Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend ISE's Rulebook and By-Laws, 54227-54231 [2019-22015]

Download as PDF Federal Register / Vol. 84, No. 196 / Wednesday, October 9, 2019 / Notices • Send an email to rule-comments@ sec.gov. Please include File Number SR– FINRA–2019–024 on the subject line. SECURITIES AND EXCHANGE COMMISSION Paper Comments [Release No. 34–87214; File No. SR–ISE– 2019–24] • 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–FINRA–2019–024. 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 a.m. and 3 p.m. Copies of such filing also will be available for inspection and copying at the principal office of FINRA. 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–FINRA– 2019–024 and should be submitted on or before October 30, 2019. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.34 Jill M. Peterson, Assistant Secretary. [FR Doc. 2019–22023 Filed 10–8–19; 8:45 am] khammond on DSKJM1Z7X2PROD with NOTICES BILLING CODE 8011–01–P Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend ISE’s Rulebook and By-Laws October 3, 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 September 23, 2019, Nasdaq ISE, LLC (‘‘ISE’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘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. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend its Rulebook and By-Laws to (i) remove obsolete provisions relating to the organization and administration of committees, (ii) modify Director categorizations, (iii) amend the compositional requirements of the Exchange’s board (‘‘Board’’) and Regulatory Oversight Committee (‘‘ROC’’), and (iv) make additional, nonsubstantive edits. The text of the proposed rule change is available on the Exchange’s website at https://ise.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. 1 15 34 17 CFR 200.30–3(a)(12). VerDate Sep<11>2014 17:13 Oct 08, 2019 2 17 Jkt 250001 PO 00000 U.S.C. 78s(b)(1). CFR 240.19b–4. Frm 00126 Fmt 4703 54227 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 Rulebook and By-Laws to (i) remove obsolete provisions relating to the organization and administration of committees, (ii) modify Director categorizations, (iii) amend the Board and ROC compositional requirements, and (iv) make additional, nonsubstantive edits. Each change is discussed below.3 Rules 200–203 Chapter 2 of the Exchange’s Rulebook presently contains a number of rules relating to the organization and administration of committees of the Exchange. In particular, Rules 200–203 set forth provisions for the establishment of committees, removal of committee members, committee procedures and the general duties and powers of committees, all of which have been in place since the Exchange’s inception. The Exchange has since amended its committee structure and related rules to align with those of its affiliates.4 Accordingly, the Exchange proposes to delete Rules 200–203 as obsolete or duplicative because the provisions related to the organization and administration of committees are now set forth in the Exchange’s Limited Liability Company Agreement (‘‘LLC Agreement’’) and its By-Laws. Historically, Rules 200 and 201 authorized the Chief Executive Officer of the Exchange to establish committees not comprised of directors pursuant to delegated authority by the Board, and to appoint or remove any such committee members with Board approval.5 With 3 All references herein and in the Exhibit 5 to ‘‘the Company’’ mean the Exchange. Company is defined in the By-Laws to mean Nasdaq ISE, LLC. 4 See Securities Exchange Act Release No. 81263 (July 31, 2017), 82 FR 36497 (August 4, 2017) (SR– ISE–2017–32) (establishing, among other changes, a Board and committee structure substantially similar to The Nasdaq Stock Market LLC’s structure); and Securities Exchange Act Release No. 83703 (July 25, 2018), 83 FR 36992 (July 31, 2018) (SR–ISE–2018– 59) (establishing, among other changes, an Exchange Review Council substantially similar to Exchange Review Council of Nasdaq BX, Inc. to replace the Business Conduct Committee). As a result of these changes, Exchange’s board and committee structure is generally harmonized with its affiliates, Nasdaq BX, Inc. (‘‘BX’’), The Nasdaq Stock Market LLC (‘‘Nasdaq’’), and Nasdaq PHLX LLC (‘‘Phlx’’). 5 For example, the Exchange’s former Business Conduct Committee (‘‘BCC’’) was established by the Chief Executive Officer pursuant to delegated authority. As noted above, the BCC was recently replaced by the Exchange Review Council in SR– ISE–2018–59. See Securities Exchange Act Release Continued Sfmt 4703 E:\FR\FM\09OCN1.SGM 09OCN1 54228 Federal Register / Vol. 84, No. 196 / Wednesday, October 9, 2019 / Notices the changes in SR–ISE–2017–32 and SR–ISE–2018–59, these rules have been superseded by By-Law provisions that specify the committees composed solely of Directors and committees not composed solely of Directors, including the appointment and removal of such committee members.6 In this respect, the Exchange notes that it is following the approach of its affiliates, BX, Nasdaq, and Phlx, which similarly have provisions in their respective By-Laws, instead of their rulebooks, pertaining to committees composed solely of Directors and committees not composed solely of Directors.7 The Exchange further seeks to delete Rules 202 and 203 given that similar provisions governing committee procedures and general duties and powers are now set forth in Section 9(g) of the LLC Agreement and in By-Law Article III and Article VI. khammond on DSKJM1Z7X2PROD with NOTICES By-Law Article I Currently, the definition of ‘‘NonIndustry Director’’ in the Exchange ByLaws refers to, among other individuals, an officer, director, or employee of an issuer of securities listed on the national securities exchange operated by the Exchange.8 Because only Nasdaq currently operates an equities listing market, the Exchange seeks to amend the definition of Non-Industry Director to refer to an officer, director, or employee of an issuer of securities listed on a national securities exchange operated by the Exchange or one of its affiliates. The Exchange believes that the proposed changes will bring greater clarity to the Exchange’s rules by aligning the By-Law provision to how the Exchange currently operates. The Exchange notes that the qualifications for a Non-Industry Director are not expanding under this proposal and as a practical matter, no changes to the current composition of Non-Industry Directors on the Exchange’s Board are contemplated by this rule change. Today, a Non-Industry Director who is not designated by the Exchange as a Public Director 9 under (i) of the No. 83703 (July 25, 2018), 83 FR 36992 (July 31, 2018) (SR–ISE–2018–59). 6 See By-Law Article III, Sections 4–6. In addition, the provisions governing the Exchange Review Council are specified in By-Law, Article VI. 7 See BX By-Law Article IV, Sections 4.12–4.14 and Article VII; Nasdaq By-Law Article III, Sections 4–6 and Article VI; and Phlx By-Law Article V. 8 In addition, the term ‘‘Non-Industry Director’’ encompasses a Director (excluding Staff Directors) who is a Public Director or any other individual who would not be an Industry Director. See By-Law Article I, Section (w). 