Document ID: SEC-2010-0675-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Stock Clearing Corp. of Philadelphia
Posted Date: 2010-05-06T04:00Z

[Federal Register: May 6, 2010 (Volume 75, Number 87)]
[Notices]               
[Page 25010-25012]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr06my10-107]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-62010; File No. SR-SCCP-2010-01]

 
Self-Regulatory Organizations; Stock Clearing Corporation of 
Philadelphia; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change Regarding Amendments to the By-Laws of The NASDAQ OMX 
Group, Inc.

April 30, 2010.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ notice is hereby given that on April 9, 2010, the Stock 
Clearing Corporation of Philadelphia (``SCCP'') filed with the 
Securities and Exchange Commission (``Commission'') the proposed rule 
change described in Items I, II, and III below, which items have been 
prepared primarily by SCCP. SCCP filed the proposal pursuant to Section 
19(b)(3)(A)(iii) of the Act \2\ and Rule 19b-4(f)(6) \3\ thereunder so 
that the proposal was effective upon filing with the Commission. The 
Commission is publishing this notice to solicit comments on the rule 
change from interested parties.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \3\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    SCCP is filing the proposed rule change relating to amendments to 
the By-Laws of its parent corporation The NASDAQ OMX Group, Inc. 
(``NASDAQ OMX'').\4\
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    \4\ Article Eighth, Paragraph B of the Restated Certificate of 
Incorporation of NASDAQ OMX and Section 11.3 of the By-Laws provides 
that proposed amendments to the By-Laws are to be reviewed by the 
Board of Directors of each regulatory subsidiary of NASDAQ OMX and 
under certain circumstances be filed with the Commission.
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II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, SCCP 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. SCCP has prepared summaries, set forth in sections (A), 
(B), and (C) below, of the most significant aspects of these 
statements.\5\
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    \5\ The Commission has modified the text of the summaries 
prepared by SCCP.
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(A) Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    NASDAQ OMX has proposed making certain amendments to its By-Laws to 
make improvements in its governance. In SR-NASDAQ-2010-025, The NASDAQ 
Stock Market LLC (``NASDAQ Exchange'') sought and received Commission 
approval to adopt these By-Laws changes as part of the rules of NASDAQ 
Exchange.\6\ SCCP is now submitting this filing regarding these By-Law 
changes. The text of the changes to the By-Laws of NASDAQ OMX can be 
viewed at http://nasdaqomxphlx.cchwallstreet.com/NASDAQOMXPHLX/pdf/
sccp-filings/2010/SR-SCCP-2010-01.pdf.
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    \6\ Securities Exchange Act Release No. 61876 (April 8, 2010), 
75 FR 19436 (April 14, 2010) (SR-NASDAQ-2010-025).
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    The NASDAQ OMX By-Laws previously provided that each director 
receiving a plurality of the votes at any election of directors at 
which a quorum was present was duly elected to the board of directors 
(``Board''). Under Corporate Governance Guidelines adopted by the 
Board, however, any director in an uncontested election who received a 
greater number of votes ``withheld'' from his or her election than 
votes ``for'' such election was required to tender his or her 
resignation promptly following receipt of the certification of the 
stockholder vote. The NASDAQ OMX Nominating & Governance Committee 
(``Nominating & Governance Committee'') then considered the resignation 
offer and recommended to the Board whether or not to accept it. Within 
90 days after the certification of the election results, the Board 
determined whether to accept or reject the resignation. Promptly 
thereafter, the Board announced its decision by means of a press 
release. In a contested election (i.e., where the number of nominees 
exceeded the number of directors to be elected), the unqualified 
plurality standard controlled.
    Uncontested Election:
    NASDAQ OMX recently amended its by-laws to adopt a majority vote 
standard. Specifically By-Law Article IV, Section 4.4 was amended to 
provide that in an uncontested election, directors shall be elected by 
holders of a majority of the votes cast at any meeting for the election 
of directors at which a quorum is present.\7\ Under the majority voting 
standard, a nominee

