Self-Regulatory Organizations; ISE Gemini, LLC; Notice of Filing of Proposed Rule Change To Amend the By-Laws of Nasdaq, Inc. To Implement Proxy Access, 69165-69172 [2016-24003]

Download as PDF Federal Register / Vol. 81, No. 193 / Wednesday, October 5, 2016 / Notices participants in the selection of directors and administration of its affairs. In drafting its proxy access provision, Nasdaq has attempted to strike an appropriate balance between responding to investor feedback and including certain procedural and informational requirements to again assure a fair representation of shareholders and participants in the selection of directors and administration of its affairs. Specifically, the procedural requirements will achieve this objective by stating clearly and explicitly the procedures stockholders must follow in order to submit a proper proxy access nomination. The informational requirements will achieve this objective by ensuring, among other things, that the Company and its stockholders have full and accurate information about nominating stockholders and their nominees and that such stockholders and nominees comply with applicable laws, regulations and other requirements. Finally, the remaining changes are clarifying in nature, and they assure fair representation by preventing confusion with respect to the operation of the ByLaw provisions. B. Self-Regulatory Organization’s Statement on Burden on Competition Because the proposed rule change relates to the governance of the Company and not to the operations of BSECC, BSECC does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were either solicited or received. asabaliauskas on DSK3SPTVN1PROD with NOTICES III. Date of Effectiveness of the Proposed Rule Change, and Timing for Commission Action Within 45 days of the date of publication of this notice in the Federal Register or within such longer period (i) as the Commission may designate up to 90 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which BSECC consents, the Commission shall: (a) By order approve or disapprove such proposed rule change, or (b) institute proceedings to determine whether the proposed rule change should be disapproved. VerDate Sep<11>2014 18:15 Oct 04, 2016 Jkt 241001 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: For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.42 Robert W. Errett, Deputy Secretary. [FR Doc. 2016–24004 Filed 10–4–16; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION 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– BSECC–2016–001 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549. All submissions should refer to File Number SR–BSECC–2016–001. 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 BSECC. 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–BSECC– 2016–001 and should be submitted on or before October 26, 2016. PO 00000 [Release No. 34–78981; File No. SR– ISEGemini–2016–10] Self-Regulatory Organizations; ISE Gemini, LLC; Notice of Filing of Proposed Rule Change To Amend the By-Laws of Nasdaq, Inc. To Implement Proxy Access September 29, 2016. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on September 15, 2016, ISE Gemini, LLC (‘‘ISE Gemini’’) or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) the proposed rule change as described in Items I, II, and III, below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange is filing this proposed rule change with respect to amendments of the By-Laws (the ‘‘By-Laws’’) of its parent corporation, Nasdaq, Inc. (‘‘Nasdaq’’ or the ‘‘Company’’), to implement proxy access. The proposed amendments will be implemented on a date designated by the Company following approval by the Commission. The text of the proposed rule change is available on the Exchange’s Web site at www.ise.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the 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 42 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 Frm 00130 Fmt 4703 69165 Sfmt 4703 E:\FR\FM\05OCN1.SGM 05OCN1 69166 Federal Register / Vol. 81, No. 193 / Wednesday, October 5, 2016 / Notices 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 aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change asabaliauskas on DSK3SPTVN1PROD with NOTICES 1. Purpose Background At Nasdaq’s 2016 annual meeting held on May 5, 2016, Nasdaq’s stockholders considered a stockholder proposal submitted under Rule 14a–8 under the Act.3 The proposal, which passed with 73.52% of the votes cast, requested that Nasdaq’s Board of Directors (the ‘‘Board’’) take steps to implement a ‘‘proxy access’’ by-law. Proxy access by-laws allow a stockholder, or group of stockholders, who comply with certain requirements, to nominate candidates for service on a board and have those candidates included in a company’s proxy materials. Such provisions allow stockholders to nominate candidates without undertaking the expense of a proxy solicitation. Following the 2016 annual meeting, the Nominating & Governance Committee (the ‘‘Committee’’) of the Board and the Board reviewed the voting results on the stockholder proposal and discussed proxy access generally. The Committee ultimately recommended to the Board, and the Board approved, certain changes to Nasdaq’s By-Laws to implement proxy access. Nasdaq now proposes to make these changes by adopting new Section 3.6 of the By-Laws and making certain conforming changes to current Sections 3.1, 3.3 and 3.5 of the By-Laws, all of which are described further below. In developing its proposal, Nasdaq has generally tried to balance the relative weight of arguments for and against proxy access provisions. On the one hand, Nasdaq recognizes the significance of this issue to some investors, who see proxy access as an important accountability mechanism that allows them to participate in board elections through the nomination of stockholder candidates that are presented in a company’s proxy statement. On the other hand, Nasdaq’s proposed proxy access provision 3 See 17 CFR 240.14a–8, which establishes procedures pursuant to which stockholders of a public company may have their proposals placed alongside management’s proposals in the company’s proxy materials for presentation to a vote at a meeting of stockholders. VerDate Sep<11>2014 18:15 Oct 04, 2016 Jkt 241001 includes certain procedural requirements that ensure, among other things, that the Company and its stockholders will have full and accurate information about nominating stockholders and their nominees and that such stockholders and nominees will comply with applicable laws, regulations and other requirements. Proposed Section 3.6(a) of the By-Laws To respond to feedback from its stockholders, Nasdaq proposes to amend its By-Laws to, as set forth in the first sentence of proposed Section 3.6(a), require the Company to include in its proxy statement, its form proxy and any ballot distributed at the stockholder meeting, the name of, and certain Required Information 4 about, any person nominated for election (the ‘‘Stockholder Nominee’’) to the Board by a stockholder or group of stockholders (the ‘‘Eligible Stockholder’’) 5 that satisfies the requirements set forth in the proxy access provision of Nasdaq’s By-Laws.6 To utilize this provision, the Eligible Stockholder must expressly elect at the time of providing a required notice to the Company of the proxy access nomination (the ‘‘Notice of Proxy Access Nomination’’) to have its nominee included in the Company’s proxy materials. Stockholders will be eligible to submit proxy access nominations only at annual meetings of stockholders when the Board solicits proxies with respect to the election of directors. The next two sentences of Section 3.6(a) provide some additional clarification on the term ‘‘Eligible Stockholder.’’ First, in calculating the number of stockholders in a group seeking to qualify as an Eligible Stockholder, two or more of the following types of funds shall be counted as one stockholder: (i) Funds under common management and investment control, (ii) funds under common management and funded primarily by the same employer, or (iii) 4 The Required Information is the information provided to Nasdaq’s Corporate Secretary about the Stockholder Nominee and the Eligible Stockholder that is required to be disclosed in the Company’s proxy statement by the regulations promulgated under the Act, and if the Eligible Stockholder so elects, a written statement, not to exceed 500 words, in support of the Stockholder Nominee(s)’ candidacy (the ‘‘Statement’’). 5 As used throughout Nasdaq’s By-Laws, the term ‘‘Eligible Stockholder’’ includes each member of a stockholder group that submits a proxy access nomination to the extent the context requires. 6 When the Company includes proxy access nominees in the proxy materials, such individuals will be included in addition to any persons nominated for election to the Board or any committee thereof. PO 00000 Frm 00131 Fmt 4703 Sfmt 4703 funds that are a ‘‘group of investment companies’’ as such term is defined in Section 12(d)(1)(G)(ii) of the Investment Company Act of 1940, as amended.7 Nasdaq views this as a stockholderfriendly provision that will make it easier for such funds to participate in a proxy access nomination since they will not have to comply with the procedural requirements in the proxy access provision multiple times. Second, in the event that the Eligible Stockholder consists of a group of stockholders, any and all requirements and obligations for an individual Eligible Stockholder shall apply to each member of the group, except that the Required Ownership Percentage (discussed further below) shall apply to the ownership of the group in the aggregate. Generally, the applicable requirements and obligations relate to information that each member of the nominating group must provide to Nasdaq about itself, as discussed further below. Nasdaq believes it is reasonable to require each member of the nominating group to provide such information so that both the Company and its stockholders are fully informed about the entire group making the proxy access nomination. The final sentence of proposed Section 3.6(a) allows Nasdaq to omit from its proxy materials any information or Statement (or portion thereof) that it, in good faith, believes is untrue in any material respect (or omits to state a material fact necessary in order to make the statements made, in light of the circumstances under which they are made, not misleading) or would violate any applicable law or regulation. This provision allows Nasdaq to comply with Rule 14a–9 under the Act 8 and to protect its stockholders from information that is materially untrue or that violates any law or regulation. The final sentence of proposed Section 3.6(a) also explicitly allows Nasdaq to solicit against, and include in the proxy statement its own statement relating to, any Stockholder Nominee. This provision merely clarifies that just because Nasdaq must include a proxy access nominee in its proxy materials if the proxy access provisions are 7 See 15 U.S.C. 80a–12(d)(1)(G)(ii), which defines ‘‘group of investment companies’’ as any two or more registered investment companies that hold themselves out to investors as related companies for purposes of investment and investor services. 8 See 17 CFR 240.14a–9, which generally prohibits proxy solicitations that contain any statement which, at the time and in the light of the circumstances under which it is made, is false or misleading with respect to any material fact, or which omits to state any material fact necessary in order to make the statements therein not false or misleading. E:\FR\FM\05OCN1.SGM 05OCN1 Federal Register / Vol. 81, No. 193 / Wednesday, October 5, 2016 / Notices satisfied, Nasdaq does not necessarily have to support that nominee. asabaliauskas on DSK3SPTVN1PROD with NOTICES Proposed Section 3.6(b) of the By-Laws Proposed Section 3.6(b) of the ByLaws establishes the deadline for a timely Notice of Proxy Access Nomination. Specifically, such a notice must be addressed to, and received by, Nasdaq’s Corporate Secretary no earlier than one hundred fifty (150) days and no later than one hundred twenty (120) days before the anniversary of the date that Nasdaq issued its proxy statement for the previous year’s annual meeting of stockholders. The Company believes this notice period will provide stockholders an adequate window to submit nominees via proxy access, while also providing the Company adequate time to diligence [sic] a proxy access nominee before including them in the proxy statement for the next annual meeting of stockholders. Proposed Section 3.6(c) of the By-Laws Proposed Section 3.6(c) specifies that the maximum number of Stockholder Nominees nominated by all Eligible Stockholders that will be included in Nasdaq’s proxy materials with respect to an annual meeting of stockholders shall not exceed the greater of two and 25% of the total number of directors in office (rounded down to the nearest whole number) as of the last day on which a Notice of Proxy Access Nomination may be delivered pursuant to and in accordance with the proxy access provision of the By-Laws (the ‘‘Final Proxy Access Nomination Date’’). In the event that one or more vacancies for any reason occurs after the Final Proxy Access Nomination Date but before the date of the annual meeting and the Board resolves to reduce the size of the Board in connection therewith, the maximum number of Stockholder Nominees included in Nasdaq’s proxy materials shall be calculated