Document ID: SEC-2010-1034-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX BX, Inc.
Posted Date: 2010-07-08T04:00Z

[Federal Register: July 8, 2010 (Volume 75, Number 130)]
[Notices]               
[Page 39299-39301]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr08jy10-131]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-62400; File No. SR-BX-2010-042]

 
Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Amend the 
BOX LLC Agreement

June 29, 2010.
    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 June 28, 2010, NASDAQ OMX BX, Inc. (the ``Exchange'') 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 self-regulatory organization. The Exchange filed the 
proposed rule change pursuant to Section 19(b)(3)(A) of the Act,\3\ and 
Rule 19b-4(f)(6) thereunder,\4\ which renders the proposal effective 
upon filing with the Commission. The Commission is publishing this 
notice to solicit comments on the proposed rule from interested 
persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend the proposed Sixth Amended and 
Restated Operating Agreement (``BOX LLC Agreement''), of the Boston 
Options Exchange Group LLC (``BOX LLC''), in connection with the 
restructuring of subsidiary holding companies by the Montreal Exchange 
Inc.,\5\ a company incorporated in Qu[eacute]bec, Canada (``MX''), 
solely involving MX subsidiaries indirectly holding ownership interests 
in BOX LLC. The text of the proposed rule change is available from the 
principal office of the Exchange, at the Commission's Public Reference 
Room and also on the Exchange's Internet Web site at http://
nasdaqomxbx.cchwallstreet.com/NASDAQOMXBX/Filings/.
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    \5\ The Montr[eacute]al Exchange Inc. is also known in French as 
the Bourse de Montr[eacute]al Inc.
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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 these statements may be examined at 
the places specified in Item IV below. The self-regulatory organization 
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
    On January 13, 2004, the Commission approved four Exchange 
proposals that together established, through an operating agreement 
among its owners, a Delaware limited liability company, BOX LLC, to 
operate BOX as an options trading facility of the Exchange.\6\
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    \6\ See Securities Exchange Act Release No. 49066 (January 13, 
2004), 69 FR 2773 (January 20, 2004) (establishing a fee schedule 
for the proposed BOX facility); Securities Exchange Act Release No. 
49065 (January 13, 2004), 69 FR 2768 (January 20, 2004) (creating 
Boston Options Exchange Regulation LLC to which the Exchange would 
delegate its self-regulatory functions with respect to the BOX 
facility); Securities Exchange Act Release No. 49068 (January 13, 
2004), 69 FR 2775 (January 20, 2004) (approving trading rules for 
the BOX facility); Securities Exchange Act Release No. 49067 
(January 13, 2004), 69 FR 2761 (January 20, 2004) (approving certain 
regulatory provisions of the operating agreement of BOX LLC).
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    Prior to the Transfer (as defined below), MX held (i) 100% of the 
common stock of MX US 1, Inc., a Delaware corporation, (ii) 100% of the 
common shares of 3226506 Nova Scotia Company, a Nova Scotia unlimited 
liability company (``NSULC 1'') and (iii) 100% of the preferred shares 
and 99.9% of the common shares of 3226507 Nova Scotia Company, a Nova 
Scotia unlimited liability company (``NSULC 2''). NSULC 1 held 0.1% of 
the common shares of NSULC 2. MX US 1, Inc. held 100% of the common 
stock of MX US 2, Inc., a Delaware corporation, and NSULC 2 owned 100% 
of the preferred stock of MX US 2, Inc. MX US 2, Inc. held a 53.83% 
ownership interest in BOX LLC.\7\
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    \7\ See Securities Exchange Act Release No. 58822 (Oct. 21, 
2008), 73 FR 63742 (Oct. 27, 2008) (SR-BSE-2008-47) (approving BOX 
purchase and cancellation of units held by a BOX LLC member 
resulting in increased ownership interest of the other members of 
the BOX LLC Agreement).
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    Upon effectiveness of this rule filing, MX is expected to effect a 
series of transactions resulting in a new ownership structure (the 
``Transfer''). Following the Transfer, the ownership structure by which 
MX will indirectly control MX US 2, Inc. will be as follows: MX will 
hold 100% of the common stock of MX US 1, Inc. MX US 1, Inc. will hold 
(i) 100% of the equity of MX US 1, LLC, a Delaware limited liability 
company, and (ii) 100% of the common stock of MX US 2, Inc. NSULC 1 
will be dissolved and its assets will be distributed to MX US 1, LLC. 
MX US 1, LLC will hold 100% of the equity of MX US 2, LLC, a Delaware 
limited liability company (formerly NSULC 2). MX US 2, LLC will hold 
100% of the preferred stock of MX US 2, Inc. MX US 2, Inc. will hold a 
53.83% ownership interest in BOX LLC.
    The Exchange is submitting the proposed rule change to the 
Commission to amend the BOX LLC Agreement pursuant to the proposed 
Instruments of Accession in connection with the Transfer. As a result 
of the Transfer, MX US 1, LLC and MX US 2, LLC will be indirect, 
wholly-owned subsidiaries of MX.
    Pursuant to Section 8.4(g) of the BOX LLC Agreement, as previously 
approved by the Commission, BOX LLC is required to amend the BOX LLC 
Agreement to make a Controlling Person \8\ a party to the BOX LLC 
Agreement if such Controlling Person establishes a Controlling Interest 
\9\ in any BOX Member that, alone or together with any Affiliate of 
such BOX Member, holds a Percentage Interest in BOX

