Document ID: SEC-2014-0308-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Miami International Securities Exchange, LLC
Posted Date: 2014-02-19T05:00Z

[Federal Register Volume 79, Number 33 (Wednesday, February 19, 2014)]
[Notices]
[Pages 9572-9576]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-03570]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71541; File No. SR-MIAX-2013-58]

Self-Regulatory Organizations; Miami International Securities 
Exchange, LLC; Notice of Filing of Amendment No. 1 and Order Granting 
Accelerated Approval of a Proposed Rule Change, as Modified by 
Amendment No. 1 Thereto, To Amend the Exchange's By-Laws

February 12, 2014.

I. Introduction

    On December 9, 2013, Miami International Securities Exchange, LLC 
(``MIAX'' or ``Exchange'') filed with the Securities and Exchange 
Commission (``Commission''), pursuant to Section 19(b)(1) \1\ of the 
Securities Exchange Act of 1934 (``Act''), and Rule 19b-4 
thereunder,\2\ a proposed rule change to amend the By-Laws of MIAX 
(``MIAX By-Laws'' and, as amended, the ``MIAX Amended and Restated By-
Laws''). The proposed rule change was published for comment in the 
Federal Register on December 30, 2013.\3\ The Commission received no 
comments on the proposal. On February 11, 2014, the Exchange filed 
Amendment No. 1 to the proposal.\4\ The Commission is publishing this 
notice to solicit comments on Amendment No. 1 from interested persons 
and is approving the proposed rule change, as modified by Amendment No. 
1, on an accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 71172 (December 23, 
2013), 78 FR 79530 (December 30, 2013) (SR-MIAX-2013-58) 
(``Notice'').
    \4\ In Amendment No. 1, the Exchange amended the proposed rule 
text to provide that an ERP Member that is already represented on 
the MIAX Board of Directors, including as a Member Representative 
Director, would not be permitted to also hold an ERP Director 
position. Such ERP Members could, however, hold an Observer 
appointment on the MIAX Board of Directors. See infra Section V; see 
also infra notes 17, 44.
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II. Background and Description of the Proposal

    On September 13, 2013, the Exchange filed an immediately effective 
proposed rule change to establish an Equity Rights Program 
(``ERP'').\5\ Pursuant to the ERP, members of the Exchange that elected 
to participate in the program were issued units representing the right 
to acquire equity in the Exchange's parent holding company, Miami 
International Holdings (``MIH'') in exchange for (1) payment of an 
initial purchase price or the prepayment of certain transaction fees 
and (2) the achievement of certain liquidity volume thresholds on the 
Exchange over a 23-month period.\6\ In that September 2013 filing to 
implement the ERP, the Exchange stated that ``[w]hen a participating 
Member acquires a certain number of units, the Member can appoint one 
director to the MIH Board [of Directors] and/or the MIAX Board [of 
Directors].'' \7\ In this December 2013 filing, the Exchange now 
proposes to amend the MIAX By-Laws to provide for the right of members 
that participate in the ERP to nominate or appoint a representative to 
the MIAX Board of Directors (``MIAX Board'' or ``Board''),\8\ as well 
as to make other changes, including certain non-substantive changes.\9\
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    \5\ See Securities Exchange Act Release No. 70498 (September 25, 
2013), 78 FR 60348 (October 1, 2013) (SR-MIAX-2013-43) (Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change to 
Implement an Equity Rights Program) (``ERP Notice'').
    \6\ See Notice, supra note 3, 78 FR at 79530-79531; and ERP 
Notice, supra note 5, 78 FR at 60348.
    \7\ See ERP Notice, supra note 5, 78 FR at 60350 n.9 and 
accompanying text. In that filing, the Commission noted that MIAX 
would need to submit a separate proposed rule change to make changes 
to its corporate governance documents to accommodate aspects of the 
proposal that involve or affect the boards of either MIAX or MIH. 
See id.
    \8\ Among other changes discussed herein, the Exchange proposes 
to add a number of definitions for key terms used to incorporate 
provisions related to the ERP. See generally MIAX Amended and 
Restated By-Laws, Article I. The Commission notes that MIAX has not 
proposed, and the Commission is therefore not presently approving, 
any changes that would impact directly the MIH Board of Directors.
    \9\ See Notice, supra note 3, 78 FR at 79530-79531. The non-
substantive changes include the deletion from the MIAX By-Laws of 
provisions that specifically referenced past deadlines and events 
that have since occurred. See id. at 79532.
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    Specifically, the Exchange proposes that an ERP Member \10\ that is 
not otherwise represented on the MIAX Board may have the right to 
nominate one ERP Director \11\ or appoint an Observer \12\ to the 
Board, as applicable.\13\ As proposed, ERP Directors will be classified 
as ``Industry Directors'' \14\ with attendant voting rights, while 
Observers will be invited to attend meetings of the Board in a non-
voting observer capacity.\15\ If an

