33290 Federal Register / Vol. 74, No. 131 / Friday, July 10, 2009 / Notices 

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

2 17 CFR 240.19b–4. 

3 17 CFR 240.19b–4(f)(6). 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.23

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. E9–16314 Filed 7–9–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–60220; File No. SR– 

NASDAQ–2009–064] 

Self-Regulatory Organizations; The 

NASDAQ Stock Market LLC; Notice of 

Filing and Immediate Effectiveness of 

a Proposed Rule Change Relating to 

NASDAQ Options Market Options 

Participant Membership Requirements, 

Order Entry Times and Confirmation 

Statements 

July 1, 2009. 

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 June 26, 

2009, The NASDAQ Stock Market LLC 

(‘‘NASDAQ’’) 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 NASDAQ. NASDAQ has 

designated the proposed rule change as 

constituting a non-controversial rule 

change under Rule 19b–4(f)(6) under the 

Act,3 which renders the proposal 

effective upon filing with the 

Commission. 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 the Substance 

of the Proposed Rule Change 

NASDAQ proposes to make three 

noncontroversial amendments to the 

NASDAQ Options Market (‘‘NOM’’ or 

‘‘Exchange’’) rule. First, Chapter II, 

Section 2 would be amended to modify 

a requirement that NOM Options 

Participants at all times maintain 

membership in another options 

exchange. Second, Chapter VI, Sections 

1, 2, 7 and 9 would be amended to 

change the time of day at which NOM 

begins accepting orders. Third, Chapter 

XI, Section 11, would be amended to 

make clear that the rule does not require 

confirmation statements to contain the 

name of the option exchange or 

exchanges on which an option contract 

is executed. 

The text of the proposed rule change 

is below. Proposed new language is 

underlined and proposed deletions are 

in brackets. 

* * * * * 

Chapter II, Participation 

* * * * * 

Section 2, Requirements for Options 

Participation 

(a)–(e) No Change. 

(f) Every Options Participant shall at 

all times maintain membership in 

another registered options exchange that 

is not registered solely under Section 

6(g) of the Securities Exchange Act of 

1934, or in FINRA. Options Participants 

that transact business with customers 

shall at all times be members of the 

FINRA. 

(g)–(h) No Change. 

Commentary .01 No Change. 

Chapter VI, Trading Systems 

Section 1, Definitions 

The following definitions apply to 

Chapter VI for the trading of options 

listed on NOM. 

(a)–(f) No Change. 

(g) The term ‘‘Time in Force’’ shall 

mean the period of time that the System 

will hold an order for potential 

execution, and shall include: 

(1) ‘‘Expire Time’’ or ‘‘EXPR’’ shall 

mean, for orders so designated, that if 

after entry into the System, the order is 

not fully executed, the order (or the 

unexecuted portion thereof) shall 

remain available for potential display 

and/or execution for the amount of time 

specified by the entering Participant 

unless canceled by the entering party. 

EXPR Orders shall be available for entry 

from [9 a.m.] the time prior to market 

open specified by the Exchange on its 

website until market close Eastern Time 

and for execution from 9:30 a.m. until 

market close. 

(2) ‘‘Immediate or Cancel’’ or ‘‘IOC’’ 

shall mean for orders so designated, that 

if after entry into the System a 

marketable limit order (or unexecuted 

portion thereof) becomes nonmarketable, the order (or unexecuted 

portion thereof) shall be canceled and 

returned to the entering participant. IOC 

Orders shall be available for entry from 

[9 a.m.] the time prior to market open 

specified by the Exchange on its Web 

site until market close and for potential 

execution from 9:30 a.m. until market 

close. IOC Orders entered between [9 

a.m.] the time specified by the Exchange 

on its Web site and 9:30 a.m. Eastern 

Time will be held within the System 

until 9:30 a.m. at which time the System 

shall determine whether such orders are 

marketable. 

(3) ‘‘DAY’’ shall mean for orders so 

designated, that if after entry into the 

System, the order is not fully executed, 

the order (or unexecuted portion 

thereof) shall remain available for 

potential display and/or execution until 

market close, unless canceled by the 

entering party, after which it shall be 

returned to the entering party. DAY 

Orders shall be available for entry from 

[9 a.m.] the time prior to market open 

specified by the Exchange on its Web 

site until market close and for potential 

execution from 9:30 a.m. until market 

close. 

