[Federal Register Volume 80, Number 211 (Monday, November 2, 2015)]
[Notices]
[Pages 67464-67467]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-27799]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-76282; File No. SR-CBOE-2015-092]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed
Rule Change To Amend the Certificate of Incorporation and Bylaws of its
Parent Company
October 27, 2015.
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 October 23, 2015, Chicago Board Options Exchange, Incorporated
(the ``Exchange'' or ``CBOE'') filed with the Securities and Exchange
Commission (``Commission'') the proposed rule change as described in
Items I, II, and III 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 certificate of incorporation and
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
[[Page 67465]]
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
CBOE Holdings is proposing to make certain amendments to its
Certificate and Bylaws.
Proposed Amendments to the Certificate
CBOE Holdings proposes to make various amendments to its
Certificate. First, CBOE Holdings proposes to eliminate references that
are applicable only in connection with the CBOE demutualization and
CBOE Holdings initial public offering (``IPO'') in 2010. Currently, the
Certificate provides for the designation, preferences and rights
related to Class A-1 and Class A-2 common stock that had been
authorized by the Board and CBOE Holdings' stockholders prior to the
IPO. No shares of Class A-1 or Class A-2 common stock are currently
outstanding, nor would CBOE Holdings be able to issue such shares at
any time in the future as the current Certificate limits their use to
the conversion of Class A and Class B common stock, which was issued in
connection with the IPO and has been retired. Accordingly, CBOE
Holdings proposes to delete obsolete provisions related to the
designation, rights and preferences of these series of common stock.
The Exchange also proposes to remove references to the 10% ownership
concentration limitation applicable before the IPO. This change would
not change the current ownership concentration limitation, which is
20%. CBOE Holdings also proposes other non-substantive changes to the
Certificate include referring to the ``Second'' Amended and Restated
Certificate of Incorporation, clarifying that any stockholder votes on
the Bylaws would be in addition to any votes required by law, and
updating references to the Common Stock, as only one class of common
stock will be outstanding. The Exchange notes that the proposed changes
will not have any effect on the rights of a stockholder.\3\
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\3\ For example, the Exchange notes that the proposed change in
Article Fourth, subparagraph (c)(x) from ``Voting Common Stock'' to
``stock of the Corporation entitled to vote thereon'' is not
intended to affect the rights of a stockholder or change which class
of shares are entitled to vote to increase or decrease the number of
authorized shares of Preferred Stock. Specifically, the Exchange
notes that, as is currently the case, for any proposal to increase
or decrease the number of authorized shares of Preferred Stock,
common stock would continue to vote together with any series of
Preferred Stock that is allowed to vote on such a proposal pursuant
to its terms. The Exchange also notes that the provisions in Article
Sixth of the Certificate which limit ownership and voting
concentration continue to apply and as such, any proposal to
increase or decrease the number of authorized shares of Preferred
Stock, if any, would be subject to those limitations.
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Proposed Amendments to the Bylaws
CBOE Holdings also proposes to make various amendments to its
Bylaws. First, CBOE Holdings proposes to adopt an Exclusive Forum
Provision. Specifically, CBOE Holdings seeks to adopt Article 11--Forum
for Adjudication of Disputes. Proposed Article 11 provides that
Delaware would be the exclusive forum for any shareholder litigation
against the Company. CBOE Holdings notes that the proposed adoption of
Article 11 alleviates the risk of multi-forum shareholder litigation in
which the same claims are litigated in different courts, which can
potentially drain corporate resources, increase the distraction and
hassle of litigation, and risk inconsistent rulings and judgments. CBOE
Holdings also notes that exclusive forum provisions have been upheld by
the Delaware Court of Chancery and that legislative amendments to the
General Corporation Law of the State of Delaware (``DGCL'') related to
exclusive forum provisions were recently signed into law by the
Delaware governor and became effective August 1, 2015.\4\
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\4\ See e.g., Boilermakers Local 154 Retirement Fund v. Chevron
Corporation, 73 A.3d 934 (Del. Ch. 2013). The Chancery Court ruled
that boards are statutorily empowered to adopt such bylaws so long
as the specific corporate articles of organization permit director
amendment of bylaws, which is generally the case. See also DGCL
Section 115.
