Self-Regulatory Organizations; BATS Exchange, Inc., BATS Y-Exchange, Inc., EDGX Exchange, Inc., EDGA Exchange, Inc.; Order Approving Proposed Rule Changes To Amend and Restate the Certificate of Incorporation and Bylaws of the Exchanges' Ultimate Parent Company, BATS Global Markets, Inc., 19252-19255 [2016-07512]
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19252
Federal Register / Vol. 81, No. 64 / Monday, April 4, 2016 / Notices
claims for cash have been historically
satisfied in full and the trend that
customer credit balances at brokerdealers have been decreasing in recent
years.15
It is therefore ordered, pursuant to
section 3(e)(2) of SIPA, that the
determination by the SIPC Board that
the standard maximum cash advance
amount will remain at $250,000
beginning January 1, 2017, and for the
five-year period immediately thereafter,
be and hereby is approved.
IV. Notice of the Standard Maximum
Cash Advance Amount
SIPA requires that the Commission
publish the standard maximum cash
advance amount in the Federal Register
no later than April 5 of any calendar
year in which SIPC is required to
determine whether an inflation
adjustment is appropriate.16
Accordingly, pursuant to section
9(e)(3)(A) of SIPA, the Commission is
hereby providing notice that the
standard maximum cash advance
amount is $250,000 beginning January
1, 2017 and for the five-year period
immediately thereafter.
By the Commission.
Brent J. Fields,
Secretary.
[FR Doc. 2016–07600 Filed 4–1–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–77464; File Nos. SR–BATS–
2016–10, SR–BYX–2016–02, SR–EDGX–
2016–04, and SR–EDGA–2016–01]
Self-Regulatory Organizations; BATS
Exchange, Inc., BATS Y-Exchange,
Inc., EDGX Exchange, Inc., EDGA
Exchange, Inc.; Order Approving
Proposed Rule Changes To Amend
and Restate the Certificate of
Incorporation and Bylaws of the
Exchanges’ Ultimate Parent Company,
BATS Global Markets, Inc.
mstockstill on DSK4VPTVN1PROD with NOTICES
March 29, 2016.
I. Introduction
On February 9, 2016, BATS Exchange,
Inc. (‘‘BATS’’), BATS Y-Exchange, Inc.
(‘‘BYX’’), EDGX Exchange, Inc.
(‘‘EDGX’’), and EDGA Exchange, Inc.
(‘‘EDGA’’) (collectively, the
‘‘Exchanges’’ and each, an ‘‘Exchange’’)
filed with the Securities and Exchange
Commission (‘‘Commission’’), pursuant
to Section 19(b)(1) of the Securities
15 See February 17, 2016 SIPC Statement of
Purpose.
16 15 U.S.C. 78fff–3(e)(3)(A).
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Exchange Act of 1934 (the ‘‘Act’’),1 and
Rule 19b–4 thereunder,2 proposed rule
changes to amend the certificate of
incorporation (the ‘‘Current Certificate
of Incorporation’’) and bylaws (the
‘‘Current Bylaws’’) of BATS Global
Markets, Inc. (the ‘‘Corporation’’), the
Exchanges’ ultimate parent company, in
connection with the Corporation’s
anticipated initial public offering of
shares of its common stock on BATS
(the ‘‘IPO’’). The proposed rule changes
for EDGX and EDGA were published for
comment in the Federal Register on
February 22, 2016, and the proposed
rule changes for BATS and BYX were
published for comment in the Federal
Register on February 23, 2016.3 The
Commission received no comment
letters regarding the proposals. This
order approves the proposed rule
changes.
II. Description of the Proposal
On December 16, 2016, the
Corporation filed a registration
statement on Form S–1 with the
Commission seeking to register shares of
common stock and to conduct an initial
public offering of those shares, which
would be listed for trading on BATS. In
connection with the IPO, the Exchanges
filed a proposed rule change to amend
and restate the Corporation’s Current
Certification of Incorporation and adopt
those changes as the Corporation’s
Amended and Restated Certificate of
Incorporation (the ‘‘New Certificate of
Incorporation’’) and amend and restate
the Corporation’s Current Bylaws and
adopt those changes as its Amended and
Restated Bylaws (the ‘‘New Bylaws’’).
The Exchanges anticipate that the
Corporation’s New Certificate of
Incorporation and New Bylaws will
become effective the moment before the
closing of the IPO.4 According to the
Exchanges, the proposed changes relate
to the Corporation’s governing
documents only and do not relate to the
governance of the Exchanges.5
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release Nos. 77147
(February 16, 2016), 81 FR 8767 (February 22, 2016)
(SR–EDGX–2016–04) (‘‘EDGX Notice’’); 77146
(February 16, 2016), 81 FR 8788 (February 22, 2016)
(SR–EDGA–2016–01) (‘‘EDGA Notice’’); 77155
(February 17, 2016), 81 FR 9008 (February 23, 2016)
(SR–BATS–2016–10) (‘‘BATS Notice’’); and 77156
(February 17, 2016), 81 FR 9052 (February 23, 2016)
(SR–BYX–2016–02) (‘‘BYX Notice’’).
4 See EDGX Notice, supra note 3, at 8767; EDGA
Notice, supra note 3, at 8788; BATS Notice, supra
note 3, at 9008; and BYX Notice, supra note 3, at
9053.
5 See id.
2 17
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Sfmt 4703
A. The New Certificate of Incorporation
1. Capital Stock; Voting Rights
The Exchanges propose to revise the
Current Certificate of Incorporation to
reclassify all of the Corporation’s
existing stock as either ‘‘Voting
Common Stock’’ or ‘‘Non-Voting
Common Stock.’’ 6 The Corporation
expects that the outstanding Class A
Non-Voting Common Stock will convert
into Voting Common Stock upon the
IPO, pursuant to the terms of the
Investor Rights Agreement dated
January 31, 2014, among the
Corporation and its stockholders
signatory thereto.7 To effect this
conversion, the New Certificate of
Incorporation states that, at the time that
the New Certificate of Incorporation
becomes effective, each authorized,
issued, and outstanding share of Class A
Non-Voting Common Stock shall be
automatically converted into one share
of Voting Common Stock.8 In addition,
the New Certificate of Incorporation
would reclassify each authorized,
issued, and outstanding share of Class B
Non-Voting Common Stock into one
share of Non-Voting Common Stock.9
Except for voting rights 10 and certain
conversion features,11 the Exchanges
propose that Non-Voting Common Stock
and Voting Common Stock would
generally rank equally and have
identical rights and privileges.12
2. Board of Directors
The New Certificate of Incorporation
would establish a ‘‘staggered’’ or
classified board structure in which the
Corporation’s directors would be
divided into three classes of equal size,
to the extent possible.13 Under the
proposed board structure, only one class
of directors would be elected each year,
and once elected, directors would serve
a three-year term.14 Pursuant to the New
6 See generally proposed Article Fourth of the
New Certificate of Incorporation.
