Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Harmonize the Exchange's By-Law Provisions Regarding the Size of the Exchange's Board of Directors to Those of the Other Nasdaq, Inc.-Owned U.S. Exchanges, 31641-31643 [2019-14053]
Download as PDF
<![CDATA[
Federal Register / Vol. 84, No. 127 / Tuesday, July 2, 2019 / Notices
are available at www.prc.gov, Docket
Nos. MC2019–158, CP2019–177.
Elizabeth Reed,
Attorney, Corporate and Postal Business Law.
[FR Doc. 2019–14116 Filed 7–1–19; 8:45 am]
BILLING CODE 7710–12–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–86203; File No. SR–BX–
2019–021]
Self-Regulatory Organizations; Nasdaq
BX, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Harmonize the
Exchange’s By-Law Provisions
Regarding the Size of the Exchange’s
Board of Directors to Those of the
Other Nasdaq, Inc.-Owned U.S.
Exchanges
June 26, 2019.
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 June 17,
2019, Nasdaq BX, Inc. (‘‘BX’’ 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.
khammond on DSKBBV9HB2PROD with NOTICES
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to harmonize
the Exchange’s By-Law provisions
regarding the size of the Exchange’s
Board of Directors (‘‘Board’’) to those of
the other Nasdaq, Inc.-owned U.S.
exchanges, The Nasdaq Stock Market
LLC (‘‘Nasdaq’’), Nasdaq PHLX LLC
(‘‘Phlx’’), Nasdaq ISE, LLC (‘‘ISE’’),
Nasdaq GEMX, LLC (‘‘GEMX’’), and
Nasdaq MRX, LLC (‘‘MRX’’) (together,
‘‘Affiliated Exchanges’’).
The text of the proposed rule change
is available on the Exchange’s website at
https://nasdaqbx.cchwallstreet.com/, at
the principal office of the Exchange, and
at the Commission’s Public Reference
Room.
1 15
2 17
U.S.C. 78s(b)(1).
CFR 240.19b–4.
VerDate Sep<11>2014
17:00 Jul 01, 2019
Jkt 247001
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
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend its
By-Laws at Article IV, Section 4.2 3 to
conform its provisions regarding the
size of the Exchange’s Board to those of
the Affiliated Exchanges.4
By-Law Article IV contains provisions
regarding the powers and composition
of the Board, which are generally
aligned with similar provisions in the
Limited Liability Company (‘‘LLC’’)
Agreements and By-Laws of the
Affiliated Exchanges. For instance, as is
the case with the Affiliated Exchanges,
the composition of the Exchange’s
Board is required to reflect a balance
among Industry Directors,5 Member
3 In Exhibit 5, the references to ‘‘Corporation’’
mean the Exchange.
4 See Nasdaq Second Amended Limited Liability
Company Agreement (‘‘Nasdaq LLC Agreement’’),
Section 9(a); Phlx Second Amended Limited
Liability Company Agreement (‘‘Phlx LLC
Agreement’’), Section 8(a); and ISE, GEMX, and
MRX Limited Liability Company Agreements,
Section 9(a).
