[Federal Register Volume 79, Number 50 (Friday, March 14, 2014)]
[Notices]
[Pages 14550-14551]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-05598]
[[Page 14550]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-71675; File No. SR-CHX-2014-03]
Self-Regulatory Organizations; Chicago Stock Exchange, Inc.;
Notice of Filing of Proposed Rule Change To Amend the Bylaws of the
Exchange
March 10, 2014.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given
that on February 28, 2014, the Chicago Stock Exchange, Inc. (``CHX'' or
``Exchange'') 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 self-regulatory
organization. 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\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of the
Substance of the Proposed Rule Change
CHX proposes to amend the Bylaws of the Exchange. The text of this
proposed rule change is available on the Exchange's Web site at http://www.chx.com/rules/proposed_rules.htm, at the principal office of the
Exchange, 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 self-regulatory organization
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
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend Article II, Sec. 5(a) of the Bylaws
of the Exchange to provide that the Vice Chairman shall be nominated by
the Chairman and elected by a majority of the CHX Board. Notably, the
Exchange proposes to eliminate the requirements that the Vice Chairman
of the CHX Board be a Participant Director \4\ and be elected by a
majority vote of Participant Directors.
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\4\ Article II, Section 2(b) of the Bylaws of the Exchange
defines ``Participant Directors'' as follows:
The term ``Participant Director'' shall mean a director who is
a Participant or an officer, managing member or partner of an entity
that is a Participant. The term ``Participant'' shall mean any
individual, corporation, partnership or other entity that holds a
permit issued by the Corporation to trade securities on the market
operated by the Corporation.
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Background
On February 9, 2005, the Exchange's ownership structure was
demutualized, pursuant to the plan proposed under SR-CHX-2004-26,\5\
which was approved by the SEC on February 8, 2005.\6\ As part of its
demutualization, the Exchange adopted separate Bylaws for the Exchange
and the new holding company, CHX Holdings, Inc.
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\5\ See Securities Exchange Act Release No. 51149 (February 8,
2005), 70 FR 7531 (February 14, 2005) (``Order'').
\6\ See Securities Exchange Act Release No. 50892 (December 20,
2004), 69 FR 77796 (December 28, 2004) (``Notice'').
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Among other things, the Bylaws of the Exchange granted Participants
certain representation rights on the Board. For example, current
Article II, Section 5(a), which was adopted upon demutualization,
provides that the Participant Directors shall elect the Vice Chairman
by majority vote from among the Participant Directors. In addition,
current Article II, Sec. 2(b) requires one-half of the CHX Board minus
one seat (rounded down to the nearest whole number) be comprised of
Participant Directors; current Article II Sec. 3 requires half of the
Nominating and Governance Committee be comprised of STP Participant
Directors (i.e., Participant Directors who were nominated through a
special process by Participant firms); and current Article II, Sec 6
requires a vacancy on the CHX Board left by a Participant Director be
filled with a Participant Director.
Proposed Amendment
The Exchange now proposes to eliminate the requirement that the
Vice Chairman of the CHX Board be a Participant Director elected by a
majority of Participant Directors. The Exchange submits that this
requirement unnecessarily shrinks the pool of qualified and willing
candidates for the position of Vice Chairman, while adding little in
the way of board representation protection for Participants above what
is already provided for in the Bylaws of the Exchange.
Specifically, the Exchange proposes to replace the first sentence
of current Article II, Sec. 5(a) of the Bylaws of the Exchange with
language that states that the Vice Chairman shall be nominated by the
Chairman and elected by a majority vote of the Board of Directors and
that the Chairman shall provide the name of his or her nominee to the
Board, in writing, no later than five business days before the date on
which the Board will be asked to vote to fill the position. The
Exchange notes that other exchanges do not explicitly provide for the
position of ``Vice Chairman'' in their bylaws.\7\ At these other
exchanges, the responsibilities of the Vice Chairman of the CHX Board
are assigned to the Chairman, another officer, or the board generally.
Also, the proposed amendment shall apply prospectively to future Vice
Chairmen of the CHX Board and shall not apply to the current Vice
Chairman.
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\7\ See By-laws of the NASDAQ Stock Market, Inc.; see also Third
Amended and Restated Bylaws of NYSE Regulation, Inc.; see also
Amended and Restated By-Laws of BATS Exchange, Inc.
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2. Statutory Basis
The Exchange believes that the proposal is consistent with the
requirements of the Act and rules and regulations thereunder that are
applicable to a national securities exchange, and, in particular, with
the requirements of Section 6(b) of the Act.\8\ In particular, proposed
Article II, Sec. 5(a) of the Bylaws of the Exchange are consistent with
Section 6(b)(1) of the Act, because it permits the CHX Board to select
a Vice Chairman from a larger pool of qualified and willing
individuals, which will result in the position being held by the most
able and willing candidate, thereby enabling the Exchange 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 Participants
and persons associated with its Participants, with the provisions of
the Act, the rules and regulations thereunder, and the rules of the
Exchange.\9\ Although the Exchange proposes to modify the requirements
and procedures for the selection of the Vice Chairman of the CHX Board,
the current compositional requirements of the CHX Board, including
current Article II, Sec. 2, will not be changed. Therefore, the CHX
Board will be required to comply with these requirements.
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\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(1).
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[[Page 14551]]
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. Specifically, the Exchange
believes that the proposed Bylaws do not directly affect competition
between the Exchange and others that provide the same goods and
services as the Exchange, since they do not affect the availability or
pricing of such goods and services.
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 up to 90 days (i) as the
Commission may designate 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 the 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-CHX-2014-03 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-CHX-2014-03. 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 Street NE.,
Washington DC 20549, 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-CHX-2014-03,
and should be submitted on or before April 4, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\10\
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\10\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-05598 Filed 3-13-14; 8:45 am]
BILLING CODE 8011-01-P