(4) ‘‘Good Til Cancelled’’ or ‘‘GTC’’ 

shall mean for orders so designated, that 

if after entry into System, the order is 

not fully executed, the order (or 

unexecuted portion thereof) shall 

remain available for potential display 

and/or execution unless cancelled by 

the entering party, or until the option 

expires, whichever comes first. GTC 

Orders shall be available for entry from 

[9 a.m.] the time prior to market open 

specified by the Exchange on its Web 

site until market close and for potential 

execution from 9:30 a.m. until market 

close. 

(5) No Change. 

(h) No Change. 

Chapter VI, Trading Systems 

* * * * * 

Section 2, Days and Hours of Business 

(a) The System operates and shall be 

available to accept bids and offers and 

orders from [9 a.m.] the time prior to 

market open specified by the Exchange 

on its Web site to market close on each 

business day, unless modified by NOM. 

Orders and bids and offers shall be open 

and available for execution as of 9:30 

a.m. Eastern Time and shall close as of 

4 p.m. Eastern Time except for option 

contracts on fund shares or broad-based 

indexes which will close as of 4:15 p.m. 

Eastern Time. 

(b)–(c) No Change. 

Chapter VI, Trading Systems 

* * * * * 

Section 7, Entry and Display Orders 

(a) Entry of Orders—Participants can 

enter orders into the System, subject to 

the following requirements and 

conditions: 

(1)–(2) No Change. 

(3) Orders can be entered into the 

System (or previously entered orders 

cancelled) from [9 a.m.] the time prior 

to market open specified by the 


sroberts on DSKD5P82C1PROD with NOTICES
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4 15 U.S.C. 78f(g). 

5See Securities Exchange Act Release No. 55667 

(April 25, 2007), 72 FR 23869 (May 1, 2007). 

6See Securities Exchange Act Release No. 55532 

(March 26, 2007), 72 FR 15729 (April 2, 2007). 

7See Chapter VI, Sections 1(g)(1), 1(g)(2), 1(g)(3), 

and 1(g)(4), Section 2(a), Section 7(a)(3), and 

Sections 9(a)(3), 9(a)(4) and 9(a)(5). 

8The proposed filing is being done pursuant to 

an industry-wide initiative under the auspices of 

the Options Self-Regulatory Council (‘‘OSRC’’), 

which is a committee comprised of representatives 

from each of the options exchanges functioning 

pursuant to the OSRC Plan (the ‘‘Plan’’). See 

Securities Exchange Act Release No. 20158 

(September 8, 1983), 48 FR 41256 (September 14, 

1983). The Plan is not a National Market System 

(‘‘NMS’’) plan under Section 1 1A of the Act, but 

rather is a plan to allocate regulatory 

responsibilities under Rule 17d–2 under the Act. 17 

CFR 240.17d–2. As a result of the introduction of 

multiply listed options and the introduction of the 

Plan for the Purpose of Creating and Operating an 

Intermarket Options Market Linkage (‘‘Options 

Continued 

Exchange on its Web site until market 

close. 

(b) No Change. 

Chapter VI, Trading Systems 

* * * * * 

Section 9, Nasdaq Closing Cross 

(a) Definitions. For the purposes of 

this rule the term: 

(1)–(2) No Change. 

(3) ‘‘Imbalance Only Order’’ or ‘‘IO’’ 

shall mean an order to buy or sell at a 

specified price or better that may be 

executed only during the Nasdaq 

Closing Cross and only against MOC or 

LOC orders. IO orders can be entered 

between [9 a.m.] the time prior to 

market open specified by the Exchange 

on its Web site and the beginning of the 

Closing Cross but they cannot be 

modified after 10 minutes prior to the 

Closing Cross except to increase the 

number of contracts. IO orders can be 

cancelled between 10 and 5 minutes 

prior to the Closing Cross only by 

requesting Nasdaq to correct a legitimate 

error (e.g., side, size, symbol, price or 

duplication of an order). IO orders 

cannot be cancelled after 5 minutes 

prior to the Closing Cross for any 

reason. IO sell (buy) orders will only 

execute at or above (below) the System 

offer (bid) at the time of the Closing 

Cross. 

