Self-Regulatory Organizations; Stock Clearing Corporation of Philadelphia; Notice of Filing of Proposed Rule Change To Amend the Restated Certificate of Incorporation and By-Laws of The NASDAQ OMX Group, Inc., 75598-75607 [2013-29617]
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Federal Register / Vol. 78, No. 239 / Thursday, December 12, 2013 / Notices
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Securities Exchange Act of 1934 (the
‘‘Act’’) and the rules and regulations
thereunder applicable to the Exchange
and, in particular, the requirements of
Section 6(b) of the Act.4 Specifically,
the Exchange believes the proposed rule
change is consistent with Section 6(b)(4)
of the Act,5 which provides that
Exchange rules may provide for the
equitable allocation of reasonable dues,
fees, and other charges among its Permit
Holders and other persons using its
facilities. Additionally, the Exchange
believes the proposed rule change is
consistent with the Section 6(b)(5)6
requirement that the rules of an
exchange not be designed to permit
unfair discrimination between
customers, issuers, brokers, or dealers.
The Exchange believes the proposed
fee change is reasonable because it
would help the Exchange offset
increased regulatory expenses, in
particular the hiring of many new
regulatory employees, but would not
result in total regulatory revenue
exceeding total regulatory costs. The
Exchange believes the ORF is equitable
and not unfairly discriminatory in that
it is charged to all Permit Holders on all
their transactions that clear in the
customer range at the OCC. Moreover,
the Exchange believes the ORF ensures
fairness by assessing higher fees to those
Permit Holders that require more
Exchange regulatory services based on
the amount of customer options
business they conduct. Regulating
customer trading activity is much more
labor intensive and requires greater
expenditure of human and technical
resources than regulating non-customer
trading activity, which tends to be more
automated and less labor-intensive. As a
result, the costs associated with
administering the customer component
of the Exchange’s overall regulatory
program are materially higher than the
costs associated with administering the
non-customer component (e.g., Permit
Holder proprietary transactions) of its
regulatory program.7
B. Self-Regulatory Organization’s
Statement on Burden on Competition
C2 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. The proposed rule
4 15
U.S.C. 78f(b).
U.S.C. 78f(b)(4).
6 Id. [sic].
7 If the Exchange changes its method of funding
regulation or if circumstances otherwise change in
the future, the Exchange may decide to modify the
ORF or assess a separate regulatory fee on Permit
Holder proprietary transactions if the Exchange
deems it advisable.
5 15
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change is not designed to address any
competitive issues. Rather, the proposed
rule change is designed to help the
Exchange to adequately fund its
regulatory activities while seeking to
ensure that total regulatory revenues do
not exceed total regulatory costs.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange neither solicited nor
received comments on the proposed
rule change.
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)
of the Act 8 and paragraph (f) of Rule
19b–4 9 thereunder. 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 will institute proceedings
to determine whether the proposed rule
change should be approved or
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–
C2–2013–040 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–C2–2013–040. 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 Room, 100 F Street NE.,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
publicly available. All submissions
should refer to File Number SR–C2–
2013–040 and should be submitted on
or before January 2, 2014.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.10
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–29605 Filed 12–11–13; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–71020; File No. SR–SCCP–
2013–01]
Self-Regulatory Organizations; Stock
Clearing Corporation of Philadelphia;
Notice of Filing of Proposed Rule
Change To Amend the Restated
Certificate of Incorporation and ByLaws of The NASDAQ OMX Group, Inc.
December 6, 2013.
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 November
27, 2013, the Stock Clearing Corporation
of Philadelphia (‘‘SCCP’’) filed with the
Securities and Exchange Commission
(‘‘SEC’’ or ‘‘Commission’’) the proposed
rule change as described in Items I, II
and III, below, which Items have been
10 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
8 15
U.S.C. 78s(b)(3)(A).
9 17 CFR 240.19b–4(f).
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Federal Register / Vol. 78, No. 239 / Thursday, December 12, 2013 / Notices
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 is filing this proposed rule
change with respect to amendments of
the Restated Certificate of Incorporation
(the ‘‘Charter’’) and By-Laws (the ‘‘ByLaws’’) of its parent corporation, The
NASDAQ OMX Group, Inc. (‘‘NASDAQ
OMX’’ or the ‘‘Company’’). The
proposed amendments will be
implemented on a date designated by
NASDAQ OMX following approval by
the Commission. The text of the
proposed rule change is available on
SCCP’s Web site at https://
nasdaqomxphlx.cchwallstreet.com/
nasdaqomxphlx/sccp/, at the principal
office of SCCP, 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,
SCCP 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. SCCP 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 to make
certain amendments to its Charter and
By-Laws.
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(i) Background
At NASDAQ OMX’s 2012 annual
meeting held on May 22, 2012,
NASDAQ OMX’s stockholders
considered two proposals submitted by
individual stockholders. The first
proposal, which passed with 68% of the
votes cast, requested that NASDAQ
OMX’s Board take steps to replace each
supermajority voting standard in the
Charter and By-Laws 3 with a voting
standard requiring a ‘‘majority of votes
3 These provisions, which are described further
below, require the affirmative vote of at least 662⁄3%
of the total voting power of the outstanding shares
of NASDAQ OMX’s capital stock to approve certain
actions.
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cast.’’ The second proposal, which did
not pass but received 49% of the votes
cast, requested that NASDAQ OMX’s
Board take steps to enable stockholders
having at least one-tenth of NASDAQ
OMX’s voting power to call a special
meeting of stockholders.
Following the 2012 annual meeting,
the Nominating & Governance
Committee of NASDAQ OMX’s Board
reviewed the voting results on the two
stockholder proposals and discussed the
stockholder voting standards and rights
contemplated by the Charter and ByLaws. Following this review, the
Nominating & Governance Committee
recommended to the Board, and the
Board approved, certain changes to the
Charter and By-Laws to address the two
stockholder proposals and make other
changes. NASDAQ OMX now proposes
to make these changes, which are
described further below.
(ii) Proposed Amendments to Charter
(a) Removal and Replacement of
Supermajority Voting Requirements
To respond to feedback from its
stockholders, NASDAQ OMX proposes
to replace each supermajority voting
requirement in the Charter with a
‘‘majority of outstanding shares’’ voting
requirement. The Charter currently
includes the following three
supermajority voting requirements.
• Removal of Directors. Article Fifth,
Paragraph D provides that, except for
directors elected by the holders of any
series of preferred stock, any director, or
the entire Board, may be removed from
office at any time, but only by the
affirmative vote of at least 662⁄3% of the
total voting power of the outstanding
shares of NASDAQ OMX’s capital stock
entitled to vote generally in the election
of directors (the ‘‘Voting Stock’’), voting
together as a single class.
• Adoption, Alteration, Amendment
and Repeal of By-Laws. Article Eighth,
Paragraph A provides that the
affirmative vote of the holders of at least
662⁄3% of the total voting power of the
outstanding Voting Stock, voting
together as a single class, shall be
required in order for the stockholders to
adopt, alter, amend or repeal any ByLaw.
• Adoption, Alteration, Amendment
and Repeal of Certain Charter
Provisions. Article Ninth, Paragraph A
provides that the affirmative vote of the
holders of at least 662⁄3% of the voting
power of the outstanding Voting Stock,
voting together as a single class, shall be
required to amend, repeal or adopt any
provision inconsistent with paragraph C
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of Article Fourth,4 Article Fifth,5 Article
Seventh,6 Article Eighth 7 or Article
Ninth of the Charter.8
In each of the three provisions
described above, NASDAQ OMX
proposes to remove the requirement for
an affirmative vote of at least
662⁄3% of the total voting power of the
Voting Stock and replace it with a
voting standard requiring the affirmative
vote of a majority of the outstanding
Voting Stock. In developing this
proposal, NASDAQ OMX considered
the relative weight of the arguments for
and against supermajority voting
requirements. Historically,
supermajority voting requirements have
protected corporations against coercive
takeover tactics by requiring broad
stockholder support for certain types of
transactions or governance changes.
However, in recent years, corporate
governance standards have evolved, and
many stockholder rights advocates argue
that supermajority voting requirements
limit stockholders’ participation in
corporate governance. NASDAQ OMX
believes that while it is important to
protect against coercive takeover tactics,
it is also critically important to obtain
stockholder input and respond to
stockholder concerns about corporate
governance.
NASDAQ OMX believes that the
proposed ‘‘majority of outstanding
shares’’ voting requirement will
continue to provide some protection
against proposals that are harmful to the
stockholders. While this requirement is
less difficult to satisfy than a
supermajority voting requirement, it is
more difficult to satisfy than a ‘‘majority
of votes cast’’ requirement, which
NASDAQ OMX considered as an
alternate option. NASDAQ OMX
believes that a ‘‘majority of outstanding
shares’’ standard is a balanced outcome
that responds to stockholder feedback
while appropriately maintaining
4 Paragraph C of Article Fourth sets forth the 5%
voting limitation, which provides that holders of
NASDAQ OMX’s voting securities may not cast
votes in excess of 5% of NASDAQ OMX’s
outstanding voting securities. To be clear, NASDAQ
OMX is not proposing any change to the 5% voting
limitation itself. NASDAQ OMX only proposes that
any future amendment of the 5% voting limitation
will require the approval of stockholders holding a
majority of the outstanding shares, rather than
stockholders holding 662⁄3% of the outstanding
shares.
5 Article Fifth includes certain provisions relating
to the Board, such as Board size and director
elections.
6 Article Seventh prohibits stockholder action by
written consent.
7 Article Eighth establishes the procedures to
adopt, alter, amend or repeal the By-Laws.
8 Article Ninth establishes the procedures to
adopt, alter, amend or repeal the Charter.
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NASDAQ OMX’s defensive posture
against hostile takeovers.
(b) Non-Substantive Changes
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NASDAQ OMX also proposes to
amend and restate the Charter to make
other non-substantive changes.
Specifically, the proposal deletes
obsolete references to the following:
• The 3.75% Series A Convertible
Notes due 2012 and the 3.75% Series B
Convertible Notes due 2012, which are
no longer outstanding, in Article Fourth,
Paragraph C and Article Eleventh;
• a voting trust agreement, which is
no longer in effect, in Article Fourth,
Paragraph C(3)(b)(iii);
• ownership of NASDAQ OMX
securities by the National Association of
Securities Dealers, Inc., certain affiliates
of Hellman & Friedman LLC, and certain
affiliates of Silver Lake, none of which
currently own any NASDAQ OMX
securities, in Article Fourth, Paragraph
C(6); 9 and
9 NASDAQ OMX notes that the remaining text of
Article Fourth, Paragraph C(6) of the Charter
includes an obsolete cross-reference to Section 6(b)
of Article Fourth, Paragraph C in the second
sentence, which begins ‘‘The Board, however, may
not approve an exemption under Section 6(b) . . .’’
NASDAQ OMX cannot correct this cross-reference,
which should refer to Section 6 without further
reference to a subsection (b), without seeking
further approval of its stockholders, which would
require NASDAQ OMX to call and hold a
stockholder meeting. Generally, NASDAQ OMX
holds stockholder meetings, which are time
consuming and expensive, only once or twice a
year. Moreover, it is atypical of a large public
company like NASDAQ OMX to submit a proposal
to its stockholders solely to correct a cross-reference
in its Charter. However, NASDAQ OMX believes,
following consultation with outside counsel, that it
is clear, based on the drafting history of this
provision, that the intent of the cross-reference is
to refer to Section 6 of Article Fourth, Paragraph C
of the Charter. In other words, the second sentence
of Article Fourth, Paragraph C(6) should read: ‘‘The
Board, however, may not approve an exemption
under Section 6: (i) For a registered broker or dealer
or an Affiliate thereof or (ii) an individual or entity
that is subject to a statutory disqualification under
Section 3(a)(39) of the Exchange Act.’’ Under no
circumstances will NASDAQ OMX read the
obsolete cross-reference to imply that the Board
could grant an exemption to the ownership
limitation in Article Fourth, Paragraph C(6) of the
Charter for a registered broker or dealer or an
Affiliate thereof, or an individual or entity that is
subject to a statutory disqualification under Section
3(a)(39) of the Exchange Act. NASDAQ OMX also
notes that it is proposing amendments to Section
12.5 of the By-Laws to eliminate cross-references to
subsection (b) of Article Fourth, Paragraph C(6) of
the Charter. Finally, NASDAQ OMX notes that
there are some differences in language between the
second sentence of Article Fourth, Paragraph C(6)
of the Charter and the second sentence of Section
12.5 of the By-Laws. To the extent that these
differences would cause a difference in
interpretation, NASDAQ OMX notes, following
consultation with outside counsel, that the Charter
language shall prevail. As soon as feasible,
NASDAQ OMX plans to present a proposal to the
stockholders to conform this provision of the
Charter to the By-Laws.
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• the phase-out of the classified board
structure, which was complete in 2007,
in Article Fifth, Paragraph B.
In Article Fifth, Paragraph B, the
proposal also clarifies that the election
of directors by stockholders shall occur
at an annual or special meeting. The
proposal corrects a typographical error
in Article Fifth, Paragraph A and
renumbers the provisions of the Charter,
where necessary following the other
amendments. Finally, the proposal
amends the introductory and
concluding language of the Charter to
incorporate language that will be
required under Delaware law when the
amended and restated Charter is filed
with the Secretary of State of the State
of Delaware.10
The amendment and restatement of
the Charter to incorporate these nonsubstantive changes will simplify and
streamline the document.
(iii) Proposed Elimination of Certificate
of Designation
NASDAQ OMX proposes to eliminate
its Certificate of Designation,
Preferences and Rights of Series A
Convertible Preferred Stock (the ‘‘Series
A Convertible Preferred Stock’’), and all
matters set forth therein. The Series A
Convertible Preferred Stock was created
in 2009 to facilitate the conversion of
certain notes into common stock.11 The
Company authorized 2 million shares of
the Series A Convertible Preferred Stock
and immediately issued 1.6 million of
those shares to the converting
noteholders.
