Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice of Filing of a Proposed Rule Change Relating to Its Director Nomination and Committee Appointment Process and Its Nominating and Governance Committee, 56072-56075 [2017-25470]
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56072
Federal Register / Vol. 82, No. 226 / Monday, November 27, 2017 / Notices
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.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–C2–2017–030, and should
be submitted on or before December 12,
2017.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.17
Eduardo A. Aleman,
Assistant Secretary.
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–82126; File No. SR–
CboeEDGX–2017–001]
Self-Regulatory Organizations; Cboe
EDGX Exchange, Inc.; Notice of Filing
of a Proposed Rule Change Relating to
Its Director Nomination and Committee
Appointment Process and Its
Nominating and Governance
Committee
asabaliauskas on DSKBBXCHB2PROD with NOTICES
November 20, 2017.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on November
14, 2017, Cboe EDGX Exchange, Inc.
(the ‘‘Exchange’’ or ‘‘EDGX’’) filed with
the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend its
governance documents with respect to
changes relating to its director
nomination and committee appointment
process and its Nominating and
Governance Committee.
The text of the proposed rule change
is available at the Exchange’s Web site
at www.bats.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 aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
[FR Doc. 2017–25466 Filed 11–24–17; 8:45 am]
17 17
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. Purpose
The Exchange proposes to amend its
Bylaws and Certificate. Specifically the
Exchange proposes to eliminate its
Nominating and Governance Committee
(‘‘N&G Committee’’), as well as amend
the process by which (i) directors are
elected, (ii) committee appointments are
made and (iii) vacancies are filled.
Additionally, the Exchange proposes to
make other technical, non-substantive
changes.
Elimination of Nominating and
Governance Committee
(a) Nomination of Directors
By way of background, Section 4.3 of
the Bylaws provides, among other
things, that the Exchange N&G
Committee shall consist of at least five
directors that are majority Non-Industry
Directors and are appointed by the
Board on the recommendation of the
N&G Committee. Section 4.3 of the
Bylaws also provides that the N&G
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Committee shall have the authority to
nominate individuals for election as
directors of the Corporation and such
other duties as prescribed by resolution
of the Board.3 Additionally, if the N&G
Committee has two or more Industry
Directors, those Industry Directors shall
act as the Representative Director
Nominating Body, which body is
responsible for the nomination of the
Representative Directors. If however,
there are less than two Industry
Directors on the N&G Committee, then
the Exchange Member Subcommittee of
the Advisory Board shall act as the
Representative Director Nominating
Body.4 The N&G Committee is bound to
accept and nominate the Representative
Director nominees recommended by the
Representative Director Nominating
Body or, in the event of a petition
candidate, the Representative Director
nominees who receive the most votes
pursuant to a Run-off Election.5
Pursuant to Section 3.1 of the Bylaws,
the N&G Committee is also responsible
for determining whether a director
candidate satisfies the applicable
qualifications for election as a director,
and the decision of the N&G Committee,
subject to review, if any, by the Board,
is final.
The Exchange first proposes to
eliminate its N&G Committee and
amend the process by which Directors
are nominated and elected. Specifically,
the Exchange proposes to provide that
the sole stockholder of the exchange
shall nominate and elect directors for
nomination at the annual meeting of the
stockholder, except with respect to fairrepresentation directors
(‘‘Representative Directors’’) as
described below. The Exchange notes
that another Exchange similarly does
not maintain an exchange-level
nominating committee and instead
provides that the sole stockholder of the
Exchange nominates and elects their
non-fair representation Directors.6 With
respect to the nomination of
Representative Directors, the Exchange
proposes to amend the definition of
‘‘Representative Director Nominating
Body’’ and provide that if the Board has
two or more Industry Directors,
excluding directors that are exchange
employees, those Industry Directors
3 Article Fifth, subparagraph (c) of the Certificate
also provides that the N&G Committee nominates
persons for election as directors.
4 See Sections 1.1(j) and 4.3 of the Bylaws.
Section 3.2 of the Bylaws sets forth a detailed
process for the nomination and selection of fair
representation directors for the Board of Directors.