(4) ‘‘Limit On Close Order’’ or ‘‘LOC’’ 

shall mean an order to buy or sell at a 

specified price or better that is to be 

executed only during the Nasdaq 

Closing Cross. LOC orders can be 

entered, cancelled, and corrected 

without restriction between [9 a.m.] the 

time prior to market open specified by 

the Exchange on its Web site and 10 

minutes prior to the Closing Cross LOC 

orders can be cancelled between 10 and 

5 minutes prior to the Closing Cross 

only by requesting Nasdaq to correct a 

legitimate error (e.g., side, size, symbol, 

price or duplication of an order). LOC 

orders cannot be cancelled after 5 

minutes prior to the Closing Cross for 

any reason. LOC Orders will execute 

only at the price determined by the 

Nasdaq Closing Cross. 

(5) ‘‘Market on Close Order or MOC’’ 

shall mean an order to buy or sell at the 

market that is to be executed only 

during the Nasdaq Closing Cross. MOC 

orders can be entered, cancelled, and 

corrected between [9 a.m.] the time prior 

to market open specified by the 

Exchange on its Web site and 10 

minutes prior to the Closing Cross MOC 

orders can be cancelled between 10 and 

5 minutes prior to the Closing Cross 

only by requesting Nasdaq to correct a 

legitimate error (e.g., side, size, symbol, 

price or duplication of an order). MOC 

orders cannot be cancelled after 5 

minutes prior to the Closing Cross for 

any reason. MOC orders will execute 

only at the price determined by the 

Nasdaq Closing Cross. 

(6)–(7) No Change. 

(b) No Change. 

Chapter XI, Doing Business with the 

Public 

* * * * * 

Section 11, Confirmation to Public 

Customers 

(a) No Change. 

(b) The confirmation shall, by 

appropriate symbols, distinguish 

between [NOM Transactions and other 

transactions in options contracts] 

Exchange options transactions and 

other transactions in option contracts 

though such confirmation does not need 

to specify the exchange or exchanges on 

which such option contracts were 

executed. 

* * * * * 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, 

NASDAQ 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. 

NASDAQ 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 purpose of the proposed rule 

change is to make certain clarifying and 

noncontroversial changes to NOM rules, 

as follows. 

Chapter II, Section 2 

Chapter II, Section 2 currently 

provides that a Participant must be a 

member of another registered options 

exchange that is not registered solely 

under Section 6(g) of the Act.4 When it 

adopted Chapter II, Section 2, Nasdaq 

made clear its intent not to serve as a 

Designated Options Examining 

Authority (‘‘DOEA’’), and stated that it 

would work with the Commission and 

the other registered options exchanges 

to ensure that each Options Participant 

would have as its DOEA a registered 

options exchange other than Nasdaq.5

The proposed amendments would 

provide an alternative to the options 

exchange membership requirement, 

such that a NOM Participant that was a 

member of Financial Industry 

Regulatory Authority, Inc. (‘‘FINRA’’)— 

itself a DOEA—would not also be 

required to maintain membership in 

another registered options exchange.6

Chapter VI, Sections 1, 2, 7 and 9 

Chapter VI currently contains a 

number of provisions which permit 

orders to be submitted to the Exchange 

no earlier than 9 a.m.7 The amendments 

would eliminate this restriction, and 

would instead provide for orders to be 

submitted no earlier than the time 

specified by NOM on its Web site. The 

proposed amendments are intended to 

provide flexibility to permit NOM to 

change this beginning time for order 

submission as circumstances may 

dictate from time to time, without filing 

a proposed rule change with the 

Commission. The actual hours of 

trading on NOM would not be affected 

by this proposal. The Exchange will 

make information regarding new order 

entry times available to all market 

participants at the same time. 

