[Federal Register Volume 79, Number 21 (Friday, January 31, 2014)]
[Notices]
[Pages 5479-5481]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-01962]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-71402; File No. SR-CBOE-2014-006]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change to Amend the Bylaws of its Parent Company
January 27, 2014.
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 January 17, 2014, Chicago Board Options Exchange, Incorporated
(the ``Exchange'' or ``CBOE'') 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
The Exchange proposes to amend the bylaws of its parent company,
CBOE Holdings, Inc. (``CBOE Holdings''). The text of the proposed rule
change is available on the Exchange's Web site (http://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), 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 these 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 aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange is proposing to make certain amendments to the Bylaws
(the ``Bylaws'') of its parent company, CBOE Holdings, Inc. (``CBOE
Holdings'') to make improvements in its governance. Currently, CBOE
Holdings' Bylaws provide that ``when a quorum is present at any
meeting, a plurality of the votes properly cast for the election of
directors shall be sufficient to elect directors.'' This applies to
both contested and uncontested elections. The Exchange proposes to
change the manner in which uncontested elections occur. Specifically,
the Exchange is proposing to move from a plurality voting standard to a
majority voting standard for uncontested elections where ``each nominee
for director shall be elected to the Board of Directors if a majority
of the votes properly cast are in favor of such nominee's election
(i.e., if the number of votes properly cast ``for'' a nominee's
election exceeds the number of votes properly cast ``against'' that
nominee's election); provided, however, that, if, as of the last date
by which stockholders of the Corporation may submit notice to nominate
a person for election as a director pursuant to Section 2.11 of these
Bylaws or pursuant to any rule or regulation of the Securities and
Exchange Commission, the number of nominees for director exceeds the
number of directors to be elected at any such meeting (a ``Contested
Election''), a plurality of the votes properly cast for the election of
directors shall be sufficient to elect directors.'' As such, there will
be no change to the voting process for contested elections.
Under the majority voting standard that will apply to uncontested
elections, a nominee who fails to receive the requisite vote would not
be duly elected to the Board; however, because a director holds office
until his or her successor is duly elected and qualified, any incumbent
director-nominee who fails to receive the requisite vote does not
automatically cease to be a director. Instead, such director continues
as a ``holdover director'' until such director's death, resignation or
removal, or until his or her successor is duly elected and qualified.
For this reason, the majority voting standard under consideration
requires that any incumbent nominee, as a condition to his or her
nomination for election, must submit in writing an irrevocable
resignation, the effectiveness of which is conditioned upon the
director's failure to receive a majority of the votes properly cast in
favor of such nominee's election and the Board's acceptance of the
resignation.\3\ The Exchange is proposing to amend the language in
Section 3.4 of the Bylaws to delete the statement that a resignation,
unless specifically contingent upon its acceptance, will be effective
as of its date or of the date specified therein, and replace that
language with the statement that a resignation ``will be effective when
delivered unless the resignation specifies a later effective date or an
effective date determined upon the happening of an event or events.''
This would allow Directors to submit resignations that are contingent
upon both the Director not receiving majority vote in an uncontested
election and the Board accepting such resignation (or some other event
that could lead to the Director no longer intending to act as a
Director at some point in the future due
[[Page 5480]]
to the occurrence of some future event). After a director's failure to
receive the majority of properly cast votes, CBOE Holdings' Nominating
& Governance Committee then considers the resignation offer and
recommends to the CBOE Holdings Board of Directors regarding whether to
accept it. Within 90 days after the certification of the election
results, the Board of Directors will decide whether to accept or reject
the resignation. Promptly thereafter, the Board will announce its
decision by means of a press release.
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\3\ Pursuant to the ``Board Election Process'' section of CBOE
Holdings' Corporate Governance Guidelines (available at http://ir.cboe.com/documentdisplay.cfm?DocumentID=7090).
