[Federal Register Volume 59, Number 138 (Wednesday, July 20, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-17657]
[[Page Unknown]]
[Federal Register: July 20, 1994]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-34379; File No. SR-CHX-94-15]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by Chicago Stock Exchange, Inc., Relating to Corporate
Governance Issues
July 14, 1994.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''), 15 U.S.C. 78s(b)(1), notice is hereby given that on June 23,
1994, the Chicago Stock Exchange, Inc. (``CHX'' or ``Exchange'') filed
with the Securities and Exchange Commission (``Commission'' or ``SEC'')
the proposed rule change as described in Items I, II and III below,
which Items have been prepared by the self-regulatory organization. On
June 30, 1994, the Exchange submitted to the Commission Amendment No. 1
to the proposed rule change in order to narrow the scope of the
original filing.\1\ The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
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\1\See letter from David T. Rusoff, Attorney, Foley & Lardner,
to Sandra Sciole, Special Counsel, Division of Market Regulation,
SEC, dated June 29, 1994 (``Amendment No. 1''). The portions of this
filing that were withdrawn in Amendment No. 1 have been resubmitted
to the Commission as File No. SR-CHX-94-17.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The CHX proposes to submit the following rule proposal to amend
Article III, Sec. 2 and Article IV, Secs. 4, 5 and 7 of the Exchange's
Constitution relating to corporate governance issues. The text of the
proposed rule change is available at the Commission.
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 these statements may be examined at
the places specified in Item IV below. The self-regulatory organization
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 purpose of the proposed change is to amend the Exchange's
Constitution relating to corporate governance issues. Specifically, the
changes concern (i) the creation of a new category of Governor and the
addition of one additional non-member Governor and (ii) providing more
flexibility by permitting re-categorizations of Governors.
The primary purpose of these proposed amendments, along with
corresponding and conforming amendments to the By-Laws of the Midwest
Clearing Corporation (``MCC'') and the Midwest Securities Trust Company
(``MSTC''),\2\ is to achieve a governance structure pursuant to which
the Exchange and two of its wholly owned subsidiaries, MCC and MSTC,
will be able to operate more as a single, coherently run business. Once
all the proposed changes are adopted, approved and implemented, the
Board of Governors of the Exchange, the Board of Directors of the MCC
and the Board of Directors of MSTC would all consist of the same 31
individuals. This would be achieved by, among other things, having the
Nominating Committees of MCC and MSTC be the same as the Exchange's
Nominating Committee. At the same time, in order to insure fair and
meaningful representation of Participants in the governance process of
MCC and MSTC, the size of the Board would be increased by four slots to
accommodate a new category of Governor that would provide the Board
with more expertise on issues affecting MCC and MSTC, as more fully
described below.
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\2\See File Nos. SR-MCC-94-07 and SR-MSTC-94-09 respectively.
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New Category of Governor/Increased Board Size
The proposed amendment would create a new category of Governor, a
Participant Governor. In order to be qualified to be a Participant
Governor, a person must be a general partner or officer of a
Participant in the MCC or MSTC and must have securities clearance and/
or settlement expertise, background or responsibilities. The proposal
would call for the addition of four Participant Governors, one each in
Class I and Class II and two in Class III. The Exchange does not
contemplate that the vacancies in the Participant Governor category
would be filled by floor members of the Exchange.\3\ The proposed
amendment also would add an additional non-member Governor slot,
increasing the slots available for non-member Governors from eight to
nine. This slot has been added to Class II. This change would maintain
the existing balance between the non-member, or ``public,'' Governors
and the industry Governors on the Board. In order to accomplish these
changes, the amendment would increase the size of the Board of
Governors to 31 from its present size of 26. Pursuant to existing
Exchange rules, the vacancies created by this amendment (one vacancy in
Class I, two vacancies in Class II and two vacancies in Class III)
could be filled by the Board, on an interim basis, until the April 1995
annual election. The slots created are as follows:
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\3\The CHX has stated that, in order to ensure that floor
members are not over-represented on the Board, management of the
Exchange will use its best efforts to ensure that the newly created
Participant Governor positions will not initially or thereafter be
filled by floor members of the Exchange. The CHX also has agreed to
notify the Commission if a floor member is elected to fill a
Participant Governor position, and to revisit this issue if its best
efforts do not succeed. See letter from David T. Rusoff, Attorney,
Foley & Lardner, to Sharon Lawson, Assistant Director, Division of
Market Regulation, SEC, dated July 8, 1994.
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Participant governors Non-member governors
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Class I\4\............. One slot created....... N/A.
Class II............... One slot created....... One slot created.
Class III.............. Two slots created...... N/A.
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\4\Class I expires in April 1995; Class II in April 1996; and Class III
in April 1997.
Re-Categorization of Governors
In order to provide increased flexibility in the composition of the
new, expanded Board, the proposed amendment also would permit a
Participant Governor to be re-categorized (within his or her class) as
a Member Governor and permit a Member Governor to be re-categorized as
a Participant Governor, if the Governor to be re-categorized otherwise
meets the qualifications of his or her new position.
2. Statutory Basis
The proposed rule change is consistent with Section 6(b)(5) of the
Act in that it is designed to promote just and equitable principles of
trade, to remove impediments 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 that the proposed rule change will
impose any burden on competition.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received from Members, Participants or Others
The proposed rule change has been approved by the Exchange's
membership.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 35 days of the publication of this notice in the Federal
Register or within such other 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 the self-regulatory organization consents, the Commission will:
(A) By order approve 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. Persons making written submissions
should file six copies thereof with the Secretary, Securities and
Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549.
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 inspection and copying at the
Commission's Public Reference Section, 450 Fifth Street, NW.,
Washington, DC 20549. Copies of such filing will also be available for
inspection and copying at the principal office of the CHX. All
submissions should refer to File No. SR-CHX-94-15 and should be
submitted by August 9, 1994.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-17657 Filed 7-19-94; 8:45 am]
BILLING CODE 8010-01-M