20058 Federal Register / Vol. 76, No. 69 / Monday, April 11, 2011 / Notices 

10 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. 78f(b). 

4 15 U.S.C. 781. 

provisions of 5 U.S.C. 552, will be 

available for website viewing and 

printing in the Commission’s Public 

Reference Room, 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–2011–044 and 

should be submitted on or before May 

2, 2011. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.10

Cathy H. Ahn, 

Deputy Secretary. 

[FR Doc. 2011–8475 Filed 4–8–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–64186; File No. SR–EDGX– 

2011–07] 

Self-Regulatory Organizations; EDGX 

Exchange, Inc.; Notice of Filing and 

Order Granting Accelerated Approval 

of Proposed Rule Change To Adopt 

Rule 3.22 (Proxy Voting), in 

Accordance With the Provisions of 

Section 957 of the Dodd-Frank Wall 

Street Reform and Consumer 

Protection Act 

April 5, 2011. 

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

Securities Exchange Act of 1934 (the 

‘‘Exchange Act’’ or ‘‘Act’’),1 and Rule 

19b–4 thereunder,2 notice is hereby 

given that on March 24, 2011, EDGX 

Exchange, Inc. (the ‘‘Exchange’’ or 

‘‘EDGX’’) filed with the Securities and 

Exchange Commission (the 

‘‘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, and is 

approving the proposed rule change on 

an accelerated basis. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to adopt Rule 

3.22 (Proxy Voting), in accordance with 

the provisions of Section 957 of the 

Dodd-Frank Wall Street Reform and 

Consumer Protection Act (the ‘‘DoddFrank Act’’). The text of the proposed 

rule change is attached as Exhibit 5 and 

is available on the Exchange’s Web site 

at http://www.directedge.com, at the 

Exchange’s principal office, and at the 

Public Reference Room of the 

Commission. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

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 III below. The 

self-regulatory organization has 

prepared summaries, set forth in 

Sections A, B and C below, of the most 

significant aspects of such statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

Purpose 

The Exchange is proposing to adopt 

EDGX Rule 3.22 (Proxy Voting), in 

accordance with the provisions of 

Section 957 of the Dodd-Frank Act, to 

prohibit Members from voting 

uninstructed shares if the matter voted 

on relates to (i) The election of a 

member of the board of directors of an 

issuer (other than an uncontested 

election of a director of an investment 

company registered under the 

Investment Company Act of 1940 (the 

‘‘Investment Company Act’’)), (ii) 

executive compensation, or (iii) any 

other significant matter, as determined 

by the Securities and Exchange 

Commission (the ‘‘Commission’’), by 

rule. 

Section 957 of the Dodd-Frank Act 

amends Section 6(b) 3 of the Securities 

Exchange Act of 1934 (the ‘‘Exchange 

Act’’) [sic] to require the rules of each 

national securities exchange to prohibit 

any member organization that is not the 

beneficial owner of a security registered 

under Section 12 4 of the Exchange Act 

from granting a proxy to vote the 

security in connection with certain 

stockholder votes, unless the beneficial 

owner of the security has instructed the 

member organization to vote the proxy 

in accordance with the voting 

instructions of the beneficial owner. The 

stockholder votes covered by Section 

957 include any vote with respect to (i) 

The election of a member of the board 

of directors of an issuer (other than an 

uncontested election of a director of an 

investment company registered under 

the Investment Company Act), (ii) 

executive compensation, or (iii) any 

other significant matter, as determined 

by the Commission, by rule. 

Accordingly, in order to carry out the 

requirements of Section 957 of the 

Dodd-Frank Act, the Exchange proposes 

to adopt proposed EDGX Rule 3.22 to 

prohibit any Member from giving a 

proxy to vote stock that is registered in 

its name, unless: (i) Such Member is the 

beneficial owner of such stock; (ii) 

pursuant to the written instructions of 

the beneficial owner; or (iii) pursuant to 

the rules of any national securities 

exchange or association of which it is a 

member provided that the records of the 

Member clearly indicate the procedure 

it is following. The Exchange is 

proposing to adopt these rules because 

other national securities exchanges and 

associations do allow proxy voting 

under certain limited circumstances 

while the current Exchange Rules are 

silent on such matters. Therefore, a 

Member that is also a member of 

another national securities exchange or 

association may vote the shares held for 

a customer when allowed under its 

membership at another national 

securities exchange or association, 

provided that the records of the Member 

clearly indicate the procedure it is 

following. 

