Document ID: SEC-2016-1779-0002
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: The NASDAQ Stock Market LLC, et al.
Posted Date: 2016-11-25T05:00Z

[Federal Register Volume 81, Number 227 (Friday, November 25, 2016)]
[Notices]
[Pages 85283-85291]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-28319]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79357; File Nos. SR-NASDAQ-2016-127; SR-BX-2016-051; 
SR-ISE-2016-22; SR-ISEGemini-2016-10; SR-ISEMercury-2016-16; SR-PHLX-
2016-93; SR-BSECC-2016-001; SR-SCCP-2016-01]

Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
NASDAQ BX, Inc.; International Securities Exchange, LLC; ISE Gemini, 
LLC; ISE Mercury, LLC; NASDAQ PHLX LLC; Boston Stock Exchange Clearing 
Corporation; Stock Clearing Corporation of Philadelphia; Notice of 
Filing of Amendment No. 1 and Order Granting Accelerated Approval of 
the Proposed Rule Change, as Modified by Amendment No. 1, Amending 
Bylaws of Nasdaq, Inc. To Implement Proxy Access

November 18, 2016.

I. Introduction

    On September 15, 2016, each of The NASDAQ Stock Market LLC 
(``Nasdaq''), NASDAQ BX, Inc. (``BX''), International Securities 
Exchange, LLC (``ISE''), ISE Gemini, LLC (``ISE Gemini''), ISE Mercury, 
LLC (``ISE Mercury''), NASDAQ PHLX LLC (``PHLX''), Boston Stock 
Exchange Clearing Corporation (``BSECC''), and Stock Clearing

[[Page 85284]]

Corporation of Philadelphia (``SCCP,'' and, together with Nasdaq, BX, 
ISE, ISE Gemini, ISE Mercury, PHLX, and BSECC, ``SROs'') filed with the 
Securities and Exchange Commission (``Commission'') pursuant to Section 
19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\ and Rule 
19b-4 thereunder,\2\ a proposed rule change to amend the Bylaws (the 
``Bylaws'') of their parent company, Nasdaq, Inc., to implement proxy 
access. The proposed rule changes were published for comment in the 
Federal Register on October 5, 2016.\3\ No comment letters were 
received in response to the proposals. On November 9, 2016, the SROs 
each filed Amendment No. 1 to the proposed rule changes.\4\ This order 
provides notice of filing of Amendment No. 1 and approves the proposed 
rule changes, 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 Nos. 78979 (Sept. 29, 
2016), 81 FR 69145 (Oct. 5, 2016) (SR-NASDAQ-2016-127); 78986 (Sept. 
29, 2016), 81 FR 69152 (Oct. 5, 2016) (SR-BX-2016-051); 78985 (Sept. 
29, 2016), 81 FR 69102 (Oct. 5, 2016) (SR-ISE-2016-22); 78981 (Sept. 
29, 2016), 81 FR 69165 (Oct. 5, 2016) (SR-ISEGemini-2016-10); 78980 
(Sept. 29, 2016), 81 FR 69127 (Oct. 5, 2016) (SR-ISEMercury-2016-
16); 78978 (Sept. 29, 2016), 81 FR 69133 (Oct. 5, 2016) (SR-PHLX-
2016-93); 78982 (Sept. 29, 2016), 81 FR 69159 (Oct. 5, 2016) (SR-
BSECC-2016-001); and 78984 (Sept., 29, 2016), 81 FR 69093 (Oct. 5, 
2016) (SR-SCCP-2016-01) (collectively, ``Notices'').
    \4\ In Amendment No. 1, the SROs clarified the circumstances 
under which proxy access nominees may be excluded from the proxy 
materials. Pursuant to Proposed Rule 3.6(h)(ii), Nasdaq, Inc. may 
disregard and exclude from proxy materials those proxy access 
nominees who are not independent under the listing standards of 
Nasdaq, any applicable rules of the Commission, and any publicly 
disclosed standards used by the Board of Directors for Nasdaq, Inc. 
(the ``Board'') in determining and disclosing the independence of 
Nasdaq, Inc.'s directors. Amendment No. 1 clarified that, other than 
the listing standards of Nasdaq and any applicable rules of the 
Commission, the Board has not adopted any additional publicly 
disclosed independence standards, as described in this provision. 
The SROs further represented that, if the Board adopts any such 
standards in the future, such standards will be in addition to, more 
stringent than, and not in conflict with the listing standards of 
Nasdaq or any applicable rules of the Commission. The SROs also 
represented that any such standards will be used to determine and 
disclose the independence of all directors, but the SROs noted that 
the Nominating and Governance Committee and/or the Board may still 
nominate a candidate who does not qualify as ``independent'' under 
these standards so long as such nomination does not cause Nasdaq, 
Inc. to fall out of compliance with the Bylaws, the listing 
standards of Nasdaq, any applicable rules of the SEC and any other 
applicable policies or regulations. Finally, the SROs stated that 
any such standards will be filed with and approved by the Commission 
pursuant to Section 19(b) of the Act prior to becoming effective and 
that any such standards will be at least referenced in the Corporate 
Governance Guidelines, available at: http://files.shareholder.com/downloads/NDAQ/2006703005x0x21344/9019EBAF-60B7-4340-8AE3-F377D313AF55/Corp_gov_guide.pdf. To promote transparency of the 
proposed amendment, the SROs submitted Amendment No. 1 as comment 
letters to their filings, which the Commission posted on its Web 
site and placed in the appropriate public comment files. See, e.g., 
Letter from Erika Moore, Senior Associate General Counsel, Nasdaq, 
to Brent J. Fields, Secretary, Commission (Nov. 9, 2016), available 
at: https://www.sec.gov/comments/sr-nasdaq-2016-127/nasdaq2016127-1.pdf.
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II. Description of the Proposed Rule Changes

    By way of background, the SROs explained that the stockholders of 
Nasdaq, Inc. considered and approved a stockholder proposal submitted 
under Rule 14a-8 under the Act at Nasdaq, Inc.'s 2016 annual 
meeting.\5\ The proposal, which the SROs noted passed with 73.52% of 
the votes cast, requested that the Board take steps to implement a 
``proxy access'' by-law.\6\ Accordingly, the SROs proposed to amend the 
Bylaws to adopt a new Section 3.6 in order to permit stockholders to 
nominate director nominees for election to the Board and to require 
Nasdaq, Inc. to include such director nominations in its proxy 
materials for the next annual meeting of stockholders.\7\
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    \5\ See Notices, supra note 3, at 81 FR 69146, 69152, 69103, 
69166, 69127, 69134, 69159, and 69093, respectively; see also 17 CFR 
240.14a-8, which establishes procedures pursuant to which 
stockholders of a public company may have their proposals placed 
alongside management's proposals in the company's proxy materials 
for presentation to a vote at a meeting of stockholders.
    \6\ See Notices, supra note 3, at 81 FR 69146, 69152, 69103, 
69166, 69127, 69134, 69159, and 69093, respectively.
    \7\ The SROs also proposed to make conforming changes to 
Sections 3.1(a), 3.3(a), 3.3(c) and 3.5 of the Bylaws to provide 
clarifications and prevent confusion. See Notices, supra note 3, at 
81 FR 69151, 69158, 69108, 69171, 69132, 69139, 69164, and 69098-99, 
respectively, for a description of these changes.
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Proposed Section 3.6(a) of the Bylaws

