[Federal Register Volume 76, Number 90 (Tuesday, May 10, 2011)]
[Notices]
[Pages 27112-27114]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-11357]
[[Page 27112]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-64394; File No. SR-C2-2011-012]
Self-Regulatory Organizations; C2 Options Exchange, Incorporated;
Notice of Filing of a Proposed Rule Change To Reduce the Minimum Size
of the Nominating and Governance Committee
May 4, 2011.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act'' or ``Exchange Act''),\1\ and Rule 19b-4 thereunder,\2\
notice is hereby given that on April 27, 2011, C2 Options Exchange,
Incorporated (``C2'') filed with the Securities and Exchange Commission
(``Commission'' or ``SEC'') the proposed rule change as described in
Items I, II, and III below, which Items have been prepared by C2. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
C2 proposes to amend its Bylaws to change the minimum size of the
C2 Nominating and Governance Committee.
The text of the proposed amendments to C2's Bylaws and the proposed
amendments to C2's rules is available on C2's Web site at (http://www.c2exchange.com/Legal), at C2'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, C2 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. C2 has prepared summaries, set forth in Sections A, B,
and C below, of the most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of this proposed rule change is to reduce the minimum
size of C2's Nominating and Governance Committee from seven to five
directors. Section 4.4 of the Second Amended and Restated Bylaws of C2
(``Bylaws'') currently provides, in pertinent part, that the Nominating
and Governance Committee shall consist of at least seven directors,
including both Industry and Non-Industry Directors; that a majority of
the directors on the Committee shall be Non-Industry Directors; and
that the exact number of members on the Committee shall be determined
from time to time by C2's Board of Directors. This rule change would be
effectuated by amending Section 4.4 of the Bylaws to provide that the
Nominating and Governance Committee shall consist of at least five
directors. The other provisions of Section 4.4 of the Bylaws would
remain unchanged. Additionally, the title of the Bylaws would be
changed to the Third Amended and Restated Bylaws of C2.
Section 3.1 of the Bylaws provides that the C2 Board of Directors
shall consist of not less than eleven and not more than twenty-three
directors, with the exact size determined by the Board. C2's Board size
has declined recently from the Board's initial size of twenty-three
directors in 2009 prior to the launch of trading on C2 to its current
size of nineteen directors. In addition, the Board size will be
declining further to sixteen directors at the time of the 2011 annual
election of C2 directors (which is anticipated to occur in May 2011).
As the Board size declines, it becomes more challenging to populate
large Board committees since there are fewer directors to serve on the
various C2 Board committees. The Exchange believes that reducing the
minimum size of the Nominating and Governance Committee to five
directors will help to alleviate this issue.
Changing the minimum size of the Nominating and Governance
Committee to five directors would also make the minimum size consistent
with the minimum size of the Nominating and Governance Committee of
CBOE Holdings, Inc. (``CBOE Holdings''), C2's parent company. C2
believes that having the same composition requirements for the
Nominating and Governance Committees of both C2 and CBOE Holdings will
promote consistency and efficiency. C2 and CBOE Holdings currently have
the same individuals serving on the C2 and CBOE Holdings Boards of
Directors and on the C2 and CBOE Holdings Nominating and Governance
Committees. This approach simplifies the process of scheduling and
conducting meetings and allows the Boards and Nominating and Governance
Committees of both entities to operate most efficiently. To the extent
that C2 and CBOE Holdings desire to continue this approach in the
future, this proposed rule change better enables C2 and CBOE Holdings
to do so.
The Exchange believes that its Nominating and Governance Committee
will continue to be able to appropriately perform its functions if it
were to be composed of five directors. The Exchange also believes that
having a Nominating and Governance Committee with a minimum size of
five directors is consistent with prior precedent, in that the Chicago
Stock Exchange (``CHX'') has a Nominating and Governance Committee with
a size of four directors.\3\ Additionally, it should be noted that
although the proposed rule change would permit the Exchange [sic]
appoint a five-person Nominating and Governance Committee and that the
Exchange may do so in the future, it is the current intention of the
Exchange to appoint a six-person Nominating and Governance Committee at
the time of the 2011 annual election of C2 directors.
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\3\ See Article II, Section 3 of the Bylaws of the Chicago Stock
Exchange, Inc.
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The Exchange will continue to provide for the fair representation
of C2 Trading Permit Holders in the selection of directors and the
administration of the Exchange consistent with Section 6(b)(3) of the
Act \4\ following this rule change. In particular, the C2 Bylaws will
continue to require that at least thirty percent of the directors on
the C2 Board of Directors must be Industry Directors and that at least
twenty percent of C2's directors must be Representative Directors.