5 ‘‘Industry Director’’ means a Director (excluding
any two officers of the Exchange, selected at the
sole discretion of the Board, amongst those officers
who may be serving as Directors (the ‘‘Staff
Directors’’)), who (i) is or has served in the prior
three years as an officer, director, or employee of
a broker or dealer, excluding an outside director or
a director not engaged in the day-to-day
management of a broker or dealer; (ii) is an officer,
director (excluding an outside director), or
employee of an entity that owns more than ten
percent of the equity of a broker or dealer, and the
broker or dealer accounts for more than five percent
of the gross revenues received by the consolidated
entity; (iii) owns more than five percent of the
equity securities of any broker or dealer, whose
investments in brokers or dealers exceed ten
percent of his or her net worth, or whose ownership
interest otherwise permits him or her to be engaged
in the day-to-day management of a broker or dealer;
(iv) provides professional services to brokers or
dealers, and such services constitute twenty percent
or more of the professional revenues received by the
Director or twenty percent or more of the gross
revenues received by the Director’s firm or
partnership; (v) provides professional services to a
director, officer, or employee of a broker, dealer, or
PO 00000
Frm 00081
Fmt 4703
Sfmt 4703
31641
Representative Directors,6 and NonIndustry Directors,7 including Public
Directors 8 and Director representatives
of issuers and investors (‘‘issuer
representatives’’). Specifically, the
number of Non-Industry Directors,
including at least one Public Director
and at least one issuer representative,
shall equal or exceed the sum of the
number of Industry Directors and
Member Representative Directors. In
addition, at least 20% of the Directors
shall be Member Representative
Directors.9
Furthermore, consistent with the
Affiliated Exchanges, the Exchange’s
By-Laws presently allow the
stockholders 10 to set the exact number
of Directors.11 Unlike the Affiliated
corporation that owns fifty percent or more of the
voting stock of a broker or dealer, and such services
relate to the director’s, officer’s, or employee’s
professional capacity and constitute twenty percent
or more of the professional revenues received by the
Director or twenty percent or more of the gross
revenues received by the Director’s firm or
partnership; or (vi) has a consulting or employment
relationship with or provides professional services
to the Exchange or any affiliate thereof or to FINRA
or has had any such relationship or provided any
such services at any time within the prior three
years. See By-Law Article I(t).
6 ‘‘Member Representative Director’’ means a
Director who has been elected by the stockholders
after having been nominated by the Member
Nominating Committee or voted upon by Exchange
Members pursuant to the By-Laws (or elected by the
stockholders without such nomination or voting in
the case of the Member Representative Directors
elected pursuant to Section 4.3(b)). A Member
Representative Director may, but is not required to
be, an officer, director, employee, or agent of an
Exchange Member. See By-Law Article I(x). Member
Representative Directors are directors that meet the
fair representation requirement in Section 6(b)(3) of
the Act, which requires that the ‘‘rules of the
Exchange assure a fair representation of its
members in the selection of its directors and
administration of its affairs. . .’’
7 ‘‘Non-Industry Director’’ means a Director
(excluding Staff Directors) who is (i) a Public
Director; (ii) an officer or employee of an issuer of
securities listed on the Exchange; or (iii) any other
individual who would not be an Industry Director.
See By-Law Article I(bb).
8 ‘‘Public Director’’ means a Director who has no
material business relationship with a broker or
dealer, the Exchange or its affiliates, or FINRA. See
By-Law Article I(gg).
9 See By-Law Article IV, Section 4.3. The
Affiliated Exchanges have substantially similar
board composition requirements, including the
requirement that at least 20% of the directors be
Member Representative Directors. In addition, the
By-Laws of Nasdaq, ISE, GEMX, and MRX each
have an additional board composition requirement
of at least two issuer representatives if the board
consists of ten or more directors. See Nasdaq LLC
Agreement, Section 9(a) and Nasdaq By-Laws,
Article III, Section 2(a); Phlx LLC Agreement,
Section 8(a) and Phlx By-Laws, Article III, Section
3–2(a); and ISE, GEMX, and MRX LLC Agreements,
Section 9(a) and ISE, GEMX, and MRX By-Laws,
Article III, Section 2(a).
10 Nasdaq, Inc. is the sole stockholder of the
Exchange.
11 See By-Law Article IV, Section 4.2. See supra
note 4.
