Document ID: SEC-2016-2172-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Stock Exchange, Inc.
Posted Date: 2016-12-12T05:00Z

[Federal Register Volume 81, Number 238 (Monday, December 12, 2016)]
[Notices]
[Pages 89543-89559]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-29646]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79474; File No. SR-CHX-2016-20]

Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; 
Notice of Filing of Proposed Rule Change in Connection With the 
Proposed Transaction Involving CHX Holdings, Inc. and North America 
Casin Holdings, Inc.

December 6, 2016.
    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 December 2, 2016, 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, II 
and III 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\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is filing this proposed rule change in connection with 
a Transaction (``Transaction'') whereby Exchange Acquisition 
Corporation (``Merger Sub''), a corporation organized under the laws of 
the State of Delaware and wholly-owned subsidiary of North America 
Casin Holdings, Inc. (``NA Casin Holdings''), a corporation organized 
under the laws of the State of Delaware,\3\ would merge with and into 
CHX Holdings, Inc. (``CHX Holdings''), a corporation organized under 
the laws of the State of Delaware,\4\ with CHX Holdings continuing as 
the surviving corporation. Pursuant to the Transaction, the Exchange 
will remain a wholly-owned subsidiary of CHX Holdings and CHX Holdings 
will become a wholly-owned subsidiary of NA Casin Holdings.
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    \3\ NA Casin Holdings was incorporated in the State of Delaware 
on January 4, 2016.
    \4\ CHX Holdings was incorporated in the State of Delaware on 
January 26, 2005.
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    The text of the proposed Third Amended and Restated Certificate of 
Incorporation of CHX Holdings (``CHX Holdings Certificate'') is 
attached as Exhibit 5A.\5\ The text of the proposed amended Bylaws of 
CHX Holdings (``CHX Holdings Bylaws'') \6\ is attached as Exhibit 
5B.\7\ The text of the proposed Amended and Restated Certificate of 
Incorporation for CHX (``CHX Certificate'') is attached as Exhibit 
5C.\8\

[[Page 89544]]

The text of the proposed amended Bylaws of the CHX (``CHX Bylaws'') is 
attached as Exhibit 5D.\9\ The text of the proposed amendments to the 
Rules of the CHX (``CHX Rules'') is attached as Exhibit 5E. The text of 
the proposed Amended and Restated Certificate of Incorporation of NA 
Casin Holdings (``NA Casin Holdings Certificate'') is attached as 
Exhibit 5F. The text of the proposed Amended and Restated Bylaws of NA 
Casin Holdings (``NA Casin Bylaws'') is attached as Exhibit 5G. The 
text of a resolution of the Board of Directors of CHX Holdings dated 
November 22, 2016 to waive certain ownership and voting limitations to 
permit the Transaction (``Resolutions'') is attached as Exhibit 5H. The 
text of the Stockholders' Agreement of NA Casin Holdings (``NACH 
Stockholders' Agreement'') is herein attached as Exhibit 5I. The text 
of the Amended and Restated Put Agreement by and among North America 
Casin Group, Inc. (``NA Casin Group''), NA Casin Holdings, and Saliba 
Ventures Holdings, LLC (``Saliba'') (``Saliba Put Agreement'') is 
herein attached as Exhibit 5J. The text of the Amended and Restated Put 
Agreement by and among NA Casin Group, NA Casin Holdings, and Raptor 
HoldCo LLC (``Raptor'') (``Raptor Put Agreement'') is herein attached 
as Exhibit 5K.
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    \5\ The original CHX Holdings Certificate was filed with the 
Delaware Secretary of State on January 26, 2005 and was last amended 
on July 26, 2006 to modify the ownership limitations applicable to 
Participants and other persons or entities and increased the number 
of shares of common stock that CHX Holdings is authorized to issue. 
See Securities Exchange Act Release No. 54213 (June 26, 2006), 71 FR 
43547 (August 1, 2006) (order approving SR-CHX-2006-22); see also 
CHX Article 1, Rule 1(s) defining ``Participant.''
    \6\ Reference to a ``current'' governing document (e.g., 
``current CHX Holdings Bylaws'') is to the version of the governing 
document that is currently operative, whereas reference to a 
``proposed'' governing document (e.g., ``proposed CHX Holdings 
Bylaws'') is to the version of the governing document that would be 
in effect pursuant to this proposed rule change.
    \7\ The CHX Holdings Bylaws were last amended on November 23, 
2009 to eliminate an age restriction for CHX Holdings Directors. See 
Securities Exchange Act Release No. 61053 (November 23, 2009), 74 FR 
62861 (December 1, 2009).
    \8\ The original Certificate of Incorporation for CHX was filed 
with the Delaware Secretary of State on March 15, 1972 and was last 
amended on February 9, 2005 in connection with the demutualization 
of the CHX. See Securities Exchange Act Release No. 51149 (February 
8, 2005), 70 FR 7531 (February 14, 2005).
    \9\ The CHX Bylaws were last amended on April 16, 2014 to modify 
the process by which the CHX Vice Chairman is nominated and elected. 
See Securities Exchange Act Release No. 71954 (April 16, 2014), 79 
FR 22557 (April 22, 2014).
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    The text of this proposed rule change is available on the 
Exchange's Web site at http://www.chx.com/regulatory-operations/rule-filings/, 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of this proposed rule filing is to adopt and amend 
rules and other relevant corporate governing documents in order to 
permit the Exchange and CHX Holdings to effect the Transaction.
Current Ownership Structure
    Since February 8, 2005, CHX has been a wholly-owned subsidiary of 
CHX Holdings.\10\ CHX Holdings is the record and beneficial owner of 
1,000 shares of CHX, par value $.01 per share, which represents all of 
the issued and outstanding shares of capital stock of CHX. CHX Holdings 
is also the sole member of CHXBD, LLC (``CHXBD''), the Exchange's 
affiliated routing broker.
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    \10\ CHX became a wholly-owned subsidiary of CHX Holdings 
pursuant to the Exchange's demutualization as approved by the 
Commission in February 2005. See Securities Exchange Act Release No. 
51149 (February 8, 2005), 70 FR 7531 (February 14, 2005) (order 
approving SR-CHX-2004-26 and Amendment No. 1 and accelerated 
approval of Amendment No. 3).
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    CHX Holdings is beneficially owned by 193 firms or individuals, 
including Participants \11\ or affiliates of Participants, many of whom 
were former seat holders on the Exchange prior to its demutualization 
in 2005.\12\ Moreover, four firms hold Series A Preferred Stock and 
seven individuals hold Series B Preferred Stock. No firm, individual, 
or group of affiliated firms or individuals beneficially own 10 percent 
or more of CHX Holdings on an as-converted basis.
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    \11\ A ``Participant'' is a ``member'' of the Exchange for 
purposes of the Act. See CHX Article 1, Rule 1(s).
    \12\ See supra note 10.
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Proposed Ownership Structure
    Pursuant to the terms of a Merger Agreement dated February 4, 2016 
(``Merger Agreement'') by and among NA Casin Holdings, Merger Sub, 
Chongqing Casin Enterprise Group Co., LTD. (``Chongqing Casin''), a 
limited company organized under the laws of the People's Republic of 
China (``PRC''), Richard G. Pane solely in his capacity as the 
Stockholders Representative thereunder, and CHX Holdings, Merger Sub 
will merge into CHX Holdings,\13\ which will then become a wholly-owned 
direct subsidiary of NA Casin Holdings. Current CHX Holdings 
stockholders will receive the right to receive cash in exchange for 
their shares. Consummation of the Transaction (``Closing'') is subject 
to satisfaction of customary conditions for a transaction of this 
nature, including approval of this proposed rule change by the 
Commission.\14\
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    \13\ Under the terms of the Merger Agreement, the CHX Holdings 
Certificate and Bylaws in effect immediately prior to the effective 
time of the Transaction, which shall be prior to the Closing, shall 
be the Certificate and Bylaws of the surviving corporation, as 
amended by this proposed rule change.
    \14\ Conditions precedent to Closing are formal requirements set 
forth in the Merger Agreement that must be satisfied or waived on or 
prior to the Closing date. These conditions include any (i) filing 
and consents under the Securities Act of 1933, the Exchange Act and 
the rules and regulations promulgated thereunder, and any other 
filings required to be made with and consents required be obtained 
from the SEC, confirming the approval of the SEC of the Transaction, 
(ii) filings required to be made with and consents required be 
obtained from any self-regulatory organizations, (iii) filings and 
consents necessary to comply with foreign and state securities and 
``blue sky'' laws, (iv) receipt of Committee on Foreign Investment 
in the United States (``CFIUS'') Approval, and (v) receipt of the 
PRC consent, the absence of any of which would prohibit the 
consummation of the Transaction.
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    Upon the Closing, all of the outstanding and issued shares of NA 
Casin Holdings will be held by the following firms and individuals 
(``Indirect Upstream Owners'' and with NA Casin Holdings ``Upstream 
Owners'') in the following percentages: \15\
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    \15\ Pursuant to Rule 6a-2 under the Act, the Exchange will, 
within 10 days after the Closing, amend its Form 1 (APPLICATION FOR, 
AND AMENDMENTS TO APPLICATION FOR REGISTRATION AS A NATIONAL 
SECURITIES EXCHANGE OR EXEMPTION FROM REGISTRATION PURSUANT TO 
SECTION 5 OF THE EXCHANGE ACT) filed with the Commission. Exhibit K 
of Form 1, which is applicable only to ``. . . exchanges that have 
one or more owners, shareholders, or partners that are not also 
members of the exchange . . .'', requires the Exchange to provide a 
list of each shareholder that directly owns 5% or more of a class of 
a voting security of the Exchange. As noted above, the Exchange 
proposes that 100% of the issued and outstanding shares of CHX will 
be directly owned by CHX Holdings.
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     Non-U.S. Indirect Upstream Owners:

[cir] NA Casin Group, a corporation incorporated under the laws of the 
State of Delaware and wholly-owned by Chongqing Casin--20%
[cir] Chongqing Jintian Industrial Co., Ltd. (``Chongqing Jintian''), a 
corporation incorporated under the laws of the PRC--15%
[cir] Chongqing Longshang Decoration Co., Ltd. (``Chongqing 
Longshang''), a corporation incorporated under the laws of the PRC--
14.50%
     U.S. Indirect Upstream Owners:

[cir] Castle YAC Enterprises, LLC (``Castle YAC''), a limited liability 
company organized under the laws of the State of New York, the sole 
member of which is Mr. Jay Lu, a U.S. citizen and Vice President of NA 
Casin Group--19%

[[Page 89545]]

[cir] Raptor, a limited liability company organized under the laws of 
the State of Delaware--11.75%
[cir] Saliba, a limited liability company organized under the laws of 
the State of Illinois--11.75%
[cir] Xian Tong Enterprises, Inc. (``Xian Tong''), a corporation 
incorporated under the laws of the State of New York--6.94%
[cir] Equity Incentive Shares to five members of the CHX Holdings 
management team, all U.S. citizens--0.88%
[cir] Cheevers & Co., Inc. (``Cheevers''), a corporation incorporated 
under the laws of the State of Illinois--0.18%

