Federal Register / Vol. 77, No. 3 / Thursday, January 5, 2012 / Notices 521 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release Nos. 65843 

(November 28, 2011), 76 FR 75577 (December 2, 

2011) (SR–CBOE–2011–107) (‘‘CBOE Notice’’) and 

65842 (November 28, 2011), 76 FR 75586 

(December 2, 2011) (SR–NSX–2011–14) (‘‘NSX 

Notice’’). 

4Conditions precedent to closing the Transaction 

are formal requirements set forth in the Purchase 

Agreement and include delivery of certain 

documents (such as officers’ certificates, legal 

opinions, and agreements), compliance by each 

party with specified representations, warranties and 

covenants, and receipt of necessary approvals by 

each party. See NSX Notice, supra note 3, at note 

1. 

5 15 U.S.C. 78f. 

6NSX would continue to adhere to the 

undertakings in the Order Instituting 

Administrative and Cease-and-Desist Proceedings 

Pursuant to Sections 19(h) and 21C of the Act, 

Making Findings, and Imposing Sanctions, 

including those related to a Regulatory Oversight 

Committee and the separation of the regulatory 

functions from the commercial interests of NSX. 

See Securities Exchange Act Release No. 51714 

(May 19, 2005). 

7 15 U.S.C. 78c(a)(2). 

8See Securities Exchange Act Release No. 55389 

(March 2, 2007), 72 FR 10575 (March 8, 2007) (SR– 

CBOE–2006–110) (the ‘‘CBSX Approval Order’’). 

See also Securities Exchange Act Release No. 55172 

(January 25, 2007), 72 FR 4745 (February 1, 2007) 

(SR–CBOE–2006–110) (the ‘‘CBSX Notice of 

Filing’’). 

9CBOE Rule 3.32(a) provides, in part: For as long 

as CBSX LLC operates as a facility of CBOE, no 

Trading Permit Holder, either alone or together with 

its Affiliates, at any time, may own, directly or 

indirectly, of record or beneficially, an aggregate 

amount of Shares that would result in a greater than 

twenty percent (20%) Percentage Interest in CBSX 

LLC (the ‘‘Concentration Limitation’’). 

In addition, the Certificate of Incorporation of 

CBOE Holdings, Inc., the owner of CBOE (‘‘CBOE 

Holdings’’), provides that no person (either alone or 

together with its related persons) may beneficially 

own more than 20% of the total outstanding shares 

of CBOE Holdings stock. See Article Sixth (b) of the 

Amended and Restated Certificate of Incorporation 

of CBOE Holdings, Inc. See also Securities 

Exchange Act Release No. 62158 (May 24, 2010), 75 

FR 30082 (May 28, 2010) (SR–CBOE–2008–88). 

10 ‘‘Voting Shares’’ means those Shares entitled to 

vote on matters submitted to the Owners, which 

Voting Shares are held by the Voting Owners. See 

Section 2.1(a)(28) of the CBSX Operating 

Agreement. 

11As noted in Section 3.2 of the CBSX Operating 

Agreement, it is the intention of the Owners that no 

other members of CBSX (other than Affiliates of 

CBOE) be owners of Series A Voting Shares, and 

that no additional Series A Voting Shares be 

authorized, created or issued for such purpose; 

provided however, that this provision is not 

intended to limit or restrict any rights of CBOE to 

transfer any of its Series A Voting Shares with the 

prior approval of the Commission as provided for 

in Article VI, including Section 6.14 of the CBSX 

Operating Agreement, or any other provision 

thereof, or any rights to be acquired by a transferee 

of those Shares as provided therein. 

12The CBSX Operating Agreement also provides 

for Series C Non-Voting Restricted Shares. Such 

Shares are not entitled to vote on any matter 

submitted to a vote of the Owners and there are 

currently no Series C shares outstanding. See 

Section 8.9 of the CBSX Operating Agreement. 

13Section 6.12(a) of the CBSX Operating 

Agreement provides that no person (other than 

CBOE), either alone or together with its Affiliates, 

may directly or indirectly own an aggregate amount 

Continued 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–66071; File Nos. SR– 

CBOE–2011–107 and SR–NSX–2011–14] 

Self-Regulatory Organizations; 

Chicago Board Options Exchange, 

Incorporated and National Stock 

Exchange, Inc.; Order Granting 

Accelerated Approval to Proposed 

Rule Changes in Connection With the 

Proposed Acquisition of the National 

Stock Exchange, Inc. by CBOE Stock 

Exchange, LLC 

December 29, 2011. 

I. Introduction 

On November 28, 2011, each of the 

Chicago Board Options Exchange, 

Incorporated (‘‘CBOE’’) and the National 

Stock Exchange, Inc. (‘‘NSX’’) 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 proposed rule 

changes in connection with the 

proposed acquisition of NSX by CBOE 

Stock Exchange, LLC (‘‘CBSX’’) (the 

‘‘Transaction’’). On December 2, 2011, 

the proposed rule changes were 

published for comment in the Federal 

Register.3 The Commission received no 

comments on either proposed rule 

change. This order approves each of the 

proposed rule changes on an accelerated 

basis. 

II. Background 

A. The Transaction 

Currently, NSX is wholly and directly 

owned by NSX Holdings, Inc. (‘‘NSX 

Holdings’’). Under a Purchase 

Agreement (the ‘‘Purchase Agreement’’) 

dated September 28, 2011 by and 

between NSX, NSX Holdings, and 

CBSX, CBSX would acquire all of the 

outstanding capital stock of NSX on the 

date of or after all conditions precedent 

to closing have been satisfied or waived, 

including approval by the Commission 

of these proposed rule changes.4

Following the completion of the 

Transaction, NSX would become a 

wholly-owned subsidiary of CBSX. NSX 

would remain a Delaware for-profit 

stock corporation, with the authority to 

issue 1,000 shares of common stock, 100 

shares of which would be issued and 

would be held in their entirety by 

CBSX. At all times, all of the 

outstanding stock of NSX would be 

owned by CBSX. NSX would remain 

registered as a national securities 

exchange under Section 6 of the Act,5

and accordingly, NSX would remain a 

self-regulatory organization (‘‘SRO’’).6

NSX has proposed to amend its 

Certificate of Incorporation and By-Laws 

to reflect and address the acquisition of 

NSX by CBSX following the 

Transaction. In addition, NSX has 

proposed other changes to its governing 

documents that are not directly related 

to the Transaction to update and 

enhance the governing documents and 

generally make them consistent with 

parallel provisions contained in the 

governing documents of other SROs. 

These changes are discussed below. 

