Document ID: SEC-2008-0216-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Boston Stock Exchange, Inc.
Posted Date: 2008-02-08T05:00Z

[Federal Register: February 8, 2008 (Volume 73, Number 27)]
[Notices]               
[Page 7617-7619]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr08fe08-105]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57260; File No. SR-BSE-2008-06]

 
Self-Regulatory Organizations; Boston Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Regarding a Proposed Combination Between the Montr[eacute]al Exchange 
Inc. and TSX Group Inc.

February 1, 2008
    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 January 29, 2008, the Boston Stock Exchange, Inc. (``BSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by BSE. The Exchange filed the 
proposal as a ``non-controversial'' proposed rule change pursuant to 
Section 19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-4(f)(6) 
thereunder,\4\ which renders the proposal effective upon filing with 
the Commission. 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.
    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 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

    The Exchange is submitting the proposed rule change to the 
Commission to amend the Fifth Amended and Restated Operating Agreement, 
dated January 26, 2005, as may be amended from time to time (``BOX LLC 
Agreement''), of the Boston Options Exchange Group LLC (``BOX LLC''), 
in connection with the proposed business combination (the 
``Combination'') of the Montr[eacute]al Exchange Inc.,\5\ a company 
incorporated in Qu[eacute]bec, Canada (``MX''), and TSX Group Inc., a 
company incorporated in Ontario, Canada (``TSX Group''). The text of 
the rule proposal, including the proposed Instrument of Accession, is 
available on the Exchange's Web site (http://www.bostonstock.com), at 

the Exchange, and at the Commission's Public Reference Room.
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    \5\ The Montr[eacute]al Exchange Inc. is also known in French as 
the Bourse de Montr[eacute]al Inc.
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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, BSE 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. BSE has prepared summaries, set forth in Sections A, B, 
and C below, of the most significant aspects of such statements.

[[Page 7618]]