5 See Sections 3.1 and 3.2 of the Bylaws and
Article Fifth, subparagraph (c) of the Certificate.
6 See Section 3.02 of the Amended and Restated
NYSE Arca, Inc. Bylaws.
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shall act as the Representative Director
Nominating Body. Additionally, similar
to the current practice, if there are less
than two Industry Directors on the
Board (excluding directors that are
employees of the Exchange), then the
Exchange Member Subcommittee of the
Advisory Board shall act as the
Representative Director Nominating
Body. The Bylaws and Certificate will
also be amended to provide that the sole
stockholder is bound to nominate and
elect the Representative Directors
nominees recommended by the
Representative Director Nominating
Body or, in the event of a petition
candidate, the Representative Director
nominees who receive the most votes
pursuant to a Run-off Election. Lastly, as
the N&G Committee is being eliminated,
the Exchange proposes to amend
Section 3.1 of the Bylaws to provide that
the Board, instead of the N&G
Committee, is responsible for
determining whether a director
candidate satisfies the applicable
qualifications for election as a director,
and the decision of the Board is final.
There are no other changes with respect
to the process for the nomination and
selection of Representative Directors.
The Exchange notes that it believes that
the proposed changes continue to give
Exchange members a voice in the
Exchange’s use of self-regulatory
authority.
asabaliauskas on DSKBBXCHB2PROD with NOTICES
(b) Committee Appointments
The N&G Committee is also currently
responsible for recommending to the
Board of Directors appointments to
certain Committees. Specifically,
Section 4.2 and Section 6.1 of the
Bylaws provides that the members of
the Executive Committee and Advisory
Board, respectively, be recommended by
the N&G Committee for approval by the
Board. Pursuant to Section 4.4 of the
Bylaws, members of the Regulatory
Oversight Committee (‘‘ROC’’) are
recommended by the Non-Industry
Directors on the N&G Committee for
approval by the Board.
In light of the elimination of the N&G
Committee, the Exchange proposes to
eliminate references to the N&G
Committee with respect to committee
appointments and transfer the N&G’s
current authority to the Board (or
appropriate subcommittee of the Board).
Specifically the Exchange proposes that
members of the Executive Committee
and Advisory Board be appointed by the
Board and members of the ROC be
appointed by the Board on the
recommendation of the Non-Industry
Directors of the Board. The Exchange
notes that Boards of other Exchanges
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also have authority to appoint Board
Committees.7
Filling of Director Vacancies
Next, the Exchange proposes to
amend the process to fill Director
vacancies. Currently, Sections 3.4 of the
Bylaws provides that in the event any
Industry Director or Non-Industry
Director fails to maintain the
qualifications required for such category
of director, his office shall become
vacant and the vacancy may be filled by
the Board with a person who qualifies
for the category in which the vacancy
exists. If a director is determined to
have requalified, Section 3.4 provides
the Board, in its sole discretion, may fill
an existing vacancy in the Board or may
increase the size of the Board, as
necessary, to appoint such director to
the Board; provided, however, that the
Board shall be under no obligation to
return such director to the Board.
Section 3.5 of the Bylaws also
provides that a vacancy on the Board
may be filled by a vote of majority of the
Directors then in office, or by the sole
remaining Director, so long as the
elected Director qualifies for the
position. Additionally, for vacancies of
Representative Directors, the
Representative Director Nominating
Body will recommend an individual to
be elected, or provide a list of
recommended individuals, and the
position shall be filled by the vote of a
majority of the Directors then in office.
Consistent with the proposal to have the
sole stockholder nominate and elect
directors to the Board (and to be bound
to accept and elect the Representative
Director Nominating Body’s
nominee(s)), the Exchange wishes to
provide that the sole stockholder,
instead of the Board, will also have the
ability to fill the above described
Director vacancies.
