Document ID: SEC-2008-0676-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Boston Stock Exchange, Inc.
Posted Date: 2008-05-08T04:00Z

[Federal Register: May 8, 2008 (Volume 73, Number 90)]
[Notices]               
[Page 26159-26170]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr08my08-134]                         

[[Page 26159]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57757; File No. SR-BSE-2008-23]

 
Self-Regulatory Organizations; Boston Stock Exchange, 
Incorporated; Notice of Filing of Proposed Rule Change Relating to the 
Acquisition of the Boston Stock Exchange, Incorporated by The NASDAQ 
OMX Group, Inc.

May 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 April 21, 2008, the Boston Stock Exchange, Incorporated 
(``Exchange'' or ``BSE'') 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 the Exchange. 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: (i) To amend and restate its Certificate of 
Incorporation and its Constitution in their entirety to reflect the 
planned acquisition of the Exchange by The NASDAQ OMX Group, Inc. 
(``NASDAQ OMX''); (ii) to redesignate its Constitution as the By-Laws 
of the Exchange (``By-Laws''); (iii) to amend the governance framework 
of Boston Options Exchange Regulation, LLC (``BOXR'') by adopting a 
written operating agreement and amending the BOXR by-laws (``BOXR By-
Laws''); (iv) to obtain approval for a change of control of BSX Group, 
LLC (``BSX'') and make related amendments to the Third Amended and 
Restated Operating Agreement of BSX; (v) to adopt two related rules; 
and (vi) to obtain Commission approval for affiliation between the 
Exchange and certain broker-dealer subsidiaries of NASDAQ OMX. The text 
of the proposed rule change is available on the Exchange's Web site 
(http://www.bostonstock.com), at the Exchange, and at the Commission's 
Public Reference Room. The text of Exhibit 5 of the proposed rule 
change is also available on the Commission's Web site (http://
www.sec.gov/rules/sro.shtml).

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 Merger
    On October 2, 2007, the Exchange announced that it had entered into 
an agreement with The Nasdaq Stock Market, Inc. (now NASDAQ OMX) 
pursuant to which NASDAQ OMX will acquire all of the outstanding 
membership interests in the Exchange and the Exchange will be merged 
with and into Yellow Merger Corporation, a Delaware corporation and 
wholly owned subsidiary of NASDAQ OMX, with the Exchange surviving the 
merger (``Merger''). As a result of the Merger, the Exchange will 
become a Delaware stock corporation, with 100% of its outstanding stock 
owned by NASDAQ OMX. Exchange Members will receive cash as 
consideration for their ownership interests, and therefore will not 
retain ownership interests in the Exchange or its affiliates. NASDAQ 
OMX will then operate the Exchange as a wholly owned subsidiary, with 
rules, membership rosters, and listings that are separate and distinct 
from the rules, membership rosters, and listings of The NASDAQ Stock 
Market LLC (``Nasdaq Exchange''). The Exchange will propose substantial 
amendments to its rules in a separate filing.
    To reflect its changed status from an independent membership 
corporation to a wholly owned stock corporation, the Exchange proposes 
to amend and restate its Certificate of Incorporation and its 
Constitution in their entirety. The amended Constitution will be 
redesignated as the By-Laws of the Exchange. In addition, the Exchange 
proposes to adopt two new rules to reflect its status as a subsidiary 
of NASDAQ OMX, which is a public company.
    The Exchange also proposes to amend the governance framework of 
BOXR by adopting a written operating agreement (the Amended and 
Restated Limited Liability Company Agreement of Boston Options Exchange 
Regulation, LLC (``BOXR LLC Agreement'')) and amending the BOXR By-
Laws. BOXR is a wholly owned subsidiary of the Exchange that regulates 
the Boston Options Exchange (``BOX''), an electronic options market 
operated as a facility of the Exchange by Boston Options Exchange Group 
LLC (``BOX LLC''). BOX LLC was established in 2002 as a joint venture 
among the Exchange, Bourse de Montr[eacute]al (``MX''), and several 
other investors. The Exchange has agreed to sell its equity interest in 
BOX LLC to MX, but the Exchange will continue to regulate BOX through 
BOXR for a period of time following the Merger. BOXR's operations are 
governed by a Plan of Delegation of Functions and Authority by the 
Exchange to BOXR and by its by-laws, both of which are rules of the 
Exchange approved by the Commission. The BOXR LLC Agreement, and the 
BOXR By-Law amendments reflect changes that will be made to the 
governance and management of BOXR as it remains the designated entity 
that will regulate the BOX market until alternative arrangements 
acceptable to the Commission are made. The amendments to the BOXR By-
Laws also make technical amendments to conform to the changes proposed 
to the Exchange Constitution.\3\
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    \3\ In a separate filing (SR-BSE-2008-27), the Exchange is 
proposing to amend the BOX LLC Operating Agreement and to adopt 
resolutions establishing an independent committee of the Exchange's 
Board of Governors (to be redesignated as the Board of Directors) 
that will review BOX rule changes and certain other BOX-related 
regulatory matters. In addition, the Exchange has submitted a filing 
to amend the Exchange's Certificate to allow for the distribution of 
the net proceeds from the Exchange's intended sale of its equity 
interests in BOX (SR-BSE-2008-02).
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    Finally, under Section 8.1 of the Third Amended and Restated 
Operating Agreement of BSX dated March 13, 2007 (``BSX Operating 
Agreement''), the Exchange must obtain Commission approval for certain 
transfers of ownership interests in BSX. In connection with the Merger, 
NASDAQ OMX will acquire direct interests in BSX, which, together with 
the Exchange's interests, will result in BSX becoming a wholly owned 
subsidiary of NASDAQ OMX. Specifically, following the Merger, the 
Exchange will continue to own ``Units'' of ownership interest in BSX 
equivalent to 53.21% of the outstanding Units, while NASDAQ OMX will 
own the remaining 46.79%.

[[Page 26160]]

Accordingly, the filing seeks approval for this transfer. The filing 
also proposes amendments to the BSX Operating Agreement to reflect 
BSX's acquisition.

Exchange Certificate of Incorporation

    Article First and Second of the amended and restated Certificate 
(as proposed to be amended and restated, the ``Restated Certificate'') 
state the name and registered agent of the Exchange. Although NASDAQ 
OMX may propose to change the name of the Exchange in the future, at 
closing, the name of the Exchange will remain ``Boston Stock Exchange, 
Incorporated.''
    Article Third of the Restated Certificate provides that the 
Exchange may engage in any lawful act or activity for which 
corporations may be organized under the General Corporation Law of the 
State of Delaware and any and all activities necessary or incidental to 
the foregoing. Without limiting these general powers, Article Third 
also specifically provides that the Exchange's activities shall include 
actions that support its regulatory responsibilities under the Act.\4\
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    \4\ In a separate filing (SR-NASDAQ-2008-035), NASDAQ OMX is 
proposing to amend its by-laws to reflect the proposed acquisition 
of the Exchange. The proposed amendments include, among other 
protections, a stipulation that for so long as NASDAQ OMX shall 
control the Exchange, the board of directors, officers, employees 
and agents of NASDAQ OMX shall give due regard to the preservation 
of the independence of the self-regulatory function of the Exchange 
and to its obligations to investors and the general public and shall 
not take any actions which would interfere with the effectuation of 
any decisions by the board of directors of the Exchange relating to 
its regulatory functions (including disciplinary matters) or the 
market structure which it regulates or which would interfere with 
the ability of the Exchange to carry out its responsibilities under 
the Act.
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    Article Fourth of the Restated Certificate provides that the 
Exchange is authorized to issue 1,000 shares of common stock, par value 
$0.01, all of which shall be held by NASDAQ OMX. The Restated 
Certificate further provides that NASDAQ OMX may not transfer or assign 
any shares of stock of the Exchange, in whole or in part, to any 
entity, unless such transfer or assignment shall be filed with and 
approved by the Commission under Section 19 of the Act and the rules 
promulgated thereunder.
    Article Fifth pertains to the governing board of the Exchange, 
which is being designated as a Board of Directors (``Board''), rather 
than a Board of Governors. The total number of Directors constituting 
the entire Board will be fixed from time to time by the stockholders 
(i.e., NASDAQ OMX), and will be elected by the stockholders to hold 
office until their respective successors have been duly elected and 
qualified, subject, however, to prior death, resignation, retirement, 
disqualification, or removal from office. However, the exact 
composition of the Board is also subject to the requirements of the By-
Laws relating to independence and fair representation of members, which 
are described in detail below.
    Article Fifth also contains standard corporate provisions governing 
meetings of stockholders. Because NASDAQ OMX will be the sole 
stockholder, however, Article Seventh provides that any action required 
or permitted to be taken at an annual or special meeting of 
stockholders may be taken without a meeting, without prior notice and 
without a vote, if a consent in writing, setting forth the action so 
taken, is signed by the holders of outstanding stock having not less 
than the minimum number of votes that would be necessary to authorize 
or take such action at a meeting at which all shares entitled to vote 
thereon were present and voted. Thus, it is expected that most 
stockholder actions will be taken through written consent, rather than 
meetings.
    Finally, Article Fifth provides that vacancies or newly created 
directorships resulting from an increase in the authorized number of 
Directors are filled as provided in the By-Laws (described below); that 
no decrease in the number of Directors shortens the term of an 
incumbent Director; and that Directors may be removed by the holders of 
a majority of the shares at the time entitled to vote at an election of 
Directors. However, the stockholders' removal authority is also limited 
by the By-Laws (as described below).
    Article Sixth limits the liability of Directors to the Exchange in 
the manner permitted under Delaware law; and Article Eighth provides 
that the Board (in addition to the stockholders) may adopt, amend or 
repeal By-Laws. Article Ninth reserves the right to amend, alter, 
change, or repeal any provisions contained in the Restated Certificate; 
\5\ and Article Tenth provides that the Exchange has perpetual 
existence.
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    \5\ All such changes must be filed with the Commission under 
Section 19(b) of the Act, 15 U.S.C. 78s(b), and become effective 
thereunder before being implemented.
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By-Laws
    The By-Laws reflect NASDAQ OMX's expectation that the Exchange will 
be operated with governance, regulatory, and market structures similar 
to those of the Nasdaq Exchange. Accordingly, the Exchange proposes to 
adopt By-Laws that are similar in all material respects to the By-Laws 
of the Nasdaq Exchange. The most significant differences result from 
the fact that the Nasdaq Exchange is a limited liability company 
whereas the Exchange will be organized as a stock corporation.
    Article I of the By-Laws contains key definitions used in the By-
Laws. Article II provides for the registered office of the Exchange in 
Delaware and such other offices as it may establish. Article III 
contains standard corporate provisions governing meetings of 
stockholders, as well as a provision consistent with the Restated 
Certificate allowing stockholder action by written consent.
    Article IV contains key provisions regarding the powers, 
composition, and selection of the Board. The property, business, and 
affairs of the Exchange will be managed under the direction of the 
Board. The exact number of Directors will be determined by the 
stockholders of the Exchange (i.e., NASDAQ OMX), but shall in no event 
be less than ten Directors. No decrease in the number of Directors 
shall shorten the term of any incumbent Director.
    As is the case with the Nasdaq Exchange, the Board composition will 
be required to reflect a balance among ``Industry Directors,'' ``Member 
Representative Directors,'' and ``Non-Industry Directors,'' including 
``Public Directors.'' An Industry Director is a person with direct ties 
to the securities industry as a result of connections to a broker-
dealer, the Exchange or its affiliates, the Financial Industry 
Regulatory Authority, Inc. (``FINRA''), or certain service providers to 
such entities.\6\ The By-Laws also permit up to

