[Federal Register Volume 79, Number 186 (Thursday, September 25, 2014)]
[Notices]
[Pages 57648-57650]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-22783]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-73145; File No. SR-SCCP-2014-01]
Self-Regulatory Organizations; Stock Clearing Corporation of
Philadelphia; Notice of Filing of Proposed Rule Change To Amend the
Amended and Restated Certificate of Incorporation and By-Laws of The
NASDAQ OMX Group, Inc.
September 19, 2014.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'')\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on September 10, 2014, Stock Clearing Corporation of Philadelphia
(``SCCP'') filed with the Securities and Exchange Commission (``SEC''
or ``Commission'') the proposed rule change as described in Items I, II
and III below, which Items have been prepared by SCCP. 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. Clearing Agency's Statement of the Terms of Substance of the
Proposed Rule Change
SCCP is filing this proposed rule change with respect to amendments
of the Amended and Restated Certificate of Incorporation (the
``Charter'') and By-Laws (the ``By-Laws'') of its parent corporation,
The NASDAQ OMX Group, Inc. (``NASDAQ OMX'' or the ``Company''). The
proposed amendments will be implemented on a date designated by NASDAQ
OMX following approval by the Commission. The text of the proposed rule
change is available on SCCP's Web site at http://nasdaqomxphlx.cchwallstreet.com/nasdaqomxphlx/sccp/, at the principal
office of SCCP, and at the Commission's Public Reference Room.
II. Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change
In its filing with the Commission, SCCP 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. SCCP has prepared summaries, set forth in sections A, B,
and C below, of the most significant aspects of such statements.
(A) Clearing Agency's Statement of the Purpose of, and Statutory Basis
for, the Proposed Rule Change
1. Purpose
NASDAQ OMX is proposing to make certain amendments to its Charter
and By-Laws.
(i) Background
Article Fourth, Paragraph C of NASDAQ OMX's Charter includes a
voting limitation that generally prohibits a stockholder from voting
shares beneficially owned, directly or indirectly, by such stockholder
in excess of 5% of the then-outstanding shares of capital stock of
NASDAQ OMX entitled to vote as of the record date in respect of any
matter. Pursuant to Article Fourth, Paragraph C(6) of the Charter,
NASDAQ OMX's Board may grant exemptions to this limitation prior to the
time a stockholder beneficially owns more than 5% of the outstanding
shares of stock entitled to vote on the election of a majority of
directors at such time. NASDAQ OMX's Board has never granted an
exemption to the 5% voting limitation and has no current plans to do
so. However, in the event the Board decides to grant such an exemption
in the future, Article Fourth, Paragraph C(6) of the Charter and
Section 12.5 of the By-Laws limit the Board's authority to grant the
exemption. These provisions, which are intended to be substantively
identical, currently contain some language differences. Following
discussions with the SEC staff,\3\ NASDAQ OMX proposes the amendments
described below to the Charter and By-Laws to conform these provisions
and remove any ambiguity that may exist because of the current language
differences.
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\3\ See Securities Exchange Act Release No. 71353 (January 17,
2014), 79 FR 4209 (January 24, 2014) (SR-BSECC-2013-001, SR-BX-2013-
057, SR-NASDAQ-2013-148, SR-Phlx-2013-115, SR-SCCP-2013-01), at note
14.
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(ii) Proposed Amendments to Charter
First, unlike the Charter, the By-Laws state that for so long as
NASDAQ OMX shall control, directly or indirectly, any self-regulatory
subsidiary, a resolution of the Board to approve an exemption for any
person under Article Fourth, Paragraph C(6) of the Charter shall not be
permitted to become effective until such resolution has been filed with
and approved by the SEC under Section 19 of the Act. NASDAQ OMX
proposes that this requirement be added to the Charter and that ``self-
regulatory subsidiary,'' which is currently not a defined term in the
Charter, be defined as any subsidiary of NASDAQ OMX that is a ``self-
regulatory organization'' as defined under Section 3(a)(26) of the
Act.\4\ At present, this defined term would include NASDAQ, BX and
Phlx, which are national securities exchanges, and BSECC and SCCP,
which are registered clearing agencies that are both currently dormant.
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\4\ Under Section 3(a)(26) of the Act, a ``self-regulatory
organization'' is ``any national securities exchange, registered
securities association, or registered clearing agency . . .'' 15
U.S.C. 78c(a)(26).
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Second, both the Charter and the By-Laws state that the Board may
not approve an exemption to the 5% voting limitation for: (i) a
registered broker or dealer or an affiliate thereof or (ii) an
individual or entity that is subject to a statutory disqualification
under Section 3(a)(39) of the Act. The By-Laws include a further
proviso stating that, for these purposes, an ``affiliate'' shall not be
deemed to include an entity that either owns 10% or less of the equity
of a broker or dealer, or receives 1% or less of its consolidated gross
revenues from a broker or dealer. This proviso, which is not currently
included in the Charter, allows NASDAQ OMX's Board to grant
[[Page 57649]]
exemptions to the 5% voting limitation for entities that either own 10%
or less of the equity of a broker or dealer, or receive 1% or less of
their consolidated gross revenues from a broker or dealer. NASDAQ OMX
proposes that this proviso be added to the Charter to ensure
consistency between the Charter and By-Laws.