[[Page 9573]]

ERP Member is otherwise able to nominate an ERP Director but cannot 
because, for example, the ERP Member already is represented on the MIAX 
Board, e.g., as a Member Representative Director,\16\ the ERP Member 
will have the right to appoint an Observer in lieu of such ERP Director 
nomination.\17\ Under the proposal, the Nominating Committee of the 
MIAX Board will only nominate to ERP Director positions those 
individuals that have been approved and submitted by the applicable ERP 
Member with the right to nominate such ERP Director.\18\
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    \10\ See MIAX Amended and Restated By-Laws, Article I(n) 
defining ``ERP Member'' as ``an Exchange Member who acquired Units 
pursuant to an ERP Agreement sufficient to acquire an ERP Director 
or an Observer position.'' MIAX Amended and Restated By-Laws, 
Article I(qq) defines ``Unit'' as ``a combination of securities or 
types of securities packaged together as one.'' MIAX Amended and 
Restated By-Laws, Article I(q) generally defines ``Exchange Member'' 
as ``any registered broker or dealer that has been admitted to 
membership in the national securities exchange operated by [MIAX].'' 
MIAX Amended and Restated By-Laws, Article I(l) defines ``ERP 
Agreement'' as ``the agreement pursuant to which Units were 
issued.''
    \11\ See MIAX Amended and Restated By-Laws, Article I(m) 
defining ``ERP Director'' as ``an Industry Director who has been 
nominated by an ERP Member and appointed to the Board of 
Directors.''
    \12\ See MIAX Amended and Restated By-Laws, Article I(gg) and 
Article II, Section 2.2 providing that ```Observer' has the meaning 
set forth in Article II, Section 2.2 of [the MIAX] By-Laws.'' As 
described further below, an ``Observer'' is a person, appointed 
pursuant to Section 2.2 of the MIAX Amended and Restated By-Laws, 
that ``may be invited to attend meetings of the Board in a non-
voting observer capacity.'' See MIAX By-Laws Article II, Section 
2.2(g).
    \13\ See MIAX Amended and Restated By-Laws, Article II, Section 
2.2(e).
    \14\ See MIAX Amended and Restated By-Laws, Article I(u) 
defining ``Industry Director'' to mean ``a Director who (i) 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; (ii) is an officer, director (excluding an outside 
director), or employee of an entity that owns more than 10% of the 
equity of a broker or dealer, and the broker or dealer accounts for 
more than 5% of the gross revenues received by the consolidated 
entity; (iii) owns more than 5% of the equity securities of any 
broker or dealer, whose investments in brokers or dealers exceed 10% 
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; (iv) provides professional services to brokers or 
dealers, and such services constitute 20% or more of the 
professional revenues received by the Director or 20% or more of the 
gross revenues received by the Director's firm or partnership; (v) 
provides professional services to a director, officer, or employee 
of a broker, dealer, or corporation that owns 50% 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% or more of the professional revenues received by the 
Director or member or 20% or more of the gross revenues received by 
the Director's or member's firm or partnership; or (vi) has a 
consulting or employment relationship with or provides professional 
services to the Company or any affiliate thereof or has had any such 
relationship or provided any such services at any time within the 
prior three years.''
    \15\ See MIAX Amended and Restated By-Laws, Article II, Section 
2.2(g)(iii). Observers will not be permitted to vote at Board 
meetings, but will be provided copies of all materials provided to 
directors provided that the Observer agrees to hold in confidence 
and trust and to act in a fiduciary manner with respect to all 
information so provided. See id. Also, MIAX proposes that Observers 
have the same participation rights as other directors on the Board 
with respect to meetings pertaining to the self-regulatory function 
of the Exchange. See MIAX Amended and Restated By-Laws Article X, 
Section 10.3; see also Notice, supra note 3, 78 FR at 79532. The 
Exchange reserves the right, however, to withhold any information, 
and to exclude Observers from any meeting or portion thereof, if 
access to such information or attendance at such meeting could 
adversely affect the attorney-client privilege between MIAX and its 
counsel or result in a disclosure of trade secrets or a conflict of 
interest. See MIAX Amended and Restated By-Laws, Article II, Section 
2.2(g)(iii).
    \16\ See MIAX Amended and Restated By-Laws, Article I(bb) 
defining ``Member Representative Director'' to mean a ``Director who 
has been elected by the LLC Member after having been nominated by 
the Member Nominating Committee or by an Exchange Member pursuant to 
these By-Laws and confirmed as the nominee of Exchange Members after 
majority vote of Exchange Members, if applicable. A Member 
Representative Director may, but is not required to be an officer, 
director, employee, or agent of an Exchange Member.''
    \17\ See Notice, supra note 3, 78 FR at 79531; see also MIAX 
Amended and Restated By-Laws, Article II, Section 2.2(g)(i). MIAX 
stated in Amendment No. 1 that an ERP Member that is represented by 
a Member Representative Director may also be able to appoint an 
Observer (but would not be able to appoint an ERP Director). 
Further, an ERP Member that is represented by an ERP Director will 
not be able to appoint an Observer. See supra note 4.
    \18\ See MIAX Amended and Restated By-Laws Article II, Section 
2.4(a). The Exchange notes that MIH, as the sole member of the MIAX 
Exchange, LLC, will then be obligated to vote for the nominated ERP 
Director. See Notice, supra note 3, 78 FR at 79531.
