Document ID: SEC-2011-0157-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market LLC
Posted Date: 2011-02-03T05:00Z

[Federal Register Volume 76, Number 23 (Thursday, February 3, 2011)]
[Notices]
[Pages 6168-6170]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-2293]

[[Page 6168]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-63786; File Nos. SR-NASDAQ-2011-013, SR-PHLX-2011-08, 
SR-BX-2011-04]

Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
NASDAQ OMX PHLX LLC; NASDAQ OMX BX, Inc.; Notice of Filing and 
Immediate Effectiveness of Proposed Rule Changes Relating to a 
Stockholders' Agreement Between the NASDAQ OMX Group, Inc. and Investor 
AB

January 27, 2011.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that, on January 19, 2011, The NASDAQ Stock Market LLC (``NASDAQ 
Exchange'') and NASDAQ OMX PHLX LLC (``PHLX''), and, on January 20, 
2011, NASDAQ OMX BX, Inc. (``BX'') (collectively, the ``NASDAQ OMX 
Exchange Subsidiaries'') filed with the Securities and Exchange 
Commission (``Commission'' or ``SEC'') the proposed rule changes as 
described in Items I and II below, which Items have been substantially 
prepared by the NASDAQ OMX Exchange Subsidiaries. The Commission is 
publishing this notice to solicit comments on the proposed rule changes 
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 Organizations' Statement of the Terms of the 
Substance of the Proposed Rule Changes

    The NASDAQ OMX Exchange Subsidiaries are filing the proposed rule 
changes regarding a stockholders' agreement between the NASDAQ OMX 
Exchange Subsidiaries' parent corporation, NASDAQ OMX, and Investor AB, 
a corporation organized under the laws of Sweden (``Investor 
Stockholders' Agreement''). The NASDAQ OMX Exchange Subsidiaries 
propose to implement these changes upon filing of these proposed rule 
changes. There is no proposed rule text.

II. Self-Regulatory Organizations' Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Changes

    In their filings with the Commission, each of the NASDAQ OMX 
Exchange Subsidiaries included statements concerning the purpose of and 
basis for its proposed rule change and discussed any comments it 
received on its proposed rule change. The text of these statements may 
be examined at the places specified in Item IV below. Each of the 
NASDAQ OMX Exchange Subsidiaries has prepared summaries, set forth in 
Sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organizations' Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Changes

1. Purpose
    On December 16, 2010, NASDAQ OMX entered into an agreement to 
repurchase approximately 22.8 million shares of NASDAQ OMX common 
stock, $0.01 par value per share, for $21.82 per share (approximately 
$497 million in aggregate) from Borse Dubai Limited (``Borse Dubai'') 
(the ``Stock Repurchase''). Also on December 16, 2010, Nomura 
International plc (``Nomura'') agreed to purchase 8 million shares of 
NASDAQ OMX common stock from Borse Dubai (``Nomura Purchase''). The 
Stock Repurchase and Nomura Purchase closed on December 21, 2010.
    On December 16, 2010, NASDAQ OMX and Investor AB also entered into 
the Investor Stockholders' Agreement, relating to 8 million shares of 
NASDAQ OMX common stock that Investor AB may purchase pursuant to a 
forward share purchase agreement with Nomura. The Investor 
Stockholders' Agreement will generally become effective after all 
applicable regulatory reviews or consents have been completed or 
obtained, and the purchase by Investor AB of 8 million shares of NASDAQ 
OMX common stock from Nomura has been completed (the ``Transaction''). 
After the completion of the Transaction, it is anticipated that 
Investor AB would be the beneficial owner of approximately 9.7% of the 
outstanding capital stock of NASDAQ OMX.
    The NASDAQ OMX shares to be acquired by Investor AB from Nomura 
are, and will be, subject to Article Fourth of NASDAQ OMX's Restated 
Certificate of Incorporation,\3\ which provides that no person who is 
the beneficial owner of voting securities of NASDAQ OMX in excess of 5% 
of the then-outstanding shares of stock generally entitled to vote 
(``Excess Securities'') may vote such Excess Securities.
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    \3\ As amended most recently on May 11, 2009. See Securities 
Exchange Act Release No. 59858 (May 4, 2009), 74 FR 22191 (May 12, 
2009)(SR-NASDAQ-2009-039).
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    Prior to the closing of the Stock Repurchase and the Nomura 
Purchase, under the existing Stockholders' Agreement between NASDAQ OMX 
and Borse Dubai (``Borse Dubai Stockholders' Agreement'') Borse Dubai 
had the right to recommend two persons reasonably acceptable to the 
NASDAQ OMX Nominating Committee (or any successor committee serving 
such function) (``Nominating Committee'') to serve as directors of 
NASDAQ OMX (the ``Borse Dubai Designees''). In addition, under the 
Borse Dubai Stockholders' Agreement, NASDAQ OMX had agreed to use 
reasonable best efforts to cause appointment of one of the Borse Dubai 
Designees to the Audit, Executive, Finance and Management Compensation 
committees of the Board, and to cause the appointment of another person 
designated by Borse Dubai to serve on the Nominating Committee, but in 
each case only if such designees met the requirements for service on 
such committee. By operation of the Borse Dubai Stockholders' 
Agreement, the sale of approximately 30.8 million shares of NASDAQ OMX 
common stock by Borse Dubai resulted in a reduction in the Borse Dubai 
Designees from two to one and in the forfeit of the right to designate 
a member to the specified Board committees.\4\ As a result, as of 
December 21, 2010, Borse Dubai is entitled to nominate one Borse Dubai 
Designee to serve as a director of NASDAQ OMX and has no rights with 
regard to Board committee membership.
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    \4\ The provisions relating to the Borse Dubai Designees 
remained in effect as long as Borse Dubai maintained at least 50% of 
42,901,148 shares of NASDAQ OMX common stock that had been acquired 
by Borse Dubai Limited. As long as Borse Dubai maintains at least 
25% of these shares, it will be entitled to propose one director for 
nomination, but will have no rights with regard to committees.
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    Under the Investor Stockholders' Agreement, among other things, 
Investor AB will have the right to recommend one person reasonably 
acceptable to the Nominating Committee to serve as a director of NASDAQ 
OMX (the ``Investor Board Designee''). NASDAQ OMX will: (i) Include the 
Investor Board Designee on each slate of nominees proposed by 
management of NASDAQ OMX; (ii) recommend the election of the Investor 
Board Designee to the stockholders of NASDAQ OMX; and (iii) otherwise 
use reasonable best efforts to cause the Investor Board Designee to be 
elected to the Board. NASDAQ OMX also has agreed to use reasonable best 
efforts to: (i) Cause the appointment of the Investor Board Designee to 
a committee of the Board reasonably agreed by Investor AB and NASDAQ 
OMX, and (ii) cause the appointment of one person designated by 
Investor AB who shall not be an Investor Board Designee and who shall 
be reasonably acceptable to the Nominating Committee to a committee of 
the Board reasonably agreed to by

