12180 Federal Register / Vol. 76, No. 43 / Friday, March 4, 2011 / Notices 

5 15 U.S.C. 78s(b)(3)(A). 

6 17 CFR 240.19b–4(f)(6). 

7 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3 15 U.S.C. 78s(b)(1). 

4 17 CFR 240.19b–4. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The proposed rule change is effective 

upon filing pursuant to Section 

19(b)(3)(A) of the Act 5 and paragraph 

(f)(6) of Rule 19b–4 thereunder,6 in that 

the proposed rule change: (i) Does not 

significantly affect the protection of 

investors or the public interest; (ii) does 

not impose any significant burden on 

competition; and (iii) does not become 

operative for 30 days after the date of 

the filing, or such shorter time as the 

Commission may designate if consistent 

with the protection of investors and the 

public interest; provided the selfregulatory organization has given the 

Commission written notice of its intent 

to file the proposed rule change, along 

with a brief description and text of the 

proposed rule change, at least five 

business days prior to the date of filing 

of the proposed rule change, or such 

shorter time as designated by the 

Commission. 

At any time within 60 days of the 

filing of the proposed rule change, the 

Commission summarily may 

temporarily suspend such rule change if 

it appears to the Commission that such 

action is necessary or appropriate in the 

public interest, for the protection of 

investors, or otherwise in furtherance of 

the purposes of the Act. If the 

Commission takes such action, the 

Commission shall institute proceedings 

to determine whether the proposed rule 

change should be approved or 

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 e-mail to rulecomments@sec.gov. Please include File 

Number SR–NASDAQ–2011–032 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number SR–NASDAQ–2011–032. This 

file number should be included on the 

subject line if e-mail 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 

a.m. and 3 p.m. Copies of the 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– 

NASDAQ–2011–032 and should be 

submitted on or before March 25, 2011. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.7

Cathy H. Ahn, 

Deputy Secretary. 

[FR Doc. 2011–4900 Filed 3–3–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63981; File No. SR–Phlx– 

2011–13] 

Self-Regulatory Organizations; Notice 

of Filing of Proposed Rule Change by 

NASDAQ OMX PHLX LLC Relating to 

Amendments to NASDAQ OMX PHLX 

LLC’s Limited Liability Company 

Agreement, By-Laws, Rules, Advices 

and Regulations 

February 25, 2011. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 (‘‘Act’’)1

and Rule 19b–42 thereunder, notice is 

hereby given that on February 16, 2011, 

NASDAQ OMX PHLX LLC (‘‘Phlx’’ or 

‘‘Exchange’’) filed with the Securities 

and Exchange Commission (‘‘SEC’’ or 

‘‘Commission’’) the proposed rule 

change as described in Items I, II, and 

III 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. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange, pursuant to Section 

19(b)(1) of the Act3 and Rule 19b–4 

thereunder,4 proposes to: (1) Amend the 

Limited Liability Company Agreement 

and By-Laws to substantially conform to 

NASDAQ Stock Market’s [sic] Second 

Amended Limited Liability Company 

Agreement and By-Laws; (2) eliminate 

the Series A Preferred Shareholder and 

adopt NASDAQ Stock Market LLC’s 

board structure and committees; (3) 

eliminate foreign currency option 

participations; (4) eliminate former 

definitions, rules and references to XLE; 

and (5) amend other terms, names, 

cross-references and make technical and 

grammatical changes to clarify and 

simplify the By-Laws, Rules, Option 

Floor Procedure Advices, Equity Floor 

Procedure Advices (collectively 

‘‘Advices’’) and Regulations of the 

Exchange. 

The text of the proposed rule change 

is available on the Exchange’s Web site 

at http://www.nasdaqtrader.com/ 

micro.aspx?id=PHLXRulefilings, at the 

principal office of the Exchange, 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 

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. 


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5See Second Amended Limited Liability Co. 

Agreement of the NASDAQ Stock Market LLC. 

6See Securities Exchange Act Release No. 49098 

(January 16, 2004), 69 FR 3974 (January 27, 2004) 

(Sr–Phlx–2003–73). 7See Securities Exchange Act Release No. 49098 

(January 16, 2004), 69 FR 3974 (January 27, 2004) 

(SR–Phlx–2003–73). 8Currently, the Series A Preferred Stock is still 

held by the PHLX Member Voting Trust pursuant 

to a Third Amended and Restated Trust Agreement 

dated February 22, 2007 (‘‘Amended Trust 

Agreement’’). 

9See Section 7 of the Second Amended Limited 

Liability Co. Agreement of the NASDAQ Stock 

Market LLC. 

10See Section 9 of the Second Amended Limited 

Liability Co. Agreement of the NASDAQ Stock 

Market LLC. 

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 rule 

change is to amend the Exchange’s 

Limited Liability Company Agreement 

(‘‘LLC Agreement’’) By-Laws, Rules, 

Advices and Regulations to mirror that 

of the NASDAQ Stock Market LLC to 

create a more streamlined governance 

process, while also making other nonsubstantive conforming amendments, 

including technical amendments. 

Limited Liability Company Agreement 

The Exchange is proposing to amend 

the current LLC Agreement to a First 

Amended LLC Agreement. The 

Exchange has amended the recitals to 

state that the Board of Governors desires 

to eliminate the Series A Preferred Stock 

and amend and restate the LLC 

Agreement in its entirety. 

In Section 1 titled Name; Conversion, 

the Exchange is proposing to delete 

paragraph 2 which references the recent 

conversion from a Delaware corporation 

to a Delaware limited liability company. 

This language was previously necessary 

to conform the old text to the limited 

liability company agreement Delaware 

Act requirements, but is no longer 

necessary in the amended and restated 

version of the LLC Agreement. 

In Section 2, titled Principal Business 

Office, the Exchange is proposing to 

rename the Board of Governors the 

Board of Directors. The Exchange is 

proposing to utilize the same Board title 

as in the NASDAQ Stock Market LLC 

Agreement.5 The Exchange proposes 

this amendment throughout the LLC 

Agreement. 

In Section 4 titled Members, the 

Exchange is proposing to amend the 

language to refer to a single Stockholder 

and to eliminate language related to the 

recent LLC conversion and add language 

indicating that one Stockholder remains 

the same, The NASDAQ OMX Group, 

Inc. 

Series A Preferred Share Elimination 

The Exchange is proposing to amend 

the Exchange’s formation documents to 

eliminate the Series A Preferred Share. 

The NASDAQ OMX Group, Inc. would 

be the only Shareholder of NASDAQ 

OMX PHLX LLC. In 2003, the 

Philadelphia Stock Exchange, Inc. (now 

NASDAQ OMX PHLX LLC) filed with 

the Securities and Exchange 

Commission to amend its formation 

documents to form a demutualized 

Delaware stock corporation.6 At that 

time, the Exchange amended its 

Certificate of Incorporation to designate 

one share of preferred stock as the 

‘‘Series A Preferred Stock.’’ The Series A 

Preferred Stock had the sole power to: 

(i) Select the On-Floor Governors, and 

(ii) remove the On-Floor Governors in 

accordance with specified procedures in 

connection with the removal of 

Governors.7 Since that time, the 

Exchange’s formation documents have 

been amended so that today, the Series 

A Preferred Stockholder is the sole 

preferred shareholder of the Exchange. 

The Series A Preferred Shareholder 

today elects the Member Governor and 

Designated Independent Governor 

pursuant to Section 16 of the LLC 

Agreement and Article IV of the ByLaws. 

At the time of demutualization, a 

Trust Agreement was created and the 

Series A Preferred Stock was held by the 

Trust.8 Pursuant to the Amended Trust 

Agreement, the Trustee of the Trust has 

the power to vote the share of Series A 

Preferred Stock with respect to the 

designated nominees, which includes 

the Member Governor and the 

Designated Independent Governor, as 

directed by the vote of the Member 

Organization Representatives of Member 

Organizations entitled to vote pursuant 

to Article III of the By-Laws. 

The single share of the Series A 

Preferred Stock, issued to the Trust 

governed by the Amended Trust 

Agreement, is designed to facilitate the 

exercise by Members and Member 

Organizations of their rights to fair 

representation in the selection and 

removal of certain Governors of the 

Exchange and to facilitate the 

administration of the affairs of the 

Exchange in accordance with the Act. 

This voting arrangement, implemented 

through the Amended Trust Agreement 

and the Series A Preferred Stock, is 

designed to give ‘‘members’’ (as defined 

in Section 3(a)(3)(A) of the Act) a voice 

in the management of the Exchange. 

These arrangements were considered 

necessary at the time of demutualization 

for two reasons: (i) Under Delaware law, 

only stockholders can elect the directors 

of a Delaware corporation; and (ii) after 

the demutualization, Members and 

Member Organizations that were not 

Owners at the time of the 

demutualization were not stockholders 

of the Exchange. This is no longer the 

case. Today, the Exchange is a whollyowned subsidiary of The NASDAQ 

OMX Group, Inc. Since the acquisition 

of the former Philadelphia Stock 

Exchange, Inc. by The NASDAQ OMX 

Group, Inc. there are no longer any other 

common shareholders of what is now 

known as NASDAQ OMX PHLX LLC. 

Also, the Exchange is no longer a 

corporation subject to Delaware 

corporate law. 

The Exchange believes that its 

proposed board structure and election 

process, identical to that of the 

NASDAQ Stock Market LLC, would 

provide Members and Member 

Organizations fair representation in the 

selection and removal of certain 

Governors of the Exchange in 

accordance with the Act. The Exchange 

is not proposing to amend its By-Laws 

with respect to the nomination of 

Governors, now proposed to be 

Directors, which process is currently the 

same as that of NASDAQ Stock Market 

LLC. Rather, the Exchange is proposing 

to eliminate the mechanism that the 

Series A Preferred Stock was designed 

to facilitate. The Exchange would 

continue to accept nominations from 

Members and Member Organizations for 

certain Board positions which will be 

explained in greater detail below. The 

Exchange does not believe the Series A 

Preferred mechanism is necessary and 

therefore proposes to eliminate such 

mechanism in favor of the structure 

currently utilized by the NASDAQ 

Stock Market LLC. 

