Document ID: SEC-2009-0346-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX, Inc.
Posted Date: 2009-03-16T04:00Z

[Federal Register: March 16, 2009 (Volume 74, Number 49)]
[Notices]               
[Page 11152-11158]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr16mr09-109]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59538; File No. SR-Phlx-2009-17]

 
Self-Regulatory Organizations; NASDAQ OMX PHLX, Inc.; Notice of 
Filing of a Proposed Rule Change Relating to the Nomination and 
Election of Candidates for Governor and Independent Governor

March 9, 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 February 23, 2009, NASDAQ OMX PHLX, Inc. (``Phlx'' or the 
``Exchange'') filed with

[[Page 11153]]

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

    The Exchange, proposes to amend its By-Laws to: (i) Replace the 
current ``Nominating, Elections and Governance Committee'' with a newly 
named ``Nominating Committee'' and a ``Member Nominating Committee''; 
(ii) modify the processes for nominating candidates for Governor and 
Designated Independent Governor; (iii) modify the procedures for Member 
Organization Representatives to vote for Designated Governor nominees 
and the procedures for meetings of Members and Member Organizations; 
(iv) modify the procedures for filling vacancies on the Board of 
Governors; (v) modify the definitions of ``Independent Governor'', 
``Trust Agreement'' and add the following definitions: ``Industry 
Member'', ``Non-Industry Member'', ``Public Member'', ``Member 
Representative member'', ``Contested Vote'', ``List of Candidates'', 
``Member Voting Record Date'' and ``Voting Date''; and (vi) amend the 
Certificate of Incorporation and By-Laws to eliminate the Vice Chair 
and PBOT Governor positions from the Board of Governors.
    The text of the proposed rule change is available on the Exchange's 
Web site at http://www.nasdaqtrader.com/micro.aspx?id=PHLXRulefilings, 
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 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 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 purpose of the proposed rule change is to streamline the 
processes related to the nomination and election of candidates for 
Governor and Designated Independent Governor positions and to conform 
the NASDAQ OMX PHLX, Inc. governance structure to that of The NASDAQ 
Stock Market LLC.\3\ To that end, the proposal establishes independent 
Nominating and Member Nominating Committees, modifies the process for 
nominating candidates for Governor and Designated Independent Governor 
and the procedures for Member Organization Representatives \4\ to vote 
for Designated Governor nominees and eliminates the Vice Chair and PBOT 
Governor positions on the Board similar to The NASDAQ Stock Market LLC, 
structure.
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    \3\ The NASDAQ Stock Market LLC is a subsidiary of NASDAQ OMX 
GROUP, Inc., the parent company of NASDAQ OMX PHLX, Inc. On July 24, 
2008, The NASDAQ OMX GROUP, Inc. acquired the Philadelphia Stock 
Exchange, Inc. See Securities Exchange Act Release No. 58098 (July 
17, 2008), 73 FR 42850 (July 23, 2008) (SR-NASDAQ-2008-035) [sic]. 
Currently, the process for selection of Governors differs between 
NASDAQ OMX PHLX, Inc. and The NASDAQ Stock Market LLC. See 
Securities Exchange Act Release No. 57757 (May 1, 2008), 73 FR 26159 
(May 8, 2008) (SR-BSE-2008-23) (Pursuant to a merger with The NASDAQ 
OMX Group, Inc., the Boston Stock Exchange, Inc. proposed to adopt 
By-Laws similar in all material respects to the By-Laws of The 
NASDAQ Stock Market LLC so that the exchanges could be operated with 
similar governance structures.)
    \4\ Pursuant to By-Law Article I, Section 1-1(w), the term 
``Member Organization Representative'' means the officer (or person 
in a similar position) of a Member Organization designated by such 
Member Organization as such Member Organization's Member 
Organization Representative, who shall have the sole authority, with 
respect to the selection or removal of Designated Nominees as 
defined in Section 3-2(a) to exercise any and all rights and to take 
any and all actions on behalf of such Member Organization and each 
Member who has designated such Member Organization as his primary 
affiliation.
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Nominating and Election of Governors