9 The term ‘‘Public Director’’ means a Director who has no material business relationship with a broker or dealer, the Company or its affiliates, or FINRA. See By-Law Article I, Section (z). VerDate Sep<11>2014 17:13 Oct 08, 2019 Jkt 250001 definition of Non-Industry Director, and that does not explicitly fall under (ii) (i.e., ‘‘an officer, director or employee of an issuer of securities listed on the national securities exchange operated by the Exchange’’) would still fall under (iii) an individual who would not be an Industry Director.10 With the proposed changes, these Non-Industry Directors could fall under both (ii) and (iii) because they would be representative of issuers listed on the Exchange’s affiliate, Nasdaq, and at the same time, not be considered Industry Directors. The Exchange also proposes to make conforming changes to the definition of a ‘‘Non-Industry member’’ of a committee.11 Currently, the Exchange’s Board compositional requirements require at least one Public Director and at least one issuer representative (or if the Board consists of ten or more Directors, at least two issuer representatives).12 As set forth in Article I, Section (z), a ‘‘Public Director’’ is defined as a Director who has no material business relationship with a broker or dealer, the Exchange or its affiliates, or FINRA. ‘‘Issuer representative’’ is not defined specifically in the Exchange’s By-Laws, but is implicitly defined in the term Non-Industry Director as ‘‘an officer, 10 The term ‘‘Industry Director’’ means a Director (excluding any two officers of the Company, 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 20 percent or more of the professional revenues received by the Director or 20 percent or more of the gross revenues received by the Director’s firm or partnership; (v) provides professional services to a director, officer, or employee of a broker, dealer, or corporation that owns 50 percent or more of the voting stock of a broker or dealer, and such services relate to the director’s, officer’s, or employee’s professional capacity and constitute 20 percent or more of the professional revenues received by the Director or member or 20 percent or more of the gross revenues received by the Director’s or member’s firm or partnership; or (vi) has a consulting or employment relationship with or provides professional services to the Company or any affiliate thereof or to FINRA (or any predecessor) or has had any such relationship or provided any such services at any time within the prior three years. See By-Law Article I, Section (m). 11 See By-Law Article I, Section (x). 12 See By-Law Article III, Section 2(a). PO 00000 Frm 00127 Fmt 4703 Sfmt 4703 director, or employee or an issuer of securities listed on the national securities exchange operated by the Exchange.’’ 13 The Exchange now proposes to clarify in the definition of Public Director that, for the avoidance of doubt, a director of an issuer of securities listed on a national securities exchange operated by the Exchange or one of its affiliates shall not be precluded from being considered a Public Director solely on the basis of such directorship. The Exchange believes that a director of a listed company can adequately represent the interests of listed companies on the Board and therefore be considered an issuer representative. At the same time, the Exchange does not believe that such a directorship always constitutes a material business relationship with a broker or dealer, the Exchange or its affiliates, or FINRA, which would prohibit the individual from being considered a Public Director.14 Of course, such issuer representative must still meet the requirements of a Public Director and not have such material business relationships by definition. Thus in limited circumstances, the Exchange believes that it is possible for directors of listed companies to be considered both Public Directors and issuer representatives. In light of the foregoing, the Exchange also proposes to make conforming changes to the definition of a ‘‘Public member’’ of a committee.15 The Exchange notes that with the proposed changes, the composition of the Board would still be required to reflect a balance among Non-Industry Directors (including Public Directors and issuer representatives), Industry Directors, and Member Representative Directors.16 Accordingly, current Board 13 See By-Law Article I, Section (w). As discussed above, the Exchange will amend this provision to refer to ‘‘an officer, director, or employee of an issuer of securities listed on a national securities exchange operated by the Exchange or one of its affiliates.’’ 14 This is consistent with the longstanding best practice of the Exchange’s ultimate parent, Nasdaq, Inc., having the Chairman of the Audit Committee of the board of directors of Nasdaq, Inc. serve as the Chairman of the Exchange Board’s Regulatory Oversight Committee, which is required to be comprised of Public Directors who are also considered ‘‘independent directors’’ as defined in Nasdaq Rule 5605. See By-Law Article III, Section 5(c). Because Nasdaq, Inc. is a listed company, this Exchange Director could be considered both an issuer representative and a Public Director. 15 See By-Law Article I, Section (aa). 16 The term ‘‘Member Representative Director’’ means a Director who has been elected or appointed after having been nominated by the Member Nominating Committee or by an Exchange Member pursuant to the Exchange’s By-Laws. A Member Representative Director may, but is not required to be, an officer, director, employee, or agent of an E:\FR\FM\09OCN1.SGM 09OCN1 Federal Register / Vol. 84, No. 196 / Wednesday, October 9, 2019 / Notices qualification requirements such as the number of Non-Industry Directors equaling or exceeding the sum of the number of Industry Directors and Member Representative Directors would continue to apply.17 By-Law Article III, Section 2(a) The Exchange proposes to amend ByLaw Article III, Section 2(a) to revise the qualifications for any position on the Board required to be representative of issuers. As discussed above, Article III, Section 2(a) requires that the Board be composed of at least one Public Director and at least one issuer representative (or if the Board consists of ten or more Directors, at least two issuer representatives).18 The Exchange adopted this provision when it conformed its By-Laws to those of Nasdaq as part of its effort to harmonize corporate governance processes with its affiliated exchanges.19 As noted above, unlike Nasdaq, the Exchange does not currently operate an equities listing market and therefore believes it is more appropriate to align its Board composition requirements on this point with the By-Laws of BX and Phlx, which both currently require only one Director representative of issuers and investors, regardless of Board size.20 The Exchange’s proposal would also change the Board composition requirement to more closely track the statutory language included in Section 6(b)(3) of the Act, which requires one or more directors to be ‘‘representative of issuers and investors.’’ khammond on DSKJM1Z7X2PROD with NOTICES By-Law Article III, Section 5(c) Currently, By-Law Article III, Section 5(c) requires that the Regulatory Oversight Committee (‘‘ROC’’) be Exchange Member. See By-Law Article I, Section (r). 