Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of Filing of Proposed Rule Change To Amend and Restate the Second Amended and Restated Certificate of Incorporation of BATS Global Markets, Inc., 56840-56844 [2011-23478]
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56840
Federal Register / Vol. 76, No. 178 / Wednesday, September 14, 2011 / Notices
should be submitted on or before
October 5, 2011.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.14
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011–23376 Filed 9–13–11; 8:45 am]
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–65298; File No. SR–BATS–
2011–033]
Self-Regulatory Organizations; BATS
Exchange, Inc.; Notice of Filing of
Proposed Rule Change To Amend and
Restate the Second Amended and
Restated Certificate of Incorporation of
BATS Global Markets, Inc.
September 8, 2011.
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 August
29, 2011, BATS Exchange, Inc. (the
‘‘Exchange’’ or ‘‘BATS’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the Exchange. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
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I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange is filing with the
Commission a proposal to amend the
Second Amended and Restated
Certificate of Incorporation of BATS
Global Markets, Inc. (the ‘‘Corporation’’)
in connection with the anticipated
initial public offering of shares of its
Class A common stock.
The text of the proposed rule change
is available at the Exchange’s Web site
at https://www.batstrading.com, at the
principal office of the Exchange, 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, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
14 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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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. The
Exchange has prepared summaries, set
forth in Sections A, B, and C below, of
the most significant parts of such
statements.
1. Purpose
On May 13, 2011, the Corporation, the
sole stockholder of the Exchange, filed
a registration statement on Form S–1
with the Commission seeking to register
shares of Class A common stock and to
conduct an initial public offering of
those shares, which will be listed for
trading on the Exchange (the ‘‘IPO’’). In
connection with its IPO, the Corporation
intends to amend and restate its
certificate of incorporation and adopt a
Third Amended and Restated Certificate
of Incorporation (the ‘‘New Certificate of
Incorporation’’). The amendments
include, among other things, (i)
Increasing the total number of
authorized shares of stock of the
Corporation, (ii) reclassifying the
existing common stock of the
Corporation into two classes of shares,
Class A and Class B, (iii) setting forth
the respective voting rights and of Class
A and Class B common stock, (iv)
setting forth certain limitations on
transfer, (v) defining the newly
reclassified shares of Class A common
stock and Class B common stock as a
single class of capital stock of the
Corporation for purposes of Article 5 of
the New Certificate of Incorporation,
entitled ‘‘Limitations on Ownership,
Transfer & Voting’’, and (vi) certain
requirements for future amendments to
the certificate of incorporation and
bylaws.
The purpose of this rule filing is to
permit the Corporation, the sole
stockholder of the Exchange, to adopt
the New Certificate of Incorporation.
The changes described herein relate to
the certificate of incorporation of the
Corporation only, not to the governance
of the Exchange. The Exchange will
continue to be governed by its existing
certificate of incorporation and by-laws.
The stock in, and voting power of, the
Exchange will continue to be directly
and solely held solely [sic] by the
Corporation. The governance of the
Exchange will continue under its
existing structure, which provides for a
ten member board of directors reflecting
diverse representation of industry, nonindustry and exchange members,
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currently including (i) The chief
executive officer of the Exchange, (ii)
two industry directors, (iii) two
Exchange member directors, and (iv)
five non-industry directors.
Background
The Corporation was originally
formed as BATS Holdings, Inc. on June
29, 2007 and subsequently changed its
name to BATS Global Markets, Inc. On
May 4, 2011, the Corporation amended
and restated its certificate of
incorporation (the ‘‘Current Certificate
of Incorporation’’) to (i) Increase the
number of authorized shares of common
stock, and (ii) designate certain shares
as either ‘‘Voting Common Stock’’ or
‘‘Non-Voting Common Stock.’’ Pursuant
to the Current Certificate of
Incorporation, shares of Non-Voting
Common Stock possess the same rights,
preferences, powers, privileges,
restrictions, qualifications and
limitations as the Voting Common
Stock, except that Non-Voting Common
Stock is generally non-voting. NonVoting Common Stock is convertible
into Voting Common Stock on a one-toone basis, either (i) Automatically upon
transfer from the holder thereof to an
unrelated person, or (ii) at any time and
from time to time at the option of the
holder. The Non-Voting Common Stock
was created in anticipation of future
issuances to stockholders who may wish
to increase their economic ownership,
but avoid accruing voting power, in the
Corporation.
Authorized Shares and Reclassification
The New Certificate of Incorporation
will revise the capital structure of the
Corporation to increase the number of
authorized shares and create two
separate classes of shares, Class A and
Class B. In particular, changes proposed
to Section 4.01 of the New Certificate of
Incorporation would increase the
number of shares authorized for
issuance to an amount that
accommodates the reclassification
discussed below, and provides
additional shares for future issuances.
Pursuant to Section 4.02 of the New
Certificate of Incorporation, the
Corporation is proposing to designate
Class A common stock as either ‘‘Class
A Common Stock’’ or ‘‘Non-Voting Class
A Common Stock,’’ and Class B
common stock will be further
designated as either ‘‘Class B Common
Stock’’ or ‘‘Non-Voting Class B Common
Stock.’’
Further pursuant to Section 4.02, on
the date that the New Certificate of
Incorporation becomes effective (the
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‘‘Effective Time’’),3 the Corporation is
proposing that each authorized, issued
and outstanding share of Voting
Common Stock will be automatically
reclassified into (i) Seven shares of Class
A Common Stock and (ii) three shares
of Class B Common Stock, and each
authorized, issued and outstanding
share of Non-Voting Common Stock will
be automatically reclassified into (i)
Seven shares of Non-Voting Class A
Common Stock and (ii) three shares of
Non-Voting Class B Common Stock.
Except for voting rights and certain
conversion features, as described below,
Class A Common Stock, Non-Voting
Class A Common Stock, Class B
Common Stock, and Non-Voting Class B
Common Stock will generally have
identical rights, privileges and will rank
equally.
