Document ID: SEC-2013-0981-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX BX, Inc.
Posted Date: 2013-05-28T04:00Z

[Federal Register Volume 78, Number 102 (Tuesday, May 28, 2013)]
[Notices]
[Pages 31993-31994]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-12486]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69607; File No. SR-BX-2013-029]

Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Order 
Approving Proposed Rule Change Relating to Board of Director 
Qualifications

May 20, 2013.
    On March 27, 2013, NASDAQ OMX BX, Inc. (``BX'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``Commission''), 
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to 
amend Article IV, Section 4.3 of the Exchange's By-Laws (``BX By-
Laws'') with respect to the composition of the Exchange's Board of 
Directors (``BX Board'').\3\ The proposed rule change was published for 
comment in the Federal Register on April 8, 2013.\4\ The Commission 
received no comments on the proposal.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 69280 (April 2, 
2013), 78 FR 20971.
    \4\ See id.
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    After careful review, the Commission finds that the proposed rule 
change is

[[Page 31994]]

consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities exchange \5\ 
and, in particular, the requirements of Sections 6(b)(3) \6\ and 
6(b)(5) of the Act.\7\ The proposal will reduce from three to one the 
minimum number of Public Directors \8\ that will be required to be 
included in the calculation of Non-Industry Directors \9\ for the 
purpose of determining the number of Non-Industry Directors that may 
serve on the BX Board. The Exchange proposed this change in light of 
the cessation in 2012 by the Boston Options Exchange LLC (``BOX'') of 
its operations as an options trading facility of the Exchange \10\ and 
the termination of the Regulatory Services Agreement (``RSA'') between 
BX and BOX.\11\ To accommodate BOX when BOX was a BX facility, three 
Public Directors were required to be included in the calculation of the 
number of Non-Industry Directors on the BX Board.\12\ The Commission 
notes that, although only one Public Director must be included in the 
composition of Non-Industry Directors as a result of the proposed rule 
change, the requirement in BX By-Law Article IV, Section 4.3 that the 
number of Non-Industry Directors must equal or exceed the sum of 
Industry Directors \13\ and Member Representative Directors \14\ will 
continue to be met. Moreover, the Commission notes that, as a result of 
the proposed rule change, the BX Board composition requirement 
regarding Public Directors now will be similar to the board composition 
requirements of NASDAQ OMX PHLX LLC (``Phlx'') and The NASDAQ Stock 
Market LLC (``NASDAQ''), both of which require that the number of Non-
Industry Directors must include at least one Public Director.\15\ In 
addition, the Commission notes that the BX Board will continue to have 
three Public Directors, because the BX Board still will need to have 
three Public Directors available to serve on its Regulatory Oversight 
Committee, as required by BX By-Law Article IV, Section 4.13. For the 
foregoing reasons, the Commission believes that the proposed rule 
change is consistent with the Act.
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    \5\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \6\ 15 U.S.C. 78f(b)(3).
    \7\ 15 U.S.C. 78f(b)(5).
    \8\ Pursuant to BX By-Law Article I(gg), a Public Director is a 
Director who has no material business relationship with a broker or 
dealer, the Corporation (i.e., the Exchange) or its affiliates, or 
FINRA.
    \9\ Pursuant to BX By-Law Article I(bb), 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.
    \10\ BOX was a facility of the Exchange under Section 39(a)(2) 
of the Act. See Securities Exchange Act Release Nos. 49066 (January 
13, 2004), 69 FR 2773 (January 20, 2004) (SR-BSE-2003-17); 49065 
(January 13, 2004), 69 FR 2768 (January 20, 2004) (SR-BSE-2003-04) 
(``BOXR Order''); and 49068 (January 13, 2004), 69 FR 2775 (January 
20, 2004) (SR-BSE-2002-15). See also Release No. 58324; 73 FR 46936 
(August 7, 2008) (File Nos. SR-BSE-2008-02; SR-BSE-2008-23; SR-BSE-
2008-25; SR-BSECC-2008-01) (``Order Approving the Acquisition of the 
Boston Stock Exchange, Incorporated by The NASDAQ OMX Group, 
Inc.'').
    \11\ The RSA specified, among other matters, that BX would 
terminate its responsibility for fulfilling certain obligations and 
cease performing certain regulatory functions as of the effective 
date of June 1, 2012, or sooner if BOX satisfied all of the 
conditions required for BOX to operate as a national securities 
exchange.
    \12\ See Securities Exchange Act Release No. 34-58324 (August 7, 
2008), 73 FR 46936 (August 12, 2008) (File Nos. SR-BSE-2008-02; SR-
BSE-2008-23; SR-BSE-2008-25; SR-BSECC-2008-01); see also Securities 
Exchange Act Release No. 67009 (May 17, 2012), 77 FR 30566 (May 23, 
2012) (SR-BX-2012-036).
    \13\ Pursuant to BX By-Law Article I(t), an Industry Director is 
a Director (excluding any two officers of the Corporation, selected 
at the sole discretion of the Board, amongst those officers who may 
be serving as Directors (the ``Staff Directors'')), who (i) is or 
has served in the prior three 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 ten percent 
of the equity of a broker or dealer, and the broker or dealer 
accounts for more than five percent of the gross revenues received 
by the consolidated entity; (iii) owns more than five percent of the 
equity securities of any broker or dealer, whose investments in 
brokers or dealers exceed ten percent 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 twenty percent or more of the professional revenues 
received by the Director or twenty percent 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 fifty percent 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 twenty percent or more of the professional revenues 
received by the Director or twenty percent 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 Corporation or any affiliate thereof or 
to FINRA or has had any such relationship or provided any such 
services at any time within the prior three years.
    \14\ Pursuant to BX By-Law Article I(x), a Member Representative 
Director is 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 BX By-Laws (or 
elected by the stockholders without such nomination or voting in the 
case of the Member Representative Directors elected pursuant to 
Article IV, Section 4.3(b)). A Member Representative Director may, 
but is not required to be, an officer, director, employee, or agent 
of an Exchange Member.
    \15\ See Phlx By-Law Article III, Section 3-2(a) and NASDAQ By-
Law Article III, Section 2(a).
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    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\16\ that the proposed rule change (SR-BX-2013-029) be, and it 
hereby is, approved.
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    \16\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-12486 Filed 5-24-13; 8:45 am]
BILLING CODE 8011-01-P