Also, the C2 Nominating and Governance Committee will continue to
include both Industry and Non-Industry Directors and to have an
Industry-Director Subcommittee that is composed of all of the Industry
Directors serving on the Committee. Representative Directors will
continue to be nominated (or otherwise selected through a petition
process) by the Industry-Director Subcommittee. Additionally, C2
Trading Permit Holders will continue to be able to nominate alternative
Representative Director candidates to those nominated by the Industry
Director Subcommittee, in which case a Run-off Election will be held in
which C2's Trading Permit Holders vote to determine which candidates
will be elected to the C2 Board of Directors to serve as Representative
Directors.
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\4\ 15 U.S.C. 78f(b)(3).
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2. Statutory Basis
For the reasons set forth above, C2 believes that this filing is
consistent
[[Page 27113]]
with Section 6(b) of the Act,\5\ in general, and furthers the
objectives of Section 6(b)(1) of the Act \6\ and Section 6(b)(5) of the
Act \7\ in particular, in that (i) It enables C2 to be so organized as
to have the capacity to be able to carry out the purposes of the Act
and to comply, and to enforce compliance by its Trading Permit Holders
and persons associated with its Trading Permit Holders, with the
provisions of the Act, the rules and regulations thereunder, and the
rules of C2 and (ii) to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, to remove
impediments to, and perfect the mechanism of, a free and open market
and, in general, to protect investors and the public interest.
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\5\ 15 U.S.C. 78f(b).
\6\ 15 U.S.C. 78f(b)(1).
\7\ 15 U.S.C. 78f(b)(5).
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Specifically, the proposed changes will streamline, make more
efficient, and improve C2's governance structure by conforming the
minimum size requirements of the C2 Nominating and Governance Committee
and the CBOE Holdings Nominating and Governance Committee, which the
Exchange believes will promote consistency and efficiency and better
enable C2 and CBOE Holdings to have the same Nominating and Governance
Committee compositions if desired. To the extent that the proposed
changes enable C2 and CBOE Holdings to have the same Nominating and
Governance Committee compositions if desired, the process of scheduling
and conducting Nominating and Governance Committee meetings is
simplified, as there can be meetings held at the same time instead of
multiple separate meetings at different times. This furthers C2's
ability to be organized in a manner to have the capacity to be able to
carry out the purposes of the Act consistent with Section 6(b)(1) of
the Act \8\ and to carry out the purposes of Section 6(b)(5) of the
Act.\9\
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\8\ 15 U.S.C. 78f(b)(1).
\9\ 15 U.S.C. 78f(b)(5).
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The proposed rule change will not impact the current provisions of
the C2 Bylaws that are designed to assure the fair representation of C2
Trading Permit Holders in the selection of directors and the
administration of C2, and thus is consistent with Section 6(b)(3) of
the Act.\10\ In particular, the Bylaws will continue to require that at
least thirty percent of C2's directors be Industry Directors; that at
least twenty percent of C2's directors be Representative Directors;
that the C2 Nominating and Governance Committee include both Industry
and Non-Industry Directors and have an Industry-Director Subcommittee
composed of all of the Industry Directors on the Committee; that
Representative Directors be nominated (or otherwise selected through a
petition process) by the Industry-Director Subcommittee; and that C2
Trading Permit Holders are able to nominate alternative Representative
Director candidates to those nominated by the Industry Director
Subcommittee, in which case a Run-off Election is held in which C2's
Trading Permit Holders vote to determine which candidates are elected
as Representative Directors.
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\10\ 15 U.S.C. 78f(b)(3).
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The proposed rule change was prompted by the reduction in the size
of the C2 Board of Directors since, as the Board size declines, it
becomes more challenging to populate large Board committees. The
Exchange believes that reducing the minimum size of the C2 Nominating
and Governance Committee will help to alleviate this issue and that,
notwithstanding this change, the Committee will continue to be able to
appropriately perform its functions, operate effectively, and thus
enable the Exchange to comply with Section 6(b)(1) of the Act.\11\
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\11\ 15 U.S.C. 78f(b)(1).
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B. Self-Regulatory Organization's Statement on Burden on Competition
C2 does not believe that the proposed rule change will impose any
burden on competition that is 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 solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period (i) As the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) By order approve or disapprove such proposed rule change, or
(B) Institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
Send an e-mail to [email protected]. Please include
File Number SR-C2-2011-012 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington DC 20549-1090.
All submissions should refer to File Number SR-C2-2011-012. This file
number should be included on the subject line if e-mail is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street, NE.,
Washington, DC 20549, on official business days between the hours of 10
a.m. and 3 p.m. Copies of such filing also will be available for
inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File No. SR-C2-2011-012 and should be
submitted on or before May 31, 2011.
[[Page 27114]]
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
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\12\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-11357 Filed 5-9-11; 8:45 am]
BILLING CODE 8011-01-P