[[Page 26161]]

two officers of the Exchange, who would otherwise be considered 
Industry Directors, to be designated as ``Staff Directors'' and thereby 
be excluded from the definition of Industry Director. With the 
exception of the initial Member Representative Directors, Member 
Representative Directors are nominated by a Member Nominating Committee 
composed of registered representatives of Exchange Members, or are 
voted upon by Exchange Members.\7\ A Member Representative Director 
may, but is not required to be, an officer, director, employee, or 
agent of an Exchange Member. The process for election of Member 
Representative Directors is described in greater detail below. A Non-
Industry Director is a Director (excluding Staff Directors) who is: (i) 
A Public Director; (ii) an officer or employee of an issuer of 
securities listed on the Exchange; or (iii) any other individual who 
would not be an Industry Director. A Public Director is a Director who 
has no material business relationship with a broker or dealer, the 
Exchange or its affiliates, or FINRA. With the exception of the initial 
Directors, Directors other than the Member Representative Directors are 
nominated by a Nominating Committee appointed by the Board and are then 
elected by NASDAQ OMX as the sole stockholder.
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    \6\ Specifically, Article I of the By-Laws defines an Industry 
Director as a person who: (i) Is or has served in the prior 3 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 10% of the equity of a broker or dealer, and the 
broker or dealer accounts for more than 5% of the gross revenues 
received by the consolidated entity; (iii) owns more than 5% of the 
equity securities of any broker or dealer, whose investments in 
brokers or dealers exceed 10% 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% or more of the professional revenues received by the 
Director or 20% or more of the gross revenues received by the 
Director's firm or partnership; (v) provides professional services 
to a director, officer, or employee of a broker, dealer, or 
corporation that owns 50% 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% or more of the 
professional revenues received by the Director or 20% or more of the 
gross revenues received by the Director'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 has had any such relationship or provided any such services 
at any time within the prior 3 years.
    \7\ Article I defines a Member Representative Director as a 
Director who has been elected by the stockholders after having been 
nominated by the Member Nominating Committee or voted upon by 
Exchange Members pursuant to the By-Laws (or elected by the 
stockholders without such nomination or voting in the case of the 
initial Member Representative Directors elected pursuant to Section 
4.3(b) of the By-Laws).
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    Section 4.3 of the By-Laws provides that the number of Non-Industry 
Directors, including at least three Public Directors and at least one 
Director representative of issuers and investors,\8\ must equal or 
exceed the sum of the number of Industry Directors and Member 
Representative Directors. At least 20% of the Directors must be Member 
Representative Directors. The By-Laws further stipulate that, as is 
currently the case, one Industry Director must be selected as a 
representative of a firm or organization that is registered with the 
Exchange for the purposes of participating in options trading on 
BOX.\9\ A Director may not be subject to a statutory 
disqualification.\10\
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    \8\ Section 6(b)(3) of the Act, 15 U.S.C. 78f(b)(3), requires 
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.
    \9\ Section 6(b)(3) of the Act, 15 U.S.C. 78f(b)(3), requires 
that the rules of the Exchange assure a fair representation of its 
members in the selection of its directors and administration of its 
affairs. The Member Representative Directors and the BOX Participant 
Director satisfy this requirement because they are selected through 
processes that rely on nominations made by nominating committees 
composed of representatives of member firms, with an opportunity for 
nomination of alternate candidates by members. See Section 4.4 of 
the proposed By-Laws of the Exchange and Section 14 of the BOXR By-
Laws.
    \10\ Section 3(a)(39) of the Act, 15 U.S.C. 78c(a)(39).
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    The process for selecting Member Representative Directors is 
described in Section 4.4 and Section 4.14. Section 4.14 provides that 
the Board will appoint a Member Nominating Committee consisting of no 
fewer than three and no more than six members. All members of the 
Member Nominating Committee must be a current associated person of a 
current Exchange Member. The Board will appoint such individuals after 
appropriate consultation with representatives of Exchange Members. The 
Member Nominating Committee will then nominate a slate of candidates 
for Member Representative Director positions to be filled. Although the 
Member Nominating Committee would have authority to nominate a number 
of candidates in excess of the number of Board seats up for election, 
the Member Nominating Committee would likely nominate a number of 
candidates equal to the number of seats. The candidates nominated by 
the Member Nominating Committee will be stated on a formal ``List of 
Candidates.''
    An Exchange Member may nominate an additional candidate for 
inclusion on the List of Candidates by submitting a timely and duly 
executed written petition to the Secretary of the Exchange. To be 
timely, an Exchange Member's notice must 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'' \11\ (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 Exchange Member 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 10th day 
following the day on which public announcement of such Voting Date is 
first made by the Exchange).\12\ The Exchange Member's notice must 
include: (i) As to the person whom the Exchange Member proposes for 
election as a Member Representative Director, 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 
Act and the rules thereunder (and such person's written consent to be 
named in the List of Candidates and to serving as a Director if 
elected); (ii) a petition in support of the candidate duly executed by 
the authorized representatives of 10% or more of all Exchange Members; 
and (iii) the name and address of the Exchange Member making the 
proposal. The Exchange may require any proposed candidate to furnish 
such other information as it may reasonably require to determine the 
eligibility of such person to serve as a Member Representative 
Director.
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    \11\ The By-Laws define Voting Date as ``a date selected by the 
Board for Exchange Members to vote with respect to Member 
Representative Directors in the event of a Contested Vote.'' As 
described below, the Board will select a Voting Date each year; 
however, a vote would be conducted on the Voting Date only in the 
event of a Contested Vote (i.e., if there is more than one candidate 
for a Board seat).
    In order to make the intent of this definition clearer, 
immediately following the closing of the Merger, the Exchange will 
propose to the newly constituted Board of the Exchange an amendment 
to the definition to read as follows: `` `Voting Date' means the 
date selected by the Board on an annual basis, on which Exchange 
Members may vote with respect to Member Representative Directors in 
the event of a Contested Vote.'' Following approval by the Board, 
the Exchange will file the amendment as a proposed rule change for 
approval by the Commission.
    \12\ Because the voting procedures contemplated by the By-Laws 
are new, the alternate time frames would apply in the case of the 
first annual meeting held under the By-Laws. Therefore, a nomination 
would be considered timely if delivered not earlier than the close 
of business on the 120th day prior to the first Voting Date and not 
later than the close of business on the later of the 90th day prior 
to the first Voting Date, or the 10th day following the day on which 
public announcement of such Voting Date is first made.
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    After the Member Nominating Committee creates the List of 
Candidates, the Board will determine a Voting Date and a ``Member 
Voting Record Date.'' \13\ Promptly after selection of the Voting Date, 
in a Notice to Exchange Members and in a prominent location on a 
publicly accessible Web site, the Exchange will announce the Voting 
Date and the List of Candidates, and describe the procedures for 
Exchange Members to propose candidates for election at the

