49060 Federal Register / Vol. 74, No. 185 / Friday, September 25, 2009 / Notices 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 60431 

(August 4, 2009), 74 FR 40265 (‘‘Notice’’). 4Amendment No. 2 is a technical amendment 

that reflects approval of portions of the proposed 

rule change by the Exchange’s Board of Governors 

(‘‘Board’’) and therefore is not required to be 

published for comment. 5The Exchange states that the NASDAQ OMX 

audit committee has broad authority to review the 

financial information that will be provided to 

shareholders and others, systems of internal 

controls, and audit, financial reporting and legal 

and compliance processes and, because NASDAQ 

OMX’s financial statements are prepared on a 

consolidated basis that includes the financial 

results of NASDAQ OMX’s subsidiaries, including 

Phlx, the NASDAQ OMX audit committee’s 

purview necessarily includes these subsidiaries. In 

addition, the Exchange states that the NASDAQ 

OMX audit committee currently is charged with 

providing oversight of financial reporting and 

independent auditor selection for NASDAQ OMX 

and all of its subsidiaries, including Phlx, and the 

NASDAQ OMX audit committee has general 

responsibility for oversight of internal controls and 

direction and oversight of the internal audit 

function for NASDAQ OMX and all of its 

subsidiaries. See Notice, 74 FR at 40266–67. 

6According to the Exchange, the NASDAQ OMX 

audit committee is composed of four or five 

directors, all of whom must be independent under 

the standards established by Section 10A(m) of the 

Act and the listing rules of The NASDAQ Exchange. 

See NASDAQ OMX Bylaws, Section 4.13(i); 

NASDAQ Exchange Rules, IM–5605–3. All 

committee members must be able to read and 

understand financial statements, and at least one 

member must have past employment experience in 

finance or accounting, requisite professional 

certification in accounting, or any other comparable 

experience or background that results in the 

individual’s financial sophistication. See NASDAQ 

Exchange Rules, IM–5603–3. 

7See Phlx Bylaws, Article I(p) for the definition 

of ‘‘Independent Governor.’’ 

8See Notice, 74 FR at 40266. 

9See id. 

10See id. 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–60687; File No. SR–Phlx– 

2009–59] 

Self-Regulatory Organizations; 

NASDAQ OMX PHLX, Inc.; Order 

Approving Proposed Rule Change, as 

Modified by Amendment Nos. 1 and 2 

Thereto, Relating to the Exchange’s 

By-Laws, Regulatory Oversight 

Committee and Referee Program 

September 18, 2009. 

On July 27, 2009, NASDAQ OMX 

PHLX, Inc. (‘‘Phlx’’ 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 July 30, 2009, the 

Exchange filed Amendment No. 1 to the 

proposed rule change. The proposed 

rule change was published for comment 

in the Federal Register on August 11, 

2009.3 On September 9, 2009, the 

Exchange filed Amendment No. 2 to the 

proposed rule change.4 The Commission 

received no comments regarding the 

proposal. This order approves the 

proposed rule change, as modified by 

Amendment Nos. 1 and 2. 

I. Description of the Proposed Rule 

Change 

The Exchange seeks to conform 

several aspects of its governance 

structure more closely to the governance 

structure of certain of its affiliates, The 

NASDAQ Stock Market LLC (the 

‘‘NASDAQ Exchange’’) and NASDAQ 

OMX BX, Inc. (‘‘BX’’). Specifically, Phlx 

proposes to amend its By-Laws to allow 

for the elimination of its audit and 

management compensation committees. 

Phlx’s audit committee is primarily 

charged with: (1) Overseeing Phlx’s 

financial reporting process; (2) 

overseeing the systems of internal 

controls established by management and 

the Exchange’s Board, as well as the 

legal and compliance process; (3) 

selection and evaluation of independent 

auditors; and (4) direction and oversight 

of the internal audit function. Currently, 

the NASDAQ OMX audit committee 

also performs these functions.5 Phlx 

proposes that the responsibilities of its 

audit committee be performed by the 

NASDAQ OMX audit committee 6 and a 

new regulatory oversight committee to 

be established by the Exchange. 