In Section 5, titled Certificates, the 

Exchange proposes to change the title 

Board of Governors to Board of 

Directors. In Section 6, titled Purpose, 

the Exchange proposes to adopt the 

language that is contained in the 

formation documents of the NASDAQ 

Stock Market LLC.9 In Section 7, titled 

Powers, the Exchange is proposing to 

change the title Board of Governors to 

Board of Directors. 

In Section 8, titled Management, the 

Exchange is proposing to mirror the 

board structure of NASDAQ Stock 

Market LLC.10 As previously stated, the 

Exchange proposes to rename the Board 

of Governors, the Board of Directors. 

The Directors shall remain ‘‘managers’’ 

within the meaning of the LLC Act 

without change. The authorized number 


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11See By-Law Article IV, Section 4–1. 

12See Section 9 of the Second Amended Limited 

Liability Co. Agreement of the NASDAQ Stock 

Market LLC. 

13See LLC Agreement at Section 8. 

14Pursuant to newly renumbered proposed ByLaw Article II, Section 2–1, an additional candidate 

may be added to the List of Candidates by a 

Member that submits a timely and duly executed 

written nomination to the Secretary of the 

Exchange. The Exchange provides Members 

procedures to nominate candidates at each annual 

meeting. See By-Law Article II, Section 2–1(a). 

15See By-Law Article IV, Section 4–3, currently 

Governors are elected for one year. 

16See Section 9 of the Second Amended Limited 

Liability Co. Agreement of the NASDAQ Stock 

Market LLC. 

17See Section 9 of the Second Amended Limited 

Liability Co. Agreement of the NASDAQ Stock 

Market LLC. 

18See proposed text at Section 8 of the 

Exchange’s LLC Agreement at (b)–(f). 

19See By-Law Article IV, Section 4–4. 

20See LLC Agreement at Section 8(d). 

21See Section 9 of the Second Amended Limited 

Liability Co. Agreement of the NASDAQ Stock 

Market LLC. 

of Directors shall be at the discretion of 

the Stockholder as opposed to the 

Board.11

The Exchange is proposing to add 

language to indicate that the 

Stockholder may determine at any time 

and in its sole and absolute discretion 

the number of Directors to constitute the 

Board. The authorized number of 

Directors may be increased or decreased 

by the Stockholder at any time in its 

sole and absolute discretion, upon 

notice to all Directors, but no decrease 

in the number of Directors shall shorten 

the term of any incumbent Member 

Representative Director. This language 

mirrors that of the NASDAQ Stock 

Market LLC.12

The Exchange proposes, similar to 

NASDAQ Stock Market LLC, that at 

least twenty percent of the Directors 

shall be Member Representative 

Directors. All Directors other than the 

Member Representative Directors shall 

be elected by the Stockholder as 

described in the By-Laws, which will be 

discussed below. Currently, a number of 

Designated Independent Governors, 

together with the Member Governors, 

shall equal at least twenty percent of the 

total number of Governors who are 

elected by the Series A Preferred 

Shareholder.13 The Exchange is not 

proposing to amend the process by 

which members may nominate 

candidates to the Board.14 The process 

by which board members are elected is 

the same process that exists today for 

the NASDAQ Stock Market LLC. 

Each Director elected, designated or 

appointed by the Stockholder shall hold 

office until a successor is elected and 

qualified or until such Director’s earlier 

death, resignation, expulsion or 

removal.15 Similar to the NASDAQ 

Stock Market LLC provisions, each 

Director shall execute and deliver an 

instrument accepting such appointment 

and agreeing to be bound by all terms 

and conditions of the LLC Agreement 

and the By-Laws.16 Also, a Director 

need not be a member of the 

Exchange.17

The Exchange is also proposing to 

adopt the exact verbiage of Section 9 of 

the Second Amended Limited Liability 

Co. Agreement of the NASDAQ Stock 

Market LLC with respect to Powers of 

the Board, the By-Laws, Meeting of the 

Board of Directors, Quorum; LLC Acts of 

the Board and Electronic 

Communications.18 The section 

discussing Powers of the Board is 

similar to the current provisions in 

Article IV, Section 4–4 and Section 8(b) 

of the LLC Agreement in that the Board 

of Governors is currently vested with 

the ability to act for the management of 

the business and affairs of the Exchange. 

They also have the power to bind the 

Exchange and delegate powers.19 The 

Exchange previously adopted its ByLaws.20

The Meetings of the Board are similar 

to the provision in By-Law Article IV, 

Sections 4–10, 4–11 and 4–14. The 

proposed quorum rules are similar to 

By-Law Article IV, Section 4–9 and 4– 

16. Electronic Communications are 

similar to By-Law Article IV, Section 4– 

22. 

The Exchange proposes to amend its 

current Standing Committees at By-Law 

Article X and instead adopt Standing 

Committees similar to NASDAQ Stock 

Market LLC. Currently, the Standing 

Committees of the Exchange are: an 

Executive Committee, a Regulatory 

Oversight Committee, a Business 

Conduct Committee, a Nominating 

Committee, a Member Nominating 

Committee, a Quality of Markets 

Committee, and an Options Trade 

Review Committee, and may also 

include a Finance Committee and such 

other committees as the Board of 

Governors shall by resolution establish. 

Each of such Committees is currently 

composed of not more than nine (9) 

members, including ex-officio members, 

except for the Options Trade Review 

Committee which may be composed of 

20 members. Currently, the Chair of 

each Standing Committee must be a 

member of the Board of Governors and 

at least one other person on each 

Committee must be a Governor, except 

for the Options Trade Review 

Committee. All committee members are 

appointed by the Board of Governors. 

Currently, all committee 

appointments are made as promptly as 

possible after each annual meeting of 

Stockholders, and each appointee serves 

for one year or until his successor is 

duly appointed. The members of the 

Options Trade Review Committee are 

appointed for terms of no more than 

three years, subject to reappointment by 

the Board. 

The Exchange proposes to replace 

these rules with ‘‘Committees Composed 

Solely of Directors’’ and ‘‘Committees 

Not Composed Solely of Directors’’ at 

newly proposed and named Article V. 

The details of those committees shall be 

discussed below in the By-Law section. 

The Exchange is proposing that the 

Board may designate one or more 

Directors as alternate members of any 

committee who may replace any absent 

or disqualified member at any meeting 

of the committee. The Committee 

members shall hold office for such 

period as may be fixed by a resolution 

adopted by the Board. Any member of 

a committee may be removed from such 

committee only by the Board. Vacancies 

shall be filled by the Board. Similar to 

By-Law Article X, Section 10–2, each 

committee may adopt its own rules of 

procedure and may meet at stated times 

or on such notice as such committee 

may determine. Each committee shall be 

required to keep regular minutes of its 

meetings and report the same to the 

Board when required. 

Similar to By-Law Article X, Section 

10–3, a majority of the committee shall 

constitute a quorum and the vote of a 

majority present shall be an act of the 

committee. A new provision proposes to 

the extent provided in the resolution of 

the Board, any committee that consists 

solely of one or more Directors shall 

have and may exercise all the powers 

and authority of the Board in the 

management of the business and affairs 

of the Exchange. Such committee or 

committees shall have such name or 

names as may be determined from time 

to time by resolution adopted by the 

Board. Further, in the absence or 

disqualification of a member of a 

committee composed solely of Directors, 

the member or members thereof present 

at any meeting and not disqualified 

from voting, whether or not such 

members constitute a quorum, may 

unanimously appoint another member 

of the Board to act at the meeting in the 

place of any such absent or disqualified 

member. 

Similar to By-Law Article IV, Section 

4–5, the Compensation of Directors, 

Expenses shall be fixed by the Board. 

This language mirrors that of the 

NASDAQ Stock Market LLC.21 The 


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22See Section 10 of the Second Amended Limited 

Liability Co. Agreement of the NASDAQ Stock 

Market LLC. 

23See Section 13 of the Second Amended Limited 

Liability Co. Agreement of the NASDAQ Stock 

Market LLC. 

24See Section 15 of the Second Amended Limited 

Liability Co. Agreement of the NASDAQ Stock 

Market LLC. 

25See Section 16 of the Second Amended Limited 

Liability Co. Agreement of the NASDAQ Stock 

Market LLC. 

26See Section 17 of the Second Amended Limited 

Liability Co. Agreement of the NASDAQ Stock 

Market LLC. 

27See Section 18 of the Second Amended Limited 

Liability Co. Agreement of the NASDAQ Stock 

Market LLC. 

28See Section 19 of the Second Amended Limited 

Liability Co. Agreement of the NASDAQ Stock 

Market LLC. 

29See Section 21 of the Second Amended Limited 

Liability Co. Agreement of the NASDAQ Stock 

Market LLC. 

30Sections 22–28 of the LLC Agreement are 

renumbered in the proposal. All references are to 

the current section numbers. 

31See Section 27 of the Second Amended Limited 

Liability Co. Agreement of the NASDAQ Stock 

Market LLC. 

32See Section 28 of the Second Amended Limited 

Liability Co. Agreement of the NASDAQ Stock 

Market LLC. 

33See Securities Exchange Act Release No. 19134 

(October 14, 1982), 47 FR 46949 (October 21, 1982) 

(SR–Phlx–82–5). 

Removal and Resignation of Directors 

language is also identical to the 

NASDAQ Stock Market LLC and ByLaw Article IV, Sections 4–4, 4–6 and 

the LLC Agreement at Section 8(f). The 

Directors as Agent language is currently 

contained in the Exchange’s LLC 

Agreement at Section 8(e). 

Section 9, titled Officers, the 

Exchange proposes to adopt the 

Appointment provisions of NASDAQ 

Stock Market LLC,22 which provisions 

are similar in nature to the existing 

provisions of Section 9(a) of the LLC 

Agreement. The terms ‘‘Governor’’ 

would be replaced with ‘‘Director’’ in 

Section 9(c) and in Section 10, titled 

Limited Liability. 

Section 11, titled Capital 

Contributions, the Exchange is reflecting 

the proposed elimination of the Series A 

Preferred Shareholder in the text. 

