Federal Register / Vol. 76, No. 62 / Thursday, March 31, 2011 / Notices 17973 

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

2 17 CFR 240.19b–4. 

3At the time C2 submitted the original proposed 

rule change, it had not yet obtained formal approval 

from its Board of Directors for the specific Bylaw 

and rule changes set forth in this proposed rule 

change. C2 stated that once that approval was 

obtained, the Exchange would file a technical 

amendment to its proposed rule change to reflect 

that approval. In Amendment No. 1, the Exchange 

notes that the C2 Board of Directors approved the 

specific Bylaw and rule changes set forth in SR–C2– 

2011–003 on February 8, 2011 and stated that no 

further action was necessary in connection with its 

proposal. Amendment No. 1 is technical in nature, 

and the Commission is not publishing Amendment 

No. 1 for public comment. 

4See Securities Exchange Act Release No. 63845 

(February 4, 2011), 76 FR 7598 (‘‘Notice’’). 

5The specific proposed Bylaw and rule changes 

relating to the elimination of the Office of the Vice 

Chairman are discussed in detail in the Notice. See 

Notice, supra note 4, 76 FR at 7598–7599. 

6Currently, the Vice Chairman is an office held 

by one of the Exchange’s Industry Directors. See 

Notice, supra note 4, 76 FR at 7598. 

7See Notice, supra note 4, 76 FR at 7598. 

8See Notice, supra note 4, 76 FR at 7599. 

9See Notice, supra note 4, 76 FR at 7599. 

10See Notice, supra note 4, 76 FR at 7599 (noting 

that the C2 Audit Committee has a more limited 

role focusing on: (1) C2’s financial statements and 

disclosure matters, and (2) C2’s oversight and risk 

management, including compliance with legal and 

regulatory requirements, in each case, only to the 

extent required in connection with C2’s discharge 

of its obligations as a self-regulatory organization). 

Institution and settlement of 

administrative proceedings; and 

Other matters relating to enforcement 

proceedings. 

At times, changes in Commission 

priorities require alterations in the 

scheduling of meeting items. 

For further information and to 

ascertain what, if any, matters have been 

added, deleted or postponed, please 

contact: 

The Office of the Secretary at (202) 

551–5400. 

Dated: March 29, 2011. 

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. 2011–7731 Filed 3–29–11; 4:15 pm] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–64128; File No. SR–C2– 

2011–003] 

Self-Regulatory Organizations; C2 

Options Exchange, Incorporated; 

Order Approving Proposed Rule 

Change, as Modified by Amendment 

No. 1, Relating to Bylaw and Related 

Rule Changes 

March 25, 2011. 

I. Introduction 

On January 27, 2011, C2 Options 

Exchange, Incorporated (‘‘C2’’ or 

‘‘Exchange’’) filed with the Securities 

and Exchange Commission 

(‘‘Commission’’), pursuant to Section 

19(b)(1) of the Securities Exchange Act 

of 1934 (‘‘Act’’),1 and Rule 19b–4 

thereunder,2 a proposed rule change to 

modify its governance structure. On 

February 9, 2011, the Exchange filed 

Amendment No. 1 to the proposed rule 

change.3 The proposed rule change was 

published for comment in the Federal 

Register on February 10, 2011.4 The 

Commission received no comment 

letters regarding the proposal. This 

order approves the proposed rule 

change, as modified by Amendment 

No. 1. 

II. Description of the Proposal 

The Exchange proposes to: (1) 

Eliminate its office of the Vice Chairman 

of the Board (‘‘Vice Chairman’’); (2) 

provide that the Board of Directors may 

establish an Advisory Board; and (3) 

eliminate the C2 Audit Committee. 

A. Elimination of the Office of the Vice 

Chairman of the Board 

The Exchange proposes to amend its 

Bylaws to eliminate the office of the 

Vice Chairman.5 The primary function 

of the Vice Chairman’s office was to 

facilitate communication between the 

Exchange and its Trading Permit 

Holders and to coordinate the activities 

of Trading Permit Holder committees.6

The Exchange believes that C2 

management is able to perform these 

functions and has represented that it 

will continue to obtain input from 

Trading Permit Holders through other 

channels, including direct 

communication with individual Trading 

Permit Holders, committees established 

by the Exchange, and through the 

proposed Advisory Board (discussed 

below).7

B. Provision for an Advisory Board 

The Exchange proposes to adopt 

Section 6.1 of the Bylaws that would 

allow the Board of Directors to establish 

an Advisory Board which would advise 

the Office of the Chairman regarding 

matters of interest to Trading Permit 

Holders. According to the Exchange, 

this would be beneficial because it 

would provide another vehicle by 

which the Exchange management could 

receive advice and feedback from 

Trading Permit Holders.8 Under the 

proposal, the Board of Directors would 

determine the number of members of 

the Advisory Board, the Chief Executive 

Officer or his or her designee would 

serve as the Chairman of an Advisory 

Board, and the C2 Nominating and 

Governance Committee would 

recommend the members of any 

Advisory Board for approval by the 

Board of Directors. 

