Document ID: SEC-2011-1432-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: BATS Y-Exchange, Inc.
Posted Date: 2011-09-26T04:00Z

[Federal Register Volume 76, Number 186 (Monday, September 26, 2011)]
[Notices]
[Pages 59462-59466]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-24584]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65352; File No. SR-BYX-2011-022]

Self-Regulatory Organizations; BATS Y-Exchange, Inc.; Notice of 
Filing of Proposed Rule Change To Amend and Restate the Amended and 
Restated Bylaws of BATS Global Markets, Inc.

September 19, 2011.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on September 7, 2011, BATS Y-Exchange, Inc. (the ``Exchange'' or 
``BYX'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by 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 is filing with the Commission a proposal to amend the 
bylaws of the Exchange's sole stockholder, BATS Global Markets, Inc.
    The text of the proposed rule change is available at the Exchange's 
Web site at http://www.batstrading.com, at the principal office of the 
Exchange, and at the Commission's Public Reference Room.

[[Page 59463]]

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 parts of such 
statements.

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

1. Purpose
    On May 13, 2011, BATS Global Markets, Inc., the sole stockholder of 
the Exchange, filed a registration statement on Form S-1 with the 
Commission seeking to register shares of Class A common stock and to 
conduct an initial public offering of those shares, which will be 
listed for trading on the Exchange (the ``IPO''). In connection with 
its IPO, BATS Global Markets, Inc. intends to amend and restate its 
Amended and Restated Bylaws (the ``Current Bylaws'') and adopt these 
changes as its Second Amended and Restated Bylaws (the ``New Bylaws'').
    The amendments to the Current Bylaws include, among other things, 
(i) Revising the procedures for stockholder proposals and nomination of 
directors, (ii) revising the authority to call special meetings of the 
stockholders, (iii) revising the process for action by written consent 
of stockholders, (iv) revising the requirements for removal of 
directors, (v) removal of provisions relating to indemnification of 
officers and directors, (vi) eliminating the authority to make loans to 
corporate officers, and (vii) revising certain requirements for 
approval of future amendments to the New Bylaws.
    The purpose of this rule filing is to submit for Commission 
approval the New Bylaws adopted by BATS Global Markets, Inc., the sole 
stockholder of the Exchange. The changes described herein relate to the 
bylaws of BATS Global Markets, Inc. only, not to the governance of the 
Exchange. The Exchange will continue to be governed by its existing 
certificate of incorporation and by-laws. The stock in, and voting 
power of, the Exchange will continue to be directly and solely held by 
BATS Global Markets, Inc.
    The Exchange has separately filed with the Commission a proposed 
amendment to the certificate of incorporation of BATS Global Markets, 
Inc. (the ``New Certificate of Incorporation''). It is anticipated that 
the New Bylaws and the New Certificate of Incorporation will become 
effective (the ``Effective Date'') the moment before the closing of the 
IPO. The amendments to the bylaws primarily reflect (i) Changes to 
conform the Current Bylaws to provisions more customary for publicly-
owned companies, (ii) amendments to conform the Current Bylaws to the 
New Certificate of Incorporation, and (iii) stylistic and other non-
substantive changes.
Registered Office
    Article I of the Current Bylaws designates the initial registered 
office of BATS Global Markets, Inc. in the State of Delaware as 1209 
Orange Street in the City of Wilmington, County of New Castle, 
Delaware. Section 1.01 of the New Bylaws would amend Article I to state 
the registered office will continue to be located at the same location 