[[Page 26162]]

next annual meeting. If, by the date on which an Exchange Member may no 
longer submit a timely nomination, there is only one candidate for each 
Member Representative Director seat, the Member Representative 
Directors would be elected by the stockholders directly from the List 
of Candidates nominated by the Member Nominating Committee. If, 
however, there is more than one candidate for a seat (i.e., if there is 
a contested vote), a formal notice of the Voting Date and the List of 
Candidates will be sent by the Exchange at least 10 days but no more 
than 60 days prior to the Voting Date to the Exchange Members who were 
Exchange Members on the Member Voting Record Date, by any means, 
including electronic transmission, as determined by the Board or a 
committee thereof.
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    \13\ The By-Laws define ``Member Voting Record Date'' as a date 
selected by the Board for the purpose of determining the Exchange 
Members entitled to vote for Member Representative Directors on a 
Voting Date in the event of a Contested Vote.
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    In the event of a Contested Vote, each Exchange Member will have 
the right to cast one vote for each Member Representative Director 
position to be filled; \14\ provided, however, that any such vote must 
be cast for a person on the List of Candidates. The votes may not be 
cumulated. The votes shall be cast by written ballot, electronic 
transmission or any other means as set forth in a notice to the 
Exchange Members sent by the Exchange prior to the Voting Date. Only 
votes received prior to 11:59 p.m. Eastern Time on the Voting Date 
shall be counted. The persons on the List of Candidates who receive the 
most votes shall be submitted to the stockholders for election, and the 
stockholders shall elect that candidate.
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    \14\ In order to limit the influence that a single affiliated 
group of members might exercise over the Exchange, immediately 
following the closing of the Merger, the Exchange will propose to 
the newly constituted Board of the Exchange an amendment to 
stipulate that no Member, either alone or together with its 
affiliates, may account for more than 20% of the votes cast for a 
candidate, and any votes cast by such Member, either alone or 
together with its affiliates, in excess of such 20% limitation shall 
be disregarded. Following approval by the Board, the Exchange will 
file the amendment as a proposed rule change for approval by the 
Commission.
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    Notwithstanding the foregoing, the initial Board immediately 
following the Merger and the adoption of these By-Laws will be selected 
by NASDAQ OMX (as the sole stockholder) without use of the nomination 
or election processes required for subsequent elections. Specifically, 
the stockholders will hold a special meeting (or sign a consent in lieu 
thereof) for the purpose of electing the Board, which shall include 
individuals satisfying the classifications required by Section 4.3(a) 
of the By-Laws but which shall not have been nominated or voted upon in 
accordance with Section 4.4. The initial Member Representative 
Directors will be officers, directors or employees of Exchange Members. 
The initial Board will consist of at least three Public Directors, one 
or two Staff Directors, at least two Member Representative Directors, 
an Industry Director representing ``BOX Participants,'' \15\ at least 
one Non-Industry Director representative of issuers and investors, and 
such additional Industry and Non-Industry Directors as NASDAQ OMX as 
the sole stockholder shall deem appropriate, consistent with the 
compositional requirements of the By-Laws. As soon as practicable 
thereafter, the Exchange shall hold its annual meeting for the purpose 
of electing Directors in accordance with the normal processes 
contemplated by the By-Laws.
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    \15\ ``BOX Participant'' means a firm or organization that is 
registered with the Exchange for the purposes of participating in 
options trading in the BOX market.
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    Section 4.5 of the By-Laws provides that Directors may be removed 
from office by the stockholders, with the vacancy thus created also 
filled by the stockholders, but that the stockholders may remove a 
Member Representative Director only for cause, which shall include, 
without limitation, the failure of such Director to be free of a 
statutory disqualification. In addition, a Director is disqualified and 
his or her term of office terminates immediately upon a determination 
by the Board, by a majority vote of the remaining Directors: (a) that 
the Director no longer satisfies the classification for which the 
Director was elected; and (b) that the Director's continued service as 
such would violate the compositional requirements of the Board set 
forth in Section 4.3. Thus, for example, if a Public Director became 
employed by a broker-dealer and the Board thereby had an inadequate 
number of Public Directors, the Director would be disqualified and 
removed. If a Director is disqualified and removed, and the remaining 
term of office of such Director at the time of termination is not more 
than 6 months, a replacement for the Director is not required until the 
next annual meeting.
    Section 4.7 of the By-Laws provides that if any Director position 
other than a Member Representative Director position becomes vacant, 
the Nominating Committee will nominate, and the Board will appoint by 
majority vote, a person satisfying the classification (Industry, Non-
Industry, or Public Director) for the directorship to fill the vacancy. 
Whenever a Member Representative Director position becomes vacant, the 
Member Nomination Committee will nominate, and the Board will appoint 
by majority vote, a person to fill the vacancy, except that if the 
remaining term of office for the vacant Member Representative Director 
position is less than 6 months, no replacement is required.
    Sections 4.8, 4.9, and 4.10 contain standard provisions for a 
Delaware corporation governing the quorum and voting requirements of 
the Board, the appropriateness of reliance by Directors upon the 
records, officers, and agents of the Exchange, and the rules governing 
conduct of meetings of the Board. Section 4.9 also recognizes the 
Exchange's status as a self-regulatory organization by providing that 
the Board, when evaluating any proposal, shall, to the fullest extent 
permitted by applicable law, take into account: (i) The potential 
impact thereof on the integrity, continuity and stability of the 
Exchange and the other operations of the Exchange, on the ability to 
prevent fraudulent and manipulative acts and practices and on investors 
and the public, and (ii) whether such would promote just and equitable 
principles of trade, foster cooperation and coordination with persons 
engaged in regulating, clearing, settling, processing information with 
respect to and facilitating transactions in securities, or assist in 
the removal of impediments to or perfection of the mechanisms for a 
free and open market and a national market system.
    Section 4.12 provides that the Board may delegate to one or more 
committees that consist solely of one or more Directors the power and 
authority to act on behalf of the Board in the management of the 
business and affairs of the Exchange. However, no committee may have 
the power or authority of the Board in reference to: (i) Approving or 
adopting, or recommending to the stockholders, any action or matter 
(other than the election of Directors) expressly required by Delaware 
law to be submitted to stockholders for approval; or (ii) adopting, 
amending, or repealing any By-Law of the Exchange. The section also 
contains standard provisions for a Delaware corporation pertaining to 
the conduct and populating of Board committees.
    Section 4.13 establishes several standing Board committees and 
delineates their general duties and compositional requirements:
     The Executive Committee may exercise all the powers and 
authority of the Board in the management of the business and affairs of 
the Exchange between meetings of the Board (subject to the limits 
described above). The number of Non-Industry Directors on

[[Page 26163]]

