Document ID: SEC-2008-1226-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Boston Stock Exchange, Inc.
Posted Date: 2008-09-09T04:00Z

[Federal Register: September 9, 2008 (Volume 73, Number 175)]
[Notices]               
[Page 52434-52436]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr09se08-145]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58445; File No. SR-BSE-2008-43]

 
Self-Regulatory Organizations; Boston Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Regarding Transfer of Ownership of MX U.S. 2, Inc.

August 29, 2008.
    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 August 28, 2008, the Boston Stock Exchange, Inc. (``BSE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been substantially prepared by the BSE.\3\ 
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.
    \3\ Capitalized terms not otherwise defined herein shall have 
the meanings set forth in the BOX LLC Agreement.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is submitting the proposed rule change to the 
Commission to amend the proposed Sixth Amended and Restated Operating 
Agreement (``BOX LLC Agreement''), of the Boston Options Exchange Group 
LLC (``BOX LLC''), in connection with the transfer by the 
Montr[eacute]al Exchange Inc.,\4\ a company incorporated in 
Qu[eacute]bec, Canada (``MX''), of its ownership interest in MX U.S. 2, 
Inc., a U.S. subsidiary of MX (``MX U.S. 2'').\5\ The text of the 
proposed rule change is available at the Exchange, the Commission's 
Public Reference Room, and http://www.bostonstock.com.
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    \4\ The Montr[eacute]al Exchange Inc. is also known in French as 
the Bourse de Montr[eacute]al Inc.
    \5\ See Securities Exchange Act Release No. 58324 (August 7, 
2008), 73 FR 46936 (August 12, 2008) (SR-BSE-2008-25).
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II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of, and basis for, the proposed rule change and 
discussed any comments it received on the proposal. The text of these 
statements

[[Page 52435]]

may be examined at the places specified in Item IV below. The BSE has 
prepared summaries, set forth in Sections A, B, and C below, of the 
most significant aspects of such statements.