Pursuant to changes proposed to
Section 4.04(a) of the New Certificate of
Incorporation, all voting power will be
vested in the Class A Common Stock
and the Class B Common Stock (except
with regard to certain matters involving
only preferred shares as noted in
proposed changes to Section 4.03 of the
New Certificate of Incorporation), which
will vote together as one class on all
matters submitted to a vote or for the
consent of the Corporation’s
stockholders, except that holders of
Class A Common Stock will be entitled
to one vote per Class A share, while
holders of Class B Common Stock will
be entitled to two and one-half votes per
Class B share. Shares of Non-Voting
Class A Common Stock and Shares of
Non-Voting Class B Common Stock are
non-voting, except with regard to
certain matters that would adversely
affect their respective rights as
described in the proposed changes to
Section 4.02(a)(ii) of the New Certificate
of Incorporation. Only Class A Common
Stock is proposed to be sold in the IPO;
Class B Common Stock and Class B
Non-Voting Common Stock will not be
sold in the IPO and will continue to be
held by existing investors.
Pursuant to changes proposed to
Section 4.04(b) of the New Certificate of
Incorporation, shares of common stock
not sold in the IPO will be subject to
restrictions on transfer following the
Effective Time. In particular, under
Section 4.04(b)(i), except for certain
permitted transfers as defined in Section
4.04(b)(iii), a holder of shares of Class A
Common Stock or Non-Voting Class A
Common Stock (including shares
subject to an option, warrant or similar
right) on the Effective Time may not
3 It is anticipated that the Effective Time will
coincide with the date of the closing of the IPO and
will occur immediately prior thereto.
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transfer any of such shares until 180
days following the Effective Time, and
then may only transfer up to fifty
percent of their total holdings of
common stock, but only in the form of
Class A Common Stock or Non-Voting
Class A Common Stock, until one year
following the Effective Time less any
shares that were sold in the IPO. In
addition, pursuant to Section 4.04(b)(ii),
subject to similar permitted transfers as
defined in Section 4.04(b)(iii), a holder
of Class B Common Stock or Non-Voting
Class B Common Stock on the Effective
Time may not transfer any of such
shares until three years from the
Effective Time.
Pursuant to Section 4.04(c), the New
Certificate of Incorporation will
generally replicate the existing
conversion features of Non-Voting
Common Stock (described above) and
apply these features to Non-Voting Class
A Common Stock. As such, Non-Voting
Class A Common Stock will be
convertible into Class A Common Stock,
on a one-to-one basis, either (i)
Automatically upon transfer from the
holder thereof to an unrelated person, or
(ii) at any time and from time to time
at the option of the holder. Non-Voting
Class B Common Stock will be
convertible into Class B Common Stock,
on a one-to-one basis, at any time and
from time to time at the option of the
holder. Subject to certain exceptions
(such as transfers among affiliates, or
between existing holders), shares of
Class B Common Stock and Non-Voting
Class B Common Stock will
automatically convert into Class A
Common Stock, on a one-to-one basis,
upon any transfer of such shares. Class
A Common Stock will not be
convertible into any other class of stock.
Finally, pursuant to changes proposed
to Section 4.02(b) and Section
4.04(c)(v)(B) of the New Certificate of
Incorporation, upon reclassification and
anytime thereafter, a stockholder that,
together with its affiliates, owns less
than 4,960,491 shares of outstanding
common stock (the ‘‘Class B
Threshold’’), will have its Class B
Common Stock automatically convert
into Class A Common Stock and its
Non-Voting Class B Common Stock
automatically convert into Non-Voting
Class A Common Stock.
The purpose for the reclassification of
the Corporation’s common stock into
Class A common stock and Class B
common stock is to encourage the
Corporation’s existing strategic investors
to remain strategic investors of the
Corporation after the IPO. The proposed
changes discussed above achieve this
goal in several ways. First, the
reclassification of each share of the
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Corporation’s existing common stock
into seven shares of Class A Common
Stock with one vote each, and three
shares of Class B Common Stock with
two and one-half votes each, in
conjunction with the application of the
Class B Threshold and other factors,
ensures that in the aggregate the Class
B common stock controls a meaningful,
but less than majority, percentage of the
vote on matters coming before the
stockholders, while simultaneously
retaining a significant economic
investment (within approximately
twenty percentage points of the voting
control represented by the Class B
common stock) in the Corporation. By
allowing the transfer restrictions on the
Class A common stock to expire in two
tranches at 180 days and one year, while
retaining transfer restrictions on the
Class B common stock for three years,
the proposal balances the ability of
existing strategic investors to orderly
sell shares in the open market, while at
the same time retaining the strategic
benefit to the Corporation of their
significant ownership for at least three
years through their holdings of Class B
common stock.
Further, the requirement that the
Class B common stock of any holder of
less than the Class B Threshold
automatically converts to Class A
common stock ensures that only
investors with a significant economic
investment (approximately two percent)
in the Corporation own Class B common
stock. As such, existing investors that
do not have an economic stake in the
Corporation above the Class B
Threshold will not own Class B
common stock after the proposed
reclassification, and existing investors
who will own Class B common stock
after the proposed reclassification will
cease to own Class B common stock
once their economic stake in the
Corporation falls below the Class B
Threshold, further ensuring an
appropriate balance between an
investor’s voting control and economic
stake in the Corporation.
Limitations on Ownership and Voting
Power
Section 5.01(b)(i) of the New
Certificate of Incorporation defines the
Class A Common Stock, the Non-Voting
Class A Common Stock, the Class B
Common Stock, the Non-Voting Class B
Common Stock and any series of
Preferred Stock of the Corporation as a
single class of capital stock of the
Corporation for purposes of Section
5.01(a)(i) and Section 5.01(a)(ii) of the
New Certificate of Incorporation. As
such, for purposes of determining
compliance with the ownership
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limitations set forth in Section 5.01(a)(i)
and Section 5.01(a)(ii) of the New
Certificate of Incorporation, the Class A
and Class B shares, including both
voting and non-voting shares, and, if
applicable, any Preferred Shares, will be
aggregated. As proposed, the New
Certificate of Incorporation will not
include a provision present in the
Current Certificate of Incorporation that
excludes non-voting stock from the
ownership and voting limitations
applicable to non-Member
shareholders.4 Retaining this provision
would have caused an internal
inconsistency with respect to
aggregation of stock, and the Exchange
does not believe that excluding nonvoting stock from such limitations is
necessary or consistent with the intent
of the limitations. The New Certificate
of Incorporation will thus maintain and
enhance the limitations on aggregate
ownership and total voting power that
currently exist under the Current
Certificate of Incorporation. References
to an Investor Rights Agreement are also
removed, as the relevant provisions of
that agreement are expected to terminate
upon the IPO.