    The SROs proposed to amend the Bylaws to require Nasdaq, Inc. to 
include in its proxy statement, its form proxy and any ballot 
distributed at the stockholder meeting, the name of, and certain 
required information \8\ about, any person nominated for election (the 
``Stockholder Nominee'') to the Board by a stockholder or group of 
stockholders (the ``Eligible Stockholder'') that satisfies the 
requirements set forth in the proxy access provision of the Bylaws.\9\ 
To utilize this provision, the Eligible Stockholder must expressly 
elect, at the time of providing a required notice to Nasdaq, Inc. of 
the proxy access nomination (the ``Notice of Proxy Access 
Nomination''), to have its nominee included in the Company's proxy 
materials.\10\ If Nasdaq, Inc. includes proxy access nominees in the 
proxy materials, stockholders meeting all of the requirements outlined 
in proposed Section 3.6 will be eligible to submit proxy access 
nominations only at annual meetings of stockholders when the Board 
solicits proxies with respect to the election of directors.\11\
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    \8\ The required information includes information provided to 
Nasdaq, Inc.'s Corporate Secretary about the Stockholder Nominee and 
the Eligible Stockholder that is required to be disclosed in the 
proxy materials by the regulations promulgated under the Act, and if 
the Eligible Stockholder so elects, a written statement, not to 
exceed 500 words, in support of the Stockholder Nominee(s)' 
candidacy (the ``Statement''). See Proposed Section 3.6(a).
    \9\ See id. The SROs explained that, when Nasdaq, Inc. includes 
proxy access nominees in the proxy materials, such individuals will 
be included in addition to any persons nominated for election to the 
Board or any committee thereof. See Notices, supra note 3, at 81 FR 
69146 n.6, 69153 n.6, 69153 n.6, 69166 n.6, 69127 n.6, 69134 n.6, 
69159 n.6, and 69094 n.6, respectively.
    \10\ See Proposed Section 3.6(a).
    \11\ Id.; see also Proposed Section 3.6(i)(ii) (noting that a 
proxy access nomination may be declared invalid if the Eligible 
Stockholder or a qualified representative thereof does not appear at 
the meeting of stockholders to present its nomination).
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    The proposed bylaws further state that, in calculating the number 
of stockholders in a group seeking to qualify as an Eligible 
Stockholder, two or more of the following types of funds shall be 
counted as one stockholder: (i) Funds under common management and 
investment control, (ii) funds under common management and funded 
primarily by the same employer, or (iii) funds that are a ``group of 
investment companies'' as such term is defined in Section 
12(d)(1)(G)(ii) of the Investment Company Act of 1940, as amended.\12\ 
Moreover, in the event that the Eligible Stockholder consists of a 
group of stockholders, the proposed bylaws state that any and all 
requirements and obligations for an individual Eligible Stockholder 
shall apply to each member of the group, except that the Required 
Ownership Percentage (discussed further below) shall apply to the 
ownership of the group in the aggregate.\13\
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    \12\ See Proposed Section 3.6(a); see also 15 U.S.C. 80a-
12(d)(1)(G)(ii), which defines ``group of investment companies'' as 
any two or more registered investment companies that hold themselves 
out to investors as related companies for purposes of investment and 
investor services.
    \13\ See Proposed Section 3.6(a). The applicable requirements 
and obligations generally relate to information that each member of 
the nominating group must provide to Nasdaq, Inc. about itself. The 
SROs asserted that it is reasonable to require each member of the 
nominating group to provide such information so that both Nasdaq, 
Inc. and its stockholders are fully informed about the entire group 
maxing the nomination. See Notices, supra note 3, at 81 FR 69146, 
69153, 69103, 69166, 69128, 69134, 69160, and 69094, respectively.

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[[Page 85285]]

    Proposed Section 3.6(a) also specifically allows Nasdaq, Inc. to 
omit from its proxy materials any information or Statement (or portion 
thereof) that it, in good faith, believes is untrue in any material 
respect (or omits to state a material fact necessary in order to make 
the statements made, in light of the circumstances under which they are 
made, not misleading) or that would violate any applicable law or 
regulation.\14\ In their filing, the SROs stated that this provision 
allows Nasdaq, Inc. to comply with Rule 14a-9 under the Act \15\ and to 
protect its stockholders from information that is materially untrue or 
that violates any law or regulation.\16\ Finally, proposed Section 
3.6(a) explicitly allows Nasdaq, Inc. to solicit against, and include 
in the proxy statement its own statement relating to, any Stockholder 
Nominee.\17\
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    \14\ Id.
    \15\ See 17 CFR 240.14a-9, which generally prohibits proxy 
solicitations that contain any statement which, at the time and in 
the light of the circumstances under which it is made, is false or 
misleading with respect to any material fact, or which omits to 
state any material fact necessary in order to make the statements 
therein not false or misleading.
    \16\ See Notices, supra note 3, at 81 FR 69146-47, 69153, 69103, 
69166, 69128, 69134, 69160, and 69094, respectively.
    \17\ See Proposed Section 3.6(a).
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Proposed Section 3.6(b) of the Bylaws

    Proposed Section 3.6(b) of the Bylaws establishes the deadline for 
a timely Notice of Proxy Access Nomination. Under the proposed bylaws, 
such a notice must be addressed to, and received by, Nasdaq, Inc.'s 
Corporate Secretary no earlier than one hundred fifty (150) days and no 
later than one hundred twenty (120) days before the anniversary of the 
date that Nasdaq, Inc. issued its proxy statement for the previous 
year's annual meeting of stockholders.\18\ The SROs asserted in their 
filings that this notice period would provide stockholders with an 
adequate window to submit nominees via proxy access, while also 
providing Nasdaq, Inc. with adequate time to complete due diligence on 
a proxy access nominee before including them in the proxy statement for 
the next annual meeting of stockholders.\19\
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    \18\ See Proposed Section 3.6(b).
    \19\ See Notices, supra note 3, at 81 FR 69147, 69153, 69104, 
69167, 69128, 69135, 69160, and 69094, respectively.
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Proposed Section 3.6(c) of the Bylaws

