Document ID: SEC-2009-0380-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Change: Boston Stock Exchange Clearing Corp.
Posted Date: 2009-03-20T04:00Z

[Federal Register: March 20, 2009 (Volume 74, Number 53)]
[Notices]               
[Page 11983-11985]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr20mr09-108]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59571; File No. SR-BSECC-2009-02]

 
Self-Regulatory Organizations; Boston Stock Exchange Clearing 
Corporation; Notice of Filing of Proposed Rule Change To Amend the 
Articles of Organization and By-Laws of Boston Stock Exchange Clearing 
Corporation

March 12, 2009.
    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 February 20, 2009, Boston Stock Exchange Clearing Corporation 
(``BSECC'') 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 BSECC. 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\ 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

    BSECC is filing this proposed rule change with regard to proposed 
changes to its Articles of Organization and By-Laws to increase its 
authorized shares and to reflect a transfer in ownership of five 
percent of BSECC's shares. BSECC is also proposing to amend its 
Articles of Organization and By-Laws to change its name to the Nasdaq 
Clearing Corporation and to make other miscellaneous changes. The 
proposed rule change will be implemented as soon as practicable 
following approval by the Commission. The text of the proposed rule 
change is available from the Commission's public reference room and at 
http://nasdaqomxbx.cchwallstreet.com.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, BSECC 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. BSECC 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 August 29, 2008, The NASDAQ OMX Group, Inc. (``NASDAQ OMX'') 
completed its acquisition of Boston Stock Exchange, Incorporated 
(recently renamed NASDAQ OMX BX, Inc.) and several of its wholly owned 
subsidiaries, including BSECC. As a result, BSECC has become an 
indirect wholly owned subsidiary of NASDAQ OMX. On January 5, 2009, OMX 
AB, which is another indirect wholly owned subsidiary of NASDAQ OMX, 
entered into agreements with Fortis Bank Global Clearing N.V. 
(``Fortis'') and European Multilateral Clearing Facility N.V. 
(``EMCF''), pursuant to which, among other things, OMX AB (i) has 
acquired a 22% equity stake in EMCF and (ii) has agreed to acquire a 5% 
equity stake in BSECC from NASDAQ OMX BX, Inc. and in turn to transfer 
this stake to EMCF.
    The Articles of BSECC provide that:

    All of the authorized shares of Common Stock of [BSECC] shall be 
issued and outstanding, and shall be held by Boston Stock Exchange, 
Incorporated, a Delaware corporation. Boston Stock Exchange, 
Incorporated may not transfer or assign any shares of stock of 
BSECC, in whole or in part, to any entity, unless such transfer or 
assignment shall be filed with and approved by the U.S. Securities 
and Exchange Commission under Section 19 of the Securities Exchange 
Act of 1934, as amended, and the rules promulgated thereunder.

    Accordingly, in order to complete the transfer of shares of BSECC 
contemplated by the agreements, BSECC must amend the Articles to 
specify an additional stockholder in BSECC and must obtain Commission 
approval for the transfer of stock. In addition, BSECC is proposing to 
amend the Articles and its By-Laws to change its name to

[[Page 11984]]

NASDAQ Clearing Corporation and to adopt other miscellaneous changes.
    EMCF is a central counterparty clearinghouse for European equity 
trading on exchanges and multilateral trading facilities, including 
NASDAQ OMX Europe Ltd., Chi-X Europe Ltd., and BATS Trading Europe Ltd. 
In addition, EMCF has agreed to provide central counterparty clearing 
services to NASDAQ OMX exchanges in Stockholm, Helsinki, Copenhagen, 
and Iceland. EMCF clears stocks traded on multiple European markets, 
including stocks comprising the AEX, DAX, FTSE100, CAC40, and SMI20 
indexes. Services offered by EMCF include novation, gross trade 
netting, settlement, margining, and fails and buy-in management. EMCF 
is headquartered in the Netherlands, and is subject to voluntary 
supervision by De Nederlandsche Bank and Autoriteit Financiele Markten. 
In addition to OMX AB, EMCF's stockholders are Fortis Bank Nederland 
(Holding) N.V. and Fortis Bank Global Clearing N.V. NASDAQ OMX and 
EMCF's other stockholders will seek to further broaden EMCF's ownership 
structure to include order flow providers and financial institutions. 
It is expected that this will increase the commitment of banks and flow 
providers towards EMCF, decrease EMCF's dependence on one shareholder, 
and demonstrate to the market that EMCF is a solid company with firm 
backing of shareholders with high standing and that EMCF is a company 
that looks after the interests of all its interested parties. Also, a 
key purpose of the diversified shareholders' base is to facilitate the 
further development of EMCF into becoming the leading central 
counterparty services provider for European cash equities.
    Under the Share Transfer Agreement dated January 5, 2009, among 
Fortis, OMX AB, and EMCF, OMX AB has agreed, subject to Commission 
approval, to transfer a 5% stake in BSECC to EMCF. The transfer of 
BSECC's shares is a portion of the consideration to be paid by OMX AB 
for obtaining a 22% stake in EMCF. Accordingly, OMX AB must obtain the 
shares from NASDAQ OMX BX, Inc. prior to transferring them to EMCF. OMX 
AB has agreed to undertake to use reasonable endeavors to obtain 
Commission approval for the transfer as soon as possible and in any 
event by July 5, 2009.
    Currently, the authorized share capital of BSECC is 150 shares, par 
value $100. Because 5% of 150 is 7.5, BSECC must increase its 
authorized share capital and pay a 2 for 1 stock dividend to NASDAQ OMX 
BX, Inc. such that it will own 300 shares and be able to transfer 15 of 
them. Accordingly, BSECC also proposes to amend its Articles in order 
to increase its authorized share capital. BSECC proposes to amend its 
Articles to reflect either OMX AB or EMCF as one of its stockholders 
(as well as the name change of NASDAQ OMX BX, Inc.).
    The amended provisions would state:

    All of the authorized shares of Common Stock of [BSECC] shall be 
issued and outstanding, and shall be held by NASDAQ OMX BX, Inc., a 
Delaware corporation, and either OMX AB, a corporation organized 
under the laws of Sweden, or European Multilateral Clearing 
Facility, N.V., a public company with limited liability incorporated 
under the laws of the Netherlands.