B. CBSX 

In 2007, the Commission approved 

the establishment of CBSX as a facility 7

of CBOE.8 As the SRO for CBSX, CBOE 

has regulatory responsibility for the 

activities of CBSX. CBSX administers 

the CBOE Stock Exchange, a fully 

automated trading platform for 

securities other than options (the ‘‘CBSX 

Trading Facility’’). As a limited liability 

company, the governance structure and 

operating authority of CBSX are set forth 

in the Operating Agreement of CBSX 

(‘‘CBSX Operating Agreement’’) and the 

CBSX Certificate of Formation. In 

connection with the establishment of 

the CBSX Trading Facility, CBOE 

adopted Rule 3.32 pertaining to 

ownership concentration and affiliation 

limitations.9

As a limited liability company, 

ownership of CBSX is represented by 

limited liability membership interests. 

The holders of such interests are 

referred to as ‘‘Owners.’’ CBOE is one of 

the Owners of CBSX and owns all 

outstanding ‘‘Series A’’ Voting Shares 10

of CBSX, representing just under 50% of 

all outstanding shares of CBSX.11 The 

outstanding ‘‘Series B’’ Voting Shares of 

CBSX are held by nine broker-dealers. 

As provided in Section 8.9 of the 

CBSX Operating Agreement, the 

outstanding Series A Voting Shares, in 

the aggregate, are entitled to a number 

of votes equal to 50% of the total 

number of Voting Shares outstanding on 

each matter submitted to a vote of the 

Owners. Each outstanding Series B 

Voting Share is entitled to one vote on 

each matter submitted to a vote of the 

Owners.12

The CBSX Approval Order and the 

CBSX Notice of Filing describe various 

characteristics of CBSX, including: the 

relationship between CBSX and CBOE; 

changes in control of CBSX; the 

regulatory jurisdiction of the 

Commission and CBOE over the 

controlling parties and the Owners; and 

the ownership and voting restrictions on 

Owners.13 These provisions, as 


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of Shares that would result in a greater than 20% 

Percentage Interest in CBSX. In addition, Section 

8.10 provides that if an Owner of Series B Voting 

Shares that is also a CBOE member owns more than 

20% of the outstanding Voting Shares (‘‘Excess 

Shares’’), alone or together with any Affiliate, such 

Owner will have no voting rights with respect to the 

Excess Shares. 

14 In approving the proposed rule change, the 

Commission has considered its impact on 

efficiency, competition, and capital formation. See 

15 U.S.C. 78c(f). 

15 15 U.S.C. 78f(b)(1). 

16 15 U.S.C. 78f(b)(3). 

17 15 U.S.C. 78f(b)(5). 

18 15 U.S.C. 78f. 

19 15 U.S.C. 78f(b)(8). 

20See, e.g., Sections 1.6 and 9.15(a)(9) and (10) 

of the CBSX Operating Agreement. 

21See Section 2.1(a)(23) of the CBSX Operating 

Agreement defining ‘‘Related Person.’’ 

22Section 2.1(a)(1) of the CBSX Operating 

Agreement defines ‘‘Affiliate’’ as, with respect to 

any person, any other person that directly, or 

indirectly through one or more intermediaries, 

controls, is controlled by, or is under common 

control with, such person. As used in this 

definition, ‘‘control’’ means the possession, directly 

or indirectly, of the power to direct or cause the 

direction of management and policies of a person, 

whether through the ownership of voting securities, 

by contract or otherwise with respect to such 

person. 

contained in the CBSX Operating 

Agreement and applicable CBOE rules, 

will remain unchanged after the 

Transaction except as otherwise 

described below. 

In connection with the Transaction, 

CBOE proposes to amend and restate the 

CBSX Operating Agreement to be 

effective as of the closing of the 

Transaction. CBOE also proposes to 

adopt new CBOE Rule 2.50 regarding its 

policy with respect to NSX. These 

changes are discussed below. 

III. Discussion and Commission 

Findings 

After careful consideration, the 

Commission finds that each proposed 

rule change is consistent with the 

requirements of the Act and the rules 

and regulations thereunder applicable to 

a national securities exchange.14 In 

particular, the Commission finds that 

the proposed rule changes are consistent 

with Section 6(b)(1) of the Act,15 which, 

among other things, requires a national 

securities exchange to be so organized 

and have the capacity to be able to carry 

out the purposes of the Act and to 

enforce compliance by its members and 

persons associated with its members 

with the provisions of the Act, the rules 

and regulations thereunder, and the 

rules of the exchange. Further, the 

Commission finds that the proposed 

rule changes are consistent with Section 

6(b)(3) of the Act,16 which requires that 

the rules of a national securities 

exchange assure the 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 also finds that the 

proposed rule change are consistent 

with Section 6(b)(5) of the Act,17 which 

requires, among other things, that the 

rules of a national securities 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, and 

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. 

As noted above, following the 

Transaction, NSX will be a whollyowned subsidiary of CBSX. NSX will 

remain registered as a national 

securities exchange under Section 6 of 

the Act,18 and, accordingly, NSX will 

remain an SRO. The Commission 

believes that the ownership of NSX by 

CBSX would not impose any burden on 

competition not necessary or 

appropriate in furtherance of the 

purposes of the Act.19 Though CBSX is 

not itself an SRO, as a holding company 

of an SRO, its activities with respect to 

the operation of NSX must be consistent 

with, and must not interfere with, the 

self-regulatory obligations of NSX. 

A. CBOE–2011–107 

1. Changes To Accommodate CBSX’s 

Ownership of NSX 

CBOE’s proposed rule change 

includes several amendments designed 

to accommodate CBSX’s ownership of 

NSX. These amendments address the 

fact that CBSX will effectively serve as 

a holding company for NSX after the 

Transaction to the extent related to 

CBSX’s control of NSX. The changes 

also clarify CBSX’s rights and 

responsibilities relating to its role as a 

holding company of a registered 

national securities exchange. For 

example, CBOE’s proposal amends 

Section 1.6 of the CBSX Operating 

Agreement to reflect CBSX’s new 

purpose to act as a holding company of 

NSX (in addition to its current purpose 

to act as a trading market for securities 

other than options as a facility of 

CBOE). The proposal also amends 

several provisions in the CBSX 

Operating Agreement to clarify that 

certain references to CBSX include its 

subsidiaries, including NSX.20

In addition, the proposal amends 

Section 6.12 of the CBSX Operating 

Agreement to provide that the 

Ownership Concentration Limitation 

described in that section, which 

currently carves out CBOE (because 

CBOE owns greater than 20% of CBSX) 

does not apply to CBOE Holdings as 

well (because CBOE Holdings indirectly 

owns CBOE). It also expands the 

applicability of the Concentration 

Limitation to persons and the broader 

category of their ‘‘Related Persons’’ 21

rather than to persons and their 

‘‘Affiliates.’’ 22 The proposal also 

amends Section 6.12(c) and (e) of the 

CBSX Operating Agreement to impose 

on NSX equity trading permit holders 

the Ownership Concentration 

Limitation prohibitions described in 

those paragraphs, which are currently 

only imposed on CBOE Trading Permit 

Holders. This change recognizes CBSX’s 

new ownership of NSX and is intended 

to guard against members of NSX 

obtaining an ownership stake in CBSX 

that could potentially be used to 

influence the performance by NSX of 

regulatory authority over such members 

or others. The Commission finds that 

these changes, which are necessary to 

reflect the change in ownership of NSX 

after the Transaction, are consistent 

with the Act. 