Notwithstanding the foregoing, a 

Member that is not the beneficial owner 

of a security registered under Section 12 

of the Exchange Act is prohibited from 

granting a proxy to vote the security in 

connection with a shareholder vote with 

respect to the election of a member of 

the board of directors of an issuer 

(except for a vote with respect to 

uncontested election of a member of the 

board of directors of any investment 

company registered under the 

Investment Company Act), executive 

compensation, or any other significant 

matter, as determined by the 

Commission, by rule, unless the 

beneficial owner of the security has 

instructed the Member to vote the proxy 

in accordance with the voting 

instructions of the beneficial owner. 

Because Section 957 of the DoddFrank Act does not provide for a 

transition phase, the Exchange is 


srobinson on DSKHWCL6B1PROD with NOTICES
Federal Register / Vol. 76, No. 69 / Monday, April 11, 2011 / Notices 20059 

5 15 U.S.C. 78a et seq. 

6 15 U.S.C. 78f(b). 

7 15 U.S.C. 78f(b)(10). 

8 15 U.S.C. 78f(b)(5). 

9See Securities Exchange Act Release 63139 

(October 20, 2010), 75 FR 65680 (October 26, 2010) 

(SR–ISE–2010–99); 61052 (November 23, 2009), 74 

FR 62857 (December 1, 2009) (SR–FINRA–2009– 

066) (finding that the proposed rule change was 

consistent with the Act because the Rule ‘‘will 

continue to provide FINRA members with guidance 

on the forwarding of proxy and other issuer-related 

materials.’’); 62992 (September 24, 2010), 75 FR 

60844 (October 1, 2010) (SR–NASDAQ–2010–114); 

and 48735 (October 31, 2003), 68 FR 63173 

(November 7, 2003) (SR–PCX–2003–50). 

10 In approving this rule change, the Commission 

notes that it has considered the proposed rule’s 

impact on efficiency, competition, and capital 

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

11 15 U.S.C. 78f(b)(5). 

proposing to adopt the proposed rule 

change pursuant to Section 19(b) of the 

Exchange Act to comply with Section 

957 of the Dodd-Frank Act and is 

requesting that the Commission approve 

the proposal on an accelerated basis. 

Additionally, proposed EDGX Rule 

3.22(a) is based on NYSE Arca, Inc. 

(‘‘NYSE Arca’’) rule 9.4 and Financial 

Industry Regulatory Authority 

(‘‘FINRA’’) rule 2251, International 

Securities Exchange, LLC (‘‘ISE’’) rule 

421(a) and proposed EDGX Rule 3.22(b) 

is based on Nasdaq rule 2251(d) and ISE 

rule 421(b). 

Basis 

The Exchange believes the proposed 

rule change is consistent with the Act 5

and the rules and regulations 

thereunder and, in particular, the 

requirements of Section 6(b) of the Act.6

Specifically, the Exchange believes the 

proposed rule change is consistent with 

Section 6(b)(10) 7 requirements that all 

national securities exchanges adopt 

rules prohibiting members from voting, 

without receiving instructions from the 

beneficial owner of shares, on the 

election of a member of a board of 

directors of an issuer (except for a vote 

with respect to the uncontested election 

of a member of the board of directors of 

any investment company registered 

under the Investment Company Act of 

1940), executive compensation, or any 

other significant matter, as determined 

by the Commission, by rule. The 

Exchange also believes that the 

proposed rule change is consistent with 

the requirements under Section 6(b)(5) 8

that an exchange have rules that are 

designed to prevent fraudulent and 

manipulative acts and practices, to 

promote just and equitable principles of 

trade, to remove impediments to, and 

perfect the mechanism of a free and 

open market and, in general, to protect 

investors and the public interest. The 

Exchange is adopting this proposed rule 

change to comply with the requirements 

of Section 957 of the Dodd-Frank Act, 

and therefore believes the proposed rule 

change to be consistent with the Act, 

particularly with respect to the 

protection of investors and the public 

interest. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The proposed rule change does not 

impose any burden on competition that 

is 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 

The Exchange has not solicited, and 

does not intend to solicit, comments on 

this proposed rule change. The 

Exchange has not received any 

unsolicited written comments from 

members or other interested parties. 