In 2010, following stockholder
approval, all 1.6 million issued shares of
the Series A Convertible Preferred Stock
were converted into common stock.
Since then, no shares of the Series A
Convertible Preferred Stock have been
outstanding, and the Company has no
intention to issue further shares of this
series.
As a clean-up matter, the Company
seeks to file a certificate of elimination
with the Secretary of State of the State
of Delaware to eliminate the Series A
Convertible Preferred Stock. Under
Delaware law, a certificate of
elimination is deemed to be an
amendment to NASDAQ OMX’s
Charter; however, since the amendment
is limited in scope, it does not require
10 See
Sections 242 and 245 of the DGCL.
Securities Exchange Act Release No. 60845
(October 20, 2009), 74 FR 55078 (October 26, 2009)
(SR–BX–2009–061, SR–NASDAQ–2009–087, SR–
Phlx–2009–88); see also Securities Exchange Act
Release No. 61000 (November 13, 2009), 74 FR
61390 (November 24, 2009) (SR–BSECC–2009–005);
see also Securities Exchange Act Release No. 61001
(November 13, 2009), 74 FR 61391 (November 24,
2009) (SR–SCCP–2009–04).
11 See
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the approval of NASDAQ OMX’s
stockholders.12
(iv) Proposed Amendments to the
By-Laws
(a) Special Meetings of Stockholders
Current Section 3.2 of NASDAQ
OMX’s By-Laws provides that only
NASDAQ OMX may call special
meetings of its stockholders.13 To
respond to feedback from its
stockholders, as discussed above,
NASDAQ OMX proposes to delete this
provision and replace it with language
that will allow NASDAQ OMX’s
stockholders to call special meetings
after following particular procedures.
Similar to the elimination of
supermajority voting requirements,
which is discussed above, the
implementation of the right of
stockholders to call a special meeting
has received recent attention from
investor and corporate governance
advocates. These advocates argue that
such a right will enable stockholders to
raise and act on matters that arise
between annual meetings.
Following discussions with some of
its stockholders, NASDAQ OMX agrees
that it is appropriate to allow
stockholders who meet certain
procedural requirements to call a
special meeting. In proposing these
procedural requirements, NASDAQ
OMX’s goals are to ensure timely notice
of a meeting request and to gather
sufficient information about the
proposing stockholder(s) and the
proposal. Among other things, this
information will ensure that NASDAQ
OMX is able to comply with its
disclosure and other requirements
under applicable law and that NASDAQ
OMX, its Board and its stockholders are
able to assess the proposal adequately.
The proposed procedural requirements
are set forth below.
First, proposed Section 3.2(a)
provides that special meetings of
NASDAQ OMX’s stockholders may only
be called: (i) At any time by NASDAQ
OMX’s Board pursuant to a resolution
adopted by a majority of the total
number of directors NASDAQ OMX
would have if there were no vacancies;
and (ii) by NASDAQ OMX’s Corporate
Secretary following the receipt of a
written request in proper form for a
special meeting (a ‘‘Special Meeting
Request’’) by one or more stockholders.
Such stockholders (the ‘‘Requisite
12 See
Section 151(g) of the DGCL.
Delaware law, special meetings of a
corporation’s stockholders may be called by the
board of directors or by such persons as may be
authorized by the certificate of incorporation or the
bylaws. See Section 211(d) of the DGCL.
13 Under
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Holders’’) must hold of record, in the
aggregate, at least 15 percent of
NASDAQ OMX’s outstanding shares of
capital stock entitled to vote on matters
to be brought before the special meeting
(the ‘‘Requisite Percentage’’). Such
shares must be ‘‘Net Long Shares,’’ 14
and the Requisite Holders must have
held the shares continuously for at least
one year as of the date of the Special
Meeting Request. Whether shares
constitute Net Long Shares shall
ultimately be decided by NASDAQ
OMX’s Board in its reasonable
determination. The intent of the
requirement for stockholders to
maintain a ‘‘net long position’’ is to
limit the ability to call a special meeting
to stockholders that have long-term
record and economic positions in
NASDAQ OMX.
Proposed Section 3.2(a) also sets forth
the procedures for determining whether
a special meeting has been requested by
Requisite Holders representing in
aggregate at least the Requisite
Percentage if multiple Special Meeting
Requests are delivered to NASDAQ
OMX’s Corporate Secretary. Multiple
requests will be considered together
only if: (i) Each Special Meeting Request
identifies substantially the same
purpose or purposes of the special
meeting and substantially the same
matters proposed to be acted on at the
requested special meeting (in each case
14 For purposes of determining Requisite Holders
under proposed Section 3.2, ‘‘Net Long Shares’’
shall be limited to the number of shares beneficially
owned, directly or indirectly, by any stockholder or
beneficial owner that constitute such person’s ‘‘net
long position’’ as defined in Rule 14e–4 under the
Act, provided that (A) for the purposes of this
definition, references in the rule to ‘‘the date the
tender offer is first publicly announced or otherwise
made known by the bidder to the holders of the
security to be acquired’’ shall be the date of the
relevant Special Meeting Request and all dates in
the one year period prior thereto, the ‘‘highest
tender offer price or stated amount of the
consideration offered for the subject security’’ shall
refer to the closing sales price of NASDAQ OMX’s
capital stock on NASDAQ on such date (or, if such
date is not a trading day, the next succeeding
trading day), the ‘‘person whose securities are the
subject of the offer’’ shall refer to NASDAQ OMX,
a ‘‘subject security’’ shall refer to the issued and
outstanding voting stock of NASDAQ OMX; and (B)
the net long position of such stockholder shall be
reduced by any shares as to which such person does
not have the right to vote or direct the vote at the
proposed special meeting or as to which such
person has entered into a derivative or other
agreement, arrangement or understanding that
hedges or transfers, in whole or in part, directly or
indirectly, any of the economic consequences of
ownership of such shares. In addition, to the extent
any affiliates of the stockholder or beneficial owner
are acting in concert with the stockholder or
beneficial owner with respect to the calling of the
special meeting, the determination of Net Long
Shares may include the effect of aggregating the Net
Long Shares (including any negative number) of
such affiliate or affiliates. See proposed Section
3.2(a) of the By-Laws.
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as determined in good faith by
NASDAQ OMX’s Board); and (ii) such
Special Meeting Requests have been
dated and delivered to NASDAQ OMX’s
Corporate Secretary within 60 days of
the earliest dated Special Meeting
Request. NASDAQ OMX believes these
procedures are reasonable and clear and
notes that they grant only limited
discretion to NASDAQ OMX’s Board in
determining whether Special Meeting
Requests will be considered together.
Pursuant to proposed Section 3.2(b), if
a Special Meeting Request is in proper
form, NASDAQ OMX’s Board shall
determine the place, if any, date and
time of the special meeting, and
NASDAQ OMX’s Corporate Secretary
shall call the special meeting within 120
days after the date the Special Meeting
Request was delivered. However,
NASDAQ OMX’s Board may, in lieu of
calling a special meeting, present an
identical or substantially similar item of
business (a ‘‘Similar Item’’),15 as
determined in good faith by NASDAQ
OMX’s Board, for stockholder approval
at any other meeting of the stockholders
that is held not less than 120 days after
the delivery of the Special Meeting
Request. The intent of this provision is
to save NASDAQ OMX the time and
expense of calling and holding a special
meeting if NASDAQ OMX intends to
hold a separate stockholders’ meeting
within 120 days. In fixing the place, if
any, date and time for any special
meeting, NASDAQ OMX’s Board may
consider such factors as it deems
relevant in its business judgment,
including the nature of the matters to be
considered, the facts and circumstances
surrounding any request for a meeting
and any plan of the Board to call an
annual meeting or a special meeting.
Proposed Section 3.2(c) sets forth
certain limitations on Special Meeting
Requests. Specifically, a Special
Meeting Request will not be valid if:
• It relates to an item of business that
is not a proper subject for stockholder
action under applicable law;
• it is delivered during the period
commencing 90 days prior to the oneyear anniversary of the date of the
immediately preceding annual meeting
and ending on the date of the next
annual meeting;
• a Similar Item was presented at any
meeting of stockholders held within 120
days prior to the date on which the
Special Meeting Request was delivered;
or
• a Similar Item is included in
NASDAQ OMX’s notice of meeting as
15 Under proposed Section 3.2(b) of the By-Laws,
the election of directors shall be deemed a ‘‘Similar
Item’’ with respect to all items of business involving
the nomination, election or removal of directors.
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an item of business to be presented at
a stockholder’s meeting that has been
called but not yet held.
The Board may adjourn or reschedule
any previously scheduled special
meeting of the stockholders. NASDAQ
OMX believes the subject matter
limitations set forth in proposed Section
3.2(c) are appropriate in order to comply
with applicable law and to prevent
multiple considerations of the same
item of business. NASDAQ OMX
believes the time limits set forth in
proposed Section 3.2(c) are appropriate
to ensure that NASDAQ OMX is not
required to incur the time and expense
of calling and holding a special meeting
of stockholders immediately prior to an
upcoming annual meeting of
stockholders or if a Similar Item of
business already has been presented at
a recent stockholders’ meeting.
To be in proper form, a Special
Meeting Request must comply with
certain requirements, as described
further below.16 NASDAQ OMX’s Board
will have the sole discretion to
determine whether a Special Meeting
Request is in proper form.17 Proposed
Section 3.2(d) sets forth the
requirements for a Special Meeting
Request to be in proper form. These
proposed requirements will ensure that
NASDAQ OMX has sufficient
information to comply with its
disclosure requirements under
applicable law and that the Requisite
Holders maintain a sufficient ownership
level through the date of the special
meeting. Specifically, a Special Meeting
Request shall:
• Be in writing, signed by each
Requesting Person 18 and delivered to
NASDAQ OMX’s Corporate Secretary at
NASDAQ OMX’s principal executive
offices;
• set forth certain information with
respect to (i) each person the Requesting
Person proposes to nominate for
director, (ii) any business the
Requesting Person proposes to bring
before the meeting and (iii) each
Requesting Person; 19 and
• include (i) an agreement by each
Requisite Holder to immediately deliver
written notice to NASDAQ OMX’s
16 See
proposed Section 3.2(a) of the By-Laws.
17 Id.
18 ‘‘Requesting Person’’ means (i) each Requisite
Holder, (ii) the beneficial owner or beneficial
owners, if different, on whose behalf the Special
Meeting Request is being delivered to NASDAQ
OMX’s Corporate Secretary and (iii) any affiliate or
associate of such stockholder or beneficial owner.
See proposed Section 3.2(e) of the By-Laws.
19 The information required is the same
information required from Proposing Persons with
respect to nominations or items of business to be
brought before an annual meeting of stockholders
and is described in detail in Section (iv)(b) below.
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Corporate Secretary in the case of any
disposition, on or prior to the record
date for the special meeting, of any
shares of NASDAQ OMX’s capital stock
held of record by such Requisite Holder
and (ii) an acknowledgement that (1)
any such disposition shall be deemed a
revocation of the Special Meeting
Request to the extent of such disposition
and (2) if, following such deemed
revocation, the Requisite Holders hold
of record, in the aggregate, less than the
Requisite Percentage of the voting
power of all outstanding shares of
NASDAQ OMX’s capital stock entitled
to vote generally in the election of
directors, NASDAQ OMX shall have no
obligation to hold the special meeting.
Proposed Section 3.2(f) provides that
at any special meeting of the
stockholders, the only business to be
conducted or considered will have been
specified in the notice of meeting (or
any supplement thereto) given by or at
the direction of NASDAQ OMX’s Board
or Corporate Secretary, as the case may
be. In any event, however, NASDAQ
OMX’s Board may submit its own
proposal or proposals for consideration
at a special meeting. Except as
otherwise allowed under proposed
Section 3.2, stockholders will not be
permitted to propose business to be
brought before a special meeting of the
stockholders. NASDAQ OMX believes
these provisions are reasonable and
necessary to limit the items of business
that may be considered at a special
meeting to those that were proposed by
the Company, the Board or stockholders
that comply with the requirements and
procedures set forth in the By-Laws.
Proposed Section 3.2(g) will require
the Requisite Holders giving a Special
Meeting Request to further update and
supplement the request, if necessary, so
that the information in the request is
true and correct as of the record date for
the special meeting and as of the 10th
business day prior to the special
meeting or any adjournment or
postponement thereof. This requirement
will ensure that NASDAQ OMX, its
Board and its other stockholders are
notified of changes to the information
they will consider in assessing a
proposed item of business prior to the
special meeting. In the case of an update
and supplement required to be made as
of the record date, the update and
supplement must be delivered to
NASDAQ OMX’s Corporate Secretary no
later than the fifth business day after the
record date for the special meeting. In
the case of an update and supplement
required to be made as of the 10th
business day prior to the special
meeting or any adjournment or
postponement thereof, the update and
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supplement must be delivered to
NASDAQ OMX’s Corporate Secretary no
later than the eighth business day prior
to the date for the special meeting or, if
practical, any adjournment or
postponement thereof (and, if not
practicable, on the first practicable date
prior to the date to which the special
meeting has been adjourned or
postponed).
Proposed Section 3.2(h) will allow the
Requisite Holders to revoke a Special
Meeting Request by written revocation
delivered to NASDAQ OMX at any time
prior to the special meeting requested.
However, NASDAQ OMX’s Board will
have the discretion to determine
whether or not to proceed with the
special meeting. The Board might wish
to continue with the special meeting if,
for example, the Company has already
spent the time and expense required to
call the meeting or if the agenda for the
meeting includes items other than those
proposed in the Special Meeting
Request.
Finally, NASDAQ OMX proposes to
designate as Section 3.2(i) existing text
that sets forth the requirements for
stockholders to submit nominees for
election as directors at certain
stockholder meetings. NASDAQ OMX
further proposes to make a minor
change to this text to clarify that
NASDAQ OMX’s Board, rather than the
Company itself, will call a special
meeting on behalf of the Company.
