[Federal Register Volume 77, Number 173 (Thursday, September 6, 2012)]
[Notices]
[Pages 54942-54943]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-21902]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-67760; File Nos. SR-BSECC-2012-01; SR-BX-2012-052; SR-
NASDAQ-2012-072; SR-Phlx-2012-95; SR-SCCP-2012-01]
Self-Regulatory Organizations; Boston Stock Exchange Clearing
Corporation; NASDAQ OMX BX, Inc.; the NASDAQ Stock Market LLC; NASDAQ
OMX PHLX LLC; Stock Clearing Corporation of Philadelphia; Order
Approving Proposed Rule Changes With Respect to the Amendment of the
By-Laws of The NASDAQ OMX Group, Inc.
August 30, 2012.
I. Introduction
On June 20, 2012, the NASDAQ Stock Market LLC (``NASDAQ''), and on
July 11, 2012, Boston Stock Exchange Clearing Corporation (``BSECC''),
NASDAQ OMX BX, Inc. (``BX''), NASDAQ OMX PHLX LLC (``Phlx''), and the
Stock Clearing Corporation of Philadelphia (``SCCP'' and, with BSECC,
BX, NASDAQ, and Phlx, the ``SROs''), filed with the Securities and
Exchange Commission (``Commission''), pursuant to Section 19(b)(1) \1\
of the Securities Exchange Act of 1934 (``Act''),\2\ and Rule 19b-4
thereunder,\3\proposed rule changes with respect to the amendment of
the by-laws (the ``NASDAQ OMX By-Laws'') of The NASDAQ OMX Group, Inc.
(``NASDAQ OMX''), the parent company of the SROs. The proposed rule
changes were published for comment in the Federal Register on July 5,
2012, July 19, 2012, and July 27, 2012.\4\ The Commission received no
comment letters on the proposals.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
\4\ See Securities Exchange Act Release Nos. 67293 (June 28,
2012), 77 FR 39751 (July 5, 2012) (SR-NASDAQ-2012-072) (the ``NASDAQ
Notice''); 67433 (July 13, 2012), 77 FR 42522 (July 19, 2012) (SR-
BX-2012-052); 67434 (July 13, 2012), 77 FR 42524 (July 19, 2012)
(SR-Phlx-2012-95); 67487 (July 23, 2012), 77 FR 44301 (July 27,
2012) (SR-BSECC-2012-001); 67486 (July 23, 2012), 77 FR 44299 (July
27, 2012) (SR-SCCP-2012-01).
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II. Background
NASDAQ OMX is proposing to amend provisions of the NASDAQ OMX By-
Laws pertaining to the composition of the Management Compensation
Committee of the NASDAQ OMX Board of Directors. Specifically, NASDAQ
OMX proposes to amend the compositional requirements of its Management
Compensation Committee as set forth in Section 4.13 of the NASDAQ OMX
By-Laws to replace a requirement that the committee be composed of a
majority of Non-Industry Directors \5\ with a requirement that the
[[Page 54943]]
number of Non-Industry Directors on the committee equal or exceed the
number of Industry Directors. The proposed compositional requirement
for the committee with regard to the balance between Industry Directors
and Non-Industry Directors would be the same as that already provided
for in the NASDAQ OMX By-Laws with respect to the Executive Committee
and the Nominating and Governance Committee, as well as the full Board
of Directors.
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\5\ Article I(j) of the NASDAQ OMX By-Laws defines an ``Industry
Director'', in part, as a Director (excluding any two officers of
NASDAQ OMX, selected at the sole discretion of the Board, amongst
those officers who may be serving as Directors (the ``Staff
Directors'')) who (1) 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; (2) 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; (3) 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;
(4) 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; (5) 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 20 percent or more of the gross revenues received
by the Director's firm or partnership; or (6) has a consulting or
employment relationship with or provides professional services to
NASDAQ OMX or any affiliate thereof or to the Financial Industry
Regulatory Authority (``FINRA'') or has had any such relationship or
provided any such services at any time within the prior three years.
Article I(m) of the NASDAQ OMX By-Laws defines a ``Non-Industry
Director'', in part, as a Director (excluding the Staff Directors)
who is (1) a Public Director; (2) an officer, director, or employee
of an issuer of securities listed on a national securities exchange
operated by any SRO; or (3) any other individual who would not be an
Industry Director.
Article I(n) of the NASDAQ OMX By-Laws defines a ``Public
Director'', in part, as a Director who has no material business
relationship with a broker or dealer, NASDAQ OMX or its affiliates,
or FINRA.
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According to the SROs, the proposed changes will provide NASDAQ OMX
with a greater flexibility with regard to populating a committee that
includes directors with relevant expertise and that is not excessively
large in relation to the size of the full Board of Directors, while
continuing to ensure that directors associated with Exchange members
and other broker-dealers do not exert disproportionate influence of the
governance of NASDAQ OMX.\6\
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\6\ See, e.g., NASDAQ Notice, 77 FR at 39752.
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III. Discussion and Commission Findings
The Commission has reviewed carefully the proposed rule changes and
finds that the proposed rule changes are consistent with the
requirements of the Act and the rules and regulations thereunder
applicable to a national securities exchange or a registered clearing
agency.\7\ In particular, the Commission finds that the proposed rule
changes are consistent with Section 6(b) of the Act,\8\ which, among
other things, requires a national securities exchange to be so
organized and have the capacity to be able to carry out the purposes of
the Act and to enforce compliance by its members and persons associated
with its members with the provisions of the Act, the rules and
regulations thereunder, and the rules of the exchange, and is designed
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 a national market
system, and, in general, to protect investors and the public interest.
The Commission also finds that the proposed rule changes are consistent
with Section 17A of the Act \9\ because the proposed rule changes will
help ensure that BSECC and SCCP are so organized and have the capacity
to comply with the provisions of the Act and the rules and regulations
thereunder.
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\7\ In approving the proposed rule changes, the Commission has
considered their impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78q-1.
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The proposed changes to the composition requirement of NASDAQ OMX's
Management Compensation Committee are identical to the composition
requirements currently in effect for the Executive Committee,
Nominating and Governance Committee, and full Board of Directors of
NASDAQ OMX.\10\ Furthermore, the NASDAQ OMX Management Compensation
Committee is required to be comprised of Independent Directors (as
defined in NASDAQ's rules).\11\
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\10\ See Sections 4.3, 4.13(d) and 4.13(h)(1) of NASDAQ OMX By-
Laws.
\11\ See NASDAQ Rule 5605(d). Rule 5605(d) provides that the
compensation committees of NASDAQ-listed companies must be comprised
solely of Independent Directors. NASDAQ OMX is a NASDAQ-listed
company.
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IV. Conclusion
For the foregoing reasons, the Commission finds that the proposed
rule changes are consistent with the Act and the rules and regulations
thereunder applicable to a national securities exchange and a
registered clearing agency.
It is therefore ordered, pursuant to Section 19(b)(2) of the Act
\12\ that the proposed rule changes (SR-BSECC-2012-001; SR-BX-2012-052;
SR-NASDAQ-2012-072; SR-Phlx-2012-95; and SR-SCCP-2012-01), are
approved.
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\12\ Id.
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For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-21902 Filed 9-5-12; 8:45 am]
BILLING CODE 8011-01-P