based on the number of directors in office as so reduced. Any individual nominated by an Eligible Stockholder for inclusion in the proxy materials pursuant to the proxy access provision of the By-Laws whom the Board decides to nominate as a nominee of the Board, and any individual nominated by an Eligible Stockholder for inclusion in the proxy materials pursuant to the proxy access provision but whose nomination is subsequently withdrawn, shall be counted as one of the Stockholder Nominees for purposes of determining when the maximum number of Stockholder Nominees has been reached. Any Eligible Stockholder submitting more than one Stockholder Nominee for VerDate Sep<11>2014 18:15 Oct 04, 2016 Jkt 241001 inclusion in the proxy materials shall rank such Stockholder Nominees based on the order that the Eligible Stockholder desires such Stockholder Nominees to be selected for inclusion in the proxy statement in the event that the total number of Stockholder Nominees submitted by Eligible Stockholders pursuant to the proxy access provision exceeds the maximum number of nominees allowed. In the event that the number of Stockholder Nominees submitted by Eligible Stockholders exceeds the maximum number of nominees allowed, the highest ranking Stockholder Nominee who meets the requirements of the proxy access provision of the By-Laws from each Eligible Stockholder will be selected for inclusion in the proxy materials until the maximum number is reached, going in order of the amount (largest to smallest) of shares of Nasdaq’s outstanding common stock each Eligible Stockholder disclosed as owned in its respective Notice of Proxy Access Nomination submitted to Nasdaq. If the maximum number is not reached after the highest ranking Stockholder Nominee who meets the requirements of the proxy access provision of the ByLaws from each Eligible Stockholder has been selected, this process will continue as many times as necessary, following the same order each time, until the maximum number is reached. Following such determination, if any Stockholder Nominee who satisfies the eligibility requirements thereafter is nominated by the Board, or is not included in the proxy materials or is not submitted for election as a director, in either case, as a result of the Eligible Stockholder becoming ineligible or withdrawing its nomination, the Stockholder Nominee becoming unwilling or unable to serve on the Board or the Eligible Stockholder or the Stockholder Nominee failing to comply with the proxy access provision of the By-Laws, no other nominee or nominees shall be included in the proxy materials or otherwise submitted for director election in substitution thereof. The Company believes it is reasonable to limit the Board seats available to proxy access nominees, to establish procedures for selecting candidates if the nominee limit is exceeded and to exclude further proxy access nominees in the cases set forth above. The limitation on Board seats available to proxy access nominees ensures that proxy access cannot be used to take over the entire Board, which is not the stated purpose of proxy access campaigns. The procedures for selecting candidates if the nominee limit is exceeded establish clear and rational guidelines for an PO 00000 Frm 00132 Fmt 4703 Sfmt 4703 69167 orderly nomination process to avoid the Company having to make arbitrary judgments among candidates. Finally, the exclusion of further proxy access nominees in certain cases will avoid further time and expense to the Company when the proxy access nominee has been nominated by the Board, in which case the goal of the proxy access nomination has been achieved, or in certain cases when the Eligible Stockholder or Stockholder Nominee is at fault. Proposed Section 3.6(d) of the By-Laws Proposed Section 3.6(d) clarifies, for the avoidance of doubt, how ‘‘ownership’’ will be defined for purposes of meeting the Required Ownership Percentage (discussed further below). Specifically, an Eligible Stockholder shall be deemed to ‘‘own’’ only those outstanding shares of Nasdaq’s common stock as to which the stockholder possesses both: (i) The full voting and investment rights pertaining to the shares; and (ii) the full economic interest in (including the opportunity for profit from and risk of loss on) such shares; provided that the number of shares calculated in accordance with clauses (i) and (ii) shall not include any shares: • Sold by such stockholder or any of its affiliates in any transaction that has not been settled or closed, including any short sale; • borrowed by such stockholder or any of its affiliates for any purposes or purchased by such stockholder or any of its affiliates pursuant to an agreement to resell; or • subject to any option, warrant, forward contract, swap, contract of sale, other derivative or similar agreement entered into by such stockholder or any of its affiliates, whether any such instrument or agreement is to be settled with shares or with cash based on the notional amount or value of shares of Nasdaq’s outstanding common stock, in any such case which instrument or agreement has, or is intended to have, or if exercised by either party would have, the purpose or effect of: Æ Reducing in any manner, to any extent or at any time in the future, such stockholder’s or its affiliates’ full right to vote or direct the voting of any such shares; and/or Æ hedging, offsetting or altering to any degree any gain or loss realized or realizable from maintaining the full economic ownership of such shares by such stockholder or its affiliates. Further, a stockholder shall ‘‘own’’ shares held in the name of a nominee or other intermediary so long as the stockholder retains the right to instruct E:\FR\FM\05OCN1.SGM 05OCN1 69168 Federal Register / Vol. 81, No. 193 / Wednesday, October 5, 2016 / Notices how the shares are voted with respect to the election of directors and possesses the full economic interest in the shares. A stockholder’s ownership of shares shall be deemed to continue during any period in which the stockholder has delegated any voting power by means of a proxy, power of attorney or other instrument or arrangement which is revocable at any time by the stockholder. A stockholder’s ownership of shares shall be deemed to continue during any period in which the stockholder has loaned such shares provided that the stockholder has the power to recall such loaned shares on three (3) business days’ notice, has recalled such loaned shares as of the date of the Notice of Proxy Access Nomination and holds such shares through the date of the annual meeting. The terms ‘‘owned,’’ ‘‘owning’’ and other variations of the word ‘‘own’’ shall have correlative meanings. Whether outstanding shares of Nasdaq’s common stock are ‘‘owned’’ for these purposes shall be determined by the Board or any committee thereof, in each case, in its sole discretion. For purposes of the proxy access provision of the By-Laws, the term ‘‘affiliate’’ or ‘‘affiliates’’ shall have the meaning ascribed thereto under the rules and regulations of the Act.9 An Eligible Stockholder shall include in its Notice of Proxy Access Nomination the number of shares it is deemed to own for the purposes of the proxy access provision of the By-Laws. Proposed Section 3.6(e) of the By-Laws The first paragraph of proposed Section 3.6(e) establishes certain requirements for an Eligible Stockholder to make a proxy access nomination. Specifically, an Eligible Stockholder must have owned (defined as discussed above) 3% or more (the ‘‘Required Ownership Percentage’’) of Nasdaq’s outstanding common stock (the ‘‘Required Shares’’) continuously for 3 years (the ‘‘Minimum Holding Period’’) as of both the date the Notice of Proxy Access Nomination is received by Nasdaq’s Corporate Secretary and the record date for determining the stockholders entitled to vote at the annual meeting and must continue to own the Required Shares through the meeting date. Proposed Section 3.6(e) also sets forth the information that an Eligible Stockholder must provide to Nasdaq’s Corporate Secretary in writing within the deadline discussed above in order to make a proxy access nomination. This information includes: • One or more written statements from the record holder of the shares (and from each intermediary through which the shares are or have been held during the Minimum Holding Period) verifying that, as of a date within seven calendar days prior to the date the Notice of Proxy Access Nomination is delivered to, or mailed to and received by, Nasdaq’s Corporate Secretary, the Eligible Stockholder owns, and has owned continuously for the Minimum Holding Period, the Required Shares, and the Eligible Stockholder’s agreement to provide, within five (5) business days after the record date for the annual meeting, written statements from the record holder and intermediaries verifying the Eligible Stockholder’s continuous ownership of the Required Shares through the record date; 10 • a copy of the Schedule 14N that has been filed with the SEC as required by Rule 14a–18 under the Act; 11 • the information, representations and agreements with respect to the Eligible Stockholder that are the same as those that would be required to be set forth in a stockholder’s notice of nomination with respect to a ‘‘Proposing Person’’ pursuant to Section 3.1(b)(i) and Section 3.1(b)(iii) of the By-Laws; 12 • the consent of each Stockholder Nominee to being named in the proxy statement as a nominee and to serving as a director if elected; 13 • a representation that the Eligible Stockholder: Æ Acquired the Required Shares in the ordinary course of business and not with the intent to change or influence 10 See proposed Section 3.6(e)(i) of the By-Laws. proposed Section 3.6(e)(ii) of the By-Laws; see also 17 CFR 240.14n–101 and 17 CFR 240.14a– 18, which generally require a Nominating Stockholder to provide notice to the Company of its intent to submit a proxy access nomination on a Schedule 14N and file that notice, including the required disclosure, with the Commission on the date first transmitted to the Company. 12 See proposed Section 3.6(e)(iii) of the By-Laws; see also Sections 3.1(b)(i) and 3.1(b)(iii) of the ByLaws, which constitute part of Nasdaq’s ‘‘advance notice’’ provision under which a ‘‘Proposing Person’’ may, among other things, nominate a person for election to the Board. 13 See proposed Section 3.6(e)(iv) of the By-Laws. asabaliauskas on DSK3SPTVN1PROD with NOTICES 11 See 9 Pursuant to Rule 12b–2 under the Act, ‘‘[a]n ‘affiliate’ of, or a person ‘affiliated’ with, a specified person, is a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the person specified.’’ 17 CFR 240.12b–2. Further, ‘‘[t]he term ‘control’ (including the terms ‘controlling,’ ‘controlled by’ and ‘under common control with’) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract, or otherwise.’’ 17 CFR 240.12b–2. VerDate Sep<11>2014 18:15 Oct 04, 2016 Jkt 241001 PO 00000 Frm 00133 Fmt 4703 Sfmt 4703 control of Nasdaq, and does not presently have such intent; 14 Æ presently intends to maintain qualifying ownership of the Required Shares through the date of the annual meeting; 15 Æ has not nominated and will not nominate for election any individual as a director at the annual meeting, other than its Stockholder Nominee(s); 16 Æ has not engaged and will not engage in, and has not and will not be a participant in another person’s, ‘‘solicitation’’ within the meaning of Rule 14a–1(l) under the Act in support of the election of any individual as a director at the annual meeting, other than its Stockholder Nominee(s) or a nominee of the Board; 17 Æ agrees to comply with all applicable laws and regulations with respect to any solicitation in connection with the meeting or applicable to the filing and use, if any, of soliciting material; 18 Æ will provide facts, statements and other information in all communications with Nasdaq and its stockholders that are or will be true and correct in all material respects and do not and will not omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; 19 and Æ as to any two or more funds whose shares are aggregated to count as one stockholder for the purpose of constituting an Eligible Stockholder, within five business days after the date of the Notice of Proxy Access Nomination, will provide to Nasdaq documentation reasonably satisfactory to Nasdaq that demonstrates that the funds satisfy the requirements in the ByLaws, which were discussed above, for the funds to qualify as one Eligible Stockholder; 20 • a representation as to the Eligible Stockholder’s intentions with respect to maintaining qualifying ownership of the Required Shares for at least one year following the annual meeting; 21 • an undertaking that the Eligible Stockholder agrees to: 14 See proposed Section 3.6(e)(v)(A) of the ByLaws. 15 See proposed Section 3.6(e)(v)(B) of the ByLaws. 16 See proposed Section 3.6(e)(v)(C) of the ByLaws. 17 See proposed Section 3.6(e)(v)(D) of the ByLaws; see also 17 CFR 240.14a–1(l), which defines the related terms ‘‘solicit’’ and ‘‘solicitation.’’ 18 See proposed Section 3.6(e)(v)(E) of the ByLaws. 19 See proposed Section 3.6(e)(v)(F) of the ByLaws. 20 See proposed Section 3.6(e)(v)(G) of the ByLaws. 