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    Additionally, MIAX proposes to amend its By-Laws to specify that an 
ERP Member's right to continued representation on the Board in the form 
of an ERP Director or Observer will be contingent upon the ERP Member 
meeting certain ``Performance Criteria'' \19\ (i.e., achievement of 
certain specified liquidity volume thresholds on the Exchange) over a 
specified ``Measurement Period.'' \20\ Thus, ERP Members with the right 
to nominate an ERP Director or appoint an Observer may lose that right 
(or such right may convert from the right to nominate an ERP Director 
to the right to appoint an Observer) if the ERP Member fails to meet 
the requisite Performance Criteria.\21\ In the event of such 
occurrence, if the ERP Member later satisfies the requisite Performance 
Criteria for a subsequent Measurement Period, the ERP Member may regain 
its right to nominate or appoint such ERP Member or Observer.\22\ An 
ERP Director or Observer position will terminate if the nominating or 
appointing ERP Member effects a transfer of common stock or warrants 
that results in such ERP Member holding less than 20% of the aggregate 
number of shares of common stock issued (or issuable pursuant to Units 
acquired) pursuant to the ERP Agreement.\23\
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    \19\ See MIAX Amended and Restated By-Laws, Article I(hh) 
defining ``Performance Criteria.''
    \20\ See MIAX Amended and Restated By-Laws Article I(z) defining 
``Measurement Period.''
    \21\ See MIAX Amended and Restated By-Laws Article II, Section 
2.3(c) and (d).
    \22\ See id.
    \23\ See MIAX Amended and Restated By-Laws Article II, Section 
2.3(e).
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    The Exchange also proposes amendments to the composition of the 
Board to reflect the addition of ERP Directors. As noted above, MIAX 
proposes that ERP Directors will be Industry Directors for the purposes 
of calculating the composition of the MIAX Board, and that Member 
Representative Directors will not include ERP Directors for the 
purposes of calculating the composition of the Board.\24\ In its 
proposal, the Exchange notes that there would be no substantive changes 
to the Board's composition, and that although the Board size will 
increase, its composition will remain the same.\25\ In addition, MIAX 
proposes to amend By-Law provisions that currently provide for the 
removal and resignation of directors and the filling of vacancies to 
reflect that, as for other MIAX directors, ERP Directors may only be 
removed for cause,\26\ and in the case of any vacancy for a reason 
other than a failure to meet Performance Criteria, as described above, 
the applicable ERP Member will retain the ability to nominate a person 
to fill the vacant ERP Director position.\27\
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    \24\ See Notice, supra note 3, 78 FR at 79531. See also MIAX 
Amended and Restated By-Laws, Article II, Section 2.2(b).
    \25\ See Notice, supra note 3, 78 FR at 79531.
    \26\ See MIAX Amended and Restated By-Laws, Article II, Section 
2.9 and Notice, supra note 3, 78 FR at 79532.
    \27\ See MIAX Amended and Restated By-Laws, Article II, Section 
2.8 and Notice, supra note 3, 78 FR at 79532.
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    Unrelated to the ERP, MIAX also proposes to add a restriction to 
the qualifications of any director of the MIAX Board, including an ERP 
Director, that, in the event a director becomes a member of the board 
of directors (or similar governing body) of a ``Specified Entity,'' 
\28\ such individual would immediately cease to be a director of the 
MIAX Board.\29\ MIAX proposes that this same restriction would apply to 
Observers (i.e., an individual would lose his or her position as an 
Observer if that individual became a member of the board of directors 
of a Specified Entity) and to committee members.\30\ Similarly, MIAX 
proposes to apply to Observers and committee members the same 
restrictions against statutory disqualification that are currently 
applicable to MIAX directors.\31\
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    \28\ See MIAX Amended and Restated By-Laws, Article I(oo) 
defining ``Specified Entity'' as ``(i) any U.S. securities option 
exchange (or facility thereof) or U.S. alternative trading system on 
which securities options are traded (other than the Company or any 
of its affiliates) that lists for trading any option contract that 
competes with an Exchange Contract, (ii) any person that owns or 
controls such U.S. securities option exchange or U.S. alternative 
trading system, and (iii) any affiliate of a person described in 
clause (i) or (ii) above.''
    \29\ See MIAX Amended and Restated By-Laws Article II, Section 
2.2(d). MIAX also proposes that existing directors that may be in 
violation of this provision would be grandfathered in and not 
subject to the new restriction. See Notice, supra note 3, 78 FR at 
79531.
    \30\ See MIAX Amended and Restated By-Laws Article II, Section 
2.2(g)(ii) and Article IV, Section 4.2(b).
    \31\ See Notice, supra note 3, 78 FR at 79531; see also MIAX 
Amended and Restated By-Laws, Article II, Sections 2.2(d) and 
(g)(ii), and Article IV, Section 4.2(b). As directors, such 
restrictions will also apply to ERP Directors.
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    Finally, the Exchange proposes to make a few non-substantive 
changes to certain provisions in the By-Laws, such as deleting 
references to time periods and events that have since passed as well as 
deleting provisions related to interim directors that are no longer 
applicable.\32\
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    \32\ See Notice, supra note 3, 78 FR at 79532.
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III. Discussion and Commission Findings

