'') filed with the Securities and 
Exchange Commission (``Commission'' or ``SEC'') the proposed rule 
change as described in Items I, and II below, which Items have been 
prepared by CBOE. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    CBOE proposes to (i) Amend its Bylaws and rules to eliminate its 
office of Vice Chairman of the Board, (ii) amend its Bylaws to 
eliminate its Trading Advisory Committee and provide that the Board of 
Directors may establish an Advisory Board, (iii) amend its Bylaws to 
eliminate its Audit Committee, and (iv) amend its Bylaws to conform the 
composition requirements of its Board of Directors and Executive 
Committee to the composition requirements of the Board of Directors and 
Executive Committee of its affiliate C2 Options Exchange, Incorporated 
(``C2'').
    The text of the proposed amendments to CBOE's Bylaws and the 
proposed amendments to CBOE's rules is available on CBOE's Web site 
(http://www.cboe.org/Legal), at CBOE's Office of the Secretary, on the 
Commission's Web site at http://www.sec.gov., 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, CBOE 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. CBOE has prepared summaries, set forth in Sections A, B, 
and C below, of the most significant aspects 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 this proposed rule change is to eliminate the office 
of CBOE Vice Chairman of the Board, to eliminate the CBOE Trading 
Advisory Committee and allow for a CBOE Advisory Board, to eliminate 
the CBOE Audit Committee, and to conform the composition requirements 
for the CBOE Board of Directors and CBOE Executive Committee to the 
corollary C2 composition requirements.
(a) Elimination of Office of Vice Chairman of the Board
    In light of CBOE's demutualization and conversion from a membership 
organization to a stock corporation owned by a public holding company 
in June 2010, and based on the Exchange's experience since that time in 
operating in that form, the Exchange believes that it is no longer 
necessary to provide for an office of Vice Chairman of the Board (which 
is an office held by one of the Exchange's Industry Directors). 
Historically, the Vice Chairman's primary functions were to take a lead 
role in facilitating communication between the Exchange and its 
membership, including lessor members that owned memberships and leased 
them to trading members, and in coordinating the activities of member 
committees. The role of the Vice Chairman has been significantly 
reduced since the Exchange has changed its structure. For example, the 
Exchange no longer has lessor members (as they became stockholders of 
CBOE's holding company, CBOE Holdings, Inc. (``CBOE Holdings''), in 
CBOE's restructuring), the Exchange's trading members are now Trading 
Permit Holders, and there are far fewer Trading Permit Holder 
committees than in the past. Additionally, the Exchange believes that 
it will continue to be able to obtain input from Trading Permit Holders 
through, among other things, direct communication with individual 
Trading Permit Holders and the ability to establish Trading Permit 
Holder committees (even if fewer than in the past) and an Advisory 
Board (as proposed by this rule filing).
    The Exchange Bylaws will also continue to require that at least 30% 
of the directors on the CBOE Board of Directors must be Industry 
Directors and that at least 20% of CBOE's directors must be 
Representative Directors. Representative Directors are Industry 
Directors nominated (or otherwise selected through a petition process) 
by the Industry-Director Subcommittee of the CBOE Nominating and 
Governance Committee. The Industry-Director Subcommittee is composed of 
all of the Industry Directors serving on the Nominating and Governance 
Committee. CBOE Trading Permit Holders may nominate alternative 
Representative Director candidates to those nominated by the Industry 
Director Subcommittee, in which case a Run-off Election is held in 
which CBOE's Trading Permit Holders vote to determine which candidates 
will be elected to the CBOE Board of Directors to serve as 
Representative Directors. Thus, the Exchange will continue to provide 
for the fair representation of CBOE Trading Permit Holders in the 
selection of directors and the administration of the Exchange 
consistent with Section 6(b)(3) of the Act.\3\
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    \3\ 15 U.S.C. 78f(b)(3).