The proposal makes similar 

amendments to Section 8.10 of the 

CBSX Operating Agreement to expand 

applicability of the voting restriction 

described in that section to persons and 

their Related Persons and to provide 

that if any person, not just a CBOE 

Trading Permit Holder, exceeds the 

Concentration Limitation set forth in 

Section 6.12 of the CBSX Operating 

Agreement, then the Owner and its 

Related Persons will have no voting 

rights with respect to the shares in 

excess of such limitation unless it 

satisfies certain requirements set forth 

in proposed Section 8.10(b) through (d) 

of the CBSX Operating Agreement. The 

proposed rule change also extends the 

applicability of the voting restriction in 

Section 8.10 of the CBSX Operating 

Agreement to cover voting agreements, 

plans, and arrangements. 

Further, the proposal amends Section 

9.15(a)(9) of the CBSX Operating 

Agreement to clarify that with respect to 

the sale of material assets or ownership 

interests that requires approval pursuant 

to Section 9.15, ‘‘material assets or 

ownership interests’’ includes 

subsidiaries of CBSX. In addition, the 

proposed rule change adds Section 

15.19 to the CBSX Operating Agreement 


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23Section 6.15(a) of the CBSX Operating 

Agreement currently provides: ‘‘The Owners 

acknowledge that to the extent they are related to 

[CBSX’s] activities, the books, records, premises, 

officers, directors, agents, and employees of the 

Owners shall be deemed to be the books, records, 

premises, officers, directors, agents, and employees 

of CBOE for the purpose of and subject to oversight 

pursuant to the Exchange Act.’’ 

24Section 6.15(b) of the CBSX Operating 

Agreement currently provides: ‘‘The books, records, 

premises, officers, directors, agents, and employees 

of [CBSX] shall be deemed to be the books, records, 

premises, officers, directors, agents, and employees 

of CBOE for the purpose of and subject to oversight 

pursuant to the Exchange Act.’’ 

25CBSX’s complete records and books of account 

must be subject at all times to inspection and 

examination by CBOE (to the extent related to the 

CBSX Trading Facility), NSX (to the extent related 

to CBSX’s control of NSX), and the Commission at 

no additional charge to CBOE, NSX, and the 

Commission, as applicable. See Section 13.2 of the 

CBSX Operating Agreement. 

26Revisions to Section 6.15(c) (consent to 

jurisdiction) and (d) (consent in writing to 

applicability) of the CBSX Operating Agreement 

also extend the requirements of these provisions to 

all agents and employees of CBSX and its Owners, 

rather than only agents and employees whose 

principal place of business and residence is outside 

of the United States. 

27 Interference with respect to the CBSX Trading 

Facility will be determined by the CBSX board 

designees of CBOE. See Section 9.15(c) of the CBSX 

Operating Agreement. 

to obligate CBSX, when voting as NSX’s 

sole shareholder in an election of the 

NSX board of directors, to vote in favor 

of ETP Holder Directors (a certain class 

of directors defined in the NSX Bylaws 

that are intended to provide NSX 

members with fair representation in the 

governance of NSX consistent with the 

Act) that were nominated in accordance 

with the procedures set forth in NSX’s 

governing documents. 

2. Preservation of the Self-Regulatory 

Function of NSX 

After the Transaction, NSX would 

become a subsidiary of CBSX. Although 

CBSX is not an SRO and, therefore, does 

not itself have self-regulatory functions, 

its activities with respect to the 

operation of NSX must be consistent 

with, and not interfere with, NSX’s selfregulatory obligations. To address this 

concern, the proposal adds various 

provisions to the CBSX Operating 

Agreement that are designed to protect 

the independence of the self-regulatory 

function of NSX and to clarify NSX’s 

rights with respect to CBSX. 

For example, the proposed rule 

change adds Section 5.7(b) to the CBSX 

Operating Agreement, which, among 

other things: 

• Requires CBSX Owners, the CBSX 

board of directors, CBSX officers, and 

CBSX employees (for so long as CBSX 

controls NSX and to the extent related 

to the activities of NSX) to give due 

regard to the preservation of the 

independence of the self-regulatory 

function of NSX and to NSX’s 

obligations under the Act; 

• Prohibits CBSX Owners, the CBSX 

board of directors, CBSX officers, and 

CBSX employees from taking any 

actions that would interfere with the 

effectuation of any decisions by the NSX 

board of directors relating to NSX’s 

regulatory functions, including 

disciplinary matters, or with NSX’s 

ability to carry out its responsibilities 

under the Act; and 

• Requires CBSX to comply with 

federal securities laws and the rules and 

regulations thereunder, and requires 

CBSX and its officers, directors, 

employees, and agents to cooperate with 

the Commission and NSX pursuant to 

and to the extent of their regulatory 

authority. 

In addition, the proposed rule amends 

Section 6.15(a) of the CBSX Operating 

Agreement to reflect the acquisition by 

CBSX of the NSX SRO and to ensure 

access by NSX to the Owners of CBSX 

that is necessary for NSX to perform its 

responsibilities as an SRO.23

Specifically, the revisions: 

• Clarify that the Owners 

acknowledge that the books, records, 

premises, officers, directors, agents, and 

employees of the Owners will be 

deemed to be the books, records, 

premises, officers, directors, agents, and 

employees of CBOE for the purpose of 

and subject to oversight pursuant to the 

Act, but only to the extent they are 

related to the CBSX Trading Facility; 

and 

• Add a provision in which the 

Owners acknowledge that the books, 

records, premises, officers, directors, 

agents, and employees of the Owners 

will be deemed to be the books, records, 

premises, officers, directors, agents, and 

employees of NSX for the purpose of 

and subject to oversight pursuant to the 

Act, but only to the extent they are 

related to the activities of NSX. 