7 See EDGX Notice, supra note 3, at 8768; EDGA
Notice, supra note 3, at 8789; BATS Notice, supra
note 3, at 9009; and BYX Notice, supra note 3, at
9053.
8 See proposed Article Fourth(b)(i) of the New
Certificate of Incorporation.
9 See proposed Article Fourth(b)(ii) of the New
Certificate of Incorporation.
10 See generally proposed Article Fourth(c) of the
New Certificate of Incorporation.
11 See generally proposed Article Fourth(d) of the
New Certificate of Incorporation.
12 See EDGX Notice, supra note 3, 8768; EDGA
Notice, supra note 3, at 8789; BATS Notice, supra
note 3, at 9009; and BYX Notice, supra note 3, at
9054.
13 See proposed Article Sixth(c) of the New
Certificate of Incorporation.
14 Id. Directors initially designated as Class I
directors would serve for a term ending on the date
of the 2017 annual meeting of stockholders,
directors initially designated as Class II directors
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Federal Register / Vol. 81, No. 64 / Monday, April 4, 2016 / Notices
Certificate of Incorporation, cumulative
voting in the election of directors would
be prohibited.15 According to the
Exchanges, cumulative voting is not
appropriate for the ultimate parent
company of a national securities
exchange because it would increase the
likelihood that a stockholder or group of
stockholders holding a minority of
voting shares might be able to exert an
outsized influence in the election of
directors of the Corporation, relative to
its stockholdings in the Corporation.16
As a result, the Exchanges state that
cumulative voting could undermine the
limitations on concentrations of
ownership or voting included in both
the Current Certificate of Incorporation
and New Certificate of Incorporation.17
mstockstill on DSK4VPTVN1PROD with NOTICES
3. Transfer, Ownership, and Voting
Restrictions
According to the Exchanges, the New
Certificate of Incorporation maintains
and enhances the limitations on
aggregate ownership and total voting
power that exist under the Current
Certificate of Incorporation.18 The New
Certificate of Incorporation would add
that, for purposes of any redemptions of
shares purportedly transferred in
violation of Article Fifth of the New
Certificate of Incorporation, which sets
forth the limitations on transfer,
ownership and voting, fair market value
would be determined as the volumeweighted average price per share of the
common stock during the five business
days immediately preceding the
redemption.19 The Exchanges state that
specifying the manner by which fair
market value would be determined
would enhance this remedy and provide
would serve for a term ending on the date 2018
annual meeting of stockholders, and directors
initially designated as Class III directors would
serve for a term ending on the date 2019 annual
meeting of stockholders. See id.
15 See proposed Article Sixth(d) of the New
Certificate of Incorporation.
16 See EDGX Notice, supra note 3, at 8769; EDGA
Notice, supra note 3, at 8790; BATS Notice, supra
note 3, at 9010; and BYX Notice, supra note 3, at
9054–55.
17 Id.
18 The New Certificate of Incorporation would
maintain the Current Certificate of Incorporation’s
provisions that impose a 40% ownership limit on
the amount of capital stock of the Corporation that
any person, either alone or together with its related
persons, may own, directly or indirectly, of record
or beneficially; impose a 20% ownership limit on
the amount of capital stock of the Corporation that
any member of the Exchange, either alone, or
together with its related persons, may own directly
or indirectly, of record or beneficially; and prohibit
any person, either alone or together with its related
persons, from having or exercising more than 20%
of the voting power of the capital stock of the
Corporation. See proposed Article Fifth(b)(i) of the
New Certificate of Incorporation.
19 See proposed Article Fifth(e) of the New
Certificate of Incorporation.
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19:03 Apr 01, 2016
Jkt 238001
clarity in the event that it is necessary
to enforce this redemption provision.20
4. No Action by Written Consent
The New Certificate of Incorporation
would provide that any action required
or permitted to be taken at an annual or
special meeting of stockholders may be
taken only upon the vote of
stockholders at an annual or special
meeting and may not be taken by
written consent of stockholders without
a meeting.21
5. Future Amendments to the Certificate
of Incorporation
The New Certificate of Incorporation
would require that certain provisions of
the New Certificate of Incorporation
may not be repealed or amended in any
respect, and no other provision may be
adopted, amended or repealed which
would have the effect of modifying or
permitting the circumvention of such
provisions, unless such action is
approved by the affirmative vote of at
least 662⁄3% of the total voting power of
the Corporation’s outstanding securities
entitled to vote generally in the election
of directors, voting together as a single
class.22 The relevant provisions include
Article Fourth(c) and (d), relating to
voting rights and conversion of NonVoting Common Stock, and Articles
Fifth through Fourteenth, relating to
limitations on transfer, ownership and
voting, board of directors, duration of
the Corporation, adopting, amending or
repealing bylaws, indemnification and
limitation of director liability, meetings
of stockholders, forum selection,
compromise or other arrangement,
Section 203 opt-in, and amendments to
the certificate of incorporation,
respectively.
According to the Exchanges, the
purpose of this supermajority
requirement, which they believe is
common among public companies, is to
deter actions being taken that the
Corporation believes may be detrimental
to the Corporation, including any
actions that could detrimentally affect
its ability to comply with its unique
responsibilities under the Act as the
ultimate parent of four registered
national securities exchanges.23 The
Exchanges further state that the reason
20 See EDGX Notice, supra note 3, at 8769; EDGA
Notice, supra note 3, at 8790; BATS Notice, supra
note 3, at 9010; and BYX Notice, supra note 3, at
9055.
21 See proposed Article Tenth(c) of the New
Certificate of Incorporation.
22 See proposed Article Fourteenth(a) of the New
Certificate of Incorporation.
23 See EDGX Notice, supra note 3, at 8769; EDGA
Notice, supra note 3, at 8790; BATS Notice, supra
note 3, at 9010; and BYX Notice, supra note 3, at
9055.