and to further provide the board of directors with the authority to 
designate another location from time to time. This will provide the 
board with the flexibility to change the registered office in the 
future if it believes such a change is necessary.
Annual Meeting of Stockholders
    Section 2.02(a) of the Current Bylaws require that an annual 
meeting of stockholders for the purpose of election of directors and 
such other business that comes before the meeting occur on the third 
Tuesday of January, or such other time as the board of directors may 
designate. The Amended Bylaws remove the reference to the third Tuesday 
of January from Section 2.02(a) and authorize the board of directors to 
determine the date and time of the annual meeting.
    Section 2.02(b) of the Current Bylaws specifies the procedures for 
stockholders to properly bring matters before the annual meeting, 
including specifying that stockholders provide timely notice to BATS 
Global Markets, Inc. of the business desired to be brought before the 
meeting. In addition to the requirements contained in the Current 
Bylaws, Section 2.02(b) of the New Bylaws would require that the 
stockholder's notice (i) Disclose the text of the proposal, (ii) 
disclose the beneficial owner on whose behalf the proposal is being 
made, (iii) disclose all agreements, arrangements or understandings 
between the stockholder and any other person pursuant to which the 
proposal is being made, (iv) disclose all arrangements or 
understandings (including derivative positions) to create or mitigate 
loss or manage the risk or benefit of share price changes, or increase 
or decrease the voting power of the stockholder or any beneficial owner 
with respect to the securities of BATS Global Markets, Inc., and (v) 
provide a representation as to whether the stockholder or any 
beneficial owner intends, or is part of a group that intends, to 
deliver a proxy statement and/or form of proxy to holders of at least 
the percentage of the voting power of BATS Global Markets, Inc. needed 
to approve or adopt the proposal, or otherwise solicit proxies from 
stockholders in support of the proposal.
    Section 2.02(c) of the Current Bylaws specifies the procedures for 
stockholders to properly nominate persons for the board of directors, 
including that the stockholder provide timely notice to BATS Global 
Markets, Inc. In addition to the requirements contained in the Current 
Bylaws, Section 2.02(c) of the New Bylaws would require that the 
stockholder's notice (i) Disclose all agreements, arrangements or 
understandings (including derivative positions) to create or mitigate 
loss or manage the risk or benefit of share price changes, or increase 
or decrease the voting power of the stockholder, beneficial owner or 
any such nominee with respect to the securities of BATS Global Markets, 
Inc., (ii) provide a representation that such stockholder is a 
stockholder entitled to vote at such meeting and intends to appear in 
person or by proxy at the meeting and to bring such nomination or other 
business before the meeting, and (iii) provide a representation as to 
whether the stockholder or any beneficial owner intends, or is part of 
a group that intends, to deliver a proxy statement and/or form of proxy 
to holders of at least the percentage of the voting power of BATS 
Global Markets, Inc. needed to elect each such nominee, or otherwise 
solicit proxies from stockholders in support of the nomination.
    The additional disclosure requirements being added to Sections 
2.02(b) and 2.02(c) are intended to assure that stockholders asked to 
vote on a stockholder proposal or stockholder nominee are more fully 
informed in their voting and are able to consider any proposals or 
nominations along with the interests of those stockholders or the 
beneficial owners on whose behalf such proposal or nomination is being 
made.
    The New Bylaws would further include a new Section 2.02(d) which 
would require that a stockholder