Chapter XI, Section 11 

Chapter XI, Section 11, currently 

provides that a confirmation shall, by 

appropriate symbols, distinguish 

between NOM Transactions and other 

transactions in options contracts. The 

proposed amendments would clarify 

that while confirmations are required to 

distinguish between Exchange option 

transactions and other transactions in 

option contracts, they do not need to 

specify the exchange or exchanges on 

which such option contracts were 

executed.8 This proposal is similar to 


sroberts on DSKD5P82C1PROD with NOTICES
33292 Federal Register / Vol. 74, No. 131 / Friday, July 10, 2009 / Notices 

Linkage Plan’’), the contracts in a customer options 

order could be executed on more than one options 

exchange, and the significance of the options 

exchange, or exchanges, that execute a particular 

options transaction has diminished significantly. 

See Securities Exchange Act Release No. 43086 

(July 28, 2000), 65 FR 48023 (August 4, 2000). 

Furthermore, the OSRC believes that in light of best 

execution and disclosure requirements, the 

usefulness of including on an options confirmation 

the name of the options exchange, or exchanges, on 

which the options transaction was effected does not 

outweigh the operational difficulties of capturing 

the information given the multiple trading of 

options and the application of the Options Linkage 

Plan industry wide. 

9See Securities Exchange Act Release Nos. 58814 

(October 20, 2008), 73 FR 63527 (October 24, 2008); 

58932 (November 12, 2008), 73 FR 69696 

(November 19, 2008); 58980 (November 19, 2008), 

73 FR 72091 (November 26, 2008); 59166 

(December 29, 2008), 74 FR 328 (January 5, 2009); 

59434 (February 23, 2009), 74 FR 9012 (February 

27, 2009); 59806 (April 21, 2009), 74 FR 19254 

(April 28, 2009); and 59978 (May 27, 2009), 74 FR 

26451 (June 2, 2009). 

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

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

12 15 U.S.C. 78s(b)(3)(A). 

13 17 CFR 240.19b–4(f)(6). When filing a proposed 

rule change pursuant to Rule 19b–4(f)(6) under the 

Act, an Exchange is required to give the 

Commission written notice of its intent to file the 

proposed rule change, along with a brief description 

and text of the proposed rule change, at least five 

business days prior to the date of filing of the 

proposed rule change, or such shorter time as 

designated by the Commission. The Exchange met 

this requirement. 

14 17 CFR 240.19b–4(f)(6)(iii). 

15 Id. 

16For the purposes only of waiving the operative 

date of this proposal, the Commission has 

considered the proposed rule’s impact on 

efficiency, competition, and capital formation. See 

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

rule change proposals that have been 

filed by the American Stock Exchange 

LLC, the Financial Industry Regulatory 

Authority, Inc., the Chicago Board 

Options Exchange, Inc. the NASDAQ 

OMX PHLX, Inc., the Boston Stock 

Exchange, Inc., the International 

Securities Exchange, LLC and NYSE 

Arca, Inc.9 The Exchange believes that 

with the expansion of multi-listing of 

options and the introduction of new 

options exchanges, it has become 

operationally inefficient to require the 

disclosure of the market center on 

which an order was executed on the 

confirmation. As an example, a 

customer may have a single option order 

containing numerous option contracts 

executed on multiple exchanges. As 

such, it would be inefficient for the 

executing firm to be required to identify 

the exchange symbol for each contract 

executed on that customer’s order. This 

proposal would clarify that written 

confirmations furnished to a customer 

will not need to specify the exchange or 

exchanges on which such option 

contracts were executed. 

2. Statutory Basis 

The Exchange believes that its 

proposal is consistent with Section 6(b) 

of the Act 10 in general, and furthers the 

objectives of Section 6(b)(5) of the Act 11

in particular, in that it is designed 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 

Exchange believes that the proposed 

rules rationalize and clarify existing 

rules, in a manner that will benefit all 

market participants. In particular, the 

proposed amendments to Chapter XI, 

Section 11 clarify the Exchange’s 

options confirmation rule to better 

reflect the realities of the modern 

options market. 