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    The specific proposed CBOE Bylaw and rule changes related to the 
elimination of the office of Vice Chairman of Board include the 
following changes:

[[Page 7611]]

    Section 3.7 of the Bylaws, which describes the selection, the term, 
and roles of the Vice Chairman, is proposed to be deleted. The current 
roles of the Vice Chairman listed in Section 3.7 of the Bylaws (and how 
those roles will be performed going forward) are (i) Presiding over 
meetings of the Board of Directors in the event that the Chairman of 
the Board is absent or unable to do so (which will be addressed by 
Section 3.8(a) of the Bylaws to be re-numbered from Section 3.9(a), 
which is proposed to be amended to eliminate references to the Vice 
Chairman and which will continue to allow the Board to designate an 
Acting Chairman of the Board in the absence or inability to act of the 
Chairman, which could be the Lead Director or another director); (ii) 
serving as chair of the Trading Advisory Committee (which Committee is 
proposed to be eliminated by this rule filing); (iii) unless otherwise 
provided in the rules or by Board resolution, appointing, subject to 
Board approval, the individuals to serve on Trading Permit Holder 
committees (which will be addressed by Section 4.1(b) of the Bylaws, 
which is proposed to be amended to vest this appointment authority, 
also subject to Board approval of such appointments, in the Chief 
Executive Officer or his or her designee); and (iv) exercising such 
other powers and performing such other duties as are delegated to the 
Vice Chairman by the Board (which is not an item that needs to be 
addressed since there are no such other powers of duties that the Board 
has delegated to the Vice Chairman).
    Two additional current roles of the Vice Chairman are set forth in 
Section 5.3 of the Bylaws, which is also proposed to be deleted. Those 
roles are presiding at meetings of Trading Permit Holders and 
coordinating the activities of all Trading Permit Holder committees. 
The Exchange's expectation is that CBOE management will perform these 
functions.
    Section 2.3 of the Bylaws is proposed to be amended to delete the 
Vice Chairman as one of the parties that can call a special meeting of 
the stockholders. This Section will continue to permit special meetings 
of the stockholders to be called by either the Chairman of the Board or 
a majority of the Board.
    Section 3.9(b) of the Bylaws is proposed to be re-numbered as 
Section 3.8(b) and to be amended to delete how the office of Vice 
Chairman is filled in the event of a vacancy in that office.
    Section 3.12 of the Bylaws is proposed to be re-numbered as Section 
3.11 and to be amended to delete the Vice Chairman as one of the 
parties that can call a special meeting of the Board of Directors. This 
Section will continue to permit special meetings of the Board to be 
called by either the Chairman of the Board or the Secretary upon the 
written request of any four directors.
    In a related change, Section 4.1(b) of the Bylaws is proposed to be 
amended to vest the authority to remove a member of an Exchange 
committee (i.e., a non-Board committee) in the Chief Executive Officer 
or his or her designee, subject to the approval of the Board. This 
authority was previously vested with the Board itself. The Exchange is 
proposing to vest this authority with the Chief Executive Officer or 
his or her designee in order to have consistency with the proposed 
Exchange committee appointment authority which, as is described above, 
is also proposed to be vested in the Chief Executive Officer or his or 
her designee, subject to the approval of the Board.
    Section 4.2 of the Bylaws is proposed to be amended to delete the 
Vice Chairman as one of the required members of the CBOE Executive 
Committee.
    Section 5.1 of the Bylaws is proposed to be amended to delete the 
Vice Chairman as one of the required officers of the Exchange.
    CBOE Rule 2.1(a) is proposed to be amended to vest the appointment 
and removal authority with respect to Exchange committees in the Chief 
Executive Officer or his or her designee, subject to the approval of 
the Board, consistent with the proposed Bylaw changes described above. 
Currently, Rule 2.1(a) provides that the Vice Chairman possesses this 
appointment authority, subject to the approval of the Board (except 
with respect to the Business Conduct Committee (``BCC'')); that the 
President possesses this appointment authority, subject to the approval 
of the Board, with respect to the BCC; and that the Board possesses the 
removal authority. The President was vested with the appointment 
authority for the BCC, subject to the approval of the Board, so that 
this authority would be exercised by an individual that is not subject 
to the disciplinary jurisdiction of the BCC. The Chief Executive 
Officer, like the President, is part of Exchange management and is not 
a Trading Permit Holder or an associated person of a Trading Permit 
Holder and is not subject to the disciplinary jurisdiction of the BCC. 
