Self-Regulatory Organizations; EDGA Exchange, Inc.; Notice of Filing of a Proposed Rule Change, as Modified by Amendment No. 1, in Connection With the Proposed Business Combination Involving BATS Global Markets, Inc. and Direct Edge Holdings LLC, 76415-76442 [2013-29900]

Agencies

• SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 78, Number 242 (Tuesday, December 17, 2013)]
[Notices]
[Pages 76415-76442]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-29900]



[[Page 76415]]

Vol. 78

Tuesday,

No. 242

December 17, 2013

Part II





 Securities and Exchange Commission





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 Self-Regulatory Organizations; EDGA Exchange, Inc.; Notice of Filing 
of a Proposed Rule Change, as Modified by Amendment No. 1, in 
Connection With the Proposed Business Combination Involving BATS Global 
Markets, Inc. and Direct Edge Holdings LLC; Notice

Federal Register / Vol. 78, No. 242 / Tuesday, December 17, 2013 / 
Notices

[[Page 76416]]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71046; File No. SR-EDGA-2013-34]


Self-Regulatory Organizations; EDGA Exchange, Inc.; Notice of 
Filing of a Proposed Rule Change, as Modified by Amendment No. 1, in 
Connection With the Proposed Business Combination Involving BATS Global 
Markets, Inc. and Direct Edge Holdings LLC

December 11, 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 29, 2013, EDGA 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. On December 9, 2013, the 
Exchange filed Amendment No. 1 to the proposed rule change. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change, as modified by Amendment No. 1, from interested 
persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    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 
indirect parent company, Direct Edge Holdings LLC (``DE Holdings''), 
and BATS Global Markets, Inc., the parent company of BATS Exchange, 
Inc. (``BATS'') and BATS Y-Exchange, Inc. (``BYX'') (collectively, 
``BATS Exchanges''), each a national securities exchange registered 
with the Commission.
    Upon completion of the Combination (the ``Closing''), DE Holdings 
and BATS Global Markets, Inc. 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 BATS Exchanges, 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 BATS Exchanges 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 
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) the proposed Resolutions of the DE 
Holdings Board of Managers regarding the Combination (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 \3\ (the 
``New BGM Charter''); (iii) the proposed Amended and Restated Bylaws of 
New BGM (the ``New BGM Bylaws''); (iv) the replacement of the Fourth 
Amended and Restated Limited Liability Company Operating Agreement of 
Direct Edge Holdings LLC \4\ (``Fourth DE Holdings LLC Agreement'') in 
its entirety with the proposed Seventh Amended and Restated Limited 
Liability Company Operating Agreement of Direct Edge Holdings LLC (the 
``New DE Holdings LLC Agreement''); (v) the proposed amendments to the 
Direct Edge, Inc. (``DEI'') Certificate of Incorporation (the ``DEI 
Certificate of Incorporation''); (vi) the proposed amendments to the 
Bylaws of Direct Edge, Inc. (the ``DEI Bylaws''); (vii) the proposed 
amendments to the Certificate of Incorporation of the Exchange (the 
``Exchange Certificate of Incorporation''); (viii) the proposed 
amendments to the Bylaws of the Exchange (the ``Exchange Bylaws''); 
(ix) the proposed amendments to Exchange Rule 2.3 to reflect the 
affiliation between the Exchange and two additional registered national 
securities exchanges; (x) the proposed amendments to Exchange Rule 2.10 
to reflect the new affiliated entities of the Exchange; (xi) the 
proposed amendments to Exchange Rule 2.12 to reflect the affiliation 
between the Exchange and the routing broker for BATS and BYX; and (xii) 
the indirect acquisition by an affiliate of the Exchange of a Member 
\5\ of the Exchange and the resulting affiliation between the Exchange 
and the Member of the Exchange, as required under Exchange Rule 2.10.
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    \3\ The title of the New BGM Charter is the ``Amended and 
Restated Certificate of Incorporation of BATS Global Markets 
Holdings, Inc.'' The name, however, will change to BATS Global 
Markets Inc. at Closing. Therefore, to avoid confusion we will refer 
to it as the ``Amended and Restated Certificate of Incorporation of 
BATS Global Markets, Inc.''
    \4\ With their applications to register as national securities 
exchanges, the Exchange and EDGX Exchange, Inc. (``EDGX'') filed 
with, and received approval for, the DE Holdings' Fourth Amended and 
Restated Limited Liability Company Operating Agreement. See 
Securities Exchange Act Release No. 61698 (Mar. 12, 2010), 75 FR 
13151 (Mar. 18, 2010). Since that time, DE Holdings amended the 
Agreement twice, creating the Fifth Amended and Restated Limited 
Liability Company Operating Agreement (``Fifth DE Holdings LLC 
Agreement'') and the Sixth Amended and Restated Limited Liability 
Company Operating Agreement (``Sixth DE Holdings LLC Agreement''). 
As required by Article 15, Section 15.2 of such Agreements, DE 
Holdings submitted its proposed amendments to the Boards of 
Directors of the Exchange and EDGX, which determined that the 
proposed amendments were not required to be filed with, or filed 
with and approved by, the Commission pursuant to Section 19 of the 
Act and the rules promulgated thereunder. 15 U.S.C. 78s(b). DE 
Holdings currently operates pursuant to the Sixth DE Holdings LLC 
Agreement.
    \5\ The term ``Member'' is defined in Exchange Rule 1.5(n) as 
``any registered broker or dealer, or any person associated with a 
registered broker or dealer, that has been admitted to membership in 
the Exchange. A Member will have the status of a `member' of the 
Exchange as that term is defined in Section 3(a)(3) of the Act.'' To 
avoid confusion, the Exchange will refer to members of any other 
national securities exchanges, including members of EDGX or the BATS 
Exchanges as ``members,'' rather than as ``Members.''
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    The text of the proposed rule change is available at the Exchange's 
Web site at www.directedge.com, at the principal office of the 
Exchange, and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant parts of such 
statements.

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

1. Purpose
    The Exchange submits this Proposed Rule Change to seek the 
Commission's approval of various changes to the organizational and 
governance documents of the Exchange and the Exchange's current and 
proposed future direct and indirect parent companies, changes to 
Exchange Rules,\6\ and related actions that are necessary in connection

[[Page 76417]]

with the Closing of the Combination, as described below.
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    \6\ The term ``Exchange Rules'' refers to the rules of the 
Exchange.
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    Other than as described herein and set forth in the attached 
Exhibits 5A through 5K, the Exchange will continue to conduct its 
regulated activities (including operating and regulating its market and 
Members) in the manner currently conducted, and will not make any 
changes to its regulated activities in connection with the Combination. 
Except as set forth in this Proposed Rule Change, the Exchange is not 
proposing any amendments to its trading and regulatory rules at this 
time. If the Exchange determines to make any such changes, it will seek 
the approval of the Commission to the extent required by the Act, the 
Commission's rules thereunder, and the Exchange Rules.
1. Current Corporate Structures
    The Exchange and EDGX (collectively, the ``DE Exchanges'') are each 
Delaware corporations that are national securities exchanges registered 
\7\ with the Commission pursuant to Section 6(a) of the Act.\8\ Each DE 
Exchange is a direct, wholly owned subsidiary of DEI, a Delaware 
corporation. DEI is a direct, wholly owned subsidiary of DE Holdings, a 
Delaware limited liability company. In addition, DE Holdings owns 100 
percent of the equity interest in Direct Edge ECN LLC d/b/a DE Route, a 
Delaware limited liability company and the routing broker-dealer for 
the DE Exchanges (``DE Route'').
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    \7\ Securities Exchange Act Release No. 61698 (Mar. 12, 2010), 
75 FR 13151 (Mar. 18, 2010).
    \8\ 15 U.S.C. 78f(a).
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    As a limited liability company, ownership in DE Holdings is 
represented by units held by members of DE Holdings (``LLC 
Members'').\9\ Certain of the DE Holdings LLC Members are Members or 
affiliates of Members of the Exchange. International Securities 
Exchange Holdings, Inc. (``ISE Holdings'') is the only LLC Member of DE 
Holdings to beneficially own greater than 20 percent of the equity 
interest in DE Holdings. Other than ISE Holdings, the only firms 
beneficially owning ten percent or greater of DE Holdings (but in each 
case less than 20 percent) are Citadel Securities LLC, The Goldman 
Sachs Group, Inc., and Knight Capital Holdings LLC, an affiliate of KCG 
Holdings, Inc. No LLC Member beneficially owns five percent or greater 
but less than ten percent of DE Holdings. Five other firms each 
beneficially own less than five percent of DE Holdings.
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    \9\ A ``Member'' is defined in Article I of the Sixth DE 
Holdings LLC Agreement as ``any Person (i) executing this Agreement 
as a member of the Company as of the Effective Date, (ii) admitted 
as a Member of the Company as of the Merger Date upon the 
effectiveness of the Merger pursuant to Sections 18-301(b)(3) and 
18-101(7) of the Act, or (iii) hereafter admitted to the Company as 
an additional or substitute member of the Company as provided in 
this Agreement, each in its capacity as a member of the Company, and 
shall have the same meaning as the term ``member'' under the Act, 
but does not include any Person who has ceased to be a member of the 
Company.'' The definition of ``Member'' is the same in the Fourth DE 
Holdings LLC Agreement. To avoid confusion with the term ``Member'' 
as defined in Exchange Rule 1.5(n), the Exchange will refer to a 
``Member'' of DE Holdings as an ``LLC Member'' in this rule filing.
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    BATS and BYX are each Delaware corporations that are national 
securities exchanges registered \10\ with the Commission pursuant to 
Section 6(a) of the Act.\11\ Each BATS Exchange is a direct, wholly 
owned subsidiary of Current BGM, a Delaware corporation. Current BGM 
also owns 100 percent of the equity interest in BATS Trading, Inc. 
(``BATS Trading''), a Delaware corporation that is a broker-dealer 
registered with the Commission that provides routing services outbound 
from and, in certain instances inbound to, each BATS Exchange.\12\ In 
contemplation of the Combination, several new entities have been 
formed: New BGM, a Delaware corporation, is currently a wholly owned 
subsidiary of Current BGM, and is currently a shell company with no 
material assets or operations. New BGM, in turn, owns 100 percent of 
the equity interest in each of Blue Merger Sub Inc., a Delaware 
corporation (``Blue Merger Sub''), and Delta Merger Sub LLC, a Delaware 
limited liability company (``Delta Merger Sub''). Each of Blue Merger 
Sub and Delta Merger Sub is currently a shell company with no material 
assets or operations.
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    \10\ Securities Exchange Act Release No. 58375 (Aug. 18, 2008), 
73 FR 49498 (Aug. 21, 2008); Securities Exchange Act Release No. 
62716 (Aug. 13, 2010), 75 FR 51295 (Aug. 19, 2010).
    \11\ 15 U.S.C. 78f(a).
    \12\ Current BGM also directly owns Omicron Intermediate 
Holdings Corp., a Delaware corporation, directly and indirectly 
(through Omicron Intermediate Holdings Corp.) owns Omicron Holdings 
Corp., a Delaware corporation, and indirectly owns Omicron 
Acquisition Corp., a Delaware corporation, BATS Trading Limited, a 
limited company organized under the laws of England and Wales, and 
Chi-X Europe Limited, a limited company organized under the laws of 
England and Wales.
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    Current BGM is beneficially owned primarily by a consortium of 
several unaffiliated firms, including members or affiliates of members 
of the BATS Exchanges. No firm beneficially owns 20 percent or greater 
of Current BGM, and the only firms beneficially owning ten percent or 
greater of Current BGM are (i) GETCO Investments LLC, an affiliate of 
KCG Holdings, Inc., (ii) BGM Holding, L.P., a holding company itself 
owned by entities affiliated with the Spectrum Equity Investors and TA 
Associates Management private investment funds, and (iii) Strategic 
Investments I, Inc., an affiliate of Morgan Stanley.\13\ Seven other 
firms each beneficially own five percent or greater but less than ten 
percent of Current BGM, while seven other firms as well as various 
individuals each beneficially own less than five percent of Current 
BGM.
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    \13\ For purposes of this Proposed Rule Change, references to 
the beneficial ownership of a ``firm'' refers to the aggregate 
beneficial ownership of the firm and its affiliated entities.
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2. The Combination
    On August 23, 2013, an Agreement and Plan of Merger (the ``Merger 
Agreement'') was entered into among Current BGM, New BGM, DE Holdings, 
Blue Merger Sub, Delta Merger Sub, and Cole, Schotz, Meisel, Forman & 
Leonard, P.A., solely in its capacity as representative of the LLC 
Members. Pursuant to and subject to the terms of the Merger Agreement, 
at the Closing, among other things:
    (i) Blue Merger Sub will be merged with and into Current BGM, 
whereupon the separate existence of Blue Merger Sub will cease and 
Current BGM will be the surviving company (the ``BATS Merger'');
    (ii) Delta Merger Sub will be merged with and into DE Holdings, 
whereupon the separate existence of Delta Merger Sub will cease and DE 
Holdings will be the surviving company (the ``Direct Edge Merger'');
    (iii) by virtue of the BATS Merger and without any action required 
on the part of Current BGM, New BGM, Blue Merger Sub or any holder of 
Current BGM stock, each outstanding share of Current BGM stock issued 
and outstanding will be converted into the right to receive shares of 
New BGM stock and the right to receive from New BGM cash consideration, 
if any, payable pursuant to the Merger Agreement, and each outstanding 
share of Blue Merger Sub issued and outstanding will be converted into 
one share of Current BGM, such that Current BGM will become a wholly 
owned subsidiary of New BGM; and
    (iv) by virtue of the Direct Edge Merger and without any action 
required on the part of DE Holdings, New BGM, Delta Merger Sub, or any 
LLC Member, each LLC Member's membership interests in DE Holdings will 
be converted into the right to receive shares of New BGM stock and the 
right to receive from New BGM cash consideration, if any, payable 
pursuant

[[Page 76418]]

to the Merger Agreement, and each unit of ownership interest of Delta 
Merger Sub issued and outstanding will be converted into one unit of 
ownership of DE Holdings, such that DE Holdings will become a wholly 
owned subsidiary of New BGM.
    Upon the Closing, each of Current BGM and New BGM will amend and 
restate their respective certificates of incorporation to, among other 
things, change their names such that New BGM will be renamed ``BATS 
Global Markets, Inc.'' and Current BGM will be renamed ``BATS Global 
Markets Holdings, Inc.''
3. Post-Closing Corporate Structure
    As a result of the Combination, New BGM will own (i) 100 percent of 
the equity interest in BGM Holdings (the entity previously referred to 
as ``Current BGM''), and (ii) 100 percent of the LLC membership 
interests in DE Holdings. BGM Holdings will continue to own 100 percent 
of the equity interest in each BATS Exchange and BATS Trading. DE 
Holdings will continue to own 100 percent of the equity interest in DE 
Route \14\ and DEI. DEI will, in turn, continue to own 100 percent of 
the equity interest in each DE Exchange. Each of the BATS Exchanges and 
BATS Trading, on the one hand, and the DE Exchanges and DE Route, on 
the other hand, will continue to operate separately.
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    \14\ As described above, the Combination will result in a change 
of ownership of both BATS Trading and DE Route, each of which is a 
member of the Financial Industry Regulatory Authority, Inc. 
(``FINRA''). The Exchange understands that, pursuant to NASD Rule 
1017, each of BATS Trading and DE Route is seeking approval for this 
change of ownership from FINRA.
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    New BGM, as the new top-level holding company for the combined 
businesses, will have widely dispersed ownership, divided among the 
several firms and individuals that previously held equity interests in 
each of Current BGM and DE Holdings. Of the firms and individuals that 
are expected to hold equity interests in New BGM after the Closing, 
none will beneficially own 20 percent or greater of New BGM and only an 
affiliate of KCG Holdings, Inc. will beneficially own ten percent or 
greater. Seven firms will beneficially own five percent or greater but 
less than ten percent, while 12 other firms as well as various 
individuals will each beneficially own less than five percent of New 
BGM.\15\
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    \15\ ISE Holdings, which will beneficially own greater than five 
percent but less than ten percent of New BGM, will receive common 
stock of New BGM designated as Class A Non-Voting Common Stock. As 
set forth in the proposed New BGM Charter and described below, 
shares of Class A Non-Voting Common Stock are generally non-voting, 
except with respect to certain actions that would adversely affect 
the preferences, rights or powers of the holders of Class A Non-
Voting Common Stock disproportionately relative to Voting Common 
Stock or the Class B Non-Voting Common Stock. See New BGM Charter, 
Art. FOURTH, para. (b)(ii). Pursuant to the New BGM Charter and the 
Investor Rights Agreement expected to be entered into at Closing and 
attached as Exhibit A to the New BGM Bylaws (the ``Investor Rights 
Agreement''), ISE Holdings' shares of Class A Non-Voting Common 
Stock may convert to Voting Common Stock (i) automatically with 
respect to any shares transferred to persons other than Related 
Persons of ISE Holdings; (ii) upon the termination of the Investor 
Rights Agreement; and (iii) automatically with respect to any shares 
of Class A Non-Voting Common Stock sold by ISE Holdings in any 
public offering of the stock of New BGM. See New BGM Charter, Art. 
FOURTH, para. (c); Investor Rights Agreement, Section 2.2(j).
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4. Voting and Ownership Limitations of DE Holdings: Resolutions
    The Sixth DE Holdings LLC Agreement \16\ states that (i) no person, 
other than ISE Holdings, either alone or together with its Related 
Persons,\17\ may own, directly or indirectly, of record or 
beneficially, Units \18\ representing in the aggregate a Percentage 
Interest \19\ of more than 40% in DE Holdings, and no person, either 
alone or together with its Related Persons, who is a Member, may own, 
directly or indirectly, of record or beneficially, Units representing 
in the aggregate a Percentage Interest of more than 20% (collectively, 
the ``DE Holdings Ownership Limitation''),\20\ and (ii) subject to 
certain exceptions, no person, other than ISE Holdings, either alone or 
together with its Related Persons, may, directly, indirectly or 
pursuant to any voting trust, agreement, plan or other arrangement, 
vote or cause the voting of Units representing a Percentage Interest of 
more than 20% in DE Holdings (the ``DE Holdings Voting 
Limitation'').\21\
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    \16\ DE Holdings is currently operating pursuant to the Sixth DE 
Holdings LLC Agreement. As a result, the Resolutions discussed 
herein were adopted pursuant to the Sixth DE Holdings LLC Agreement. 
Therefore, the Sixth DE Holdings LLC Agreement, rather than the 
Fourth DE Holdings LLC Agreement, is the operative governing 
document for this Section 4 of the Proposed Rule Change, 
notwithstanding the fact that Exhibit 5D is marked to show changes 
from the Fourth DE Holdings LLC Agreement.
    \17\ A ``Related Person'' is defined in Article I of the Sixth 
DE Holdings LLC Agreement as the following: ``with respect to any 
Person: (A) any Affiliate of such Person; (B) any other Person with 
which such first Person has any agreement, arrangement or 
understanding (whether or not in writing) to act together for the 
purpose of acquiring, voting, holding or disposing of Units; (C) in 
the case of a Person that is a company, corporation or similar 
entity, any executive officer (as defined under Rule 3b-7 under the 
Exchange Act) or director of such Person and, in the case of a 
Person that is a partnership or limited liability company, any 
general partner, managing member or manager of such Person, as 
applicable; (D) in the case of any Exchange Member, any Person that 
is associated with the Exchange Member (as determined using the 
definition of `person associated with a member' as defined under 
Section 3(a)(21) of the Exchange Act); (E) in the case of a Person 
that is a natural person and an Exchange Member, any broker or 
dealer that is also an Exchange Member with which such Person is 
associated; (F) in the case of a Person that is a natural person, 
any relative or spouse of such Person, or any relative of such 
spouse who has the same home as such Person or who is a director or 
officer of [DE Holdings] or any of its parents or subsidiaries; (G) 
in the case of a Person that is an executive officer (as defined 
under Rule 3b-7 under the Exchange Act) or a director of a company, 
corporation or similar entity, such company, corporation or entity, 
as applicable; and (H) in the case of a Person that is a general 
partner, managing member or manager of a partnership or limited 
liability company, such partnership or limited liability company, as 
applicable.'' Pursuant to Article I of the Sixth DE Holdings LLC 
Agreement, ``Affiliate'' has the meaning set forth in Rule 12b-2 
under the Act; ``Person'' is defined as any individual, partnership, 
joint stock company, corporation, entity, association, trust, 
limited liability company, joint venture, unincorporated 
organization, and any government, governmental department or agency 
or political subdivision of any government; and ``Exchange Member'' 
is defined as (i) any registered broker or dealer, as defined in 
Section 3(a)(48) of the Act, that is registered with the Commission 
under the Act and that has been admitted to membership in the 
national securities exchange operated by a Company-Related SRO, or 
(ii) any associated person of any registered broker or dealer (as 
determined using the definition of ``person associated with a 
member'' as defined under Section 3(a)(21) of the Act) that has been 
admitted to membership in the national securities exchange operated 
by a Company-Related SRO. A ``Company-Related SRO'' is defined in 
Article I as any Exchange Subsidiary of the DE Holdings that is 
registered with the Commission as a national securities exchange, as 
provided in Section 6 of the Act, and an ``Exchange Subsidiary'' is 
defined in Article I as the Exchange, EDGX, and any subsidiary of DE 
Holdings that is registered with the Commission as a national 
securities exchange. The Exchange notes that these definitions are 
substantively the same as the definitions contained in the Fourth DE 
Holdings LLC Agreement.
    \18\ Units are defined in Article I of the Sixth DE Holdings LLC 
Agreement as ``units of interest in the ownership and profits and 
losses of [DE Holdings] and such [LLC Member's] right to receive 
distributions in its capacity as a [LLC Member].'' This is the same 
definition of ``Units'' as set forth in the Fourth DE Holdings LLC 
Agreement.
    \19\ ``Percentage Interest'' is defined to mean, with respect to 
an LLC Member, the ratio of the number of Units held by the Member 
to the total of all of the issued and outstanding Units, expressed 
as a percentage. For purposes of Article XII and any references to 
Article XII, Percentage Interest also includes Units owned, directly 
or indirectly, of record or beneficially, by a Person, either alone 
or together with its Related Persons. Sixth DE Holdings LLC 
Agreement, Art. I, Section 1.1. This definition of Percentage 
Interest is the same definition as set forth in the Fourth DE 
Holdings LLC Agreement.
    \20\ See Sixth DE Holdings LLC Agreement, Art. XII, Section 
12.1(a)(1) and 12.1(a)(2). The DE Holdings Ownership Limitation is 
the same as the comparable provisions set forth in the Fourth DE 
Holdings LLC Agreement. See Fourth DE Holdings LLC Agreement, Art. 
XII, Sections 12.1(a)(1) and 12.1(a)(2).
    \21\ See Sixth DE Holdings LLC Agreement, Art. XII, Section 
12.1(a)(3). The DE Holdings Ownership Limitation is substantively 
the same as the comparable provision set forth in the Fourth DE 
Holdings LLC Agreement. See Fourth DE Holdings LLC Agreement, Art. 
XII, Section 12.1(a)(3).
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    However, the Sixth DE Holdings LLC Agreement provides that each of 
the DE

[[Page 76419]]

Holdings Ownership Limitation and the DE Holdings Voting Limitation may 
be waived (except with respect to Members and their Related Persons) 
pursuant to an amendment to the Sixth DE Holdings LLC Agreement and a 
resolution duly adopted by the Board of Managers of DE Holdings if, in 
connection with taking such action, the Board of Managers states in 
such resolution that it is its determination that the waiver:
     Will not impair the ability of either DE Exchange to carry 
out its functions and responsibilities under the Act and the rules and 
regulations promulgated thereunder;
     is otherwise in the best interests of DE Holdings, its LLC 
Members, and each DE Exchange;
     will not impair the ability of the Commission to enforce 
the Act and the rules and regulations promulgated thereunder; \22\
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    \22\ See Sixth DE Holdings LLC Agreement, Art. XII, Section 
12.1(b). Article XII, Section 12.1(b) of the Sixth DE Holdings LLC 
Agreement and of the Fourth DE Holdings LLC Agreement are 
substantively the same. See Fourth DE Holdings LLC Agreement, Art. 
XII, Section 12.1(b).

