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[Federal Register Volume 89, Number 244 (Thursday, December 19, 2024)]
[Notices]
[Pages 103904-103907]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-30160]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-101905; File No. SR-IEX-2024-28]

Self-Regulatory Organizations; Investors Exchange LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Amend the 
Bylaws of the Exchange's Parent Corporation To Add Provisions 
Permitting the Board of Directors, in Its Sole Discretion, To Invite 
One or More Observers To Attend and Participate in Board Meetings in a 
Non-Voting Capacity and to Make a Conforming Change to the Bylaws

December 13, 2024.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on December 3, 2025, the Investors Exchange LLC (``IEX'' or the 
``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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.

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[[Page 103905]]

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Pursuant to the provisions of Section 19(b)(1) under the Act,\3\ 
and Rule 19b-4 thereunder,\4\ the Exchange is filing with the 
Commission a proposed rule change to amend the bylaws (the ``Bylaws'') 
of IEX Group, Inc. (``Group''), the Exchange's parent corporation, to 
add provisions permitting the Group Board of Directors (the ``Group 
Board''), in its sole discretion, to invite one or more observers to 
attend and participate in Group Board meetings in a non-voting capacity 
(``Board Observers'') and to make a conforming change to the Bylaws. 
The Exchange has designated this proposal as non-controversial and 
provided the Commission with the notice required by Rule 19b-
4(f)(6)(iii) under the Act.\5\
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    \3\ 15 U.S.C. 78s(b)(1).
    \4\ 17 CFR 240.19b-4.
    \5\ 17 CFR 240.19b-4(f)(6)(iii).
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    The text of the proposed rule change is available at the Exchange's 
website at www.iextrading.com, 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 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 these statements may be examined at 
the places specified in Item IV 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

1. Purpose
    The Exchange proposes to amend its Group Bylaws \6\ to codify an 
existing arrangement whereby the Group Board, at its sole discretion, 
may invite Board Observers to attend meetings of the Group Board in a 
non-voting capacity. The proposed amendment is intended to set forth 
and delineate the rights, responsibilities and obligations of Board 
Observers with respect to such meetings. The Exchange is also proposing 
to make a non-substantive conforming change to the Group Bylaws, as 
described below.
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    \6\ Group governance documents, including the Group Bylaws, are 
accessible on the Group website at https://www.iex.io/legal/governance. These documents are also accessible on the Exchange's 
website at https://www.iexexchange.io/resources/regulation/governance.
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    The Exchange makes this proposal to codify an existing arrangement 
in which the Group Board may, from time to time, invite certain 
parties, including representatives of some Group shareholders, to 
attend Group Board meetings as non-voting ``Board Observers.'' At Group 
Board meetings, the Board Observers are permitted to contribute to any 
discussions, in particular discussions about which they have relevant 
expertise. The Group Board, as appropriate, exercises its discretionary 
right to exclude these Board Observers from applicable Group Board 
materials, meetings or specific portions of meetings if the 
conversation involves attorney-client privileged matters, or matters 
that are confidential, proprietary, or otherwise concern information 
deemed by the Group Board to be inappropriate to share with the Board 
Observers. IEX notes that it is not novel to allow non-voting persons 
to attend board meetings as observers. For example, BOX Exchange allows 
observers to attend its board meetings, and MEMX allows certain 
shareholders to appoint non-voting board observers who may participate 
in its board meetings.\7\
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    \7\ See Section 5.02 of the Bylaws of BOX Exchange LLC, 
available at https://boxexchange.com/assets/BOX-Exchange-Bylaws-221004.pdf; Section 8.13 of Seventh Amended and Restated LLC 
Agreement of MEMX Holdings LLC (March 17, 2023), available at 
https://info.memxtrading.com/wp-content/uploads/2023/03/MEMX-SeventhAmendedandRestatedLLCA-3.17.23.pdf.
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    IEX proposes to codify this arrangement in order to delineate the 
rights, responsibilities and obligations of Board Observers. 
Specifically, IEX proposes to amend Article IV, Section 26 as follows:

     Add ``(a) General'' to the beginning of the existing 
text to reflect the addition of the proposed new paragraph (b).
     Add paragraph (b) which would read in full: ``(b) Board 
Observers. The Board of Directors may, from time to time and, in its 
sole discretion, invite one or more observers to attend and 
participate in meetings of the Board of Directors in a non-voting 
capacity (``Board Observers''). Board Observers shall hold in 
confidence any and all information so provided. Board Observers may 
be excluded from access to any material or meeting or portion 
thereof if the Board of Directors determines in good faith, upon the 
advice of counsel, that such exclusion is reasonably necessary to 
preserve the attorney-client privilege, to protect highly 
confidential proprietary information, or for other similar reasons, 
including, but not limited to, sensitive regulatory information, 
regulatory independence or other similar regulatory matters relating 
to Investors' Exchange LLC or otherwise. The Board of Directors 
shall, as promptly as practicable, take such actions as are 
necessary and appropriate to exclude any Board Observer upon the 
Board of Directors becoming aware that any of the bad actor 
disqualifying events described in Rule 506(d)(1)(i)-(viii) of the 
Securities Act of 1933, or any of the statutory disqualifications 
described in Section 3(a)(39) of the 1934 Act apply to such Board 
Observer, and such exclusion may be lifted in the event the Board of 
Directors determines that the applicable bad actor or statutory 
disqualifications no longer apply to such Board Observer. For so 
long as the Corporation shall control Investors' Exchange LLC, each 
Board Observer shall, in connection with such Board Observer's 
attendance and participation in meetings of the Board of Directors 
be subject to Article VII of these Bylaws, and in furtherance of the 
applicability of Article VII to such Board Observers, the Board of 
Directors may exclude such Board Observer from applicable materials 
or meetings or portions thereof. Notwithstanding the preceding 
sentence or anything set forth in these Bylaws to the contrary, 
nothing in these Bylaws or the applicability of Article VII shall be 
interpreted to expand the role or position of a Board Observer 
beyond the scope of attending and participating in meetings at the 
invitation of the Board of Directors or to otherwise give Board 
Observers any right or authority to take any action on behalf of the 
Corporation. No present or past stockholder, employee, beneficiary, 
agent, customer, creditor, regulatory authority (or member thereof) 
or other person or entity shall have any rights against any Board 
Observer under this Section 26(b).

    As set forth in the proposed new paragraph (b) of Section 26 of the 
Group Bylaws, the Group Board may, from time to time and in its sole 
discretion, invite one or more Board Observers to attend and 
participate in meetings of the Group Board in a non-voting capacity. 
Board Observers shall hold in confidence any and all information 
provided to them at Group Board meetings. Additionally, Board Observers 
may be excluded from access to any material or meeting or portion 
thereof if the Group Board determines in good faith, upon the advice of 
counsel, that such exclusion is reasonably necessary to preserve the 
attorney-client privilege, to protect highly confidential proprietary 
information, or for other similar reasons, including, but not limited 
to, sensitive regulatory information, regulatory independence or other 
similar regulatory matters relating to the Exchange or otherwise.
    The proposed amendment further provides that the Group Board shall, 
as promptly as practicable, take such actions as are necessary and 
appropriate to exclude any Board Observer upon the Group Board becoming 
aware that any

[[Page 103906]]