The Exchange represents that any designee of the Chief Executive 
Officer designated to appoint the members of the BCC, subject to the 
approval of the Board, would also not be a Trading Permit Holder or an 
associated person of a Trading Permit Holder and would also not be 
subject to the disciplinary jurisdiction of the BCC.
    CBOE Rule 16.1 is proposed to be amended to vest the President with 
summary suspension authority under the Rule instead of the Vice 
Chairman. The Chairman of the Board would also continue to retain that 
authority. Also, the title of Chapter XVI of the Exchange's rules is 
proposed to be shortened from ``Summary Suspension by Chairman of the 
Board or Vice Chairman of the Board'' to ``Summary Suspension'' in 
order to eliminate the reference to the Vice Chairman.
(b) Elimination of Trading Advisory Committee and Addition of Advisory 
Board Provision
    Section 4.7 of the Bylaws currently provides for a Trading Advisory 
Committee to advise CBOE's Office of the Chairman regarding matters of 
interest to Trading Permit Holders. Section 4.7 provides that the Board 
of Directors sets the number of members on the Trading Advisory 
Committee, that the majority of the members of the Committee shall be 
involved in trading either directly or through their firms, that the 
Chairman of the Committee is the Vice Chairman of the Board, and that 
the Vice Chairman appoints the other members of the Committee with the 
approval of the Board.
    In place of a Trading Advisory Committee, the Exchange proposes to 
amend the Bylaws to delete Section 4.7 of the Bylaws as well as a 
reference to the Trading Advisory Committee in Section 4.1(b) of the 
Bylaws and to provide in new proposed Section 6.1 of the Bylaws that 
the Board of Directors may establish an Advisory Board which shall 
advise the Office of the Chairman regarding matters of interest to 
Trading Permit Holders. The Exchange believes that the term ``Advisory 
Board'' better reflects the important function served by such a body in 
providing a vehicle for Exchange management to receive advice from the 
perspective of Trading Permit Holders and regarding matters that impact 
Trading Permit Holders.
    Under proposed Section 6.1 of the Bylaws, it is proposed that the 
Board of Directors shall determine the number of members of an Advisory 
Board, that the Chief Executive Officer or his or her designee shall 
serve as the Chairman of an Advisory Board, and that the CBOE 
Nominating and Governance Committee shall recommend the members of an 
Advisory Board for approval by the Board of Directors.
    The Advisory Board would be completely advisory in nature and not

[[Page 7612]]

be vested with any Exchange decision-making authority or other 
authority to act on behalf of the Exchange. Although proposed Section 
6.1 of the Bylaws provides the Board of Directors with the discretion 
of whether or not to put in place an Advisory Board, it is the current 
intention of the Board of Directors to establish an Advisory Board.
(c) Elimination of Exchange Audit Committee
    The Exchange proposes to eliminate its Audit Committee because its 
functions are duplicative of the functions of the Audit Committee of 
its parent company, CBOE Holdings.
    Under its charter, the CBOE Holdings Audit Committee has broad 
authority to assist the CBOE Holdings Board of Directors in discharging 
its responsibilities relating to, among other things, (i) The 
qualifications, engagement, and oversight of CBOE Holdings' independent 
auditor, (ii) CBOE Holdings' financial statements and disclosure 
matters, (iii) CBOE Holdings' internal audit function and internal 
controls, and (iv) CBOE Holdings' oversight and risk management, 
including compliance with legal and regulatory requirements. Because 
CBOE Holdings' financial statements are prepared on a consolidated 
basis that includes the financial results of CBOE Holdings' 
subsidiaries, including CBOE, the CBOE Holdings Audit Committee's 
purview necessarily includes CBOE. The CBOE Holdings Audit Committee is 
composed of at least three CBOE Holdings directors, all of whom must be 
independent within the meaning given to that term in the CBOE Holdings 
Bylaws and Corporate Governance Guidelines and Rule 10A-3 under the 
Act.\4\ All CBOE Holdings Audit Committee members must be financially 
literate (or become financially literate within a reasonable period of 
time after appointment to the Committee), and at least one member of 
the Committee must be an ``audit committee financial expert'' as 
defined by the SEC.