Such an amendment shall not be effective until it is filed with and 
approved by the Commission.\23\
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    \23\ Id.
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    In granting such a waiver, the DE Holdings Board of Managers has 
the discretion to impose on the person and its Related Persons such 
conditions and restrictions that it deems necessary, appropriate or 
desirable in furtherance of the objectives of the Act and the rules and 
regulations promulgated thereunder, and the governance of each DE 
Exchange.\24\
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    \24\ Id.
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    In addition, notwithstanding the above, the Sixth DE Holdings LLC 
Agreement provides \25\ that in any case where a person, either alone 
or with its Related Persons, would own or vote more than the DE 
Holdings Ownership Limitation or DE Holdings Voting Limitation, 
respectively, upon consummation of any proposed Transfer \26\ of Units, 
such a transaction will not become effective until the DE Holdings 
Board of Managers determines, by resolution, that such person and its 
Related Persons are not subject to any ``statutory disqualification,'' 
as defined in Section 3(a)(39) of the Act.\27\
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    \25\ See Sixth DE Holdings LLC Agreement, Art. XII, Section 
12.1(c). Section 12.1(c) are the same for both the Fourth and the 
Sixth DE Holdings LLC Agreements. See Fourth DE Holdings LLC 
Agreement, Art. XII, Section 12.1(c).
    \26\ ``Transfer'' is defined in the Sixth DE Holdings LLC 
Agreement, Article I, Section 1.1 to mean, (i) when used as a verb, 
to sell, transfer, assign, encumber or otherwise dispose of, 
directly or indirectly, voluntarily or involuntarily, by operation 
of law or otherwise, and (ii) when used as a noun, a direct or 
indirect, voluntary or involuntary, sale, transfer, assignment, 
encumbrance or other disposition by operation of law or otherwise. 
The same definition of ``Transfer'' is set forth in Article I, 
Section 1.1 of the Fourth DE Holdings LLC Agreement.
    \27\ 15 U.S.C. 78c(a)(39).
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    As described above, upon Closing of the proposed Combination, New 
BGM will become the sole owner of DE Holdings. Additionally as 
discussed in more detail below, the Exchange is also seeking the 
Commission's approval for DE Holdings [sic] proposal to, 
contemporaneously with the Closing, replace the Sixth DE Holdings LLC 
Agreement with the New DE Holdings LLC Agreement. Unlike the Sixth DE 
Holdings LLC Agreement, the New DE Holdings LLC Agreement will not 
contain the DE Holdings Ownership Limitation or the DE Holdings Voting 
Limitation. While the DE Holdings Ownership Limitation and the DE 
Holdings Voting Limitation will not be contained in the New DE Holdings 
LLC Agreement, the New DE Holdings LLC Agreement specifies that DE 
Holdings' only LLC Member will be New BGM,\28\ and the New BGM Charter 
will contain substantively identical ownership and voting limitation 
provisions, which will also become effective contemporaneously with the 
Closing.\29\
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    \28\ See New DE Holdings LLC Agreement, Art. II, Section 2.01.
    \29\ See New BGM Charter, Art. FIFTH, para. (b)(i).
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    As a result, New BGM's acquisition of ownership and voting rights 
in DE Holdings upon Closing would not cause New BGM to contravene the 
DE Holdings Ownership Limitation or DE Holdings Voting Limitation, 
because the Sixth DE Holdings LLC Agreement will be contemporaneously 
amended to eliminate the DE Holdings Ownership Limitation and the DE 
Holdings Voting Limitation, and the New BGM Charter will be 
contemporaneously amended with respect to New BGM's stockholders.
    Nevertheless, because the Combination will result in a change of 
ownership of DE Holdings (in that New BGM will become the sole owner of 
DE Holdings), the Exchange and the Board of Managers of DE Holdings 
each believe that it is appropriate for the Board of Managers of DE 
Holdings to adopt the Resolutions, attached as Exhibit 5A, making 
certain determinations with respect to New BGM and the Combination 
similar to those that would be necessary to waive the DE Holdings 
Ownership Limitation and DE Holdings Voting Limitation.\30\ 
Specifically, the Board of Managers of DE Holdings determined that:
---------------------------------------------------------------------------

    \30\ The waiver process for the DE Holdings Ownership Limitation 
and DE Holdings Voting Limitation is substantively the same in the 
Fourth DE Holdings LLC Agreement and in the Sixth DE Holdings LLC 
Agreement. See Sixth DE Holdings LLC Agreement, Art. XII, Section 
12.1(b) and Fourth DE Holdings LLC Agreement, Art. XII, Section 
12.1(b).
---------------------------------------------------------------------------

     The acquisition of the proposed ownership by New BGM in DE 
Holdings will not impair the ability of the DE Exchanges to carry out 
their functions and responsibilities under the Act and the rules and 
regulations promulgated thereunder, is in the best interests of DE 
Holdings and its LLC Members and the DE Exchanges, and will not impair 
the ability of the Commission to enforce the Act and the rules and 
regulations promulgated thereunder;
     the acquisition or exercise of the proposed voting rights 
by New BGM in DE Holdings will not impair the ability of each DE 
Exchange to carry out its functions and responsibilities as an 
``exchange'' under the Act and the rules and regulations promulgated 
thereunder, that it is otherwise in the best interests of DE Holdings, 
its LLC Members and the DE Exchanges, and that it will not impair the 
ability of the Commission to enforce the Act and the rules and 
regulations promulgated thereunder;
     neither New BGM, nor any of its Related Persons, is 
subject to ``statutory disqualification'' within the meaning of Section 
3(a)(39) of the Act; \31\ and
---------------------------------------------------------------------------

    \31\ 15 U.S.C. 78c(a)(39).
---------------------------------------------------------------------------

     neither New BGM, nor any of its Related Persons (excluding 
BATS Trading, which is an Exchange Member) \32\ is an Exchange 
Member.\33\
---------------------------------------------------------------------------

    \32\ As noted above, BATS Trading is a routing broker-dealer and 
an Exchange Member that is affiliated with the BATS Exchanges, and a 
direct subsidiary of Current BGM. The same structure will continue 
to be in place following the Closing and BATS Trading will remain a 
direct subsidiary of BGM Holdings.
    \33\ In addition, the Resolutions contain a determination that 
the execution and delivery of the Merger Agreement by New BGM 
constituted notice of New BGM's intention to acquire ownership and 
voting rights in excess of the DE Holdings Ownership Limitation and 
DE Holdings Voting Limitation, respectively, in writing and not less 
than 45 days before the Closing. See Sixth DE Holdings LLC 
Agreement, Art. XII, Section 12.1(d), which is the same provision as 
set forth in Art. XII, Section 12.1(d) of the Fourth DE Holdings LLC 
Agreement.
---------------------------------------------------------------------------

    The Board of Managers of DE Holdings also has determined that it 
has given due regard to the preservation of the independence of the 
self-regulatory function of each DE Exchange and to its obligations to 
investors and the general public, and determined that the actions to be 
taken pursuant to the Resolutions do not interfere with the 
effectuation of decisions by the board of each DE Exchange relating to 
its regulatory functions (including disciplinary

[[Page 76420]]

matters) or would not otherwise interfere with each DE Exchange's 
ability to carry out its responsibilities under the Act.
    The Exchange has reviewed such Resolutions and requests that the 
Commission approve such Resolutions. The Exchange believes that the 
Commission should approve the Resolutions, as the Combination will not 
impair the ability of either DE Exchange to carry out its functions and 
responsibilities under the Act and the rules and regulations 
promulgated thereunder, or the ability of the Commission to enforce the 
Act and the rules and regulations promulgated thereunder. The DE 
Exchanges will continue to operate and regulate their markets and 
Members as they have done prior to the Combination. Thus, each DE 
Exchange will continue to enforce the Act, the Commission's rules 
thereunder, and each Exchange's own rules, in the manner it does today. 
Further, the Commission will continue to have plenary regulatory 
authority over the DE Exchanges, as is currently the case with these 
entities.
    The Exchange also notes that the Resolutions reflect the 
determination by the DE Holdings Board of Managers that the Combination 
and New BGM's resulting ownership and voting rights in DE Holdings are 
otherwise in the best interests of DE Holdings, its LLC Members, and 
the DE Exchanges.
    In addition, the Exchange notes that notwithstanding the 
Resolutions and the Combination, the DE Holdings Ownership Limitation 
and the DE Holdings Voting Limitation will remain in place with respect 
to potential future transactions involving the ultimate parent company 
of the DE Exchanges, New BGM. As described in more detail below, the 
Exchange is also proposing the adoption of the New BGM Charter and the 
New BGM Bylaws, which are modeled in large part on the Current BGM 
Charter and the Current BGM Bylaws (and include provisions 
substantially identical to the DE Holdings Ownership Limitation and the 
DE Holdings Voting Limitation), creating an ownership structure that 
will continue to provide the Commission with appropriate oversight 
tools to ensure that the Commission will have the ability to enforce 
the Act with respect to the Exchange, its direct and indirect parent 
entities, and its directors, officers, employees and agents to the 
extent they are involved in the activities of the Exchange, and protect 
the independence of the Exchange's self-regulatory activities.
    The Exchange therefore requests that the Commission approve the 
Resolutions, attached as Exhibit 5A.
5. Adoption of New BGM Charter and New BGM Bylaws
    New BGM was incorporated on August 22, 2013, under the name BATS 
Global Markets Holdings, Inc., by filing a certificate of incorporation 
with the Secretary of State of Delaware. Upon incorporation, New BGM 
also adopted bylaws. New BGM is currently a shell company, with no 
material assets or operations. Therefore, neither its certificate of 
incorporation nor bylaws currently need or contain any provisions that 
would be appropriate for an entity that has direct or indirect 
ownership in a registered national securities exchange.
    However, in connection with the Combination, upon Closing, New BGM 
will become (i) the indirect owner (through BGM Holdings) of each of 
the BATS Exchanges and BATS Trading, (ii) the indirect owner (through 
DE Holdings and DEI) of each of the DE Exchanges, and (iii) the 
indirect owner (through DE Holdings) of DE Route. As a result, the 
Exchange is proposing that in connection with New BGM's acquisition of 
indirect ownership in the Exchange, New BGM would amend and restate 
each of its certificate of incorporation and bylaws to adopt provisions 
designed to protect and maintain the integrity of the self-regulatory 
functions of the Exchange and to facilitate the ability of the Exchange 
and the Commission to carry out their regulatory and oversight 
obligations under the Act. Each of the New BGM Charter and the New BGM 
Bylaws is modeled on, and substantially similar to, the Current BGM 
Charter and Current BGM Bylaws, respectively, except with respect to 
the differences described below. The Exchange is filing with the 
Commission the New BGM Charter and New BGM Bylaws because, after the 
Combination, New BGM will be the ultimate parent company of the 
Exchange, and, as such, the New BGM Charter and New BGM Bylaws will be 
considered rules of the Exchange under Section 19(b)(1) of the Act.\34\
---------------------------------------------------------------------------

    \34\ 15 U.S.C. 78s(b)(1).
---------------------------------------------------------------------------

a. New BGM Charter
    The New BGM Charter is proposed to be adopted as the Amended and 
Restated Certificate of Incorporation of BATS Global Markets Holdings, 
Inc. However, the New BGM Charter will effect an amendment to the name 
of the corporation upon Closing such that it will be renamed ``BATS 
Global Markets, Inc.'' \35\ The change of name is intended to reflect 
the fact that New BGM is succeeding to the business of Current BGM in 
all respects, notwithstanding the technical change of corporate entity 
that will result from the structure of the Combination.
---------------------------------------------------------------------------

    \35\ See New BGM Charter, Art. FIRST.
---------------------------------------------------------------------------

    The New BGM Charter, which is attached as Exhibit 5B, is 
substantially similar to the Current BGM Charter, which the Commission 
has previously found to be consistent with the Act.\36\ The Current BGM 
Charter provides that (i) no person, either alone or together with its 
Related Persons,\37\ may own, directly or indirectly, of record or 
beneficially, shares constituting more than 40 percent of any class of 
its capital stock (the ``BGM Ownership Limitation'') and (ii) subject 
to certain exceptions, no person, either alone or together with its 
Related Persons, at any time may, directly, indirectly or pursuant to 
any of various

[[Page 76421]]

arrangements, vote or cause the voting of shares representing more than 
20 percent of the voting power of its then issued and outstanding 
capital stock (the ``BGM Voting Limitation'').\38\ The New BGM Charter 
also will contain provisions imposing the BGM Ownership Limitation and 
the BGM Voting Limitation on any owners or prospective owners of New 
BGM.\39\ In addition, similar to the Current BGM Charter, the New BGM 
Charter prohibits a member of any of New BGM's registered national 
securities exchange subsidiaries, either alone or together with such 
member's Related Persons,\40\ from owning, directly or indirectly, of 
record or beneficially, more than 20 percent of shares of any class of 
capital stock of New BGM.\41\ As in the Current BGM Charter, purported 
sales, transfers, assignments, pledges or ownership that would result 
in a violation of the BGM Ownership Limitation will not be recognized 
by New BGM to the extent of any ownership in excess of the limitation, 
and New BGM shall have the right to redeem the shares in excess of the 
applicable ownership limit for their fair market value. In addition, in 
contrast to the Current BGM Charter, the New BGM Charter would clarify 
that these same non-recognition and redemption rights apply in the case 
of a purported conversion of shares resulting in a violation of the BGM 
Ownership Limitation, as apply to purported sales, transfers, 
assignments, pledges or ownership that result in such a violation.\42\ 
Similarly, as in the Current BGM Charter, purported voting or voting 
arrangements in violation of the BGM Voting Limitation will not be 
honored by New BGM to the extent of any voting in excess of the 
limitation.\43\
---------------------------------------------------------------------------

    \36\ See Securities Exchange Act Release No. 58375 (Aug. 18, 
2008), 73 FR 49498 (Aug. 21, 2008); Securities Exchange Act Release 
No. 62716 (Aug. 13, 2010), 75 FR 51295 (Aug. 19, 2010).
    \37\ The Current BGM Charter generally defines a ``Related 
Person'' as, with respect to any person, (i) any ``affiliate'' of 
such person (as defined in Rule 12b-2 under the Act), (ii) any other 
person with which such first person has any agreement, arrangement 
or understanding (whether or not in writing) to act together for the 
purpose of acquiring, voting, holding or disposing of shares of the 
capital stock of Current BGM (provided no person is deemed a Related 
Person pursuant to clause (ii) solely as a result of such person's 
being or becoming a party to the Investor Rights Agreement entered 
into by and among Current BGM and the stockholders named therein on 
January 1, 2008), (iii) in the case of a person that is a company, 
corporation or similar entity, any executive officer (as defined 
under Rule 3b-7 under the Act) or director of such person and, in 
the case of a person that is a partnership or limited liability 
company, any general partner, managing member or manager of such 
person, as applicable; (iv) in the case of any person that is a 
registered broker or dealer that has been admitted to membership in 
either of the BATS Exchanges (for purposes of this definition of 
``Related Person,'' each such national securities exchange shall be 
referred to generally as an ``Exchange'' and any member of such 
Exchange, an ``Exchange Member''), any person that is associated 
with the Exchange Member (as determined using the definition of 
``person associated with a member'' as defined under Section 
3(a)(21) of the Act); (v) in the case of a person that is a natural 
person and Exchange Member, any broker or dealer that is also an 
Exchange Member with which such person is associated; (vi) in the 
case of a person that is a natural person, any relative or spouse of 
such person, or any relative of such spouse who has the same home as 
such person or who is a director or officer of Current BGM or any of 
its parents or subsidiaries; (vii) in the case of a person that is 
an executive office (as defined under Rule 3b-7 under the Act) or a 
director of a company, corporation or similar entity, such company, 
corporation or entity, as applicable; and (viii) in the case of a 
person that is a general partner, managing member or manager of a 
partnership or limited liability company, such partnership or 
limited liability company, as applicable. See Current BGM Charter, 
Art. FIFTH, para. (a)(ii).
    \38\ See Current BGM Charter, Art. FIFTH, para. (b).
    \39\ See New BGM Charter, Art. FIFTH, paras. (b)(i)(A) and (C).
    \40\ The New BGM Charter defines ``Related Persons'' consistent 
with the definition in the Current BGM Charter, except that (i) the 
definition of ``Exchange'' for purposes of such definition is 
expanded to refer to any national securities exchange that is a 
direct or indirect subsidiary of New BGM, and (ii) the reference to 
the ``Investor Rights Agreement'' has been revised to refer to the 
Investor Rights Agreement to be entered into upon Closing.
    \41\ See New BGM Charter, Art. FIFTH, para. (b)(i)(B).
    \42\ See New BGM Charter, Art. FIFTH, paras. (d)-(e).
    \43\ See New BGM Charter, Art. FIFTH, para. (d).
---------------------------------------------------------------------------

    These provisions are designed to prevent any stockholder from 
exercising undue control over the operation of the BATS Exchanges or 
the DE Exchanges (together, the ``Exchange Subsidiaries''), each of 
which New BGM will indirectly own following the Combination, and to 
assure that each Exchange Subsidiary and the Commission are able to 
carry out their regulatory obligations under the Act.
    Further, consistent with the Current BGM Charter, the New BGM 
Charter provides that, for so long as New BGM controls, directly or 
indirectly, a registered national securities exchange, before any 
amendment to the New BGM Charter may be effective, those changes must 
be submitted to the board of directors of each such exchange, and if 
the amendment is required to be filed with, or filed with and approved 
by, the Commission pursuant to Section 19(b) of the Act,\44\ such 
change shall not be effective until filed with, or filed with and 
approved by, the Commission.\45\ The Exchange believes that these 
provisions will assist the Exchange in fulfilling its self-regulatory 
obligations and in administering and complying with the requirements of 
the Act.
---------------------------------------------------------------------------

    \44\ 15 U.S.C. 78s(b).
    \45\ See New BGM Charter, Art. TWELFTH.
---------------------------------------------------------------------------

    The provisions of the New BGM Charter differ from those of the 
Current BGM Charter in certain limited respects:
     The total number of shares of common stock that New BGM 
will have authority to issue is 75,000,000, divided between 55,000,000 
shares designated as Voting Common Stock, 10,000,000 shares designated 
as Class A Non-Voting Common Stock, and 10,000,000 shares designated as 
Class B Non-Voting Common Stock.\46\ This represents an increase from 
the 25,000,000 shares that Current BGM is authorized to issue (divided 
between 24,500,000 shares designated as Voting Common Stock and 500,000 
shares designated as Non-Voting Common Stock). The increase in 
authorized shares is due to the greater number of stockholders that New 
BGM will have following the Combination, as compared to Current BGM, as 
well as to provide an adequate number of authorized shares to allow for 
potential future issuances. The rights and preferences of the Class A 
Non-Voting Common Stock and Class B Non-Voting Common Stock are 
identical in all respects, except for conversion rights. Class A Non-
Voting Common Stock converts into Voting Common Stock automatically 
upon transfer to a person other than a Related Person of such holder, 
upon termination of the Investor Rights Agreement, and may be converted 
into Voting Common Stock at any time at the option of the holder.\47\ 
Class B Non-Voting Common Stock, however, may only be converted into 
Voting Common Stock following a ``Qualified Transfer.'' \48\ The term 
``Qualified Transfer'' means a sale or other transfer of Class B Non-
Voting Common Stock by a holder of such shares: (a) In a widely 
distributed public offering registered pursuant to the Securities Act 
of 1933; \49\ (b) in a private sale or transfer in which the relevant 
transferee (together with its Affiliates, as defined below, and other 
transferees acting in concert with it) acquires no more than two 
percent of any class of voting shares (as defined in 12 CFR 225.2(q)(3) 
and determined by giving effect to any such permitted conversion of 
transferred shares of Class B Non-Voting Common Stock upon such 
transfer pursuant to Article FOURTH of the New BGM Charter); (c) to a 
transferee that (together with its Affiliates and other transferees 
acting in concert with it) owns or controls more than 50 percent of any 
class of voting shares (as defined in 12 CFR 225.2(q)(3)) of New BGM 
without regard to any transfer of shares from the transferring holder 
of shares of Class B Non-Voting Common Stock; or (d) to New BGM. As 
used above, the term ``Affiliate'' means, with respect to any person, 
any other person directly or indirectly controlling, controlled by or 
under common control with such person, and ``control'' (including, with 
correlative meanings, the terms ``controlled by'' and ``under common 
control with'') has the meaning set forth in 12 CFR 225.2(e)(1).\50\ 
The Exchange understands that certain persons that will become 
stockholders

[[Page 76422]]

of New BGM as of the Closing may be, or may become, subject to 
restrictions under the Bank Holding Company Act of 1956 \51\ on the 
extent to which they are permitted to own voting stock of New BGM or 
certain types of non-voting stock convertible into voting stock of New 
BGM. The Exchange understands that New BGM's Class B Non-Voting Common 
Stock is designed to permit a stockholder that may be subject to such 
restrictions to maintain an economic interest in New BGM, through 
ownership of Class B Non-Voting Common Stock, in excess of its voting 
interest and in compliance with such restrictions, for purposes of the 
Bank Holding Company Act of 1956.
---------------------------------------------------------------------------

    \46\ See New BGM Charter, Art. FOURTH, para. (a).
    \47\ See New BGM Charter, Art. FOURTH, para. (c). In addition, 
Class A Non-Voting Common Stock held by ISE Holdings will convert 
automatically if ISE Holdings includes any such shares in any public 
offering of stock of New BGM.
    \48\ The Exchange notes that, notwithstanding the conversion 
features, neither Class A Non-Voting Common Stock nor Class B Non-
Voting Common Stock may convert into Voting Common Stock if such a 
conversion would cause the stockholder to own, alone or with its 
Related Persons, directly or indirectly, of record or beneficially 
(i) more than 40% of any class of capital stock of New BGM in 
contravention of the BGM Ownership Limitation (unless a waiver is 
granted by the board of directors of New BGM and approved by the 
Commission), or (ii) in the case of an Exchange Member stockholder, 
more than 20% of any class of capital stock of New BGM. See New BGM 
Charter, Art. FIFTH, para. (b)(i)(A) and (B). In addition, to the 
extent that any Class A Non-Voting Common Stock or Class B Non-
Voting Common Stock is converted into Voting Common Stock, the 
stockholder owning the converted Voting Common Stock would be 
subject to the BGM Voting Limitation and not permitted, either alone 
or together with its Related Persons, at any time, directly, 
indirectly or pursuant to any of various arrangements, to vote or 
cause the voting of shares or give any consent or proxy with respect 
to shares representing more than 20 percent of the voting power of 
the then issued and outstanding capital stock of New BGM (unless a 
waiver is granted by the board of directors of New BGM and approved 
by the Commission). See New BGM Charter, Art. FIFTH, para. 
(b)(i)(C).
    \49\ 15 U.S.C. 77a.
    \50\ See New BGM Charter, Art. FOURTH, para. (d)(i).
    \51\ 12 U.S.C. 1841 et seq.
---------------------------------------------------------------------------