Current Nominating Process

    Currently, the Nominating, Elections and Governance Committee is 
comprised of five members including four Independent Governors \5\ (one 
of whom must be a Designated Independent Governor \6\) and one Member 
Governor \7\. The Nominating, Elections and Governance Committee 
submits nominations for the positions of Designated Governors from 
candidates selected in accordance with Exchange By-Law Article III, 
Section 3-4 and 3-6 concerning qualifications and recommendations 
received at open meetings and in writing by the Secretary of the 
Exchange. The Nominating, Elections and Governance Committee holds at 
least two (2) open meetings to receive recommendations for the 
positions of Designated Independent Governors or Member Governor.\8\ 
Recommendations may be made by any Member, participant or Member 
Organization Representative or by any Member of the Nominating, 
Elections or Governance Committee then in office and may be submitted 
in writing or in person.\9\ Independent nominations for the positions 
of Designated Governors may be made by a written petition by Member 
Organization Representatives and filed with the Secretary of the 
Exchange in a sealed envelope within two (2) weeks after the posting of 
the report of the Nominating, Elections and Governance Committee to the 
Member Organization Representatives.\10\ Nominations are valid only 
when signed by Member Organization Representatives representing not 
less than fifty (50) votes.\11\
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    \5\ By-Law Article I, Section 1-1(p) defines an Independent 
Governor as ``* * * a Governor who must satisfy the definition of 
Independent as set forth herein and is duly elected to fill one of 
the vacancies on the Board of Governors allocated to the Independent 
Governors.'' By-Law Article I, Section 1-1(o) defines Independent as 
``The term ``Independent'' when used in the context of Governors or 
committee members, shall mean persons affirmatively determined by 
the Board as having no Material Relationship with the Exchange or 
any affiliate of the Exchange, any Member of the Exchange or any 
affiliate of such Member, or any issuer of securities that are 
listed or traded on the Exchange or a facility of the Exchange.''
    \6\ By-Law Article I, Section 1-1(f) defines a Designated 
Independent Governor as, ``* * * those * * * who are elected by the 
holder of the Series A Preferred Stock in accordance with Article 
SIXTH of the Certificate of Incorporation.''
    \7\ By-Law Article I, Section 1-1(u) defines a Member Governor 
as, ``* * * a Governor who is a Member or a general partner or an 
executive officer (vice-president and above) of a Member 
Organization and is duly elected to fill the one (1) vacancy on the 
Board of Governors allocated to the Member Governor.''
    \8\ See By-Law Article III, Section 3-6.
    \9\ See By-Law Article III, Section 3-6.
    \10\ See By-Law Article III, Section 3-7.
    \11\ See By-Law Article III, Section 3-7. Further, ``[a] Member 
Organization Representative shall not endorse more than one (1) 
nominee per vacancy; provided, however, that the Member Organization 
Representatives representing not less than seventy-five (75) votes 
may, by petition, propose an entire ticket, or any portion thereof, 
for the vacancies of Designated Governors on the Board of Governors 
to be filled at the ensuing election.''
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    At the annual meeting of Members and Member Organizations, Member 
Organization representatives elect the Designated Governors, who are 
then elected at the annual Stockholders meeting by the holder of the 
Series A

[[Page 11154]]

Preferred Stock.\12\ At the annual meeting of stockholders, the Holder 
of Common Stock presents for nomination to the Nominating, Elections 
and Governance Committee the candidates for Vice Chair, Stockholder 
Governor and Independent Governors for placement on the ballot for 
election by the Holder of Common Stock.\13\
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    \12\ See Phlx By-Laws, Article III, Section 3-2(a) and Article 
XXVIII, Section 28-2. On February 22, 2007, the Philadelphia Stock 
Exchange, Inc. (now NASDAQ OMX PHLX, Inc.) entered into a Third 
Amended and Restated Trust Agreement with Wilmington Trust Company. 
The Exchange issued to the Trust one share of Series A Preferred 
Stock, which share has the exclusive right to elect and remove 
Designated Governors. Wilmington Trust is the Trustee of the Trust 
pursuant to the agreement.
    \13\ See By-Law Article XXVIII, Section 28-3.
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Proposed Nominating Process

