Self-Regulatory Organizations; Stock Clearing Corporation of Philadelphia; Notice of Filing of Proposed Rule Change With Respect to the Amendment of the By-Laws of Its Parent Corporation, The NASDAQ OMX Group, Inc., 128-132 [2012-31464]
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Federal Register / Vol. 78, No. 1 / Wednesday, January 2, 2013 / Notices
Program Manager, at 301–287–0727, or
by email at kimberly.meyerchambers@nrc.gov. Determinations on
requests for reasonable accommodation
will be made on a case-by-case basis.
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This notice is distributed
electronically to subscribers. If you no
longer wish to receive it, or would like
to be added to the distribution, please
contact the Office of the Secretary,
Washington, DC 20555 (301–415–1969),
or send an email to
darlene.wright@nrc.gov.
Dated: December 27, 2012.
Rochelle C. Bavol,
Policy Coordinator, Office of the Secretary.
[FR Doc. 2012–31613 Filed 12–28–12; 4:15 pm]
BILLING CODE 7590–01–P
SECURITIES AND EXCHANGE
COMMISSION
Proposed Collection; Comment
Request
Upon Written Request Copies Available
From: Securities and Exchange
Commission, Office of Investor
Education and Advocacy,
Washington, DC 20549–0213.
tkelley on DSK3SPTVN1PROD with
Extension: Rule 15c3–4; OMB Control No.
3235–0497, SEC File No. 270–441.
Notice is hereby given that pursuant
to the Paperwork Reduction Act of 1995
(44 U.S.C. 3501 et seq.) (the ‘‘Paperwork
Reduction Act’’), the Securities and
Exchange Commission (the
‘‘Commission’’) is soliciting comments
on the collection of information
summarized below. The Commission
plans to submit this existing collection
of information to the Office of
Management and Budget (‘‘OMB’’) for
extension and approval.
Rule 15c3–4 (17 CFR 240.15c3–4) (the
‘‘Rule’’) under the Securities Exchange
Act of 1934 (15 U.S.C. 78a et seq.) (the
‘‘Exchange Act’’) requires certain
broker-dealers that are registered with
the Commission as OTC derivatives
dealers, or who compute their net
capital charges under Appendix E to
Rule 15c3–1 (17 CFR 240.15c3–1)
(‘‘ANC firms’’), to establish, document,
and maintain a system of internal risk
management controls. The Rule sets
forth the basic elements for an OTC
derivatives dealer or an ANC firm to
consider and include when establishing,
documenting, and reviewing its internal
risk management control system, which
are designed to, among other things,
ensure the integrity of an OTC
derivatives dealer’s or an ANC firm’s
risk measurement, monitoring, and
management process, to clarify
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accountability at the appropriate
organizational level, and to define the
permitted scope of the dealer’s activities
and level of risk. The Rule also requires
that management of an OTC derivatives
dealer or an ANC firm must periodically
review, in accordance with written
procedures, the firm’s business
activities for consistency with its risk
management guidelines.
The staff estimates that the average
amount of time a new OTC derivatives
dealer will spend establishing and
documenting its risk management
control system is 2,000 hours and that,
on average, a registered OTC derivatives
dealer will spend approximately 200
hours each year to maintain (e.g.,
reviewing and updating) its risk
management control system.1 Currently,
four firms are registered with the
Commission as OTC derivatives dealers.
The staff estimates that approximately
four additional OTC derivatives dealers
may become registered within the next
three years. Thus, the estimated
annualized burden would be 800 hours
for the four OTC derivatives dealers
currently registered with the
Commission to maintain their risk
management control systems,2 2,666
hours for the four new OTC derivatives
dealers to establish and document their
risk management control systems,3 and
400 hours for the four new OTC
derivatives dealers to maintain their risk
management control systems.4
Accordingly, the staff estimates the total
annualized burden associated with Rule
15c3–4 for the eight OTC derivatives
dealers will be approximately 3,866
hours annually.
The staff believes that the cost of
complying with Rule 15c3–4 will be
approximately $279 per hour.5 This per
hour cost is based upon an annual
average hourly salary for a compliance
manager who would be responsible for
ensuring compliance with the
requirements of Rule 15c3–4.
1 This
notice does not cover the hour burden
associated with ANC firms, because the hour
burden for ANC firms is included in the Paperwork
Reduction Act collection for Rule 15c3–1, which
requires ANC firms to comply with specific
provisions of Rule 15c3–4 in Appendix E to Rule
15c3–1. See 17 CFR 240.15c3–1(a)(7)(iii), 17 CFR
240.15c3–1e(a)(1)(ii), and 17 CFR 240.15c3–
1e(a)(1)(viii)(C).
2 (200 hours × 4 firms) = 800.
3 (2000 hours × 1.333 firms) = 2,666.
4 (200 hours × 4 firms x/2) = 400 {the number is
divided by two to show an average, since it is
assumed that the four new OTC derivatives dealers
will register in even intervals over the three years}.
5 The $279 per hour salary figure for a compliance
manager is from SIFMA’s Management &
Professional Earnings in the Securities Industry
2011, modified by Commission staff to account for
an 1800-hour work-year and multiplied by 5.35 to
account for bonuses, firm size, employee benefits
and overhead.
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Accordingly, the total annualized cost
for all affected OTC derivatives dealers
is estimated to be $1,078,614.6
Written comments are invited on: (a)
Whether the proposed collection of
information is necessary for the proper
performance of the functions of the
Commission, including whether the
information shall have practical utility;
(b) the accuracy of the Commission’s
estimates of the burden of the proposed
collection of information; (c) ways to
enhance the quality, utility, and clarity
of the information collected; and (d)
ways to minimize the burden of the
collection of information on
respondents, including through the use
of automated collection techniques or
other forms of information technology.
Consideration will be given to
comments and suggestions submitted in
writing within 60 days of this
publication.
The Commission may not conduct or
sponsor a collection of information
unless it displays a currently valid OMB
control number. No person shall be
subject to any penalty for failing to
comply with a collection of information
subject to the Paperwork Reduction Act
that does not display a valid OMB
control number.
Comments should be directed to
Thomas Bayer, Director/Chief
Information Officer, Securities and
Exchange Commission, c/o Remi PavlikSimon, 6432 General Green Way,
Alexandria, Virginia 22312 or send an
email to: PRA_Mailbox@sec.gov.
Dated: December 26, 2012.
