
[Federal Register: May 6, 2010 (Volume 75, Number 87)]
[Notices]               
[Page 25022-25024]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr06my10-113]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61994; File No. SR-Phlx-2010-58]

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

April 27, 2010.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\, and Rule 19b-4 \2\ thereunder, notice is hereby given 
that on April 9, 2010, NASDAQ OMX PHLX, Inc. (``Phlx'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``SEC'' or 
``Commission'') the proposed rule change as described in Items I and II 
below, which Items have been prepared by the Exchange. The Commission 
is publishing this notice to solicit comments on the proposed rule 
change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to file a proposed rule change relating to 
the By-Laws of its parent corporation, The NASDAQ OMX Group, Inc. 
(``NASDAQ OMX''). The text of the proposed rule change is available on 
the Exchange's Web site at http://www.nasdaqtrader.com/
micro.aspx?id=PHLXRulefilings, at the principal office of the Exchange, 
on the Commission's Web site at http://www.sec.gov, and at the 
Commission's Public Reference Room.

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

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change 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. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

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

1. Purpose
    NASDAQ OMX has proposed making certain amendments to its By-Laws to 
make improvements in its governance. In SR-NASDAQ-2010-025, The NASDAQ 
Stock Market LLC (``NASDAQ Exchange'') sought Commission approval to 
adopt these By-Laws changes as part of the rules of NASDAQ Exchange, 
and the Commission granted approval to these changes in an order dated 
April 8, 2010.\3\ The Exchange is

[[Page 25023]]

now submitting this filing on an immediately effective basis to adopt 
the same By-Law changes as rules of the Exchange.
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    \3\ See Securities Exchange Act Release No. 61876 (April 8, 
2010), 75 FR 19436 (April 14, 2010) (SR-NASDAQ-2010-025).
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    The NASDAQ OMX By-Laws previously provided that each director 
receiving a plurality of the votes at any election of directors at 
which a quorum is present is duly elected to the Board. Under Corporate 
Governance Guidelines adopted by the Board, however, any director in an 
uncontested election who received a greater number of votes 
``withheld'' from his or her election than votes ``for'' such election 
was required to tender his or her resignation promptly following 
receipt of the certification of the stockholder vote. The NASDAQ OMX 
Nominating & Governance Committee then considered the resignation offer 
and recommended to the Board whether to accept it. Within 90 days after 
the certification of the election results, the Board determined whether 
to accept or reject the resignation. Promptly thereafter, the Board 
announced its decision by means of a press release. In a contested 
election (i.e., where the number of nominees exceeds the number of 
directors to be elected), the unqualified plurality standard controls.
    Uncontested Election:
    NASDAQ OMX recently amended its By-Laws to adopt a majority vote 
standard, specifically By-Law Article IV, Section 4.4 of the By-Laws 
was amended to provide that, in an uncontested election, directors 
shall be elected by holders of a majority of the votes cast at any 
meeting for the election of directors at which a quorum is present.\4\ 
Under the majority voting standard, a nominee who fails to receive the 
requisite vote will not be duly elected to the Board. The By-Laws 
require that any incumbent nominee, as a condition to his or her 
nomination for election, must submit in writing an irrevocable 
resignation, the effectiveness of which is conditioned upon the 
director's failure to receive the requisite vote in any uncontested 
election and the Board's acceptance of the resignation. The resignation 
will be considered by the Nominating & Governance Committee and acted 
upon by the Board in the same manner described above.\5\ Acceptance of 
that resignation by the Board shall be in accordance with the policies 
and procedures adopted by the Board for such purpose. NASDAQ OMX 
specifies its policies and procedures pertaining to the election of its 
directors in its By-Laws. Specifically, the policies and procedures for 
the acceptance of the resignation of a director, by the Board, are 
proposed to be specified in By-Law Article IV, Section 4.4. There are 
no additional policies and procedures other than what is indicated in 
the By-Laws. In the event that NASDAQ OMX proposes to further amend its 
By-Laws with respect to the election of directors, including the 
adoption of any policies and procedures with respect to such election, 
NASDAQ OMX shall file a proposed rule change with the Commission to 
seek approval of those amendments.
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    \4\ NASDAQ OMX also amended its Corporate Governance Guidelines 
to reflect the majority vote standard for uncontested director 
elections.
    \5\ See NASDAQ OMX By-Law Article IV, Section 4.5.
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    Contested Election:
    NASDAQ OMX codified its process for a contested election. The 
directors will continue to be elected by a plurality vote in a 
contested election. There is no change to the process for contested 
elections because if a majority voting standard were to apply in a 
contested election, the likelihood of a ``failed election'' (i.e., a 
situation in which no director receives the requisite vote) would be 
more pronounced. Moreover, the rationale underpinning the majority 
voting policy does not apply in contested elections where stockholders 
are offered a choice among competing candidates. Directors are elected 
by a plurality of votes present in person or represented by proxy at a 
meeting. The directors who receive the greatest number of votes cast 
for election of directors at the meeting will be elected.
    General Election Requirements:
    The following applies to elections of directors and were not 
amended. Each share of common stock has one vote,\6\ subject to the 
voting limitation in NASDAQ OMX's certificate of incorporation that 
generally prohibits a holder from voting in excess of 5% of the total 
voting power of NASDAQ OMX.\7\ In addition, each note holder is 
entitled to the number of votes equal to the number of shares of common 
stock into which such note could be converted on the record date, 
subject to the 5% voting limitation contained in the certificate of 
incorporation.
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    \6\ See NASDAQ OMX Certificate of Incorporation at Article IV, 
C.1(a).
    \7\ See NASDAQ OMX Certificate of Incorporation at Article IV, 
C.1(b)2.
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    The presence of owners of a majority (greater than 50%) of the 
votes entitled to be cast by holder of NASDAQ OMX voting securities 
constitutes a quorum. Presence may be in person or by proxy. Any 
securities not voted, by abstention, will not impact the vote.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Act,\8\ in general, and with 
Sections 6(b)(1) and (b)(5) of the Act,\9\ in particular, in that the 
proposal enables the Exchange to be so organized as to have the 
capacity to be able to carry out the purposes of the Act and to comply 
with and enforce compliance by members and persons associated with 
members with provisions of the Act, the rules and regulations 
thereunder, and self-regulatory organization rules, and is designed to 
prevent fraudulent and manipulative acts and practices, to promote just 
and equitable principles of trade, to foster cooperation and 
coordination with persons engaged in regulating, clearing, settling, 
processing information with respect to, and facilitating transactions 
in securities, to remove impediments to and perfect the mechanism of a 
free and open market and a national market system, and, in general, to 
protect investors and the public interest. The proposed amendments 
adopting a majority vote standard would enable the directors to be 
elected in a manner reflective of the desires of shareholders and 
provide a mechanism to protect against the election of directors by 
less than a majority vote of the shareholders.
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    \8\ 15 U.S.C. 78f.
    \9\ 15 U.S.C. 78f(b)(2)[sic], (5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act.