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Frm 00142
Fmt 4703
Sfmt 4703
19253
the supermajority voting requirement is
applicable only to certain specified
provisions of the New Certificate of
Incorporation is to focus such
requirement on the most critical
provisions of the New Certificate of
Incorporation.24
6. Other Amendments
According to the Exchanges, the
proposal would also amend and restate
various other provisions of the Current
Certificate of Incorporation in a manner
that the Exchanges believe are intended
to reflect provisions that are more
customary for publicly-owned
companies organized under Delaware
Law, such as those relating to the
Corporation’s preferred stock,25 forum
selection,26 and Section 203 opt-in,27
among others.28 The New Certificate of
Incorporation also removes various
references to the Investor Rights
Agreement, as the provisions of that
agreement, other than certain
registration rights, are expected to
terminate upon the occurrence of the
IPO.29 Finally, the exchanges propose
various non-substantive, stylistic or
technical changes throughout the New
Certificate of Incorporation. For
example, the New Certificate of
Incorporation would amend the name of
the Corporation from ‘‘BATS Global
Markets, Inc.’’ to ‘‘Bats Global Markets,
Inc.’’ 30
B. The New Bylaws
1. Annual Meeting of Stockholders
The Exchanges propose to revise the
Current Bylaws to require stockholders
to make certain disclosures and
representations in notices to the
Corporation concerning business
proposals and director nominations at
annual meetings, and to comply with
longer advanced notice requirements.31
24 See EDGX Notice, supra note 3, at 8769; EDGA
Notice, supra note 3, at 8790; BATS Notice, supra
note 3, at 9010–11; and BYX Notice, supra note 3,
at 9055.
25 See proposed Article Fourth (a)(ii) of the New
Certificate of Incorporation.
26 See proposed Article Eleventh of the New
Certificate of Incorporation.
27 See proposed Article Thirteenth of the New
Certificate of Incorporation.
28 See EDGX Notice, supra note 3, at 8770; EDGA
Notice, supra note 3, at 8791; BATS Notice, supra
note 3, at 9011; and BYX Notice, supra note 3, at
9055–56.
29 See EDGX Notice, supra note 3, at 8770; EDGA
Notice, supra note 3, at 8791; BATS Notice, supra
note 3, at 9011; and BYX Notice, supra note 3, at
9056.
30 See id.
31 See generally proposed Section 2.02 of the New
Bylaws. The New Bylaws would also state that such
notice requirements would be satisfied if done in
compliance with Exchange Act Rule 14a-8. See
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04APN1
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Federal Register / Vol. 81, No. 64 / Monday, April 4, 2016 / Notices
In addition, the New Bylaws would
require that all proposals and
nominations comply with applicable
requirements of the Act.32 The
Exchanges represent that the purpose of
the disclosure and representation
requirements is to assure that
stockholders asked to vote on
stockholder proposals or nominations
are more fully informed and are able to
consider any proposals or nominations
along with the interests of those
stockholders or the beneficial owners on
whose behalf such proposal or
nomination is being made.33
2. Special Meetings of Stockholders
The New Bylaws would only permit
a special meeting of the stockholders to
be called by the board of directors
pursuant to a resolution adopted by the
majority of the board.34 According to the
Exchanges, this amendment is designed
to prevent any stockholder from
exercising undue control over the
operation of an Exchange by
circumventing the board of directors of
the Corporation through a special
meeting of the stockholders.35
3. Adjournment of Meetings
The New Bylaws would also provide
that only the chairman of the meeting or
the board of directors would be
permitted to adjourn a stockholder
meeting.36 According to the Exchanges,
such a requirement is common among
publicly-held companies.37
Furthermore, the Exchanges believe that
this amendment would provide the
Corporation with flexibility to postpone
a stockholder vote if it determines it is
necessary and would prevent
stockholders from adjourning a meeting
if the board of directors and chairman
desire to continue with the meeting.38
mstockstill on DSK4VPTVN1PROD with NOTICES
4. No Action by Written Consent
The Exchanges propose that no action
may be taken by written consent of the
proposed Section 2.02(f) of the New Bylaws.
Additionally, the New Bylaws would require
stockholders to appear at any meeting to present
such proposals or nominations. See proposed
Section 2.02(d) of the New Bylaws.
32 See proposed Section 2.02(e) of the New
Bylaws.
33 See EDGX Notice, supra note 3, at 8771; EDGA
Notice, supra note 3, at 8792; BATS Notice, supra
note 3, at 9012; and BYX Notice, supra note 3, at
9057.
34 See proposed Section 2.03 of the New Bylaws.
35 See EDGX Notice, 81 FR at 8771; EDGA Notice,
81 FR at 8792; BATS Notice, 81 FR at 9012; and
BYX Notice, 81 FR at 9057.
36 See proposed Section 2.06 of the New Bylaws.
37 See EDGX Notice, supra note 3, at 8772; EDGA
Notice, supra note 3, at 8793; BATS Notice, supra
note 3, at 9013; and BYX Notice, supra note 3, at
9057.
38 See id.
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19:03 Apr 01, 2016
Jkt 238001
stockholders without a meeting, subject
to the rights of any holders of Preferred
Stock.39
5. Number of Directors and Classified
Board Structure
Under the New Bylaws, the board of
directors would consist of one or more
directors, with the exact number of
directors to be determined by resolution
adopted by the majority of the board of
directors.40 In addition, the New Bylaws
would, consistent with the New
Certificate of Incorporation, establish a
classified board structure, in which the
directors would be divided into three
classes of equal size, to the extent
possible.41
6. Removal of Directors
The Current Bylaws provide that the
board of directors or any director may
be removed, with or without cause, by
the affirmative vote of at least 662⁄3
percent of the voting power of all thenoutstanding shares of voting stock of the
Corporation.42 The New Bylaws would
provide that directors may only be
removed for cause with the affirmative
vote of a simple majority of the holders
of voting power of all then-outstanding
securities of the Corporation generally
entitled to vote in the election of
directors, voting together as a single
class.43
The Exchanges state that the purpose
of this amendment is to align the
Corporation’s requirements for removal
of directors with Delaware Law, which
generally provides that, in the case of a
corporation with a classified board, a
simple majority of stockholders may
remove any director, but only for cause,
unless the certificate of incorporation
provides otherwise.44
7. Future Bylaws Amendments
The New Bylaws would provide that
the bylaws may be altered, adopted,
amended or repealed either by a
majority of the board of directors, or by
the stockholders with the affirmative
vote of not less than 662⁄3 percent of the
total voting power then entitled to vote
at a meeting of stockholders voting as a
single class.45 The Exchanges state that
the purpose of this amendment is to be
39 See proposed Section 2.10 of the New Bylaws.
This revision would be consistent with the New
Certificate of Incorporation. See proposed Article
Tenth(c) of the New Certificate of Incorporation.
40 See proposed Section 3.01 of the New Bylaws.
41 Id.
42 See Section 3.05 of the Current Bylaws.
43 See proposed Section 3.05 of the New Bylaws.
44 See EDGX Notice, supra note 3, at 8772; EDGA
Notice, supra note 3, at 8793; BATS Notice, supra
note 3, at 9013–14; and BYX Notice, supra note 3,
at 9058.