E:\FR\FM\02JYN1.SGM
02JYN1
31642
Federal Register / Vol. 84, No. 127 / Tuesday, July 2, 2019 / Notices
khammond on DSKBBV9HB2PROD with NOTICES
Exchanges, however, the Exchange’s ByLaws require that the minimum Board
size be fixed at ten Directors.12 The
Exchange now proposes to remove the
minimum threshold of ten Directors
contained in the By-Laws to align with
the provisions in the LLC Agreements of
the Affiliated Exchanges. The Exchange
does not seek to amend the Board’s
authority or qualification requirements
in the By-Laws other than to remove
this minimum threshold. As such, the
current requirements that the number of
Non-Industry Directors (including at
least one Public Director and at least
one issuer representative) equal or
exceed the sum of the number of
Industry Directors and Member
Representative Directors, and at least
20% of the Directors be Member
Representative Directors, would
continue to apply.
The practical effect of the proposed
rule change is to enable the size of the
Board to be set below ten members. The
Exchange believes that a Board
consisting of less than ten members is
sufficiently large to effectively perform
the Board’s oversight responsibilities,
and when combined with the current
Board composition requirements
discussed above, is consistent with the
Act. Furthermore, as noted above, while
the Affiliated Exchanges have
substantially similar provisions in their
respective LLC Agreements authorizing
the sole member to determine the
number of directors, these LLC
Agreement provisions do not have a
strict minimum threshold on Board size
like BX.13 As such, the proposed
changes will further streamline the rules
governing the organization and
administration across BX and the
Affiliated Exchanges.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act,14 in general, and furthers the
objectives of Section 6(b)(1) of the Act,15
which requires that the Exchange to be
so organized so as to have the capacity
to be able to carry out the purposes of
the Act and to comply, and to enforce
compliance by its members and persons
associated with its members, with the
provisions of the Act, the rules and
regulations thereunder, and the rules of
the Exchange; Section 6(b)(3) of the
Act,16 which requires that the rules of
12 See By-Law Article IV, Section 4.2. Section 4.2
also provides that no decrease in the number of
Directors shall shorten the term of any incumbent
Director.
13 See supra note 4.
14 15 U.S.C. 78f(b).
15 15 U.S.C. 78f(b)(1).
16 15 U.S.C. 78f(b)(3).
VerDate Sep<11>2014
17:00 Jul 01, 2019
Jkt 247001
a national securities exchange assure the
fair representation of its members in the
selection of its directors and
administration of its affairs, and provide
that one or more directors shall be
representative of issuers and investors
and not be associated with a member of
the exchange, broker, or dealer; and
Section 6(b)(5) of the Act,17 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. The proposed changes
will eliminate the requirement for a
minimum of ten Directors on the Board
currently in Article IV, Section 4.2 of
the Exchange’s By-Laws. As discussed
above, the current Board composition
requirements in the By-Laws remain
unchanged under this proposal, and the
requirements that the number of NonIndustry Directors (including at least
one Public Director and at least one
issuer representative) equal or exceed
the sum of the number of Industry
Directors and Member Representative
Directors, and at least 20% of the
Directors be Member Representative
Directors, would continue to apply.
Accordingly, the Exchange believes that
the proposed removal of the minimum
threshold will improve administrative
efficiency and effectiveness by operating
with a smaller number of directors
while continuing to fulfill its statutory
obligations regarding the fair
representation of members of the
Exchange. In addition, the proposed
amendments will have the additional
benefit of bringing the Exchange’s
requirements on Board size into greater
conformity with those of the Affiliated
Exchanges, which allow for discretion
as to the size of their boards, thereby
creating more consistent standards
among the affiliated exchanges owned
by Nasdaq, Inc.18 As such, the Exchange
believes that its proposal will bring
greater consistency to its rules, which is
beneficial to both investors and the
public interest.
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. The
proposed rule change relates solely to
the administration and governance of
the Exchange and will have no effect on
PO 00000
17 15
U.S.C. 78f(b)(5).
supra note 4.
18 See
Frm 00082
Fmt 4703
Sfmt 4703
the Exchange’s business operations or
competitive position.