Technical, Non-Substantive Changes
Lastly, the Exchange proposes to
change the Exchange’s name in the title
and signature line in its Certificate from
‘‘Bats EDGX Exchange, Inc.’’ to ‘‘Cboe
EDGX Exchange, Inc.’’ The Exchange
notes that it recently changed its legal
name, but was unable to update the
Exchange’s name in the title or signature
line in its Certificate as the name
changes were not effective until the
Exchange, as previously named, filed
the proposed changes in Delaware. The
Exchange had noted in the filing that
proposed the name changes that it
would later amend the Certificate to
7 See e.g., Eleventh Amended and Restated
Operating Agreement of New York Stock Exchange,
LLC, Section 2.03(h) and By-Laws of Nasdaq Phlx
LLC, Section 5–3.
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reflect the new name in the title and
signature line and the Exchange is
seeking to do so now. The Exchange
also proposes to make clarifying
amendments and cite to the applicable
provisions of the General Corporation
Law of the State of Delaware in
connection with the proposed
restatement and amendment.
2. Statutory Basis
The Exchange believes the proposed
rule change is consistent with the
Securities Exchange Act of 1934 (the
‘‘Act’’) and the rules and regulations
thereunder applicable to the Exchange
and, in particular, the requirements of
Section 6(b) of the Act.8 Specifically,
the Exchange believes the proposed rule
change is consistent with the Section
6(b)(5) 9 requirements that the rules of
an exchange be designed to prevent
fraudulent and manipulative acts and
practices, to promote just and equitable
principles of trade, to foster cooperation
and coordination with persons engaged
in regulating, clearing, settling,
processing information with respect to,
and facilitating transactions in
securities, to remove impediments to
and perfect the mechanism of a free and
open market and a national market
system, and, in general, to protect
investors and the public interest.
Additionally, the Exchange believes the
proposed rule change is consistent with
the Section 6(b)(5) 10 requirement that
the rules of an exchange not be designed
to permit unfair discrimination between
customers, issuers, brokers, or dealers.
The Exchange also believes that its
proposal is consistent with Section 6(b)
of the Act in general, and furthers the
objectives of Section 6(b)(1) of the Act
in particular, in that it enables the
Exchange to be so organized as to have
the capacity to be able to carry out the
purposes of the Act and to comply, and
to enforce compliance by its exchange
members and persons associated with
its exchange members, with the
provisions of the Act, the rules and
regulations thereunder, and the rules of
the Exchange. The Exchange also
believes that this proposal furthers the
objectives of Section 6(b)(3) 11 of the Act
in particular, in that it is designed to
assure a fair representation of Exchange
Members in the selection of its directors
and administration of its affairs and
provide that one or more directors
would be representative of issuers and
investors and not be associated with a
member of the exchange, broker, or
8 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
10 Id.
11 15 U.S.C. 78f(b)(3).
9 15
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Federal Register / Vol. 82, No. 226 / Monday, November 27, 2017 / Notices
dealer. For instance, the proposed
changes continue to include a process
by which Exchange members can
directly petition and vote for
representation on the Board.
The Exchange believes eliminating
the exchange-level N&G Committee
allows the Exchange to eliminate a
board committee whose core
responsibilities can be adequately
handled by its sole stockholder or
Board, as applicable. The Exchange
believes the elimination of this board
committee will streamline, make more
efficient, and improve the Exchange’s
governance structure and allow
directors of the Exchange to continue to
focus their attention on matters within
the purview of the Exchange’s Board
including its orderly discharge of
regulatory duties to prevent fraudulent
and manipulative acts and practices, to
promote just and equitable principles of
trade, to foster cooperation and
coordination with persons engaged in
regulating, clearing, settling, processing
information with respect to, and
facilitating transactions in securities, to
remove impediments to and perfect the
mechanism of a free and open market
and a national market system, and, in
general, to protect investors and the
public interest. The Exchange also notes
that it is not statutorily required to
maintain a standing nominating
committee. Indeed, another Exchange
similarly does not do so and instead
provides that its sole stockholder
nominates and elects its non-fair
representation directors.12 Other
Exchanges also provide that their Board,
without input from a nominating
committee, appoint members to
committees.13 The Exchange also
believes that since it is being proposed
that the sole stockholder have the
authority to nominate (and elect)
directors to the Board (and accept and
elect Representative Director nominees),
it is also consistent to transfer the
authority to fill director vacancies from
the Board to the sole stockholder.