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    \4\ 17 CFR 240.10A-3.
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    By contrast, the CBOE Audit Committee has a more limited role, 
focused solely on CBOE. Under its charter, the primary functions of the 
CBOE Audit Committee are focused on (i) CBOE's financial statements and 
disclosure matters and (ii) CBOE's oversight and risk management, 
including compliance with legal and regulatory requirements, in each 
case, only to the extent required in connection with CBOE's discharge 
of its obligations as a self-regulatory organization. However, to the 
extent that the CBOE Audit Committee reviews financial statements and 
disclosure matters, its activities are duplicative of the activities of 
the CBOE Holdings Audit Committee, which is also charged with review of 
financial statements and disclosure matters. Similarly, the CBOE 
Holdings Audit Committee has general responsibility for oversight and 
risk management, including compliance with legal and regulatory 
requirements, for CBOE Holdings and all of its subsidiaries, including 
CBOE. Thus, the responsibilities of the CBOE Audit Committee are fully 
duplicated by the responsibilities of the CBOE Holdings Audit 
Committee. Accordingly, CBOE is proposing to delete Section 4.3 of the 
CBOE Bylaws which provides for the CBOE Audit Committee and to delete a 
reference to the CBOE Audit Committee in Section 4.1(a) of the CBOE 
Bylaws (which lists the required CBOE Board committees).
    Although the CBOE Holdings Audit Committee has and will continue to 
have overall responsibilities with respect to the internal audit 
function, the CBOE Board of Directors will still maintain its own 
independent oversight over the internal audit function with respect to 
CBOE regulatory functions through the CBOE Regulatory Oversight 
Committee. Specifically, upon elimination of the CBOE Audit Committee, 
the charter of the CBOE Regulatory Oversight Committee will be amended 
to provide that the Regulatory Oversight Committee will review all 
internal audits relating to CBOE's regulatory functions and that the 
Regulatory Oversight Committee will have the authority to review the 
internal audit plan with respect to CBOE's regulatory functions and to 
request at any time that CBOE's internal auditor conduct an audit 
relating to those functions. These changes are in addition to the 
current CBOE Regulatory Oversight Committee charter provision which 
provides that the Regulatory Oversight Committee shall meet regularly 
with CBOE's internal auditor regarding regulatory functions and are 
consistent with the Regulatory Oversight Committee's existing practice 
of reviewing internal audits of CBOE's regulatory functions.
    CBOE believes that its proposal to eliminate its Audit Committee is 
substantially similar to prior actions by other securities exchanges 
with parent company audit committees to eliminate their exchange-level 
audit committees.\5\
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    \5\ See, e.g., Exchange Act Release No. 60276 (July 9, 2009), 74 
FR 34840 (July 17, 2009) (File No. NASDAQ-2009-042).
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(d) Composition Requirements for Board of Directors and Executive 
Committee
    CBOE proposes to amend its Bylaws to conform the composition 
requirements of its Board of Directors and Executive Committee to the 
composition requirements of the Board of Directors and Executive 
Committee of C2.
    Section 3.1 of the CBOE Bylaws currently provides, in pertinent 
part, that in no event shall the number of Non-Industry Directors on 
the CBOE Board of Directors constitute less than a majority of the 
members of the Board. Consistent with Section 3.1 of the C2 Bylaws, 
CBOE proposes to change this provision to provide that in no event 
shall the number of Non-Industry Directors on the CBOE Board constitute 
less than the number of Industry Directors on the Board (excluding the 
Chief Executive Officer from the calculation of Industry Directors for 
such purpose).