the Executive Committee must equal or exceed the number of Industry 
Directors on the Executive Committee. The percentage of Public 
Directors on the Executive Committee must be at least as great as the 
percentage of Public Directors on the whole Board, and the percentage 
of Member Representative Directors on the Executive Committee must be 
at least as great as the percentage of Member Representative Directors 
on the whole Board.
     The Finance Committee shall advise the Board with respect 
to the oversight of the financial operations and conditions of the 
Exchange, including recommendations for the Exchange's annual operating 
and capital budgets and proposed changes to the rates and fees charged 
by the Exchange.
     The Management Compensation Committee shall consider and 
recommend compensation policies, programs, and practices for employees 
of the Exchange. A majority of Management Compensation Committee 
members shall be Non-Industry Directors. The Chief Executive Officer of 
the Exchange shall be an ex-officio, non-voting member of the 
Management Compensation Committee.
     The Audit Committee shall consist of four or five 
Directors, none of whom shall be officers or employees of the Exchange. 
A majority of the Audit Committee members shall be Non-Industry 
Directors. The Audit Committee shall include two Public Directors. A 
Public Director shall serve as Chair of the Committee. The Audit 
Committee shall: (A) Provide oversight over the Exchange's financial 
reporting process and the financial information that is provided to the 
stockholders and others; (B) provide oversight over the systems of 
internal controls established by management and the Board and the 
Exchange's legal and compliance process; (C) select, evaluate and, 
where appropriate, replace the Exchange's independent auditors (or 
nominate the independent auditors to be proposed for ratification by 
the stockholders); and (D) direct and oversee all the activities of the 
Exchange's internal audit function, including but not limited to 
management's responsiveness to internal audit recommendations. The 
Audit Committee shall have exclusive authority to: (A) Hire or 
terminate the head of the Exchange's Internal Audit Department; (B) 
determine the compensation of the head of the Internal Audit 
Department; and (C) determine the budget for the Internal Audit 
Department. The Internal Audit Department and its head shall report 
directly to the Audit Committee. The Audit Committee may, in its 
discretion, direct that the Internal Audit Department also report to 
senior management of the Exchange on matters the Audit Committee deems 
appropriate and may request that senior management of the Exchange 
perform such operational oversight as necessary and proper, consistent 
with preservation of the independence of the internal audit function. 
The Internal Audit Department and its head may also be employees of one 
or more affiliates of the Exchange (i.e., NASDAQ OMX), and may serve in 
a similar capacity with respect to such affiliate(s).
     The Regulatory Oversight Committee shall: (i) Oversee the 
adequacy and effectiveness of the Exchange's regulatory and self-
regulatory organization responsibilities; (ii) assess the Exchange's 
regulatory performance; and (iii) assist the Board and other committees 
of the Board in reviewing the regulatory plan and the overall 
effectiveness of the Exchange's regulatory functions. In furtherance of 
its functions, the Regulatory Oversight Committee shall: (A) Review the 
Exchange's regulatory budget and specifically inquire into the adequacy 
of resources available in the budget for regulatory activities; (B) 
meet regularly with the Exchange's Chief Regulatory Officer in 
executive session; and (C) be informed about the compensation and 
promotion or termination of the Chief Regulatory Officer and the 
reasons therefore. The Regulatory Oversight Committee shall consist of 
three members, each of whom shall be a Public Director and an 
``independent director'' as defined in Rule 4200 of the Rules of the 
Nasdaq Stock Market.
    Section 4.14 and Articles VI and VII govern the appointment by the 
Board of certain standing committees, not composed of Directors, to be 
appointed to administer various provisions of the rules that the 
Exchange expects to propose with respect to governance, listing, equity 
trading, and member discipline:
     The Member Nominating Committee will nominate candidates 
for each Member Representative Director position on the Board, and will 
also nominate candidates for appointment by the Board for positions on 
certain standing committees with positions reserved for Member 
Representatives. The Member Nominating Committee shall consist of no 
fewer than three and no more than six members. All members of the 
Member Nominating Committee shall be a current associated person of a 
current Exchange Member. The Board will appoint such individuals after 
appropriate consultation with representatives of Exchange Members.
     The Nominating Committee will nominate candidates for all 
other vacant or new Director positions on the Board, and candidates for 
all other vacant or new positions on certain standing committees. In 
nominating an Industry Director who is representative of BOX 
Participants, the Nominating Committee shall adopt the recommendation 
of the Nominating Committee of the Exchange's subsidiary, BOXR, and the 
stockholders of the Exchange (i.e., NASDAQ OMX) shall elect the 
candidate.\16\ The Nominating Committee shall consist of no fewer than 
six and no more than nine members. The number of Non-Industry members 
on the Nominating Committee must equal or exceed the number of Industry 
members on the Nominating Committee. If the Nominating Committee 
consists of six members, at least two shall be Public members. If the 
Nominating Committee consists of seven or more members, at least three 
shall be Public members. No officer or employee of the Exchange 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 
Directors. A Nominating Committee member may not simultaneously serve 
on the Nominating Committee and the Board, unless such

[[Page 26164]]

member is in his or her final year of service on the Board, and 
following that year, that member may not stand for election to the 
Board until such time as he or she is no longer a member of the 
Nominating Committee.
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    \16\ As noted above in footnote 8, the BOX Participant Director, 
together with the Member Representative Directors, allow the 
Exchange to fulfill the requirement of Section 6(b)(3) of the Act, 
15 U.S.C. 78f(b)(3) that the rules of the Exchange assure a fair 
representation of its members in the selection of its directors and 
administration of its affairs. Article II, Section 4 of the 
Exchange's Constitution currently requires that the Exchange's Board 
of Governors select and appoint as governor a candidate put forth by 
the BOXR Nominating Committee for the position on the Board of 
Governors reserved for a representative of BOX Participants. It is 
the intent of the Exchange that a person nominated by the BOXR 
Nominating Committee for this position will, consistent with the 
current requirement in the Exchange's Constitution, continue to be 
automatically nominated and elected through the Exchange's Board 
selection process, unless such nominee is not eligible for service 
under Section 4.3 of the By-Laws (i.e., because the nominee is 
subject to a statutory disqualification). The Exchange believes that 
this intent is reflected in the text of the Restated Certificate and 
By-Laws as approved by the Exchange's members, but could be 
reflected with greater clarity through further limited amendments to 
the text of the By-Laws. Accordingly, immediately following the 
closing of the Merger, the Exchange will propose to the newly 
constituted Board of the Exchange an amendment to the By-Laws to 
make it clear that the person nominated by the BOXR Nominating 
Committee shall also be nominated by the Exchange Nominating 
Committee and elected by the stockholders, unless such nominee is 
not eligible for service under Section 4.3; and the Exchange shall 
file the amendment as a proposed rule change for approval by the 
Commission.
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     The composition and duties of the Exchange Listing and 
Hearings Review Council are described in Articles VI. Under the rules 
to be proposed with respect to listings on the Exchange, the Exchange 
Listing and Hearing Review Council will review appeals from decisions 
to deny issuers listings on the Exchange, and will also consider and 
make recommendations to the Board on policy and rule changes relating 
to issuer listings. The Exchange Listing and Hearing Review Council 
will consist of no fewer than eight and no more than eighteen members, 
of which not more than 50% may be engaged in market-making activity or 
employed by an Exchange Member whose revenues from market-making 
activity exceed 10% of its total revenues. The Exchange Listing and 
Hearing Review Council will include at least five Non-Industry members 
(including at least two Public members), and a number of Member 
Representative members that is equal to at least 20% of the total 
number of members of the Exchange Listing and Hearing Review Council. A 
quorum of the Exchange Listing and Hearing Review Council will consist 
of a majority of its members, including one Non-Industry member and one 
Member Representative member.
     The composition and duties of the Exchange Review Council 
are described in Article VII. Under the disciplinary and membership 
rules to be proposed for the Exchange, the Exchange Review Council may 
be authorized to act with respect to an appeal or review of a 
disciplinary proceeding, a statutory disqualification proceeding, or a 
membership proceeding; a review of an offer of settlement, a letter of 
acceptance, waiver, and consent, and a minor rule violation plan 
letter; the exercise of exemptive authority; and such other proceedings 
or actions as may be authorized by the Exchange Rules.\17\ The Exchange 
Review Council also may consider and make recommendations to the Board 
on policy and rule changes relating to business and sales practices of 
Exchange Members and associated persons and enforcement policies, 
including policies with respect to fines and other sanctions. The 
Exchange Review Council shall consist of no fewer than eight and no 
more than twelve members. The Exchange Review Council shall include a 
number of Member Representative members that is equal to at least 20% 
of the total number of members of the Exchange Review Council. The 
number of Non-Industry members, including at least three Public 
members, shall equal or exceed the sum of the number of Industry 
members and Member Representative members. A quorum of the Exchange 
Review Council will consist of a majority of its members, including not 
less than 50% of its Non-Industry members and one Member Representative 
member.
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    \17\ As provided in the current rules relating to BOX, certain 
disciplinary matters pertaining to BOX Participants may be subject 
to review by the BOXR Board of Directors and the Exchange Board. The 
Exchange Review Council is not expected to have a role in BOX 
matters.
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     The Quality of Markets Committee will: (A) Provide advice 
and guidance to the Board on issues relating to the fairness, 
integrity, efficiency, and competitiveness of the information, order 
handling, and execution mechanisms of the Exchange from the perspective 
of investors, both individual and institutional, retail firms, market 
making firms, companies listed on the Exchange, and other market 
participants; and (B) advise the Board with respect to national market 
system plans and linkages between the facilities of the Exchange and 
other markets. The Quality of Markets Committee shall include broad 
representation of participants in the Exchange, including investors, 
market makers, integrated retail firms, and order entry firms. The 
Quality of Markets Committee shall include a number of Member 
Representatives that is equal to at least 20% of the total number of 
members of the Quality of Markets Committee. The number of Non-Industry 
members of the Quality of Markets Committee shall equal or exceed the 
sum of the number of Industry members and Member Representative 
members. A quorum of the Quality of Markets Committee will consist of a 
majority of its members, and at least 50% of its Non-Industry members 
must either be present or must waive attendance after receiving an 
agenda of the meeting.
     The Market Operations Review Committee will administer 
certain rules planned for the Exchange, notably appeals from decisions 
to cancel or modify clearly erroneous trades on the Exchange. The 
Market Operation Review Committee must include a number of Member 
Representatives that is equal to at least 20% of the total number of 
members of the Market Operations Review Committee. No more than 50% of 
the members of the Market Operations Review Committee shall be engaged 
in market making activity or employed by an Exchange Member firm whose 
revenues from market making activity exceed 10% of its total revenues.
     The Arbitration and Mediation Committee will: (i) Advise 
the Board on the development and maintenance of an equitable and 
efficient system of dispute resolution that will equally serve the 
needs of public investors and Exchange Members; (ii) shall monitor 
rules and procedures governing the conduct of dispute resolution; and 
(iii) shall have such other powers and authority as are necessary to 
effectuate the purposes of the Exchange Rules. The Arbitration and 
Mediation Committee must consist of no fewer than three and no more 
than ten members, and shall have at least 50% Non-Industry members. As 
is the case with the Nasdaq Exchange, the Arbitration Committee may be 
populated with members of FINRA's Arbitration and Mediation Committee, 
assuming the Exchange receives regulatory services from FINRA.\18\ A 
quorum of the Arbitration and Mediation Committee will consist of a 
majority of its members, and at least 50% of its Non-Industry members 
must either be present or must waive attendance after receiving an 
agenda of the meeting.
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    \18\ ``The Board shall appoint an Arbitration and Mediation 
Committee, or shall cause the Corporation to enter into an agreement 
with a self-regulatory organization that provides regulatory 
services pursuant to which such self-regulatory organization shall 
appoint an Arbitration and Mediation Committee on the Corporation's 
behalf.'' Section 4.14(e) of the Restated Certificate.
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     The Market Regulation Committee will: (i) Advise the Board 
on regulatory proposals and industry initiatives relating to 
quotations, execution, trade reporting, and trading practices; (ii) 
advise the Board in its administration of programs and systems for the 
surveillance and enforcement of rules governing Exchange Member's 
conduct and trading activities in the Exchange; (iii) provide a pool of 
attorney panelists for hearing panels under the Exchange Rules; (iv) 
participate in the training of hearing panelists on issues relating to 
quotations, executions, trade reporting, and trading practices; and (v) 
review and recommend to the Exchange Review Council changes to the 
Exchange's guidelines for sanctions to be imposed on members for 
violations of Exchange Rules. The Market Regulation Committee shall not 
have any involvement in deciding whether or not to institute 
disciplinary proceedings. The Market Regulation Committee shall have at 
least 50% Non-Industry members. As is the case with the Nasdaq 
Exchange, the Market Regulation Committee may be