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Bylaws and Future Amendments to the
Certificate of Incorporation
Article 9 and Article 15 of the New
Certificate of Incorporation relate to the
adoption of, and amendments to, the
Corporation’s bylaws, and future
amendments to the Corporation’s
certificate of incorporation, respectively.
Pursuant to Section 9.01, the New
Certificate of Incorporation preserves
the existing right of the Corporation’s
Board of Directors to adopt, amend or
repeal the Corporation’s bylaws.
Pursuant to proposed Section 9.02(a) of
the New Certificate of Incorporation,
prior to a Change in Ownership, which
is defined in Section 6.01(b) of the New
Certificate of Incorporation as ‘‘a
transaction or series of transactions
which results in the beneficial owners
of the Class B [common stock] owning
in the aggregate less than a majority of
the total voting power of [the
Corporation’s outstanding securities]
* * *’’, the stockholders may adopt,
amend or repeal the bylaws upon the
affirmative vote of the majority of the
total voting power of the Corporation’s
outstanding securities entitled to vote
generally in the election of directors,
voting together as a single class.
Pursuant to proposed Section 9.02(b),
upon a Change in Ownership, the
4 The Exchange notes that there is no currently
issued and outstanding non-voting stock of the
Corporation, nor has the Corporation previously
issued non-voting stock.
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stockholders may adopt, amend, or
repeal the bylaws upon the affirmative
vote of not less than seventy percent of
the total voting power of the
Corporation’s outstanding securities
entitled to vote generally in the election
of directors, voting together as a single
class.
Similarly, pursuant to proposed
Section 15.01 of the New Certificate of
Incorporation, prior to any Change in
Ownership, and subject to Section
15.03, which requires any proposed
amendment to be reviewed by the Board
of Directors of the Exchange and filed
with the Commission if required under
Section 19 of the Act, the certificate of
incorporation can be amended in any
manner permitted by the General
Corporation Law of the State of
Delaware, as amended (‘‘Delaware
Law’’), which today generally allows for
the amendment of a certificate of
incorporation by the affirmative vote of
the majority of the outstanding stock
entitled to vote thereon. Pursuant to
proposed Section 15.02 of the New
Certificate of Incorporation, upon a
Change in Ownership, and again subject
to Section 15.03, certain provisions of
the certificate of incorporation can only
be amended upon the affirmative vote of
not less than seventy percent of the total
voting power of the Corporation’s
outstanding securities entitled to vote
generally in the election of directors,
voting together as a single class. These
provisions include Sections 4.04(b) and
4.04(c), relating to transfer restrictions
and conversion rights, and Article 5
through Article 15, relating to
limitations on ownership, transfer, and
voting, defined terms, board of
directors, duration of the Corporation,
bylaws, indemnification, meetings and
actions of stockholders, forum selection,
compromise or other arrangement,
Section 203 opt-out, and amendments,
respectively.
The purpose for the distinction in the
stockholders’ ability to adopt, amend, or
repeal the bylaws, or amend the
certificate of incorporation, prior to
versus upon a Change in Ownership is
to maintain the existing ability of the
Corporation’s strategic investors to take
such actions so long as they continue to
control, through their aggregate
ownership of Class A Common Stock
and Class B Common Stock, a majority
of the voting power of the Corporation’s
outstanding securities, and to adopt
common public company supermajority
requirements upon a Change in
Ownership to deter actions being taken
that the Corporation believes may be
detrimental to the Corporation,
including any actions which could
detrimentally effect the Corporation’s
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ability to comply with its unique
responsibilities under the Act as the
sole owner of two registered national
securities exchanges in the United
States. The purpose for limiting the
application of the supermajority voting
requirements to certain specified
provisions of the certificate of
incorporation is to focus such
requirements on the most critical
provisions of the certificate of
incorporation.
Other Amendments
The New Certificate of Incorporation
will amend and restate various other
provisions of the Current Certificate of
Incorporation in a manner that the
Exchange believes are intended to
reflect provisions that are more
customary for publicly-owned
companies (such as those relating to the
indemnification of directors and
business combinations, among others).
In particular, pursuant to changes
proposed to Section 4.01 of the New
Certificate of Incorporation, the
Corporation will have the authority to
issue 40 million shares of Preferred
Stock, par value $0.01 per share (the
‘‘Preferred Stock’’), which the
Corporation’s Board of Directors may,
by resolution from time to time, issue in
one or more classes or series by filing
a certificate pursuant to Delaware Law
fixing the terms and conditions of such
class or series of Preferred Stock. The
Preferred Stock may be used by the
Corporation to raise capital or to act as
a safety mechanism for unwanted
takeovers.
Pursuant to Section 4.04(c)(vii) of the
New Certificate of Incorporation, the
Corporation will be required to reserve
and keep available out of its authorized
but unissued capital stock shares of
Class A common stock and Class B
common stock solely for the purpose of
effecting the conversion of such shares
of capital stock. In addition, pursuant to
Section 4.04(c)(viii), the Corporation
may establish certain policies and
procedures relating to the conversion of
capital stock and the general
administration of the Corporation’s
multi-class common stock structure.
Also, Article 6 of the New Certificate
of Incorporation includes certain
defined terms that are used in the New
Certificate of Incorporation, such as
‘‘Change in Ownership’’, ‘‘Change of
Control’’, and ‘‘Related Persons’’, among
others.
Pursuant to Section 7.04 of the New
Certificate of Incorporation, cumulative
voting in the election of directors will
be prohibited. If the Corporation were to
permit cumulative voting, stockholders
would be entitled to as many votes as
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are equal to the number of votes which
such stockholder would be entitled to
cast for the election of directors with
respect to such stockholder’s shares of
stock, multiplied by the number of
directors to be elected by such holder,
and such stockholder may cast all of
such votes for a single director or may
distribute them among the number to be
voted for, as such stockholder may see
fit. In contrast, in ‘‘regular’’ or
‘‘statutory’’ voting (i.e., when
cumulative voting is prohibited),
stockholders may not give more than
one vote per share to any single director
nominee.