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

    No written comments were either solicited or received.

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

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days after the date of the filing, or such 
shorter time as the Commission may designate, if consistent with the 
protection of investors and the public interest, it has become 
effective pursuant to 19(b)(3)(A)

[[Page 25024]]

of the Act \10\ and Rule 19b-4(f)(6) \11\ thereunder.
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
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    The Exchange has noted that the proposed rule change is identical 
to a proposed rule change recently approved by the Commission with 
respect to the NASDAQ Exchange \12\ and has requested that the 
Commission waive the 30-day operative delay to ensure that NASDAQ OMX 
is able to implement the proposed rule change without undue delay. The 
Commission has determined that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest 
because such waiver will enable NASDAQ OMX to implement the proposed 
rule change without undue delay in a manner consistent with a proposed 
rule change previously approved by the Commission.\13\ Therefore, the 
Commission designates the proposal operative upon filing.\14\
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    \12\ See Securities Exchange Act Release No. 61876 (April 8, 
2010), 75 FR 19436 (April 14, 2010) (SR-NASDAQ-2010-025).
    \13\ Id.
    \14\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    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.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://
www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-Phlx-2010-58 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-Phlx-2010-58. 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 Web site viewing and 
printing in the Commission's Public Reference Room, on official 
business days between the hours of 10 a.m. and 3 p.m. Copies of the 
filing also will be available for inspection and copying at the 
principal office of the Exchange. All comments received will be posted 
without change; the Commission does not edit personal identifying 
information from submissions. You should submit only information that 
you wish to make available publicly. All submissions should refer to 
File Number SR-Phlx-2010-58 and should be submitted on or before May 
27, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-10593 Filed 5-5-10; 8:45 am]
BILLING CODE 8011-01-P