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 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 

No written comments were either 

solicited or received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Because the foregoing proposed rule 

change does not: (1) Significantly affect 

the protection of investors or the public 

interest; (2) impose any significant 

burden on competition; and (3) become 

operative for 30 days from the date on 

which it was filed, or such shorter time 

as the Commission may designate if 

consistent with the protection of 

investors and the public interest, it has 

become effective pursuant to Section 

19(b)(3)(A) of the Act 12 and Rule 19b– 

4(f)(6) thereunder.13

A proposed rule change filed under 

Rule 19b–4(f)(6) normally may not 

become operative prior to 30 days after 

the date of filing.14 However, Rule 19b– 

4(f)(6) 15 permits the Commission to 

designate a shorter time if such action 

is consistent with the protection of 

investors and the public interest. 

Nasdaq has requested that the 

Commission waive the 30-day operative 

delay. The Exchange believes that 

waiving the 30-day operative delay is 

consistent with the protection of 

investors and the public interest 

because it would provide market 

participants with clarified and 

rationalized rules on an expedited basis. 

For this reason, the Commission 

designates the proposal to be operative 

upon filing with the Commission.16

At any time within 60 days of the 

filing of such proposed rule change, the 

Commission may summarily abrogate 

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 the furtherance of the 

purposes of the Act. 

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 (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an e-mail to rulecomments@sec.gov. Please include File 

Number SR–NASDAQ–2009–064 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–NASDAQ–2009–064. 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 inspection and copying 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 


sroberts on DSKD5P82C1PROD with NOTICES
Federal Register / Vol. 74, No. 131 / Friday, July 10, 2009 / Notices 33293 

17 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 Nos. 30697 

(May 13, 1992), 57 FR 21434 (May 20, 1992) (SR– 

NYSE–92–05) (approval order) and 52569 (October 

6, 2005), 70 FR 60118 (October 14, 2005) (SR– 

NYSE–2005–61) (notice of filing and immediate 

effectiveness). 

4See Securities Exchange Act Release No. 59464 

(February 26, 2009), 74 FR 9864 (March 6, 2009) 

(‘‘Notice’’). 

5See Comment letters in the Commission’s Public 

Reference Room or on the Commission’s Web site 

at http://www.sec.gov. For a complete list of 

comment letters and the short cites to letters used 

here, see Appendix A, attached hereto. 

6The proposed change to NYSE Rule 452 would 

not apply to a meeting that was originally 

scheduled to be held prior to January 1, 2010, but 

was properly adjourned to a date on or after the 

effective date. 

7As discussed in more detail below, under 

current NYSE Rule 452 a broker can vote without 

instruction from the beneficial owner provided ‘‘the 

person in the member organization giving or 

authorizing the giving of the proxy has no 

knowledge of any contest as to the action to be 

taken at the meeting and provided such action is 

adequately disclosed to stockholders and does not 

include authorization for a merger, consolidation or 

any matter which may affect substantially the rights 

or privileges of such stock.’’ See current NYSE Rule 

452.10(3). Items where a broker is allowed to vote 

without specific instructions from the beneficial 

owner under Rule 452 are often referred to as 

‘‘routine’’ matters. NYSE Rule 452 also currently 

contains a list of eighteen enumerated items where 

the broker may not vote without specific voting 

instructions from the beneficial owner. See Notice, 

supra note 4 and infra note 14. 

8The codification will place the interpretations 

into the rule text of Rule 452. 

9Final Report of the U.S. Securities and Exchange 

Commission on the Practice of Recording the 

Ownership of Securities in the Records of the Issuer 

in Other Than the Name of the Beneficial Owner 

of Such Securities (December 3, 1976), at 54. 

10This is due, among other things, to the advent 

of margin accounts, technological developments, 

and clearing efficiencies. 

the principal office of Nasdaq. 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–2009–064 and 

should be submitted on or before July 

31, 2009. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.17

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. E9–16315 Filed 7–9–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–60215; File No. SR–NYSE– 

2006–92] 

Self-Regulatory Organizations; New 

York Stock Exchange LLC; Order 

Approving Proposed Rule Change, as 

Modified by Amendment No. 4, To 

Amend NYSE Rule 452 and 

Corresponding Listed Company 

Manual Section 402.08 To Eliminate 

Broker Discretionary Voting for the 

Election of Directors, Except for 

Companies Registered Under the 

Investment Company Act of 1940, and 

To Codify Two Previously Published 

Interpretations That Do Not Permit 

Broker Discretionary Voting for 

Material Amendments to Investment 

Advisory Contracts With an Investment 

Company 

July 1, 2009. 