    The Commission originally approved the governance structure of the 
Exchange, including the MIAX By-Laws, when it approved MIAX's 
application for registration as a national securities Exchange.\33\ In 
connection with that approval, the Commission found the MIAX By-Laws to 
be consistent with the Act, and stated its belief that certain 
provisions in the MIAX By-Laws are designed to help maintain the 
independence of MIAX's regulatory function and help facilitate the 
ability of MIAX to carry out its responsibilities and operate in a 
manner consistent with the Act.\34\ As discussed above, the Exchange 
recently implemented an ERP, pursuant to which ERP Members that acquire 
a certain number of Units may

[[Page 9574]]

appoint either an ERP Director or Observer to the MIAX Board, and the 
Exchange is now proposing to amend the MIAX By-Laws to incorporate such 
rights to appoint Board representation, as well as to make other 
unrelated changes.
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    \33\ See Securities Exchange Act Release No. 68341 (December 3, 
2012), 77 FR 73065 (December 7, 2012) (``Exchange Registration 
Release'').
    \34\ See e.g., Exchange Registration Release, supra note 33, 77 
FR at 73071 n.88 and accompanying text. The Commission also found 
certain provisions to be consistent with the requirements of Section 
6(b)(3) of the Act (15 U.S.C. 78f(b)(3)). See id. at 73067.
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    The Commission has carefully reviewed the proposed rule change and 
finds that the proposed rule change is consistent with the requirements 
of the Act and the rules and regulations thereunder applicable to a 
national securities exchange.\35\ In particular, the Commission finds 
that the proposed rule change is consistent with Sections 6(b)(1) and 
(3) of the Act,\36\ which, among other things, require a national 
securities exchange to be so organized and have the capacity to be able 
to carry out the purposes of the Act, and to enforce compliance by its 
members and persons associated with its members with the provisions of 
the Act, the rules and regulations thereunder, and the rules of the 
exchange; and assure the fair representation of its members in the 
selection of its directors and administration of its affairs, and 
provide that one or more directors shall be representative of issuers 
and investors and not be associated with a member of the exchange, 
broker, or dealer.
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    \35\ In approving the proposed rule changes, the Commission has 
considered their impact on efficiency, competition, and capital 
formation. See 15 U.S.C. 78c(f).
    \36\ 15 U.S.C. 78f(b)(1) and (b)(3).
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A. Addition of ERP Directors and Related Provisions