    Under the proposed rule change, By-Law Article III, Sections 3-4, 
3-6, 3-7 and 3-16, Article X, Sections 10-1 and 10-19, Article XI, 
Section 11-1 and Article XXVIII, Sections 28-3, 28-8 and 28-12 would be 
amended to replace the current ``Nominating, Elections and Governance 
Committee'' with a newly named ``Nominating Committee'' and a ``Member 
Nominating Committee'' as well as modify the processes for nominating 
candidates for Governor and Designated Independent Governor. Further, 
By-Law Article III, Sections 3-2, 3-3, 3-4, 3-6, 3-7, 3-8, 3-11, 3-12, 
3-13 and 3-14, and Article XXVIII, Section 28-2 would be amended to 
modify the procedures for Member Organization Representatives to vote 
for Designated Governor nominees and the procedures for meetings of 
Members and Member Organizations. These proposed amendments would 
conform the NASDAQ OMX PHLX, Inc. By-Laws to those of The NASDAQ Stock 
Market LLC.
    The proposed rule change amends By-Law Article III, Sections 3-2 
and 3-7 so that Designated Governors would be elected to the Board of 
Governors on an annual basis.\14\ For each annual election, the Board 
of Governors would select a Member Voting Record Date \15\ and a Voting 
Date.\16\ The Member Voting Record Date would be at least 10 days but 
not more than 60 days prior to the Voting Date.\17\ The Member 
Nominating Committee would create a list of one or more candidates for 
each Designated Governor position on the Board to be elected by the 
Series A Preferred Stock Holders at the annual meeting of Stockholders 
or a special meeting in lieu thereof.\18\ Promptly after selection of 
the Voting Date, in a notice transmitted to Member Organization 
Representatives and in a prominent location on a publicly accessible 
Web site, the Exchange (i) shall announce the Voting Date and the List 
of Candidates,\19\ and (ii) shall describe the procedures for Member 
Organization Representatives to nominate candidates for election at the 
next annual meeting of Stockholders. In the event of a Contested 
Vote,\20\ the Exchange shall also send Member Organization 
Representatives formal notice, which notice shall be sent by the 
Exchange at least 10 days but no more than 60 days prior to the Voting 
Date to the Member Organization Representatives of persons that were 
Member Organizations on the Member Voting Record Date, by any means, 
including electronic transmission, as determined by the Board of 
Governors or committee thereof.\21\ The notice shall indicate by 
appropriate designation whether each person on the List of Candidates 
is a Member or a foreign currency options participant of the Exchange 
or is a non-member or non-foreign currency options participant of the 
Exchange who is a general partner or executive officer (vice-president 
or above) of a Member Organization or participant organization of the 
Exchange or is nominated to be a Designated Independent Governor.
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    \14\ See similar provision in The NASDAQ Stock Market LLC By-
Laws at Article II, Section 1. Currently, Governors are elected for 
terms of one year.
    \15\ A Member Voting Record Date definition is proposed herein 
under the section titled Definitions.
    \16\ A Voting Date definition is proposed herein under the 
section titled Definitions.
    \17\ See similar provision in The NASDAQ Stock Market LLC By-
Laws at Article II, Section 1.
    \18\ This provision is similar to Exchange By-Law Article III, 
Section 3-2 in that the Series A Preferred Stock Holder would 
continue to be the mechanism to elect the Member nominees. Moreover, 
it is similar to The NASDAQ Stock Market LLC By-Law Article II, 
Section 1, in that the Member Nominating Committee creates the List 
of Candidates.
    \19\ A List of Candidates definition is proposed herein under 