     The term ``Exchange,'' as used in the New BGM Charter, is 
defined to refer to ``any national securities exchange registered under 
Section 6 of the Act with the [Commission] that is a direct or indirect 
subsidiary'' of New BGM.\52\ The term ``Exchange'' is used throughout 
the New BGM Charter to refer to subsidiaries of New BGM that are 
registered as national securities exchanges. This definition differs 
from the definition contained in the Current BGM Charter, which defines 
``Exchange'' by specific reference to the names of the BATS Exchanges. 
Because, following the Combination, the DE Exchanges will also become 
indirect subsidiaries of New BGM, the definition in the New BGM Charter 
has been expanded so as to capture the DE Exchanges in addition to the 
BATS Exchanges.
---------------------------------------------------------------------------

    \52\ See New BGM Charter, Art. FIFTH, para. (a)(ii).
---------------------------------------------------------------------------

     The New BGM Charter reflects certain non-substantive 
differences and typographical corrections, including conforming the 
spelling of ``Bylaws'' throughout the organizational documents of New 
BGM and its proposed subsidiaries.
b. New BGM Bylaws
    As with the New BGM Charter, the New BGM Bylaws, which are set 
forth in Exhibit 5C, contain provisions substantially similar to those 
of the Current BGM Bylaws, which the Commission has previously found to 
be consistent with the Act.\53\ This includes provisions that are 
designed to maintain the independence of the self-regulatory functions 
of the Exchange Subsidiaries. Consistent with the Current BGM Bylaws, 
the New BGM Bylaws provide that New BGM and its officers, directors, 
employees and agents by virtue of their acceptance of such positions, 
shall be deemed to irrevocably submit to the jurisdiction of the United 
States federal courts, the Commission, and each Exchange Subsidiary for 
the purposes of any suit, action or proceeding pursuant to the United 
States federal securities laws, and the rules or regulations 
thereunder, arising out of, or relating to, the activities of the 
Exchange Subsidiary, and by virtue of their acceptance of any such 
position, shall be deemed to waive, and agree not to assert by way of 
motion, as a defense or otherwise in any such suit, action or 
proceeding, any claims that it or they are not personally subject to 
the jurisdiction of the United States federal courts, the Commission or 
the Exchange Subsidiary, that the suit, action or proceeding is an 
inconvenient forum or that the venue of the suit, action or proceeding 
is improper, or that the subject matter of that suit, action or 
proceeding may not be enforced in or by such courts or agency.\54\ In 
addition, for so long as New BGM controls, directly or indirectly, such 
Exchange Subsidiary, New BGM's books and records shall be subject at 
all times to inspection and copying by the Commission and each Exchange 
Subsidiary, provided that such books and records are related to the 
operation or administration of the Exchange Subsidiary.\55\ In 
addition, to the extent they are related to the operation or 
administration of an Exchange Subsidiary, the books, records, premises, 
officers, directors, agents, and employees of New BGM shall be deemed 
to be the books, records, premises, officers, directors, agents, and 
employees of the Exchange Subsidiary for the purposes of, and subject 
to oversight pursuant to, the Act.\56\
---------------------------------------------------------------------------

    \53\ See Securities Exchange Act Release No. 58375 (Aug. 18, 
2008), 73 FR 49498 (Aug. 21, 2008); Securities Exchange Act Release 
No. 62716 (Aug. 13, 2010), 75 FR 51295 (Aug. 19, 2010).
    \54\ See New BGM Bylaws, Art. XIV, Section 14.05.
    \55\ See New BGM Bylaws, Art. XIV, Section 14.03.
    \56\ Id.
---------------------------------------------------------------------------

    The New BGM Bylaws also provide that all books and records of an 
Exchange Subsidiary reflecting confidential information pertaining to 
the self-regulatory function of the Exchange Subsidiary (including but 
not limited to disciplinary matters, trading data, trading practices 
and audit information) that shall come into the possession of New BGM 
shall not be made available other than to those officers, directors, 
employees and agents of New BGM that have a reasonable need to know the 
contents thereof, and shall be retained in confidence by New BGM, the 
members of its board of directors, its officers, employees and agents, 
and not be used for any non-regulatory purposes.\57\ The New BGM 
Bylaws, however, specify that the New BGM Bylaws (including these 
confidentiality provisions) shall not be interpreted so as to limit or 
impede the rights of the Commission or an Exchange Subsidiary to access 
and examine such confidential information pursuant to the federal 
securities laws and the rules and regulations thereunder, or to limit 
or impede the ability of any officers, directors, employees or agents 
of New BGM to disclose such confidential information to the Commission 
or an Exchange Subsidiary.\58\
---------------------------------------------------------------------------

    \57\ See New BGM Bylaws, Art. XIV, Section 14.02.
    \58\ See id.
---------------------------------------------------------------------------

    In addition, for so long as New BGM, directly or indirectly, 
controls an Exchange Subsidiary, the directors, officers, employees, 
and agents of New BGM are required to give due regard to the 
preservation of the independence of each Exchange Subsidiary's self-
regulatory functions, and to its obligations to investors and the 
general public, and shall not take any actions which would interfere 
with the effectuation of decisions by the board of directors of such 
Exchange Subsidiary relating to its regulatory functions (including 
disciplinary matters) or which would interfere with such Exchange 
Subsidiary's ability to carry out its responsibilities under the 
Act.\59\ Further, the New BGM Bylaws require that, for so long as New 
BGM controls, directly or indirectly, an Exchange Subsidiary, before 
any amendment to or repeal of any provision of the New BGM Bylaws may 
be effective, those changes must be submitted to the board of directors 
of each Exchange Subsidiary, and, if such amendment is required to be 
filed with, or filed with and approved by, the Commission before the 
changes may be effective under Section 19 of the Act, and the rules 
promulgated thereunder by the Commission or otherwise, then the 
proposed changes to the New BGM Bylaws shall not be effective until 
filed with, or filed with and approved by, the Commission, as the case 
may be.\60\ The Exchange believes that these provisions will assist the 
Exchange in fulfilling its self-regulatory obligations and in 
administering and complying with the requirements of the Act.
---------------------------------------------------------------------------

    \59\ See New BGM Bylaws, Art. XIV, Section 14.01.
    \60\ See New BGM Bylaws, Art. XII.
---------------------------------------------------------------------------

    The provisions of the New BGM Bylaws differ from those of the 
Current BGM Bylaws in certain limited respects:
     The New BGM Bylaws provide for two separate corporate 
officer positions, one known as the Chief Executive

[[Page 76423]]

Officer and another known as the President. The Current BGM Bylaws, in 
contrast, provide for a combined position known as the President and 
Chief Executive Officer.\61\ Under the New BGM Bylaws, the Chief 
Executive Officer will be the chief executive officer of New BGM and 
subject to the control of the board of directors of New BGM, has 
general supervision, direction and control of the business and affairs 
of New BGM,\62\ while the President will be a senior executive officer 
with certain designated powers, among other things, to serve as the 
chief executive officer in the absence or disability of the Chief 
Executive Officer.\63\ References to corporate officers throughout the 
New BGM Bylaws reflect this difference. The difference in corporate 
officer designations is intended to facilitate the anticipated 
executive leadership of New BGM following the Combination. It is 
anticipated that, following the Combination, the current President and 
Chief Executive Officer of Current BGM will become the Chief Executive 
Officer of New BGM, while the current Chief Executive Officer of DE 
Holdings will become the President of New BGM.
---------------------------------------------------------------------------

    \61\ Compare New BGM Bylaws, Art. IV, Section 4.01 and 4.02 with 
Current BGM Bylaws, Art. IV, Section 4.01 and 4.02(c) and (d).
    \62\ See New BGM Bylaws, Art. IV, Section 4.02(c).
    \63\ See New BGM Bylaws, Art. IV, Section 4.02(d).
---------------------------------------------------------------------------

     The New BGM Bylaws provide for a board of directors 
consisting of 15 members, or such other number of members as the Board 
of Directors determines from time to time. The Current BGM Bylaws 
provide that the Board of Directors will consist of one or more 
members, as determined by resolution of the Board of Directors.\64\ The 
size of the New BGM Board is proposed initially to be set at 15 in 
order to reflect the anticipated initial membership of the Board of 
Directors of New BGM. The Current BGM Board of Directors currently has 
13 members. After the Closing, it is anticipated that the New BGM Board 
of Directors will consist of the same members as the Current BGM Board, 
except that the New BGM Board will be expanded by two members, to 
include representatives of two additional firms that are currently LLC 
Members of DE Holdings but will, by virtue of the Combination, become 
stockholders of New BGM.
---------------------------------------------------------------------------

    \64\ Compare New BGM Bylaws, Art. III, Section 3.01 with Current 
BGM Bylaws, Art. III, Section 3.01.
---------------------------------------------------------------------------

     Article V, Section 5.02(a) of the Current BGM Bylaws sets 
forth the process for representatives of Current BGM to attend meetings 
of, and vote the shares of, any corporation, partnership or other 
entity (including each BATS Exchange) in which Current BGM may hold 
stock, partnership, or other equity interests. This provision 
parenthetically refers to the BATS Exchanges to reflect the fact that 
Current BGM is the direct owner of each of the BATS Exchanges. However, 
following the Combination, New BGM will instead be the direct owner of 
each of BGM Holdings and DE Holdings. The corresponding provision in 
the New BGM Bylaws therefore contains a similar parenthetical reference 
to its ownership of BGM Holdings and DE Holdings, rather than the BATS 
Exchanges.\65\ In addition, the New BGM Bylaws include a reference to 
meetings of ``members'' of any ``limited liability company'' in which 
New BGM holds equity interests, which terms are not included in the 
corresponding provision in the Current BGM Bylaws.\66\ This is intended 
to reflect the fact that New BGM will, following the Closing, be the 
sole member of DE Holdings, a limited liability company, while Current 
BGM does not hold equity in any limited liability companies.\67\ In 
addition, the Current BGM Bylaws contain provisions that relate to 
Current BGM's voting of shares in the election of directors, and 
members of the Member Nominating Committees, of the BATS Exchanges.\68\ 
These provisions will not be applicable to New BGM and are not included 
in the New BGM Bylaws, as the BATS Exchanges will be directly owned by 
BGM Holdings, rather than New BGM.\69\
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    \65\ See New BGM Bylaws, Art. V, Section 5.02(a).
    \66\ Id.
    \67\ Compare New BGM Bylaws, Art. V, Section 5.02 with Current 
BGM Bylaws, Art. V, Section 5.02(a).
    \68\ See Current BGM Bylaws, Art. V, Sections 5.02(b) and (c).
    \69\ The Exchange understands that substantially identical 
provisions are instead included in the BGM Holdings Bylaws.
---------------------------------------------------------------------------

     The term ``Exchange,'' as used in the New BGM Bylaws, is 
defined to refer to ``any national securities exchange registered with 
the [Commission] under Section 6 of the 1934 Act that is a direct or 
indirect subsidiary'' of New BGM.\70\ The term ``Exchange'' is used 
throughout the New BGM Bylaws to refer to subsidiaries of New BGM that 
are registered as national securities exchanges. The Current BGM Bylaws 
either refer to each BATS Exchange by name or define ``Exchange'' by 
specific reference to the BATS Exchanges. Because, following the 
Combination, the DE Exchanges will also become indirect subsidiaries of 
New BGM, the definition in the New BGM Bylaws has been expanded so as 
to capture the DE Exchanges in addition to the BATS Exchanges.
---------------------------------------------------------------------------

    \70\ See New BGM Bylaws, Art. X, Section 10.02.
---------------------------------------------------------------------------

     The New BGM Bylaws reflect certain non-substantive updates 
to dates of agreements and cross-references, as well as typographical 
corrections, including conforming the spelling of ``Bylaws'' throughout 
the organizational documents of New BGM and its proposed subsidiaries.
6. New DE Holdings LLC Agreement
    After Closing, DE Holdings will continue to hold direct ownership 
of DEI and indirect ownership of the DE Exchanges, but it will no 
longer be the ultimate holding company of the corporate structure with 
a number of LLC Members. Instead, DE Holdings will be a wholly owned 
subsidiary of New BGM, and, as a result, New BGM will be the only LLC 
member of DE Holdings (the ``Sole LLC Member''). Accordingly, the Sixth 
DE Holdings LLC Agreement would no longer be appropriate.\71\ 
Therefore, DE Holdings proposes to restate the Sixth DE Holdings LLC 
Agreement in its entirety and rename it as the Seventh Amended and 
Restated Limited Liability Company Operating Agreement.\72\ The New DE 
Holdings LLC Agreement, which is set forth in Exhibit 5D, is drafted to 
reflect DE Holdings' new status as an intermediate holding company. As 
required by Article 15, Section 15.2 of

[[Page 76424]]

the Sixth DE Holdings LLC Agreement, DE Holdings submitted its proposed 
amendments to the Sixth DE Holdings LLC Agreement to the Board of 
Directors of the Exchange.\73\ The Board of Directors of the Exchange 
determined that the proposed amendments were required to be filed with 
and approved by the Commission pursuant to Section 19 of the Act and 
the rules promulgated thereunder.\74\ Therefore, the Exchange requests 
the Commission's approval of the New DE Holdings LLC Agreement pursuant 
to this Proposed Rule Change. The Exchange believes that the proposed 
changes to the Sixth DE Holdings LLC Agreement are consistent with the 
requirements of the Act.
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    \71\ As noted previously, DE Holdings currently operates 
pursuant to the Sixth DE Holdings LLC Agreement. The Fourth DE 
Holdings LLC Agreement was the last version filed with and approved 
by the Commission. The Exchange and EDGX Boards determined that a 
rule filing was unnecessary to reflect the changes made to the 
Fourth DE Holdings LLC Agreement and the Fifth DE Holdings LLC 
Agreement. Specifically, the Fourth DE Holdings LLC Agreement or 
Fifth DE Holdings LLC Agreement was amended to reflect that (i) DE 
Holdings could issue options to purchase equity interests in DE 
Holdings to officers and employees in conjunction with an approved 
equity plan; (ii) because the DE Exchanges became national 
securities exchanges, a facility of ISE Stock Exchange LLC (``ISE 
Exchange'') ceased operations; (iii) the Commission had approved DEI 
as a wholly-owned subsidiary of DE Holdings and direct parent 
company of the DE Exchanges; (iv) certain rights and obligations 
related to the transaction in which ISE Holdings became an LLC 
Member of DE Holdings expired on December 23, 2010; (v) service 
agreements with certain LLC Members had been updated, and (vi) that 
Units of DE Holdings were held by Knight Capital Holdings LLC and 
not Knight Trimark, Inc., and Citadel Securities LLC and not Citadel 
Derivatives Group LLC. Therefore, to ensure regulatory continuity, 
the Exchange will discuss the changes it proposes to make to the 
Fourth DE Holdings LLC Agreement, rather than the Sixth DE Holdings 
LLC Agreement, to create the New DE Holdings LLC Agreement. As 
necessary, the Exchange notes where the Fourth DE Holdings LLC 
Agreement and the Sixth LLC Agreement differ as a result of one or 
more of the above categories of changes.
    \72\ The Exchange is not proposing any changes to the 
Certificate of Formation of DE Holdings.
    \73\ DE Holdings also submitted its proposed amendments to the 
Sixth DE Holdings LLC Agreement to the EDGX Board of Directors. As 
discussed in EDGX's companion rule filing, the EDGX Board of 
Directors also determined that the proposed amendments were required 
to be filed with and approved by the Commission pursuant to Section 
19 of the Act and the rules promulgated thereunder. See SR-EDGX-
2013-43.
    \74\ 15 U.S.C. 78s(b).
---------------------------------------------------------------------------

    Following the Closing, DE Holdings will continue to be the sole 
stockholder of DEI, which, in turn, holds 100% of the equity of the DE 
Exchanges. Although DE Holdings will not carry out any regulatory 
functions, the Exchange notes that its activities with respect to the 
operation of the DE Exchanges must be consistent with, and must not 
interfere with, the self-regulatory obligations of each DE 
Exchange.\75\ The New DE Holdings LLC Agreement therefore continues to 
include the provisions in the Fourth DE Holdings LLC Agreement that are 
designed to maintain the independence of the Exchange's self-regulatory 
functions, enable the Exchange to operate in a manner that complies 
with the federal securities laws, including the objectives of Sections 
6(b) \76\ and 19(g) \77\ of the Act, and facilitate the ability of the 
Exchange and the Commission to fulfill their regulatory and oversight 
obligations under the Act. Specifically, the New DE Holdings LLC 
Agreement would contain the following provisions which are 
substantially similar to the comparable provisions in the Fourth DE 
Holdings LLC Agreement.
---------------------------------------------------------------------------

    \75\ The Exchange notes that the proposed Combination will not 
affect the explicit agreement between the Exchange and DE Holdings 
which requires DE Holdings to provide adequate funding for the 
Exchange's operations, including the regulation of the Exchange. See 
Securities Exchange Act Release No. 61698 (Mar. 12, 2010), 75 FR 
13151 (Mar. 18, 2010).
    \76\ 15 U.S.C. 78f(b).
    \77\ 15 U.S.C. 78s(g).
---------------------------------------------------------------------------

    The New DE Holdings LLC Agreement, like the Fourth DE Holdings LLC 
Agreement, would require that, for so long as DE Holdings, directly or 
indirectly, controls an Exchange Subsidiary,\78\ DE Holdings' LLC 
Member, officers, employees and agents give due regard to the 
preservation of the independence of the self-regulatory function of 
such Exchange Subsidiary, as well as to its obligations to investors 
and the general public, and not take any actions that would interfere 
with the effectuation of any decisions by a board of directors of an 
Exchange Subsidiary relating to its regulatory functions (including 
disciplinary matters) or which would interfere with the ability of such 
Exchange Subsidiary to carry out its responsibilities under the 
Act.\79\ The New DE Holdings LLC Agreement, like the Fourth DE Holdings 
LLC Agreement, would require that DE Holdings comply with the U.S. 
federal securities laws and rules and regulations thereunder and 
cooperate with the Commission and each Exchange Subsidiary, as 
applicable, pursuant to and to the extent of their respective 
regulatory authority.\80\ Pursuant to the New DE Holdings LLC 
Agreement, DE Holdings' officers, employees and agents, by virtue of 
their acceptance of such positions, shall be deemed to agree (x) to 
comply with the U.S. federal securities laws and the rules and 
regulations thereunder; and (y) to cooperate with the Commission and 
each Exchange Subsidiary in respect of the Commission's oversight 
responsibilities regarding the Exchange Subsidiaries and the self-
regulatory functions and responsibilities of the Exchange Subsidiaries, 
and DE Holdings will take reasonable steps to cause its officers, 
employees and agents to so cooperate.\81\
---------------------------------------------------------------------------

    \78\ For the purposes of the New DE Holdings LLC Agreement, the 
term ``Exchange Subsidiary'' is defined to include the Exchange and 
EDGX. Section 3.04(b) of the New DE Holdings LLC Agreement.
    \79\ Compare Fourth DE Holdings LLC Agreement, Art. XIV, Section 
14.1 with New DE Holdings LLC Agreement, Art. X, Section 10.01(a). 
These two provisions are substantively identical. Obsolete 
references to the ISE Exchange and to International Securities 
Exchange, LLC (``ISE LLC'') have been deleted from the version set 
forth in the Fourth DE Holdings LLC Agreement.
    \80\ Compare Fourth DE Holdings LLC Agreement, Art. XIV, Section 
14.2 with New DE Holdings LLC Agreement, Art. X, Section 10.02(a).
    \81\ Id.
---------------------------------------------------------------------------

    Furthermore, to the fullest extent permitted by law, DE Holdings 
and its officers, employees and agents, by virtue of their acceptance 
of such position, shall be deemed to irrevocably submit to the 
jurisdiction of the U.S. federal courts, the Commission, and each 
Exchange Subsidiary, as applicable, for purposes of any suit, action, 
or proceeding pursuant to the U.S. federal securities laws and the 
rules or regulations thereunder arising out of, or relating to, the 
activities of an Exchange Subsidiary.\82\ By virtue of their acceptance 
of any such position, DE Holdings and its officers, employees and 
agents also will be deemed to waive, and agree not to assert by way of 
motion, as a defense or otherwise in any such suit, action or 
proceeding, any claims that it or they are not personally subject to 
the jurisdiction of the U.S. federal courts, the Commission and the 
Exchange Subsidiaries that the suit, action or proceeding is an 
inconvenient forum or that the venue of the suit, action or proceeding 
is improper, or that the subject matter of that suit, action or 
proceeding may not be enforced in or by such courts or agency.\83\
---------------------------------------------------------------------------

    \82\ Compare Fourth DE Holdings LLC Agreement, Art. XIV, Section 
14.3 with New DE Holdings LLC Agreement, Art. X, Section 10.03(a).
    \83\ Id.
---------------------------------------------------------------------------

    The New DE Holdings LLC Agreement, like the Fourth DE Holdings LLC 
Agreement, also would contain a number of provisions designed to ensure 
that the Exchange has sufficient access to the books and records of DE 
Holdings. Pursuant to the New DE Holdings LLC Agreement, to the extent 
they are related to the operation or administration of the Exchange 
Subsidiary, the books, records, premises, officers, agents, and 
employees of DE Holdings are deemed to be the books, records, premises, 
officers, agents and employees of such Exchange Subsidiary for purposes 
of, and subject to oversight pursuant to, the Act.\84\ In addition, for 
as long as DE Holdings controls, directly or indirectly, an Exchange 
Subsidiary, DE Holdings' books and records shall be subject at all 
times to inspection and copying by the Commission and the applicable 
Exchange Subsidiary, provided that such books and records are related 
to the operation or administration of an Exchange Subsidiary.\85\
---------------------------------------------------------------------------

    \84\ Compare Fourth DE Holdings LLC Agreement, Art. XI, Section 
11.2(b) with New DE Holdings LLC Agreement, Art. XI, Section 
11.02(b). These two provisions are the same except obsolete 
references to the ISE Exchange and to ISE LLC have been deleted from 
the version set forth in the Fourth DE Holdings LLC Agreement. 
References to managers and directors have also been deleted because 
DE Holdings will be managed by its Sole LLC Member, new BGM, and 
will not be managed by managers or directors.
    \85\ Id.
---------------------------------------------------------------------------

    The New DE Holdings LLC Agreement, similar to the Fourth DE 
Holdings LLC Agreement, also would provide that, to the fullest extent 
permitted by applicable law, all books and records of an Exchange 
Subsidiary reflecting confidential information

[[Page 76425]]

pertaining to the self-regulatory function of an Exchange Subsidiary 
(including disciplinary matters, trading data, trading practices and 
audit information) that shall come into the possession of DE Holdings, 
and the information contained in those books and records shall (i) be 
retained in confidence by DE Holdings, its Sole LLC Member, and its 
officers, employees and agents, and (ii) not be used for any non-
regulatory purposes.\86\ The New DE Holdings LLC Agreement provides, 
however, that the foregoing shall not be interpreted so as to limit or 
impede the rights of the Commission or an Exchange Subsidiary to access 
and examine such confidential information pursuant to the U.S. federal 
securities laws and the rules and regulations thereunder, or limit or 
impede the ability of the Sole LLC Member, or any of DE Holdings' 
officers, directors, employees or agents to disclose such information 
to the Commission or an Exchange Subsidiary.\87\
---------------------------------------------------------------------------

