Document ID: SEC-2009-0897-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Order Approving Proposed Rule Change, as Modified by Amendment No. 1 Thereto, to Amend the By-Laws of The NASDAQ OMX Group, Inc.
Posted Date: 2009-07-07T04:00Z

[Federal Register: July 7, 2009 (Volume 74, Number 128)]
[Notices]               
[Page 32207-32209]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr07jy09-104]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60183; File No. SR-NASDAQ-2009-039]

 
Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Order 
Approving Proposed Rule Change, as Modified by Amendment No. 1 Thereto, 
to Amend the By-Laws of The NASDAQ OMX Group, Inc.

June 26, 2009.
    On April 27, 2009, The NASDAQ Stock Market LLC (``NASDAQ 
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 the By-Laws of The NASDAQ OMX Group, Inc. 
(``NASDAQ OMX''). The proposed rule change was published for comment in 
the Federal Register on May 12, 2009.\3\ On June 2, 2009, the NASDAQ 
Exchange filed Amendment No. 1 to the proposed rule change.\4\ The 
Commission

[[Page 32208]]

received no comments regarding the proposal. This order approves the 
proposed rule change.
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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. 59858 (May 4, 2009), 
74 FR 22191 (``Notice'').
    \4\ Amendment No. 1 modified the original rule proposal to 
indicate that the Board of Directors of NASDAQ OMX approved the 
proposed rule change on May 28, 2009, in addition to December 17, 
2008, and to revise the proposed rule change with respect to 
``Extension of Time Period for Commission Action.'' Because these 
are technical modifications, the Commission is not publishing 
Amendment No. 1 for comment.
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I. Description of the Proposal

    As provided in Article XI of the NASDAQ OMX By-Laws, proposed 
amendments to the By-Laws are to be reviewed by the Board of Directors 
of each self-regulatory subsidiary of NASDAQ OMX, and if any such 
proposed amendment must, under Section 19 of the Act and the rules 
promulgated thereunder, be filed with, or filed with and approved by, 
the Commission before such amendment may be effective, then such 
amendment shall not be effective until filed with, or filed with and 
approved by, the Commission, as the case may be. Consistent with such 
requirement, the NASDAQ Exchange has filed proposed amendments to the 
NASDAQ OMX By-Laws.\5\ As described more fully in the Notice, the 
NASDAQ Exchange proposed the following amendments to the By-Laws.
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    \5\ Although there is a reference in the Notice to a proposed 
amendment to the Certificate of Incorporation of NASDAQ OMX 
(``NASDAQ OMX Certificate''), this proposal does not in fact amend 
the NASDAQ OMX Certificate. The Exchange recently amended the NASDAQ 
OMX Certificate pursuant to a separate filing with the Commission. 
See Securities Exchange Act Release No. 59460 (February 26, 2009), 
74 FR 9841 (March 6, 2009).
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    1. Amend Article I to reflect the recent name changes of the 
Philadelphia Stock Exchange and the Boston Stock Exchange to NASDAQ OMX 
PHLX, Inc. and NASDAQ OMX BX, Inc., respectively;
    2. Amend Article III to require a stockholder making a proposal to 
supply more complete information about the stockholder's background.
    3. Amend Article IV to state that both the NASDAQ OMX Audit and 
Management Compensation Committees shall be composed of independent 
directors within the meaning of the rules of the NASDAQ Exchange that 
govern NASDAQ OMX's listing (and, in the case of the Audit Committee, 
Section 10A of the Act).
    4. Amend Article IV to revise the compositional requirements of the 
NASDAQ OMX Nominating Committee.
    5. Amend Article VIII to: (a) Require NASDAQ OMX to provide 
indemnification against liability, advancement of expenses, and the 
power to purchase and maintain insurance on behalf of persons serving 
as a director, officer, or employee of any wholly owned subsidiary of 
NASDAQ OMX to the same extent as indemnification, advancement of 
expenses, and the power to maintain insurance is provided for 
directors, officers, or employees of NASDAQ OMX; (b) extend the 
discretionary authority of NASDAQ OMX under Section 8.1(c) of the By-
Laws to provide indemnification to persons serving as an agent of 
NASDAQ OMX to persons serving as an agent of any wholly owned 
subsidiary of NASDAQ OMX; and (c) clarify that any repeal, modification 
or amendment of, or adoption of any provision inconsistent with, the 
indemnification and advancement of expenses provided for in Article 
VIII will not adversely affect the right of any person covered by the 
provision if the act or omission that any proceeding arises out of or 
is related to had occurred prior to the time for the repeal, amendment, 
adoption or modification.
    6. Amend Article IX to revise the language of the provisions 
dealing with capital stock to reflect possible participation in the 
Direct Registration System (``DRS'').
    7. Amend Article XII to conform certain provisions applicable to 
NASDAQ OMX's directors, officers, employees, and/or agents more closely 
to corresponding provisions in the Amended and Restated By-Laws of NYSE 
Euronext (``NYSE Euronext By-Laws'').

