Federal Register / Vol. 74, No. 96 / Wednesday, May 20, 2009 / Notices 23759 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 59697 

(April 2, 2009), 74 FR 16249 (‘‘Notice’’). 

4 In Amendment No. 2, Phlx made technical and 

conforming changes to certain By-Laws, including 

changes to the paragraph numbering in Article I, 

Section 1–1 (Definitions) and revisions to the 

marking of new rule text in Article X, Sections 10– 

1 (Standing Committees) and 10–15 (Finance 

Committee). These changes were designed to reflect 

intervening amendments to those By-Laws 

proposed in a preceding Phlx filing (File No. SR– 

Phlx–2009–17) that were recently approved by the 

Commission. See Securities Exchange Act Release 

No. 59794 (April 20, 2009), 74 FR 18761 (April 24, 

2009) (SR–Phlx–2009–17). Because Amendment 

No. 2 is technical in nature, the Commission is not 

required to publish it for comment. 

5The Exchange, Nasdaq, and BX 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.). 

6The Weekly Bulletin contained, among other 

things, notice of changes in permit holder and 

member organization status and applications. 

Currently, if the Admissions Committee votes 

favorably regarding a request by an applicant, Phlx 

posts his or her name in the Weekly Bulletin and 

on its Web site for seven days to invite readers to 

report information regarding applications and 

applicants. The Exchange proposes to eliminate the 

Weekly Bulletin and instead provide notification 

regarding membership approvals on its Web site. 

7The remaining standing committees would be: 

Executive Committee, Audit Committee, Business 

Conduct Committee, Compensation Committee, 

Finance Committee, Nominating Committee, 

Member Nominating Committee, and Quality of 

Markets Committee. See Phlx By-Law Article X, 

Section 10–1. See also Amendment No. 2 (reflecting 

changes made by SR–Phlx–2009–17 to create the 

Nominating Committee and the Member 

Nominating Committee). 

8The Exchange noted that Nasdaq’s Finance 

Committee is also optional at the discretion of 

Nasdaq’s board of directors. See Notice, supra note 

3, at 74 FR 16254. 

9 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). 

10 15 U.S.C. 78f(b)(1). 

11 15 U.S.C. 78f(b)(3). 

12 15 U.S.C. 78f(b)(5). 

196. Robert Mabe, Registered 

Representative, dated April 18, 

2009 (‘‘Mabe’’) 

197. John R. Still, dated April 20, 2009 

(‘‘Still’’) 

198. David Farrell, dated April 20, 2009 

(‘‘Farrell’’) 

199. Daniel Woodring, V.P. and Chief 

Compliance Officer, PFS 

Investments Inc., dated April 20, 

2009 (‘‘PFS’’) 

200. James Rice, Registered Principal, 

Royal Alliance Associates, dated 

April 21, 2009 (‘‘J. Rice/Royal 

Alliance’’) 

201. Hattie Evans, Registered 

Representative, Financial Network, 

dated April 21, 2009 (‘‘H. Evans/ 

Financial Network’’) 

202. Doria G. Bachenheimer, VP, 

Associate General Counsel, 

Regulatory Law, and Pamela Lewis 

Marlborough, Associate General 

Counsel, TIAA–CREF, dated April 

22, 2009 (‘‘TIAA–CREF’’) 

203. Doug Richards, dated April 27, 

2009 (‘‘Richards’’) 

[FR Doc. E9–11697 Filed 5–19–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–59924; File No. SR–Phlx– 

2009–23] 

Self-Regulatory Organizations; 

NASDAQ OMX PHLX, Inc., Order 

Approving Proposed Rule Change as 

Modified by Amendment Nos. 1 and 2 

Thereto To Amend the By-Laws, Rules, 

and Option Floor Procedure Advices 

Concerning Governance of the 

Exchange 

May 14, 2009. 

On March 13, 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 By-Laws, Rules of 

the Board of Governors, Options Rules, 

and Option Floor Procedure Advices to 

make changes to certain standing 

committees and governance processes of 

the Exchange. On March 25, 2009, Phlx 

filed Amendment No. 1 to the proposed 

rule change. The proposed rule change 

was published for comment in the 

Federal Register on April 9, 2009.3 On 

April 30, 2009, Phlx 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. 

In its filing, the Exchange proposes to 

conform its governance structure to 

more closely resemble that of its 

corporate siblings, The NASDAQ Stock 

Market LLC (‘‘Nasdaq’’) and NASDAQ 

OMX BX, Inc. (‘‘BX’’).5 In particular, 

Phlx proposes to eliminate the 

Admissions Committee and the Options 

Allocation, Evaluation and Securities 

Committee (‘‘Allocation Committee’’); 

consolidate the Options Committee and 

the Foreign Currency Options 

Committee into the Quality of Markets 

Committee; and eliminate the use of the 

Weekly Bulletin.6 Phlx also proposes to 

change the membership structure of the 

Business Conduct Committee and 

eliminate the Hearing Officer; make the 

Finance Committee optional at the 

discretion of the Board; and authorize 

the Board or its designee to take certain 

actions in the event of an emergency or 

extraordinary market conditions. 