the section titled Definitions.
    \20\ A Contested Vote definition is proposed herein under the 
section titled Definitions.
    \21\ See similar provision in The NASDAQ Stock Market LLC By-
Laws at Article II, Section 1.
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    An additional candidate may be added to the List of Candidates by a 
Member Organization Representative that submits a timely and duly 
executed written nomination to the Secretary of the Exchange. To be 
timely, a Member Organization Representative's notice would be 
delivered to the Secretary at the principal executive offices of the 
Exchange not later than the close of business on the 90th day nor 
earlier than the close of business on the 120th day prior to the first 
anniversary of the preceding year's Voting Date, provided however that 
in the event that the Voting Date is more than 30 days before or more 
than 70 days after such anniversary date, notice by the Member 
Organization Representative must be so delivered not earlier than the 
close of business on the 120th day prior to such Voting Date and not 
later than the close of business on the later of the 90th day prior to 
such Voting Date or the tenth day following the day on which public 
announcement of such Voting Date is first made by the Exchange.\22\ 
Such Member Organization Representative's notice shall set forth: (i) 
As to the person whom the Member Organization Representative proposes 
to nominate for election as a Designated Governor, all information 
relating to that person that is required to be disclosed in 
solicitations of proxies for election of directors in an election 
contest, or is otherwise required, in each case pursuant to Regulation 
14A under the Exchange Act and the rules thereunder (and such person's 
written consent to be named in the List of Candidates as a nominee and 
to serving as a Governor if elected); (ii) a petition in support of the 
nomination duly executed by the Member Organization Representatives of 
10% or more of all Member Organizations; and (iii) the name and address 
of the Member Organization Representative making the nomination.\23\ 
The Exchange may require any proposed nominee to furnish such other 
information as it may reasonably require to determine the eligibility 
of such proposed nominee to serve as a Designated Governor.\24\
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    \22\ See similar provision in The NASDAQ Stock Market LLC By-
Laws at Article II, Section 1.
    \23\ See similar provision in The NASDAQ Stock Market LLC By-
Laws at Article II, Section 1.
    \24\ See similar provisions in The NASDAQ Stock Market LLC By-
Laws at Article II, Section 1, which relates to the nomination of 
alternate candidates.
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    If by the date on which a Member Organization Representative may no 
longer submit a timely nomination, there is only one candidate for each 
Designated Governor position to be voted on the Voting Date, the 
candidates on the List of Candidates shall be the ``Designated 
Nominees,'' which the holder of the Series A Preferred Stock shall be 
required to elect as Designated Governors in accordance with the 
Certificate of Incorporation at Article Six as well as the Trust 
Agreement. In the event of a Contested Vote, the Exchange would conduct 
a vote to determine the Designated Nominees in accordance with proposed 
Article III, Section 3-7.\25\
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    \25\ See similar provisions in The NASDAQ Stock Market LLC By-
Laws at Article II, Section 1.
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    If there is a Contested Vote, the Designated Nominees would be 
selected through a balloting process but without a formal meeting of 
the Members and

