[Federal Register Volume 77, Number 244 (Wednesday, December 19, 2012)]
[Notices]
[Pages 75237-75238]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-30502]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-68429; File No. C2-2012-039]
Self-Regulatory Organizations; C2 Options Exchange, Incorporated;
Notice of Proposed Rule Change Related to Bylaw and Other Changes
December 13, 2012.
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 November 30, 2012, the Chicago Board Options Exchange,
Incorporated (``Exchange'' or ``C2'') 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 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: (i) Amend its Bylaws to expressly provide that the
Representative Director Nominating Body and any petition candidate must
satisfy the compositional requirements determined by the Board from
time to time pursuant to a resolution adopted by the Board; (ii) amend
its Bylaws relating to the Board size range such that the Board shall
consist of not less than 12 and not more than 16 directors; and (iii)
make conforming changes to the C2 Certificate of Incorporation. The
text of the proposed amendments to C2's Bylaws and C2's Certificate of
Incorporation are available on the Exchange's Web site (http://www.c2exchange.com/Legal/), 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 those 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 parts 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 (i) amend C2's
Bylaws to expressly state that the Representative Director Nominating
Body and any petition candidate must satisfy the compositional
requirements determined by the Board from time to time pursuant to a
resolution adopted by the Board; (ii) amend its Bylaws relating to the
Board size range such that the Board shall consist of not less than 12
and not more than 16 directors; and (iii) make conforming changes to
the C2 Certificate of Incorporation.
(1) Compositional Requirements Determined by the Board
Last year, C2 amended its Bylaws and Certificate of Incorporation
to, among other things: (i) eliminate the requirement that its Board of
Directors be composed of at least 30% Industry Directors, and (ii)
eliminate the requirement in Section 3.2 of the Bylaws that the
Representative Directors must be Industry Directors.\3\ In its rule
filing, C2 noted that the changes would provide it with appropriate
flexibility as it evaluates the structure and composition of its Board
in the future.\4\ Additionally, C2 stated that no matter what the
composition of its Board is, the Exchange intends to maintain the fair
representation of its Trading Permit Holders in the selection of its
directors and administration of its affairs consistent with Section
6(b)(3) of the Securities Exchange Act of 1934, as amended (``Act'').
In approving C2's rule filing, the SEC noted that it has previously
approved proposals in which an exchange's board of directors was
composed of all or nearly all non-industry directors where the process
was nevertheless designed to comply with the ``fair representation''
requirement in the selection and election of directors.\5\
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\3\ The Exchange notes that at all times at least 20% of the
directors serving on the Board shall be Representative Directors
nominated by the Representative Director Nominating Body as provided
in Section 3.2 of the Bylaws (or otherwise selected through the
petition process). Under Section 3.2, the Representative Director
Nominating Body provides a mechanism for Trading Permit Holders to
provide input with respect to the nominees for Representative
Directors and Trading Permit Holders are also allowed to nominate
alternative candidates by petition.
\4\ See Securities Exchange Act Release No. 65681 (November 3,
2011), 76 FR 69783 (November 9, 2011) (noticing for comment SR-C2-
2011-031); Securities Exchange Act Release No. 65979 (December 15,
2011), 76 FR 79239 (December 21, 2011) (approving SR-C2-2011-031).
\5\ See, e.g., Securities Exchange Act Release No. 48946
(December 17, 2003), 68 FR 74678 (December 24, 2003) (approving SR-
NYSE-2003-34).