    The Exchange submits the following regarding the Indirect Upstream 
Owners: \16\
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    \16\ An opinion of counsel in support of each of these 
assertions has been provided to the Commission by outside counsel 
for the Exchange.
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     The only Related Persons \17\ among the Indirect Upstream 
Owners are Castle YAC and NA Casin Group.\18\
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    \17\ As used herein, ``Related Persons'' shall mean: (1) With 
respect to any Person, any executive officer (as such term is 
defined in Rule 3b-7 under the Securities Exchange Act of 1934 
(``Exchange Act'')), director, general partner, manager or managing 
member, as applicable, and all ``affiliates'' and ``associates'' of 
such Person (as those terms are defined in Rule 12b-2 under the 
Exchange Act), and other Person(s) whose beneficial ownership of 
shares of stock of the Corporation with the power to vote on any 
matter would be aggregated with such first Person's beneficial 
ownership of such stock or deemed to be beneficially owned by such 
first Person pursuant to Rules 13d-3 and 13d-5 under the Exchange 
Act; and (2) in the case of any Person constituting a member (as 
that term is defined in Section 3(a)(3)(A) of the Exchange Act) of 
CHX (defined in the Rules of the Chicago Stock Exchange, Inc. (``CHX 
Rules''), as such rules may be amended from time to time, as a 
``Participant'') for so long as CHX remains a registered national 
securities exchange, such Person and any broker or dealer with which 
such Person is associated; and (3) any other Person(s) with which 
such Person has any agreement, an arrangement or understanding 
(whether or not in writing) to act together for the purpose of 
acquiring, voting, holding or disposing of shares of the stock of 
the Corporation; and (4) in the case of a Person that is a natural 
person, any relative or spouse of such Person, or any relative of 
such spouse, who has the same home as such Person or who is a 
director or officer of the Corporation or any of its parents or 
subsidiaries. See Section (b) of Article FOURTH of the proposed CHX 
Holdings Certificate; see also Section (4) of Article IX of the 
proposed NA Casin Holdings Certificate.
    \18\ Mr. Jay Lu, the sole member of Castle YAC, is associated 
with an affiliate of Chongqing Casin and is also the son of Mr. 
Shengju Lu, the Chairman of Chongqing Casin.
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     There are no other Related Persons among the Indirect 
Upstream Owners.
     None of the Indirect Upstream Owners directly, or 
indirectly through one or more intermediaries, controls, or is 
controlled by, or is under common control with, a governmental entity 
or any political subdivision thereof.
    As Related Persons, NA Casin Group and Castle YAC would own a 
combined 39% voting interest in NA Casin Holdings and, by extension, 
CHX Holdings, which is within the proposed 40% Concentration Limitation 
of NA Casin Holdings and CHX Holdings, as described below.\19\ However, 
NA Casin Group and Castle YAC will not be permitted to exercise their 
collective voting interest in excess of the proposed 20% Voting 
Limitations of NA Casin Holdings and CHX Holdings, as described 
below.\20\
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    \19\ See Section (9) of Article IX of the proposed NA Casin 
Holdings Certificate; see also Article FOURTH, paragraph (c)(i) of 
the proposed CHX Holdings Certificate. As described in detail below, 
the Exchange proposes to adopt similar Ownership and Voting 
Limitations for NA Casin Holdings and CHX Holdings.
    \20\ See Section (5) of Article IX of the proposed NA Casin 
Holdings Certificate; see also Article FOURTH, paragraph (b)(i) of 
the proposed CHX Holdings Certificate.
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    The Exchange submits that execution of the proposed NACH 
Stockholders' Agreement would not result in the parties to the 
agreement becoming Related Persons for the purposes of compliance with 
the proposed Ownership and Voting Limitations of NA Casin Holdings and 
CHX Holdings (``Ownership and Voting Limitations''). Generally, the 
proposed NACH Stockholders' Agreement includes provisions governing the 
relationship between the Indirect Upstream Owners, which are intended 
to protect the ownership interests of the respective individual 
Indirect Upstream Owners. While the proposed NACH Stockholders' 
Agreement includes various transfer of shares provisions,\21\ the 
agreement does not contain any provisions, such as lock-up, drag-along 
or tag-along rights, which could result in the Indirect Upstream Owners 
becoming Related Persons.22 23 Accordingly, the Exchange 
believes that the NACH Stockholders' Agreement would not result in the 
parties to the agreement becoming Related Persons for the purposes of 
compliance with the proposed Ownership and Voting Limitations.
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    \21\ See Sections 4.02 (Right of First Offer), 4.03 (Rights to 
Acquire Interest Upon Change of Control), Section 6.02 (Right to 
Purchase New Securities) of the proposed NACH Stockholders' 
Agreement.
    \22\ Specifically, the Right of First Offer, Rights to Acquire 
Interest Upon Change of Control and the Right to Purchase New 
Securities contained in the NACH Stockholders' Agreement would not 
render it an ``agreement, an arrangement or understanding (whether 
or not in writing) to act together for the purpose of acquiring, 
voting, holding or disposing of shares of the stock of the 
Corporation.'' See Section (4)(iii) of Article IX of the proposed NA 
Casin Holdings Certificate.
    \23\ See supra note 17.
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    The Exchange further notes that execution of the Saliba Put 
Agreement or the Raptor Put Agreement would not result in any Indirect 
Upstream Owners becoming Related Persons for the purposes of compliance 
with the proposed Ownership and Voting Limitations. Specifically, the 
Saliba Put Agreement grants Saliba a put option (``Saliba Put Option'') 
that, if exercised by Saliba, would compel NA Casin Holdings (and not 
another Indirect Upstream Owner) to purchase, or arrange for an 
unspecified third-party to purchase, a specified amount of Saliba's 
equity interest in NA Casin Holdings. Similarly, the Raptor Put 
Agreement grants Raptor a put option (``Raptor Put Option'') that, if 
exercised by Raptor, would compel NA Casin Holdings (and not another 
Indirect Upstream Owner) to purchase, or arrange for an unspecified 
third-party to purchase, a specified amount of Raptor's equity interest 
in NA Casin Holdings. Accordingly, the Exchange submits that execution 
of the Saliba Put Agreement or the Raptor Put Agreement would not 
result in the parties to the agreement becoming Related Persons for the 
purposes of compliance with the proposed Ownership and Voting 
Limitations.\24\ The Exchange also notes that the exercise of the put 
options under either the Saliba Put Agreement or the Raptor Put 
Agreement would be subject to, among other things, compliance with the 
proposed Ownership and Voting Limitations.\25\
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    \24\ Specifically, the put agreements do not constitute an 
``agreement, an arrangement or understanding (whether or not in 
writing) to act together for the purpose of acquiring, voting, 
holding or disposing of shares of the stock of the Corporation.'' 
See Section (4)(iii) of Article IX of the proposed NA Casin Holdings 
Certificate.
    \25\ See Section 3(c) of the Saliba Put Agreement; see also 
Section 3(c) of the Raptor Put Agreement.
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    Following the Closing, CHX will remain a Delaware for-profit stock 
corporation, with authority to issue 1,000 shares of common stock, all 
of which will remain owned by CHX Holdings.\26\ Moreover, CHX Holdings 
shall have the authority to issue 1,000 shares of common stock, all of 
which will be owned by NA Casin Holdings.\27\ CHX will also remain 
registered as a national securities exchange under Section 6 of the Act 
\28\ and a self-regulatory organization (``SRO'') as defined in Section 
3(a)(26) of the Act.\29\ CHX Rules will remain in full force and effect 
as of the date of the instant rule filing, will continue to govern the 
activities of CHX up to and after the Closing and CHX will continue to

[[Page 89546]]

discharge its SRO responsibilities pursuant to CHX's registration under 
Section 6 of the Act. Assuming that the Closing occurs, CHX Holdings 
represents that it will at all times ensure that the Exchange has 
access to financial resources sufficient for it to discharge its SRO 
responsibilities after the date of Closing.
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    \26\ See Article FOURTH of the proposed CHX Certificate.
    \27\ See Article FOURTH of the proposed CHX Holdings 
Certificate.
    \28\ 15 U.S.C. 78f.
    \29\ 15 U.S.C. 78c(a)(26).
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    Following the Closing, CHXBD will remain a Delaware limited 
liability corporation of which CHX Holdings will remain the sole 
member. Pursuant to Article 19, Rule 2 of CHX Rules, CHXBD provides the 
outbound routing of orders from the Exchange to other trading centers. 
CHXBD operates a facility (as defined in Section 3(a)(2) of the 
Exchange Act) \30\ of the Exchange. The Financial Industry Regulatory 
Authority (``FINRA''), an SRO unaffiliated with the Exchange or any of 
its affiliates, carries out oversight and enforcement responsibilities 
as the designated examining authority designated by the Commission 
pursuant to Section 17d-1 of the Act \31\ with the responsibility for 
examining CHXBD for compliance with the applicable financial 
responsibility rules. As provided in Article 19, Rule 2(a)(3), a 
Participant's use of CHXBD to route orders to another trading center is 
optional; any Participant that does not wish to use CHXBD may use other 
routers to route orders to other trading centers. Further, as provided 
in Article 19, Rule 2(a)(6) of CHX Rules, the books, records, premises, 
officers, agents, directors and employees of CHXBD as a facility of the 
Exchange are deemed to be those of the Exchange for purposes of, and 
oversight pursuant to, the Act, and the books and records of CHXBD as a 
facility of the Exchange are at all times subject to inspection and 
copying by the Exchange and by the Commission.
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    \30\ 15 U.S.C. 78c(a)(2).
    \31\ 15 U.S.C. 78q(d)(1).
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    The Exchange states that all of the provisions of Article 19, Rule 
2 of CHX Rules governing the operation of CHXBD will remain in full 
force and effect at all times prior to and after the Closing. The 
Exchange, on behalf of CHXBD, will provide notice to, and obtain any 
required consents from, FINRA, for the Transaction.
Proposed CHX Certificate and Bylaws Generally
    The Exchange proposes to retain most of the current provisions of 
the CHX Certificate and Bylaws, except that the Exchange proposes to 
amend certain requirements regarding CHX's board and committee 
composition and procedures to be largely similar to the board and 
committee composition requirements and procedures of the National Stock 
Exchange, Inc. (``NSX'').\32\
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    \32\ See Articles III and V of the NSX By-Laws. NSX is a 
registered national securities exchange. In 2015, the Commission 
approved a transaction involving NSX. See Exchange Act Release No. 
74270 (February 13, 2015), 80 FR 9286 (February 20, 2015) (Approval 
Order for SR-NSX-2014-017); see also Exchange Act Release No. 73944 
(December 24, 2014), 80 FR 85 (January 2, 2015) (SR-NSX-2014-017).
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    Initially, the Exchange proposes the following non-substantive 
amendments to the CHX Certificate:
     Amend the title to CHX Certificate to reflect ``Amended 
and Restated Certificate of Incorporation of the Chicago Stock 
Exchange, Inc.''
     Add an attestation clause and signature block to the end 
of the proposed CHX Certificate.
    The Exchange also proposes the following non-substantive amendments 
to the CHX Bylaws:
     Move Articles I through XI of the current CHX Bylaws to 
Article II through XII of the proposed CHX Bylaws, in light of the 
adoption of the definitions under Article I of the proposed CHX Bylaws, 
as discussed below, and amend all citations to reflect the new Article.
     Amend references to each section under an Article to 
reflect the Article to which it is associated (e.g., current Article I, 
``Sec. 1'' is proposed ``Section 1.1'').
CHX Board Composition Requirements and Procedures
    As discussed in detail below, the proposed CHX board and committee 
composition and procedure requirements are similar to the board and 
committee composition and procedure requirements of NSX,\33\ except 
that the proposed CHX requirements:
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    \33\ See id.
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     include a new board composition requirement that at least 
20% of the CHX Board be comprised of CHX Holdings Directors, which is 
not an NSX requirement; \34\
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    \34\ Section 1.1(s) of the proposed CHX Bylaws defines ``CHX 
Holdings Director'' as ``a member of the Board who is a director of 
CHX Holdings, Inc.''
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     require a minimum of ten CHX Board directors, as opposed 
to a minimum of seven NSX board directors;
     maintain the current position of Vice Chairman and 
associated responsibilities, which is not an NSX requirement; and
     maintain current procedures for selecting members of CHX 
Board committees, current composition requirements for CHX Board 
committees (e.g., different composition requirements for the respective 
Executive Committees \35\) and does not require the establishment of an 
Appeals Committee or a Business Conduct Committee, all of which differ 
from the analagous NSX requirements.
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    \35\ See Section 5.5 of the proposed CHX Bylaws; see also 
Section 5.5 of Article V of the NSX By-Laws.
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    Initially, the Exchange proposes to adopt Article I of the proposed 
CHX Bylaws to provide definitions for certain terms used throughout the 
proposed CHX Bylaws, which are largely similar to the terms and 
definitions under Article I of the Third Amended and Restated By-Laws 
of NSX (``NSX By-Laws'').\36\
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    \36\ See supra note 32.
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    Article II and Article IV of the current CHX Bylaws and Article 
FIFTH of the current CHX Certificate provide, among other things, CHX 
Board composition and procedure requirements, the key provisions of 
which include the following:
     The CHX Board shall consist of not fewer than ten (10) and 
not more than sixteen (16) directors (``CHX Directors'') divided into 
three classes, with the term of office of one class expiring each 
year.\37\
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    \37\ See Section 2(a) of Article II of the current CHX Bylaws.
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     The CHX Board shall consist of the following: \38\
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    \38\ See Section 2(b) of Article II of the current CHX Bylaws.
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    [cir] The Chief Executive Officer (``CEO'') of the CHX;
    [cir] Public Directors,\39\ who shall equal one-half the number of 
directors comprising the entire CHX Board (rounded up to the next whole 
number); and
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    \39\ Article II, Section 2(b) of the current CHX Bylaws defines 
``Public Director'' as a director who (i) is not a Participant, or 
an officer, managing member, partner or employee of an entity that 
is a Participant, (ii) is not an employee of the Corporation or any 
of its affiliates, (iii) is not broker or dealer or an officer or 
employee of a broker or dealer, or (iv) does not have any other 
material business relationship with (x) CHX Holdings, Inc., the 
Corporation or any of their affiliates or (y) any broker or dealer.
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    [cir] Participant Directors.\40\
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    \40\ Article II, Section 2(b) of the current CHX Bylaws defines 
``Participant Director'' as ``a director who is a Participant or an 
officer, managing member or partner of an entity that is a 
Participant'' and the term ``Participant'' means ``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.'' See supra note 11.
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     The Chairman of the CHX Board shall be either the CEO of 
CHX or a Public Director and if the CEO of CHX is the Chairman of the 
CHX Board, the CEO may not hold any other office at CHX.\41\
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    \41\ See Section 4(a) of Article II of the current CHX Bylaws.

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[[Page 89547]]

     The Nominating and Governance Committee shall nominate 
directors for each director position standing for election, provided 
that candidates for STP Director positions may also be nominated by 
Participants.\42\
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    \42\ See Section 3(b) and (e) of Article II of the current CHX 
Bylaws.
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     CHX Directors are elected to full three-year terms at the 
annual meeting of stockholders at which a quorum is present by a 
plurality of the votes cast.\43\
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    \43\ See Section 2(c) of Article II of the current CHX Bylaws; 
see also Section 9 of Article III of the current CHX Bylaws.
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     Vacancies are generally filled only with a person 
nominated by the Chairman and Vice Chairman and elected by a majority 
of the directors then in office, though less than a quorum or by a sole 
remaining director, provided that the CHX Board composition 
requirements are met.\44\ A director chosen to fill a vacancy shall 
hold office until end of the the next annual meeting of 
stockholders.\45\
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    \44\ See Section 6 of Article II of the current CHX Bylaws.
    \45\ See id.
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     Members of the CHX Board (``CHX Directors'') may only be 
removed for cause.\46\
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    \46\ See Section (f) of Article FIFTH of the current CHX 
Certificate.
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    The Exchange now proposes various amendments to the CHX Board 
composition requirements, which include the following key amendments: 
\47\
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    \47\ The Exchanges notes that the following provisions under the 
current CHX Certificate are being deleted as they are being 
superseded by new provisions under the proposed CHX Bylaws: Sections 
(b) and (c) of Article FIFTH of the current CHX Certificate is 
replaced by Section 3.2 of the proposed CHX Bylaws; Section (d) of 
Article FIFTH of the current CHX Certificate is replaced by Section 
3.3 of the proposed CHX Bylaws; Section (f) of Article FIFTH of the 
current CHX Certificate is replaced by Section 3.8 of the proposed 
CHX Bylaws; and Section (g) of Article FIFTH of the current CHX 
Certificate is replaced by Section 3.7 of the proposed CHX Bylaws.
---------------------------------------------------------------------------

     The CHX Board shall consist of not fewer than ten (10) and 
not more than twenty-five (25) CHX Directors and shall not be divided 
into classes. NSX requires at least seven directors.\48\ The Exchange 
is proposing to maintain the current minimum requirement of 10 CHX 
Directors as that is the minimum number of directors that would permit 
the Exchange to meet the proposed CHX Board composition requirements, 
as described immediately below.
---------------------------------------------------------------------------

    \48\ See Section 3.2(a) of the proposed CHX Bylaws; see also 
Section 3.2 of Article III of the NSX By-Laws.
---------------------------------------------------------------------------

     The CHX Board shall be comprised of: \49\
---------------------------------------------------------------------------

    \49\ See Section 3.2(b) of the proposed CHX Bylaws.
---------------------------------------------------------------------------

    [cir] The CEO of the CHX;
    [cir] at least 50% Non-Industry Directors \50\ (at least one of 
whom shall be an Independent Director \51\);
---------------------------------------------------------------------------

