[Federal Register Volume 78, Number 102 (Tuesday, May 28, 2013)]
[Notices]
[Pages 31993-31994]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-12486]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-69607; File No. SR-BX-2013-029]
Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Order
Approving Proposed Rule Change Relating to Board of Director
Qualifications
May 20, 2013.
On March 27, 2013, NASDAQ OMX BX, Inc. (``BX'' or ``Exchange'')
filed with the Securities and Exchange Commission (``Commission''),
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to
amend Article IV, Section 4.3 of the Exchange's By-Laws (``BX By-
Laws'') with respect to the composition of the Exchange's Board of
Directors (``BX Board'').\3\ The proposed rule change was published for
comment in the Federal Register on April 8, 2013.\4\ The Commission
received no comments on the proposal.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 69280 (April 2,
2013), 78 FR 20971.
\4\ See id.
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After careful review, the Commission finds that the proposed rule
change is
[[Page 31994]]
consistent with the requirements of the Act and the rules and
regulations thereunder applicable to a national securities exchange \5\
and, in particular, the requirements of Sections 6(b)(3) \6\ and
6(b)(5) of the Act.\7\ The proposal will reduce from three to one the
minimum number of Public Directors \8\ that will be required to be
included in the calculation of Non-Industry Directors \9\ for the
purpose of determining the number of Non-Industry Directors that may
serve on the BX Board. The Exchange proposed this change in light of
the cessation in 2012 by the Boston Options Exchange LLC (``BOX'') of
its operations as an options trading facility of the Exchange \10\ and
the termination of the Regulatory Services Agreement (``RSA'') between
BX and BOX.\11\ To accommodate BOX when BOX was a BX facility, three
Public Directors were required to be included in the calculation of the
number of Non-Industry Directors on the BX Board.\12\ The Commission
notes that, although only one Public Director must be included in the
composition of Non-Industry Directors as a result of the proposed rule
change, the requirement in BX By-Law Article IV, Section 4.3 that the
number of Non-Industry Directors must equal or exceed the sum of
Industry Directors \13\ and Member Representative Directors \14\ will
continue to be met. Moreover, the Commission notes that, as a result of
the proposed rule change, the BX Board composition requirement
regarding Public Directors now will be similar to the board composition
requirements of NASDAQ OMX PHLX LLC (``Phlx'') and The NASDAQ Stock
Market LLC (``NASDAQ''), both of which require that the number of Non-
Industry Directors must include at least one Public Director.\15\ In
addition, the Commission notes that the BX Board will continue to have
three Public Directors, because the BX Board still will need to have
three Public Directors available to serve on its Regulatory Oversight
Committee, as required by BX By-Law Article IV, Section 4.13. For the
foregoing reasons, the Commission believes that the proposed rule
change is consistent with the Act.
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\5\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
\6\ 15 U.S.C. 78f(b)(3).
\7\ 15 U.S.C. 78f(b)(5).
\8\ Pursuant to BX By-Law Article I(gg), a Public Director is a
Director who has no material business relationship with a broker or
dealer, the Corporation (i.e., the Exchange) or its affiliates, or
FINRA.
\9\ Pursuant to BX By-Law Article I(bb), a Non-Industry Director
is a Director (excluding Staff Directors) who is (i) a Public
Director; (ii) an officer or employee of an issuer of securities
listed on the Exchange; or (iii) any other individual who would not
be an Industry Director.
\10\ BOX was a facility of the Exchange under Section 39(a)(2)
of the Act. See Securities Exchange Act Release Nos. 49066 (January
13, 2004), 69 FR 2773 (January 20, 2004) (SR-BSE-2003-17); 49065
(January 13, 2004), 69 FR 2768 (January 20, 2004) (SR-BSE-2003-04)
(``BOXR Order''); and 49068 (January 13, 2004), 69 FR 2775 (January
20, 2004) (SR-BSE-2002-15). See also Release No. 58324; 73 FR 46936
(August 7, 2008) (File Nos. SR-BSE-2008-02; SR-BSE-2008-23; SR-BSE-
2008-25; SR-BSECC-2008-01) (``Order Approving the Acquisition of the
Boston Stock Exchange, Incorporated by The NASDAQ OMX Group,
Inc.'').
\11\ The RSA specified, among other matters, that BX would
terminate its responsibility for fulfilling certain obligations and
cease performing certain regulatory functions as of the effective
date of June 1, 2012, or sooner if BOX satisfied all of the
conditions required for BOX to operate as a national securities
exchange.
\12\ See Securities Exchange Act Release No. 34-58324 (August 7,
2008), 73 FR 46936 (August 12, 2008) (File Nos. SR-BSE-2008-02; SR-
BSE-2008-23; SR-BSE-2008-25; SR-BSECC-2008-01); see also Securities
Exchange Act Release No. 67009 (May 17, 2012), 77 FR 30566 (May 23,
2012) (SR-BX-2012-036).
\13\ Pursuant to BX By-Law Article I(t), an Industry Director is
a Director (excluding any two officers of the Corporation, 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 twenty percent or more of the professional revenues
received by the Director or twenty 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 fifty 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 twenty percent or more of the professional revenues
received by the Director or twenty percent or more of the gross
revenues received by the Director's firm or partnership; or (vi) has
a consulting or employment relationship with or provides
professional services to the Corporation or any affiliate thereof or
to FINRA or has had any such relationship or provided any such
services at any time within the prior three years.
\14\ Pursuant to BX By-Law Article I(x), a Member Representative
Director is a Director who has been elected by the stockholders
after having been nominated by the Member Nominating Committee or
voted upon by Exchange Members pursuant to the BX By-Laws (or
elected by the stockholders without such nomination or voting in the
case of the Member Representative Directors elected pursuant to
Article IV, Section 4.3(b)). A Member Representative Director may,
but is not required to be, an officer, director, employee, or agent
of an Exchange Member.
\15\ See Phlx By-Law Article III, Section 3-2(a) and NASDAQ By-
Law Article III, Section 2(a).
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It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\16\ that the proposed rule change (SR-BX-2013-029) be, and it
hereby is, approved.
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\16\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
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\17\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-12486 Filed 5-24-13; 8:45 am]
BILLING CODE 8011-01-P