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 . . .’’ 17 See By-Law Article III, Section 2(a). In addition, the Board qualification requirement that at least 20% of the Directors be Member Representative Directors will continue to apply. See LLC Agreement Section 9(a). 18 By-Law Article III, Section 2(a) also requires that the number of Non-Industry Directors (which includes Public Directors and issuer representatives) shall equal or exceed the sum of the number of Industry Directors and Member Representative Directors. Furthermore, Section 9(a) of the LLC Agreement requires that at least 20% of the Directors be Member Representative Directors. These Board qualifications are not being amended. 19 See Securities Exchange Act Release No. 81263 (July 31, 2017), 82 FR 36497 (August 4, 2017) (SR– ISE–2017–32). 20 See BX By-Law Article IV, Section 4.3; and Phlx By-Law Article III, Section 3–2(a). Similar to the Exchange, BX and Phlx do not currently operate equities listing markets. VerDate Sep<11>2014 17:13 Oct 08, 2019 Jkt 250001 comprised of three members, each of whom shall be a Public Director and an ‘‘independent director’’ as defined in Nasdaq Rule 5605. The Exchange proposes to amend Section 5(c) to provide that the ROC shall be comprised of at least three members, as is currently set forth in the ROC Charter.21 All members of the ROC will continue to be Public Directors and ‘‘independent directors’’ as defined in Nasdaq Rule 5605. Lastly, the Exchange also proposes to make technical changes in Section 5(c) to correct a typographical error and to update Nasdaq’s name. 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act,22 in general, and furthers the objectives of Section 6(b)(1), Section 6(b)(3), and Section 6(b)(5) of the Act,23 in particular, which require, among other things, an exchange to be so organized as to have the capacity to be able to carry out the purposes of the Act; that one or more directors be representative of issuers and investors and not be associated with a member of the exchange, broker, or dealer; and that the rules of an exchange be 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. Rules 200–203 As discussed above, the Exchange proposes to delete Rules 200–203 as obsolete or duplicative because the provisions related to the organization and administration of committees are now set forth in the Exchange’s LLC Agreement and By-Laws. The Exchange believes that deleting rules that no longer apply to the Exchange’s current committee structure will more clearly identify currently applicable rules, which will remove impediments to and perfect the mechanism of a free and open market. The Exchange further believes that the proposed rule change will eliminate potential confusion regarding which rules apply to the organization and administration of committees, which ultimately protects investors and the public interest. By-Law Article I The Exchange believes that the changes to the definitions of NonIndustry Director and Non-Industry 21 The ROC Charter is available at: https:// ir.nasdaq.com/static-files/ad0a0102-e977-40cf8139-15c359576a25. 22 15 U.S.C. 78f(b). 23 15 U.S.C. 78f(b)(1), (b)(3), and (b)(5). PO 00000 Frm 00128 Fmt 4703 Sfmt 4703 54229 member proposed above will enhance the clarity of these provisions given that only the Exchange’s affiliate (Nasdaq) currently operates an equities listing market. Accordingly, the proposed changes should more accurately reflect how the Exchange currently operates. The Exchange also believes that the proposed changes to the definitions of Public Director and Public member are consistent with the Act as these modifications are intended to make clear that a Director is not barred from being considered a Public Director merely because the Director serves as a director of an issuer of securities listed on a national securities exchange operated by the Exchange or one of its affiliates, and are consistent with current corporate governance practices.24 Furthermore, as discussed above, the requirements that the number of Non-Industry Directors (including at least one Public Director and at least one Director representative of issuers and investors) 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.25 Accordingly, the Exchange believes that the proposed changes will more accurately reflect the Exchange’s current operations and governance practices while continuing to comport with the Exchange’s statutory obligations regarding fair representation under Section 6(b)(3) of the Act. By-Law Article III, Section 2(a) The Exchange believes that its proposal to expand the Board qualifications from an issuer representative to a representative of issuers and investors, and eliminate the requirement that the Board have two such representatives if the Board consists of ten or more Directors is consistent with the Act. The Exchange notes that the proposed changes track the statutory language included in Section 6(b)(3) of the Act, which requires one or more directors to be ‘‘representative of issuers and investors.’’ The Exchange also notes that the elimination of the requirement to have at least two Director positions representative of issuers if the Board consists of ten or more Directors is consistent with Section 6(b)(3) of the Act, which only requires the Board to have one such representative. Furthermore, the Exchange will continue to require the Board 24 See 25 See supra note 14. supra notes 16 and 17, with accompanying text. E:\FR\FM\09OCN1.SGM 09OCN1 54230 Federal Register / Vol. 84, No. 196 / Wednesday, October 9, 2019 / Notices composition to reflect a balance among Non-Industry Directors (including Public Directors and Director representatives of issuers and investors), Industry Directors, and Member Representative Directors (with the latter continuing to constitute 20% of the Board).26 Accordingly, the Exchange believes that the changes to the Board qualifications proposed herein will more accurately reflect current Exchange operations while continuing to meet the statutory requirements under Section 6(b)(3) of the Act. In addition, the proposed amendments will have the additional benefit of bringing the Exchange’s Board qualifications on this point into greater conformity with those of BX and Phlx, thereby creating more consistent standards among the affiliated exchanges owned by Nasdaq, Inc.27 By-Law Article III, Section 5(c) The Exchange believes that the proposed rule change in By-Law Article III, Section 5(c) to provide that the ROC shall be comprised of at least three members is consistent with the Act because it will promote transparency to the Exchange’s current practices by conforming the By-Law language to the ROC Charter. As discussed above, the composition requirements that all ROC members be Public Directors and ‘‘independent directors’’ as defined in Nasdaq Rule 5605 will remain unchanged with this proposal, thereby ensuring that an independent Board committee will continue to be responsible for the regulatory oversight of the Exchange. Lastly, the proposed technical changes in Section 5(c) to correct a typographical error and to update Nasdaq’s name will bring greater clarity to the Exchange’s rules, which protects investors and the public interest. khammond on DSKJM1Z7X2PROD with NOTICES B. Self-Regulatory Organization’s Statement on Burden on Competition Because the proposed rule change relates to the corporate governance of the Exchange and not to the Exchange’s operations, the Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were either solicited or received. 