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

1. Purpose
    On January 13, 2004, the Commission approved four BSE proposals 
that together established, through an operating agreement among its 
owners, a Delaware limited liability company, BOX LLC, to operate BOX 
as an options trading facility of the Exchange.\6\ MX owns a 100% 
ownership interest in MX U.S. 2, which holds a 31.37% ownership 
interest in BOX LLC.\7\ MX has transferred 100% of its common stock 
ownership interest in MX U.S. 2 to MX U.S. 1, Inc., a wholly owned U.S. 
subsidiary of MX (``MX U.S. 1'') (``Common Stock Transfer''). 3226507 
Nova Scotia Company, a Nova Scotia, Canada unlimited liability company, 
a subsidiary of MX (``NSULC 2''), has also acquired 100% of the 
preferred stock of MX U.S. 2 (``Preferred Stock Transfer''). NSULC 2 is 
a direct subsidiary of MX and 3226506 Nova Scotia Company, a Nova 
Scotia, Canada unlimited liability company and a wholly owned 
subsidiary of MX (``NSULC 1''). Furthermore, NSULC 1 has acquired 0.1% 
of the common stock of NSULC 2 (``NSULC 2 Transfer'' and collectively 
with the Common Stock Transfer and the Preferred Stock Transfer, the 
``Transfers'').
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    \6\ See Securities Exchange Act Release No. 49066 (January 13, 
2004), 69 FR 2773 (January 20, 2004) (establishing a fee schedule 
for the proposed BOX facility); Securities Exchange Act Release No. 
49065 (January 13, 2004), 69 FR 2768 (January 20, 2004) (creating 
Boston Options Exchange Regulation LLC to which the BSE would 
delegate its self-regulatory functions with respect to the BOX 
facility); Securities Exchange Act Release No. 49068 (January 13, 
2004), 69 FR 2775 (January 20, 2004) (approving trading rules for 
the BOX facility); Securities Exchange Act Release No. 49067 
(January 13, 2004), 69 FR 2761 (January 20, 2004) (approving certain 
regulatory provisions of the operating agreement of BOX LLC).
    \7\ Upon the consummation of the Exchange's transfer of its 
21.87% ownership interest in BOX to MX U.S. 2, MX U.S. 2 will hold a 
53.24% ownership interest in BOX (``BSE Transfer''). See Securities 
Exchange Act Release No. 58324 (August 7, 2008), 73 FR 46936 (August 
12, 2008) (SR-BSE-2008-25).
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    The Exchange is submitting the proposed rule change to the 
Commission to amend the BOX LLC Agreement pursuant to the proposed 
Instruments of Accession in connection with the Transfers. As a result 
of the Transfers, MX U.S. 2 is a direct subsidiary of MX U.S. 1 and 
NSULC 2.
    Pursuant to section 8.4(g) of the BOX LLC Agreement, as previously 
approved by the Commission, BOX LLC is required to amend the BOX LLC 
Agreement to make a Controlling Person\8\ a party to the BOX LLC 
Agreement if such Controlling Person establishes a Controlling 
Interest\9\ in any BOX Member that, alone or together with any 
Affiliate of such BOX Member, holds a Percentage Interest in BOX equal 
to or greater than 20%.\10\ Pursuant to the Common Stock Transfer and 
the Preferred Stock Transfer, MX U.S. 1 and NSULC 2 have acquired a 
Controlling Interest in MX U.S. 2, which owns a 31.37% ownership 
interest in BOX LLC and will own a 53.24% ownership interest in BOX LLC 
upon the consummation of the BSE Transfer. MX U.S. 1 and NSULC 2, as 
Controlling Persons, are required to and will become parties to the BOX 
LLC Agreement pursuant to the proposed Instruments of Accession. 
Furthermore, NSULC 1, which acquired 0.1% of the common stock ownership 
interest in NSULC 2, a direct subsidiary of MX that holds an ownership 
interest in 100% of the preferred shares of MX U.S. 2 that holds and 
will hold an interest in BOX that is greater than twenty percent of all 
outstanding BOX ownership interests, is also required to and will 
become a party to the BOX LLC Agreement. As a result, MX U.S. 1, NSULC 
1 and NSULC 2 will agree to abide by all the provisions of the BOX LLC 
Agreement, including those provisions requiring submission to the 
jurisdiction of the Commission.\11\
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    \8\ A ``Controlling Person'' is defined as ``a Person who, alone 
or together with any Affiliate of such Person, holds a controlling 
interest in a [BOX] Member.'' See Section 8.4(g)(v)(B), BOX LLC 
Agreement.
    \9\ A ``Controlling Interest'' is defined as ``the direct or 
indirect ownership of 25% or more of the total voting power of all 
equity securities of a Member (other than voting rights solely with 
respect to matters affecting the rights, preferences, or privileges 
of a particular class of equity securities), by any Person, alone or 
together with any Affiliate of such Person.'' See Section 
8.4(g)(v)(A), BOX LLC Agreement.
    \10\ See Section 8.4(g), BOX LLC Agreement.
    \11\ The BOX LLC states, in part, that ``the Members, officers, 
directors, agents, and employees of Members irrevocably submit to 
the exclusive jurisdiction of the U.S. federal courts, U.S. 
Securities and Exchange Commission, and the Boston Stock Exchange, 
for the purposes of any suit, action or proceeding pursuant to U.S. 
federal securities laws, the rules or regulations thereunder, 
arising out of, or relating to, BOX activities or Article 19.6(a), 
(except that such jurisdictions shall also include Delaware for any 
such matter relating to the organization or internal affairs of BOX, 
provided that such matter is not related to trading on, or the 
regulation, of the BOX Market), and hereby waive, and agree not to 
assert by way of motion, as a defense or otherwise in any such suit, 
action or proceeding, any claims that they are not personally 
subject to the jurisdiction of the U.S. Securities and Exchange 
Commission, that the suit, action or proceeding is an inconvenient 
forum or that the venue of the suit, action or proceeding is 
improper, or that the subject matter hereof may not be enforced in 
or by such courts or agency.'' See BOX LLC Agreement, Section 19.6.
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    For the reasons stated above, the BSE is submitting to the 
Commission the proposed Instruments of Accession to the BOX LLC 
Agreement as a rule change.
2. Statutory Basis
    The Exchange believes that the proposal is consistent with the 
requirements of section 6(b) of the Act,\12\ in general, and furthers 
the objectives of section 6(b)(1),\13\ in particular, in that it 
enables the Exchange to be so organized so as to have the capacity to 
be able to carry out the purposes of the Act and to comply, and to 
enforce compliance by its exchange members and persons associated with 
its exchange members, with the provisions of the Act, the rules and 
regulations thereunder, and the rules of the Exchange. The Exchange 
also believes that this filing furthers the objectives of section 
6(b)(5) of the Act\14\ in that it is designed to facilitate 
transactions in securities, to prevent fraudulent and manipulative acts 
and practices, to promote just and equitable principles of trade, to 
foster cooperation and coordination with persons engaged in regulating, 
clearing, settling, processing information with respect to, and 
facilitating transactions in securities, to remove impediments to and 
perfect the mechanism of a free and open market and a national market 
system, and, in general, to protect investors and the public interest.
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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(5).
    \14\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act.