[[Page 6169]]

Investor AB and NASDAQ OMX (``Additional Committee Designee''), in each 
of the foregoing subject to applicable law, regulation, stock exchange 
listing standard or committee composition standards. The provisions 
relating to the Investor Board Designee and committee membership remain 
in effect as long as Investor AB beneficially owns at least 5% of the 
outstanding capital stock of NASDAQ OMX.
    The Investor Stockholders' Agreement relates solely to the Board of 
NASDAQ OMX, and not to the boards of any of its subsidiaries, including 
the board of directors of the NASDAQ OMX Exchange Subsidiaries. 
Nevertheless, the provisions of the Investor Stockholders' Agreement 
described above could be considered a proposed rule change of a 
subsidiary that is a self-regulatory organization (``SRO''), if the 
provisions were viewed as affecting the influence that a significant 
stockholder of the parent corporation might be seen as exercising over 
the business and affairs of the SRO in its capacity as a wholly owned 
subsidiary of the parent corporation. Accordingly, senior management of 
the NASDAQ OMX Exchange Subsidiaries, through delegated authority of 
their governing boards, have determined that the proposed changes 
should be filed with the Commission, and the governing boards of BSECC 
and SCCP have each reviewed the proposed changes and determined that 
they should be filed with the Commission.\5\
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    \5\ The NASDAQ OMX Exchange Subsidiaries, BSECC and SCCP are 
each submitting this filing pursuant to Section 19(b)(3)(A) of the 
Act, 15 U.S.C. 78s(b)(3)(A)(iii).
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    In general, directors of NASDAQ OMX, including the Investor Board 
Designee, must be nominated by a Nominating Committee,\6\ the 
composition of which is subject to the requirements of the NASDAQ OMX 
By-Laws and NASDAQ Exchange Rule 5605(e),\7\ and must then be elected 
by the stockholders of NASDAQ OMX. The NASDAQ OMX Board is currently 
composed of 15 members and is expected to increase to 16 members upon 
the closing of the Transaction. Thus, the Investor Board Designee would 
represent approximately 6% of the NASDAQ OMX Board.
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    \6\ An exception to the requirement of nomination by the 
Nominating Committee exists for nominations by a stockholder who is 
conducting a proxy contest and who complies with the strict 
requirements of the NASDAQ OMX By-Laws governing direct stockholder 
nomination. The Investor Board Designee would not be nominated by 
Investor AB under these provisions.
    \7\ The NASDAQ OMX By-Laws provide that the Nominating Committee 
shall be appointed annually by the Board of Directors and shall 
consist of four or five directors, each of whom shall be an 
independent director within the meaning of the rules of the NASDAQ 
OMX Exchange Subsidiaries. The number of Non-Industry Directors 
(i.e, directors without material ties to the securities industry) on 
the Nominating Committee shall equal or exceed the number of 
Industry Directors and at least two members of the committee shall 
be Public Directors (i.e., directors who have no material business 
relationship with a broker or dealer, NASDAQ OMX or its affiliates, 
or FINRA). Rule 5605(e), which governs NASDAQ OMX as a company whose 
securities are listed on the Exchange, requires Nominating Committee 
members to satisfy the definition of ``independence'' in NASDAQ 
Exchange Rule 5605 and IM-5605 and to otherwise be deemed 
independent by the Board of Directors.
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    Board committees are subject to compositional requirements 
established by the NASDAQ OMX By-Laws; moreover, the Audit, Management 
Compensation, and Nominating Committees are subject to independence 
requirements established by NASDAQ Exchange Rule 5605 and, in the case 
of the Audit Committee, by SEC Section 10A and Rule 10A-3 of the 
Act.\8\ Thus, the affiliations of the Investor Board Designee and 
Additional Committee Designee and the judgment of the NASDAQ OMX Board 
of Directors with regard to his or her independence will be taken into 
account in considering eligibility for service on these committees.
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    \8\ 17 CFR 240.10A-3.
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2. Statutory Basis
    The NASDAQ OMX Exchange Subsidiaries believe that their respective 
proposed rule changes are consistent with the provisions of Section 6 
of the Act,\9\ in general, and with Sections 6(b)(1) and (b)(5) of the 
Act,\10\ in particular, in that the proposals enable the NASDAQ OMX 
Exchange Subsidiaries 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 members and persons associated with members with 
provisions of the Act, the rules and regulations thereunder, and SRO 
rules, 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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    \9\ 15 U.S.C. 78f.
    \10\ 15 U.S.C. 78f(b)(1), (5).
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B. Self-Regulatory Organizations' Statement on Burden on Competition