Section 12, titled Additional 

Contributions, the Exchange is revising 

the text to mirror that of the NASDAQ 

Stock Market LLC.23 Section 13, titled 

Allocation of Profits and Losses, 

remains unchanged. Section 14, titled 

Distributions, the Exchange is once 

again mirroring the language of the 

NASDAQ Stock Market LLC.24 The 

Distribution language is not altogether 

different from the existing language and 

will solely impact the Shareholder, The 

NASDAQ OMX Group, Inc. In Section 

15, titled Books and Records, the 

Exchange substantially mirrors the 

language of NASDAQ Stock Market LLC 

except that the provision ‘‘within the 

United States’’ was added.25

Section 16, titled Reports, is new to 

the Exchange’s LLC Act and is being 

added to mirror the language of the 

NASDAQ Stock Market LLC.26 Section 

17, titled Limited Liability Company 

Interests, the Exchange is removing the 

references to the Series A Preferred 

Shareholder as described herein. The 

Exchange is proposing language to 

cancel the existing Series A Preferred 

Stock. Section 18, titled Other Business, 

the Exchange is proposing to mirror the 

language of the NASDAQ Stock Market 

LLC.27 The language is substantially 

similar to the language currently in 

Section 17. 

Section 19, Exculpation and 

Indemnification, the Exchange is 

proposing to once again mirror the 

language of the NASDAQ Stock Market 

LLC.28 The language is substantially 

similar to the language currently in 

Section 18. Section 19, titled 

Assignment, the Exchange proposes to 

allow assignments to affiliates of the 

member. The reference to Section 20 

would be deleted. Section 21, titled 

Dissolution, is amended to mirror the 

language of the NASDAQ Stock Market 

LLC.29 The language is substantially 

similar to the language currently in 

Section 21. 

Section 22, titled Benefits of 

Agreement; No Third-Party Rights, seeks 

to eliminate references to the Series A 

Preferred Shareholder as described 

herein as does Section 25, titled Binding 

Agreement.30 The Exchange is not 

proposing amendments to Sections 23, 

titled Severability of Provisions, 24, 

titled Entire Agreement or 26, titled 

Governing Law. 

Minor amendments are proposed to 

Section 25, titled Binding Agreement, to 

account for only one proposed 

Stockholder. Section 27, titled 

Amendments, would be amended to 

mirror the language of the NASDAQ 

Stock Market LLC.31 Section 28, titled 

Notices, would be amended to mirror 

the language of the NASDAQ Stock 

Market LLC.32

The Exchange proposes to add a new 

Schedule A to the LLC Agreement to 

define certain new terms, namely: ‘‘LLC 

Act’’, ‘‘Affiliate’’, ‘‘Agreement’’, 

‘‘Bankruptcy’’, ‘‘Board’’, ‘‘By-Laws’’, 

‘‘Certificate of Formation’’, ‘‘Covered 

Persons’’, ‘‘Directors’’, ‘‘Exchange’’, 

‘‘Exchange Act’’, ‘‘Member 

Organization’’, ‘‘Member Representative 

Director’’, ‘‘Officer’’, ‘‘Person’’, 

‘‘Regulatory Fund’’ and ‘‘Stockholder’’ for 

ease of reference. The Exchange also 

proposes a section on rules of 

construction which further explain the 

definitions. The definitions are only 

applicable to the LLC Agreement. 

Previous Schedule A is now Schedule B 

and is amended to eliminate the 

reference to the PHLX Member Voting 

Trust as discussed herein. 

By-Laws 

The Exchange is proposing to amend 

the By-Laws of the Exchange to 

substantially mirror those of NASDAQ 

Stock Market LLC. 

In Article I, the Exchange proposes to 

reflect the proposed board structure and 

add clarifying definitions. Specifically, 

the Exchange is adding the following 

new definitions: ‘‘Act’’, ‘‘Associated 

Person or Person Associated with a 

Member Organization’’, ‘‘Board or Board 

of Directors’’, ‘‘Director’’, ‘‘Election Date’’, 

‘‘Executive Representative’’, ‘‘FINRA’’, 

‘‘Industry Director’’, ‘‘Member 

Representative Director’’, ‘‘Non-Industry 

Director’’, ‘‘Public Director’’, ‘‘Statutory 

Disqualification’’ and ‘‘Stockholder 

Director’’. The specific board 

designations will be discussed below. 

The Exchange is proposing to delete 

certain definitions that reference the 

current board structure, which the 

Exchange is proposing to change, and 

other obsolete terms. Specifically, the 

Exchange is proposing to delete the 

following definitions: ‘‘Approved 

Lessor’’, ‘‘Designated Governor’’, 

‘‘Designated Independent Governors’’, 

‘‘Foreign Currency Options 

Participation’’, ‘‘Foreign Currency 

Options Participant or Participant’’, 

‘‘Foreign Currency Options Participant 

Organization’’, ‘‘Governor’’, 

‘‘Independent’’, ‘‘Independent 

Governor’’, ‘‘Lessee’’, ‘‘Lessor’’, ‘‘Material 

Relationship’’, ‘‘Member Governor’’, 

‘‘Member Organization Representative’’, 

‘‘Owner’’, ‘‘Trust Agreement’’, ‘‘Series A 

Preferred Stock’’, ‘‘Stockholder 

Governor’’, ‘‘Preferred Stock’’, and 

‘‘Trust’’. The Exchange is proposing to 

delete the Governor and Trust 

designations related to the Board in 

connection with the proposed board 

structure. The Exchange is also 

proposing to eliminate foreign currency 

option participations. 

Foreign Currency Option Participations 

In 1982, the Exchange filed a proposal 

concerning access to the Exchange’s 

foreign currency options market.33 The 

Exchange at that time indicated that 

such access to the Exchange’s foreign 

currency options market would be 

available to those who have purchased 

a foreign currency options participation 


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34See Securities Exchange Act Release No. 19134 

(October 14, 1982), 47 FR 46949 (October 21, 1982) 

(SR–Phlx–82–5). 

35See Securities Exchange Act Release No. 19134 

(October 14, 1982), 47 FR 46949 (October 21, 1982) 

(SR–Phlx–82–5). 

36See Securities Exchange Act Release No. 48847 

(November 26, 2003), 68 FR 67720 (December 3, 

2003) (SR–Phlx–2003–73). 

37See Exchange Rule 908. The Series A–1 permit 

allows members to trade FCOs. 

38Today Members trade foreign currency 

utilizing a Series A–1 permit. 

39With respect to the election of the Member 

Representative Director, the process remains 

substantially unchanged. In the uncontested 

election, newly proposed By-Law Section 2–1(d) 

provides the Stockholder elects from the List of 

Candidates, specifically the Member Representative 

Directors shall be elected by the Stockholder from 

the List of Candidate; uncontested would be where 

there is only one candidate for each Member 

Representative Director position. In a contested 

election newly proposed By-Law Section 2–2 

provides that the Stockholder shall elect the 

persons on the List of Candidates who receive the 

most votes, where the Members have the right to 

cast one vote for each Member Representative 

Director position to be filled. 

40See proposed By-Law Article III, Section 3– 

1(b). 

(‘‘FCO Participation’’). Non-members 

were admitted to the Exchange as 

foreign currency option participants 

(‘‘FCO Participants’’) by the Admission 

Committee by completing an 

application process similar to that 

utilized when Exchange membership 

was sought.34 The initial offering period 

began on January 25, 1982 and extended 

through the last business day preceding 

the first day of foreign currency options 

trading on the Exchange.35

Currently, the holder of an FCO 

Participation is entitled to enter into 

foreign currency options transactions on 

the Exchange. FCO Participants and the 

organizations upon which they confer 

foreign currency options trading 

privileges are subject to all the 

provisions of the Exchange Rules that 

are applicable to Members and Member 

Organizations and to many provisions of 

Exchange’s By-Laws. 

In 2003, the Exchange filed to 

demutualize the Exchange. At the time 

of demutualization, the Exchange 

proposed that access to the Exchange 

facilities and the right to trade will be 

conferred by newly-issued permits 

rather than by ownership or leasing of 

seats of the Exchange.36 Trading of 

foreign currency options continued to 

be allowed through the FCO 

Participations, but, after 

demutualization, such trading of FCOs 

were permitted through permits.37

The Exchange currently does not have 

any persons who are FCO 

Participants.38 The Exchange does not 

believe such participations are 

necessary in light of the ability to gain 

access to the Exchange with a permit. 

The Exchange is proposing to eliminate 

FCO Participations at this time. 

Specifically, the Exchange proposes to 

delete all references to FCO 

Participations, participants, participant 

organizations, seat leases, owners and 

lessors. 

In Article II, the Exchange proposes to 

delete By-Law Sections 2–1 titled 

Registered Office and Registered Agent 

and By-Law Section 2–2 titled Other 

Offices. The Exchange states its 

registered office in the Certificate of 

Formation and LLC Agreement at ByLaw Section 3. The Exchange proposes 

to rename Article II ‘‘Annual Election of 

Member Representative Directors and 

Other Actions By Members.’’ The 

Exchange proposes to mirror the 

provisions of the NASDAQ Stock 

Market LLC’s Second Amended Limited 

Liability Company Agreement at Article 

II. The Exchange is proposing to add the 

following provisions to Article II: ByLaw Section 2–1 titled Record and 

Election Date; By-Law Section 2–2 titled 

Voting, By-Law Section 2–3 titled 

Filling of Vacancies; and By-Law 

Section 2–4 titled Member Meetings. 

Proposed By-Law Section 2–1 

concerning the Record and Election 

Date would replace the following 

current By-Law Sections, which are 

proposed to be deleted: By-Law Sections 

3–2 and 3–15. The language contained 

in proposed By-Law Section 2–1 is 

substantially similar to the language in 

current By-Law Section 3–2. Proposed 

Section 2–2 concerning voting contains 

similar language to current By-Law 

Sections 3–7 and 3–12. Proposed ByLaw Section 2–3 concerning vacancies, 

which allows for an Exchange Member 

to fill the vacancy, would replace 

current By-Law Section 4–7, which 

provides for a majority vote by the 

Board of Governors. Proposed By-Law 

Section 2–4 titled Member Meetings 

states that the Exchange shall not be 

required to hold member meetings. 