[[Page 11155]]

Member Organizations. A formal notice of the Voting Date and the List 
of Candidates would be sent by the Exchange at least 10 days but no 
more than 60 days prior to the Voting Date to the Member Organization 
Representatives of persons that were Member Organizations on the Member 
Voting Record Date, by any means, including electronic transmission, as 
determined by the Board of Governors or committee thereof.\26\ The 
notice would indicate whether each person on the List of Candidates was 
a Member or foreign currency options participant of the Exchange or a 
non-member or non-foreign currency options participant of the Exchange 
who is a general partner or executive officer of a Member Organization 
or participant organization of the Exchange or is nominated to be a 
Designated Independent Governor.
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    \26\ See similar provisions in The NASDAQ Stock Market LLC By-
Laws at Article II, Section 1.
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    Votes would be cast by written ballot, electronic submission, or 
any other means as set forth in a notice to the Member Organization 
Representatives sent by the Exchange prior to the Voting Date. Only 
votes received prior to 11:59 p.m. Eastern Time on the Voting Date 
would count for the election of a Designated Nominee.\27\ The vote 
would not be valid unless a majority of the Member Organization 
Representatives entitled to vote cast a vote; if a quorum is lacking, 
the Board of Governors would declare a subsequent Voting Date and 
Member Voting Record Date for the purpose of selecting Designated 
Nominees and would again follow the procedures for conducting a 
Contested Election. These voting provisions replace the current secret 
written ballot provisions in Article III, Section 3-12. Minor technical 
amendments were made to Exchange By-Law Article III, Section 3-13 
related to quorums for meetings of Members and Member Organizations.
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    \27\ See similar provision in The NASDAQ Stock Market LLC By-
Laws at Article II, Section 1 [sic].
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    The persons on the List of Candidates receiving the highest number 
of votes for the category of Governor for which they were nominated 
would be declared the Designated Nominees for their respective 
positions as Designated Governors. In the case of a tie, the names of 
the proposed Designated Governors involved in such tie would be 
referred to the Member Nominating Committee, which would make the 
selection as to who among such tying proposed Designated Governors 
would be nominated as the Designated Nominees for election at the 
Annual Meeting of Stockholders.
    Except as provided in these By-Laws, the Exchange shall not be 
required to hold meetings of Members, Member Organizations, or Member 
Organization Representatives. If such a meeting is held, however, the 
By-Laws currently state that any notice of the meeting shall be in 
writing and state the place, date, hour and purpose of such meeting and 
shall not be given less than ten days before the date of the meeting 
nor more than fifty days before the date of the meeting. Exchange By-
Law Article III, Section 3-11 is proposed to be amended to provide that 
the notice shall not be given less than ten days before the date of the 
meeting nor more than sixty days before the date of the meeting. Also, 
language is proposed to be added to that By-Law to state that notice 
may be sent via mail or electronic transmission and if notice is sent 
via electronic transmission, notice is given when sent to the e-mail 
address of the Member Organization Representative as it appears on the 
books and records of the Exchange.
Composition of Nominating Committee
    This proposed rule change would amend Exchange By-Law Article X, 
Section 10-19 to create a Nominating Committee which would nominate 
candidates for all other vacant or new Governor positions on the Board 
of Governors that are not nominated by the Member Nominating Committee. 
The Nominating Committee would consist of no fewer than six (6) and no 
more than nine (9) members and the number of Non-Industry members would 
equal or exceed the number of Industry members on the Committee. If the 
Nominating Committee consists of six (6) members, at least two (2) 
shall be Public Members. If the Nominating Committee consists of seven 
(7) or more members, at least three shall be Public members. Also, no 
officer or employee of the Company shall serve as a member of the 
Nominating Committee in any voting or non-voting capacity. No more than 
three of the Nominating Committee members and no more than two of the 
Industry members shall be current Governors. Finally, a Nominating 
Committee member may not simultaneously serve on the Nominating 
Committee and the Board of Governors unless such member is in his or 
her final year of service on the Board of Governors and following that 
year, that member may not stand for election to the Board of Governors 
until such time as he or she is no longer a member of the Nominating 
Committee. Members of this Committee would be appointed annually and 
may be removed by a majority vote of the Board of Governors.\28\ The 
Exchange's proposed amendments to the Nominating Committee's 
composition and number of members attempts to fairly represent the 
various interests of the membership and trading community, including 
investors. Also the public governors should bring diverse experience to 
the nominating process.
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    \28\ The provisions related to the Nominating Committee are 
similar to the provisions in The NASDAQ Stock Market LLC By-Laws at 
Article III, Section 6.
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Composition of Member Nominating Committee

    The proposal would amend Exchange By-Law Article X, Section 10-19 
to create a Member Nominating Committee which would nominate candidates 
for each Designated Governor position on the Board of Governors and 
also nominate candidates for appointment by the Board for each vacant 
or new position on any committee that is to be filled with a Member 
Representative member. The Member Nominating Committee would consist of 
no fewer than three (3) and no more than six (6) members. All members 
of the Member Nominating Committee would be a current associated person 
of a current Member Organization. The Board of Governors would appoint 
such individuals after consultation with Member Organization 
Representatives. Members of this Committee would be appointed annually 
and may be removed by a majority vote of the Board of Governors.\29\
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    \29\ The provisions related to the Member Nominating Committee 
are similar to the provisions in The NASDAQ Stock Market LLC By-Laws 
at Article III, Section 6.
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    By-Law Article X, Section 10-19 proposes to add language that the 
Secretary shall collect from each nominee for Governor such information 
as is reasonably necessary to serve as the basis for a determination of 
the nominee's classification as a Member Governor, Stockholder 
Governor, or Independent Governor, or Designated Governor, if 
applicable, and the Secretary shall certify to the Nominating Committee 
or the Member Nominating Committee each nominee's classification, if 
applicable. Governors would update the information submitted under this 
subsection at least annually and upon request of the Secretary, and 
shall report immediately to the Secretary.
Board of Governor Vacancies and Resignations
    Under the proposed rule change, By-Law Article III, Section 3-8, 
Article IV,