21 See proposed Section 3.6(e)(vi) of the By-Laws. E:\FR\FM\05OCN1.SGM 05OCN1 Federal Register / Vol. 81, No. 193 / Wednesday, October 5, 2016 / Notices asabaliauskas on DSK3SPTVN1PROD with NOTICES Æ Assume all liability stemming from any legal or regulatory violation arising out of the Eligible Stockholder’s communications with Nasdaq’s stockholders or out of the information that the Eligible Stockholder provided to Nasdaq; 22 Æ indemnify and hold harmless Nasdaq and each of its directors, officers and employees individually against any liability, loss or damages in connection with any threatened or pending action, suit or proceeding, whether legal, administrative or investigative, against Nasdaq or any of its directors, officers or employees arising out of any nomination submitted by the Eligible Stockholder pursuant to the proxy access provision; 23 and Æ file with the SEC any solicitation or other communication with Nasdaq’s stockholders relating to the meeting at which the Stockholder Nominee will be nominated, regardless of whether any such filing is required under Regulation 14A of the Act or whether any exemption from filing is available thereunder; 24 and • in the case of a nomination by a group of stockholders that together is an Eligible Stockholder, the designation by all group members of one group member that is authorized to act on behalf of all such members with respect to the nomination and matters related thereto, including withdrawal of the nomination.25 In proposing the Required Ownership Percentage and the Minimum Holding Period, Nasdaq seeks to ensure that the Eligible Stockholder has had a sufficient stake in the Company for a sufficient amount of time and is not pursuing a short-term agenda. In proposing the informational requirements for the Eligible Stockholder, Nasdaq’s goal is to gather sufficient information about the Eligible Stockholder for both itself and its stockholders. Among other things, this information will ensure that Nasdaq is able to comply with its disclosure and other requirements under applicable law and that Nasdaq, its Board and its stockholders are able to assess the proxy access nomination adequately. Proposed Section 3.6(f) of the By-Laws Proposed Section 3.6(f) establishes the information the Stockholder Nominee must deliver to Nasdaq’s Corporate 22 See proposed Section 3.6(e)(vii)(A) of the ByLaws. 23 See proposed Section 3.6(e)(vii)(B) of the ByLaws. 24 See proposed Section 3.6(e)(vii)(C) of the ByLaws; see also 17 CFR 240.14a–1—14b–2, which governs solicitations of proxies. 25 See proposed Section 3.6(e)(viii) of the ByLaws. VerDate Sep<11>2014 18:15 Oct 04, 2016 Jkt 241001 Secretary within the time period specified for delivering the Notice of Proxy Access Nomination. This information includes: • The information required with respect to persons whom a stockholder proposes to nominate for election or reelection as a director by Section 3.1(b)(i) of the By-Laws 26 including, but not limited to, the signed questionnaire, representation and agreement required by Section 3.1(b)(i)(D) of the By-Laws; 27 and • a written representation and agreement that such person: Æ Will act as a representative of all of Nasdaq’s stockholders while serving as a director; and Æ will provide facts, statements and other information in all communications with Nasdaq and its stockholders that are or will be true and correct in all material respects (and shall not omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading). In addition, at the request of Nasdaq, the Stockholder Nominee(s) must submit all completed and signed questionnaires required of Nasdaq’s directors and officers. Nasdaq may request such additional information as necessary to (y) permit the Board to determine if each Stockholder Nominee satisfies the requirements of the proxy access provision of the By-Laws or if each Stockholder Nominee is independent under the listing standards of The NASDAQ Stock Market, any applicable rules of the SEC and any publicly disclosed standards used by the Board in determining and disclosing the independence of Nasdaq’s directors 28 and/or (z) permit Nasdaq’s 26 Section 3.1(b)(i) of the By-Laws describes the information that a proposing stockholder must provide about an individual the stockholder proposes to nominate for election or reelection as a director pursuant to the ‘‘advance notice’’ provision of the By-Laws. 27 Section 3.1(b)(i)(D) of the By-Laws requires a completed and signed questionnaire, representation and agreement, each containing certain information, from each individual proposed to be nominated for election or reelection as a director pursuant to the ‘‘advance notice’’ provision of the By-Laws. 28 Currently, the independence of Nasdaq’s directors is determined pursuant to the definition of ‘‘Independent Director’’ in Listing Rule 5605(a)(2) of The NASDAQ Stock Market, under which certain categories of individuals cannot be deemed independent and with respect to other individuals, the Board must make an affirmative determination that such individual has no relationship that, in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. Other independence standards under the SEC rules and the Listing Rules of The NASDAQ Stock Market apply to members of certain of the Board’s committees. As detailed below, the PO 00000 Frm 00134 Fmt 4703 Sfmt 4703 69169 Corporate Secretary to determine the classification of such nominee as an Industry, Non-Industry, Issuer or Public Director, if applicable, in order to make the certification referenced in Section 4.13(h)(iii) of the By-Laws.29 Like the informational requirements for an Eligible Stockholder, which are set forth above, the informational requirements for the Stockholder Nominee ensure that both Nasdaq and its stockholders will have sufficient information about the Stockholder Nominee. Among other things, this information will ensure that Nasdaq is able to comply with its disclosure and other requirements under applicable law and that Nasdaq, its Board and its stockholders are able to assess the proxy access nomination adequately. Proposed Section 3.6(g) of the By-Laws Pursuant to proposed Section 3.6(g), each Eligible Stockholder or Stockholder Nominee must promptly notify Nasdaq’s Corporate Secretary of any information or communications provided by the Eligible Stockholder or Stockholder Nominee to Nasdaq or its stockholders that ceases to be true and correct in all material respects or omits a material fact necessary to make the statements made, in light of the circumstances under which they were made, not misleading and of the information that is required to correct any such defect. This provision further states that providing any such notification shall not be deemed to cure any defect or, with respect to any defect that Nasdaq determines is material, limit Nasdaq’s rights to omit a Stockholder Nominee from its proxy materials. This provision is intended to protect Nasdaq’s stockholders by requiring an Eligible Stockholder or Stockholder Nominee to give Nasdaq notice of information previously provided that is materially untrue. Nasdaq may then decide what action to take with respect to such defect, which may include, with respect to a material defect, omitting the relevant Stockholder Nominee from its proxy materials. Commission notes that, while additional, more stringent independence standards may be adopted by the Board in the future, as of the date of this Notice no such standards have been adopted by the Board. 29 Section 4.13(h)(iii) of the By-Laws requires Nasdaq’s Corporate Secretary to collect from each nominee for director such information as is reasonably necessary to serve as the basis for a determination of the nominee’s classification as an Industry, Non-Industry, Issuer, or Public Director, if applicable, and to certify to the Committee each nominee’s classification, if applicable. Detailed definitions of the terms ‘‘Industry Director,’’ ‘‘NonIndustry Director,’’ ‘‘Issuer Director’’ and ‘‘Public Director’’ are included in Article I of the By-Laws. E:\FR\FM\05OCN1.SGM 05OCN1 69170 Federal Register / Vol. 81, No. 193 / Wednesday, October 5, 2016 / Notices asabaliauskas on DSK3SPTVN1PROD with NOTICES Proposed Section 3.6(h) of the By-Laws Proposed Section 3.6(h) provides that Nasdaq shall not be required to include a Stockholder Nominee in its proxy materials for any meeting of stockholders under certain circumstances. In these situations, the proxy access nomination shall be disregarded and no vote on such Stockholder Nominee will occur, even if Nasdaq has received proxies in respect of the vote. These circumstances occur when the Stockholder Nominee: • Has been nominated by an Eligible Stockholder who has engaged in or is currently engaged in, or has been or is a participant in another person’s, ‘‘solicitation’’ within the meaning of Rule 14a–1(l) under the Act in support of the election of any individual as a director at the annual meeting other than its Stockholder Nominee(s) or a nominee of the Board; 30 • is not independent under the listing standards of The NASDAQ Stock Market, any applicable rules of the SEC and any publicly disclosed standards used by the Board in determining and disclosing independence of Nasdaq’s directors, in each case as determined by the Board in its sole discretion; 31 • would, if elected as a member of the Board, cause Nasdaq to be in violation of the By-Laws (including but not limited to the compositional requirements of the Board set forth in Section 4.3 of the By-Laws), its Amended and Restated Certificate of Incorporation, the rules and listing standards of The NASDAQ Stock Market, or any applicable state or federal law, rule or regulation; 32 30 See proposed Section 3.6(h)(i) of the By-Laws; see also 17 CFR 240.14a–1(l), which defines the related terms ‘‘solicit’’ and ‘‘solicitation.’’ 31 See proposed Section 3.6(h)(ii) of the By-Laws; see also footnote 28, supra. The Commission notes that, while additional, more stringent independence standards may be adopted by the Board in the future, as of the date of this Notice no such standards have been adopted by the Board. The Commission further notes that, according to Nasdaq, should the Board decide to adopt additional, more stringent standards than those required under Nasdaq listing standards and any requirements under Commission rules, all director nominees would be evaluated against these standards—not just those shareholder candidates nominated under the provisions of proposed Section 3.6. 32 See proposed Section 3.6(h)(iii) of the By-Laws; see also Section 4.3 of the By-Laws, which provides that the number of Non-Industry Directors on the Board must equal or exceed the number of Industry Directors. In addition, the Board must include at least two Public Directors and may include at least one, but no more than two, Issuer Directors. Finally, the Board shall include no more than one Staff Director, unless the Board consists of ten or more directors, in which case, the Board shall include no more than two Staff Directors. Detailed definitions of the terms ‘‘Non-Industry Director,’’ ‘‘Industry Director,’’ ‘‘Public Director,’’ ‘‘Issuer Director’’ and VerDate Sep<11>2014 18:15 Oct 04, 2016 Jkt 241001 • is or has been, within the past three (3) years, an officer or director of a competitor, as defined for purposes of Section 8 of the Clayton Antitrust Act of 1914; 33 • is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses) or has been convicted in such a criminal proceeding within the past ten (10) years; 34 • is subject to any order of the type specified in Rule 506(d) of Regulation D promulgated under the Securities Act of 1933, as amended; 35 • is subject to ‘‘statutory disqualification’’ under Section 3(a)(39) of the Act; 36 • has, or the applicable Eligible Stockholder has, provided information to Nasdaq in respect of the proxy access nomination that was untrue in any material respect or omitted to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading, as determined by the Board or any committee thereof, in each case, in its sole discretion; 37 or • breaches or fails, or the applicable Eligible Stockholder breaches or fails, to comply with its obligations pursuant to the By-Laws, including, but not limited to, the proxy access provisions and any agreement, representation or undertaking required by the proxy access provisions.38 Nasdaq believes these provisions will protect the Company and its stockholders by allowing it to exclude certain categories of objectionable Stockholder Nominees from the proxy statement. Proposed Section 3.6(i) of the By-Laws Under proposed Section 3.6(i), the Board or the chairman of the meeting of ‘‘Staff Director’’ are included in Article I of the ByLaws. 33 See proposed Section 3.6(h)(iv) of the By-Laws; see also 15 U.S.C. 19(a)(1), which generally provides that ‘‘[n]o person shall, at the same time, serve as a director or officer in any two corporations’’ that are ‘‘competitors’’ such that ‘‘the elimination of competition by agreement between them would constitute a violation of any of the antitrust laws.’’ 34 See proposed Section 3.6(h)(v) of the By-Laws. 35 See proposed Section 3.6(h)(vi) of the By-Laws; see also 17 CFR 230.506(d), which generally disqualifies offerings involving certain felons and other bad actors from relying on the ‘‘safe harbor’’ in Rule 506 of Regulation D from registration under the Securities Act of 1933, as amended. 36 See proposed Section 3.6(h)(vii) of the ByLaws; see also 15 U.S.C. 78c(a)(39), which disqualifies certain categories of individuals who generally have engaged in misconduct from membership or participation in, or association with a member of, a self-regulatory organization. 37 See proposed Section 3.6(h)(viii) of the ByLaws. 