[[Page 39300]]

equal to or greater than 20%.\10\ Pursuant to the Transfer, MX US 1, 
LLC has acquired a Controlling Interest in MX US 2, LLC, which owns 
100% of the preferred shares of MX US 2, Inc., which owns a 53.83% 
Controlling Interest in BOX LLC. MX US 1, LLC and MX US 2, LLC, as 
Controlling Persons, are required to be and will become parties to the 
BOX LLC Agreement pursuant to the proposed Instruments of Accession. As 
a result, MX US 1, LLC and MX US 2, LLC will agree to abide by all the 
provisions of the BOX LLC Agreement, including those provisions 
requiring submission to the jurisdiction of the Commission.\11\
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    \8\ A ``Controlling Person'' is defined as ``a Person who, alone 
or together with any Affiliate of such Person, holds a controlling 
interest in a [BOX] Member.'' See Section 8.4(g)(v)(B), BOX LLC 
Agreement.
    \9\ A ``Controlling Interest'' is defined as ``the direct or 
indirect ownership of 25% or more of the total voting power of all 
equity securities of a Member (other than voting rights solely with 
respect to matters affecting the rights, preferences, or privileges 
of a particular class of equity securities), by any Person, alone or 
together with any Affiliate of such Person.'' See Section 
8.4(g)(v)(A), BOX LLC Agreement.
    \10\ See Section 8.4(g), BOX LLC Agreement.
    \11\ The BOX LLC Agreement states, in part, that ``the Members, 
officers, directors, agents, and employees of Members irrevocably 
submit to the exclusive jurisdiction of the U.S. Federal courts, 
U.S. Securities and Exchange Commission, and the Boston Stock 
Exchange, for the purposes of any suit, action or proceeding 
pursuant to U.S. Federal securities laws, the rules or regulations 
thereunder, arising out of, or relating to, BOX activities or 
Article 19.6(a), (except that such jurisdictions shall also include 
Delaware for any such matter relating to the organization or 
internal affairs of BOX, provided that such matter is not related to 
trading on, or the regulation, of the BOX Market), and hereby waive, 
and agree not to assert by way of motion, as a defense or otherwise 
in any such suit, action or proceeding, any claims that they are not 
personally subject to the jurisdiction of the U.S. Securities and 
Exchange Commission, that the suit, action or proceeding is an 
inconvenient forum or that the venue of the suit, action or 
proceeding is improper, or that the subject matter hereof may not be 
enforced in or by such courts or agency.'' See BOX LLC Agreement, 
Section 19.6.
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    For the reasons stated above, the Exchange is submitting to the 
Commission the proposed Instruments of Accession to the BOX LLC 
Agreement as a rule change.
2. Basis
    The Exchange believes that the proposal is consistent with the 
requirements of Section 6(b) of the Act,\12\ in general, and furthers 
the objectives of Section 6(b)(1),\13\ in particular, in that it 
enables the Exchange to be so organized so 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 exchange members and persons associated with 
its exchange members, with the provisions of the Act, the rules and 
regulations thereunder, and the rules of the Exchange. The Exchange 
also believes that this filing furthers the objectives of Section 
6(b)(5) of the Act \14\ in that it is designed to facilitate 
transactions in securities, 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. 
The Exchange believes that the proposed rule change to amend the BOX 
LLC Agreement to make MX US 1, LLC and MX US 2, LLC parties to the BOX 
LLC Agreement, pursuant to the proposed Instruments of Accession, 
should provide the Commission with sufficient authority over changes in 
control of BOX LLC to enable the Commission to carry out its regulatory 
oversight responsibilities with respect to BX and the BOX facility.
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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(5)[sic].
    \14\ 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.