    Proposed Section 3.6(c) specifies that the maximum number of 
Stockholder Nominees that will be included in Nasdaq, Inc.'s proxy 
materials with respect to an annual meeting of stockholders shall not 
exceed the greater of two and 25% of the total number of directors in 
office (rounded down to the nearest whole number) as of the last day on 
which a Notice of Proxy Access Nomination may be delivered pursuant to 
and in accordance with the proxy access provision of the Bylaws (the 
``Final Proxy Access Nomination Date'').\20\ In the event that one or 
more vacancies for any reason occurs after the Final Proxy Access 
Nomination Date but before the date of the annual meeting and the Board 
resolves to reduce the size of the Board in connection therewith, the 
proposed bylaws state that the maximum number of Stockholder Nominees 
included in Nasdaq, Inc.'s proxy materials shall be calculated based on 
the number of directors in office as so reduced.\21\ Any individual 
nominated by an Eligible Stockholder for inclusion in the proxy 
materials pursuant to the proxy access provision of the Bylaws whom the 
Board decides to nominate as a nominee of the Board, and any individual 
nominated by an Eligible Stockholder for inclusion in the proxy 
materials pursuant to the proxy access provision but whose nomination 
is subsequently withdrawn, shall be counted as one of the Stockholder 
Nominees for purposes of determining when the maximum number of 
Stockholder Nominees has been reached.\22\
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    \20\ See Proposed Section 3.6(c).
    \21\ See id.
    \22\ See id.
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    Proposed Section 3.6(c) further states that any Eligible 
Stockholder submitting more than one Stockholder Nominee for inclusion 
in the proxy materials shall rank such Stockholder Nominees based on 
the order that the Eligible Stockholder desires such Stockholder 
Nominees to be selected for inclusion in the proxy statement in the 
event that the total number of Stockholder Nominees submitted by 
Eligible Stockholders pursuant to the proxy access provision exceeds 
the maximum number of nominees allowed.\23\ In such event, the proposed 
bylaws state that the highest ranking Stockholder Nominee who meets the 
requirements of the proxy access provision of the Bylaws from each 
Eligible Stockholder will be selected for inclusion in the proxy 
materials until the maximum number is reached, going in order of the 
amount (largest to smallest) of shares of Nasdaq, Inc.'s outstanding 
common stock each Eligible Stockholder disclosed as owned in its 
respective Notice of Proxy Access Nomination submitted to Nasdaq, 
Inc.\24\ If the maximum number is not reached after the highest ranking 
Stockholder Nominee who meets the requirements of the proxy access 
provision of the Bylaws from each Eligible Stockholder has been 
selected, proposed Section 3.6(c) indicates that this process will 
continue as many times as necessary, following the same order each 
time, until the maximum number is reached.\25\ Following such 
determination, if any Stockholder Nominee who satisfies the eligibility 
requirements thereafter is nominated by the Board, or is not included 
in the proxy materials or is not submitted for election as a director 
as a result of the Eligible Stockholder becoming ineligible or 
withdrawing its nomination, the Stockholder Nominee becoming unwilling 
or unable to serve on the Board, or the Eligible Stockholder or the 
Stockholder Nominee failing to comply with the proxy access provision 
of the Bylaws, proposed Section 3.6(c) states that no other nominee or 
nominees shall be included in the proxy materials or otherwise 
submitted for director election in substitution thereof.\26\
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    \23\ See id.
    \24\ See id.
    \25\ See id.
    \26\ See id.
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    The SROs stated in their filings that it was reasonable to limit 
the Board seats available to proxy access nominees, to establish 
procedures for selecting candidates if the nominee limit is exceeded, 
and to exclude further proxy access nominees in the cases set forth 
above.\27\ The SROs asserted that the limitation on Board seats 
available to proxy access nominees would ensure that proxy access 
cannot be used to take over the entire Board, which is not the purpose 
of proxy access campaigns.\28\ The SROs further asserted that the 
proposed procedures establish clear and rational guidelines for an 
orderly nomination process that will help Nasdaq, Inc. to avoid 
arbitrary judgments among candidates.\29\ Finally, the SROs argued that 
the exclusion of proxy access nominees where the proxy access nominee 
has been nominated by the Board, or where the Eligible Stockholder or 
Stockholder Nominee has somehow failed to comply with the Bylaws, will 
avoid further time and expense to Nasdaq, Inc.\30\
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    \27\ See Notices, supra note 3, at 81 FR 69147, 69154, 69104, 
69167, 69128, 69135, 69160 and 69095, respectively.
    \28\ Id.
    \29\ Id., at 81 FR 69147, 69154, 69104, 69167, 69128, 69135, 
69160-61, and 69095, respectively.
    \30\ Id., at 81 FR 69147, 69154, 69104, 69167, 69128-29, 69135, 
69161, and 69095, respectively.
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Proposed Section 3.6(d) of the Bylaws

    Under proposed Section 3.6(d), an Eligible Stockholder shall be 
deemed to

[[Page 85286]]

``own'' only those outstanding shares of Nasdaq, Inc.'s common stock as 
to which the stockholder possesses both: (i) The full voting and 
investment rights pertaining to the shares; and (ii) the full economic 
interest in (including the opportunity for profit from and risk of loss 
on) such shares; provided that the number of shares calculated in 
accordance with clauses (i) and (ii) shall not include any shares:
     Sold by such stockholder or any of its affiliates in any 
transaction that has not been settled or closed, including any short 
sale;
     borrowed by such stockholder or any of its affiliates for 
any purposes or purchased by such stockholder or any of its affiliates 
pursuant to an agreement to resell; or
     subject to any option, warrant, forward contract, swap, 
contract of sale, other derivative or similar agreement entered into by 
such stockholder or any of its affiliates, whether any such instrument 
or agreement is to be settled with shares or with cash based on the 
notional amount or value of shares of Nasdaq, Inc.'s outstanding common 
stock, in any such case which instrument or agreement has, or is 
intended to have, or if exercised by either party would have, the 
purpose or effect of:
    [cir] reducing in any manner, to any extent or at any time in the 
future, such stockholder's or its affiliates' full right to vote or 
direct the voting of any such shares; and/or
    [cir] hedging, offsetting or altering to any degree any gain or 
loss realized or realizable from maintaining the full economic 
ownership of such shares by such stockholder or its affiliates.\31\
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    \31\ See Proposed Section 3.6(d). For purposes of the proxy 
access provision, the proposed bylaws state that the term 
``affiliate'' or ``affiliates'' shall have the meaning ascribed 
thereto under the rules and regulations of the Act. Id.; see also 17 
CFR 240.12b-2.
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    Further, proposed Section 3.6(d) states that a stockholder shall 
``own'' shares held in the name of a nominee or other intermediary so 
long as the stockholder retains the right to instruct how the shares 
are voted with respect to the election of directors and possesses the 
full economic interest in the shares.\32\ Additionally, under the 
proposed bylaws, a stockholder's ownership of shares shall be deemed to 
continue during any period in which the stockholder has delegated any 
voting power by means of a proxy, power of attorney or other instrument 
or arrangement which is revocable at any time by the stockholder.\33\ A 
stockholder's ownership of shares shall also be deemed to continue 
during any period in which the stockholder has loaned such shares 
provided that the stockholder has the power to recall such loaned 
shares on three (3) business days' notice, has recalled such loaned 
shares as of the date of the Notice of Proxy Access Nomination and 
holds such shares through the date of the annual meeting.\34\ Whether 
outstanding shares of Nasdaq, Inc.'s common stock are ``owned'' for 
these purposes shall be determined by the Board or any committee 
thereof, in each case, in its sole discretion.\35\ Proposed Section 
3.6(d) further notes that an Eligible Stockholder shall include in its 
Notice of Proxy Access Nomination the number of shares it is deemed to 
own for the purposes of the proxy access provision of the Bylaws.\36\
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    \32\ See Proposed Section 3.6(d).
    \33\ See id.
    \34\ See id.
    \35\ See id.
    \36\ See Proposed Section 3.6(d).
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Proposed Section 3.6(e) of the Bylaws

