Federal Register / Vol. 74, No. 136 / Friday, July 17, 2009 / Notices 34837 

10 Id. 

11See NYSE Arca Equities Rule 7.13; see also 

Securities Exchange Act Release No. 44983 (October 

25, 2001), 66 FR 55225 (November 1, 2001) (SR– 

PCX–00–25). 

12For 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). 

13 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

4(f)(6) 10 permits the Commission to 

designate a shorter time if such action 

is consistent with the protection of 

investors and the public interest. CHX 

has requested that the Commission 

waive the 30-day operative delay. The 

Exchange notes that the proposed rule 

change is substantially similar to a rule 

change proposed by NYSE Arca, Inc.11

The Exchange also believes that it is 

important to implement this rule change 

as soon as practicable to ensure that the 

Exchange has adequate personnel 

available to suspend or reinstate trading 

on the Exchange when necessary. The 

Commission believes that waiving the 

30-day operative delay is consistent 

with the protection of investors and the 

public interest because it should further 

the Exchange’s ability to suspend or 

reinstate trading on the Exchange when 

necessary in the public interest. For this 

reason, the Commission designates the 

proposal to be operative upon filing 

with the Commission.12

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–CHX–2009–05 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–CHX–2009–05. 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 the filing also will be available 

for inspection and copying at the 

principal office of the CHX. 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–CHX–2009–05 and should 

be submitted on or before August 7, 

2009. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.13

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. E9–17010 Filed 7–16–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–60282; File No. SR– 

NYSEArca–2009–66) 

Self-Regulatory Organizations; Notice 

of Filing and Immediate Effectiveness 

of Proposed Rule Change by NYSE 

Arca, Inc. Amending Option Trading 

Rules in Order To Adopt the Quarterly 

Option Series Pilot Program on a 

Permanent Basis 

July 10, 2009. 

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

Securities Exchange Act of 1934 

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

notice is hereby given that on July 9, 

2009, NYSE Arca, Inc. (‘‘NYSE Arca’’ or 

the ‘‘Exchange’’) filed with the 

Securities and Exchange Commission 

(‘‘SEC’’ or ‘‘Commission’’) the proposed 

rule change as described in Items I and 

II 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 its 

option trading rules in order to adopt 

the Quarterly Option Series Pilot 

Program on a permanent basis. The text 

of the proposed rule change is attached 

as Exhibit 5 to the 19b–4 form. A copy 

of this filing is available on the 

Exchange’s Web site at http:// 

www.nyse.com, at the 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 

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 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 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange is proposing to adopt 

the Quarterly Option Series Pilot 

Program (‘‘QOS Program’’) on a 

permanent basis. On July 12, 2006, the 

Exchange filed with the Securities and 

Exchange Commission (‘‘Commission’’) 

SR–NYSEArca–2006–45, which was 

effective on filing and established the 

QOS Program. The QOS Program allows 

NYSE Arca to list and trade Quarterly 

Option Series, which expire at the close 

of business of the last business day of 

a calendar quarter. Under the QOS 

Program, NYSE Arca may select up to 

five (5) currently listed exchange traded 

fund (‘‘ETF’’) or index option classes on 

which Quarterly Option Series may be 

opened. In addition, NYSE Arca may 

also list Quarterly Option Series on any 

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34838 Federal Register / Vol. 74, No. 136 / Friday, July 17, 2009 / Notices 

options classes that are selected by other 

securities exchanges that employ a 

similar pilot program under their 

respective rules. 

The Exchange may list series that 

expire at the end of the next consecutive 

four (4) calendar quarters, as well as the 

fourth quarter of the next calendar year. 

For example, if the Exchange is trading 

Quarterly Options Series in the month 

of May 2009, it may list series that 

expire at the end of the second, third, 

and fourth quarters of 2009, as well as 

the first and fourth quarters of 2010. 

Following the second quarter 2009 

expiration, the Exchange could add 

series that expire at the end of the 

second quarter of 2010. 

Quarterly Option Series are P.M. 

settled. 