    \50\ Section 1.1(n) of the proposed CHX Bylaws defines ``Non-
Industry Director'' as ``a member of the Board who is (1) an 
Independent Director; or (2) any other individual who would not be 
an Industry Director.'' In turn, Section 1.1(m) of the proposed CHX 
Bylaws defines ``Industry Director'' as ``a member of the Board who 
(1) 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; (2) 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; (3) 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; (4) provides 
professional services to brokers or dealers, and such services 
constitute 20 percent or more of the professional revenues received 
by the member of the Board or 20 percent or more of the gross 
revenues received by the member of the Board's firm or partnership; 
(5) provides professional services to a director, officer, or 
employee of a broker, dealer, or corporation that owns 50 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 20 percent or more of the professional 
revenues received by the member of the Board or member or 20 percent 
or more of the gross revenues received by the member of the Board's 
or member's firm or partnership; or (6) has a consulting or 
employment relationship with or provides professional services to 
the Exchange or any affiliate thereof or has had any such 
relationship or provided any such services at any time within the 
prior three years. The proposed definition is virtually identical to 
the definition of ``Industry Director'' under the NSX By-Laws. See 
Section 1.1 of the NSX By-Laws.
    \51\ Section 1.1(l) of the proposed CHX Bylaws defines 
``Independent Director'' as ``a member of the Board that the Board 
has determined to have no material relationship with the Exchange or 
any affiliate of the Exchange or any Participant or any affiliate of 
any such Participant other than as a member of the Board.''
---------------------------------------------------------------------------

    [cir] at least 20% Participant Directors; \52\ and
---------------------------------------------------------------------------

    \52\ Section 1.1(g) of the proposed CHX Bylaws defines 
``Participant Director'' as ``a director who is a Participant or a 
director, officer, managing member or partner of an entity that is 
or is an affiliate of, a Participant.''
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    [cir] at least 20% CHX Holdings Directors.\53\
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    \53\ The Exchange believes that requiring at least 20% of the 
CHX board be comprised of CHX Holdings Directors will promote 
governance efficiencies between CHX Holdings and CHX that will 
operate to enhance the governance and operation of the Exchange as 
an SRO. The Exchange notes that the bylaws of NYSE Market (DE), 
Inc., a parent of NYSE MKT, LLC, a national securities exchange, 
requires a majority of its board be comprised of board members of an 
indirect parent; provided that such members meet certain 
independence and domicile requirements. See Article III, Section 
1(A) of the Fourth Amended and Restated Bylaws of the NYSE Market 
(DE), Inc. The Exchange further notes that the NSX does not have a 
similar requirement.
---------------------------------------------------------------------------

     The Chairman of the CHX Board may be the CEO and/or 
President of CHX or a Non-Industry Director.\54\
---------------------------------------------------------------------------

    \54\ See Section 3.4 of the proposed CHX Bylaws; see also 
Section 3.6 of the NSX By-Laws.
---------------------------------------------------------------------------

     The CHX Director term shall be one year, except that the 
term of the CEO of CHX shall expire when such individual ceases to be 
the CEO of the CHX.\55\ The Exchange believes that this change will 
facilitate compliance with the proposed board composition requirements, 
which is more specific than the current requirements.
---------------------------------------------------------------------------

    \55\ See Section 3.3 of the proposed CHX Bylaws; see also 
Section 3.4 of the NSX By-Laws.
---------------------------------------------------------------------------

     Eliminate the ``STP Participant Director'' positions and 
corresponding nominating and selection process and replace with a 
simplified Participant Director nominating process, whereby the 
Participant Director Nominating Committee \56\ shall recommend 
individual(s) to the Board from which the stockholders will elect the 
required number of Participant Directors at the annual meeting of 
stockholders.
---------------------------------------------------------------------------

    \56\ See Section 5.11 of the proposed CHX Bylaws.
---------------------------------------------------------------------------

     Adopt a CHX Holdings Director nomination and selection 
process that is virtually identical to the proposed Participant 
Director nominating and selection process, except that candidates for 
the CHX Holdings Director positions shall be selected by the CHX 
Holdings Board.\57\
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    \57\ See Sections 3.6 and 5.2 of the proposed CHX Bylaws; see 
also Sections 3.5 and 5.2 of the NSX By-Laws.
---------------------------------------------------------------------------

     CHX Directors may be removed from office by a vote of the 
stockholders at any time with or without cause; provided, however, that 
any Participant Director or CHX Holdings Director may only be removed 
for cause.\58\ The Exchange believes that this change will provide 
stockholders with recourse in the event the best interest of the 
Exchange requires the removal of a director who could not be removed 
for cause.
---------------------------------------------------------------------------

    \58\ Section 3.7 of the proposed CHX Bylaws provides that for 
``the purposes of Section 3.7 only, `cause' shall mean shall mean 
only (a) a breach of a director's duty of loyalty to the Corporation 
or its stockholders, (b) acts or omissions not in good faith or 
which involve intentional misconduct or a knowing violation of law, 
(c) actions resulting in liability under Section 174 of the General 
Corporation Law of Delaware, or (d) transactions from which a 
director derived an improper personal benefit. Any director may be 
removed for cause by the holders of a majority of the shares of 
capital stock then entitled to be voted at an election of directors.
---------------------------------------------------------------------------

     Adopt Chairman of the CHX Board,\59\ CHX Board Vacancy 
\60\ and

[[Page 89548]]

CHX Board Quorum and Action \61\ provisions that are similar to the 
analagous provisions under the NSX By-Laws, except that the proposed 
CHX Board Vacancy provisions contemplate procedures for filing 
vacancies for CHX Holdings Directors that are not found under the NSX 
By-Laws.
---------------------------------------------------------------------------

    \59\ See Section 3.4 of the proposed CHX Bylaws; see also 
Section 3.6 of the NSX By-Laws.
    \60\ See Section 3.7 of the proposed CHX Bylaws; see also 
Section 3.7 of the NSX By-Laws.
    \61\ See Section 3.13 of the proposed CHX Bylaws; see also 
Section 3.12 of the NSX By-Laws.
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    Incidentally, the Exchange proposes to delete Sections (b) through 
(d), (f) and (g) of Article FIFTH of the current CHX Certificate, as 
the provisions are obviated by the proposed amendments reflected in the 
proposed CHX Bylaws.\62\ The Exchange proposes to maintain Section (e) 
of Article FIFTH of the current CHX Certificate, but to move the 
provision to Section (b) of Article FIFTH of the proposed CHX 
Certificate.\63\
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    \62\ See supra note 47.
    \63\ The CHX Director election requirements may also be found 
under Section 4.9 of the proposed CHX Bylaws.
---------------------------------------------------------------------------

    The Exchange also proposes to amend Article IV of the current CHX 
Bylaws regarding CHX Committees. The current key requirements for CHX 
Committees are as follows:
     The CHX Bylaws currently require the following CHX 
Committees: Executive Committee; Nominating and Governance Committee; 
Audit Committee; Compensation Committee; Regulatory Oversight 
Committee; Finance Committee; Judiciary Committee; and other CHX 
Committees as may be provided in the bylaws or CHX Rules or as may be 
from time to time established by the CHX Board.\64\
---------------------------------------------------------------------------

    \64\ See Section 1 of Article IV of the current CHX Bylaws.
---------------------------------------------------------------------------

     Members of the CHX Committees are selected (1) by the 
Chairman and/or Vice Chairman of the CHX Board with approval of the CHX 
Board; (2) by the Vice Chairman of the CHX Board with approval of the 
Public Directors of the CHX Board--for the Regulatory Oversight 
Committee; (3) by the CEO of CHX alone--for the Judiciary Committee; or 
(4) by the CHX Board alone--for the Nominating and Governance 
Committees, subject to composition requirements, as described under 
current Article 2 of the CHX Rules.\65\ In contrast, all committees of 
the NSX Board are selected by the Chairman with approval of the NSX 
Board.\66\
---------------------------------------------------------------------------

    \65\ See Section 2 of Article IV of the current CHX Bylaws.
    \66\ See Section 5.2 of the NSX By-Laws.
---------------------------------------------------------------------------

    The Exchange proposes to maintain the current requirements for the 
CHX Committees with the following amendments:
     Move Article 2, Rules 2-4, 8-9, and 11-12 of the current 
CHX Rules \67\ and restate them under Article V of the proposed CHX 
Bylaws as Sections 5.5 through 5.10 and 5.12 of the proposed CHX Bylaws 
with amendments (1) to contemplate the proposed CHX board composition 
requirements of Article III of the proposed CHX Bylaws and (2) to 
require that the Regulatory Oversight Committee consist of at least 
five members, all of whom must be Non-Industry Directors, the later 
requirement being similar to a requirement of NSX that ``[t]he 
Regulatory Oversight Committee shall at all times be comprised entirely 
of Non-Industry Directors.'' 68 69 Thus, Article 2 of the 
proposed CHX Rules will only include rules describing the current CHX 
Committees that are comprised solely of Participants.\70\
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    \67\ The Exchange proposes to eliminate Article 2, Rule 6 of the 
current CHX Rules as it is currently reserved.
    \68\ Section 5.6 of the NSX By-Laws.
    \69\ While all members of the current Regulatory Oversight 
Committee are Public Directors, Article 2, Rule 4 (Regulatory 
Oversight Committee) of the current CHX Rules only requires that a 
minimum of five members be Public Directors. See supra note 39. The 
Exchange believes that explicitly requiring all members of the 
Regulatory Oversight Committee to be Non-Industry Directors will 
serve to better avoid conflicts of interest between members of the 
Regulatory Oversight Committee and Participants.
    \70\ The Exchange propose the following amendments to Article 2 
of the current CHX Rules: Amend title from ``Committees'' to 
``Participant Committees;'' delete current CHX Article 2, Rule 1 as 
the rule is redundant of, and obviated by, provisions in the 
proposed CHX Bylaws; proposed CHX Article 2, Rule 1 (current CHX 
Article 2, Rule 5) describes the Committee on Exchange Procedure, 
and the Exchange proposes non-substantive amendments the current CHX 
Article 2, Rule 5 to replace references to ``Exchange Procedure 
Committee'' with the more accurate and consistent ``Committee on 
Exchange Procedure;'' and proposed CHX Article 2, Rule 2 (current 
CHX Article 2, Rule 7) describes the Judiciary Committee; proposed 
CHX Article 2, Rule 3 (current CHX Article 2, Rule 10) describes the 
Participant Advisory Committee.
---------------------------------------------------------------------------

     Adopt Section 3.6 of the proposed CHX Bylaws, which 
provide CHX Director nomination and election provisions similar to 
analagous provisions under the NSX By-Laws.\71\ Generally, paragraph 
(a) and (b) thereunder provides that the Nominating and Governance 
Committee each year shall nominate directors for each director position 
standing for election at the annual meeting of stockholders that year. 
In addition, with respect to the nomination and election of CHX 
Holdings and Participant Directors:
---------------------------------------------------------------------------

    \71\ See Section 3.5 of the NSX By-Laws.
---------------------------------------------------------------------------

    [cir] Paragraph (b) thereunder provides that the Nominating and 
Governance Committee will only nominate persons (1) for Participant 
Director positions who have been approved and submitted by the 
Participant Director Nominating Committee and (2) for CHX Holdings 
Director positions who have been approved and submitted by the CHX 
Holdings Board.
    [cir] Paragraph (c) thereunder provides that the Participant 
Director Nominating Committee shall consult with the Nominating and 
Governance Committee, the Chairman of the CHX Board and the CEO of CHX, 
as well as solicit comments from Participants, for the purpose of 
identifying Participant Director nominees. The list of Participant 
Director nominees (``initial nominees'') shall be submitted to the 
Nominating and Governance Committee no later than 75 days prior to the 
date announced for the annual meeting of stockholders.
    [cir] Paragraph (d) thereunder provides that the Nominating and 
Governance Committee shall provide the Secretary of CHX the initial 
nominees no later than 60 days prior to the date announced for the 
annual meeting of stockholders. The Participants may also identify 
other candidates (``additional candidates''), subject to specific 
conditions and requirements.
    [cir] Paragraph (e) thereunder provides that if additional 
candidates are identified and validly presented to the Secretary of 
CHX, the Secretary of CHX shall notify all Participants of the list of 
initial nominees and additional candidates, as well as the date and 
time of the Participant Director election, no later than 20 days prior 
the date announced for the annual meeting of stockholders. Paragraph 
(e) further provides specific Participant voting requirements, 
procedures and limitations.
    [cir] Paragraph (f) thereunder provides that if no additional 
candidates are received by the date that is 35 days prior to the date 
announced for the annual meeting of stockholders, the initial nominees 
shall be deemed to be the persons approved by the Participants as 
Participant Director nominees and the Secretary of CHX shall so notify 
the Nominating and Governance Committee.
     Adopt Section 5.11 of the proposed CHX Bylaws describing 
the Participant Director Nominating Committee, which is virtually 
identical Section 5.7 of the NSX By-Laws.\72\
---------------------------------------------------------------------------

    \72\ See supra note 32.
---------------------------------------------------------------------------

    The Exchange also proposes to amend current Section 2 of Article II 
(Special Meetings) of the current CHX Bylaws (i.e., Section 4.2 of the 
proposed CHX Bylaws) (1) to clarify that a special meeting of the 
stockholders may be called ``at any time'' by the CEO or the

[[Page 89549]]

CHX Board and (2) to permit a special meeting of the stockholders to be 
called ``upon written notice to the Corporation by the stockholders 
holding one-third of the votes entitled to be cast'' (``CHX 
stockholder-called special meeting provision'').73 74 Given 
that there will be 13 Indirect Upstream Owners of the Exchange, the 
Exchange submits that the CHX stockholder-called special meeting 
provision would facilitate the calling of special meetings of the 
stockholders, which would promote stockholder communication and 
transparency. The Exchange notes that while the proposed stockholder-
called special meeting provision may result in a special meeting being 
called by as few as three Indirect Upstream Owners, any action by the 
stockholders during a special meeting would be subject to the general 
quorum and voting requirements of Section 4.9 of the proposed CHX 
Bylaws, which requires, among other things, that the majority of the 
total votes which all of the outstanding stock of the Corporation would 
be entitled to cast at the meeting to be present, in person or by 
proxy, to constitute a quorum.
---------------------------------------------------------------------------