The Advisory Board would be 

completely advisory in nature and 

would not be vested with any Exchange 

decision-making authority or other 

authority to act on behalf of the 

Exchange. Pursuant to proposed Section 

6.1 of the Bylaws, the Board of Directors 

would have the discretion as to whether 

(or not) to put an Advisory Board in 

place. C2 has represented that the Board 

of Directors intends to establish an 

Advisory Board.9

C. Elimination of Exchange Audit 

Committee 

C2 proposes to amend its Bylaws to 

eliminate its Audit Committee because 

its functions are duplicative of the 

functions performed by the Audit 

Committee of its parent company, CBOE 

Holdings, Inc. (‘‘CBOE Holdings’’). 

The CBOE Holdings Audit Committee 

has broad authority to assist the CBOE 

Holdings Board of Directors in 

discharging its responsibilities relating 

to, among other things: (1) The 

qualifications, engagement, and 

oversight of CBOE Holdings’ 

independent auditor; (2) CBOE 

Holdings’ financial statements and 

disclosure matters; (3) CBOE Holdings’ 

internal audit function and internal 

controls; and (4) CBOE Holdings’ 

oversight and risk management, 

including compliance with legal and 

regulatory requirements. CBOE 

Holdings’ financial statements are 

prepared on a consolidated basis that 

includes the financial results of CBOE 

Holdings’ subsidiaries, including C2. 

Therefore, according to the Exchange, 

the CBOE Holdings Audit Committee’s 

purview necessarily includes C2 and the 

responsibilities of the C2 Audit 

Committee are fully duplicated by the 

responsibilities of the CBOE Holdings 

Audit Committee.10 Consequently, C2 

proposes that the responsibilities of its 

audit committee be performed by the 

CBOE Holdings Audit Committee. 

Although the CBOE Holdings Audit 

Committee would continue to have 

overall responsibility with respect to the 

internal audit function, the C2 Board of 

Directors would maintain its own 

independent oversight over the internal 

audit function with respect to C2 

regulatory functions through the C2 

Regulatory Oversight Committee. 

Specifically, upon elimination of the C2 

Audit Committee, the Regulatory 

Oversight Committee would have the 

authority to review the internal audit 

plan relating to C2’s regulatory 


wwoods2 on DSK1DXX6B1PROD with NOTICES
17974 Federal Register / Vol. 76, No. 62 / Thursday, March 31, 2011 / Notices 

11These changes would be in addition to the C2’s 

current Regulatory Oversight Committee charter 

provision, which provides that the Regulatory 

Oversight Committee shall meet regularly with C2’s 

internal auditor regarding regulatory functions. C2’s 

Regulatory Oversight Committee would continue its 

existing practice of reviewing internal audits of C2’s 

regulatory functions. See Notice, supra note 4, 76 

FR at 7600. 

12 In approving this proposed rule change, the 

Commission has considered the proposed rule’s 

impact on efficiency, competition, and capital 

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

13 15 U.S.C. 78f(b)(1). 

14Representative Directors are Industry Directors 

nominated (or otherwise selected through a petition 

process) by the Industry-Director Subcommittee of 

the C2 Nominating and Governance Committee. C2 

Trading Permit Holders may nominate alternative 

Representative Director candidates to those 

nominated by the Industry Director Subcommittee, 

in which case a Run-off Election would be held in 

which C2’s Trading Permit Holders would vote to 

determine which candidates would be elected to 

the C2 Board of Directors to serve as Representative 

Directors. See Notice, supra note 4, 76 FR at 7599. 

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

16See Securities Exchange Act Release No. 61152 

(December 10, 2009), 74 FR 66699 (December 16, 

2009) (File No. 191) (approving C2 as a national 

securities exchange) (‘‘C2 Approval Order’’). 

17Persons interested in being considered for a 

seat on an Advisory Board could contact the 

Nominating and Governance Committee, but the 

Nominating and Governance Committee would 

have sole discretion in recommending members of 

the Advisory Board to the Board of Directors for 

approval. 

18See Securities Exchange Act Release No. 55293 

(February 14, 2007), 72 FR 8033 (February 22, 2007) 

(SR–NYSE–2006–120). 

19See Securities Exchange Act Release Nos. 

60276 (July 9, 2009), 74 FR 34840 (July 17, 2009) 

(SR–NASDAQ–2009–042), 60247 (July 17, 2009), 74 

FR 33495 (July 13, 2009) (SR–BX–2009–021), and 

60687 (September 18, 2009), 74 FR 49060 

(September 25, 2009) (SR–Phlx–2009–59). 

20 15 U.S.C. 78s(b)(2). 