    Similarly, Section 4.2 of the CBOE Bylaws currently provides, in 
pertinent part, that at all times the majority of the directors serving 
on the CBOE Executive Committee must be Non-Industry Directors. Like 
with the proposed change to the composition requirements for the CBOE 
Board of Directors and consistent with Section 4.2 of the C2 Bylaws, 
CBOE proposes to change this provision to provide that in no event 
shall the number of Non-Industry Directors constitute less than the 
number of Industry Directors serving on the CBOE Executive Committee 
(excluding the Chief Executive Officer from the calculation of Industry 
Directors for such purpose).
    Accordingly, following this proposed change to the CBOE Executive 
Committee composition requirements and the proposed elimination of the 
Vice Chairman, Section 4.2 of the CBOE Bylaws will require that the 
Executive Committee include the Chairman of the Board, the Chief 
Executive Officer (if a director), the Lead Director (if any), at least 
one Representative Director, and such other number of directors that 
the Board deems appropriate, provided that in no event shall the number 
of Non-Industry Directors constitute less than the number of Industry 
Directors serving on the Executive Committee (excluding the Chief 
Executive Officer from the

[[Page 7613]]

calculation of Industry Directors for such purpose).\6\
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    \6\ CBOE's Executive Committee generally does not make a 
decision unless there is a need for a CBOE Board-level decision 
between CBOE Board meetings due to the time sensitivity of the 
matter. In addition, in situations when the Executive Committee does 
make a decision between CBOE Board meetings, the CBOE Board is 
generally aware ahead of time of the potential that the Executive 
Committee may need to make the decision. The CBOE Board is fully 
informed of any decision made by the Executive Committee at its next 
meeting and can always decide to review that decision and take a 
different action. CBOE previously noted the foregoing to the 
Commission (see Footnote 87 of Exchange Act Release No. 62158 (May 
24, 2010), 75 FR 30082 (May 28, 2010) (SR-CBOE-2008-88)) and it 
continues to be the case.
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    CBOE believes that having the same composition requirements for 
CBOE Holdings' two affiliated securities exchange subsidiaries (CBOE 
and C2) will promote consistency and efficiency. CBOE and C2 currently 
have the same individuals serving on the CBOE and C2 Boards and the 
CBOE and C2 Executive Committees. This approach simplifies the process 
of scheduling and conducting meetings and allows the Boards and 
Executive Committees of both exchanges to operate most efficiently. To 
the extent that CBOE and C2 desire to continue this approach in the 
future, these proposed changes better enable CBOE and C2 to do so. 
Also, in addition to being consistent with C2's corollary composition 
requirements for its Board and Executive Committee, CBOE believes that 
the proposed CBOE Board and Executive Committee composition requirement 
changes are consistent with the composition requirements of the Board 
of Directors and Executive Committee of NASDAQ Stock Market LLC.\7\
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    \7\ See Article I(l), Section 2(a) of Article III, and Section 
5(a) of Article III of the By-Laws of the NASDAQ Stock Market LLC. 
See also Exchange Act Release No. 44280 (May 8, 2001), 66 FR 26892 
(May 15, 2001) (SR-NASD-2001-06) (approving amendment to NASD By-
Laws to allow for the treatment of staff Governors as ``neutral'' 
for purposes of Industry/Non-Industry balancing on the NASD Board of 
Governors).
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(e) Miscellaneous Non-Substantive Bylaw and Rule Changes
    In addition to the changes set forth above, the Exchange proposes 
to make the following non-substantive changes to its Bylaws and rules.
    First, the Exchange proposes to amend the title of the Bylaws from 
``Amended and Restated Bylaws of Chicago Board Options Exchange, 
Incorporated'' to ``Second Amended and Restated Bylaws of Chicago Board 
Options Exchange, Incorporated'' since the Exchange is making the Bylaw 
changes proposed by this rule filing through as second amendment and 
restatement of its Bylaws.
    Second, the Exchange is proposing to re-number various sections of 
the Bylaws to eliminate gaps in the numbering of the Bylaw sections 
resulting from the proposed deletion of certain of the Bylaw sections 
as described above.