[[Page 26165]]

populated with members of FINRA's Market Regulation Committee, assuming 
the Exchange receives regulatory services from FINRA.\19\ A quorum of 
the Market Regulation Committee will consist of a majority of its 
members, and at least 50% of its Non-Industry members must either be 
present or must waive attendance after receiving an agenda of the 
meeting.
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    \19\ The Board shall appoint a Market Regulation Committee, or 
shall cause the Corporation to enter into an agreement with a self-
regulatory organization that provides regulatory services pursuant 
to which such self-regulatory organization shall appoint a Market 
Regulation Committee on the Corporation's behalf.
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    Sections 4.15, 4.16, and 4.17 contain standard provisions for a 
Delaware corporation requiring: (i) Recusal by Directors and committee 
members subject to conflicts of interest; (ii) providing for the 
enforceability of contracts in which a Director has an interest if 
appropriately approved or ratified by disinterested Directors or by 
stockholders, or if fair to the Exchange; (iii) allowing for 
compensation of Board members; and (iv) allowing for Board action by 
unanimous written consent.
    Article V governs the appointment by the Board of the Exchange's 
officers, agents, and employees, and specifically provides for the 
appointment of a Chair of the Board,\20\ a Chief Executive Officer, a 
President, Vice Presidents, a Chief Regulatory Officer, a Secretary, an 
Assistant Secretary, a Treasurer, and an Assistant Treasurer.
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    \20\ The designation by the By-Laws of the Chair of the Board as 
an officer of the Corporation within the meaning of the By-Laws 
reflects standard corporate practice for a Delaware corporation and 
would not cause an independent Director chosen who is selected as 
the Chair to cease to be an independent Director.
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    The Chief Regulatory Officer shall have general supervision of the 
regulatory operations of the Exchange, including responsibility for 
overseeing the Exchange's surveillance, examination, and enforcement 
functions and for administering any regulatory services agreements with 
another self-regulatory organization to which the Exchange is a party. 
The Chief Regulatory Officer shall meet with the Regulatory Oversight 
Committee of the Exchange in executive session at regularly scheduled 
meetings of such committee, and at any time upon request of the Chief 
Regulatory Officer or any member of the Regulatory Oversight Committee. 
The Chief Regulatory Officer may also serve as the General Counsel of 
the Exchange.
    Article VIII provides for indemnification by the Exchange of 
Directors, officers, employees and agents in a manner consistent with 
that of most Delaware stock corporations, and allows for the purchase 
of director and officer liability insurance. Article IX contains 
standard corporate provisions relating to the Exchange's capital stock, 
including provisions relating to stock certificates, the Exchange's 
stock ledger, and transfers of stock. However, like the Restated 
Certificate, the By-Laws also contain a stipulation that all shares of 
Common Stock are held by NASDAQ OMX, which may not transfer or assign 
any shares of stock of the Exchange, in whole or in part, to any 
entity, unless such transfer or assignment shall be filed with and 
approved by the Commission under Section 19 of the Act and the rules 
promulgated thereunder. The Article also contains a stipulation that 
dividends may not be paid to the stockholders (i.e., to NASDAQ OMX) 
using ``Regulatory Funds,'' which are defined as fees, fines, or 
penalties derived from the regulatory operations of the Exchange. The 
definition further provides, however, that the term shall not be 
construed to include revenues derived from listing fees, market data 
revenues, transaction revenues, or any other aspect of the commercial 
operations of the Exchange, even if a portion of such revenues are used 
to pay costs associated with the regulatory operations of the Exchange.
    Article X contains miscellaneous standard corporate provisions 
relating to the corporate seal, the fiscal year of the Exchange, waiver 
of notice of meetings, and the Exchange's contracting authority. 
Article XI authorizes amendments to the By-Laws by either the 
stockholders or the vote of a majority of the whole Board,\21\ as well 
as the adoption of emergency by-laws by the Board. Article XII contains 
specific authorization for the Board to adopt rules needed to effect 
the Exchange's obligations as a self-regulatory organization, to 
establish disciplinary procedures and impose sanctions on members, to 
establish standards for membership, and to impose dues, fees, 
assessments, and other charges. Finally, Section 12.5 authorizes the 
Board, or such person or persons as may be designated by the Board, in 
the event of an emergency or extraordinary market conditions, to take 
any action regarding: (a) The trading in or operation of the Exchange 
or any other organized securities markets that may be operated by the 
Exchange, the operation of any automated system owned or operated by 
the Exchange, and the participation in any such system or any or all 
persons or the trading therein of any or all securities; and (b) the 
operation of any or all offices or systems of Exchange Members, if, in 
the opinion of the Board or the person or persons hereby designated, 
such action is necessary or appropriate for the protection of investors 
or the public interest or for the orderly operation of the marketplace 
or the system.
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    \21\ All such changes must be filed with the Commission under 
Section 19(b) of the Act, 15 U.S.C. 78s(b), and become effective 
thereunder before being implemented.
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BOXR LLC Agreement
    Upon the creation of BOXR, the Exchange filed a Certificate of 
Formation with the State of Delaware.\22\ The purpose of the creation 
of BOXR was specifically for supporting the operation, regulation, and 
surveillance of the BOX facility. In connection with that, the Exchange 
drafted and filed with the Commission the BOXR By-Laws, which filing 
was approved on January 13, 2004,\23\ and incorporated into the BOX 
Rules. However, no written LLC operating agreement was created for the 
entity. Accordingly, since the time of formation, BOXR has operated 
under an unwritten operating agreement, with its written By-Laws 
standing in place for, and reflecting, the intention of the agreement 
of BOXR. The Exchange therefore proposes to adopt the BOXR LLC 
Agreement, which includes all standard provisions typically found in a 
State of Delaware Limited Liability Company operating agreement. These 
provisions include a statement, found in Section 22 of the agreement, 
that the BOXR LLC Agreement may not be deemed to provide rights to any 
persons other than those named specifically in the agreement. The 
provision stipulates, however, that such rights include the rights of 
BOX Participants in the selection of directors of BOXR in the manner 
currently provided by the BOXR By-Laws. In addition, Section 20 of the 
BOXR LLC Agreement will provide that a transfer or assignment of the 
Exchange's limited liability company interests in BOXR must be filed 
with and approved by the Commission under Section 19 of the Act. The 
BOXR LLC Agreement also expands the recognized officers of BOXR to 
include its Chief Legal Officer and includes Schedules that list the 
directors and officers of BOXR as of April 15, 2008.
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    \22\ The Certificate of Formation was filed on March 25, 2002.
    \23\ See Securities Exchange Act Release No. 49065 (January 13, 
2004), 69 FR 2768 (January 20, 2004) (SR-BSE-2003-04).
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BOXR By-Laws
    The BOXR By-Laws are being amended for consistency with other