21 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

functions and to request at any time that 

C2’s internal auditor conduct an audit 

relating to those functions.11

III. Discussion 

After careful review of the proposal, 

the Commission finds that the proposed 

rule change, as modified by Amendment 

No. 1, is consistent with the 

requirements of the Act and the rules 

and regulations thereunder applicable to 

a national securities exchange.12 In 

particular, the Commission finds that 

the proposal is consistent with Section 

6(b)(1) of the Act,13 which requires a 

national securities exchange to be so 

organized and have the capacity to carry 

out the purposes of the Act and to 

comply, and to enforce compliance by 

its members and persons associated 

with its members, with the provisions of 

the Act. 

The Commission finds that the 

proposed elimination of C2’s Office of 

the Vice Chairman of the Board is 

consistent with the Act. As noted above, 

the Exchange believes that the role 

previously performed by the Vice 

Chairman of the Board can effectively be 

performed by C2 management and the 

new Advisory Board. Accordingly, the 

Exchange seeks to eliminate this 

position to make its governance 

structure more streamlined and 

efficient. With respect to member input 

in the affairs of the Exchange, the 

Commission notes that the Exchange 

Bylaws will continue to require that at 

least 30% of the directors on the C2 

Board of Directors be Industry Directors 

and that at least 20% of C2’s directors 

be Representative Directors.14 The 

Commission has previously noted that 

this requirement, consistent with 

Section 6(b)(3) of the Act,15 helps to 

ensure that an exchange’s members have 

a voice in the governing body of the 

exchange and the corresponding 

exercise by the exchange of its selfregulatory authority, and that the 

exchange is administered in a way that 

is equitable to all who trade on its 

market or through its facilities.16 The 

Commission believes that, despite the 

elimination of the office of the Vice 

Chairman, C2 governance will continue 

to provide for the fair representation of 

C2 Trading Permit Holders in the 

selection of directors and the 

administration of the Exchange 

consistent with Section 6(b)(3) of the 

Act. Further, as discussed below, 

additional opportunities for member 

input could result from the proposed 

Advisory Board. 

In addition, the Commission finds 

that the Exchange’s proposal to 

authorize an Advisory Board to advise 

the Office of the Chairman regarding 

matters of interest to Trading Permit 

Holders is consistent with the Act. With 

respect to composition, the Nominating 

and Governance Committee will 

recommend members of the Advisory 

Board for approval by the Board of 

Directors.17 The Commission notes that 

the new Advisory Board will be 

advisory in nature and will not be 

vested with decision-making authority 

or the authority to act on behalf of the 

Exchange. Nevertheless, the Advisory 

Board could serve as a supplemental 

adjunct advisory body that can provide 

an additional forum for members to be 

heard and provide input to Exchange 

management above and beyond the 

formal role played by Representative 

Directors, discussed above. 

Finally, the Commission finds that the 

proposed elimination of C2’s Audit 

Committee is consistent with the Act. 

The Commission previously approved a 

structure in which certain committees of 

the board of directors of NYSE 

Euronext, including its audit committee, 

were authorized to perform functions 

for various subsidiaries, including the 

New York Stock Exchange, LLC.18 More 

recently, the Commission approved 

proposals by The NASDAQ Stock 

Market LLC, NASDAQ OMX BX, Inc., 

and NASDAQ OMX PHLX, Inc. to 

eliminate their respective audit 

committees.19 The responsibilities of 

the C2 Audit Committee are fully 

duplicated by the CBOE Holdings Audit 

Committee. Further, the C2 Regulatory 

Oversight Committee has broad 

authority to oversee the adequacy and 

effectiveness of C2’s regulatory 

responsibilities and is able to maintain 

oversight over internal controls in 

tandem with the CBOE Holdings Audit 

Committee. Accordingly, elimination of 

the C2 Audit Committee should not 

impact the ability of the C2 Board or the 

C2 Regulatory Oversight Committee to 

maintain substantial and independent 

oversight of the Exchange’s regulatory 

program. 

IV. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,20 that the 

proposed rule change (SR–C2–2011– 

003), as modified by Amendment No. 1, 

be, and hereby is, approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.21

Cathy H Ahn, 

Deputy Secretary. 

[FR Doc. 2011–7605 Filed 3–30–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–64127; File No. SR–CBOE– 

2011–010] 

Self-Regulatory Organizations; 

Chicago Board Options Exchange, 

Incorporated; Order Approving 

Proposed Rule Change, as Modified by 

Amendment No. 1, Relating to Bylaw 

and Related Rule Changes 

March 25, 2011. 

I. Introduction 

On January 27, 2011, Chicago Board 

Options Exchange, Incorporated 

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

Securities and Exchange Commission 

(‘‘Commission’’), pursuant to Section 

19(b)(1) of the Securities Exchange Act 

of 1934 (‘‘Act’’),1 and Rule 19b–4 

thereunder,2 a proposed rule change to 

modify its governance structure. On 

February 9, 2011, the Exchange filed 


wwoods2 on DSK1DXX6B1PROD with NOTICES