45 See proposed Article XI of the New Bylaws.
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Fmt 4703
Sfmt 4703
consistent with other publicly-held
companies.46
In addition to the board of directors
and stockholder approval requirements,
the New Bylaws would maintain the
provisions requiring that, for so long as
the Corporation will control a national
securities exchange registered with the
Commission under Section 6 of the Act,
before any amendment to the New
Bylaws may become effective, the
amendment must be submitted to the
board of directors of such exchange, and
if required by Section 19 of the Act,
filed with or filed with and approved by
the Commission.47
8. Other Amendments
The New Bylaws make various nonsubstantive, stylistic or technical
changes throughout. For example, the
New Bylaws remove references to the
Investor Rights Agreement, as the
provisions of that agreement, other than
certain registration rights, is expected to
terminate upon the occurrence of the
IPO.48 The proposal would also amend
and restate various other provisions
such as those relating to the registered
office of the Corporation,49 quorum and
vote requirements,50 voting rights,51
organization,52 vacancies and
resignation of directors,53 board
committees,54 preferred stock
directors,55 officers of the Corporation,56
form of stock certificates,57 transfers of
stock,58 fixing of record dates,59
indemnification,60 notices,61 among
others.
III. Discussion
After careful review of the proposal,
the Commission finds that the proposed
rule changes are consistent with the
requirements of the Act and the rules
and regulations thereunder applicable to
46 See EDGX Notice, supra note 3, at 8773–74;
EDGA Notice, supra note 3, at 8794–95; BATS
Notice, supra note 3, at 9014–15; and BYX Notice,
supra note 3, at 9059–60.
47 See proposed Article XI of the New Bylaws.
48 See EDGX Notice, supra note 3, at 8774; EDGA
Notice, supra note 3, at 8795; BATS Notice, supra
note 3, at 9015; and BYX Notice, supra note 3, at
9060.
49 See proposed Section 1.01 of the New Bylaws.
50 See proposed Section 2.05 of the New Bylaws.
51 See proposed Section 2.07 of the New Bylaws.
52 See proposed Section 2.11 of the New Bylaws.
53 See proposed Sections 3.03 and 3.04 of the
New Bylaws.
54 See proposed Section 3.10 of the New Bylaws.
55 See proposed Section 3.12 of the New Bylaws.
56 See proposed Section 4.01 of the New Bylaws.
57 See proposed Section 6.01 of the New Bylaws.
58 See proposed Section 6.03(d) of the New
Bylaws.
59 See proposed Section 6.04 of the New Bylaws.
60 See Article X of the Current Bylaws.
61 See proposed Article X of the New Bylaws.
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04APN1
Federal Register / Vol. 81, No. 64 / Monday, April 4, 2016 / Notices
a national securities exchange.62 In
particular, the Commission finds that
the proposals are consistent with
Section 6(b)(1) of the Act,63 which
require a national securities exchange to
be so organized and have the capacity
to carry out the purposes of the Act and
to enforce compliance by its members
and persons associated with the
provisions of the Act.
The Commission notes that the
Exchanges have represented that the
proposed rule changes relate solely to
the certificate of the incorporation and
bylaws of the Corporation and that each
Exchange will continue to be governed
by its respective existing certificate of
incorporation and bylaws.64 BATS and
BYX have represented that BATS Global
Markets Holdings, Inc., an intermediate
holding company wholly-owned by the
Corporation will continue to directly
and solely hold the stock in, and voting
power of, BATS and BYX, and BATS
and BYX will continue to operate
pursuant to its existing governance
structure.65 EDGA and EDGX have
similarly represented that Direct Edge
LLC, an intermediate holding company
wholly-owned by the Corporation will
continue to directly and solely hold the
stock in, and voting power of, EDGX
and EDGA and, EDGX and EDGA will
continue to operate pursuant to its
existing governance structure.66
The Commission further notes that
each Exchange has represented that the
proposed rule change will maintain the
existing ownership and voting
limitations in the Current Certificate of
Incorporation.67 As a result, the
Commission believes that the proposed
rule changes should effectively maintain
the ownership and voting limits
currently in place for the Corporation
consistent with Section 6(b)(1) of the
Exchange Act. In addition, the
Commission notes that each Exchange
has represented that it would continue
to operate pursuant to its existing
governance structure.68 The
mstockstill on DSK4VPTVN1PROD with NOTICES
62 In
approving this proposed rule change, the
Commission has considered the proposed rule’s
impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
63 15 U.S.C. 78f(b)(1).
64 See EDGX Notice, supra note 3, at 8767; EDGA
Notice, supra note 3, at 8788; BATS Notice, supra
note 3, at 9008; and BYX Notice, supra note 3, at
9053.
65 See BATS Notice, supra note 3, at 9008; and
BYX Notice, supra note 3, at 9053.
66 See EDGX Notice, supra note 3, at 8767; EDGA
Notice, supra note 3, at 8788.
67 See supra note 18 (discussing the limitations of
ownership of capital stock of the Corporation to
40% for any Person and 20% for any member and
voting power of capital stock of the Corporation to
20% for any Person).
68 See EDGX Notice, supra note 3, at 8767; EDGA
Notice, supra note 3, at 8788; BATS Notice, supra
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19:03 Apr 01, 2016
Jkt 238001
Commission also notes that the
Exchanges do not propose any
substantive changes to the provision of
the Corporation’s bylaws relating to
SRO functions of the Exchanges.69
The Commission, therefore, believes
that the proposed rule changes are
consistent with Section 6(b)(1) of the
Exchange Act, which requires each
Exchange to have the ability to be so
organized as to have the capacity 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 provisions of the
Act, the rules and regulations
thereunder, and the rules of such
Exchange.70
III. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,71 that the
proposed rule changes (SR–BATS–
2016–10, SR–BYX–2016–02, SR–EDGX–
2016–04, SR–EDGA–2016–01) be, and
hereby are, approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.72
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016–07512 Filed 4–1–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–77463; File No. SR–
NYSEArca–2015–107]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Order Granting Approval of
Proposed Rule Change, as Modified by
Amendment Nos. 1, 2, 3, and 4 Thereto,
To List and Trade Shares of the REX
Gold Hedged S&P 500 ETF and the
REX Gold Hedged FTSE Emerging
Markets ETF Under NYSE Arca
Equities Rule 8.600
March 29, 2016.
I. Introduction
On December 10, 2015, NYSE Arca,
Inc. (‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’), pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’) 1 and Rule 19b–4
thereunder,2 a proposed rule change to
list and trade shares (‘‘Shares’’) of the
note 3, at 9008; and BYX Notice, supra note 3, at
9053.
69 See proposed Article XII of the New Bylaws.
70 15 U.S.C. 78f(b)(1).
71 15 U.S.C. 78s(b)(2).
