[Federal Register Volume 62, Number 139 (Monday, July 21, 1997)]
[Notices]
[Page 39042]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-19032]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-38837; File No. SR-CBOE-97-24]
Self-Regulatory Organizations; Chicago Board Options Exchange,
Inc.; Order Granting Approval to Proposed Rule Change and Amendment No.
1 Thereto Relating to a Reduction of the Quorum Requirements in
Uncontested Elections
July 14, 1997.
I. Introduction
On May 21, 1997, the Chicago Board Options Exchange, Inc. (``CBOE''
or ``Exchange'') submitted to the Securities and Exchange Commission
(``SEC'' or ``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 the CBOE's Constitution
to reduce the quorum required in uncontested elections. On June 4,
1997, the CBOE submitted Amendment No. 1 to the proposed rule
change.\3\
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Letter from Debora E. Barnes, Senior Attorney, CBOE, to
Debra Flynn, Attorney, Division of Market Regulation, SEC, dated
June 3, 1997. In Amendment No. 1, the CBOE replaced all references
to ``Constitution'' change with ``Rule'' change, clarified the
definition of ``uncontested elections'' by deleting the phrase ``for
example,'' and clarified the language in Sections 3.6 and 3.7 of the
Constitution.
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The proposed rule change was published for comment in the Federal
Register on June 13, 1997.\4\ No comments were received on the
proposal. This Order approves the proposal.
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\4\ See Securities Exchange Act Release No. 38723 (June 6,
1997), 62 FR 32393 (June 13, 1997).
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II. Description of the Proposal
The Exchange conducts an annual election and special meetings of
its membership.\5\ Currently, at all meetings of Exchange members,
including elections, a majority of the membership entitled to vote
constitutes a quorum. The Exchange is proposing to amend Section 3.6 of
the Constitution to reduce the quorum requirement, in uncontested
elections only, from a majority to one-third of the members entitled to
vote.\6\ Uncontested elections are elections in which each candidate is
running for office unopposed. If any candidate for office is opposed,
the entire election would be considered contested, and would require a
majority for a quorum.
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\5\ At annual election meetings, the CBOE membership votes for a
slate of candidates proposed by the Nominating Committee for
expiring terms and vacancies on the Board of Directors and certain
other Exchange Committees, such as the Nominating and Modified
Trading System Committees.
\6\ In connection with the proposed amendment to the
Constitution, the Election Committee stated that its policy under
the reduced quorum proposal, if approved, would be to collect
ballots and proxies in-person for three trading sessions prior to
any meeting at which a vote would be conducted. Any change to this
Election Committee policy would need to be approved by the Board of
Directors and submitted to the Commission pursuant to Rule 19b-4.
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The Exchange is also making a change to Section 3.7 of the
Constitution to clarify that this Section governs voting by members on
issues other than elections. The quorum requirement will remain a
majority of the members entitled to vote on issues arising pursuant to
Section 3.7.
III. Discussion
After careful review, the Commission finds that the proposed rule
change is consistent with the requirements of the Act and the rules and
regulations thereunder applicable to a national securities exchange.\7\
Specifically, the Commission believes that the proposal, as amended, is
consistent with and furthers the objectives of Section 6(b)(5) of the
Act \8\ in that it is designed to promote just and equitable principles
of trade, and to remove impediments to and perfect the mechanism of a
free and open market and a national market system.
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\7\ In approving this rule, the Commission notes that it has
considered the proposed rule's impact on efficiency, competition,
and capital formation. 15 U.S.C. 78c(f).
\8\ 15 U.S.C. 78f(b)(5).
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The Commission believes that reducing the quorum required in
uncontested elections should improve the efficiency of the CBOE's
election process. A quorum requirement of one-third of the members
entitled to vote should demand less of the CBOE's resources than the
current majority requirement which, at times, has required considerable
Exchange staff time and resources. The Commission believes that the
proposed rule change should maximize the use of Exchange resources.
In addition, the Commission notes that the existing quorum
requirement will be reduced only for uncontested elections. The
Commission believes that Exchange members should be encouraged strongly
to vote in contested elections and therefore, it would be inappropriate
to reduce the quorum requirement for contested elections. The
Commission further believes that in circumstances in which even one
nominated candidate is opposed, the more rigid quorum requirement is
appropriate to ensure that the Exchange's membership is compelled to
consider carefully the candidates.
Finally, the Commission notes that the proposed rule was
overwhelmingly approved by the Exchange's membership at the CBOE's most
recent Annual Election Meeting, held on December 11, 1996. The
membership's approval of the proposal indicates that CBOE's members
expect the proposed reduction of the quorum requirement in uncontested
elections will not affect adversely either the operations of the
Exchange or the membership's interests.
IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\9\ that the proposed rule change (SR-CBOE-97-24), including
Amendment No. 1, is approved.
\9\ 15 U.S.C. 78s(b)(2).
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For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\10\
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\10\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-19032 Filed 7-18-97; 8:45 am]
BILLING CODE 8010-01-M