Similarly, the proposed rule change 

amends Section 6.15(b) of the CBSX 

Operating Agreement concerning access 

by NSX to CBSX personnel and 

records 24 to add the provision that the 

books, records, premises, officers, 

directors, agents, and employees of 

CBSX will be deemed to be the books, 

records, premises, officers, directors, 

agents, and employees of NSX for the 

purpose of and subject to oversight 

pursuant to the Act, but only to the 

extent related to the activities of NSX.25

The proposal also amends Section 

6.15(c) of the CBSX Operating 

Agreement to provide that CBSX and 

the Owners and their respective officers, 

directors, agents, and employees,26

irrevocably submit to the jurisdiction of 

the U.S. federal courts, the Commission, 

CBOE, and NSX for the purposes of any 

suit, action, or proceeding pursuant to 

U.S. federal securities laws or the rules 

or regulations thereunder, commenced 

or initiated by the Commission arising 

out of, or relating to, the CBSX Trading 

Facility or the CBSX’s control of NSX, 

as applicable. 

In addition, the proposed rule change 

amends Sections 9.15(c) and 9.16 of the 

CBSX Operating Agreement to provide 

that CBSX directors agree to comply 

with the federal securities laws and the 

rules and regulations thereunder, and to 

cooperate with the Commission, CBOE, 

and NSX pursuant to their regulatory 

authority, as applicable, and the 

provisions of the CBSX Operating 

Agreement. The proposal also amends 

Section 9.15(c) of the CBSX Operating 

Agreement to provide that CBSX 

directors will take into consideration 

whether any actions taken or proposed 

to be taken as a director for or on behalf 

of CBSX, or any failure or refusal to act, 

would constitute interference with 

CBOE’s or NSX’s regulatory functions 

and responsibilities, as applicable, in 

violation of the CBSX Operating 

Agreement or the Act.27 These 

provisions are designed to foster 

compliance with the federal securities 

laws and to emphasize the 

considerations that are necessary on the 

part of CBSX’s directors to reflect NSX’s 

responsibilities as an SRO. 

Additionally, the proposal amends 

Section 14.1(a) of the CBSX Operating 

Agreement to provide that, for so long 

as CBSX controls NSX, before any 

amendment, alteration, or repeal of any 

provision of the CBSX Operating 

Agreement, to the extent related to 

CBSX’s control of NSX, will be effective, 

such amendment, alteration, or repeal 

must be submitted to the NSX board of 

directors, and if CBOE and the NSX 

board of directors determine that such 

amendment, alteration, or repeal must 

be filed with or filed with and approved 

by the Commission, then such 

amendment, alteration, or repeal will 

not become effective until filed with or 

filed with and approved by the 

Commission, as the case may be. The 

proposal also adds a 10-day notice 

provision for any amendment, 

alteration, or repeal of the CBSX 

Operating Agreement made pursuant to 

Section 14.1(a) to provide CBOE and 

NSX with sufficient opportunity to 

review any potential regulatory impacts 


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28 15 U.S.C. 78f(b)(1). 

29See CBOE Holdings Certificate of Incorporation 

Article Fifth (a)(xi). 

30See also Sections 1.8, 6.2(e), 6.15(c) and (d), 

9.2(d), 9.15(a)(14) and 14.1(a) for additional 

clarifications. 

31See Section 3.2(d), signature page, and Exhibit 

A to the CBSX Operating Agreement. 

32See Sections 6.12(c) and (e) and 8.10 of the 

CBSX Operating Agreement. 

33See Section 2.1 of the CBSX Operating 

Agreement. 

34See Section 2.1(a)(26). This change is 

consistent with the original structure of CBSX 

under which a super majority could be obtained 

with an affirmative vote of CBOE and two initial 

owners, who all initially had ten (10%) percentage 

interests in CBSX. 

of such amendment, alteration, or repeal 

before it becomes effective. 

Further, to ensure unencumbered 

access to all relevant information, 

regardless of whether such information 

is considered ‘‘confidential,’’ the 

proposal amends Section 15.2 of the 

CBSX Operating Agreement to provide 

that nothing in the CBSX Operating 

Agreement will be interpreted to limit 

or impede the rights of the Commission, 

CBOE, or NSX to access and examine 

any Confidential Information (as 

defined in the CBSX Operating 

Agreement) pursuant to the U.S. federal 

securities laws and the rules thereunder, 

or to limit or impede the ability of an 

Owner or an officer, director, agent, or 

employee of an Owner to disclose any 

Confidential Information to the 

Commission, CBOE, or NSX. Proposed 

Section 15.2 of the CBSX Operating 

Agreement also provides that the 

obligation of Owners not to disclose 

Confidential Information described in 

that section does not apply to CBOE’s or 

NSX’s communications with the 

Commission with respect to the conduct 

of the CBSX Trading Facility’s business 

or NSX’s business, respectively. 

3. CBOE Rule 2.50 

The CBOE proposed rule change 

proposes to adopt new CBOE Rule 2.50, 

which is intended to foster and preserve 

the self-regulatory function of NSX. 

Specifically, CBOE Rule 2.50(a) 

proposes a policy that CBOE, as a 

controlling owner of CBSX, will not take 

any action related to NSX’s activities 

that would interfere with NSX’s efforts 

to carry out its self-regulatory 

obligations under the Act and the rules 

and regulations thereunder. 

Additionally, proposed CBOE Rule 

2.50(b) provides that CBOE will 

‘‘exercise its powers as a partial owner 

of CBSX to support the fulfillment by 

NSX of its self-regulatory obligations, 

including the appropriate allocation by 

NSX of such financial, technological, 

technical and personnel resources as 

may be necessary or appropriate for 

NSX to meet its obligations under the 

[Act].’’ The purpose of proposed CBOE 

Rule 2.50(a) is to provide that CBOE 

will, through its control interest in 

CBSX and consistent with its 

relationship with CBSX, work with NSX 

to establish and maintain adequate and 

appropriate resources to enable NSX to 

perform its self-regulatory obligations. 

CBOE Rule 2.50 is designed to 

facilitate NSX’s ability to fulfill its selfregulatory obligations and, therefore, is 

consistent with the Act, including 

Section 6(b)(1) of the Act,28 which 

requires, among other things, that a 

national securities exchange be so 

organized and have the capacity to carry 

out the purposes of the Act, and to 

comply and enforce compliance by its 

members and persons associated with 

its members, with the provisions of the 

Act, the rules and regulations 

thereunder, and the rules of the 

exchange. Proposed Rule 2.50 

represents CBOE’s commitment, as a 

controlling owner of CBSX, to support 

NSX in the fulfillment of NSX’s role as 

an SRO. 

4. CBOE Holdings and Regulated 

Securities Exchange Subsidiaries 

CBOE is wholly-owned by CBOE 

Holdings, and as discussed above, CBOE 

owns a controlling interest in CBSX. 