[[Page 26166]]

changes being made in the governance of the Exchange. Specifically, the 
proposed changes: (i) Replace references to the Constitution of the 
Exchange with references to the By-Laws and references to the Board of 
Governors with references to the Board of Directors; (ii) add 
appropriate references to the BOXR LLC Agreement; (iii) amend the 
definition of ``Public Director'' to exclude persons having a material 
business relationship with affiliates of the Exchange, BOX, or BOXR; 
and (iv) make several clarifying and corrective edits. In addition, 
Section 14 is being amended to state that the BOX Participant nominee 
selected by BOX Participants for service on the Exchange Board is 
recommended for service on such Board, but is not directly elected, to 
reflect the fact that BOX Participants are not stockholders of the 
Exchange. Section 14 is also amended to provide that a disciplinary 
decision of a BOXR Hearing Committee or panel with respect to any BOX 
Participant that is an affiliate of NASDAQ OMX within the meaning of 
proposed Chapter XXXIX, Section 2 of the rules of the Exchange (as 
described below) may not be appealed to or reviewed by the BOXR Board 
of Directors or the Exchange Board of Directors, but rather shall 
constitute final disciplinary action of the Exchange for purposes of 
Commission Rule 19d-1(c)(1) and may be appealed to the Commission. 
Together with the new rules described below, the limitation is intended 
to guard against any possibility that the Exchange may exercise, or 
forebear to exercise, regulatory authority with respect to an 
affiliated member in a manner that is influenced by commercial 
considerations.\24\ Finally, the Exchange is proposing to replace the 
indemnification provisions of Section 24 with a cross-reference to 
updated indemnification provisions being adopted in the BOXR LLC 
Agreement.
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    \24\ Prior to resuming trading of equities securities, the 
Exchange will propose new rules that will include a comparable 
restriction on review of disciplinary decisions affecting an 
affiliated member trading equities through the Exchange.
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Change of Control of BSX
    BSX was formed in 2004 as a joint venture between the Exchange and 
several investors to operate an electronic trading facility (``Boston 
Equities Exchange'' or ``BeX'') for trading cash equities. BeX ended 
its operations in September 2007. In connection with the Merger, NASDAQ 
OMX is purchasing all of the outstanding limited liability company 
interests in BSX held by investors other than the Exchange. By virtue 
of this purchase, NASDAQ OMX will directly own 46.79% of these 
interests, and will indirectly, through the Exchange, own the remainder 
of the outstanding interests in BSX. Section 8.1 of the BSX Operating 
Agreement provides that the Exchange must obtain Commission approval 
for certain transfers of ownership interests in BSX. Accordingly, the 
Exchange, through this filing, seeks Commission approval for the 
transfer of ownership interests to NASDAQ OMX contemplated by the 
Merger. Following such transfer, the Exchange and NASDAQ OMX will be 
the sole members of BSX, and the admission of additional or substitute 
members would require approval by the Commission pursuant to a filing 
under Section 19 of the Act. In addition, the Exchange is also 
proposing amendments to the BSX Operating Agreement to reflect its 
status as a wholly owned subsidiary of NASDAQ OMX, and to remove 
references to BeX. Notably, the Exchange is proposing to make the 
following amendments:
     Section 4.1 is amended to provide that a five-member Board 
of Directors will be selected by BSE.
     Section 4.4 is amended to replace a provision requiring a 
super-majority of director votes in favor of BSX taking certain 
significant actions, such as entry into a new line of business or 
replacing BSE as BSX's regulatory service provider, with more general 
authority of BSE to veto or mandate actions as dictated by regulatory 
requirements.
     Article VII and Sections 8.2 and 8.3 are amended to remove 
provisions that allow members to exercise rights of first refusal in 
the event that one member proposes to transfer its ownership interests 
in BSX to another member or BSX proposes to issue additional units of 
ownership.
     Section 8.4(f) (redesignated as 8.2(f)) is amended to 
clarify terms used to describe certain ownership interests in a Member 
of BSX.
     Various amendments are being made to delete references to 
BeX.
     Sections 8.5 and 8.6 (redesignated as Sections 8.3 and 
8.4), which restricted ownership and voting of ownership interests in 
BSX above the 20% level by a BeX participant or its affiliates, are 
being retained but amended. The amendments replace ``BeX Participant'' 
with ``BSE member'' to apply more broadly to any person that is a 
member of the Exchange. However, the amendments also provide that the 
restrictions of these provisions shall not be construed to limit the 
ownership of membership interests by NASDAQ OMX or BSE. This proviso is 
necessary because, as discussed in greater detail below, the Nasdaq 
Exchange owns two broker-dealers, the ownership of which has been 
previously approved by the Commission. These broker-dealers are, and 
will continue to be, members of the Exchange.
     Article 9, which governs distributions to Members, is 
being amended to adopt a restriction on distributions of Regulatory 
Funds comparable to the restriction proposed for inclusion in the 
Exchange's By-Laws.
     Article 13, which governs disputes among members via 
arbitration, is being deleted to reflect the BSX's wholly owned status.
     Section 16.2, which governs the confidentiality 
obligations of Members, is being amended: (i) To clarify that Members 
may use confidential information pursuant to the Act and the rules and 
regulations thereunder; (ii) to stipulate that directors, officers, and 
employees receiving confidential information must themselves be under 
confidentiality obligations; and (iii) to require Members to conduct 
their business activities so as to limit the applicability of legal 
disclosure obligations that may supersede the confidentiality 
requirements of the BSX Operating Agreement.
     New Section 16.7 is being added to provide that to the 
fullest extent permitted by applicable law, all confidential 
information pertaining to the self-regulatory function of the Exchange 
or the Exchange's equity business (including but not limited to 
disciplinary matters, trading data, trading practices and audit 
information) contained in the books and records of BSX shall: (a) Not 
be made available to any person (other than as provided in the proviso 
of this sentence) other than to those officers, directors, employees 
and agents of BSX who have a reasonable need to know the contents 
thereof; (b) be retained in confidence by BSX and its officers, 
directors, employees and agents; and (c) not be used for any commercial 
purposes; provided, that nothing in this sentence shall be interpreted 
so as to limit or impede the rights of the Commission or the Exchange 
to access and examine such confidential information pursuant to the 
federal securities laws and the rules and regulations thereunder, or to 
limit or impede the ability of any officers, directors, employees or 
agents of BSX to disclose such confidential information to the 
Commission or the Exchange.
     Amending Section 18.6 to clarify that the jurisdiction of 
the U.S. federal courts, the Commission, and the

[[Page 26167]]

