Document ID: SEC-2013-0190-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Miami International Securities Exchange LLC
Posted Date: 2013-01-30T05:00Z

[Federal Register Volume 78, Number 20 (Wednesday, January 30, 2013)]
[Notices]
[Pages 6365-6368]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-01970]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68723; File No. SR-MIAX-2013-02]

Self-Regulatory Organizations: Miami International Securities 
Exchange LLC; Notice of Filing and Order Granting Accelerated Approval 
of Proposed Rule Change To Adopt MIAX Rule 319 Relating to Proxy Voting

January 24, 2013.
    Pursuant to the provisions of 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 16, 2013, Miami International 
Securities Exchange LLC (``MIAX'' or ``Exchange'') filed with the 
Securities and Exchange Commission (``Commission'') a proposed rule 
change as described in Items I and II below, which Items have been 
prepared by the Exchange. The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested persons, 
and is approving the proposed rule change on an accelerated basis.
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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 is filing a proposal to adopt Rule 319 (Proxy Voting) 
in accordance with the provisions of Section 957 of the Dodd-Frank Wall 
Street Reform and Consumer Protection Act (the ``Dodd-Frank Act'').
    The text of the proposed rule change is provided in Exhibit 5. The 
text of the proposed rule change is also available on the Exchange's 
Web site at http://www.miaxoptions.com/filter/wotitle/rule_filing, at 
MIAX's principal office, and at the Commission's Public Reference Room.

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

    In its filing with the Commission, 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 Exchange is proposing to adopt MIAX Rule 319 (Proxy Voting), in 
accordance with the provisions of Section 957 of the Dodd-Frank Act, to 
prohibit Members from voting uninstructed shares if the matter voted on 
relates to (i) the election of a member of the board of directors of an 
issuer (other than an uncontested election of a director of an 
investment company registered under the Investment Company Act of 1940 
(the ``Investment Company Act'')), (ii) executive compensation, or 
(iii) any other significant matter, as determined by the Commission, by 
rule.
    Section 957 of the Dodd-Frank Act amends Section 6(b) \3\ of the 
Act to require the rules of each national securities exchange to 
prohibit any member organization that is not the beneficial owner of a 
security registered under Section 12 \4\ of the Act from granting a 
proxy to vote the security in connection with certain stockholder 
votes, unless the beneficial owner of the security has instructed the 
member organization to vote the proxy in accordance with the voting 
instructions of the beneficial owner. The stockholder votes covered by 
Section 957 include any vote with respect to (i) the election of a 
member of the board of directors of an issuer (other than an 
uncontested election of a director of an investment company registered 
under the Investment Company Act), (ii) executive compensation, or 
(iii) any other significant matter, as determined by the Commission, by 
rule.
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    \3\ 15 U.S.C. 78(f)(b).
    \4\ 15 U.S.C. 781.

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[[Page 6366]]

