Federal Register / Vol. 74, No. 78 / Friday, April 24, 2009 / Notices 18761 

11 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 59538 

(March 9, 2009), 74 FR 11152 (‘‘Notice’’). 

4Both the Exchange and Nasdaq are subsidiaries 

of The NASDAQ OMX GROUP, Inc. See Securities 

Exchange Act Release No. 58179 (July 17, 2008), 73 

FR 42874 (July 23, 2008) (SR–Phlx–2008–31) (order 

approving changes to the Exchange’s governing 

documents in connection with its acquisition by 

The NASDAQ OMX Group, Inc.). 

5 In approving this proposed rule change, the 

Commission has considered the proposed rule’s 

impact on efficiency, competition, and capital 

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

6 15 U.S.C. 78f(b)(1). 

7 15 U.S.C. 78f(b)(3). 

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

9The term ‘‘Designated Governor,’’ which 

includes the Member Governor and a number of 

Designated Independent Governors, refers to a 

Governor who is selected through a process that is 

subject to the input of the Exchange’s Member 

Organization Representatives. See Proposed Phlx 

By-Law Article I, Section 1–1(e) (defining 

‘‘Designated Governor’’ as proposed to be amended 

by Phlx to exclude the PBOT Governor position). 

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 inspection and copying 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– 

NYSEArca–2009–32 and should be 

submitted on or before May 15, 2009. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.11

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–9402 Filed 4–23–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–59794; File No. SR–Phlx– 

2009–17] 

Self-Regulatory Organizations; 

NASDAQ OMX PHLX, Inc., Order 

Approving Proposed Rule Change 

Relating to the Nomination and 

Election of Candidates for Governor 

and Independent Governor 

April 20, 2009. 

On February 23, 2009, NASDAQ OMX 

PHLX, Inc. (‘‘Phlx’’ or the ‘‘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 amend its Certificate of 

Incorporation and By-Laws to modify its 

processes relating to the nomination and 

election of candidates for the Board of 

Governors (‘‘Board’’). The proposed rule 

change was published for comment in 

the Federal Register on March 16, 

2009.3 The Commission received no 

comments regarding the proposal. This 

order approves the proposed rule 

change. 

In its filing, the Exchange sought to 

conform its governance structure, 

including its process for the nomination 

and election of candidates for Governor 

and Designated Independent Governor 

positions, to more closely resemble that 

of its corporate sibling, The NASDAQ 

Stock Market LLC (‘‘Nasdaq’’).4 In 

particular, the Exchange proposed 

several changes to its governance 

structure, including (i) bifurcating the 

‘‘Nominating, Elections and Governance 

Committee’’ into a separate 

‘‘Nominating Committee’’ and a 

‘‘Member Nominating Committee’’; (ii) 

modifying the processes for nominating 

candidates for Governor and Designated 

Independent Governor; (iii) modifying 

the procedures for Member Organization 

Representatives to vote for Designated 

Governor nominees and the procedures 

for meetings of Members and Member 

Organizations; (iv) changing the 

procedures for filling vacancies on the 

Board, and the timeframe for submitting 

Board resignations; and (v) adding 

several new definitions, including 

‘‘Industry Member,’’ ‘‘Non-Industry 

Member,’’ and ‘‘Member Representative 

member.’’ The Exchange also proposed 

to amend its Certificate of Incorporation 

and its By-Laws to delete the positions 

of Vice Chair and PBOT Governor. 

The Commission has carefully 

reviewed the proposed rule change and 

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 5 including, in 

particular, Section 6(b)(1) of the Act,6

which requires a national securities 

exchange to be so organized and have 

the capacity to carry out the purposes of 

the Act and to enforce compliance by its 

members and persons associated with 

its members with the provisions of the 

Act; Section 6(b)(3) of the Act,7 which 

requires that the rules of a national 

securities exchange assure a fair 

representation of its members in the 

selection of its directors and 

administration of its affairs, and 

provided that one or more directors 

shall be representative of issuers and 

investors and not be associated with a 

member of the exchange, broker or 

dealer; and Section 6(b)(5) of the Act,8

which requires that an exchange have 

rules 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 a national market 

system, and, in general, protect 

investors and the public interest. 

