Document ID: SEC-2015-1782-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Board Options Exchange, Inc.
Posted Date: 2015-11-02T05:00Z

[Federal Register Volume 80, Number 211 (Monday, November 2, 2015)]
[Notices]
[Pages 67464-67467]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-27799]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76282; File No. SR-CBOE-2015-092]

Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change To Amend the Certificate of Incorporation and Bylaws of its 
Parent Company

October 27, 2015.
    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 October 23, 2015, Chicago Board Options Exchange, Incorporated 
(the ``Exchange'' or ``CBOE'') 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 prepared by the 
Exchange. The Commission is publishing this notice to solicit comments 
on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend the certificate of incorporation and 
bylaws of its parent Company, CBOE Holdings, Inc. (``CBOE Holdings''). 
The text of the proposed rule change is available on the Exchange's Web 
site (http://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), at 
the Exchange's Office of the Secretary, 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

[[Page 67465]]

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
    CBOE Holdings is proposing to make certain amendments to its 
Certificate and Bylaws.
Proposed Amendments to the Certificate
    CBOE Holdings proposes to make various amendments to its 
Certificate. First, CBOE Holdings proposes to eliminate references that 
are applicable only in connection with the CBOE demutualization and 
CBOE Holdings initial public offering (``IPO'') in 2010. Currently, the 
Certificate provides for the designation, preferences and rights 
related to Class A-1 and Class A-2 common stock that had been 
authorized by the Board and CBOE Holdings' stockholders prior to the 
IPO. No shares of Class A-1 or Class A-2 common stock are currently 
outstanding, nor would CBOE Holdings be able to issue such shares at 
any time in the future as the current Certificate limits their use to 
the conversion of Class A and Class B common stock, which was issued in 
connection with the IPO and has been retired. Accordingly, CBOE 
Holdings proposes to delete obsolete provisions related to the 
designation, rights and preferences of these series of common stock. 
The Exchange also proposes to remove references to the 10% ownership 
concentration limitation applicable before the IPO. This change would 
not change the current ownership concentration limitation, which is 
20%. CBOE Holdings also proposes other non-substantive changes to the 
Certificate include referring to the ``Second'' Amended and Restated 
Certificate of Incorporation, clarifying that any stockholder votes on 
the Bylaws would be in addition to any votes required by law, and 
updating references to the Common Stock, as only one class of common 
stock will be outstanding. The Exchange notes that the proposed changes 
will not have any effect on the rights of a stockholder.\3\
---------------------------------------------------------------------------

    \3\ For example, the Exchange notes that the proposed change in 
Article Fourth, subparagraph (c)(x) from ``Voting Common Stock'' to 
``stock of the Corporation entitled to vote thereon'' is not 
intended to affect the rights of a stockholder or change which class 
of shares are entitled to vote to increase or decrease the number of 
authorized shares of Preferred Stock. Specifically, the Exchange 
notes that, as is currently the case, for any proposal to increase 
or decrease the number of authorized shares of Preferred Stock, 
common stock would continue to vote together with any series of 
Preferred Stock that is allowed to vote on such a proposal pursuant 
to its terms. The Exchange also notes that the provisions in Article 
Sixth of the Certificate which limit ownership and voting 
concentration continue to apply and as such, any proposal to 
increase or decrease the number of authorized shares of Preferred 
Stock, if any, would be subject to those limitations.
---------------------------------------------------------------------------

Proposed Amendments to the Bylaws
    CBOE Holdings also proposes to make various amendments to its 
Bylaws. First, CBOE Holdings proposes to adopt an Exclusive Forum 
Provision. Specifically, CBOE Holdings seeks to adopt Article 11--Forum 
for Adjudication of Disputes. Proposed Article 11 provides that 
Delaware would be the exclusive forum for any shareholder litigation 
against the Company. CBOE Holdings notes that the proposed adoption of 
Article 11 alleviates the risk of multi-forum shareholder litigation in 
which the same claims are litigated in different courts, which can 
potentially drain corporate resources, increase the distraction and 
hassle of litigation, and risk inconsistent rulings and judgments. CBOE 
Holdings also notes that exclusive forum provisions have been upheld by 
the Delaware Court of Chancery and that legislative amendments to the 
General Corporation Law of the State of Delaware (``DGCL'') related to 
exclusive forum provisions were recently signed into law by the 
Delaware governor and became effective August 1, 2015.\4\
---------------------------------------------------------------------------

    \4\ See e.g., Boilermakers Local 154 Retirement Fund v. Chevron 
Corporation, 73 A.3d 934 (Del. Ch. 2013). The Chancery Court ruled 
that boards are statutorily empowered to adopt such bylaws so long 
as the specific corporate articles of organization permit director 
amendment of bylaws, which is generally the case. See also DGCL 
Section 115.
---------------------------------------------------------------------------