III. 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–EDGX–2011–07 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–EDGX–2011–07. 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 website 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 such 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–EDGX– 

2011–07 and should be submitted on or 

before May 2, 2011. 

IV. Commission’s Findings and Order 

Granting Accelerated Approval of the 

Proposed Rule Change 

In its filing, the Exchange requested 

that the Commission approve the 

proposal on an accelerated basis so that 

the Exchange could immediately 

comply with the requirements imposed 

by the Dodd-Frank Act, and because the 

proposed rule text is based upon ISE 

Rule 421, FINRA Rule 2251, Nasdaq 

Rule 2251(d), and NYSE Arca Rule 9.4.9

After careful consideration, the 

Commission finds that the proposed 

rule change is consistent with the 

requirements of the Act and the rules 

and regulations thereunder applicable to 

a national securities exchange.10

The Commission believes that 

proposed Rule 3.22(a) is consistent with 

Section 6(b)(5) 11 of the Act, which 

provides, among other things, that the 

rules of the Exchange must be designed 

to promote just and equitable principles 

of trade, 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, and 

are not designed to permit unfair 

discrimination between customers, 

issuers, brokers, or dealers. 

Under proposed Rule 3.22(a), a 

Member shall be prohibited from voting 

uninstructed shares unless (1) That 

Member is the beneficial owner of the 

stock; (2) pursuant to the written 

instructions of the beneficial owner; or 

(3) pursuant to the rules of any national 

securities exchange or association of 

which it is also a member, provided that 

the Member’s records clearly indicate 

the procedure it is following. This 

provision is based on ISE Rule 421, 

FINRA Rule 2251 and NYSE Arca Rule 

9.4, which were previously approved by 


srobinson on DSKHWCL6B1PROD with NOTICES
20060 Federal Register / Vol. 76, No. 69 / Monday, April 11, 2011 / Notices 

12See supra note 9. 

13 15 U.S.C. 78f(b)(10). 

14See S. Rep. No. 111–176, at 136 (2010). 

15The Commission has not, to date, adopted rules 

concerning other significant matters where 

uninstructed broker votes should be prohibited, 

although it may do so in the future. Should the 

Commission adopt such rules, we would expect the 

Exchange to adopt coordinating rules promptly to 

comply with the statute. 

16 15 U.S.C. 78f(b)(5). 

17As the Commission stated in approving NYSE 

rules prohibiting broker voting in the election of 

directors, having those with an economic interest in 

the company vote the shares, rather than the broker 

who has no such economic interest, furthers the 

goal of enfranchising shareholders. See Securities 

Exchange Act Release No. 60215 (July 1, 2009), 74 

FR 33293 (July 10, 2009) (SR–NYSE–2006–92). 

18 15 U.S.C. 78s(b)(2). 

19See supra note 9. 

20See supra note 9. 

21 15 U.S.C. 78s(b)(2). 

22 17 CFR 200.30–3(a)(12). 

the Commission.12 The Commission 

notes that the proposed change will 

provide clarity to Exchange Members 

going forward on whether broker 

discretionary voting is permitted by 

Exchange Members under limited 

circumstances when the Member is also 

a member of another national securities 

exchange that permits broker 

discretionary voting. In approving this 

portion of the proposal, the Commission 

notes that Rule 3.22(a) is consistent with 

the approach taken under the rules of 

other national securities exchanges or 

national securities association, and for 

Exchange Members who are not also 

members of another national securities 

exchange prohibits broker discretionary 

voting on any matter, consistent with 

investor protection and the public 

interest. 

The Commission believes that 

proposed Rule 3.22(b) is consistent with 

Section 6(b)(10) 13 of the Act, which 

requires that national securities 

exchanges adopt rules prohibiting 

members that are not beneficial holders 

of a security from voting uninstructed 

proxies with respect to the election of a 

member of the board of directors of an 

issuer (except for uncontested elections 

of directors for companies registered 

under the Investment Company Act), 

executive compensation, or any other 

significant matter, as determined by the 

Commission by rule. 