    The Commission finds that the Exchange's proposal to amend the MIAX 
By-Laws to provide for the inclusion of ERP Directors on the MIAX 
Board, including related amendments to add various definitions and 
provisions for terms of office, nomination and election, filling of 
vacancies, and removal and resignation, are consistent with the 
Act.\37\ The Commission notes that although the Board may become larger 
if ERP Directors are added, the composition previously approved by the 
Commission in connection with MIAX's registration as a national 
securities exchange \38\ will remain the same.\39\ ERP Directors will 
be Industry Directors,\40\ and the Board will continue to be comprised 
of a number of Non-Industry Directors,\41\ including at least one 
Independent Director,\42\ that equals or exceeds the sum of the number 
of Industry Directors and Member Representative Directors.\43\ The 
number of Member Representative Directors will not include ERP 
Directors, and shall continue to comprise at least 20% of the MIAX 
Board.\44\ Additionally, the process for nomination and election of 
Member Representative Directors is not impacted by the Exchange's 
proposal.\45\ Accordingly, the Commission finds that the provisions 
reflecting the possible addition of ERP Directors to the MIAX Board are 
consistent with the Act, and in particular with Section 6(b)(3) of the 
Act,\46\ in that the MIAX Amended and Restated By-Laws will continue to 
provide for the fair representation of members in the selection of 
directors and the administration of the MIAX Exchange, as well as 
representation of issuers and investors.
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    \37\ See MIAX Amended and Restated By-Laws, Article II, Sections 
2.2, 2.3, 2.4, 2.8, and 2.9.
    \38\ See Exchange Registration Release, supra note 33, 77 FR at 
73066-73067.
    \39\ See MIAX Amended and Restated By-Laws, Article II, Section 
2.2(a) and (b). Additionally, the Commission notes that the Exchange 
represents that although its Board size will increase, the current 
composition will remain the same, and that the proposal will not 
affect the Member Representative Director calculation in any way. 
See supra note 25 and accompanying text.
    \40\ See supra note 14.
    \41\ See MIAX Amended and Restated By-Law Article I(ee) defining 
``Non-Industry Director'' to mean ``a Director who is (i) an 
Independent Director; or (ii) any other individual who would not be 
an Industry Director.''
    \42\ See MIAX Amended and Restated By-Law Article I(s) defining 
``Independent Director'' to mean ``a Director who has no material 
relationship with the Company or any affiliate of the Company, or 
any Exchange Member or any affiliate of any such Exchange Member; 
provided, however, that an individual who otherwise qualifies as an 
Independent Director shall not be disqualified from serving in such 
capacity solely because such Director is a Director of the Company 
or its LLC Member.''
    \43\ See MIAX Amended and Restated By-Laws, Article II, Section 
2.2(b).
    \44\ See MIAX Amended and Restated By-Laws, Article II, Section 
2.2(b). The Commission notes that the Exchange represents in 
Amendment No. 1 that an ERP Member that is represented by a Member 
Representative Director may also be able to appoint an Observer but 
would not be able to appoint an ERP Director. See infra Section V; 
see also supra notes 4 and 17.
    \45\ See MIAX Amended and Restated By-Laws, Article V, Section 
5.3.
    \46\ 15 U.S.C. 78f(b)(3).
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    The Commission also notes that ERP Directors will be subject to the 
same duties and obligations as any other member of the MIAX Board, 
including provisions that are designed to help maintain the 
independence of the regulatory functions of the Exchange and help 
facilitate MIAX's ability to carry out its responsibilities and operate 
in a manner consistent with the Act.\47\ For example, ERP Directors 
will be subject to MIAX Amended and Restated By-Laws provisions 
requiring the MIAX Board, in connection with managing the business and 
affairs of MIAX, to consider applicable requirements under Section 6(b) 
of the Act governing conflicts of interest; requiring the MIAX Board, 
when evaluating any proposal, to take into account MIAX's status as a 
self-regulatory organization (``SRO''); and protecting the 
confidentiality of information and records related to the Exchange's 
SRO function.\48\ In this regard, the Commission finds that the 
provisions reflecting the addition of ERP Directors to the MIAX Board 
are consistent with the Act, and in particular with Section 6(b)(1), 
which requires an exchange to be so organized and have the capacity to 
carry out the purposes of the Act.\49\
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    \47\ See Exchange Registration Release, supra note 33, 77 FR at 
73070-73071.
    \48\ See MIAX Amended and Restated By-Laws, Article II, Sections 
2.1(d) and (e) and Section 2.20, and Article X, Section 10.4. The 
Commission also notes that the Exchange represented in its filing 
that ERP Directors will be subject to the same restrictions as 
current directors, including the provisions noted above. See Notice, 
supra note 3, 78 FR at 79533. In addition, the Commission notes that 
other provisions of the MIAX Amended and Restated By-Laws, 
previously approved by the Commission and designed to help maintain 
the independence of the Exchange's regulatory function and help 
facilitate the Exchange's ability to carry out its responsibilities 
and operate in a manner consistent with the Act, are not being 
amended by the proposed rule change. Such provisions include those 
governing the maintenance of MIAX's books and records in the U.S. 
and the availability of such records to the Commission, the 
composition of MIAX committees, and the ownership structure of the 
Exchange. See Exchange Registration Release, supra note 33, 77 FR at 
73069-73071. See also MIAX Amended and Restated By-Laws, Article X, 
Section 10.4; Article IV; and Article I(y).
    \49\ 15 U.S.C. 78f(b)(1).
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B. Addition of Observer Positions and Related Provisions