    \73\ As described below, the Exchange is also proposing to adopt 
virtually identical amendments to Section 4.2 of the proposed CHX 
Holdings Bylaws.
    \74\ The Exchange also notes that the CHX stockholder-called 
special meeting provision is different from Section 2.2 of the 
proposed NA Casin Holdings Bylaws and Section 4.2 of the NSX By-
Laws, both of which permit a special meeting of the stockholders to 
be called by a majority of the stockholders and Section 1.2 of the 
By-Laws of NSX Holdings, Inc. (``NSX Holdings By-Laws''), which do 
not permit stockholders to call a special meeting of the 
stockholders.
---------------------------------------------------------------------------

Proposed CHX Holdings Certificate and Bylaws Generally
    The Exchange proposes to retain most of the current provisions of 
the CHX Holdings Certificate and Bylaws, except that the Exchange 
proposes to amend certain requirements regarding (1) board composition 
and procedures; (2) Ownership and Voting Limitations to be similar to 
those of NSX Holdings; \75\ and (3) special meetings to permit a 
special meeting of the stockholders to be called upon written notice to 
the Corporation by the stockholders holding one-third of the votes 
entitled to be cast.
---------------------------------------------------------------------------

    \75\ See Section (B) of Article FOURTH and Article SEVENTH of 
the Second Amended and Restated Certificate of Incorporation of NSX 
Holding (``NSX Holdings Certificate''); see also Article II of the 
NSX Holdings By-Laws; see also supra note 32. NSX Holdings is the 
direct parent of the NSX.
---------------------------------------------------------------------------

    Initially, the Exchange proposes the following non-substantive 
amendments to the CHX Holdings Certificate:
     Replace current Article FOURTH in its entirety with, among 
other provisions described in detail below, language that provides that 
the total number of shares of stock which CHX Holdings shall have 
authority to issue is 1,000 shares of common stock having a par value 
of $0.01 per share and that NA Casin Holdings shall be the sole owner 
of this stock.
     Amend title to the CHX Holdings Certificate to state 
``Third Amended and Restated Certificate of Incorporation of the 
Chicago Stock Exchange, Inc.''
     Adopt caption paragraph above Article FIRST to reflect the 
amendment history of the CHX Holdings Certificate.
     Move Article SIXTH of the current CHX Holdings Certificate 
to Article FIFTH of the proposed CHX Holdings Certificate, due to the 
proposed deletion of Article FIFTH of the current CHX Holdings 
Certificate, as discussed below.
     Delete Article SEVENTH of the current CHX Holdings 
Certificate as it contains obsolete information regarding the 
incorporator.
     Move Articles EIGHTH through THIRTEENTH of the current CHX 
Holdings Certificate to Articles SIXTH through ELEVENTH of the proposed 
CHX Holdings Certificate, respectively, due to proposed deletions of 
Articles FIFTH and SEVENTH of the current CHX Holdings Certificate. 
Moreover, replace ``United States Securities and Exchange Commission'' 
with ``Commission,'' due to adoption of the shorthand reference of 
``Commission'' for the ``United States Securities and Exchange 
Commission'' under paragraph (b)(ii) of Article FOURTH of the proposed 
CHX Holdings Certificate.
     Add attestation clause and signature block to the end of 
the proposed CHX Holdings Certificate.
    The Exchange also proposes the following non-substantive amendments 
to the CHX Holdings Bylaws:
     Amend reference to each section under an Article to 
reflect the Article to which it is associated (e.g., current ``Article 
I, Sec. 1'' would be proposed ``Section 1.1'') and associated cross-
references.
     Amend reference to the ``Securities Exchange Act of 1934'' 
under Section 3.1 of the proposed CHX Holdings Bylaws to note shorthand 
reference to the ``Exchange Act'' and corresponding amendments to 
Section 3.3 and Article VIII of the proposed CHX Holdings Bylaws to 
replace references to either ``Securities Exchange Act of 1934'' or the 
``Act'' with the ``Exchange Act.''
     Amend reference to the ``Chicago Stock Exchange, Inc.'' 
under Section 3.1 of the proposed CHX Holdings Bylaws to note shorthand 
reference to ``CHX'' and corresponding amendments under Sections 3.1, 
3.2, 3.5, 3.6, 7.5, 9.3 and Article VIII of the proposed CHX Holdings 
Bylaws.
     Adopt shorthand reference of ``Commission'' for the 
``United States Securities and Exchange Commission'' under Section 3.2 
of the proposed CHX Holdings Bylaws and corresponding amendments under 
Section 3.5 and Article VIII of the proposed CHX Holdings Bylaws.
    The Exchange further proposes to adopt Section (a) of Article 
FOURTH of the proposed CHX Holdings Certificate to authorize the CHX 
Holdings Board to create and issue options, warrants and other rights. 
The Exchange believes that the proposed provision would facilitate the 
ability of the CHX Holdings Board to raise additional capital for CHX 
Holdings, which would in turn permit CHX Holdings to further capitalize 
the Exchange so that the Exchange may continue to meet its regulatory 
obligations. The Exchange notes that the proposed provision is 
virtually identical to Section (A) of Article FOURTH of the NSX 
Holdings Certificate.
CHX Holdings Board Composition Requirements and Procedures
    The Exchange proposes to substantively modify certain requirements 
related to CHX Holdings Board composition and procedures, which is 
similar to the board composition and procedures requirement of NSX 
Holdings, as described below. Article SIXTH of the current CHX Holdings 
Certificate and Articles II, IV and V of the current CHX Holdings 
Bylaws provide, among other things, CHX Holdings Board composition and 
procedure requirements, the relevant provisions of which include the 
following:
     CHX Holdings Board shall consist of not less than 10 nor 
more than 16 directors, divided into three classes, where one CHX 
Holdings Director must be the CEO of CHX Holdings.\76\
---------------------------------------------------------------------------

    \76\ See Section 2 of Article II of the current CHX Holdings 
Bylaws.
---------------------------------------------------------------------------

     The Nominating and Governance Committee, comprised of six 
or more CHX Holdings Directors, shall nominate directors for the class 
of directors standing for election each year. In the event a vacancy on 
the CHX Holdings Board occurs between annual meeting of the 
stockholders, the vacancy shall be filled only with a person nominated 
by the Chairman and Vice Chairman and elected by a majority of the CHX 
Holdings Directors then in office, though less than a quorum, except 
that those vacancies resulting from removal from office by a vote of 
the stockholders

[[Page 89550]]

for cause may be filled by a vote of the stockholders at the same 
meeting at which such removal occurs.\77\
---------------------------------------------------------------------------

    \77\ See Sections 3 and 6 of Article II of the current CHX 
Holdings Bylaws.
---------------------------------------------------------------------------

     CHX Holdings Directors are elected to full three-year 
terms at the annual meeting of stockholders at which a quorum is 
present by a plurality of the votes cast, with one class expiring each 
year.\78\
---------------------------------------------------------------------------

    \78\ See Section 2(c) of Article II of the current CHX Holdings 
Bylaws; see also Section 9 of Article IV of the current CHX Holdings 
Bylaws.
---------------------------------------------------------------------------

     CHX Holdings directors may only be removed for ``cause'' 
\79\ by the holders of a majority of the shares of capital stock then 
entitled to be voted at an election of directors.\80\
---------------------------------------------------------------------------

    \79\ Article SIXTH, Section (f) of the current CHX Holdings 
Certificate defines ``cause'' only as ``(i) a breach of a director's 
duty of loyalty to the Corporation or its stockholders, (ii) acts or 
omissions not in good faith or which involve intentional misconduct 
or a knowing violation of law, (iii) actions resulting in liability 
under Section 174 of the General Corporation Law of Delaware, or 
(iv) transactions from which a director derived an improper personal 
benefit.''
    \80\ See Section (f) of Article SIXTH of the current CHX 
Holdings Certificate.
---------------------------------------------------------------------------

     Vacancies created on the CHX Holdings Board may only be 
filled by a person nominated by the Chairman and Vice Chairman of CHX 
Holdings and elected by a majority of the directors then in office, 
though less than a quorum, except that those vacancies resulting from 
removal from office by a vote of the stockholders for cause may be 
filled by a vote of the stockholders at the same meeting at which such 
removal occurs.\81\
---------------------------------------------------------------------------

    \81\ See Section 6 of Article II of the current CHX Holdings 
Bylaws.
---------------------------------------------------------------------------

     All committees of CHX Holdings are appointed by the 
Chairman and/or Vice Chairman, with the approval of the CHX Holdings 
Board, except that members of the Nominating and Governance Committee 
are appointed by the board of directors.\82\
---------------------------------------------------------------------------

    \82\ See Section 3 of Article II of the current CHX Holdings 
Bylaws; see also Section 2 of Article V of the current CHX Holdings 
Bylaws.
---------------------------------------------------------------------------

    The Exchange now proposes various amendments to the CHX Holdings 
Board composition requirements and procedures to be similar to those of 
NSX Holdings, which include the following key amendments: \83\
---------------------------------------------------------------------------

    \83\ The Exchanges notes that the following provisions under the 
current CHX Holdings Certificate are being deleted as they are being 
superseded by new provisions under the proposed CHX Holdings Bylaws 
or obsolete: Sections (b) and (c) of Article SIXTH of the current 
CHX Holdings Certificate is replaced by Section 2.2 of the proposed 
CHX Holdings Bylaws; Section (d) of Article SIXTH of the current CHX 
Holdings Certificate is replaced by Section 2.2(c) and (d) of the 
proposed CHX Holdings Bylaws; Section (f) of Article SIXTH of the 
current CHX Holdings Certificate is replaced by Section 2.16 of the 
proposed CHX Holdings Bylaws; Section (g) of Article SIXTH of the 
current CHX Holdings Certificate is being deleted as obsolete; and 
Section (h) of Article SIXTH of the current CHX Holdings Certificate 
is replaced by Section 2.6 of the proposed CHX Holdings Bylaws.
---------------------------------------------------------------------------

     Eliminate required minimum and maximum number of CHX 
Holdings Directors and permit the number of CHX Holdings Directors to 
be fixed by resolution of the CHX Holdings Board.\84\
---------------------------------------------------------------------------

    \84\ See Section 2.2(a) of the proposed CHX Holdings Bylaws; see 
also Article SEVENTH of the NSX Holdings Certificate.
---------------------------------------------------------------------------

     Eliminate classes of CHX Holdings Directors and associated 
three-year terms and replace with a general provision that each CHX 
Holdings Director shall hold office until his or her successor is 
elected and qualified or until his or her earlier resignation or 
removal. CHX Holdings Directors shall continue to be elected at the 
annual meeting of stockholders at which a quorum is present by a 
plurality of the votes cast.\85\
---------------------------------------------------------------------------

    \85\ See Section 2.2(c) of the proposed CHX Holdings Bylaws; see 
also Article SEVENTH of the NSX Holdings Certificate.
---------------------------------------------------------------------------

     Maintain the current CHX Holdings Director nominating 
process via the Nominating and Governance Committee, but reduce the 
number of required members of the Nominating and Governance Committee 
to one or more directors, in light of the proposed elimination of the 
required minimum/maximum number of CHX Holdings Directors. This would 
harmonize the minimum CHX Holdings Board and committee member 
requirements.
     Any CHX Holdings Director or the entire CHX Holdings Board 
may be removed, with or without cause, by the holders of a majority of 
the voting power of the shares then entitled to vote at an election of 
directors; except that the CHX Holdings Board must consist of one 
director who is the CEO of CHX Holdings.\86\ The Exchange believes that 
this change will provide stockholders with recourse in the event the 
best interest of the Exchange requires the removal of a director who 
could not be removed for cause.
---------------------------------------------------------------------------

    \86\ See Section 2.16 of the proposed CHX Holdings Bylaws; see 
also Article SEVENTH of the NSX Holdings Certificate.
---------------------------------------------------------------------------

    Incidentally, the Exchange proposes to delete paragraphs (b) 
through (d) and (f) through (h) of Article SIXTH of the current CHX 
Holdings Certificate, as the provisions are either obviated by the 
proposed amendments reflected in the proposed CHX Holdings Bylaws or 
obsolete.\87\ The Exchange proposes to maintain current Section (e) of 
Article SIXTH of the current CHX Holdings Certificate, but to move the 
provision to Section (b) of Article FIFTH of the proposed CHX Holdings 
Certificate.\88\ The Exchange also proposes to delete reference to CHX 
Holdings Director classes under Section 2.6 of the proposed CHX 
Holdings Bylaws.
---------------------------------------------------------------------------

    \87\ See supra note 83.
    \88\ The CHX Holdings Director election requirements may also be 
found under Section 4.9 of the proposed CHX Holdings Bylaws.
---------------------------------------------------------------------------

    The Exchange also proposes to amend current Section 2 of Article IV 
(Special Meetings) of the current CHX Holdings Bylaws (i.e., Section 
4.2 of the proposed CHX Holdings Bylaws) (1) to clarify that a special 
meeting of the stockholders may be called ``at any time'' by the CEO or 
the CHX Holdings Board and (2) to permit a special meeting of the 
stockholders to be called ``upon written notice to the Corporation by 
the stockholders holding one-third of the votes entitled to be cast'' 
(``CHX Holdings stockholder-called special meeting provision''). 
Similar to the reasoning for the proposed amendment to Section 4.2 of 
the CHX Bylaws, given that there will be 13 Upstream Owners of CHX 
Holdings, the Exchange submits that the CHX Holdings stockholder-called 
special meeting provision would facilitate the calling of special 
meetings of the stockholders, which would promote stockholder 
communication and transparency. The Exchange notes that while the 
proposed CHX Holdings stockholder-called special meeting provision may 
result in a special meeting of the stockholders being called by as few 
as three Indirect Upstream Owners, any action by the stockholders 
during a special meeting would be subject to the general quorum and 
voting requirements of Section 4.9 of the proposed CHX Holdings Bylaws, 
which requires, among other things, that the majority of the total 
votes which all of the outstanding stock of CHX Holdings would be 
entitled to cast at the meeting to be present, in person or by proxy, 
to constitute a quorum.
CHX Holdings Current Ownership and Voting Limitations
    Section (b) of Article FIFTH of the current CHX Holdings 
Certificate contains Ownership and Voting Limitations, which provide in 
general that for so long as CHX Holdings controls the CHX: No 
Person,\89\ either alone or together with its Related Persons,\90\ may 
own, directly or

