[Federal Register Volume 82, Number 47 (Monday, March 13, 2017)]
[Notices]
[Pages 13527-13529]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-04815]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-80167; File No SR-CBOE-2017-017]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Notice of Filing of a Proposed Rule Change To Amend the
Bylaws and Certificate of Incorporation
March 7, 2017.
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 February 22, 2017, 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 its Bylaws and Certificate of
Incorporation. 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
[[Page 13528]]
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 proposes to amend its Bylaws and Certificate of
Incorporation. Specifically the Exchange proposes to amend its Board
size range and eliminate its Compensation Committee.
First, the Exchange proposes to amend its Bylaws relating to Board
size range. Currently, Section 3.1 of the Bylaws provide that the Board
shall consist of not less than 12 and not more than 16 directors. The
Exchange proposes to change the Board size range such that the Board
shall consist of no less than 5 directors. The Exchange believes the
proposed change will provide greater flexibility by permitting the
Board to increase or decrease the size of the board without the need to
further amend the Bylaws.\3\ The Exchange notes that any changes in the
number of directors will continue to be in all cases subject to the
compositional requirements of the board set forth in the Bylaws,
including its provision relating to the fair representation of
members.\4\ The Exchange also notes that the Bylaws of other Exchanges
have similar board size provisions.\5\ The Exchange also proposes to
make conforming changes to its Certificate of Incorporation.
Specifically, CBOE proposes to amend subparagraph (b) of Article Fifth
to also provide that the Board of Directors shall consist of not less
than 5 directors, and eliminate the current referenced range of 12 to
16 directors.
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\3\ The Board notes that it does not at this time anticipate
changing the current Board size outside of the original range of 12-
16 directors.
\4\ See Section 3.2 of the CBOE Bylaws.
\5\ See e.g., Fourth Amended and Restated Bylaws of BZX
Exchange, Inc., Article III, Board of Directors, Section 2(a), which
provides that the Board of Directors shall consist of four (4) or
more Directors, the number of which would be determined by
resolution of the Board.
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Next, the Exchange proposes to eliminate the Exchange-level
Compensation Committee. The Exchange seeks to eliminate the
Compensation Committee because it believes that the Compensation
Committee's functions are duplicative of the functions of the
Compensation Committee of its parent company, CBOE Holdings.\6\
Specifically, under its charter, the CBOE Holdings Compensation
Committee has authority to assist the CBOE Holdings Board of Directors
in carrying out its overall responsibilities relating to executive
compensation and also, among other things, (i) recommending the
compensation of the Company's Chief Executive Officer and certain other
executive officers and (ii) approving and administering all cash and
equity-based incentive compensation plans of the Company that affect
employees of the Company and its subsidiaries. Similarly, under its
charter, the CBOE Compensation Committee has authority to assist the
CBOE Board and the Parent Compensation Committee in carrying out its
overall responsibilities relating to executive compensation as well as
(i) recommending the compensation of certain executive officers
designated by the Board whose compensation has not been, and is not
expected to be, determined by the compensation committee of the Parent
Board or another Board committee \7\ and (ii) assist the Parent
Compensation Committee in the administration of cash and equity-based
incentive compensation plans of the Company that affects employees of
the Company and its subsidiaries. As such, other than to the extent
that the CBOE Compensation Committee recommends the compensation of
executive officers whose compensation is not already determined by the
CBOE Holdings Compensation Committee, its activities are duplicative of
the activities of the CBOE Holdings Compensation Committee. The
Exchange notes that currently, each of the executive officers whose
compensation would be determined by the CBOE Compensation Committee is
also an executive officer of CBOE Holdings, and as such, the CBOE
Holdings Compensation Committee already performs these functions for
such officers. To the extent that compensation need be determined by
[sic] any CBOE officer who is not also a CBOE Holdings officer in the
future, the CBOE Board or senior management will perform such action
without the use of a compensation committee, as provided for in Section
5.11 of the Bylaws. Thus, the responsibilities of the CBOE Compensation
Committee are fully duplicated by the responsibilities of the CBOE
Holdings Compensation Committee. Accordingly, CBOE is proposing to
delete Section 4.3 of the CBOE Bylaws which provides for the CBOE
Compensation Committee and to delete a reference to the CBOE
Compensation Committee in Section 4.1(a) of the CBOE Bylaws (which
lists the required CBOE Board committees). CBOE also proposes to
eliminate the reference to the CBOE Compensation Committee in Section
5.11 of the CBOE Bylaws (which provides that officers are entitled to
salaries, compensation or reimbursement as shall be fixed or allowed
from time to time by the Board unless otherwise delegated to the
Compensation Committee of the Board or to members of senior
management). CBOE believes that its proposal to eliminate its
Compensation Committee is substantially similar to prior actions taken
by other securities exchanges with parent company compensation
committees to eliminate their exchange-level compensation
committees.\8\
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\6\ The Exchange notes that the current composition of the CBOE
and CBOE Holdings Compensation Committees are the same.
\7\ The Exchange notes that pursuant to its Charter, the CBOE
Regulatory Oversight and Compliance Committee (ROCC) of the CBOE
Board recommends to the Board compensation for the Chief Regulatory
Officer and any Deputy Chief Regulatory Officers. The Exchange notes
that the proposed change will not affect this process. The Exchange
also notes that currently not all executive officers of CBOE are
required to have their compensation determined by the Compensation
Committee.
\8\ See e.g., Securities Exchange Act Release No. 60276 (July 9,
2009), 74 FR 34840 (July 17, 2009) (SR-NASDAQ-2009-042). See also
Securities Exchange Act Release No. 62304 (June 16, 2010), 75 FR
36136 (June 24, 2010) (SR-NYSEArca-2010-31).
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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.\9\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \10\ 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) \11\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(5).
\11\ Id.
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[[Page 13529]]
In particular, the proposed rule change to amend the Board size
range in the Bylaws and Certificate of Incorporation provides the Board
with flexibility. Additionally, the Exchange is not proposing to amend
any of the compositional requirements currently set forth in the
Bylaws. The Exchange therefore believes that the proposed changes will
provide greater flexibility to the Exchange in populating a Board of
Directors that includes directors with relevant and diverse expertise,
while continuing to ensure that the Board is of adequate size and the
existing compositional requirements of the Exchange are met, including
the provision relating to the fair representation of members.
The Exchange believes eliminating the Exchange-level Compensation
Committee allows the Exchange to eliminate a board committee whose
responsibilities overlap with, and are adequately handled by, the
corresponding committee of the Exchange's ultimate parent. This will
allow directors of the Exchange to focus their attention on matters
falling directly within the purview of the Exchange's board, including
its orderly discharge of regulatory duties 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.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe the proposed rule change will impose
any burden on competition not necessary or appropriate in furtherance
of the purposes of the Act. The proposed rule change relates to the
corporate governance of CBOE and not the operations of the Exchange.
This is not a competitive filing and, therefore, imposes no burden on
competition.
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
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 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. 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-2017-017 on the subject line.
Paper Comments
Send paper comments in triplicate to Brent J. Fields,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549.
All submissions should refer to File Number SR-CBOE-2017-017. 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 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-2017-017 and should be
submitted on or before April 3, 2017.
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\12\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-04815 Filed 3-10-17; 8:45 am]
BILLING CODE 8011-01-P