of the ``bad actor'' disqualifying events described in Rule 
506(d)(1)(i)-(viii) under the Securities Act of 1933,\8\ or any of the 
statutory disqualifications described in Section 3(a)(39) of the Act 
\9\ apply to such Board Observer, with the additional provision that 
such exclusion may be lifted in the event the Group Board determines 
that the applicable bad actor events or statutory disqualification no 
longer apply to such Board Observer.
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    \8\ 17 CFR 230.506(d)(i-viii).
    \9\ 15 U.S.C. 78c(a)(39).
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    As proposed, the amended Group Bylaws further provide that, for so 
long as Group shall control the Exchange, each Board Observer shall, in 
connection with such Board Observer's attendance and participation in 
meetings of the Group Board, be subject to Article VII of the Group 
Bylaws \10\ and, in furtherance of the applicability of Article VII to 
such Board Observers, the Group Board may exclude such Board Observer 
from applicable materials or meetings or portions thereof.\11\ However, 
notwithstanding the foregoing provision or anything set forth in the 
Group Bylaws to the contrary, nothing in the Group Bylaws or the 
applicability of Article VII shall be interpreted to expand the role or 
position of a Board Observer beyond the scope of attending and 
participating in meetings at the invitation of the Group Board, or to 
otherwise give Board Observers any right or authority to take any 
action on behalf of Group.
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    \10\ Article VII of the Group Bylaws, ``SRO Functions of 
Investors' Exchange LLC,'' addresses the obligations of Group and 
the Group Board with respect to the regulatory independence of the 
Exchange in its capacity as a self-regulatory organization pursuant 
to Section 6 of the Act, 15 U.S.C. 78f. These include Section 34 
(Non-Interference), pertaining to the preservation of the 
independence of the Exchange's self-regulatory function; Section 35 
(Confidentiality), requiring that Group maintain the confidentiality 
of all information in its possession pertaining to the Exchange's 
self-regulatory functions; Section 36 (Books and Records), requiring 
Group books and records to be maintained within the United States 
and deeming any of its books and records to be records of the 
Exchange to the extent they pertain to the Exchange's self-
regulatory functions and subject to Commission oversight; Section 37 
(Cooperation with the Securities and Exchange Commission); Section 
38 (Consent to Jurisdicton) requiring consent to the jurisdiction of 
the federal courts, the Commission and the Exchange in any action of 
proceeding involving the activities of the Exchange under the 
federal securities laws, rules and regulations; and Section 39 
(Consent to Application), requiring Group to take reasonable steps 
to cause its officers, directors, employees and agents to consent in 
writing to the applicability of Article VII of the Bylaws to their 
activities related to the Exchange.
    \11\ IEX notes that BOX and MEMX similarly require their board 
observers to meet the same confidentiality requirements that are 
imposed upon its board members. See supra note 8.
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    Finally, the proposed amendment states that no present or past 
stockholder, employee, beneficiary, agent, customer, creditor, 
regulatory authority (or member thereof) or other person or entity 
shall have any rights against any Board Observer under proposed Section 
26(b). This provision is intended to clarify that the proposed 
amendments do not expand the role or position of a Board Observer 
beyond the scope of attending and participating in meetings and does 
not permit present or past stockholders, employees, beneficiaries, 
agents, customers, creditors, regulatory authorities (or members 
thereof) or other persons or entities to bring claims against Board 
Observers.
    The Exchange is also proposing to make a non-substantive conforming 
change to the Group Bylaws to: (i) rename the document by adding 
``Amended and Restated'' to the header and (ii) delete the words 
``Adopted November 30, 2015'' from the header and replace them with the 
words ``Amended December 3, 2024''.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\12\ in general, and furthers the 
objectives of Section 6(b)(1) of the Act in particular,\13\ in that it 
continues to assure that the Exchange is so organized as to have the 
capacity to be able to carry out the purposes of the Act and to comply, 
and to enforce compliance by its Exchange members and persons 
associated with its Exchange members, with the provisions of the 
Exchange Act, the rules and regulations thereunder, and the rules of 
the Exchange.
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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(1).
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    The Exchange also believes that the proposed rule change is 
consistent with Section 6(b)(5) of the Act \14\ in that they are 
intended to, inter alia, promote just and equitable principles of 
trade, foster cooperation and coordination with persons engaged in 
regulating, clearing, settling, processing information with respect to, 
and facilitating transactions in securities, 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. 
Additionally, the proposed amendment is not designed to permit unfair 
discrimination between customers, issuers, brokers, or dealers.
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    \14\ 15 U.S.C. 78f(b)(5).
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    As noted in the Purpose section, the proposed amendment to the 
Group Bylaws is intended to foster clarity and transparency with 
respect to Board Observers attending Group Board meetings at the Group 
Board's invitation and sole discretion, and to delineate the roles, 
responsibilities, and obligations of Board Observers with respect to 
such meetings. The proposed amendment contains detailed provisions to 
that effect, and also provides for instances where Board Observers' 
participation in a particular meeting may be limited, or disallowed, as 
well as exclusion of an individual subject to a ``bad actor'' or 
statutory disqualification as described in the Purpose section. The 
Exchange believes that the inclusion of Board Observers, at the Group 
Board's sole discretion and at its invitation, provides a valuable 
opportunity for other constituencies to participate in the work of the 
Group Board in a manner that safeguards the Exchange's regulatory 
independence and its operation as a self-regulatory organization. The 
Exchange believes that the proposed amendments thereby fulfill the 
goals of Section 6(b) of the Act \15\ in that they are designed to 
promote just and equitable principles of trade, remove impediments to 
and perfect the mechanism of a free and open market and national market 
system, and in general operate to protect investors and the public 
interest.
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    \15\ 15 U.S.C. 78f(b).
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    Additionally, as noted in the Purpose section, allowing board 
observers to attend holding company board meetings is not novel.\16\ 
Thus, this proposed rule change does not raise any new or novel issues 
that have not already been considered by the Commission.
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    \16\ See supra note 8.
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    Finally, IEX believes that the proposed non-substantive conforming 
changes to the header of the Bylaws further the purposes of the Act 
because they provide greater clarity and consistency to the Bylaws 
thereby reducing the potential for confusion by market participants.