Finally, the Exchange proposes 

technical changes that, among other 

things, delete obsolete references to 

departments and positions that have 

been re-named or no longer exist. 

Pursuant to this proposed rule 

change, the eleven current standing 

committees of the Board of Governors of 

the Exchange (‘‘Board’’) would be 

reduced to eight.7 Of those eight, the 

Finance Committee would become 

optional at the discretion of the Board.8

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 9 including, in 

particular, Section 6(b)(1) of the Act,10

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,11 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 provide 

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,12 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. 

The proposed rule change will 

conform certain of the By-Laws and 

rules of the Exchange to those of 

Nasdaq, while maintaining the fair 

representation of the Exchange’s 

members in the administration of the 

affairs of the Exchange. Among other 

things, the Exchange proposes to 

eliminate the Admissions Committee, 

and to have the Phlx Membership 

Department perform the functions that 

are currently performed by the 

Admissions Committee. In this respect, 

the proposed change would reflect the 

practice at Nasdaq, which does not have 

an Admissions Committee and whose 

staff handles membership application 

23760 Federal Register / Vol. 74, No. 96 / Wednesday, May 20, 2009 / Notices 

13See Notice, supra note 3, at note 13. 

14According to the Exchange, its staff has been 

‘‘involved in virtually all aspects of the Exchange’s 

admissions and membership process,’’ including 

assisting the Admissions Committee in the 

performance of its duties. See Notice, supra note 3, 

at 74 FR 16250. To accomplish this transfer, the 

Exchange proposes to delete By-Law Article X, 

Section 10–6 (Admissions Committee) and transfer 

the duties and functions of that committee to the 

Membership Department in new Rule 900.1 

(General Powers and Duties of Membership 

Department). In addition, Exchange proposes to 

delete By-Law Article XII, Section 12–5, which sets 

forth duties and functions of the Admissions 

Committee with respect to applications for permits 

and admission as a foreign currency options 

participant, and transfer those duties to the 

Membership Department in new Rule 900.2 

(Membership Applications). 

15Such appeals would be heard by a special 

committee of the Board composed of at least three 

governors, at least one of which would be an 

Independent Governor. See Phlx By-Law Article XI, 

Section 11–1(c). Designated Independent Governors 

are selected through a process that is subject to the 

input of Phlx’s Member Organization 

Representatives. See Phlx By-Law Article III, 

Section 3–2 (Member Nominating Committee 

creates a list of candidates for each Designated 

Governor Position); see also Article I, Section 1–1(e) 

(Designated Governors include Designated 

Independent Governors). 

16The Exchange notes that Nasdaq does have a 

board of directors committee that is equivalent to 

the Allocation Committee. See Notice, supra note 

3, at note 20. 

17A Member Representative Member is ‘‘a 

member of any committee appointed by the Board 

of Governors who has been elected or appointed 

after having been nominated by the Member 

Nominating Committee.’’ See Phlx By-Law Article 

I, Section 1–1. 18See Notice, supra note 3, at note 29. 19See Proposed Phlx By-Law Article IV, Section 

4–23. See also Nasdaq By-Law Article IX, Section 

5. In addition, the Exchange currently has other 

extraordinary market conditions provisions in its 

rules. See Rules 1080(e) and 98. 20The BCC currently consists of nine members 

including three Independent Governors, one 

member or person associated with a member 

organization who conducts business on XLE (Phlx’s 

electronic equity trading system), one member who 

conducts an options business at the Exchange, and 

four persons who are members or persons 

associated with a member organization. In 

particular, the Exchange poses to eliminate the 

requirement to seat on the BCC one member or 

person associated with a member organization who 

conducts business on XLE, because XLE is no 

longer operating. See Notice, supra note 3, at note 

34. 

21See E-mail from Jurij Trypupenko, Assistant 

General Counsel, The NASDAQ OMX Group, Inc., 

to Richard Holley III, Senior Special Counsel, 

Division of Trading and Markets, Commission, 

dated May 14, 2009. Phlx has committed to submit 

a separate proposed rule change by its July 2009 

Board meeting to clarify in Article X, Section 10– 

11 that the Business Conduct Committee shall 

include a number of committee members equal to 

at least 20% of the total number of members on the 

Business Conduct Committee that are representative 

of Phlx members. This provision would be relevant 

only in the event that the Exchange chose to 

appoint six or more members to the BCC, since with 

a five member BCC the required appointment of ‘‘at 

least one’’ committee member who is a member of 

the Exchange that conducts an options business at 

Phlx would satisfy the 20% requirement. 

processing and decisions regarding 

membership.13 As proposed, the 

Membership Department would assume 

responsibility for administering the 

admissions and membership processes 

currently overseen by that committee 

including, among other things, the 

admission, denial, reinstatement and 

revocation of membership to the 

Exchange.14

An applicant for Exchange 

membership or admission whose 

application is not approved currently 

has a right to an appeal hearing 

pursuant to By-Law Article XI. The 

Exchange proposes to include the 

Membership Department in this By-Law 

in order to permit appeals from 

Membership Department decisions.15

Accordingly, the current appeal rights of 

applicants will be preserved. 