    The NASDAQ OMX Exchange Subsidiaries do not believe that the 
proposed rule changes will result in any burden on competition that is 
not necessary or appropriate in furtherance of the purposes of the Act, 
as amended.

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

    Written comments were neither solicited nor received.

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

    Because the foregoing proposed rule changes do not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the dates on which they were filed, 
or such shorter time as the Commission may designate, they have become 
effective pursuant to Section 19(b)(3)(A) of the Act \11\ and Rule 19b-
4(f)(6) thereunder.\12\
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under 19b-4(f)(6) may not become 
operative prior to 30 days after the date of filing unless the 
Commission designates a shorter time if such action is consistent with 
the protection of investors and the public interest.\13\ The NASDAQ OMX 
Exchange Subsidiaries have requested that the Commission waive the 30-
day operative delay set forth in Rule 19b-4(f)(6)(iii) under the Act 
\14\ to ensure that the filing is effective and therefore does not 
delay the closing of the Transaction. The parties to the Transaction 
expect all regulatory actions necessary for the closing of the 
Transaction to be completed as early as January 2011. The Commission 
believes that the earlier operative date is consistent with the 
protection of investors and the public interest. Accordingly, the 
Commission designates the proposal to be operative upon filing with the 
Commission.\15\
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    \13\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires that a SRO submit to the Commission written notice of its 
intent to file the proposed rule change, along with a brief 
description and text of the proposed rule change, at least five 
business days prior to the date of filing of the proposed rule 
change, or such shorter time as designated by the Commission. The 
Commission notes that the NASDAQ OMX Exchange Subsidiaries have 
satisfied the five-day pre-filing notice requirement.
    \14\ 17 CFR 240.19b-4(f)(6)(iii).
    \15\ For purposes only of waiving the 30-day operative delay of 
this proposal, the Commission has considered the proposed rules' 
impact on efficiency, competition, and capital formation. 15 U.S.C. 
78c(f).

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    At any time within 60 days of the filing of the respective proposed 
rule change by the applicable NASDAQ OMX Exchange Subsidiary, the 
Commission summarily may temporarily suspend such rule change if it 
appears to the Commission that such action is necessary or appropriate 
in the public interest, for the protection of investors, or otherwise 
in furtherance of the purposes of the Act.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
changes are 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 Nos. SR-NASDAQ-2011-013, SR-PHLX-2011-08, and SR-BX-2011-04 on the 
subject line.

Paper Comments

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

All submissions should refer to File Nos. SR-NASDAQ-2011-013, SR-PHLX-
2011-08, and SR-BX-2011-04. These file numbers 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 changes that 
are filed with the Commission, and all written communications relating 
to the proposed rule changes between the Commission and any person, 
other than those that may be withheld from the public in accordance 
with the provisions of 5 U.S.C. 552, will be available for Web site 
viewing and printing in the Commission's Public Reference Room, 100 F 
Street, NE., Washington, DC 20549-1090, on official business days 
between the hours of 10 a.m. and 3 p.m. Copies of such filings also 
will be available for inspection and copying at the principal offices 
of the NASDAQ OMX Exchange Subsidiaries. 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 Nos. SR-NASDAQ-2011-013, SR-PHLX-
2011-08, and SR-BX-2011-04 and should be submitted on or before 
February 24, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-2293 Filed 2-2-11; 8:45 am]
BILLING CODE 8011-01-P