(b) Annual Meetings of Stockholders
Section 3.1 of NASDAQ OMX’s ByLaws, which is the ‘‘advance notice’’
provision,20 requires stockholders to
notify NASDAQ OMX, during a
specified period in advance of an
annual meeting, of their intention to
nominate one or more persons for
election to the Board or to present a
business proposal for consideration by
the stockholders at the meeting. While
designing the proposed procedural
requirements for stockholders to call a
special meeting, as outlined above,
NASDAQ OMX evaluated the existing
procedural requirements for
stockholders to bring business before an
annual meeting. NASDAQ OMX is
therefore proposing changes to some of
these procedures to enhance them and
conform them, in some cases, to the
procedures relating to special meetings.
20 ‘‘Advance notice’’ provisions allow
stockholder(s) to bring business before an annual
meeting of stockholders, but set forth procedural
requirements to ensure that companies and boards
have sufficient information about the proposal and
the proposing stockholder(s), as well as adequate
time to consider the proposal, by requiring the
proposing stockholder(s) to give advance notice of
the intention to bring the proposal before the
annual meeting.
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Generally, the proposed amendments
add requirements for extensive
disclosures by proposing stockholders
about themselves, any proposed
nominees for director and any proposed
items of business to be brought before a
meeting. The specific amendments are
discussed in detail below.
First, Section 3.1(a) of the By-Laws
currently states that nominations of
persons for election to NASDAQ OMX’s
Board and the proposal of other
business to be considered by the
stockholders at an annual meeting of
stockholders may be made only: (i)
Pursuant to the Company’s notice of
meeting (or any supplement thereto); (ii)
by or at the direction of NASDAQ
OMX’s Board or its Nominating &
Governance Committee; or (iii) by any
stockholder of the Company that meets
certain requirements. These
requirements state that the stockholder
must: (i) Be a stockholder of record at
the time of delivery of notice to the
Company of nominees or other business
to be conducted at the meeting; (ii) be
entitled to vote at the meeting; and (iii)
comply with the notice procedures set
forth in the By-Laws. NASDAQ OMX
proposes to add a parenthetical to the
requirement that a stockholder must be
a stockholder of record to clarify that a
nomination or proposal of other
business may be made on behalf of a
beneficial owner, if different from the
stockholder of record, only if the
beneficial owner is the beneficial owner
of NASDAQ OMX shares. This
modification will clarify that both
record and beneficial owners of
NASDAQ OMX stock have the right to
propose nominees or business to be
considered at an annual meeting.
NASDAQ OMX further proposes that a
stockholder who proposes nominees or
business to be considered at an annual
meeting must hold shares in the
Company at the time of the meeting, in
addition to the time of delivery of the
required notice to the Company. This
will ensure that a stockholder retains an
interest in the Company until the
meeting at which the stockholder’s
nominee or other business is
considered. Finally, NASDAQ OMX
proposes to number the procedural
requirements for stockholders who
propose nominees or business to make
them easier to understand.
Currently, Section 3.1(b) of the ByLaws sets forth the requirements for a
stockholder’s notice to NASDAQ OMX
of nominations or other business to be
considered at an annual meeting.
NASDAQ OMX proposes certain
amendments to this section to ensure
that NASDAQ OMX has sufficient
information about such nominations or
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other business proposed by a
stockholder to enable the Company, the
Board and the other stockholders to
assess a position on the nominations or
other business. The additional
information requirements will also
ensure that NASDAQ OMX can make
adequate disclosures to its stockholders
and comply with requirements under
applicable law.
Specifically, NASDAQ OMX proposes
an amendment to the first paragraph of
this section to require a stockholder
who provides a notice relating to a
nomination to include with the notice,
a completed and signed questionnaire,
representation and agreement relating to
the nominee(s) for director.21 NASDAQ
OMX also proposes to require a
stockholder who provides a notice to
further update and supplement the
notice, if necessary, so that the
information in the notice is true and
correct as of the record date for the
annual meeting and as of the 10th
business day prior to the annual
meeting or any adjournment or
postponement thereof.22 This
requirement will ensure that NASDAQ
OMX, its Board and its other
stockholders are notified of changes to
the information they will consider in
assessing a proposed item of business
prior to the annual meeting. In the case
of an update and supplement required
to be made as of the record date, the
update and supplement must be
delivered to NASDAQ OMX’s Corporate
Secretary no later than the fifth business
day after the record date for the annual
meeting. In the case of an update and
supplement required to be made as of
the 10th business day prior to the
annual meeting or any adjournment or
postponement thereof, the update and
supplement must be delivered to
NASDAQ OMX’s Corporate Secretary no
later than the eighth business day prior
to the date for the annual meeting or, if
practicable, any adjournment or
postponement thereof (and, if not
practicable, on the first practicable date
prior to the date to which the annual
meeting has been adjourned or
postponed).
Section 3.1(b)(i) of the By-Laws
currently sets forth the information that
a stockholder must provide to NASDAQ
OMX about each person whom the
stockholder proposes to nominate for
21 The contents of and rationale for the
questionnaire, representation and agreement are
discussed further in Section (iv)(c) below.
22 NASDAQ OMX notes that this proposal is
similar to proposed Section 3.2(g) of the By-Laws,
which requires updates and supplements to a
stockholder notice relating to a special meeting.
This proposed change is discussed further in
Section (iv)(a) above.
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election as a director. NASDAQ OMX
proposes changes to this section to use
the defined term ‘‘Proposing Person’’
instead of stockholder,23 to require
information with respect to nominees
for reelection as well as nominees for
election, to correct a reference to the Act
and to add numbering and other
organizational changes to make the
requirements easier to read and
understand. NASDAQ OMX also
proposes to require the same
information with respect to a proposed
nominee that will be required with
respect to a Proposing Person, as
discussed further below. In addition,
NASDAQ OMX proposes to add two
new informational requirements for
proposed nominees, including:
• A description of all direct and
indirect compensation and other
material monetary agreements,
arrangements and understandings
during the past three years, and any
other material relationships, between or
among any Proposing Person, on the one
hand, and such proposed nominee and
any of his or her respective affiliates and
associates, on the other hand, including,
without limitation, all information that
would be required to be disclosed
pursuant to Item 404 under Regulation
S–K if such Requesting Person were the
‘‘registrant’’ for purposes of such rule
and the proposed nominee were a
director or executive officer of such
registrant; and
• a completed and signed
questionnaire, representation and
agreement.24
Finally, NASDAQ OMX proposes to
add a catch-all provision to Section
3.1(b)(i) of the By-Laws that will allow
the Company to require any proposed
nominee to furnish such other
information (i) as the Company may
reasonably require to determine the
eligibility of such proposed nominee to
serve as a director or (ii) that could be
material to a reasonable stockholder’s
understanding of the independence, or
lack of independence, of such proposed
nominee. NASDAQ OMX believes that
all of the new information requirements
included in proposed Section 3.1(b)(i)
23 ‘‘Proposing Person’’ means (i) the stockholder
providing the notice of business or the notice of the
nomination, as applicable, proposed to be brought
before an annual meeting, (ii) any beneficial owner
or beneficial owners, if different, on whose behalf
such business is proposed to be brought before the
meeting or the notice of the nomination proposed
to be made at the meeting is made, as applicable,
and (iii) any affiliate or associate (each within the
meaning of Rule 12b–2 under the Act for purposes
of the By-Laws) of such stockholder or beneficial
owner. See proposed Section 3.1(c) of the By-Laws.
24 The contents of and rationale for the
questionnaire, representation and agreement are
discussed further in Section (iv)(c) below.
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are reasonable and necessary in order to
assist the Company in evaluating
director eligibility, independence and
potential conflicts of interest.
Section 3.1(b)(ii) of the By-Laws
currently sets forth the information that
a stockholder must provide to NASDAQ
OMX about any business, other than
nominations for director, that the
stockholder proposes to bring before an
annual meeting. NASDAQ OMX
proposes changes to this section to
require that the description of the
proposed business be reasonably
detailed, to use the defined term
‘‘Proposing Person’’ instead of
stockholder and beneficial owner in
certain places and to add numbering,
reordering and other organizational
changes to make the requirements easier
to read and understand. NASDAQ OMX
also proposes to add a new requirement
for a stockholder to provide a
reasonably detailed description of all
contracts, agreements, arrangements and
understandings between or among any
of the Proposing Persons or between or
among any Proposing Person in
connection with the proposal. NASDAQ
OMX believes this information will be
useful in assessing the aims and
incentives of Proposing Persons in
proposing business before an annual
meeting.
Section 3.1(b)(iii) of the By-Laws
currently sets forth the information that
a stockholder who proposes nominee(s)
for director or other business to be put
forth before an annual meeting must
provide to NASDAQ OMX about such
stockholder and the beneficial owner, if
any, on whose behalf the nomination or
proposal is made. NASDAQ OMX
proposes changes to this section to use
the defined term ‘‘Proposing Person’’
instead of stockholder and beneficial
owner in certain places and to add
numbering, reordering and other
organizational changes to make the
requirements easier to read and
understand.
Relating to the existing requirement in
Section 3.1(b)(iii)(B) that a proposing
stockholder describe the class or series
and number of shares of NASDAQ OMX
capital stock owned beneficially and of
record by such stockholder and the
beneficial owner, NASDAQ OMX
proposes to add a parenthetical stating
that beneficial ownership shall be
determined within the meaning of Rule
13d-3 under the Act. NASDAQ OMX
also proposes to state that a Proposing
Person shall in all events be deemed to
beneficially own any shares of any class
or series of NASDAQ OMX’s capital
stock as to which such person has a
right to acquire beneficial ownership at
any time in the future. These proposed
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changes merely clarify how the concept
of beneficial ownership will be
interpreted under this section of the ByLaws.
Current Section 3.1(b)(iii)(D) requires
proposing stockholders to describe to
NASDAQ OMX any agreement,
arrangement or understanding
(including any derivative or short
positions, profit interests, options,
warrants, convertible securities, stock
appreciation or similar rights, hedging
transactions, and borrowed or loaned
shares) that has been entered into as of
the date of the notice by the stockholder
and the beneficial owners with respect
to NASDAQ OMX’s stock. Given the
increased complexity of such
transactions in today’s marketplace,
NASDAQ OMX proposes to replace the
current language with a similar
requirement for disclosure of any
Synthetic Equity Interest,25 without
regard to whether: (i) The derivative,
swap or other transaction or series of
transactions conveys any voting rights
in such shares to the Proposing Person;
(ii) the derivative, swap or other
transaction or series of transactions is
required to be, or is capable of being,
settled through delivery of such shares;
or (iii) the Proposing Person may have
entered into other transactions that
hedge or mitigate the economic effect of
such derivative, swap or other
transaction or series of transactions.
This proposed provision will assist
NASDAQ OMX, its Board and its other
stockholders in understanding a
Proposing Person’s full economic
interests in NASDAQ OMX and possible
aims and incentives in submitting the
proposed business for consideration at
an annual meeting.
For this same reason, NASDAQ OMX
also proposes to add several new
disclosures that a Proposing Person
must include in a notice to NASDAQ
OMX regarding nominees or other
business to be conducted at an annual
meeting. These include disclosures
regarding:
25 ‘‘Synthetic Equity Interest’’ shall mean any
derivative, swap or other transaction (including any
short positions, profit interest, options, warrants,
convertible securities, stock appreciation or similar
rights) or series of transactions engaged in, directly
or indirectly, by a Proposing Person, the purpose or
effect of which is to give the Proposing Person
economic risk similar to ownership of shares of any
class or series of NASDAQ OMX, including due to
the fact that the value of such derivative, swap or
other transaction or series of transactions is
determined by reference to the price, value or
volatility of any shares of any class or series of
NASDAQ OMX, or which derivative, swap or other
transaction or series of transactions provides,
directly or indirectly, the opportunity to profit from
any increase in the price or value of shares of any
class or series of NASDAQ OMX. See proposed
Section 3.1(b)(iii)(D) of the By-Laws.
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• any proxy (other than a revocable