38 See proposed Section 3.6(h)(ix) of the By-Laws. PO 00000 Frm 00135 Fmt 4703 Sfmt 4703 stockholders shall declare a proxy access nomination invalid, and such nomination shall be disregarded even if proxies in respect of such nomination have been received by the Company, if: • The Stockholder Nominee(s) and/or the applicable Eligible Stockholder have breached its or their obligations under the proxy access provision of the ByLaws, as determined by the Board or the chairman of the meeting of stockholders, in each case, in its or his sole discretion; or • the Eligible Stockholder (or a qualified representative thereof) does not appear at the meeting of stockholders to present the proxy access nomination. Nasdaq believes this provision protects the Company and its stockholders by providing the Board or the chairman of the stockholder meeting limited authority to disqualify a proxy access nominee when that nominee or the sponsoring stockholder(s) have breached an obligation under the proxy access provision, including the obligation to appear at the stockholder meeting to present the proxy access nomination. Proposed Section 3.6(j) of the By-Laws Proposed Section 3.6(j) states that the following Stockholder Nominees who are included in the Company’s proxy materials for a particular annual meeting of stockholders will be ineligible to be a Stockholder Nominee for the next two annual meetings: • A Stockholder Nominee who withdraws from or becomes ineligible or unavailable for election at the annual meeting; or • a Stockholder Nominee who does not receive at least 25% of the votes cast in favor of such Stockholder Nominee’s election. This provision will save the Company and its stockholders the time and expense of analyzing and addressing subsequent proxy access nominations regarding individuals who were included in the proxy materials for a particular annual meeting but ultimately did not stand for election or receive a substantial amount of votes. After the next two annual meetings, these Stockholder Nominees would again be eligible for nomination through the proxy access provisions of the By-Laws. Proposed Section 3.6(k) of the By-Laws In case there are matters involving a proxy access nomination that are open to interpretation, proposed Section 3.6(k) states that the Board (or any other person or body authorized by the Board) shall have exclusive power and authority to interpret the proxy access E:\FR\FM\05OCN1.SGM 05OCN1 Federal Register / Vol. 81, No. 193 / Wednesday, October 5, 2016 / Notices provisions of the By-Laws and make all determinations deemed necessary or advisable as to any person, facts or circumstances. In addition, all actions, interpretations and determinations of the Board (or any person or body authorized by the Board) with respect to the proxy access provisions shall be final, conclusive and binding on the Company, the stockholders and all other parties. While Nasdaq has attempted to implement a clear, detailed and thorough proxy access provision, there may be matters about future proxy access nominations that are open to interpretation. In these cases, Nasdaq believes it is reasonable and necessary to designate an arbiter to make final decisions on these points and that the Board is best-suited to act as that arbiter. Proposed Section 3.6(l) of the By-Laws Proposed Section 3.6(l) prohibits a stockholder from joining more than one group of stockholders to become an Eligible Stockholder for purposes of submitting a proxy access nomination for each annual meeting of stockholders. Nasdaq analogizes this provision to Article IV, Paragraph C(1) of its Amended and Restated Certificate of Incorporation, under which each holder of Nasdaq’s common stock shall be entitled to one vote per share on all matters presented to the stockholders for a vote. Similar to that provision, Nasdaq believes it is reasonable for each share to count only once in submitting a proxy access nomination. asabaliauskas on DSK3SPTVN1PROD with NOTICES Proposed Section 3.6(m) of the By-Laws For the avoidance of doubt, proposed Section 3.6(m) states that the proxy access provisions outlined in Section 3.6 of the By-Laws shall be the exclusive means for stockholders to include nominees in the Company’s proxy materials. Stockholders may, of course, continue to propose nominees to the Committee and Board through other means, but the Committee and Board will have final authority to determine whether to include those nominees in the Company’s proxy materials. Revisions to Other Sections of the ByLaws Nasdaq also proposes to make conforming changes to Sections 3.1(a), 3.3(a), 3.3(c) and 3.5 of the By-Laws to provide clarifications and prevent confusion. Specifically, current Section 3.1(a) enumerates the methods by which nominations of persons for election to the Board may be made at an annual meeting of stockholders; Nasdaq proposes to add proxy access nominations to the list of methods. Current Section 3.3(a) specifies that, VerDate Sep<11>2014 18:15 Oct 04, 2016 Jkt 241001 among other things, only such persons who are nominated in accordance with the procedures set forth in Article III of the By-Laws 39 shall be eligible to be elected at an annual or special meeting of Nasdaq’s stockholders to serve as directors; for the avoidance of doubt, Nasdaq proposes to clarify that the reference to Article III includes the proxy access provision in Section 3.6 of the By-Laws with respect to director nominations in connection with annual meetings. Current Section 3.3(c) states, among other things, that compliance with Section 3.1(a)(iii) and (b) 40 shall be the exclusive means for a stockholder to make a director nomination; Nasdaq proposes to add proxy access as an additional means for a stockholder to make a director nomination. Finally, current Section 3.5 requires Nasdaq’s director nominees to submit to Nasdaq’s Corporate Secretary a questionnaire, representation and agreement within certain time periods; Nasdaq proposes to clarify that proxy access nominees must submit these materials within the time periods prescribed for delivery of a Notice of Proxy Access Nomination, as described above. 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act,41 in general, and furthers the objectives of Section 6(b)(5) of the Act,42 in particular, in that it is designed to promote just and equitable principles of trade, 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. In response to feedback from its investors, Nasdaq is proposing changes to its By-Laws to implement proxy access. The Exchange believes that, by permitting an Eligible Stockholder of Nasdaq that meets the stated requirements to nominate directors and have its nominees included in Nasdaq’s annual meeting proxy statement, the proposed rule change strengthens the corporate governance of the Exchange’s ultimate parent company, which is beneficial to both investors and the public interest. In drafting its proxy access provision, Nasdaq has attempted to strike an appropriate balance between responding 39 Article III of the By-Laws relates to stockholder meetings. 40 As part of Nasdaq’s ‘‘advance notice’’ provision, Sections 3.1(a)(iii) and (b) of the By-Laws describe certain procedures that a stockholder must follow to, among other things, nominate a person for election to the Board. 41 15 U.S.C. 78f(b). 42 15 U.S.C. 78f(b)(5). PO 00000 Frm 00136 Fmt 4703 Sfmt 4703 69171 to investor feedback and including certain procedural and informational requirements for the protection of the Company and its investors. Specifically, the procedural requirements will protect investors by stating clearly and explicitly the procedures stockholders must follow in order to submit a proper proxy access nomination. The informational requirements will enhance investor protection by ensuring, among other things, that the Company and its stockholders have full and accurate information about nominating stockholders and their nominees and that such stockholders and nominees comply with applicable laws, regulations and other requirements. Finally, the remaining changes are clarifying in nature, and they enhance investor protection and the public interest by preventing confusion with respect to the operation of the By-Law provisions. B. Self-Regulatory Organization’s Statement on Burden on Competition Because the proposed rule change relates to the governance of the Company and not to the operations of the Exchange, the Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were either solicited or received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 45 days of the date of publication of this notice in the Federal Register or within such longer period (i) as the Commission may designate up to 90 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the Exchange consents, the Commission shall: (a) By order approve or disapprove such proposed rule change, or (b) institute proceedings to determine whether the proposed rule change should be disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: E:\FR\FM\05OCN1.SGM 05OCN1 69172 Federal Register / Vol. 81, No. 193 / Wednesday, October 5, 2016 / Notices 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– ISEGemini–2016–10 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. asabaliauskas on DSK3SPTVN1PROD with NOTICES All submissions should refer to File Number SR–ISEGemini–2016–10. 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– ISEGemini–2016–10 and should be submitted on or before October 26, 2016. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.43 Robert W. Errett, Deputy Secretary. [FR Doc. 2016–24003 Filed 10–4–16; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–78988; File No. SR– BatsEDGX–2016–41] Self-Regulatory Organizations; Bats EDGX Exchange, Inc.; Notice of Filing of a Proposed Rule Change Related to the Exchange’s Equity Options Platform To Adopt a Price Improvement Auction, the Bats Auction Mechanism September 29, 2016. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1, and Rule 19b–4 thereunder,2 notice is hereby given that on September 16, 2016, Bats EDGX Exchange, Inc. (the ‘‘Exchange’’ or ‘‘EDGX’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange filed a proposal for the Exchange’s equity options platform (‘‘EDGX Options’’) to adopt a price improvement auction, the Bats Auction Mechanism, as further discussed below. The text of the proposed rule change is available at the Exchange’s Web site at www.batstrading.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in Sections A, B, and C below, of the most significant parts of such statements. 1 15 43 17 CFR 200.30–3(a)(12). VerDate Sep<11>2014 18:15 Oct 04, 2016 2 17 Jkt 241001 PO 00000 U.S.C. 78s(b)(1). CFR 240.19b–4. Frm 00137 Fmt 4703 Sfmt 4703 A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose Overview The purpose of the proposed rule change is to establish a price improvement auction, the Bats Auction Mechanism (‘‘BAM’’, ‘‘BAM Auction’’, or ‘‘Auction’’) on the Exchange. BAM includes functionality in which a Member (an ‘‘Initiating Member’’) may electronically submit for execution an order it represents as agent on behalf of a Priority Customer,3 broker dealer, or any other person or entity (‘‘Agency Order’’) against principal interest or against any other order it represents as agent (an ‘‘Initiating Order’’) provided it submits the Agency Order for electronic execution into the BAM Auction pursuant to the proposed Rule. For purposes of this filing and the proposed Rule, the term ‘‘NBBO’’ shall mean the national best bid or national best offer at the particular point in time applicable to the reference and the term ‘‘Initial NBBO’’ shall mean the national best bid or national best offer at the time an Auction is initiated. The Exchange believes that the BAM Auction, as proposed herein, will encourage participants on EDGX Options to quote or display orders at the NBBO with additional size and thereby result in tighter and deeper markets, resulting in more liquidity on EDGX Options. Specifically, by offering all EDGX Options participants (‘‘Users’’) the ability to receive priority in the proposed allocation during the BAM Auction up to the size of their quote, an EDGX User will be encouraged to maintain quotes or orders with additional size outside of the BAM Auction at the best and most aggressive prices. The Exchange believes that this incentive may result in a narrowing of quotes and thus further enhance EDGX’s market quality. Within the BAM Auction, EDGX believes that the rules that are proposed will encourage EDGX Users to compete vigorously to provide the opportunity for price improvement in a competitive auction process. 3 The term ‘‘Priority Customer’’ means any person or entity that is not: (A) a broker or dealer in securities; or (B) a Professional. The term ‘‘Priority Customer Order’’ means an order for the account of a Priority Customer. See Rule 16.1(a)(45). A ‘‘Professional’’ is any person or entity that: (A) is not a broker or dealer in securities; and (B) places more than 390 orders in listed options per day on average during a calendar month for its own beneficial account(s). All Professional orders shall be appropriately marked by Options Members. See Rule 16.1(a)(46). E:\FR\FM\05OCN1.SGM 05OCN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 81, Number 193 (Wednesday, October 5, 2016)]
[Notices]
[Pages 69165-69172]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-24003]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78981; File No. SR-ISEGemini-2016-10]