The Exchange importantly notes that
it is not proposing to amend any of the
compositional requirements currently
set forth in the Bylaws and that
notwithstanding the proposed changes,
existing compositional requirements of
the Exchange will still be required to be
satisfied, including the provision
relating to the fair representation of
members. While the delegation of the
authority relating to the (i) nomination
12 See Section 3.02 of the Amended and Restated
NYSE Arca, Inc. Bylaws.
13 See e.g., Eleventh Amended and Restated
Operating Agreement of New York Stock Exchange,
LLC, Section 2.03(h) and By-Laws of Nasdaq Phlx
LLC, Section 5–3.
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and election of directors, (ii) nominating
body for Representative Directors, (iii)
filling of Director vacancies and (iv)
appointment of committees is being
modified, the substantive practices of
the Exchange will remain the same. For
example, the sole stockholder will be
bound to nominate and elect the
Representative Directors nominees
recommended by the Representative
Director Nominating Body or, in the
event of a petition candidate, the
Representative Director nominees who
receive the most votes pursuant to a
Run-off Election.
Lastly, the Exchange believes the
clarifying changes to the Exchange’s
Certificate, including updating the
Exchange’s name in the title and
signature line, allows the Exchange to
comply with Delaware law and reduce
potential confusion. The alleviation of
confusion removes impediments to, and
perfects the mechanism for a free and
open market and a national market
system, and, in general, protects
investors and the public interest of
market participants.
The Exchange believes the proposed
changes do not affect the meaning,
administration, or enforcement of any
rules of the Exchange or the rights,
obligations, or privileges of Exchange
members or their associated persons is
any way.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe the
proposed rule change will impose any
burden on competition not necessary or
appropriate in furtherance of the
purposes of the Act. The proposed rule
change relates to the corporate
governance of the Exchange and not the
operations of the Exchange. This is not
a competitive filing and, therefore,
imposes no burden on competition.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange neither solicited nor
received comments on the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period
up to 90 days (i) as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding or (ii) as to which
the Exchange consents, the Commission
will:
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A. By order approve or disapprove
such proposed rule change, or
B. institute proceedings to determine
whether the proposed rule change
should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
CboeEDGX–2017–001 on the subject
line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–CboeEDGX–2017–001. 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 the Exchange. All comments
received will be posted without change.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–CboeEDGX–2017–001, and
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Federal Register / Vol. 82, No. 226 / Monday, November 27, 2017 / Notices
56075
should be submitted on or before
December 12, 2017.
the most significant aspects of such
statements.
necessary for Rule 713 which discusses
priority.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.14
Eduardo A. Aleman,
Assistant Secretary.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
[FR Doc. 2017–25470 Filed 11–24–17; 8:45 am]
1. Purpose
BILLING CODE 8011–01–P
The Exchange previously filed a rule
change to amend the All-Or-None Order
so that it may only be entered into the
trading system with a time-in-force
designation of Immediate-Or-Cancel.3
Previously, an All-Or-None Order was a
limit or market order that is to be
executed in its entirety or not at all. It
was designated as a market or limit
order with any time-in-force
designation. The Exchange filed to limit
All-Or-None Orders to only be accepted
with a time-in-force designation of
Immediate-Or-Cancel.4 Today, an
Immediate-Or-Cancel Order is a limit
order that is to be executed in whole or
in part upon receipt. Any portion not so
executed is to be treated as cancelled. At
that time, the Exchange also proposed to
amend Supplementary Material .02 to
Rule 713 to make clear that All-Or-None
Orders will only be accepted with a
time-in-force designation of ImmediateOr-Cancel and, therefore, would not
persist in the Order Book.5
The Exchange proposes at this time to
remove Supplementary Material .02 to
Rule 713 as unnecessary as All-Or-None
Orders do not rest on the Order Book.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
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. This
proposal seeks to delete rule text which
is unnecessary and may lead to
confusion. All-Or-None Orders do not
rest on the order book and do not
allocate differently than any other
incoming order.