72 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
PO 00000
Frm 00144
Fmt 4703
Sfmt 4703
19255
REX Gold Hedged S&P 500 ETF and the
REX Gold Hedged FTSE Emerging
Markets ETF (individually, a ‘‘Fund,’’
and collectively, ‘‘Funds’’), which will
be offered by Exchange Traded Concepts
Trust (‘‘Trust’’). The proposed rule
change was published for comment in
the Federal Register on December 30,
2015.3 On January 15, 2016, the
Exchange submitted Amendment No. 1
to the proposed rule change.4 On
January 27, 2016, the Exchange
submitted Amendment No. 2 to the
proposed rule change.5 On February 11,
2016, the Exchange submitted
Amendment No. 3 to the proposed rule
change.6 On February 12, 2016,
pursuant to Section 19(b)(2) of the Act,7
the Commission designated a longer
period within which to approve the
proposed rule change, disapprove the
proposed rule change, or institute
proceedings to determine whether to
disapprove the proposed rule change.8
On March 24, 2016, the Exchange
submitted Amendment No. 4 to the
proposed rule change.9 The Commission
3 See Securities Exchange Act Release No. 76761
(December 23, 2015), 80 FR 81564 (‘‘Notice’’).
4 In Amendment No. 1, which replaced and
superseded the original filing in its entirety, the
Exchange clarified the Funds’ direct and indirect
principal and other investments; the determination
of the value of certain underlying assets for
purposes of the Funds’ net asset value (‘‘NAV’’)
calculation; and the availability of price
information for certain underlying assets. Because
Amendment No. 1 adds clarification to the proposal
and does not materially alter the substance of the
proposed rule change or raise unique or novel
regulatory issues, Amendment No. 1 is not subject
to notice and comment (Amendment No. 1 to the
proposed rule change is available at: https://
www.sec.gov/comments/sr-nysearca-2015-107/
nysearca2015107-1.pdf).
5 In Amendment No. 2, the Exchange made
additional clarifying changes regarding the Funds’
other investments; the availability of price
information for certain underlying assets; and the
dissemination of the Portfolio Indicative Value (as
defined herein). Because Amendment No. 2 adds
clarification to the proposal and does not materially
alter the substance of the proposed rule change or
raise unique or novel regulatory issues, Amendment
No. 2 is not subject to notice and comment
(Amendment No. 2 to the proposed rule change is
available at: https://www.sec.gov/comments/srnysearca-2015-107/nysearca2015107-2.pdf).
6 In Amendment No. 3, the Exchange expanded
the application of the criteria for non-U.S. equity
securities in the REX Gold Hedged FTSE Emerging
Markets ETF portfolio so that they will apply on a
continual basis. Because Amendment No. 3 does
not materially alter the substance of the proposed
rule change or raise unique or novel regulatory
issues, Amendment No. 3 is not subject to notice
and comment (Amendment No. 3 to the proposed
rule change is available at: https://www.sec.gov/
comments/sr-nysearca-2015-107/nysearca20151073.pdf).
7 15 U.S.C. 78s(b)(2).
8 See Securities Exchange Act Release No. 77128,
81 FR 8557 (February 19, 2016).
9 In Amendment No. 4, the Exchange clarified
that: (a) all statements and representations made in
the proposal regarding the description of the
E:\FR\FM\04APN1.SGM
Continued
04APN1
Agencies
[Federal Register Volume 81, Number 64 (Monday, April 4, 2016)]
[Notices]
[Pages 19252-19255]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-07512]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-77464; File Nos. SR-BATS-2016-10, SR-BYX-2016-02, SR-
EDGX-2016-04, and SR-EDGA-2016-01]
Self-Regulatory Organizations; BATS Exchange, Inc., BATS Y-
Exchange, Inc., EDGX Exchange, Inc., EDGA Exchange, Inc.; Order
Approving Proposed Rule Changes To Amend and Restate the Certificate of
Incorporation and Bylaws of the Exchanges' Ultimate Parent Company,
BATS Global Markets, Inc.
March 29, 2016.
I. Introduction
On February 9, 2016, BATS Exchange, Inc. (``BATS''), BATS Y-
Exchange, Inc. (``BYX''), EDGX Exchange, Inc. (``EDGX''), and EDGA
Exchange, Inc. (``EDGA'') (collectively, the ``Exchanges'' and each, an
``Exchange'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (the ``Act''),\1\ and Rule 19b-4 thereunder,\2\
proposed rule changes to amend the certificate of incorporation (the
``Current Certificate of Incorporation'') and bylaws (the ``Current
Bylaws'') of BATS Global Markets, Inc. (the ``Corporation''), the
Exchanges' ultimate parent company, in connection with the
Corporation's anticipated initial public offering of shares of its
common stock on BATS (the ``IPO''). The proposed rule changes for EDGX
and EDGA were published for comment in the Federal Register on February
22, 2016, and the proposed rule changes for BATS and BYX were published
for comment in the Federal Register on February 23, 2016.\3\ The
Commission received no comment letters regarding the proposals. This
order approves the proposed rule changes.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release Nos. 77147 (February 16,
2016), 81 FR 8767 (February 22, 2016) (SR-EDGX-2016-04) (``EDGX
Notice''); 77146 (February 16, 2016), 81 FR 8788 (February 22, 2016)
(SR-EDGA-2016-01) (``EDGA Notice''); 77155 (February 17, 2016), 81
FR 9008 (February 23, 2016) (SR-BATS-2016-10) (``BATS Notice''); and
77156 (February 17, 2016), 81 FR 9052 (February 23, 2016) (SR-BYX-
2016-02) (``BYX Notice'').
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II. Description of the Proposal
On December 16, 2016, the Corporation filed a registration
statement on Form S-1 with the Commission seeking to register shares of
common stock and to conduct an initial public offering of those shares,
which would be listed for trading on BATS. In connection with the IPO,
the Exchanges filed a proposed rule change to amend and restate the
Corporation's Current Certification of Incorporation and adopt those
changes as the Corporation's Amended and Restated Certificate of
Incorporation (the ``New Certificate of Incorporation'') and amend and
restate the Corporation's Current Bylaws and adopt those changes as its
Amended and Restated Bylaws (the ``New Bylaws''). The Exchanges
anticipate that the Corporation's New Certificate of Incorporation and
New Bylaws will become effective the moment before the closing of the
IPO.\4\ According to the Exchanges, the proposed changes relate to the
Corporation's governing documents only and do not relate to the
governance of the Exchanges.\5\
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\4\ See EDGX Notice, supra note 3, at 8767; EDGA Notice, supra
note 3, at 8788; BATS Notice, supra note 3, at 9008; and BYX Notice,
supra note 3, at 9053.
\5\ See id.