Proposed By-Law Section 2–4 would 

replace current By-Law Sections 3–1 

and 3–11, which sections presuppose 

member meetings.39

In Article III, the Exchange is 

proposing to delete various By-Laws 

and replace them with the By-Laws 

similar to those of NASDAQ Stock 

Market LLC’s Second Amended Limited 

Liability Company Agreement at Article 

III. The title to Article III captioned 

Member and Member Organization 

Nominations-Member and Member 

Organization Annual Elections— 

Member and Member Organizations 

Meetings is being deleted. The Exchange 

is deleting By-Law Section 3–1 titled 

Place of Member and Member 

Organization Meetings, which By-Law is 

replaced by By-Law Section 2–4. The 

Exchange is deleting By-Law Section 3– 

2 titled Annual Selection of Designated 

Governors which is replaced by 

proposed By-Law Section 2–1. The 

Exchange is deleting Section 3–3 titled 

Removal of Designated Governors. This 

language would be replaced by 

proposed By-Law Section 3–2. The 

Exchange is deleting current By-Law 

Sections 3–4 through 3–6, which are 

reserved. The Exchange is replacing 

current By-Law Section 3–7 titled 

Election of Nominees for Designate [sic] 

Governors In the Event of a Contested 

Vote, with proposed new By-Law 

Section 2–2. The Exchange is deleting 

current By-Law Section 3–8 titled 

Death, Withdrawal or Disqualification of 

Designated Nominees. A portion of this 

By-Law is contained in proposed ByLaw Section 2–1(c). The Exchange is 

deleting By-Law Sections 3–9 and 3–10, 

which are reserved. The Exchange is 

deleting current By-Law Section 3–11 

titled Notice of Member and Member 

Organization Meetings, as per proposed 

By-Law Section 2–4. The Exchange is 

deleting current By-Law 3–12 titled 

Vote of Member Organizations, which is 

replaced by proposed By-Law Section 

2–1. The Exchange is deleting current 

By-Law Sections 3–13 titled Quorum of 

Members and Member Organizations— 

Proxies and By-Law Section 3–14 titled 

Lists of Members and Member 

Organizations Entitled to Vote, as per 

proposed By-Law Section 2–4. The 

process for voting is contained in 

proposed By-Law Section 2–1. The 

Exchange is proposing to delete By-Law 

Section 3–15 titled Determination of 

Record Dates, which is replaced by 

proposed By-Law Section 2–1. The 

Exchange is deleting current By-Law 

Section 3–16 titled Governance of 

Member and Member Organization 

Meetings as per proposed By-Law 

Section 2–4. 

The Exchange is proposing to add 

similar By-Law Sections to newly 

named Article III captioned ‘‘Board of 

Directors,’’ which mirror those of 

NASDAQ Stock Market LLC’s Second 

Amended Limited Liability Company 

Agreement at Article III. The Exchange 

is proposing to add a new By-Law 

Section 3–1 titled ‘‘Selection; Term,’’ 

which replaces current By-Law Section 

4–4 as described above and adds 

language to clarify that the Directors 

shall serve for a one year term.40 The 

Exchange proposes a new By-Law 

Section 3–2 titled ‘‘Qualifications’’ to 

replace current By-Law Sections 4–1 


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41By-Law Article III, Section 3–2(b) contains 

newly proposed language that would allow for 

removal of a director with cause (the Director no 

longer satisfies the classification for which the 

Director was elected or the Director’s continued 

service as such would violate the compositional 

requirements of the Board set forth in Article III, 

Section 3–2(a)). 

42The Board is currently named the Board of 

Governors. 43See Exchange’s LLC Agreement Section 8(a). 

44See NASDAQ Stock Market LLC By-Law 

Article III at Section 7. 

and 4–4(c).41 The Exchange also 

proposes a new By-Law Section 3–3 

titled ‘‘Regulation,’’ a proposed new ByLaw Section 3–4 ‘‘Conflicts of Interest, 

Contracts and Transactions Involving 

Directors’’ and proposed new By-Law 

Section 3–5 ‘‘Compensation of Board, 

Council, and Committee Members.’’ 

Board of Directors 

The Exchange is proposing to amend 

the qualifications for its Board, which it 

proposes to rename ‘‘Board of 

Directors.’’ 42 Currently, the Board of 

Governors is composed of the number of 

Governors determined from time to time 

by the Board of Governors and includes: 

one (1) Governor, who is the Chief 

Executive Officer; one (1) Governor who 

is a Member Governor who meets the 

qualifications set forth in By-Law 

Article I with respect to the Member 

Governor; one (1) Governor who is a 

Stockholder Governor who meets the 

qualifications set forth in By-Law 

Article I with respect to the Stockholder 

Governor; and such additional 

Governors who are Independent 

Governors and meet the qualifications 

set forth in By-Law Article I, fill the 

remaining seats on the Board of 

Governors, including a number of 

Designated Independent Governors, 

which, together with the Member 

Governor equal at least 20 percent of the 

total number of Governors. 

The Exchange is proposing to replace 

this aforementioned Board composition 

with the following: A Board comprised 

of a number of Non-Industry Directors, 

including at least one Public Director 

and at least one issuer representative (or 

if the Board consists of ten or more 

Directors, at least two issuer 

representatives), which would equal or 

exceed the sum of the number of 

Industry Directors and Member 

Representative Directors to be elected 

under the terms of the LLC Agreement. 

The Stockholder may determine at any 

time in its sole and absolute discretion 

the number of Directors to constitute the 

Board. The authorized number of 

Directors may be increased or decreased 

by the Stockholder at any time in its 

sole and absolute discretion, upon 

notice to all Directors, but no decrease 

in the number of Directors would 

shorten the term of any incumbent 

Member Representative Director. At 

least twenty percent (20%) of the 

Directors would be Member 

Representative Directors. Each Director 

elected, designated or appointed by the 

Stockholder would hold office until a 

successor is elected and qualified or 

until such Director’s earlier death, 

resignation, expulsion or removal. A 

Director need not be a member of the 

Exchange.43

The Exchange proposes the following 

definitions below for the various 

Director positions in Article I of the ByLaws. The term ‘‘Industry Director’’ shall 

mean a Director (excluding any two 

officers of the Exchange, selected at the 

sole discretion of the Board, amongst 

those officers who may be serving as 

Directors (the ‘‘Staff Directors’’)), who (i) 

is or has served in the prior three years 

as an officer, director, or employee of a 

broker or dealer, excluding an outside 

director or a director not engaged in the 

day-to-day management of a broker or 

dealer; (ii) is an officer, director 

(excluding an outside director), or 

employee of an entity that owns more 

than ten percent of the equity of a 

broker or dealer, and the broker or 

dealer accounts for more than five 

percent of the gross revenues received 

by the consolidated entity; (iii) owns 

more than five percent of the equity 

securities of any broker or dealer, whose 

investments in brokers or dealers exceed 

ten percent of his or her net worth, or 

whose ownership interest otherwise 

permits him or her to be engaged in the 

day-to-day management of a broker or 

dealer; (iv) provides professional 

services to brokers or dealers, and such 

services constitute 20 percent or more of 

the professional revenues received by 

the Director or 20 percent or more of the 

gross revenues received by the 

Director’s firm or partnership; (v) 

provides professional services to a 

director, officer, or employee of a 

broker, dealer, or corporation that owns 

50 percent or more of the voting stock 

of a broker or dealer, and such services 

relate to the director’s, officer’s, or 

employee’s professional capacity and 

constitute 20 percent or more of the 

professional revenues received by the 

Director or member or 20 percent or 

more of the gross revenues received by 

the Director’s or member’s firm or 

partnership; or (vi) has a consulting or 

employment relationship with or 

provides professional services to the 

Exchange or any affiliate thereof or to 

FINRA (or any predecessor) or has had 

any such relationship or provided any 

such services at any time within the 

prior three years. 

The term ‘‘Member Representative 

Director’’ shall mean a Director who has 

been elected or appointed after having 

been nominated by the Member 

Nominating Committee or by a Member 

pursuant to these By-Laws. A Member 

Representative Director may, but is not 

required to be, an officer, director, 

employee, or agent of a Member. The 

term ‘‘Non-Industry Director’’ shall mean 

a Director (excluding Staff Directors) 

who is (i) a Public Director; (ii) an 

officer, director, or employee of an 

issuer of securities listed on the national 

securities exchange operated by the 

Exchange; or (iii) any other individual 

who would not be an Industry Director. 

The term ‘‘Public Director’’ shall mean a 

Director who has no material business 

relationship with a broker or dealer, the 

Exchange or its affiliates, or FINRA. The 

term ‘‘Stockholder Director’’ shall mean 

a Director who is an officer, director (or 

a person in a similar position in 

business entities that are not 

corporations), designee or an employee 

of a holder of Common Stock or any 

affiliate or subsidiary of such holder of 

Common Stock and is duly elected to 

fill the one (1) vacancy on the Board of 

Directors allocated to the Stockholder 

Director. 

The Exchange is proposing to replace 

the Independent Director with a Public 

Director. The Exchange is proposing to 

replace the Designated Industry 

Governor/Member Governor designation 

with a Member Representative Director. 

The Exchange is proposing to replace 

the Stockholder Governor with a 

Stockholder Director. The Exchange is 

also proposing to add an Industry 

Director. The Exchange is retaining the 

same 20 percent requirement with 

respect to Member representation. The 

composition of this Board would be 

identical to that of the NASDAQ Stock 

Market LLC. 

The Exchange is proposing to add a 

By-Law Section 3–3 titled ‘‘Regulation.’’ 

This By-Law Section mirrors that of the 

NASDAQ Stock Market LLC.44

Currently, By-Law Section 4–24 

concerns Interested Transactions. This 

proposed new By-Law would replace 

current By-Law Section 4–24. The 

Exchange is proposing to add a By-Law 

Section 3–5 titled ‘‘Compensation of 

Board, Council, and Committee 

Members.’’ This By-Law would replace 

current By-Law Section 4–5, which 

concerns the Compensation of 


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45See NASDAQ Stock Market LLC By-Law 

Article III at Section 8. 

46See NASDAQ Stock Market LLC By-Laws 

Article IV. 

47See NASDAQ Stock Market LLC By-Laws 

Article IV. 

48See NASDAQ Stock Market LLC By-Law 

Article III, Sections 4–6. 

