Document ID: SEC-2011-1651-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ OMX PHLX LLC
Posted Date: 2011-10-28T04:00Z

[Federal Register Volume 76, Number 209 (Friday, October 28, 2011)]
[Notices]
[Pages 67015-67017]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-27936]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65605; File No. SR-PHLX-2011-140]

Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of 
Filing of Proposed Rule Change To Amend the By-Laws of The NASDAQ OMX 
Group, Inc.

October 21, 2011.
    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 11, 2011, NASDAQ OMX PHLX LLC (``PHLX'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I, II, and III below, which 
Items have been prepared by the Exchange. 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

    PHLX is filing this proposed rule change with respect to an 
amendment to the by-laws of its parent corporation, The NASDAQ OMX 
Group, Inc. (``NASDAQ OMX''). The text of the proposed rule change is 
available on the Exchange's Web site at http://nasdaqomxphlx.cchwallstreet.com, at the principal office of the 
Exchange, and at the Commission's Public Reference Room. The proposed 
amendments will be implemented upon approval by the Commission.

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. The 
text of these 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 aspects of such 
statements.

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

1. Purpose
    NASDAQ OMX is proposing amendments to provisions of its by-laws 
pertaining to the composition of committees of the NASDAQ OMX Board of 
Directors. First, NASDAQ OMX is amending the compositional requirements 
of its Audit Committee in Section 4.13(g) to provide that the committee 
shall include three or more directors. Currently, the provision 
provides that the Audit Committee shall be composed of either four or 
five directors. The change will provide the NASDAQ OMX Board of 
Directors, which has authority to establish the size of each committee 
of the Board of Directors, with flexibility to increase or decrease the 
size of the committee, as long as the committee includes at least three 
directors. The listing standards of the NASDAQ Stock Market, which 
apply to NASDAQ OMX as a listed company, require that NASDAQ OMX's 
Audit Committee must have at least three members.\3\ The amendment 
would not change any of the other compositional requirements of the 
Audit Committee, including independence requirements.
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    \3\ NASDAQ IM-4605-3. [sic]
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    Similarly, NASDAQ OMX is proposing to amend the compositional 
requirements of the Nominating & Governance Committee in Section 
4.13(h) to replace a requirement that the committee comprise four or 
five members with a requirement to include two or more members, thereby 
creating flexibility to populate a larger or a

[[Page 67016]]

smaller committee than is currently the case. NASDAQ Stock Market 
listing standards do not regulate the size of a listed company's 
nominating committee. The amendment would not change any of the other 
compositional requirements of the Nominating & Governance Committee, 
including independence requirements.
    PHLX expects that the NASDAQ OMX Board of Directors will, in the 
immediate future, use the modified authority to increase the size of 
the Nominating & Governance Committee to six directors, but will not 
modify the size of the Audit Committee at this time. It is likely that 
the authority would be used to reduce the size of these committees 
below their current levels only in the event of a reduction in the 
overall size of the NASDAQ OMX Board of Directors (which currently has 
16 members). The Audit Committee supervises the audit function with 
respect to NASDAQ OMX and all of its subsidiaries, including PHLX, but 
the Nominating & Governance Committee does not perform a nominating 
function with respect to NASDAQ OMX's subsidiaries.
    Third, NASDAQ OMX proposes to delete a paragraph of the by-laws 
(Section 4.13(k)) that pertains to the qualifications of committee 
members who are not directors. This provision was originally adopted by 
NASDAQ OMX's predecessor corporation, The Nasdaq Stock Market, Inc., 
when it was a subsidiary and facility of the National Association of 
Securities Dealers, Inc. (``NASD''). In that capacity, The Nasdaq Stock 
Market, Inc. appointed committees that included non-directors and that 
exercised authority provided for under NASD rules. For example, at that 
time, the Board of Directors of The Nasdaq Stock Market, Inc. appointed 
the Nasdaq Listing and Hearing Review Council, a committee composed of 
non-directors with authority to review listing decisions with respect 
to companies with securities listed on The Nasdaq Stock Market, which 
was then a facility of NASD.
    In 2005, The NASDAQ Stock Market LLC (``NASDAQ'') was formed as a 
subsidiary [sic] The Nasdaq Stock Market, Inc., and in 2006, NASDAQ was 
registered as a national securities exchange. The Nasdaq Stock Market, 
Inc., which had already issued stock to the public, became a holding 
company, and in 2007, it ceased operating as a facility of NASD or 
NASDAQ. Subsequently, following the acquisition of OMX AB, The Nasdaq 
Stock Market, Inc. became NASDAQ OMX. As a public holding company, 
NASDAQ OMX no longer appoints committees that include non-directors. 
Accordingly, the provision with respect to the qualifications of non-
directors is obsolete and may appropriately be deleted.
    Finally, NASDAQ OMX is correcting a typographical error in the 
numbering of the provisions of Section 4.13(h) of the by-laws.
2. Statutory Basis
    PHLX believes that the proposed rule change is consistent with the 
provisions of Section 6 of the Act,\4\ in general, and with Sections 
6(b)(1) and (b)(5) of the Act,\5\ in particular, in that the proposal 
enables PHLX to be so organized and 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 PHLX 
rules, and is designed 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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    \4\ 15 U.S.C. 78f.
    \5\ 15 U.S.C. 78f(b)(1), (5).
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    PHLX believes that the proposed amendments are non-controversial. 
The proposal to modify the compositional requirements of the NASDAQ OMX 
Audit Committee and Nominating & Governance Committee will provide the 
NASDAQ OMX Board of Directors with greater flexibility to determine the 
appropriate size for these committees, while maintaining compliance 
with applicable listing standards. PHLX expects that the NASDAQ OMX 
Board of Directors will, in the immediate future, use the modified 
authority to increase the size of the Nominating & Governance Committee 
to six directors, but will not modify the size of the Audit Committee 
at this time. The proposed changes also delete an obsolete provision 
from the by-laws and correct a typographical error.

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

    No written comments were either 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 shall: 
(a) By order approve or disapprove such 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-PHLX-2011-140 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-PHLX-2011-140. 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

[[Page 67017]]

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 a.m. and 3 p.m. Copies of such 
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 publicly available. All submissions should refer to 
File Number SR-PHLX-2011-140 and should be submitted on or before 
November 18, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\6\
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    \6\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2011-27936 Filed 10-27-11; 8:45 am]
BILLING CODE 8011-01-P