    The first paragraph of proposed Section 3.6(e) establishes certain 
requirements for an Eligible Stockholder to make a proxy access 
nomination. Specifically, an Eligible Stockholder must have owned 3% or 
more (the ``Required Ownership Percentage'') of Nasdaq's outstanding 
common stock (the ``Required Shares'') continuously for 3 years (the 
``Minimum Holding Period'') as of both the date the Notice of Proxy 
Access Nomination is received by Nasdaq, Inc.'s Corporate Secretary and 
the record date for determining the stockholders entitled to vote at 
the annual meeting, and an Eligible Stockholder must continue to own 
the Required Shares through the meeting date.\37\
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    \37\ See Proposed Section 3.6(e).
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    Proposed Section 3.6(e) also sets forth the information that an 
Eligible Stockholder must provide to Nasdaq, Inc.'s Corporate Secretary 
in writing in order to submit a proxy access nomination. Under the 
proposed bylaws, this information includes:
     One or more written statements from the record holder of 
the shares (and from each intermediary through which the shares are or 
have been held during the Minimum Holding Period) verifying that, as of 
a date within seven calendar days prior to the date the Notice of Proxy 
Access Nomination is delivered to, or mailed to and received by, 
Nasdaq, Inc.'s Corporate Secretary, the Eligible Stockholder owns, and 
has owned continuously for the Minimum Holding Period, the Required 
Shares, and the Eligible Stockholder's agreement to provide, within 
five (5) business days after the record date for the annual meeting, 
written statements from the record holder and intermediaries verifying 
the Eligible Stockholder's continuous ownership of the Required Shares 
through the record date; \38\
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    \38\ See Proposed Section 3.6(e)(i).
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     a copy of the Schedule 14N that has been filed with the 
Commission as required by Rule 14a-18 under the Act; \39\
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    \39\ See Proposed Section 3.6(e)(ii); see also 17 CFR 240.14n-
101 and 17 CFR 240.14a-18, which generally require a Nominating 
Stockholder to provide notice to Nasdaq, Inc. of its intent to 
submit a proxy access nomination on a Schedule 14N and file that 
notice, including the required disclosure, with the Commission on 
the date first transmitted to Nasdaq, Inc.
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     the information, representations and agreements with 
respect to the Eligible Stockholder that are the same as those that 
would be required to be set forth in a stockholder's notice of 
nomination with respect to a ``Proposing Person'' pursuant to the 
``advance notice'' provisions of Section 3.1(b)(i) and Section 
3.1(b)(iii) of the Bylaws; \40\
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    \40\ See proposed Section 3.6(e)(iii). The ``advance notice'' 
provisions of Sections 3.1(b)(i) and 3.1(b)(iii) of the Bylaws 
provide another method by which a stockholder may nominate a person 
for election to the Board. The proxy access provisions proposed by 
the SROs are in addition to these ``advance notice'' provisions.
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     the consent of each Stockholder Nominee to being named in 
the proxy statement as a nominee and to serving as a director if 
elected; \41\
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    \41\ See Proposed Section 3.6(e)(iv).
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     a representation that the Eligible Stockholder:
    [cir] Acquired the Required Shares in the ordinary course of 
business and not with the intent to change or influence control of 
Nasdaq, Inc., and does not presently have such intent; \42\
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    \42\ See Proposed Section 3.6(e)(v)(A).
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    [cir] presently intends to maintain qualifying ownership of the 
Required Shares through the date of the annual meeting; \43\
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    \43\ See Proposed Section 3.6(e)(v)(B).
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    [cir] has not nominated and will not nominate for election any 
individual as a director at the annual meeting, other than its 
Stockholder Nominee(s); \44\
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    \44\ See Proposed Section 3.6(e)(v)(C).
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    [cir] has not engaged and will not engage in, and has not and will 
not be a participant in another person's, ``solicitation'' within the 
meaning of Rule 14a-1(l) under the Act in support of the election of 
any individual as a director at the annual meeting, other than its 
Stockholder Nominee(s) or a nominee of the Board; \45\
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    \45\ See Proposed Section 3.6(e)(v)(D); see also 17 CFR 240.14a-
1(l), which defines the related terms ``solicit'' and 
``solicitation.''

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[[Page 85287]]

    [cir] agrees to comply with all applicable laws and regulations 
with respect to any solicitation in connection with the meeting or 
applicable to the filing and use, if any, of soliciting material; \46\
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    \46\ See Proposed Section 3.6(e)(v)(E).
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    [cir] will provide facts, statements and other information in all 
communications with Nasdaq, Inc. and its stockholders that are or will 
be true and correct in all material respects and do not and will not 
omit to state a material fact necessary in order to make the statements 
made, in light of the circumstances under which they were made, not 
misleading; \47\ and
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    \47\ See Proposed Section 3.6(e)(v)(F).
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    [cir] as to any two or more funds whose shares are aggregated to 
count as one stockholder for the purpose of constituting an Eligible 
Stockholder, within five business days after the date of the Notice of 
Proxy Access Nomination, will provide to Nasdaq, Inc. reasonably 
satisfactory documentation that demonstrates that the funds satisfy the 
requirements in the Bylaws for the funds to qualify as one Eligible 
Stockholder; \48\
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    \48\ See Proposed Section 3.6(e)(v)(G).
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     a representation as to the Eligible Stockholder's 
intentions with respect to maintaining qualifying ownership of the 
Required Shares for at least one year following the annual meeting; 
\49\
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    \49\ See Proposed Section 3.6(e)(vi).
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     an undertaking that the Eligible Stockholder agrees to:
    [cir] Assume all liability stemming from any legal or regulatory 
violation arising out of the Eligible Stockholder's communications with 
Nasdaq, Inc.'s stockholders or out of the information that the Eligible 
Stockholder provided to Nasdaq, Inc.; \50\
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    \50\ See Proposed Section 3.6(e)(vii)(A).
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    [cir] indemnify and hold harmless Nasdaq, Inc. and each of its 
directors, officers and employees individually against any liability, 
loss or damages in connection with any threatened or pending action, 
suit or proceeding, whether legal, administrative or investigative, 
against Nasdaq, Inc. or any of its directors, officers or employees 
arising out of any nomination submitted by the Eligible Stockholder 
pursuant to the proxy access provision; \51\ and
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    \51\ See Proposed Section 3.6(e)(vii)(B).
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    [cir] file with the Commission any solicitation or other 
communication with Nasdaq, Inc.'s stockholders relating to the meeting 
at which the Stockholder Nominee will be nominated, regardless of 
whether any such filing is required under Regulation 14A of the Act or 
whether any exemption from filing is available thereunder; \52\ and
---------------------------------------------------------------------------

    \52\ See Proposed Section 3.6(e)(vii)(C); see also 17 CFR 
240.14a-1--14b-2, which governs solicitations of proxies.
---------------------------------------------------------------------------

     in the case of a nomination by a group of stockholders 
that together is an Eligible Stockholder, the designation by all group 
members of one group member that is authorized to act on behalf of all 
such members with respect to the nomination and matters related 
thereto, including withdrawal of the nomination.\53\
---------------------------------------------------------------------------

    \53\ See Proposed Section 3.6(e)(viii).
---------------------------------------------------------------------------

    In proposing the Required Ownership Percentage and the Minimum 
Holding Period, the SROs explained that they seek to ensure that the 
Eligible Stockholder has had a sufficient stake in Nasdaq, Inc. for a 
sufficient amount of time and is not pursuing a short-term agenda.\54\ 
In proposing the informational requirements for the Eligible 
Stockholder, the SROs stated that their goal is to gather sufficient 
information about the Eligible Stockholder for Nasdaq, Inc. and its 
stockholders.\55\ Among other things, the SROs stated that this 
information would ensure that Nasdaq, Inc. is able to comply with its 
disclosure and other requirements under applicable law and that Nasdaq, 
Inc., its Board and its stockholders would be able to assess the proxy 
access nomination adequately.\56\
---------------------------------------------------------------------------

    \54\ See Notices, supra note 3, at 81 FR 69149, 69155, 69106, 
69169, 69130, 69137, 69162, and 69096, respectively.
    \55\ Id.
    \56\ Id., at 81 FR 69149, 69155-56, 69106, 69169, 69130, 69137, 
69162, and 69096, respectively.
---------------------------------------------------------------------------

Proposed Section 3.6(f) of the Bylaws

    Proposed Section 3.6(f) establishes the information the Stockholder 
Nominee must deliver to Nasdaq, Inc.'s Corporate Secretary within the 
time period specified for delivering the Notice of Proxy Access 
Nomination. This information includes:
     The information required with respect to persons whom a 
stockholder proposes to nominate for election or reelection as a 
director pursuant to the ``advance notice'' provisions of Section 
3.1(b)(i) of the Bylaws including, but not limited to, the signed 
questionnaire, representation and agreement required by Section 
3.1(b)(i)(D) of the Bylaws; \57\ and
---------------------------------------------------------------------------

    \57\ See Proposed Section 3.6(f)(i).
---------------------------------------------------------------------------

     a written representation and agreement that such person:
    [cir] Will act as a representative of all of Nasdaq, Inc.'s 
stockholders while serving as a director; and
    [cir] will provide facts, statements and other information in all 
communications with Nasdaq, Inc. and its stockholders that are or will 
be true and correct in all material respects (and shall not omit to 
state a material fact necessary in order to make the statements made, 
in light of the circumstances under which they were made, not 
misleading).\58\
---------------------------------------------------------------------------