26 See 27 See supra note 18. supra note 20. VerDate Sep<11>2014 17:13 Oct 08, 2019 Jkt 250001 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 28 and subparagraph (f)(6) of Rule 19b–4 thereunder.29 A proposed rule change filed pursuant to Rule 19b–4(f)(6) under the Act 30 normally does not become operative for 30 days after the date of its filing. However, Rule 19b–4(f)(6)(iii) 31 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 requested that the Commission waive the 30-day operative delay. The Commission notes that waiver of the operative delay would allow the Exchange to effect the changes to its Rulebook and By-Laws, which would eliminate obsolete provisions in the Exchange’s Rulebook and better align provisions in the Exchange’s By-Laws with those in the By-Laws of its affiliates, in time for the Exchange Board meeting on September 25, 2019. The Commission believes that waiver of the 30-day operative delay is consistent with the protection of investors and the public interest. Accordingly, the Commission hereby waives the operative delay and designates the proposed rule change operative upon filing.32 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 28 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. 30 17 CFR 240.19b–4(f)(6). 31 17 CFR 240.19b–4(f)(6)(iii). 32 For purposes only of waiving the 30-day operative delay, the Commission also has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 29 17 PO 00000 Frm 00129 Fmt 4703 Sfmt 4703 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 rule-comments@ sec.gov. Please include File Number SR– ISE–2019–24 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–ISE–2019–24. 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–ISE–2019–24 and should be submitted on or before October 30, 2019. E:\FR\FM\09OCN1.SGM 09OCN1 Federal Register / Vol. 84, No. 196 / Wednesday, October 9, 2019 / Notices For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.33 Jill M. Peterson, Assistant Secretary. [FR Doc. 2019–22015 Filed 10–8–19; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–87216; File No. SR–CBOE– 2019–073] Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Make Minor Updates and Consolidate Various Exchange Rules in Connection With Regulatory Reports, Records, and Audits on the Exchange, and Move Those Rules From the Currently Effective Rulebook to Proposed Chapter 7 of the Shell Structure for the Exchange’s Rulebook That Will Become Effective Upon the Migration of the Exchange’s Trading Platform to the Same System Used by the Cboe Affiliated Exchanges October 3, 2019. 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 September 27, 2019, Cboe Exchange, Inc. (the ‘‘Exchange’’ or ‘‘Cboe Options’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. The Exchange filed the proposal as a ‘‘non-controversial’’ proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act 3 and Rule 19b–4(f)(6) thereunder.4 The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change Cboe Exchange, Inc. (the ‘‘Exchange’’ or ‘‘Cboe Options’’) proposes to make minor updates and consolidate various Exchange Rules in connection with regulatory reports, records, and audits on the Exchange, and move those Rules from the currently effective Rulebook (‘‘current Rulebook’’) to proposed Chapter 7 of the shell structure for the Exchange’s Rulebook that will become effective upon the migration of the Exchange’s trading platform to the same system used by the Cboe Affiliated Exchanges (as defined below) (‘‘shell Rulebook’’). The text of the proposed rule change is provided in Exhibit 5. The text of the proposed rule change is also available on the Exchange’s website (https://www.cboe.com/ AboutCBOE/CBOELegal RegulatoryHome.aspx), at the Exchange’s Office of the Secretary, 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 54231 (formerly named CBOE Holdings, Inc.) (‘‘Cboe Global’’), which is also the parent company of Cboe C2 Exchange, Inc. (‘‘C2’’), acquired Cboe EDGA Exchange, Inc. (‘‘EDGA’’), Cboe EDGX Exchange, Inc. (‘‘EDGX’’ or ‘‘EDGX Options’’), Cboe BZX Exchange, Inc. (‘‘BZX’’ or ‘‘BZX Options’’), and Cboe BYX Exchange, Inc. (‘‘BYX’’ and, together with Cboe Options, C2, EDGX, EDGA, and BZX, the ‘‘Cboe Affiliated Exchanges’’). The Cboe Affiliated Exchanges are working to align certain system functionality, retaining only intended differences, between the Cboe Affiliated Exchanges, in the context of a technology migration. Cboe Options intends to migrate its trading platform to the same system used by the Cboe Affiliated Exchanges, which the Exchange expects to complete on October 7, 2019. In connection with this technology migration, the Exchange has a shell Rulebook that resides alongside its current Rulebook, which shell Rulebook will contain the Rules that will be in place upon completion of the Cboe Options technology migration. The Exchange proposes to consolidate current rules in connection with regulatory reports, records, and audits, including the rules related to the Consolidated Audit Trail (‘‘CAT’’), on the Exchange into sections of proposed Chapter 7 in the shell Rulebook. The Exchange notes that in addition to consolidating and moving the various rules related to reports, records, and audits to proposed Chapter 7, the proposed rule change deletes the rules from the current Rulebook. The proposed rule change moves and, where applicable, consolidates the rules as follows: 1. Purpose In 2016, the Exchange’s parent company, Cboe Global Markets, Inc. CHAPTER 7—REGULATORY REPORTS, RECORDS, AND AUDITS Section A. General khammond on DSKJM1Z7X2PROD with NOTICES 7.1 Maintenance, Retention, and Furnishing of Books, Records, and Other Information 7.1(a) ........................................................................................................ 7.1(b) ........................................................................................................ 7.1(c) ......................................................................................................... 7.1(d) ........................................................................................................ 33 17 2 17 1 15 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 3 15 VerDate Sep<11>2014 20:05 Oct 08, 2019 Jkt 250001 PO 00000 15.1 Maintenance, Retention and Furnishing of Books, Records, and Other Information, including 15.1.01. 15.1.02. 15.1.03. 15.1.04. CFR 240.19b–4. U.S.C. 78s(b)(3)(A)(iii). Frm 00130 Fmt 4703 Sfmt 4703 4 17 E:\FR\FM\09OCN1.SGM CFR 240.19b–4(f)(6). 09OCN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 84, Number 196 (Wednesday, October 9, 2019)]
[Notices]
[Pages 54227-54231]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-22015]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-87214; File No. SR-ISE-2019-24]


Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend ISE's 
Rulebook and By-Laws

October 3, 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 September 23, 2019, Nasdaq ISE, LLC (``ISE'' or ``Exchange'') filed 
with the Securities and Exchange Commission (``SEC'' or ``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 amend its Rulebook and By-Laws to (i) 
remove obsolete provisions relating to the organization and 
administration of committees, (ii) modify Director categorizations, 
(iii) amend the compositional requirements of the Exchange's board 
(``Board'') and Regulatory Oversight Committee (``ROC''), and (iv) make 
additional, non-substantive edits.
    The text of the proposed rule change is available on the Exchange's 
website at https://ise.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 Rulebook and By-Laws to (i) 
remove obsolete provisions relating to the organization and 
administration of committees, (ii) modify Director categorizations, 
(iii) amend the Board and ROC compositional requirements, and (iv) make 
additional, non-substantive edits. Each change is discussed below.\3\
---------------------------------------------------------------------------

    \3\ All references herein and in the Exhibit 5 to ``the 
Company'' mean the Exchange. Company is defined in the By-Laws to 
mean Nasdaq ISE, LLC.
---------------------------------------------------------------------------

Rules 200-203
    Chapter 2 of the Exchange's Rulebook presently contains a number of 
rules relating to the organization and administration of committees of 
the Exchange. In particular, Rules 200-203 set forth provisions for the 
establishment of committees, removal of committee members, committee 
procedures and the general duties and powers of committees, all of 
which have been in place since the Exchange's inception. The Exchange 
has since amended its committee structure and related rules to align 
with those of its affiliates.\4\ Accordingly, the Exchange proposes to 
delete Rules 200-203 as obsolete or duplicative because the provisions 
related to the organization and administration of committees are now 
set forth in the Exchange's Limited Liability Company Agreement (``LLC 
Agreement'') and its By-Laws.
---------------------------------------------------------------------------

    \4\ See Securities Exchange Act Release No. 81263 (July 31, 
2017), 82 FR 36497 (August 4, 2017) (SR-ISE-2017-32) (establishing, 
among other changes, a Board and committee structure substantially 
similar to The Nasdaq Stock Market LLC's structure); and Securities 
Exchange Act Release No. 83703 (July 25, 2018), 83 FR 36992 (July 
31, 2018) (SR-ISE-2018-59) (establishing, among other changes, an 
Exchange Review Council substantially similar to Exchange Review 
Council of Nasdaq BX, Inc. to replace the Business Conduct 
Committee). As a result of these changes, Exchange's board and 
committee structure is generally harmonized with its affiliates, 
Nasdaq BX, Inc. (``BX''), The Nasdaq Stock Market LLC (``Nasdaq''), 
and Nasdaq PHLX LLC (``Phlx'').
---------------------------------------------------------------------------

    Historically, Rules 200 and 201 authorized the Chief Executive 
Officer of the Exchange to establish committees not comprised of 
directors pursuant to delegated authority by the Board, and to appoint 
or remove any such committee members with Board approval.\5\ With