    Next, CBOE Holdings proposes to amend various sections in Article 2 
to delete obsolete and/or unnecessary language, as well as reflect 
current best practices among Delaware corporations in the drafting of 
their governing documents, including changes with respect to the 
scheduling, notice and action at meetings and the nomination of 
directors. For example, Section 2.2 of the Bylaws is proposed to be 
amended to delete language requiring the annual meeting of stockholders 
to be held on the third Tuesday in May of each year, as the Exchange 
does not believe such requirement is necessary. Additionally, Section 
2.2 is proposed to be amended to eliminate now outdated language which 
provides that such requirement starts the year immediately following 
the year in which the restructuring of CBOE is consummated. Section 2.4 
of the Bylaws is proposed to be amended to add language providing that 
certain notice requirements of each meeting of stockholders apply 
except as otherwise provided by the Certificate of Incorporation or 
CBOE Holdings Bylaws. CBOE Holdings also proposes to add language to 
Section 2.4 to explicitly provide that notices of all meetings shall 
state the means of remote communications, if any, by which stockholders 
and proxy holders may be deemed to be present in person and vote at 
such meeting. CBOE Holdings notes that Section 2.1 already contemplates 
remote communications.\5\ Section 2.7 of the Bylaws is being amended to 
make the Bylaw language consistent with DGCL Section 222 (c) (Notice of 
meetings and adjourned meetings). Section 2.10 is being proposed to be 
amended to make certain clarifications relating to actions at meetings. 
For example, CBOE Holdings proposes to clarify that a majority of the 
votes properly cast upon any question other than an election of 
directors shall decide the question, except when a ``different'' 
(rather than ``larger'') vote is required by the Bylaws, rules or 
regulations of any stock exchange applicable to the Corporation, or any 
law or regulation applicable to the Corporation or its securities. 
Additionally, CBOE Holdings proposes to explicitly clarify that 
``abstentions'' and ``broker nonvotes'' are not counted as a vote case 
either ``for'' or ``against'' a director's election. Section 2.11 is 
being proposed to be amended to (i) eliminate outdated language and 
(ii) make minor changes related to the nomination process for election 
of Board of Directors in a manner similar to the practices of other 
Delaware corporations. For example, Section 2.11 is being amended with 
regards to notice requirements for director nominations in the event 
the annual meeting is not conducted within a certain period of time. 
Specifically, Section 2.11 currently provides that if the annual 
meeting is not held within thirty (30) days before or after the 
anniversary date of the preceding year's annual meeting of 
stockholders, the nominations must be delivered or mailed and received 
by the Secretary not later than the close of business on the 10th day 
following the date on which public announcement of the annual meeting 
date was made. CBOE Holdings seeks to amend Section

[[Page 67466]]

2.11 to permit the annual meeting to be held up to seventy (70) days 
after the anniversary date of the immediately preceding annual meeting 
without altering the deadlines regarding when the nominations must be 
delivered or mailed and received by apply and to also confirm that an 
adjournment or postponement of an annual meeting does not commence a 
new time period or extend any time period for a stockholder's notice. 
CBOE Holdings notes that the proposed change provides CBOE Holdings 
more flexibility with regards to scheduling the annual meeting date 
without altering the time periods for stockholder notices for director 
nominations. CBOE Holdings additionally proposes to amend Section 2.11 
to clarify that stockholder notices for director nominations shall also 
set forth any other information relating to the stockholder and 
beneficial owner, if any, required to be disclosed in a proxy statement 
or other filings required to be made in connection with solicitations 
of proxies, as well and also explicitly provide that CBOE Holdings may 
require any proposed nominee to furnish any other information that CBOE 
Holdings may reasonable require to determine eligibility of the 
proposed nominee to serve as director of the Corporation.
---------------------------------------------------------------------------

    \5\ See CBOE Holdings Bylaws, Section 2.1 which provides that 
``all meetings of stockholders shall be held at such place, if any, 
within or without the State of Delaware . . .''
---------------------------------------------------------------------------