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 foregoing 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, it has
become effective pursuant to Section
19(b)(3)(A) of the Act 19 and Rule 19b–
4(f)(6) thereunder.20
A proposed rule change filed under
Rule 19b–4(f)(6) 21 normally does not
become operative prior to 30 days after
the date of the filing. However, Rule
19b–4(f)(6)(iii) 22 permits the
Commission to 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. The Exchange states
that the annual meeting of the
stockholder will take place in June 2019
to address the election of Directors as
well as certain housekeeping items,
which has historically included setting
the size of the Board. The Exchange
states that the waiver of the operative
delay will allow the Exchange to
harmonize its rules across the Affiliated
Exchanges in a timely manner, thereby
creating more consistent standards for
the administration and governance
across the Nasdaq, Inc.-owned affiliated
exchanges. Accordingly, the
Commission believes that waiver of the
30-day operative delay is consistent
with the protection of investors and the
public interest. Therefore, the
Commission hereby waives the 30-day
operative delay and designates the
19 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6)(iii) requires a self-regulatory organization to
give the Commission written notice of its 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.
21 17 CFR 240.19b–4(f)(6).
22 17 CFR 240.19b–4(f)(6)(iii).
20 17
E:\FR\FM\02JYN1.SGM
02JYN1
Federal Register / Vol. 84, No. 127 / Tuesday, July 2, 2019 / Notices
proposed rule change as operative upon
filing.23
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
khammond on DSKBBV9HB2PROD with 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–
BX–2019–021 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–BX–2019–021. 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 website (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 website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549, on official
23 For purposes only of waiving the 30-day
operative delay, the Commission has also
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
VerDate Sep<11>2014
17:00 Jul 01, 2019
Jkt 247001
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–BX–2019–021 and should
be submitted on or before July 23, 2019.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.24
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019–14053 Filed 7–1–19; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–86204; File No. SR–BYX–
2012–019]
Self-Regulatory Organization; Cboe
BYX Exchange, Inc.; Order Granting an
Extension to Limited Exemption From
Rule 612(c) of Regulation NMS in
Connection With the Exchange’s Retail
Price Improvement Program
June 26, 2019.
On November 27, 2012, the Securities
and Exchange Commission
(‘‘Commission’’) issued an order
pursuant to its authority under Rule
612(c) of Regulation NMS (‘‘Sub-Penny
Rule) 1 that granted the BATS BYXExchange, Inc. (k/n/a ‘‘Cboe BYX’’ or
the ‘‘Exchange’’) a limited exemption
from the Sub-Penny Rule in connection
with the operation of the Exchange’s
Retail Price Improvement (‘‘RPI’’)
Program (the ‘‘Program’’). The limited
exemption was granted concurrently
with the Commission’s approval of the
Exchange’s proposal to adopt the
Program for a one-year pilot term.2 The
exemption was granted coterminous
with the effectiveness of the pilot
Program and has been extended seven
times; 3 both the pilot Program and
CFR 200.30–3(a)(12).
CFR 242.612(c).
2 See Securities Exchange Act Release No. 68303
(November 27, 2012), 77 FR 71652 (December 3,
2012) (‘‘RPI Approval Order’’) (SR–BXY–2012–019).
3 See Securities Exchange Act Release Nos. 71249
(January 7, 2014), 79 FR 2229 (January 13, 2012)
(SR–BYX–2014–001) (Notice of Filing and
Immediate Effectiveness of a Proposed Rule Change
to Extend the Pilot Period for the RPI); 71250
(January 7, 2014), 79 FR 2234 (January 13, 2012)
(Order Granting an Extension to Limited Exemption
PO 00000
24 17
1 17
Frm 00083
Fmt 4703
Sfmt 4703
31643
exemption are scheduled to expire on
December 31, 2018.
The Exchange now seeks to extend
the exemption until September 30,
2019.4 The Exchange’s request was
made in conjunction with an
immediately effective filing that extends
the operation of the Program until
September 30, 2019.5 In its request to
extend the exemption, the Exchange
notes that the Program was
implemented gradually over time.