[[Page 89551]]

indirectly, of record or beneficially shares of stock of CHX Holdings 
representing in the aggregate more than forty percent (40%) of the 
then-outstanding votes entitled to be cast on any matter; (2) no 
Person, either alone or together with its Related Persons, who is a 
Participant may own, directly or indirectly, of record or beneficially 
shares of stock of CHX Holdings representing in the aggregate more than 
twenty percent (20%) of the then-outstanding votes entitled to be cast 
on any matter; and (3) no Person, either alone or together with its 
Related Persons, at any time may, directly, indirectly or pursuant to 
any voting trust, agreement, plan or other arrangement, vote or cause 
the voting of shares of the capital stock (whether such shares be 
common stock or preferred stock) of CHX Holdings or give any consent or 
proxy with respect to shares representing more than twenty percent 
(20%) of the voting power of the then issued and outstanding capital 
stock of CHX Holdings. Section (a) of Article FIFTH of the current CHX 
Holdings Certificate contains obsolete stock transfer restrictions that 
expired in 2004, which the Exchange proposes to delete in its entirety.
---------------------------------------------------------------------------

    \89\ Paragraph (a)(i) of Article FIFTH of the current CHX 
Holdings Certificate defines ``Person'' as ``an individual, 
partnership (general or limited), joint stock company, corporation, 
limited liability company, trust or unincorporated organization, or 
any governmental entity or agency or political subdivision 
thereof.''
    \90\ Paragraph (a)(ii) of Article FIFTH of the current CHX 
Holdings Certificate defines ``Related Persons'' as ``(A) with 
respect to any Person, all ``affiliates'' and ``associates'' of such 
Person (as such terms are defined in Rule 12b-2 under the Securities 
Exchange Act of 1934, as amended); (B) with respect to any Person 
that holds a permit issued by the Chicago Stock Exchange, Inc. to 
trade securities on the Chicago Stock Exchange (a ``Participant''), 
any broker or dealer with which a Participant is associated; and (C) 
any two or more Persons that have any agreement, arrangement or 
understanding (whether or not in writing) to act together for the 
purpose of acquiring, voting, holding or disposing of shares of the 
capital stock of the Corporation.''
---------------------------------------------------------------------------

    The current CHX Holdings Certificate contains provisions to address 
violations of the current Ownership and Voting Limitations. 
Specifically, Section (d) of Article FIFTH the current CHX Holdings 
Certificate (Effect of Purported Transfers and Voting in Violation of 
this Article) requires CHX Holdings to only record the transfer or 
voting of shares that do not violate the Ownership and Voting 
Limitations. That is, to the extent a purported transfer or voting of 
shares exceeds the Ownership and Voting Limitations (``excess 
shares''), such excess shares are not recorded nor effective. 
Furthermore, Section (e) of Article FIFTH the current CHX Holdings 
Certificate (Right to Redeem Shares Purportedly Transferred or Voted in 
Violation of this Article) provides that if any stockholder purports to 
transfer or vote shares in excess of the Ownership and Voting 
Limitations, CHX Holdings shall have the right to redeem such excess 
shares for a price per share equal to the par value of those shares.
    With respect to the ability of the Commission to enforce the Act as 
it applies to the CHX after the Closing, the CHX will operate in the 
same manner following the close of the Transaction in which it operates 
today. Thus, the Commission will continue to have plenary regulatory 
authority over the CHX, as is the case currently with the CHX being a 
wholly-owned subsidiary of CHX Holdings. As described throughout this 
proposed rule filing, the CHX is proposing a series of amendments to 
its governing documents, as well as governing documents of NA Casin 
Holdings that will create an ownership structure and provide the 
Commission with appropriate oversight tools to ensure that the 
Commission will have the ability to enforce the Exchange Act with 
respect to the CHX and their respective directors, officers, employees, 
and agents to the extent that they are involved in the activities of 
the CHX.
Waiver of Current Ownership and Voting Limitations
    As described above, CHX Holdings will become a wholly-owned direct 
subsidiary of NA Casin Holdings (``Proposed Share Ownership''). In 
order to permit the Proposed Share Ownership in excess of the current 
Ownership and Voting Limitations, paragraph (b)(iii)(B) and paragraph 
(b)(iv) of Article FIFTH of the current CHX Holdings Certificate 
requires that the CHX Holdings Board adopt a bylaw that waives the 
current Ownership and Voting Limitations and make certain findings with 
respect to the waiver of the current Ownership and Voting 
Limitations.\91\
---------------------------------------------------------------------------

    \91\ Current Paragraph (b)(iii)(B) of Article FIFTH of the 
current CHX Holdings Certificate provides as follows: ``the 
limitations in clauses (ii)(A) and (ii)(C) may be waived by the 
Board of Directors of the Corporation pursuant to an amendment to 
the bylaws adopted by the Board of Directors, if, in connection with 
the adoption of such amendment, the Board of Directors adopts a 
resolution stating that it is the determination of such Board that 
such amendment will not impair the ability of the Chicago Stock 
Exchange, Inc., to carry out its functions and responsibilities as 
an `exchange' under the Act, and the rules under the Act; is 
otherwise in the best interests of the Corporation and its 
stockholders and the Chicago Stock Exchange, Inc.; will not impair 
the ability of the United States Securities and Exchange Commission 
to enforce the Act, and such amendment shall not be effective until 
approved by said Commission. In making the determinations referred 
to in the immediately preceding sentence, the Board of Directors may 
impose on the Person in question and its Related Persons such 
conditions and restrictions as it may in its sole discretion deem 
necessary, appropriate or desirable in furtherance of the objectives 
of the Act, and the rules under the Act, and the governance of the 
Chicago Stock Exchange, Inc.'' Current Paragraph (b)(iv) of Article 
FIFTH of the current CHX Holdings Certificate provides as follows: 
``Notwithstanding clauses (iii)(A) and (iii)(B) above, in any case 
where a Person, either alone or together with its Related Persons, 
would own or vote more than the above percentage limitations upon 
consummation of any proposed sale, assignment or transfer of the 
Corporation's capital stock, such sale, assignment or transfer shall 
not become effective until the Board of Directors of the Corporation 
shall have determined, by resolution, that such Person and its 
Related Persons are not subject to any applicable `statutory 
disqualification' (within the meaning of Section 3(a)(39) of the 
Securities Exchange Act of 1934, as amended).''
---------------------------------------------------------------------------

    Thus, pursuant to paragraph (b)(iii)(B) of Article FIFTH of the 
current CHX Holdings Certificate, on February 3, 2016 and November 22, 
2016, the CHX Holdings Board voted to approve Article XII, Section 12.1 
of the proposed CHX Holdings Bylaws, which provides as follows:

    (a) For the sole purpose of permitting the merger contemplated 
by an Agreement and Plan of Merger, dated February 4, 2016, among 
the Corporation, Exchange Acquisition Corporation (``Merger Sub'') 
and North America Casin Holdings, Inc. (``Parent''), under which the 
Corporation will become a wholly-owned subsidiary of Parent, the 
Board of Directors hereby waives pursuant to Article FIFTH, 
paragraph (b)(iii)(B) of the certificate of incorporation of the 
Corporation dated July 27, 2006, as amended (``2006 Certificate''): 
(i) The restrictions on ownership of capital stock of the 
Corporation described in Article FIFTH, paragraph (b)(ii)(A) of the 
2006 Certificate (``Ownership Limits'') to permit Parent to possess 
ownership in the Corporation in excess of the Ownership Limits 
(``Proposed Share Ownership''); and (ii) the restrictions on voting 
rights with respect to the capital stock of the Corporation as 
described in Article FIFTH, paragraph (b)(ii)(C) of the 2006 
Certificate (``Voting Limits'') to permit Parent to possess voting 
rights in excess of the Voting Limits (``Proposed Voting Rights'').
    (b) In so waiving the applicable Ownership Limits and Voting 
Limits, the Board of Directors has determined that: (i) The 
acquisition of the Proposed Share Ownership by Parent will not 
impair the ability of the Chicago Stock Exchange, Inc. 
(``Exchange'') to carry out its functions and responsibilities as an 
``exchange'' under the Exchange Act and the rules and regulations 
promulgated thereunder, is otherwise in the best interests of the 
Corporation, its stockholders and the Exchange, and will not impair 
the ability of the Commission to enforce the Exchange Act and the 
rules and regulations promulgated thereunder; (ii) the acquisition 
or exercise of the Proposed Voting Rights by Parent will not impair 
the ability of the Exchange to carry out its functions and 
responsibilities as an ``exchange'' under the Exchange Act and the 
rules and regulations promulgated thereunder, that it is otherwise 
in the best interests of the Corporation, its stockholders and the 
Exchange, and that it will not impair the ability of the Commission 
to enforce the

[[Page 89552]]

Exchange Act and the rules and regulations promulgated thereunder; 
and (iii) neither Parent, nor any of its Related Persons, is subject 
to ``statutory disqualification'' within the meaning of Section 
3(a)(39) of the Exchange Act.\92\
---------------------------------------------------------------------------

    \92\ 15 U.S.C. 78c(a)(39).

    Moreover, on November 22, 2016, the CHX Holdings Board approved the 
Resolutions, herein attached as Exhibit 5H, which includes, among other 
things, findings that (1) the acquisition of the Proposed Share 
Ownership by Parent will not impair the ability of the Exchange to 
carry out its functions and responsibilities as an ``exchange'' under 
the Exchange Act and the rules and regulations promulgated thereunder, 
is otherwise in the best interests of the Corporation, its stockholders 
and the Exchange, and will not impair the ability of the Commission to 
enforce the Exchange Act and the rules and regulations promulgated 
thereunder; (2) the acquisition or exercise of the Proposed Voting 
Rights by Parent will not impair the ability of the Exchange to carry 
out its functions and responsibilities as an ``exchange'' under the 
Exchange Act and the rules and regulations promulgated thereunder, that 
it is otherwise in the best interests of the Corporation, its 
stockholders and the Exchange, and that it will not impair the ability 
of the Commission to enforce the Exchange Act and the rules and 
regulations promulgated thereunder; (3) neither Parent, nor any of its 
Related Persons, is subject to ``statutory disqualification'' within 
the meaning of Section 3(a)(39) of the Exchange Act; and (4) execution 
and delivery of the Merger Agreement by Parent constitutes notice of 
Parent's intention to acquire the Proposed Share Ownership and the 
Proposed Voting Rights, in writing not less than forty-five days before 
the proposed ownership of such shares or the proposed exercise of such 
voting rights.\93\
---------------------------------------------------------------------------

    \93\ The Merger Agreement was executed on February 4, 2016 and 
the Resolutions were approved on November 22, 2016.
---------------------------------------------------------------------------

    The Exchange submits that SEC approval of the proposed rule change 
and, in particular, Section 12.1 of the proposed CHX Holdings Bylaws, 
will effectuate a waiver of the current Ownership and Voting 
Limitations and will permit the Proposed Share Ownership and the 
Proposed Voting Rights.
Proposed Ownership and Voting Limitations
    The Exchange further proposes to replace the Exchange's current 
Ownership and Voting Limitations under Article FIFTH of the current CHX 
Holdings Certificate with similar Ownership and Voting Limitations 
(comprised of the ``Voting Limitation'' and the ``Concentration 
Limitation'') utilized by NSX Holdings, except that the Exchange is not 
requesting a temporary waiver of the Concentration Limitation as 
provided under Section B of Article FOURTH of the NSX Holdings 
Certificate. Given that the Indirect Upstream Owners will have a direct 
ownership interest in NA Casin Holdings, NA Casin Holdings would also 
adopt Ownership and Voting Limitations under the proposed NA Casin 
Holdings Certificate identical to the those in the proposed CHX 
Holdings Certificate,\94\ with additional language that provides that 
for so long as the Corporation shall directly or indirectly control 
CHX, the Corporation shall take reasonable steps necessary to cause CHX 
Holdings, a Delaware corporation and a wholly-owned subsidiary of the 
Corporation, to be in compliance with the Voting Limitation and the 
Concentration Limitation, as such terms are defined in Article FOURTH 
of the proposed CHX Holdings Certificate.\95\
---------------------------------------------------------------------------

    \94\ See Sections (4)-(15) of Article IX of the proposed NA 
Casin Holdings Certificate.
    \95\ See Section (4) of Article IX of the proposed NA Casin 
Holdings Certificate.
---------------------------------------------------------------------------

    Paragraph (c)(i) of Article FOURTH of the proposed CHX Holdings 
Certificate provides as follows:

    Except as otherwise provided in this Section (c) of Article 
FOURTH, no Person,\96\ either alone or with its Related Persons,\97\ 
shall be permitted at any time to own beneficially shares of stock 
of the Corporation representing in the aggregate more than 40% of 
the then outstanding votes entitled to be cast on any matter (the 
``Concentration Limitation'').
---------------------------------------------------------------------------

    \96\ Section (b) of Article FOURTH of the proposed CHX Holdings 
Certificate provides, in pertinent part, as follows: ```Person' as a 
natural person, partnership (general or limited), corporation, 
limited liability company, trust or unincorporated organization, or 
a governmental entity or political subdivision thereof.''
    \97\ Supra note 17.

    Paragraph (c)(i)(A) of Article FOURTH of the proposed CHX Holdings 
---------------------------------------------------------------------------
Certificate provides as follows:

    The Concentration Limitation shall apply unless and until: (x) a 
Person (either alone or with its Related Persons) intending to 
acquire such ownership shall have delivered to the Board of 
Directors of the Corporation a notice in writing, not less than 45 
days (or such shorter period as the Board of Directors of the 
Corporation shall expressly consent to) prior to the acquisition of 
any shares that would cause such Person (either alone or with its 
Related Persons) to exceed the Concentration Limitation, of its 
intention to acquire such ownership; (y) the Board of Directors of 
the Corporation shall have resolved to expressly permit such 
ownership; and (z) such resolution shall have been filed with the 
Commission under Section 19(b) of the Exchange Act and shall have 
become effective thereunder.

    Paragraph (c)(i)(B) of Article FOURTH of the proposed CHX Holdings 
Certificate provides as follows:

    Subject to its fiduciary obligations pursuant to the Delaware 
General Corporation Law, the Board of Directors of the Corporation 
shall not adopt any resolution pursuant to paragraph (i)(A) of this 
Section (c) of Article FOURTH unless the Board of Directors of the 
Corporation shall have determined that: (x) such acquisition of 
beneficial ownership by such Person, either alone or with its 
Related Persons, will not impair any of the Corporation's or CHX's 
ability to discharge its responsibilities under the Exchange Act and 
the rules and regulations thereunder and is otherwise in the best 
interests of the Corporation and its stockholders; (y) such 
acquisition of beneficial ownership by such Person, either alone or 
with its Related Persons, will not impair the Commission's ability 
to enforce the Exchange Act; and (z) neither such Person nor any of 
its Related Persons is subject to any statutory disqualification as 
defined in Section 3(a)(39) of the Exchange Act. In making such 
determinations, the Board of Directors of the Corporation may impose 
such conditions and restrictions on such Person and its Related 
Persons owning any shares of stock of the Corporation entitled to 
vote on any matter as the Board of Directors of the Corporation may 
in its sole discretion deem necessary, appropriate or desirable in 
furtherance of the objectives of the Exchange Act and the governance 
of the Corporation.