Governors. By-Law Section 3–5 mirrors 

that of NASDAQ Stock Market LLC.45

The amendments discussed herein to 

Article III and the proposed Board 

structure and proposed By-Laws would 

replace By-Law Article IV. Specifically, 

By-Law Section 4–1, titled Number and 

Composition, would be deleted and 

replaced by newly proposed By-Law 

Section 3–2. By-Law Section 4–2, which 

is reserved, would be deleted. By-Law 

Section 4–3, titled Term, would be 

deleted and replaced by Section 8 of the 

LLC Agreement and By-Law Section 2– 

1. Section 4–4, titled Duties and Powers, 

would be deleted and replaced by the 

newly proposed By-Law Sections in 

Article III. 

As mentioned above, By-Law Section 

4–5 titled Compensation of Governors 

would be deleted and replaced by new 

By-Law Section 3–5. By-Law Section 4– 

6 titled Resignations would be deleted 

and replaced by new By-Law Section 3– 

1. By-Law Section 4–7 titled Vacancies 

would be deleted and replaced by new 

By-Law Section 3–1. By-Law Section 4– 

8 titled Disqualification of Governors 

would be deleted and replaced by new 

By-Law Section 3–1. By-Law Section 4– 

9 titled Quorum and By-Law Section 4– 

10 titled Place of Meeting are being 

deleted and replaced by Section 8 of the 

LLC Agreement. The following By-Law 

Sections are also being deleted and 

replaced by Section 8 of the LLC 

Agreement: By-Law Section 4–11 titled 

Regular and Annual Meetings; By-Law 

Section 4–12 titled Action at Meetings; 

By-Law Section 4–13 titled Adjourned 

Meetings; By-Law Section 4–14 titled 

Special Meetings; By-Law Section 4–15 

titled Notices of Meetings of Board of 

Governors; By-Law Section 4–16 titled 

Informal Action by the Board of 

Governors; and By-Law Section 4–17 

titled Interpretation of By-Laws. 

The Exchange is simply renumbering 

By-Law Section 4–18 titled 

Indemnification, to By-Law Section 3–6 

and changing references from Governor 

to Director and correcting By-Law 

references. By-Law Section 4–19 titled 

Term of Office would be deleted and 

replaced by Section 8 of the LLC 

Agreement. 

The Exchange is simply renumbering 

By-Law Section 4–20 titled Exercise 

Rights with Respect to Stock Clearing 

Corporation Stock to By-Law Section 3– 

7 and amending the reference from 

Governor to Director. By-Law Section 4– 

21 titled Annual Financial Report 

would be deleted. By-Law Section 4–22 

titled Attendance of Meetings by 

Electronic Means would be simply 

renumbered as By-Law Section 3–8 and 

references to Governor are being 

changed to Director. By-Law Section 4– 

23 titled Authority to Take Action 

Under Emergency or Extraordinary 

Market Conditions would be simply 

renumbered as By-Law Section 7–5. ByLaw Section 4–24 titled Interested 

Transaction would be deleted and 

replaced by proposed new By-Law 

Section 3–4. 

The Exchange is renaming Article IV, 

which is currently captioned Chair and 

Officers of the Exchange to ‘‘OFFICERS, 

AGENTS AND EMPLOYEES.’’ The 

NASDAQ Stock Market LLC has a 

similar caption in its By-Laws.46 The 

Exchange is proposing to mirror the 

NASDAQ Stock Market By-Laws 

Sections 1 though 11. The Exchange has 

adopted proposed new By-Law Sections 

4–1 titled ‘‘Delegation of Duties of 

Officers’’ and By-Law Section 4–2 titled 

‘‘Resignation and Removal of Officers’’ 

text from the NASDAQ Stock Market 

LLC By-Laws and amended the 

remaining By-Laws in proposed Article 

III to mirror those of NASDAQ Stock 

Market LLC. The Exchange proposes to 

rename the remainder of Article IV as 

follows: By-Law Sections 4–3 titled 

Chair of the Board of Directors; By-Law 

Section 4–4 titled Chief Executive 

Officer; By-Law Section 4–5 titled 

President; By-Law Section 4–6 titled 

Vice President; By-Law Section 4–7 

titled Chief Regulatory Officer; By-Law 

Section 4–8 titled Secretary; By-Law 

Section 4–9 titled Assistant Secretary; 

By-Law Section 4–10 titled Treasurer; 

and By-Law Section 4–11 titled 

Assistant Treasurer. These sections all 

mirror those of NASDAQ Stock Market 

LLC.47

The Remaining Sections of current 

Article V are being deleted. Specifically, 

By-Law Section 5–1 titled Board’s 

Appointive Power would be replaced by 

proposed new By-Law Section 4–1. ByLaw Section 5–3, which is reserved, 

would be deleted. By-Law Section 5–7 

titled Other Officers would be replaced 

by proposed new By-Law Section 4–1. 

By-Law Section 5–8 titled Powers and 

Duties of the Secretary would be 

replaced by proposed new By-Law 

Section 4–8. By-Law Section 5–9 titled 

Powers and Duties of the Treasurer 

would be replaced by proposed new ByLaw Section 4–10. By-Law Sections 5– 

10 titled Powers and Duties of Vice 

Presidents and Assistant Officers, ByLaw Section 5–11 titled Delegation of 

Office and By-Law Section 5–12, titled 

Resignations, are being deleted. 

The Exchange is deleting current ByLaw Articles VI and VII, which are 

reserved. By-Law Article VIII, currently 

captioned Presiding Officials of the 

Exchange, will be renumbered as ByLaw Article V and will be captioned as 

‘‘STANDING COMMITTEES.’’ The 

Exchange is proposing to delete By-Law 

Section 8–1 titled Presiding Exchange 

Officials, and relocate this By-Law into 

Rule 1000(e). This will be discussed in 

further detail below. By-Law Article IX, 

which is currently reserved, is proposed 

to be deleted. 

The Exchange is proposing to mirror 

the NASDAQ Stock Market LLC in 

adopting By-Law Sections 5–1, 5–2 and 

5–3.48 The Exchange is proposing to 

adopt similar committees which exist 

today under the NASDAQ Stock Market 

LLC By-Laws. Proposed new By-Law 

Section 5–1, titled ‘‘Committees,’’ would 

require committee members, who are 

not Directors, to provide the Secretary of 

the Exchange certain information to 

classify a committee member. This 

Section will also govern the term of 

office. 

Proposed new By-Law Section 5–2, 

would be titled ‘‘Committees Composed 

Solely of Directors.’’ These committees 

would include an Executive Committee, 

Finance Committee and a Regulatory 

Oversight Committee. The Exchange 

currently has these committees. 

Proposed new By-Law Section 5–3 

would be titled ‘‘Committees Not 

Composed Solely of Directors.’’ The 

Nominating Committee and the Member 

Nominating Committee would remain 

the same as currently exists today. The 

Business Conduct Committee would 

also remain unchanged. 

The Exchange proposes to amend the 

composition of the Business Conduct 

Committee. Currently, the Business 

Conduct Committee is required to be 

comprised of not less than five (5) nor 

more than nine (9) members, as 

established by the Board of Governors. 

The majority of committee members are 

required to be Non-Industry members; 

and the remaining committee members 

are Industry members. The Exchange 

proposes to amend the composition as 

follows: The Business Conduct 

Committee shall consist of not less than 

eight (8) nor more than twelve (12) 

members, as established by the Board of 

Directors. The Business Conduct 

Committee shall include a number of 

Member Representative members that is 

equal to at least 20 percent of the total 

number of members of the Business 


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49See NASDAQ Stock Market LLC By-Law 

Article VI, Section 2. 

50Additional language was added to Rule 507 

which is proposed to be deleted from By-Law 

Article XI, Section 11–1. 

51Additional language was added to Rule 511 

which is proposed to be deleted from By-Law 

Article XI, Section 11–1. 

52Additional language was added to Rule 900.2 

which is proposed to be deleted from By-Law 

Article XI, Section 11–1. 

53Additional language was added to Rule 960.9 

which is proposed to be deleted from By-Law 

Article XI, Section 11–2. 

54For purposes of By-Law Section 6–6, a 

substantial stockholder is a stockholder with a 

controlling interest in the entity. 

Conduct Committee. The number of 

Non-Industry members, including at 

least three Public members, shall equal 

or exceed the sum of the number of 

Industry members and Member 

Representative members. This proposed 

composition mirrors that of the 

NASDAQ Stock Market’s NASDAQ 

Review Council composition.49

The Quality of Markets Committee 

would continue to exist with different 

functions. Similar to the NASDAQ 

Stock Market LLC By-Laws, the 

Exchange proposes that the Quality of 

Markets Committee would have the 

following functions: (A) To provide 

advice and guidance to the Board on 

issues relating to the fairness, integrity, 

efficiency, and competitiveness of the 

information, order handling, and 

execution mechanisms of the national 

securities exchange operated by the 

Exchange from the perspective of 

investors, both individual and 

institutional, retail firms, market making 

firms, Nasdaq-listed companies, and 

other market participants; and (B) to 

advise the Board with respect to 

national market system plans and 

linkages between the facilities of the 

Exchange and other markets. The 

Quality of Markets Committee would 

include broad representation of 

participants in the national securities 

exchange operated by the Exchange, 

including investors, market makers, 

integrated retail firms, and order entry 

firms. The Quality of Markets 

Committee would be comprised of a 

number of Member Representative 

members that is equal to at least 20 

percent of the total number of members 

of the Quality of Markets Committee. 

The number of Non-Industry members 

of the Quality of Markets Committee 

would equal or exceed the sum of the 

number of Industry members and 

Member Representative members. 

Finally, the Exchange proposes to 

rename its Options Trade Review 

Committee as the Market Operations 

Review Committee. The functions of 

this committee are specified in Rules 

124, 1092, 3312 and Option Floor 

Procedure Advice F–27. The Market 

Operation Review Committee shall 

include a number of Member 

Representative members that is equal to 

at least 20 percent of the total number 

of members of the Market Operations 

Review Committee. No more than 50 

percent of the members of the Market 

Operations Review Committee would be 

engaged in market making activity or 

employed by a Member firm whose 

revenues from market making activity 

exceed 10 percent of its total revenues. 