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Next, CBOE Holdings proposes to amend various sections in Article 2
to delete obsolete and/or unnecessary language, as well as reflect
current best practices among Delaware corporations in the drafting of
their governing documents, including changes with respect to the
scheduling, notice and action at meetings and the nomination of
directors. For example, Section 2.2 of the Bylaws is proposed to be
amended to delete language requiring the annual meeting of stockholders
to be held on the third Tuesday in May of each year, as the Exchange
does not believe such requirement is necessary. Additionally, Section
2.2 is proposed to be amended to eliminate now outdated language which
provides that such requirement starts the year immediately following
the year in which the restructuring of CBOE is consummated. Section 2.4
of the Bylaws is proposed to be amended to add language providing that
certain notice requirements of each meeting of stockholders apply
except as otherwise provided by the Certificate of Incorporation or
CBOE Holdings Bylaws. CBOE Holdings also proposes to add language to
Section 2.4 to explicitly provide that notices of all meetings shall
state the means of remote communications, if any, by which stockholders
and proxy holders may be deemed to be present in person and vote at
such meeting. CBOE Holdings notes that Section 2.1 already contemplates
remote communications.\5\ Section 2.7 of the Bylaws is being amended to
make the Bylaw language consistent with DGCL Section 222 (c) (Notice of
meetings and adjourned meetings). Section 2.10 is being proposed to be
amended to make certain clarifications relating to actions at meetings.
For example, CBOE Holdings proposes to clarify that a majority of the
votes properly cast upon any question other than an election of
directors shall decide the question, except when a ``different''
(rather than ``larger'') vote is required by the Bylaws, rules or
regulations of any stock exchange applicable to the Corporation, or any
law or regulation applicable to the Corporation or its securities.
Additionally, CBOE Holdings proposes to explicitly clarify that
``abstentions'' and ``broker nonvotes'' are not counted as a vote case
either ``for'' or ``against'' a director's election. Section 2.11 is
being proposed to be amended to (i) eliminate outdated language and
(ii) make minor changes related to the nomination process for election
of Board of Directors in a manner similar to the practices of other
Delaware corporations. For example, Section 2.11 is being amended with
regards to notice requirements for director nominations in the event
the annual meeting is not conducted within a certain period of time.
Specifically, Section 2.11 currently provides that if the annual
meeting is not held within thirty (30) days before or after the
anniversary date of the preceding year's annual meeting of
stockholders, the nominations must be delivered or mailed and received
by the Secretary not later than the close of business on the 10th day
following the date on which public announcement of the annual meeting
date was made. CBOE Holdings seeks to amend Section
[[Page 67466]]
2.11 to permit the annual meeting to be held up to seventy (70) days
after the anniversary date of the immediately preceding annual meeting
without altering the deadlines regarding when the nominations must be
delivered or mailed and received by apply and to also confirm that an
adjournment or postponement of an annual meeting does not commence a
new time period or extend any time period for a stockholder's notice.
CBOE Holdings notes that the proposed change provides CBOE Holdings
more flexibility with regards to scheduling the annual meeting date
without altering the time periods for stockholder notices for director
nominations. CBOE Holdings additionally proposes to amend Section 2.11
to clarify that stockholder notices for director nominations shall also
set forth any other information relating to the stockholder and
beneficial owner, if any, required to be disclosed in a proxy statement
or other filings required to be made in connection with solicitations
of proxies, as well and also explicitly provide that CBOE Holdings may
require any proposed nominee to furnish any other information that CBOE
Holdings may reasonable require to determine eligibility of the
proposed nominee to serve as director of the Corporation.
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\5\ See CBOE Holdings Bylaws, Section 2.1 which provides that
``all meetings of stockholders shall be held at such place, if any,
within or without the State of Delaware . . .''