    Moreover, paragraph (c)(i)(C) of Article FOURTH of the proposed CHX 
Holdings Certificate provides as follows:

    Unless the conditions specified in paragraph (i)(A) of this 
Section (c) of Article FOURTH are met, if any Person, either alone 
or with its Related Persons, at any time owns beneficially shares of 
stock of the Corporation in excess of the Concentration Limitation, 
the Corporation shall call from such Person and its Related Persons 
that number of shares of stock of the Corporation entitled to vote 
on any matter that exceeds the Concentration Limitation in 
accordance with Section (e) of this Article FOURTH at a price equal 
to the par value of such shares of stock.\98\

    \98\ Any stock called pursuant to Article FOURTH, paragraph 
(c)(i)(C) of the proposed CHX Holdings Certificate shall be effected 
by a resolution of the CHX Holdings Board that must be filed with 
the Commission pursuant to Section 19(b) of the Exchange Act.
---------------------------------------------------------------------------

    The proposed CHX Holdings Certificate also provides for limitations 
on ownership of shares by Participants of the Exchange. Paragraph 
(c)(ii) of Article FOURTH of the proposed CHX Holdings Certificate 
provides as follows:

    For so long as CHX remains a registered national securities 
exchange under Section 6

[[Page 89553]]

of the Exchange Act, no Participant, either alone or with its 
Related Persons, shall be permitted at any time to own beneficially 
shares of stock of the Corporation representing in the aggregate 
more than 20% of the then outstanding votes entitled to be cast on 
any matter. If any Participant, either alone or with its Related 
Persons, at any time owns beneficially shares of stock in excess of 
such 20% limitation, the Corporation shall call from such 
Participant and its Related Persons that number of shares of stock 
of the Corporation entitled to vote on any matter that exceeds such 
20% limitation in accordance with Section (e) of this Article FOURTH 
at a price equal to the par value of such shares of stock.

    Paragraph (c)(iii) of Article FOURTH of the proposed CHX Holdings 
Certificate provides as follows:

    The Corporation shall not register the purported transfer of any 
shares of stock of the Corporation in violation of the restrictions 
imposed by this Section (c) of Article FOURTH.

    Paragraph (c)(iv) of Article FOURTH of the proposed CHX Holdings 
Certificate provides as follows:

    For purposes of this Section (c) of this Article FOURTH, no 
Person shall be deemed to have any agreement, arrangement or 
understanding to act together with respect to voting shares of stock 
of the Corporation solely because such Person or any of such 
Person's Related Persons has or shares the power to vote or direct 
the voting of such shares of stock pursuant to a revocable proxy 
given in response to a public proxy or consent solicitation 
conducted pursuant to, and in accordance with, Regulation 14A 
promulgated pursuant to the Exchange Act, except if such power (or 
the arrangements relating thereto) is then reportable under Item 6 
of Schedule 13D under the Exchange Act (or any similar provision of 
a comparable or successor report).

    Section (d) of Article FOURTH (Ownership Limitation for 
Disqualified Controlling Stockholders) of the proposed CHX Holdings 
Certificate provides as follows:

    Notwithstanding any other provision of this Third Amended and 
Restated Certificate of Incorporation, no Person that is subject to 
any statutory disqualification as defined in Section 3(a)(39) of the 
Exchange Act shall be permitted at any time to own beneficially, 
either alone or with its Related Persons, shares of stock of the 
Corporation representing in the aggregate more than 20% of the then 
outstanding votes entitled to be cast on any matter (such Person, a 
``Disqualified Controlling Stockholder''). If a Person becomes a 
Disqualified Controlling Stockholder, the Corporation shall call 
from such Person and its Related Persons that number of shares of 
stock entitled to vote on any matter that exceeds such 20% 
limitation in accordance with Section (e) of this Article FOURTH at 
a price equal to the par value of such shares of stock.

    Section (e) of Article FOURTH of the proposed CHX Holdings 
Certificate (Procedure for Calling Shares) provides as follows:

    In the event the Corporation shall call shares of stock (the 
``Called Stock'') of the Corporation pursuant to Sections (c) or (d) 
of this Article FOURTH, notice of such call shall be given by first 
class mail, postage prepaid, mailed not less than 5 business nor 
more than 60 calendar days prior to the call date, to the holder of 
the Called Stock, at such holder's address as the same appears on 
the stock register of the Corporation. Each such notice shall state: 
(w) the call date; (x) the number of Called Stock to be called; (y) 
the aggregate call price; and (z) the place or places where Called 
Stock are to be surrendered for payment of the call price. Failure 
to give notice aforesaid, or any defect therein, shall not affect 
the validity of the call of Called Stock. From and after the call 
date (unless default shall be made by the Corporation in providing 
funds for the payment of the call price), shares of Called Stock, 
which have been called as aforesaid shall be cancelled, shall no 
longer be deemed to be outstanding, and all rights of the holder of 
such Called Stock as a stockholder of the Corporation (except the 
right to receive from the Corporation the call price against 
delivery to the Corporation of evidence of ownership of such shares) 
shall cease. Upon surrender in accordance with said notice of 
evidence of ownership of Called Stock so called (properly assigned 
for transfer, if the Board of Directors of the Corporation shall so 
require and the notice shall so state), such shares shall be called 
by the Corporation at par value.

    Section (f) of Article FOURTH of the proposed CHX Holdings 
Certificate (Right to Information; Determinations by the Board of 
Directors) provides as follows:

    The Board of Directors of the Corporation shall have the right 
to require any Person and its Related Persons reasonably believed 
(v) to be subject to the Voting Limitation or the Nonvoting 
Agreement Prohibition, (w) to own beneficially (within the meaning 
of Rules 13d-3 and 13d-5 under the Exchange Act) shares of stock of 
the Corporation entitled to vote on any matter in excess of the 
Concentration Limitation, (x) to own beneficially (within the 
meaning of Rules 13d-3 and 13d-5 under the Exchange Act) an 
aggregate of 5% or more of the then outstanding shares of stock of 
the Corporation entitled to vote on any matter, which ownership such 
Person, either alone or with its Related Persons, has not reported 
to the Corporation, (y) to be subject to the ownership limitation 
set forth in paragraph (ii) of Section (c) of this Article FOURTH or 
(z) to be a Disqualified Controlling Stockholder, to provide the 
Corporation complete information as to all shares of stock of the 
Corporation beneficially owned by such Person and its Related 
Persons and any other factual matter relating to the applicability 
or effect of this Article FOURTH as may reasonably be requested of 
such Person and its Related Persons. Any constructions, applications 
or determinations made by the Board of Directors of the Corporation 
pursuant to this Article FOURTH in good faith and on the basis of 
such information and assistance as was then reasonably available for 
such purpose shall be conclusive and binding upon the Corporation 
and its directors, officers and stockholders.

    With respect to voting limitations, paragraph (b)(i) of Article 
FOURTH of the proposed CHX Holdings Certificate provides as follows:

    Notwithstanding any other provision of this Third Amended and 
Restated Certificate of Incorporation, (x) no Person, either alone 
or with its Related Persons, as of any record date for the 
determination of stockholders entitled to vote on any matter, shall 
be entitled to vote or cause the voting of shares of stock of the 
Corporation, in person or by proxy or through any voting agreement 
or other arrangement, to the extent such shares represent in the 
aggregate more than 20% of the then outstanding votes entitled to be 
cast on such matter (the ``Voting Limitation''), and if votes have 
been cast, in person or by proxy or through any voting agreement or 
other arrangement, by any Person, either alone or with its Related 
Persons, in excess of the Voting Limitation, the Corporation shall 
disregard such votes cast in excess of the Voting Limitation and (y) 
no Person, either alone or with its Related Persons, may enter into 
any agreement, plan or other an agreement relating to shares of 
stock of the Corporation entitled to vote on any matter with any 
other Person, either alone or with its Related Persons, under 
circumstances which would result in shares of stock of the 
Corporation that would be subject to such agreement, plan or other 
arrangement not being voted on any matter, or the withholding of any 
proxy relating thereto, where the effect of such agreement, plan or 
other arrangement would be to enable any Person, either alone or 
with its Related Persons, to vote, possess the right to vote or 
cause the voting of shares of stock of the Corporation which would, 
as a result thereof, represent in the aggregate more than 20% of the 
then outstanding votes entitled to be cast on such matter (the 
``Nonvoting Agreement Prohibition'').\99\

    \99\ Article FOURTH, paragraph (b)(i) of the proposed CHX 
Holdings Certificate prohibits ``Nonvoting Agreements'' by or among 
Persons and their Related Persons that would result in shares of 
stock of CHX Holdings that would be subject to such agreement plan 
or other arrangement not being voted on any matter, or the 
withholding of any proxy relating those shares, where the effect of 
such an agreement would be to enable any Person, either alone or 
with its Related Persons, to vote, possess the right to vote or 
cause the voting of shares of CHX Holdings which would, as a result 
thereof, represent in the aggregate more than 20% of the then 
outstanding votes entitled to be cast (the ``Nonvoting Agreement 
Prohibition''). Any share owner seeking a waiver of the Nonvoting 
Agreement Prohibition so as to be able to enter into such an 
agreement would also be required to obtain express permission of the 
CHX Holdings Board through a duly authorized written resolution that 
is filed with and approved by the Commission under Section 19(b) of 
the Exchange Act.

---------------------------------------------------------------------------

[[Page 89554]]

    Paragraph (b)(ii) of Article FOURTH of the proposed CHX Holdings 
---------------------------------------------------------------------------
Certificate provides as follows:

    The Voting Limitation or the Nonvoting Agreement Prohibition, as 
applicable, shall apply unless and until: (x) a Person (and its 
Related Persons) owning any shares of stock of the Corporation 
entitled to vote on such matter shall have delivered to the Board of 
Directors of the Corporation a notice in writing, not less than 45 
days (or such shorter period as the Board of Directors of the 
Corporation shall expressly consent to) prior to any vote, of its 
intention to cast more than 20% of the votes entitled to be cast on 
such matter or to enter into an agreement, plan or other arrangement 
that would violate the Nonvoting Agreement Prohibition, as 
applicable; (y) the Board of Directors of the Corporation shall have 
resolved to expressly permit such exercise or the entering into of 
such agreement, plan or other arrangement, as applicable; and (z) 
such resolution shall have been filed with the Securities and 
Exchange Commission (the ``Commission'') under Section 19(b) of the 
Exchange Act and shall have become effective thereunder.

    Paragraph (b)(iii) of Article FOURTH of the proposed CHX Holdings 
Certificate provides as follows:

    Subject to its fiduciary obligations pursuant to the Delaware 
General Corporation Law, the Board of Directors of the Corporation 
shall not adopt any resolution pursuant to paragraph (b)(ii) of this 
Article FOURTH unless the Board of Directors of the Corporation 
shall have determined that: (v) the exercise of such voting rights 
or the entering into of such agreement, plan or other arrangement, 
as applicable, by such Person, either alone or with its Related 
Persons, will not impair any of the Corporation's or the CHX's 
ability to discharge its responsibilities under the Exchange Act and 
the rules and regulations thereunder and is otherwise in the best 
interests of the Corporation and its stockholders; (w) the exercise 
of such voting rights or the entering into of such agreement, plan 
or other arrangement, as applicable, by such Person, either alone or 
with its Related Persons, will not impair the Commission's ability 
to enforce the Exchange Act; (x) neither such Person nor any of its 
Related Persons is subject to any statutory disqualification as 
defined in Section 3(a)(39) of the Exchange Act; (y) in the case of 
a resolution to approve the exercise of voting rights in excess of 
the Voting Limitation, for so long as CHX remains a registered 
national securities exchange as defined under Section 6 of the 
Exchange Act, neither such Person nor any of its Related Persons is 
a Participant (any such Person that is a Related Person of a 
Participant shall hereinafter also be deemed to be a Participant for 
purposes of this Third Amended and Restated Certificate of 
Incorporation, as the context may require); and (z) in the case of a 
resolution to approve any waiver of the Nonvoting Agreement 
Prohibition, no such waiver may be approved with respect to any 
agreement, plan or other arrangement to which a Participant is a 
party that relates to shares of stock of the Corporation entitled to 
vote on any matter. In making such determinations, the Board of 
Directors of the Corporation may impose such conditions and 
restrictions on such Person and its Related Persons owning any 
shares of stock of the Corporation entitled to vote on any matter as 
the Board of Directors of the Corporation may in its sole discretion 
deem necessary, appropriate or desirable in furtherance of the 
objectives of the Exchange Act and the governance of the 
Corporation.