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2012–31466 Filed 12–31–12; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–68536; File No. SR–SCCP–
2012–02]
Self-Regulatory Organizations; Stock
Clearing Corporation of Philadelphia;
Notice of Filing of Proposed Rule
Change With Respect to the
Amendment of the By-Laws of Its
Parent Corporation, The NASDAQ OMX
Group, Inc.
December 26, 2012.
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 December
hours × $279 per hour = $1,078,614.
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
6 3,866
1 15
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Federal Register / Vol. 78, No. 1 / Wednesday, January 2, 2013 / Notices
19, 2012, Stock Clearing Corporation of
Philadelphia (‘‘SCCP’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared by SCCP. 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
SCCP proposes a rule change with
respect to the amendment of the by-laws
of its parent corporation, The NASDAQ
OMX Group, Inc. (‘‘NASDAQ OMX’’ or
the ‘‘Corporation’’). The text of the
proposed rule change is available at
https://
nasdaqomxphlx.cchwallstreet.com/
nasdaqomxphlx/sccp/, at SCCP’s
principal office, and at the
Commission’s Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Corporation 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
Corporation 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
tkelley on DSK3SPTVN1PROD with
1. Purpose
NASDAQ OMX is proposing
amendments to provisions of its ByLaws pertaining to the compositional
requirements of the NASDAQ OMX
Board. The changes are primarily
focused on amending the definition of
‘‘Industry Director’’ (and ‘‘Industry
committee member’’) 3 to make the
3 The term ‘‘committee member’’ in the By-Laws
refers to membership in the committees authorized
under Section 4.13 of the By-Laws, such as the
Executive Committee and the Audit Committee.
Under the By-Laws and the Delaware General
Corporation Law, all members of committees with
the power and authority to act on behalf of the
Board in the management of the business and affairs
of NASDAQ OMX must themselves be Directors.
Accordingly, the definitions of ‘‘Industry Director’’
and ‘‘Industry committee member’’ are coterminous
as applied to any member of these committees. The
By-Laws do not presently contemplate any
committees with non-Director members.
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definition less restrictive, but in a
manner that the Corporation believes
will continue to serve the purpose of
ensuring that members and member
organizations of Self-Regulatory
Subsidiaries 4—the self-regulatory
organizations owned by NASDAQ
OMX—do not have disproportionate
influence on its governance. In making
the change, NASDAQ OMX is adapting
concepts already approved by the
Commission in its review of the
Independence Policy of the NYSE
Euronext Board of Directors (the
‘‘Independence Policy’’).5 The proposed
rule change also makes several other
changes to provisions pertaining to the
Board’s compositional requirements and
categorization of Directors.
Definitions
The By-Laws require Directors to be
assigned to certain defined categories,
based on their current and past
affiliations.6 Specifically, Directors may
be categorized as ‘‘Industry Directors,’’
‘‘Non-Industry Directors,’’ ‘‘Public
Directors,’’ and/or ‘‘Staff Directors.’’
Currently, an Industry Director is
defined as a Director who:
(1) Is or has served in the prior three
years as an officer, director, or employee
of a broker or dealer, excluding an
outside director or a director not
engaged in the day-to-day management
of a broker or dealer;
(2) Is an officer, director (excluding an
outside director), or employee of an
entity that owns more than ten percent
of the equity of a broker or dealer, and
the broker or dealer accounts for more
than five percent of the gross revenues
received by the consolidated entity;
(3) Owns more than five percent of
the equity securities of any broker or
dealer, whose investments in brokers or
dealers exceed ten percent of his or her
net worth, or whose ownership interest
otherwise permits him or her to be
engaged in the day-to-day management
of a broker or dealer;
(4) Provides professional services to
brokers or dealers, and such services
constitute 20 percent or more of the
4 The By-Laws define each of The NASDAQ Stock
Market LLC (‘‘NASDAQ’’), NASDAQ OMX BX, Inc.
(‘‘BX’’), NASDAQ OMX PHLX LLC (‘‘Phlx’’), the
Boston Stock Exchange Clearing Corporation
(‘‘BSECC’’), and SCCP as a ‘‘Self-Regulatory
Subsidiary.’’
5 Securities Exchange Act Release No. 51217
(February 16, 2005), 70 FR 9688 (February 28, 2005)
(SR–NYSE–2004–54); Securities Exchange Act
Release No. 55293 (February 14, 2007), 72 FR 8033
(February 22, 2007) (SR–NYSE–2006–120);
Securities Exchange Act Release No. 67564 (August
1, 2012), 77 FR 47161) (SR–NYSE–2012–17; SR–
NYSEArca–2012–59; SR–NYSEMKT–2012–07).
6 As discussed above, the categories also govern
the classification of members of committees of
NASDAQ OMX, as provided for in the By-Laws.
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129
professional revenues received by the
Director or 20 percent or more of the
gross revenues received by the
Director’s firm or partnership;
(5) Provides professional services to a
director, officer, or employee of a
broker, dealer, or corporation that owns
50 percent or more of the voting stock
of a broker or dealer, and such services
relate to the director’s, officer’s, or
employee’s professional capacity and
constitute 20 percent or more of the
professional revenues received by the
Director or 20 percent or more of the
gross revenues received by the
Director’s firm or partnership; or
(6) Has a consulting or employment
relationship with or provides
professional services to the Corporation
or any affiliate 7 thereof (including any
Self-Regulatory Subsidiary) or to the
Financial Industry Regulatory Authority
(‘‘FINRA’’) (or any predecessor) or has
had any such relationship or provided
any such services at any time within the
prior three years. Thus, the current
definition focuses on a Director’s
affiliation with any broker-dealer,
regardless of whether the broker-dealer
is a member or member organization of
a Self-Regulatory Subsidiary. The
definition also features a three-year
‘‘look-back’’ period during which a
Director formerly associated with a
broker-dealer would continue to be
deemed an Industry Director. In lieu of
this definition, NASDAQ OMX is
proposing to adopt a definition that
focuses on whether a Director is
affiliated with a member or a member
organization of a Self-Regulatory
Subsidiary. Under the revised
definition, an Industry Director will be
defined as a Director who:
(1) Is, or within the last year was, or
has an immediate family member 8 who
is, or within the last year was, a member
of a Self-Regulatory Subsidiary; 9
(2) Is, or within the last year was,
employed by a member or a member
7 NASDAQ OMX is adding a definition of
‘‘affiliate’’ as follows: ‘‘An ‘affiliate’ of, or a person
‘affiliated’ with, a specified person, is a person that
directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is
under common control with, the person specified.’’
The definition is identical to the definition of the
term in SEC Rule 12b–2, 17 CFR 240.12b–2.