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CBOE Holdings also proposes to amend the Bylaws to make other non-
substantive changes. For example, CBOE Holdings proposes to amend
Section 3.4 of the Bylaws to provide that a director may resign by
giving either written or electronic notice as well as proposes to
delete an unnecessary sentence related to the term of the Executive
Committee members in Article 4, Section 4.2.\6\ Additionally, CBOE
Holdings proposes to make non-substantive, clarifying changes to
Section 9.3 of the Bylaws including adding the term ``equity owners''
(in addition to the current terms of ``stockholders'' and
``shareholders''). CBOE Holdings also proposes to amend Section 10.1 of
the Bylaws. Specifically, Section 10.1 currently provides that
stockholders of CBOE Holdings may amend the Bylaws, provided that
notice of the proposed change was given in the notice of the
stockholders meeting at which such action is to be taken. CBOE Holdings
proposes to eliminate this requirement as it does not believe it is
substantive or necessary. Particularly, CBOE Holdings notes that this
requirement is already provided for in Section 2.12 of the Bylaws.\7\
Additionally, CBOE Holdings notes that Article Twelfth of the
Certificate, which governs amendments of the Bylaws by stockholders of
CBOE Holdings, does not include this requirement. Accordingly, and in
order to conform Section 10.1 of the Bylaws to Article Twelfth of the
Certificate, CBOE Holdings proposes to remove this language from
Section 10.1. CBOE Holdings also proposes to amend Section 10.2 of the
Bylaws to replace the reference of ``CBOE'' to ``Chicago Board Options
Exchange, Incorporated'' to avoid any potential confusion as to what
CBOE refers to.
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\6\ The Exchange notes that pursuant to Section 3.2 of the
Bylaws, directors are to be elected annually and thus the term for
any Board committee composed exclusively of directors would be for
no longer than one year. The Exchange also notes that the terms for
members of other Board committees are also not explicitly referenced
or included in CBOE Holdings' Bylaws. See Article 4, Sections 4.3
(The Audit Committee), 4.4 (The Compensation Committee) and 4.5 (The
Nominating and Governance Committee).
\7\ See Section 2.12 of the Bylaws which provides ``To be in
proper written form, a stockholder's notice to the Secretary shall
set forth . . . the text of any resolutions proposed for
consideration and, in the event that such business includes a
proposal to amend the Bylaws of the Corporation, the language of the
proposed amendment . . .''
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2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Securities Exchange Act of 1934 (the ``Act'') and the rules and
regulations thereunder applicable to the Exchange and, in particular,
the requirements of Section 6(b) of the Act.\8\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \9\ 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) \10\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(5).
\10\ Id.
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In particular, CBOE Holdings believes that eliminating references
in the Certificate that are applicable only in connection with the 2010
IPO removes obsolete language and alleviates potential confusion.
Additionally, CBOE Holdings believes the remaining changes to the
Certificate are non-substantive and clarifying in nature, which makes
the Certificate easier to read and also alleviates potential confusion.
The alleviation of potential confusion removes impediments to and
perfects the mechanism of a free and open market and a national market
system, and, in general, protect investors and the public interest.
The Exchange believes adopting Article 11 governing the forum for
adjudication of disputes alleviates the risk of multi-forum shareholder
litigation in which the same claims are litigated in different courts,
which can potentially drain corporate resources, increase the
distraction and hassle of litigation, and risk inconsistent rulings and
judgments. The Exchange believes alleviating potential drain on
corporate resources allows the Exchange to direct such resources in
administration of the Exchange, enhancing investor protection.
CBOE Holdings believes the remaining changes are either clarifying
in nature or reflect current best practices among Delaware corporations
in the drafting of their governing documents and thus enhance investor
protection by making CBOE Holdings governance documents clearer and
easier to understand and in line with current governance best
practices.
B. Self-Regulatory Organization's Statement on Burden on Competition
Because the proposed rule change relates to the governance of CBOE
Holdings and not to the operations of the Exchange, the Exchange 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
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not:
A. Significantly affect the protection of investors or the public
interest;
B. impose any significant burden on competition; and
C. 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
[[Page 67467]]
pursuant to Section 19(b)(3)(A) of the Act \11\ and Rule 19b-4(f)(6)
\12\ 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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\11\ 15 U.S.C. 78s(b)(3)(A).
\12\ 17 CFR 240.19b-4(f)(6).
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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
Internet comment form (http://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-CBOE-2015-092 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-CBOE-2015-092. 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 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-2015-092 and should be
submitted on or before November 23, 2015.
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\13\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-27799 Filed 10-30-15; 8:45 am]
BILLING CODE 8011-01-P