Third, both the Charter and By-Laws require the Board to make
certain determinations prior to granting an exemption to the 5% voting
limitation. Regarding the first of these determinations, the Charter
states that the Board must determine that granting such an exemption
would not reasonably be expected to diminish the quality of, or public
confidence in, NASDAQ OMX or The NASDAQ Stock Market LLC or the other
operations of NASDAQ OMX and its subsidiaries, on the ability to
prevent fraudulent and manipulative acts and practices and on investors
and the public. The By-Laws include similar language, but state that
the Board must make this determination with respect to NASDAQ OMX or
its self-regulatory-subsidiaries. Because the term ``self-regulatory
subsidiary'' includes The NASDAQ Stock Market LLC but also includes
other entities, NASDAQ OMX proposes that the provisions be made fully
consistent by amending the Charter to refer to NASDAQ OMX or the self-
regulatory subsidiaries, and to define the term ``self-regulatory
subsidiary'' as described above.
Fourth, unlike the Charter, the By-Laws further provide that prior
to granting an exemption from the 5% voting limitation, the Board must
also determine that granting the exemption would promote the prompt and
accurate clearance and settlement of securities transactions (and to
the extent applicable, derivative agreements, contracts and
transactions), assure the safeguarding of securities and funds in the
custody or control of the self-regulatory subsidiaries that are
clearing agencies or securities and funds for which they are
responsible, foster cooperation and coordination with persons engaged
in the clearance and settlement of securities transactions, and remove
impediments to and perfect the mechanism of a national system for the
prompt and accurate clearance and settlement of securities
transactions. NASDAQ OMX proposes that this language be added to the
Charter.
Finally, NASDAQ OMX proposes that Article Fourth, Paragraph C(6) of
the Charter be amended to correct a cross-reference to subparagraph
6(b), which no longer exists.
(iii) Proposed Amendments to the By-Laws
NASDAQ OMX also proposes amendments to NASDAQ OMX's By-Laws to
further conform the Charter and By-Law provisions discussed above.
Specifically, the proposed amendment to Article I(s) revises the
definition of ``self-regulatory subsidiary'' in the By-Laws to refer to
any subsidiary of NASDAQ OMX that is a self-regulatory organization as
defined under Section 3(a)(26) of the Act, rather than list specific
subsidiaries that would fall within this category. This revised
definition, which is the same definition of ``self-regulatory
subsidiary'' proposed for purposes of the Charter as described above,
will capture NASDAQ OMX's current self-regulatory subsidiaries as well
as any subsidiaries that in the future meet the definition of ``self-
regulatory organization'' under the Act. Consequently, such future
self-regulatory subsidiaries will automatically be subject to the By-
Law provisions relating to these subsidiaries without NASDAQ OMX having
to take formal action to amend the By-Laws to include them.
The proposed By-Law amendments also include the correction of a
typographical error in Article I and minor edits to Section 12.5 to
conform the language regarding the 5% voting limitation to the language
in the analogous provision of the Charter.
2. Statutory Basis
SCCP believes that its proposal is consistent with Section
17A(b)(3)(C) of the Act,\5\ in that it assures a fair representation of
shareholders and participants in the selection of directors and
administration of its affairs. While the proposals relate to the
organizational documents of NASDAQ OMX, rather than SCCP, SCCP is
indirectly owned by NASDAQ OMX, and therefore, NASDAQ OMX's
stockholders have an indirect stake in SCCP. In addition, the
participants in SCCP, to the extent any exist, could purchase stock in
NASDAQ OMX in the open market, just like any other stockholder. The
proposals ensure that NASDAQ OMX stockholders have clarity about the
existing voting limitation in NASDAQ OMX's Charter and By-Laws. As a
result, SCCP believes that the proposals assure a fair representation
of NASDAQ OMX's stockholders in the selection of directors and
administration of NASDAQ OMX's affairs, as well as the affairs of SCCP.
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\5\ 15 U.S.C. 78q-1(b)(3)(C).
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Specifically, NASDAQ OMX is proposing changes to its Charter and
By-Laws to conform the provisions in each document relating to the
procedures by which NASDAQ OMX's Board may grant an exemption to the
prohibition on any NASDAQ OMX stockholder voting shares in excess of 5%
of the Company's then-outstanding shares of capital stock. SCCP
believes that the changes will eliminate confusion that may exist
because of the current language differences between the two provisions.
In addition, NASDAQ OMX is proposing to define ``self-regulatory
subsidiary'' with reference to a definition in the Act. This will
ensure that any NASDAQ OMX subsidiary that meets the definition of
``self-regulatory organization'' in the Act will be subject to the
Charter and By-Law provisions relating to self-regulatory subsidiaries.
Finally, the remaining changes are clarifying in nature, and they
protect stockholders by making NASDAQ OMX's governance documents
clearer and easier to understand.
(B) Clearing Agency's Statement on Burden on Competition
Because the proposed rule change relates to the governance of
NASDAQ OMX and not to the operations of SCCP, SCCP 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) Clearing Agency's Statement on Comments on the Proposed Rule Change
Received From Members, Participants, or Others
No written comments were either solicited or received.
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 SCCP consents, the Commission shall: (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.
[[Page 57650]]
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-SCCP-2014-01 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-SCCP-2014-01. 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 the filing also will be available
for inspection and copying at the principal office of SCCP. 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-SCCP-2014-01 and should be
submitted on or before October 16, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\6\
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\6\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-22783 Filed 9-24-14; 8:45 am]
BILLING CODE 8011-01-P