
[Federal Register Volume 76, Number 85 (Tuesday, May 3, 2011)]
[Notices]
[Pages 24947-24949]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-10651]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64346; File No. SR-PHLX-2011-54]


Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change Relating 
to Amendments to the NASDAQ OMX Group, Inc.'s By-Laws

April 27, 2011.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on April 14, 2011, NASDAQ OMX PHLX LLC (``PHLX'' or ``Exchange'') filed 
with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I and II, 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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[[Page 24948]]

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to file a rule change related 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 recently made certain clarifying amendments to its By-
Laws.\3\ Specifically, the recently approved NASDAQ OMX rule change: 
(i) Amended the name of the Nominating Committee to the Nominating & 
Governance Committee; (ii) amended the PHLX reference to reflect a 
recent conversion to a limited liability company; and (iii) clarified 
By-Law Article IV, Section 4.4 that broker nonvotes are not counted as 
a vote cast either ``for'' or ``against'' a Director in an uncontested 
election.\4\
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    \3\ See Securities Exchange Act Release No. 64285 (April 8, 
2011) (SR-NASDAQ-2011-025) (``Approval Order''). SR-NASDAQ-2011-025 
was filed by NASDAQ Stock Market LLC on behalf of NASDAQ OMX to 
amend the By-Laws of its parent corporation.
    \4\ Id.
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    NASDAQ OMX By-Laws previously provided for a Nominating Committee 
which is appointed pursuant to the By-Laws. In addition to the 
responsibilities listed in By-Law Article IV, Section 4.13(h), the 
Nominating Committee also conducts certain governance functions such as 
consulting with the Board and the management to determine the 
characteristics, skills and experience desired for the Board as a whole 
and for its individual members, overseeing the annual director 
evaluation, and reviewing the overall effectiveness of the Board. 
Accordingly, NASDAQ OMX renamed and changed all references to the 
``Nominating Committee'' in the By-Laws, to the ``Nominating & 
Governance Committee'' so that the title of the committee accurately 
reflects all of its current functions, including those that are deemed 
governance functions. The proposal to rename the Nominating Committee 
did not change the function of the committee, but was intended to 
clarify the current functions and its governance role with respect to 
the Board selection process.
    Additionally, NASDAQ OMX amended Article 1, Section (o) of NASDAQ 
OMX's By-Laws to change the reference to ``NASDAQ OMX PHLX, Inc.'' to 
``NASDAQ OMX PHLX LLC'' to reflect a recently filed rule change by the 
Exchange from a Delaware corporation to a Delaware limited liability 
company.\5\
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    \5\ See Securities Exchange Act Release No. 62783 (August 27, 
2010), 75 FR 54204 (September 3, 2010) (SR-Phlx-2010-104).
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    Finally, NASDAQ OMX added the words ``and broker nonvotes'' to 
NASDAQ OMX's By-Law Article IV, Section 4.4 to make clear that broker 
nonvotes will not be counted as a vote cast either ``for'' or 
``against'' that director's election. In its filing to amend NASDAQ 
OMX's By-Laws, NASDAQ Stock Market LLC noted that NASDAQ OMX's past 
practice has been to not count a broker nonvote as a vote cast either 
for or against a director's election.\6\ Accordingly, this change 
clarifies this practice by codifying it into the By-Laws, especially in 
light of NASDAQ OMX's recent change to a majority vote standard in the 
uncontested election of directors.
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    \6\ See Securities Exchange Act Release No. 63925 (February 17, 
2011), 76 FR 10418 (February 24, 2011) (SR-NASDAQ-2011-025).
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    In 2010, NASDAQ OMX amended its By-Laws to state that in an 
uncontested election, a majority voting standard would apply to the 
election of its directors, requiring directors to be elected by the 
holders of a majority of the votes cast at any meeting for the election 
of directors at which a quorum is present in an uncontested 
election.\7\ A plurality standard would still remain in a contested 
election. While in its filing to amend NASDAQ OMX's By-Laws, NASDAQ 
Stock Market LLC noted that it has always been NASDAQ OMX's practice to 
not count broker nonvotes ``for'' or ``against'' in director elections, 
as the Commission noted in its Approval Order the impact of the broker 
nonvote and how such votes are counted will take on added significance 
under NASDAQ OMX's newly adopted majority vote standard for director 
elections. Although in its filing NASDAQ Stock Market LLC stated that 
under Delaware case law,\8\ broker nonvotes are not considered as votes 
cast for or against a proposal or director nominee, the Exchange 
proposes the change for clarity and transparency purposes.
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    \7\ See Securities Exchange Act Release No. 63925 [sic] (April 
8, 2010), 75 FR 19436 (April 14, 2010) (SR-NASDAQ-2010-025).
    \8\ See Berlin v. Emerald Partners, 552 A.2d 482 494 (Del Supr. 
1988).
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Act,\9\ in general, and with 
Sections 6(b)(1) and 6(b)(5) of the Act,\10\ 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, 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.
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    \9\ 15 U.S.C. 78f.
    \10\ 15 U.S.C. 78f(b)(1),(5).
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    The Exchange believes changing the name of the Nominating Committee 
to the Nominating and Governance Committee and amending references to 
an exchange name to reflect a corporate change to a limited liability 
company are both clarifying in nature. The changes will ensure that the 
committee's title accurately reflects its functions and will ensure 
that the By-Laws accurately and properly reflect an exchange entity 
name. As discussed above, the amendment that broker nonvotes will not 
be counted as a vote either ``for'' or ``against'' in director 
elections will codify NASDAQ OMX's past practice, providing clarity and 
transparency. Accordingly the Exchange believes that the amendments are 
consistent with investor protection and the public interest.