Self-Regulatory Organizations; ISE Gemini, LLC; Notice of Filing 
of Proposed Rule Change To Amend the By-Laws of Nasdaq, Inc. To 
Implement Proxy Access

September 29, 2016.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on September 15, 2016, ISE Gemini, LLC (``ISE Gemini'') or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I, II, and III, below, which Items have been prepared by the 
Exchange. The Commission is publishing this notice to solicit comments 
on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is filing this proposed rule change with respect to 
amendments of the By-Laws (the ``By-Laws'') of its parent corporation, 
Nasdaq, Inc. (``Nasdaq'' or the ``Company''), to implement proxy 
access. The proposed amendments will be implemented on a date 
designated by the Company following approval by the Commission. The 
text of the proposed rule change is available on the Exchange's Web 
site at www.ise.com, at the principal office of the Exchange, and at 
the Commission's Public Reference Room.

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

    In its filing with the Commission, the 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

[[Page 69166]]

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 aspects of such statements.

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

1. Purpose
Background
    At Nasdaq's 2016 annual meeting held on May 5, 2016, Nasdaq's 
stockholders considered a stockholder proposal submitted under Rule 
14a-8 under the Act.\3\ The proposal, which passed with 73.52% of the 
votes cast, requested that Nasdaq's Board of Directors (the ``Board'') 
take steps to implement a ``proxy access'' by-law. Proxy access by-laws 
allow a stockholder, or group of stockholders, who comply with certain 
requirements, to nominate candidates for service on a board and have 
those candidates included in a company's proxy materials. Such 
provisions allow stockholders to nominate candidates without 
undertaking the expense of a proxy solicitation.
---------------------------------------------------------------------------

    \3\ See 17 CFR 240.14a-8, which establishes procedures pursuant 
to which stockholders of a public company may have their proposals 
placed alongside management's proposals in the company's proxy 
materials for presentation to a vote at a meeting of stockholders.
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    Following the 2016 annual meeting, the Nominating & Governance 
Committee (the ``Committee'') of the Board and the Board reviewed the 
voting results on the stockholder proposal and discussed proxy access 
generally. The Committee ultimately recommended to the Board, and the 
Board approved, certain changes to Nasdaq's By-Laws to implement proxy 
access. Nasdaq now proposes to make these changes by adopting new 
Section 3.6 of the By-Laws and making certain conforming changes to 
current Sections 3.1, 3.3 and 3.5 of the By-Laws, all of which are 
described further below.
    In developing its proposal, Nasdaq has generally tried to balance 
the relative weight of arguments for and against proxy access 
provisions. On the one hand, Nasdaq recognizes the significance of this 
issue to some investors, who see proxy access as an important 
accountability mechanism that allows them to participate in board 
elections through the nomination of stockholder candidates that are 
presented in a company's proxy statement. On the other hand, Nasdaq's 
proposed proxy access provision includes certain procedural 
requirements that ensure, among other things, that the Company and its 
stockholders will have full and accurate information about nominating 
stockholders and their nominees and that such stockholders and nominees 
will comply with applicable laws, regulations and other requirements.
Proposed Section 3.6(a) of the By-Laws
    To respond to feedback from its stockholders, Nasdaq proposes to 
amend its By-Laws to, as set forth in the first sentence of proposed 
Section 3.6(a), require the Company to include in its proxy statement, 
its form proxy and any ballot distributed at the stockholder meeting, 
the name of, and certain Required Information \4\ about, any person 
nominated for election (the ``Stockholder Nominee'') to the Board by a 
stockholder or group of stockholders (the ``Eligible Stockholder'') \5\ 
that satisfies the requirements set forth in the proxy access provision 
of Nasdaq's By-Laws.\6\ To utilize this provision, the Eligible 
Stockholder must expressly elect at the time of providing a required 
notice to the Company of the proxy access nomination (the ``Notice of 
Proxy Access Nomination'') to have its nominee included in the 
Company's proxy materials. Stockholders will be eligible to submit 
proxy access nominations only at annual meetings of stockholders when 
the Board solicits proxies with respect to the election of directors.
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    \4\ The Required Information is the information provided to 
Nasdaq's Corporate Secretary about the Stockholder Nominee and the 
Eligible Stockholder that is required to be disclosed in the 
Company's proxy statement by the regulations promulgated under the 
Act, and if the Eligible Stockholder so elects, a written statement, 
not to exceed 500 words, in support of the Stockholder Nominee(s)' 
candidacy (the ``Statement'').
    \5\ As used throughout Nasdaq's By-Laws, the term ``Eligible 
Stockholder'' includes each member of a stockholder group that 
submits a proxy access nomination to the extent the context 
requires.
    \6\ When the Company includes proxy access nominees in the proxy 
materials, such individuals will be included in addition to any 
persons nominated for election to the Board or any committee 
thereof.
---------------------------------------------------------------------------

    The next two sentences of Section 3.6(a) provide some additional 
clarification on the term ``Eligible Stockholder.'' First, in 
calculating the number of stockholders in a group seeking to qualify as 
an Eligible Stockholder, two or more of the following types of funds 
shall be counted as one stockholder: (i) Funds under common management 
and investment control, (ii) funds under common management and funded 
primarily by the same employer, or (iii) funds that are a ``group of 
investment companies'' as such term is defined in Section 
12(d)(1)(G)(ii) of the Investment Company Act of 1940, as amended.\7\ 
Nasdaq views this as a stockholder-friendly provision that will make it 
easier for such funds to participate in a proxy access nomination since 
they will not have to comply with the procedural requirements in the 
proxy access provision multiple times. Second, in the event that the 
Eligible Stockholder consists of a group of stockholders, any and all 
requirements and obligations for an individual Eligible Stockholder 
shall apply to each member of the group, except that the Required 
Ownership Percentage (discussed further below) shall apply to the 
ownership of the group in the aggregate. Generally, the applicable 
requirements and obligations relate to information that each member of 
the nominating group must provide to Nasdaq about itself, as discussed 
further below. Nasdaq believes it is reasonable to require each member 
of the nominating group to provide such information so that both the 
Company and its stockholders are fully informed about the entire group 
making the proxy access nomination.
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    \7\ See 15 U.S.C. 80a-12(d)(1)(G)(ii), which defines ``group of 
investment companies'' as any two or more registered investment 
companies that hold themselves out to investors as related companies 
for purposes of investment and investor services.
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    The final sentence of proposed Section 3.6(a) allows Nasdaq to omit 
from its proxy materials any information or Statement (or portion 
thereof) that it, in good faith, believes is untrue in any material 
respect (or omits to state a material fact necessary in order to make 
the statements made, in light of the circumstances under which they are 
made, not misleading) or would violate any applicable law or 
regulation. This provision allows Nasdaq to comply with Rule 14a-9 
under the Act \8\ and to protect its stockholders from information that 
is materially untrue or that violates any law or regulation. The final 
sentence of proposed Section 3.6(a) also explicitly allows Nasdaq to 
solicit against, and include in the proxy statement its own statement 
relating to, any Stockholder Nominee. This provision merely clarifies 
that just because Nasdaq must include a proxy access nominee in its 
proxy materials if the proxy access provisions are

[[Page 69167]]