    \86\ Compare Fourth DE Holdings LLC Agreement, Art. XI, Section 
11.2(a) with New DE Holdings LLC Agreement, Art. XI, Section 
11.02(a).
    \87\ Id.
---------------------------------------------------------------------------

    Furthermore, the New DE Holdings LLC Agreement would require that 
DE Holdings take reasonable steps necessary to cause its current 
officers, employees and agents and prospective officers, employees and 
agents, prior to the commencement of such Person's employment, 
appointment or other service, to consent in writing to the 
applicability of Section 11.02, and Article X, of the New DE Holdings 
LLC Agreement with respect to activities related to an Exchange 
Subsidiary.\88\
---------------------------------------------------------------------------

    \88\ Compare Fourth DE Holdings LLC Agreement, Art. XIV, Section 
14.4 with New DE Holdings LLC Agreement, Art. X, Section 10.04.
---------------------------------------------------------------------------

    In addition, the New DE Holdings LLC Agreement would provide that, 
for so long as DE Holdings, directly or indirectly, controls an 
Exchange Subsidiary, before any amendment to or repeal of any provision 
of the New DE Holdings LLC Agreement shall be effective, those changes 
must be submitted to the board of directors of each Exchange 
Subsidiary, and if the same must be filed with or filed with and 
approved by the SEC before the changes may be effective, under Section 
19 of the Act and the rules and regulations promulgated thereunder by 
the SEC or otherwise,\89\ then the proposed changes to the New DE 
Holdings LLC Agreement shall not be effective until filed with or filed 
with and approved by the Commission, as the case may be.\90\
---------------------------------------------------------------------------

    \89\ 15 U.S.C. 78s.
    \90\ Compare Fourth DE Holdings LLC Agreement, Art. XV, Section 
15.2(b) with New DE Holdings LLC Agreement, Art. XII, Section 
12.02(b). These two provisions are the same except obsolete 
references to the ISE Exchange and to ISE LLC have been deleted from 
the version set forth in the Fourth DE Holdings LLC Agreement. In 
addition, this provision has been revised to reflect changes in the 
amendment process, as described above, and to reflect additional 
non-material changes.
---------------------------------------------------------------------------

    The Exchange also proposes that certain provisions of the Fourth DE 
Holdings LLC Agreement be deleted in their entirety or revised and 
simplified to reflect the transfer of ownership of DE Holdings to New 
BGM from the existing LLC Members. First, in light of the change in 
ownership, the Exchange proposes to eliminate the DE Holdings Ownership 
and Voting Limitations set forth in the Fourth DE Holdings LLC 
Agreement and replace them with a provision that identifies New BGM as 
the Sole LLC Member.\91\ The identification of the Sole LLC Member of 
DE Holdings is designed to assure that any change to the indirect 
ownership or control of the DE Exchanges occurs through a change in the 
ownership or control of New BGM, or in accordance with the rule filing 
process described above. If the change of control occurs through a 
change in the ownership or control of New BGM, any purported change of 
such ownership or control would need to comply with the New BGM Charter 
and New BGM Bylaws, including the BGM Ownership Limitation and the BGM 
Voting Limitation (or a Commission-approved waiver therefrom).
---------------------------------------------------------------------------

    \91\ See New DE Holdings LLC Agreement, Art. II, Section 2.01.
---------------------------------------------------------------------------

    In addition, the Exchange proposes to delete various other 
provisions that are applicable to a limited liability company with 
multiple LLC Members, but not to one with a Sole LLC Member. The more 
significant changes include the following: \92\
---------------------------------------------------------------------------

    \92\ The Exchange also proposes a variety of other changes, 
including, but not limited to, (1) replacing the existing Recitals 
with a description of the Combination; (2) deleting Article I, which 
includes the Definitions section, because the definitions are 
generally applicable to deleted provisions; and (3) deleting 
Sections 7.17 (Tax Matters Partner), 7.18 (Restrictions on Foreign 
Operations) and 7.19 (Conversion to Corporation; Registration 
Rights; Initial Public Offering); 10.7 (Other Activities of 
Members); and 10.8 (Use of Trade Name and Trademarks), among others.
---------------------------------------------------------------------------

     The Exchange proposes that DE Holdings delete Article IV 
of the Fourth DE Holdings LLC Agreement regarding equity interests of 
DE Holdings. Article IV, among other things, provides that equity 
interests in DE Holdings are represented by Units,\93\ authorizes DE 
Holdings to issue certificates evidencing the Units, and requires the 
maintenance of books for the purpose of registering the Transfer of 
Units. In contrast, Section 4.01 of the New DE Holdings LLC Agreement, 
which describes the capital structure of DE Holdings, states that the 
capital structure of DE Holdings consists of one class of common 
interests. All such common interests are identical with each other in 
every respect, and the LLC Member owns all of the common interests 
issued and outstanding.
---------------------------------------------------------------------------

    \93\ ``Units'' are defined as the units of interest in the 
ownership and profits and losses of DE Holdings and such LLC 
Member's right to receive distributions in its capacity as a LLC 
Member. See Fourth DE Holdings LLC Agreement, Art. I, Section 1.1.
---------------------------------------------------------------------------

     The Exchange proposes that DE Holdings delete Article V of 
the Fourth DE Holdings LLC Agreement regarding the capital 
contributions of the LLC Members, and replace it with Section 4.02 of 
the New DE Holdings LLC Agreement. Article V of the Fourth DE Holdings 
LLC Agreement describes each LLC Member's capital contribution, 
including its valuation,\94\ and the terms of any additional capital 
contributions required of LLC Members.\95\ In contrast, Section 4.02 of 
the New DE Holdings LLC Agreement states that a capital contributions 
account shall be maintained for the LLC Member, to which contributions 
shall be credited and against which distributions of capital 
contributions shall be charged. From time to time, the LLC Member may 
determine that DE Holdings requires capital and may make capital 
contributions in an amount determined by the LLC Member, and such 
contributions shall be credited to the LLC Member's capital 
contributions account.
---------------------------------------------------------------------------

    \94\ See Fourth DE Holdings LLC Agreement, Art. V, Section 5.1.
    \95\ See Fourth DE Holdings LLC Agreement, Art. V, Section 5.2.
---------------------------------------------------------------------------

     The Exchange proposes to delete Article VI of the Fourth 
DE Holdings LLC Agreement, which describes (i) the rights of LLC 
Members in the event of a Transfer \96\ of Units, including the right 
of first refusal, drag-along rights and pre-emptive rights,\97\ (ii) 
the general restrictions on Transfers of Units and the admission of new 
LLC Members; and (iii) the requirement for the Board to keep a list of 
LLC Members and the

[[Page 76426]]

number of Units and Percentage Interest of each LLC Member. In 
contrast, Article VII of the New DE Holdings LLC Agreement states that 
the Sole LLC Member may not sell, assign, transfer, convey, gift, 
exchange or otherwise dispose of any or all of its common interests 
except pursuant to an amendment to the New DE Holdings LLC Agreement, 
which shall not be effective until filed with and approved by the 
Commission under Section 19 of the Act and the rules and regulations 
promulgated thereunder by the Commission or otherwise, as the case may 
be. After such amendment is effective and, upon receipt by DE Holdings 
of a written agreement executed by the person or entity to whom such 
common interests are to be transferred agreeing to be bound by the 
terms of the New DE Holdings LLC Agreement, such person shall be 
admitted as an LLC Member of DE Holdings. In addition, Section 2.05 of 
the New DE Holdings LLC Agreement states that new LLC Members of DE 
Holdings shall be admitted only upon the approval of the Sole LLC 
Member and pursuant to an amendment to the New DE Holdings LLC 
Agreement, which shall not be effective until filed with and approved 
by the Commission under Section 19 of the Act and the rules and 
regulations promulgated thereunder by the SEC or otherwise.\98\
---------------------------------------------------------------------------

    \96\ A ``Transfer'' means (i) when used as a verb, to sell, 
transfer, assign, encumber or otherwise dispose of, directly or 
indirectly, voluntarily or involuntarily, by operation of law or 
otherwise, and (ii) when used as a noun, a direct or indirect, 
voluntary or involuntary, sale, transfer, assignment, encumbrance or 
other disposition by operation of law or otherwise. See Fourth DE 
Holdings LLC Agreement, Art. I, Section 1.1.
    \97\ See Fourth DE Holdings LLC Agreement, Art. VI, Sections 
6.2, 6.3 and 6.4, respectively.
    \98\ Article VI of the Fourth DE Holdings LLC Agreement was 
amended to delete obsolete provisions, including provisions related 
to ISE Holdings and for dated actions for which the date had passed.
---------------------------------------------------------------------------

     The Exchange proposes that DE Holdings delete Sections 
7.1, 7.2, 7.3(c), 7.3(e), 7.4-7.9, and 7.14-7.19 of the Fourth DE 
Holdings LLC Agreement regarding the governance of DE Holdings.\99\ 
Section 7.1 and 7.2(a) provide for the governance of DE Holdings by a 
Board of Managers, which is populated by representatives of various LLC 
Members. Section 7.2(b) permits the Board to designate committees 
subject to certain requirements, including the representation of 
certain significant LLC Members on the committee. Section 7.3(c) 
addresses matters related to Owner Directors of the Exchange and EDGX. 
As discussed below in Section 8 of this Proposed Rule Change, the 
Exchange proposes to eliminate the category of Owner Directors from the 
Board of the Exchange and of EDGX, thereby making this provision 
unnecessary. Section 7.3(e) addresses meetings of equity holders of 
subsidiaries that are not exchanges. Sections 7.4 and 7.5 set forth 
requirements for board and committee meetings, and Section 7.6 permits 
the election of a Chairman of the Board. Section 7.7 sets forth the 
circumstances under which certain actions require supermajority board 
approval, majority board approval and/or the approval of a majority of 
all or a subset of LLC Members. Under the New DE Holdings LLC 
Agreement, DE Holdings will be managed by New BGM, as the Sole LLC 
Member, rather than a board.\100\ Section 7.8 prohibits LLC Members 
from entering into voting trusts. Section 7.9 describes how Managers 
are agents of DE Holdings. Because DE Holdings will not have a Board of 
Managers or multiple LLC Members after Closing, these provisions would 
no longer be relevant.\101\ The Exchange also proposes to delete 
Sections 7.14 through 7.19, which address, respectively, the powers of 
members, non-solicitation and confidentiality, reliance by third 
parties, the tax matters partner, restrictions on foreign operations, 
and the conversion to a corporation, registration rights and an initial 
public offering.
---------------------------------------------------------------------------

    \99\ Provisions comparable to the remaining provisions of 
Article 7 of the Fourth DE Holdings LLC Agreement have been 
incorporated into the New DE Holdings LLC Agreement.
    \100\ See New DE Holdings LLC Agreement, Art. III, Section 3.01.
    \101\ Article VII of the Fourth DE Holdings LLC Agreement was 
amended to reflect the various categories of changes described above 
in paragraph (ii) through (vi) in footnote 71.
---------------------------------------------------------------------------

     The Exchange proposes to replace Article VIII of the 
Fourth DE Holdings LLC Agreement regarding distributions with the more 
simplified version as set forth in Article V, Section 5.02 of the New 
DE Holdings LLC Agreement. For example, Article VIII of the Fourth DE 
Holdings LLC Agreement addresses tax distributions to LLC Members and 
explains how withholdings on behalf of LLC Members are treated as 
distributions. Article V, Section 5.02 of the New Holdings LLC 
Agreement does not address these issues.
     The Exchange proposes to replace Article IX of the Fourth 
DE Holdings LLC Agreement with the more simplified version in Article 
V, Section 5.01 of the New DE Holdings LLC Agreement. Article IX of the 
Fourth DE Holdings LLC Agreement provides, among other things, for the 
calculation and allocation of profits and losses among LLC Members in 
order to determine distributions to LLC Members. In contrast, Article 
V, Section 5.01 does not address such issues because all allocations of 
profits and losses are made to the Sole LLC Member.
7. Amendments to DEI Certificate of Incorporation and DEI Bylaws
    After Closing, DEI will continue to be a wholly owned subsidiary of 
DE Holdings and will continue to hold direct ownership of the DE 
Exchanges. DEI, however, will have a new ultimate parent company, New 
BGM. Therefore, the Exchange proposes that DEI make minor revisions to 
its Certificate of Incorporation and Bylaws to reflect certain aspects 
of the Combination.
    As required by Article EIGHTH, Paragraph 3 of the current DEI 
Certificate of Incorporation and Article VI, Section 6.4 of the current 
DEI Bylaws, DEI submitted its proposed amendments to the DEI 
Certificate of Incorporation and DEI Bylaws to the Board of Directors 
of the Exchange. The Board of Directors of the Exchange determined that 
the proposed amendments were required to be filed with and approved by 
the Commission pursuant to Section 19 of the Act and the rules 
promulgated thereunder.\102\ Therefore, the Exchange requests the 
Commission's approval of the proposed amendments to the DEI Certificate 
of Incorporation and DEI Bylaws pursuant to this Proposed Rule Change. 
The Exchange believes that the proposed changes to the DEI Certificate 
of Incorporation and DEI Bylaws are consistent with the requirements of 
the Act.
---------------------------------------------------------------------------

    \102\ 15 U.S.C. 78s.
---------------------------------------------------------------------------

a. DEI Certificate of Incorporation
    In connection with the Combination, the Exchange proposes that DEI 
amend and restate its Certificate of Incorporation. The DEI Certificate 
of Incorporation, as revised, is set forth in Exhibit 5E. DEI proposes 
to make the following amendments to its Certificate of Incorporation:
     Deleting as outdated Article FIFTH regarding the name and 
address of the sole incorporator.
     Deleting paragraphs 1 and 2 of Article SIXTH (renumbered 
Article FIFTH). Paragraph 1 of Article SIXTH states that the business 
and affairs of DEI shall be managed by or under the direction of the 
board of directors of DEI (``DEI board of directors''), provided that 
any action that specifically requires the approval of the Board of 
Managers and/or LLC Members of DE Holdings pursuant to Section 7.7 of 
the Fourth DE Holdings LLC Agreement, by and among the LLC Members of 
DE Holdings, as such agreement may be amended from time to time, shall 
require the approval of the stockholders of DEI. Paragraph 2 of Article 
SIXTH generally states that,

[[Page 76427]]

notwithstanding paragraph 1 of Article SIXTH, nothing in Section 7.7 of 
the Fourth DE Holdings LLC Agreement shall be applicable where the 
application of such provision(s) would interfere with the effectuation 
of any decisions by the DEI board of directors relating to regulatory 
functions of each Exchange Subsidiary (including disciplinary matters) 
or the structure of the market that each Exchange Subsidiary \103\ 
regulates, or would interfere with the ability of each Exchange 
Subsidiary to carry out its responsibilities under the Act or to 
oversee the structure of the market that each Exchange Subsidiary 
regulates, in each case as determined by the DEI board of directors, 
which functions or responsibilities shall include the ability of the 
Exchange Subsidiary as a self-regulatory organization to prevent 
fraudulent and manipulative acts and practices; promote just and 
equitable principles of trade; foster cooperation and coordination with 
persons engaged in regulating, clearing, settling, processing 
information with respect to, and facilitating transactions in 
securities; remove impediments to and perfect the mechanism of a free 
and open market and a national market system; and, in general, protect 
investors and the public interest. Both paragraph 1 and 2 of Article 
SIXTH address the application of Section 7.7 of the Fourth DE Holdings 
LLC Agreement to the actions of DEI. As discussed above in Section 6 of 
this Proposed Rule Change, the Exchange proposes to delete Section 7.7 
of the Fourth DE Holdings LLC Agreement because it describes certain 
circumstances that require the majority or supermajority vote of the DE 
Holdings Board of Managers or the LLC Members. However, such majority 
and supermajority voting requirements are unnecessary when, upon 
Closing, there will be only one LLC Member of DE Holdings and when DE 
Holdings will no longer have a Board of Managers. Therefore, paragraphs 
1 and 2 of Article SIXTH would no longer be necessary.
---------------------------------------------------------------------------

    \103\ For purposes of the DEI Certificate of Incorporation, 
``Exchange Subsidiary'' means any subsidiary of DEI that is 
registered with the Commission as a national securities exchange, as 
provided in Section 6 of the Act. Article SIXTH, para. 2 of the 
current DEI Certificate of Incorporation.
---------------------------------------------------------------------------

     Moving the current definition of ``Exchange Subsidiary'' 
from current Article SIXTH to Article SEVENTH (renumbered Article 
SIXTH). Currently, the definition of ``Exchange Subsidiary'' is set 
forth in Article SIXTH. However, with the deletion of paragraphs 1 and 
2 of Article SIXTH, the definition of ``Exchange Subsidiary'' also 
would be deleted. As a result, the Exchange proposes to move the 
definition to Article SEVENTH (renumbered as Article SIXTH).
     Changing the reference to ``DE Holdings'' in paragraph 4 
of Article EIGHTH (renumbered as Article SEVENTH) from the abbreviated 
``DE Holdings'' to ``Direct Edge Holdings LLC.'' Currently, Direct Edge 
Holdings LLC is defined as ``DE Holdings'' in paragraph 1 of Article 
SIXTH. However, with the deletion of paragraph 1, the definition of the 
abbreviated name also would be deleted. Therefore, it is necessary to 
use the full name, rather than the abbreviated version.
     Paragraph 3 of the Article SEVENTH, as re-numbered from 
Article EIGHTH, is proposed to be amended to make minor revisions to it 
so that it would read as follows: ``For so long as the Corporation 
shall control, directly or indirectly, an Exchange Subsidiary, before 
any amendment to or repeal of any provision of this Certificate of 
Incorporation shall be effective, those changes shall be submitted to 
the board of directors of each Exchange Subsidiary and if the same must 
be filed with, or filed with and approved by, the Securities and 
Exchange Commission (the ``SEC'') before the changes may be effective 
under Section 19 of the Exchange Act and the rules promulgated 
thereunder by the SEC or otherwise, then the proposed changes to this 
Certificate of Incorporation of this Corporation shall not be effective 
until filed with, or filed with and approved by, the SEC, as the case 
may be.'' \104\
---------------------------------------------------------------------------

    \104\ See Amendment No. 1 to the Form 19b-4 filed by the 
Exchange.
---------------------------------------------------------------------------

     Making corresponding administrative changes to the DEI 
Certificate of Incorporation, including revising numbering and certain 
cross-references to reflect the above changes.
    The Exchanges notes that it is not deleting Article EIGHTH, 
paragraph 4 (to be renumbered Article SEVENTH, paragraph 4), which 
identifies DE Holdings as the sole stockholder of DEI.
b. Amended and Restated Bylaws of DEI
    In connection with the Combination, the Exchange proposes that DEI 
amend its Bylaws and adopt the amended Bylaws as its Amended and 
Restated Bylaws. The DEI Bylaws, as revised, are set forth in Exhibit 
5F. The Exchange proposes that DEI make the following amendments to its 
Bylaws:
     Deleting the following phrase from Section 2.15(b): ``and 
other than `Owner Directors' \105\ as defined in the governance 
documents of EDGA and EDGX, as applicable.'' Section 2.15(b) states, 
among other things, that, at any meeting of the equity holders of an 
Exchange Subsidiary \106\ held for the purpose of electing directors 
(other than the chief executive officer of the Exchange or EDGX, as 
applicable and other than Owner Directors), DEI shall cause all 
outstanding equity of such Exchange Subsidiary to be voted in favor of 
the election of certain directors. As discussed below in Section 8 of 
this Proposed Rule Change in more detail, the Exchange proposes to 
eliminate the category of Owner Directors from the Board of the 
Exchange. Therefore, the provisions in the DEI Bylaws related to such 
Owner Directors are no longer applicable.
---------------------------------------------------------------------------

    \105\ ``Owner Directors'' are defined in the current Exchange 
Bylaws as a Director nominated by a Designating Owner pursuant to 
Article III, Section 4(g) of the Exchange Bylaws and elected by the 
stockholders of the Exchange. Exchange Bylaws, Art. I, Paragraph 
(w). Correspondingly, a ``Designating Owner'' means an LLC Member of 
DE Holdings that holds (together with its Affiliates) at least 15% 
Percentage Interest (as defined in the Fourth DE Holdings LLC 
Agreement) in DE Holdings. A ``Percentage Interest'' is defined in 
the Article I of the Fourth DE Holdings LLC Agreement as, with 
respect to an LLC Member, the ratio of the number of Units held by 
the LLC Member to the total of all of the issued and outstanding 
Units, expressed as a percentage. For purposes of Article XII and 
any references to Article XII in the Fourth DE Holdings LLC 
Agreement, Percentage Interest also includes Units owned, directly 
or indirectly, of record or beneficially, by a Person, either alone 
or together with its Related Persons.
    \106\ An ``Exchange Subsidiary'' is defined in Section 2.15(b) 
of the DEI Bylaws as the Exchange, EDGX or any other subsidiary of 
DEI that is registered with the Commission as a national securities 
exchange, as provided in Section 6 of the Act.
---------------------------------------------------------------------------

     Deleting Section 2.15(c) in its entirety. Section 2.15(c) 
states that DEI shall take all actions in its capacity as a stockholder 
of the Exchange and EDGX, as applicable, to vote or consent with 
respect to matters concerning an Owner Director according to the 
written instructions of the relevant LLC Member of DE Holdings that is 
entitled to nominate such Owner Director. Section 2.15(c) further 
states that, without limiting the generality of the foregoing, at any 
meeting of the stockholders of the Exchange or EDGX held for the 
purpose of electing or removing and/or replacing Owner Directors of 
such Exchange Subsidiary, or in the event written consents are 
solicited or otherwise sought from the stockholders of the Exchange or 
EDGX with respect thereto, DEI shall cause all outstanding shares of 
such Exchange Subsidiary owned by DEI and entitled to vote to be voted, 
or, in the event written consents are solicited or otherwise sought 
from the equity holders of an Exchange Subsidiary, shall cause to be 
validly

[[Page 76428]]

executed only such written consents, (i) electing each Owner Director 
nominated by the Designating Owner or (ii) removing and/or replacing 
each Owner Director who had been nominated by the Designating Owner in 
accordance with the governance documents of such Exchange Subsidiary. 
Section 2.15(c) also states that DEI shall not vote or execute a 
consent to effectuate the matters in clauses (i) or (ii) unless and 
until the Designating Owner has provided written notice to DEI of such 
Designating Owner's designation of an individual to serve as an Owner 
Director, to be removed as an Owner Director or to replace another 
individual as an Owner Director, as applicable. Because the Exchange 
proposes to eliminate the category of Owner Directors from the Board of 
the Exchange, Section 2.15(c) would no longer be applicable.\107\
---------------------------------------------------------------------------

    \107\ With the elimination of paragraph (c) of Section 2.15, the 
Exchange also proposes to renumber the current paragraph (d) of 
Section 2.15 as paragraph (c).
---------------------------------------------------------------------------