The CBOE Holdings Certificate of 

Incorporation contains provisions that 

are applicable to ‘‘Regulated Securities 

Exchange Subsidiaries’’ of CBOE 

Holdings, which entities are defined as 

‘‘any national securities exchange 

controlled, directly or indirectly, by 

[CBOE Holdings], including, but not 

limited to CBOE.’’ 29 Various provisions 

in the CBOE Holdings Certificate of 

Incorporation reference ‘‘Regulated 

Securities Exchange Subsidiary,’’ 

including Articles Sixth (voting and 

ownership limitations), Eleventh 

(amendments to the CBOE Holdings 

Certificate of Incorporation must be 

submitted to the board of each 

Regulated Securities Exchange 

Subsidiary), Twelfth (amendments to 

the CBOE Holdings Bylaws must be 

submitted to the board of each 

Regulated Securities Exchange 

Subsidiary), Fourteenth (submission to 

jurisdiction arising out of or relating to 

Regulated Securities Exchange 

Subsidiaries’ activities), Fifteenth 

(confidential information of Regulated 

Securities Exchange Subsidiaries and 

access to CBOE Holdings’ books and 

records by Regulated Securities 

Exchange Subsidiaries), and Sixteenth 

(cooperation with the SEC and each 

Regulated Securities Exchange 

Subsidiary, consent to applicability of 

various provisions, due regard to 

preservation of regulatory 

independence, and consideration of 

effect of actions on each Regulated 

Securities Exchange Subsidiary). NSX, 

to the extent it is indirectly controlled 

by CBOE Holdings by virtue of CBOE 

Holdings’ control of CBOE and CBOE’s 

controlling interest in CBSX, which in 

turn will wholly-own NSX after the 

consummation of the Transaction, 

would qualify as a ‘‘Regulated Securities 

Exchange Subsidiary.’’ 

5. Facility of CBOE 

The proposed rule change amends 

various provisions to clarify that the 

operations of CBSX that relate to the 

CBSX Stock Exchange trading facility 

are a facility of CBOE under the Act, 

while the aspect of CBSX that relates to 

its control of NSX will not be a 

‘‘facility’’ of CBOE. For example, the 

proposal amends Section 1.7 of the 

CBSX Operating Agreement to clarify 

that the CBSX Trading Facility (and not 

CBSX to the extent it will act as a 

holding company for NSX) is a facility 

of CBOE under the Act, and therefore 

the CBSX Trading Facility will be 

subject to self-regulation by CBOE, with 

oversight by the Commission.30

6. Additional Changes 

Finally, the proposed rule change 

makes several non-substantive technical 

and conforming changes throughout the 

CBSX Operating Agreement, including: 

updating the name and date of the CBSX 

Operating Agreement; updating the 

current Owners and their current 

percentage interests and CBSX shares 

owned; 31 replacing references to CBOE 

members with CBOE trading permit 

holders; 32 updating the table of contents 

and section references; and adding new 

defined terms and renumbering the 

defined terms as necessary.33 In 

connection with the updates to reflect 

the current Owners, the proposed rule 

change amends the definition of ‘‘Super 

Majority of the Owners’’ to mean, 

subject to the regulatory requirements 

described in Section 1.8 of the CBSX 

Operating Agreement, the affirmative 

vote of both (i) all of the Owners of the 

Series A Voting Shares at the time, and 

(ii) Owners of the Series B Voting 

Shares who then retain ownership of 

Series B Voting Shares and represent at 

least a twenty (20%) percentage interest 

in CBSX, which more accurately 

corresponds to CBSX’s current 

ownership structure.34 The Commission 

finds these non-substantive changes to 

be consistent with the Act as they are 


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35See 15 U.S.C. 78c(a)(26). 

36See Securities Exchange Act Release No. 53963 

(June 8, 2006), 71 FR 34660 (June 15, 2006) (SR– 

NSX–2006–03) (Commission order approving NSX’s 

demutualization). 

37See, e.g., Article 6 of the Certificate of 

Incorporation of EDGA Exchange, Inc. and Article 

9 of the Certificate of Incorporation of C2 Options 

Exchange, Inc. 

38See A&R Certificate of Incorporation, Articles 

Seventh and Eleventh. 

39See A&R Certificate of Incorporation, Article 

Fifth, (b). See also, e.g., Article II, Section 7(a) of 

the Amended and Restated By-Laws of BATS 

Exchange, Inc. and Article II, Section 7(a) of the 

Amended and Restated Bylaws of EDGA Exchange, 

Inc. 

40 15 U.S.C. 78f(b)(1). 

necessary to reflect the acquisition by 

CBSX of NSX following the Transaction. 

B. NSX–2011–14 

NSX proposes to amend its Certificate 

of Incorporation and By-Laws to reflect 

and address NSX’s proposed new 

ownership pursuant to which NSX will 

become wholly-owned by CBSX 

following the Transaction. In addition, 

NSX is making several other changes to 

its governing documents that are not 

directly related to the Transaction to 

update and enhance the governing 

documents and generally make them 

consistent with parallel provisions 

contained in the governing documents 

of other SROs. Certain provisions of the 

current NSX By-Laws that are historic in 

nature are also proposed to be deleted 

as no longer applicable. 

Except as described below, NSX’s 

governing documents, rules, and 

manner of operation, including 

restrictions on ownership and transfer, 

registration as a national securities 

exchange under Section 6 of the Act, 

and the continuance of NSX as an 

SRO 35 will remain unchanged.36

In addition, the NSX proposal also 

contains the CBSX Operating 

Agreement, as revised in the 

contemporaneous rule filing CBOE– 

2011–107 and as described above, since 

provisions in the CBSX Operating 

Agreement are relevant to NSX’s 

structure and operations. The proposed 

amendments to the NSX governing 

documents and the CBSX Operating 

Agreement are intended to provide NSX 

with the authority and ability to 

effectively fulfill its self-regulatory 

duties pursuant to the Act and the rules 

promulgated thereunder. The proposed 

amendments also modernize and 

enhance the ownership and voting 

limitations in order to guard against 

undue influence over or interference 

with the NSX’s regulatory functions and 

fulfillment of its regulatory obligations 

under the Act. 

The proposed Amended and Restated 

NSX Certificate of Incorporation (the 

‘‘A&R Certificate’’) and Second 

Amended and Restated NSX By-Laws 

(the ‘‘A&R By-Laws’’), amended as 

described below, and NSX Rules (which 

are proposed to remain unchanged) 

would continue to govern the activities 

of NSX. These revised documents reflect 

NSX’s status as a wholly-owned 

subsidiary of CBSX, continued 

management of NSX by the NSX Board 

of Directors (‘‘NSX Board’’) and 

designated officers, and the NSX’s 

continuing self-regulatory 

responsibilities pursuant to NSX’s 

registration under Section 6 of the Act. 