proxy or consent given in response to a
solicitation made pursuant to, and in
accordance with, Section 14(a) of the
Act by way of a solicitation statement
filed on Schedule 14A), agreement,
arrangement, understanding or
relationship pursuant to which the
Proposing Person has or shares a right
to vote any shares of any class or series
of NASDAQ OMX; 26
• any proportionate interest in
NASDAQ OMX shares or Synthetic
Equity Interest held, directly or
indirectly, by a general or limited
partnership in which the Proposing
Person is a general partner or, directly
or indirectly, beneficially owns an
interest in a general partner; 27
• any agreement, arrangement,
understanding or relationship,
including any repurchase or similar socalled ‘‘stock borrowing’’ agreement or
arrangement, entered into or engaged in,
directly or indirectly, by the Proposing
Person, the purpose or effect of which
is to mitigate loss to, reduce the
economic risk (of ownership or
otherwise) of shares of any class or
series of NASDAQ OMX by, manage the
risk of share price changes for, or
increase or decrease the voting power
of, the Proposing Person with respect to
shares of any class or series of NASDAQ
OMX, or that provides, directly or
indirectly, the opportunity to profit
from any decrease in the price or value
of shares of any class or series of
NASDAQ OMX (any of the foregoing, a
‘‘Short Interest’’); 28
• any performance-related fees (other
than an asset-based fee) to which the
Proposing Person is entitled based on
any increase or decrease in the price or
value of shares of any class or series of
NASDAQ OMX, or any Synthetic Equity
Interest or Short Interest; 29
• any significant equity interest or
any Synthetic Equity Interest or Short
Interest in any principal competitor of
NASDAQ OMX held by the Proposing
Person; 30
• any direct or indirect interest of the
Proposing Person in any contract with
NASDAQ OMX, any affiliate of
NASDAQ OMX or any principal
competitor of NASDAQ OMX
(including, in any such case, any
employment agreement, collective
26 See proposed Section 3.1(b)(iii)(E) of the ByLaws.
27 See proposed Section 3.1(b)(iii)(F) of the ByLaws.
28 See proposed Section 3.1(b)(iii)(G) of the ByLaws.
29 See proposed Section 3.1(b)(iii)(H) of the ByLaws.
30 See proposed Section 3.1(b)(iii)(I) of the ByLaws.
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bargaining agreement or consulting
agreement); 31
• any pending or threatened litigation
in which the Proposing Person is a party
or material participant involving
NASDAQ OMX or any of its officers or
directors, or any affiliate of NASDAQ
OMX; 32
• any material transaction occurring,
in whole or in part, during the then
immediately preceding 12-month period
between such Proposing Person, on the
one hand, and NASDAQ OMX, any
affiliate of NASDAQ OMX or any
principal competitor of NASDAQ OMX,
on the other hand; 33 and
• any other information relating to
the Proposing Person required to be
disclosed in a proxy statement or other
filings required to be made in
connection with solicitations of proxies
for, as applicable, the proposal and/or
for the election of directors in an
election contest pursuant to and in
accordance with Section 14(a) of the Act
and the rules and regulations
promulgated thereunder.34
(c) Questionnaire, Representation and
Agreement for Director-Nominees
NASDAQ OMX proposes to add a
new Section 3.5 to its By-Laws to
require nominees for director to deliver
to NASDAQ OMX, in accordance with
the time periods prescribed for delivery
of a stockholder’s notice: (i) A written
questionnaire with respect to the
background and qualifications of the
nominee; and (ii) a written
representation and agreement as to
certain matters. Specifically, the written
representation and agreement will
provide that the nominee:
• is not and will not become a party
to (i) any agreement as to how the
nominee will act or vote on any issue
or question (a ‘‘Voting Commitment’’)
that has not been fully disclosed to
NASDAQ OMX or (ii) any Voting
Commitment that could limit or
interfere with the nominee’s fiduciary
duties under applicable law;
• is not and will not become a party
to any agreement with any person other
than NASDAQ OMX with respect to any
31 See proposed Section 3.1(b)(iii)(J) of the ByLaws.
32 See proposed Section 3.1(b)(iii)(K) of the ByLaws.
33 See proposed Section 3.1(b)(iii)(L) of the ByLaws.
34 See proposed Section 3.1(b)(iii)(M) of the ByLaws. NASDAQ OMX also proposes to include an
exception to each of the aforementioned disclosure
requirements for any disclosures with respect to the
ordinary course business activities of any broker,
dealer, commercial bank, trust company or other
nominee who is a Proposing Person solely as a
result of being the stockholder directed to prepare
and submit the notice required by the By-Laws on
behalf of a beneficial owner.
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direct or indirect compensation,
reimbursement or indemnification in
connection with service or action as a
director of NASDAQ OMX that has not
been fully disclosed to NASDAQ OMX;
• would be in compliance, if elected,
and will comply, with the provisions of
NASDAQ OMX’s By-Laws relating to
qualifications of directors, conflicts of
interest and contracts and transactions
involving directors; and
• in such proposed nominee’s
individual capacity and on behalf of any
person on whose behalf the nomination
is made, would be in compliance, if
elected, and will comply, with
NASDAQ OMX’s Corporate Governance
Guidelines, Board of Director Code of
Conduct and Code of Ethics, including
all applicable, publicly disclosed
conflict of interest, confidentiality, stock
ownership and insider trading policies
and guidelines.
The requirements of proposed Section
3.5 of the By-Laws, which will apply to
both the Company’s and stockholders’
nominees for director, will ensure that
NASDAQ OMX has the necessary
information about nominees to fulfill its
public disclosure requirements. The
requirements also will ensure that
nominees will comply with the legal
obligations, policies and procedures
applicable to all NASDAQ OMX
directors.
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(d) Removal and Replacement of
Supermajority Voting Provisions
Consistent with the proposed
amendments to remove and replace the
supermajority voting provisions in the
Charter discussed above, NASDAQ
OMX proposes to amend each provision
of the By-Laws that currently requires a
supermajority vote of stockholders to
instead require a ‘‘majority of votes
outstanding.’’ NASDAQ OMX’s By-Laws
currently include the following two
supermajority voting requirements, each
of which conforms with an analogous
provision in the Charter.
• Removal of Directors. Section 4.6
provides that any or all of the directors
may be removed from office at any time
by the affirmative vote of at least 662⁄3%
of the total voting power of the Voting
Stock, voting together as a single class.35
• Adoption, Alteration, Amendment
and Repeal of By-Laws. Section 11.1
provides that the By-Laws may be
altered amended or repealed, or new ByLaws may be adopted, at any meeting of
the stockholders by the affirmative vote
of the holders of at least 662⁄3% of the
35 This provision is analogous to Article Fifth,
Paragraph D of the Charter, which is discussed
under Section (ii)(a) above.
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voting power of the Voting Stock, voting
together as a single class.36
To conform with the proposed
changes to the Charter, NASDAQ OMX
proposes to replace each of these
supermajority voting requirements with
a voting standard requiring the
affirmative vote of a majority of the
outstanding Voting Stock. As discussed
above with respect to the analogous
Charter amendments, NASDAQ OMX
believes that a ‘‘majority of outstanding
shares’’ standard reflects a balanced
approach that responds to stockholder
feedback while appropriately
maintaining NASDAQ OMX’s defensive
posture against hostile takeovers.
(e) Procedures for Filling Board
Vacancies
Section 4.8 of the By-Laws sets forth
the procedures to fill a director position
that has become vacant, whether
because of death, disability,
disqualification, removal or resignation.
Under the current provisions, if such a
vacancy occurs, the Nominating &
Governance Committee of the Board
shall nominate, and the Board shall
elect by majority vote, a person to fill
the vacancy. In light of the addition of
a right for stockholders to call a special
meeting, as discussed above, NASDAQ
OMX proposes amendments to Section
4.8 to state explicitly that vacancies on
the Board are to be filled by a majority
vote of the Board, and not by
stockholders. In addition, to prescribe
procedures in case multiple Board
vacancies occur at the same time, the
proposed amendments state that a Board
vacancy shall be filled by the majority
of the directors, even if there is less than
a quorum, or by the sole remaining
director, if there is only one director
remaining on the Board. The proposed
amendments do not change any of the
other procedures for filling Board
vacancies.
(f) Use of Electronic Means for Certain
Notices and Related Waivers
Currently, Section 4.12(a) of the ByLaws provides that notice of any
meeting of the Board shall be deemed
duly given to a director if, among other
methods, the notice is sent to the
director at the address last made known
in writing to NASDAQ OMX by
telegraph, telefax, cable, radio or
wireless. Section 4.12(b) of the By-Laws
provides that such notice of a board
meeting need not be given to any
director if waived by the director in
writing or by electronic transmission (or
36 This provision is analogous to Article Eighth,
Paragraph A of the Charter, which is discussed
under Section (ii)(a) above.
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75605
by telegram, telefax, cable, radio or
wireless and subsequently confirmed in
writing or by electronic transmission).
NASDAQ OMX proposes amendments
to Sections 4.12(a) and (b) to provide
that both notices and waivers of such
notices can be given by email or other
means of written electronic
transmission. These amendments are
intended merely to expand the means
through which notices and waivers of
notices may be given, and the
amendments do not affect any of the
other procedural requirements of
Sections 4.12(a) and (b). In addition, the
proposed amendments reflect current
practices, as a substantial amount of
communications between NASDAQ
OMX and its directors, outside of Board
meetings, occurs through electronic
means.
(g) Composition of the Management
Compensation Committee
As required by the Dodd-Frank Wall
Street Reform and Consumer Protection
Act and Rule 10C–1 under the Exchange
Act,37 NASDAQ recently amended its
listing rules relating to compensation
committees.38 Since NASDAQ OMX is
listed on NASDAQ, it must comply with
these listing rules just like any other
listed company. NASDAQ OMX
therefore proposes amendments to
Section 4.13(f) of the By-Laws, which
relates to the composition of the
Management Compensation Committee
of NASDAQ OMX’s Board, to conform
to the recent amendments to NASDAQ’s
listing rules. Specifically, NASDAQ
OMX proposes to state that the
Management Compensation Committee
must consist of at least two members
and that each member shall meet the
eligibility requirements set forth in the
rules of The NASDAQ Stock Market.
(h) No Amendment or Repeal of Certain
By-Law Amendments
While current Section 11.1 of the ByLaws provides for alteration,
amendment, repeal and adoption of ByLaws by the stockholders, current
Section 11.2 provides for alteration,
amendment, repeal and adoption of ByLaws by the Board. These two sections
operate as alternate means to alter,
amend, repeal or adopt By-Laws. In
37 See Public Law 111–203, 124 Stat. 1376 (2010)
and 17 CFR 240.10C–1.
38 See Securities Exchange Act Release No. 68640
(January 11, 2013), 78 FR 4554 (January 22, 2013)
(SR–NASDAQ–2012–109). Among other things, the
amendments require each NASDAQ-listed
company, with certain exceptions, to have a
compensation committee of its board of directors,
consisting of a minimum of two independent
directors who meet additional eligibility
requirements relating to compensatory fees and
affiliation.
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Federal Register / Vol. 78, No. 239 / Thursday, December 12, 2013 / Notices
other words, the stockholders may alter,
amend, repeal or adopt By-Laws
without any action by the Board, and
vice versa. NASDAQ OMX proposes to
add a proviso to Section 11.2 to state
that no By-Law adopted by the
stockholders shall be amended or
repealed by the Board if the By-Law so
adopted so provides. This is a
stockholder-friendly provision that is
intended to prevent the Board from
subsequently overriding stockholder
action to amend or repeal the By-Laws.
(i) Non-Substantive Changes
The remaining proposed By-Law
amendments are non-substantive
changes, which will simplify and
streamline the document. Specifically,
NASDAQ OMX proposes minor changes
to Section 3.3 to incorporate the new
defined term ‘‘Proposing Person,’’ to use
the term ‘‘nomination’’ rather than
‘‘nominee’’ for consistency and to
correct two cross-references. NASDAQ
OMX also proposes to delete obsolete
references to the 3.75% Series A
Convertible Notes due 2012 and the
Series B Convertible Notes due 2012,
which are no longer outstanding, in
Section 12.7.
In addition, NASDAQ OMX proposes
to correct typographical errors and/or
delete obsolete cross-references in
Article I(f), Section 4.3, Section 9.4(b),
Section 12.5 and Section 12.6. Finally,
NASDAQ OMX proposes to renumber
and reorganize the provisions of the ByLaws, where necessary following the
other amendments.
maindgalligan on DSK5TPTVN1PROD with NOTICES
2. Statutory Basis
SCCP believes that its proposal is
consistent with Section 17A(b)(3)(C) of
the Act,39 in that it assures a fair
representation of shareholders and
participants in the selection of directors
and administration of its affairs. While
the proposals relate to the
organizational documents of NASDAQ
OMX, rather than SCCP, SCCP is wholly
owned by NASDAQ OMX, and
therefore, NASDAQ OMX’s stockholders
have an indirect stake in SCCP. In
addition, the participants in SCCP, to
the extent any exist, could purchase
stock in NASDAQ OMX in the open
market, just like any other stockholder.
The proposals respond directly to
feedback from existing NASDAQ OMX
stockholders about their participation in
NASDAQ OMX’s governance. As a
result, NASDAQ OMX believes that the
proposals assure a fair representation of
its stockholders in the selection of
39 15
U.S.C. 78q–1(b)(3)(C).
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16:45 Dec 11, 2013
Jkt 232001
directors and administration of its
affairs, as well as the affairs of SCCP.
Specifically, in response to feedback
from its existing investors, NASDAQ
OMX is proposing changes to its Charter
to replace each supermajority voting
requirement with a ‘‘majority of
outstanding shares’’ voting standard.
NASDAQ OMX believes this approach
will strike an appropriate balance
between responding to stockholder
feedback and protecting the Company
and its investors against hostile
takeovers. In addition, the clarifying
changes to the Charter will make the
Charter more concise and easier to
understand. Both sets of changes to the
Charter were approved by NASDAQ
OMX’s investors at the most recent
annual meeting of stockholders.
NASDAQ OMX also proposes to
eliminate the Certificate of Designation
relating to the Series A Convertible
Preferred Stock, which is no longer
outstanding. This proposed change will
enhance the clarity of NASDAQ OMX’s
Charter.
Finally, NASDAQ OMX proposes
changes to its By-Laws: (i) To
implement a stockholder right to call a
special meeting; (ii) to enhance the
‘‘advance notice’’ procedures; (iii) to
require certain information and
agreements from director-nominees; (iv)
to remove and replace the supermajority
voting provisions to conform to the
Charter amendments; (v) to clarify the
procedures for filling Board vacancies;
(vi) to allow the use of electronic means
for certain notices and waivers; (vii) to
conform the composition requirements
for the Management Compensation
Committee of NASDAQ OMX’s Board
with the NASDAQ listing rules; (vii)[sic]
to prevent the Board from amending or
repealing By-Law amendments
approved by the stockholders; and
(viii)[sic] to make other non-substantive
changes.
The proposals relating to the
stockholder right to call a special
meeting and to remove and replace the
supermajority voting requirements are
responsive to feedback from NASDAQ
OMX’s stockholders. The additional
procedural requirements relating to
special and annual meetings will state
clearly and explicitly the procedures
stockholders must follow to propose
business at such meetings. The
requirement for certain information and
agreements from director-nominees will
ensure that nominees provide adequate
information about themselves and also
comply with applicable law and certain
NASDAQ OMX policies and procedures
relating to the Board. The prohibition on
the Board amending or repealing ByLaw amendments approved by the
PO 00000
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Fmt 4703
Sfmt 4703
stockholders is a stockholder-friendly
provision that is intended to prevent the
Board from subsequently overriding
stockholders’ wishes. Finally, the
remaining changes are clarifying in
nature, and they conform NASDAQ
OMX’s governance documents to
current practices and applicable rules
and make them clearer and easier to
understand.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
Because the proposed rule change
relates to the governance of NASDAQ
OMX and not to the operations of SCCP,
SCCP 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.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or 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 (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 SCCP consents, the
Commission shall: (a) By order approve
or disapprove such proposed rule
change, or (b) institute proceedings to
determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rulecomments@sec.gov. Please include File
Number SR–SCCP–2013–01 on the
subject line.