Phlx also proposes to eliminate its 

compensation committee, and to 

prescribe that its duties be performed by 

the NASDAQ OMX compensation 

committee, or the full Phlx board when 

required. The NASDAQ OMX 

compensation committee considers and 

recommends compensation policies, 

programs, and practices for employees 

of NASDAQ OMX. According to Phlx, 

some employees performing work for 

Phlx are also employees of NASDAQ 

OMX, and certain senior officers of Phlx 

are also officers of NASDAQ OMX and 

other NASDAQ OMX subsidiaries 

because their responsibilities relate to 

multiple entities within the NASDAQ 

OMX corporate structure. As a result, 

NASDAQ OMX establishes 

compensation and compensation policy 

for these employees. To the extent that 

policies, programs, and practices must 

be established for any Phlx officers or 

employees who are not also NASDAQ 

OMX officers or employees, Phlx states 

that the Phlx Board will perform such 

actions without the use of a 

compensation committee, subject to 

recusal by the chief executive officer 

and the Stockholder Governor. 

The Exchange also proposes to create 

a regulatory oversight committee 

(‘‘ROC’’) composed of three members, 

each of whom would be an Independent 

Governor.7 The Exchange’s ROC would 

carry out regulatory oversight tasks 

formerly performed by the audit 

committee. More specifically, the ROC 

would oversee the adequacy and 

effectiveness of Phlx’s regulatory and 

self-regulatory organization 

responsibilities; assess Phlx’s regulatory 

performance; and assist the Board and 

its standing committees in reviewing the 

regulatory plan and the overall 

effectiveness of Phlx’s regulatory 

functions. Its duties would include 

reviewing Phlx’s regulatory budget and 

inquiring into the adequacy of resources 

available in the budget for regulatory 

activities; meeting regularly with Phlx’s 

chief regulatory officer in executive 

session; and being informed about the 

compensation and promotion or 

termination of the chief regulatory 

officer and the corresponding 

justifications for such actions. 

In addition, Phlx stated that, like the 

NASDAQ Exchange’s regulatory 

oversight committee, the proposed ROC 

will have broad authority to oversee the 

adequacy and effectiveness of Phlx’s 

regulatory and self-regulatory 

organization responsibilities, and will 

therefore be able to maintain oversight 

over controls in tandem with the 

NASDAQ OMX audit committee’s 

responsibilities.8 In this regard, Phlx 

noted that it is already the practice of 

NASDAQ OMX’s Internal Audit 

Department, which performs internal 

audit functions for all NASDAQ OMX 

subsidiaries, to report to the Phlx Board 

on all internal audit matters relating to 

Phlx, and that this practice would be 

formally reflected in the Department’s 

written procedures.9 Phlx also 

represented that, to ensure that the Phlx 

board retains authority to direct the 

Department’s activities with respect to 

Phlx, the Department’s written 

procedures will be amended to stipulate 

that the ROC may, at any time, direct 

the Department to conduct an audit of 

a matter of concern to it and report the 

results of the audit both to the ROC and 

the NASDAQ OMX audit committee.10

Phlx also proposes to codify in its ByLaws a description of the position of 

chief regulatory officer. Article V, 

Section 5–6 of the By-Laws would 

provide that the chief regulatory officer 

will have general supervision of Phlx’s 

regulatory operations, including the 

responsibility for overseeing its 

surveillance, examination, and 

enforcement functions and for 


jlentini on DSKJ8SOYB1PROD with NOTICES
Federal Register / Vol. 74, No. 185 / Friday, September 25, 2009 / Notices 49061 

11 In approving this proposed 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). 

12 15 U.S.C. 78(b)(1). 

13 15 U.S.C. 78f(b)(5). 

14Securities Exchange Act Release No. 55293 

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

(SR–NYSE–2006–120). 

15See Securities Exchange Act Release Nos. 

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

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

2009), 74 FR 33495 (July 13, 2009) (SR–BX–2009– 

021). 

16 15 U.S.C. 78s(b)(2). 

17 17 CFR 200.30–3(a)(12). 

administering any regulatory services 

agreements with another self-regulatory 

organization to which the Exchange is a 

party. The revised By-Laws would 

require the chief regulatory officer to 

meet with the regulatory oversight 

committee in executive session at 

regularly scheduled meetings, and at 

any time upon request of the chief 

regulatory officer or any member of the 

committee. 

Finally, Phlx proposes to replace its 

Referee with an Options Trade Review 

Committee, and, as more fully described 

in the Notice, make conforming changes 

to the Exchange’s rules and one of its 

Options Floor Procedure Advices. 