[[Page 25011]]

who fails to receive the requisite vote will not be duly elected to the 
Board. The By-Laws also now require that any incumbent director 
nominee, as a condition to his or her nomination for reelection to the 
Board, must submit in writing an irrevocable resignation, the 
effectiveness of which is conditioned upon the director's failure to 
receive the requisite vote in any uncontested election and the Board's 
acceptance of the resignation. Acceptance of the resignation by the 
Board shall be in accordance with the policies and procedures adopted 
by the Board for such purpose.
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    \7\ NASDAQ OMX also amended its Corporate Governance Guidelines 
to reflect the majority vote standard for uncontested director 
elections.
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    Contested Election:
    NASDAQ OMX codified its process for a contested election. The 
directors will continue to be elected by a plurality vote in a 
contested election. There is no change to the process for contested 
elections because if a majority voting standard were to apply in a 
contested election, the likelihood of a ``failed election'' (i.e., a 
situation in which no director receives the requisite vote) would be 
more pronounced. Moreover, the rationale underpinning the majority 
voting policy does not apply in contested elections where stockholders 
are offered a choice among competing candidates. Directors are elected 
by a plurality of votes present in person or represented by proxy at a 
meeting convened for that purpose. The directors who receive the 
greatest number of votes cast will be elected.
    General Election Requirements:
    The following requirements apply to elections of directors and were 
not amended. Each share of common stock has one vote,\8\ subject to the 
voting limitation in NASDAQ OMX's certificate of incorporation that 
generally prohibits a holder from voting in excess of 5% of the total 
voting power of NASDAQ OMX.\9\ In addition, each note holder is 
entitled to the number of votes equal to the number of shares of common 
stock into which such note could be converted on the record date, 
subject to the 5% voting limitation contained in the certificate of 
incorporation.
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    \8\ NASDAQ OMX Certificate of Incorporation at Article IV, 
C.1(a).
    \9\ NASDAQ OMX Certificate of Incorporation at Article IV, 
C.1(b)2.
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    At a meeting to elect directors, the presence of holders of a 
majority (greater than 50%) of NASDAQ OMX voting securities constitutes 
a quorum. Presence may be in-person or by proxy. Any securities not 
voted will not impact the vote.
2. Statutory Basis
    SCCP believes that the proposed rule change is consistent with 
Section 17A of the Act,\10\ as amended, and with Section 17A(b)(3)(A) 
of the Act,\11\ in particular, because it is designed to ensure that 
SCCP is so organized and has the capacity to be able to facilitate the 
prompt and accurate clearance and settlement of securities transactions 
and to enforce compliance by its participants with the rules of the 
clearing agency.
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    \10\ 15 U.S.C. 78q-1.
    \11\ 15 U.S.C. 78q-1(b)(3)(A).
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(B) Self-Regulatory Organization's Statement on Burden on Competition

    SCCP does not believe that the proposed rule change will have any 
impact or impose any burden on competition.

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

    Written comments relating to the proposed rule change were not and 
are not intended to be solicited or received. SCCP will notify the 
Commission of any written comments received by SCCP.

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

    The foregoing proposed rule change has become effective upon filing 
pursuant to Section 19(b)(3)(A)(iii) of the Act \12\ and Rule 19b-
4(f)(6) \13\ thereunder because the proposed rule change does not (i) 
significantly affect the protection of investors or the public 
interest; (ii) does not impose any significant burden on competition; 
and (iii) by its terms, does not become operative for 30 days after the 
date of filing, or such shorter time as the Commission may designate if 
consistent with the protection of investors and the public interest. At 
any time within sixty 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.
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    \12\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \13\ 17 CFR 240.19b-4(f)(6).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://
www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-SCCP-2010-01 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-SCCP-2010-01. 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 web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street, NE., 
Washington, DC 20549, on official business days between the hours of 10 
am and 3 pm. Copies of such filings also will be available for 
inspection and copying at the principal office of SCCP and on SCCP's 
Web site at http://nasdaqomxphlx.cchwallstreet.com/NASDAQOMXPHLX/pdf/
sccp-filings/2010/SR-SCCP-2010-01.pdf.
    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-SCCP-2010-01 
and should be submitted on or before May 27, 2010.

[[Page 25012]]

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-10646 Filed 5-5-10; 8:45 am]
BILLING CODE 8011-01-P