Document ID: SEC-2009-1512-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX BX, Inc.
Posted Date: 2009-10-26T04:00Z

[Federal Register: October 26, 2009 (Volume 74, Number 205)]
[Notices]               
[Page 55078-55080]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr26oc09-130]                         

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60845; File Nos. SR-BX-2009-061, SR-NASDAQ-2009-087, 
SR-Phlx-2009-88]

 
Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; The NASDAQ 
Stock Market LLC; NASDAQ OMX PHLX, Inc.; Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change To Amend the Restated Certificate 
of Incorporation of The NASDAQ OMX Group, Inc.

October 20, 2009.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on October 1, 2009, NASDAQ OMX BX, Inc. (``BX''), The NASDAQ Stock 
Market LLC (``NASDAQ Exchange'') and NASDAQ OMX PHLX, Inc. (``Phlx'') 
(collectively, the ``NASDAQ OMX Exchange Subsidiaries'') \3\ filed with 
the Securities and Exchange Commission (``Commission'') the proposed 
rule change as described in Items I and II below, which Items have been 
prepared by the NASDAQ OMX Exchange Subsidiaries. The Commission is 
publishing this notice to solicit comments on the proposed rule change 
from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ The Commission notes that on October 1, 2009, substantially 
similar filings also were submitted by Boston Stock Exchange 
Clearing Corporation (``BSECC'') (SR-BSECC-2009-005) and Stock 
Clearing Corporation of Philadelphia (``SCCP'') (SR-SCCP-2009-04), 
the clearing corporation subsidiaries of NASDAQ OMX Group, Inc. 
(``NASDAQ OMX'').
---------------------------------------------------------------------------

I. Self-Regulatory Organizations' Statement of the Terms of the 
Substance of the Proposed Rule Change

    The NASDAQ OMX Exchange Subsidiaries are filing the proposed rule 
change with regard to proposed changes to the Restated Certificate of 
Incorporation (the ``Certificate'') of their parent corporation, The 
NASDAQ OMX Group, Inc. (``NASDAQ OMX''). The proposed rule change will 
be implemented as soon as practicable following filing with the 
Commission. The text of the proposed rule change for each of the NASDAQ 
OMX Exchange Subsidiaries is available at http://
nasdaqomxbx.cchwallstreet.com, http://nasdaqomx.cchwallstreet.com/, and 
http://www.nasdaqtrader.com/Micro.aspx?id=PhlxApprovedRulefilings, 
respectively, at the respective NASDAQ OMX Exchange Subsidiary's 
principal office, and at the Commission's Public Reference Room.

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

    In their filings with the Commission, each of the NASDAQ OMX 
Exchange Subsidiaries included statements concerning the purpose of and 
basis for its proposed rule change and discussed any comments it 
received on its proposed rule change. The text of these statements may 
be examined at the places specified in Item IV below. Each of the 
NASDAQ OMX Exchange Subsidiaries has prepared summaries, set forth in 
Sections A, B, and C below, of the most significant aspects of such 
statements.

[[Page 55079]]

A. Self-Regulatory Organizations' Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    NASDAQ OMX is proposing to file the Certificate of Designation 
described below. Under Article Fourth, Paragraph B of the Certificate, 
NASDAQ OMX's Board of Directors may authorize the issuance of preferred 
stock, establish the number of shares to be included in such series and 
fix the designation, powers, preferences and rights of the shares of 
such series, and the qualifications, limitations and restrictions 
thereof. As provided in Articles XI and XII of the NASDAQ OMX By-Laws, 
proposed amendments to the Certificate are to be reviewed by the Board 
of Directors of each self-regulatory subsidiary of NASDAQ OMX, and if 
any such proposed amendment must, under Section 19 of the Act and the 
rules promulgated thereunder, be filed with, or filed with and approved 
by, the Commission before such amendment may be effective, then such 
amendment shall not be effective until filed with, or filed with and 
approved by, the Commission, as the case may be. Senior management of 
each of the NASDAQ OMX Exchange Subsidiaries, through delegated 
authority of their governing boards, have determined that the proposed 
change should be filed with the Commission, and the governing boards of 
BSECC and SCCP have each reviewed the proposed change and determined 
that it should be filed with the Commission.\4\ Under Delaware law, the 
amendment of the Certificate by the filing of a Certificate of 
Designation does not require approval by the stockholders of NASDAQ 
OMX.
---------------------------------------------------------------------------