The Exchange is replacing current ByLaw Sections 10–1 titled Standing 

Committees, By-Law Section 10–2 titled 

General Duties and Powers of 

Committees, By-Law Section 10–3 titled 

Proceedings of Special and Standing 

Committees, By-Law Section 10–4 titled 

Vacancies in Standing Committees—Ad 

Interim Appointments, By-Law Section 

10–5 titled Continuation of Committees, 

By-Law Section 10–9 titled Regulatory 

Oversight Committee, By-Law Section 

10–10 titled Options Trade Review 

Committee, By-Law Section 10–11 titled 

Business Conduct Committee, By-Law 

Section 10–14 titled Executive 

Committee, By-Law Section 10–15 titled 

Finance Committee, By-Law Section 10– 

19 titled Nominating Committees and 

By-Law Section 10–21 titled Quality of 

Markets Committee with these proposed 

new By-Law Sections: By-Law Section 

5–1 titled Committees, By-Law Section 

5–2 titled Committees Composed Solely 

of Directors and By-Law Section 5–3 

titled Committees Not Composed Solely 

of Directors. The following By-Law 

Sections, which are currently reserved, 

are being deleted: By-Law Sections 10– 

6, 10–7, 10–8, 10–12, 10–13, 10–16, 10– 

17, 10–18 and 10–20. 

The Exchange is proposing to delete 

the title of By-Law Article XI concerning 

Appeals. The Exchange is also deleting 

By-Law Sections 11–1 titled When 

Allowed, 11–2 titled Advisory 

Committees on Appeals and 11–3 

Appeal from Decisions of Hearing Panel 

or Business Conduct Committee. 

Exchange Rules 124, 507 50, 51151, 

900.2 52, 960.9 53, 1092 and 3312 

currently contain review procedures 

where applicable. Additional language 

was added to Rules 511, 900.2 and 960.9 

concerning review procedures. 

The Exchange is proposing to delete 

the title of By-Law Section XII 

captioned ‘‘Permits-Eligibility-ElectionInitiation Fee.’’ By-Law Section 12–1 

titled Rights to Issue Permits and NonTransferability would be deleted and 

renumbered new By-Law Section 7–4. 

By-Law Section 12–2 titled Eligibility 

and By-Law Section 12–3 titled Number 

Held is deleted and proposed to be 

moved into Rule 908. By-Law Section 

12–4 titled Admission of Corporation 

would be deleted, renumbered and 

proposed as new Rule 798. By-Law 

Section 12–5, which is reserved, would 

be deleted. By Law Section 12–6 titled 

Rights and Privileges would be deleted 

and renumbered as proposed new ByLaw Section 6–1. By-Law Section 12–7 

titled Rights and Privileges of Corporate 

Member would be and renumbered as 

part of proposed new By-Law Section 6– 

1(c). By-Law Section 12–8 titled 

Maintenance of Qualifying Permit 

Holder and Member Organization 

Representative would be deleted and 

added to Rule 921. By-Law Section 12– 

9 titled Acceptance of LLC Agreement, 

By-Laws and Rules, would be deleted 

and renumbered as proposed new ByLaw Section 6–2. By-Law Section 12–10 

titled Inactive Nominees would be 

deleted, renumbered and proposed as 

new Rule 925. By-Law Section 12–11 

titled Use of Facilities of Exchange, 

would be deleted and renumbered as 

new By-Law Section 6–3. By-Law 

Section 12–12 titled, Certain 

Transitional Rules would be deleted and 

renumbered as new By-Law Section 6– 

4. 

The title to By-Law Article XIII 

captioned Member Organizations— 

Trading-Specialist and Floor Brokerage 

Operations would be deleted. By-Law 

Section 13–1, titled Qualification would 

be deleted and renumbered as proposed 

new Rule 910 along with the following 

By-Law Sections: 13–2 titled 

Qualifications, 13–3 titled Exclusion of 

Banks and Investment Trusts, 13–6 

titled Conditions to Member 

Organization Status, 13–7 titled 

Violation of Terms of Registration, 13– 

8 titled Termination of Registration; and 

13–9 titled Absence or Disability of an 

Officer, Member of the Exchange. ByLaw Section 13–4 titled Provisions of 

By-Laws and Rules Applicable to 

Member and Participant Organizations 

was renumbered as proposed new ByLaw Section 6–5 and retitled as 

Provisions of By-Laws and Rules 

Applicable to Member Organizations. 

By-Law Section 13–5 titled Liability of 

Officers, Directors and Substantial 

Stockholders 54 was renumbered as 

proposed new By-Law Section 6–6. ByLaw Section 13–10 titled Application to 

Member Organizations would be 

renumbered as proposed new By-Law 

Section 6–7. In relocating these Rules, 

all references to foreign currency 

options participants or participations 


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were removed from the text of new 

rules. 

The title to By-Law Article XIV 

captioned Dues, Fines, Net 

Commissions and Other Charges— 

Penalties for Non-Payment would be 

deleted. By-Law Section 14–1 titled 

Fees, Dues and Other Charges would be 

deleted. This By-Law Section language 

is currently contained in Rule 55. ByLaw Article 14–5 titled Penalty for NonPayment is being deleted and 

renumbered as Rule 55. By-Law Article 

14–2, which is reserved, would be 

deleted. By-Law Section 14–3 titled 

Corporate Member Exempt would be 

deleted and renumbered as Rule 798. 

By-Law Section 14–4 titled May Be 

Waived for Members in Military Service 

would be deleted and renumbered as 

proposed new Rule 53 along with ByLaw Section 14–6 titled Liability for 

Dues Until Transfer. By-Law Section 

14–7 titled Dues on Transfer of 

Participation is being deleted and 

renumbered as proposed new Rule 53. 

By-Law Sections 14–8 and 14–9, which 

are reserved, would be deleted. By-Law 

Section 14–10 titled Service Fee would 

be deleted and renumbered as proposed 

new Rule 54. By-Law Section 14–11 

titled Claims by Former or Deceased 

Members would be deleted and 

renumbered as proposed new Rule 55. 

By-Law Section 14–12 titled Effect of 

Suspension or Termination on Payment 

of Fees would be deleted and 

renumbered as proposed new Rule 56. 

In relocating these Rules, all references 

to foreign currency options participants 

or participations were removed from the 

text of new rules. 

The title to By-Law Article XV 

captioned Transfer of Foreign Currency 

Options Participations would be deleted 

along with Sections 15–1 through 15–11 

because the Exchange is proposing to 

eliminate foreign currency option 

participations. 

The title of By-Law Article XVI 

captioned Members’ Contracts and 

Exchange Contracts would be deleted. 

By-Law Section 16–1 titled Members’ 

Contracts would be deleted and 

renumbered as proposed new Rule 57. 

By-Law Article 16–2 titled Exchange 

Contracts would be deleted and 

renumbered proposed new Rule 58. ByLaw Article 16–3 titled By-Laws and 

Rules Incorporated into Exchange 

Contracts would be renumbered as 

proposed new By-Law Section 6–8. ByLaw Section 16–4 titled Deliveries 

through Registered Clearing Agencies 

would be deleted and renumbered as 

proposed new Rule 59. 

The title to By-Law Article XVII 

captioned Insolvency—Suspension— 

Reinstatement would be deleted. ByLaw Section 17–1 titled Suspension for 

Insolvency on Declaration would be 

deleted and renumbered as proposed 

new Rule 70. By-Law Section 17–2 

titled Suspension for Insolvency on 

Advice to Committee on Business 

Conduct would be deleted and 

renumbered as proposed new Rule 71. 

By-Law Section 17–3 titled Investigation 

of Insolvency would be deleted and 

renumbered as proposed new Rule 72. 

By-Law Article 17–4 titled Time for 

Settlement of Insolvent Member or 

Participant would be deleted and 

renumbered as proposed new Rule 73. 

By-Law Section 17–5 titled 

Reinstatement of Insolvent Member or 

Participant would be deleted and 

renumbered as proposed new Rule 74. 

By-Law Section 17–6 titled Disciplinary 

Measures During Suspension for 

Insolvency would be deleted and 

renumbered as proposed new Rule 75. 

By-Law Section 17–7 titled Rights of 

Member Suspended for Insolvency 

would be deleted and renumbered as 

proposed new Rule 76. In relocating 

these Rules, all references to foreign 

currency options participants or 

participations were removed from the 

text of new rules. 

The title to Article XVIII captioned 

Offenses, Discipline, Penalties and 

Business Connections would be deleted. 

The language in By-Law Section 18–1 

titled Offenses, Discipline, Penalties is 

being deleted as the language is 

currently contained in Rule 960.1. ByLaw Section 18–2 titled Announcement 

of Penalties is being deleted and the text 

is being relocated into current Rule 

960.8. By-Law Section 18–3 titled 

Responsibility of Member or Participant 

for Acts of His Organization would be 

deleted and relocated as proposed new 

Rule 910. By-Law Section 18–4 titled 

Disapproval of Business is being deleted 

and relocated as proposed new Rule 63. 

By-Law Section 18–5 titled Effect of 

Suspension or Termination would be 

deleted and renumbered as proposed 

new Rule 63. In relocating these Rules, 

all references to foreign currency 

options participants or participations 

were removed from the text of new 

rules. 

The title to By-Law Article XIX, 

which is reserved, would be deleted. 

The title to By-Law Article XX 

captioned Vacancies Created By 

Expulsion, Suspension, or Termination 

would be deleted. By-Law Section 20– 

1 titled Office Vacated by Suspension or 

Termination would be deleted and 

renumbered as proposed new Rule 64. 

By-Law Sections 20–2, which is 

reserved, and By-Law Section 20–3 

titled Change in Status of Partner of 

Officer, would be deleted as they are 

being replaced by proposed new Board 

definitions as discussed herein. 

The title to By-Law Article XXI, 

which is reserved, would be deleted. 

The title to By-Law Article XXII 

captioned Amending the By-Laws, 

would be deleted. By-Law Section 22– 

1 titled Amendments to By-Laws would 

be renumbered as By-Law Section 6–9. 

The title to By-Law Article XXIII, which 

is reserved, would be deleted. The title 

to By-Law Article XXIV captioned Seal 

of the Exchange would be deleted. ByLaw Section 24–1 titled Seal would be 

renumbered as By-Law Section 6–10. 