    \58\ See Proposed Section 3.6(f)(ii).
---------------------------------------------------------------------------

    Proposed Section 3.6(f) additionally states that, at the request of 
Nasdaq, Inc., the Stockholder Nominee(s) must submit all completed and 
signed questionnaires required of Nasdaq, Inc.'s directors and 
officers. Nasdaq, Inc. may also request such additional information as 
necessary to permit the Board to determine if each Stockholder Nominee 
satisfies the requirements of the proxy access provision of the Bylaws 
or if each Stockholder Nominee is independent under the listing 
standards of Nasdaq, any applicable rules of the SEC and any publicly 
disclosed standards used by the Board in determining and disclosing the 
independence of Nasdaq, Inc.'s directors \59\ and/or permit Nasdaq, 
Inc.'s Corporate Secretary to determine the classification of such 
nominee as an Industry, Non-Industry, Issuer or Public Director, if 
applicable, in order to make the certification referenced in Section 
4.13(h)(iii) of the Bylaws.\60\
---------------------------------------------------------------------------

    \59\ Currently, the independence of Nasdaq, Inc.'s directors is 
determined pursuant to the definition of ``Independent Director'' in 
Listing Rule 5605(a)(2) of The NASDAQ Stock Market, under which 
certain categories of individuals cannot be deemed independent and 
with respect to other individuals, the Board must make an 
affirmative determination that such individual has no relationship 
that, in the opinion of the Board, would interfere with the exercise 
of independent judgment in carrying out the responsibilities of a 
director. Other independence standards under the SEC rules and the 
Listing Rules of The NASDAQ Stock Market apply to members of certain 
of the Board's committees. To date, the Board has not adopted any 
additional standards, in compliance with Amendment No. 1. See note 
4, supra; see also note 68, infra.
    \60\ Section 4.13(h)(iii) of the Bylaws requires Nasdaq, Inc.'s 
Corporate Secretary to collect from each nominee for director such 
information as is reasonably necessary to serve as the basis for a 
determination of the nominee's classification as an Industry, Non-
Industry, Issuer, or Public Director, if applicable, and to certify 
to the Committee each nominee's classification, if applicable. 
Detailed definitions of the terms ``Industry Director,'' ``Non-
Industry Director,'' ``Issuer Director'' and ``Public Director'' are 
included in Article I of the Bylaws.
---------------------------------------------------------------------------

    In their filings, the SROs represented that the informational 
requirements for the Stockholder Nominee ensure that both Nasdaq, Inc. 
and its stockholders will have sufficient information about the 
Stockholder Nominee.\61\ Among other things, the SROs stated that this 
information will ensure that Nasdaq,

[[Page 85288]]

Inc. is able to comply with its disclosure and other requirements under 
applicable law and that Nasdaq, Inc., its Board and its stockholders 
are able to assess the proxy access nomination adequately.\62\
---------------------------------------------------------------------------

    \61\ See Notices, supra note 3, at 81 FR 69149, 69156, 69106, 
69169, 69131, 69137, 69163, and 69097, respectively.
    \62\ Id.
---------------------------------------------------------------------------

Proposed Section 3.6(g) of the Bylaws

    Pursuant to proposed Section 3.6(g), each Eligible Stockholder or 
Stockholder Nominee must promptly notify Nasdaq, Inc.'s Corporate 
Secretary of any information or communications provided by the Eligible 
Stockholder or Stockholder Nominee to Nasdaq, Inc. or its stockholders 
that ceases to be true and correct in all material respects or omits a 
material fact necessary to make the statements made, in light of the 
circumstances under which they were made, not misleading and of the 
information that is required to correct any such defect.\63\ This 
provision further states that providing any such notification shall not 
be deemed to cure any defect, or, with respect to any defect that 
Nasdaq, Inc. determines is material, limit Nasdaq, Inc.'s rights to 
omit a Stockholder Nominee from its proxy materials.\64\ The SROs 
asserted that this provision is intended to protect Nasdaq, Inc.'s 
stockholders from information previously provided that may be 
materially untrue.\65\
---------------------------------------------------------------------------

    \63\ See Proposed Section 3.6(g).
    \64\ See id.
    \65\ See Notices, supra note 3, at 81 FR 69150, 69156, 69106-07, 
69169, 69131, 69137, 69163, and 69097, respectively.
---------------------------------------------------------------------------

Proposed Section 3.6(h) of the Bylaws

    Proposed Section 3.6(h) provides that Nasdaq, Inc. shall not be 
required to include a Stockholder Nominee in its proxy materials for 
any meeting of stockholders under certain circumstances. In these 
situations, the proxy access nomination shall be disregarded and no 
vote on such Stockholder Nominee will occur, even if Nasdaq, Inc. has 
received proxies in respect of the vote.\66\ These circumstances occur 
when the Stockholder Nominee:
---------------------------------------------------------------------------

    \66\ See Proposed Section 3.6(h).
---------------------------------------------------------------------------

     Has been nominated by an Eligible Stockholder who has 
engaged in or is currently engaged in, or has been or is a participant 
in another person's, ``solicitation'' within the meaning of Rule 14a-
1(l) under the Act in support of the election of any individual as a 
director at the annual meeting other than its Stockholder Nominee(s) or 
a nominee of the Board; \67\
---------------------------------------------------------------------------

    \67\ See Proposed Section 3.6(h)(i); see also 17 CFR 240.14a-
1(l), which defines the related terms ``solicit'' and 
``solicitation.''
---------------------------------------------------------------------------

     is not independent under the listing standards of Nasdaq, 
any applicable rules of the SEC and any publicly disclosed standards 
used by the Board in determining and disclosing independence of 
Nasdaq's directors, in each case as determined by the Board in its sole 
discretion; \68\
---------------------------------------------------------------------------

    \68\ See Proposed Section 3.6(h)(ii); see also note 59, supra. 
In Amendment No. 1, the SROs made clear that the Board does not 
currently use any ``publicly disclosed standards'' to determine and 
disclose the independence of Nasdaq, Inc.'s directors, other than 
the listing standards of Nasdaq and any applicable rules of the 
Commission. If the Board adopts any such standards in the future, 
the SROs further represented that such standards will be in addition 
to, more stringent than, and not in conflict with the listing 
standards of Nasdaq or any applicable rules of the Commission. The 
SROs stated that any such standards will be used to determine and 
disclose the independence of all of Nasdaq, Inc.'s directors. 
However, the SROs noted that the Committee and/or Board may nominate 
a candidate who does not qualify as ``independent'' under any such 
standards, provided that such nomination does not cause Nasdaq, Inc. 
to fall out of compliance with the Bylaws, the listing standards of 
Nasdaq, and any other applicable policies and regulations. The SROs 
asserted that any ``publicly disclosed standards'' will be filed 
with and approved by the Commission prior to becoming effective. 
Moreover, the SROs stated that any such standards will be at least 
referenced in Nasdaq, Inc.'s Corporate Governance Guidelines 
following implementation. See Amendment No. 1, supra note 4.
---------------------------------------------------------------------------

     would, if elected as a member of the Board, cause Nasdaq, 
Inc. to be in violation of the Bylaws (including but not limited to the 
compositional requirements of the Board set forth in Section 4.3 of the 
Bylaws), its Amended and Restated Certificate of Incorporation, the 
rules and listing standards of Nasdaq, or any applicable state or 
federal law, rule or regulation; \69\
---------------------------------------------------------------------------