[[Page 59464]]

proposal or a stockholder nomination be disregarded if the stockholder 
(or a qualified representative) does not appear at the annual or 
special meeting to present the proposal or nomination, notwithstanding 
that proxies may have been received and counted for purposes of 
determining a quorum. A ``qualified representative'' would include a 
duly authorized officer, manager or partner of the stockholder, or such 
other person authorized in writing to act as such stockholder's proxy. 
The purpose of this requirement is to assure that the stockholders' 
time at meetings is used efficiently and only serious stockholder 
proposals and nominations are considered.
    The New Bylaws would also add Section 2.02(e), which would require 
that a stockholder, in addition to (and in no way limiting) all 
requirements set forth in Section 2.02 with respect to proposals or 
nominations, must also comply with all applicable requirements of the 
Act and the rules and regulations promulgated thereunder.
    New Section 2.02(f) of the New Bylaws would note that, 
notwithstanding anything to the contrary in the New Bylaws, the notice 
requirements with respect to business proposals or nominations would be 
deemed satisfied if the stockholder submitted a proposal in compliance 
with Rule 14a-8 of the Act \3\ and the proposal has been included in a 
proxy statement prepared by BATS Global Markets, Inc. to solicit 
proxies of the meeting of stockholders. This provision would assure 
that, in addition to proposals that meet the requirements of Section 
2.02(b) of the New Bylaws, BATS Global Markets, Inc. would comply with 
the provisions of the Act and the rules promulgated thereunder with 
respect to the inclusion of stockholder proposals in its proxy 
statement.
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    \3\ 17 CFR 240.14a-8.
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Special Meetings of Stockholders
    Section 2.03 of the Current Bylaws permits a special meeting of the 
stockholders to be called by any of (i) The chairman of the board of 
directors, (ii) the chief executive officer, (iii) the board of 
directors pursuant to a resolution passed by a majority of the board, 
or (iv) by the stockholders entitled to vote at least ten percent of 
the votes at the meeting. The New Bylaws would amend Section 2.03 to 
only permit a special meeting of the stockholders to be called by the 
board of directors pursuant to a resolution adopted by the majority of 
the board. Additionally, whenever any holders of preferred stock have 
the right to elect directors pursuant to the New Certificate of 
Incorporation, such holders may call, pursuant to the terms of a 
resolution adopted by the board, a special meeting of the holders of 
such preferred stock. These amendments are designed to prevent any 
stockholder from exercising undue control over the operation of the 
Exchange by circumventing the board of directors of BATS Global 
Markets, Inc. through a special meeting of the stockholders.
Voting Rights
    Section 2.07 of the Current Bylaws describes the rights of 
stockholders of BATS Global Markets, Inc. to vote their shares at a 
meeting of stockholders. The New Bylaws would amend Section 2.07 to 
further clarify that any share of stock of BATS Global Markets, Inc. 
held by BATS Global Markets, Inc. shall have no voting rights, except 
when such shares are held in a fiduciary capacity.
Action Without a Meeting
    Section 2.10 of the Current Bylaws permits certain actions to be 
taken by written consent of stockholders if signed by the holders of 
outstanding stock representing not less than the number of votes 
necessary to authorize or take such action at a meeting where all 
shares entitled to vote were present and voted. Section 2.10(c) of the 
Current Bylaws also require that prompt notice of such actions by less 
than unanimous consent be given to those stockholders that did not 
consent in writing. The New Bylaws would amend Section 2.10(c) to 
clarify that such notice need only be provided to those stockholders 
who would have been entitled to notice of the meeting if the record 
date for such notice had been the date the written consent was 
delivered to BATS Global Markets, Inc.
    Section 2.10(c) of the Current Bylaws further provides that no 
action by written consent may be taken following an initial public 
offering of the common stock of BATS Global Markets, Inc. The New 
Bylaws would amend Section 2.10(c) to instead provide that no action by 
written consent may be taken following a Change in Ownership, as 
defined in the New Certificate of Incorporation.\4\ This change is 
consistent with amendments contained in the New Certificate of 
Incorporation and is designed to prevent any stockholder from 
exercising undue control over the operation of the Exchange by 
circumventing the board of directors of BATS Global Markets, Inc. 
through action by written consent.
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    \4\ Under the New Certificate of Incorporation, a ``Change in 
Ownership'' is deemed to occur at such time as the beneficial owners 
of the Class B Common Stock and Non-Voting Class B Common Stock own, 
in the aggregate, less than a majority of the total voting power of 
BATS Global Markets, Inc.
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Removal of Directors
    Section 3.05 of the Current Bylaws provides that the board of 
directors or any director may be removed, with or without cause, by the 
affirmative vote of at least sixty-six and two-thirds percent of the 
voting power of all then-outstanding shares of voting stock of BATS 
Global Markets, Inc. The New Bylaws would amend Section 3.05 to reduce 
the percentage of the voting power required to remove a director, with 
or without cause, from sixty-six and two-thirds percent to a simple 
majority.
    The purpose of this amendment is to align BATS Global Markets, 
Inc.'s requirements for removal of directors with Section 141(k) of the 
Delaware General Corporation Law, which generally permits a simple 
majority of stockholders to remove any director or a the board of 
directors with or without cause.
Committees of Directors
    Section 3.10(a) of the Current Bylaws permit the board of directors 
to appoint an executive committee with certain enumerated powers of the 
board, as well as other committees permitted by law. The New Bylaws 
would amend Section 3.10(a) to eliminate specific reference to an 
executive committee and authorize the board to designate one or more 
committees that may exercise the power of the board to the extent 
permitted in the resolution designating the committee. This amendment 
would enhance the board's flexibility to create those committees it 
deems necessary and most efficient for the functioning of the board. 
Section 3.10(a) would be further amended to provide that no committee 
would have the power to (i) Approve, adopt or recommend to the 
stockholders any matter required by Delaware law to be submitted to 
stockholder approval, or (ii) adopt, amend or repeal any bylaw. These 
amendments are being made to assure that the full board of directors 
considers and passes upon these significant corporate decisions.
Preferred Stock Directors
    The New Bylaws would add new Section 3.12 to clarify that whenever 
the holders of one or more classes or series of preferred stock have 
the right to elect a preferred stock director, pursuant to the New 
Certificate of Incorporation, the provisions of Article 3 of the New 
Bylaws relating to the election, term of