Quarterly Option Series in ETF Options 

If an ETF option is selected for 

participation in the QOS Program, the 

strike price of each Quarterly Option 

Series is fixed at a price per share, with 

at least two strike prices above and two 

strike prices below the approximate 

value of the underlying security at about 

the time the Quarterly Options Series is 

opened for trading on the Exchange. 

NYSE Arca shall list strikes prices for a 

Quarterly Option series that are within 

$5 from the closing price of the 

underlying security on the preceding 

day. 

The Exchange may open for trading 

additional Quarterly Options Series of 

the same class when the Exchange 

deems is necessary to maintain an 

orderly market, to meet customer 

demand or when the market price of the 

underlying security moves substantially 

from the initial exercise price or prices. 

To the extent that any additional strike 

prices are listed by the Exchange, such 

additional strike prices shall be within 

thirty percent (30%) above or below the 

closing price of the underlying ETF on 

the preceding day. The Exchange may 

also open additional strike prices of 

Quarterly Option Series in ETF options 

that are more than 30% above or below 

the current price of the underlying ETF 

provided that demonstrated customer 

interest exists for such series, as 

expressed by institutional, corporate or 

individual customers or their brokers. 

Market-Makers trading for their own 

account shall not be considered when 

determining customer interest under 

this provision. The opening of the new 

Quarterly Options Series shall not affect 

the series of options of the same class 

previously opened. In addition to the 

initial listed series, the Exchange may 

list up to sixty (60) additional series per 

expiration month for each Quarterly 

Options Series in ETF options. 

The interval between strike prices on 

Quarterly Options Series shall be the 

same as the interval for strike prices for 

series in that same options class that 

expire in accordance with the normal 

monthly expiration cycle. 

The Exchange has adopted a delisting 

policy with respect to QOS in ETF 

options. On a monthly basis, the 

Exchange reviews series that are outside 

a range of five (5) strikes above and five 

(5) strikes below the current price of the 

underlying ETF, and delists series with 

no open interest in both the put and the 

call series having a: (i) Strike higher 

than the highest strike price with open 

interest in the put and/or call series for 

a given expiration month; and (ii) strike 

lower than the lowest strike price with 

open interest in the put and/or call 

series for a given expiration month. 

Notwithstanding the delisting policy, 

customer requests to add strikes and/or 

maintain strikes in QOS in ETF options 

in series eligible for delisting shall be 

granted. 

Further, in connection with the 

delisting policy, if the Exchange 

identifies series for delisting, the 

Exchange shall notify other options 

exchanges with similar delisting 

policies regarding eligible series for 

listing, and shall work with such other 

exchanges to develop a uniform list of 

series to be delisted, so as to ensure 

uniform series delisting of multiply 

listed Quarterly Options Series in ETF 

options. 

During the last quarter of 2008 (and 

for the new expiration month added 

after December Quarterly Option Series 

expiration), the Exchange was permitted 

to list up to one hundred (100) 

additional series per expiration month 

for each Quarterly Options Series in 

ETF options. 

Quarterly Option Series in Index 

Options 

If an index option is selected for 

participation in the QOS Program, the 

strike price of each Quarterly Option 

Series will be fixed at a price per share, 

with at least two, but no more than five, 

strike prices above and at least two, but 

no more than five, strike prices below 

the value of the underlying index at 

about the time that a Quarterly Options 

Series is opened for trading on the 

Exchange. The Exchange shall list strike 

prices for Quarterly Options Series that 

are reasonably related to the current 

index value of the underlying index to 

which such series relates at about the 

time such series of options is first 

opened for trading on the Exchange. The 

term ‘‘reasonably related to the current 

index value of the underlying index’’ 

means that the exercise price is within 

thirty percent (30%) of the current 

index value. 

The Exchange may open for trading 

additional Quarterly Options Series of 

the same class when the Exchange 

deems it necessary to maintain an 

orderly market, to meet customer 

demand or when the market price of the 

underlying security moves substantially 

from the initial exercise price or prices. 

The Exchange may also open for trading 

additional Quarterly Options Series that 

are more than thirty percent (30%) of 

the current index value, provided that 

demonstrated customer interest exists 

for such series, as expressed by 

institutional, corporate, or individual 

customers or their brokers. MarketMakers trading for their own account 

shall not be considered when 

determining customer interest under 

this provision. 