[[Page 54228]]

the changes in SR-ISE-2017-32 and SR-ISE-2018-59, these rules have been 
superseded by By-Law provisions that specify the committees composed 
solely of Directors and committees not composed solely of Directors, 
including the appointment and removal of such committee members.\6\ In 
this respect, the Exchange notes that it is following the approach of 
its affiliates, BX, Nasdaq, and Phlx, which similarly have provisions 
in their respective By-Laws, instead of their rulebooks, pertaining to 
committees composed solely of Directors and committees not composed 
solely of Directors.\7\ The Exchange further seeks to delete Rules 202 
and 203 given that similar provisions governing committee procedures 
and general duties and powers are now set forth in Section 9(g) of the 
LLC Agreement and in By-Law Article III and Article VI.
---------------------------------------------------------------------------

    \5\ For example, the Exchange's former Business Conduct 
Committee (``BCC'') was established by the Chief Executive Officer 
pursuant to delegated authority. As noted above, the BCC was 
recently replaced by the Exchange Review Council in SR-ISE-2018-59. 
See Securities Exchange Act Release No. 83703 (July 25, 2018), 83 FR 
36992 (July 31, 2018) (SR-ISE-2018-59).
    \6\ See By-Law Article III, Sections 4-6. In addition, the 
provisions governing the Exchange Review Council are specified in 
By-Law, Article VI.
    \7\ See BX By-Law Article IV, Sections 4.12-4.14 and Article 
VII; Nasdaq By-Law Article III, Sections 4-6 and Article VI; and 
Phlx By-Law Article V.
---------------------------------------------------------------------------

By-Law Article I
    Currently, the definition of ``Non-Industry Director'' in the 
Exchange By-Laws refers to, among other individuals, an officer, 
director, or employee of an issuer of securities listed on the national 
securities exchange operated by the Exchange.\8\ Because only Nasdaq 
currently operates an equities listing market, the Exchange seeks to 
amend the definition of Non-Industry Director to refer to an officer, 
director, or employee of an issuer of securities listed on a national 
securities exchange operated by the Exchange or one of its affiliates. 
The Exchange believes that the proposed changes will bring greater 
clarity to the Exchange's rules by aligning the By-Law provision to how 
the Exchange currently operates. The Exchange notes that the 
qualifications for a Non-Industry Director are not expanding under this 
proposal and as a practical matter, no changes to the current 
composition of Non-Industry Directors on the Exchange's Board are 
contemplated by this rule change. Today, a Non-Industry Director who is 
not designated by the Exchange as a Public Director \9\ under (i) of 
the definition of Non-Industry Director, and that does not explicitly 
fall under (ii) (i.e., ``an officer, director or employee of an issuer 
of securities listed on the national securities exchange operated by 
the Exchange'') would still fall under (iii) an individual who would 
not be an Industry Director.\10\ With the proposed changes, these Non-
Industry Directors could fall under both (ii) and (iii) because they 
would be representative of issuers listed on the Exchange's affiliate, 
Nasdaq, and at the same time, not be considered Industry Directors. The 
Exchange also proposes to make conforming changes to the definition of 
a ``Non-Industry member'' of a committee.\11\
---------------------------------------------------------------------------

    \8\ In addition, the term ``Non-Industry Director'' encompasses 
a Director (excluding Staff Directors) who is a Public Director or 
any other individual who would not be an Industry Director. See By-
Law Article I, Section (w).
    \9\ The term ``Public Director'' means a Director who has no 
material business relationship with a broker or dealer, the Company 
or its affiliates, or FINRA. See By-Law Article I, Section (z).
    \10\ The term ``Industry Director'' means a Director (excluding 
any two officers of the Company, 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 20 percent or more of the professional 
revenues received by the Director or 20 percent or more of the gross 
revenues received by the Director's firm or partnership; (v) 
provides professional services to a director, officer, or employee 
of a broker, dealer, or corporation that owns 50 percent or more of 
the voting stock of a broker or dealer, and such services relate to 
the director's, officer's, or employee's professional capacity and 
constitute 20 percent or more of the professional revenues received 
by the Director or member or 20 percent or more of the gross 
revenues received by the Director's or member's firm or partnership; 
or (vi) has a consulting or employment relationship with or provides 
professional services to the Company or any affiliate thereof or to 
FINRA (or any predecessor) or has had any such relationship or 
provided any such services at any time within the prior three years. 
See By-Law Article I, Section (m).
    \11\ See By-Law Article I, Section (x).
---------------------------------------------------------------------------

    Currently, the Exchange's Board compositional requirements require 
at least one Public Director and at least one issuer representative (or 
if the Board consists of ten or more Directors, at least two issuer 
representatives).\12\ As set forth in Article I, Section (z), a 
``Public Director'' is defined as a Director who has no material 
business relationship with a broker or dealer, the Exchange or its 
affiliates, or FINRA. ``Issuer representative'' is not defined 
specifically in the Exchange's By-Laws, but is implicitly defined in 
the term Non-Industry Director as ``an officer, director, or employee 
or an issuer of securities listed on the national securities exchange 
operated by the Exchange.'' \13\ The Exchange now proposes to clarify 
in the definition of Public Director that, for the avoidance of doubt, 
a director of an issuer of securities listed on a national securities 
exchange operated by the Exchange or one of its affiliates shall not be 
precluded from being considered a Public Director solely on the basis 
of such directorship. The Exchange believes that a director of a listed 
company can adequately represent the interests of listed companies on 
the Board and therefore be considered an issuer representative. At the 
same time, the Exchange does not believe that such a directorship 
always constitutes a material business relationship with a broker or 
dealer, the Exchange or its affiliates, or FINRA, which would prohibit 
the individual from being considered a Public Director.\14\ Of course, 
such issuer representative must still meet the requirements of a Public 
Director and not have such material business relationships by 
definition. Thus in limited circumstances, the Exchange believes that 
it is possible for directors of listed companies to be considered both 
Public Directors and issuer representatives. In light of the foregoing, 
the Exchange also proposes to make conforming changes to the definition 
of a ``Public member'' of a committee.\15\
---------------------------------------------------------------------------