satisfied, Nasdaq does not necessarily have to support that nominee.
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    \8\ See 17 CFR 240.14a-9, which generally prohibits proxy 
solicitations that contain any statement which, at the time and in 
the light of the circumstances under which it is made, is false or 
misleading with respect to any material fact, or which omits to 
state any material fact necessary in order to make the statements 
therein not false or misleading.
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Proposed Section 3.6(b) of the By-Laws
    Proposed Section 3.6(b) of the By-Laws establishes the deadline for 
a timely Notice of Proxy Access Nomination. Specifically, such a notice 
must be addressed to, and received by, Nasdaq's Corporate Secretary no 
earlier than one hundred fifty (150) days and no later than one hundred 
twenty (120) days before the anniversary of the date that Nasdaq issued 
its proxy statement for the previous year's annual meeting of 
stockholders. The Company believes this notice period will provide 
stockholders an adequate window to submit nominees via proxy access, 
while also providing the Company adequate time to diligence [sic] a 
proxy access nominee before including them in the proxy statement for 
the next annual meeting of stockholders.
Proposed Section 3.6(c) of the By-Laws
    Proposed Section 3.6(c) specifies that the maximum number of 
Stockholder Nominees nominated by all Eligible Stockholders that will 
be included in Nasdaq's proxy materials with respect to an annual 
meeting of stockholders shall not exceed the greater of two and 25% of 
the total number of directors in office (rounded down to the nearest 
whole number) as of the last day on which a Notice of Proxy Access 
Nomination may be delivered pursuant to and in accordance with the 
proxy access provision of the By-Laws (the ``Final Proxy Access 
Nomination Date''). In the event that one or more vacancies for any 
reason occurs after the Final Proxy Access Nomination Date but before 
the date of the annual meeting and the Board resolves to reduce the 
size of the Board in connection therewith, the maximum number of 
Stockholder Nominees included in Nasdaq's proxy materials shall be 
calculated based on the number of directors in office as so reduced. 
Any individual nominated by an Eligible Stockholder for inclusion in 
the proxy materials pursuant to the proxy access provision of the By-
Laws whom the Board decides to nominate as a nominee of the Board, and 
any individual nominated by an Eligible Stockholder for inclusion in 
the proxy materials pursuant to the proxy access provision but whose 
nomination is subsequently withdrawn, shall be counted as one of the 
Stockholder Nominees for purposes of determining when the maximum 
number of Stockholder Nominees has been reached.
    Any Eligible Stockholder submitting more than one Stockholder 
Nominee for inclusion in the proxy materials shall rank such 
Stockholder Nominees based on the order that the Eligible Stockholder 
desires such Stockholder Nominees to be selected for inclusion in the 
proxy statement in the event that the total number of Stockholder 
Nominees submitted by Eligible Stockholders pursuant to the proxy 
access provision exceeds the maximum number of nominees allowed. In the 
event that the number of Stockholder Nominees submitted by Eligible 
Stockholders exceeds the maximum number of nominees allowed, the 
highest ranking Stockholder Nominee who meets the requirements of the 
proxy access provision of the By-Laws from each Eligible Stockholder 
will be selected for inclusion in the proxy materials until the maximum 
number is reached, going in order of the amount (largest to smallest) 
of shares of Nasdaq's outstanding common stock each Eligible 
Stockholder disclosed as owned in its respective Notice of Proxy Access 
Nomination submitted to Nasdaq. If the maximum number is not reached 
after the highest ranking Stockholder Nominee who meets the 
requirements of the proxy access provision of the By-Laws from each 
Eligible Stockholder has been selected, this process will continue as 
many times as necessary, following the same order each time, until the 
maximum number is reached. Following such determination, if any 
Stockholder Nominee who satisfies the eligibility requirements 
thereafter is nominated by the Board, or is not included in the proxy 
materials or is not submitted for election as a director, in either 
case, as a result of the Eligible Stockholder becoming ineligible or 
withdrawing its nomination, the Stockholder Nominee becoming unwilling 
or unable to serve on the Board or the Eligible Stockholder or the 
Stockholder Nominee failing to comply with the proxy access provision 
of the By-Laws, no other nominee or nominees shall be included in the 
proxy materials or otherwise submitted for director election in 
substitution thereof.
    The Company believes it is reasonable to limit the Board seats 
available to proxy access nominees, to establish procedures for 
selecting candidates if the nominee limit is exceeded and to exclude 
further proxy access nominees in the cases set forth above. The 
limitation on Board seats available to proxy access nominees ensures 
that proxy access cannot be used to take over the entire Board, which 
is not the stated purpose of proxy access campaigns. The procedures for 
selecting candidates if the nominee limit is exceeded establish clear 
and rational guidelines for an orderly nomination process to avoid the 
Company having to make arbitrary judgments among candidates. Finally, 
the exclusion of further proxy access nominees in certain cases will 
avoid further time and expense to the Company when the proxy access 
nominee has been nominated by the Board, in which case the goal of the 
proxy access nomination has been achieved, or in certain cases when the 
Eligible Stockholder or Stockholder Nominee is at fault.
Proposed Section 3.6(d) of the By-Laws
    Proposed Section 3.6(d) clarifies, for the avoidance of doubt, how 
``ownership'' will be defined for purposes of meeting the Required 
Ownership Percentage (discussed further below). Specifically, an 
Eligible Stockholder shall be deemed to ``own'' only those outstanding 
shares of Nasdaq's common stock as to which the stockholder possesses 
both: (i) The full voting and investment rights pertaining to the 
shares; and (ii) the full economic interest in (including the 
opportunity for profit from and risk of loss on) such shares; provided 
that the number of shares calculated in accordance with clauses (i) and 
(ii) shall not include any shares:
     Sold by such stockholder or any of its affiliates in any 
transaction that has not been settled or closed, including any short 
sale;
     borrowed by such stockholder or any of its affiliates for 
any purposes or purchased by such stockholder or any of its affiliates 
pursuant to an agreement to resell; or
     subject to any option, warrant, forward contract, swap, 
contract of sale, other derivative or similar agreement entered into by 
such stockholder or any of its affiliates, whether any such instrument 
or agreement is to be settled with shares or with cash based on the 
notional amount or value of shares of Nasdaq's outstanding common 
stock, in any such case which instrument or agreement has, or is 
intended to have, or if exercised by either party would have, the 
purpose or effect of:
    [cir] Reducing in any manner, to any extent or at any time in the 
future, such stockholder's or its affiliates' full right to vote or 
direct the voting of any such shares; and/or
    [cir] hedging, offsetting or altering to any degree any gain or 
loss realized or realizable from maintaining the full economic 
ownership of such shares by such stockholder or its affiliates.
    Further, a stockholder shall ``own'' shares held in the name of a 
nominee or other intermediary so long as the stockholder retains the 
right to instruct

[[Page 69168]]

how the shares are voted with respect to the election of directors and 
possesses the full economic interest in the shares. A stockholder's 
ownership of shares shall be deemed to continue during any period in 
which the stockholder has delegated any voting power by means of a 
proxy, power of attorney or other instrument or arrangement which is 
revocable at any time by the stockholder. A stockholder's ownership of 
shares shall be deemed to continue during any period in which the 
stockholder has loaned such shares provided that the stockholder has 
the power to recall such loaned shares on three (3) business days' 
notice, has recalled such loaned shares as of the date of the Notice of 
Proxy Access Nomination and holds such shares through the date of the 
annual meeting. The terms ``owned,'' ``owning'' and other variations of 
the word ``own'' shall have correlative meanings. Whether outstanding 
shares of Nasdaq's common stock are ``owned'' for these purposes shall 
be determined by the Board or any committee thereof, in each case, in 
its sole discretion. For purposes of the proxy access provision of the 
By-Laws, the term ``affiliate'' or ``affiliates'' shall have the 
meaning ascribed thereto under the rules and regulations of the Act.\9\ 
An Eligible Stockholder shall include in its Notice of Proxy Access 
Nomination the number of shares it is deemed to own for the purposes of 
the proxy access provision of the By-Laws.
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    \9\ Pursuant to Rule 12b-2 under the Act, ``[a]n `affiliate' of, 
or a person `affiliated' with, a specified person, is a person that 
directly, or indirectly through one or more intermediaries, 
controls, or is controlled by, or is under common control with, the 
person specified.'' 17 CFR 240.12b-2. Further, ``[t]he term 
`control' (including the terms `controlling,' `controlled by' and 
`under common control with') means the possession, direct or 
indirect, of the power to direct or cause the direction of the 
management and policies of a person, whether through the ownership 
of voting securities, by contract, or otherwise.'' 17 CFR 240.12b-2.
---------------------------------------------------------------------------

Proposed Section 3.6(e) of the By-Laws
    The first paragraph of proposed Section 3.6(e) establishes certain 
requirements for an Eligible Stockholder to make a proxy access 
nomination. Specifically, an Eligible Stockholder must have owned 
(defined as discussed above) 3% or more (the ``Required Ownership 
Percentage'') of Nasdaq's outstanding common stock (the ``Required 
Shares'') continuously for 3 years (the ``Minimum Holding Period'') as 
of both the date the Notice of Proxy Access Nomination is received by 
Nasdaq's Corporate Secretary and the record date for determining the 
stockholders entitled to vote at the annual meeting and must continue 
to own the Required Shares through the meeting date.
    Proposed Section 3.6(e) also sets forth the information that an 
Eligible Stockholder must provide to Nasdaq's Corporate Secretary in 
writing within the deadline discussed above in order to make a proxy 
access nomination. This information includes:
     One or more written statements from the record holder of 
the shares (and from each intermediary through which the shares are or 
have been held during the Minimum Holding Period) verifying that, as of 
a date within seven calendar days prior to the date the Notice of Proxy 
Access Nomination is delivered to, or mailed to and received by, 
Nasdaq's Corporate Secretary, the Eligible Stockholder owns, and has 
owned continuously for the Minimum Holding Period, the Required Shares, 
and the Eligible Stockholder's agreement to provide, within five (5) 
business days after the record date for the annual meeting, written 
statements from the record holder and intermediaries verifying the 
Eligible Stockholder's continuous ownership of the Required Shares 
through the record date; \10\
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    \10\ See proposed Section 3.6(e)(i) of the By-Laws.
---------------------------------------------------------------------------

     a copy of the Schedule 14N that has been filed with the 
SEC as required by Rule 14a-18 under the Act; \11\
---------------------------------------------------------------------------

    \11\ See proposed Section 3.6(e)(ii) of the By-Laws; see also 17 
CFR 240.14n-101 and 17 CFR 240.14a-18, which generally require a 
Nominating Stockholder to provide notice to the Company of its 
intent to submit a proxy access nomination on a Schedule 14N and 
file that notice, including the required disclosure, with the 
Commission on the date first transmitted to the Company.
---------------------------------------------------------------------------

     the information, representations and agreements with 
respect to the Eligible Stockholder that are the same as those that 
would be required to be set forth in a stockholder's notice of 
nomination with respect to a ``Proposing Person'' pursuant to Section 
3.1(b)(i) and Section 3.1(b)(iii) of the By-Laws; \12\
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    \12\ See proposed Section 3.6(e)(iii) of the By-Laws; see also 
Sections 3.1(b)(i) and 3.1(b)(iii) of the By-Laws, which constitute 
part of Nasdaq's ``advance notice'' provision under which a 
``Proposing Person'' may, among other things, nominate a person for 
election to the Board.
---------------------------------------------------------------------------

     the consent of each Stockholder Nominee to being named in 
the proxy statement as a nominee and to serving as a director if 
elected; \13\
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    \13\ See proposed Section 3.6(e)(iv) of the By-Laws.
---------------------------------------------------------------------------

     a representation that the Eligible Stockholder:
    [cir] Acquired the Required Shares in the ordinary course of 
business and not with the intent to change or influence control of 
Nasdaq, and does not presently have such intent; \14\
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    \14\ See proposed Section 3.6(e)(v)(A) of the By-Laws.
---------------------------------------------------------------------------

    [cir] presently intends to maintain qualifying ownership of the 
Required Shares through the date of the annual meeting; \15\
---------------------------------------------------------------------------

    \15\ See proposed Section 3.6(e)(v)(B) of the By-Laws.
---------------------------------------------------------------------------

    [cir] has not nominated and will not nominate for election any 
individual as a director at the annual meeting, other than its 
Stockholder Nominee(s); \16\
---------------------------------------------------------------------------

    \16\ See proposed Section 3.6(e)(v)(C) of the By-Laws.
---------------------------------------------------------------------------

    [cir] has not engaged and will not engage in, and has not and will 
not be a participant in another person's, ``solicitation'' within the 
meaning of Rule 14a-1(l) under the Act in support of the election of 
any individual as a director at the annual meeting, other than its 
Stockholder Nominee(s) or a nominee of the Board; \17\
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    \17\ See proposed Section 3.6(e)(v)(D) of the By-Laws; see also 
17 CFR 240.14a-1(l), which defines the related terms ``solicit'' and 
``solicitation.''
---------------------------------------------------------------------------

    [cir] agrees to comply with all applicable laws and regulations 
with respect to any solicitation in connection with the meeting or 
applicable to the filing and use, if any, of soliciting material; \18\
---------------------------------------------------------------------------

    \18\ See proposed Section 3.6(e)(v)(E) of the By-Laws.
---------------------------------------------------------------------------