Pursuant to the changes proposed to
Section 11.03 of the New Certificate of
Incorporation, prior to a Change in
Ownership, any action may be taken by
the stockholders without a meeting, by
written consent to the extent permitted
under Delaware Law. Following a
Change in Control, any action required
or permitted to be taken at any meeting
of the stockholders may be taken only
upon the vote of stockholders at a
meeting of the stockholders in
accordance with Delaware Law and the
New Certificate of Incorporation, and
may not be taken by written consent
without a meeting, except under certain
circumstances.
Pursuant to Article 14 of the New
Certificate of Incorporation, prior to any
Change in Ownership, the Corporation
will not be governed by Section 203 of
Delaware Law; however, following a
Change in Ownership, the Corporation
will be governed by Section 203 of
Delaware Law. In general, Section 203
prohibits a publicly-held Delaware
corporation from engaging in a business
combination with anyone who owns at
least fifteen percent of its common
stock. This prohibition lasts for a period
of three years after that person has
acquired the fifteen percent ownership.
The corporation may, however, engage
in a business combination if it is
approved by its board of directors before
the person acquires the fifteen percent
ownership or later by its board of
directors and two-thirds of the
stockholders of the public corporation.
The restrictions contained in Section
203 do not apply if, among other things,
the corporation’s certificate of
incorporation contains a provision
expressly electing not to be governed by
Section 203.
The New Certificate of Incorporation
also makes various non-substantive,
stylistic changes throughout.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with the
requirements of the Act and rules and
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regulations thereunder that are
applicable to a national securities
exchange, and, in particular, with the
requirements of Section 6(b) of the Act.5
In particular, the proposal is consistent
with Section 6(b)(1) of the Act, because
it retains and enhances existing
limitations on ownership and total
voting power that currently exist and
that are designed to prevent any
stockholder from exercising undue
control over the operation of the
Exchange and to assure that the
Exchange is able to carry out its
regulatory obligations under the Act.
Under the proposal, the Corporation is
reclassifying its existing voting common
stock into shares of Class A Common
Stock and shares of Class B Common
Stock, and is authorizing the potential
future issuance of Preferred Stock. Class
A Common Stock and Class B Common
Stock have identical economic rights,
and the only distinction between the
Class A Common Stock and the Class B
Common Stock, other than the transfer
restrictions and conversion provisions
applicable to such shares, is the number
of votes attributable to each share. The
consideration of Class A Common
Stock, Non-Voting Class A Common
Stock, Class B Common Stock, NonVoting Class B Common Stock and any
series of Preferred Stock as a single class
of capital stock of the Corporation under
the proposal for purposes of Section
5.01(a)(i) and Section 5.01(a)(ii) is
consistent with and enhances the
limitations on ownership in place under
the Current Certificate of Incorporation.
In other words, aggregation of all the
capital stock of the Corporation for
purposes of the ownership and voting
limitations is consistent with the policy
concerns sought to be addressed by
these provisions of the Current
Certificate of Incorporation and the
proposed New Certificate of
Incorporation. Specifically, these
ownership and voting limitations ensure
that no single Exchange Member or
other person can exercise undue
influence over the Exchange through
ownership of a combination of different
classes of stock issued by the
Corporation.
Moreover, the voting limitations
contained in Section 5.01(a)(iii) of the
New Certificate of Incorporation are
unaffected by the reclassification of the
Corporation’s common stock into Class
A Common Stock and Class B Common
Stock or the potential issuance of
Preferred Stock in the future. To
determine any stockholder’s compliance
with such voting limitations, all Class A
Common Stock, Non-Voting Class A
5 15
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Common Stock, Class B Common Stock,
Non-Voting Class B Common Stock and
Preferred Stock would be aggregated
under the Current Certificate of
Incorporation as well as the proposed
New Certificate of Incorporation.
(B) Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act.
(C) Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants or Others
The Exchange has neither solicited
nor received written comments on 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 Exchange 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 proposal 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
No. SR–BATS–2011–033 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 No.
SR–BATS–2011–033. This file number
should be included on the subject line
if e-mail is used. To help the
Commission process and review your
E:\FR\FM\14SEN1.SGM
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56844
Federal Register / Vol. 76, No. 178 / Wednesday, September 14, 2011 / Notices
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 changes 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
will also 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–BATS–
2011–033 and should be submitted on
or before October 5, 2011.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.6
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011–23478 Filed 9–13–11; 8:45 am]
BILLING CODE 8011–01–P
change as described in Items I and II
below, which Items have been prepared
by the Exchange. The Commission is
publishing this notice to solicit
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 ISE is proposing to amend its
transaction fees and rebates for adding
and removing liquidity. The text of the
proposed rule change is available on the
Exchange’s Web site (https://
www.ise.com), at the principal office of
the Exchange, 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, 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 these statements may be examined at
the places specified in Item IV below.
The self-regulatory organization 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
Statutory Basis for, the Proposed Rule
Change
1. Purpose
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–65297; File No. SR–ISE–
2011–54]
Self-Regulatory Organizations;
International Securities Exchange,
LLC; Notice of Filing and Immediate
Effectiveness of Proposed Rule
Change Relating to Fees and Rebates
for Adding and Removing Liquidity
mstockstill on DSK4VPTVN1PROD with NOTICES
September 8, 2011.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that, on August
30, 2011, the International Securities
Exchange, LLC (the ‘‘Exchange’’ or the
‘‘ISE’’) filed with the Securities and
Exchange Commission (the
‘‘Commission’’) the proposed rule
6 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 Options classes subject to maker/taker fees are
identified by their ticker symbol on the Exchange’s
Schedule of Fees.