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–82130; File No. SR–ISE–
2017–99]
Self-Regulatory Organizations; Nasdaq
ISE, LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change Relating to All-Or-None
Orders
November 20, 2017.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on November
13, 2017, Nasdaq ISE, LLC (‘‘ISE’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I and II,
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.
asabaliauskas on DSKBBXCHB2PROD with NOTICES
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
Rule 713 to delete Supplementary
Material .02, which no longer is
applicable.
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
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
14 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,6 in general, and furthers the
objectives of Section 6(b)(5) of the Act,7
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
because the current notation in
Supplementary Material .02 to Rule 713
is confusing and unnecessary. All-OrNone Orders do not rest on the order
book and do not allocate differently
than any other incoming order therefore
no specific mention of this order type is
3 See Securities Exchange Act Release No. 80432
(April 11, 2017), 82 FR 18191 (April 17, 2017) (SR–
ISE–2017–03) (Order Approving Proposed Rule
Change, As Modified by Amendment No. 1, To
Amend Various Rules in Connection with a System
Migration to Nasdaq INET Technology).
4 Id.
5 Id.
6 15 U.S.C. 78f(b).
7 15 U.S.C. 78f(b)(5).
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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
Because the proposed rule change
does not (i) significantly affect the
protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate if
consistent with the protection of
investors and the public interest, the
proposed rule change has become
effective pursuant to Section 19(b)(3)(A)
of the Act 8 and Rule 19b–4(f)(6)
thereunder.9
A proposed rule change filed under
Rule 19b–4(f)(6) 10 normally does not
become operative for 30 days after the
date of filing. However, pursuant to
Rule 19b–4(f)(6)(iii),11 the Commission
may designate a shorter time if such
action is consistent with the protection
of investors and the public interest. The
Exchange has asked the Commission to
waive the 30-day operative delay so that
the proposal may become operative
immediately upon filing. The
Commission believes that waiving the
30-day operative delay is consistent
with the protection of investors and the
public interest as it will allow the
Exchange to immediately delete
8 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6)(iii) requires the Exchange to give the
Commission written notice of the Exchange’s intent
to file the proposed rule change, along with a brief
description and text of the proposed rule change,
at least five business days prior to the date of filing
of the proposed rule change, or such shorter time
as designated by the Commission. The Exchange
has satisfied this requirement.
10 17 CFR 240.19b–4(f)(6).
11 17 CFR 240.19b–4(f)(6)(iii).
9 17
E:\FR\FM\27NON1.SGM
27NON1
]]>Agencies
[Federal Register Volume 82, Number 226 (Monday, November 27, 2017)]
[Notices]
[Pages 56072-56075]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-25470]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-82126; File No. SR-CboeEDGX-2017-001]
Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice
of Filing of a Proposed Rule Change Relating to Its Director Nomination
and Committee Appointment Process and Its Nominating and Governance
Committee
November 20, 2017.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on November 14, 2017, Cboe EDGX Exchange, Inc. (the ``Exchange''
or ``EDGX'') filed with the Securities and Exchange Commission (the
``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.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend its governance documents with
respect to changes relating to its director nomination and committee
appointment process and its Nominating and Governance Committee.
The text of the proposed rule change is available at the Exchange's
Web site at www.bats.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 aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend its Bylaws and Certificate.
Specifically the Exchange proposes to eliminate its Nominating and
Governance Committee (``N&G Committee''), as well as amend the process
by which (i) directors are elected, (ii) committee appointments are
made and (iii) vacancies are filled. Additionally, the Exchange
proposes to make other technical, non-substantive changes.
Elimination of Nominating and Governance Committee
(a) Nomination of Directors
By way of background, Section 4.3 of the Bylaws provides, among
other things, that the Exchange N&G Committee shall consist of at least
five directors that are majority Non-Industry Directors and are
appointed by the Board on the recommendation of the N&G Committee.