Similarly, the Exchange proposes to 

delete the Allocations Committee and 

have the Exchange’s staff perform the 

duties and functions that are currently 

performed by the Allocation 

Committee.16

In addition, the Exchange proposes to 

combine its Options Committee and 

Foreign Currency Options Committee, 

which are currently two separate Board 

committees, into the existing Quality of 

Markets Committee. The duties and 

functions of the Exchange’s 

reformulated Quality of Markets 

Committee would be analogous to those 

of the Nasdaq’s Quality of Markets 

Committee and would include, among 

other things, responsibility for advising 

the Board on issues relating to the 

fairness, integrity, efficiency, and 

competitiveness of the Exchange’s 

market. The Quality of Markets 

Committee would include a number of 

Member Representative members that is 

equal to at least twenty percent of the 

total number of members of the Quality 

of Markets Committee.17 In addition, the 

number of Non-Industry members on 

the Quality of Markets Committee 

would equal the sum of the number of 

Industry members and Member 

Representative members. Accordingly, 

the proposed new formulation for the 

Quality of Markets Committee would 

continue to assure the fair 

representation of the Exchange’s 

members on this committee. 

The Exchange also proposes to 

provide that the President of the 

Exchange, and his or her designated 

staff, would have general supervision 

over the options trading floor as well as 

general supervision over the dealings of 

members on the trading floor and on 

Exchange trading systems. The 

President would also be given 

responsibility regarding supervision of 

relations with other options exchanges. 

The Exchange notes that such authority 

is consistent with the practice at 

Nasdaq.18 Similarly, the Exchange 

proposes to adopt a By-Law provision 

similar to Nasdaq that authorizes the 

Board or its designee to take certain 

actions in the event of an emergency or 

extraordinary market conditions.19

Further, the Exchange proposes to 

alter the composition of the Business 

Conduct Committee, which serves as the 

disciplinary committee of the Exchange. 

As amended, the Business Conduct 

Committee could consist of not less than 

five, or more than nine, members.20 In 

addition, the majority of committee 

members would be Non-Industry 

members, and the remaining committee 

members would be Industry members. 

At least one BCC member would have 

to be a member of the Exchange that 

conducts an options business at Phlx. 

The Exchange has informed the 

Commission that, upon approval, it 

initially intends to have five persons 

serve on the BCC.21

In addition, the Exchange proposes to 

conform its hearings processes to more 

closely resemble those of Nasdaq. 

Specifically, the Exchange proposes to 

change the composition of its 

disciplinary hearing panel by deleting 

the requirement to have a presiding 

Hearing Officer. In its place, a new 

position of Hearing Attorney would be 

created to assume the administrative 

duties that the Hearing Officer 

previously handled. The Hearing 

Attorney would advise the Hearing 

Panel on applicable rules and 

procedures, but would not be a voting 

member of the Hearing Panel. The 

process of appealing Hearing Panel 

decisions would remain unchanged. 

The Commission notes that the 

Exchange’s proposal is designed to more 

closely align certain aspects of Phlx’s 

governance structure and processes to 

more closely resemble that of Nasdaq, 

which, like the Exchange, is a 

subsidiary of NASDAQ OMX GROUP, 

Inc. As discussed above, the 

Commission finds that the proposal is 

consistent with the Act. In particular, 

the proposal should allow the 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, 

and should continue to assure the fair 

representation of the Exchange’s 

members in the 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– 

Federal Register / Vol. 74, No. 96 / Wednesday, May 20, 2009 / Notices 23761 

22 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3The Agreement includes and incorporates an 

exhibit designated as the By-Laws of the NASDAQ 

Exchange (the ‘‘By-Laws’’). Under applicable 

Delaware law, the By-Laws are considered part of 

the Agreement. 

4Securities Exchange Act Release No. 55293 

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

(SR–NYSE–2006–120). 

5NYSE Group, Inc., the former public holding 

company of NYSE Euronext’s U.S. exchanges. 6New York Stock Exchange LLC (‘‘NYSE’’), a 

registered national securities exchange. 7NYSE Market, Inc., a subsidiary of NYSE to 

which it has delegated certain operational 

authority. 8NYSE Regulation, Inc., a subsidiary of NYSE to 

which it has delegated certain operational 

authority. 