    The Commission finds that the proposed amendments to the MIAX By-
Laws that add provisions relating to the appointment of Observers, 
including related amendments that add various definitions and 
provisions for appointment and terms of office are consistent with the 
Act.\50\ The Commission also finds that the proposed amendments 
governing the rights and obligations of Observers are consistent with 
the Act. The Commission notes that although Observers will generally 
have the right to attend all meetings of the Board and receive 
materials provided to directors,\51\ they will have the right to attend 
those meetings only in a non-voting capacity and must agree to hold 
such information in confidence and trust and to act in a fiduciary 
manner with respect to such information.\52\ Additionally, the 
Commission notes that

[[Page 9575]]

the Exchange states in its proposal that Observers will be subject to 
the same requirements as members of the Board to maintain the 
confidentiality of all books and records of the Company reflecting 
confidential information pertaining to the SRO function of the 
Company.\53\ The Commission also notes that MIAX reserves the right to 
withhold any information from an Observer and to exclude an Observer 
from any meeting or portion thereof that could, among other things, 
result in the disclosure of trade secrets or a conflict of 
interest.\54\ The Commission believes that these restrictions on, and 
obligations of, Observers are consistent with the Act, particularly 
Section 6(b)(1),\55\ in that they are designed to ensure that MIAX will 
remain so organized as to have the capacity to carry out the purposes 
of the Act.
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    \50\ See MIAX Amended and Restated By-Laws, Article II, Sections 
2.2 and 2.3.
    \51\ See supra note 15 and accompanying text.
    \52\ See MIAX Amended and Restated By-Laws, Article II, Section 
2.2(g)(iii), and Article X, Sections 10.3 and 10.4; see also supra 
note 15.
    \53\ See Notice, supra note 3, 78 FR at 79532.
    \54\ See MIAX Amended and Restated By-Laws, Article II, Section 
2.2(g)(iii); see also supra note 15.
    \55\ 15 U.S.C. 78s(b)(1).
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C. Disqualification Due to Statutory Disqualification or Service for a 
Specified Entity