8 NASDAQ OMX is adding a definition of
‘‘immediate family member’’ as follows:
‘‘ ‘Immediate family member’ means a person’s
spouse, parents, children and siblings, whether by
blood, marriage or adoption, or anyone residing in
such person’s home.’’ The definition is identical to
the definition of ‘‘family member’’ contained in
NASDAQ listing standards, as provided in
NASDAQ Rule 5605.
9 This provision would apply to an individual
that was a member of Phlx, the only Self-Regulatory
Subsidiary that allows natural persons to become
members.
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organization of a Self-Regulatory
Subsidiary; 10
(3) Has an immediate family member
who is, or within the last year was, an
executive officer of a member or a
member organization 11 of a SelfRegulatory Subsidiary;
(4) Has within the last year received
from any member or member
organization of a Self-Regulatory
Subsidiary more than $100,000 per year
in direct compensation, or received
from such members or member
organizations in the aggregate an
amount of direct compensation that in
any one year is more than 10 percent of
the Director’s annual gross
compensation for such year, excluding
in each case director and committee fees
and pension or other forms of deferred
compensation for prior service
(provided such compensation is not
contingent in any way on continued
service); or
(5) Is affiliated, directly or indirectly,
with a member or member organization
of a Self-Regulatory Subsidiary.
NASDAQ OMX believes that the
change is warranted to ensure that the
definition of Industry Director is
appropriately focused on the mitigation
of potential conflicts of interest
associated with Directors who are
currently or were very recently
employed by members or member
organizations of Self-Regulatory
Subsidiaries, or that otherwise have
material affiliations with such members
or member organizations. The current
definition covers individuals who are
employed by broker-dealers that are not
members of Self-Regulatory
Subsidiaries, or who retired from
service at a broker-dealer more than one,
but less than three years in the past. The
Corporation believes that by deeming
such potential Directors to be Industry
Directors, the current By-Laws
unnecessarily restrict highly qualified
individuals with extensive knowledge
of the financial services industry from
serving on the Board.
In addition to this change, NASDAQ
OMX is also proposing the following
additional changes to the definitions
applicable to categories of Directors:
(1) NASDAQ OMX proposes a new
definition of ‘‘Staff Director.’’ Currently,
the definition of ‘‘Staff Director’’ is
10 A broker-dealer that is admitted to membership
in Phlx is referred to as a ‘‘member organization;’’
broker-dealers admitted to membership in the other
Self-Regulatory Subsidiaries are referred to as
‘‘members.’’
11 An ‘‘Executive Officer’’ of a member or member
organization means those officers covered in Rule
16a–1(f) under the Act, as if the member or member
organization were an issuer within the meaning of
such Rule. 17 CFR 240.16a–1(f).
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included within the definition of
‘‘Industry Director,’’ and is defined as
‘‘any two officers of the Corporation,
selected at the sole discretion of the
Board, amongst those officers who may
be serving as Directors.’’ By virtue of
being designated as Staff Directors,
these Directors are not considered to be
Industry Directors for purposes of the
compositional requirements of the ByLaws. Instead, NASDAQ OMX proposes
a separate definition of ‘‘Staff Director’’
as ‘‘an officer of the Corporation that is
serving as a Director.’’ 12 As discussed
below, however, Section 4.3 of the ByLaws is to be amended to provide that
only one Staff Director may serve on the
Board, unless the Board consists of ten
or more Directors, in which case no
more than two Staff Directors may serve.
Thus, the change will further restrict the
number of possible Staff Directors in
instances where the Board is smaller
than ten Directors, while retaining the
current limit for a larger Board.
(2) NASDAQ OMX is adopting a new
definition of ‘‘Issuer Director’’ and
‘‘Issuer committee member.’’ The ByLaws currently provide that the number
of ‘‘Non-Industry Directors’’ (i.e.,
Directors who are not Industry
Directors) must equal or exceed the
number of Industry Directors, and shall
include at least one ‘‘issuer
representative,’’ unless the Board
consists of ten or more Directors, in
which case it must include at least two
issuer representatives. The Corporation
believes that requiring the
representation of issuers on the Board is
consistent with the goal of promoting a
diversity of viewpoints and skills among
Directors and the requirement of Section
6(b)(3) of the Act 13 to provide for
representation of issuers among the
directors of a national securities
exchange. The term ‘‘issuer
representative’’ is not directly defined
in the By-Laws, but is implicitly defined
in the definition of ‘‘Non-Industry
Director’’ as ‘‘an officer, director, or
employee of an issuer of securities listed
on a national securities exchange
operated by any Self-Regulatory
Subsidiary.’’ The new proposed
definition is ‘‘a Director (excluding any
Staff Director) or committee member
who is an officer or employee of an
issuer of securities listed on a national
securities exchange operated by any
12 The definition of ‘‘Industry Director’’ will
continue to exclude Staff Directors, who might
otherwise be considered Industry Directors by
virtue of affiliation with NASDAQ Exchange
Services LLC and NASDAQ Options Services, LLC,
registered broker-dealers that are members or
NASDAQ and BX and member organizations of
Phlx.
13 15 U.S.C. 78f(b)(3).
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Self-Regulatory Subsidiary, excluding
any Director or committee member who
is a director of such an issuer but is not
also an officer or employee of such an
issuer.’’ The exclusion of Staff Directors
from the definition is necessary because
NASDAQ OMX is listed on NASDAQ,
but the purposes of the By-Laws in
requiring issuer representation to
promote a diversity of viewpoints
among Directors would not be well
served by deeming Staff Directors also
to be Issuer Directors. The definition is
also being changed to exclude persons
who are directors of issuers but not also
officers or employees. This change is
intended to make it clear that a Director
is not barred from being considered a
Public Director 14 merely because the
Director serves as an independent
director of another listed company.
(3) The definition of ‘‘Public Director’’
and ‘‘Public committee member’’ is
being restated as follows: ‘‘a Director or
committee member who (1) Is not an
Industry Director or Industry committee
member, (2) is not an Issuer Director or
Issuer committee member, and (3) has
no material business relationship with a
member or member organization of a
Self-Regulatory Subsidiary, the
Corporation or its affiliates, or FINRA.’’
The definition currently covers a person
who ‘‘has no material business
relationship with a broker or dealer, the
Corporation or its affiliates, or FINRA.’’