    \4\ The Nasdaq OMX Exchange Subsidiaries, BSECC and SCCP are 
each submitting this filing pursuant to Section 19(b)(3)(A)(iii) of 
the Act, 15 U.S.C. 78s(b)(3)(A)(iii).
---------------------------------------------------------------------------

    The issuance of the Series A Preferred is part of a transaction 
between NASDAQ OMX and one of its existing shareholders, Silver Lake 
Partners (``Silver Lake''), whereby Silver Lake agreed to convert all 
of the 3.75% Series A Convertible Notes due 2012 (the ``Notes'') held 
by certain of its affiliates (``Silver Lake Affiliates'') into shares 
of NASDAQ OMX common stock (``Common Stock'') prior to the maturity 
date of such Notes.\5\ As an inducement to convert the Notes, NASDAQ 
OMX has delivered a cash payment and has agreed to deliver 1,600,000 
shares of Series A Preferred to the Silver Lake Affiliates 
(``Transaction''). Effective September 28, 2009, the Silver Lake 
Affiliates converted Notes into 8,246,680 shares of Common Stock. As a 
result, Silver Lake no longer holds any Notes and, through certain of 
the Silver Lake Affiliates, currently is the beneficial owner of shares 
of Common Stock that equal less than five percent (5%) of the 
outstanding voting securities of NASDAQ OMX.
---------------------------------------------------------------------------

    \5\ Under Article Fourth, Section C.1(b) of the Certificate, the 
Notes are entitled to vote on an as-converted basis on matters that 
are submitted to a vote of the stockholders of NASDAQ OMX, voting 
together with the holders of the Common Stock and any other shares 
of capital stock entitled to vote.
---------------------------------------------------------------------------

    Under the Certificate of Designation, up to two million shares will 
be designated for issuance as shares of Series A Preferred. The Series 
A Preferred will be senior in preference and priority to the Common 
Stock and on parity with all other classes and series of preferred 
stock.
    The Series A Preferred will have limited voting rights and will not 
have the right to vote on any matters that are subject to the vote of 
the holders of Common Stock. The approval of at least a majority of the 
then outstanding shares of Series A Preferred will be required to 
approve any amendment to the Certificate or the NASDAQ OMX By-Laws that 
would adversely affect the rights, preferences or privileges of the 
Series A Preferred (including any change in the dividends payable or 
liquidation preference). In addition, any amendments to reduce the 
dividend payable to the Series A Preferred, to increase the number of 
authorized shares of the Series A Preferred or to change certain 
specified provisions of the Certificate of Designation will require the 
written consent of 75% of the then outstanding shares of Series A 
Preferred, voting together as a class.
    The shares of Series A Preferred will be convertible into shares of 
Common Stock. Under the applicable NASDAQ listing rules, approval by 
the stockholders of NASDAQ OMX (``Shareholder Approval'') is required 
to permit the conversion of the Series A Preferred.\6\ NASDAQ OMX 
intends to seek Shareholder Approval at the company's 2010 annual 
meeting of stockholders.
---------------------------------------------------------------------------

    \6\ Pursuant to NASDAQ Listing Rule 5635(c), shareholder 
approval is required when an equity compensation arrangement is made 
pursuant to which stock may be acquired by an issuer's officers, 
directors, employees, or consultants. Pursuant to agreements 
relating to the issuance of the Notes, a Silver Lake representative 
currently serves on the NASDAQ OMX Board of Directors. The 
Commission notes that it takes no position regarding whether the 
requirements of NASDAQ Listing Rule 5635(c) have been satisfied with 
respect to the Series A Preferred Stock.
---------------------------------------------------------------------------

    Upon the date of Shareholder Approval, the Series A Preferred will 
mandatorily convert into shares of Common Stock as provided in the 
Certificate of Designation.\7\ In the event that Shareholder Approval 
is not obtained, the Series A Preferred will accrue cumulative 
dividends, accrued on a daily basis and compounded quarterly, at a per 
annum rate equal to 12%. In addition, in the event that Shareholder 
Approval is not obtained, the Series A Preferred will be subject to 
optional redemption by NASDAQ OMX subject to the terms of the 
Certificate of Designation. The Series A Preferred will be mandatorily 
redeemable by NASDAQ OMX on the fourth anniversary of the original 
issuance date and will be redeemable at the option of the holders upon 
a Fundamental Change (as defined in the Certificate of Designation).
---------------------------------------------------------------------------