9Archipelago Holdings, Inc., formerly the public 

holding company of the entities now known as 

NYSE Arca, Inc. and NYSE Arca Equities, Inc. 

10NYSE Arca, Inc., a registered national securities 

exchange. 

11NYSE Arca Equities, Inc., a subsidiary of NYSE 

Arca to which it has delegated certain operational 

authority. 

12 15 U.S.C. 78j–1(m). 

23), 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.22

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–11739 Filed 5–19–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–59907 File No. SR– 

NASDAQ–2009–042] 

Self-Regulatory Organizations; The 

NASDAQ Stock Market LLC; Notice of 

Filing of Proposed Rule Change To 

Amend Its Limited Liability Agreement 

May 12, 2009. 

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

Securities Exchange Act of 1934 (‘‘Act’’ 

or ‘‘Exchange Act’’) 1 and Rule 19b–4 

thereunder,2 notice is hereby given that, 

on April 29, 2009, The NASDAQ Stock 

Market LLC (‘‘NASDAQ Exchange’’ or 

‘‘Exchange’’) filed with the Securities 

and Exchange Commission 

(‘‘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 NASDAQ Exchange is filing this 

proposed rule change with regard to 

proposed changes to its Limited 

Liability Company Agreement (the 

‘‘Agreement’’).3 The proposed rule 

change will be implemented as soon as 

practicable following approval by the 

Commission. The text of the proposed 

rule change is available at http:// 

www.cchwallstreet.com/nasdaq, at the 

NASDAQ Exchange’s principal office, 

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 

NASDAQ 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 those 

statements may be examined at the 

places specified in Item IV below. The 

NASDAQ Exchange 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 the 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

On July 24, 2008, NASDAQ OMX 

acquired the Philadelphia Stock 

Exchange, Inc. (renamed NASDAQ 

OMX PHLX, Inc. (‘‘PHLX’’)), and on 

August 29, 2008, NASDAQ OMX 

acquired the Boston Stock Exchange, 

Incorporated (renamed NASDAQ OMX 

BX, Inc. (‘‘BX’’)). Following those 

acquisitions, the NASDAQ Exchange, 

PHLX, and BX have been evaluating 

means to realize synergies in the 

operations of these three exchanges 

while maintaining the separate identity 

and member representation structures of 

each. 

In making this evaluation, the 

NASDAQ Exchange and its sister 

exchanges have given consideration to 

the experiences of their respective 

boards and have reviewed the 

governance documents of other 

exchanges. In particular, the NASDAQ 

Exchange and the other exchanges have 

reviewed the board structures 

established by NYSE Euronext and its 

exchange subsidiaries. In Securities 

Exchange Act Release No. 55293,4 the 

Commission approved a structure in 

which certain committees of the board 

of directors of NYSE Euronext, the 

public holding company, perform 

functions for exchange subsidiaries, 

which do not themselves have these 

committees. Specifically, the 

Commission’s approval order states that 

‘‘the NYSE Euronext board of directors 

will have an audit committee, a human 

resource and compensation committee, 

and a nominating and governance 

committee. Each of the audit committee, 

human resource and compensation 

committee, and nominating and 

governance committee of the NYSE 

Euronext board of directors will consist 

solely of directors meeting the 

independence requirements of NYSE 

Euronext. These committees also will 

perform relevant functions for NYSE 

Group,5 the Exchange,6 NYSE Market,7

NYSE Regulation,8 Archipelago,9 NYSE 

Arca,10 and NYSE Arca Equities,11 as 

well as other subsidiaries of NYSE 

Euronext, except that the board of 

directors of NYSE Regulation will 

continue to have its own compensation 

committee and nominating and 

governance committee.’’ 

The NASDAQ Exchange and the other 

exchanges owned by NASDAQ OMX 

have also considered the experience of 

the NASDAQ Exchange in operating as 

a subsidiary of a public company since 

2006. During the period, the board of 

each of the NASDAQ Exchange and its 

parent corporation (currently NASDAQ 

OMX, and formerly The Nasdaq Stock 

Market, Inc.) has appointed its own 

audit committee and management 

compensation committee. However, 

these committees at the NASDAQ 

Exchange level have generally found 

themselves duplicating the work of 

other committees at the exchange or 

holding company level. 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. Because NASDAQ OMX’s 

financial statements are prepared on a 

consolidated basis that includes the 

financial results of NASDAQ OMX’s 

subsidiaries, including the NASDAQ 

Exchange and the other exchange 

subsidiaries, the NASDAQ OMX audit 

committee’s purview necessarily 

includes these subsidiaries. The 

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 12 and Rule 4200(a) of the NASDAQ 

Exchange. 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,