Thus, the changes make it clear that any
Industry Director or Issuer Director
would not be considered a Public
Director. As noted above, however, an
independent director of an issuer of
securities listed on NASDAQ could be
considered a Public Director. In
addition, in keeping with the change to
the definition of Industry Director
discussed above, the final clause of the
definition is being revised to focus on
the existence of a material business
relationship with a member or member
organization of a Self-Regulatory
Subsidiary, rather than any broker or
dealer. Thus, for example, a Director
that had a material business relationship
with a non-U.S. broker or dealer that
was not a member or a member
organization of a Self-Regulatory
Subsidiary might be eligible to be a
Public Director.
(4) The definition of ‘‘Non-Industry
Director’’ or ‘‘Non-Industry committee
member’’ is proposed to be amended to
cover any ‘‘Director (excluding any Staff
Director) or committee member who is
(1) A Public Director or Public
committee member; (2) an Issuer
Director or Issuer committee member; or
14 The definition of Public Director is discussed
below.
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Federal Register / Vol. 78, No. 1 / Wednesday, January 2, 2013 / Notices
(3) any other individual who would not
be an Industry Director or Industry
committee member.’’ The revised
definition is generally consistent with
the current definition, but reflects the
adoption of a definition for ‘‘Issuer
Director or Issuer committee member.’’
(5) NASDAQ OMX is making
conforming changes to the letter
designations of paragraphs in Article I
of the By-Laws.
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Qualifications of Directors
NASDAQ OMX is proposing to amend
Section 4.3 of the By-Laws, which
governs the qualifications and
compositional requirements of the
Board of Directors, to (i) increase the
required number of Public Directors
from one to two, (ii) replace the
requirement to include at least one
issuer representative (or at least two
issuer representatives if the Board
consists of ten or more Directors) with
a requirement to include at least one,
but no more than two, Issuer Directors,
and (iii) provide that the number of Staff
Directors may not exceed one, unless
the Board consists of ten or more
Directors, in which case the number
may not exceed two. The section will
continue to require that the number of
Non-Industry Directors equals or
exceeds the number of Industry
Directors. Although these changes will
not significantly modify the Board’s
compositional requirements, they will
continue to ensure a diversity of
representation among Industry, Staff,
Issuer, and Public Directors, will place
more stringent caps on the number of
Issuer and Staff Directors, and will
increase the requirement for Public
Directors. NASDAQ OMX also proposes
to make a conforming change to add the
term ‘‘Issuer Director’’ to Section 4.8
and Section 4.13(h), which govern the
filling of vacancies on the Board and the
determination of Directors’
qualifications by NASDAQ OMX’s
Secretary.
The changes to the compositional
requirements imposed specifically by
the By-Laws do not alter in any respect
the compositional requirements
imposed by NASDAQ listing standards
on NASDAQ OMX as a public company.
Specifically, NASDAQ Rule 5605
requires that the board of directors of a
company listed on NASDAQ must have
a majority of directors that are
‘‘independent’’ within the meaning of
that rule. As provided in NASDAQ Rule
5605(a)(2) with respect to a company
listed on NASDAQ (a ‘‘Company’’),
‘‘ ‘Independent Director’ means a person
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other than an Executive Officer 15 or
employee of the Company or any other
individual having a relationship which,
in the opinion of the Company’s board
of directors, would interfere with the
exercise of independent judgment in
carrying out the responsibilities of a
director.’’ The rule goes on to provide
that directors having certain defined
relationships with a Company may not
be considered independent. Thus, while
Staff Directors are clearly not
independent within the meaning of Rule
5605, other Directors may or may not be
considered independent, depending on
the specific facts of their relationship to
NASDAQ OMX. The proposed rule
change does not alter in any respect the
obligations of the NASDAQ OMX Board
under NASDAQ Rule 5605.
Composition of Executive Committee
NASDAQ OMX is proposing a minor
amendment to the compositional
requirements of its Executive
Committee. Currently, Section 4.13(d) of
the By-Laws provides that the
percentage of Public Directors on the
Executive Committee must be at least as
great as the percentage of Public
Directors on the whole Board. As noted
above, however, the By-Laws currently
require only one Public Director on the
whole Board (a requirement that
NASDAQ OMX is proposing to raise to
two Public Directors). Thus, the ByLaws currently reflect a standard under
which voluntary inclusion of additional
Public Directors on the full Board
translates into a requirement to include
ever increasing numbers of Public
Directors on the Executive Committee,
even though the requirements for the
full Board itself may be satisfied with
only one Public Director. Accordingly,
NASDAQ OMX is proposing to make
the requirements consistent by requiring
at least two Public Directors on the
Executive Committee.
Composition of the Audit Committee
Earlier this year, the Commission
approved changes to the provisions of
NASDAQ OMX’s By-Laws pertaining to
the composition of the Management
Compensation Committee of its Board of
Directors. NASDAQ OMX is now
proposing comparable changes to the
compositional requirements of its Audit
Committee. Specifically, NASDAQ
OMX is proposing to amend Section
4.13(g) to replace a requirement that the
Audit Committee be composed of a
majority of Non-Industry Directors with
a requirement that the number of Non15 NASDAQ Rule 5605(a)(1) provides that
‘‘ ‘Executive Officer’ means those officers covered in
Rule 16a–1(f) under the Act.’’ 17 CFR 240.16a–1(f).
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131
Industry Directors on the committee
equal or exceed the number of Industry
Directors. Thus, in the case of a
committee composed of four Directors,
the current By-Law provides that only
one Director may be an Industry
Director, while the amended By-Law
would allow up to two Directors to be
Industry Directors. The proposed
compositional requirement for the
committee with regard to the balance
between Industry Directors and NonIndustry Directors would be the same as
that already provided for in the By-Laws
with respect to the Executive
Committee, the Nominating and
Governance Committee, the
Management Compensation Committee,
and the full Board of Directors.
The Corporation believes that the
change will provide greater flexibility to
NASDAQ OMX with regard to
populating a committee that includes
Directors with relevant expertise and
that is not excessively large in relation
to the size of the full Board of Directors,
while continuing to ensure that
Directors associated with members and
member organizations of the SelfRegulatory Subsidiaries do not exert
disproportionate influence of the
governance of NASDAQ OMX. As
required by Section 10A of the Act,16
SEC Rule 10A–3 thereunder,17 and
NASDAQ Rule 5605(c), the committee
would continue at all times to be
composed solely of Directors who are
independent within the meaning of
those provisions.
2. Statutory Basis
The Corporation believes that that the
proposed rule change is consistent with
provisions of Section 17A of the Act.18
In particular, the Corporation believes
that the change to the definition of
Industry Director is warranted to ensure
that it is appropriately focused on the
mitigation of potential conflicts of
interest associated with Directors who
are currently or were very recently
employed by members or member
organizations of Self-Regulatory
Subsidiaries, or that otherwise have
material affiliations with such members
or member organizations, without
unnecessarily restricting highly
qualified individuals with extensive
knowledge of the financial services
industry from serving on the Board. The
Corporation further believes that the
other definitional changes and the
changes to the compositional
requirements of the NASDAQ OMX
Board and the Executive Committee will
16 15
U.S.C. 78j–1.