    CBOE Holdings also proposes to amend the Bylaws to make other non-
substantive changes. For example, CBOE Holdings proposes to amend 
Section 3.4 of the Bylaws to provide that a director may resign by 
giving either written or electronic notice as well as proposes to 
delete an unnecessary sentence related to the term of the Executive 
Committee members in Article 4, Section 4.2.\6\ Additionally, CBOE 
Holdings proposes to make non-substantive, clarifying changes to 
Section 9.3 of the Bylaws including adding the term ``equity owners'' 
(in addition to the current terms of ``stockholders'' and 
``shareholders''). CBOE Holdings also proposes to amend Section 10.1 of 
the Bylaws. Specifically, Section 10.1 currently provides that 
stockholders of CBOE Holdings may amend the Bylaws, provided that 
notice of the proposed change was given in the notice of the 
stockholders meeting at which such action is to be taken. CBOE Holdings 
proposes to eliminate this requirement as it does not believe it is 
substantive or necessary. Particularly, CBOE Holdings notes that this 
requirement is already provided for in Section 2.12 of the Bylaws.\7\ 
Additionally, CBOE Holdings notes that Article Twelfth of the 
Certificate, which governs amendments of the Bylaws by stockholders of 
CBOE Holdings, does not include this requirement. Accordingly, and in 
order to conform Section 10.1 of the Bylaws to Article Twelfth of the 
Certificate, CBOE Holdings proposes to remove this language from 
Section 10.1. CBOE Holdings also proposes to amend Section 10.2 of the 
Bylaws to replace the reference of ``CBOE'' to ``Chicago Board Options 
Exchange, Incorporated'' to avoid any potential confusion as to what 
CBOE refers to.
---------------------------------------------------------------------------

    \6\ The Exchange notes that pursuant to Section 3.2 of the 
Bylaws, directors are to be elected annually and thus the term for 
any Board committee composed exclusively of directors would be for 
no longer than one year. The Exchange also notes that the terms for 
members of other Board committees are also not explicitly referenced 
or included in CBOE Holdings' Bylaws. See Article 4, Sections 4.3 
(The Audit Committee), 4.4 (The Compensation Committee) and 4.5 (The 
Nominating and Governance Committee).
    \7\ See Section 2.12 of the Bylaws which provides ``To be in 
proper written form, a stockholder's notice to the Secretary shall 
set forth . . . the text of any resolutions proposed for 
consideration and, in the event that such business includes a 
proposal to amend the Bylaws of the Corporation, the language of the 
proposed amendment . . .''
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Securities Exchange Act of 1934 (the ``Act'') and the rules and 
regulations thereunder applicable to the Exchange and, in particular, 
the requirements of Section 6(b) of the Act.\8\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \9\ requirements that the rules of an exchange be 
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. Additionally, 
the Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \10\ requirement that the rules of an exchange not be 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
    \10\ Id.
---------------------------------------------------------------------------

    In particular, CBOE Holdings believes that eliminating references 
in the Certificate that are applicable only in connection with the 2010 
IPO removes obsolete language and alleviates potential confusion. 
Additionally, CBOE Holdings believes the remaining changes to the 
Certificate are non-substantive and clarifying in nature, which makes 
the Certificate easier to read and also alleviates potential confusion. 
The alleviation of potential confusion removes impediments to and 
perfects the mechanism of a free and open market and a national market 
system, and, in general, protect investors and the public interest.
    The Exchange believes adopting Article 11 governing the forum for 
adjudication of disputes alleviates the risk of multi-forum shareholder 
litigation in which the same claims are litigated in different courts, 
which can potentially drain corporate resources, increase the 
distraction and hassle of litigation, and risk inconsistent rulings and 
judgments. The Exchange believes alleviating potential drain on 
corporate resources allows the Exchange to direct such resources in 
administration of the Exchange, enhancing investor protection.
    CBOE Holdings believes the remaining changes are either clarifying 
in nature or reflect current best practices among Delaware corporations 
in the drafting of their governing documents and thus enhance investor 
protection by making CBOE Holdings governance documents clearer and 
easier to understand and in line with current governance best 
practices.

B. Self-Regulatory Organization's Statement on Burden on Competition

    Because the proposed rule change relates to the governance of CBOE 
Holdings and not to the operations of the Exchange, the Exchange does 
not believe that the proposed rule change will impose any burden on 
competition not necessary or appropriate in furtherance of the purposes 
of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

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

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

    Because the foregoing proposed rule change does not:
    A. Significantly affect the protection of investors or the public 
interest;
    B. impose any significant burden on competition; and
    C. become operative for 30 days from the date on which it was 
filed, or such shorter time as the Commission may designate, it has 
become effective

[[Page 67467]]

pursuant to Section 19(b)(3)(A) of the Act \11\ and Rule 19b-4(f)(6) 
\12\ thereunder. At any time within 60 days of the filing of the 
proposed rule change, 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. If 
the Commission takes such action, the Commission will institute 
proceedings to determine whether the proposed rule change should be 
approved or disapproved.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------

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

     Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-CBOE-2015-092 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-CBOE-2015-092. 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 
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-CBOE-2015-092 and should be 
submitted on or before November 23, 2015.
---------------------------------------------------------------------------

    \13\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-27799 Filed 10-30-15; 8:45 am]
 BILLING CODE 8011-01-P