     Eliminating Section 2.15(e) regarding the election, 
removal or replacement of directors designated by LLC Members of DE 
Holdings for any non-exchange subsidiaries of DEI entitled to make such 
designation under the governing documents of such subsidiary. 
Specifically, Section 2.15(e) states that, at any meeting of the equity 
holders of a subsidiary, other than an Exchange Subsidiary, held for 
the purpose of electing or removing and/or replacing any director 
designated by any DE Holdings LLC Member who is entitled to designate 
or remove one or more directors of such subsidiary in accordance with 
the governance documents of such subsidiary, or, in the event written 
consents are solicited or otherwise sought from the equity holders of 
such subsidiary, DEI shall cause all outstanding equity of such 
subsidiary owned by DEI and entitled to vote to be voted, or in the 
event written consents are solicited or otherwise sought from the 
equity holders of such subsidiary, shall cause to be validly executed 
only such written consents, (i) electing each director nominated by 
such DE Holdings LLC Member or (ii) removing and/or replacing such 
director who had been nominated by such DE Holdings LLC Member in 
accordance with the governance documents of such subsidiary. This 
provision is unnecessary going forward because, after Closing, there 
will be no non-exchange subsidiary of DEI.
     Changing the term ``Exchange Member Nominating Committee'' 
to ``Member Nominating Committee'' in Section 2.15(b). As discussed in 
more detail below in Section 8 of this Proposed Rule Change, the 
Exchange proposes to change the name of the ``Exchange Member 
Nominating Committee'' to ``Member Nominating Committee'' to conform 
the term with the bylaws of the BATS Exchanges.\108\ Therefore, this 
change is intended to conform the name of this committee with the name 
as set forth in the revised version of the Exchange Bylaws.
---------------------------------------------------------------------------

    \108\ Compare Art. I, para. (q) of the Current Exchange Bylaws 
with Art. I, para. (r) of the revised Exchange Bylaws.
---------------------------------------------------------------------------

     Changing the term ``Exchange Member Director'' to ``Member 
Representative Director'' in Section 2.15(d) (to be renumbered Section 
2.15(c)). As discussed in more detail below in Section 8 of this 
Proposed Rule Change, the Exchange proposes to change the name of the 
``Exchange Member Director'' to ``Member Representative Director'' to 
conform the term with the bylaws of the BATS Exchanges.\109\ Therefore, 
this change is intended to conform the name of this director with the 
name as set forth in the revised version of the Exchange Bylaws.
---------------------------------------------------------------------------

    \109\ Compare Art. I, para. (p) of the Current Exchange Bylaws 
with Art., I, para. (s) of the revised Exchange Bylaws.
---------------------------------------------------------------------------

     Deleting Section 4.6(b) of the DEI Bylaws, which states 
that DEI shall not make a dividend payment to any stockholder of DEI 
if, and to the extent, such dividend payment would violate the General 
Corporation Law of the State of Delaware or other applicable law, or 
would come from any Regulatory Funds. ``Regulatory Funds'' is defined 
as ``any fees, fines or penalties derived from the regulatory 
operations of an Exchange Subsidiary (as defined herein), provided that 
Regulatory Funds shall not include revenues derived from listing fees, 
market data revenue, transaction revenues or any other aspect of the 
commercial operations of such Exchange Subsidiary, even if a portion of 
such revenues are used to pay costs associated with the regulatory 
operations of such Exchange Subsidiary.'' \110\ The Exchange Bylaws and 
the bylaws of EDGX each prohibit the Exchange and EDGX, respectively, 
from distributing any such funds to its stockholder, instead requiring 
that such funds only be applied to fund the legal and regulatory 
operations of the respective exchange or pay restitution and 
disgorgement of funds intended for customers.\111\ As a result, DEI 
will not be permitted to come into possession of regulatory funds, as 
they will remain at the respective exchange and used only for permitted 
purposes. The Exchange therefore believes that a provision in the DEI 
Bylaws relating to the handling by DEI of such funds is unnecessary and 
potentially confusing.\112\
---------------------------------------------------------------------------

    \110\ DEI Bylaws, Section 4.6(b).
    \111\ See Exchange Bylaws, Art. X, Section 4; and EDGX Bylaws, 
Art. X, Section 4.
    \112\ The Exchange understands that the proposed BGM Holdings 
Bylaws do not contain a provision relating to BGM Holdings' handling 
of funds derived from the regulatory operations of its exchange 
subsidiaries, such as regulatory fees, fines and penalties. See SR-
BATS-2013-059 and SR-BYX-2013-039. Similarly, the Exchange does not 
propose to add such a provision to the New DE Holdings LLC 
Agreement.
---------------------------------------------------------------------------

     Revising Section 5.8(a) to state that, to the fullest 
extent permitted by law, all books and records of an Exchange 
Subsidiary reflecting confidential information pertaining to the self-
regulatory function of such Exchange Subsidiary (including disciplinary 
matters, trading data, trading practices and audit information) that 
shall come into the possession of DEI, and the information contained in 
those books and records, ``shall not be made available to any persons 
(other than as provided in the next sentence) other than to those 
officers, directors, employees and agents of the Corporation that have 
a reasonable need to know the contents thereof.'' The Commission has 
previously approved such language.\113\
---------------------------------------------------------------------------

    \113\ See, e.g., Securities Exchange Act Release No. 66171 (Jan. 
17, 2013), 77 FR 3297 (Jan. 23, 2012).
---------------------------------------------------------------------------

     Making minor revisions to the language in Section 6.4 to 
be fully consistent with the proposed language in Article XII of the 
New BGM Bylaws and in Section 12.02(b) of the New DE Holdings LLC 
Agreement. Revised Section 6.4 would read as follows: ``For so long as 
the Corporation shall control, directly or indirectly, an Exchange 
Subsidiary, before any amendment to or repeal of any provision of these 
Bylaws shall be effective, those changes shall be submitted to the 
board of directors of each Exchange Subsidiary and if the same must be 
filed with or filed with and approved by the SEC before the changes may 
be effective, under Section 19 of the Exchange Act and the rules and 
regulations promulgated thereunder by the SEC or otherwise, then the 
proposed changes to these Bylaws shall not be effective until filed 
with or filed with and approved by the SEC, as the case may be.'' The 
Commission has previously approved this provision as proposed.\114\
---------------------------------------------------------------------------

    \114\ See Securities Exchange Act Release No. 58375 (Aug. 18, 
2008), 73 FR 49498 (Aug. 21, 2008); Securities Exchange Act Release 
No. 62716 (Aug. 13, 2010), 75 FR 51295 (Aug. 19, 2010).

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

[[Page 76429]]

     Replacing the term ``Company'' with ``Corporation'' in 
Section 7.5 to make the terminology referring to DEI consistent 
throughout the Bylaws.
     Making non-substantive changes to correct typographical 
errors, such as deletions to unnecessary spaces.
8. Amendments to Exchange Certificate of Incorporation and Exchange 
Bylaws
    In connection with the Combination, the Exchange proposes to make 
various revisions to its Certificate of Incorporation and Bylaws. Upon 
Closing, the Exchange's corporate family will include four separate 
exchanges, the two DE Exchanges and the two BATS Exchanges. 
Accordingly, the Exchange believes that it is important for each of the 
four exchanges to have a consistent, uniform approach to corporate 
governance. Therefore, to simplify and unify the governance and 
corporate practices of these four exchanges, the Exchange proposes to 
revise its Certificate of Incorporation and Bylaws to conform them with 
the certificates of incorporation and bylaws of the BATS Exchanges. In 
addition, the Exchange proposes several amendments to the Exchange 
Bylaws that reflect changes that the BATS Exchanges propose to make to 
their bylaws as a result of the Combination.\115\ These additional 
changes to the Exchange Bylaws would reconcile and conform the Exchange 
Bylaws and the bylaws of the BATS Exchanges going forward. The Exchange 
believes that the proposed changes to the Exchange Certificate of 
Incorporation and Exchange Bylaws are consistent with the requirements 
of the Act. Finally, in proposing these revisions to the Exchange 
Certificate of Incorporation and the Exchange Bylaws, the Exchange 
emphasizes that it believes that the Proposed Rule Change is not 
inconsistent with the Order Instituting Administrative and Cease-and-
Desist Proceedings Pursuant to Sections 19(h) and 21C of the Securities 
Exchange Act of 1934, Making Findings, and Imposing Remedial Sanctions 
and Cease-and-Desist Order, entered by the Commission on October 13, 
2011.\116\ Set forth below are the proposed changes to the Exchange 
Certificate of Incorporation and Exchange Bylaws.\117\
---------------------------------------------------------------------------

    \115\ The BATS Exchanges describe these proposed revisions in 
the BATS Exchanges' companion rule filings related to the 
Combination. See SR-BATS-2013-059 and SR-BYX-2013-039.
    \116\ See Securities Exchange Act Release No. 65556 (Oct. 13, 
2011).
    \117\ In addition to the substantive changes discussed below, 
the revised Certificate of Incorporation and Bylaws of the Exchange 
also reflect certain non-substantive differences, including, but not 
limited to, various conforming changes to terminology, renumbering 
and typographical changes.
---------------------------------------------------------------------------

a. Exchange Certificate of Incorporation
    The Exchange proposes to amend and restate its Certificate of 
Incorporation and rename it the Restated Certificate of Incorporation 
of the Exchange. The revised Exchange Certificate of Incorporation, 
which is set forth in Exhibit 5G, is modeled on, and substantially 
similar to, the current certificates of incorporation of the BATS 
Exchanges. The Commission has previously found the certificates of 
incorporation of the BATS Exchanges to be consistent with the Act.\118\ 
Therefore, by making the Exchange Certificate consistent with the 
certificates of incorporation of the BATS Exchanges, the Exchange 
believes that, like the BATS Exchanges, the Exchange will continue to 
be so organized and have the capacity to be able to carry out the 
purposes of the Act and to comply and to enforce compliance by its 
Members and persons associated with its Members, with the provisions of 
the Act, the rules and regulations thereunder, and the Exchange Rules, 
as required by Section 6(b)(1) of the Act.\119\
---------------------------------------------------------------------------

    \118\ See Securities Exchange Act Release No. 58375 (Aug. 18, 
2008), 73 FR 49498 (Aug. 21, 2008); Securities Exchange Act Release 
No. 62716 (Aug. 13, 2010), 75 FR 51295 (Aug. 19, 2010).
    \119\ 15 U.S.C. 78f(b)(1).
---------------------------------------------------------------------------

    Specifically, to conform the Exchange Certificate of Incorporation 
with those of the BATS Exchanges, the Exchange proposes to make the 
following amendments:
     Delete as outdated Article FIFTH setting forth the name 
and mailing address of the sole incorporator.
     Delete Article SIXTH, which includes paragraphs one 
through five, in its entirety. Paragraph 1 provides that the business 
and affairs of the Exchange shall be managed by or under the direction 
of the Board; provided, that, any action that specifically requires the 
approval of the Board of Managers and/or LLC Members of DE Holdings 
pursuant to Section 7.7 of the Third Amended and Restated Limited 
Liability Company Operating Agreement of DE Holdings, dated as of 
December 23, 2008, by and among the LLC Members of DE Holdings, as such 
agreement may be amended from time to time, shall require the approval 
of the stockholders of the Exchange.\120\ Paragraph 2 states that the 
election of directors need not be by written ballot. Paragraph 3 states 
that the Board of Directors of the Exchange is expressly authorized to 
adopt, amend, alter or repeal the Exchange Bylaws. Paragraph 4 states 
that the Bylaws may also be amended, altered or repealed, or new bylaws 
may be adopted, by action taken by the stockholders of the Exchange. 
Paragraph 5 states that any Director may be removed with or without 
cause by a majority vote of the stockholders.\121\ The Exchange 
proposes to delete this Article SIXTH because the certificates of 
incorporation of the BATS Exchanges do not contain these provisions, 
and the Exchange intends to conform the Exchange Certificate of 
Incorporation with the certificates of incorporation of the BATS 
Exchanges.
---------------------------------------------------------------------------

    \120\ The Exchange also notes that paragraph 1 of Article SIXTH 
would be obsolete after the Closing. As discussed above in Section 7 
of this Proposed Rule Change, Section 7.7 of the Fourth DE Holdings 
LLC Agreement sets forth the circumstances under which certain 
actions require supermajority board approval, majority board 
approval and/or the approval of a majority of all or a subset of LLC 
Members. Under the New DE Holdings LLC Agreement, DE Holdings will 
be managed by New BGM, as the Sole LLC Member, rather than a board. 
Because DE Holdings will only have one LLC Member after Closing, the 
provisions regarding majority and supermajority approval would be 
unnecessary. Accordingly, the Exchange proposes that DE Holdings 
delete Section 7.7 of the Fourth DE Holdings LLC Agreement. 
Correspondingly, the Exchange proposes to delete paragraph 1 of 
Article SIXTH as it would refer to provisions that no longer exists 
in the New DE Holdings LLC Agreement.
    \121\ The Exchange also notes that Article III, Section 4, 
Article IX, Section 1, and Article III, Section 7 of the Exchange 
Bylaws address the election of Directors, the amendment, alteration 
and repeal of the Exchange Bylaws and the removal of Directors, 
respectively. Therefore, the Exchange believes that the proposed 
deletions from Article SIXTH of the Exchange Certificate do not 
leave these areas unaddressed. Moreover, as discussed in Section 
8(b) of this Proposed Rule Change, these provisions of the Exchange 
Bylaws also will be consistent with the bylaws of the BATS 
Exchanges.
---------------------------------------------------------------------------

     Delete Article SEVENTH, which addresses liability of 
Directors to the Exchange or its stockholders for monetary damages for 
any breach of fiduciary duty. Specifically, Article SEVENTH states 
that, except to the extent that the General Corporation Law of Delaware 
prohibits the elimination or limitation of liability of directors for 
breaches of fiduciary duty, no director of the Exchange shall be 
personally liable to the Exchange or its stockholders for monetary 
damages for any breach of fiduciary duty as a director, notwithstanding 
any provision of law imposing such liability. No amendment to or repeal 
of Article SEVENTH shall apply to or have any effect on the liability 
or alleged liability of any director of the Exchange for or with 
respect to any acts or omissions of such director occurring prior to 
such amendment. The Exchange proposes to delete this Article SEVENTH 
because the certificates of incorporation of the BATS Exchanges do not 
contain this provision. The deletion of this provision would not be 
expected to materially

[[Page 76430]]

affect the Exchange as it removes a provision limiting the personal 
liability of its Directors.
     Delete Article EIGHTH, which provides that the Exchange 
reserves the right to amend, alter, change or repeal any provision 
contained in the Exchange Certificate of Incorporation, in the manner 
now or hereafter prescribed by statute and the Exchange Certificate of 
Incorporation, and all rights conferred upon stockholders in the 
Exchange Certificate of Incorporation are granted subject to this 
reservation. The Exchange proposes to delete Article EIGHTH because the 
certificates of incorporation of the BATS Exchanges do not contain this 
provision.\122\
---------------------------------------------------------------------------

    \122\ The Exchange also notes that the deletion of this 
provision does not change the manner in which provisions in the 
Exchange Certificate may be amended, altered, changed or repealed, 
as Article EIGHTH merely refers back to statutory rights in that 
regard and does not further elaborate on the means for amending the 
Exchange Certificate.
---------------------------------------------------------------------------

b. Exchange Bylaws
    In connection with the Combination, the Exchange proposes to amend 
and restate its Second Amended and Restated Bylaws to adopt the amended 
Exchange Bylaws as its Third Amended and Restated Bylaws. The new 
Exchange Bylaws, which are set forth in Exhibit 5H, are modeled on, and 
substantially similar to, the current bylaws of the BATS Exchanges, as 
proposed to reflect the Combination. The Commission has previously 
found the current bylaws of the BATS Exchanges to be consistent with 
the Act.\123\ Section (i) of this Section 8(b) summarizes the changes 
that the Exchange proposes to make to the Exchange Bylaws to conform 
them with the current bylaws of the BATS Exchanges. In addition, in 
Section (ii) of this Section 8(b) of this Proposed Rule Change, the 
Exchange summarizes its proposed amendments to the Exchange Bylaws that 
reflect changes that the BATS Exchanges propose to make to their bylaws 
as a result of the Combination. The Exchange believes that, with these 
proposed changes, the Exchange will continue to be so organized and 
have the capacity to be able to carry out the purposes of the Act and 
to comply and to enforce compliance by its Members and persons 
associated with its Members, with the provisions of the Act, the rules 
and regulations thereunder, and the Exchange Rules, as required by 
Section 6(b)(1) of the Act.\124\
---------------------------------------------------------------------------

    \123\ See Securities Exchange Act Release No. 58375 (Aug. 18, 
2008), 73 FR 49498 (Aug. 21, 2008); Securities Exchange Act Release 
No. 62716 (Aug. 13, 2010), 75 FR 51295 (Aug. 19, 2010); Securities 
Exchange Act Release No. 69884 (Jun. 27, 2013), 78 FR 40255 (Jul. 3, 
2013).
    \124\ 15 U.S.C. 78f(b)(1).
---------------------------------------------------------------------------

(i) Changes to Conform to Existing Bylaws of BATS Exchanges
(I) Board of Directors
    Article III of the Exchange Bylaws describes the powers, 
composition and selection of Directors. The Exchange proposes to amend 
various provisions in this Article to conform them to the bylaws of the 
BATS Exchanges.
    First, the Exchange proposes to amend the size and composition of 
the Board, as set forth in Article III, Section 2. Currently, Section 
2(a) states that, subject to Article III, Section 2(b), 4(g) and 6(a), 
the Board will consist of nineteen Directors, a majority of which must 
be Independent Directors.\125\ In addition, the Board must be comprised 
initially of the following: The Chief Executive Officer, four Owner 
Directors,\126\ 10 Independent Directors and four Exchange Member 
Directors.\127\ The Owner Directors are subject to increase pursuant to 
Article III, Section 2(b) and 4(g), and Independent Directors and 
Exchange Member Directors are subject to increase pursuant to Article 
III, Section 2(b). Each Director will serve until his or her term 
expires as provided in Article III, Section 3. Furthermore, Section 
2(b) states that the Board may, by resolution, add or remove Director 
positions to the Board, provided that (i) the number of Director 
positions will not be fewer than seven nor more than 25; (ii) no 
removal of a Director position will have the effect of shortening the 
term of an incumbent Director and (iii) the Board at all times will 
include a directorship for the Chief Executive Officer, a majority of 
Independent Directors, at least twenty percent Exchange Member 
Directors, and a number of Owner Director positions that equals the 
number of Owner Directors that the Designating Owners are entitle to 
nominate and that the stockholders of the Exchange have elected.
---------------------------------------------------------------------------

    \125\ The term ``Independent Director'' is defined in Article I, 
paragraph (t) of the current Exchange Bylaws.
    \126\ The term ``Owner Director'' is defined in Article I, 
paragraph (w) of the current Exchange Bylaws.
    \127\ The term ``Exchange Member Director'' is defined in 
Article I, paragraph (p) of the current Exchange Bylaws.
---------------------------------------------------------------------------

    The Exchange proposes to revise these provisions to state that the 
Board would consist of four or more Directors, with the number thereof 
to be determined from time to time by the resolution of the Board, 
subject to the compositional requirements of the Board set forth in 
Article III, Section 2(b) of the revised Exchange Bylaws. At all times, 
the Board would consist of the Chief Executive Officer and sufficient 
numbers of Non-Industry \128\ (including Independent \129\), Industry 
\130\ and Member Representative Directors,\131\ as those terms are 
defined in BATS Exchanges' current bylaws, to satisfy the following 
composition requirements: (i) The number of Non-Industry Directors, 
including at least one Independent Director, shall equal or exceed the 
sum of the number of Industry Directors and Member Representative 
Directors elected pursuant to Article III, Section 4; and (ii) the 
number of Member Representative Directors shall be at least twenty 
percent of the Board.
---------------------------------------------------------------------------

    \128\ See Art. I(v) of the revised Exchange Bylaws. Because the 
Exchange proposes to introduce the new Non-Industry Director 
classification, the Exchange proposes to require that the Secretary 
collect information as is reasonably necessary to serve as a basis 
for determining the nominee's classification as a Non-Industry 
Director. See Art. III, Section 2(c) of the revised Exchange Bylaws.
    \129\ See Art. I(m) of the revised Exchange Bylaws.
    \130\ See Art. I(o) of the revised Exchange Bylaws.
    \131\ See Art. I(s) of the revised Exchange Bylaws.
---------------------------------------------------------------------------

    With the introduction of the terms Industry and Non-Industry 
Directors to the Exchange Bylaws, the Exchange proposes to add 
definitions of these terms to Article I. Specifically, an Industry 
Director would be defined in Article I(o) as a

    Director who (i) is or has served in the prior three years as an 
officer, director, or employee of a broker or dealer, excluding an 
outside director or a director not engaged in the day-to-day 
management of a broker or dealer; (ii) is an officer, director 
(excluding an outside director), or employee of an entity that owns 
more than ten percent of the equity of a broker or dealer, and the 
broker or dealer accounts for more than five percent of the gross 
revenues received by the consolidated entity; (iii) owns more than 
five percent of the equity securities of any broker or dealer, whose 
investments in brokers or dealers exceed ten percent of his or her 
net worth, or whose ownership interest otherwise permits him or her 
to be engaged in the day-to-day management of a broker or dealer; 
(iv) provides professional services to brokers or dealers, and such 
services constitute 20 percent or more of the professional revenues 
received by the Director or 20 percent or more of the gross revenues 
received by the Director's firm or partnership; (v) provides 
professional services to a director, officer, or employee of a 
broker, dealer, or corporation that owns 50 percent or more of the 
voting stock of a broker or dealer, and such services relate to the 
director's, officer's, or employee's professional capacity and 
constitute 20 percent or more of the professional revenues received 
by the Director or member or 20 percent or more of the gross 
revenues received by the Director's or member's firm or partnership; 
or (vi) has a consulting or employment relationship with or provides 
professional services to the

[[Page 76431]]

Company or any affiliate thereof or has had any such relationship or 
provided any such services at any time within the prior three years.