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A. The New Certificate of Incorporation
1. Capital Stock; Voting Rights
The Exchanges propose to revise the Current Certificate of
Incorporation to reclassify all of the Corporation's existing stock as
either ``Voting Common Stock'' or ``Non-Voting Common Stock.'' \6\ The
Corporation expects that the outstanding Class A Non-Voting Common
Stock will convert into Voting Common Stock upon the IPO, pursuant to
the terms of the Investor Rights Agreement dated January 31, 2014,
among the Corporation and its stockholders signatory thereto.\7\ To
effect this conversion, the New Certificate of Incorporation states
that, at the time that the New Certificate of Incorporation becomes
effective, each authorized, issued, and outstanding share of Class A
Non-Voting Common Stock shall be automatically converted into one share
of Voting Common Stock.\8\ In addition, the New Certificate of
Incorporation would reclassify each authorized, issued, and outstanding
share of Class B Non-Voting Common Stock into one share of Non-Voting
Common Stock.\9\
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\6\ See generally proposed Article Fourth of the New Certificate
of Incorporation.
\7\ See EDGX Notice, supra note 3, at 8768; EDGA Notice, supra
note 3, at 8789; BATS Notice, supra note 3, at 9009; and BYX Notice,
supra note 3, at 9053.
\8\ See proposed Article Fourth(b)(i) of the New Certificate of
Incorporation.
\9\ See proposed Article Fourth(b)(ii) of the New Certificate of
Incorporation.
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Except for voting rights \10\ and certain conversion features,\11\
the Exchanges propose that Non-Voting Common Stock and Voting Common
Stock would generally rank equally and have identical rights and
privileges.\12\
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\10\ See generally proposed Article Fourth(c) of the New
Certificate of Incorporation.
\11\ See generally proposed Article Fourth(d) of the New
Certificate of Incorporation.
\12\ See EDGX Notice, supra note 3, 8768; EDGA Notice, supra
note 3, at 8789; BATS Notice, supra note 3, at 9009; and BYX Notice,
supra note 3, at 9054.
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2. Board of Directors
The New Certificate of Incorporation would establish a
``staggered'' or classified board structure in which the Corporation's
directors would be divided into three classes of equal size, to the
extent possible.\13\ Under the proposed board structure, only one class
of directors would be elected each year, and once elected, directors
would serve a three-year term.\14\ Pursuant to the New
[[Page 19253]]
Certificate of Incorporation, cumulative voting in the election of
directors would be prohibited.\15\ According to the Exchanges,
cumulative voting is not appropriate for the ultimate parent company of
a national securities exchange because it would increase the likelihood
that a stockholder or group of stockholders holding a minority of
voting shares might be able to exert an outsized influence in the
election of directors of the Corporation, relative to its stockholdings
in the Corporation.\16\ As a result, the Exchanges state that
cumulative voting could undermine the limitations on concentrations of
ownership or voting included in both the Current Certificate of
Incorporation and New Certificate of Incorporation.\17\
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\13\ See proposed Article Sixth(c) of the New Certificate of
Incorporation.
\14\ Id. Directors initially designated as Class I directors
would serve for a term ending on the date of the 2017 annual meeting
of stockholders, directors initially designated as Class II
directors would serve for a term ending on the date 2018 annual
meeting of stockholders, and directors initially designated as Class
III directors would serve for a term ending on the date 2019 annual
meeting of stockholders. See id.
\15\ See proposed Article Sixth(d) of the New Certificate of
Incorporation.
\16\ See EDGX Notice, supra note 3, at 8769; EDGA Notice, supra
note 3, at 8790; BATS Notice, supra note 3, at 9010; and BYX Notice,
supra note 3, at 9054-55.
\17\ Id.
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3. Transfer, Ownership, and Voting Restrictions
According to the Exchanges, the New Certificate of Incorporation
maintains and enhances the limitations on aggregate ownership and total
voting power that exist under the Current Certificate of
Incorporation.\18\ The New Certificate of Incorporation would add that,
for purposes of any redemptions of shares purportedly transferred in
violation of Article Fifth of the New Certificate of Incorporation,
which sets forth the limitations on transfer, ownership and voting,
fair market value would be determined as the volume-weighted average
price per share of the common stock during the five business days
immediately preceding the redemption.\19\ The Exchanges state that
specifying the manner by which fair market value would be determined
would enhance this remedy and provide clarity in the event that it is
necessary to enforce this redemption provision.\20\
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\18\ The New Certificate of Incorporation would maintain the
Current Certificate of Incorporation's provisions that impose a 40%
ownership limit on the amount of capital stock of the Corporation
that any person, either alone or together with its related persons,
may own, directly or indirectly, of record or beneficially; impose a
20% ownership limit on the amount of capital stock of the
Corporation that any member of the Exchange, either alone, or
together with its related persons, may own directly or indirectly,
of record or beneficially; and prohibit any person, either alone or
together with its related persons, from having or exercising more
than 20% of the voting power of the capital stock of the
Corporation. See proposed Article Fifth(b)(i) of the New Certificate
of Incorporation.
\19\ See proposed Article Fifth(e) of the New Certificate of
Incorporation.
\20\ See EDGX Notice, supra note 3, at 8769; EDGA Notice, supra
note 3, at 8790; BATS Notice, supra note 3, at 9010; and BYX Notice,
supra note 3, at 9055.
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4. No Action by Written Consent
The New Certificate of Incorporation would provide that any action
required or permitted to be taken at an annual or special meeting of
stockholders may be taken only upon the vote of stockholders at an
annual or special meeting and may not be taken by written consent of
stockholders without a meeting.\21\
---------------------------------------------------------------------------
\21\ See proposed Article Tenth(c) of the New Certificate of
Incorporation.
---------------------------------------------------------------------------
5. Future Amendments to the Certificate of Incorporation
The New Certificate of Incorporation would require that certain
provisions of the New Certificate of Incorporation may not be repealed
or amended in any respect, and no other provision may be adopted,
amended or repealed which would have the effect of modifying or
permitting the circumvention of such provisions, unless such action is
approved by the affirmative vote of at least 66\2/3\% of the total
voting power of the Corporation's outstanding securities entitled to
vote generally in the election of directors, voting together as a
single class.\22\ The relevant provisions include Article Fourth(c) and
(d), relating to voting rights and conversion of Non-Voting Common
Stock, and Articles Fifth through Fourteenth, relating to limitations
on transfer, ownership and voting, board of directors, duration of the
Corporation, adopting, amending or repealing bylaws, indemnification
and limitation of director liability, meetings of stockholders, forum
selection, compromise or other arrangement, Section 203 opt-in, and
amendments to the certificate of incorporation, respectively.
---------------------------------------------------------------------------
\22\ See proposed Article Fourteenth(a) of the New Certificate
of Incorporation.