Currently, the NSX Board consists of 

thirteen director positions, of which 

seven are Independent, three are ETP 

Holder, two are At Large, and one is the 

NSX Chief Executive Officer. The 

Transaction contemplates that all 

current Exchange directors and 

committee members, including the 

Chief Executive Officer, will resign from 

the Board and committees, as 

applicable, effective upon closing. At 

such time, the vacancies on the Board 

and committees of the Board will be 

filled in accordance with applicable 

procedures contained in the A&R ByLaws. Candidates with the necessary 

qualifications will be appointed in 

accordance with Sections 3 or 5, as 

applicable, of the A&R By-Laws to fulfill 

the expired portion of any vacancies 

created by the resignation. Thereafter, 

directors and committee members will 

be nominated and elected in accordance 

with the A&R By-Laws. 

1. Amended and Restated Certificate of 

Incorporation of NSX 

Under the proposed rule change, the 

requirement that NSX be at all times 

wholly-owned by NSX Holdings is 

proposed to be changed to allow for the 

consummation of the Transaction and 

acquisition of all of the outstanding 

NSX stock by CBSX. To make clear that 

NSX will be entirely owned by CBSX 

(regardless of whether outstanding NSX 

stock is voting or non-voting), the 

proposed A&R Certificate would be 

modified in Article IV to provide that, 

at all times, all of the outstanding stock 

of NSX shall be owned by CBSX. 

In addition, new language is proposed 

to be added to Articles VII and XI of the 

NSX Certificate of Incorporation 

designed to enable NSX Board and the 

Commission to continue to exercise 

oversight of NSX. In conformity with 

similar language in other governing 

documents of other exchanges,37 NSX 

proposes to add a provision to each of 

Articles VII and XI to make clear that 

before any amendment to, or repeal of, 

any provision of the NSX By-Laws and/ 

or Certificate of Incorporation shall be 

effective, those changes shall be 

submitted to the NSX Board and, if such 

amendment or repeal must be filed with 

or filed with and approved by the 

Commission, then the proposed changes 

shall not become effective until filed 

with or filed with and approved by the 

Commission.38 For purposes of clarity 

regarding Commission approval of NSX 

proposed rule changes, specific 

reference to Section 19 of the Act and 

the rules promulgated thereunder is also 

introduced to Articles VII and XI. 

Finally, consistent with similar 

provisions in the governing documents 

of other exchanges,39 the proposed A&R 

Certificate in Article V is amended to 

allow directors (other than ETP Holder 

Directors) to be removed with or 

without cause by a majority vote of 

stockholders. This amendment is 

intended to promote efficient NSX 

governance while continuing to protect 

and preserve the fair representation of 

ETP Holders through the ETP Holder 

Director election process contained in 

NSX’s By-Laws. 

The Commission believes that the 

proposed A&R Certificate, as amended 

to accommodate the Transaction, is 

designed to facilitate the NSX’s ability 

to fulfill its self-regulatory obligations 

and are, therefore, consistent with the 

Act. In particular, the Commission 

believes the changes are consistent with 

Section 6(b)(1) of the Act,40 which 

requires, among other things, that a 

national securities exchange be so 

organized and have the capacity to carry 

out the purposes of the Act, and to 

comply and enforce compliance by its 

members and persons associated with 

its members, with the provisions of the 

Act, the rules and regulations 

thereunder, and the rules of the 

exchange. 

2. Second Amended and Restated ByLaws of NSX 

Under the proposed rule change, due 

to the transfer of ownership of NSX 

from NSX Holdings to CBSX, references 

in the NSX By-Laws specific to NSX 

Holdings are proposed to be replaced 

with references to CBSX. Specifically, 

Section 3.2(c) is proposed to be 

modified to provide that no two or more 

directors of NSX may be partners, 

officers, or directors of the same person 

or be affiliated with the same person, 

unless such affiliation is with a national 

securities exchange or CBSX. In 

addition, Section 10.2 is proposed to be 

modified to provide that in no event 

shall members of the CBSX Board who 

are not also members of the NSX Board, 


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41See, e.g., Third Amended and Restated Bylaws 

of the C2 Options Exchange, Inc.; Second Amended 

and Restated By-Laws of CBOE; Amended and 

Restated By-Laws of BATS Exchange, Inc.; and the 

Amended and Restated Bylaws of EDGA Exchange, 

Inc. 

42See A&R By-Laws Section 3.2 (Board 

composition requirements) and 1.1 (definitions of 

‘‘Industry Director’’ and ‘‘Non-Industry Director’’). 

See also e.g., Third Amended and Restated Bylaws 

of the C2 Options Exchange, Inc., Article III, Section 

1; Second Amended and Restated Bylaws of the 

CBOE Article III, Section 1; and the Amended and 

Restated By-Laws of BATS Exchange, Inc., Article 

I. 

43See A&R By-Laws Section 1.5 (definitions) and 

deletions to current By-Laws in Sections 3.2(b) and 

3.4(e). 

44See deletions to current By-Laws in Sections 

1.5, 3.2(b), 3.3, 3.4(d), 3.5(g) and 3.7. 

45See A&R By-Laws Section 3.2(a). 

46See A&R By-Laws Section 3.2(b). See also 

Third Amended and Restated Bylaws of the C2 

Options Exchange, Inc. Article III, Section 3.1; 

Second Amended and Restated Bylaws of CBOE 

Section III, Article 3.1; and the Amended and 

Restated By-Laws of BATS Exchange, Inc., Article 

III, Section 2. 

47See Third Amended and Restated Bylaws of the 

C2 Options Exchange, Inc., Article III, Section 3.1; 

and Second Amended and Restated Bylaws of the 

CBOE. Section III, Article 3.1. 

48See A&R By-Laws Section 3.4(a) through (e). 

49See Third Amended and Restated Bylaws of the 

C2 Options Exchange, Inc., Article III, Section 3.1; 

Second Amended and Restated Bylaws of the CBOE 

Article III, Section 3.1. 

50See NSX Notice, supra note 3, at 76 FR 75589. 

51See A&R By-Laws Section 3.7. See also Third 

Amended and Restated Bylaws of the C2 Options 

Exchange, Inc., Article III, Section 3.5; Second 

Amended and Restated Bylaws of the CBOE Section 

III, Article 3.5; Amended and Restated By-Laws of 

BATS Exchange, Inc., Article III, Section 6; and 

Amended and Restated Bylaws of EDGA Exchange, 

Inc., Article III, Section 6. 