    Correspondingly, the term ``Non-Industry Director'' would be 
defined in Article I(v) as a Director who is (i) an Independent 
Director; or (ii) any other individual who would not be an Industry 
Director.
    With the proposed change in composition of the Board, the Exchange 
will now use the term ``Non-Industry Directors,'' as opposed to just 
``Independent Directors.'' These two terms are comparable, although not 
identical. Article I(t) of the current Exchange Bylaws generally 
defines the term ``Independent Director'' as a Director who has no 
material relationship with the Exchange, an Affiliate \132\ of the 
Exchange, a Member of the Exchange or an Affiliate of a Member of the 
Exchange, provided that an individual who otherwise qualifies as an 
Independent Director shall not be disqualified from serving in such 
capacity solely because such Director is a Director of the Exchange, 
DEI, DE Holdings or EDGX. In contrast, a Non-Industry Director is 
defined as an Independent Director or any other Director that does not 
satisfy one of the specific scenarios in the definition of Industry 
Director. Therefore, the Non-Industry Director may be somewhat broader 
than the definition of an Independent Director because it may include 
an individual with a material relationship with the Exchange, its 
Affiliate, or a Member of the Exchange or its Affiliate, provided that 
it does not satisfy the definition of an Industry Director.
---------------------------------------------------------------------------

    \132\ The term ``Affiliate'' is defined in Article I(b) of the 
current Exchange Bylaws.
---------------------------------------------------------------------------

    In addition, the Exchange proposes to eliminate the category of 
Owner Directors from its Board. An Owner Director is currently defined 
in Article I(w) as ``a Director nominated by a Designating Owner 
pursuant to Article III, Section 4(g) and elected by the stockholders 
of the Company.'' A ``Designating Owner,'' in turn, is defined in 
Article I(i) as ``a member of Direct Edge Holdings that holds (together 
with its Affiliates) at least a 15% Percentage Interest \133\ (as 
defined in the [the Fourth DE Holdings LLC Agreement]) in Direct Edge 
Holdings.'' DE Holdings will only have one LLC Member after the 
Combination. Accordingly, the Exchange proposes to delete the 
definitions of ``Owner Director'' and ``Designating Owner'' from 
Article I, as well as all references to and provisions related to Owner 
Directors throughout the Bylaws.\134\
---------------------------------------------------------------------------

    \133\ See Fourth DE Holdings LLC Agreement, Art. I.
    \134\ The following provisions in the current Exchange Bylaws 
related to Owner Directors will be deleted: Article III, Sections 
2(a) and (b), 4(a), 4(g), 6(a), 6(c) and 7(a); Article VI, Section 
2; and Article IX, Section 1.
---------------------------------------------------------------------------

    Furthermore, the Exchange proposes to replace the term ``Exchange 
Member Director'' with the term ``Member Representative Director,'' and 
replace the existing definition of ``Exchange Member Director'' with 
the definition of ``Member Representative Director,'' as set forth in 
the bylaws of the BATS Exchanges. Although worded differently, the 
definitions of ``Exchange Member Director'' and ``Member Representative 
Director'' are substantively similar. Specifically, an Exchange Member 
Director is currently defined as an officer, director, employee or 
agent of an Exchange Member, other than an Owner Exchange Member, who 
is elected as a Director in accordance with the Bylaws. The Exchange 
proposes to define ``Member Representative Director'' as ``a Director 
who has been appointed as such to the initial Board of Directors 
pursuant to Article III, Section 4(g) of these Bylaws, or elected by 
stockholders after having been nominated by the Member Nominating 
Committee or by an Exchange Member pursuant to these Bylaws and 
confirmed as the nominee of Exchange Members after majority vote of 
Exchange Members, if applicable. A Member Representative Director must 
be an officer, director, employee or agent of an Exchange Member that 
is not a Stockholder Exchange Member.'' \135\
---------------------------------------------------------------------------

    \135\ The Exchange also proposes to replace the term ``Owner 
Exchange Member'' with the new term ``Stockholder Exchange Member'' 
in Article I. The definitions of these two terms are identical.
---------------------------------------------------------------------------

    Second, the Exchange proposes to amend the manner in which the 
Board is divided into classes. Specifically, Section 3(b) currently 
states that ``The Board shall be divided into three (3) classes.'' The 
Exchange proposes to provide additional clarity, by revising this 
provision to states that ``Each of the Non-Industry and Industry 
Directors (excluding the Chief Executive Officer, but including Member 
Representative Directors) shall be divided into three (3) classes.'' In 
addition, the Exchange proposes to clarify in Section 3(b) that 
Directors--other than the Chief Executive Officer--will serve staggered 
three year terms.
    Third, the Exchange proposes to amend Section 5 of Article III 
regarding the Chairman of the Board to state that the Chief Executive 
Officer shall be the Chairman of the Board. Currently, the Chief 
Executive Officer may be, but is not required to be, the Chairman of 
the Board.
    Fourth, the Exchange proposes to revise the process for filling 
Board vacancies as set forth in Section 6 of Article III. Currently, 
under Sections 6(a) and (b), a majority of Directors then in office, 
though less than a quorum or a sole remaining Director, are required to 
elect the new Director that has been nominated by the Nominating and 
Governance Committee. The Exchange proposes to amend this provision to 
require the stockholder to elect the nominee. In addition, Section 
6(b), which addresses vacancies for Member Representative Directors, 
would be revised to permit the Member Nominating Committee to recommend 
an individual or list of individuals to the stockholders from which the 
stockholders shall elect the new Director, rather than nominating a 
person for the vacancies. In addition, the Exchange proposes to delete 
the provisos in Section 6(a) and (b) that state that any vacancy 
resulting from the removal from office by a vote of the stockholders 
for cause may be filled by a vote of the stockholders at the same 
meeting at which such removal occurs. Without these two provisos, the 
Director vacancies must be filled in accordance with the procedures set 
forth in Section 6(a) and (b). That is, the Nominating Committee must 
nominate, and the stockholders must elect, a person satisfying the 
classification (Industry, Non-Industry, or Independent Director), if 
applicable, for the directorship to fill such vacancy until the 
expiration of the remaining term or to fill such newly-created Director 
position until the expiration of such position's designated term. The 
revised Exchange Bylaws would not specifically address whether or not 
the removal and new election may occur in the same meeting. The 
Exchange believes that, with these proposed changes, the Exchange will 
continue to be so organized and have the capacity to be able to carry 
out the purposes of the Act and to comply and to enforce compliance by 
its Members and persons associated with its Members, with the 
provisions of the Act, the rules and regulations thereunder, and the 
Exchange Rules, as required by Section 6(b)(1) of the Act.\136\
---------------------------------------------------------------------------

    \136\ 15 U.S.C. 78f(b)(1).
---------------------------------------------------------------------------

    Fifth, the Exchange Bylaws currently state in Section 2(d) of 
Article III that a Director will no longer qualify to be a Director 
upon a determination by the Board (i) that the Director no longer 
satisfies the classification for which the

[[Page 76432]]

Director was elected; and (ii) that the Director's continued service 
would violate the compositional requirements of the Board set forth in 
Article III, Section 2(b). The Exchange proposes to move this provision 
to new Section 7(b) and to revise the language to clarify that, under 
these two scenarios, the Director will be removed immediately upon 
determination of the Board by a majority vote of the remaining 
Directors.
    Sixth, the Exchange proposes to amend Section 7(b) (to be 
renumbered Section 7(c)) to permit a Director to resign upon notice of 
resignation to the Chairman, the President or Secretary, rather than 
the Chairman, Chief Executive Officer or Secretary, as the Proposed 
Rule Change would require that the Chairman and Chief Executive Officer 
be the same person.
    Seventh, the Exchange proposes to amend Section 10(a) of Article 
III regarding special meetings to permit the President to call a 
special meeting. Under the current Bylaws, the Chairman and Chief 
Executive Officer are authorized to do so. However, with the revisions 
pursuant to this Proposed Rule Change, the Chairman and Chief Executive 
Officer will be the same person. To continue to ensure that at least 
two different persons may call a special meeting, the Exchange proposes 
to permit the President in addition to the Chairman to call such 
meetings. The Commission has previously found this consistent with the 
Act as it is part of the current bylaws of the BATS Exchanges. 
Furthermore, the Exchange proposes to add language to paragraph (b) of 
Section 10 to describe the process for providing notice of special 
meetings to each Director. Specifically, Section 10 would state that 
notice of any special meeting shall be given to each Director at his or 
her business address or such other address as he or she may have 
advised the Secretary to use for such purpose. If delivered, notice 
shall be deemed to be given when delivered to such address or to the 
Director to be notified. If mailed, such notice shall be deemed to be 
given five business days after deposit in the United States mail, 
postage prepaid, of a letter addressed to the appropriate location. 
Notice may also be given by telephone, electronic transmission or other 
means not specified in this section, and in each such case shall be 
deemed to be given when actually received by the Director to be 
notified.
    Eighth, current Section 12 of Article III defines a quorum for the 
transaction of business as a majority of the number of Directors then 
in office, but in no event less than 1/3 of the total number of 
Directors. The Exchange proposes to eliminate from the quorum 
calculation the minimum requirement of 1/3 of the total number of 
Directors.
    Ninth, the Exchange also proposes to add to Article III a new 
Section 13, entitled ``Presumption of Assent.'' It would state that a 
Director of the Exchange who is present at a duly convened meeting of 
the Board or of a committee of the Board at which action on any 
corporate matter is taken shall be conclusively presumed to have 
assented to the action taken unless his or her dissent or election to 
abstain shall be entered in the minutes of the meeting or unless he or 
she shall file his or her written dissent or election to abstain to 
such action with the person acting as the secretary of the meeting 
before the adjournment of the meeting or shall forward such dissent or 
election to abstain by registered or certified mail to the Secretary of 
the Exchange immediately after the adjournment of the meeting. Such 
right to dissent or abstain shall apply to a Director who voted in 
favor of such action.
    Tenth, the Exchange proposes to add to Article III a new Section 
17,\137\ which would state that the Board shall have the power to 
interpret the Exchange Bylaws and any interpretation made by it shall 
be final and conclusive.
---------------------------------------------------------------------------

    \137\ As a result, the Exchange is proposing corresponding 
amendments to renumber current Section 16 as Section 18, as 
described below.
---------------------------------------------------------------------------

    Finally, the Exchange proposes several amendments to current 
Section 16, entitled Conflicts of Interest; Contracts and Transactions 
Involving Directors, and to renumber it as Section 18. Section 16(a) 
currently states that, to the fullest extent permitted by law, a 
Director or a member of any committee may not participate in 
consideration or decision of any matter relating to a particular Member 
or Person if such Director or committee member has a material interest 
in, or a professional, business or personal relationship with, that 
Member or other Person, or if such participation shall create an 
appearance of impropriety. The Exchange proposes to add to this 
provision the statement that ``[i]n any such case, the Director or 
committee member shall recuse himself or herself or shall be 
disqualified. If a member of the Board or any committee is recused from 
consideration of a matter, any decision on the matter shall be by a 
vote of a majority of the remaining members of the Board or applicable 
committee.'' In addition, the Exchange proposes to delete the following 
statement from this paragraph: ``Exchange Member Directors shall not be 
deemed to be personally interested in the determination of matters that 
may affect the Exchange Members as a whole or certain groups of 
Exchange Members, and Exchange Member Directors shall not be prohibited 
from participating in such determinations in the normal course of 
conducting the Exchange's business.''
    In addition, paragraph (b) of this Section addresses Exchange 
contracts and transactions involving Directors and officers. 
Specifically, this paragraph currently states that:

    No contract or transaction between the [Exchange] and one or 
more of its Directors or officers, or between the [Exchange] and any 
other corporation, partnership, association, or other organization 
in which one or more of its Directors or officers are directors or 
officers, or have a financial interest, shall be void or voidable 
solely for this reason, or solely because the director or officer is 
present at or participates in the meeting of the Board or committee 
which authorizes the contracts or transaction, or solely because any 
such Director's or officer's votes are counted for such purpose, if 
(i) the material facts pertaining to such Director's or officer's 
relationship or interest and as to the contract or transactions are 
disclosed or are known to the Board or the committee, and the Board 
or committee in good faith authorizes the contract or transaction by 
the affirmative vote of a majority of the disinterested Directors, 
even though the disinterested Directors be less than a quorum; (ii) 
the material facts as to the Director's or officer's relationship or 
interest and as to the contract or transaction are disclosed or are 
known to the stockholders entitled to vote thereon, and the contract 
or transaction is specifically approved in good faith by vote of the 
stockholders; or (iii) the contract or transaction is fair as to the 
[Exchange] as of the time it is authorized, approved or ratified, by 
the Board, a committee or the stockholders.

    The Exchange proposes to delete the phrase ``or solely because the 
director or officer is present at or participates in the meeting of the 
Board or committee which authorizes the contracts or transaction, or 
solely because any such Director's or officer's votes are counted for 
such purpose,'' as well as clause (iii). In addition, the Exchange 
proposes to amend clause (ii) to state ``the material facts are 
disclosed or become known to the Board or committee after the contract 
or transaction is entered into, and the Board or committee in good 
faith ratifies the contract or transaction by the affirmative vote of a 
majority of disinterested Directors, even though the disinterested 
Directors be less than a quorum.'' With these changes, paragraph (b) 
will be consistent with the bylaws of the BATS Exchanges.
    The changes to these provisions of the Exchange Bylaws relating to 
the Board of Directors will permit the Exchange to continue to be so 
organized and have

[[Page 76433]]

the capacity to be able to carry out the purpose of the Act and to 
comply and to enforce compliance by its Members and persons associated 
with its Members, with the provisions of the Act, the rules and 
regulations thereunder, and the Exchange Rules, as required by Section 
6(b)(1) of the Act.\138\
---------------------------------------------------------------------------

    \138\ 15 U.S.C. 78f(b)(1).
---------------------------------------------------------------------------

(II) Stockholders
    The Exchange proposes several minor changes to Article IV of the 
Exchange Bylaws, which describes matters related to the stockholders of 
the Exchange.
     The Exchange proposes to amend Section 2 to permit the 
Chairman, Board or the President to call a special meeting of the 
stockholders, rather than the Chairman, Board or Chief Executive 
Officer.
     The Exchange proposes to amend Section 3 to require the 
list of the stockholders to be open to examination by any stockholder 
at a place within the city where the meeting is to be held, or at the 
place where the meeting is to be held, which place shall be specified 
in the notice of the meeting, or, if not so specified, at the place 
where the meeting is to be held, rather than at the principal place of 
business of the Exchange.
     The Exchange proposes to add Section 7, which states that 
the stockholder may not transfer or assign, in whole or in part, its 
ownership interest(s) in the Exchange.
(III) Committees of the Board
    The Exchange proposes the following amendments to Article V of the 
Exchange Bylaws, which sets forth various requirements regarding 
committees of the Board.
     Section 1 would no longer require the formation of an 
Executive Committee, although such a Committee would be permissible.
     The Exchange proposes to eliminate the requirement that 
Board committees other than those listed in this section be formed 
``for a specific and limited purpose'' as set forth in Section 1.
     The Exchange proposes to amend the process for the 
appointment and removal of committee members, as well as the committee 
composition, as set forth in Section 2(a). The existing Bylaws require 
the Board, after consultation with the Chairman, to appoint committee 
members, and the Board to remove committee members. The Exchange 
proposes to require the Chairman, with the approval of the Board, to 
appoint committee members, and to permit the Chairman, with the 
approval of the Board, to remove committee members.\139\ 
Correspondingly, the Chairman, rather than the Board, would be 
responsible for determining whether committees meet the applicable 
compositional requirements. In addition, under Article V, Section 2(a) 
of the current Exchange Bylaws, each committee must be comprised of at 
least three members of the Board, with a majority of Independent 
Directors (although Article V, Section 5(a) and (c) of the current 
Exchange Bylaws additionally require that the Regulatory Oversight 
Committee and Compensation Committee consist solely of Independent 
Directors). The Exchange proposes to require that each committee be 
comprised of at least three people and may include persons who are not 
members of the Board. Other proposed provisions of Article V would 
provide additional requirements for the composition of the various 
committees. For example, proposed Article V, Section 6(a) would require 
each voting member of the Compensation Committee to be a Non-Industry 
Director, and proposed Article V, Section 6(c) would require that each 
member of the Regulatory Oversight Committee be a Non-Industry 
Director. Furthermore, the revised Bylaws would clarify that committee 
members who are not also Board members shall only participate in 
committee actions to the extent permitted by law. Finally, the Exchange 
proposes to eliminate the statement that ``[t]he Board, after 
consultation with the Chairman, may designate one or more Directors as 
alternate members of any committee who may replace any absent or 
disqualified member at any meeting of the committee. Except as 
otherwise set forth in these Bylaws, the Board, after consultation with 
the Chairman, may have non-voting observers attend committee 
meetings.''
---------------------------------------------------------------------------

    \139\ Note that the Exchange also proposes to revise Section 
2(a) of the Exchange Bylaws to state that the Chairman, with the 
approval of the Board, shall appoint the chair of each committee. 
This change is discussed below in Section 8(b)(ii), as a new change 
to the Exchange Bylaws as well as to the bylaws of the BATS 
Exchanges.
---------------------------------------------------------------------------

     The Exchange proposes to add as new Section 2(b) a 
requirement that, upon request of the Secretary, each prospective 
committee member who is not a Director provide the Secretary such 
information as is reasonably necessary to serve as a basis for 
determining the prospective member's classification as an Industry, 
Non-Industry or Independent member. In addition, the Secretary would be 
required to certify to the Board each prospective committee member's 
classification. Such committee members must update the information 
submitted under new Section 2(b) at least annually and upon request of 
the Secretary, and shall report immediately to the Secretary any change 
in such information.\140\
---------------------------------------------------------------------------

    \140\ Note that comparable language to this provision is 
currently set forth in Article VI, Section 3. The Exchange proposes 
to delete the language in Article VI and move it to this Article.
---------------------------------------------------------------------------

     With the introduction of the terms ``Industry member'', 
``Non-Industry member'', ``Independent member'' and ``Member 
Representative member'' with respect to committees, the Exchange 
proposes to add definitions of each of these terms to Article I. 
Specifically, the Exchange proposes to define an Independent member as 
``a member of any committee who has no material relationship with the 
Company or any affiliate of the Company, or any Exchange Member or any 
affiliate of any such Exchange Member, other than as a committee 
member. The term Independent member may, but is not required to, refer 
to an Independent Director who serves on a committee.'' In addition, 
the Exchange proposes to define an Industry member in Article I(p) as 
``a member of any committee or hearing panel who (i) is or has served 
in the prior three years as an officer, director, or employee of a 
broker or dealer, excluding an outside director or a director not 
engaged in the day-to-day management of a broker or dealer; (ii) is an 
officer, director (excluding an outside director), or employee of an 
entity that owns more than ten percent of the equity of a broker or 
dealer, and the broker or dealer accounts for more than five percent of 
the gross revenues received by the consolidated entity; (iii) owns more 
than five percent of the equity securities of any broker or dealer, 
whose investments in brokers or dealers exceed ten percent of his or 
her net worth, or whose ownership interest otherwise permits him or her 
to be engaged in the day-to-day management of a broker or dealer; (iv) 
provides professional services to brokers or dealers, and such services 
constitute 20 percent or more of the professional revenues received by 
the Director or 20 percent or more of the gross revenues received by 
the Director's firm or partnership; (v) provides professional services 
to a director, officer, or employee of a broker, dealer, or corporation 
that owns 50 percent or more of the voting stock of a broker or dealer, 
and such services relate to the director's, officer's, or employee's 
professional capacity and constitute 20 percent or more of the 
professional

[[Page 76434]]

revenues received by the Director or member or 20 percent or more of 
the gross revenues received by the Director's or member's firm or 
partnership; or (vi) has a consulting or employment relationship with 
or provides professional services to the Company or any affiliate 
thereof or has had any such relationship or provided any such services 
at any time within the prior three years.''
     In addition, the Exchange proposes to add the following 
definition of Non-Industry member as Article I(w): ``a member of any 
committee who is (i) an Independent member; or (ii) any other 
individual who would not be an Industry member.'' Finally, the Exchange 
proposes to define a ``Member Representative member'' in Article I(t) 
as ``a member of any committee or hearing panel who is an officer, 
director, employee or agent of an Exchange Member that is not a 
Stockholder Exchange Member.''
     The Exchange proposes to revise current Article V, Section 
2(c) (renumbered as Section 2(d)) to state that the Chairman, with 
approval of the Board, instead of the Board, after consultation with 
the Chairman, will fill committee vacancies.
     The Exchange proposes to add as Article V, Section 3 a 
provision stating that, to the extent provided in the resolution of the 
Board of Directors of the Exchange, any committee that consists solely 
of one or more Directors shall have and may exercise all the powers and 
authority of the Board in the management of the business and affairs of 
the Exchange.
     The Exchange proposes to amend the provisions regarding 
the appointment, composition and responsibilities of the Compensation 
Committee in Section 5(a) (to be renumbered as Section 6(a)). 
Specifically, the Chairman, with the approval of the Board, would 
appoint a Compensation Committee, rather than the Board, after 
consultation with the Chairman. In addition, each member of the 
Compensation Committee would be a Non-Industry Director, rather than an 
Independent Director. Moreover, the Exchange would eliminate (1) the 
requirement that the committee have three members; (2) the requirement 
that the Compensation Committee assist the Board in fulfilling its 
responsibilities to ensure the structures of compensation systems of 
the Exchange do not interfere with the Exchange's ability to fulfill 
its responsibilities as an SRO; and (3) the statement that the Board, 
after consultation with the Chairman, may designate non-voting 
observers who shall be permitted to attend and participate in committee 
meetings.
     The Exchange proposes to amend the provisions regarding 
the appointment, composition and responsibilities of the Audit 
Committee in Section 5(b) (to be renumbered as Section 6(b)). 
Specifically, the Chairman, with the approval of the Board, would 
appoint the Audit Committee, rather than the Board, after consultation 
with the Chairman. In addition, a majority of the members of the Audit 
Committee would be Non-Industry Directors, rather than Independent 
Directors. A Non-Industry Director, rather than an Independent 
Director, would serve as the Chairman of the Audit Committee. Moreover, 
the Exchange proposes to eliminate the following Audit Committee 
responsibilities: (1) assist the Board in fulfilling its 
responsibilities to oversee the financial soundness and compliance 
resources and the effectiveness of financial and compliance control 
processes related to the operation of the Exchange; (2) take 
appropriate actions to oversee overall corporate policy for quality 
activities and reporting of a SRO, sound business risk management 
practices and ethical behavior; (3) provide oversight over the 
technology and information integrity established by management and the 
Board; (4) selecting and replacing and determining the compensation of 
the head of the Internal Audit Department (or if such position is 
outsourced, of the third party service provider) in consultation with 
management; and (5) overseeing enterprise risk and technology 
operations, including security and business continuity measures. The 
Exchange also proposes to add the parenthetical ``(or nominate the 
independent auditors to be proposed for ratification by stockholders)'' 
to the function of selecting, evaluating, and where appropriate, 
replacing the Company's independent auditor. The Exchange also would 
clarify that the Audit Committee had ``exclusive'' authority to perform 
certain functions, including hiring the Exchange's Internal Audit 
Department, determining the compensation of the head of the Internal 
Audit Department and determining the budget for the Internal Audit 
Department. Finally, the Exchange would eliminate the statement in this 
Section that nothing in this Section shall prohibit or be deemed to be 
in conflict with the ability of the Exchange to retain a third party to 
perform all or a portion of its audit function, provided that the 
Exchange shall supervise and have primary responsibility for any action 
undertaken by a third party auditor retained to perform such audit 
functions.
     The Exchange proposes to amend the provisions regarding 
the appointment and composition of the Regulatory Oversight Committee 
in Section 5(c) (to be renumbered as Section 6(c)). Specifically, the 
Chairman, with the approval of the Board, would appoint the Regulatory 
Oversight Committee, rather than the Board, after consultation with the 
Chairman. In addition, each member of the Regulatory Oversight 
Committee would be a Non-Industry Director, rather than an Independent 
Director.
     The Exchange proposes to amend the provisions regarding 
the appointment and composition of the Appeals Committee in Section 
5(d) (to be renumbered as Section 6(d)). Specifically, the Chairman, 
with the approval of the Board, would appoint the Appeals Committee, 
rather than the Board, after consultation with the Chairman. In 
addition, the Appeals Committee would no longer consist of two 
Independent Directors and one Exchange Member Director. Instead, the 
Appeals Committee would consist of one Independent Director, one 
Industry Director, and one Member Representative Director. If the 
Independent Director recuses himself or herself from an appeal, due to 
a conflict of interest or otherwise, such Independent Director may be 
replaced by a Non-Industry Director for purposes of the applicable 
appeal if there is no other Independent Director able to serve as a 
replacement.
     The Exchange proposes to amend Section 5(e) (to be 
renumbered as Section 6(e)) regarding the Executive Committee in two 
ways. Specifically, the Chairman, with the approval of the Board, would 
appoint the Executive Committee, rather than the Board, after 
consultation with the Chairman. In addition, the Exchange would add the 
requirement that the number of Non-Industry Directors on the Executive 
Committee equal or exceed the number of Industry Directors on the 
Executive Committee.
     The Exchange proposes to add Section 6(f), stating that 
the Chairman, with the approval of the Board, may appoint a Finance 
Committee. If appointed, the Finance Committee will advise the Board 
with respect to the oversight of the financial operations and 
conditions of the Exchange, including recommendations for the 
Exchange's annual operating and capital budgets.
    The changes to these provisions of the Exchange Bylaws relating to 
committees of the Board will permit the Exchange