Among other things, the Exchange 

proposed to bifurcate its Nominating, 

Elections and Governance Committee 

into (1) a Member Nominating 

Committee that would be responsible 

for nominating candidates for each 

vacant Designated Governor 9 position 

and would also nominate candidates for 

appointment by the Board for each 

vacant or new position on any 

committee that is to be filled with a 

Member Representative member, and (2) 

a Nominating Committee that would 

nominate candidates for all other vacant 

Governor positions that are not 

nominated by the Member Nominating 

Committee. All members of the Member 

Nominating Committee would be a 

current associated person of a current 

member organization and would be 

appointed annually by the Board 

following consultations with Member 

Organization Representatives. The 

Nominating Committee would consist of 

a number of non-industry members that 

equal or exceed the number of industry 

members. In addition, a number of 

Public Members would be represented 

on the Nominating Committee, and no 

officer or employee of the Exchange 

could serve in any voting or non-voting 

capacity on the committee. 

Further, the Exchange proposed to 

modify its nominating process, 

including the procedures for Member 

Organization Representatives to vote for 

Designated Governor nominees and the 

procedures for meetings of Members 

and Member Organizations, to more 

closely align them with Nasdaq’s 

process and procedures. Among other 

things, the proposed procedures would 

continue to afford Member Organization 

Representatives the ability to nominate 

candidates for Designated Governor 

positions subject to certain conditions. 

In addition, in the event of a contested 

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18762 Federal Register / Vol. 74, No. 78 / Friday, April 24, 2009 / Notices 

10The function of the Vice Chair was to preside 

over meetings of the Board in the absence of the 

Chair. See Phlx By-Law Sec. 28–12. 

11With the acquisition of the Exchange by The 

NASDAQ OMX GROUP, Inc., the Philadelphia 

Board of Trade, Inc (‘‘PBOT’’) (n/k/a NASDAQ 

OMX Futures Exchange, Inc.) became a subsidiary 

of the parent holding company. Accordingly, the 

Exchange determined that it was no longer 

appropriate to provide for this special 

representation on the Board. See Notice, supra note 

3, at 74 FR 11157. 

12See the Exchange’s Certificate of Incorporation, 

Article Sixth. 

13The election of the Designated Governors is 

conducted pursuant to the Exchange’s Trust 

Agreement under which an independent trustee 

exercises voting authority with respect to the one 

outstanding share of Series A Preferred Stock, 

which share has the exclusive right to elect and 

remove such Governors. The Series A Preferred 

Stock is voted by the trustee, pursuant to the Trust 

Agreement, as directed by Phlx members in 

accordance with the Exchange’s governing 

documents. 

14 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3The term ‘‘Trading Officials’’ currently means 

two Exchange members designated as Floor 

Officials and one member of the Exchange’s staff 

designated to perform Trading Official functions. 

See Rules 6.25.02 and 24.16.02. 

vote for a Designated Governor position, 

Member Organization Representatives 

would have the opportunity to vote on 

the list of candidates, and the Exchange 

would utilize a balloting process rather 

than hold a formal meeting of members. 