    Accordingly, in order to carry out the requirements of Section 957 
of the Dodd-Frank Act, the Exchange proposes to adopt proposed MIAX 
Rule 319 to prohibit any Member from giving a proxy to vote stock that 
is registered in its name, unless: (i) Such Member is the beneficial 
owner of such stock; (ii) pursuant to the written instructions of the 
beneficial owner; or (iii) pursuant to the rules of any national 
securities exchange or association of which it is a member provided 
that the records of the Member clearly indicate the procedure it is 
following. The Exchange is proposing to adopt these rules because other 
national securities exchanges and associations do allow proxy voting 
under certain limited circumstances while the current Exchange Rules 
are silent on such matters. Therefore, a Member that is also a member 
of another national securities exchange or association may vote the 
shares held for a customer when allowed under its membership at another 
national securities exchange or association, provided that the records 
of the Member clearly indicate the procedure it is following.
    Notwithstanding the forgoing, a Member that is not the beneficial 
owner of a security registered under Section 12 of the Act is 
prohibited from granting a proxy to vote the security in connection 
with a shareholder vote with respect to the election of a member of the 
board of directors of an issuer (except for a vote with respect to 
uncontested election of a member of the board of directors of any 
investment company registered under the Investment Company Act), 
executive compensation, or any other significant matter, as determined 
by the Commission, by rule, unless the beneficial owner of the security 
has instructed the Member to vote the proxy in accordance with the 
voting instructions of the beneficial owner.
    The Exchange notes that proposed MIAX Rule 319 is identical to 
International Securities Exchange (``ISE'') Rule 421; and proposed MIAX 
Rule 319(a) is based on NYSE Arca, Inc. (``NYSE Arca'') Rule 9.4, 
Financial Industry Regulatory Authority (``FINRA'') Rule 2251; and 
proposed MIAX Rule 319(b) is based on Nasdaq Rule 2251(d).
2. Statutory Basis
    MIAX believes that its proposed rule change is consistent with 
Section 6(b) of the Act \5\ in general, and furthers the objectives of 
Section 6(b)(5) of the Act \6\ in particular. The Exchange believes 
that proposed Rule 319(a) will provide clarity to MIAX members going 
forward on whether broker discretionary voting is permitted by MIAX 
members under limited circumstances when the MIAX member is also a 
member of another national securities exchange that permits broker 
discretionary voting.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that proposed Rule 319(b) is consistent with 
Section 6(b)(10) \7\ of the Act, which requires that national 
securities exchanges adopt rules prohibiting members that are not 
beneficial holders of a security from voting uninstructed proxies with 
respect to the election of a member of the board of directors of an 
issuer (except for uncontested elections of directors for companies 
registered under the Investment Company Act), executive compensation, 
or any other significant matter, as determined by the Commission by 
rule. The Exchange believes that proposed Rule 319(b) is consistent 
with Section 6(b)(10) of the Act because it adopts provisions that 
comply with that section.
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    \7\ 15 U.S.C. 78f(b)(10)
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    The Exchange also believes that proposed Rule 319(b) is consistent 
with Section 6(b)(5) \8\ of the Act, which provides, among other 
things, that the rules of the Exchange must be designed to promote just 
and equitable principles of trade, remove impediments to and perfect 
the mechanism of a free and open market and a national market system, 
and, in general, to protect investors and the public interest, and are 
not designed to permit unfair discrimination between customers, 
issuers, brokers, or dealers. The Exchange is adopting this proposed 
rule to comply with the requirements of Section 957 of the Dodd-Frank 
Act, and therefore believes the proposed rule to be consistent with the 
Exchange Act, particularly with respect to the protection of investors 
and the public interest.
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    \8\ 15 U.S.C. 78f(b)(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 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. The propose (sic) rule would 
allow the Exchange to implement Section 957 of the Dodd-Frank Act and 
adopt rules consistent with Section 6(b)(10) of the Act, which is 
applicable to all national securities exchanges and national securities 
association (sic).\9\ The Exchange notes this proposed rule does not go 
outside of the scope of the rules of other national securities (sic). 
Additionally, consistency among the various proxy voting rules 
governing national securities exchanges reduces the possibility of any 
regulatory arbitrage on the part of a market participant seeking a 
forum with a lower regulatory requirement.
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    \9\ The Commission notes that Section 6(b)(10) of the Act, 15 
U.S.C. 78f(b)(10), does not apply to national securities 
associations.
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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. 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 email to rule-comments@sec.gov. Please include 
File Number SR-MIAX-2013-02 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 Number SR-MIAX-2013-02. This file 
number should be included on the subject line if email 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 Web site viewing and

[[Page 6367]]

printing in the Commission's Public Reference Room, 100 F Street, NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 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-MIAX-2013-02 and 
should be submitted on or before February 20, 2013.