    \69\ See Proposed Section 3.6(h)(iii); see also Section 4.3 of 
the Bylaws, which provides that the number of Non-Industry Directors 
on the Board must equal or exceed the number of Industry Directors. 
In addition, the Board must include at least two Public Directors 
and may include at least one, but no more than two, Issuer 
Directors. Finally, the Board shall include no more than one Staff 
Director, unless the Board consists of ten or more directors, in 
which case, the Board shall include no more than two Staff 
Directors. Detailed definitions of the terms ``Non-Industry 
Director,'' ``Industry Director,'' ``Public Director,'' ``Issuer 
Director'' and ``Staff Director'' are included in Article I of the 
Bylaws.
---------------------------------------------------------------------------

     is or has been, within the past three (3) years, an 
officer or director of a competitor, as defined for purposes of Section 
8 of the Clayton Antitrust Act of 1914; \70\
---------------------------------------------------------------------------

    \70\ See Proposed Section 3.6(h)(iv); see also 15 U.S.C. 
19(a)(1), which generally provides that ``[n]o person shall, at the 
same time, serve as a director or officer in any two corporations'' 
that are ``competitors'' such that ``the elimination of competition 
by agreement between them would constitute a violation of any of the 
antitrust laws.''
---------------------------------------------------------------------------

     is a named subject of a pending criminal proceeding 
(excluding traffic violations and other minor offenses) or has been 
convicted in such a criminal proceeding within the past ten (10) years; 
\71\
---------------------------------------------------------------------------

    \71\ See Proposed Section 3.6(h)(v).
---------------------------------------------------------------------------

     is subject to any order of the type specified in Rule 
506(d) of Regulation D promulgated under the Securities Act of 1933, as 
amended; \72\
---------------------------------------------------------------------------

    \72\ See Proposed Section 3.6(h)(vi); see also 17 CFR 
230.506(d), which generally disqualifies offerings involving certain 
felons and other bad actors from relying on the ``safe harbor'' in 
Rule 506 of Regulation D from registration under the Securities Act 
of 1933, as amended.
---------------------------------------------------------------------------

     is subject to ``statutory disqualification'' under Section 
3(a)(39) of the Act; \73\
---------------------------------------------------------------------------

    \73\ See Proposed Section 3.6(h)(vii); see also 15 U.S.C. 
78c(a)(39), which disqualifies certain categories of individuals who 
generally have engaged in misconduct from membership or 
participation in, or association with a member of, a self-regulatory 
organization.
---------------------------------------------------------------------------

     has, or the applicable Eligible Stockholder has, provided 
information to Nasdaq, Inc. in respect of the proxy access nomination 
that was untrue in any material respect or omitted to state a material 
fact necessary in order to make the statements made, in light of the 
circumstances under which they were made, not misleading, as determined 
by the Board or any committee thereof, in each case, in its sole 
discretion; \74\ or
---------------------------------------------------------------------------

    \74\ See Proposed Section 3.6(h)(viii).
---------------------------------------------------------------------------

     breaches or fails, or the applicable Eligible Stockholder 
breaches or fails, to comply with its obligations pursuant to the 
Bylaws, including, but not limited to, the proxy access provisions and 
any agreement, representation or undertaking required by the proxy 
access provisions.\75\

    \75\ See Proposed Section 3.6(h)(ix).

The SROs stated their belief that these provisions will protect Nasdaq, 
Inc. and its stockholders by allowing it to exclude Stockholder 
Nominees that they view as objectionable from the proxy statement.\76\
---------------------------------------------------------------------------

    \76\ See Notices, supra note 3, at 81 FR 69150, 69157, 69107, 
69169, 69131, 69138, 69163, and 69098, respectively.
---------------------------------------------------------------------------

Proposed Section 3.6(i) of the Bylaws

    Under proposed Section 3.6(i), the Board or the chairman of the 
meeting of stockholders shall declare a proxy access nomination 
invalid, and such nomination shall be disregarded even if proxies in 
respect of such nomination have been received by Nasdaq, Inc., if:
     The Stockholder Nominee(s) and/or the applicable Eligible 
Stockholder have breached its or their obligations under the proxy 
access provision of the

[[Page 85289]]

Bylaws, as determined by the Board or the chairman of the meeting of 
stockholders, in each case, in its or his sole discretion; or
     the Eligible Stockholder (or a qualified representative 
thereof) does not appear at the meeting of stockholders to present the 
proxy access nomination.\77\
---------------------------------------------------------------------------

    \77\ See Proposed Section 3.6(i).
---------------------------------------------------------------------------

    The SROs stated in their filings that this provision protects 
Nasdaq, Inc. and its stockholders by providing the Board or the 
chairman of the stockholder meeting limited authority to disqualify a 
proxy access nominee when that nominee or the sponsoring stockholder(s) 
have breached an obligation under the proxy access provision, including 
the obligation to appear at the stockholder meeting to present the 
proxy access nomination.\78\
---------------------------------------------------------------------------

    \78\ See Notices, supra note 3, at 81 FR 69150, 69157, 69107, 
69170, 69132, 69138, 69164, and 69098, respectively.
---------------------------------------------------------------------------

Proposed Section 3.6(j) of the Bylaws

    Proposed Section 3.6(j) states that the following Stockholder 
Nominees who are included in Nasdaq, Inc.'s proxy materials for a 
particular annual meeting of stockholders will be ineligible to be a 
Stockholder Nominee for the next two annual meetings:
     A Stockholder Nominee who withdraws from or becomes 
ineligible or unavailable for election at the annual meeting; or
     a Stockholder Nominee who does not receive at least 25% of 
the votes cast in favor of such Stockholder Nominee's election.\79\
---------------------------------------------------------------------------

    \79\ See Proposed Section 3.6(j).
---------------------------------------------------------------------------

    The SROs asserted that this provision will save Nasdaq, Inc. and 
its stockholders the time and expense of analyzing and addressing 
subsequent proxy access nominations regarding individuals who were 
included in the proxy materials for a particular annual meeting but 
ultimately did not stand for election or receive a substantial amount 
of votes.\80\ Under the proposed bylaws, Stockholder Nominees excluded 
under this provision would again be eligible for nomination through the 
proxy access provisions after the next two annual meetings.\81\
---------------------------------------------------------------------------

    \80\ See Notices, supra note 3, at 81 FR 69150-51, 69157, 69107, 
69170, 69132, 69138, 69164, and 69098, respectively.
    \81\ See Proposed Section 3.6(j); see also Notices, supra note 
3, at 81 FR 69151, 69157, 69107, 69170, 69132, 69138, 69164, and 
69098, respectively.
---------------------------------------------------------------------------

Proposed Section 3.6(k) of the Bylaws

    Proposed Section 3.6(k) states that the Board (or any other person 
or body authorized by the Board) shall have exclusive power and 
authority to interpret the proxy access provisions of the Bylaws and to 
make all determinations deemed necessary or advisable as to any person, 
facts or circumstances.\82\ In addition, all actions, interpretations 
and determinations of the Board (or any person or body authorized by 
the Board) with respect to the proxy access provisions shall be final, 
conclusive and binding on Nasdaq, Inc., the stockholders and all other 
parties.\83\ In their filings, the SROs noted that they have attempted 
to implement a clear, detailed and thorough proxy access provision, but 
acknowledged there may be matters about future proxy access nominations 
that are open to interpretation.\84\ In these cases, the SROs stated 
that, in their view, it is reasonable and necessary to designate an 
arbiter to make final decisions on these points and that they believed 
the Board is best-suited to act as that arbiter.\85\
---------------------------------------------------------------------------

    \82\ See Proposed Section 3.6(k).
    \83\ Id.
    \84\ See Notices, supra note 3, at 81 FR 69151, 69157, 69108, 
69171, 69132, 69139, 69164, and 69098, respectively.
    \85\ Id.
---------------------------------------------------------------------------

