Document ID: SEC-2009-1658-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Stock Clearing Corporation of Philadelphia; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Restated Certificate of Incorporation of the NASDAQ OMX Group, Inc.
Posted Date: 2009-11-24T05:00Z

[Federal Register: November 24, 2009 (Volume 74, Number 225)]
[Notices]               
[Page 61391-61393]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr24no09-86]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61001; File No. SR-SCCP-2009-04]

 
Self-Regulatory Organizations; Stock Clearing Corporation of 
Philadelphia; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change To Amend the Restated Certificate of Incorporation of the 
NASDAQ OMX Group, Inc.

November 13, 2009.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder \2\ notice is hereby given that 
on October 1, 2009, Stock Clearing Corporation of Philadelphia 
(``SCCP'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by SCCP. The Commission 
is publishing this notice to solicit comments on the proposed rule 
change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    SCCP is filing this proposed rule change with regard to proposed 
changes to the Restated Certificate of Incorporation (``Certificate'') 
of its

[[Page 61392]]

parent corporation, The NASDAQ OMX Group, Inc. (``NASDAQ OMX''). The 
proposed rule change will be implemented as soon as practicable 
following filing with the Commission. The text of the proposed rule 
change is available at http://www.nasdaqtrader.com/
Trader.aspx?id=SCCPApprovedRules.

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

    In its filing with the Commission, SCCP included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. SCCP has prepared summaries, set forth in Sections A, B, 
and C below of the most significant aspects of such statements.

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

1. Purpose
    NASDAQ OMX is proposing to file the Certificate of Designation 
described below. Under Article Four, Paragraph B of the Certificate, 
NASDAQ OMX's Board of Directors may authorize the issuance of preferred 
stock, establish the number of shares to be included in such series, 
and fix the designation, powers, preferences and rights of the shares 
of such series, and the qualifications, limitations, and restrictions 
thereof. As provided in Articles XI and XII of the NASDAQ OMX By-Laws, 
proposed amendments to the Certificate are to be reviewed by the Board 
of Directors of each self-regulatory subsidiary of NASDAQ OMX, and if 
any such proposed amendment must under Section 19 of the Act and the 
rules promulgated thereunder be filed with or filed with and approved 
by the Commission before such amendment may be effective, then such 
amendment shall not be effective until filed with or filed with and 
approved by the Commission, as the case may be. Senior management of 
NASDAQ, PHLX, and BX, through delegated authority of their governing 
boards, have determined that the proposed change should be filed with 
the Commission, and the governing boards of BSECC and SCCP have each 
reviewed the proposed change and determined that it should be filed 
with the Commission.\3\ Under Delaware law, the amendment of the 
Certificate by the filing of a Certificate of Designation does not 
require approval by the stockholders of NASDAQ OMX.
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    \3\ NASDAQ, PHLX, BX, BSECC and SCCP are each submitting this 
filing pursuant to Section 19(b)(3)(A)(iii) of the Act, 15 U.S.C. 
78s(b)(3)(A)(iii).
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    The issuance of the Series A Preferred is part of a transaction 
between NASDAQ OMX and one of its existing shareholders, Silver Lake 
Partners (``Silver Lake''), whereby Silver Lake agreed to convert all 
of the 3.75% Series A Convertible Notes due 2012 (``Notes'') held by 
certain of its affiliates (``Silver Lake Affiliates'') into shares of 
NASDAQ OMX common stock (``Common Stock'') prior to the maturity date 
of such Notes.\4\ As an inducement to convert the Notes, NASDAQ OMX has 
delivered a cash payment and has agreed to deliver 1,600,000 shares of 
Series A Preferred to the Silver Lake Affiliates (``Transaction''). 
Effective September 28, 2009, the Silver Lake Affiliates converted 
Notes into 8,246,680 shares of Common Stock. As a result, Silver Lake 
no longer holds any Notes and through certain of the Silver Lake 
Affiliates currently is the beneficial owner of shares of Common Stock 
that equal less than five percent (5%) of the outstanding voting 
securities of NASDAQ OMX.
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    \4\ Under Article Four, Section C.1(b) of the Certificate, the 
Notes are entitled to vote on an as-converted basis on matters that 
are submitted to a vote of the stockholders of NASDAQ OMX, voting 
together with the holders of the Common Stock and any other shares 
of capital stock entitled to vote.
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    Under the Certificate of Designation, up to two million shares will 
be designated for issuance as shares of Series A Preferred. The Series 
A Preferred will be senior in preference and priority to the Common 
Stock and on parity with all other classes and series of preferred 
stock.
    The Series A Preferred will have limited voting rights and will not 
have the right to vote on any matters that are subject to the vote of 
the holders of Common Stock. The approval of at least a majority of the 
then outstanding shares of Series A Preferred will be required to 
approve any amendment to the Certificate or the NASDAQ OMX By-Laws that 
would adversely affect the rights, preferences, or privileges of the 
Series A Preferred (including any change in the dividends payable or 
liquidation preference). In addition, any amendments to reduce the 
dividend payable to the Series A Preferred, to increase the number of 
authorized shares of the Series A Preferred, or to change certain 
specified provisions of the Certificate of Designation will require the 
written consent of 75 percent of the then outstanding shares of Series 
A Preferred, voting together as a class.
    The shares of Series A Preferred will be convertible into shares of 
Common Stock. Under the applicable NASDAQ listing rules, approval by 
the stockholders of NASDAQ OMX (``Shareholder Approval'') is required 
to permit the conversion of the Series A Preferred.\5\ NASDAQ OMX 
intends to seek Shareholder Approval at the company's 2010 annual 
meeting of stockholders.
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    \5\ Pursuant to NASDAQ Listing Rule 5635(c), shareholder 
approval is required when an equity compensation arrangement is made 
pursuant to which stock may be acquired by an issuer's officers, 
directors, employees, or consultants. Pursuant to agreements 
relating to the issuance of the Notes, a Silver Lake representative 
currently serves on the NASDAQ OMX Board of Directors.
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    Upon the date of Shareholder Approval, the Series A Preferred will 
mandatorily convert into shares of Common Stock as provided in the 
Certificate of Designation.\6\ In the event that Shareholder Approval 
is not obtained, the Series A Preferred will accrue cumulative 
dividends, accrued on a daily basis and compounded quarterly, at a per 
annum rate equal to 12%. In addition, in the event that Shareholder 
Approval is not obtained, the Series A Preferred will be subject to 
optional redemption by NASDAQ OMX subject to the terms of the 
Certificate of Designation. The Series A Preferred will be mandatorily 
redeemable by NASDAQ OMX on the fourth anniversary of the original 
issuance date and will be redeemable at the option of the holders upon 
a Fundamental Change (as defined in the Certificate of Designation).
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    \6\ The number of shares of Common Stock to be issued upon 
conversion is variable. To the extent that the conversion results in 
Silver Lake obtaining beneficial ownership of shares of voting 
securities in excess of five percent (5%) of the then-outstanding 
shares of stock entitled to vote, Silver Lake will be subject to the 
existing voting restrictions in Article Fourth, Section C.3 of the 
Certificate. This provision provides that no person who is the 
beneficial owner of voting securities of NASDAQ OMX in excess of 
five percent (5%) of the then-outstanding shares of stock generally 
entitled to vote (``Excess Securities'') may vote such Excess 
Securities.
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    The issuance of Series A Preferred will result in no substantive 
change in the ownership or governance structure of NASDAQ OMX since the 
Series A Preferred will have no voting rights other than the limited 
rights described above. The Transaction also has resulted in the 
conversion of most of the outstanding Notes into Common Stock.\7\
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    \7\ Prior to the Transaction, the Silver Lake Affiliates held 
approximately $119.5 million in aggregate principal amount of the 
outstanding Notes. Another holder continues to hold approximately 
$500,000 in aggregate principal amount of the outstanding Notes.