Paper Comments
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
E:\FR\FM\12DEN1.SGM
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Federal Register / Vol. 78, No. 239 / Thursday, December 12, 2013 / Notices
100 F Street NE., Washington, DC
20549–1090.
SECURITIES AND EXCHANGE
COMMISSION
All submissions should refer to File
Number SR–SCCP–2013–01. 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 Room, 100 F Street NE.,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of 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–2013–01 and should
be submitted on or before January 2,
2014.
[Release No. 34–71023; File No. SR–BATS–
2013–059]
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.40
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–29617 Filed 12–11–13; 8:45 am]
maindgalligan on DSK5TPTVN1PROD with NOTICES
BILLING CODE 8011–01–P
Self-Regulatory Organizations; BATS
Exchange, Inc.; Notice of Filing of a
Proposed Rule Change in Connection
With the Proposed Business
Combination Involving BATS Global
Markets, Inc. and Direct Edge Holdings
LLC
December 6, 2013.
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 November
25, 2013, BATS Exchange, Inc. (the
‘‘Exchange’’) 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 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 Exchange filed a proposed rule
change (the ‘‘Proposed Rule Change’’) in
connection with the proposed business
combination (the ‘‘Combination’’), as
described in more detail below,
involving its parent company, BATS
Global Markets, Inc. and Direct Edge
Holdings LLC (‘‘DE Holdings’’), the
indirect parent company of EDGX
Exchange, Inc. (‘‘EDGX’’) and EDGA
Exchange, Inc. (‘‘EDGA’’), each a
national securities exchange registered
with the Commission.
Upon completion of the Combination
(the ‘‘Closing’’), BATS Global Markets,
Inc. and DE Holdings will each become
intermediate holding companies, held
under a single new holding company.
The new holding company, currently
named ‘‘BATS Global Markets Holdings,
Inc.,’’ will at that time change its name
to ‘‘BATS Global Markets, Inc.’’ In
addition, the current parent company of
the Exchange, BATS Global Markets,
Inc., will at that time change its name
to ‘‘BATS Global Markets Holdings,
Inc.’’
For ease of reference, this Proposed
Rule Change will refer to the current
parent company of the Exchange as
‘‘Current BGM’’ when referring to the
entity prior to the Closing, and as ‘‘BGM
Holdings’’ when referring to that entity
after the Closing. The entity that will
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
CFR 200.30–3(a)(12).
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16:45 Dec 11, 2013
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Fmt 4703
become the new top-level holding
company that will, after Closing, own
BGM Holdings and DE Holdings, will be
referred to as ‘‘New BGM.’’
To effectuate the Combination, the
Exchange seeks to obtain the
Commission’s approval of (i) resolutions
of Current BGM’s board of directors (the
‘‘Resolutions’’) making certain
determinations regarding New BGM and
the impact of the Combination on the
Exchange; (ii) the proposed Amended
and Restated Certificate of Incorporation
of New BGM (the ‘‘New BGM Charter’’);
(iii) the proposed Amended and
Restated Bylaws of New BGM (the ‘‘New
BGM Bylaws’’); (iv) the proposed
amendments to Current BGM’s Second
Amended and Restated Certificate of
Incorporation (the ‘‘Current BGM
Charter,’’ and after such amendments,
the ‘‘BGM Holdings Charter’’); (v) the
proposed amendments to the Amended
and Restated Bylaws of Current BGM
(the ‘‘Current BGM Bylaws,’’ and after
such amendments, the ‘‘BGM Holdings
Bylaws’’); (vi) the proposed
amendments to the By-Laws of the
Exchange (the ‘‘Exchange Bylaws’’); (vii)
the proposed amendments to Exchange
Rule 2.3 to reflect the affiliation
between the Exchange and two
additional registered national securities
exchanges; (viii) the proposed
amendments to Exchange Rule 2.12 to
reflect the affiliation between the
Exchange and the routing broker for
EDGA and EDGX; and (ix) the indirect
acquisition by an affiliate of the
Exchange of a Member 3 of the Exchange
and the resulting affiliation between the
Exchange and the Member of the
Exchange, as required under Exchange
Rule 2.10.
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
3 The term ‘‘Member’’ is defined in Exchange
Rule 1.5(n) as any registered broker or dealer that
has been admitted to membership in the Exchange.
1 15
40 17
75607
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E:\FR\FM\12DEN1.SGM
12DEN1
]]>Agencies
[Federal Register Volume 78, Number 239 (Thursday, December 12, 2013)]
[Notices]
[Pages 75598-75607]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-29617]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-71020; File No. SR-SCCP-2013-01]
Self-Regulatory Organizations; Stock Clearing Corporation of
Philadelphia; Notice of Filing of Proposed Rule Change To Amend the
Restated Certificate of Incorporation and By-Laws of The NASDAQ OMX
Group, Inc.
December 6, 2013.
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 November 27, 2013, the Stock Clearing Corporation of Philadelphia
(``SCCP'') filed with the Securities and Exchange Commission (``SEC''
or ``Commission'') the proposed rule change as described in Items I, II
and III, below, which Items have been
[[Page 75599]]
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 is filing this proposed rule change with respect to amendments
of the Restated Certificate of Incorporation (the ``Charter'') and By-
Laws (the ``By-Laws'') of its parent corporation, The NASDAQ OMX Group,
Inc. (``NASDAQ OMX'' or the ``Company''). The proposed amendments will
be implemented on a date designated by NASDAQ OMX following approval by
the Commission. The text of the proposed rule change is available on
SCCP's Web site at https://nasdaqomxphlx.cchwallstreet.com/nasdaqomxphlx/sccp/, at the principal office of SCCP, 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, SCCP 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. SCCP 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 to make certain amendments to its Charter
and By-Laws.
(i) Background
At NASDAQ OMX's 2012 annual meeting held on May 22, 2012, NASDAQ
OMX's stockholders considered two proposals submitted by individual
stockholders. The first proposal, which passed with 68% of the votes
cast, requested that NASDAQ OMX's Board take steps to replace each
supermajority voting standard in the Charter and By-Laws \3\ with a
voting standard requiring a ``majority of votes cast.'' The second
proposal, which did not pass but received 49% of the votes cast,
requested that NASDAQ OMX's Board take steps to enable stockholders
having at least one-tenth of NASDAQ OMX's voting power to call a
special meeting of stockholders.
---------------------------------------------------------------------------
\3\ These provisions, which are described further below, require
the affirmative vote of at least 66\2/3\% of the total voting power
of the outstanding shares of NASDAQ OMX's capital stock to approve
certain actions.
---------------------------------------------------------------------------
Following the 2012 annual meeting, the Nominating & Governance
Committee of NASDAQ OMX's Board reviewed the voting results on the two
stockholder proposals and discussed the stockholder voting standards
and rights contemplated by the Charter and By-Laws. Following this
review, the Nominating & Governance Committee recommended to the Board,
and the Board approved, certain changes to the Charter and By-Laws to
address the two stockholder proposals and make other changes. NASDAQ
OMX now proposes to make these changes, which are described further
below.
(ii) Proposed Amendments to Charter
(a) Removal and Replacement of Supermajority Voting Requirements
To respond to feedback from its stockholders, NASDAQ OMX proposes
to replace each supermajority voting requirement in the Charter with a
``majority of outstanding shares'' voting requirement. The Charter
currently includes the following three supermajority voting
requirements.
Removal of Directors. Article Fifth, Paragraph D provides
that, except for directors elected by the holders of any series of
preferred stock, any director, or the entire Board, may be removed from
office at any time, but only by the affirmative vote of at least 66\2/
3\% of the total voting power of the outstanding shares of NASDAQ OMX's
capital stock entitled to vote generally in the election of directors
(the ``Voting Stock''), voting together as a single class.
Adoption, Alteration, Amendment and Repeal of By-Laws.
Article Eighth, Paragraph A provides that the affirmative vote of the
holders of at least 66\2/3\% of the total voting power of the
outstanding Voting Stock, voting together as a single class, shall be
required in order for the stockholders to adopt, alter, amend or repeal
any By-Law.
Adoption, Alteration, Amendment and Repeal of Certain
Charter Provisions. Article Ninth, Paragraph A provides that the
affirmative vote of the holders of at least 66\2/3\% of the voting
power of the outstanding Voting Stock, voting together as a single
class, shall be required to amend, repeal or adopt any provision
inconsistent with paragraph C of Article Fourth,\4\ Article Fifth,\5\
Article Seventh,\6\ Article Eighth \7\ or Article Ninth of the
Charter.\8\
---------------------------------------------------------------------------
\4\ Paragraph C of Article Fourth sets forth the 5% voting
limitation, which provides that holders of NASDAQ OMX's voting
securities may not cast votes in excess of 5% of NASDAQ OMX's
outstanding voting securities. To be clear, NASDAQ OMX is not
proposing any change to the 5% voting limitation itself. NASDAQ OMX
only proposes that any future amendment of the 5% voting limitation
will require the approval of stockholders holding a majority of the
outstanding shares, rather than stockholders holding 66\2/3\% of the
outstanding shares.
\5\ Article Fifth includes certain provisions relating to the
Board, such as Board size and director elections.
\6\ Article Seventh prohibits stockholder action by written
consent.
\7\ Article Eighth establishes the procedures to adopt, alter,
amend or repeal the By-Laws.
\8\ Article Ninth establishes the procedures to adopt, alter,
amend or repeal the Charter.
---------------------------------------------------------------------------
In each of the three provisions described above, NASDAQ OMX
proposes to remove the requirement for an affirmative vote of at least
66\2/3\% of the total voting power of the Voting Stock and replace it
with a voting standard requiring the affirmative vote of a majority of
the outstanding Voting Stock. In developing this proposal, NASDAQ OMX
considered the relative weight of the arguments for and against
supermajority voting requirements. Historically, supermajority voting
requirements have protected corporations against coercive takeover
tactics by requiring broad stockholder support for certain types of
transactions or governance changes. However, in recent years, corporate
governance standards have evolved, and many stockholder rights
advocates argue that supermajority voting requirements limit
stockholders' participation in corporate governance. NASDAQ OMX
believes that while it is important to protect against coercive
takeover tactics, it is also critically important to obtain stockholder
input and respond to stockholder concerns about corporate governance.
NASDAQ OMX believes that the proposed ``majority of outstanding
shares'' voting requirement will continue to provide some protection
against proposals that are harmful to the stockholders. While this
requirement is less difficult to satisfy than a supermajority voting
requirement, it is more difficult to satisfy than a ``majority of votes
cast'' requirement, which NASDAQ OMX considered as an alternate option.
NASDAQ OMX believes that a ``majority of outstanding shares'' standard
is a balanced outcome that responds to stockholder feedback while
appropriately maintaining
[[Page 75600]]
NASDAQ OMX's defensive posture against hostile takeovers.
(b) Non-Substantive Changes
NASDAQ OMX also proposes to amend and restate the Charter to make
other non-substantive changes. Specifically, the proposal deletes
obsolete references to the following:
The 3.75% Series A Convertible Notes due 2012 and the
3.75% Series B Convertible Notes due 2012, which are no longer
outstanding, in Article Fourth, Paragraph C and Article Eleventh;
a voting trust agreement, which is no longer in effect, in
Article Fourth, Paragraph C(3)(b)(iii);
ownership of NASDAQ OMX securities by the National
Association of Securities Dealers, Inc., certain affiliates of Hellman
& Friedman LLC, and certain affiliates of Silver Lake, none of which
currently own any NASDAQ OMX securities, in Article Fourth, Paragraph
C(6); \9\ and
---------------------------------------------------------------------------
\9\ NASDAQ OMX notes that the remaining text of Article Fourth,
Paragraph C(6) of the Charter includes an obsolete cross-reference
to Section 6(b) of Article Fourth, Paragraph C in the second
sentence, which begins ``The Board, however, may not approve an
exemption under Section 6(b) . . .'' NASDAQ OMX cannot correct this
cross-reference, which should refer to Section 6 without further
reference to a subsection (b), without seeking further approval of
its stockholders, which would require NASDAQ OMX to call and hold a
stockholder meeting. Generally, NASDAQ OMX holds stockholder
meetings, which are time consuming and expensive, only once or twice
a year. Moreover, it is atypical of a large public company like
NASDAQ OMX to submit a proposal to its stockholders solely to
correct a cross-reference in its Charter. However, NASDAQ OMX
believes, following consultation with outside counsel, that it is
clear, based on the drafting history of this provision, that the
intent of the cross-reference is to refer to Section 6 of Article
Fourth, Paragraph C of the Charter. In other words, the second
sentence of Article Fourth, Paragraph C(6) should read: ``The Board,
however, may not approve an exemption under Section 6: (i) For a
registered broker or dealer or an Affiliate thereof or (ii) an
individual or entity that is subject to a statutory disqualification
under Section 3(a)(39) of the Exchange Act.'' Under no circumstances
will NASDAQ OMX read the obsolete cross-reference to imply that the
Board could grant an exemption to the ownership limitation in
Article Fourth, Paragraph C(6) of the Charter for a registered
broker or dealer or an Affiliate thereof, or an individual or entity
that is subject to a statutory disqualification under Section
3(a)(39) of the Exchange Act. NASDAQ OMX also notes that it is
proposing amendments to Section 12.5 of the By-Laws to eliminate
cross-references to subsection (b) of Article Fourth, Paragraph C(6)
of the Charter. Finally, NASDAQ OMX notes that there are some
differences in language between the second sentence of Article
Fourth, Paragraph C(6) of the Charter and the second sentence of
Section 12.5 of the By-Laws. To the extent that these differences
would cause a difference in interpretation, NASDAQ OMX notes,
following consultation with outside counsel, that the Charter
language shall prevail. As soon as feasible, NASDAQ OMX plans to
present a proposal to the stockholders to conform this provision of
the Charter to the By-Laws.
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the phase-out of the classified board structure, which was
complete in 2007, in Article Fifth, Paragraph B.