The Exchange may open additional 

strike prices of a Quarterly Option 

Series that are above the value of the 

underlying index provided that the total 

number of strike prices above the value 

of the underlying index is no greater 

than five. The Exchange may open 

additional strike prices of a Quarterly 

Option Series that are below the value 

of the underlying index provided that 

the total number of strike prices below 

the value of the underlying index is no 

greater than five. The opening of any 

new Quarterly Option Series shall not 

affect the series of options of the same 

class previously opened. 

By definition, Quarterly Option Series 

on an option class can never expire in 

the same week in which monthly option 

series on the same class expires. The 

same, however, is not the case with 

regards to Short Term Option Series. 

Quarterly Option Series and Short Term 

Option Series on the same options class 

may expire concurrently. However, to 

avoid any confusion in the market 

place, the Exchange will not list a Short 

Term Option Series on an options class 

whose expiration coincides with that of 

a Quarterly Option Series on the same 

options class. In other words, the 

Exchange will not list a Short Term 

Options Series on an ETF or an index 

if a Quarterly Option Series on that ETF 

or index were to expire on a Friday, the 

only day of the week during which both 

Quarterly Option Series and a P.M.- 

settled Short Term Option Series can 

potentially expire concurrently. 

There being one exception to this 

rule. The Exchange may list a P.M.- 

settled Quarterly Option Series on an 

options class concurrent with an A.M.- 

settled Short Term Options Series on 

that same options class, both of which 

may expire on a Friday. In other words, 

the Exchange may list a P.M.-settled 

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Federal Register / Vol. 74, No. 136 / Friday, July 17, 2009 / Notices 34839 

3See Securities Exchange Act Release No. 60164 

(June 23, 2009), 74 FR 31333 (June 30, 2009) (order 

approving SR–CBOE–2009–29). 

4 15 U.S.C. 78f(b). 

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

6 15 U.S.C. 78s(b)(3)(A). 

7 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 

4(f)(6) requires a self-regulatory organization to give 

the Commission written notice of its intent to file 

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 has satisfied this 

requirement. 

8See Securities Exchange Act Release No. 60164, 

supra note 3 (approving the quarterly options series 

program on a permanent basis). 

9For purposes only of waiving the 30-day 

operative delay, the Commission has considered the 

proposed rule’s impact on efficiency, competition, 

and capital formation. See 15 U.S.C. 78c(f). 

Quarterly Option Series on an ETF on 

an index concurrent with an A.M.- 

settled Short Term Option Series on that 

ETF or index and both of which expire 

on a Friday. The Exchange believes that 

the concurrent listing of an A.M.-settled 

Short Term Option Series and a P.M.- 

settled Quarterly Option Series on the 

same underlying ETF or index will 

provide investors with yet another 

hedging mechanism. Finally, the 

interval between strike prices on 

Quarterly Option Series shall be the 

same as the interval for strike prices for 

series in the same options class that 

expires in accordance with the normal 

monthly expiration cycles. 

The Exchange presently lists and 

trades Quarterly Option Series on the 

following six ETF option classes as part 

of the QOS Program: DIAMONDS Trust 

(DIA), Standard and Poor’s Depositary 

Receipts/SPDRs (SPY), iShares Russell 

2000 Index Fund (IWM), PowerShares 

QQQ Trust (QQQQ), Energy Select 

SPDR (XLE), and the KBW Bank Index 

(BKX). NYSE Arca believes the QOS 

Program has been successful and well 

received by its members and the 

investing public for the nearly three 

years that it has been in operation as a 

pilot program. 

NYSE Arca is now proposing to make 

the QOS Program permanent. In support 

of approving the QOS Program on a 

permanent basis, the Exchange has 

submitted to the Commission a Pilot 

Program Report (‘‘Report’’) detailing the 

Exchange’s experience with the QOS 

Program. Specifically, the Report 

contains data and written analysis 

regarding the six ETF option classes 

included in the QOS Program. The 

Report was submitted under separate 

cover and seeks confidential treatment 

under the Freedom of Information Act. 