52See NSX Notice, supra note 3, at 76 FR 75589. 

53See A&R By-Laws Section 3.7(a)(i). 

54See Third Amended and Restated Bylaws of the 

C2 Options Exchange, Inc., Article III, Section 3.5. 

55 15 U.S.C. 78f(b)(1). 

56See, e.g., Third Amended and Restated Bylaws 

of the C2 Options Exchange, Inc.; Second Amended 

and Restated By-Laws of CBOE; Amended and 

Restated By-Laws of BATS Exchange, Inc.; and 

Amended and Restated Bylaws of EDGA Exchange, 

Inc. 

57See A&R By-Laws Section 3.5(d) and (e). See 

also, e.g., Amended and Restated By-Laws of BATS 

Exchange, Inc., Article III, Section 4. 

or any officers, staff, counsel, or 

advisors of CBSX who are not also 

officers, staff, counsel, or advisors of 

NSX (or any committees of NSX), be 

allowed to participate in any meetings 

of the NSX Board (or any committee of 

NSX) pertaining to the self-regulatory 

function of NSX (including disciplinary 

matters). These amendments recognize 

CBSX as direct owner of NSX while 

preserving a mechanism to prevent 

undue influence over NSX’s selfregulatory functions. 

In connection with the ownership of 

NSX by CBSX, new Section 10.1(b) will 

provide that, for so long as CBSX 

controls NSX, NSX shall promptly 

inform the CBSX board of directors, in 

writing, in the event that NSX has, or 

experiences, a deficiency related to its 

ability to carry out its obligations as a 

national securities exchange under the 

Act, including if NSX does not have or 

is not appropriately allocating such 

financial, technological, technical, and 

personnel resources as may be necessary 

or appropriate for NSX to meet its 

obligations under the Act. This 

provision will assist the CBSX board in 

its oversight of NSX, and will also assist 

CBOE, pursuant to CBOE Rule 2.50, in 

CBOE’s commitment, as a controlling 

owner of CBSX, to support NSX in the 

fulfillment of NSX’s role as an SRO. 

In addition, in conformity with the 

board composition provisions of other 

SROs,41 certain NSX Board composition 

changes are proposed in order to 

streamline and promote the efficiency 

and effectiveness of NSX Board 

governance. Specifically, By-Law 

provisions regarding the number of 

directors on the NSX Board are 

proposed to be amended to allow any 

number between (and including) seven 

(7) and twenty-five (25). In addition, the 

requirement that at least 50% of NSX 

Board members be ‘‘Independent’’ 

Directors is proposed to be replaced 

with a requirement that at least 50% of 

NSX Board members be ‘‘Non-Industry’’ 

Directors, at least one of whom must 

qualify as Independent.42 The category 

of ‘‘At Large’’ Directors, which under 

current By-Laws means directors who 

are not Independent, is eliminated.43

Finally, the category of CBOE Director, 

and corresponding provisions 

discussing CBOE ownership of Class B 

stock and related Board representation, 

are proposed to be deleted as obsolete.44

As a result, the proposed NSX Board 

composition after the closing of the 

Transaction will consist of not fewer 

than seven (7) and not more than 

twenty-five (25) directors 45 and at all 

times shall include the Chief Executive 

Officer of NSX, at least 50% NonIndustry Directors (at least one of whom 

shall be an Independent Director), and 

such number of ETP Holder Directors as 

is necessary to comprise at least 20% of 

the NSX Board.46 For purposes of 

calculating the percentage of NonIndustry Directors, the Chief Executive 

Officer of NSX is excluded.47

By-Law provisions relating to the 

terms of office of each type of director 

are also amended from staggered threeyear terms to one-year terms (other than 

the CEO Director, which individual’s 

term expires upon ceasing to be 

Exchange Chief Executive Officer).48

NSX stated that the change to annual 

from staggered three-year director terms, 

which is consistent with provisions of 

other SROs,49 promotes efficient 

Exchange governance and effective ETP 

Holder representation.50

With respect to the filling of vacancies 

on the NSX Board,51 the A&R By-Laws 

are proposed to be amended to 

differentiate the procedure depending 

on whether the vacancy is of an ETP 

Holder Director or another type of 

director. Under current NSX By-Laws, 

no such distinction is made. NSX stated 

that it believes a distinction is necessary 

in order to promote, in the event of a 

vacancy of an ETP Holder Director, the 

fair representation of ETP Holders on 

the NSX Board.52 For non-ETP Holder 

Directors, the A&R By-Laws provide, 

consistent with current Exchange ByLaws, that any vacancy may be filled by 

vote of a majority of the directors then 

in office, although less than a quorum, 

or by a sole remaining director, 

provided such new director qualifies for 

the category in which the vacancy 

exists. A director elected to fill a 

vacancy shall hold office until the next 

annual meeting of stockholders, subject 

to the election and qualification of his 

or her successor and to his or her earlier 

death, resignation, disqualification, or 

removal.53 Regarding the filling of 

vacancies of ETP Holder Directors, the 

ETP Holder Director Nominating 

Committee shall either recommend an 

individual to the NSX Board to be 

elected to fill such vacancy or provide 

a list of recommended individuals to the 

NSX Board from which the NSX Board 

shall elect the individual to fill such 

vacancy. The NSX Board shall elect 

only individuals recommended by the 

ETP Holder Director Nominating 

Committee. The proposed amendments 

conform to analogous provisions of the 

governance documents of another 

exchange.54

The Commission finds that the 

proposed changes regarding the 

composition of the Board are consistent 

with the Act, including Section 6(b)(1) 

of the Act,55 which requires, among 

other things, that a national securities 

exchange be organized to carry out the 

purposes of the Act and comply with 

the requirements of the Act. The 

Commission notes that the proposed 

changes are consistent with the board 

composition provisions of other SROs.56

Certain other edits are proposed to the 

current NSX By-Laws to promote clarity 

and efficient governance. Such edits 

generally are intended to conform NSX’s 

governing documents to analogous 

provisions contained in the governing 

documents of other exchanges.57

Specifically, in order to promote fair 

representation among all ETP Holders, 


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58See A&R By-Laws Sections 5.5 through 5.13. 

See also, e.g., Amended and Restated By-Laws of 

BATS Exchange, Inc., Article V, Section 6, and 

Article VI, Section 2. 

59See A&R By-Laws Section 5.5(a), which 

provides, in part, that the Executive Committee at 

all times shall include the Chief Executive Officer 

of NSX, at least 50% Non-Industry Directors, at 

least one Independent Director and such number of 

ETP Holder Directors as is necessary to comprise at 

least 20% of the Executive Committee. See also, 

e.g., Amended and Restated By-Laws of BATS 

Exchange, Inc., Article V, Section 6(e). 