Currently, the Exchange’s By-Laws and 

rules provide that the Referee is an 

Exchange employee (or independent 

contractor), supervised by the audit 

committee, who reviews Options 

Exchange Official rulings concerning 

the nullification and/or adjustment of 

transactions. In addition, the Referee 

can act in the capacity of an Options 

Exchange Official respecting initial 

rulings concerning requests for relief 

from the requirements of certain 

Exchange rules, Equity Floor Procedure 

Advices and Option Floor Procedure 

Advices. The proposed new Options 

Trade Review Committee would review 

Options Exchange Official rulings, but 

would not act in the capacity of an 

Options Exchange Official, even though 

the Referee was able to do so. In light 

of the time sensitivity of rendering 

trading decisions, the Exchange would 

allow the Options Trade Review 

Committee to act through a panel with 

a minimum of three committee 

members, of which no more than 50% 

may be engaged in market making 

activity or employed by an Exchange 

Member Organization whose revenues 

from market making activity exceed 

10% of its total revenues. When needed, 

a panel would be selected by Exchange 

regulatory staff from the Committee 

members on a rotating basis, taking into 

consideration availability and prompt 

response as well as frequency of service, 

and the importance of assembling a 

panel quickly. Appeals of Options 

Exchange Official decisions would be 

presented to the panel on an anonymous 

basis to reduce the risk of conflict or 

bias. Committee decisions, like Referee 

decisions, would not be appealable. 

The Options Trade Review Committee 

would be appointed by the Exchange’s 

Board pursuant to new By-Law Article 

X, Section 10–10 as a standing 

committee of the Board and would 

include a number of Member 

Representative members equal to at least 

20% of the total number of members of 

the Committee. No more than 50% of 

committee members can be engaged in 

market making activity or employed by 

an Exchange Member Organization 

whose revenues from market making 

activity exceed 10% of its total 

revenues. 

II. Discussion and Commission 

Findings 

After careful review, the Commission 

finds that the proposed rule change is 

consistent with the requirements of the 

Act and the rules and regulations 

thereunder applicable to a national 

securities exchange.11 In particular, the 

Commission finds that the proposed 

rule change is consistent with Section 

6(b)(1) of the Act,12 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 also finds that 

the proposed rule change is consistent 

with Section 6(b)(5) of the Act,13 in that 

it is designed, among other things, 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 a national market system, and, in 

general, to protect investors and the 

public interest. 

The Commission finds that the 

proposed elimination of the Phlx’s audit 

and management compensation 

committees is consistent with the Act. 

The Commission previously approved a 

structure in which certain committees of 

the board of directors of NYSE 

Euronext, including the audit and 

compensation committees, were 

authorized to perform functions for 

various subsidiaries, including the New 

York Stock Exchange, LLC (‘‘NYSE’’).14

More recently, the Commission 

approved proposals by the NASDAQ 

Exchange and BX to eliminate their 

respective audit and compensation 

committees.15

The Commission further finds that the 

elimination of the Referee position and 

its replacement with the Options Trade 

Review Committee is consistent with 

the Act. The compositional 

requirements for the Committee and 

committee panels, the rotating service of 

panel members, and the anonymous 

presentation of appeals of Options 

Exchange Official decisions to a panel of 

the Committee are designed to assure 

impartial review of those decisions. 

Finally, the Commission finds that the 

proposals relating to codifying the 

position of chief regulatory officer and 

creating a regulatory oversight 

committee to oversee all regulatory 

initiatives are designed to allow the 

Exchange to carry out its regulatory 

obligations and are consistent with the 

Act. 

III. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,16 that the 

proposed rule change (SR–Phlx–2009– 

59), as modified by Amendment Nos. 1 

and 2, be, and it hereby is, approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.17

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–23096 Filed 9–24–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[File No. 500–1] 

AEI Transportation Holdings, Inc.; The 

Alcar Chemicals Group, Inc.; China 

Adnet Enterprises Inc.; Innolife 

Pharma, Inc.; KSW Industries, Inc.; 

Level Vision Electronics, Ltd.; Life 

Exchange, Inc.; Lotta Coal, Inc.; 

Magellan Energy Ltd.; Marinas 

International, Inc.; Microlink Solutions, 

Inc.; UDS Group, Inc.; United 

Environmental Energy Corp.; Uptrend 

Corp.; VShield Software Corp.; World 

Hockey Association Corp.; WW 

Energy, Inc.; Order of Suspension of 

Trading 

September 23, 2009. 

It appears to the Securities and 

Exchange Commission that there is a 

lack of current and accurate information 

concerning the securities of AEI 

Transportation Holdings, Inc., which are 

quoted on the Pink OTC Markets under 

the prior name of Doll Technology 

Group, Inc. using the ticker symbol 

DTGP. Trading in the securities of AEI 

Transportation Holdings, Inc. appears to 

be predicated on apparent 


jlentini on DSKJ8SOYB1PROD with NOTICES