    Third, the Exchange proposes to make a clarifying change to Section 
3.2 of the Bylaws to change a reference to the Industry-Director 
Subcommittee of the Nominating and Governance Committee from 
``committee'' to ``Subcommittee.''
    Fourth, the Exchange is proposing to make a clarifying change to 
CBOE Rule 2.1 in addition to the changes to Rule 2.1 discussed above to 
make clear that the term of an Exchange committee member's appointment 
continues until the first regular meeting of the Board of Directors of 
the next calendar year and until that committee member's successor is 
appointed or that committee member's earlier death, resignation, or 
removal. In other words, if the Board of Directors does not appoint a 
successor to the committee member at the first regular Board meeting of 
the year, the committee member would continue in office until a 
successor is appointed or the person's earlier death, resignation, or 
removal.
(f) Effectiveness of Changes
    The Exchange proposes to make effective the proposed Bylaw and rule 
changes related to the elimination of the Vice Chairman of the Board 
that are described in subsection (a)(1) of Item 3 of this rule filing 
on the date of the annual election of CBOE directors in 2011 (which is 
anticipated to occur in May 2011). The Exchange proposes to make 
effective these changes at that time because the current term of the 
Vice Chairman expires on that date and this will permit the current 
Vice Chairman to serve out his current term of office.
    The Exchange proposes to make effective all of the other changes 
proposed by this rule filing at the time that the Commission approves 
this rule filing. These changes include those relating to the 
elimination of the Trading Advisory Committee and the addition of an 
Advisory Board provision, to the elimination of the CBOE Audit 
Committee, and to the composition requirements for the Board of 
Directors and Executive Committee and they also include the 
miscellaneous non-substantive Bylaw changes (all of which are described 
in subsections (a)(2)-(a)(5) of Item 3 of this rule filing).
2. Statutory Basis
    For the reasons set forth above, CBOE believes that this filing is 
consistent with Section 6(b) of the Act,\8\ in general, and furthers 
the objectives of Section 6(b)(1) of the Act \9\ and Section 6(b)(5) of 
the Act \10\ in particular, in that (i) it enables CBOE to be so 
organized as to have the capacity to be able to carry out the purposes 
of the Act and to comply, and to enforce compliance by its Trading 
Permit Holders and persons associated with its Trading Permit Holders, 
with the provisions of the Act, the rules and regulations thereunder, 
and the rules of CBOE and (ii) to prevent fraudulent and manipulative 
acts and practices, to promote just and equitable principles of trade, 
to remove impediments to, and perfect the mechanism of, a free and open 
market and, in general, to protect investors and the public interest. 
Specifically, the proposed changes will streamline, make more 
efficient, and improve CBOE's governance structure (i) By eliminating 
the position of Vice Chairman of the Board which CBOE no longer 
believes is necessary; (ii) by eliminating the Trading Advisory 
Committee and adding a Bylaw provision that the Board of Directors may 
establish an Advisory Board, which CBOE views as a useful vehicle that 
the Board may utilize to receive input from the perspective of Trading 
Permit Holders and with respect to matters of interest to Trading 
Permit Holders; (iii) by eliminating the CBOE Audit Committee, which 
CBOE believes is duplicative of the CBOE Holdings Audit Committee and 
which change will allow CBOE directors to focus their attention on 
matters falling directly within the purview of the CBOE Board of 
Directors; and (iv) by conforming the composition requirements of the 
CBOE Board of Directors and CBOE Executive Committee to the corollary 
C2 composition requirements, which CBOE believes will promote 
consistency and efficiency and better enable CBOE and C2 to have the 
same Board compositions if desired.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(1).
    \10\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    CBOE does not believe that the proposed rule change will impose any 
burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act.

[[Page 7614]]

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

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove such proposed rule change, or
    (B) Institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-CBOE-2011-010 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-CBOE-2011-010. This file 
number should be included on the subject line if e-mail is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for 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 
a.m. and 3 p.m. Copies of such filing also will be available for 
inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File No. SR-CBOE-2011-010 and should be 
submitted on or before March 3, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-2971 Filed 2-9-11; 8:45 am]
BILLING CODE 8011-01-P