II. Discussion and Commission's Findings

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities exchange.\6\ 
In particular, for the reasons discussed below, the Commission finds 
that the proposed rule change is consistent with Section 6(b)(1) of the 
Act,\7\ which requires a national securities exchange to be so 
organized and have the capacity to carry out the purposes of the Act 
and to enforce compliance by its members and persons associated with 
its members with the provisions of the Act, and Section 6(b)(5) of the 
Act,\8\ in that it is designed, among other things, to prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade, 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.
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    \6\ In approving this proposed rule change, the Commission notes 
that it has considered the proposed rule's impact on efficiency, 
competition, and capital formation. See 15 U.S.C. 78c(f).
    \7\ 15 U.S.C. 78(b)(1).
    \8\ 15 U.S.C. 78f(b)(5).
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    The NASDAQ Exchange proposes to revise the structure of the NASDAQ 
OMX Nominating Committee. Currently, the NASDAQ OMX Nominating 
Committee is required to be composed solely of persons who are not 
directors, or who are directors not standing for re-election. Under the 
amended By-Laws, the NASDAQ OMX Nominating Committee would be composed 
of four or five directors, all of whom must be independent within the 
meaning of the rules of the NASDAQ Exchange.\9\ Further, the number of 
Non-Industry Directors (i.e., Directors without material ties to the 
securities industry) must equal or exceed the number of Industry 
Directors, and at least two members of the committee must be Public 
Directors (i.e., directors who have no material business relationship 
with a broker or dealer, NASDAQ OMX or its affiliates, or FINRA).\10\
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    \9\ See NASDAQ Exchange Rule 5605(a)(2). Rule 5605(a)(2) was 
formerly designated Rule 4200(a)(15). See Securities Exchange Act 
Release No. 59663 (March 31, 2009), 74 FR 15552 (April 6, 2009) (SR-
NASDAQ-2009-018).
    \10\ See NASDAQ OMX By-laws, Article I (j), (m), and (n) for the 
definitions of Industry Director, Non-Industry Director, and Public 
Director, respectively.
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    The Commission believes that it is appropriate for NASDAQ OMX to 
revise the composition of its Nominating Committee so that it is 
composed exclusively of directors that would be considered independent 
within the meaning of the listing rules of the NASDAQ Exchange,\11\ to 
provide for a compositional balance between Industry Directors, Non-
Industry Directors, and to specify that at least two Nominating 
Committee members must be Public Directors. The Commission further 
believes that it is appropriate for the By-Laws to be amended to 
specify that the NASDAQ OMX Management Compensation Committee and the 
Audit Committee must be composed exclusively of independent director 
members within the meaning of the listing rules of the NASDAQ Exchange 
(and, in the case of the Audit Committee, Section 10A of the Act).\12\ 
The NASDAQ Exchange has represented that NASDAQ OMX adheres to the 
director independence requirements in the NASDAQ Exchange's listing 
rules and, in the case the of the Audit Committee) Section 10A of the 
Act, but believed that such requirements should be set forth expressly 
in the By-Laws.
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    \11\ Id.
    \12\ See NASDAQ Exchange Rule 5605(a)(2). 15 U.S.C. 78j-1(m).
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    Currently, NASDAQ OMX directors, officers, and employees, as well 
as

[[Page 32209]]

agents, are required by the By-Laws to give due regard to the 
preservation of the independence of each self-regulatory subsidiary of 
NASDAQ OMX, not to take any actions that would interfere with each 
self-regulatory subsidiary's regulatory functions, to cooperate with 
the Commission, to consent to U.S. jurisdiction, and to consent in 
writing to the applicability of these provisions. As more fully 
described in the Notice, the proposed rule change would conform Article 
XII of the By-Laws more closely to corresponding provisions in the NYSE 
Euronext By-Laws, which the Commission previously approved.\13\
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    \13\ See NYSE Euronext Bylaws, Article III, Section 9.3; NYSE 
Euronext Bylaws, Article VII, Section 7.1. See also Securities 
Exchange Act Release No. 55293 (February 14, 2007), 72 FR 8033 
(February 22, 2007) (SR-NYSE-2006-120).
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III. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\14\ that the proposed rule change (SR-NASDAQ-2009-039) be, and it 
hereby is, approved.
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    \14\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. E9-15899 Filed 7-6-09; 8:45 am]

BILLING CODE 8010-01-P