[[Page 76435]]

to continue to be so organized and have the capacity to be able to 
carry out the purpose of the Act and to comply and to enforce 
compliance by its Members and persons associated with its Members, with 
the provisions of the Act, the rules and regulations thereunder, and 
the Exchange Rules, as required by Section 6(b)(1) of the Act.\141\
---------------------------------------------------------------------------

    \141\ 15 U.S.C. 78f(b)(1).
---------------------------------------------------------------------------

(IV) Nominating Committees
    The Exchange also proposes to amend Article VI regarding the 
Nominating Committees of the Exchange.\142\ To conform the requirements 
regarding the Exchange's Nominating and Governance Committee with that 
of the BATS Exchanges, the Exchange proposes to rename the Nominating 
and Governance Committee the ``Nominating Committee.'' \143\ In 
addition, the Exchange would change the composition of this Committee 
from a committee of three Independent Directors, to a committee in 
which the number of Non-Industry members equals or exceeds the number 
of Industry members. The Exchange also proposes to streamline the 
responsibilities of this Committee by eliminating the following 
responsibilities from the Committee's purview: (1) Developing and 
recommending governance policies to the Board; (2) nominating 
chairpersons to serve on committees of the Board; (3) overseeing an 
annual self-evaluation of the independent Directors and Board 
committees; (4) overseeing the implementation and effectiveness of the 
Bylaws, committee charters, policies and other governance documents as 
needed; (5) reviewing and recommending best practices in corporate 
governance; and (6) overseeing an orientation for new Directors. 
Finally, the Exchange proposes to add to Section 2 that a Nominating 
Committee member may simultaneously serve on the Nominating Committee 
and the Board, unless the Nominating Committee is nominating Director 
candidates for the Director's class. Notwithstanding the prior 
sentence, a Director may serve on the Nominating Committee in his or 
her final year of service on the Board. Following that year, that 
member may not stand for election to the Board until such time as he or 
she is no longer a member of the Nominating Committee.
---------------------------------------------------------------------------

    \142\ To conform the terms of Section 1 of Article VI with the 
bylaws of the BATS Exchanges, the Exchange also proposes to add the 
following: ``the stockholder shall appoint the initial Nominating 
Committee and Member Nominating Committee consistent with the 
compositional requirements of Article VI. In each subsequent year, 
each of the Nominating Committee and Member Nominating Committee 
shall nominate candidates to serve on the succeeding year's 
Nominating Committee and member Nominating Committee, as applicable, 
such candidates to be voted on by stockholders at the annual meeting 
of stockholders.''
    \143\ The Exchange proposes to make this change to the 
definition of ``Nominating and Governance Committee'' in Article 
I(v) (to be renumbered Article I(u)) and throughout the Bylaws).
---------------------------------------------------------------------------

    The Exchange also proposes to amend the description of the Exchange 
Member Nominating Committee, as set forth in Section 3 of Article VI. 
First, the Exchange proposes to change the name of the ``Exchange 
Member Nominating Committee'' to ``Member Nominating Committee.'' \144\ 
Second, the Member Nominating Committee will continue to nominate 
candidates for Exchange Member Directors (to be renamed the ``Member 
Representative Director'') position on the Board that is to be elected 
by Exchange Member or stockholders, but will no longer be tasked with 
the obligation to nominate candidates for ``all other vacant or new 
Exchange Member Director positions on the Board.'' Third, the Exchange 
would amend the description of the composition of this Committee by 
changing the committee member qualification requirement from ``an 
Exchange Member Director, except that such committee member is not 
required to be a Director'' to ``a Member Representative member.'' 
Fourth, the Exchange proposes to delete the provisions regarding the 
process for confirming whether a prospective committee member satisfies 
such member's classification requirements, and move such provisions to 
Article V, Section 2(b).
---------------------------------------------------------------------------

    \144\ The Exchange proposes to make this change to the 
definition of ``Exchange Member Nominating Committee'' in Article 
I(q) (to be renumbered Article I(r)) as well as throughout the 
Bylaws where the term ``Exchange Member Nominating Committee'' is 
used.
---------------------------------------------------------------------------

(V) Officers, Agents and Employees
    The Exchange proposes the following amendments to Article VII of 
the Exchange Bylaws, which sets forth various requirements regarding 
the officers, agents and employees of the Exchange.
     The Exchange proposes to revise Section 1 to require that 
the Exchange have a President, Secretary and Treasurer in addition to 
the currently required Chief Executive Officer and Chief Regulatory 
Officer. In addition, the Exchange proposes to prohibit the same person 
from holding the offices of both the President and the Secretary. 
Currently, this prohibition applies to the offices of the Chief 
Executive Officer and the Secretary.
     The Exchange proposes to amend Section 3(a) of Article VII 
to permit an officer to provide his or her resignation to the President 
in addition to the Chairman, Chief Executive Officer or the Secretary. 
The Exchange also proposes the corresponding amendment to Section 3(a) 
to provide that an officer could no longer provide such resignation to 
a designee of the Board, if no such officers are then appointed. In 
addition, the Exchange proposes to add Section 3(c), which would state 
that vacancies in any office of the Exchange may be filled for the 
unexpired term by the Board.
     The Exchange proposes to amend Section 4 of Article VII 
regarding officer compensation to reflect the proposed change to 
Article V, Section 6(c) of the Exchange Bylaws regarding the 
compensation of the Chief Regulatory Officer. Specifically, the 
Exchange proposes to add the phrase ``Except as otherwise provided in 
Article V, Section 6(c) of these Bylaws,'' to the statement that the 
salaries of all other officers and agents of the Company shall be fixed 
by the Chief Executive Officer, in consultation with the Compensation 
Committee.
     The Exchange proposes to amend Section 6 of Article VII 
regarding the Chief Executive Officer to state that the Chief Executive 
Officer shall be the Chairman of the Board and ``shall preside at all 
meetings of the Board at which the Chief Executive Officer is present; 
provided, however, that he or she shall not participate in executive 
sessions'' of the Board.
     Section 7 of Article VII (to be renumbered Section 9) 
regarding the Chief Regulatory Officer would be revised to require the 
Chief Regulatory Officer to be an officer of the Exchange with the 
position of Executive Vice President or Senior Vice President.
     Section 8 of Article VII (to be renumbered Section 10) 
regarding the Secretary would be revised to state that the President, 
in addition to the Board and Chief Executive Officer, may assign duties 
to the Secretary. The President's ability to do so comports with the 
responsibilities as set forth in new proposed Section 7, as discussed 
below.
     The Exchange proposes to add new Sections 7, 8, 11, 12 and 
13 to Article VII of the Exchange Bylaws describing the 
responsibilities of the President, Vice President, Assistant Secretary, 
Treasurer and Assistant Treasurer, respectively. Specifically, Section 
7 would state the following: ``The President shall, in the absence of 
the Chairman and Chief Executive Officer, preside at all meetings of 
the Board at which the President is present. The

[[Page 76436]]

President shall have general supervision over the operations of the 
Company. The President shall have all powers and duties usually 
incident to the office of the President, except as specifically limited 
by a resolution of the Board. The President shall exercise such other 
powers and perform such other duties as may be assigned to the 
President from time to time by the Board.''
     In addition, Section 8 of Article VII regarding Vice 
Presidents would read as follows:

    The Board shall appoint one or more Vice Presidents. In the 
absence or disability of the President or if the office of President 
becomes vacant, the Vice Presidents in the order determined by the 
Board, or if no such determination has been made, in the order of 
their seniority, shall perform the duties and exercise the powers of 
the President, subject to the right of the Board at any time to 
extend or restrict such powers and duties or to assign them to 
others. Any Vice President may have such additional designations in 
such Vice President's title as the Board may determine. The Vice 
Presidents shall generally assist the President in such manner as 
the President shall direct. Each Vice President shall exercise such 
other powers and perform such other duties as may be assigned to 
such Vice President from time to time by the Board, the Chief 
Executive Officer or the President. The term ``Vice President'' used 
in this Section shall include the positions of Executive Vice 
President, Senior Vice President, and Vice President.

     Furthermore, new Section 11 of Article VII would describe 
the responsibilities of an Assistant Secretary as follows: ``In the 
absence of the Secretary or in the event of the Secretary's inability 
or refusal to act, any Assistant Secretary, approved by the Board, 
shall exercise all powers and perform all duties of the Secretary. An 
Assistant Secretary shall also exercise such other powers and perform 
such other duties as may be assigned to such Assistant Secretary from 
time to time by the Board or the Secretary.''
     In addition, Section 12 of Article VII, regarding 
Treasurers, would state:
    The Treasurer shall have general supervision over the care and 
custody of the funds and over the receipts and disbursements of the 
Company and shall cause the funds of the Company to be deposited in the 
name of the Company in such banks or other depositories as the Board 
may designate. The Treasurer shall have supervision over the care and 
safekeeping of the securities of the Company. The Treasurer shall have 
all powers and duties usually incident to the office of Treasurer 
except as specifically limited by a resolution of the Board. The 
Treasurer shall exercise such other powers and perform such other 
duties as may be assigned to the Treasurer from time to time by the 
Board, the Chief Executive Officer or the President.
    Finally, new Section 13 of Article VII would describe the role of 
the Assistant Treasurer. Specifically, it would state that ``In the 
absence of the Treasurer or in the event of the Treasurer's inability 
or refusal to act, any Assistant Treasurer, approved by the Board, 
shall exercise all powers and perform all duties of the Treasurer. An 
Assistant Treasurer shall also exercise such other powers and perform 
such other duties as may be assigned to such Assistant Treasurer from 
time to time by the Board or the Treasurer.''
(VI) Indemnification
    The Exchange also proposes to make certain amendments to the 
indemnification provisions set forth in Section 1 of Article VIII of 
the Exchange Bylaws, including the following:
     The Exchange proposes to revise paragraph (a) (to be 
renumbered (b)). First, this paragraph would state that the Exchange 
shall advance to any person who was or is a party or is threatened to 
be made a party to any threatened, pending or completed proceeding of 
any kind by reason of the fact that he is or was a Director or 
executive officer of the Exchange or is or was serving at the request 
of the Exchange as a Director or executive officer of another entity, 
prior to the final disposition of such proceeding, all expenses 
incurred by such person in such proceeding upon receipt of such 
person's undertaking to repay amounts if it should be determined 
ultimately that such person is not entitled to be indemnified. The 
Exchange would add a second paragraph to this renumbered paragraph (b) 
stating that in general no advance shall be made by the Exchange to an 
executive officer of the Exchange (except by reason of the fact that 
such executive officer is or was a Director of the Exchange in which 
event this paragraph shall not apply) in any proceeding of any kind if 
a determination is reasonably and promptly made (i) by the Board of 
Directors by a majority vote of a quorum of directors who were not 
parties to the proceeding, or (ii) if such quorum is not obtainable, 
or, even if obtainable, a quorum of disinterested Directors so directs, 
by independent legal counsel in a written opinion, that the facts 
demonstrate clearly and convincingly that such person acted in bad 
faith or in a manner that such person did not believe to be in or not 
opposed to the best interests of the Exchange.
     The Exchange proposes to delete paragraph (c) and replace 
it in its entirety. Paragraph (c) currently states that, if a claim for 
indemnification (following the final disposition of such proceeding) or 
advancement of expenses under Article VIII is not paid in full within 
thirty days after a written claim by the applicable person has been 
received by the Exchange, such person may file suit to recover the 
unpaid amount and, if successful shall be entitled to be paid the 
expense of prosecuting such claim to the fullest extent permitted by 
law. In any such action the Exchange shall have the burden of proving 
that such person is not entitled to the indemnification or advancement 
of expenses under applicable law. The revised paragraph (c) would state 
that any right to indemnification or advances granted by Article VIII 
is enforceable by or on behalf of the person holding such right if (i) 
the claim for indemnification or advances is denied, in whole or in 
part, or (ii) no disposition of such claim is made within ninety (90) 
days of request therefor. The claimant, if successful in whole or in 
part, shall also be entitled to be paid expenses relating to 
prosecuting his claim.
     The Exchange proposes to revise paragraph (f) (to be 
renumbered paragraph (e)) to clarify that the rights conferred on any 
person by Article VIII continue as to a person who has ceased to be a 
Director or executive officer of the Exchange.
     The Exchange proposes to amend paragraph (k) (to be 
renumbered paragraph (i)) by adding two new paragraphs. The first new 
paragraph states that the term ``proceeding'' shall be broadly 
construed. The second new paragraph provides that references to a 
``director,'' ``officer,'' ``employee,'' or ``agent'' of the Exchange 
shall include, without limitation, situations where such person is 
serving at the request of the Exchange as a director, officer, 
employee, trustee or agent of another entity.
     The Exchange also proposes to make certain additional 
amendments to Article VIII of the Exchange Bylaws that are not material 
and will not impair the ability of (1) the Exchange to carry out its 
functions and responsibilities under the Act and the rules and 
regulations promulgated thereunder or (2) the Commission to enforce the 
Act and the rules and regulations thereunder.
(VII) Miscellaneous Provisions
    The Exchange proposes to make the following amendments to Article 
XI of the Exchange Bylaws:
     Revising the language of the following sentence in Section 
3 of Article XI: ``All books and records of the

[[Page 76437]]

[Exchange] reflecting confidential information pertaining to the self-
regulatory function of the [Exchange] (including disciplinary matters, 
trading data, trading practices, and audit information) and the 
information contained in those books and records shall be retained in 
confidence by the [Exchange] and the Directors, officers, employees, 
hearing officers, other agents and advisors of the [Exchange], shall 
not be used by the [Exchange] for any non-regulatory purposes and shall 
not be made available to any Person (including any [Member]), other 
than to personnel of the Commission, and those Directors, officers, 
employees, hearing officers, other agents and advisors of the 
[Exchange] to the extent necessary or appropriate to discharge properly 
the self-regulatory responsibilities of the [Exchange].'' Specifically, 
the Exchange proposes to (i) delete the phrase ``and the information 
contained in those books and records''; (ii) replace the phrase ``the 
Directors, officers, employees, hearing officers, other agents and 
advisors'' of the Exchange with the more general term ``personnel''; 
(iii) add the following to the list of persons who may receive 
confidential information to the extent necessary or appropriate to 
properly discharge the self-regulatory responsibilities of the 
Exchange: Members of committees of the Board, members of the Board, 
hearing officers and other agents of the Exchange.
     Amending Section 6(a) of Article XI (Execution of 
Instruments, Contracts, etc.) to eliminate the statement that the Chief 
Executive Officer, the Chief Regulatory Officer, the Secretary or such 
other officer or officers or person or persons as the Chief Executive 
Officer, the Chief Regulatory Officer, or the Secretary may from time 
to time designate may sign checks, drafts, bills of exchange, notes or 
other obligations or orders for the payment of money, and to eliminate 
the defined term ``Authorized Officers.'' Correspondingly, any 
``officer, employee or agent,'' instead of an Authorized Officer, would 
be authorized, in the name of and on behalf of the Exchange, to enter 
into or execute and deliver deeds, bonds, mortgages, contracts and 
other obligations or instruments, and such authority may be general or 
confined to specific instances.
     Amending Section 6(b) of Article XI to permit any officer 
of the Exchange, or, to the extent designated for such purposes from 
time to time by the Board, an employee or agent of the Exchange, rather 
than an Authorized Officer, to execute all applications, written 
instruments and papers required by any department of the United States 
government or by any state, county, municipal or other governmental 
authority in the name of the Exchange. Such designation may contain the 
power to substitute, in the discretion of the person named, one or more 
persons.
     Deleting Section 8 of Article XI regarding how notices 
contemplated by the Exchange Bylaws may be given.\145\
---------------------------------------------------------------------------

    \145\ Comparable language has been moved to Article III, Section 
10.
---------------------------------------------------------------------------

     Deleting Section 10 of Article XI regarding stock 
certificates and uncertificated shares.
(VIII) Additional Amendments
    In addition to the definitional changes discussed above, the 
Exchange proposes to make the following changes to Article I of the 
Exchange Bylaws regarding definitions.\146\
---------------------------------------------------------------------------

    \146\ The Exchange also proposes to make changes to other 
provisions of the Bylaws that reflect the changes made to these 
definitions.
---------------------------------------------------------------------------

     Amend the definition of ``Act'' by deleting the 
parenthetical ``and in effect from time to time and any successor 
statute'' to conform to the BATS Exchanges' definition.
     Replace the Exchange's current definition of ``Affiliate'' 
with the BATS Exchanges' definition. The Exchange currently defines an 
``Affiliate'' as ``with respect to any Person, any other person 
directly or indirectly through one or more intermediaries Controlling, 
Controlled by, or under direct or indirect common Control with, such 
Person. `Affiliated' shall have the correlative meaning.'' 
Correspondingly, the Exchange currently defines ``Control'' to mean 
``the possession, directly or indirectly, of the power to direct or 
cause the direction of the management or policies of a Person, whether 
through the ownership of voting securities or general partnership or 
managing member interests, by contract or otherwise. `Controlling' and 
`Controlled' shall have correlative meanings.'' The Exchange would 
eliminate both of these definitions, and adopt the following definition 
of ``affiliate'': ``a person that directly, or indirectly through one 
or more intermediaries, controls or is controlled by, or is under 
common control with, the person specified.''
     Amend the definition of ``Board'' to include ``Board of 
Directors'' as a defined term.
     Delete the definition of ``Business Day,'' and add the 
definition of ``day''. ``Day'' would be defined as a ``calendar day.''
     Define a ``broker'' as having the same meaning as in 
Section 3(a)(4) of the Act.
     Delete the definition of ``Chairman'' as it is defined in 
Article III, Section 5 of the Bylaws.
     Delete the definition of ``Control.''
     Define a ``dealer'' as having the same meaning as in 
Section 3(a)(5) of the Act.\147\
---------------------------------------------------------------------------

    \147\ 15 U.S.C. 78c(a)(5).
---------------------------------------------------------------------------

     Delete the definition of ``DGCL'' as the term will not be 
used in the revised Exchange Bylaws.
     Delete the definitions of ``Direct Edge Holdings,'' 
``Direct Edge'' and ``Holdings Operating Agreement.''
     Revise the definition of an ``Exchange Member'' to replace 
the reference to a broker or dealer that has been admitted to 
membership in the ``Exchange'' with the more general phrase ``national 
securities exchange operated by the [Exchange].''
     Replace the term ``Exchange Member Representative'' with 
the term ``Executive Representative.'' In addition, the Exchange 
proposes to clarify within the definition the means by which the 
Executive Representative may give notice to the Secretary. 
Specifically, the amendment would provide that notice may be given 
``via electronic process or such other process as the [Exchange] may 
prescribe.''
     Revise the proviso in the definition of ``Independent 
Director,'' which currently states that ``an individual who otherwise 
qualifies as an Independent Director shall not be disqualified from 
serving in such capacity solely because such Director is a Director of 
the Company, Direct Edge, Direct Edge Holdings or EDGX Exchange, Inc.'' 
The Exchange proposes to replace the phrase ``Direct Edge, Direct Edge 
Holdings or EDGX Exchange, Inc.'' with the phrase ``or its 
stockholder.''
     Replace the current definition of ``List of Candidates'' 
with the version of the definition employed by the BATS Exchanges. 
Specifically, the Exchange proposes to delete its existing definition, 
which states that the List of Candidates ``shall have the meaning set 
forth in Article III, Section 4(e).'' In its place, the Exchange would 
define a List of Candidates as ``the list of nominees for Member 
Representative Director positions as nominated by the Member Nominating 
Committee and amended by petitions filed by Exchange Members. The List 
of Candidates is submitted to Exchange Members for the final selection 
of nominees to be elected by stockholders to serve as Member 
Representative Directors.''
     Revise the definition of ``Person.'' The Exchange 
currently defines a ``Person'' as ``any individual, partnership, joint 
stock company,

[[Page 76438]]

corporation, entity, association, trust, limited liability company, 
joint venture, unincorporated organization, and any government, 
governmental department or agency or political subdivision of any 
government.'' The new definition would define a ``person'' as ``a 
natural person, partnership, corporation, limited liability company, 
entity, government, or political subdivision, agency or instrumentality 
of a government.''
     Delete the specific reference to branch managers from the 
definition of ``person associated with an Exchange Member.''
     Delete the definition of ``Petition Candidates.''
     Delete the definition of ``Petition Deadline'' and replace 
the term ``Petition Date'' with the term ``Record Date.'' The Exchange 
would continue to define the ``Record Date'' as ``a date at least 
thirty-five (35) days before the date announced as the date for the 
annual meeting of stockholders.'' In addition, however, the Exchange 
proposes to clarify that the Record Date is ``set as the last date on 
which Exchange Members may petition to add to the List of Candidates 
and used to determine whether Exchange Members are entitled to vote on 
the final List of Candidates.''
     Amend the definition of ``Rules'' by deleting the 
parenthetical ``with respect to the company.''
     Delete the definition of ``SRO.'' \148\
---------------------------------------------------------------------------

    \148\ As discussed above, the Exchange also proposes to change 
the name of the ``Exchange Member Nominating Committee'' to ``Member 
Nominating Committee,'' and move the definition from Art. I(q) to 
I(r).
---------------------------------------------------------------------------

     Corresponding technical, non-substantive changes to 
conform the paragraph letters for defined terms.
    The Exchange notes that it is not proposing to change the statement 
in the definition of ``stockholder'' that identifies DEI as the sole 
stockholder of the Exchange.\149\
---------------------------------------------------------------------------

    \149\ See Exchange Bylaws, Art. I(hh) (to be renumbered Article 
I(cc)).
---------------------------------------------------------------------------

(ii) Changes to Conform to the BATS Exchanges' Proposed Changes to the 
Existing Bylaws in Connection With the Combination
    In addition to the changes discussed above, the Exchange proposes 
to make the following amendments to the Exchange Bylaws, which are 
consistent with the changes proposed to be made by the BATS Exchanges 
in connection with the Combination:
     Adding new Section 2(b) and amending Section 3(b) of 
Article III of the Exchange Bylaws to clarify that the Chief Executive 
Officer of the Exchange is considered to be an Industry Director, but 
is excluded from being designated as a member of one of the three 
classes of directors for purposes of the Board's staggered three-year 
terms. The Exchange understands that the BATS Exchanges have proposed 
this amendment to clarify, rather than change, their current practice. 
The revised Exchange Bylaws require that the Board of Directors be 
composed of one Director who is the Chief Executive Officer of the 
Exchange, and a sufficient number of Non-Industry Directors (including 
Independent Directors), Industry Directors and Member Representative 
Directors such that (i) the number of Non-Industry Directors, including 
at least one Independent Director, equals or exceeds the sum of the 
number of Industry Directors and Member Representative Directors, and 
(ii) the number of Member Representative Directors equals at least 20 
percent of the Board of Directors (the ``Exchange Board Composition 
Requirements'').\150\ Because the definition of ``Industry Director'' 
includes a Director that has an employment relationship with the 
Exchange,\151\ the Chief Executive Officer of the Exchange will always 
meet the definition of ``Industry Director.'' Consistent with this 
definition, and in order to effectuate the Exchange Board Composition 
Requirements, the Exchange considers the Chief Executive Officer to be 
an Industry Director. Were the Chief Executive Officer to not be 
considered for purpose of determining composition of the board, the 
total number of persons affiliated with the securities industry 
(including Industry Directors, Member Representative Directors and the 
Chief Executive Officer) could potentially exceed the number of Non-
Industry Directors--a result that the Exchange believes the Exchange 
Board Composition Requirements were intended to prevent. The Exchange 
therefore proposes to add new Section 2(b) of Article III of the 
Exchange Bylaws to explicitly clarify that the Chief Executive Officer 
shall be considered to be an Industry Director. The Exchange Bylaws 
separately provide that each of the Non-Industry Directors and Industry 
Directors are divided into one of three classes to serve staggered 
three-year terms.\152\ Unlike other Industry Directors, rather than 
serving a three-year term, the Chief Executive Officer of the Exchange 
serves on the Board of Directors until he or she ceases to be Chief 
Executive Officer.\153\ The Exchange is therefore proposing to amend 
Section 3(b) of Article III of the Exchange Bylaws to explicitly 
clarify that the reference to each Industry Director serving a 
staggered three-year term excludes the Chief Executive Officer.
---------------------------------------------------------------------------