The title to By-Law Article XXV 

captioned Fiscal Year of the Exchange 

would be deleted. By-Law Section 25– 

1 titled Fiscal Year would be 

renumbered as By-Law Section 6–11. 

The title to By-Law Article XXVI 

captioned Exchange Options Trading 

would be deleted. By-Law Sections 26– 

1 and 26–2, which are reserved, are 

being deleted. By-Law Section 26–3 

titled Dealings would be renumbered as 

By-Law Section 6–12. 

The title to By-Law Article XXVII 

captioned Foreign Currency Options 

Trading would be deleted. By-Law 

Sections 27–1 through 27–4 would be 

deleted as well because the Exchange is 

eliminating foreign currency option 

participations. 

The title to By-Law Article XXVIII 

captioned Stockholder Nominations— 

Stockholder Annual Elections— 

Stockholder Meetings would be deleted. 

By-Law Sections 28–1 through 28–12 

are being deleted because they are 

superseded by the proposed 

amendments to the LLC Agreement and 

By-Law Article II. By-Law Article 28–13 

titled Action Without Meeting would be 

renumbered as proposed new By-Law 

Section 6–13. 

The title to By-Law Article XXIX 

captioned Shares would be deleted. ByLaw Sections 29–1 titled Certificates, 

29–2 titled Signatures, 29–3 titled Share 

Ledger, 29–4 titled Transfers of Shares, 

29–5 titled Cancellation, 29–6 titled 

Lost, Stolen, Destroyed and Mutilated 

Certificates are superseded by 

amendments to the LLC Agreement and 

therefore deleted. By-Law Section 29–7 

titled Fixing of Record Date would be 

renumbered as proposed new By-Law 

6–14. By-Law Section 29–8 titled 

Distributions would be renumbered as 

proposed new By-Law Section 6–15. 

Proposed new By-Law Section 6–16 

titled ‘‘Waiver of Notice’’ and By-Law 

Section 6–17 titled ‘‘Execution of 

Instruments Contracts, etc.’’ are being 

added and mirror language contained in 


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55See NASDAQ Stock Market LLC By-Laws at 

Article VII, Sections 1 and 2. 

56See NASDAQ Stock Market LLC By-Laws at 

Article IX, Sections 1 through 5. 

57See Exchange Rule 1080(a). 

58See Securities Exchange Act Release No. 62783 

(August 27, 2010), 75 FR 54204 (September 3, 2010) 

(SR–Phlx-2010–104). 

59See Securities Exchange Act Release No. 62783 

(August 27, 2010), 75 FR 54204 (September 3, 2010) 

(SR–Phlx-2010–104). 

60See Exchange Rule 1092 (Obvious Errors and 

Catastrophic Errors) and 3312 (Clearly Erroneous 

Transactions). 

61See Securities Exchange Act Release No. 58613 

(September 22, 2008), 73 FR 57181 (October 1, 

2008) (SR–Phlx–2008–65). 

the NASDAQ Stock Market LLC ByLaws.55

The title to proposed new By-Law 

Article VII captioned ‘‘Exchange 

Authorities’’ would be added. Proposed 

new By-Law Section 7–1 titled ‘‘Rules’’, 

By-Law Section 7–2 titled ‘‘Disciplinary 

Proceedings’’, By-Law Section 7–3 titled 

‘‘Membership Qualifications’’, By-Law 

Section 7–4 titled ‘‘Fees, Dues, 

Assessments, and Other Charges’’, and 

By-Law Section 7–5 titled ‘‘Authority to 

Take Action Under Emergency or 

Extraordinary Market Conditions’’ are 

being added and substantially mirror 

language in the NASDAQ Stock Market 

By-Laws.56 By-Law Section12–1 titled 

Right to Issue Permits and NonTransferability was deleted and 

renumbered and is currently Section 7– 

6. 

Rules 

The Exchange is proposing to delete 

definitions from Rule 1. The Exchange 

is proposing to delete definitions that 

relate to foreign currency options 

participations because the Exchange is 

proposing to eliminate such 

participations. The following definitions 

are related to foreign currency option 

participations and are proposed for 

deletion: ‘‘Foreign Currency Options 

Participant or Participant’’, ‘‘Foreign 

Currency Option Participant 

Organization’’, ‘‘Approved Lessor’’, 

‘‘Lessee and Lessor’’. 

The Exchange is also proposing to 

delete definitions that related to the 

former XLE trading system. The 

following definitions relate to XLE and 

are obsolete and proposed for deletion: 

‘‘Approved Dealer’’, ‘‘Market Maker’’, 

‘‘Market Maker Authorized Trader’’, 

‘‘Participant Authorized User or PAU’’, 

‘‘Routing Agreement’’, ‘‘XLE’’, ‘‘XLE 

Participant’’, ‘‘Quote Management 

Instruction or QMI’’, ‘‘Public Agency 

Order’’, ‘‘Professional Order’’, 

‘‘Proprietary Order’’, ‘‘Mixed Lot’’, 

‘‘Round Lot’’ and ‘‘Odd Lot’’. The term 

‘‘Member Organization Representative’’ 

is also being deleted and replaced by the 

proposed term ‘‘Executive 

Representative’’. 

The Exchange is also proposing to add 

several clarifying definitions such as 

‘‘Act, Exchange Act or Securities 

Exchange Act’’, ‘‘Associated Person or 

Person Associated with a Member 

Organization’’, ‘‘Board or Board of 

Directors’’, ‘‘By-Laws’’, ‘‘Commission’’, 

‘‘Director’’, ‘‘FINRA’’, ‘‘Investment 

Banking or Securities Business’’, ‘‘SEC’’, 

‘‘Representative’’ and ‘‘Securities Act’’. 

The Exchange believes these definitions, 

which are located throughout the Rules, 

will clarify the meaning of each of these 

terms. The Exchange also proposed to 

alphabetize the definitions. 

The Exchange is proposing several 

universal amendments to both the ByLaws and Rules of the Exchange. The 

Exchange is proposing to change 

references from ‘‘Board of Governors’’ to 

‘‘Board of Directors’’. The Exchange is 

proposing to change references to 

‘‘National Association of Securities 

Dealers’’ or ‘‘NASD’’ to ‘‘Financial 

Industry Regulatory Authority, Inc.’’ or 

‘‘FINRA’’. The Exchange is proposing to 

replace certain references to ‘‘XLE’’ with 

‘‘PSX’’, where applicable and delete all 

obsolete references. The Exchange is 

proposing to replace ‘‘Member 

Organization Representative’’ with 

‘‘Executive Representative’’. The 

Exchange is proposing to delete all 

references to Foreign Currency Options 

Participation, Participation, Lessor and 

Lessee. The Exchange is proposing to 

replace certain usages of ‘‘Phlx’’ with 

‘‘Exchange’’. The Exchange proposes to 

remove certain references to AUTOM 

and AUTO–X, which terms were 

replaced by Phlx XL.57

The Exchange is proposing to replace 

‘‘NASDAQ OMX PHLX, Inc.’’ with 

‘‘NASDAQ OMX PHLX LLC’’.58

References to the ‘‘Certificate of 

Incorporation’’ are proposed to be 

replaced with ‘‘Limited Liability 

Company Agreement’’ and/or 

‘‘Certificate of Formation’’ where 

appropriate.59

The Exchange is proposing to add 

Rules as indicated above that were 

originally contained in the By-Laws. 

The Exchange is proposing to make 

capitalizations of certain terms 

consistent such as the words ‘‘Rules’’ 

and ‘‘By-Laws’’. Also, the Exchange 

proposes to reference Member and 

Member Organization with 

capitalizations in the By-Laws and 

lower case letters in the Rules. The 

Exchange proposes to delete certain 

Equity Floor Procedure Advices which 

are no longer relevant because the 

Exchange does not have an equity 

trading floor or because XLE is no 

longer utilized. 

The Exchange proposes to update 

names of certain self-regulatory 

organizations to reflect corporate 

actions. The Exchange proposes to 

change references to the Examinations 

Department to reflect the Exchange or 

the Membership Department as 

applicable. The Exchange has 

restructured certain departments and 

would like to clarify which departments 

should receive such information and in 

some cases reflect the Exchange instead 

of a specific department because the 

Exchange otherwise uses forms or 

indicates via its Web site which specific 

person should receive certain 

information. The Exchange also 

proposes to change references from 

‘‘Market Surveillance’’ to ‘‘Regulatory 

staff.’’ This change also reflects the 

restructuring of certain departments. 

The Exchange is proposing to clarify 

certain Standing Committee references. 

References to the ‘‘Options Trade 

Review Committee’’ are proposed to be 

changed to ‘‘Market Oversight Review 

Committee’’. This Market Oversight 

Review Committee would be utilized for 

both equity and options matters.60 The 

Exchange is proposing to delete Rules 

930–949 which concern Foreign 

Currency Option Participations, which 

the Exchange is proposing to delete. 

The Exchange is reserving the 

following rules which related to XLE 

and are no longer necessary as they do 

not relate to PSX: Rule 111, Bids and 

Offers Binding, Rule 125, Order Entry 

and Execution Increments, Rule 161, 

Transmission of Bids or Offers, Rule 

162, Orders Deemed Regular Way, Rule 

163, Clearly Erroneous Executions, Rule 

164, Trading Halts, Rule 165, Clearance 

and Settlement, Rule 170, Registration 

of Market Makers, Rule 171, Obligations 

of Market Maker Authorized Traders, 

Rule 172, Registration of Market Makers 

in a Security, Rule 173, Obligations of 

Market Makers, Rule 174, Hearing and 

Review of Decisions by the Exchange 

Staff, Rule 180, Access, Rule 181, Order 

Entry, Rule 182, Order Marking, Rule 

183, Trading Sessions Customer 

Disclosure, Rule 184, Order Ranking 

and Display, Rule 185, Orders and 

Order Execution, Rule 186, Locking or 

Crossing Quotations in NMS Stocks, 

Rule 187, Odd and Mixed Lots and Rule 

189, Clearance and Settlement and 

Anonymity. 

These Rules are related to XLE, the 

Exchange’s former equity trading 

system, which ceased operations in 

October 2008.61 The Exchange recently 

launched a new cash equities trading 


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62See Securities Exchange Act Release No. 62877 

(September 9, 2010), 75 FR 56633 (September 16, 

2010) (SR–Phlx–2010–79). 