[[Page 11156]]

Sections 4-6 and 4-7 and Article XXVIII, Section 28-4 would be amended 
to modify the procedures for filling vacancies on the Board of 
Governors. Currently, vacancies are filled by the Nominating, Elections 
and Governance Committee, subject to the approval by a majority of the 
Governors then in office, although less than a quorum, or by a sole 
remaining Governor.\30\ The proposed rule change would provide that in 
the event of a vacancy on the Board occurring between annual meetings, 
the appropriate nominating committee would nominate, and the Board 
would appoint, a replacement Governor to fill the vacancy.\31\
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    \30\ See By-Law Article IV, Section 4-7.
    \31\ See similar provisions in The NASDAQ Stock Market LLC By-
Laws at Article II, Section 3.
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    Amendments are also proposed to Exchange By-Law Article IV, Section 
4-6 to modify the timeframes associated with submitting Board 
resignations. Currently a Board member may resign at any time by 
submitting a written resignation to the Exchange which shall take 
effect at the time of its receipt by the Exchange unless another time 
is fixed in the resignation.\32\ In the event of a merger, 
consolidation or other acquisition, the Board member is currently 
required to notify the Chair of the Board of Governors of their 
resignation by the first day of the January preceding the next annual 
meeting of Stockholders. This proposal seeks to revise the timeframe in 
the event of a merger, consolidation or other acquisition to state that 
a Board member is required to notify the Chair of the Board of 
Governors of their resignation by the first day of the following month 
of their resignation. Similarly, in the event of a change in 
occupational category or Member Organization or participant 
organization, such Governor is currently required to notify the Chair 
of the Board of Governors of his resignation by the first day of the 
January preceding the next annual election. This proposal seeks to 
amend this language to similarly state that the Board member shall 
notify the Chair in the event of an occupational category or Member 
Organization or participant organization by the first day of the 
following month. Additionally, Article IV, Section 4-6 indicates that 
as related to resignations in the event of a merger, consolidation, or 
other acquisition or because of a change in occupational category, the 
resignations shall become effective no later than the expiration of the 
term of the outgoing class of Governors. This language is being deleted 
as it is no longer applicable. By providing a shorter time period to 
provide notification, the Exchange is ensuring that the Board members 
will continue to be qualified to serve on the Board in their respective 
positions as opposed to a longer notification period.
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    \32\ See By-Law Article IV, Section 4-6.
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Definitions