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[[Page 61393]]

2. Statutory Basis
    SCCP believes that the proposed rule change is consistent with the 
provisions of Section 17A of the Act,\8\ in general, and with Section 
17A(b)(3)(A) of the Act,\9\ in particular, in that it is designed to 
ensure that SCCP is so organized and has the capacity to be able to 
facilitate the prompt and accurate clearance and settlement of 
securities transactions. SCCP believes that the proposed rule change 
and the issuance of Series A Preferred to existing investors will 
result in no substantive change to the corporate ownership structure of 
its parent NASDAQ OMX.
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    \8\ 15 U.S.C. 78q-1.
    \9\ 15 U.S.C. 78q-1(b)(3)(A).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    SCCP does not believe that the proposed rule change will result in 
any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act, as amended.

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

    Written comments were neither solicited nor received.

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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(iii) of the Act \10\ and subparagraph (f)(3) of Rule 19b-4 
thereunder.\11\ At any time within 60 days of the filing of the 
proposed rule change, the Commission may summarily abrogate such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act.
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    \10\ 15 U.S.C. 78s(b)(3)(a)(iii).
    \11\ 17 CFR 240.19b-4(f)(3).
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IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://
www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number R-SCCP-2009- 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-SCCP-2009-04. This file 
number should be included on the subject line if e-mail is used.
    To help the Commission process and review your comments more 
efficiently, please use only one method. The Commission will post all 
comments on the Commission's Internet Web site (http://www.sec.gov/
rules/sro.shtml). Copies of the submission, all subsequent amendments, 
all written statements with respect to the proposed rule change that 
are filed with the Commission, and all written communications relating 
to the proposed rule change between the Commission and any person, 
other than those that may be withheld from the public in accordance 
with the provisions of 5 U.S.C. 552, will be available for inspection 
and copying in the Commission's Public Reference Room on official 
business days between the hours of 10 a.m. and 3 p.m. Copies of such 
filing also will be available for inspection and copying at the 
principal 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-SCCP-2009-04, and 
should be submitted on or before December 15, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-28095 Filed 11-23-09; 8:45 am]

BILLING CODE 8011-01-P