63See Securities Exchange Act Release Nos. 

62877 (September 9, 2010), 75 FR 56633 (September 

16, 2010) (SR–Phlx–2010–79). 

64See Securities Exchange Act Release Nos. 

42889 (June 2, 2000), 65 FR 36878 (June 12, 2000) 

(SR–Phlx–00–12) (a proposal to rescind Rule 132); 

60169 (June 24, 2009), 74 FR 31782 (July 2, 2009) 

(SR–Phlx–2009–40) (a proposal to amend text in 

Rule 1043); and 63036 (October 4, 2010), 75 FR 

62621 (October 12, 2010) (SR–Phlx–2010–131) (a 

proposal to revise Rule 1014). 

65 15 U.S.C. 78f(b). 

66 15 U.S.C. 78f(b)(5). 

67The Exchange’s minor rule plan consists of 

options floor procedure advices (‘‘OFPAs’’) And 

[sic] equity floor procedure advices (‘‘EFPAs’’) 

(collectively ‘‘Advices’’) with preset fines, pursuant 

to Rule 19d–1(c) under the Act. See 17 

CFR240.19d–1(c) [sic]. Most Advices have 

corresponding options rules. 

platform.62 The Exchange filed to 

establish rules relating to PSX. 

Specifically, Rule 3202 notes existing 

rules which are applicable to PSX. The 

aforementioned rules are not related to 

PSX or the Exchange’s options business 

and are therefore obsolete. 

With respect to Exchange Rule 3202, 

the Exchange relocated several By-Laws, 

which are applicable to PSX 

Participants to sections of the Rules. 

The Exchange is amending Rule 3202 to 

specifically enumerate those former bylaws as proposed rules applicable to 

PSX Participants. The new Rules, which 

were previously By-Laws, include Rules 

52, 53, 54, 55, 56, 57, 58, 59, 62, 63, 64, 

70, 71, 72, 73, 74, 75, 76, 798, 910 and 

925. Additionally, the Exchange is 

proposing to add Rule 803, Criteria for 

Listing–Tier 1, to Rule 3202. The 

Exchange previously filed a rule change 

which discussed the applicability of 

Rule 803 to PSX Participants.63 The 

Exchange proposes to note that rule is 

applicable to PSX Participants by 

adding Rule 803 to the list of Rules 

notes in 3202. 

The Exchange is removing references 

to XLE in Rule 110, Bids and Offers— 

Precedence, Rule 120, Precedence of 

Offers at Same Price, and Rule 136 

Trading Halts in Certain Exchange 

Traded Funds, because those references 

are no longer relevant. The Exchange is 

amending the title of Rule 124, 

‘‘Disputes—Options’’ to indicate that 

Rule applies to options and not equities. 

The Exchange is also amending other 

references in the Rule text to correct 

cross-references to sections that were 

impacted by previous rule changes.64

The Exchange has amended certain 

cross-references for technical accuracy. 

The Exchange has made technical 

amendments to certain rules which are 

reserved or require a heading for ease of 

reference. The Exchange added various 

additional clarifying text throughout to 

make the Rules more clear and provide 

additional references where necessary. 

These technical amendments were not 

substantive. 

2. Statutory Basis 

The Exchange believes that its 

proposal is consistent with Section 6(b) 

of the Act 65 in general, and furthers the 

objectives of Section 6(b)(5) of the Act 66

in particular, in that it is designed to 

promote just and equitable principles of 

trade, 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, by 

streamlining subsidiary self-regulatory 

organizations of NASDAQ OMX Group 

to conform the corporate documents and 

provide clarity to its members. The 

Exchange believes that amending the 

Limited Liability Company Agreement 

and the By-Laws to amend the board 

structure and committees and eliminate 

the Series A Preferred Shareholder 

continues to provide for the fair 

representation for its members. 

The Exchange is proposing to 

populate the board with public and nonindustry Directors and Member 

Representative Directors, which would 

continue to comprise twenty percent of 

Directors. The Exchange is not 

amending its current structure which 

allows for the nomination of Directors 

by the membership. The Exchange 

believes that the current board structure 

and election process provide for the fair 

representation of members in the 

selection of directors and the 

administration of the Exchange 

consistent with the requirements of 

Section 6(b)(3) of the Exchange Act. 

This proposal will allow members to 

have a voice in the use of the Exchange 

and ensure that the Exchange is 

administered in a way that is equitable 

to all those who trade on its market or 

through its facilities. Additionally, the 

Exchange believes that the composition 

of the Board satisfies the requirements 

of Section 6(b)(3) of the Exchange Act, 

which requires that one or more 

directors be representative of issuers 

and investors and not be associated with 

a member of the Exchange, or a broker 

dealer. 

The Regulatory Oversight Committee 

will continue to be comprised of Public 

Directors and ensure the Exchange’s 

ability to protect the public interest and 

foster the integrity of the Exchange by 

bringing a unique, unbiased prospective 

to the process. The Exchange is not 

amending the composition of its 

Executive, Finance, Nominating or 

Member Nominating Committees. The 

Exchange is amending the composition 

of its Business Conduct Committee so 

that the majority of its committee 

members shall be Non-Industry 

members and the remaining committee 

members shall be Industry members. 

The Exchange is also amending the 

Quality of Markets Committee and the 

Market Operations Review Committee 

(currently named Options Trade Review 

Committee) composition so that those 

committees are comprised of a number 

of Member Representative members that 

equal to at least twenty percent of the 

total number of members of the Quality 

of Markets Committee. These 

Committees continue to allow for fair 

representation of members. 

The remaining conforming 

amendments to the Limited Liability 

Company Agreement and By-Laws to 

the NASDAQ Stock Market LLC model 

would streamline the NASDAQ’s 

governance process and create 

equivalent governing standards among 

the NASDAQ self-regulatory 

organizations. The Exchange also 

renumbered various By-Law provisions 

into the Exchange By-Laws without 

substantive change. 

The Exchange is also proposing 

certain amendments to eliminate the 

foreign currency option participations, 

delete obsolete terms, amend cross 

references, update terminology and 

conform the Rules to the proposes 

amendments to the Limited Liability 

Company Agreement and By-Laws. The 

Exchange believes that these 

amendments will provide more clarity 

and simplicity to the Exchange’s Rules, 

Advices 67 and Regulations. 

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 not 

necessary or appropriate in furtherance 

of the purposes of the Act. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

No written comments were either 

solicited or received. 

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 (i) 


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68 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3 15 U.S.C. 78s(b)(1). 

4 17 CFR 240.19b–4. 

5This proposal refers to ‘‘PHLX XL’’ as the 

Exchange’s automated options trading system. In 

May, 2009 the Exchange enhanced the system and 

adopted corresponding rules referring to the system 

as ‘‘Phlx XL II.’’ See Securities Exchange Act Release 

No. 59995 (May 28, 2009), 74 FR 26750 (June 3, 

2009) (SR–Phlx–2009–32). The Exchange intends to 

submit a separate technical proposed rule change 

that would change all references to the system from 

‘‘Phlx XL II’’ to ‘‘PHLX XL’’ for branding purposes. 

6A ‘‘valid width quote’’ for options on equities 

and index options means bidding and/or offering so 

as to create differences of no more than $.25 

between the bid and the offer for each option 

contract for which the prevailing bid is less than $2; 

no more than $.40 where the prevailing bid is $2 

or more but less than $5; no more than $.50 where 

the prevailing bid is $5 or more but less than $10; 

no more than $.80 where the prevailing bid is $10 

or more but less than $20; and no more than $1 

where the prevailing bid is $20 or more, provided 

that, in the case of equity options, the bid/ask 

differentials stated above shall not apply to in-themoney series where the market for the underlying 

security is wider than the differentials set forth 

above. For such series, the bid/ask differentials may 

be as wide as the quotation for the underlying 

security on the primary market, or its decimal 

equivalent rounded up to the nearest minimum 

increment. The Exchange may establish differences 

other than the above for one or more series or 

classes of options. See Exchange Rule 

1014(c)(i)(A)(1)(a). 

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 Exchange consents, 

the Commission shall: (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 e-mail to rulecomments@sec.gov. Please include File 

Number SR–Phlx–2011–13 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number SR–Phlx–2011–13. This file 

number should be included on the 

subject line if e-mail 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 

a.m. and 3 p.m. Copies of the 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–Phlx–2011–13 and should 

be submitted on or before March 25, 

2011. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.68

Cathy H. Ahn, 

Deputy Secretary. 

[FR Doc. 2011–4898 Filed 3–3–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63979; File No. SR–Phlx– 

2011–21] 

Self-Regulatory Organizations; 

NASDAQ OMX PHLX LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change Relating to 

Quality Opening Markets 

February 25, 2011. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’),1 and Rule 19b–4 2 thereunder, 

notice is hereby given that, on February 

16, 2011, NASDAQ OMX PHLX LLC 

(‘‘Phlx’’ or ‘‘Exchange’’) filed with the 

Securities and Exchange Commission 

(‘‘SEC’’ or ‘‘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. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange, pursuant to Section 

19(b)(1) of the Act 3 and Rule 19b–4 

thereunder,4 proposes to amend Rule 

1017, Openings in Options, to reflect a 

system change under which the PHLX 

XL® automated options trading system 5

will initiate an opening ‘‘imbalance 

process’’ during the opening of trading 

in an option series when: (i) No other 

U.S. options exchange has opened the 

affected series for trading, and (ii) there 

is not a ‘‘quality opening market’’ (as 

defined below) present on the Exchange 

in such option series. 

The text of the proposed rule change 

is available on the Exchange’s Web site 

at http://www.nasdaqtrader.com/ 

micro.aspx?id=PHLXRulefilings, at the 

principal office of the Exchange, 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 

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 purpose of the proposed rule 

change is to improve the quality of 

executions that take place on the 

Exchange during the Opening Process 

when no other market center is open for 

trading in the affected series, by 

amending Exchange Rule 1017. 

Specifically, the Exchange’s PHLX XL 

system will initiate an imbalance 

process when marketable opening 

orders on the Exchange could be 

executed against valid width quotes 

(defined in Exchange Rule 1014) 6 but 

there is not a ‘‘quality opening market’’ 


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