---------------------------------------------------------------------------
According to the Exchanges, the purpose of this supermajority
requirement, which they believe is common among public companies, is to
deter actions being taken that the Corporation believes may be
detrimental to the Corporation, including any actions that could
detrimentally affect its ability to comply with its unique
responsibilities under the Act as the ultimate parent of four
registered national securities exchanges.\23\ The Exchanges further
state that the reason the supermajority voting requirement is
applicable only to certain specified provisions of the New Certificate
of Incorporation is to focus such requirement on the most critical
provisions of the New Certificate of Incorporation.\24\
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\23\ See EDGX Notice, supra note 3, at 8769; EDGA Notice, supra
note 3, at 8790; BATS Notice, supra note 3, at 9010; and BYX Notice,
supra note 3, at 9055.
\24\ See EDGX Notice, supra note 3, at 8769; EDGA Notice, supra
note 3, at 8790; BATS Notice, supra note 3, at 9010-11; and BYX
Notice, supra note 3, at 9055.
---------------------------------------------------------------------------
6. Other Amendments
According to the Exchanges, the proposal would also amend and
restate various other provisions of the Current Certificate of
Incorporation in a manner that the Exchanges believe are intended to
reflect provisions that are more customary for publicly-owned companies
organized under Delaware Law, such as those relating to the
Corporation's preferred stock,\25\ forum selection,\26\ and Section 203
opt-in,\27\ among others.\28\ The New Certificate of Incorporation also
removes various references to the Investor Rights Agreement, as the
provisions of that agreement, other than certain registration rights,
are expected to terminate upon the occurrence of the IPO.\29\ Finally,
the exchanges propose various non-substantive, stylistic or technical
changes throughout the New Certificate of Incorporation. For example,
the New Certificate of Incorporation would amend the name of the
Corporation from ``BATS Global Markets, Inc.'' to ``Bats Global
Markets, Inc.'' \30\
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\25\ See proposed Article Fourth (a)(ii) of the New Certificate
of Incorporation.
\26\ See proposed Article Eleventh of the New Certificate of
Incorporation.
\27\ See proposed Article Thirteenth of the New Certificate of
Incorporation.
\28\ See EDGX Notice, supra note 3, at 8770; EDGA Notice, supra
note 3, at 8791; BATS Notice, supra note 3, at 9011; and BYX Notice,
supra note 3, at 9055-56.
\29\ See EDGX Notice, supra note 3, at 8770; EDGA Notice, supra
note 3, at 8791; BATS Notice, supra note 3, at 9011; and BYX Notice,
supra note 3, at 9056.
\30\ See id.
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B. The New Bylaws
1. Annual Meeting of Stockholders
The Exchanges propose to revise the Current Bylaws to require
stockholders to make certain disclosures and representations in notices
to the Corporation concerning business proposals and director
nominations at annual meetings, and to comply with longer advanced
notice requirements.\31\
[[Page 19254]]
In addition, the New Bylaws would require that all proposals and
nominations comply with applicable requirements of the Act.\32\ The
Exchanges represent that the purpose of the disclosure and
representation requirements is to assure that stockholders asked to
vote on stockholder proposals or nominations are more fully informed
and are able to consider any proposals or nominations along with the
interests of those stockholders or the beneficial owners on whose
behalf such proposal or nomination is being made.\33\
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\31\ See generally proposed Section 2.02 of the New Bylaws. The
New Bylaws would also state that such notice requirements would be
satisfied if done in compliance with Exchange Act Rule 14a-8. See
proposed Section 2.02(f) of the New Bylaws. Additionally, the New
Bylaws would require stockholders to appear at any meeting to
present such proposals or nominations. See proposed Section 2.02(d)
of the New Bylaws.
\32\ See proposed Section 2.02(e) of the New Bylaws.
\33\ See EDGX Notice, supra note 3, at 8771; EDGA Notice, supra
note 3, at 8792; BATS Notice, supra note 3, at 9012; and BYX Notice,
supra note 3, at 9057.
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2. Special Meetings of Stockholders
The New Bylaws would only permit a special meeting of the
stockholders to be called by the board of directors pursuant to a
resolution adopted by the majority of the board.\34\ According to the
Exchanges, this amendment is designed to prevent any stockholder from
exercising undue control over the operation of an Exchange by
circumventing the board of directors of the Corporation through a
special meeting of the stockholders.\35\
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\34\ See proposed Section 2.03 of the New Bylaws.
\35\ See EDGX Notice, 81 FR at 8771; EDGA Notice, 81 FR at 8792;
BATS Notice, 81 FR at 9012; and BYX Notice, 81 FR at 9057.
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3. Adjournment of Meetings
The New Bylaws would also provide that only the chairman of the
meeting or the board of directors would be permitted to adjourn a
stockholder meeting.\36\ According to the Exchanges, such a requirement
is common among publicly-held companies.\37\ Furthermore, the Exchanges
believe that this amendment would provide the Corporation with
flexibility to postpone a stockholder vote if it determines it is
necessary and would prevent stockholders from adjourning a meeting if
the board of directors and chairman desire to continue with the
meeting.\38\
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\36\ See proposed Section 2.06 of the New Bylaws.
\37\ See EDGX Notice, supra note 3, at 8772; EDGA Notice, supra
note 3, at 8793; BATS Notice, supra note 3, at 9013; and BYX Notice,
supra note 3, at 9057.
\38\ See id.
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4. No Action by Written Consent
The Exchanges propose that no action may be taken by written
consent of the stockholders without a meeting, subject to the rights of
any holders of Preferred Stock.\39\
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\39\ See proposed Section 2.10 of the New Bylaws. This revision
would be consistent with the New Certificate of Incorporation. See
proposed Article Tenth(c) of the New Certificate of Incorporation.
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5. Number of Directors and Classified Board Structure
Under the New Bylaws, the board of directors would consist of one
or more directors, with the exact number of directors to be determined
by resolution adopted by the majority of the board of directors.\40\ In
addition, the New Bylaws would, consistent with the New Certificate of
Incorporation, establish a classified board structure, in which the
directors would be divided into three classes of equal size, to the
extent possible.\41\
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\40\ See proposed Section 3.01 of the New Bylaws.
\41\ Id.
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6. Removal of Directors
The Current Bylaws provide that the board of directors or any
director may be removed, with or without cause, by the affirmative vote
of at least 66\2/3\ percent of the voting power of all then-outstanding
shares of voting stock of the Corporation.\42\ The New Bylaws would
provide that directors may only be removed for cause with the
affirmative vote of a simple majority of the holders of voting power of
all then-outstanding securities of the Corporation generally entitled
to vote in the election of directors, voting together as a single
class.\43\
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\42\ See Section 3.05 of the Current Bylaws.
\43\ See proposed Section 3.05 of the New Bylaws.
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The Exchanges state that the purpose of this amendment is to align
the Corporation's requirements for removal of directors with Delaware
Law, which generally provides that, in the case of a corporation with a
classified board, a simple majority of stockholders may remove any
director, but only for cause, unless the certificate of incorporation
provides otherwise.\44\
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\44\ See EDGX Notice, supra note 3, at 8772; EDGA Notice, supra
note 3, at 8793; BATS Notice, supra note 3, at 9013-14; and BYX
Notice, supra note 3, at 9058.