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 that is not necessary or appropriate 
in furtherance of the purposes of the Exchange Act. The proposed 
amendments relate to the rights, responsibilities and obligations of 
Board Observers at Group Board meetings and, as such, are concerned 
solely with the corporate governance of Group, the Exchange's parent 
corporation, and do not present any issues that impact competition.

[[Page 103907]]

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The Exchange has designated this rule filing as non-controversial 
under Section 19(b)(3)(A) \17\ of the Act and Rule 19b-4(f)(6) \18\ 
thereunder. Because the proposed rule change does not: (i) 
significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6) thereunder.
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    \17\ 15 U.S.C. 78s(b)(3)(A).
    \18\ 17 CFR 240.19b-4(f)(6).
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    The Exchange believes that the proposed rule change would not 
adversely affect investors or the public interest. In fact, the 
Exchange believes that the proposed amendments to the Group Bylaws 
operate to enhance investor protection and the public interest by 
providing clarity and transparency into the roles, responsibilities and 
obligations of Board Observers. The proposed amendments thus fulfill 
the purposes of Section 6(b)(1) of the Act, which requires that ``. . . 
[s]uch exchange is so organized and has the capacity to be able to 
carry out the purposes of this chapter and to comply, and (subject to 
any rule or order of the Commission pursuant to section 78q(d) or 
78s(g)(2) of this title) to enforce compliance by its members and 
persons associated with its members, with the provisions of this 
chapter, the rules and regulations thereunder, and the rules of the 
exchange.'' Additionally, as discussed in the Purpose and Statutory 
Basis sections, this rule change proposal is not novel; at least two 
other exchanges, BOX and MEMX, also allow non-voting board observers to 
participate in board meetings, subject to similar confidentiality 
requirements to IEX's proposal.
    The Exchange further believes that the proposed rule change would 
not impose a burden on competition because it is not intended to 
address competitive issues but rather is concerned solely with the 
corporate governance of Group, the Exchange's parent corporation. 
Accordingly, for the foregoing reasons, this rule filing qualifies for 
immediate effectiveness as a ``non-controversial'' rule change under 
paragraph (f)(6) of Rule 19b-4.
    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 under 
Section 19(b)(2)(B) \19\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \19\ 15 U.S.C. 78s(b)(2)(B).
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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 (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-IEX-2024-28 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to file number SR-IEX-2024-28. This file 
number should be included on the subject line if email 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 website (https://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 
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available 
for inspection and copying at the principal office of the Exchange. Do 
not include personal identifiable information in submissions; you 
should submit only information that you wish to make available 
publicly. We may redact in part or withhold entirely from publication 
submitted material that is obscene or subject to copyright protection. 
All submissions should refer to file number SR-IEX-2024-28, and should 
be submitted on or before January 9, 2025.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-30160 Filed 12-18-24; 8:45 am]
BILLING CODE 8011-01-P
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