CFR 240.10A–3.
18 15 U.S.C. 78q–1.
17 17
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Federal Register / Vol. 78, No. 1 / Wednesday, January 2, 2013 / Notices
enhance the clarity of these provisions
and promote a diversity of backgrounds
and viewpoints on the NASDAQ OMX
Board. The Corporation believes that
these changes will collectively promote
the capacity of the NASDAQ OMX
Board to fulfill its responsibilities.
With respect to the proposed changes
to the Audit Committee’s compositional
requirements, the Corporation believes
that the change will provide greater
flexibility to NASDAQ OMX with regard
to populating a committee that includes
Directors with relevant expertise and
that is not excessively large in relation
to the size of the full Board of Directors,
while continuing to ensure that
Directors associated with members and
member organizations of Self-Regulatory
Subsidiaries do not exert
disproportionate influence of the
governance of NASDAQ OMX. The
change would not affect NASDAQ
OMX’s compliance with Section 10A of
the Act,19 SEC Rule 10A–3
thereunder,20 and NASDAQ Rule
5605(c), as the committee would
continue at all times to be composed
solely of Directors who are independent
within the meaning of those provisions.
(B) Self-Regulatory Organization’s
Statement on Burden on Competition
The Corporation does not believe that
the proposed rule change will impose
any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act. Specifically,
the Corporation believes that the ByLaws of its holding company, NASDAQ
OMX, do not directly affect competition,
since they do not affect the availability
or pricing of goods and services.
Moreover, the Corporation is not
currently operational, so the change will
not in any event have any impact on its
competitive standing. To the extent that
the proposed change to the By-Laws
may be construed to have any bearing
on competition, the Corporation
believes that the change will promote
competition, since the change will allow
NASDAQ OMX to have greater
flexibility in the selection of its
Directors in a manner similar to the
flexibility available to NYSE Euronext
under its Independence Policy.
tkelley on DSK3SPTVN1PROD with
(C) Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants or Others
Written comments were neither
solicited nor received.
19 15
U.S.C. 78j–1.
20 17 CFR 240.10A–3.
VerDate Mar<15>2010
16:42 Dec 31, 2012
Jkt 229001
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
up to 90 days (i) as the Commission may
designate 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
the 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 (https://www.sec.gov/
rules/sro.shtml) or
• Send an email to rulecomments@sec.gov. Please include File
Number SR–SCCP–2012–02 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–SCCP–2012–02. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Section, 100 F Street NE.,
Washington, DC 20549, on official
business days between the hours of
PO 00000
Frm 00050
Fmt 4703
Sfmt 4703
10:00 a.m. and 3:00 p.m. Copies of such
filing also will be available for
inspection and copying at the principal
offices of SCCP. 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–SCCP–2012–02, and should
be submitted on or before January 23,
2012.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.21
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2012–31464 Filed 12–31–12; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–68537; File No. SR–
BSECC–2012–002]
Self-Regulatory Organizations; Boston
Stock Exchange Clearing Corporation;
Notice of Filing of Proposed Rule
Change With Respect to the
Amendment of the By-Laws of Its
Parent Corporation, The NASDAQ OMX
Group, Inc.
December 26, 2012.
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 December
19, 2012, Boston Stock Exchange
Clearing Corporation (‘‘BSECC’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I, II, and III below, which Items
have been prepared by BSECC. 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
BSECC proposes a rule change with
respect to the amendment of the by-laws
of its parent corporation, The NASDAQ
OMX Group, Inc. (‘‘NASDAQ OMX’’ or
the ‘‘Corporation’’). The text of the
proposed rule change is available at
https://nasdaqomxbx.cchwallstreet.com/,
at BSECC’s principal office, and at the
Commission’s Public Reference Room.
21 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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]]>Agencies
[Federal Register Volume 78, Number 1 (Wednesday, January 2, 2013)]
[Notices]
[Pages 128-132]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-31464]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-68536; File No. SR-SCCP-2012-02]
Self-Regulatory Organizations; Stock Clearing Corporation of
Philadelphia; Notice of Filing of Proposed Rule Change With Respect to
the Amendment of the By-Laws of Its Parent Corporation, The NASDAQ OMX
Group, Inc.
December 26, 2012.
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 December
[[Page 129]]
19, 2012, Stock Clearing Corporation of Philadelphia (``SCCP'') filed
with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I, II, and III below, which
Items have been prepared by SCCP. 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
SCCP proposes a rule change with respect to the amendment of the
by-laws of its parent corporation, The NASDAQ OMX Group, Inc. (``NASDAQ
OMX'' or the ``Corporation''). The text of the proposed rule change is
available at https://nasdaqomxphlx.cchwallstreet.com/nasdaqomxphlx/sccp/
, at SCCP's principal office, and at the Commission's Public Reference
Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Corporation 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 Corporation 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
NASDAQ OMX is proposing amendments to provisions of its By-Laws
pertaining to the compositional requirements of the NASDAQ OMX Board.
The changes are primarily focused on amending the definition of
``Industry Director'' (and ``Industry committee member'') \3\ to make
the definition less restrictive, but in a manner that the Corporation
believes will continue to serve the purpose of ensuring that members
and member organizations of Self-Regulatory Subsidiaries \4\--the self-
regulatory organizations owned by NASDAQ OMX--do not have
disproportionate influence on its governance. In making the change,
NASDAQ OMX is adapting concepts already approved by the Commission in
its review of the Independence Policy of the NYSE Euronext Board of
Directors (the ``Independence Policy'').\5\ The proposed rule change
also makes several other changes to provisions pertaining to the
Board's compositional requirements and categorization of Directors.
---------------------------------------------------------------------------
\3\ The term ``committee member'' in the By-Laws refers to
membership in the committees authorized under Section 4.13 of the
By-Laws, such as the Executive Committee and the Audit Committee.
Under the By-Laws and the Delaware General Corporation Law, all
members of committees with the power and authority to act on behalf
of the Board in the management of the business and affairs of NASDAQ
OMX must themselves be Directors. Accordingly, the definitions of
``Industry Director'' and ``Industry committee member'' are
coterminous as applied to any member of these committees. The By-
Laws do not presently contemplate any committees with non-Director
members.