Section 4.3 of the Bylaws also provides that the N&G Committee shall
have the authority to nominate individuals for election as directors of
the Corporation and such other duties as prescribed by resolution of
the Board.\3\ Additionally, if the N&G Committee has two or more
Industry Directors, those Industry Directors shall act as the
Representative Director Nominating Body, which body is responsible for
the nomination of the Representative Directors. If however, there are
less than two Industry Directors on the N&G Committee, then the
Exchange Member Subcommittee of the Advisory Board shall act as the
Representative Director Nominating Body.\4\ The N&G Committee is bound
to accept and nominate the Representative Director nominees recommended
by the Representative Director Nominating Body or, in the event of a
petition candidate, the Representative Director nominees who receive
the most votes pursuant to a Run-off Election.\5\ Pursuant to Section
3.1 of the Bylaws, the N&G Committee is also responsible for
determining whether a director candidate satisfies the applicable
qualifications for election as a director, and the decision of the N&G
Committee, subject to review, if any, by the Board, is final.
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\3\ Article Fifth, subparagraph (c) of the Certificate also
provides that the N&G Committee nominates persons for election as
directors.
\4\ See Sections 1.1(j) and 4.3 of the Bylaws. Section 3.2 of
the Bylaws sets forth a detailed process for the nomination and
selection of fair representation directors for the Board of
Directors.
\5\ See Sections 3.1 and 3.2 of the Bylaws and Article Fifth,
subparagraph (c) of the Certificate.
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The Exchange first proposes to eliminate its N&G Committee and
amend the process by which Directors are nominated and elected.
Specifically, the Exchange proposes to provide that the sole
stockholder of the exchange shall nominate and elect directors for
nomination at the annual meeting of the stockholder, except with
respect to fair-representation directors (``Representative Directors'')
as described below. The Exchange notes that another Exchange similarly
does not maintain an exchange-level nominating committee and instead
provides that the sole stockholder of the Exchange nominates and elects
their non-fair representation Directors.\6\ With respect to the
nomination of Representative Directors, the Exchange proposes to amend
the definition of ``Representative Director Nominating Body'' and
provide that if the Board has two or more Industry Directors, excluding
directors that are exchange employees, those Industry Directors
[[Page 56073]]
shall act as the Representative Director Nominating Body. Additionally,
similar to the current practice, if there are less than two Industry
Directors on the Board (excluding directors that are employees of the
Exchange), then the Exchange Member Subcommittee of the Advisory Board
shall act as the Representative Director Nominating Body. The Bylaws
and Certificate will also be amended to provide that the sole
stockholder is bound to nominate and elect the Representative Directors
nominees recommended by the Representative Director Nominating Body or,
in the event of a petition candidate, the Representative Director
nominees who receive the most votes pursuant to a Run-off Election.
Lastly, as the N&G Committee is being eliminated, the Exchange proposes
to amend Section 3.1 of the Bylaws to provide that the Board, instead
of the N&G Committee, is responsible for determining whether a director
candidate satisfies the applicable qualifications for election as a
director, and the decision of the Board is final. There are no other
changes with respect to the process for the nomination and selection of
Representative Directors. The Exchange notes that it believes that the
proposed changes continue to give Exchange members a voice in the
Exchange's use of self-regulatory authority.
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\6\ See Section 3.02 of the Amended and Restated NYSE Arca, Inc.
Bylaws.
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(b) Committee Appointments
The N&G Committee is also currently responsible for recommending to
the Board of Directors appointments to certain Committees.
Specifically, Section 4.2 and Section 6.1 of the Bylaws provides that
the members of the Executive Committee and Advisory Board,
respectively, be recommended by the N&G Committee for approval by the
Board. Pursuant to Section 4.4 of the Bylaws, members of the Regulatory
Oversight Committee (``ROC'') are recommended by the Non-Industry
Directors on the N&G Committee for approval by the Board.