Accordingly, the Exchange has asked for
additional time to allow itself and the
Commission to analyze data concerning
the Program, which the Exchange
committed to provide to the
From Rule 612(c) of Regulation NMS in Connection
With the Exchange’s Retail Price Improvement
Program); 74111 (January 22, 2015), 80 FR 4598
(January 28, 2015) (SR–BYX–2015–05) (Notice of
Filing and Immediate Effectiveness of a Proposed
Rule Change to Extend the Pilot Period for the RPI);
and 74115 (January 22, 2015), 80 FR 4324 (January
27, 2015) (Order Granting an Extension to Limited
Exemption From Rule 612(c) of Regulation NMS in
Connection With the Exchange’s Retail Price
Improvement Program); 76965 (January 22, 2016),
81 FR 4682 (January 27, 2016) (SR–BYX–2016–01)
(Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change to Extend the Pilot Period for
the RPI); 76953 (January 21, 2016), 81 FR 4728
(January 27, 2016) (Order Granting an Extension to
Limited Exemption From Rule 612(c) of Regulation
NMS in Connection With the Exchange’s Retail
Price Improvement Program); 78180 (June 28, 2016),
81 FR 43306 (July 1, 2016) (SR–BYX–2016–15)
(Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change to Extend the Pilot Period for
the RPI); 78178 (July 5, 2016), 81 FR 43689 (July
5, 2016) (Order Granting an Extension to Limited
Exemption From Rule 612(c) of Regulation NMS in
Connection With the Exchange’s Retail Price
Improvement Program); 81368 (August 10, 2017), 82
FR 38960 (August 16, 2017) (SR-BatsBYX–2017–18)
(Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change to Extend the Pilot Period for
the RPI); 81364 (August 8, 2018), 82 FR 38733
(August 15, 2017) (Order Granting an Extension to
Limited Exemption From Rule 612(c) of Regulation
NMS in Connection With the Exchange’s Retail
Price Improvement Program); 83758 (August 1,
2018), 83 FR 38757 (August 7, 2018) (SR-CboeBYX–
2018–015) (Notice of Filing and Immediate
Effectiveness of a Proposed Rule Change to Extend
the Pilot Period for the RPI); 83756 (August 1,
2018), 83 FR 38748 (August 7, 2018) (Order
Granting an Extension to Limited Exemption From
Rule 612(c) of Regulation NMS in Connection With
the Exchange’s Retail Price Improvement Program);
84830 (December 17, 2018) 83 FR 65769 (December
21, 2018) (SR-CboeBYX–2018–025) (Notice of Filing
and Immediate Effectiveness of a Proposed Rule
Change to Extend the Pilot Period for the RPI);
84845 (December 18, 2018), 83 FR 66329 (December
26, 2018) (Order Granting an Extension to Limited
Exemption From Rule 612(c) of Regulation NMS in
Connection With the Exchange’s Retail Price
Improvement Program). The Exchange filed to make
the pilot program permanent, but subsequently
withdrew that filing. See Securities Exchange Act
Release No. 83831 (August 13, 2018), 83 FR 41128
(August 17, 2018) (SR-CboeBYX–2018–014); 85586
(April 10, 2019), 84 FR 15657 (April 16, 2019) (SR–
CBOE–2018–014).
4 See letter from Adrian Griffiths, Assistant
General Counsel, Cboe BYX, to Vanessa
Countryman, Secretary, Commission, dated June 25,
2019.
5 See SR-CboeBYX–2019–010.
E:\FR\FM\02JYN1.SGM
02JYN1
]]>Agencies
[Federal Register Volume 84, Number 127 (Tuesday, July 2, 2019)]
[Notices]
[Pages 31641-31643]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-14053]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-86203; File No. SR-BX-2019-021]
Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Harmonize the
Exchange's By-Law Provisions Regarding the Size of the Exchange's Board
of Directors to Those of the Other Nasdaq, Inc.-Owned U.S. Exchanges
June 26, 2019.