    The Commission finds the proposed provision to provide that an 
individual serving as a director (including an ERP Director), Observer, 
or a member of a committee of the Board will cease to hold such 
position if that individual becomes a member of the board of directors 
or similar governing body of a Specified Entity,\56\ is consistent with 
the Act. The Commission notes that such provisions would not prohibit 
an Exchange member from having representation on both the MIAX 
governing body and that of a Specified Entity, but would only prevent 
the same natural person from serving on the governing body of both MIAX 
and a Specified Entity. The Commission also finds that the provisions 
that would prohibit an Observer or committee member from being subject 
to a statutory disqualification,\57\ as is currently the case with 
respect to MIAX directors,\58\ are consistent with the Act. The 
Commission notes that the Exchange states the prohibitions on statutory 
disqualification and service on the board (or similar governing body) 
of a Specified Entity will help to ensure that all directors, ERP 
Directors, Observers, and committee members are held to the same 
restrictions against: (1) Statutory disqualification, and (2) conflicts 
of interest that could result from such persons also serving as a 
member of the board of directors or similar body of a competitor.\59\ 
The Commission finds these provisions to be consistent with the Act, 
and in particular with Sections 6(b)(1),\60\ in that they are designed 
to help ensure that the Exchange has the capacity to carry out the 
purposes of the Act.
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    \56\ See MIAX Amended and Restated By-Laws, Article II, Sections 
2.2(d) and (g)(ii), and Article IV, Section 4.2(b). The Commission 
notes that this provision will only apply to directors (including 
ERP Directors), Observers, and committee members appointed after the 
Effective Date.
    \57\ See MIAX Amended and Restated By-Laws, Article II, Section 
2.2(g)(2), and Article IV, Section 4.2(b).
    \58\ See MIAX Amended and Restated By-Laws, Article II, Section 
2.2(d).
    \59\ See Notice, supra note 3, 78 FR at 79533.
    \60\ 15 U.S.C. 78s(b)(1).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether Amendment No. 1 
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-MIAX-2013-58 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-MIAX-2013-58. 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 20549-1090 on official business days between the hours 
of 10:00 a.m. and 3:00 p.m. Copies of such filing also will be 
available for inspection and copying at the principal offices 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-
MIAX-2013-58, and should be submitted on or before March 12, 2014.

V. Accelerated Approval of a Proposed Rule Change As Modified by 
Amendment No. 1

    As discussed above, the Exchange submitted Amendment No. 1 to 
remove the ability of an ERP Member to appoint an ERP Director if such 
ERP Member is already represented on the MIAX Board in the capacity of 
a Member Representative Director. As originally proposed, an ERP Member 
would have been able to appoint an ERP Director even if such ERP Member 
was already represented on the Board in the capacity of a Member 
Representative Director. The Commission notes that this change modifies 
the Exchange's proposal to reflect current restrictions in place at 
other exchanges.\61\ Further, the change prevents an ERP Member from 
holding multiple director seats on the MIAX SRO Board and thus is 
designed to prevent an ERP Member from having a disproportional 
presence on the Board of the MIAX SRO, which serves as the regulatory 
body for all MIAX members, including an ERP Member. Thus, the change in 
Amendment No. 1 is designed to help ensure that the Exchange has the 
capacity to carry out the purposes of the Act. Accordingly, the 
Commission finds good cause, pursuant to Section 19(b)(2) of the 
Act,\62\ for approving the proposed rule change, as modified by 
Amendment No. 1, prior to the 30th day after the date of publication of 
notice in the Federal Register.
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    \61\ See, e.g., Second Amended and Restated Constitution of the 
International Securities Exchange, LLC, Article III, Section 3.2(e) 
(``No Exchange Member shall have more than one officer, director or 
partner of such Exchange Member elected to the Board of Directors 
during any term.'').
    \62\ 15 U.S.C. 78s(b)(2).
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VI. Conclusion

    For the foregoing reasons, the Commission finds that the proposed 
rule changes are consistent with the Act and the rules and regulations 
thereunder applicable to a national securities exchange.
    It is therefore ordered, pursuant to Section 19(b)(2) of the Act 
\63\ that the proposed rule change, as modified by Amendment No. 1 (SR-
MIAX-2013-

[[Page 9576]]

58), is hereby approved on an accelerated basis. For the Commission, by 
the Division of Trading and Markets, pursuant to delegated 
authority.\64\
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    \63\ 15 U.S.C. 78s(b)(2).
    \64\ 17 CFR 200.30-3(a)(12).

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-03570 Filed 2-18-14; 8:45 am]
BILLING CODE 8011-01-P