1 15
VerDate Mar<15>2010
19:00 Sep 13, 2011
The Exchange currently assesses a per
contract transaction charge to market
participants that add or remove
liquidity from the Exchange (‘‘maker/
taker fees’’) in 100 options classes (the
‘‘Select Symbols’’).3 The purpose of this
proposed rule change is to amend the
list of Select Symbols on the Exchange’s
Schedule of Fees, titled ‘‘Rebates and
Fees for Adding and Removing
Liquidity in Select Symbols.’’
Specifically, the Exchange proposes to
add Apple Inc. (‘‘AAPL’’), Baidu, Inc.
(‘‘BIDU’’), and iPath S&P 500 VIX ShortTerm Futures ETN (‘‘VXX’’) to the list
of Select Symbols.
While changes to the Fee Schedule
pursuant to this proposal are effective
upon filing, the Exchange has
designated these changes to be operative
on September 1, 2011.
Jkt 223001
PO 00000
Frm 00115
Fmt 4703
Sfmt 4703
2. Statutory Basis
The Exchange believes that its
proposal to amend its Fee Schedule is
consistent with Section 6(b) of the Act 4
in general, and furthers the objectives of
Section 6(b)(4) of the Act 5 in particular,
in that it is an equitable allocation of
reasonable fees and other charges among
Exchange members and other persons
using its facilities.
The Exchange believes that it is
reasonable to add AAPL, BIDU, and
VXX to its list of Select Symbols to
attract additional order flow to the
Exchange. The Exchange anticipates
that the addition of AAPL, BIDU, and
VXX to the list of Select Symbols will
attract market participants to transact
equity options at the Exchange because
of the available rebates.
The Exchange believes that it is
equitable to amend the list of Select
Symbols by adding AAPL, BIDU, and
VXX because the list of Select Symbols
would apply uniformly to all categories
of participants in the same manner. All
market participants who trade the Select
Symbols would be subject to the
applicable maker/taker fees and rebates.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The proposed rule change does not
impose any burden on competition that
is not necessary or appropriate in
furtherance of the purposes of the Act.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange has not solicited, and
does not intend to solicit, comments on
this proposed rule change. The
Exchange has not received any
unsolicited written comments from
members or other interested parties.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to Section
19(b)(3)(A)(ii) of the Act.6 At any time
within 60 days of the filing of the
proposed rule change, the Commission
summarily may temporarily suspend
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. If the Commission
takes such action, the Commission shall
institute proceedings to determine
4 15
U.S.C. 78f(b).
U.S.C. 78f(b)(4).
6 15 U.S.C. 78s(b)(3)(A)(ii).
5 15
E:\FR\FM\14SEN1.SGM
14SEN1
]]>Agencies
[Federal Register Volume 76, Number 178 (Wednesday, September 14, 2011)]
[Notices]
[Pages 56840-56844]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-23478]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-65298; File No. SR-BATS-2011-033]
Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of
Filing of Proposed Rule Change To Amend and Restate the Second Amended
and Restated Certificate of Incorporation of BATS Global Markets, Inc.
September 8, 2011.
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 August 29, 2011, BATS Exchange, Inc. (the ``Exchange'' or
``BATS'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II below, which Items have been prepared by the Exchange. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange is filing with the Commission a proposal to amend the
Second Amended and Restated Certificate of Incorporation of BATS Global
Markets, Inc. (the ``Corporation'') in connection with the anticipated
initial public offering of shares of its Class A common stock.
The text of the proposed rule change is available at the Exchange's
Web site at https://www.batstrading.com, at the principal office of the
Exchange, 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, 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 these 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
Statutory Basis for, the Proposed Rule Change
1. Purpose
On May 13, 2011, the Corporation, the sole stockholder of the
Exchange, filed a registration statement on Form S-1 with the
Commission seeking to register shares of Class A common stock and to
conduct an initial public offering of those shares, which will be
listed for trading on the Exchange (the ``IPO''). In connection with
its IPO, the Corporation intends to amend and restate its certificate
of incorporation and adopt a Third Amended and Restated Certificate of
Incorporation (the ``New Certificate of Incorporation''). The
amendments include, among other things, (i) Increasing the total number
of authorized shares of stock of the Corporation, (ii) reclassifying
the existing common stock of the Corporation into two classes of
shares, Class A and Class B, (iii) setting forth the respective voting
rights and of Class A and Class B common stock, (iv) setting forth
certain limitations on transfer, (v) defining the newly reclassified
shares of Class A common stock and Class B common stock as a single
class of capital stock of the Corporation for purposes of Article 5 of
the New Certificate of Incorporation, entitled ``Limitations on
Ownership, Transfer & Voting'', and (vi) certain requirements for
future amendments to the certificate of incorporation and bylaws.
The purpose of this rule filing is to permit the Corporation, the
sole stockholder of the Exchange, to adopt the New Certificate of
Incorporation. The changes described herein relate to the certificate
of incorporation of the Corporation only, not to the governance of the
Exchange. The Exchange will continue to be governed by its existing
certificate of incorporation and by-laws. The stock in, and voting
power of, the Exchange will continue to be directly and solely held
solely [sic] by the Corporation. The governance of the Exchange will
continue under its existing structure, which provides for a ten member
board of directors reflecting diverse representation of industry, non-
industry and exchange members, currently including (i) The chief
executive officer of the Exchange, (ii) two industry directors, (iii)
two Exchange member directors, and (iv) five non-industry directors.
Background
The Corporation was originally formed as BATS Holdings, Inc. on
June 29, 2007 and subsequently changed its name to BATS Global Markets,
Inc. On May 4, 2011, the Corporation amended and restated its
certificate of incorporation (the ``Current Certificate of
Incorporation'') to (i) Increase the number of authorized shares of
common stock, and (ii) designate certain shares as either ``Voting
Common Stock'' or ``Non-Voting Common Stock.'' Pursuant to the Current
Certificate of Incorporation, shares of Non-Voting Common Stock possess
the same rights, preferences, powers, privileges, restrictions,
qualifications and limitations as the Voting Common Stock, except that
Non-Voting Common Stock is generally non-voting. Non-Voting Common
Stock is convertible into Voting Common Stock on a one-to-one basis,
either (i) Automatically upon transfer from the holder thereof to an
unrelated person, or (ii) at any time and from time to time at the
option of the holder. The Non-Voting Common Stock was created in
anticipation of future issuances to stockholders who may wish to
increase their economic ownership, but avoid accruing voting power, in
the Corporation.