The Commission believes that 

proposed Rule 3.22(b) is consistent with 

Section 6(b)(10) of the Act because it 

adopts revisions that comply with that 

section. As noted in the accompanying 

Senate Report, Section 957, which 

enacted Section 6(b)(10), reflects the 

principle that ‘‘final vote tallies should 

reflect the wishes of the beneficial 

owners of the stock and not be affected 

by the wishes of the broker that holds 

the shares.’’ 14 The proposed rule change 

will make the Exchange compliant with 

the new requirements of Section 

6(b)(10) by specifically prohibiting 

broker-dealers, who are not beneficial 

owners of a security, from voting 

uninstructed shares in connection with 

a shareholder vote on the election of a 

member of the board of directors of an 

issuer (except for a vote with respect to 

the uncontested election of a member of 

the board of directors of any investment 

company registered under the 

Investment Company Act of 1940), 

executive compensation, or any other 

significant matter, as determined by the 

Commission by rule, unless the member 

receives voting instructions from the 

beneficial owner of the shares.15

The Commission also believes that 

proposed Rule 3.22(b) is consistent with 

Section 6(b)(5) 16 of the Act, which 

provides, among other things, that the 

rules of the Exchange must be designed 

to promote just and equitable principles 

of trade, 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, and 

are not designed to permit unfair 

discrimination between customers, 

issuers, brokers, or dealers. 

The Commission believes that the rule 

assures that shareholder votes on the 

election of the board of directors of an 

issuer (except for a vote with respect to 

the uncontested election of a member of 

the board of directors of any investment 

company registered under the 

Investment Company Act of 1940) and 

on executive compensation matters are 

made by those with an economic 

interest in the company, rather than by 

a broker that has no such economic 

interest, which should enhance 

corporate governance and accountability 

to shareholders.17

Based on the above, the Commission 

finds that the Exchange’s proposal will 

further the purposes of Sections 6(b)(5) 

and 6(b)(10) of the Act because it should 

enhance corporate accountability to 

shareholders while also serving to fulfill 

the Congressional intent in adopting 

Section 6(b)(10) of the Act. 

The Commission also finds good 

cause, pursuant to Section 19(b)(2) of 

the Act,18 for approving the proposed 

rule change prior to the 30th day after 

the date of publication of notice in the 

Federal Register. The Commission 

believes that good cause exists to grant 

accelerated approval to proposed Rule 

3.22(a), because this proposed rule will 

conform the Exchange rule to ISE Rule 

421, NYSE Arca Rule 9.4 and FINRA 

Rule 2251, which were published for 

public comment in the Federal Register 

and approved by the Commission, and 

for which no comments were received.19

Because proposed Rule 3.22(a) is 

substantially similar to the ISE, NYSE 

Arca and FINRA rules, it raises no new 

regulatory issues. 

The Commission also believes that 

good cause exists to grant accelerated 

approval to proposed Rule 3.22(b), 

which conforms the Exchange’s rules to 

the requirements of Section 6(b)(10) of 

the Act. Section 6(b)(10) of the Act, 

enacted under Section 957 of the DoddFrank Act, does not provide for a 

transition phase, and requires rules of 

national securities exchanges to prohibit 

broker voting on the election of a 

member of the board of directors of an 

issuer (except for a vote with respect to 

the uncontested election of a member of 

the board of directors of any investment 

company registered under the 

Investment Company Act of 1940), 

executive compensation, or any other 

significant matter, as determined by the 

Commission by rule. The Commission 

believes that good cause exists to grant 

accelerated approval to proposed Rule 

3.22(b), because it will conform the 

Exchange rule to the requirements of 

Section 6(b)(10) of the Act. Moreover, 

proposed Rule 3.22(b) is substantially 

similar to ISE Rule 421 and Nasdaq Rule 

2251.20

V. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,21 that the 

proposed rule change (SR–EDGX–2011– 

07) be, and it hereby is, approved on an 

accelerated basis. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.22

Cathy H. Ahn, 

Deputy Secretary. 

[FR Doc. 2011–8476 Filed 4–8–11; 8:45 am] 

BILLING CODE 8011–01–P 


srobinson on DSKHWCL6B1PROD with NOTICES