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 June 17, 2019, Nasdaq BX, Inc. (``BX'' 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.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to harmonize the Exchange's By-Law provisions
regarding the size of the Exchange's Board of Directors (``Board'') to
those of the other Nasdaq, Inc.-owned U.S. exchanges, The Nasdaq Stock
Market LLC (``Nasdaq''), Nasdaq PHLX LLC (``Phlx''), Nasdaq ISE, LLC
(``ISE''), Nasdaq GEMX, LLC (``GEMX''), and Nasdaq MRX, LLC (``MRX'')
(together, ``Affiliated Exchanges'').
The text of the proposed rule change is available on the Exchange's
website at https://nasdaqbx.cchwallstreet.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
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend its By-Laws at Article IV, Section
4.2 \3\ to conform its provisions regarding the size of the Exchange's
Board to those of the Affiliated Exchanges.\4\
---------------------------------------------------------------------------
\3\ In Exhibit 5, the references to ``Corporation'' mean the
Exchange.
\4\ See Nasdaq Second Amended Limited Liability Company
Agreement (``Nasdaq LLC Agreement''), Section 9(a); Phlx Second
Amended Limited Liability Company Agreement (``Phlx LLC
Agreement''), Section 8(a); and ISE, GEMX, and MRX Limited Liability
Company Agreements, Section 9(a).
---------------------------------------------------------------------------
By-Law Article IV contains provisions regarding the powers and
composition of the Board, which are generally aligned with similar
provisions in the Limited Liability Company (``LLC'') Agreements and
By-Laws of the Affiliated Exchanges. For instance, as is the case with
the Affiliated Exchanges, the composition of the Exchange's Board is
required to reflect a balance among Industry Directors,\5\ Member
Representative Directors,\6\ and Non-Industry Directors,\7\ including
Public Directors \8\ and Director representatives of issuers and
investors (``issuer representatives''). Specifically, the number of
Non-Industry Directors, including at least one Public Director and at
least one issuer representative, shall equal or exceed the sum of the
number of Industry Directors and Member Representative Directors. In
addition, at least 20% of the Directors shall be Member Representative
Directors.\9\
---------------------------------------------------------------------------
\5\ ``Industry Director'' means a Director (excluding any two
officers of the Exchange, selected at the sole discretion of the
Board, amongst those officers who may be serving as Directors (the
``Staff Directors'')), who (i) is or has served in the prior three
years as an officer, director, or employee of a broker or dealer,
excluding an outside director or a director not engaged in the day-
to-day management of a broker or dealer; (ii) is an officer,
director (excluding an outside director), or employee of an entity
that owns more than ten percent of the equity of a broker or dealer,
and the broker or dealer accounts for more than five percent of the
gross revenues received by the consolidated entity; (iii) owns more
than five percent of the equity securities of any broker or dealer,
whose investments in brokers or dealers exceed ten percent of his or
her net worth, or whose ownership interest otherwise permits him or
her to be engaged in the day-to-day management of a broker or
dealer; (iv) provides professional services to brokers or dealers,
and such services constitute twenty percent or more of the
professional revenues received by the Director or twenty percent or
more of the gross revenues received by the Director's firm or
partnership; (v) provides professional services to a director,
officer, or employee of a broker, dealer, or corporation that owns
fifty percent or more of the voting stock of a broker or dealer, and
such services relate to the director's, officer's, or employee's
professional capacity and constitute twenty percent or more of the
professional revenues received by the Director or twenty percent or
more of the gross revenues received by the Director's firm or
partnership; or (vi) has a consulting or employment relationship
with or provides professional services to the Exchange or any
affiliate thereof or to FINRA or has had any such relationship or
provided any such services at any time within the prior three years.
See By-Law Article I(t).