In Article Fifth, Paragraph B, the proposal also clarifies that the
election of directors by stockholders shall occur at an annual or
special meeting. The proposal corrects a typographical error in Article
Fifth, Paragraph A and renumbers the provisions of the Charter, where
necessary following the other amendments. Finally, the proposal amends
the introductory and concluding language of the Charter to incorporate
language that will be required under Delaware law when the amended and
restated Charter is filed with the Secretary of State of the State of
Delaware.\10\
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\10\ See Sections 242 and 245 of the DGCL.
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The amendment and restatement of the Charter to incorporate these
non-substantive changes will simplify and streamline the document.
(iii) Proposed Elimination of Certificate of Designation
NASDAQ OMX proposes to eliminate its Certificate of Designation,
Preferences and Rights of Series A Convertible Preferred Stock (the
``Series A Convertible Preferred Stock''), and all matters set forth
therein. The Series A Convertible Preferred Stock was created in 2009
to facilitate the conversion of certain notes into common stock.\11\
The Company authorized 2 million shares of the Series A Convertible
Preferred Stock and immediately issued 1.6 million of those shares to
the converting noteholders.
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\11\ See Securities Exchange Act Release No. 60845 (October 20,
2009), 74 FR 55078 (October 26, 2009) (SR-BX-2009-061, SR-NASDAQ-
2009-087, SR-Phlx-2009-88); see also Securities Exchange Act Release
No. 61000 (November 13, 2009), 74 FR 61390 (November 24, 2009) (SR-
BSECC-2009-005); see also Securities Exchange Act Release No. 61001
(November 13, 2009), 74 FR 61391 (November 24, 2009) (SR-SCCP-2009-
04).
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In 2010, following stockholder approval, all 1.6 million issued
shares of the Series A Convertible Preferred Stock were converted into
common stock. Since then, no shares of the Series A Convertible
Preferred Stock have been outstanding, and the Company has no intention
to issue further shares of this series.
As a clean-up matter, the Company seeks to file a certificate of
elimination with the Secretary of State of the State of Delaware to
eliminate the Series A Convertible Preferred Stock. Under Delaware law,
a certificate of elimination is deemed to be an amendment to NASDAQ
OMX's Charter; however, since the amendment is limited in scope, it
does not require the approval of NASDAQ OMX's stockholders.\12\
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\12\ See Section 151(g) of the DGCL.
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(iv) Proposed Amendments to the By-Laws
(a) Special Meetings of Stockholders
Current Section 3.2 of NASDAQ OMX's By-Laws provides that only
NASDAQ OMX may call special meetings of its stockholders.\13\ To
respond to feedback from its stockholders, as discussed above, NASDAQ
OMX proposes to delete this provision and replace it with language that
will allow NASDAQ OMX's stockholders to call special meetings after
following particular procedures. Similar to the elimination of
supermajority voting requirements, which is discussed above, the
implementation of the right of stockholders to call a special meeting
has received recent attention from investor and corporate governance
advocates. These advocates argue that such a right will enable
stockholders to raise and act on matters that arise between annual
meetings.
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\13\ Under Delaware law, special meetings of a corporation's
stockholders may be called by the board of directors or by such
persons as may be authorized by the certificate of incorporation or
the bylaws. See Section 211(d) of the DGCL.
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Following discussions with some of its stockholders, NASDAQ OMX
agrees that it is appropriate to allow stockholders who meet certain
procedural requirements to call a special meeting. In proposing these
procedural requirements, NASDAQ OMX's goals are to ensure timely notice
of a meeting request and to gather sufficient information about the
proposing stockholder(s) and the proposal. Among other things, this
information will ensure that NASDAQ OMX is able to comply with its
disclosure and other requirements under applicable law and that NASDAQ
OMX, its Board and its stockholders are able to assess the proposal
adequately. The proposed procedural requirements are set forth below.
First, proposed Section 3.2(a) provides that special meetings of
NASDAQ OMX's stockholders may only be called: (i) At any time by NASDAQ
OMX's Board pursuant to a resolution adopted by a majority of the total
number of directors NASDAQ OMX would have if there were no vacancies;
and (ii) by NASDAQ OMX's Corporate Secretary following the receipt of a
written request in proper form for a special meeting (a ``Special
Meeting Request'') by one or more stockholders. Such stockholders (the
``Requisite
[[Page 75601]]
Holders'') must hold of record, in the aggregate, at least 15 percent
of NASDAQ OMX's outstanding shares of capital stock entitled to vote on
matters to be brought before the special meeting (the ``Requisite
Percentage''). Such shares must be ``Net Long Shares,'' \14\ and the
Requisite Holders must have held the shares continuously for at least
one year as of the date of the Special Meeting Request. Whether shares
constitute Net Long Shares shall ultimately be decided by NASDAQ OMX's
Board in its reasonable determination. The intent of the requirement
for stockholders to maintain a ``net long position'' is to limit the
ability to call a special meeting to stockholders that have long-term
record and economic positions in NASDAQ OMX.
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\14\ For purposes of determining Requisite Holders under
proposed Section 3.2, ``Net Long Shares'' shall be limited to the
number of shares beneficially owned, directly or indirectly, by any
stockholder or beneficial owner that constitute such person's ``net
long position'' as defined in Rule 14e-4 under the Act, provided
that (A) for the purposes of this definition, references in the rule
to ``the date the tender offer is first publicly announced or
otherwise made known by the bidder to the holders of the security to
be acquired'' shall be the date of the relevant Special Meeting
Request and all dates in the one year period prior thereto, the
``highest tender offer price or stated amount of the consideration
offered for the subject security'' shall refer to the closing sales
price of NASDAQ OMX's capital stock on NASDAQ on such date (or, if
such date is not a trading day, the next succeeding trading day),
the ``person whose securities are the subject of the offer'' shall
refer to NASDAQ OMX, a ``subject security'' shall refer to the
issued and outstanding voting stock of NASDAQ OMX; and (B) the net
long position of such stockholder shall be reduced by any shares as
to which such person does not have the right to vote or direct the
vote at the proposed special meeting or as to which such person has
entered into a derivative or other agreement, arrangement or
understanding that hedges or transfers, in whole or in part,
directly or indirectly, any of the economic consequences of
ownership of such shares. In addition, to the extent any affiliates
of the stockholder or beneficial owner are acting in concert with
the stockholder or beneficial owner with respect to the calling of
the special meeting, the determination of Net Long Shares may
include the effect of aggregating the Net Long Shares (including any
negative number) of such affiliate or affiliates. See proposed
Section 3.2(a) of the By-Laws.
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Proposed Section 3.2(a) also sets forth the procedures for
determining whether a special meeting has been requested by Requisite
Holders representing in aggregate at least the Requisite Percentage if
multiple Special Meeting Requests are delivered to NASDAQ OMX's
Corporate Secretary. Multiple requests will be considered together only
if: (i) Each Special Meeting Request identifies substantially the same
purpose or purposes of the special meeting and substantially the same
matters proposed to be acted on at the requested special meeting (in
each case as determined in good faith by NASDAQ OMX's Board); and (ii)
such Special Meeting Requests have been dated and delivered to NASDAQ
OMX's Corporate Secretary within 60 days of the earliest dated Special
Meeting Request. NASDAQ OMX believes these procedures are reasonable
and clear and notes that they grant only limited discretion to NASDAQ
OMX's Board in determining whether Special Meeting Requests will be
considered together.
Pursuant to proposed Section 3.2(b), if a Special Meeting Request
is in proper form, NASDAQ OMX's Board shall determine the place, if
any, date and time of the special meeting, and NASDAQ OMX's Corporate
Secretary shall call the special meeting within 120 days after the date
the Special Meeting Request was delivered. However, NASDAQ OMX's Board
may, in lieu of calling a special meeting, present an identical or
substantially similar item of business (a ``Similar Item''),\15\ as
determined in good faith by NASDAQ OMX's Board, for stockholder
approval at any other meeting of the stockholders that is held not less
than 120 days after the delivery of the Special Meeting Request. The
intent of this provision is to save NASDAQ OMX the time and expense of
calling and holding a special meeting if NASDAQ OMX intends to hold a
separate stockholders' meeting within 120 days. In fixing the place, if
any, date and time for any special meeting, NASDAQ OMX's Board may
consider such factors as it deems relevant in its business judgment,
including the nature of the matters to be considered, the facts and
circumstances surrounding any request for a meeting and any plan of the
Board to call an annual meeting or a special meeting.
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\15\ Under proposed Section 3.2(b) of the By-Laws, the election
of directors shall be deemed a ``Similar Item'' with respect to all
items of business involving the nomination, election or removal of
directors.
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Proposed Section 3.2(c) sets forth certain limitations on Special
Meeting Requests. Specifically, a Special Meeting Request will not be
valid if:
It relates to an item of business that is not a proper
subject for stockholder action under applicable law;
it is delivered during the period commencing 90 days prior
to the one-year anniversary of the date of the immediately preceding
annual meeting and ending on the date of the next annual meeting;
a Similar Item was presented at any meeting of
stockholders held within 120 days prior to the date on which the
Special Meeting Request was delivered; or
a Similar Item is included in NASDAQ OMX's notice of
meeting as an item of business to be presented at a stockholder's
meeting that has been called but not yet held.
The Board may adjourn or reschedule any previously scheduled
special meeting of the stockholders. NASDAQ OMX believes the subject
matter limitations set forth in proposed Section 3.2(c) are appropriate
in order to comply with applicable law and to prevent multiple
considerations of the same item of business. NASDAQ OMX believes the
time limits set forth in proposed Section 3.2(c) are appropriate to
ensure that NASDAQ OMX is not required to incur the time and expense of
calling and holding a special meeting of stockholders immediately prior
to an upcoming annual meeting of stockholders or if a Similar Item of
business already has been presented at a recent stockholders' meeting.
To be in proper form, a Special Meeting Request must comply with
certain requirements, as described further below.\16\ NASDAQ OMX's
Board will have the sole discretion to determine whether a Special
Meeting Request is in proper form.\17\ Proposed Section 3.2(d) sets
forth the requirements for a Special Meeting Request to be in proper
form. These proposed requirements will ensure that NASDAQ OMX has
sufficient information to comply with its disclosure requirements under
applicable law and that the Requisite Holders maintain a sufficient
ownership level through the date of the special meeting. Specifically,
a Special Meeting Request shall:
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\16\ See proposed Section 3.2(a) of the By-Laws.
\17\ Id.
---------------------------------------------------------------------------
Be in writing, signed by each Requesting Person \18\ and
delivered to NASDAQ OMX's Corporate Secretary at NASDAQ OMX's principal
executive offices;
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\18\ ``Requesting Person'' means (i) each Requisite Holder, (ii)
the beneficial owner or beneficial owners, if different, on whose
behalf the Special Meeting Request is being delivered to NASDAQ
OMX's Corporate Secretary and (iii) any affiliate or associate of
such stockholder or beneficial owner. See proposed Section 3.2(e) of
the By-Laws.
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set forth certain information with respect to (i) each
person the Requesting Person proposes to nominate for director, (ii)
any business the Requesting Person proposes to bring before the meeting
and (iii) each Requesting Person; \19\ and
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\19\ The information required is the same information required
from Proposing Persons with respect to nominations or items of
business to be brought before an annual meeting of stockholders and
is described in detail in Section (iv)(b) below.
---------------------------------------------------------------------------
include (i) an agreement by each Requisite Holder to
immediately deliver written notice to NASDAQ OMX's
[[Page 75602]]
Corporate Secretary in the case of any disposition, on or prior to the
record date for the special meeting, of any shares of NASDAQ OMX's
capital stock held of record by such Requisite Holder and (ii) an
acknowledgement that (1) any such disposition shall be deemed a
revocation of the Special Meeting Request to the extent of such
disposition and (2) if, following such deemed revocation, the Requisite
Holders hold of record, in the aggregate, less than the Requisite
Percentage of the voting power of all outstanding shares of NASDAQ
OMX's capital stock entitled to vote generally in the election of
directors, NASDAQ OMX shall have no obligation to hold the special
meeting.
Proposed Section 3.2(f) provides that at any special meeting of the
stockholders, the only business to be conducted or considered will have
been specified in the notice of meeting (or any supplement thereto)
given by or at the direction of NASDAQ OMX's Board or Corporate
Secretary, as the case may be. In any event, however, NASDAQ OMX's
Board may submit its own proposal or proposals for consideration at a
special meeting. Except as otherwise allowed under proposed Section
3.2, stockholders will not be permitted to propose business to be
brought before a special meeting of the stockholders. NASDAQ OMX
believes these provisions are reasonable and necessary to limit the
items of business that may be considered at a special meeting to those
that were proposed by the Company, the Board or stockholders that
comply with the requirements and procedures set forth in the By-Laws.
Proposed Section 3.2(g) will require the Requisite Holders giving a
Special Meeting Request to further update and supplement the request,
if necessary, so that the information in the request is true and
correct as of the record date for the special meeting and as of the
10th business day prior to the special meeting or any adjournment or
postponement thereof. This requirement will ensure that NASDAQ OMX, its
Board and its other stockholders are notified of changes to the
information they will consider in assessing a proposed item of business
prior to the special meeting. In the case of an update and supplement
required to be made as of the record date, the update and supplement
must be delivered to NASDAQ OMX's Corporate Secretary no later than the
fifth business day after the record date for the special meeting. In
the case of an update and supplement required to be made as of the 10th
business day prior to the special meeting or any adjournment or
postponement thereof, the update and supplement must be delivered to
NASDAQ OMX's Corporate Secretary no later than the eighth business day
prior to the date for the special meeting or, if practical, any
adjournment or postponement thereof (and, if not practicable, on the
first practicable date prior to the date to which the special meeting
has been adjourned or postponed).
Proposed Section 3.2(h) will allow the Requisite Holders to revoke
a Special Meeting Request by written revocation delivered to NASDAQ OMX
at any time prior to the special meeting requested. However, NASDAQ
OMX's Board will have the discretion to determine whether or not to
proceed with the special meeting. The Board might wish to continue with
the special meeting if, for example, the Company has already spent the
time and expense required to call the meeting or if the agenda for the
meeting includes items other than those proposed in the Special Meeting
Request.
