Document ID: SEC-2012-1469-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Boston Stock Exchange Clearing Corp.; NASDAQ OMX BX, Inc.; NASDAQ Stock Market LLC, et al.
Posted Date: 2012-09-06T04:00Z

[Federal Register Volume 77, Number 173 (Thursday, September 6, 2012)]
[Notices]
[Pages 54942-54943]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-21902]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-67760; File Nos. SR-BSECC-2012-01; SR-BX-2012-052; SR-
NASDAQ-2012-072; SR-Phlx-2012-95; SR-SCCP-2012-01]

Self-Regulatory Organizations; Boston Stock Exchange Clearing 
Corporation; NASDAQ OMX BX, Inc.; the NASDAQ Stock Market LLC; NASDAQ 
OMX PHLX LLC; Stock Clearing Corporation of Philadelphia; Order 
Approving Proposed Rule Changes With Respect to the Amendment of the 
By-Laws of The NASDAQ OMX Group, Inc.

 August 30, 2012.

I. Introduction

    On June 20, 2012, the NASDAQ Stock Market LLC (``NASDAQ''), and on 
July 11, 2012, Boston Stock Exchange Clearing Corporation (``BSECC''), 
NASDAQ OMX BX, Inc. (``BX''), NASDAQ OMX PHLX LLC (``Phlx''), and the 
Stock Clearing Corporation of Philadelphia (``SCCP'' and, with BSECC, 
BX, NASDAQ, and Phlx, the ``SROs''), filed with the Securities and 
Exchange Commission (``Commission''), pursuant to Section 19(b)(1) \1\ 
of the Securities Exchange Act of 1934 (``Act''),\2\ and Rule 19b-4 
thereunder,\3\proposed rule changes with respect to the amendment of 
the by-laws (the ``NASDAQ OMX By-Laws'') of The NASDAQ OMX Group, Inc. 
(``NASDAQ OMX''), the parent company of the SROs. The proposed rule 
changes were published for comment in the Federal Register on July 5, 
2012, July 19, 2012, and July 27, 2012.\4\ The Commission received no 
comment letters on the proposals.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
    \4\ See Securities Exchange Act Release Nos. 67293 (June 28, 
2012), 77 FR 39751 (July 5, 2012) (SR-NASDAQ-2012-072) (the ``NASDAQ 
Notice''); 67433 (July 13, 2012), 77 FR 42522 (July 19, 2012) (SR-
BX-2012-052); 67434 (July 13, 2012), 77 FR 42524 (July 19, 2012) 
(SR-Phlx-2012-95); 67487 (July 23, 2012), 77 FR 44301 (July 27, 
2012) (SR-BSECC-2012-001); 67486 (July 23, 2012), 77 FR 44299 (July 
27, 2012) (SR-SCCP-2012-01).
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II. Background

    NASDAQ OMX is proposing to amend provisions of the NASDAQ OMX By-
Laws pertaining to the composition of the Management Compensation 
Committee of the NASDAQ OMX Board of Directors. Specifically, NASDAQ 
OMX proposes to amend the compositional requirements of its Management 
Compensation Committee as set forth in Section 4.13 of the NASDAQ OMX 
By-Laws to replace a requirement that the committee be composed of a 
majority of Non-Industry Directors \5\ with a requirement that the

[[Page 54943]]

