Document ID: SEC-2007-1181-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: Chicago Stock Exchange, Inc
Posted Date: 2007-08-24T04:00Z

[Federal Register: August 24, 2007 (Volume 72, Number 164)]
[Notices]               
[Page 48708-48709]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr24au07-129]                         

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56281; File No. SR-CHX-2007-16]

 
Self-Regulatory Organizations; The Chicago Stock Exchange, Inc.; 
Notice of Filing of Proposed Rule Change as Modified by Amendment No. 1 
Thereto To Amend Its Bylaws To Prevent Exchange Director From 
Participating in the Determination of Any Matter Involving an Issuer of 
a Security Listed or To Be Listed on the Exchange if the Director Is a 
Director, Officer, or Employee of the Issuer

August 17, 2007.
    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 July 27, 2007, the Chicago Stock Exchange, Inc. (``CHX'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been substantially prepared by CHX. On 
August 10, 2007, CHX filed an amendment to the proposed rule change.\3\ 
The Commission is publishing this notice to solicit comments on the 
proposed rule change, as amended, from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Partial Amendment No. 1 modified the last sentence of 
footnote 6 below, to state that when a director recuses himself or 
herself from a decision, the Exchange reflects that recusal in the 
minutes of the meeting at which the recusal occurred, in accordance 
with its internal written policies.
---------------------------------------------------------------------------

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

    CHX proposes to amend its bylaws to bar a director from 
participating in a matter relating to an issuer of a security, if the 
director is a director, officer or employee of the issuer of that 
security. The text of this proposed rule change is available on the 
Exchange's Web site at http://www.chx.com/content/Participant_Information/Rules_Filings.html
, at the Office of the Secretary 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, CHX included statements 
concerning the purpose of and basis for the proposed rule changes and 
discussed any comments it received regarding the proposal. The text of 
these statements may be examined at the places specified in Item IV 
below. CHX 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 Changes

1. Purpose
    Under the Exchange's rules, if the Exchange proposes to delist a 
security, the issuer of the security has the right to avail itself of a 
hearing before a hearing officer and to appeal the decision of the 
hearing officer to the Exchange's Executive Committee.\4\ The 
Exchange's Executive Committee is composed entirely of Exchange 
directors.\5\
---------------------------------------------------------------------------

    \4\ See Article 25, Rule 4 of CHX's bylaws.
    \5\ See Article 2, Rule 2 of CHX's bylaws. The committee must 
consist of not less than five members, plus the chairman of the 
Board. A majority of the committee members must be public directors. 
Id.
---------------------------------------------------------------------------

    Although the Exchange's bylaws generally prevent a director from 
participating in the determination of any matter in which the director 
is personally interested, no provision of

[[Page 48709]]

the bylaws specifically confirms that a director should not participate 
in a decision involving the issuer of a security if he or she is a 
director, officer or employee of the issuer. This proposed change would 
add a clarification to the Exchange's bylaws to confirm that, in a 
matter involving the issuer of a security listed or to be listed on the 
Exchange, a director shall be deemed to be personally interested in the 
matter if he or she is a director, officer or employee of the issuer of 
the security.\6\ The Exchange believes that this new provision 
appropriately limits a director's ability to participate in proceedings 
involving a company for which he or she serves as a director, officer 
or employee.\7\
---------------------------------------------------------------------------

    \6\ This proposal is a slightly-amended version of the proposal 
originally made in SR-CHX-2006-25, which has been withdrawn. In this 
new version of the proposal, the Exchange, at the recommendation of 
Commission staff, has expanded its original filing to cover all 
proceedings involving an issuer of a security, instead of limiting 
the proposal only to delisting proceedings. Importantly, however, 
this proposal is not designed to affect other provisions of this 
section of the bylaws; specifically, this proposal is not designed 
to prevent a participant director who is an employee of an issuer 
that is also a participant firm from participating in the 
determination of matters that may affect participants as a whole or 
certain groups of participants, as already expressly permitted by 
the bylaws. See Article II, Section 7 of the CHX's bylaws.
    In this revised version of the original proposal, the Exchange 
also has confirmed that, although it will typically deem a director 
to be ``personally interested'' in a matter relating to an issuer if 
the director is a director, officer or employee of that issuer 
(subject to the exception described above), the Exchange will review 
other relationships between a director and an issuer on a case-by-
case basis to determine whether inappropriate personal interest 
exists. When a director recuses himself or herself from a decision, 
the Exchange reflects that recusal in the minutes of the meeting at 
which the recusal occurred, in accordance with its internal written 
policies.
    \7\ This bylaws change is also consistent with a recommendation 
made by the Commission's Office of Compliance Inspections and 
Examinations.
---------------------------------------------------------------------------

2. Statutory Basis
    CHX believes the proposal is consistent with the requirements of 
the Act and the rules and regulations thereunder that are applicable to 
a national securities exchange, and, in particular, with the 
requirements of Section 6(b) of the Act.\8\ The proposed rule change is 
consistent with Section 6(b)(5) of the Act \9\ because it would promote 
just and equitable principles of trade, remove impediments to, and 
perfect the mechanism of, a free and open market and a national market 
system, and, in general, protect investors and the public interest by 
confirming that an Exchange director should not participate in 
proceedings involving a company for which he or she serves as a 
director, officer or employee.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78(f)(b).
    \9\ 15 U.S.C. 78(f)(b)(5).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement of Burden on Competition

    The Exchange does not believe that the proposed rule changes will 
impose any burden on competition.

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

    No written comments were either solicited or received.

III. Date of Effectiveness of the Proposed Rule Changes 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 self-regulatory organization consents, the Commission will:
    (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-CHX-2007-16 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-CHX-2007-16. 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 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-CHX-2007-16 and should be 
submitted on or before September 14, 2007.
---------------------------------------------------------------------------

    \10\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\10\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-16756 Filed 8-23-07; 8:45 am]

BILLING CODE 8010-01-P