    Paragraph (b)(iv) of Article FOURTH of the proposed CHX Holdings 
Certificate provides as follows:

    This Section (b) of Article FOURTH shall not apply to (x) any 
solicitation of any revocable proxy from any stockholder of the 
Corporation by or on behalf of the Corporation or by any officer or 
director of the Corporation acting on behalf of the Corporation or 
(y) any solicitation of any revocable proxy from any stockholder of 
the Corporation by any other stockholder that is conducted pursuant 
to, and in accordance with, Regulation 14A promulgated pursuant to 
the Exchange Act.
Jurisdiction Over Individuals
    The Exchange proposes to harmonize provisions under the proposed 
CHX Holdings Bylaws and the NA Casin Holdings Bylaws regarding 
jurisdiction over individuals.
    Specifically, Section 3.5 of the proposed CHX Holdings Bylaws \100\ 
provides as follows:
---------------------------------------------------------------------------

    \100\ Section 3.6 of the proposed CHX Holdings Bylaws provides 
that the Corporation shall take such action as is necessary to 
ensure that the Corporation's officers, directors and employees 
consent to the applicability of Sections 3.1, 3.2, 3.3, 3.4 and 3.5 
with respect to activities related to the CHX.
---------------------------------------------------------------------------

     The Corporation and its officers, directors, employees and 
agents, by virtue of their acceptance of such position, shall be deemed 
to irrevocably submit to the jurisdiction of the United States federal 
courts, Commission, and CHX,\101\ for the purposes of any suit, action 
or proceeding pursuant to the United States federal securities laws, 
and the rules or regulations thereunder, arising out of, or relating 
to, the activities of CHX, and by virtue of their acceptance of any 
such position, shall be deemed to 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 it or they are not personally subject to 
the jurisdiction of the United States federal courts, Commission or the 
CHX, 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 of that suit, action or proceeding may not be 
enforced in or by such courts or agency. The Corporation and its 
officers, directors, employees and agents also agree that they will 
maintain an agent, in the United States, for the service of process of 
a claim arising out of, or relating to, the activities of CHX.
---------------------------------------------------------------------------

    \101\ Section 3.5 of the proposed CHX Holdings Bylaws is 
virtually identical to Article III, Section 5 of the current CHX 
Holdings Bylaws, except for amendments to replace ``Chicago Stock 
Exchange, Inc.'' with the abbreviated ``CHX.''
---------------------------------------------------------------------------

    Similarly, Section 10.1.1 of the NA Casin Holdings Bylaws \102\ 
provides as follows:
---------------------------------------------------------------------------

    \102\ Similar to Section 3.6 of the proposed CHX Holdings 
Bylaws, Section 10.1.2 of the NA Casin Bylaws would provide that the 
Corporation shall take reasonable steps necessary to cause its 
officers, directors, and employees prior to accepting a position as 
an officer, director, or employee, as applicable, of the Corporation 
to consent to the applicability to them of Sections 1, 3, 16 and 17 
of Article IX of the Certificate of Incorporation and Section 10.1.1 
hereof to the extent that such officers, directors, and employees 
are involved in the activities of CHX. See supra note 100.
---------------------------------------------------------------------------

     The Corporation and its officers, directors, employees and 
agents, by virtue of their acceptance of such position, shall be deemed 
to irrevocably submit to the jurisdiction of the United States federal 
courts, United States Securities and Exchange Commission 
(``Commission''), and the Chicago Stock Exchange, Inc. (``CHX''), for 
the purposes of any suit, action or proceeding pursuant to the United 
States federal securities laws, and the rules or regulations 
thereunder, arising out of, or relating to, the activities of CHX, and 
by virtue of their acceptance of any such position, shall be deemed to 
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 it or 
they are not personally subject to the jurisdiction of the United 
States federal courts, Commission or the CHX, 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 of that 
suit, action or proceeding may not be enforced in or by such courts or 
agency. The Corporation and its officers, directors, employees and 
agents also agree that they will maintain an agent, in the United 
States, for the service of process of a claim arising out of, or 
relating to, the activities of CHX.
Access to Books and Records
    The Exchange proposes to harmonize provisions under the CHX 
Holdings Bylaws and the NA Casin Holdings Certificate regarding access 
to certain books and records so as to facilitate access to such books 
and records of the Indirect Upstream Owners by the Commission and CHX.

[[Page 89555]]

    Specifically, the proposed CHX Holdings Bylaws includes the 
following provisions:
     Section 3.2 \103\ would provide that all confidential 
information pertaining to the self-regulatory function of CHX 
(including, but not limited to, confidential information regarding 
disciplinary matters, trading data, trading practices and audit 
information) contained in the books and records of CHX that shall come 
into the possession of the Corporation shall, to the fullest extent 
permitted by law: (i) Not be made available to any Person (other than 
as provided in the next sentence) other than to those officers, 
directors, employees and agents of the Corporation that have a 
reasonable need to know the contents thereof; (ii) be retained in 
confidence by the Corporation and the officers, directors, employees 
and agents of the Corporation; and (iii) not be used for any non-
regulatory purposes. Nothing in these bylaws shall be interpreted as to 
limit or impede: (a) The rights of the Commission or CHX to access and 
examine such confidential information pursuant to the federal 
securities laws and the rules and regulations promulgated thereunder; 
or (b) the ability of any officers, directors, employees or agents of 
the Corporation to disclose such confidential information to the 
Commission or CHX.
---------------------------------------------------------------------------

    \103\ See supra note 100.
---------------------------------------------------------------------------

     Section 3.3 \104\ would provide that for so long as the 
Corporation shall control, directly or indirectly, CHX, the books, 
records, premises, officers, directors and employees of the Corporation 
shall be deemed to be the books, records, premises, officers, directors 
and employees of CHX for purposes of and subject to oversight pursuant 
to the Exchange Act, but only to the extent that such books and records 
are related to, or such officers, directors and employees are involved 
in, the activities of CHX. The Corporation's books and records relating 
to the activities of CHX shall be subject at all times to inspection 
and copying by the Commission and CHX. The Corporation's books and 
records related to the activities of CHX shall be maintained within the 
United States.
---------------------------------------------------------------------------

    \104\ See id.
---------------------------------------------------------------------------

     Section 3.7 provides that for so long as a stockholder 
shall maintain a direct or indirect equity interest in the Chicago 
Stock Exchange, Inc.: (a) The books, records, officers, directors (or 
equivalent) and employees of the stockholder shall be deemed to be the 
books, records, officers, directors and employees of Chicago Stock 
Exchange, Inc. for purposes of and subject to oversight pursuant to the 
Exchange Act to the extent that such books and records are related to, 
or such officers, directors (or equivalent) and employees are involved 
in, the activities of Chicago Stock Exchange, Inc.; (b) the 
stockholder's books and records related to the activities of Chicago 
Stock Exchange, Inc. shall at all times be made available for 
inspection and copying by the Commission and Chicago Stock Exchange, 
Inc.; and (c) the stockholder's books and records related to the 
activities of Chicago Stock Exchange, Inc. shall be maintained within 
the United States.
    Similarly, the NA Casin Holdings Certificate includes the following 
provisions:
     Similar to Section 3.2 of the proposed CHX Holdings 
Bylaws, Section (16) of Article IX would provide that all confidential 
information pertaining to the self-regulatory function of CHX 
(including, but not limited to, confidential information regarding 
disciplinary matters, trading data, trading practices and audit 
information) contained in the books and records of CHX that shall come 
into the possession of the Corporation shall, to the fullest extent 
permitted by law: (i) Not be made available to any Person (other than 
as provided in the next sentence) other than to those officers, 
directors, employees and agents of the Corporation that have a 
reasonable need to know the contents thereof; (ii) be retained in 
confidence by the Corporation and the officers, directors, employees 
and agents of the Corporation; and (iii) not be used for any non-
regulatory purposes. Nothing in this Amended and Restated Certificate 
of Incorporation shall be interpreted as to limit or impede: (A) The 
rights of the Commission or CHX to access and examine such confidential 
information pursuant to the federal securities laws and the rules and 
regulations promulgated thereunder; or (B) the ability of any officers, 
directors, employees or agents of the Corporation to disclose such 
confidential information to the Commission or CHX.
     Similar to Section 3.3 of the proposed CHX Holdings 
Bylaws, Section (17) of Article IX would provide that for so long as 
the Corporation shall control, directly or indirectly, CHX, the books, 
records, premises, officers, directors and employees of the Corporation 
shall be deemed to be the books, records, premises, officers, directors 
and employees of CHX for purposes of and subject to oversight pursuant 
to the Exchange Act, but only to the extent that such books and records 
are related to, or such officers, directors and employees are involved 
in, the activities of CHX. The Corporation's books and records relating 
to the activities of CHX shall be subject at all times to inspection 
and copying by the Commission and CHX. The Corporation's books and 
records related to the activities of CHX shall be maintained within the 
United States.
     Similar to Section 3.7 of the proposed CHX Holdings 
Bylaws, Section (18) of Article IX would provide that for so long as a 
stockholder shall maintain a direct or indirect equity interest in CHX: 
(a) The books, records, officers, directors (or equivalent) and 
employees of the stockholder shall be deemed to be the books, records, 
officers, directors and employees of CHX for purposes of and subject to 
oversight pursuant to the Exchange Act to the extent that such books 
and records are related to, or such officers, directors (or equivalent) 
and employees are involved in, the activities of CHX; (b) the 
stockholder's books and records related to the activities of CHX shall 
at all times be made available for inspection and copying by the 
Commission and CHX; and (c) the stockholder's books and records related 
to the activities of CHX shall be maintained within the United States.
Additional Matters
    The Exchange proposes to harmonize provisions under the CHX 
Holdings Bylaws and the NA Casin Holdings Certificate regarding the 
preservation of the independence of the self-regulatory function of the 
CHX, directors' consideration of the effect of CHX Holdings' actions on 
the CHX's ability to carry out its responsibilities under the Exchange 
Act and cooperation with the Commission and the CHX.
    Specifically, the proposed CHX Holdings Bylaws includes the 
following provisions:
     Section 3.1 provides that for so long as the Corporation 
shall control Chicago Stock Exchange, Inc. (``CHX''), the Corporation 
and its Board of Directors, officers, employees and agents shall give 
due regard to the preservation of the independence of the self-
regulatory function of the CHX and to its obligations to investors and 
the general public and shall not take any actions which would interfere 
with the effectuation of any decisions by the Board of Directors of the 
CHX relating to its regulatory functions (including enforcement and 
disciplinary matters) or the structure of the market which it regulates 
or which would interfere with the ability of the CHX to carry out its 
responsibilities under the Securities

[[Page 89556]]

Exchange Act of 1934, as amended (the ``Exchange Act''). The 
Corporation's books and records related to the activities of CHX shall 
be maintained within the United States.
     Section 3.4 provides that the Corporation and its 
officers, directors, employees and agents, by virtue of their 
acceptance of such position, shall comply with the federal securities 
laws and rules and regulations thereunder and shall: (a) Cooperate (i) 
with the Commission, and (ii) with CHX pursuant to, and to the extent 
of, CHX's regulatory authority; and (b) take reasonable steps necessary 
to cause its agents to cooperate (i) with the Commission, and (ii) with 
CHX pursuant to, and to the extent of, CHX's regulatory authority with 
respect to such agents' activities related to CHX.
    Similarly, the NA Casin Holdings Certificate includes the following 
provisions:
     Similar to Section 3.1 of the proposed CHX Holdings 
Bylaws, Section (3) of Article IX would provide that for so long as the 
Corporation shall control CHX, the Corporation and its Board of 
Directors, officers, employees and agents shall give due regard to the 
preservation of the independence of the self-regulatory function of the 
CHX and to its obligations to investors and the general public and 
shall not take any actions which would interfere with the effectuation 
of any decisions by the Board of Directors of the CHX relating to its 
regulatory functions (including enforcement and disciplinary matters) 
or the structure of the market which it regulates or which would 
interfere with the ability of the CHX to carry out its responsibilities 
under the Securities Exchange Act of 1934, as amended. The 
Corporation's books and records related to the activities of CHX shall 
be maintained within the United States.
     Similar to Section 3.4 of the proposed CHX Holdings 
Bylaws, Section (2) of Article IX would provide that the Corporation 
and its officers, directors, employees and agents, by virtue of their 
acceptance of such position, shall comply with the federal securities 
laws and rules and regulations thereunder and shall: (a) Cooperate (i) 
with the United States Securities and Exchange Commission (the 
``Commission''), and (ii) with the Chicago Stock Exchange, Inc. a 
Delaware corporation and an indirect wholly-owned subsidiary of the 
Corporation (``CHX''), pursuant to, and to the extent of, CHX's 
regulatory authority; and (b) take reasonable steps necessary to cause 
its agents to cooperate (i) with the Commission, and (ii) with CHX 
pursuant to, and to the extent of, CHX's regulatory authority with 
respect to such agents' activities related to CHX.
    Moreover, so as to ensure that a new NA Casin Holdings board is 
elected by the Indirect Upstream Owners as soon as practicable after 
the Closing and to facilitate the ability of NA Casin Holdings to 
maintain board members that are experienced with the operation of the 
Exchange, NA Casin Holdings would adopt the following provision in the 
NA Casin Holdings Certificate:
     Section (4) of Article V of the NA Casin Holdings 
Certificate would provide that the directors shall hold office until 
their successors are elected and qualified, and prior to the election 
of directors described in paragraph (5) below, any director may be 
removed with or without cause at any time by a vote of the 
recordholders of a majority of the Shares then entitled to vote, or by 
written consent of the recordholders of a majority of the Shares 
entitled to vote at a meeting of the stockholders.
     Section (5) of Article V of the NA Casin Holdings 
Certificate would provide that within 30 days after the consummation of 
the merger contemplated by the Agreement and Plan of Merger dated as of 
February 4, 2016 among CHX Holdings, Inc., the Corporation and Exchange 
Acquisition Corp. (the ``Merger Agreement'') the Corporation shall 
convene a special meeting of its stockholders for the purpose of 
electing a new Board of Directors. From and after such special meeting, 
the Board shall be and is divided into three classes, as nearly equal 
in number as possible, designated: Class I, Class II and Class III. In 
case of any increase or decrease, from time to time, in the number of 
directors, the number of directors in each class shall be apportioned 
as nearly equal as possible. No decrease in the number of directors 
shall shorten the term of any incumbent director.
     Section (6) of Article V of the NA Casin Holdings 
Certificate would provide that each director shall serve for a term 
ending on the date of the third annual meeting following the meeting at 
which such director was elected; provided, that each director initially 
appointed to Class I shall serve for an initial term expiring at the 
corporation's annual meeting of stockholders held in 2017; each 
director initially appointed to Class II shall serve for an initial 
term expiring at the corporation's annual meeting of stockholders held 
in 2018; and each director initially appointed to Class III shall serve 
for an initial term expiring at the corporation's annual meeting of 
stockholders held in 2019; provided further, that the term of each 
director shall continue until the election and qualification of a 
successor and be subject to such director's earlier death, resignation 
or removal.
    The class board structure of Article V of the NA Casin Holdings 
Certificate would ensure overlap of board member terms, which would 
provide continuity and stability as to board composition and, thereby, 
facilitate the ability of the NA Casin Holdings board to meet its 
obligations under Article IX of the NA Casin Holdings Certificate.
Effecting Amendments to CHX Holdings and NA Casin Governing Documents
    The Exchange proposes to harmonize provisions under the CHX 
Holdings Bylaws, the NA Casin Holdings Certificate and the NA Casin 
Holdings Bylaws regarding the effectuation of amendments to those 
documents.
    Specifically, Article VIII of the proposed CHX Holdings Bylaws 
provides as follows:
     These bylaws may be amended or repealed, or new bylaws may 
be adopted, by the Board of Directors. These bylaws may also be amended 
or repealed, or new bylaws may be adopted, by action taken by the 
stockholders of the Corporation. For so long as this Corporation shall 
control, directly or indirectly, CHX, before any amendment to or repeal 
of any provision of the bylaws of this Corporation shall be effective, 
those changes shall be submitted to the Board of Directors of CHX and 
if that Board shall determine that the same must be filed with or filed 
with and approved by the Commission before the changes may be 
effective, under Section 19 of the Exchange Act and the rules 
promulgated under that Exchange Act by the Commission or otherwise, 
then the proposed changes to the bylaws of this Corporation shall not 
be effective until filed with or filed with and approved by the 
Commission, as the case may be.
    Also, Article ELEVENTH of the proposed CHX Holdings Certificate 
provides as follows:
     The Corporation reserves the right to amend this 
certificate of incorporation, and to change or repeal any provision of 
the certificate of incorporation, in the manner prescribed at the time 
by statute, and all rights conferred upon stockholders by such 
certificate of incorporation are granted subject to this reservation. 
For so long as this Corporation shall control, directly or indirectly, 
Chicago Stock Exchange, Inc., before any amendment to or repeal of any 
provision of this certificate of incorporation shall be effective, 
those changes shall be submitted to the Board of Directors of