    \150\ See Exchange Bylaws, Art. III, Section 2(b).
    \151\ See Exchange Bylaws, Art. I, para. (o)(vi).
    \152\ See Exchange Bylaws, Art. III, Section 3(b).
    \153\ See Exchange Bylaws, Art. III, Section 3(a).
---------------------------------------------------------------------------

     Amending Section 4(a), Section 4(c) and Section 4(e) of 
Article III of the Exchange Bylaws to permit the Director nomination 
and election process (including the Member Representative Director 
nomination and election process conducted by the Member Nominating 
Committee) to be conducted through either an annual or special meeting 
of stockholders, rather than solely through an annual meeting of 
stockholders. Without this change, should one or more vacancies on the 
Board of Directors occur, the vacancies would continue until they can 
be filled at an annual meeting. As a result, vacancies that arise soon 
after an annual meeting could remain for close to a full year. The 
Exchange therefore proposes to amend the Exchange Bylaws to add 
flexibility to the governance process around the nomination and 
election of a Director position that may become vacant at a time that 
does not coincide with the Exchange's annual director election process, 
by permitting the process to occur at any time via a special meeting of 
stockholders.
     Amending Section 2(a) of Article V of the Exchange Bylaws 
to clarify that the Chairman, with the approval of the Board, not only 
appoints the members of all committees of the Board, but also the chair 
of each committee. The Exchange understands that this amendment is 
intended to reflect the current committee and committee Chair 
appointment processes utilized by the BATS Exchanges.
     Amending Section 6(c) of Article V of the Exchange Bylaws 
to clarify that the Regulatory Oversight Committee responsibilities 
include, in consultation with the Chief Executive Officer of the 
Exchange, establishing the goals, assessing the performance, and fixing 
the compensation of the Chief Regulatory Officer of the Company. These 
amendments are intended to reflect the current responsibilities of the 
Regulatory Oversight Committee for the Exchange.
     Expanding the prohibition contained in Section 2 of 
Article XI of the Exchange Bylaws. Currently, Section 2 prohibits DEI 
and DE Holdings directors, officers, employees, agents or advisors who 
are not also directors, officers, staff, counsel or advisors of the 
Exchange from participating in any meetings of the Exchange's Board of 
Directors (or any committee thereof) pertaining to the self-regulatory 
function

[[Page 76439]]

of the Exchange (including disciplinary matters). Because, following 
the Combination, the Exchange also will be owned indirectly by New BGM, 
instead of only directly by DEI and indirectly by DE Holdings, the 
Exchange is proposing to expand this prohibition to cover both its 
direct and indirect parent companies. The Exchange believes that this 
amendment will protect the independence of the Exchange's self-
regulatory activities.
     Correcting certain typographical errors, including 
conforming the spelling of ``Bylaws'' throughout the organizational 
documents of the Exchange and its parent companies.
9. Exchange Rule 2.3--Member Eligibility
    Pursuant to Exchange Rule 2.3, in order to be eligible for 
membership in the Exchange, a registered broker or dealer is required 
to be a member of at least one other national securities association or 
national securities exchange. However, membership in the Exchange's 
affiliated national securities exchange, EDGX, is not sufficient for 
purposes of eligibility for Exchange membership. As a result of the 
Combination, the Exchange will additionally become affiliated with the 
BATS Exchanges. The Exchange continues to believe that it is 
appropriate to limit its membership to registered broker-dealers that 
are members of at least one national securities association or national 
securities exchange that is not affiliated with the Exchange. 
Therefore, the Exchange proposes to amend Exchange Rule 2.3 to specify 
that a registered broker-dealer will be eligible for membership only if 
it is a member of a national securities association or national 
securities exchange other than or in addition to BATS, BYX, or EDGX. 
The proposed amendments to Exchange Rule 2.3 are set forth in Exhibit 
5I.
10. Exchange Rule 2.12--DE Route as Inbound Router
    DE Route provides Members of the Exchange and EDGX with optional 
routing services to other market centers. Thus, in certain 
circumstances, DE Route provides inbound routing from EDGX to the 
Exchange. Exchange Rule 2.12 governs this inbound routing of orders by 
DE Route to the Exchange in DE Route's capacity as a facility of EDGX. 
Recognizing that the Commission has previously expressed concern 
regarding the potential for conflicts of interest in instances where a 
member firm is affiliated with an exchange to which it is routing 
orders, the Exchange has implemented limitations and conditions on DE 
Route's affiliation with the Exchange in order to permit the Exchange 
to accept inbound orders that DE Route routes in its capacity as a 
facility of EDGX. These conditions and limitations, set forth in 
Exchange Rule 2.12(a), require that:
    (1) The Exchange must enter into (a) a plan pursuant to Rule 17d-2 
under the Act with a non-affiliated self-regulatory organization 
(``SRO'') to relieve the Exchange of regulatory responsibilities for DE 
Route with respect to rules that are common rules between the Exchange 
and the non-affiliated SRO, and (b) a regulatory services contract 
(``Regulatory Contract'') with a non-affiliated SRO to perform 
regulatory responsibilities for DE Route for unique Exchange rules.
    (2) The Regulatory Contract must require the Exchange to provide 
the non-affiliated SRO with information, in an easily accessible 
manner, regarding all exception reports, alerts, complaints, trading 
errors, cancellations, investigations, and enforcement matters 
(collectively ``Exceptions'') in which DE Route is identified as a 
participant that has potentially violated Exchange or Commission Rules, 
and requires that the non-affiliated SRO provide a report, at least 
quarterly, to the Exchange quantifying all Exceptions in which DE Route 
is identified as a participant that has potentially violated Exchange 
or Commission rules.
    (3) The Exchange, on behalf of its parent company, must establish 
and maintain procedures and internal controls reasonably designed to 
ensure that DE Route does not develop or implement changes to its 
system based on non-public information obtained as a result of its 
affiliation with the Exchange, until such information is available 
generally to similarly situated Members of the Exchange.
    (4) The Exchange may furnish to DE Route only the same information 
and on the same terms as the Exchange makes available in the normal 
course of business to other users.\154\
---------------------------------------------------------------------------

    \154\ See Exchange Rule 2.12(a)(2).
---------------------------------------------------------------------------

    In addition, Exchange Rule 2.12(b) states that, provided the 
conditions in Exchange Rule 2.12(a) are complied with, and provided 
further that DE Route operates as an outbound router on behalf of EDGX 
on the same terms and conditions as it does for the Exchange, and in 
accordance with the rules of EDGX, DE Route may provide inbound routing 
services to the Exchange from EDGX.
    Similar to the role of DE Route with respect to the DE Exchanges, 
the Exchange understands that BATS Trading provides members of the BATS 
Exchanges with optional routing services to other market centers, which 
may include routing from a BATS Exchange to the Exchange. Following the 
Combination, it is expected that BATS Trading will continue to provide 
these routing services, which may involve routing to the Exchange. 
Because, following the Combination, BATS Trading will be affiliated 
with and potentially routing to the Exchange, the Exchange believes 
that the potential conflict of interest currently addressed by Exchange 
Rule 2.12 with respect to DE Route must also be addressed with respect 
to BATS Trading.
    The Exchange is therefore proposing to amend and expand Exchange 
Rule 2.12 such that substantially the same conditions and limitations 
that currently apply to the inbound routing of orders by DE Route apply 
to the inbound routing of orders by BATS Trading. The proposed 
amendments to Exchange Rule 2.12, as set forth in Exhibit 5K, would 
provide that, in order for the Exchange to accept inbound routed orders 
from BATS Trading, the conditions and limitations currently set forth 
in Exchange Rule 2.12 with respect to DE Route must also be satisfied 
with respect to BATS Trading.
    The Exchange believes that these proposed amendments will 
adequately manage the potential for a conflict of interest that could 
arise from BATS Trading routing orders to the Exchange. The Exchange 
expects to arrange that these conditions be met prior to the Closing so 
as to allow BATS Trading to continue routing to the Exchange following 
the Closing without interruption.\155\
---------------------------------------------------------------------------

    \155\ If such conditions and limitations are not satisfied by 
Closing, the Exchange will not accept inbound orders from BATS 
Trading until such conditions and limitations are satisfied.
---------------------------------------------------------------------------

    In addition, the language in Exchange Rule 2.12(a) leading into the 
four conditions described above incorrectly refers to the conditions 
being undertaken by ``each of the Exchange and DE Route.'' However, by 
their terms, the conditions contained in Exchange Rule 2.12 are 
undertaken only by the Exchange and, in one case, the Exchange on 
behalf of its parent company. The Exchange therefore proposes to delete 
the incorrect reference to DE Route.
11. Exchange Rule 2.10--Affiliation Between Exchange and a Member
a. Affiliation With BATS Trading
    Exchange Rule 2.10 provides that, subject to certain exceptions, 
without the prior approval of the Commission,

[[Page 76440]]

(i) the Exchange or any entity with which the Exchange is affiliated 
(as defined in Rule 12b-2 under the Act), may not directly or 
indirectly acquire or maintain an ownership interest in a Member of the 
Exchange, and (ii) a Member of the Exchange may not be or become an 
affiliate of the Exchange, or an affiliate of any affiliate of the 
Exchange.
    BATS Trading is currently a Member of the Exchange. As a result of 
the Combination, (i) New BGM, an entity affiliated with the Exchange, 
will acquire and maintain an indirect ownership interest in BATS 
Trading, and (ii) BATS Trading will become an affiliate of the 
Exchange. Pursuant to Exchange Rule 2.10, the Exchange is seeking the 
Commission's prior approval to permit this affiliation.
    The Exchange notes that the purpose of Exchange Rule 2.10 is to 
prevent or manage potential conflicts of interest that could arise from 
the Exchange or its affiliates having an ownership interest in an 
Exchange Member, particularly with respect to the Exchange's obligation 
under Section 19(g) of the Act to enforce its Members' compliance with 
the Act, the Commission's rules thereunder, and Exchange Rules.\156\
---------------------------------------------------------------------------

    \156\ 15 U.S.C. 78s(g).
---------------------------------------------------------------------------

    The Exchange believes that it should be permitted to become 
affiliated with BATS Trading, notwithstanding BATS Trading's Exchange 
membership. As described above, as a result of the proposed amendments 
to Exchange Rule 2.12, the Exchange intends on addressing the potential 
conflicts of interests arising from its expected affiliation with BATS 
Trading by, among other things, entering into (i) a plan pursuant to 
Rule 17d-2 under the Act with a non-affiliated SRO to relieve the 
Exchange of regulatory responsibilities for BATS Trading with respect 
to rules that are common rules between the Exchange and the non-
affiliated SRO, and (ii) a Regulatory Contract with a non-affiliated 
SRO to perform regulatory responsibilities for BATS Trading for unique 
Exchange rules. The Exchange believes that any potential conflict of 
interest that would arise as a result of its affiliation with BATS 
Trading will be mitigated by the same procedures that the Exchange 
anticipates adopting to satisfy the proposed amendments to Exchange 
Rule 2.12. The Exchange therefore requests that, pursuant to Exchange 
Rule 2.10, the Commission approve the indirect acquisition of BATS 
Trading by an affiliate of the Exchange and the resulting affiliation 
between the Exchange and BATS Trading, so long as the requirements 
under Exchange Rule 2.12, as proposed to be amended, are satisfied.
b. Proposed Amendments to Exchange Rule 2.10
    The Exchange also proposes to make several changes to Exchange Rule 
2.10 to reflect the proposed change in the corporate structure of the 
Exchange after Closing. Specifically, Rule 2.10 currently states that 
nothing in Rule 2.10 shall prohibit a Member or its affiliate from 
acquiring or holding an equity interest in DE Holdings that is 
permitted by the DE Holdings Ownership and Voting Limitations. 
Furthermore, Rule 2.10 currently states that nothing in Rule 2.10 shall 
prohibit a Member from being or becoming an affiliate of the Exchange, 
or an affiliate of any affiliate of the Exchange, solely by reason of 
such Member or any officer, director, manager, managing member, partner 
or affiliate of such Member being or becoming a Director serving on the 
Board of Directors of DE Holdings. Because New BGM will replace DE 
Holdings as the ultimate parent company of the Exchange after Closing, 
New BGM's governing documents, as opposed to the revised DE Holdings 
governing documents, set forth the relevant ownership and voting 
limitations, and provide for Member representation on the New BGM 
Board. Therefore, the Exchange proposes to replace the references to DE 
Holdings and its governing documents in Rule 2.10 with references to 
New BGM and its governing documents. The proposed revisions to Exchange 
Rule 2.10 are set forth in Exhibit 5J.
    In addition, current Exchange Rule 2.10 states that nothing in this 
Rule shall prohibit the Exchange from being an affiliate of DE Route or 
of EDGX Exchange, Inc. Because the Exchange will be affiliated with 
BATS Trading and the BATS Exchanges, as well as DE Route and EDGX, 
after Closing, the Exchange proposes to expand this provision to 
specifically permit the Exchange's affiliation with BATS Trading and 
the BATS Exchanges.
2. Statutory Basis
    The Exchange believes that the Proposed Rule Change is consistent 
with the requirements of the Act \157\ and the rules and regulations 
thereunder that are applicable to a national securities exchange, and, 
in particular, with the requirements of Section 6(b) of the Act.\158\ 
In particular, the proposal is consistent with Section 6(b)(1) of the 
Act \159\ in that it enables the Exchange to be so organized as to have 
the capacity to be able to carry out the purposes of the Act and to 
comply, and to enforce compliance by its Members and persons associated 
with its Members, with the provisions of the Act, the rules and 
regulations thereunder, and the Rules of the Exchange. The Proposed 
Rule Change is designed to enable the Exchange to continue to have the 
authority and ability to effectively fulfill its self-regulatory duties 
pursuant to the Act and the rules promulgated thereunder. In 
particular, the Proposed Rule Change includes in the New BGM Charter 
and New BGM Bylaws, like the Current BGM Charter and Current BGM 
Bylaws, various provisions intended to protect and maintain the 
integrity of the self-regulatory functions of the Exchange upon 
Closing. Including such provisions in the New BGM Charter and New BGM 
Bylaws is important because New BGM will be the new ultimate parent 
company of the Exchange. For example, the New BGM Bylaws, as described 
above, are drafted to preserve the independence of the Exchange's self-
regulatory function and ensure that the Exchange is able to obtain 
information it needs from the specified parties to detect and deter any 
fraudulent and manipulative acts in its marketplace and carry out their 
regulatory responsibilities under the Act. In addition, the New BGM 
Charter and New BGM Bylaws are drafted to make sure that the Exchange's 
Board of Directors receives notice of any amendment to the New BGM 
Charter and New BGM Bylaws so that the Exchange's Board of Directors 
may review and approve, and the Exchange may make any filings with the 
Commission necessary for the Exchange to fulfill its regulatory duties 
under the Act. The New BGM Charter also imposes the BGM Ownership 
Limitation and BGM Voting Limitation to preclude undue influence over 
or interference with the Exchange's self-regulatory functions and 
fulfillment of its regulatory duties under the Act. Moreover, to the 
extent any protections are being deleted in any governing documents, 
there are adequate substitutes proposed to be implemented. For example, 
the deletion of the DE Holdings Ownership and Voting Limitations are 
being deleted, in favor of the BGM Ownership Limitation and the BGM 
Voting Limitation.
---------------------------------------------------------------------------

    \157\ 15 U.S.C. 78s(b)(1).
    \158\ 15 U.S.C. 78f(b).
    \159\ 15 U.S.C. 78f(b)(1).
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    Moreover, notwithstanding the Proposed Rule Change, including the 
change to the ownership structure of the

[[Page 76441]]

Exchange, the Commission will continue to have regulatory authority 
\160\ over the Exchange, as is currently the case, as well as 
jurisdiction over the Exchange's direct and indirect parents with 
respect to activities related to the Exchange.\161\ As a result, the 
Proposed Rule Change will facilitate an ownership structure that will 
provide the Commission with appropriate oversight tools to ensure that 
the Commission will have the ability to enforce the Act with respect to 
the Exchange, its direct and indirect parent entities and their 
directors (where applicable), officers, employees and agents to the 
extent they are involved in the activities of the Exchange.
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    \160\ See, e.g., New DE Holdings LLC Agreement, Art. X, Section 
10.03.
    \161\ See, e.g., New BGM Bylaws, Section 14.05; BGM Holdings 
Bylaws, Section 7.3.
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    The Exchange also believes that the Proposed Rule Change furthers 
the objectives of Section 6(b)(5) of the Act.\162\ The Proposed Rule 
Change is consistent with and facilitates a governance and regulatory 
structure that is designed to prevent fraudulent and manipulative acts 
and practices, to promote just and equitable principles of trade, to 
foster cooperation and coordination with persons engaged in regulating, 
clearing, settling, processing information with respect to, and 
facilitating transactions in securities, to remove impediments to, and 
perfect the mechanism of a free and open market and a national market 
system and, in general, to protect investors and the public interest. 
The Proposed Rule Change provides transparency and certainty, and 
promotes efficiency, with respect to the governance and corporate 
structure of the Exchange and its direct and indirect parent companies. 
For example, the Exchange proposes to adopt an approach to corporate 
governance that is consistent with the approach taken by the BATS 
Exchanges and previously approved by the Commission.\163\ The Exchange 
proposes to revise the Exchange Certificate of Incorporation and 
Exchange Bylaws to make them substantively consistent with the BATS 
Exchanges' existing governing documents. In addition, the Exchange 
proposes several amendments to the Exchange Bylaws that reflect changes 
that the BATS Exchanges propose to make to their Bylaws as a result of 
the Combination. The Exchange believes that these additional changes, 
among other things, will remove administrative impediments to, and 
reduce the potential for conflicts of interest in, the governance of 
the Exchange. By simplifying and unifying the governance structure of 
the four exchanges in this way, the Proposed Rule Change promotes the 
maintenance of a fair and orderly market, the protection of investors 
and the protection of the public interest.
---------------------------------------------------------------------------

    \162\ 15 U.S.C. 78f(b)(5).
    \163\ See Securities Exchange Act Release No. 58375 (Aug. 18, 
2008), 73 FR 49498 (Aug. 21, 2008); Securities Exchange Act Release 
No. 62716 (Aug. 13, 2010), 75 FR 51295 (Aug. 19, 2010).
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    In addition, the Exchange expects that the Combination will 
facilitate efficiencies and innovation for clients and efficient, 
transparent and well-regulated markets for issuers and clients, thus 
removing impediments to, and perfecting the mechanism of a free and 
open market and a national market system. The Combination will benefit 
investors, the market as a whole, and shareholders by, among other 
things, enhancing competition among securities venues and reducing 
costs. In particular, the Combination will result in a third major 
exchange operator which will have more streamlined and efficient 
operations, including the transition of the DE Exchanges to a 
technology platform in common with the BATS Exchanges, thereby 
intensifying competition for transaction order flow with other exchange 
and non-exchange trading centers, as well as potentially in other areas 
where the two major exchange operators lead, such as proprietary market 
data products and listings. This enhanced level of competition among 
trading centers will benefit investors through new or more competitive 
product offerings and, ultimately, lower costs.
    Furthermore, the Exchange is not proposing any significant changes 
to its existing operational and trading structure in connection with 
the change in ownership; the Exchange will operate in essentially the 
same manner upon Closing as it operates today. Therefore, the Exchange 
believes that it will continue to satisfy the requirements of the Act 
and the rules and regulations thereunder that are applicable to a 
national securities exchange. The changes the Exchange is proposing to 
Exchange Rules 2.3 are designed to extend the membership eligibility 
criteria in a way that is consistent with the current rule, taking into 
account the prospective affiliation with the BATS Exchanges. The 
proposed changes to Exchange Rules 2.12 and 2.10 are designed to 
address the potential for conflicts of interest due to the prospective 
affiliation between the Exchange and BATS Trading. The Exchange 
believes that these proposed changes to its Rules are consistent with 
the requirements of the Act and the rules and regulations thereunder. 
The Exchange believes that these rule changes promote the maintenance 
of a fair and orderly market, the protection of investors and the 
public interest, and is in the best interests of the Exchange and its 
Members as it would continue to allow routing of orders between four 
affiliated exchanges.
    Finally, with the Proposed Rule Change, the Exchange emphasizes 
that it believes that the Proposed Rule Change is not inconsistent with 
the Order Instituting Administrative and Cease-and-Desist Proceedings 
Pursuant to Sections 19(h) and 21C of the Securities Exchange Act of 
1934, Making Findings, and Imposing Remedial Sanctions and Cease-and-
Desist Order, entered by the Commission on October 13, 2011.\164\
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    \164\ See Securities Exchange Act Release No. 65556 (Oct. 13, 
2011).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the Proposed Rule Change would 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. Indeed, the 
Exchange believes that the Proposed Rule Change will enhance 
competition among intermarket trading venues, as the Exchange believes 
that the Combination will produce a stronger and more efficient entity 
that will have an improved ability to provide innovative products and 
services. Moreover, the Exchange will continue to conduct regulated 
activities (including operating and regulating its market and Members) 
of the type it currently conducts, but will be able to do so in a more 
efficient manner to the benefit of its Members. Furthermore, the 
Exchange's conclusion that the Proposed Rule Change would not result in 
any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act \165\ is consistent with the 
Commission's prior conclusions about similar combinations involving 
multiple exchanges in a single corporate family.\166\
---------------------------------------------------------------------------

    \165\ 15 U.S.C. 78f(b)(8).
    \166\ See, e.g., Securities Exchange Act Release No. 66071 (Dec. 
29, 2011), 77 FR 521 (Jan. 05, 2012) (SR-CBOE-2011-107 and SR-NSX-
2011-14); Securities Exchange Act Release No. 58324 (Aug. 7, 2008), 
73 FR 46936 (Aug. 12, 2008) (SR-BSE-2008-02; SR-BSE-2008-23; SR-BSE-
2008-25; SR-BSECC-2008-01); Securities Exchange Act Release No. 
53382 (Feb. 27, 2006), 71 FR 11251 (Mar. 06, 2006) (SR-NYSE-2005-
77).

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[[Page 76442]]

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

    The Exchange has not solicited or received written comments on the 
Proposed Rule Change.

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

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

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-EDGA-2013-34 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-EDGA-2013-34. 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 the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-EDGA-2013-34 and should be 
submitted on or before January 7, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\167\
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    \167\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-29900 Filed 12-16-13; 8:45 am]
BILLING CODE 8011-01-P