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    On January 13, 2004, the Commission approved four BSE proposals 
that together established, through an operating agreement among its 
owners, a Delaware limited liability company, BOX LLC, to operate BOX 
as an options trading facility of the Exchange.\6\ Currently, MX U.S. 
2, Inc., a wholly owned U.S. subsidiary of MX (``MX US''), owns a 31.4% 
ownership interest in BOX LLC.
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    \6\ See Securities Exchange Act Release Nos. 49066 (January 13, 
2004), 69 FR 2773 (January 20, 2004) (establishing a fee schedule 
for the proposed BOX facility); 49065 (January 13, 2004), 69 FR 2768 
(January 20, 2004) (creating Boston Options Exchange Regulation LLC 
to which the BSE would delegate its self-regulatory functions with 
respect to the BOX facility); 49068 (January 13, 2004), 69 FR 2775 
(January 20, 2004) (approving trading rules for the BOX facility); 
and 49067 (January 13, 2004), 69 FR 2761 (January 20, 2004) 
(approving certain regulatory provisions of the operating agreement 
of BOX LLC).
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    The Exchange is submitting the proposed rule change to the 
Commission to amend the BOX LLC Agreement pursuant to the proposed 
Instrument of Accession in connection with the Combination of MX, the 
largest derivatives exchange in Canada, and TSX Group, which, among 
other things, owns Canada's pre-eminent equity market. As a result of 
the Combination, MX will become a direct \7\ subsidiary of TSX Group, a 
publicly traded Ontario corporation.\8\
    The Combination will be effected through a series of amalgamations 
\9\ involving intermediate holding companies, which will cease to exist 
following completion of the Combination. As a result of these 
transactions, MX will be amalgamated with a direct subsidiary of TSX 
Group. The amalgamated company also will be named Montr[eacute]al 
Exchange Inc. and will be a Qu[eacute]bec corporation. Consequently, MX 
U.S. (including MX US's 31.4% ownership interest in BOX LLC) will 
become an indirect, wholly owned subsidiary of TSX Group. The 
Combination is subject to the approval of the Autorit[eacute] des 
march[eacute]s financiers (the securities regulator for the province of 
Qu[eacute]bec, Canada) and the shareholders of MX, as well as other 
regulatory approvals.
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    \7\ Certain non-voting preference shares of MX will be owned by 
TSX Inc., a direct, wholly owned subsidiary of TSX Group. The share 
interests of TSX Group and TSX Inc. will together represent the 
entire ownership interest, voting and non-voting, in MX.
    \8\ At its next shareholders' meeting after the effective date 
of the Combination, TSX Group will propose changing its name to TMX 
Group Inc.
    \9\ The term ``amalgamation'' refers to the combination of two 
or more business entities into a single entity pursuant to which the 
combined entity becomes the successor in interest, by operation of 
law, to the rights and obligations of the combining entities. 
Amalgamations are commonly used in Canada to effect business 
combinations and are similar to mergers in the United States.
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    Following the Combination, MX, MX US, and TSX Group will continue 
to operate their respective businesses in substantially the same manner 
as they had prior to the Combination, and MX and MX US senior 
management will remain under the stewardship of MX's current chief 
executive officer.\10\ Additionally, the operations of each of MX and 
TSX Group will continue to be located in the same province in which it 
is currently located, and each will remain subject to its existing 
regulatory framework and oversight. Consequently, MX US's management of 
its ownership interest in BOX shall remain essentially unaffected by 
the Combination.
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    \10\ Organizational changes contemplated in connection with the 
Combination are described in the TSX Group registration statement 
separately filed with the Commission regarding the issuance of 
shares in connection with the Combination.
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    Pursuant to Section 8.4(g) of the BOX LLC Agreement, BOX LLC is 
required to amend the BOX LLC Agreement to make an Acquirer \11\ a 
party to the LLC Agreement if such Acquirer acquires a Controlling 
Interest \12\ in a BOX Member who holds a percentage interest in BOX 
LLC equal to or greater than 20%. Therefore, since TSX Group is 
acquiring a Controlling Interest in MX, whose wholly owned subsidiary, 
MX US, owns a 31.4% ownership interest in BOX LLC, TSX Group, as an 
Acquirer, is required to and will become a party to the BOX LLC 
Agreement pursuant to the proposed Instrument of Accession. As a 
result, TSX Group will agree to abide by all the provisions of the BOX 
LLC Agreement, including those provisions requiring submission to the 
jurisdiction of the Commission.\13\
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    \11\ An ``Acquirer'' is defined as ``a Person who, alone or 
together with any Affiliate of such Person, acquires a controlling 
interest in a Member.'' See BOX LLC Agreement, Section 8.4(g)(ii).
    \12\ A ``Controlling Interest'' is defined as ``the ownership by 
any Person, alone or together with any Affiliate of such Person, of 
a 25% or greater interest in a Member.'' See BOX LLC Agreement, 
Section 8.4(g)(i).
    \13\ The BOX LLC Agreement states, in part, that ``the Members, 
officers, directors, agents, and employees of Members irrevocably 
submit to the exclusive jurisdiction of the U.S. federal courts, 
U.S. Securities and Exchange Commission, and the Boston Stock 
Exchange, for the purposes of any suit, action or proceeding 
pursuant to U.S. federal securities laws, the rules or regulations 
thereunder, arising out of, or relating to, BOX activities or 
Article 19.6(a), (except that such jurisdictions shall also include 
Delaware for any such matter relating to the organization or 
internal affairs of BOX, provided that such matter is not related to 
trading on, or the regulation, of the BOX Market), and hereby waive, 
and agree not to assert by way of motion, as a defense or otherwise 
in any such suit, action or proceeding, any claims that they are not 
personally subject to the jurisdiction of the U.S. Securities and 
Exchange Commission, that the suit, action or proceeding is an 
inconvenient forum or that the venue of the suit, action or 
proceeding is improper, or that the subject matter hereof may not be 
enforced in or by such courts or agency.'' See BOX LLC Agreement, 
Section 19.6.
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    For the reasons stated above, BSE is submitting to the Commission 
the proposed Instrument of Accession, which constitutes an amendment to 
the BOX LLC Agreement, as a rule change. The proposed rule change is 
subject to becoming effective and operative pursuant to Section 
19(b)(3)(A) of the Act \14\ and Rule 19b-4(f)(6) \15\ thereunder. BSE 
proposes to make this proposal operative upon the consummation of the 
Combination, currently anticipated in late February 2008.
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    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 17 CFR 240.19b-4(f)(6).
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2. Statutory Basis
    The Exchange believes that the proposal is consistent with the 
requirements of Section 6(b) of the Act,\16\ in general, and furthers 
the objectives of Section 6(b)(1),\17\ in particular, in that it 
enables the Exchange to be so organized so as to have the capacity to 
be able to carry out the purposes of the Act and to comply, and to 
enforce compliance by its exchange members and persons associated with 
its exchange members, with the provisions of the Act, the rules and 
regulations thereunder, and the rules of the Exchange.
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    \16\ 15 U.S.C. 78f(b).
    \17\ 15 U.S.C. 78f(b)(1).
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    The Exchange also believes that this filing furthers the objectives 
of Section 6(b)(5) of the Act \18\ in that it is designed to facilitate 
transactions in securities, 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 regulating, 
clearing, settling, processing information with respect to, and 
facilitating transactions in securities, 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.
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    \18\ 15 U.S.C. 78f(b)(5).
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    Additionally, the Exchange notes that the provisions of the BOX LLC 
Agreement, previously approved by the Commission, provide a framework 
for addressing the Combination. Accordingly, BSE believes the 
Combination does not present any novel