The Exchange also proposed to delete 

the position of Vice Chair, which is a 

position that Nasdaq does not 

maintain.10 In addition, the Exchange 

proposed to eliminate the PBOT 

Governor position and replace it with a 

new Designated Independent Governor 

position.11 The Exchange’s current 

Certificate of Incorporation specifies 

that the Board shall be composed of ‘‘[a] 

number of Designated Independent 

Governors, which, together with the 

Member Governor and the PBOT 

Governor, shall equal at least 20% of the 

total number of Governors* * *’’ 12

Because the Exchange proposed to 

replace the PBOT Governor position 

with a new Designated Independent 

Governor, which position, like all other 

‘‘Designated’’ Governor positions, 

would be selected pursuant to a process 

that involves member input, the 

proposal does not change the 

composition of the Board with respect 

to the minimum percentage of 

Governors that would be selected 

pursuant to member input.13

Finally, the Exchange proposed to 

modify the process for filing vacancies 

on the Board to reflect the newly 

proposed structure. Among other things, 

in the event of a vacancy, the 

appropriate nominating committee 

would nominate, and the Board would 

appoint, a replacement Governor. For 

example, in the event of a vacancy in 

the Member Governor position, the new 

Member Nominating Committee would 

nominate a replacement. 

Accordingly, the proposed changes 

will more closely align Phlx’s 

governance structure to that of Nasdaq, 

which, like the Exchange, is a 

subsidiary of NASDAQ OMX GROUP, 

Inc. At the same time, the proposed 

changes will continue to assure the fair 

representation of the Exchange’s 

members in the selection of the 

Exchange’s directors and administration 

of its affairs. 

It is therefore ordered, pursuant to 

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

proposed rule change (SR–Phlx–2009– 

17) be, and it hereby is, approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.14

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–9389 Filed 4–23–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–59793; File No. SR–CBOE– 

2009–024] 

Self-Regulatory Organizations; 

Chicago Board Options Exchange, 

Incorporated; Notice of Filing of a 

Proposed Rule Change Related to Its 

Obvious Error Rules 

April 20, 2009. 

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

Securities Exchange Act of 1934 (the 

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

notice is hereby given that on April 8, 

2009, the Chicago Board Options 

Exchange, Incorporated (the ‘‘Exchange’’ 

or ‘‘CBOE’’) filed with the Securities 

and Exchange Commission (the 

‘‘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 proposes to amend 

Rules 6.25, Nullification and 

Adjustment of Equity Options 

Transactions, and 24.16, Nullification 

and Adjustment of Transactions in 

Index Options, Options on ETFs and 

Options on HOLDRS. The text of the 

proposed rule change is available on the 

Exchange’s Web site (http:// 

www.cboe.org/Legal), at the Office of the 

Secretary, CBOE and at 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 

self-regulatory organization 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 those 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 parts of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and the 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

CBOE proposes to amend Rules 6.25 

and 24.16, pertaining to the nullification 

and adjustment of options transactions, 

in several respects. 

Merging Rules. The Exchange is 

proposing to merge Rule 24.16 (which 

currently relates to only index, ETF and 

HOLDRS options) into Rule 6.25 (which 

currently relates to only equity options) 

to form a single obvious error rule. This 

merger will simplify the administration 

of the rules and incorporate a uniform 

obvious error approach for all equity, 

index, ETF, and HOLDRS options. 

Obvious Pricing Errors. The Exchange 

is proposing certain changes to the 

Obvious Pricing Error provision of Rule 

6.25. Under the current rule, an Obvious 

Pricing Error occurs when the execution 

price of an electronic transaction is 

above or below the Theoretical Price for 

the series by a specified amount. For 

purpose of the rule, the ‘‘Theoretical 

Price’’ of an option series is currently 

defined, for series traded on at least one 

other options exchange, as the last bid 

price with respect to an erroneous sell 

transaction and the last offer price with 

respect to an erroneous buy transaction, 

just prior to the trade, disseminated by 

the competing options exchange that 

has the most liquidity in that option 

class in the previous two calendar 

months. If there are no quotes for 

comparison, Trading Officials 3

determine the Theoretical Price. 

First, the Exchange is proposing to 

amend Rule 6.25’s definition of 

‘‘Theoretical Price’’ to base it on the 

national best bid or offer (‘‘NBBO’’) 

instead of the market with the most 

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