The Exchange believes there is 

sufficient investor interest and demand 

in the QOS Program to warrant its 

permanent approval. The Exchange 

believes that the QOS Program has 

provided investors with additional 

means of managing their risk exposures 

and carrying out their investment 

objectives. Furthermore, the Exchange 

has not experienced any capacityrelated problems with respect to 

Quarterly Option Series. The Exchange 

also represents that is has the necessary 

system capacity to continue to support 

the option series listed under the QOS 

Program. 

This proposal is substantially similar 

to the recently approved proposal by the 

Chicago Board Options Exchange 

(‘‘CBOE’’), to make permanent their 

Quarterly Options Series Program.3

2. Statutory Basis 

The proposed rule change is 

consistent with Section 6(b) 4 of the 

Securities Exchange Act of 1934 (the 

‘‘Act’’), in general, and furthers the 

objectives of Section 6(b)(5) 5 in 

particular in that it is designed to 

prevent fraudulent and manipulative 

acts and practices, to promote just and 

equitable principles of trade, to foster 

cooperation and coordination with 

persons engaged in facilitating 

transactions in securities, and to remove 

impediments to and perfect the 

mechanisms of a free and open market 

and a national market system. The 

Exchange believes that the QOS 

Program promotes just and equitable 

principles of trade and further believes 

the QOS Program has been successful 

and well received by the investing 

public for the nearly three years that it 

has been in operation as a pilot 

program. 

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 Act. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

No written comments were solicited 

or received with respect to the proposed 

rule change. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Because the foregoing 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 after the date of 

the filing, 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 6 and Rule 19b– 

4(f)(6) thereunder.7

The Exchange has requested that the 

Commission waive the 30-day operative 

delay so that the Exchange can 

permanently establish a Quarterly 

Options Series Program that is 

consistent with those of other options 

exchanges.8 In addition, the 

Commission notes that the Exchange’s 

QOS Program currently is scheduled to 

expire on July 10, 2009. The 

Commission therefore has determined 

that waiving the 30-day operative delay 

of the Exchange’s proposal is consistent 

with the protection of investors and the 

public interest because such waiver will 

enable the Exchange to permanently 

establish the QOS program without 

disruption.9 Therefore, the Commission 

designates the proposal operative upon 

filing. 

At any time within 60 days of the 

filing of the 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 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–NYSEArca–2009–66 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–NYSEArca–2009–66. This 

file number should be included on the 

subject line if e-mail is used. To help the 

mstockstill on DSKH9S0YB1PROD with NOTICES

34840 Federal Register / Vol. 74, No. 136 / Friday, July 17, 2009 / Notices 

10 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 

Stock Market LLC. Accordingly, the By-Laws are 

part of the Agreement. See Securities Exchange Act 

Release No. 59907 (May 12, 2009), 74 FR 23761 

(‘‘Notice’’), 23761 n.3. 

4See Notice, supra note 3. 

5See Notice, 74 FR at 23761. 

6Specifically, the Exchange would: reflect the 

name change of The Nasdaq Stock Market, Inc. to 

The NASDAQ OMX Group, Inc.; reflect the name 

change of National Association of Securities 

Dealers, Inc. to FINRA; correct typographical errors 

in the definition of ‘‘Industry member’’ in Article 

I of the By-Laws and in Section 6 of the Agreement; 

and redesignate the Agreement as the ‘‘Second 

Amended Limited Liability Company Agreement of 

The NASDAQ Stock Market LLC.’’ 

7 In approving this proposed rule change, the 

Commission notes that it has considered the 

proposed rule’s impact on efficiency, competition, 

and capital formation. See 15 U.S.C. 78c(f). 

8 15 U.S.C. 78f(b)(1). 

9 15 U.S.C. 78f(b)(3). 

10 15 U.S.C. 78f(b)(5). 

11Securities Exchange Act Release No. 55293 

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

(SR–NYSE–2006–120). 