\4\ The By-Laws define each of The NASDAQ Stock Market LLC
(``NASDAQ''), NASDAQ OMX BX, Inc. (``BX''), NASDAQ OMX PHLX LLC
(``Phlx''), the Boston Stock Exchange Clearing Corporation
(``BSECC''), and SCCP as a ``Self-Regulatory Subsidiary.''
\5\ Securities Exchange Act Release No. 51217 (February 16,
2005), 70 FR 9688 (February 28, 2005) (SR-NYSE-2004-54); Securities
Exchange Act Release No. 55293 (February 14, 2007), 72 FR 8033
(February 22, 2007) (SR-NYSE-2006-120); Securities Exchange Act
Release No. 67564 (August 1, 2012), 77 FR 47161) (SR-NYSE-2012-17;
SR-NYSEArca-2012-59; SR-NYSEMKT-2012-07).
---------------------------------------------------------------------------
Definitions
The By-Laws require Directors to be assigned to certain defined
categories, based on their current and past affiliations.\6\
Specifically, Directors may be categorized as ``Industry Directors,''
``Non-Industry Directors,'' ``Public Directors,'' and/or ``Staff
Directors.'' Currently, an Industry Director is defined as a Director
who:
---------------------------------------------------------------------------
\6\ As discussed above, the categories also govern the
classification of members of committees of NASDAQ OMX, as provided
for in the By-Laws.
---------------------------------------------------------------------------
(1) Is or has served in the prior three years as an officer,
director, or employee of a broker or dealer, excluding an outside
director or a director not engaged in the day-to-day management of a
broker or dealer;
(2) Is an officer, director (excluding an outside director), or
employee of an entity that owns more than ten percent of the equity of
a broker or dealer, and the broker or dealer accounts for more than
five percent of the gross revenues received by the consolidated entity;
(3) Owns more than five percent of the equity securities of any
broker or dealer, whose investments in brokers or dealers exceed ten
percent of his or her net worth, or whose ownership interest otherwise
permits him or her to be engaged in the day-to-day management of a
broker or dealer;
(4) Provides professional services to brokers or dealers, and such
services constitute 20 percent or more of the professional revenues
received by the Director or 20 percent or more of the gross revenues
received by the Director's firm or partnership;
(5) Provides professional services to a director, officer, or
employee of a broker, dealer, or corporation that owns 50 percent or
more of the voting stock of a broker or dealer, and such services
relate to the director's, officer's, or employee's professional
capacity and constitute 20 percent or more of the professional revenues
received by the Director or 20 percent or more of the gross revenues
received by the Director's firm or partnership; or
(6) Has a consulting or employment relationship with or provides
professional services to the Corporation or any affiliate \7\ thereof
(including any Self-Regulatory Subsidiary) or to the Financial Industry
Regulatory Authority (``FINRA'') (or any predecessor) or has had any
such relationship or provided any such services at any time within the
prior three years. Thus, the current definition focuses on a Director's
affiliation with any broker-dealer, regardless of whether the broker-
dealer is a member or member organization of a Self-Regulatory
Subsidiary. The definition also features a three-year ``look-back''
period during which a Director formerly associated with a broker-dealer
would continue to be deemed an Industry Director. In lieu of this
definition, NASDAQ OMX is proposing to adopt a definition that focuses
on whether a Director is affiliated with a member or a member
organization of a Self-Regulatory Subsidiary. Under the revised
definition, an Industry Director will be defined as a Director who:
---------------------------------------------------------------------------
\7\ NASDAQ OMX is adding a definition of ``affiliate'' as
follows: ``An `affiliate' of, or a person `affiliated' with, a
specified person, is a person that directly, or indirectly through
one or more intermediaries, controls, or is controlled by, or is
under common control with, the person specified.'' The definition is
identical to the definition of the term in SEC Rule 12b-2, 17 CFR
240.12b-2.
---------------------------------------------------------------------------
(1) Is, or within the last year was, or has an immediate family
member \8\ who is, or within the last year was, a member of a Self-
Regulatory Subsidiary; \9\
---------------------------------------------------------------------------
\8\ NASDAQ OMX is adding a definition of ``immediate family
member'' as follows: `` `Immediate family member' means a person's
spouse, parents, children and siblings, whether by blood, marriage
or adoption, or anyone residing in such person's home.'' The
definition is identical to the definition of ``family member''
contained in NASDAQ listing standards, as provided in NASDAQ Rule
5605.
\9\ This provision would apply to an individual that was a
member of Phlx, the only Self-Regulatory Subsidiary that allows
natural persons to become members.
---------------------------------------------------------------------------
(2) Is, or within the last year was, employed by a member or a
member
[[Page 130]]
organization of a Self-Regulatory Subsidiary; \10\
---------------------------------------------------------------------------
\10\ A broker-dealer that is admitted to membership in Phlx is
referred to as a ``member organization;'' broker-dealers admitted to
membership in the other Self-Regulatory Subsidiaries are referred to
as ``members.''
---------------------------------------------------------------------------
(3) Has an immediate family member who is, or within the last year
was, an executive officer of a member or a member organization \11\ of
a Self-Regulatory Subsidiary;
---------------------------------------------------------------------------
\11\ An ``Executive Officer'' of a member or member organization
means those officers covered in Rule 16a-1(f) under the Act, as if
the member or member organization were an issuer within the meaning
of such Rule. 17 CFR 240.16a-1(f).
---------------------------------------------------------------------------
(4) Has within the last year received from any member or member
organization of a Self-Regulatory Subsidiary more than $100,000 per
year in direct compensation, or received from such members or member
organizations in the aggregate an amount of direct compensation that in
any one year is more than 10 percent of the Director's annual gross
compensation for such year, excluding in each case director and
committee fees and pension or other forms of deferred compensation for
prior service (provided such compensation is not contingent in any way
on continued service); or
(5) Is affiliated, directly or indirectly, with a member or member
organization of a Self-Regulatory Subsidiary.
NASDAQ OMX believes that the change is warranted to ensure that the
definition of Industry Director is appropriately focused on the
mitigation of potential conflicts of interest associated with Directors
who are currently or were very recently employed by members or member
organizations of Self-Regulatory Subsidiaries, or that otherwise have
material affiliations with such members or member organizations. The
current definition covers individuals who are employed by broker-
dealers that are not members of Self-Regulatory Subsidiaries, or who
retired from service at a broker-dealer more than one, but less than
three years in the past. The Corporation believes that by deeming such
potential Directors to be Industry Directors, the current By-Laws
unnecessarily restrict highly qualified individuals with extensive
knowledge of the financial services industry from serving on the Board.