\6\ ``Member Representative Director'' means a Director who has
been elected by the stockholders after having been nominated by the
Member Nominating Committee or voted upon by Exchange Members
pursuant to the By-Laws (or elected by the stockholders without such
nomination or voting in the case of the Member Representative
Directors elected pursuant to Section 4.3(b)). A Member
Representative Director may, but is not required to be, an officer,
director, employee, or agent of an Exchange Member. See By-Law
Article I(x). Member Representative Directors are directors that
meet the fair representation requirement in Section 6(b)(3) of the
Act, which requires that the ``rules of the Exchange assure a fair
representation of its members in the selection of its directors and
administration of its affairs. . .''
\7\ ``Non-Industry Director'' means a Director (excluding Staff
Directors) who is (i) a Public Director; (ii) an officer or employee
of an issuer of securities listed on the Exchange; or (iii) any
other individual who would not be an Industry Director. See By-Law
Article I(bb).
\8\ ``Public Director'' means a Director who has no material
business relationship with a broker or dealer, the Exchange or its
affiliates, or FINRA. See By-Law Article I(gg).
\9\ See By-Law Article IV, Section 4.3. The Affiliated Exchanges
have substantially similar board composition requirements, including
the requirement that at least 20% of the directors be Member
Representative Directors. In addition, the By-Laws of Nasdaq, ISE,
GEMX, and MRX each have an additional board composition requirement
of at least two issuer representatives if the board consists of ten
or more directors. See Nasdaq LLC Agreement, Section 9(a) and Nasdaq
By-Laws, Article III, Section 2(a); Phlx LLC Agreement, Section 8(a)
and Phlx By-Laws, Article III, Section 3-2(a); and ISE, GEMX, and
MRX LLC Agreements, Section 9(a) and ISE, GEMX, and MRX By-Laws,
Article III, Section 2(a).
---------------------------------------------------------------------------
Furthermore, consistent with the Affiliated Exchanges, the
Exchange's By-Laws presently allow the stockholders \10\ to set the
exact number of Directors.\11\ Unlike the Affiliated
[[Page 31642]]
Exchanges, however, the Exchange's By-Laws require that the minimum
Board size be fixed at ten Directors.\12\ The Exchange now proposes to
remove the minimum threshold of ten Directors contained in the By-Laws
to align with the provisions in the LLC Agreements of the Affiliated
Exchanges. The Exchange does not seek to amend the Board's authority or
qualification requirements in the By-Laws other than to remove this
minimum threshold. As such, the current requirements that the number of
Non-Industry Directors (including at least one Public Director and at
least one issuer representative) equal or exceed the sum of the number
of Industry Directors and Member Representative Directors, and at least
20% of the Directors be Member Representative Directors, would continue
to apply.
---------------------------------------------------------------------------
\10\ Nasdaq, Inc. is the sole stockholder of the Exchange.
\11\ See By-Law Article IV, Section 4.2. See supra note 4.
\12\ See By-Law Article IV, Section 4.2. Section 4.2 also
provides that no decrease in the number of Directors shall shorten
the term of any incumbent Director.
---------------------------------------------------------------------------
The practical effect of the proposed rule change is to enable the
size of the Board to be set below ten members. The Exchange believes
that a Board consisting of less than ten members is sufficiently large
to effectively perform the Board's oversight responsibilities, and when
combined with the current Board composition requirements discussed
above, is consistent with the Act. Furthermore, as noted above, while
the Affiliated Exchanges have substantially similar provisions in their
respective LLC Agreements authorizing the sole member to determine the
number of directors, these LLC Agreement provisions do not have a
strict minimum threshold on Board size like BX.\13\ As such, the
proposed changes will further streamline the rules governing the
organization and administration across BX and the Affiliated Exchanges.
---------------------------------------------------------------------------
\13\ See supra note 4.