In light of the elimination of the N&G Committee, the Exchange
proposes to eliminate references to the N&G Committee with respect to
committee appointments and transfer the N&G's current authority to the
Board (or appropriate subcommittee of the Board). Specifically the
Exchange proposes that members of the Executive Committee and Advisory
Board be appointed by the Board and members of the ROC be appointed by
the Board on the recommendation of the Non-Industry Directors of the
Board. The Exchange notes that Boards of other Exchanges also have
authority to appoint Board Committees.\7\
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\7\ See e.g., Eleventh Amended and Restated Operating Agreement
of New York Stock Exchange, LLC, Section 2.03(h) and By-Laws of
Nasdaq Phlx LLC, Section 5-3.
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Filling of Director Vacancies
Next, the Exchange proposes to amend the process to fill Director
vacancies. Currently, Sections 3.4 of the Bylaws provides that in the
event any Industry Director or Non-Industry Director fails to maintain
the qualifications required for such category of director, his office
shall become vacant and the vacancy may be filled by the Board with a
person who qualifies for the category in which the vacancy exists. If a
director is determined to have requalified, Section 3.4 provides the
Board, in its sole discretion, may fill an existing vacancy in the
Board or may increase the size of the Board, as necessary, to appoint
such director to the Board; provided, however, that the Board shall be
under no obligation to return such director to the Board.
Section 3.5 of the Bylaws also provides that a vacancy on the Board
may be filled by a vote of majority of the Directors then in office, or
by the sole remaining Director, so long as the elected Director
qualifies for the position. Additionally, for vacancies of
Representative Directors, the Representative Director Nominating Body
will recommend an individual to be elected, or provide a list of
recommended individuals, and the position shall be filled by the vote
of a majority of the Directors then in office. Consistent with the
proposal to have the sole stockholder nominate and elect directors to
the Board (and to be bound to accept and elect the Representative
Director Nominating Body's nominee(s)), the Exchange wishes to provide
that the sole stockholder, instead of the Board, will also have the
ability to fill the above described Director vacancies.
Technical, Non-Substantive Changes
Lastly, the Exchange proposes to change the Exchange's name in the
title and signature line in its Certificate from ``Bats EDGX Exchange,
Inc.'' to ``Cboe EDGX Exchange, Inc.'' The Exchange notes that it
recently changed its legal name, but was unable to update the
Exchange's name in the title or signature line in its Certificate as
the name changes were not effective until the Exchange, as previously
named, filed the proposed changes in Delaware. The Exchange had noted
in the filing that proposed the name changes that it would later amend
the Certificate to reflect the new name in the title and signature line
and the Exchange is seeking to do so now. The Exchange also proposes to
make clarifying amendments and cite to the applicable provisions of the
General Corporation Law of the State of Delaware in connection with the
proposed restatement and amendment.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Securities Exchange Act of 1934 (the ``Act'') and the rules and
regulations thereunder applicable to the Exchange and, in particular,
the requirements of Section 6(b) of the Act.\8\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \9\ requirements that the rules of an exchange be
designed to prevent fraudulent and manipulative acts and practices, to
promote just and equitable principles of trade, to foster cooperation
and coordination with persons engaged in regulating, clearing,
settling, processing information with respect to, and facilitating
transactions in securities, to remove impediments to and perfect the
mechanism of a free and open market and a national market system, and,
in general, to protect investors and the public interest. Additionally,
the Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \10\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers. The Exchange also believes that its proposal is
consistent with Section 6(b) of the Act in general, and furthers the
objectives of Section 6(b)(1) of the Act in particular, in that it
enables the Exchange to be so organized as to have the capacity to be
able to carry out the purposes of the Act and to comply, and to enforce
compliance by its exchange members and persons associated with its
exchange members, with the provisions of the Act, the rules and
regulations thereunder, and the rules of the Exchange. The Exchange
also believes that this proposal furthers the objectives of Section
6(b)(3) \11\ of the Act in particular, in that it is designed to assure
a fair representation of Exchange Members in the selection of its
directors and administration of its affairs and provide that one or
more directors would be representative of issuers and investors and not
be associated with a member of the exchange, broker, or
[[Page 56074]]
dealer. For instance, the proposed changes continue to include a
process by which Exchange members can directly petition and vote for
representation on the Board.