In addition to this change, NASDAQ OMX is also proposing the
following additional changes to the definitions applicable to
categories of Directors:
(1) NASDAQ OMX proposes a new definition of ``Staff Director.''
Currently, the definition of ``Staff Director'' is included within the
definition of ``Industry Director,'' and is defined as ``any two
officers of the Corporation, selected at the sole discretion of the
Board, amongst those officers who may be serving as Directors.'' By
virtue of being designated as Staff Directors, these Directors are not
considered to be Industry Directors for purposes of the compositional
requirements of the By-Laws. Instead, NASDAQ OMX proposes a separate
definition of ``Staff Director'' as ``an officer of the Corporation
that is serving as a Director.'' \12\ As discussed below, however,
Section 4.3 of the By-Laws is to be amended to provide that only one
Staff Director may serve on the Board, unless the Board consists of ten
or more Directors, in which case no more than two Staff Directors may
serve. Thus, the change will further restrict the number of possible
Staff Directors in instances where the Board is smaller than ten
Directors, while retaining the current limit for a larger Board.
---------------------------------------------------------------------------
\12\ The definition of ``Industry Director'' will continue to
exclude Staff Directors, who might otherwise be considered Industry
Directors by virtue of affiliation with NASDAQ Exchange Services LLC
and NASDAQ Options Services, LLC, registered broker-dealers that are
members or NASDAQ and BX and member organizations of Phlx.
---------------------------------------------------------------------------
(2) NASDAQ OMX is adopting a new definition of ``Issuer Director''
and ``Issuer committee member.'' The By-Laws currently provide that the
number of ``Non-Industry Directors'' (i.e., Directors who are not
Industry Directors) must equal or exceed the number of Industry
Directors, and shall include at least one ``issuer representative,''
unless the Board consists of ten or more Directors, in which case it
must include at least two issuer representatives. The Corporation
believes that requiring the representation of issuers on the Board is
consistent with the goal of promoting a diversity of viewpoints and
skills among Directors and the requirement of Section 6(b)(3) of the
Act \13\ to provide for representation of issuers among the directors
of a national securities exchange. The term ``issuer representative''
is not directly defined in the By-Laws, but is implicitly defined in
the definition of ``Non-Industry Director'' as ``an officer, director,
or employee of an issuer of securities listed on a national securities
exchange operated by any Self-Regulatory Subsidiary.'' The new proposed
definition is ``a Director (excluding any Staff Director) or committee
member who is an officer or employee of an issuer of securities listed
on a national securities exchange operated by any Self-Regulatory
Subsidiary, excluding any Director or committee member who is a
director of such an issuer but is not also an officer or employee of
such an issuer.'' The exclusion of Staff Directors from the definition
is necessary because NASDAQ OMX is listed on NASDAQ, but the purposes
of the By-Laws in requiring issuer representation to promote a
diversity of viewpoints among Directors would not be well served by
deeming Staff Directors also to be Issuer Directors. The definition is
also being changed to exclude persons who are directors of issuers but
not also officers or employees. This change is intended to make it
clear that a Director is not barred from being considered a Public
Director \14\ merely because the Director serves as an independent
director of another listed company.
---------------------------------------------------------------------------
\13\ 15 U.S.C. 78f(b)(3).
\14\ The definition of Public Director is discussed below.
---------------------------------------------------------------------------
(3) The definition of ``Public Director'' and ``Public committee
member'' is being restated as follows: ``a Director or committee member
who (1) Is not an Industry Director or Industry committee member, (2)
is not an Issuer Director or Issuer committee member, and (3) has no
material business relationship with a member or member organization of
a Self-Regulatory Subsidiary, the Corporation or its affiliates, or
FINRA.'' The definition currently covers a person who ``has no material
business relationship with a broker or dealer, the Corporation or its
affiliates, or FINRA.'' Thus, the changes make it clear that any
Industry Director or Issuer Director would not be considered a Public
Director. As noted above, however, an independent director of an issuer
of securities listed on NASDAQ could be considered a Public Director.
In addition, in keeping with the change to the definition of Industry
Director discussed above, the final clause of the definition is being
revised to focus on the existence of a material business relationship
with a member or member organization of a Self-Regulatory Subsidiary,
rather than any broker or dealer. Thus, for example, a Director that
had a material business relationship with a non-U.S. broker or dealer
that was not a member or a member organization of a Self-Regulatory
Subsidiary might be eligible to be a Public Director.
(4) The definition of ``Non-Industry Director'' or ``Non-Industry
committee member'' is proposed to be amended to cover any ``Director
(excluding any Staff Director) or committee member who is (1) A Public
Director or Public committee member; (2) an Issuer Director or Issuer
committee member; or
[[Page 131]]
(3) any other individual who would not be an Industry Director or
Industry committee member.'' The revised definition is generally
consistent with the current definition, but reflects the adoption of a
definition for ``Issuer Director or Issuer committee member.''
(5) NASDAQ OMX is making conforming changes to the letter
designations of paragraphs in Article I of the By-Laws.
Qualifications of Directors
NASDAQ OMX is proposing to amend Section 4.3 of the By-Laws, which
governs the qualifications and compositional requirements of the Board
of Directors, to (i) increase the required number of Public Directors
from one to two, (ii) replace the requirement to include at least one
issuer representative (or at least two issuer representatives if the
Board consists of ten or more Directors) with a requirement to include
at least one, but no more than two, Issuer Directors, and (iii) provide
that the number of Staff Directors may not exceed one, unless the Board
consists of ten or more Directors, in which case the number may not
exceed two. The section will continue to require that the number of
Non-Industry Directors equals or exceeds the number of Industry
Directors. Although these changes will not significantly modify the
Board's compositional requirements, they will continue to ensure a
diversity of representation among Industry, Staff, Issuer, and Public
Directors, will place more stringent caps on the number of Issuer and
Staff Directors, and will increase the requirement for Public
Directors. NASDAQ OMX also proposes to make a conforming change to add
the term ``Issuer Director'' to Section 4.8 and Section 4.13(h), which
govern the filling of vacancies on the Board and the determination of
Directors' qualifications by NASDAQ OMX's Secretary.