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Additionally, the Exchange is proposing some non-substantive
changes to Section 3.2 of the Bylaws for added clarity. For example,
the term ``Board'' is being replaced with ``Board of Directors'' in two
places to add clarity. Also, the phrase ``Directors will serve one-year
terms ending on the annual meeting following the meeting at which such
directors were elected or at such time as their successors are elected
or appointed and qualified. . .'' is being replaced with ``Directors
shall be elected annually and shall hold office until the next annual
meeting and until such time as their successors are elected or
appointed and qualified'' to avoid confusion regarding the term length
and to clarify until when elected directors hold office. This change
will clarify that terms are not necessarily for one year, but until the
next annual meeting (which may not be exactly one year from the date of
the previous meeting), and that there may be holdover directors until
their successors are elected or appointed and qualified (except in the
event of earlier death, resignation or removal).
As CBOE Holdings is listed on the NASDAQ Stock Market, these
proposed changes are not inconsistent with the NASDAQ listing rules.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Act and the rules and regulations thereunder applicable to the
Exchange and, in particular, the requirements of Section 6(b) of the
Act.\4\ Specifically, the Exchange believes the proposed rule change is
consistent with the Section 6(b)(5) \5\ requirements that the rules of
an exchange be designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, to foster
cooperation and coordination with persons engaged in regulating,
clearing, settling, processing information with respect to, and
facilitating transactions in securities, 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.
Additionally, the Exchange believes the proposed rule change is
consistent with the Section 6(b)(5)\6\ requirement that the rules of an
exchange not be designed to permit unfair discrimination between
customers, issuers, brokers, or dealers.
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\4\ 15 U.S.C. 78f(b).
\5\ 15 U.S.C. 78f(b)(5).
\6\ Id.
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In particular, for purposes of an uncontested election, the
proposed amendments adopt a majority vote standard for director
elections for the Exchange's parent company, which would enable its
directors to be elected in a manner that the Board of Directors
believes is reflective of the desires of shareholders and provide a
mechanism to protect against the election of directors by less than the
majority vote of the shareholders.
The proposed rule change to amend CBOE Holdings' Bylaws to adopt a
majority vote standard for uncontested elections is consistent with the
Act because the proposed change is designed to allow the members of the
Board of Directors to be elected in a manner that the Board of
Directors believes closely reflects the desires of its shareholders (as
well as a manner in which uncontested Board of Director elections are
conducted for the majority of large public companies in the United
States), while also providing a process for addressing the circumstance
when a director fails to receive a majority of the votes in an
uncontested election. The plurality standard would continue to apply in
contested elections.
The proposed non-substantive changes to the Bylaws are intended to
enhance clarity and prevent confusion, thereby removing impediments to
and perfecting the mechanism of a free and open market and a national
market system, and, in general, protecting investors and the public
interest.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange 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. The proposed change does not
impact either intermarket or intramarket competition, but instead is
intended to enhance the governance of the Exchange's parent company.
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
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \7\ and Rule 19b-4(f)(6) thereunder.\8\
Because the foregoing proposed rule change does not: (1) Significantly
affect the protection of investors or the public interest; (2) impose
any significant burden on competition; and (3) become operative for 30
days from the date on which it was filed, or such shorter time as the
Commission may designate, it has become effective pursuant to Section
19(b)(3)(A) of the Act \9\ and Rule 19b-4(f)(6) \10\ thereunder. At any
time within 60 days of the filing of the proposed rule change, the
Commission summarily may temporarily suspend such rule change if it
appears to the Commission that such action is necessary or appropriate
in the public interest, for the protection of investors, or otherwise
in furtherance of the purposes of the Act. If the Commission takes such
action, the Commission will institute proceedings to determine whether
the proposed rule change should be approved or disapproved.
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\7\ 15 U.S.C. 78s(b)(3)(A)(iii).
\8\ 17 CFR 240.19b-4(f)(6).
\9\ 15 U.S.C. 78s(b)(3)(A).
\10\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires the Exchange to give the Commission written notice of the
Exchange's intent to file the proposed rule change, along with a
brief description and text of the proposed rule change, at least
five business days prior to the date of filing of the proposed rule
change, or such shorter time as designated by the Commission. The
Exchange has satisfied this requirement.
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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-CBOE-2014-0006 on the subject line.
Paper Comments
[[Page 5481]]
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-2014-006. 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, 100 F Sreet NE.,
Washington, DC 20549, on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the 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 Number SR-CBOE-2014-006 and should be
submitted on or before February 21, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary,
[FR Doc. 2014-01962 Filed 1-30-14; 8:45 am]
BILLING CODE 8011-01-P