    \7\ The number of shares of Common Stock to be issued upon 
conversion is variable. To the extent that the conversion results in 
Silver Lake obtaining beneficial ownership of shares of voting 
securities in excess of five percent (5%) of the then-outstanding 
shares of stock entitled to vote, Silver Lake will be subject to the 
existing voting restrictions in Article Fourth, Section C.3 [sic] of 
the Certificate. This provision provides that no person who is the 
beneficial owner of voting securities of NASDAQ OMX in excess of 
five percent (5%) of the then-outstanding shares of stock generally 
entitled to vote (``Excess Securities'') may vote such Excess 
Securities.
---------------------------------------------------------------------------

    The issuance of Series A Preferred will result in no substantive 
change in the ownership or governance structure of NASDAQ OMX, since 
the Series A Preferred will have no voting rights other than the 
limited rights described above. The Transaction also has resulted in 
the conversion of most of the outstanding Notes into Common Stock.\8\
---------------------------------------------------------------------------

    \8\ Prior to the Transaction, the Silver Lake Affiliates held 
approximately $119.5 million in aggregate principal amount of the 
outstanding Notes. Another holder continues to hold approximately 
$500,000 in aggregate principal amount of the outstanding Notes.
---------------------------------------------------------------------------

2. Statutory Basis
    The NASDAQ OMX Exchange Subsidiaries believe that the proposed rule 
change is consistent with the provisions of Section 6 of the Act,\9\ in 
general, and with Sections 6(b)(1) and (b)(5) of the Act,\10\ in 
particular, in that the proposal enables the NASDAQ OMX Exchange 
Subsidiaries to be so organized as to have the capacity to be able to 
carry out the purposes of the Act and to comply with and enforce 
compliance by members and persons associated with members with 
provisions of the Act, the rules and regulations thereunder, and self-
regulatory organization rules, and is designed to prevent fraudulent 
and manipulative acts and practices, to promote just and equitable 
principles of trade, to foster cooperation and

[[Page 55080]]

coordination with persons engaged in regulating, clearing, settling, 
processing information with respect to, and facilitating transactions 
in securities, to remove impediments to and perfect the mechanism of a 
free and open market and a national market system, and, in general, to 
protect investors and the public interest. The NASDAQ OMX Exchange 
Subsidiaries believe that the issuance of Series A Preferred to 
existing investors will result in no substantive change to the 
corporate ownership structure of their parent NASDAQ OMX.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78f.
    \10\ 15 U.S.C. 78f(b)(1), (5).
---------------------------------------------------------------------------

B. Self-Regulatory Organizations' Statement on Burden on Competition

    The NASDAQ OMX Exchange Subsidiaries do not believe that the 
proposed rule change will result in any burden on competition that is 
not necessary or appropriate in furtherance of the purposes of the Act, 
as amended.
C. Self-Regulatory Organizations' Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others
    Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(iii) of the Act \11\ and subparagraph (f)(3) of Rule 19b-4 
thereunder.\12\ At any time within 60 days of the filing of the 
respective proposed rule change by the applicable NASDAQ OMX Exchange 
Subsidiary, the Commission may summarily abrogate such rule change if 
it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78s(b)(3)(a)(iii).
    \12\ 17 CFR 240.19b-4(f)(3).
---------------------------------------------------------------------------

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://
www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Nos. SR-BX-2009-061, SR-NASDAQ-2009-087, and SR-Phlx-2009-88 on 
the subject line.

Paper Comments

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

All submissions should refer to File Nos. SR-BX-2009-061, SR-NASDAQ-
2009-087, and SR-Phlx-2009-88. These file numbers should be included on 
the subject line if e-mail is used. To help the Commission process and 
review your comments more efficiently, please use only one method. The 
Commission will post all comments on the Commission's Internet Web site 
(http://www.sec.gov/rules/sro.shtml). Copies of the submission, all 
subsequent amendments, all written statements with respect to the 
proposed rule change that are filed with the Commission, and all 
written communications relating to the proposed rule change between the 
Commission and any person, other than those that may be withheld from 
the public in accordance with the provisions of 5 U.S.C. 552, will be 
available for inspection and copying in the Commission's Public 
Reference Room, 100 F Street, NE., Washington, DC 20549, on official 
business days between the hours of 10 a.m. and 3 p.m. Copies of such 
filings also will be available for inspection and copying at the 
principal offices of the respective NASDAQ OMX Exchange Subsidiary. 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 Nos. SR-BX-2009-061, SR-
NASDAQ-2009-087, and SR-Phlx-2009-88, and should be submitted on or 
before November 16, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
---------------------------------------------------------------------------

    \13\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-25708 Filed 10-23-09; 8:45 am]

BILLING CODE 8011-01-P