IV. Commission's Findings and Order Granting Accelerated Approval of 
the Proposed Rule Change

    In its filing, the Exchange requested that the Commission approve 
the proposal on an accelerated basis so that the Exchange could 
immediately comply with the requirements imposed by the Dodd-Frank Act, 
and because the proposed rule text is based upon, among others, ISE 
Rule 421.\10\ After careful consideration, the Commission finds that 
the proposed rule change is consistent with the requirements of the Act 
and the rules and regulations thereunder applicable to a national 
securities exchange.\11\
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    \10\ See Securities Exchange Act Release No. 63139 (October 20, 
2010), 75 FR 65680 (October 26, 2010) (SR-ISE-2010-99).
    \11\ In approving this rule change, the Commission notes that it 
has considered the proposed rule's impact on efficiency, 
competition, and capital formation. See 15 U.S.C. 78c(f).
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    The Commission believes that proposed Rule 319(a) is consistent 
with Section 6(b)(5) \12\ of the Act, which provides, among other 
things, that the rules of the Exchange must be designed to promote just 
and equitable principles of trade, remove impediments to and perfect 
the mechanism of a free and open market and a national market system, 
and, in general, to protect investors and the public interest, and are 
not designed to permit unfair discrimination between customers, 
issuers, brokers, or dealers.
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    \12\ 15 U.S.C. 78f(b)(5).
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    Under proposed Rule 319(a), a Member shall be prohibited from 
voting uninstructed shares unless (1) that Member is the beneficial 
owner of the stock; (2) pursuant to the written instructions of the 
beneficial owner; or (3) pursuant to the rules of any national 
securities exchange or association of which it is also a member, 
provided that the Member's records clearly indicate the procedure it is 
following. This provision is based on ISE Rule 421, which was 
previously approved by the Commission.\13\ The Commission notes that 
the proposed change will provide clarity to Exchange Members going 
forward on whether broker discretionary voting is permitted by Exchange 
Members under limited circumstances when the Member is also a member of 
another national securities exchange that permits broker discretionary 
voting. In approving this portion of the proposal, the Commission notes 
that Rule 319(a) is consistent with the approach taken under the rules 
of other national securities exchanges or national securities 
association, and for Exchange Members who are not also members of 
another national securities exchange prohibits broker discretionary 
voting on any matter, consistent with investor protection and the 
public interest under Section 6(b)(5) of the Act.\14\
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    \13\ See supra note 10.
    \14\ 15 U.S.C. 78f(b)(5).
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    The Commission believes that proposed Rule 319(b) is consistent 
with Section 6(b)(10) \15\ of the Act, which requires that national 
securities exchanges adopt rules prohibiting members that are not 
beneficial holders of a security from voting uninstructed proxies with 
respect to the election of a member of the board of directors of an 
issuer (except for uncontested elections of directors for companies 
registered under the Investment Company Act), executive compensation, 
or any other significant matter, as determined by the Commission by 
rule.
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    \15\ 15 U.S.C. 78f(b)(10).
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    The Commission believes that proposed Rule 319(b) is consistent 
with Section 6(b)(10) of the Act because it adopts new language that 
complies with that section. As noted in the accompanying Senate Report, 
Section 957, which enacted Section 6(b)(10), reflects the principle 
that ``final vote tallies should reflect the wishes of the beneficial 
owners of the stock and not be affected by the wishes of the broker 
that holds the shares.'' \16\ The proposed rule change will make the 
Exchange compliant with the new requirements of Section 6(b)(10) by 
specifically prohibiting broker-dealers, who are not beneficial owners 
of a security, from voting uninstructed shares in connection with a 
shareholder vote on the election of a member of the board of directors 
of an issuer (except for a vote with respect to the uncontested 
election of a member of the board of directors of any investment 
company registered under the Investment Company Act of 1940), executive 
compensation, or any other significant matter, as determined by the 
Commission by rule, unless the member receives voting instructions from 
the beneficial owner of the shares.\17\
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    \16\ See S. Rep. No. 111-176, at 136 (2010).
    \17\ The Commission has not, to date, adopted rules concerning 
other significant matters where uninstructed broker votes should be 
prohibited, although it may do so in the future. Should the 
Commission adopt such rules, we would expect the Exchange to adopt 
coordinating rules promptly to comply with the statute.
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    The Commission also believes that proposed Rule 319(b) is 
consistent with Section 6(b)(5) \18\ of the Act, which provides, among 
other things, that the rules of the Exchange must be designed to 
promote just and equitable principles of trade, remove impediments to 
and perfect the mechanism of a free and open market and a national 
market system, and, in general, to protect investors and the public 
interest, and are not designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers.
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    \18\ 15 U.S.C. 78f(b)(5).
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    The Commission believes that the rule assures that shareholder 
votes on the election of the board of directors of an issuer (except 
for a vote with respect to the uncontested election of a member of the 
board of directors of any investment company registered under the 
Investment Company Act of 1940) and on executive compensation matters 
are made by those with an economic interest in the company, rather than 
by a broker that has no such economic interest, which should enhance 
corporate governance and accountability to shareholders.\19\
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    \19\ As the Commission stated in approving New York Stock 
Exchange (``NYSE'') rules prohibiting broker voting in the election 
of directors, having those with an economic interest in the company 
vote the shares, rather than the broker who has no such economic 
interest, furthers the goal of enfranchising shareholders. See 
Securities Exchange Act Release No. 60215 (July 1, 2009), 74 FR 
33293 (July 10, 2009) (SR-NYSE-2006-92).
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    Based on the above, the Commission finds that the Exchange's 
proposal will further the purposes of Sections 6(b)(5) and 6(b)(10) of 
the Act because it should enhance corporate accountability to 
shareholders while also serving to fulfill the Congressional intent in 
adopting Section 6(b)(10) of the Act.
    The Commission also finds good cause, pursuant to Section 19(b)(2) 
of the Act,\20\ for approving the proposed rule change prior to the 
30th day after the date of publication of notice in the Federal 
Register. The Commission believes that good cause exists to grant 
accelerated approval to proposed Rule 319(a), because this proposed 
rule will conform the Exchange rule to ISE Rule

[[Page 6368]]

421, which was published for public comment in the Federal Register and 
approved by the Commission, and for which no comments were 
received.\21\ Because proposed Rule 319(a) is identical to the ISE 
rule, it raises no new regulatory issues.
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    \20\ 15 U.S.C. 78s(b)(2).
    \21\ See supra note 10.
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    The Commission also believes that good cause exists to grant 
accelerated approval to proposed Rule 319(b), which conforms the 
Exchange's rules to the requirements of Section 6(b)(10) of the Act. 
Section 6(b)(10) of the Act, enacted under Section 957 of the Dodd-
Frank Act, does not provide for a transition phase, and requires rules 
of national securities exchanges to prohibit broker voting on the 
election of a member of the board of directors of an issuer (except for 
a vote with respect to the uncontested election of a member of the 
board of directors of any investment company registered under the 
Investment Company Act of 1940), executive compensation, or any other 
significant matter, as determined by the Commission by rule. The 
Commission believes that good cause exists to grant accelerated 
approval to proposed Rule 3.22(b), because it will conform the Exchange 
rule to the requirements of Section 6(b)(10) of the Act. Moreover, 
proposed Rule 319(b) is identical to ISE Rule 421.\22\
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    \22\ See supra note 10.
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V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\23\ that the proposed rule change (SR-MIAX-2013-02) be, and it 
hereby is, approved on an accelerated basis.
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    \23\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\24\
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    \24\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-01970 Filed 1-29-13; 8:45 am]
BILLING CODE 8011-01-P