I. Introduction 

On October 24, 2006, the New York 

Stock Exchange LLC (‘‘Exchange’’ or 

‘‘NYSE’’) 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 NYSE 

Rule 452 and corresponding Section 

402.08 of the Listed Company Manual 

(‘‘Manual’’) to eliminate broker 

discretionary voting for the election of 

directors. On May 23, 2007, the 

Exchange filed Amendment No. 1 to the 

proposed rule change to exempt 

companies registered under the 

Investment Company Act of 1940 

(‘‘1940 Act’’) from the ban on broker 

discretionary voting for the election of 

directors. On June 28, 2007, the 

Exchange filed Amendment No. 2 to the 

proposed rule change, to codify two 

previously published interpretations 3

that do not permit broker discretionary 

voting for material amendments to 

investment advisory contracts with an 

investment company. On February 26, 

2009, the Exchange filed and withdrew 

Amendment No. 3 to the proposed rule 

change for technical reasons. On 

February 26, 2009, the Exchange filed 

Amendment No. 4 to the proposed rule 

change. Amendment No. 4 superseded 

and replaced the proposal in its entirety. 

The Commission published the 

proposed rule change, as modified by 

Amendment No. 4, for comment in the 

Federal Register on March 6, 2009.4 The 

Commission received 153 comments 

from 137 commenters on the proposal.5

This order approves the proposed rule 

change, as modified by Amendment No. 

4. 

II. Description of the Proposal and 

Background 

A. Description of the Proposal 

The Exchange proposes amending 

NYSE Rule 452 and Section 402.08 of 

the Manual (together, ‘‘NYSE Rule 452’’) 

to eliminate broker discretionary voting 

for all elections of directors at 

shareholder meetings held on or after 

January 1, 2010,6 whether contested or 

not, except for companies registered 

under the 1940 Act. Currently, NYSE 

Rule 452 permits brokers to vote 

without voting instructions from the 

beneficial owner on uncontested 

elections of directors.7 Specifically, the 

NYSE proposal would add to the list of 

enumerated items for which a member 

generally may not give a proxy to vote 

without instructions from the beneficial 

owner, the ‘‘election of directors.’’ The 

proposal contains a specific exception, 

however, for companies registered 

under the 1940 Act. 

In addition, the Exchange proposes 

amending NYSE Rule 452 to codify two 

previously published interpretations.8

First, the NYSE proposes codifying that 

NYSE Rule 452 would preclude broker 

discretionary voting on a matter that 

materially amends an investment 

advisory contract with an investment 

company. Second, the NYSE proposes 

codifying that a material amendment to 

an investment advisory contract would 

include any proposal to obtain 

shareholder approval of an investment 

company’s investment advisory contract 

with a new investment adviser for 

which shareholder approval is required 

by the 1940 Act and the rules 

thereunder. 

B. Background 

A shareholder of a public company 

may hold shares either directly, as the 

record holder, or indirectly, as the 

beneficial holder, with the shares held 

in the name of the beneficial 

shareholder’s broker-dealer, bank 

nominee, or custodian (‘‘securities 

intermediary’’), which is the record 

holder. The latter generally is referred to 

as holding securities in ‘‘street name.’’ 

The NYSE’s discretionary voting rule 

dates back to 1937. Historically, the 

majority of shareholders held their 

shares directly as record holders. In 

1976, for example, shareholders held 

approximately 71% of securities of 

record (in their own name), while only 

approximately 29% of securities were 

held by securities intermediaries in 

street name.9 The number of beneficial 

owners holding securities in street 

name, however, has increased 

significantly since 1976,10 with the 

result that securities intermediaries, on 

behalf of beneficial owners, now hold a 

substantial majority of exchange traded 


sroberts on DSKD5P82C1PROD with NOTICES