number of Non-Industry Directors on the committee equal or exceed the 
number of Industry Directors. The proposed compositional requirement 
for the committee with regard to the balance between Industry Directors 
and Non-Industry Directors would be the same as that already provided 
for in the NASDAQ OMX By-Laws with respect to the Executive Committee 
and the Nominating and Governance Committee, as well as the full Board 
of Directors.
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    \5\ Article I(j) of the NASDAQ OMX By-Laws defines an ``Industry 
Director'', in part, as a Director (excluding any two officers of 
NASDAQ OMX, selected at the sole discretion of the Board, amongst 
those officers who may be serving as Directors (the ``Staff 
Directors'')) who (1) 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; (2) 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; (3) 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; 
(4) provides professional services to brokers or dealers, and such 
services constitute 20 percent or more of the professional revenues 
received by the Director or 20 percent or more of the gross revenues 
received by the Director's firm or partnership; (5) 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 Director or 20 percent or more of the gross revenues received 
by the Director's firm or partnership; or (6) has a consulting or 
employment relationship with or provides professional services to 
NASDAQ OMX or any affiliate thereof or to the Financial Industry 
Regulatory Authority (``FINRA'') or has had any such relationship or 
provided any such services at any time within the prior three years.
    Article I(m) of the NASDAQ OMX By-Laws defines a ``Non-Industry 
Director'', in part, as a Director (excluding the Staff Directors) 
who is (1) a Public Director; (2) an officer, director, or employee 
of an issuer of securities listed on a national securities exchange 
operated by any SRO; or (3) any other individual who would not be an 
Industry Director.
    Article I(n) of the NASDAQ OMX By-Laws defines a ``Public 
Director'', in part, as a Director who has no material business 
relationship with a broker or dealer, NASDAQ OMX or its affiliates, 
or FINRA.
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    According to the SROs, the proposed changes will provide NASDAQ OMX 
with a greater flexibility with regard to populating a committee that 
includes directors with relevant expertise and that is not excessively 
large in relation to the size of the full Board of Directors, while 
continuing to ensure that directors associated with Exchange members 
and other broker-dealers do not exert disproportionate influence of the 
governance of NASDAQ OMX.\6\
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    \6\ See, e.g., NASDAQ Notice, 77 FR at 39752.
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III. Discussion and Commission Findings

    The Commission has reviewed carefully the proposed rule changes and 
finds that the proposed rule changes are consistent with the 
requirements of the Act and the rules and regulations thereunder 
applicable to a national securities exchange or a registered clearing 
agency.\7\ In particular, the Commission finds that the proposed rule 
changes are consistent with Section 6(b) of the Act,\8\ which, among 
other things, requires a national securities exchange to be so 
organized and have the capacity to be able to carry out the purposes of 
the Act and to enforce compliance by its members and persons associated 
with its members with the provisions of the Act, the rules and 
regulations thereunder, and the rules of the exchange, and is designed 
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 also finds that the proposed rule changes are consistent 
with Section 17A of the Act \9\ because the proposed rule changes will 
help ensure that BSECC and SCCP are so organized and have the capacity 
to comply with the provisions of the Act and the rules and regulations 
thereunder.
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    \7\ In approving the proposed rule changes, the Commission has 
considered their impact on efficiency, competition, and capital 
formation. See 15 U.S.C. 78c(f).
    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78q-1.
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    The proposed changes to the composition requirement of NASDAQ OMX's 
Management Compensation Committee are identical to the composition 
requirements currently in effect for the Executive Committee, 
Nominating and Governance Committee, and full Board of Directors of 
NASDAQ OMX.\10\ Furthermore, the NASDAQ OMX Management Compensation 
Committee is required to be comprised of Independent Directors (as 
defined in NASDAQ's rules).\11\
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    \10\ See Sections 4.3, 4.13(d) and 4.13(h)(1) of NASDAQ OMX By-
Laws.
    \11\ See NASDAQ Rule 5605(d). Rule 5605(d) provides that the 
compensation committees of NASDAQ-listed companies must be comprised 
solely of Independent Directors. NASDAQ OMX is a NASDAQ-listed 
company.
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IV. Conclusion

    For the foregoing reasons, the Commission finds that the proposed 
rule changes are consistent with the Act and the rules and regulations 
thereunder applicable to a national securities exchange and a 
registered clearing agency.
    It is therefore ordered, pursuant to Section 19(b)(2) of the Act 
\12\ that the proposed rule changes (SR-BSECC-2012-001; SR-BX-2012-052; 
SR-NASDAQ-2012-072; SR-Phlx-2012-95; and SR-SCCP-2012-01), are 
approved.
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    \12\ Id.
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    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-21902 Filed 9-5-12; 8:45 am]
BILLING CODE 8011-01-P