[Federal Register Volume 76, Number 90 (Tuesday, May 10, 2011)]
[Notices]
[Pages 27125-27127]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-11381]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-64395; File No. SR-CBOE-2011-044]
Self-Regulatory Organizations; Chicago Board 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, Chicago Board Options
Exchange, Incorporated (``CBOE'') filed with the Securities and
Exchange Commission (``Commission'' or ``SEC'') the proposed rule
change as described in Items I, and II below, which Items have been
prepared by CBOE. 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
CBOE proposes to amend its Bylaws to change the minimum size of the
CBOE Nominating and Governance Committee.
The text of the proposed amendments to CBOE's Bylaws and the
proposed amendments to CBOE's rules is available on CBOE's Web site
(http://www.cboe.org/Legal), at CBOE'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, CBOE 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. CBOE 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 CBOE's Nominating and Governance Committee from seven to five
directors. Section 4.4 of the Second Amended and Restated Bylaws of
CBOE (``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 CBOE'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 CBOE.
Section 3.1 of the Bylaws provides that the CBOE 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. CBOE's Board
size has declined recently from twenty-three directors prior to CBOE's
demutualization in 2010 to the 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 CBOE 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 CBOE Board committees. The
Exchange believes that reducing the minimum size of the Nominating and
[[Page 27126]]
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''), CBOE's parent company. CBOE
believes that having the same composition requirements for the
Nominating and Governance Committees of both CBOE and CBOE Holdings
will promote consistency and efficiency. CBOE and CBOE Holdings
currently have the same individuals serving on the CBOE and CBOE
Holdings Boards of Directors and on the CBOE 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 CBOE and CBOE Holdings desire to
continue this approach in the future, this proposed rule change better
enables CBOE 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 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 CBOE 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 CBOE 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 CBOE Bylaws will
continue to require that at least thirty percent of the directors on
the CBOE Board of Directors must be Industry Directors and that at
least twenty percent of CBOE's directors must be Representative
Directors. Also, the CBOE 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, CBOE
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 CBOE's Trading Permit Holders vote to determine which candidates
will be elected to the CBOE 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, CBOE believes that this filing is
consistent 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 CBOE 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 CBOE 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 CBOE's governance structure by conforming the
minimum size requirements of the CBOE Nominating and Governance
Committee and the CBOE Holdings Nominating and Governance Committee,
which the Exchange believes will promote consistency and efficiency and
better enable CBOE and CBOE Holdings to have the same Nominating and
Governance Committee compositions if desired. To the extent that the
proposed changes enable CBOE 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 CBOE'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 CBOE Bylaws that are designed to assure the fair representation of
CBOE Trading Permit Holders in the selection of directors and the
administration of CBOE, 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 CBOE's directors be Industry Directors; that at
least twenty percent of CBOE's directors be Representative Directors;
that the CBOE 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 CBOE
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 CBOE'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 CBOE 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 CBOE 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
CBOE does not believe that the proposed rule change will impose any
burden on competition that is not
[[Page 27127]]
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-CBOE-2011-044 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-CBOE-2011-044. 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-CBOE-2011-044 and should be
submitted on or before May 31, 2011.
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. 2011-11381 Filed 5-9-11; 8:45 am]
BILLING CODE 8011-01-P