Exchange over BSX, its Members, and the officers, directors, agents, 
and employees of the Company and its Members is exclusive (subject, 
however, to Delaware jurisdiction over matters relating to the 
organization or internal affairs of BSX), adding conforming references 
with respect to the provision's waiver of claims as to lack of personal 
jurisdiction, and providing for the waiver of any foreign secrecy or 
blocking statutes or regulations to the fullest extent permitted by 
law.
    Prior to resuming trading of cash equities, the Exchange will file 
amended rules with the Commission that would replace the current BeX 
rules, as well as certain other rules of the Exchange. At this time, 
the Exchange expects to operate its cash equities market through the 
BSX entity. However, the Exchange will not resume cash equities trading 
until the new rule set is approved. If necessary to accurately reflect 
BSX's operations and to impose any additional regulatory safeguards 
deemed necessary by the Exchange or the Commission, the new rule set 
will include further amendments to the BSX Operating Agreement. In 
addition, the Exchange will provide the Commission with the opportunity 
to review, and if necessary, approve, any agreements between BSX and 
the Exchange or any third party to support BSX's operations of a 
facility of the Exchange, such as an amended BSE Facility Services 
Agreement. References to superseded agreements that formerly supported 
BeX, such as agreements with Lava Trading, Inc., and Atos Euronext 
S.A., are being deleted from the BSX Operating Agreement, as are other 
provisions that were applicable to BSX's initial formation and 
operation.
New Rules
    The Exchange proposes to adopt two new rules that will reflect its 
status as a wholly owned subsidiary of NASDAQ OMX upon the 
effectiveness of the Merger. The purpose of the rules is to guard 
against any possibility that the Exchange may exercise, or forebear to 
exercise, regulatory authority with respect to an affiliated member in 
a manner that is influenced by commercial considerations, to provide an 
opportunity for Commission review of certain proposed affiliations, and 
to ensure that certain affiliated members do not receive advantaged 
access to information in comparison with unaffiliated members. The 
Exchange believes that the proposed rules will provide added assurance 
of regulatory integrity without subjecting the Exchange and its 
affiliates to unwarranted restrictions on their commercial activities.
    First, Chapter XXXIX, Section 1 will limit ownership of NASDAQ 
OMX's voting securities by members of the Exchange and their associated 
persons (i.e., their registered representatives). The rule is 
comparable to Rule 2130 of the Nasdaq Exchange, and provides that no 
member or associated person of a member shall be the beneficial owner 
of greater than 20% of the then-outstanding voting securities of NASDAQ 
OMX. ``Beneficial ownership'' is defined with reference to NASDAQ OMX's 
Certificate of Incorporation, which in turn provides that a person 
shall be deemed the ``beneficial owner'' of, shall be deemed to have 
``beneficial ownership'' of, and shall be deemed to ``beneficially 
own'' any securities: (i) Which such person or any of such person's 
affiliates is deemed to beneficially own, directly or indirectly, 
within the meaning of Rule 13d-3 under the Act * * *; \25\ (ii) subject 
to certain narrow exceptions described in the certificate of 
incorporation, which such person or any of such person's affiliates has 
the right to acquire or to vote pursuant to any agreement, arrangement, 
or understanding; or (iii) subject to certain narrow exceptions 
described in the certificate of incorporation, which are beneficially 
owned, directly or indirectly, by any other person and with respect to 
which such person or any of such person's affiliates has any agreement, 
arrangement or understanding for the purpose of acquiring, holding, 
voting or disposing of such securities.
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    \25\ Rule 13d-3 under the Act, 17 CFR 240.13d-3, in turn 
provides that a beneficial owner of a security includes any person 
who, directly or indirectly, through any contract, arrangement, 
understanding, relationship, or otherwise has or shares voting power 
or investment power.
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    Second, Chapter XXXIX, Section 2 regulates affiliation between the 
Exchange and its affiliates, on the one hand, and Exchange members, on 
the other hand, in a manner comparable to Rule 2140 of the Nasdaq 
Exchange. In general, the proposed rule provides that the Exchange must 
file a proposed rule change with the Commission before the Exchange or 
an entity with which it is affiliated acquires or maintains an 
ownership interest in, or engages in a business venture with, an 
Exchange member or an affiliate of an Exchange member.\26\ The rule 
defines ``affiliate'' with reference to Rule 12b-2 under the Act,\27\ 
which provides that if one person controls, is controlled by, or is 
under common control another person, the persons are affiliates.
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    \26\ As used in the rule, the term ``affiliate'' includes 
natural persons, but the term ``entity,'' when used to describe an 
affiliate, excludes natural persons.
    \27\ 17 CFR 240.12b-2.
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    The proposed rule would make it clear that in a case where the 
Exchange or an affiliate of the Exchange proposes an acquisition of, or 
a merger or business venture with an Exchange member, a Commission 
filing will be required. In order to make it clear that the obligation 
to avoid affiliations that have not been filed is imposed by the rule 
both on the Exchange and its members, moreover, the rule provides that 
an Exchange member shall not be or become an affiliate of the Exchange, 
or an affiliate of any entity affiliated with the Exchange, without a 
Commission filing.
    The term ``business venture,'' as used in the rule, is defined as 
an arrangement under which the Exchange or an entity with which it is 
affiliated, on the one hand, and an Exchange member or affiliate 
thereof, on the other hand, engage in joint activities with an 
expectation of shared profit and a risk of shared loss from common 
entrepreneurial efforts. Thus, the term does not include, and the 
proposed rule does not regulate, contracts with members or their 
affiliates to provide goods, products, or services for consideration, 
including, but not limited to, asset or stock purchase agreements that 
do not result in ongoing ties with a member or its affiliates,\28\ 
credit or debt facilities, licenses of intellectual property, contracts 
for investment banking, financial advisory, or consulting services,\29\ 
or the provision of transaction services or data to a broker-dealer 
member or products or services to a listed company that is or that owns 
a member broker-dealer.
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    \28\ For example, in the case of an acquisition of a non-member 
subsidiary of a member in a transaction that did not result in an 
ongoing affiliation with the member, the transaction would not be 
regulated by the rule.
    \29\ In some cases, such contracts may involve sharing of 
confidential information with a member in circumstances where a 
member acts as a fiduciary for BSE or one of its affiliates. The 
member would be required to take measures to prevent such 
information from being misused, and a failure to do so would 
constitute a violation of BSE rules, including, depending on the 
circumstances, Chapter II, Sections 14, 25, and 36, and Chapter 
XXXVII, Section 11. Amended rules to be proposed by BSE to govern 
equity trading in the future will maintain comparable prohibitions.
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    The rule limits possible expansive interpretations of the term 
``affiliate'' by stipulating that one entity is not deemed to be an 
affiliate of another entity solely by virtue of having a common 
director. For example, if one of the member representative directors of 
the Exchange is also a director of an Exchange member, that member 
would not be deemed to be an affiliate of the

[[Page 26168]]

Exchange solely because of the common director. In addition, the rule 
should not be construed to regulate in any manner the selection of 
directors or standing committee members of the Exchange, NASDAQ OMX, 
the Nasdaq Exchange, or their affiliates, provided such selections are 
conducted in accordance with applicable provisions of governing 
corporate documents.
    In circumstances where a Commission filing is required, the rule 
may, in appropriate cases, permit a filing to be submitted on an 
immediately effective basis under Section 19(b)(3)(A) of the Act \30\ 
and Rule 19b-4(f) thereunder.\31\ For example, in cases where a 
proposed affiliation or business venture would not result in the 
establishment of a ``facility'' of the Exchange within the meaning of 
Section 3 of the Act,\32\ a filing to establish rules to govern the 
operation of the affiliate or business venture would not be required or 
appropriate. Rather, in such circumstances, the Exchange would expect 
to engage in informal consultation with the Division of Trading and 
Markets and/or members of the Commission, and would then submit a 
filing to amend the rule itself, to establish that the affiliation or 
business venture could exist as an exception to the rule. Depending on 
the circumstances, such a filing might be submitted on an immediately 
effective basis.
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    \30\ 15 U.S.C. 78s(b)(3)(A).
    \31\ 17 CFR 240.19b-4(f).
    \32\ 15 U.S.C. 78c.
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    There are also several important exceptions to the general filing 
requirement of the rule. First, the rule would not require a filing for 
transactions that result in an Exchange member acquiring or holding an 
interest in NASDAQ OMX that is consistent with Chapter XXXIX, Section 1 
(discussed above). Second, no filing is required for the Exchange or an 
entity affiliated with the Exchange acquiring or maintaining an 
ownership interest in, or engaging in a business venture with, an 
affiliate of an Exchange member if there are information barriers 
between the member and the Exchange and its facilities, such that the 
member: (i) Will not be provided an informational advantage concerning 
the operation of the Exchange and its facilities, and will not be 
provided changes or improvements to the trading system that are not 
available to the industry generally or other Exchange members; (ii) 
will not have knowledge in advance of other members of proposed 
changes, modifications, or improvements to the operations or trading 
systems of the Exchange and its facilities, including advance knowledge 
of Exchange filings pursuant to Section 19(b) of the Act; (iii) will be 
notified of any proposed changes, modifications, or improvements to the 
operations or trading systems of the Exchange and its facilities in the 
same manner as other Exchange members are notified; and (iv) will not 
share employees, office space, or databases with the Exchange or its 
facilities, NASDAQ OMX, or any entity that is controlled by NASDAQ 
OMX.\33\ The Exchange's Regulatory Oversight Committee must certify, on 
an annual basis, to the Director of the Division of Trading and 
Markets, that the Exchange has taken all reasonable steps to implement 
the foregoing requirements with respect to any affiliate to which they 
apply and is in compliance therewith.
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    \33\ BSE will not construe these limitations to bar an employee 
of an affiliated member from serving on a BSE advisory committee, 
since: (i) Such committee members will be required to sign 
confidentiality agreements with regard to information received 
through committee service, and (ii) the committee member employed by 
the affiliate would receive information provided through committee 
service at the same time as other committee members.
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    This exception is aimed at circumstances in which the Exchange or 
an affiliated entity acquires, or enters into a business venture with, 
an affiliate of an Exchange member, and the Exchange erects information 
barriers between the member and the Exchange and its facilities. Thus, 
the Exchange ensures that the member does not receive any advantage as 
a result of its affiliation.
    In connection with the adoption of this rule, it is also necessary 
for the Exchange to seek Commission approval under the rule for the 
affiliation that will result by virtue of the Merger between the 
Exchange and the two broker-dealer subsidiaries of the Nasdaq Exchange: 
Nasdaq Execution Services, LLC (``NES'') and NASDAQ Options Services, 
LLC (``NOS''). The acquisition of the entities that are now NES and NOS 
by The Nasdaq Stock Market, Inc. (now NASDAQ OMX) was approved by the 
Commission in 2004 and 2005.\34\ The rules under which NES currently 
routes orders to other market centers were approved by the Commission 
in 2006 and subsequently amended on several occasions.\35\ Notably, 
Nasdaq Exchange Rule 4758(b) establishes the parameters for operation 
of NES as follows: (1) All routing of equities by the Nasdaq Exchange 
is performed by NES, which, in turn, routes orders to other market 
centers as directed by the Nasdaq Exchange; (2) NES will not engage in 
any business other than: (a) As a outbound router for the Nasdaq 
Exchange and (b) any other activities it may engage in as approved by 
the Commission; (3) NES will operate as a facility, as defined in 
Section 3(a)(2) of the Act, of the Nasdaq Exchange; (4) for purposes of 
Commission Rule 17d-1, the designated examining authority of NES will 
be a self-regulatory organization unaffiliated with the Nasdaq Exchange 
or any of its affiliates; (5) the Nasdaq Exchange shall be responsible 
for filing with the Commission rule changes related to the operation 
of, and fees for services provided by, NES, and NES shall be subject to 
exchange non-discrimination requirements; (6) the books, records, 
premises, officers, agents, directors and employees of NES, as a 
facility of the Nasdaq Exchange, shall be deemed to be the books, 
records, premises, officers, agents, directors and employees of the 
Nasdaq Exchange for purposes of, and subject to oversight pursuant to, 
the Act, and the books and records of NES, as a facility of the Nasdaq 
Exchange, shall be subject at all times to inspection and copying by 
the Commission; and (7) use of NES is optional.
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    \34\ See Order Granting Application for a Temporary Conditional 
Exemption Pursuant To Section 36(a) of the Exchange Act by the 
National Association of Securities Dealers, Inc. Relating to the 
Acquisition of an ECN by The Nasdaq Stock Market, Inc., Securities 
Exchange Act Release No. 50311 (September 3, 2004), 69 FR 54818 
(September 10, 2004); Order Approving a Proposed Rule Change To 
Establish Rules Governing the Operation of the INET System, 
Securities Exchange Act Release No. 52902 (December 7, 2005), 70 FR 
73810 (December 13, 2005) (SR-NASD-2005-128).
    \35\ See Securities Exchange Act Release No. 56867 (November 29, 
2007), 72 FR 69263 (December 7, 2007) (SR-NASDAQ-2007-065); 
Securities Exchange Act Release No. 56708 (October 26, 2007), 72 FR 
61925 (November 1, 2007) (SR-NASDAQ-2007-078); Securities Exchange 
Act Release No. 55335 (February 23, 2007), 72 FR 9369 (March 1, 
2007) (SR-NASDAQ-2007-005); Securities Exchange Act Release No. 
54613 (October 17, 2006), 71 FR 62325 (October 24, 2006) (SR-NASDAQ-
2006-043); Securities Exchange Act Release No. 54271 (August 3, 
2006), 71 FR 45876 (August 10, 2006) (SR-NASDAQ-2006-027); and 
Securities Exchange Act Release No. 54155 (July 14, 2006), 71 FR 
41291 (July 20, 2006) (SR-NASDAQ-2006-001).
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    Currently, routing by NES on behalf of the Nasdaq Exchange takes 
two forms: (i) Orders that access any liquidity on the Nasdaq Exchange 
book that has a price equal to or superior to the prices available on 
other ``automated market centers'' and thereafter route to seek the 
best available price, and (ii) routing of ``directed orders'' to 
automated market centers other than the Nasdaq Exchange on an 
``immediate-or-cancel'' basis. Such directed orders may be designated 
as ``intermarket sweep orders,'' which may be executed by the receiving 
venue based on the representation of the market participant that it has 
routed to