Authorized Shares and Reclassification
The New Certificate of Incorporation will revise the capital
structure of the Corporation to increase the number of authorized
shares and create two separate classes of shares, Class A and Class B.
In particular, changes proposed to Section 4.01 of the New Certificate
of Incorporation would increase the number of shares authorized for
issuance to an amount that accommodates the reclassification discussed
below, and provides additional shares for future issuances. Pursuant to
Section 4.02 of the New Certificate of Incorporation, the Corporation
is proposing to designate Class A common stock as either ``Class A
Common Stock'' or ``Non-Voting Class A Common Stock,'' and Class B
common stock will be further designated as either ``Class B Common
Stock'' or ``Non-Voting Class B Common Stock.''
Further pursuant to Section 4.02, on the date that the New
Certificate of Incorporation becomes effective (the
[[Page 56841]]
``Effective Time''),\3\ the Corporation is proposing that each
authorized, issued and outstanding share of Voting Common Stock will be
automatically reclassified into (i) Seven shares of Class A Common
Stock and (ii) three shares of Class B Common Stock, and each
authorized, issued and outstanding share of Non-Voting Common Stock
will be automatically reclassified into (i) Seven shares of Non-Voting
Class A Common Stock and (ii) three shares of Non-Voting Class B Common
Stock. Except for voting rights and certain conversion features, as
described below, Class A Common Stock, Non-Voting Class A Common Stock,
Class B Common Stock, and Non-Voting Class B Common Stock will
generally have identical rights, privileges and will rank equally.
---------------------------------------------------------------------------
\3\ It is anticipated that the Effective Time will coincide with
the date of the closing of the IPO and will occur immediately prior
thereto.
---------------------------------------------------------------------------
Pursuant to changes proposed to Section 4.04(a) of the New
Certificate of Incorporation, all voting power will be vested in the
Class A Common Stock and the Class B Common Stock (except with regard
to certain matters involving only preferred shares as noted in proposed
changes to Section 4.03 of the New Certificate of Incorporation), which
will vote together as one class on all matters submitted to a vote or
for the consent of the Corporation's stockholders, except that holders
of Class A Common Stock will be entitled to one vote per Class A share,
while holders of Class B Common Stock will be entitled to two and one-
half votes per Class B share. Shares of Non-Voting Class A Common Stock
and Shares of Non-Voting Class B Common Stock are non-voting, except
with regard to certain matters that would adversely affect their
respective rights as described in the proposed changes to Section
4.02(a)(ii) of the New Certificate of Incorporation. Only Class A
Common Stock is proposed to be sold in the IPO; Class B Common Stock
and Class B Non-Voting Common Stock will not be sold in the IPO and
will continue to be held by existing investors.
Pursuant to changes proposed to Section 4.04(b) of the New
Certificate of Incorporation, shares of common stock not sold in the
IPO will be subject to restrictions on transfer following the Effective
Time. In particular, under Section 4.04(b)(i), except for certain
permitted transfers as defined in Section 4.04(b)(iii), a holder of
shares of Class A Common Stock or Non-Voting Class A Common Stock
(including shares subject to an option, warrant or similar right) on
the Effective Time may not transfer any of such shares until 180 days
following the Effective Time, and then may only transfer up to fifty
percent of their total holdings of common stock, but only in the form
of Class A Common Stock or Non-Voting Class A Common Stock, until one
year following the Effective Time less any shares that were sold in the
IPO. In addition, pursuant to Section 4.04(b)(ii), subject to similar
permitted transfers as defined in Section 4.04(b)(iii), a holder of
Class B Common Stock or Non-Voting Class B Common Stock on the
Effective Time may not transfer any of such shares until three years
from the Effective Time.
Pursuant to Section 4.04(c), the New Certificate of Incorporation
will generally replicate the existing conversion features of Non-Voting
Common Stock (described above) and apply these features to Non-Voting
Class A Common Stock. As such, Non-Voting Class A Common Stock will be
convertible into Class A Common Stock, on a one-to-one basis, either
(i) Automatically upon transfer from the holder thereof to an unrelated
person, or (ii) at any time and from time to time at the option of the
holder. Non-Voting Class B Common Stock will be convertible into Class
B Common Stock, on a one-to-one basis, at any time and from time to
time at the option of the holder. Subject to certain exceptions (such
as transfers among affiliates, or between existing holders), shares of
Class B Common Stock and Non-Voting Class B Common Stock will
automatically convert into Class A Common Stock, on a one-to-one basis,
upon any transfer of such shares. Class A Common Stock will not be
convertible into any other class of stock.
Finally, pursuant to changes proposed to Section 4.02(b) and
Section 4.04(c)(v)(B) of the New Certificate of Incorporation, upon
reclassification and anytime thereafter, a stockholder that, together
with its affiliates, owns less than 4,960,491 shares of outstanding
common stock (the ``Class B Threshold''), will have its Class B Common
Stock automatically convert into Class A Common Stock and its Non-
Voting Class B Common Stock automatically convert into Non-Voting Class
A Common Stock.
The purpose for the reclassification of the Corporation's common
stock into Class A common stock and Class B common stock is to
encourage the Corporation's existing strategic investors to remain
strategic investors of the Corporation after the IPO. The proposed
changes discussed above achieve this goal in several ways. First, the
reclassification of each share of the Corporation's existing common
stock into seven shares of Class A Common Stock with one vote each, and
three shares of Class B Common Stock with two and one-half votes each,
in conjunction with the application of the Class B Threshold and other
factors, ensures that in the aggregate the Class B common stock
controls a meaningful, but less than majority, percentage of the vote
on matters coming before the stockholders, while simultaneously
retaining a significant economic investment (within approximately
twenty percentage points of the voting control represented by the Class
B common stock) in the Corporation. By allowing the transfer
restrictions on the Class A common stock to expire in two tranches at
180 days and one year, while retaining transfer restrictions on the
Class B common stock for three years, the proposal balances the ability
of existing strategic investors to orderly sell shares in the open
market, while at the same time retaining the strategic benefit to the
Corporation of their significant ownership for at least three years
through their holdings of Class B common stock.