---------------------------------------------------------------------------
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act,\14\ in general, and furthers the objectives of Section
6(b)(1) of the Act,\15\ which requires that the Exchange to be so
organized so as to have the capacity to be able to carry out the
purposes of the Act and to comply, and to enforce compliance by its
members and persons associated with its members, with the provisions of
the Act, the rules and regulations thereunder, and the rules of the
Exchange; Section 6(b)(3) of the Act,\16\ which requires that the rules
of a national securities exchange assure the fair representation of its
members in the selection of its directors and administration of its
affairs, and provide that one or more directors shall be representative
of issuers and investors and not be associated with a member of the
exchange, broker, or dealer; and Section 6(b)(5) of the Act,\17\ 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. The proposed changes will eliminate
the requirement for a minimum of ten Directors on the Board currently
in Article IV, Section 4.2 of the Exchange's By-Laws. As discussed
above, the current Board composition requirements in the By-Laws remain
unchanged under this proposal, and the requirements that the number of
Non-Industry Directors (including at least one Public Director and at
least one issuer representative) equal or exceed the sum of the number
of Industry Directors and Member Representative Directors, and at least
20% of the Directors be Member Representative Directors, would continue
to apply. Accordingly, the Exchange believes that the proposed removal
of the minimum threshold will improve administrative efficiency and
effectiveness by operating with a smaller number of directors while
continuing to fulfill its statutory obligations regarding the fair
representation of members of the Exchange. In addition, the proposed
amendments will have the additional benefit of bringing the Exchange's
requirements on Board size into greater conformity with those of the
Affiliated Exchanges, which allow for discretion as to the size of
their boards, thereby creating more consistent standards among the
affiliated exchanges owned by Nasdaq, Inc.\18\ As such, the Exchange
believes that its proposal will bring greater consistency to its rules,
which is beneficial to both investors and the public interest.
---------------------------------------------------------------------------
\14\ 15 U.S.C. 78f(b).
\15\ 15 U.S.C. 78f(b)(1).
\16\ 15 U.S.C. 78f(b)(3).
\17\ 15 U.S.C. 78f(b)(5).
\18\ See supra note 4.
---------------------------------------------------------------------------
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. The proposed rule change
relates solely to the administration and governance of the Exchange and
will have no effect on the Exchange's business operations or
competitive position.
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 foregoing 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, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \19\ and Rule 19b-
4(f)(6) thereunder.\20\
---------------------------------------------------------------------------
\19\ 15 U.S.C. 78s(b)(3)(A).
\20\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization to give the Commission
written notice of its 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.
---------------------------------------------------------------------------
A proposed rule change filed under Rule 19b-4(f)(6) \21\ normally
does not become operative prior to 30 days after the date of the
filing. However, Rule 19b-4(f)(6)(iii) \22\ permits the Commission to
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. The Exchange states
that the annual meeting of the stockholder will take place in June 2019
to address the election of Directors as well as certain housekeeping
items, which has historically included setting the size of the Board.
The Exchange states that the waiver of the operative delay will allow
the Exchange to harmonize its rules across the Affiliated Exchanges in
a timely manner, thereby creating more consistent standards for the
administration and governance across the Nasdaq, Inc.-owned affiliated
exchanges. Accordingly, the Commission believes that waiver of the 30-
day operative delay is consistent with the protection of investors and
the public interest. Therefore, the Commission hereby waives the 30-day
operative delay and designates the
[[Page 31643]]
proposed rule change as operative upon filing.\23\
---------------------------------------------------------------------------
\21\ 17 CFR 240.19b-4(f)(6).
\22\ 17 CFR 240.19b-4(f)(6)(iii).
\23\ For purposes only of waiving the 30-day operative delay,
the Commission has also considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
---------------------------------------------------------------------------
At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-BX-2019-021 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-BX-2019-021. 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 website (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 website 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-BX-2019-021 and should be submitted on
or before July 23, 2019.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\24\
---------------------------------------------------------------------------
\24\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-14053 Filed 7-1-19; 8:45 am]
BILLING CODE 8011-01-P