    [cir] will provide facts, statements and other information in all 
communications with Nasdaq and its stockholders that are or will be 
true and correct in all material respects and do not and will not omit 
to state a material fact necessary in order to make the statements 
made, in light of the circumstances under which they were made, not 
misleading; \19\ and
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    \19\ See proposed Section 3.6(e)(v)(F) of the By-Laws.
---------------------------------------------------------------------------

    [cir] as to any two or more funds whose shares are aggregated to 
count as one stockholder for the purpose of constituting an Eligible 
Stockholder, within five business days after the date of the Notice of 
Proxy Access Nomination, will provide to Nasdaq documentation 
reasonably satisfactory to Nasdaq that demonstrates that the funds 
satisfy the requirements in the By-Laws, which were discussed above, 
for the funds to qualify as one Eligible Stockholder; \20\
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    \20\ See proposed Section 3.6(e)(v)(G) of the By-Laws.
---------------------------------------------------------------------------

     a representation as to the Eligible Stockholder's 
intentions with respect to maintaining qualifying ownership of the 
Required Shares for at least one year following the annual meeting; 
\21\
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    \21\ See proposed Section 3.6(e)(vi) of the By-Laws.
---------------------------------------------------------------------------

     an undertaking that the Eligible Stockholder agrees to:

[[Page 69169]]

    [cir] Assume all liability stemming from any legal or regulatory 
violation arising out of the Eligible Stockholder's communications with 
Nasdaq's stockholders or out of the information that the Eligible 
Stockholder provided to Nasdaq; \22\
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    \22\ See proposed Section 3.6(e)(vii)(A) of the By-Laws.
---------------------------------------------------------------------------

    [cir] indemnify and hold harmless Nasdaq and each of its directors, 
officers and employees individually against any liability, loss or 
damages in connection with any threatened or pending action, suit or 
proceeding, whether legal, administrative or investigative, against 
Nasdaq or any of its directors, officers or employees arising out of 
any nomination submitted by the Eligible Stockholder pursuant to the 
proxy access provision; \23\ and
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    \23\ See proposed Section 3.6(e)(vii)(B) of the By-Laws.
---------------------------------------------------------------------------

    [cir] file with the SEC any solicitation or other communication 
with Nasdaq's stockholders relating to the meeting at which the 
Stockholder Nominee will be nominated, regardless of whether any such 
filing is required under Regulation 14A of the Act or whether any 
exemption from filing is available thereunder; \24\ and
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    \24\ See proposed Section 3.6(e)(vii)(C) of the By-Laws; see 
also 17 CFR 240.14a-1--14b-2, which governs solicitations of 
proxies.
---------------------------------------------------------------------------

     in the case of a nomination by a group of stockholders 
that together is an Eligible Stockholder, the designation by all group 
members of one group member that is authorized to act on behalf of all 
such members with respect to the nomination and matters related 
thereto, including withdrawal of the nomination.\25\
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    \25\ See proposed Section 3.6(e)(viii) of the By-Laws.
---------------------------------------------------------------------------

    In proposing the Required Ownership Percentage and the Minimum 
Holding Period, Nasdaq seeks to ensure that the Eligible Stockholder 
has had a sufficient stake in the Company for a sufficient amount of 
time and is not pursuing a short-term agenda. In proposing the 
informational requirements for the Eligible Stockholder, Nasdaq's goal 
is to gather sufficient information about the Eligible Stockholder for 
both itself and its stockholders. Among other things, this information 
will ensure that Nasdaq is able to comply with its disclosure and other 
requirements under applicable law and that Nasdaq, its Board and its 
stockholders are able to assess the proxy access nomination adequately.
Proposed Section 3.6(f) of the By-Laws
    Proposed Section 3.6(f) establishes the information the Stockholder 
Nominee must deliver to Nasdaq's Corporate Secretary within the time 
period specified for delivering the Notice of Proxy Access Nomination. 
This information includes:
     The information required with respect to persons whom a 
stockholder proposes to nominate for election or reelection as a 
director by Section 3.1(b)(i) of the By-Laws \26\ including, but not 
limited to, the signed questionnaire, representation and agreement 
required by Section 3.1(b)(i)(D) of the By-Laws; \27\ and
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    \26\ Section 3.1(b)(i) of the By-Laws describes the information 
that a proposing stockholder must provide about an individual the 
stockholder proposes to nominate for election or reelection as a 
director pursuant to the ``advance notice'' provision of the By-
Laws.
    \27\ Section 3.1(b)(i)(D) of the By-Laws requires a completed 
and signed questionnaire, representation and agreement, each 
containing certain information, from each individual proposed to be 
nominated for election or reelection as a director pursuant to the 
``advance notice'' provision of the By-Laws.
---------------------------------------------------------------------------

     a written representation and agreement that such person:
    [cir] Will act as a representative of all of Nasdaq's stockholders 
while serving as a director; and
    [cir] will provide facts, statements and other information in all 
communications with Nasdaq and its stockholders that are or will be 
true and correct in all material respects (and shall not omit to state 
a material fact necessary in order to make the statements made, in 
light of the circumstances under which they were made, not misleading).
    In addition, at the request of Nasdaq, the Stockholder Nominee(s) 
must submit all completed and signed questionnaires required of 
Nasdaq's directors and officers. Nasdaq may request such additional 
information as necessary to (y) permit the Board to determine if each 
Stockholder Nominee satisfies the requirements of the proxy access 
provision of the By-Laws or if each Stockholder Nominee is independent 
under the listing standards of The NASDAQ Stock Market, any applicable 
rules of the SEC and any publicly disclosed standards used by the Board 
in determining and disclosing the independence of Nasdaq's directors 
\28\ and/or (z) permit Nasdaq's Corporate Secretary to determine the 
classification of such nominee as an Industry, Non-Industry, Issuer or 
Public Director, if applicable, in order to make the certification 
referenced in Section 4.13(h)(iii) of the By-Laws.\29\
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    \28\ Currently, the independence of Nasdaq's directors is 
determined pursuant to the definition of ``Independent Director'' in 
Listing Rule 5605(a)(2) of The NASDAQ Stock Market, under which 
certain categories of individuals cannot be deemed independent and 
with respect to other individuals, the Board must make an 
affirmative determination that such individual has no relationship 
that, in the opinion of the Board, would interfere with the exercise 
of independent judgment in carrying out the responsibilities of a 
director. Other independence standards under the SEC rules and the 
Listing Rules of The NASDAQ Stock Market apply to members of certain 
of the Board's committees. As detailed below, the Commission notes 
that, while additional, more stringent independence standards may be 
adopted by the Board in the future, as of the date of this Notice no 
such standards have been adopted by the Board.
    \29\ Section 4.13(h)(iii) of the By-Laws requires Nasdaq's 
Corporate Secretary to collect from each nominee for director such 
information as is reasonably necessary to serve as the basis for a 
determination of the nominee's classification as an Industry, Non-
Industry, Issuer, or Public Director, if applicable, and to certify 
to the Committee each nominee's classification, if applicable. 
Detailed definitions of the terms ``Industry Director,'' ``Non-
Industry Director,'' ``Issuer Director'' and ``Public Director'' are 
included in Article I of the By-Laws.
---------------------------------------------------------------------------

    Like the informational requirements for an Eligible Stockholder, 
which are set forth above, the informational requirements for the 
Stockholder Nominee ensure that both Nasdaq and its stockholders will 
have sufficient information about the Stockholder Nominee. Among other 
things, this information will ensure that Nasdaq is able to comply with 
its disclosure and other requirements under applicable law and that 
Nasdaq, its Board and its stockholders are able to assess the proxy 
access nomination adequately.
Proposed Section 3.6(g) of the By-Laws
    Pursuant to proposed Section 3.6(g), each Eligible Stockholder or 
Stockholder Nominee must promptly notify Nasdaq's Corporate Secretary 
of any information or communications provided by the Eligible 
Stockholder or Stockholder Nominee to Nasdaq or its stockholders that 
ceases to be true and correct in all material respects or omits a 
material fact necessary to make the statements made, in light of the 
circumstances under which they were made, not misleading and of the 
information that is required to correct any such defect. This provision 
further states that providing any such notification shall not be deemed 
to cure any defect or, with respect to any defect that Nasdaq 
determines is material, limit Nasdaq's rights to omit a Stockholder 
Nominee from its proxy materials. This provision is intended to protect 
Nasdaq's stockholders by requiring an Eligible Stockholder or 
Stockholder Nominee to give Nasdaq notice of information previously 
provided that is materially untrue. Nasdaq may then decide what action 
to take with respect to such defect, which may include, with respect to 
a material defect, omitting the relevant Stockholder Nominee from its 
proxy materials.

[[Page 69170]]

Proposed Section 3.6(h) of the By-Laws
    Proposed Section 3.6(h) provides that Nasdaq shall not be required 
to include a Stockholder Nominee in its proxy materials for any meeting 
of stockholders under certain circumstances. In these situations, the 
proxy access nomination shall be disregarded and no vote on such 
Stockholder Nominee will occur, even if Nasdaq has received proxies in 
respect of the vote. These circumstances occur when the Stockholder 
Nominee:
     Has been nominated by an Eligible Stockholder who has 
engaged in or is currently engaged in, or has been or is a participant 
in another person's, ``solicitation'' within the meaning of Rule 14a-
1(l) under the Act in support of the election of any individual as a 
director at the annual meeting other than its Stockholder Nominee(s) or 
a nominee of the Board; \30\
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    \30\ See proposed Section 3.6(h)(i) of the By-Laws; see also 17 
CFR 240.14a-1(l), which defines the related terms ``solicit'' and 
``solicitation.''
---------------------------------------------------------------------------

     is not independent under the listing standards of The 
NASDAQ Stock Market, any applicable rules of the SEC and any publicly 
disclosed standards used by the Board in determining and disclosing 
independence of Nasdaq's directors, in each case as determined by the 
Board in its sole discretion; \31\
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    \31\ See proposed Section 3.6(h)(ii) of the By-Laws; see also 
footnote 28, supra. The Commission notes that, while additional, 
more stringent independence standards may be adopted by the Board in 
the future, as of the date of this Notice no such standards have 
been adopted by the Board. The Commission further notes that, 
according to Nasdaq, should the Board decide to adopt additional, 
more stringent standards than those required under Nasdaq listing 
standards and any requirements under Commission rules, all director 
nominees would be evaluated against these standards--not just those 
shareholder candidates nominated under the provisions of proposed 
Section 3.6.
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     would, if elected as a member of the Board, cause Nasdaq 
to be in violation of the By-Laws (including but not limited to the 
compositional requirements of the Board set forth in Section 4.3 of the 
By-Laws), its Amended and Restated Certificate of Incorporation, the 
rules and listing standards of The NASDAQ Stock Market, or any 
applicable state or federal law, rule or regulation; \32\
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    \32\ See proposed Section 3.6(h)(iii) of the By-Laws; see also 
Section 4.3 of the By-Laws, which provides that the number of Non-
Industry Directors on the Board must equal or exceed the number of 
Industry Directors. In addition, the Board must include at least two 
Public Directors and may include at least one, but no more than two, 
Issuer Directors. Finally, the Board shall include no more than one 
Staff Director, unless the Board consists of ten or more directors, 
in which case, the Board shall include no more than two Staff 
Directors. Detailed definitions of the terms ``Non-Industry 
Director,'' ``Industry Director,'' ``Public Director,'' ``Issuer 
Director'' and ``Staff Director'' are included in Article I of the 
By-Laws.
---------------------------------------------------------------------------

     is or has been, within the past three (3) years, an 
officer or director of a competitor, as defined for purposes of Section 
8 of the Clayton Antitrust Act of 1914; \33\
---------------------------------------------------------------------------