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7. Future Bylaws Amendments
The New Bylaws would provide that the bylaws may be altered,
adopted, amended or repealed either by a majority of the board of
directors, or by the stockholders with the affirmative vote of not less
than 66\2/3\ percent of the total voting power then entitled to vote at
a meeting of stockholders voting as a single class.\45\ The Exchanges
state that the purpose of this amendment is to be consistent with other
publicly-held companies.\46\
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\45\ See proposed Article XI of the New Bylaws.
\46\ See EDGX Notice, supra note 3, at 8773-74; EDGA Notice,
supra note 3, at 8794-95; BATS Notice, supra note 3, at 9014-15; and
BYX Notice, supra note 3, at 9059-60.
---------------------------------------------------------------------------
In addition to the board of directors and stockholder approval
requirements, the New Bylaws would maintain the provisions requiring
that, for so long as the Corporation will control a national securities
exchange registered with the Commission under Section 6 of the Act,
before any amendment to the New Bylaws may become effective, the
amendment must be submitted to the board of directors of such exchange,
and if required by Section 19 of the Act, filed with or filed with and
approved by the Commission.\47\
---------------------------------------------------------------------------
\47\ See proposed Article XI of the New Bylaws.
---------------------------------------------------------------------------
8. Other Amendments
The New Bylaws make various non-substantive, stylistic or technical
changes throughout. For example, the New Bylaws remove references to
the Investor Rights Agreement, as the provisions of that agreement,
other than certain registration rights, is expected to terminate upon
the occurrence of the IPO.\48\ The proposal would also amend and
restate various other provisions such as those relating to the
registered office of the Corporation,\49\ quorum and vote
requirements,\50\ voting rights,\51\ organization,\52\ vacancies and
resignation of directors,\53\ board committees,\54\ preferred stock
directors,\55\ officers of the Corporation,\56\ form of stock
certificates,\57\ transfers of stock,\58\ fixing of record dates,\59\
indemnification,\60\ notices,\61\ among others.
---------------------------------------------------------------------------
\48\ See EDGX Notice, supra note 3, at 8774; EDGA Notice, supra
note 3, at 8795; BATS Notice, supra note 3, at 9015; and BYX Notice,
supra note 3, at 9060.
\49\ See proposed Section 1.01 of the New Bylaws.
\50\ See proposed Section 2.05 of the New Bylaws.
\51\ See proposed Section 2.07 of the New Bylaws.
\52\ See proposed Section 2.11 of the New Bylaws.
\53\ See proposed Sections 3.03 and 3.04 of the New Bylaws.
\54\ See proposed Section 3.10 of the New Bylaws.
\55\ See proposed Section 3.12 of the New Bylaws.
\56\ See proposed Section 4.01 of the New Bylaws.
\57\ See proposed Section 6.01 of the New Bylaws.
\58\ See proposed Section 6.03(d) of the New Bylaws.
\59\ See proposed Section 6.04 of the New Bylaws.
\60\ See Article X of the Current Bylaws.
\61\ See proposed Article X of the New Bylaws.
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III. Discussion
After careful review of the proposal, the Commission finds that the
proposed rule changes are consistent with the requirements of the Act
and the rules and regulations thereunder applicable to
[[Page 19255]]
a national securities exchange.\62\ In particular, the Commission finds
that the proposals are consistent with Section 6(b)(1) of the Act,\63\
which require a national securities exchange to be so organized and
have the capacity to carry out the purposes of the Act and to enforce
compliance by its members and persons associated with the provisions of
the Act.
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\62\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
\63\ 15 U.S.C. 78f(b)(1).
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The Commission notes that the Exchanges have represented that the
proposed rule changes relate solely to the certificate of the
incorporation and bylaws of the Corporation and that each Exchange will
continue to be governed by its respective existing certificate of
incorporation and bylaws.\64\ BATS and BYX have represented that BATS
Global Markets Holdings, Inc., an intermediate holding company wholly-
owned by the Corporation will continue to directly and solely hold the
stock in, and voting power of, BATS and BYX, and BATS and BYX will
continue to operate pursuant to its existing governance structure.\65\
EDGA and EDGX have similarly represented that Direct Edge LLC, an
intermediate holding company wholly-owned by the Corporation will
continue to directly and solely hold the stock in, and voting power of,
EDGX and EDGA and, EDGX and EDGA will continue to operate pursuant to
its existing governance structure.\66\
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\64\ See EDGX Notice, supra note 3, at 8767; EDGA Notice, supra
note 3, at 8788; BATS Notice, supra note 3, at 9008; and BYX Notice,
supra note 3, at 9053.
\65\ See BATS Notice, supra note 3, at 9008; and BYX Notice,
supra note 3, at 9053.
\66\ See EDGX Notice, supra note 3, at 8767; EDGA Notice, supra
note 3, at 8788.
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The Commission further notes that each Exchange has represented
that the proposed rule change will maintain the existing ownership and
voting limitations in the Current Certificate of Incorporation.\67\ As
a result, the Commission believes that the proposed rule changes should
effectively maintain the ownership and voting limits currently in place
for the Corporation consistent with Section 6(b)(1) of the Exchange
Act. In addition, the Commission notes that each Exchange has
represented that it would continue to operate pursuant to its existing
governance structure.\68\ The Commission also notes that the Exchanges
do not propose any substantive changes to the provision of the
Corporation's bylaws relating to SRO functions of the Exchanges.\69\
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\67\ See supra note 18 (discussing the limitations of ownership
of capital stock of the Corporation to 40% for any Person and 20%
for any member and voting power of capital stock of the Corporation
to 20% for any Person).
\68\ See EDGX Notice, supra note 3, at 8767; EDGA Notice, supra
note 3, at 8788; BATS Notice, supra note 3, at 9008; and BYX Notice,
supra note 3, at 9053.
\69\ See proposed Article XII of the New Bylaws.
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The Commission, therefore, believes that the proposed rule changes
are consistent with Section 6(b)(1) of the Exchange Act, which requires
each Exchange to have the ability to be so organized as to have the
capacity 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 provisions of the Act, the rules and regulations
thereunder, and the rules of such Exchange.\70\
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\70\ 15 U.S.C. 78f(b)(1).
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III. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\71\ that the proposed rule changes (SR-BATS-2016-10, SR-BYX-2016-
02, SR-EDGX-2016-04, SR-EDGA-2016-01) be, and hereby are, approved.
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\71\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\72\
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\72\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-07512 Filed 4-1-16; 8:45 am]
BILLING CODE 8011-01-P