[[Page 7619]]

issues that have not been anticipated and addressed by the BOX LLC 
Agreement.

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

    The Exchange has neither solicited nor received comments on 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 from the date on which it was filed, 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 \19\ and Rule 19b-
4(f)(6) thereunder.\20\
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    \19\ 15 U.S.C. 78s(b)(3)(A).
    \20\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires that a self-regulatory organization submit to the 
Commission written notice of its intent to file the proposed rule 
change, along with a brief description and text of 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 Commission notes that BSE has satisfied the five-day 
pre-filing notice requirement.
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    Normally, a proposed rule change filed under Rule 19b-4(f)(6) \21\ 
may not become operative prior to 30 days after the date of filing. 
However, Rule 19b-4(f)(6)(iii) \22\ permits the Commission to designate 
a shorter time if such action is consistent with the protection of 
investors and the public interest. The Exchange has requested that the 
Commission waive the 30-day operative delay. In its filing, the 
Exchange requested waiver of the 30-day operative delay because the MX 
shareholders are expected to approve the Combination on February 13, 
2008 and subsequent thereto the Combination is expected to close in 
late February of 2008. Furthermore, BSE believes the Combination does 
not present any novel issues that have not been anticipated and 
addressed by the BOX LLC Agreement.
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    \21\ 17 CFR 240.19b-4(f)(6).
    \22\ 17 CFR 240.19b-4(f)(6)(iii).
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    The Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest 
because the proposed rule change will allow the Exchange to proceed 
with the Combination, without undue delay, in a manner consistent with 
the provisions of the BOX LLC Operating Agreement. Accordingly, 
consistent with the protection of investors and the public interest, 
the Commission designates the proposed rule change to be operative upon 
consummation of the Combination.\23\
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    \23\ For the 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).
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    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 rule-comments@sec.gov. Please include 

File Number SR-BSE-2008-06 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-BSE-2008-06. 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 BSE. 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-BSE-2008-06 and should be 
submitted on or before February 29, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\24\
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    \24\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E8-2329 Filed 2-7-08; 8:45 am]

BILLING CODE 8011-01-P