[[Page 24949]]

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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \11\ and Rule 19b-4(f)(6) thereunder.\12\ 
Because the 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 prior to 
30 days from the date on which it was filed, or such shorter time as 
the Commission may designate, if consistent with the protection of 
investors and the public interest, the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6) (iii) thereunder.
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    \11\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \12\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) \13\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b4(f)(6)(iii),\14\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has 
requested that the Commission waive the 30-day operative delay to 
ensure that NASDAQ OMX is able to implement the rule changes.
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    \13\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires that a self-regulatory organization submit to the 
Commission written notice of its intent to file the proposed rule 
change, along with a brief description and text of the proposed rule 
change, at least five business days prior to the filing of the 
proposed rule change, or such shorter time as designated by the 
Commission. The Commission notes that the Exchange has satisfied 
this requirement.
    \14\ 17 CFR 240.19b-4(f)(6)(iii).
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    The Commission finds that waiver of the operative delay is 
consistent with the protection of investors and the public interest. 
The Commission notes in waiving the 30-day operative delay that the 
Commission published for comment in the Federal Register the initial 
filing to amend NASDAQ OMX's By-Laws, did not receive any comments,\15\ 
and subsequently approved the proposed rule change.\16\ Further, the 
Commission notes that the Exchange's proposal is identical to the 
proposed rule change previously approved by the Commission.\17\ 
Accordingly, the Commission finds that it is consistent with investor 
protection and the public interest to waive the 30-day operative delay 
in accordance with 19b-4(f)(6)(iii) so that NASDAQ OMX's By-Laws can be 
effective without undue delay, and therefore designates the proposal 
operative upon filing.\18\
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    \15\ See supra note 6.
    \16\ See supra note 3.
    \17\ Id.
    \18\ 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 such proposed rule 
change, the Commission summarily may temporarily suspend 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-2011-54 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-2011-54. 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, 100 F 
Street, NE., Washington, DC 20549, 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 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 No. SR-Phlx-
2011-54 and should be submitted on or before May 24, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-10651 Filed 5-2-11; 8:45 am]
BILLING CODE 8011-01-P