    \12\ See By-Law Article III, Section 2(a).
    \13\ See By-Law Article I, Section (w). As discussed above, the 
Exchange will amend this provision to refer to ``an officer, 
director, or employee of an issuer of securities listed on a 
national securities exchange operated by the Exchange or one of its 
affiliates.''
    \14\ This is consistent with the longstanding best practice of 
the Exchange's ultimate parent, Nasdaq, Inc., having the Chairman of 
the Audit Committee of the board of directors of Nasdaq, Inc. serve 
as the Chairman of the Exchange Board's Regulatory Oversight 
Committee, which is required to be comprised of Public Directors who 
are also considered ``independent directors'' as defined in Nasdaq 
Rule 5605. See By-Law Article III, Section 5(c). Because Nasdaq, 
Inc. is a listed company, this Exchange Director could be considered 
both an issuer representative and a Public Director.
    \15\ See By-Law Article I, Section (aa).
---------------------------------------------------------------------------

    The Exchange notes that with the proposed changes, the composition 
of the Board would still be required to reflect a balance among Non-
Industry Directors (including Public Directors and issuer 
representatives), Industry Directors, and Member Representative 
Directors.\16\ Accordingly, current Board

[[Page 54229]]

qualification requirements such as the number of Non-Industry Directors 
equaling or exceeding the sum of the number of Industry Directors and 
Member Representative Directors would continue to apply.\17\
---------------------------------------------------------------------------

    \16\ The term ``Member Representative Director'' means a 
Director who has been elected or appointed after having been 
nominated by the Member Nominating Committee or by an Exchange 
Member pursuant to the Exchange's By-Laws. 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, 
Section (r). 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 . . .''
    \17\ See By-Law Article III, Section 2(a). In addition, the 
Board qualification requirement that at least 20% of the Directors 
be Member Representative Directors will continue to apply. See LLC 
Agreement Section 9(a).
---------------------------------------------------------------------------

By-Law Article III, Section 2(a)
    The Exchange proposes to amend By-Law Article III, Section 2(a) to 
revise the qualifications for any position on the Board required to be 
representative of issuers. As discussed above, Article III, Section 
2(a) requires that the Board be composed of at least one Public 
Director and at least one issuer representative (or if the Board 
consists of ten or more Directors, at least two issuer 
representatives).\18\ The Exchange adopted this provision when it 
conformed its By-Laws to those of Nasdaq as part of its effort to 
harmonize corporate governance processes with its affiliated 
exchanges.\19\ As noted above, unlike Nasdaq, the Exchange does not 
currently operate an equities listing market and therefore believes it 
is more appropriate to align its Board composition requirements on this 
point with the By-Laws of BX and Phlx, which both currently require 
only one Director representative of issuers and investors, regardless 
of Board size.\20\ The Exchange's proposal would also change the Board 
composition requirement to more closely track the statutory language 
included in Section 6(b)(3) of the Act, which requires one or more 
directors to be ``representative of issuers and investors.''
---------------------------------------------------------------------------

    \18\ By-Law Article III, Section 2(a) also requires that the 
number of Non-Industry Directors (which includes Public Directors 
and issuer representatives) shall equal or exceed the sum of the 
number of Industry Directors and Member Representative Directors. 
Furthermore, Section 9(a) of the LLC Agreement requires that at 
least 20% of the Directors be Member Representative Directors. These 
Board qualifications are not being amended.
    \19\ See Securities Exchange Act Release No. 81263 (July 31, 
2017), 82 FR 36497 (August 4, 2017) (SR-ISE-2017-32).
    \20\ See BX By-Law Article IV, Section 4.3; and Phlx By-Law 
Article III, Section 3-2(a). Similar to the Exchange, BX and Phlx do 
not currently operate equities listing markets.
---------------------------------------------------------------------------

By-Law Article III, Section 5(c)
    Currently, By-Law Article III, Section 5(c) requires that the 
Regulatory Oversight Committee (``ROC'') be comprised of three members, 
each of whom shall be a Public Director and an ``independent director'' 
as defined in Nasdaq Rule 5605. The Exchange proposes to amend Section 
5(c) to provide that the ROC shall be comprised of at least three 
members, as is currently set forth in the ROC Charter.\21\ All members 
of the ROC will continue to be Public Directors and ``independent 
directors'' as defined in Nasdaq Rule 5605. Lastly, the Exchange also 
proposes to make technical changes in Section 5(c) to correct a 
typographical error and to update Nasdaq's name.
---------------------------------------------------------------------------

    \21\ The ROC Charter is available at: https://ir.nasdaq.com/static-files/ad0a0102-e977-40cf-8139-15c359576a25.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\22\ in general, and furthers the objectives of Section 
6(b)(1), Section 6(b)(3), and Section 6(b)(5) of the Act,\23\ in 
particular, which require, among other things, an exchange to be so 
organized as to have the capacity to be able to carry out the purposes 
of the Act; that one or more directors be representative of issuers and 
investors and not be associated with a member of the exchange, broker, 
or dealer; and that the rules of an exchange be 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.
---------------------------------------------------------------------------

    \22\ 15 U.S.C. 78f(b).
    \23\ 15 U.S.C. 78f(b)(1), (b)(3), and (b)(5).
---------------------------------------------------------------------------