[[Page 89557]]

Chicago Stock Exchange, Inc. and if that Board shall determine that the 
same must be filed with or filed with and approved by the Commission 
before the changes may be effective, under Section 19 of the Act and 
the rules promulgated under that Act by the Commission or otherwise, 
then the proposed changes to the certificate of incorporation of this 
Corporation shall not be effective until filed with or filed with and 
approved by the Commission, as the case may be.
    Similarly, NA Casin Holdings would adopt the following provisions 
in its governing documents to require the consent of the CHX's board of 
directors in amending or repealing any provisions of NA Casin Holdings' 
governing documents:
     Section 11.1 of the NA Casin Holdings Bylaws would 
provide, in pertinent part, that for so long as this Corporation shall 
control, directly or indirectly, CHX, before any amendment to or repeal 
of any provision of these Bylaws shall be effective, the same shall be 
submitted to the board of directors of CHX and if said board shall 
determine that the same must be filed with, or filed with and approved 
by, the Commission before the same may be effective, under Section 19 
of the Securities and Exchange Act of 1934 and the rules promulgated 
thereunder, then the same shall not be effective until filed with, or 
filed with and approved by, the Commission, as the case may be.
     Article X of the NA Casin Holdings Certificate would 
provide that for so long as this Corporation shall control, directly or 
indirectly, CHX before any amendment to or repeal of any provision of 
this Certificate of Incorporation shall be effective, the same shall be 
submitted to the board of directors of CHX and if said board shall 
determine that the same must be filed with, or filed with and approved 
by, the Commission before the same may be effective, under Section 19 
of the Exchange Act and the rules promulgated thereunder, then the same 
shall not be effective until filed with, or filed with and approved by, 
the Commission, as the case may be.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act in general,\105\ and Section 6(b)(1) in 
particular.\106\ Specifically, the Exchange believes that the proposed 
non-substantive amendments to the governing documents of CHX and CHX 
Holdings and the CHX Rules clarify the history and organization of 
those documents and eliminates redundant provisions, which include the 
following key changes described in greater detail above:
---------------------------------------------------------------------------

    \105\ 15 U.S.C. 78f(b).
    \106\ 15 U.S.C. 78f(b)(1).
---------------------------------------------------------------------------

     Omitting provisions from the proposed CHX Holdings 
Certificate regarding board composition requirements and election/
vacancy procedures, as they are fully-described under Article II of the 
proposed CHX Holdings Bylaws.
     Omitting provisions from the proposed CHX Certificate 
regarding board composition requirements and election/vacancy 
procedures, as they are fully-described under Article III of the 
proposed CHX Bylaws.
     Moving provisions under Article 2, Rule 1 of the current 
CHX Rules regarding board committees and their respective composition 
requirements to Article V of the proposed CHX Bylaws.
    Accordingly, the Exchange believes that the proposed rule change 
would further enable 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, in furtherance 
of the objectives of Section 6(b)(1) of the Act.
    Moreover, the Exchange believes that the proposed rule change 
furthers the objectives of Section 6(b)(5) \107\ in that it is designed 
to promote just and equitable principles of trade, to foster 
cooperation and coordination with persons engaged in facilitating 
transactions in securities, to remove impediments and perfect the 
mechanisms of a free and open market, and, in general, to protect 
investors and the public interest. Specifically, the Exchange submits 
that the CHX Rules, the relevant governing documents of CHX and its 
upstream affiliates, CHX Holdings and NA Casin Holdings, the NACH 
Stockholders' Agreement, the Saliba Put Agreement and the Raptor Put 
Agreement, as proposed to be adopted or amended, to permit the 
Transaction, are consistent with Section 6(b) of the Act,\108\ in 
general and 6(b)(5), in particular.
---------------------------------------------------------------------------

    \107\ 15 U.S.C. 78f(b)(5).
    \108\ 15 U.S.C. 78f(b).
---------------------------------------------------------------------------

    The proposed CHX Holdings Certificate and Bylaws establish an 
organizational structure for CHX Holdings, as the holding company for 
CHX, which will assure that the Commission and CHX will continue to be 
able to fully discharge their respective obligations to effectively 
regulate the equity securities markets and CHX. Specifically, among 
other key provisions, CHX Holdings and its directors, officers, 
employees and agents, are subject to the exclusive jurisdiction of the 
U.S. federal courts, the SEC and CHX; CHX Holdings is obligated to 
comply with the federal securities laws and the rules and regulations 
thereunder, as are its directors, officers and employees; prospective 
owners would be required to adhere to the proposed Ownership and Voting 
Limitations; and the books, records, premises, directors, employees and 
agents of CHX Holdings are deemed to be those of CHX for purposes of 
and subject to oversight pursuant to the Act. As such, these provisions 
operate to assure that the Exchange's rules meet the statutory 
requirements of Section 6(b)(5) of the Act to promote just and 
equitable principles of trade and to protect investors and the public 
interest.
    The proposed CHX Holding Certificate and Bylaws also establish 
board composition and procedure requirements, which will facilitate the 
ability of the CHX Holdings to ensure that the CHX Holdings Board is 
optimally constituted with members that would give due regard to the 
preservation of the independence of the SRO function of the Exchange. 
To this end, the CHX Holdings Certificate and Bylaws have been updated 
to be largely consistent with the board composition and procedure 
requirements of NSX Holdings. Specifically, among other provisions, the 
proposed CHX Holdings Board composition and procedure requirements 
provide flexibility regarding the number of CHX Holdings Directors and 
the removal of CHX Holdings Directors. The Exchange believes that the 
proposed changes will also promote consistency among the various 
governance documents of the holding companies of the national 
securities exchanges and facilitate the ability of the Commission to 
provide oversight regarding the upstream governance of national 
securities exchanges. The Exchange also notes that CHX Holdings 
stockholder-called special meeting provision will facilitate the 
calling of special meetings of the stockholders, which would promote 
stockholder communication and transparency. As such, these provisions 
operate to assure that the Exchange's rules meet the statutory 
requirements of Section 6(b)(5) of the Act to promote just and 
equitable principles of trade and to protect investors and the public 
interest.
    The proposed NA Casin Holdings Certificate and Bylaws establish an

[[Page 89558]]

organizational structure for NA Casin Holdings, as the direct holding 
company for CHX Holdings, which will assure that the Commission and CHX 
will continue to be able to fully discharge their respective 
obligations to effectively regulate the equity securities markets and 
CHX. Specifically, similar to the requirements under the CHX Holdings 
Certificate and Bylaws, among other provisions, NA Casin Holdings and 
its directors, officers, employees and agents, would be subject to the 
exclusive jurisdiction of the U.S. federal courts, the SEC and CHX; NA 
Casin Holdings is obligated to comply with the federal securities laws 
and the rules and regulations thereunder, as are its directors, 
officers and employees; prospective owners would be required to adhere 
to the Ownership and Voting Limitations; and the books, records, 
premises, directors, employees and agents of NA Casin Holdings are 
deemed to be those of CHX for purposes of and subject to oversight 
pursuant to the Act. Moreover, the harmonization between the NA Casin 
Holdings Certificate and Bylaws and the CHX Holdings Certificate and 
Bylaws are intended to align the CHX Holdings governance structure with 
that of NA Casin Holdings and thus enhance governance efficiencies. As 
such, these provisions operate to assure that the Exchange's rules meet 
the statutory requirements of Section 6(b)(5) of the Act to promote 
just and equitable principles of trade and to protect investors and the 
public interest.
    The proposed CHX Certificate, Bylaws and Rules establish an 
organization structure for CHX that will assure that CHX will continue 
to be able to fully-discharge its obligations as an SRO pursuant to the 
Exchange Act. Specifically, among other key provisions, the CHX board 
composition and procedure requirements have been updated to be largely 
consistent with the board composition and procedure requirements of 
NSX; the CHX Regulatory Oversight Committee composition requirements 
have been updated to be consistent with the NSX Regulatory Oversight 
Committee composition requirements; and the rules governing the 
composition of the various CHX board committees have been restated 
under the proposed CHX Bylaws in a manner similar to the NSX By-Laws. 
The Exchange believes that these amendments will promote consistency 
among the various governance documents of the national securities 
exchanges and facilitate the ability of the Commission to provide 
oversight of the equity securities markets. The Exchange also notes 
that the current provisions regarding the SRO function of CHX will 
remain substantively unchanged and will remain in full force and effect 
prior to, during and after the Closing. As such, these provisions 
operate to assure that the Exchange's rules meet the statutory 
requirements of Section 6(b)(5) of the Act to promote just and 
equitable principles of trade and to protect investors and the public 
interest.
    To the extent that the CHX Certificate and Bylaws differ from that 
of NSX, the Exchange believes that those provisions are also consistent 
with the objectives of Section 6(b)(5). Specifically, the Exchange 
believes that the proposed requirement that at least 20% of the CHX 
board be comprised of CHX Holdings Directors will promote governance 
efficiencies between CHX Holdings and CHX that will operate to enhance 
the governance and operation of the Exchange as an SRO. Also, the 
Exchange believes that maintaining the role of Vice Chairman of the CHX 
Board and the current CHX Board committee composition requirements 
(except for the Regulatory Oversight Committee composition 
requirements, as described above) will provide continuity in CHX 
governance so as to facilitate the transition to the post-Closing 
governance structure. Finally, the Exchange believes that the CHX 
stockholder-called special meeting provision will facilitate the 
calling of special meetings of the stockholders, which would promote 
stockholder communication and transparency. As such, all of these 
provisions operate to assure that the Exchange's rules meet the 
statutory requirements of Section 6(b)(5) of the Act to promote just 
and equitable principles of trade and to protect investors and the 
public interest.
    In addition, the proposed NACH Stockholders' Agreement, Saliba Put 
Agreement and Raptor Put Agreement include provisions that provide 
reasonable financial protections to the Indirect Upstream Owners so as 
to facilitate consummation of the Transaction without violating the 
proposed Ownership and Voting Limitations. Specifically, while the 
proposed NACH Stockholders' Agreement includes various transfer of 
shares provisions, the agreement does not contain any provisions, such 
as lock-up, drag-along or tag-along rights, that could result in the 
Indirect Upstream Owners becoming Related Persons.109 110 
Accordingly, the Exchange believes that these agreements would not by 
themselves result in a violation of the proposed Ownership and Voting 
Limitations and would, instead, facilitate the ability of the Indirect 
Upstream Owners to provide additional capital to the Exchange so that 
the Exchange's rules meet the statutory requirements of Section 6(b)(5) 
of the Act to promote just and equitable principles of trade and to 
protect investors and the public interest.
---------------------------------------------------------------------------

    \109\ See supra note 17.
    \110\ See supra note 22.
---------------------------------------------------------------------------

    Moreover, the Exchange submits that the proposed call options under 
the proposed CHX Holdings Certificate \111\ and NA Casin Holdings 
Certificate \112\ will serve as an enforcement and deterrence mechanism 
to ensure compliance with the proposed Ownership and Voting Limitations 
by the Upstream Owners and any future owners. Thus, the Exchange 
submits that the call options are consistent with Section 6(b)(5) in 
that the call options further the protection of investors and the 
public interest by ensuring diversity in the ownership of the Exchange, 
which is key to protecting the Exchange's independence and its ability 
to meet its obligations pursuant to the Exchange Act.
---------------------------------------------------------------------------

    \111\ See Section (e) of Article FOURTH of the proposed CHX 
Holdings Certificate.
    \112\ See Section (14) of Article IX of the proposed NA Casin 
Holdings Certificate.
---------------------------------------------------------------------------

    Further, the proposed rule change is designed to effectuate changes 
to the CHX Holdings' ownership necessary to close the Transaction and 
provide for an efficient transition into a new organizational structure 
as soon as practicable after approval by the Commission of the proposed 
rule change. To this extent, the Exchange submits that the rule changes 
are consistent with Section 6(b)(5) in that they are designed to remove 
impediments to and perfect the mechanism of a free and open market and 
national market system.
    The Exchange believes that the Transaction and the proposed rule 
change promote the protection of investors and the public interest. The 
Exchange submits that its proposal and the proposed ownership structure 
are consistent with the public interest in promoting efficient markets, 
reducing administrative burdens on exchanges, and providing flexibility 
where appropriate to the effective discharge of SRO responsibilities. 
The amendments are intended to provide market participants, investors, 
and the public with a clear and transparent description of the proposed 
changes to the CHX Holdings' ownership and governance structure as 
reflected in governing corporate documents. The Exchange

[[Page 89559]]

also believes that the Closing will operate to enhance competition 
among the equity securities markets and provide new trading and capital 
formation opportunities for market participants and the investing 
public. As such, the Transaction and the proposed rule change will 
assure that the Exchange meets its statutory requirements of Section 
6(b)(5) of the Act to promote just and equitable principles of trade 
and to protect investors and the public interest.

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. The rule change is being 
proposed in connection with the Transaction that will, upon completion, 
change the ownership structure of CHX Holdings. The Exchange believes 
that the Transaction will result in substantial capital investment into 
the Exchange, which will better enable the Exchange to compete within 
the highly competitive U.S. securities market and better enable the 
Exchange to further the objectives of the Act. As such, the Exchange 
believes that there is no burden on competition that is 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

    No written comments were solicited or received.

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 (i) as the Commission may 
designate up to 90 days of such date 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-2016-20 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-2016-20. 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 the 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-CHX-2016-20 and should be 
submitted on or before January 3, 2017.
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    \113\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\113\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2016-29646 Filed 12-9-16; 8:45 am]
 BILLING CODE 8011-01-P