[Federal Register Volume 82, Number 82 (Monday, May 1, 2017)]
[Notices]
[Pages 20409-20410]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-08699]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-80522; File No. SR-C2-2017-009]
Self-Regulatory Organizations; C2 Options Exchange, Incorporated;
Order Approving a Proposed Rule Change To Amend the Bylaws and
Certificate of Incorporation
April 25, 2017.
I. Introduction
On February 22, 2017, C2 Options Exchange, Incorporated
(``Exchange'' or ``C2'') filed with the Securities and Exchange
Commission (``Commission''), pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4
thereunder,\2\ a proposed rule change to amend its Bylaws \3\ and
Certificate of Incorporation.\4\ The Commission published the proposed
rule change for comment in the Federal Register on March 13, 2017.\5\
The Commission received no comments on the proposal. This order
approves the proposed rule change.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Amended and Restated Bylaws of C2 Options Exchange,
Incorporated (``Bylaws'').
\4\ See Amended and Restated Certificate of Incorporation of C2
Options Exchange, Incorporated (``Certificate of Incorporation'').
\5\ See Securities Exchange Act Release No. 80166 (March 7,
2017), 82 FR 13518 (``Notice'').
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II. Description of the Proposed Rule Change
First, the Exchange proposes to amend its Bylaws relating to the
Board of Directors (``Board'') size range. Currently, Section 3.1 of
the Bylaws provides 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 five
directors. The Exchange also proposes to make conforming changes to its
Certificate of Incorporation by amending subparagraph (b) of Article
Fifth to also provide that the Board shall consist of not less than
five directors and to eliminate the current referenced range of 12 to
16 directors.\6\
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\6\ Id.
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Second, the Exchange proposes to eliminate the Exchange-level
Compensation Committee. C2 is proposing to delete Section 4.3 of the
Bylaws, which provides for the C2 Compensation Committee, and to delete
a reference to the C2 Compensation Committee in Section 4.1(a) of the
Bylaws (which lists the required Board committees). C2 also proposes to
eliminate the reference to the C2 Compensation Committee in Section
5.11 of the 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
Board's Compensation Committee or to senior management. The Exchange
justifies eliminating the C2 Compensation Committee because its
functions largely are duplicative of
[[Page 20410]]
those of the Compensation Committee of its parent company, CBOE
Holdings.\7\
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\7\ Id. at 13518-19. The Exchange notes that the composition of
both committees currently are the same. See id. at 13518 n.6.
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III. Discussion and Commission Findings
After careful review, the Commission finds that the proposed rule
change is consistent with the requirements of Section 6 of the Act,\8\
and the rules and regulations thereunder applicable to a national
securities exchange.\9\ In particular, the Commission finds that the
proposed rule change is consistent with Section 6(b)(1) of the Act,\10\
which requires a national securities exchange to be so organized and
have the capacity to carry out the purposes of the Act and to comply,
and to enforce compliance by its members and persons associated with
its members, with the provisions of the Act. The Commission also finds
that the proposed rule change is consistent with Section 6(b)(3) of the
Act,\11\ which requires that the rules of a national securities
exchange assure a fair representation of its members in the selection
of its directors and administration of its affairs and provide that one
or more directors shall be representative of issuers and investors and
not be associated with a member of the exchange, broker, or dealer. The
Commission further finds that the proposed rule change is consistent
with Section 6(b)(5) of the Act,\12\ which requires, among other
things, that a national securities exchange have rules 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.
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\8\ 15 U.S.C. 78f.
\9\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
\10\ 15 U.S.C. 78f(b)(1).
\11\ 15 U.S.C. 78f(b)(3).
\12\ 15 U.S.C. 78f(b)(5).
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In particular, the Commission notes that the proposal to require at
least five directors for the Board, rather than a required range of not
less than 12 and not more than 16, is comparable to the board size
requirements stipulated in the bylaws of at least one other exchange,
which was approved by the Commission.\13\ Importantly, the Exchange
represents that it is not proposing to amend any of the compositional
requirements of the Board, including its provision relating to the fair
representation of members, which are set forth in Section 3.2 of the
Bylaws.\14\ The Commission notes that the Exchange represents that,
while the proposal provides the Board with greater flexibility to
determine the size of the Board without amending the Bylaws, it will
continue to allow the Exchange to ensure that the Board is of adequate
size and includes directors with relevant and diverse experience.\15\
The Exchange also notes that it has no current plans to change the size
of its Board outside of the original range of 12-16 directors.\16\
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\13\ See Securities Exchange Act Release No. 69884 (June 27,
2013), 78 FR 40255 (July 3, 2013) (SR-BYX-2013-013) (providing that
the BATS Y-Exchange board of directors will consist of four or more
directors).
\14\ See Notice, supra note 5, at 13518.
\15\ See id. at 13519.
\16\ See id. at 13518 n.3.
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With regard to the proposal to eliminate the C2 Compensation
Committee, the Commission notes that this change is comparable to the
governing structures of other exchanges, which the Commission has
previously approved.\17\ As more fully set forth in the Notice, the
Exchange explains that the C2 Compensation Committee's responsibilities
largely are duplicative of those of the corresponding Compensation
Committee of CBOE Holdings, other than to the extent that the C2
Compensation Committee recommends the compensation of executive
officers whose compensation is not already determined by the CBOE
Holdings Compensation Committee.\18\ Accordingly, under the proposed
rule change, such functions now will be performed by the CBOE Holdings
Compensation Committee or as otherwise provided in the Bylaws.\19\ The
Commission notes that the Exchange represents that currently, each of
the executive officers whose compensation would need to be determined
by the Compensation Committee are officers of both C2 and CBOE
Holdings, but should compensation need to be determined in the future
for any C2 officer who is not also a CBOE Holdings officer, the C2
Board or C2 senior management will perform such action without the use
of a compensation committee, as provided for in Section 5.11 of the
Bylaws.\20\ Further, the Commission notes that the C2 Regulatory
Oversight and Compliance Committee (``ROCC'') of the Board will
continue to recommend to the Board the compensation for the Chief
Regulatory Officer and any Deputy Chief Regulatory Officers, and this
process is not be affected by this proposed rule change.
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\17\ 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).
\18\ See Notice, supra note 5, at 13518-9.
\19\ Id.
\20\ See Bylaws Section 5.11 (providing that ``[o]fficers of the
Corporation shall be entitled to such 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'').
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For the reasons noted above, the Commission finds that the proposed
rule change is consistent with the Act.
IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\21\ that the proposed rule change (SR-C2-2017-009) be, and hereby
is, approved.
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\21\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\22\
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\22\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-08699 Filed 4-28-17; 8:45 am]
BILLING CODE 8011-01-P