Rules 200-203
    As discussed above, the Exchange proposes to delete Rules 200-203 
as obsolete or duplicative because the provisions related to the 
organization and administration of committees are now set forth in the 
Exchange's LLC Agreement and By-Laws. The Exchange believes that 
deleting rules that no longer apply to the Exchange's current committee 
structure will more clearly identify currently applicable rules, which 
will remove impediments to and perfect the mechanism of a free and open 
market. The Exchange further believes that the proposed rule change 
will eliminate potential confusion regarding which rules apply to the 
organization and administration of committees, which ultimately 
protects investors and the public interest.
By-Law Article I
    The Exchange believes that the changes to the definitions of Non-
Industry Director and Non-Industry member proposed above will enhance 
the clarity of these provisions given that only the Exchange's 
affiliate (Nasdaq) currently operates an equities listing market. 
Accordingly, the proposed changes should more accurately reflect how 
the Exchange currently operates. The Exchange also believes that the 
proposed changes to the definitions of Public Director and Public 
member are consistent with the Act as these modifications are intended 
to make clear that a Director is not barred from being considered a 
Public Director merely because the Director serves as a director of an 
issuer of securities listed on a national securities exchange operated 
by the Exchange or one of its affiliates, and are consistent with 
current corporate governance practices.\24\ Furthermore, as discussed 
above, the requirements that the number of Non-Industry Directors 
(including at least one Public Director and at least one Director 
representative of issuers and investors) 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.\25\ Accordingly, the Exchange believes that the 
proposed changes will more accurately reflect the Exchange's current 
operations and governance practices while continuing to comport with 
the Exchange's statutory obligations regarding fair representation 
under Section 6(b)(3) of the Act.
---------------------------------------------------------------------------

    \24\ See supra note 14.
    \25\ See supra notes 16 and 17, with accompanying text.
---------------------------------------------------------------------------

By-Law Article III, Section 2(a)
    The Exchange believes that its proposal to expand the Board 
qualifications from an issuer representative to a representative of 
issuers and investors, and eliminate the requirement that the Board 
have two such representatives if the Board consists of ten or more 
Directors is consistent with the Act. The Exchange notes that the 
proposed changes track the statutory language included in Section 
6(b)(3) of the Act, which requires one or more directors to be 
``representative of issuers and investors.'' The Exchange also notes 
that the elimination of the requirement to have at least two Director 
positions representative of issuers if the Board consists of ten or 
more Directors is consistent with Section 6(b)(3) of the Act, which 
only requires the Board to have one such representative. Furthermore, 
the Exchange will continue to require the Board

[[Page 54230]]

composition to reflect a balance among Non-Industry Directors 
(including Public Directors and Director representatives of issuers and 
investors), Industry Directors, and Member Representative Directors 
(with the latter continuing to constitute 20% of the Board).\26\ 
Accordingly, the Exchange believes that the changes to the Board 
qualifications proposed herein will more accurately reflect current 
Exchange operations while continuing to meet the statutory requirements 
under Section 6(b)(3) of the Act. In addition, the proposed amendments 
will have the additional benefit of bringing the Exchange's Board 
qualifications on this point into greater conformity with those of BX 
and Phlx, thereby creating more consistent standards among the 
affiliated exchanges owned by Nasdaq, Inc.\27\
---------------------------------------------------------------------------

    \26\ See supra note 18.
    \27\ See supra note 20.
---------------------------------------------------------------------------

By-Law Article III, Section 5(c)
    The Exchange believes that the proposed rule change in By-Law 
Article III, Section 5(c) to provide that the ROC shall be comprised of 
at least three members is consistent with the Act because it will 
promote transparency to the Exchange's current practices by conforming 
the By-Law language to the ROC Charter. As discussed above, the 
composition requirements that all ROC members be Public Directors and 
``independent directors'' as defined in Nasdaq Rule 5605 will remain 
unchanged with this proposal, thereby ensuring that an independent 
Board committee will continue to be responsible for the regulatory 
oversight of the Exchange. Lastly, the proposed technical changes in 
Section 5(c) to correct a typographical error and to update Nasdaq's 
name will bring greater clarity to the Exchange's rules, which protects 
investors and the public interest.

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

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

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

    No written comments were either solicited or received.

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

    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 \28\ and 
subparagraph (f)(6) of Rule 19b-4 thereunder.\29\
---------------------------------------------------------------------------

    \28\ 15 U.S.C. 78s(b)(3)(A).
    \29\ 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 pursuant to Rule 19b-4(f)(6) under the 
Act \30\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \31\ 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 requested that the Commission waive the 30-day operative delay. The 
Commission notes that waiver of the operative delay would allow the 
Exchange to effect the changes to its Rulebook and By-Laws, which would 
eliminate obsolete provisions in the Exchange's Rulebook and better 
align provisions in the Exchange's By-Laws with those in the By-Laws of 
its affiliates, in time for the Exchange Board meeting on September 25, 
2019. The Commission believes that waiver of the 30-day operative delay 
is consistent with the protection of investors and the public interest. 
Accordingly, the Commission hereby waives the operative delay and 
designates the proposed rule change operative upon filing.\32\
---------------------------------------------------------------------------

    \30\ 17 CFR 240.19b-4(f)(6).
    \31\ 17 CFR 240.19b-4(f)(6)(iii).
    \32\ For purposes only of waiving the 30-day operative delay, 
the Commission also has 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-ISE-2019-24 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-ISE-2019-24. 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-ISE-2019-24 and should be submitted on 
or before October 30, 2019.


[[Page 54231]]


    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\33\
---------------------------------------------------------------------------

    \33\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-22015 Filed 10-8-19; 8:45 am]
 BILLING CODE 8011-01-P

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