Proposed Section 3.6(l) of the Bylaws

    Proposed Section 3.6(l) prohibits a stockholder from joining more 
than one group of stockholders to become an Eligible Stockholder for 
purposes of submitting a proxy access nomination for each annual 
meeting of stockholders.\86\ The SROs analogized this provision to 
Article IV, Paragraph C(1) of Nasdaq, Inc.'s Amended and Restated 
Certificate of Incorporation, under which each holder of Nasdaq, Inc.'s 
common stock shall be entitled to one vote per share on all matters 
presented to the stockholders for a vote.\87\ In light of that 
provision, the SROs believed it was reasonable for each share to count 
only once in submitting a proxy access nomination.\88\
---------------------------------------------------------------------------

    \86\ See Proposed Section 3.6(l).
    \87\ See Notices, supra note 3, at 81 FR 69151, 69157, 69108, 
69171, 69132, 69139, 69164, and 69098, respectively.
    \88\ Id.
---------------------------------------------------------------------------

Proposed Section 3.6(m) of the Bylaws

    Proposed Section 3.6(m) states that the proxy access provisions 
outlined in the proposal shall be the exclusive means for stockholders 
to include nominees in Nasdaq, Inc.'s proxy materials.\89\ The SROs 
noted that stockholders may continue to propose nominees to the 
Committee and Board through other means, but that the Committee and 
Board will have final authority to determine whether to include those 
nominees in Nasdaq, Inc.'s proxy materials.\90\
---------------------------------------------------------------------------

    \89\ See Proposed Section 3.6(m).
    \90\ See Notices, supra note 3, at 81 FR 69151, 69157, 69108, 
69171, 69132, 69139, 69164, and 69098, respectively.
---------------------------------------------------------------------------

III. Discussion and Commission Findings

    The Commission finds, after careful review, that the proposed rule 
changes, as modified by Amendment No. 1, are consistent with the 
requirements of Section 6 of the Act \91\ and the rules and regulations 
thereunder applicable to a national securities exchange.\92\ In 
particular, the Commission finds that the proposed rule changes, as 
modified by Amendment No. 1, are consistent with the requirements of 
Section 6(b)(5) of the Act, which requires, among other things, that an 
exchange's rules be designed to prevent fraudulent and manipulative 
acts and practices, to promote just and equitable principles of trade, 
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; and are not designed to permit 
unfair discrimination between customers, issuers, brokers or 
dealers.\93\
---------------------------------------------------------------------------

    \91\ 15 U.S.C. 78f(b).
    \92\ In approving these proposed rule changes, the Commission 
has considered the proposed rules' impact on efficiency, 
competition, and capital formation. See 15 U.S.C. 78c(f).
    \93\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    A stockholder who wishes to nominate his or her own candidate for 
director may initiate a proxy contest in order to solicit proxies from 
fellow shareholders, but doing so requires the preparation and 
dissemination of separate proxy materials and entails substantial cost. 
Proposed Section 3.6 of the Bylaws provides Nasdaq, Inc. stockholders 
an alternative path for having their nominees considered through the 
proxy process. This proposal is intended to respond to a stockholder 
proposal, submitted under Rule 14a-8 of the Act and approved by Nasdaq, 
Inc. stockholders, requesting that the Board take steps to implement a 
proxy access bylaw.\94\
---------------------------------------------------------------------------

    \94\ See note 5-7, supra, and accompanying text.
---------------------------------------------------------------------------

    The SROs stated that the proposal, by providing a process for 
certain stockholders to nominate directors to be included in Nasdaq, 
Inc.'s proxy materials,\95\ should help to strengthen

[[Page 85290]]

the corporate governance of Nasdaq, Inc., thereby protecting investors 
and the public interest.\96\ The Commission believes that the proposal 
to provide a process for stockholder proxy access in the Bylaws should 
help to provide the stockholders of Nasdaq, Inc. that meet the stated 
requirements of proposed Section 3.6 with an alternative opportunity to 
exercise their right to nominate directors for the Board, consistent 
with the Act.
---------------------------------------------------------------------------

    \95\ As discussed above, however, the number of permitted 
director nominees under Section 3.6 may constitute less than twenty-
five percent of the number of directors currently serving on the 
Board and, under certain circumstances, could be less than two 
nominees. See notes 20-26, supra, and accompanying text; see also 
Proposed Section 3.6(c).
    \96\ See Notices, supra note 3, at 81 FR 69151, 69158, 69108, 
69171, 69132, 69164, and 69069, respectively.
---------------------------------------------------------------------------

    The proposed rule changes will require Nasdaq, Inc. to include in 
its proxy materials information regarding a director nominee nominated 
pursuant to proposed Section 3.6, including disclosures regarding the 
nominee and nominating stockholder(s), any statement in support of the 
nominee provided by the nominating stockholder(s), and any other 
information that Nasdaq, Inc. or the Board determines to include 
relating to the nomination.\97\ The Commission believes that the 
provision of such information could help stockholders to assess whether 
a nominee submitted pursuant to proposed Section 3.6 possesses the 
necessary qualifications and experience to serve as a director.
---------------------------------------------------------------------------

    \97\ See, e.g., Proposed Section 3.6(a).
---------------------------------------------------------------------------

    The proposed rule changes to Nasdaq, Inc.'s Bylaws limit the 
availability of proxy access in certain circumstances. For example, in 
order to be eligible to submit a nomination to be included in the proxy 
materials pursuant to proposed Section 3.6, a stockholder (or group of 
stockholders) is required to own at least three percent of Nasdaq, 
Inc.'s outstanding shares of common stock continuously for at least 
three years.\98\ Furthermore, a stockholder may only nominate a 
director to be included in the proxy materials pursuant to proposed 
Section 3.6 if he or she represents that he or she did not acquire and 
is not holding Nasdaq, Inc.'s securities with the intent of effecting a 
change of control of Nasdaq, Inc.\99\ The proposed rule changes also 
limit the number of director nominees submitted pursuant to proposed 
Section 3.6 that may be included in the proxy materials to twenty-five 
percent of the total number of directors of the Board.\100\ The 
proposed rule changes would allow Nasdaq, Inc. to disregard or omit 
nominees submitted pursuant to proposed Section 3.6 from the proxy 
materials in certain circumstances, including where there is a material 
defect in the information provided by the Stockholder Nominee or 
Eligible Stockholder to the Board.\101\ Such limitations on proxy 
access seem designed to balance the ability of Nasdaq, Inc. 
stockholders to participate more fully in the nomination and election 
process against the potential cost and practical difficulties of 
requiring inclusion of stockholder nominations in proxy materials.
---------------------------------------------------------------------------

    \98\ See Proposed Section 3.6(e).
    \99\ See Proposed Section 3.6(e)(v)(A).
    \100\ See Proposed Section 3.6(c).
    \101\ See Proposed Section 3.6(h)(viii).
---------------------------------------------------------------------------

    As noted above, the proposed proxy access provisions include 
safeguards that will help to ensure that any director nominees 
submitted pursuant to proposed Section 3.6 would qualify as independent 
directors and that the nominating shareholder's nomination of the 
nominee, and the nominee's membership on the Board, if elected, would 
not violate any applicable laws, rules or regulations of any government 
entity or relevant self-regulatory organization. Specifically, the 
proposed rule changes permit Nasdaq, Inc. to disregard and omit from 
the proxy materials any candidate whose election to the Board would 
cause Nasdaq, Inc. to be in violation of the Bylaws, the Certificate of 
Incorporation, the rules and listing standards of Nasdaq, or any 
applicable state or federal law, rule or regulation.\102\
---------------------------------------------------------------------------

    \102\ See Proposed Section 3.6(h)(iii).
---------------------------------------------------------------------------