Further, the requirement that the Class B common stock of any
holder of less than the Class B Threshold automatically converts to
Class A common stock ensures that only investors with a significant
economic investment (approximately two percent) in the Corporation own
Class B common stock. As such, existing investors that do not have an
economic stake in the Corporation above the Class B Threshold will not
own Class B common stock after the proposed reclassification, and
existing investors who will own Class B common stock after the proposed
reclassification will cease to own Class B common stock once their
economic stake in the Corporation falls below the Class B Threshold,
further ensuring an appropriate balance between an investor's voting
control and economic stake in the Corporation.
Limitations on Ownership and Voting Power
Section 5.01(b)(i) of the New Certificate of Incorporation defines
the Class A Common Stock, the Non-Voting Class A Common Stock, the
Class B Common Stock, the Non-Voting Class B Common Stock and any
series of Preferred Stock of the Corporation as a single class of
capital stock of the Corporation for purposes of Section 5.01(a)(i) and
Section 5.01(a)(ii) of the New Certificate of Incorporation. As such,
for purposes of determining compliance with the ownership
[[Page 56842]]
limitations set forth in Section 5.01(a)(i) and Section 5.01(a)(ii) of
the New Certificate of Incorporation, the Class A and Class B shares,
including both voting and non-voting shares, and, if applicable, any
Preferred Shares, will be aggregated. As proposed, the New Certificate
of Incorporation will not include a provision present in the Current
Certificate of Incorporation that excludes non-voting stock from the
ownership and voting limitations applicable to non-Member
shareholders.\4\ Retaining this provision would have caused an internal
inconsistency with respect to aggregation of stock, and the Exchange
does not believe that excluding non-voting stock from such limitations
is necessary or consistent with the intent of the limitations. The New
Certificate of Incorporation will thus maintain and enhance the
limitations on aggregate ownership and total voting power that
currently exist under the Current Certificate of Incorporation.
References to an Investor Rights Agreement are also removed, as the
relevant provisions of that agreement are expected to terminate upon
the IPO.
---------------------------------------------------------------------------
\4\ The Exchange notes that there is no currently issued and
outstanding non-voting stock of the Corporation, nor has the
Corporation previously issued non-voting stock.
---------------------------------------------------------------------------
Bylaws and Future Amendments to the Certificate of Incorporation
Article 9 and Article 15 of the New Certificate of Incorporation
relate to the adoption of, and amendments to, the Corporation's bylaws,
and future amendments to the Corporation's certificate of
incorporation, respectively. Pursuant to Section 9.01, the New
Certificate of Incorporation preserves the existing right of the
Corporation's Board of Directors to adopt, amend or repeal the
Corporation's bylaws. Pursuant to proposed Section 9.02(a) of the New
Certificate of Incorporation, prior to a Change in Ownership, which is
defined in Section 6.01(b) of the New Certificate of Incorporation as
``a transaction or series of transactions which results in the
beneficial owners of the Class B [common stock] owning in the aggregate
less than a majority of the total voting power of [the Corporation's
outstanding securities] * * *'', the stockholders may adopt, amend or
repeal the bylaws upon the affirmative vote of the majority of the
total voting power of the Corporation's outstanding securities entitled
to vote generally in the election of directors, voting together as a
single class. Pursuant to proposed Section 9.02(b), upon a Change in
Ownership, the stockholders may adopt, amend, or repeal the bylaws upon
the affirmative vote of not less than seventy percent of the total
voting power of the Corporation's outstanding securities entitled to
vote generally in the election of directors, voting together as a
single class.
Similarly, pursuant to proposed Section 15.01 of the New
Certificate of Incorporation, prior to any Change in Ownership, and
subject to Section 15.03, which requires any proposed amendment to be
reviewed by the Board of Directors of the Exchange and filed with the
Commission if required under Section 19 of the Act, the certificate of
incorporation can be amended in any manner permitted by the General
Corporation Law of the State of Delaware, as amended (``Delaware
Law''), which today generally allows for the amendment of a certificate
of incorporation by the affirmative vote of the majority of the
outstanding stock entitled to vote thereon. Pursuant to proposed
Section 15.02 of the New Certificate of Incorporation, upon a Change in
Ownership, and again subject to Section 15.03, certain provisions of
the certificate of incorporation can only be amended upon the
affirmative vote of not less than seventy percent of the total voting
power of the Corporation's outstanding securities entitled to vote
generally in the election of directors, voting together as a single
class. These provisions include Sections 4.04(b) and 4.04(c), relating
to transfer restrictions and conversion rights, and Article 5 through
Article 15, relating to limitations on ownership, transfer, and voting,
defined terms, board of directors, duration of the Corporation, bylaws,
indemnification, meetings and actions of stockholders, forum selection,
compromise or other arrangement, Section 203 opt-out, and amendments,
respectively.
The purpose for the distinction in the stockholders' ability to
adopt, amend, or repeal the bylaws, or amend the certificate of
incorporation, prior to versus upon a Change in Ownership is to
maintain the existing ability of the Corporation's strategic investors
to take such actions so long as they continue to control, through their
aggregate ownership of Class A Common Stock and Class B Common Stock, a
majority of the voting power of the Corporation's outstanding
securities, and to adopt common public company supermajority
requirements upon a Change in Ownership to deter actions being taken
that the Corporation believes may be detrimental to the Corporation,
including any actions which could detrimentally effect the
Corporation's ability to comply with its unique responsibilities under
the Act as the sole owner of two registered national securities
exchanges in the United States. The purpose for limiting the
application of the supermajority voting requirements to certain
specified provisions of the certificate of incorporation is to focus
such requirements on the most critical provisions of the certificate of
incorporation.
Other Amendments
The New Certificate of Incorporation will amend and restate various
other provisions of the Current Certificate of Incorporation in a
manner that the Exchange believes are intended to reflect provisions
that are more customary for publicly-owned companies (such as those
relating to the indemnification of directors and business combinations,
among others).