    The Exchange proposes to amend the definitions of ``Independent 
Governor'', and ``Trust Agreement'' and add the definitions for 
``Industry Member'', ``Non-Industry Member'' and ``Public Member.'' The 
proposed rule change would amend the definition of Independent Governor 
as follows: The term ``Independent Governor'' shall mean a Governor who 
has no material relationship with the Exchange or any affiliate of the 
Exchange, any Member of the Exchange or any affiliate of such Member, 
or any issuer of securities that are listed or traded on the Exchange 
or a facility of the Exchange and is duly elected to fill one of the 
vacancies on the Board of Governors allocated to the Independent 
Governors. The term ``material relationship'' will be defined as a 
relationship, whether compensatory or otherwise, that reasonably could 
affect the independent judgment or decision-making of the Governor.\33\ 
Also, the Exchange proposes to amend By-Law Article I, Section 1-1-(dd) 
to modify the definition of Trust Agreement to include language that 
indicates that such agreement may be amended from time to time.\34\
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    \33\ See footnote 5 for current Independent Governor and 
Independent definitions.
    \34\ The term ``Trust Agreement'' is currently defined as the 
Third Amended and Restated Trust Agreement, dated as of February 22, 
2007, between the Exchange and the trustee under such Trust 
Agreement.
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    The Exchange proposes adding the following definition to Article I, 
Section 1-1, ``Industry Member'', ``Non-Industry Member'' and ``Public 
Member'' as these amendments correspond to the proposed amendments to 
the election process of Designated Governors. The term ``Industry 
Member'' is proposed to be added to Article I, Section 1-1(pp) and 
shall mean a member of any committee appointed by the Board of 
Governors who (i) is or has served in the prior three years as an 
officer, director, or employee of a broker or dealer, excluding an 
outside director or a director not engaged in the day-to-day management 
of a broker or dealer; (ii) is an officer, director (excluding an 
outside director), or employee of an entity that owns more than ten 
percent of the equity of a broker or dealer, and the broker or dealer 
accounts for more than five percent of the gross revenues received by 
the consolidated entity; (iii) owns more than five percent of the 
equity securities of any broker or dealer, whose investments in brokers 
or dealers exceed ten percent of his or her net worth, or whose 
ownership interest otherwise permits him or her to be engaged in the 
day-to-day management of a broker or dealer; (iv) provides professional 
services to brokers or dealers, and such services constitute 20 percent 
or more of the professional revenues received by the committee member 
or 20 percent or more of the gross revenues received by the committee 
member's firm or partnership; (v) provides professional services to a 
director, officer, or employee of a broker, dealer, or corporation that 
owns 50 percent or more of the voting stock of a broker or dealer, and 
such services relate to the director's, officer's, or employee's 
professional capacity and constitute 20 percent or more of the 
professional revenues received by the committee member or 20 percent or 
more of the gross revenues received by the committee member's firm or 
partnership; or (vi) has a consulting or employment relationship with 
or provides professional services to the Exchange or any affiliate 
thereof or to FINRA (or any predecessor) or has had any such 
relationship or provided any such services at any time within the prior 
three years.\35\
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    \35\ This definition is substantially similar to the same term 
found in The NASDAQ Stock Market LLC By-Laws at Article I.
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    The term ``Non-Industry Member'' is proposed to be added at Article 
I, Section 1-1(rr) and shall mean a member of any committee appointed 
by the Board of Governors who is (i) a Public member; (ii) an officer, 
director, or employee of an issuer of securities listed on the 
Exchange; or (iii) any other individual who would not be an Industry 
member.\36\ The term ``Public Member is proposed to be added at Article 
I, Section 1-1(ss) and shall mean a member of any committee appointed 
by the Board of Governors who has no material business relationship 
with a broker or dealer, the Exchange, or its affiliates.\37\
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    \36\ This definition is substantially similar to the same term 
in The NASDAQ Stock Market LLC By-Laws at Article I.
    \37\ This definition is substantially similar to the same term 
found in The NASDAQ Stock Market LLC By-Laws at Article I.
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    The term ``Member Representative member'' is proposed to be added 
at Article I, Section 1-1(qq) and shall mean a member of any committee 
appointed by the Board of Governors who has been elected or appointed 
after

[[Page 11157]]

having been nominated by the Member Nominating Committee pursuant to 
these By-Laws.\38\ The term ``Contested Vote'' is proposed to be added 
at Article I, Section 1-1(mm) and shall mean a process for selection of 
one or more Designated Governors for which the number of candidates on 
the List of Candidates exceeds the number of positions to be elected by 
the holder of the Series A Preferred Stock.\39\ The term ``List of 
Candidates'' is proposed to be added at Article I, Section 1-1(nn) and 
shall mean the list of candidates for Designated Governor positions to 
be voted upon by Member Organization Representatives on a Voting 
Date.\40\ The term ``Member Voting Record Date'' `` is proposed to be 
added at Article I, Section 1-1(oo) and shall mean a date selected by 
the Board of Governors for the purpose of determining the Member 
Organization Representatives entitled to vote for Designated Governors 
on a Voting Date in the event of a Contested Vote.\41\ Finally, the 
term ``Voting Date'' is proposed to be added at Article I, Section 1-
1(tt) and shall mean a date selected by the Board of Governors for 
Member Organization Representatives to vote with respect to Designated 
Governors in the event of a Contested Vote.\42\
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    \38\ This definition is substantially similar to the same term 
found in The NASDAQ Stock Market LLC By-Laws at Article I.
    \39\ This definition is substantially similar to that of 
Contested Election found in The NASDAQ Stock Market LLC By-Laws at 
Article I.
    \40\ This definition is substantially similar to the same term 
found in The NASDAQ Stock Market LLC By-Laws at Article I.
    \41\ This definition is substantially similar to that of Record 
Date found in The NASDAQ Stock Market LLC By-Laws at Article I.
    \42\ This definition is substantially similar to that of 
Election Date found in The NASDAQ Stock Market LLC By-Laws at 
Article I.
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    The amended and newly added definitions are necessary to effectuate 
the amendments proposed herein related to the nominating process to 
elect Designated Governors.