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

    The Exchange has neither solicited nor received comments on the 
proposed rule change.

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

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public

[[Page 52436]]

interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate if consistent with 
the protection of investors and the public interest, it has become 
effective pursuant to section 19(b)(3)(A) of the Act\15\ and Rule 19b-
4(f)(6) thereunder.\16\
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    \15\ 15 U.S.C. 78s(b)(3)(A).
    \16\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) normally may 
not become operative prior to 30 days after the date of filing.\17\ 
However, Rule 19b-4(f)(6)(iii) permits the Commission to designate a 
shorter time if such action is consistent with the protection of 
investors and the public interest.\18\ The Exchange has requested that 
the Commission waive the 5-day pre-filing requirement and the 30-day 
operative delay.\19\ The Commission believes that waiving the 5-day 
pre-filing requirement and the 30-day operative delay is consistent 
with the protection of investors and the public interest because BSE 
has represented that the Instruments of Accession will be executed on 
August 29, 2008, and there is no reason to delay implementation of the 
changes to the BOX LLC Agreement pursuant to the Instruments of 
Accession. For these reasons, the Commission designates the proposal to 
be operative upon filing with the Commission.\20\
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    \17\ 17 CFR 240.19b-4(f)(6)(iii). In addition, Rule 19b-
4(f)(6)(iii) requires the self-regulatory organization to give the 
Commission notice of its intent to file the proposed rule change, 
along with a brief description and text of the proposed rule change, 
at least five business days prior to the date of filing of the 
proposed rule change, or such shorter time as designated by the 
Commission.
    \18\ 17 CFR 240.19b-4(f)(6)(iii).
    \19\ See Email from Lisa J. Fall, General Counsel and Corporate 
Secretary, BOX, to Molly Kim, Special Counsel, Division of Trading 
and Markets, Commission, on August 29, 2008.
    \20\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission may summarily abrogate such rule change if it 
appears to the Commission that such action is necessary or appropriate 
in the public interest, for the protection of investors, or otherwise 
in furtherance of the purposes of the Act.\21\
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    \21\ See 15 U.S.C. 78s(b)(3)(C).
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IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://
www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-BSE-2008-43 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-BSE-2008-43. This file 
number should be included on the subject line if e-mail is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/
sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for inspection and 
copying in the Commission's Public Reference Room, 100 F Street, NE., 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the BSE. 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-BSE-2008-43 and should be 
submitted on or before September 30, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
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    \22\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-20869 Filed 9-8-08; 8:45 am]

BILLING CODE 8010-01-P