60See A&R By-Laws Section 8.1. See also, e.g., 

Amended and Restated By-Laws of BATS Exchange, 

Inc., Article IX, Section 1. 

61See A&R By-Laws Section 3.8. See also, e.g., 

Article II, Section 7(a) of the Amended and Restated 

By-Laws of BATS Exchange, Inc.; and Article II, 

Section 7(a) of the Amended and Restated Bylaws 

of EDGA Exchange, Inc. 

62See A&R By-Laws Section 10.3. 

63Non-substantive, conforming edits to the A&R 

By-Laws are reflected in the following Sections of 

the A&R By-Laws: 3.2(d) (clarifying that directors 

may not serve if subject to statutory disqualification 

as such term is defined in the Act); 3.7(c) (providing 

that any grace periods for re-qualification of a 

director must be for only a reasonable length of 

time); 3.17(clarifying that NSX Board authority to 

interpret Exchange By-Laws remains subject to the 

Act); 5.2(clarifying that the composition 

requirements set forth in description of each 

committee in Article V control, and that 

responsibility for maintenance of committee 

composition in connection with new committee 

appointments resides with the Chairman); 5.6 

(specifying that the Regulatory Oversight 

Committee shall at all times be comprised entirely 

of Non-Industry Directors); and 6.3 (clarifying that 

officer disqualification will terminate an officer’s 

term of office). Relevant definitions are also added 

to Section 1.1. 

64 15 U.S.C. 78s(b)(2). 

65 15 U.S.C. 78s(b)(2)(C)(iii). 

66 15 U.S.C. 78s(b)(2). 

67 17 CFR 200.30–3(a)(12). 

A&R By-Laws Section 3.5(d) is proposed 

to be amended to provide that no ETP 

Holder, together with its affiliates, may 

account for more than fifty percent 

(50%) of the signatures endorsing a 

particular candidate, and any signatures 

of such ETP Holder, together with its 

affiliates, in excess of fifty percent 

(50%) limitation shall be disregarded. 

Similarly, in order to promote fair 

representation among all ETP Holders, 

in an election among ETP Holders of 

candidates for ETP Holder Director, 

A&R By-Laws Section 3.5(e) is proposed 

to be amended to provide that any vote 

must be cast for a person duly 

nominated on the list of candidates and 

that no ETP Holder, together with its 

affiliates, may account for more than 

twenty percent (20%) of the votes cast 

for a candidate, and any votes cast by 

such ETP Holder, together with its 

affiliates, in excess of such twenty 

percent (20%) limitation shall be 

disregarded. These provisions are 

intended to guard against the exercise of 

undue influence in the selection of ETP 

Holder directors. 

In addition, the A&R By-Laws have 

been revised to include a fuller 

description of the composition and 

authority of Exchange committees.58

The description of the Executive 

Committee, which has authority to act 

on behalf of the full NSX Board under 

certain circumstances, is amended to 

clarify that the composition 

requirements of such committee must 

mirror the requirements applicable to 

the full Board.59 Regarding other 

Exchange committees, descriptions of 

the duties and composition 

requirements are included for each of 

the ETP Holder Director Nominating 

Committee, the Executive Compensation 

Committee, the Audit Committee, the 

Governance and Nominating 

Committee, the Appeals Committee, and 

the Business Conduct Committee. 

Reference to a Securities Committee was 

deleted. 

Consistent with analogous provisions 

contained in the governing documents 

of other exchanges, the procedures for 

amendments to NSX’s By-Laws are 

proposed to be amended to provide for 

NSX Board review and, as necessary, 

Commission approval, prior to the 

effectiveness of any amendments to the 

Exchange’s By-Laws.60

Consistent with the proposed edits to 

the A&R Certificate and similar 

provisions in the governing documents 

of other exchanges,61 the proposed A&R 

By-Laws are further proposed to be 

modified to allow directors (other than 

ETP Holder Directors) to be removed 

with or without cause by a majority vote 

of stockholders. This amendment, 

consistent with a parallel proposed 

amendment to the NSX A&R Certificate, 

is intended to promote efficient 

Exchange governance while protecting 

the fair representation of ETP Holders 

through the ETP Holder Director 

election process as set forth in the A&R 

By-Laws. 

In addition, to clarify that the 

confidentiality provisions of Section 

10.3 may not be interpreted to limit 

Commission jurisdiction over NSX 

books and records, a clarifying 

statement is proposed to be added to 

A&R By-Laws Section 10.3 to provide 

that nothing in Section 10.3 shall be 

interpreted as to limit or impede the 

rights of the Commission to access and 

examine Exchange confidential 

information pursuant to the federal 

securities laws and the rules and 

regulations thereunder, or to limit or 

impede the ability of any officers, 

directors, employees, or agents of NSX 

to disclose such confidential 

information to the Commission.62

Finally, the proposed A&R By-Laws 

contain several other non-substantive, 

conforming edits to the A&R By-Laws 

that are consistent with the principles 

discussed above, as well as the Act and 

the rules promulgated thereunder.63

C. Accelerated Approval 

The Commission finds good cause, 

pursuant to Section 19(b)(2) of the 

Act,64 for approving each of the 

proposed rule changes prior to the 30th 

day after the date of publication of 

notice in the Federal Register. Both the 

NSX Notice and the CBOE Notice were 

published in the Federal Register on 

December 2, 2011. Pursuant to Section 

19(b)(2)(C)(iii) of the Act,65 the 

Commission may not approve a 

proposed rule change earlier than 30 

days after the date of publication thereof 

unless the Commission finds good cause 

for so doing. In the case of the CBOE 

and NSX proposals, the 30th day occurs 

in three days and falls on a nonbusiness day (a Sunday). Further, the 

comment period on each proposal has 

closed, and the Commission has not 

received comment on either proposal. In 

light of the Commission’s findings that 

the proposals are consistent with the 

Act, the Commission believes that good 

cause exists to accelerate approval of 

each proposal by a few days in order to 

accommodate the closing of the 

Transaction in calendar year 2011. 

IV. Conclusion 

For the foregoing reasons, the 

Commission finds that each of the 

proposed rule changes are consistent 

with the Act and the rules and 

regulations thereunder applicable to a 

national securities exchange. 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,66 that the 

proposed rule changes (SR–CBOE– 

2011–107 and SR–NSX–2011–14) be 

and hereby are approved on an 

accelerated basis. 

For the Commission, by the Division 

of Trading and Markets, pursuant to 

delegated authority.67

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2011–33826 Filed 1–4–12; 8:45 am] 

BILLING CODE 8011–01–P 


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