Document ID: SEC-2014-0422-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Stock Exchange, Inc.
Posted Date: 2014-03-14T04:00Z

[Federal Register Volume 79, Number 50 (Friday, March 14, 2014)]
[Notices]
[Pages 14550-14551]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-05598]

[[Page 14550]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71675; File No. SR-CHX-2014-03]

Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; 
Notice of Filing of Proposed Rule Change To Amend the Bylaws of the 
Exchange

March 10, 2014.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given 
that on February 28, 2014, the Chicago Stock Exchange, Inc. (``CHX'' or 
``Exchange'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I and II 
below, which Items have been prepared by the self-regulatory 
organization. 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\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    CHX proposes to amend the Bylaws of the Exchange. The text of this 
proposed rule change is available on the Exchange's Web site at http://www.chx.com/rules/proposed_rules.htm, at the principal office of the 
Exchange, 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 self-regulatory organization 
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 those 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
    The Exchange proposes to amend Article II, Sec. 5(a) of the Bylaws 
of the Exchange to provide that the Vice Chairman shall be nominated by 
the Chairman and elected by a majority of the CHX Board. Notably, the 
Exchange proposes to eliminate the requirements that the Vice Chairman 
of the CHX Board be a Participant Director \4\ and be elected by a 
majority vote of Participant Directors.
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    \4\ Article II, Section 2(b) of the Bylaws of the Exchange 
defines ``Participant Directors'' as follows:
     The term ``Participant Director'' shall mean a director who is 
a Participant or an officer, managing member or partner of an entity 
that is a Participant. The term ``Participant'' shall mean any 
individual, corporation, partnership or other entity that holds a 
permit issued by the Corporation to trade securities on the market 
operated by the Corporation.
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Background
    On February 9, 2005, the Exchange's ownership structure was 
demutualized, pursuant to the plan proposed under SR-CHX-2004-26,\5\ 
which was approved by the SEC on February 8, 2005.\6\ As part of its 
demutualization, the Exchange adopted separate Bylaws for the Exchange 
and the new holding company, CHX Holdings, Inc.
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    \5\ See Securities Exchange Act Release No. 51149 (February 8, 
2005), 70 FR 7531 (February 14, 2005) (``Order'').
    \6\ See Securities Exchange Act Release No. 50892 (December 20, 
2004), 69 FR 77796 (December 28, 2004) (``Notice'').
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    Among other things, the Bylaws of the Exchange granted Participants 
certain representation rights on the Board. For example, current 
Article II, Section 5(a), which was adopted upon demutualization, 
provides that the Participant Directors shall elect the Vice Chairman 
by majority vote from among the Participant Directors. In addition, 
current Article II, Sec. 2(b) requires one-half of the CHX Board minus 
one seat (rounded down to the nearest whole number) be comprised of 
Participant Directors; current Article II Sec. 3 requires half of the 
Nominating and Governance Committee be comprised of STP Participant 
Directors (i.e., Participant Directors who were nominated through a 
special process by Participant firms); and current Article II, Sec 6 
requires a vacancy on the CHX Board left by a Participant Director be 
filled with a Participant Director.
Proposed Amendment
    The Exchange now proposes to eliminate the requirement that the 
Vice Chairman of the CHX Board be a Participant Director elected by a 
majority of Participant Directors. The Exchange submits that this 
requirement unnecessarily shrinks the pool of qualified and willing 
candidates for the position of Vice Chairman, while adding little in 
the way of board representation protection for Participants above what 
is already provided for in the Bylaws of the Exchange.
    Specifically, the Exchange proposes to replace the first sentence 
of current Article II, Sec. 5(a) of the Bylaws of the Exchange with 
language that states that the Vice Chairman shall be nominated by the 
Chairman and elected by a majority vote of the Board of Directors and 
that the Chairman shall provide the name of his or her nominee to the 
Board, in writing, no later than five business days before the date on 
which the Board will be asked to vote to fill the position. The 
Exchange notes that other exchanges do not explicitly provide for the 
position of ``Vice Chairman'' in their bylaws.\7\ At these other 
exchanges, the responsibilities of the Vice Chairman of the CHX Board 
are assigned to the Chairman, another officer, or the board generally. 
Also, the proposed amendment shall apply prospectively to future Vice 
Chairmen of the CHX Board and shall not apply to the current Vice 
Chairman.
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    \7\ See By-laws of the NASDAQ Stock Market, Inc.; see also Third 
Amended and Restated Bylaws of NYSE Regulation, Inc.; see also 
Amended and Restated By-Laws of BATS Exchange, Inc.
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2. Statutory Basis
    The Exchange believes that the 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.\8\ In particular, proposed 
Article II, Sec. 5(a) of the Bylaws of the Exchange are consistent with 
Section 6(b)(1) of the Act, because it permits the CHX Board to select 
a Vice Chairman from a larger pool of qualified and willing 
individuals, which will result in the position being held by the most 
able and willing candidate, thereby enabling 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 Participants 
and persons associated with its Participants, with the provisions of 
the Act, the rules and regulations thereunder, and the rules of the 
Exchange.\9\ Although the Exchange proposes to modify the requirements 
and procedures for the selection of the Vice Chairman of the CHX Board, 
the current compositional requirements of the CHX Board, including 
current Article II, Sec. 2, will not be changed. Therefore, the CHX 
Board will be required to comply with these requirements.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(1).

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[[Page 14551]]

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. Specifically, the Exchange 
believes that the proposed Bylaws do not directly affect competition 
between the Exchange and others that provide the same goods and 
services as the Exchange, since they do not affect the availability or 
pricing of such goods and services.

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

    No written comments were solicited or received with respect to 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 up to 90 days (i) as the 
Commission may designate if it finds such longer period to be 
appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    A. By order approve or disapprove the 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 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-CHX-2014-03 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-CHX-2014-03. 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 such filing also will be available 
for inspection and copying at the principal offices 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-CHX-2014-03, 
and should be submitted on or before April 4, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-05598 Filed 3-13-14; 8:45 am]
BILLING CODE 8011-01-P