In particular, pursuant to changes proposed to Section 4.01 of the
New Certificate of Incorporation, the Corporation will have the
authority to issue 40 million shares of Preferred Stock, par value
$0.01 per share (the ``Preferred Stock''), which the Corporation's
Board of Directors may, by resolution from time to time, issue in one
or more classes or series by filing a certificate pursuant to Delaware
Law fixing the terms and conditions of such class or series of
Preferred Stock. The Preferred Stock may be used by the Corporation to
raise capital or to act as a safety mechanism for unwanted takeovers.
Pursuant to Section 4.04(c)(vii) of the New Certificate of
Incorporation, the Corporation will be required to reserve and keep
available out of its authorized but unissued capital stock shares of
Class A common stock and Class B common stock solely for the purpose of
effecting the conversion of such shares of capital stock. In addition,
pursuant to Section 4.04(c)(viii), the Corporation may establish
certain policies and procedures relating to the conversion of capital
stock and the general administration of the Corporation's multi-class
common stock structure.
Also, Article 6 of the New Certificate of Incorporation includes
certain defined terms that are used in the New Certificate of
Incorporation, such as ``Change in Ownership'', ``Change of Control'',
and ``Related Persons'', among others.
Pursuant to Section 7.04 of the New Certificate of Incorporation,
cumulative voting in the election of directors will be prohibited. If
the Corporation were to permit cumulative voting, stockholders would be
entitled to as many votes as
[[Page 56843]]
are equal to the number of votes which such stockholder would be
entitled to cast for the election of directors with respect to such
stockholder's shares of stock, multiplied by the number of directors to
be elected by such holder, and such stockholder may cast all of such
votes for a single director or may distribute them among the number to
be voted for, as such stockholder may see fit. In contrast, in
``regular'' or ``statutory'' voting (i.e., when cumulative voting is
prohibited), stockholders may not give more than one vote per share to
any single director nominee.
Pursuant to the changes proposed to Section 11.03 of the New
Certificate of Incorporation, prior to a Change in Ownership, any
action may be taken by the stockholders without a meeting, by written
consent to the extent permitted under Delaware Law. Following a Change
in Control, any action required or permitted to be taken at any meeting
of the stockholders may be taken only upon the vote of stockholders at
a meeting of the stockholders in accordance with Delaware Law and the
New Certificate of Incorporation, and may not be taken by written
consent without a meeting, except under certain circumstances.
Pursuant to Article 14 of the New Certificate of Incorporation,
prior to any Change in Ownership, the Corporation will not be governed
by Section 203 of Delaware Law; however, following a Change in
Ownership, the Corporation will be governed by Section 203 of Delaware
Law. In general, Section 203 prohibits a publicly-held Delaware
corporation from engaging in a business combination with anyone who
owns at least fifteen percent of its common stock. This prohibition
lasts for a period of three years after that person has acquired the
fifteen percent ownership. The corporation may, however, engage in a
business combination if it is approved by its board of directors before
the person acquires the fifteen percent ownership or later by its board
of directors and two-thirds of the stockholders of the public
corporation. The restrictions contained in Section 203 do not apply if,
among other things, the corporation's certificate of incorporation
contains a provision expressly electing not to be governed by Section
203.
The New Certificate of Incorporation also makes various non-
substantive, stylistic changes throughout.
2. Statutory Basis
The Exchange believes that its proposal is consistent with the
requirements of the Act and rules and regulations thereunder that are
applicable to a national securities exchange, and, in particular, with
the requirements of Section 6(b) of the Act.\5\ In particular, the
proposal is consistent with Section 6(b)(1) of the Act, because it
retains and enhances existing limitations on ownership and total voting
power that currently exist and that are designed to prevent any
stockholder from exercising undue control over the operation of the
Exchange and to assure that the Exchange is able to carry out its
regulatory obligations under the Act. Under the proposal, the
Corporation is reclassifying its existing voting common stock into
shares of Class A Common Stock and shares of Class B Common Stock, and
is authorizing the potential future issuance of Preferred Stock. Class
A Common Stock and Class B Common Stock have identical economic rights,
and the only distinction between the Class A Common Stock and the Class
B Common Stock, other than the transfer restrictions and conversion
provisions applicable to such shares, is the number of votes
attributable to each share. The consideration of Class A Common Stock,
Non-Voting Class A Common Stock, Class B Common Stock, Non-Voting Class
B Common Stock and any series of Preferred Stock as a single class of
capital stock of the Corporation under the proposal for purposes of
Section 5.01(a)(i) and Section 5.01(a)(ii) is consistent with and
enhances the limitations on ownership in place under the Current
Certificate of Incorporation. In other words, aggregation of all the
capital stock of the Corporation for purposes of the ownership and
voting limitations is consistent with the policy concerns sought to be
addressed by these provisions of the Current Certificate of
Incorporation and the proposed New Certificate of Incorporation.
Specifically, these ownership and voting limitations ensure that no
single Exchange Member or other person can exercise undue influence
over the Exchange through ownership of a combination of different
classes of stock issued by the Corporation.
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\5\ 15 U.S.C. 78f(b).
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Moreover, the voting limitations contained in Section 5.01(a)(iii)
of the New Certificate of Incorporation are unaffected by the
reclassification of the Corporation's common stock into Class A Common
Stock and Class B Common Stock or the potential issuance of Preferred
Stock in the future. To determine any stockholder's compliance with
such voting limitations, all Class A Common Stock, Non-Voting Class A
Common Stock, Class B Common Stock, Non-Voting Class B Common Stock and
Preferred Stock would be aggregated under the Current Certificate of
Incorporation as well as the proposed New Certificate of Incorporation.
(B) Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act.
(C) Self-Regulatory Organization's Statement on Comments on the
Proposed Rule Change Received From Members, Participants or Others
The Exchange has neither solicited nor received written comments on
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 Exchange 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 proposal 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 No. SR-BATS-2011-033 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 No. SR-BATS-2011-033. This file
number should be included on the subject line if e-mail is used. To
help the Commission process and review your
[[Page 56844]]
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 changes 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 will also 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-BATS-2011-033 and should be submitted on or before October
5, 2011.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\6\
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\6\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-23478 Filed 9-13-11; 8:45 am]
BILLING CODE 8011-01-P