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 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: (1) Does not 
significantly affect the protection of investors or the public 
interest; (2) does not impose any significant burden on competition; 
and (3) by its terms does not become operative for 30 days after the 
date of this filing, or such shorter time as the Commission may 
designate if consistent with the protection of investors and the public 
interest, the proposed rule change has become effective pursuant to 
Section 19(b)(3)(A) \15\ of the Act and Rule 19b-4(f)(6) 
thereunder.\16\
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    \15\ 15 U.S.C. 78s(b)(3)(A).
    \16\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to provide the Commission 
with written notice of its intent to file the proposed rule change, 
along with a brief description and text of the proposed rule change, 
at least five business days prior to the date of filing of the 
proposed rule change, or such shorter time as designated by the 
Commission. The Exchange has met this requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) \17\ normally 
may not become operative prior to 30 days after the date of filing. 
However, Rule 19b-4(f)(6)(iii) \18\ permits the Commission to designate 
a shorter time if such action is consistent with the protection of 
investors and the public interest. The Exchange requests that the 
Commission waive the 30-day operative delay, as specified in Rule 19b-
4(f)(6)(iii),\19\ which would make the rule change effective and 
operative upon filing. The Commission believes that waiving the 30-day 
operative delay is consistent with the protection of investors and the 
public interest because the Exchange has represented that the Transfer 
is anticipated to be consummated on June 29, 2010.\20\ In addition, the 
proposed rule change to amend the BOX LLC Agreement to make MX US 1, 
LLC and MX US 2, LLC parties to the BOX LLC Agreement, pursuant to the 
proposed Instruments of Accession, should provide the Commission with 
sufficient authority over changes in control of BOX LLC to enable the 
Commission to carry out its regulatory oversight responsibilities with 
respect to BX and the BOX facility. Accordingly, the Commission 
designates the proposed rule change operative upon filing with the 
Commission.
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    \17\ 17 CFR 240.19b-4(f)(6).
    \18\ 17 CFR 240.19b-4(f)(6)(iii).
    \19\ Id.
    \20\ For purposes only of waiving the operative delay for this 
proposal, the Commission has considered the proposed rule's impact 
on efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of such proposed rule 
change, the Commission may summarily abrogate 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.

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 e-mail to rule-comments@sec.gov. Please include 
File Number SR-BX-2010-042 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary,

[[Page 39301]]

Securities and Exchange Commission, 100 F Street, NE., Washington, DC 
20549-1090.

All submissions should refer to File Number SR-BX-2010-042. 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/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 
a.m. and 3 p.m. Copies of such 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-BX-2010-042 and should be 
submitted on or before July 29, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
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    \21\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-16533 Filed 7-7-10; 8:45 am]
BILLING CODE 8010-01-P