    The language in the Articles providing that a stockholder may not 
transfer or assign shares of stock of BSECC without approval of the 
Commission would remain in place, such that all of the stockholders of 
BSECC would be bound by that restriction.
    The Share Transfer Agreement also provides that under certain 
circumstances, EMCF may transfer the shares of BSECC back to OMX AB or 
NASDAQ OMX BX, Inc., thereby unwinding this aspect of the transaction. 
In order to avoid the need to seek approval for such an unwinding in 
the future, BSECC requests that the Commission approve at this time 
both the initial transfer and any future unwinding.
    Finally, at the time of the transfer EMCF and NASDAQ OMX BX, Inc. 
will enter into a Shareholders Agreement to govern their relationship 
with respect to BSECC. The key provisions of the Shareholders Agreement 
are as follows. First, EMCF will grant BSECC a right of first refusal 
to purchase all or any portion of its shares that EMCF may propose to 
transfer. Second, if NASDAQ OMX BX, Inc. proposes to transfer any of 
its shares of BSECC to any person, it must provide EMCF with the right 
to substitute EMCF's shares in such transfer in proportion to EMCF's 
percentage share of ownership in BSECC. Third, if NASDAQ OMX BX, Inc. 
proposes to enter into a transaction under which it would no longer own 
a majority of BSECC's outstanding shares or a sale of all or 
substantially all of the assets of BSECC (``Sale Transaction''), EMCF 
will in most circumstances take such actions as are necessary to 
support the consummation of the Sale Transaction. Fourth, if BSECC 
issues new securities it must first offer them to NASDAQ OMX BX, Inc. 
and EMCF. Finally, the Shareholders Agreement provides for rights of 
the stockholders to obtain information from BSECC about its financial 
performance and operations.
    Because the share transfers described by the Shareholders Agreement 
would require Commission approval under the Articles, the Agreement 
also provides that ``[n]othing in the Agreement shall be construed to 
authorize [BSECC] or any stockholder of [BSECC] to transfer any share 
or other interests in [BSECC] unless such transfer is approved in 
accordance with the restrictions contained in the [Articles] of [BSECC] 
and such other restrictions as may be imposed by the * * * Commission 
or other governmental authority having jurisdiction over [BSECC].''
    BSECC is also proposing changing its name from Boston Stock 
Exchange Clearing Corporation to NASDAQ Clearing Corporation. The 
change reflects BSECC's changed status as a subsidiary of NASDAQ OMX. 
In addition, BSECC is proposing the following miscellaneous changes to 
its Articles and By-Laws. First, BSECC is restating its Articles to 
consolidate prior amendments into a single document. Under 
Massachusetts law, the form for restatement of the Articles 
necessitates nonsubstantive changes to citations to Massachusetts 
statutes in the title of the Articles, changes to prefatory language in 
Article IV of the Articles, and the addition of nonsubstantive language 
regarding date of effectiveness as a new Article VII. Second, BSECC is 
amending the Articles and By-Laws to reflect the change in the name of 
Boston Stock Exchange, Incorporated to NASDAQ OMX BX, Inc. Finally, 
BSECC is correcting several typographical errors in Article X of the 
By-Laws.
2. Statutory Basis
    The proposed rule change is consistent with the provisions of 
Section 17A of the Act,\3\ in general, and with Section 17A(b)(3)(A) of 
the Act,\4\ in particular, in that it is designed to ensure that BSECC 
is so organized and has the capacity to be able to facilitate the 
prompt and accurate clearance and settlement of securities 
transactions. The change will allow investment in BSECC by EMCF, a 
central counterparty clearinghouse with substantial expertise in 
clearing of equity trades on exchanges and multilateral trading 
facilities. At the same time, the changes are structured to allow the 
Commission ongoing oversight over any further transfers of BSECC's 
common stock that may be proposed in the future.
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    \3\ 15 U.S.C. 78q-1.
    \4\ 15 U.S.C. 78q-1(b)(3)(A).

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[[Page 11985]]

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

    BSECC does not believe that the proposed rule change will result in 
any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act, as amended.

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

    Written comments were neither solicited nor received.

III. 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-BSECC-2009-02 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-BSECC-2009-02. 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 inspection and 
copying 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. The text of the proposed rule change is available at 
BSECC, the Commission's Public Reference Room, and http://
nasdaqomxbx.cchwallstreet.com/NASDAQOMXBX/pdf/bsecc-filings/2009/SR-
BSECC-2009-002.pdf. 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-BSECC-2009-02 and should be submitted on or before April 10, 2009.

    For the Commission by the Division of Trading and Markets, 
pursuant to delegated authority.\5\
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    \5\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-6084 Filed 3-19-09; 8:45 am]