Document ID: SEC-2008-0662-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Boston Stock Exchange, Inc.
Posted Date: 2008-05-07T04:00Z

[Federal Register: May 7, 2008 (Volume 73, Number 89)]
[Notices]               
[Page 25809-25811]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr07my08-138]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57760; File No. SR-BSE-2008-02]

 
Self-Regulatory Organizations; Boston Stock Exchange, 
Incorporated; Notice of Filing of Proposed Rule Change Amending the 
Certificate of Incorporation of Boston Stock Exchange, Incorporated

May 1, 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 April 23, 2008, the Boston Stock Exchange, Incorporated (``BSE'' 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 substantially prepared by BSE. 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 BSE proposes to amend its Certificate of Incorporation in order 
to make distributions to Exchange membership \3\ owners under certain 
circumstances. Specifically, the amended Certificate of Incorporation 
will permit the Exchange to distribute the net proceeds from the 
Exchange's intended sale of its equity interests in the Boston Options 
Exchange Group LLC (``BOX'') to the Bourse de Montr[eacute]al (``MX'') 
by means of a pro rata redemption of a portion of each Exchange 
membership. The text of the proposed rule change is available on the 
Exchange's Web site (http://www.bostonstock.com), at the principal 
offices of the Exchange, and at the Commission's Public Reference Room.
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    \3\ As that term is defined in Article I, Section 3(h), and 
Article IX of the BSE Constitution.
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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, BSE included statements 
concerning the purpose of, and basis for, the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. BSE has prepared

[[Page 25810]]

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 October 2, 2007, the Exchange announced that it had entered into 
an agreement to be acquired by The Nasdaq Stock Market, Inc., (n/k/a 
The NASDAQ OMX Group, Inc.) (``NASDAQ OMX'') in a transaction that is 
subject to approval by the Exchange's members and by the Commission. 
The Exchange is being sold in its entirety to NASDAQ OMX, including all 
of its subsidiaries, with the exception of BOX. The sale will be 
structured as a merger of the Exchange with and into a wholly- owned 
subsidiary of NASDAQ OMX. The Exchange will be the surviving 
corporation and will become a wholly- owned subsidiary of NASDAQ OMX. 
Proposed rule changes, filed pursuant to Section 19 of the Act, 
relating to NASDAQ OMX's planned acquisition of the Exchange must be 
approved by the Commission in order for the transaction to close and 
are the subject of a separate filing.\4\ The sale of the Exchange's 
equity interest in BOX to a third party is a condition precedent to 
completing the sale of the Exchange to NASDAQ OMX.
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    \4\ See Securities Exchange Act Release No. 57757 (May 1, 2008) 
(SR-BSE-2008-23).
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    Currently, BOX is owned by the Exchange, MX, and several other 
investors. On December 21, 2007, the Exchange announced that it had 
reached an agreement with MX to sell the Exchange's remaining equity 
interest in BOX to MX. Upon closing of this transaction, which is also 
subject to approval by the Commission, the Exchange will no longer have 
an equity interest in BOX, and MX will have increased its ownership 
interest in BOX from 31.4% to 53.24%.\5\ Exchange membership owners \6\ 
will be compensated for their equity interest in BOX as would be 
provided in Article Fourth of the Restated Certificate of Incorporation 
of Boston Stock Exchange, Incorporated (``Restated Certificate'').
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    \5\ See Securities Exchange Act Release No. 57714 (April 25, 
2008) (SR-BSE-2008-25).
    \6\ All holders of outstanding BSE memberships, including 
lessors but not lessees, and excluding electronic access members 
(``EAMs''), will be entitled to receive their pro rata share of the 
equity interest in BOX based on the outstanding number of such BSE 
memberships.
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    After completing the sale of all of its equity interests in BOX, 
the Exchange will continue to act as the self-regulatory organization 
for the BOX facility, and the Exchange's wholly- owned subsidiary 
Boston Options Exchange Regulation, LLC (``BOXR'') will provide the 
regulatory framework for the BOX facility. BOXR, together with BOX, 
will continue to have regulatory responsibility for the activities of 
the BOX facility.
    In order for the Exchange to distribute the net proceeds from the 
BOX sale to the Exchange's membership owners, the Exchange's 
Certificate of Incorporation must be amended in order to remove the 
existing provision that prevents the Exchange from making distributions 
to Exchange membership owners, and to add a provision that allows the 
Exchange to redeem a portion of each membership for a pro rata share of 
the net proceeds of the BOX sale.\7\ The Exchange has been advised that 
the use of the redemption as a means to distribute proceeds from the 
sale of its equity interest in BOX may provide beneficial tax 
treatment. Therefore, the Restated Certificate would permit the 
Exchange to make distributions to membership owners, and also would 
permit the use of such pro rata redemption. The Restated Certificate 
also would delete obsolete text regarding the incorporators of the 
Exchange.
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    \7\ See Restated Certificate, Article Fourth.
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    If approved by the Commission, the Restated Certificate would be 
effective immediately prior to the closing of the BOX distribution upon 
the filing of the Restated Certificate with the Secretary of State of 
the State of Delaware. It is anticipated that the Restated Certificate 
would be amended again upon the closing of NASDAQ OMX's planned 
acquisition of the Exchange.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the requirements under section 6(b)(5) of the Act,\8\ that an 
exchange have rules that are designed to promote just and equitable 
principles of trade, to remove impediments to and to perfect the 
mechanism of a free and open market and a national market system, and, 
in general, to protect investors and the public interest in that, if 
approved, the proposed rule change will provide a means for the 
Exchange to distribute the proceeds from the sale of the Exchange's 
equity interest in BOX to all of the Exchange's owners of memberships.
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    \8\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    BSE 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.

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

    Written comments were neither solicited nor received.

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

    Within 35 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 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 e-mail to rule-comments@sec.gov. Please include 
File Number SR-BSE-2008-02 on the subject line.

Paper comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, Station Place, 100 F 
Street, NE., Washington, DC 20549-1090. All submissions should refer to 
File Number SR-BSE-2008-02. This file number should be included on the 
subject line if e-mail is used. To help the Commission process and 
review your comments more efficiently, please use only one method. The 
Commission will post all comments on the Commission's Internet Web site 
(http://www.sec.gov/rules/sro.shtml). Copies of the submission, all 
subsequent

[[Page 25811]]

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 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-BSE-2008-02 and should be submitted on or before May 28, 
2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E8-10072 Filed 5-6-08; 8:45 am]

BILLING CODE 8010-01-P