The changes to the compositional requirements imposed specifically
by the By-Laws do not alter in any respect the compositional
requirements imposed by NASDAQ listing standards on NASDAQ OMX as a
public company. Specifically, NASDAQ Rule 5605 requires that the board
of directors of a company listed on NASDAQ must have a majority of
directors that are ``independent'' within the meaning of that rule. As
provided in NASDAQ Rule 5605(a)(2) with respect to a company listed on
NASDAQ (a ``Company''), `` `Independent Director' means a person other
than an Executive Officer \15\ or employee of the Company or any other
individual having a relationship which, in the opinion of the Company's
board of directors, would interfere with the exercise of independent
judgment in carrying out the responsibilities of a director.'' The rule
goes on to provide that directors having certain defined relationships
with a Company may not be considered independent. Thus, while Staff
Directors are clearly not independent within the meaning of Rule 5605,
other Directors may or may not be considered independent, depending on
the specific facts of their relationship to NASDAQ OMX. The proposed
rule change does not alter in any respect the obligations of the NASDAQ
OMX Board under NASDAQ Rule 5605.
---------------------------------------------------------------------------
\15\ NASDAQ Rule 5605(a)(1) provides that `` `Executive Officer'
means those officers covered in Rule 16a-1(f) under the Act.'' 17
CFR 240.16a-1(f).
---------------------------------------------------------------------------
Composition of Executive Committee
NASDAQ OMX is proposing a minor amendment to the compositional
requirements of its Executive Committee. Currently, Section 4.13(d) of
the By-Laws provides that the percentage of Public Directors on the
Executive Committee must be at least as great as the percentage of
Public Directors on the whole Board. As noted above, however, the By-
Laws currently require only one Public Director on the whole Board (a
requirement that NASDAQ OMX is proposing to raise to two Public
Directors). Thus, the By-Laws currently reflect a standard under which
voluntary inclusion of additional Public Directors on the full Board
translates into a requirement to include ever increasing numbers of
Public Directors on the Executive Committee, even though the
requirements for the full Board itself may be satisfied with only one
Public Director. Accordingly, NASDAQ OMX is proposing to make the
requirements consistent by requiring at least two Public Directors on
the Executive Committee.
Composition of the Audit Committee
Earlier this year, the Commission approved changes to the
provisions of NASDAQ OMX's By-Laws pertaining to the composition of the
Management Compensation Committee of its Board of Directors. NASDAQ OMX
is now proposing comparable changes to the compositional requirements
of its Audit Committee. Specifically, NASDAQ OMX is proposing to amend
Section 4.13(g) to replace a requirement that the Audit Committee be
composed of a majority of Non-Industry Directors with a requirement
that the number of Non-Industry Directors on the committee equal or
exceed the number of Industry Directors. Thus, in the case of a
committee composed of four Directors, the current By-Law provides that
only one Director may be an Industry Director, while the amended By-Law
would allow up to two Directors to be Industry Directors. The proposed
compositional requirement for the committee with regard to the balance
between Industry Directors and Non-Industry Directors would be the same
as that already provided for in the By-Laws with respect to the
Executive Committee, the Nominating and Governance Committee, the
Management Compensation Committee, and the full Board of Directors.
The Corporation believes that the change will provide greater
flexibility to NASDAQ OMX with regard to populating a committee that
includes Directors with relevant expertise and that is not excessively
large in relation to the size of the full Board of Directors, while
continuing to ensure that Directors associated with members and member
organizations of the Self-Regulatory Subsidiaries do not exert
disproportionate influence of the governance of NASDAQ OMX. As required
by Section 10A of the Act,\16\ SEC Rule 10A-3 thereunder,\17\ and
NASDAQ Rule 5605(c), the committee would continue at all times to be
composed solely of Directors who are independent within the meaning of
those provisions.
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\16\ 15 U.S.C. 78j-1.
\17\ 17 CFR 240.10A-3.
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2. Statutory Basis
The Corporation believes that that the proposed rule change is
consistent with provisions of Section 17A of the Act.\18\ In
particular, the Corporation believes that the change to the definition
of Industry Director is warranted to ensure that it is appropriately
focused on the mitigation of potential conflicts of interest associated
with Directors who are currently or were very recently employed by
members or member organizations of Self-Regulatory Subsidiaries, or
that otherwise have material affiliations with such members or member
organizations, without unnecessarily restricting highly qualified
individuals with extensive knowledge of the financial services industry
from serving on the Board. The Corporation further believes that the
other definitional changes and the changes to the compositional
requirements of the NASDAQ OMX Board and the Executive Committee will
[[Page 132]]
enhance the clarity of these provisions and promote a diversity of
backgrounds and viewpoints on the NASDAQ OMX Board. The Corporation
believes that these changes will collectively promote the capacity of
the NASDAQ OMX Board to fulfill its responsibilities.
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\18\ 15 U.S.C. 78q-1.
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With respect to the proposed changes to the Audit Committee's
compositional requirements, the Corporation believes that the change
will provide greater flexibility to NASDAQ OMX with regard to
populating a committee that includes Directors with relevant expertise
and that is not excessively large in relation to the size of the full
Board of Directors, while continuing to ensure that Directors
associated with members and member organizations of Self-Regulatory
Subsidiaries do not exert disproportionate influence of the governance
of NASDAQ OMX. The change would not affect NASDAQ OMX's compliance with
Section 10A of the Act,\19\ SEC Rule 10A-3 thereunder,\20\ and NASDAQ
Rule 5605(c), as the committee would continue at all times to be
composed solely of Directors who are independent within the meaning of
those provisions.
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\19\ 15 U.S.C. 78j-1.
\20\ 17 CFR 240.10A-3.
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(B) Self-Regulatory Organization's Statement on Burden on Competition
The Corporation does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. Specifically, the Corporation
believes that the By-Laws of its holding company, NASDAQ OMX, do not
directly affect competition, since they do not affect the availability
or pricing of goods and services. Moreover, the Corporation is not
currently operational, so the change will not in any event have any
impact on its competitive standing. To the extent that the proposed
change to the By-Laws may be construed to have any bearing on
competition, the Corporation believes that the change will promote
competition, since the change will allow NASDAQ OMX to have greater
flexibility in the selection of its Directors in a manner similar to
the flexibility available to NYSE Euronext under its Independence
Policy.
(C) Self-Regulatory Organization's Statement on Comments on the
Proposed Rule Change Received From Members, Participants or Others
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate 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 the 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 (https://www.sec.gov/rules/sro.shtml) or
Send an email to rule-comments@sec.gov. Please include
File Number SR-SCCP-2012-02 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-SCCP-2012-02. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Section, 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 such filing also will be
available for inspection and copying at the principal offices of SCCP.
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-SCCP-2012-02, and
should be submitted on or before January 23, 2012.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\21\
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\21\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-31464 Filed 12-31-12; 8:45 am]
BILLING CODE 8011-01-P