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\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(5).
\10\ Id.
\11\ 15 U.S.C. 78f(b)(3).
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The Exchange believes eliminating the exchange-level N&G Committee
allows the Exchange to eliminate a board committee whose core
responsibilities can be adequately handled by its sole stockholder or
Board, as applicable. The Exchange believes the elimination of this
board committee will streamline, make more efficient, and improve the
Exchange's governance structure and allow directors of the Exchange to
continue to focus their attention on matters within the purview of the
Exchange's Board including its orderly discharge of regulatory duties
to prevent fraudulent and manipulative acts and practices, to promote
just and equitable principles of trade, to foster cooperation and
coordination with persons engaged in regulating, clearing, settling,
processing information with respect to, and facilitating transactions
in securities, to remove impediments to and perfect the mechanism of a
free and open market and a national market system, and, in general, to
protect investors and the public interest. The Exchange also notes that
it is not statutorily required to maintain a standing nominating
committee. Indeed, another Exchange similarly does not do so and
instead provides that its sole stockholder nominates and elects its
non-fair representation directors.\12\ Other Exchanges also provide
that their Board, without input from a nominating committee, appoint
members to committees.\13\ The Exchange also believes that since it is
being proposed that the sole stockholder have the authority to nominate
(and elect) directors to the Board (and accept and elect Representative
Director nominees), it is also consistent to transfer the authority to
fill director vacancies from the Board to the sole stockholder.
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\12\ See Section 3.02 of the Amended and Restated NYSE Arca,
Inc. Bylaws.
\13\ See e.g., Eleventh Amended and Restated Operating Agreement
of New York Stock Exchange, LLC, Section 2.03(h) and By-Laws of
Nasdaq Phlx LLC, Section 5-3.
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The Exchange importantly notes that it is not proposing to amend
any of the compositional requirements currently set forth in the Bylaws
and that notwithstanding the proposed changes, existing compositional
requirements of the Exchange will still be required to be satisfied,
including the provision relating to the fair representation of members.
While the delegation of the authority relating to the (i) nomination
and election of directors, (ii) nominating body for Representative
Directors, (iii) filling of Director vacancies and (iv) appointment of
committees is being modified, the substantive practices of the Exchange
will remain the same. For example, the sole stockholder will be bound
to nominate and elect the Representative Directors nominees recommended
by the Representative Director Nominating Body or, in the event of a
petition candidate, the Representative Director nominees who receive
the most votes pursuant to a Run-off Election.
Lastly, the Exchange believes the clarifying changes to the
Exchange's Certificate, including updating the Exchange's name in the
title and signature line, allows the Exchange to comply with Delaware
law and reduce potential confusion. The alleviation of confusion
removes impediments to, and perfects the mechanism for a free and open
market and a national market system, and, in general, protects
investors and the public interest of market participants.
The Exchange believes the proposed changes do not affect the
meaning, administration, or enforcement of any rules of the Exchange or
the rights, obligations, or privileges of Exchange members or their
associated persons is any way.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe the proposed rule change will impose
any burden on competition not necessary or appropriate in furtherance
of the purposes of the Act. The proposed rule change relates to the
corporate governance of the Exchange and not the operations of the
Exchange. This is not a competitive filing and, therefore, imposes no
burden on competition.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange neither solicited nor received comments on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the Exchange consents, the Commission will:
A. By order approve or disapprove such proposed rule change, or
B. institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-CboeEDGX-2017-001 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-CboeEDGX-2017-001. 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 the Exchange. All
comments received will be posted without change. Persons submitting
comments are cautioned that we do not redact or edit personal
identifying information from comment submissions. You should submit
only information that you wish to make available publicly. All
submissions should refer to File Number SR-CboeEDGX-2017-001, and
[[Page 56075]]
should be submitted on or before December 12, 2017.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
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\14\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-25470 Filed 11-24-17; 8:45 am]
BILLING CODE 8011-01-P