[[Page 59465]]

office, filling of vacancies, removal, and other features of 
directorships would not apply to preferred stock directors. Rather, 
such features would be governed by the applicable provisions of the New 
Certificate of Incorporation. This amendment is consistent with the New 
Certificate of Incorporation with respect to the rights of preferred 
stockholders, should any class or series of preferred stock be issued 
with director voting rights in the future.
Form of Stock Certificates
    The New Bylaws would amend Section 6.01 of the Current Bylaws to 
state that the shares of BATS Global Markets, Inc. shall be represented 
by certificates, unless the board provides by resolution that some or 
all of any class or series of stock be uncertificated. Except as 
otherwise provided by law, holders of certificated and uncertificated 
shares of the same class and series would have identical rights and 
obligations. The board will also have the power to make rules for 
issuance, transfer and registration of certificated or uncertificated 
shares, and the issuance of new certificates in lieu of those lost or 
destroyed. The New Bylaws further amend Section 6.01 to provide that 
BATS Global Markets, Inc. will not have the power to issue a 
certificate in bearer form. These amendments are intended to align the 
bylaws of BATS Global Markets, Inc. with standard provisions for 
Delaware public companies.
Indemnification
    Article X of the Current Bylaws contains certain provisions for the 
indemnification of directors, officers, employees and certain other 
agents of BATS Global Markets, Inc. The New Bylaws will eliminate such 
provisions in their entirety. These provisions are being eliminated 
because provisions regarding indemnification will instead be contained 
in Article 10 of the New Certificate of Incorporation.
Future Bylaws Amendments
    In addition to the power of the board to adopt, amend or repeal 
bylaws provided by Article Eighth of the current certificate of 
incorporation and Article 9 of the New Certificate of Incorporation, 
Article XII of the Current Bylaws permit the bylaws to be amended or 
repealed by the action of stockholders holding seventy percent of the 
shares entitled to vote. To conform to the New Certificate of 
Incorporation, Article 11 of the New Bylaws would amend Article XII to 
provide that, until a Change in Ownership, the bylaws may be adopted, 
amended or repealed by the stockholders with the affirmative vote of 
not less than a majority of the total voting power then entitled to 
vote in the election of directors. Upon the occurrences of a Change in 
Ownership, the New Bylaws would provide that bylaws may be adopted, 
amended or repealed by the stockholders only with the affirmative vote 
of not less than seventy percent of the total voting power then 
entitled to vote in the election of directors.
    This change is consistent with amendments contained in Section 9.02 
of the New Certificate of Incorporation. Section 11.01(c) of the New 
Bylaws will maintain the provisions contained in Article XII of the 
Current Bylaws requiring that, for so long as BATS Global Markets, Inc. 
will control the Exchange, before any amendment to the New Bylaws may 
become effective, the amendment must be submitted to the board of 
directors of the Exchange, and if required by Section 19 of the Act,\5\ 
filed with or filed with and approved by the Commission.
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    \5\ 15 U.S.C. 78s.
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Loans to Officers
    Article XIII of the Current Bylaws authorize BATS Global Markets, 
Inc. to lend money to or guarantee obligations of any officer of the 
company under certain circumstances. In order to comply with Section 
13(k)(1) of the Act,\6\ which will apply to BATS Global Markets, Inc. 
after the IPO, the New Bylaws eliminate this authority.
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    \6\ 15 U.S.C. 78m(k)(1).
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with the 
requirements of the Act and rules and regulations thereunder that are 
applicable to a national securities exchange, and, in particular, with 
the requirements of Section 6(b) of the Act.\7\ In particular, Sections 
2.03 and 2.10(c) of the proposed New Bylaws, which prohibit the ability 
of the stockholders to call a special meeting of the stockholders to 
act by written consent is consistent with Section 6(b)(1) of the Act, 
because it prevents any stockholder from exercising undue control over 
the operation of the Exchange and thereby 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, and to enforce compliance by its members and 
persons associated with its members, with the provisions of the Act, 
the rules and regulations thereunder, and the rules of the Exchange.
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    \7\ 15 U.S.C. 78f(b).
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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 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

    The Exchange has neither solicited nor received written comments on 
the proposed rule change.

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

    Within 45 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 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 Exchange consents, the Commission will: (a) By order approve 
or disapprove 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 proposal 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 No. SR-BYX-2011-022 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 No. SR-BYX-2011-022. 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/

[[Page 59466]]

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 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 on official business days between the 
hours of 10 a.m. and 3 p.m. Copies of such filing will also 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 No. SR-BYX-
2011-022 and should be submitted on or before October 17, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-24584 Filed 9-23-11; 8:45 am]
BILLING CODE 8011-01-P