    \33\ See proposed Section 3.6(h)(iv) of the By-Laws; see also 15 
U.S.C. 19(a)(1), which generally provides that ``[n]o person shall, 
at the same time, serve as a director or officer in any two 
corporations'' that are ``competitors'' such that ``the elimination 
of competition by agreement between them would constitute a 
violation of any of the antitrust laws.''
---------------------------------------------------------------------------

     is a named subject of a pending criminal proceeding 
(excluding traffic violations and other minor offenses) or has been 
convicted in such a criminal proceeding within the past ten (10) years; 
\34\
---------------------------------------------------------------------------

    \34\ See proposed Section 3.6(h)(v) of the By-Laws.
---------------------------------------------------------------------------

     is subject to any order of the type specified in Rule 
506(d) of Regulation D promulgated under the Securities Act of 1933, as 
amended; \35\
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    \35\ See proposed Section 3.6(h)(vi) of the By-Laws; see also 17 
CFR 230.506(d), which generally disqualifies offerings involving 
certain felons and other bad actors from relying on the ``safe 
harbor'' in Rule 506 of Regulation D from registration under the 
Securities Act of 1933, as amended.
---------------------------------------------------------------------------

     is subject to ``statutory disqualification'' under Section 
3(a)(39) of the Act; \36\
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    \36\ See proposed Section 3.6(h)(vii) of the By-Laws; see also 
15 U.S.C. 78c(a)(39), which disqualifies certain categories of 
individuals who generally have engaged in misconduct from membership 
or participation in, or association with a member of, a self-
regulatory organization.
---------------------------------------------------------------------------

     has, or the applicable Eligible Stockholder has, provided 
information to Nasdaq in respect of the proxy access nomination that 
was untrue in any material respect or omitted to state a material fact 
necessary in order to make the statements made, in light of the 
circumstances under which they were made, not misleading, as determined 
by the Board or any committee thereof, in each case, in its sole 
discretion; \37\ or
---------------------------------------------------------------------------

    \37\ See proposed Section 3.6(h)(viii) of the By-Laws.
---------------------------------------------------------------------------

     breaches or fails, or the applicable Eligible Stockholder 
breaches or fails, to comply with its obligations pursuant to the By-
Laws, including, but not limited to, the proxy access provisions and 
any agreement, representation or undertaking required by the proxy 
access provisions.\38\
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    \38\ See proposed Section 3.6(h)(ix) of the By-Laws.
---------------------------------------------------------------------------

    Nasdaq believes these provisions will protect the Company and its 
stockholders by allowing it to exclude certain categories of 
objectionable Stockholder Nominees from the proxy statement.
Proposed Section 3.6(i) of the By-Laws
    Under proposed Section 3.6(i), the Board or the chairman of the 
meeting of stockholders shall declare a proxy access nomination 
invalid, and such nomination shall be disregarded even if proxies in 
respect of such nomination have been received by the Company, if:
     The Stockholder Nominee(s) and/or the applicable Eligible 
Stockholder have breached its or their obligations under the proxy 
access provision of the By-Laws, as determined by the Board or the 
chairman of the meeting of stockholders, in each case, in its or his 
sole discretion; or
     the Eligible Stockholder (or a qualified representative 
thereof) does not appear at the meeting of stockholders to present the 
proxy access nomination.
    Nasdaq believes this provision protects the Company and its 
stockholders by providing the Board or the chairman of the stockholder 
meeting limited authority to disqualify a proxy access nominee when 
that nominee or the sponsoring stockholder(s) have breached an 
obligation under the proxy access provision, including the obligation 
to appear at the stockholder meeting to present the proxy access 
nomination.
Proposed Section 3.6(j) of the By-Laws
    Proposed Section 3.6(j) states that the following Stockholder 
Nominees who are included in the Company's proxy materials for a 
particular annual meeting of stockholders will be ineligible to be a 
Stockholder Nominee for the next two annual meetings:
     A Stockholder Nominee who withdraws from or becomes 
ineligible or unavailable for election at the annual meeting; or
     a Stockholder Nominee who does not receive at least 25% of 
the votes cast in favor of such Stockholder Nominee's election.
    This provision will save the Company and its stockholders the time 
and expense of analyzing and addressing subsequent proxy access 
nominations regarding individuals who were included in the proxy 
materials for a particular annual meeting but ultimately did not stand 
for election or receive a substantial amount of votes. After the next 
two annual meetings, these Stockholder Nominees would again be eligible 
for nomination through the proxy access provisions of the By-Laws.
Proposed Section 3.6(k) of the By-Laws
    In case there are matters involving a proxy access nomination that 
are open to interpretation, proposed Section 3.6(k) states that the 
Board (or any other person or body authorized by the Board) shall have 
exclusive power and authority to interpret the proxy access

[[Page 69171]]

provisions of the By-Laws and make all determinations deemed necessary 
or advisable as to any person, facts or circumstances. In addition, all 
actions, interpretations and determinations of the Board (or any person 
or body authorized by the Board) with respect to the proxy access 
provisions shall be final, conclusive and binding on the Company, the 
stockholders and all other parties. While Nasdaq has attempted to 
implement a clear, detailed and thorough proxy access provision, there 
may be matters about future proxy access nominations that are open to 
interpretation. In these cases, Nasdaq believes it is reasonable and 
necessary to designate an arbiter to make final decisions on these 
points and that the Board is best-suited to act as that arbiter.
Proposed Section 3.6(l) of the By-Laws
    Proposed Section 3.6(l) prohibits a stockholder from joining more 
than one group of stockholders to become an Eligible Stockholder for 
purposes of submitting a proxy access nomination for each annual 
meeting of stockholders. Nasdaq analogizes this provision to Article 
IV, Paragraph C(1) of its Amended and Restated Certificate of 
Incorporation, under which each holder of Nasdaq's common stock shall 
be entitled to one vote per share on all matters presented to the 
stockholders for a vote. Similar to that provision, Nasdaq believes it 
is reasonable for each share to count only once in submitting a proxy 
access nomination.
Proposed Section 3.6(m) of the By-Laws
    For the avoidance of doubt, proposed Section 3.6(m) states that the 
proxy access provisions outlined in Section 3.6 of the By-Laws shall be 
the exclusive means for stockholders to include nominees in the 
Company's proxy materials. Stockholders may, of course, continue to 
propose nominees to the Committee and Board through other means, but 
the Committee and Board will have final authority to determine whether 
to include those nominees in the Company's proxy materials.
Revisions to Other Sections of the By-Laws
    Nasdaq also proposes to make conforming changes to Sections 3.1(a), 
3.3(a), 3.3(c) and 3.5 of the By-Laws to provide clarifications and 
prevent confusion. Specifically, current Section 3.1(a) enumerates the 
methods by which nominations of persons for election to the Board may 
be made at an annual meeting of stockholders; Nasdaq proposes to add 
proxy access nominations to the list of methods. Current Section 3.3(a) 
specifies that, among other things, only such persons who are nominated 
in accordance with the procedures set forth in Article III of the By-
Laws \39\ shall be eligible to be elected at an annual or special 
meeting of Nasdaq's stockholders to serve as directors; for the 
avoidance of doubt, Nasdaq proposes to clarify that the reference to 
Article III includes the proxy access provision in Section 3.6 of the 
By-Laws with respect to director nominations in connection with annual 
meetings. Current Section 3.3(c) states, among other things, that 
compliance with Section 3.1(a)(iii) and (b) \40\ shall be the exclusive 
means for a stockholder to make a director nomination; Nasdaq proposes 
to add proxy access as an additional means for a stockholder to make a 
director nomination. Finally, current Section 3.5 requires Nasdaq's 
director nominees to submit to Nasdaq's Corporate Secretary a 
questionnaire, representation and agreement within certain time 
periods; Nasdaq proposes to clarify that proxy access nominees must 
submit these materials within the time periods prescribed for delivery 
of a Notice of Proxy Access Nomination, as described above.
---------------------------------------------------------------------------

    \39\ Article III of the By-Laws relates to stockholder meetings.
    \40\ As part of Nasdaq's ``advance notice'' provision, Sections 
3.1(a)(iii) and (b) of the By-Laws describe certain procedures that 
a stockholder must follow to, among other things, nominate a person 
for election to the Board.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\41\ in general, and furthers the objectives of Section 
6(b)(5) of the Act,\42\ in particular, in that it is designed to 
promote just and equitable principles of trade, 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.
---------------------------------------------------------------------------

    \41\ 15 U.S.C. 78f(b).
    \42\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    In response to feedback from its investors, Nasdaq is proposing 
changes to its By-Laws to implement proxy access. The Exchange believes 
that, by permitting an Eligible Stockholder of Nasdaq that meets the 
stated requirements to nominate directors and have its nominees 
included in Nasdaq's annual meeting proxy statement, the proposed rule 
change strengthens the corporate governance of the Exchange's ultimate 
parent company, which is beneficial to both investors and the public 
interest.
    In drafting its proxy access provision, Nasdaq has attempted to 
strike an appropriate balance between responding to investor feedback 
and including certain procedural and informational requirements for the 
protection of the Company and its investors. Specifically, the 
procedural requirements will protect investors by stating clearly and 
explicitly the procedures stockholders must follow in order to submit a 
proper proxy access nomination. The informational requirements will 
enhance investor protection by ensuring, among other things, that the 
Company and its stockholders have full and accurate information about 
nominating stockholders and their nominees and that such stockholders 
and nominees comply with applicable laws, regulations and other 
requirements.
    Finally, the remaining changes are clarifying in nature, and they 
enhance investor protection and the public interest by preventing 
confusion with respect to the operation of the By-Law provisions.

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

    Because the proposed rule change relates to the governance of the 
Company and not to the operations of the Exchange, the Exchange does 
not believe that the proposed rule change will impose any burden on 
competition not necessary or appropriate in furtherance of the purposes 
of the Act.

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

    No written comments were either solicited or received.

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

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

IV. Solicitation of Comments

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

[[Page 69172]]

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-ISEGemini-2016-10 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

    All submissions should refer to File Number SR-ISEGemini-2016-10. 
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-
ISEGemini-2016-10 and should be submitted on or before October 26, 
2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\43\
---------------------------------------------------------------------------

    \43\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-24003 Filed 10-4-16; 8:45 am]
 BILLING CODE 8011-01-P

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