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In connection with these changes, C2 also amended Section 3.1 of
the Bylaws to provide that: ``[T]he Board shall determine from time to
time pursuant to resolution adopted by the Board the total number of
directors, the number of Non-Industry Directors and Industry Directors
(if any), and the number of Representative Directors that are Non-
Industry Directors and Industry Directors (if any).'' C2 now proposes
to amend the Bylaws to expressly provide that any person nominated by
the Representative Director Nominating Body and any petition candidate
nominated pursuant to the Section 3.2 of the Bylaws shall satisfy the
compositional requirements determined by the Board pursuant to a
resolution adopted by the Board in accordance with Section 3.1
designating the number of Representative Directors that are Non-
Industry Directors and Industry Directors (if any). C2 also proposes to
amend Section 3.5 of the Bylaws relating to the filling of vacancies on
the Board to provide that the Representative Director Nominating Body
shall only recommend individuals to fill a vacancy in a Representative
Director position who satisfy the compositional requirements designated
by the Board pursuant to resolution adopted by the Board in accordance
with Section 3.1, designating the number of Representative Directors
that are Non-Industry Directors and Industry Directors (if any). C2
believes that these changes are consistent with the changes to the
Bylaws that were made last year
[[Page 75238]]
and simply makes those changes more explicit.
(2) Board Size Range
C2 proposes to amend its Bylaws relating to the Board size range.
Currently, the Bylaws provide that the Board shall consist of not less
than 11 and not more than 23 directors. C2 proposes to change the Board
size range such that the Board shall consist of not less than 12 and
not more than 16 directors. C2 believes that this new Board size range
is consistent with the current size of C2's Board and the Board size
range that it expects to maintain in the future.
(3) Amendment to Certificate of Incorporation
C2 proposes to make conforming changes to its Certificate of
Incorporation. Specifically, C2 proposes to amend its Certificate of
Incorporation to expressly provide that any individual(s) recommended
by the Representative Director Nominating Body and any individual(s)
who are petition candidates shall satisfy the compositional
requirements determined by the Board of Directors from time to time
pursuant to a resolution adopted by the Board in accordance with
Section 3.1 of C2's Bylaws, designating the number of Representative
Directors that are Non-Industry Directors and Industry Directors (if
any). C2 also proposes to include in its Certificate of Incorporation
that the Board of Directors and/or Nominating and Governance Committee,
as applicable, shall make such determinations as to whether a director
candidate satisfies applicable qualifications for election as a
director pursuant to and in accordance with Section 3.1 of the
Corporation's Bylaws, which is consistent with the current provisions
in the Bylaws.
2. Statutory Basis
For the reasons set forth above, C2 believes that this filing is
consistent with Section 6(b) of the Act,\6\ in general, and furthers
the objectives of Section 6(b)(1) of the Act \7\ and Section 6(b)(5) of
the Act \8\ 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.
Specifically, C2 believes that the proposed changes will enhance C2's
governance structure by (i) by expressly providing that any person
nominated by the Representative Director Nominating Body and any
petition candidate nominated pursuant to the Section 3.2 of the Bylaws
shall satisfy the compositional requirements determined by the Board
pursuant to a resolution adopted by the Board in accordance with
Section 3.1 designating the number of Representative Directors that are
Non-Industry Directors and Industry Directors (if any); and (ii) by
changing the Board size range from 11 to 23 directors to 12 to 16
directors. Additionally, C2 believes that this filing is consistent
with Section 6(b)(3) of the Act in that C2's Bylaws will continue to
provide for the fair representation of C2 Trading Permit Holders in the
selection of directors and the administration of the Exchange.
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\6\ 15 U.S.C. 78f(b).
\7\ 15 U.S.C. 78f(b)(1).
\8\ 15 U.S.C. 78f(b)(5).
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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 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
The Exchange neither solicited nor received comments on the
proposal.
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 email to [email protected]. Please include
File Number SR-C2-2012-039 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-C2-2012-039. 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 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 on
official business days between the hours of 10:00 a.m. and 3:00 p.m.
Copies of such filing also will be available for inspection and copying
at the principal offices 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 Number SR-C2-2012-039, and should be submitted on
or before January 9, 2013.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\9\
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\9\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-30502 Filed 12-18-12; 8:45 am]
BILLING CODE 8011-01-P