[[Page 26169]]

all superior protected quotations, or not so designated, in which case 
the orders will execute only if their execution would not result in a 
trade-through.
    NOS serves as the outbound router for the Nasdaq Options Market 
(``NOM''), which commenced operations on March 31, 2008. Under NOM Rule 
Chapter VI, Section 11: (1) NOM will route orders in options via NOS, 
which serves as the sole ``Routing Facility'' of NOM; (2) the sole 
function of the Routing Facility will be to route orders in options 
listed and open for trading on NOM to away markets pursuant to NOM 
rules, solely on behalf of NOM; (3) NOS is a member of an unaffiliated 
self-regulatory organization which is the designated examining 
authority for the broker-dealer; (4) the Routing Facility is subject to 
regulation as a facility of the Nasdaq Exchange, including the 
requirement to file proposed rule changes under Section 19 of the Act; 
(5) NOM shall establish and maintain procedures and internal controls 
reasonably designed to adequately restrict the flow of confidential and 
proprietary information between the Nasdaq Exchange and its facilities 
(including the Routing Facility), and any other entity; and (6) the 
books, records, premises, officers, directors, agents, and employees of 
the Routing Facility, as a facility of the Nasdaq Exchange, shall be 
deemed to be the books, records, premises, officers, directors, agents, 
and employees of the Nasdaq Exchange for purposes of and subject to 
oversight pursuant to the Act, and the books and records of the Routing 
Facility, as a facility of the Exchange, shall be subject at all times 
to inspection and copying by the Nasdaq Exchange and the 
Commission.\36\
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    \36\ See Securities Exchange Act Release No. 57478 (March 12, 
2008), 73 FR 14521 (March 18, 2008) (SR-NASDAQ-2007-004 and -080) 
(``NOM Approval Order'').
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    Unlike NES, NOS does not have a ``directed order'' for options that 
are trading on NOM; rather, all routable orders for options that are 
trading on NOM check the NOM book prior to routing. However, NOS also 
routes orders in options that are not trading on NOM. When routing 
orders in options that are not listed and open for trading on NOM, NOS 
will not be regulated as a facility of the Nasdaq Exchange but rather 
as a broker-dealer regulated by its designated examining authority. 
However, as provided by Chapter IV, Section 5 of the NOM Rules, all 
orders routed by NOS under these circumstances will be routed to away 
markets that are at the best price, and solely on an immediate-or-
cancel basis.
    Although not explicitly stated in Chapter VI, Section 11, NOS, like 
NES, will be subject to exchange non-discrimination requirements, and 
the use of NOS will be optional.\37\ In addition, NOS will not engage 
in any business other than the activities approved by the Commission in 
the NOM Approval Order and such other activities as may be approved by 
the Commission at a later date.
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    \37\ Consistent with this restriction, Chapter VI, Section 11 
currently states that NOM participants can designate orders as 
either available for routing or not available for routing.
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    In order to further restrict the interaction between the Exchange 
and NES and NOS, the Nasdaq Exchange has agreed that it will, prior to 
the closing of the Merger, amend its rules to change the routing 
practices of NES and NOS. With respect to NES, directed orders will not 
be eligible for routing to Exchange facilities (including a planned 
Exchange facility for trading equities). With respect to NOS, when 
routing orders in options that are not listed and open for trading on 
NOM, NOS will not route to Exchange facilities (including BOX). Routing 
of orders that check the Nasdaq Exchange and NOM books prior to routing 
to the Exchange will continue.
    The Exchange notes that at a later date, an equity trading system 
operated by the Exchange may opt to use NES to route on behalf of the 
Exchange. Similarly, if the Exchange operates an options trading system 
other than BOX following a future termination of relations between the 
Exchange and BOX, the Exchange may opt to use NOS to perform 
routing.\38\ Such future uses of NES or NOS would be reflected in 
filings to establish the terms and conditions of such routing, but 
would not allow for routing of directed orders to the Nasdaq Exchange, 
NOM, or any other affiliated exchange or trading facility thereof.
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    \38\ In this regard, it should be noted that both the New York 
Stock Exchange LLC and NYSE Arca, Inc. (``NYSE Arca'') use NYSE 
Arca's broker-dealer subsidiary to perform routing.
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    In light of the foregoing facts and circumstances, and in 
accordance with proposed Exchange Rule Chapter XXXIX, Section 2(a)(2), 
the Exchange proposes that NES and NOS be permitted to become 
affiliates of the Exchange subject to the following:
     With respect to NES: NES remains a facility of the Nasdaq 
Exchange; use of NES's routing function by Nasdaq Exchange members 
continues to be optional; and NES does not provide routing of directed 
orders to the Exchange or any trading facilities thereof, unless such 
orders first attempt to access any liquidity on the Nasdaq Exchange 
book.
     With respect to NOS: NOS remains a facility of the Nasdaq 
Exchange; use of NOS's Routing Facility function by Nasdaq Exchange 
members continues to be optional; and NOS does not provide routing of 
orders in options that are not listed and open for trading on NOM to 
the Exchange or any trading facilities thereof.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Act,\39\ in general, and with 
Sections 6(b)(1), (b)(3) and (b)(5) of the Act,\40\ in particular, in 
that the proposal: enables the Exchange to be so organized as to have 
the capacity to be able to carry out the purposes of the Act and to 
comply with and enforce compliance by Exchange Members and persons 
associated with Exchange Members with provisions of the Act, the rules 
and regulations thereunder, and the rules of the Exchange; is designed 
to assure a fair representation of Exchange Members in the selection of 
Directors; and is designed 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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    \39\ 15 U.S.C. 78f.
    \40\ 15 U.S.C. 78f(b)(1), (3) and (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 
result in any burden on competition that is 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

    Written comments were neither solicited nor 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

[[Page 26170]]

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-BSE-2008-23 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-BSE-2008-23. 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 the 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-BSE-2008-23 and should be 
submitted on or before May 29, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\41\
Florence E. Harmon,
Deputy Secretary.
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    \41\ 17 CFR 200.30-3(a)(12).
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 [FR Doc. E8-10093 Filed 5-7-08; 8:45 am]

BILLING CODE 8010-01-P