Finally, NASDAQ OMX proposes to designate as Section 3.2(i)
existing text that sets forth the requirements for stockholders to
submit nominees for election as directors at certain stockholder
meetings. NASDAQ OMX further proposes to make a minor change to this
text to clarify that NASDAQ OMX's Board, rather than the Company
itself, will call a special meeting on behalf of the Company.
(b) Annual Meetings of Stockholders
Section 3.1 of NASDAQ OMX's By-Laws, which is the ``advance
notice'' provision,\20\ requires stockholders to notify NASDAQ OMX,
during a specified period in advance of an annual meeting, of their
intention to nominate one or more persons for election to the Board or
to present a business proposal for consideration by the stockholders at
the meeting. While designing the proposed procedural requirements for
stockholders to call a special meeting, as outlined above, NASDAQ OMX
evaluated the existing procedural requirements for stockholders to
bring business before an annual meeting. NASDAQ OMX is therefore
proposing changes to some of these procedures to enhance them and
conform them, in some cases, to the procedures relating to special
meetings. Generally, the proposed amendments add requirements for
extensive disclosures by proposing stockholders about themselves, any
proposed nominees for director and any proposed items of business to be
brought before a meeting. The specific amendments are discussed in
detail below.
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\20\ ``Advance notice'' provisions allow stockholder(s) to bring
business before an annual meeting of stockholders, but set forth
procedural requirements to ensure that companies and boards have
sufficient information about the proposal and the proposing
stockholder(s), as well as adequate time to consider the proposal,
by requiring the proposing stockholder(s) to give advance notice of
the intention to bring the proposal before the annual meeting.
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First, Section 3.1(a) of the By-Laws currently states that
nominations of persons for election to NASDAQ OMX's Board and the
proposal of other business to be considered by the stockholders at an
annual meeting of stockholders may be made only: (i) Pursuant to the
Company's notice of meeting (or any supplement thereto); (ii) by or at
the direction of NASDAQ OMX's Board or its Nominating & Governance
Committee; or (iii) by any stockholder of the Company that meets
certain requirements. These requirements state that the stockholder
must: (i) Be a stockholder of record at the time of delivery of notice
to the Company of nominees or other business to be conducted at the
meeting; (ii) be entitled to vote at the meeting; and (iii) comply with
the notice procedures set forth in the By-Laws. NASDAQ OMX proposes to
add a parenthetical to the requirement that a stockholder must be a
stockholder of record to clarify that a nomination or proposal of other
business may be made on behalf of a beneficial owner, if different from
the stockholder of record, only if the beneficial owner is the
beneficial owner of NASDAQ OMX shares. This modification will clarify
that both record and beneficial owners of NASDAQ OMX stock have the
right to propose nominees or business to be considered at an annual
meeting. NASDAQ OMX further proposes that a stockholder who proposes
nominees or business to be considered at an annual meeting must hold
shares in the Company at the time of the meeting, in addition to the
time of delivery of the required notice to the Company. This will
ensure that a stockholder retains an interest in the Company until the
meeting at which the stockholder's nominee or other business is
considered. Finally, NASDAQ OMX proposes to number the procedural
requirements for stockholders who propose nominees or business to make
them easier to understand.
Currently, Section 3.1(b) of the By-Laws sets forth the
requirements for a stockholder's notice to NASDAQ OMX of nominations or
other business to be considered at an annual meeting. NASDAQ OMX
proposes certain amendments to this section to ensure that NASDAQ OMX
has sufficient information about such nominations or
[[Page 75603]]
other business proposed by a stockholder to enable the Company, the
Board and the other stockholders to assess a position on the
nominations or other business. The additional information requirements
will also ensure that NASDAQ OMX can make adequate disclosures to its
stockholders and comply with requirements under applicable law.
Specifically, NASDAQ OMX proposes an amendment to the first
paragraph of this section to require a stockholder who provides a
notice relating to a nomination to include with the notice, a completed
and signed questionnaire, representation and agreement relating to the
nominee(s) for director.\21\ NASDAQ OMX also proposes to require a
stockholder who provides a notice to further update and supplement the
notice, if necessary, so that the information in the notice is true and
correct as of the record date for the annual meeting and as of the 10th
business day prior to the annual meeting or any adjournment or
postponement thereof.\22\ This requirement will ensure that NASDAQ OMX,
its Board and its other stockholders are notified of changes to the
information they will consider in assessing a proposed item of business
prior to the annual meeting. In the case of an update and supplement
required to be made as of the record date, the update and supplement
must be delivered to NASDAQ OMX's Corporate Secretary no later than the
fifth business day after the record date for the annual meeting. In the
case of an update and supplement required to be made as of the 10th
business day prior to the annual meeting or any adjournment or
postponement thereof, the update and supplement must be delivered to
NASDAQ OMX's Corporate Secretary no later than the eighth business day
prior to the date for the annual meeting or, if practicable, any
adjournment or postponement thereof (and, if not practicable, on the
first practicable date prior to the date to which the annual meeting
has been adjourned or postponed).
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\21\ The contents of and rationale for the questionnaire,
representation and agreement are discussed further in Section
(iv)(c) below.
\22\ NASDAQ OMX notes that this proposal is similar to proposed
Section 3.2(g) of the By-Laws, which requires updates and
supplements to a stockholder notice relating to a special meeting.
This proposed change is discussed further in Section (iv)(a) above.
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Section 3.1(b)(i) of the By-Laws currently sets forth the
information that a stockholder must provide to NASDAQ OMX about each
person whom the stockholder proposes to nominate for election as a
director. NASDAQ OMX proposes changes to this section to use the
defined term ``Proposing Person'' instead of stockholder,\23\ to
require information with respect to nominees for reelection as well as
nominees for election, to correct a reference to the Act and to add
numbering and other organizational changes to make the requirements
easier to read and understand. NASDAQ OMX also proposes to require the
same information with respect to a proposed nominee that will be
required with respect to a Proposing Person, as discussed further
below. In addition, NASDAQ OMX proposes to add two new informational
requirements for proposed nominees, including:
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\23\ ``Proposing Person'' means (i) the stockholder providing
the notice of business or the notice of the nomination, as
applicable, proposed to be brought before an annual meeting, (ii)
any beneficial owner or beneficial owners, if different, on whose
behalf such business is proposed to be brought before the meeting or
the notice of the nomination proposed to be made at the meeting is
made, as applicable, and (iii) any affiliate or associate (each
within the meaning of Rule 12b-2 under the Act for purposes of the
By-Laws) of such stockholder or beneficial owner. See proposed
Section 3.1(c) of the By-Laws.
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A description of all direct and indirect compensation and
other material monetary agreements, arrangements and understandings
during the past three years, and any other material relationships,
between or among any Proposing Person, on the one hand, and such
proposed nominee and any of his or her respective affiliates and
associates, on the other hand, including, without limitation, all
information that would be required to be disclosed pursuant to Item 404
under Regulation S-K if such Requesting Person were the ``registrant''
for purposes of such rule and the proposed nominee were a director or
executive officer of such registrant; and
a completed and signed questionnaire, representation and
agreement.\24\
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\24\ The contents of and rationale for the questionnaire,
representation and agreement are discussed further in Section
(iv)(c) below.
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Finally, NASDAQ OMX proposes to add a catch-all provision to
Section 3.1(b)(i) of the By-Laws that will allow the Company to require
any proposed nominee to furnish such other information (i) as the
Company may reasonably require to determine the eligibility of such
proposed nominee to serve as a director or (ii) that could be material
to a reasonable stockholder's understanding of the independence, or
lack of independence, of such proposed nominee. NASDAQ OMX believes
that all of the new information requirements included in proposed
Section 3.1(b)(i) are reasonable and necessary in order to assist the
Company in evaluating director eligibility, independence and potential
conflicts of interest.
Section 3.1(b)(ii) of the By-Laws currently sets forth the
information that a stockholder must provide to NASDAQ OMX about any
business, other than nominations for director, that the stockholder
proposes to bring before an annual meeting. NASDAQ OMX proposes changes
to this section to require that the description of the proposed
business be reasonably detailed, to use the defined term ``Proposing
Person'' instead of stockholder and beneficial owner in certain places
and to add numbering, reordering and other organizational changes to
make the requirements easier to read and understand. NASDAQ OMX also
proposes to add a new requirement for a stockholder to provide a
reasonably detailed description of all contracts, agreements,
arrangements and understandings between or among any of the Proposing
Persons or between or among any Proposing Person in connection with the
proposal. NASDAQ OMX believes this information will be useful in
assessing the aims and incentives of Proposing Persons in proposing
business before an annual meeting.
Section 3.1(b)(iii) of the By-Laws currently sets forth the
information that a stockholder who proposes nominee(s) for director or
other business to be put forth before an annual meeting must provide to
NASDAQ OMX about such stockholder and the beneficial owner, if any, on
whose behalf the nomination or proposal is made. NASDAQ OMX proposes
changes to this section to use the defined term ``Proposing Person''
instead of stockholder and beneficial owner in certain places and to
add numbering, reordering and other organizational changes to make the
requirements easier to read and understand.
Relating to the existing requirement in Section 3.1(b)(iii)(B) that
a proposing stockholder describe the class or series and number of
shares of NASDAQ OMX capital stock owned beneficially and of record by
such stockholder and the beneficial owner, NASDAQ OMX proposes to add a
parenthetical stating that beneficial ownership shall be determined
within the meaning of Rule 13d-3 under the Act. NASDAQ OMX also
proposes to state that a Proposing Person shall in all events be deemed
to beneficially own any shares of any class or series of NASDAQ OMX's
capital stock as to which such person has a right to acquire beneficial
ownership at any time in the future. These proposed
[[Page 75604]]
changes merely clarify how the concept of beneficial ownership will be
interpreted under this section of the By-Laws.
Current Section 3.1(b)(iii)(D) requires proposing stockholders to
describe to NASDAQ OMX any agreement, arrangement or understanding
(including any derivative or short positions, profit interests,
options, warrants, convertible securities, stock appreciation or
similar rights, hedging transactions, and borrowed or loaned shares)
that has been entered into as of the date of the notice by the
stockholder and the beneficial owners with respect to NASDAQ OMX's
stock. Given the increased complexity of such transactions in today's
marketplace, NASDAQ OMX proposes to replace the current language with a
similar requirement for disclosure of any Synthetic Equity
Interest,\25\ without regard to whether: (i) The derivative, swap or
other transaction or series of transactions conveys any voting rights
in such shares to the Proposing Person; (ii) the derivative, swap or
other transaction or series of transactions is required to be, or is
capable of being, settled through delivery of such shares; or (iii) the
Proposing Person may have entered into other transactions that hedge or
mitigate the economic effect of such derivative, swap or other
transaction or series of transactions. This proposed provision will
assist NASDAQ OMX, its Board and its other stockholders in
understanding a Proposing Person's full economic interests in NASDAQ
OMX and possible aims and incentives in submitting the proposed
business for consideration at an annual meeting.
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\25\ ``Synthetic Equity Interest'' shall mean any derivative,
swap or other transaction (including any short positions, profit
interest, options, warrants, convertible securities, stock
appreciation or similar rights) or series of transactions engaged
in, directly or indirectly, by a Proposing Person, the purpose or
effect of which is to give the Proposing Person economic risk
similar to ownership of shares of any class or series of NASDAQ OMX,
including due to the fact that the value of such derivative, swap or
other transaction or series of transactions is determined by
reference to the price, value or volatility of any shares of any
class or series of NASDAQ OMX, or which derivative, swap or other
transaction or series of transactions provides, directly or
indirectly, the opportunity to profit from any increase in the price
or value of shares of any class or series of NASDAQ OMX. See
proposed Section 3.1(b)(iii)(D) of the By-Laws.
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For this same reason, NASDAQ OMX also proposes to add several new
disclosures that a Proposing Person must include in a notice to NASDAQ
OMX regarding nominees or other business to be conducted at an annual
meeting. These include disclosures regarding:
any proxy (other than a revocable proxy or consent given
in response to a solicitation made pursuant to, and in accordance with,
Section 14(a) of the Act by way of a solicitation statement filed on
Schedule 14A), agreement, arrangement, understanding or relationship
pursuant to which the Proposing Person has or shares a right to vote
any shares of any class or series of NASDAQ OMX; \26\
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\26\ See proposed Section 3.1(b)(iii)(E) of the By-Laws.
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any proportionate interest in NASDAQ OMX shares or
Synthetic Equity Interest held, directly or indirectly, by a general or
limited partnership in which the Proposing Person is a general partner
or, directly or indirectly, beneficially owns an interest in a general
partner; \27\
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\27\ See proposed Section 3.1(b)(iii)(F) of the By-Laws.
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any agreement, arrangement, understanding or relationship,
including any repurchase or similar so-called ``stock borrowing''
agreement or arrangement, entered into or engaged in, directly or
indirectly, by the Proposing Person, the purpose or effect of which is
to mitigate loss to, reduce the economic risk (of ownership or
otherwise) of shares of any class or series of NASDAQ OMX by, manage
the risk of share price changes for, or increase or decrease the voting
power of, the Proposing Person with respect to shares of any class or
series of NASDAQ OMX, or that provides, directly or indirectly, the
opportunity to profit from any decrease in the price or value of shares
of any class or series of NASDAQ OMX (any of the foregoing, a ``Short
Interest''); \28\
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\28\ See proposed Section 3.1(b)(iii)(G) of the By-Laws.
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any performance-related fees (other than an asset-based
fee) to which the Proposing Person is entitled based on any increase or
decrease in the price or value of shares of any class or series of
NASDAQ OMX, or any Synthetic Equity Interest or Short Interest; \29\
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\29\ See proposed Section 3.1(b)(iii)(H) of the By-Laws.
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any significant equity interest or any Synthetic Equity
Interest or Short Interest in any principal competitor of NASDAQ OMX
held by the Proposing Person; \30\
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\30\ See proposed Section 3.1(b)(iii)(I) of the By-Laws.