Vice Chair and PBOT Governor Elimination

    The Exchange's proposed rule change seeks to amend the Certificate 
of Incorporation and delete By-Law Article V, Section 5-3 to delete the 
Vice Chair position as well as amend By-Law Article 1, Section 1-1, 
Article III, Section 3-16, Article IV, Sections 4-1 and 4-14, Article 
X, Sections 10-14 and 10-15 and Article XXVIII, Sections 28-3 and 28-12 
to eliminate references to the Vice Chair position.\43\
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    \43\ The Vice Chair is elected by the Holder of Common Stock and 
does not effect the fair representation requirement.
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    After integration and a period of time functioning under a global 
holding company structure, the Exchange has determined that eliminating 
this position would streamline the governance structure. The NASDAQ 
Stock Market does not have a Vice Chair. References to the Vice Chair 
are being deleted, including a description of who may serve as Vice 
Chair, which appears in the Certificate of Incorporation and By-laws, 
as well as the current function of the Vice Chair to preside over Board 
meetings in the absence of the Chair of the Board of Governors.
    The Exchange proposes to amend the Certificate of Incorporation and 
By-Law Article I, Sections 1-1(e) and 1-1(aa), Article IV, Section 4-1 
and Article V, Section 5-3 [sic] to delete the position of PBOT 
Governor. Since the Philadelphia Board of Trade, Inc (``PBOT'') \44\ 
now has the status of one of multiple subsidiaries within a global 
holding company structure, it is no longer appropriate to provide its 
members special representation on the Exchange board, which is likewise 
a NASDAQ OMX subsidiary. The PBOT Governor position would be replaced 
with a Designated Independent Governor. The Exchange's proposed changes 
will continue to provide for a fair representation of its members on 
the Board of Governors.
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    \44\ PBOT recently changed its corporate name to NASDAQ OMX 
Futures Exchange, Inc.
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \45\ in general, and furthers the objectives of: (1) 
Section 6(b)(1) of the Act,\46\ which requires a national securities 
exchange to be so organized and have the capacity to carry out purposes 
of the Act and to enforce compliance by its members and persons 
associated with its members with the provisions of the Act; (2) Section 
6(b)(3) of the Act,\47\ which requires that the rules of a national 
securities exchange assume the 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 ``fair representation requirement''); and Section 
6(b)(5) of the Act,\48\ 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. 
Specifically, Members will continue to be represented on the Board and 
on key standing committees, and will have a voice in the selection of 
Governors through the Member Nominating Committee and the ability to 
nominate alternate candidates and thereby cause a Contested Vote in 
which all Member Organization Representatives may vote.
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    \45\ 15 U.S.C. 78f(b).
    \46\ 15 U.S.C. 78(b)(1). [sic]
    \47\ 15 U.S.C. 78(b)(3). [sic]
    \48\ 15 U.S.C. 78f(b)(5).
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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

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the Exchange consents, the Commission shall: (a) by order approve 
such proposed rule change, or (b) institute proceedings to determine 
whether the proposed rule change should be disapproved.

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 rule-comments@sec.gov. Please include 
File Number SR-Phlx-2009-17 on the subject line.

[[Page 11158]]

Paper Comments

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

All submissions should refer to File Number SR-Phlx-2009-17. 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 the principal office of Phlx. 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 publicly available.

All submissions should refer to File Number SR-Phlx-2009-17 and should 
be submitted on or before April 6, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\49\
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    \49\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E9-5565 Filed 3-13-09; 8:45 am]

BILLING CODE 8011-01-P