    In addition, Nasdaq, Inc. may disregard or omit from the proxy 
materials any candidate who does not qualify as independent under the 
listing standards of Nasdaq, any applicable rules of the Commission, 
and any publicly disclosed independence standards used by the Board to 
determine and disclose the independence of Nasdaq, Inc.'s 
directors.\103\ Aside from the independence listing standards of Nasdaq 
and any applicable rules of the Commission, Nasdaq, Inc. does not 
currently use any other standards to evaluate the independence of its 
directors.\104\
---------------------------------------------------------------------------

    \103\ See Proposed Section 3.6(h)(ii).
    \104\ See Amendment No. 1, supra note 4. If such standards were 
to be adopted in the future, the SROs have represented that they 
will be filed with an approved by the Commission prior to becoming 
effective and, following implementation, that such standards will be 
at least referenced in Nasdaq, Inc.'s Corporate Governance 
Guidelines.
---------------------------------------------------------------------------

    The SROs have represented, however, that any such standards adopted 
in the future will be in addition to, more stringent than, and not in 
conflict with the listing standards of Nasdaq or any applicable rules 
of the Commission.\105\ The SROs have also represented that any such 
standards adopted by the Board will be used to determine and disclose 
the independence of all of Nasdaq, Inc.'s director nominees, including 
proxy access nominees and Board nominees.\106\ However, while 
stockholder nominees could be omitted from the proxy materials if they 
do not meet any such future independence standards, a candidate 
submitted by the Committee and/or the Board would not have to meet 
these standards, and could remain on the ballot, provided that the 
election of such candidate would not cause Nasdaq, Inc. to fall out of 
compliance with the listing standards of Nasdaq, any applicable rules 
of the Commission, the Bylaws, or any other applicable policies or 
regulations.\107\ The Commission notes that this difference seems 
acceptable because, while the proxy access candidates must meet all 
applicable independence requirements--including any future standards 
adopted by Nasdaq, Inc.--in order to be a proxy access nominee for the 
Board, a candidate submitted by the Committee and/or the Board could 
potentially be a nominee and Board member if that does not cause the 
Board to fall out of compliance with the Bylaws or the above-listed 
standards, rules, policies or regulations.\108\
---------------------------------------------------------------------------

    \105\ Id.
    \106\ Id.
    \107\ Id.
    \108\ While a Board-nominated candidate's compliance with any 
applicable independence standards would be disclosed, that candidate 
would not necessarily be excluded if filling a non-independent Board 
seat. See, e.g., Nasdaq, Inc. Corporate Governance Guidelines, 
available at: http://files.shareholder.com/downloads/NDAQ/2006703005x0x21344/9019EBAF-60B7-4340-8AE3-F377D313AF55/Corp_gov_guide.pdf.
---------------------------------------------------------------------------

    The Commission believes that the safeguards and limitations 
described above should help to ensure that Nasdaq, Inc. can comply with 
its Bylaws and any applicable laws, rules, regulations, including, 
among others, exchange listing standards on independent directors, 
consistent with Section 6(b)(5) of the Act. Based on the foregoing, the 
Commission finds that the proposed rule changes, as modified by 
Amendment No. 1, are consistent with the Act.
    The Commission also finds that the proposed rule changes by BSECC 
and SCCP are consistent with the requirements of the Act and the rules 
and regulations thereunder applicable to clearing agencies. Section 
17A(b)(3)(F) of the Act requires, among other things, that the rules of 
a clearing agency be designed to protect investors and the public 
interest.\109\ In addition, Rule 17Ad-22(d)(8) under the Act requires 
registered clearing agencies to establish, implement, maintain, and 
enforce

[[Page 85291]]

written policies and procedures reasonably designed to have governance 
arrangements that are clear and transparent.\110\ Here, BSECC and SCCP 
filed proposed rule changes to highlight changes being made to the 
Bylaws of Nasdaq, Inc.,\111\ which indirectly owns BSECC and SCCP. 
Therefore, the proposed rule changes by BSECC and SCCP help make clear 
and transparent the governance arrangements of Nasdaq, Inc. and, thus, 
BSECC and SCCP, which helps ensure investor protection and the public 
interest.
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    \109\ 15 U.S.C. 78q-1(b)(3)(F).
    \110\ 17 CFR 240.17Ad-22(d)(8).
    \111\ Certain provisions of the Bylaws are considered rules of 
BSECC and SCCP if they are stated policies, practices, or 
interpretations, as defined in Rule 19b-4 under the Act, of BSECC 
and SCCP, and must be filed with the Commission pursuant to Section 
19(b) of the Act and Rule 19b-4 thereunder. 15 U.S.C. 78q-1(b); 17 
CFR 40.19b-4.
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    Finally, the Commission finds that the proposed conforming changes 
to Sections 3.1(a), 3.3(a), 3.3(c), and 3.5 of the Bylaws are 
consistent with the Act because these changes prevent stockholder 
confusion by clarifying the operation of the proposed proxy access 
provision and other provisions by which stockholders may nominate 
directors to the Board.

IV. Solicitation of Comments on Amendment No. 1

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the filings, as 
modified by Amendment No. 1, are 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 Nos. SR-NASDAQ-2016-127; SR-BX-2016-051; SR-ISE-2016-22; SR-
ISEGemini-2016-10; SR-ISEMercury-2016-16; SR-PHLX-2016-93; SR-BSECC-
2016-001; SR-SCCP-2016-01 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 Nos. SR-NASDAQ-2016-127; SR-BX-
2016-051; SR-ISE-2016-22; SR-ISEGemini-2016-10; SR-ISEMercury-2016-16; 
SR-PHLX-2016-93; SR-BSECC-2016-001; SR-SCCP-2016-01. These file numbers 
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 submissions, all subsequent amendments, all written 
statements with respect to the proposed rule changes that are filed 
with the Commission, and all written communications relating to the 
proposed rule changes 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 on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of such filings 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 Nos. SR-NASDAQ-2016-127; SR-BX-2016-
051; SR-ISE-2016-22; SR-ISEGemini-2016-10; SR-ISEMercury-2016-16; SR-
PHLX-2016-93; SR-BSECC-2016-001; SR-SCCP-2016-01, and should be 
submitted on or before December 16, 2016.

V. Accelerated Approval of Proposed Rule Changes, as Modified by 
Amendment No. 1

    The Commission finds good cause, pursuant to Section 19(b)(2) of 
the Act, to approve the proposed rule changes, as modified by Amendment 
No. 1, prior to the 30th day after the date of publication of Amendment 
No. 1 in the Federal Register. As discussed above, Amendment No. 1 
clarifies the circumstances under which proxy access nominees may be 
excluded from the proxy materials and clarifies that the Board does not 
currently have in place the publicly disclosed independence standards 
described in this provision.\112\ The Commission believes that these 
revisions provide needed clarity to the proposed rule changes.
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    \112\ See supra, note 4.
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    Accordingly, the Commission finds good cause for approving the 
proposed rule changes, as modified by Amendment No. 1, on an 
accelerated basis, pursuant to Section 19(b)(2) of the Act.\113\
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    \113\ 15 U.S.C. 78s(b)(2).
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VI. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\114\ that the proposed rule changes (SR-NASDAQ-2016-127; SR-BX-
2016-051; SR-ISE-2016-22; SR-ISEGemini-2016-10; SR-ISEMercury-2016-16; 
SR-PHLX-2016-93; SR-BSECC-2016-001; SR-SCCP-2016-01), as modified by 
Amendment No. 1, be, and hereby are, approved on an accelerated basis.
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    \114\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\115\
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    \115\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2016-28319 Filed 11-23-16; 8:45 am]
 BILLING CODE 8011-01-P