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any direct or indirect interest of the Proposing Person in
any contract with NASDAQ OMX, any affiliate of NASDAQ OMX or any
principal competitor of NASDAQ OMX (including, in any such case, any
employment agreement, collective bargaining agreement or consulting
agreement); \31\
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\31\ See proposed Section 3.1(b)(iii)(J) of the By-Laws.
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any pending or threatened litigation in which the
Proposing Person is a party or material participant involving NASDAQ
OMX or any of its officers or directors, or any affiliate of NASDAQ
OMX; \32\
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\32\ See proposed Section 3.1(b)(iii)(K) of the By-Laws.
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any material transaction occurring, in whole or in part,
during the then immediately preceding 12-month period between such
Proposing Person, on the one hand, and NASDAQ OMX, any affiliate of
NASDAQ OMX or any principal competitor of NASDAQ OMX, on the other
hand; \33\ and
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\33\ See proposed Section 3.1(b)(iii)(L) of the By-Laws.
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any other information relating to the Proposing Person
required to be disclosed in a proxy statement or other filings required
to be made in connection with solicitations of proxies for, as
applicable, the proposal and/or for the election of directors in an
election contest pursuant to and in accordance with Section 14(a) of
the Act and the rules and regulations promulgated thereunder.\34\
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\34\ See proposed Section 3.1(b)(iii)(M) of the By-Laws. NASDAQ
OMX also proposes to include an exception to each of the
aforementioned disclosure requirements for any disclosures with
respect to the ordinary course business activities of any broker,
dealer, commercial bank, trust company or other nominee who is a
Proposing Person solely as a result of being the stockholder
directed to prepare and submit the notice required by the By-Laws on
behalf of a beneficial owner.
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(c) Questionnaire, Representation and Agreement for Director-Nominees
NASDAQ OMX proposes to add a new Section 3.5 to its By-Laws to
require nominees for director to deliver to NASDAQ OMX, in accordance
with the time periods prescribed for delivery of a stockholder's
notice: (i) A written questionnaire with respect to the background and
qualifications of the nominee; and (ii) a written representation and
agreement as to certain matters. Specifically, the written
representation and agreement will provide that the nominee:
is not and will not become a party to (i) any agreement as
to how the nominee will act or vote on any issue or question (a
``Voting Commitment'') that has not been fully disclosed to NASDAQ OMX
or (ii) any Voting Commitment that could limit or interfere with the
nominee's fiduciary duties under applicable law;
is not and will not become a party to any agreement with
any person other than NASDAQ OMX with respect to any
[[Page 75605]]
direct or indirect compensation, reimbursement or indemnification in
connection with service or action as a director of NASDAQ OMX that has
not been fully disclosed to NASDAQ OMX;
would be in compliance, if elected, and will comply, with
the provisions of NASDAQ OMX's By-Laws relating to qualifications of
directors, conflicts of interest and contracts and transactions
involving directors; and
in such proposed nominee's individual capacity and on
behalf of any person on whose behalf the nomination is made, would be
in compliance, if elected, and will comply, with NASDAQ OMX's Corporate
Governance Guidelines, Board of Director Code of Conduct and Code of
Ethics, including all applicable, publicly disclosed conflict of
interest, confidentiality, stock ownership and insider trading policies
and guidelines.
The requirements of proposed Section 3.5 of the By-Laws, which will
apply to both the Company's and stockholders' nominees for director,
will ensure that NASDAQ OMX has the necessary information about
nominees to fulfill its public disclosure requirements. The
requirements also will ensure that nominees will comply with the legal
obligations, policies and procedures applicable to all NASDAQ OMX
directors.
(d) Removal and Replacement of Supermajority Voting Provisions
Consistent with the proposed amendments to remove and replace the
supermajority voting provisions in the Charter discussed above, NASDAQ
OMX proposes to amend each provision of the By-Laws that currently
requires a supermajority vote of stockholders to instead require a
``majority of votes outstanding.'' NASDAQ OMX's By-Laws currently
include the following two supermajority voting requirements, each of
which conforms with an analogous provision in the Charter.
Removal of Directors. Section 4.6 provides that any or all
of the directors may be removed from office at any time by the
affirmative vote of at least 66\2/3\% of the total voting power of the
Voting Stock, voting together as a single class.\35\
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\35\ This provision is analogous to Article Fifth, Paragraph D
of the Charter, which is discussed under Section (ii)(a) above.
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Adoption, Alteration, Amendment and Repeal of By-Laws.
Section 11.1 provides that the By-Laws may be altered amended or
repealed, or new By-Laws may be adopted, at any meeting of the
stockholders by the affirmative vote of the holders of at least 66\2/
3\% of the voting power of the Voting Stock, voting together as a
single class.\36\
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\36\ This provision is analogous to Article Eighth, Paragraph A
of the Charter, which is discussed under Section (ii)(a) above.
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To conform with the proposed changes to the Charter, NASDAQ OMX
proposes to replace each of these supermajority voting requirements
with a voting standard requiring the affirmative vote of a majority of
the outstanding Voting Stock. As discussed above with respect to the
analogous Charter amendments, NASDAQ OMX believes that a ``majority of
outstanding shares'' standard reflects a balanced approach that
responds to stockholder feedback while appropriately maintaining NASDAQ
OMX's defensive posture against hostile takeovers.
(e) Procedures for Filling Board Vacancies
Section 4.8 of the By-Laws sets forth the procedures to fill a
director position that has become vacant, whether because of death,
disability, disqualification, removal or resignation. Under the current
provisions, if such a vacancy occurs, the Nominating & Governance
Committee of the Board shall nominate, and the Board shall elect by
majority vote, a person to fill the vacancy. In light of the addition
of a right for stockholders to call a special meeting, as discussed
above, NASDAQ OMX proposes amendments to Section 4.8 to state
explicitly that vacancies on the Board are to be filled by a majority
vote of the Board, and not by stockholders. In addition, to prescribe
procedures in case multiple Board vacancies occur at the same time, the
proposed amendments state that a Board vacancy shall be filled by the
majority of the directors, even if there is less than a quorum, or by
the sole remaining director, if there is only one director remaining on
the Board. The proposed amendments do not change any of the other
procedures for filling Board vacancies.
(f) Use of Electronic Means for Certain Notices and Related Waivers
Currently, Section 4.12(a) of the By-Laws provides that notice of
any meeting of the Board shall be deemed duly given to a director if,
among other methods, the notice is sent to the director at the address
last made known in writing to NASDAQ OMX by telegraph, telefax, cable,
radio or wireless. Section 4.12(b) of the By-Laws provides that such
notice of a board meeting need not be given to any director if waived
by the director in writing or by electronic transmission (or by
telegram, telefax, cable, radio or wireless and subsequently confirmed
in writing or by electronic transmission). NASDAQ OMX proposes
amendments to Sections 4.12(a) and (b) to provide that both notices and
waivers of such notices can be given by email or other means of written
electronic transmission. These amendments are intended merely to expand
the means through which notices and waivers of notices may be given,
and the amendments do not affect any of the other procedural
requirements of Sections 4.12(a) and (b). In addition, the proposed
amendments reflect current practices, as a substantial amount of
communications between NASDAQ OMX and its directors, outside of Board
meetings, occurs through electronic means.
(g) Composition of the Management Compensation Committee
As required by the Dodd-Frank Wall Street Reform and Consumer
Protection Act and Rule 10C-1 under the Exchange Act,\37\ NASDAQ
recently amended its listing rules relating to compensation
committees.\38\ Since NASDAQ OMX is listed on NASDAQ, it must comply
with these listing rules just like any other listed company. NASDAQ OMX
therefore proposes amendments to Section 4.13(f) of the By-Laws, which
relates to the composition of the Management Compensation Committee of
NASDAQ OMX's Board, to conform to the recent amendments to NASDAQ's
listing rules. Specifically, NASDAQ OMX proposes to state that the
Management Compensation Committee must consist of at least two members
and that each member shall meet the eligibility requirements set forth
in the rules of The NASDAQ Stock Market.
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\37\ See Public Law 111-203, 124 Stat. 1376 (2010) and 17 CFR
240.10C-1.
\38\ See Securities Exchange Act Release No. 68640 (January 11,
2013), 78 FR 4554 (January 22, 2013) (SR-NASDAQ-2012-109). Among
other things, the amendments require each NASDAQ-listed company,
with certain exceptions, to have a compensation committee of its
board of directors, consisting of a minimum of two independent
directors who meet additional eligibility requirements relating to
compensatory fees and affiliation.
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(h) No Amendment or Repeal of Certain By-Law Amendments
While current Section 11.1 of the By-Laws provides for alteration,
amendment, repeal and adoption of By-Laws by the stockholders, current
Section 11.2 provides for alteration, amendment, repeal and adoption of
By-Laws by the Board. These two sections operate as alternate means to
alter, amend, repeal or adopt By-Laws. In
[[Page 75606]]
other words, the stockholders may alter, amend, repeal or adopt By-Laws
without any action by the Board, and vice versa. NASDAQ OMX proposes to
add a proviso to Section 11.2 to state that no By-Law adopted by the
stockholders shall be amended or repealed by the Board if the By-Law so
adopted so provides. This is a stockholder-friendly provision that is
intended to prevent the Board from subsequently overriding stockholder
action to amend or repeal the By-Laws.
(i) Non-Substantive Changes
The remaining proposed By-Law amendments are non-substantive
changes, which will simplify and streamline the document. Specifically,
NASDAQ OMX proposes minor changes to Section 3.3 to incorporate the new
defined term ``Proposing Person,'' to use the term ``nomination''
rather than ``nominee'' for consistency and to correct two cross-
references. NASDAQ OMX also proposes to delete obsolete references to
the 3.75% Series A Convertible Notes due 2012 and the Series B
Convertible Notes due 2012, which are no longer outstanding, in Section
12.7.
In addition, NASDAQ OMX proposes to correct typographical errors
and/or delete obsolete cross-references in Article I(f), Section 4.3,
Section 9.4(b), Section 12.5 and Section 12.6. Finally, NASDAQ OMX
proposes to renumber and reorganize the provisions of the By-Laws,
where necessary following the other amendments.
2. Statutory Basis
SCCP believes that its proposal is consistent with Section
17A(b)(3)(C) of the Act,\39\ in that it assures a fair representation
of shareholders and participants in the selection of directors and
administration of its affairs. While the proposals relate to the
organizational documents of NASDAQ OMX, rather than SCCP, SCCP is
wholly owned by NASDAQ OMX, and therefore, NASDAQ OMX's stockholders
have an indirect stake in SCCP. In addition, the participants in SCCP,
to the extent any exist, could purchase stock in NASDAQ OMX in the open
market, just like any other stockholder. The proposals respond directly
to feedback from existing NASDAQ OMX stockholders about their
participation in NASDAQ OMX's governance. As a result, NASDAQ OMX
believes that the proposals assure a fair representation of its
stockholders in the selection of directors and administration of its
affairs, as well as the affairs of SCCP.
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\39\ 15 U.S.C. 78q-1(b)(3)(C).
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Specifically, in response to feedback from its existing investors,
NASDAQ OMX is proposing changes to its Charter to replace each
supermajority voting requirement with a ``majority of outstanding
shares'' voting standard. NASDAQ OMX believes this approach will strike
an appropriate balance between responding to stockholder feedback and
protecting the Company and its investors against hostile takeovers. In
addition, the clarifying changes to the Charter will make the Charter
more concise and easier to understand. Both sets of changes to the
Charter were approved by NASDAQ OMX's investors at the most recent
annual meeting of stockholders.
NASDAQ OMX also proposes to eliminate the Certificate of
Designation relating to the Series A Convertible Preferred Stock, which
is no longer outstanding. This proposed change will enhance the clarity
of NASDAQ OMX's Charter.
Finally, NASDAQ OMX proposes changes to its By-Laws: (i) To
implement a stockholder right to call a special meeting; (ii) to
enhance the ``advance notice'' procedures; (iii) to require certain
information and agreements from director-nominees; (iv) to remove and
replace the supermajority voting provisions to conform to the Charter
amendments; (v) to clarify the procedures for filling Board vacancies;
(vi) to allow the use of electronic means for certain notices and
waivers; (vii) to conform the composition requirements for the
Management Compensation Committee of NASDAQ OMX's Board with the NASDAQ
listing rules; (vii)[sic] to prevent the Board from amending or
repealing By-Law amendments approved by the stockholders; and
(viii)[sic] to make other non-substantive changes.
The proposals relating to the stockholder right to call a special
meeting and to remove and replace the supermajority voting requirements
are responsive to feedback from NASDAQ OMX's stockholders. The
additional procedural requirements relating to special and annual
meetings will state clearly and explicitly the procedures stockholders
must follow to propose business at such meetings. The requirement for
certain information and agreements from director-nominees will ensure
that nominees provide adequate information about themselves and also
comply with applicable law and certain NASDAQ OMX policies and
procedures relating to the Board. The prohibition on the Board amending
or repealing By-Law amendments approved by the stockholders is a
stockholder-friendly provision that is intended to prevent the Board
from subsequently overriding stockholders' wishes. Finally, the
remaining changes are clarifying in nature, and they conform NASDAQ
OMX's governance documents to current practices and applicable rules
and make them clearer and easier to understand.
B. Self-Regulatory Organization's Statement on Burden on Competition
Because the proposed rule change relates to the governance of
NASDAQ OMX and not to the operations of SCCP, SCCP 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.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or 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 (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 SCCP consents, the Commission shall: (a) By order approve or
disapprove such proposed rule change, or (b) institute proceedings to
determine whether the proposed rule change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-SCCP-2013-01 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission,
[[Page 75607]]
100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-SCCP-2013-01. 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 Room, 100 F Street NE., Washington,
DC 20549, on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of 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-2013-01 and
should be submitted on or before January 2, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\40\
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\40\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-29617 Filed 12-11-13; 8:45 am]
BILLING CODE 8011-01-P