12Specifically the NASDAQ Exchange states the 

NASDAQ OMX audit committee, described infra at 

n.13, has broad authority to review the financial 

information that will be provided to shareholders 

and others, systems of internal controls, and audit, 

financial reporting and legal and compliance 

processes and, because NASDAQ OMX’s financial 

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 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–2009–66 and 

should be submitted on or before 

August 7, 2009. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.10

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. E9–17007 Filed 7–16–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–60276; File No. SR– 

NASDAQ–2009–042] 

Self-Regulatory Organizations; The 

NASDAQ Stock Market LLC; Order 

Approving Proposed Rule Change To 

Amend Its Limited Liability Agreement 

and By-Laws 

July 9, 2009. 

On April 29, 2009, The NASDAQ 

Stock Market LLC (‘‘NASDAQ 

Exchange’’ or ‘‘Exchange’’) filed with 

the Securities and Exchange 

Commission (‘‘Commission’’) pursuant 

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

Exchange Act of 1934 (‘‘Act’’),1 and 

Rule 19b–4 thereunder,2 a proposed rule 

change to amend its Limited Liability 

Agreement (‘‘Agreement’’) and ByLaws.3 The proposed rule change was 

published for comment in the Federal 

Register on May 20, 2009.4 The 

Commission received no comments 

regarding the proposal. This order 

approves the proposed rule change. 

I. Description of the Proposed Rule 

Change 

Currently, the NASDAQ Exchange 

board and the board of its parent 

company, NASDAQ OMX Group, Inc. 

(‘‘NASDAQ OMX’’), maintain their own 

audit committee and management 

compensation committees. As more 

fully discussed in the Notice, the 

Exchange states that it has found the 

work of these committees to overlap 

substantially.5 As a result, the Exchange 

proposes to revise its Agreement to 

allow for the elimination of its audit and 

management compensation committees. 

The Exchange also proposes to amend 

the Agreement to allow for the 

elimination of its arbitration and 

mediation committee, provided that the 

NASDAQ Exchange’s arbitration and 

mediation program is operated by the 

Financial Industry Regulatory Authority 

(‘‘FINRA’’), which the NASDAQ 

Exchange states is currently the case. 

In addition, as discussed in the 

Notice, the Exchange proposes changes 

to its rules governing the selection of 

Member Representative Directors, as 

well as to update certain aspects of its 

Agreement.6

II. Discussion and Commission 

Findings 

After careful review, the Commission 

finds that the proposed rule change is 

consistent with the requirements of the 

Act and the rules and regulations 

thereunder applicable to a national 

securities exchange.7 In particular, the 

Commission finds that the proposed 

rule change is consistent with Section 

6(b)(1) of the Act,8 which requires a 

national securities exchange to be so 

organized and have the capacity to carry 

out the purposes of the Act and to 

comply, and to enforce compliance by 

its members and persons associated 

with its members, with the provisions of 

the Act. The Commission also finds that 

the proposed rule change is consistent 

with Section 6(b)(3) of the Act,9 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. The 

Commission further finds that the 

proposed rule change is consistent with 

Section 6(b)(5) of the Act,10 in that it is 

designed, among other things, to 

prevent fraudulent and manipulative 

acts and practices, to promote just and 

equitable principles of trade, to remove 

impediments to and perfect the 

mechanism of a free and open market 

and a national market system, and, in 

general, to protect investors and the 

public interest. The Commission 

previously approved a structure in 

which certain committees of the board 

of directors of NYSE Euronext, 

including the audit and compensation 

committees, were authorized to perform 

functions for various subsidiaries, 

including the New York Stock 

Exchange, LLC (‘‘NYSE’’).11

A. Elimination of the Exchange’s Audit 

and Management Compensation 

Committees 

Currently, the NASDAQ Exchange 

audit committee is primarily charged 

with: (1) Oversight of the NASDAQ 

Exchange’s financial reporting; (2) 

oversight of the systems of internal 

controls established by management and 

the NASDAQ Exchange board, as well 

as the legal and compliance process; (3) 

selection and evaluation of independent 

auditors; and (4) direction and oversight 

of the internal audit function. The 

Exchange states that the responsibilities 

of the NASDAQ Exchange’s audit 

committee are fully duplicated 12 by the 

mstockstill on DSKH9S0YB1PROD with NOTICES