
[Federal Register Volume 76, Number 90 (Tuesday, May 10, 2011)]
[Notices]
[Pages 27125-27127]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-11381]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64395; File No. SR-CBOE-2011-044]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing of a Proposed Rule Change To Reduce the 
Minimum Size of the Nominating and Governance Committee

May 4, 2011.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act'' or ``Exchange Act''),\1\ and Rule 19b-4 thereunder,\2\ 
notice is hereby given that on April 27, 2011, Chicago Board Options 
Exchange, Incorporated (``CBOE'') filed with the Securities and 
Exchange Commission (``Commission'' or ``SEC'') the proposed rule 
change as described in Items I, and II below, which Items have been 
prepared by CBOE. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

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

    CBOE proposes to amend its Bylaws to change the minimum size of the 
CBOE Nominating and Governance Committee.
    The text of the proposed amendments to CBOE's Bylaws and the 
proposed amendments to CBOE's rules is available on CBOE's Web site 
(http://www.cboe.org/Legal), at CBOE's Office of the Secretary, 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, CBOE 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. CBOE 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of this proposed rule change is to reduce the minimum 
size of CBOE's Nominating and Governance Committee from seven to five 
directors. Section 4.4 of the Second Amended and Restated Bylaws of 
CBOE (``Bylaws'') currently provides, in pertinent part, that the 
Nominating and Governance Committee shall consist of at least seven 
directors, including both Industry and Non-Industry Directors; that a 
majority of the directors on the Committee shall be Non-Industry 
Directors; and that the exact number of members on the Committee shall 
be determined from time to time by CBOE's Board of Directors. This rule 
change would be effectuated by amending Section 4.4 of the Bylaws to 
provide that the Nominating and Governance Committee shall consist of 
at least five directors. The other provisions of Section 4.4 of the 
Bylaws would remain unchanged. Additionally, the title of the Bylaws 
would be changed to the Third Amended and Restated Bylaws of CBOE.
    Section 3.1 of the Bylaws provides that the CBOE Board of Directors 
shall consist of not less than eleven and not more than twenty-three 
directors, with the exact size determined by the Board. CBOE's Board 
size has declined recently from twenty-three directors prior to CBOE's 
demutualization in 2010 to the current size of nineteen directors. In 
addition, the Board size will be declining further to sixteen directors 
at the time of the 2011 annual election of CBOE directors (which is 
anticipated to occur in May 2011). As the Board size declines, it 
becomes more challenging to populate large Board committees since there 
are fewer directors to serve on the various CBOE Board committees. The 
Exchange believes that reducing the minimum size of the Nominating and

[[Page 27126]]

Governance Committee to five directors will help to alleviate this 
issue.
    Changing the minimum size of the Nominating and Governance 
Committee to five directors would also make the minimum size consistent 
with the minimum size of the Nominating and Governance Committee of 
CBOE Holdings, Inc. (``CBOE Holdings''), CBOE's parent company. CBOE 
believes that having the same composition requirements for the 
Nominating and Governance Committees of both CBOE and CBOE Holdings 
will promote consistency and efficiency. CBOE and CBOE Holdings 
currently have the same individuals serving on the CBOE and CBOE 
Holdings Boards of Directors and on the CBOE and CBOE Holdings 
Nominating and Governance Committees. This approach simplifies the 
process of scheduling and conducting meetings and allows the Boards and 
Nominating and Governance Committees of both entities to operate most 
efficiently. To the extent that CBOE and CBOE Holdings desire to 
continue this approach in the future, this proposed rule change better 
enables CBOE and CBOE Holdings to do so.
    The Exchange believes that its Nominating and Governance Committee 
will continue to be able to appropriately perform its functions if it 
were to be composed of five directors. The Exchange also believes that 
having a Nominating and Governance Committee with a minimum size of 
five directors is consistent with prior precedent, in that the Chicago 
Stock Exchange (``CHX'') has a Nominating and Governance Committee with 
a size of four directors.\3\ Additionally, it should be noted that 
although the proposed rule change would permit the Exchange appoint a 
five-person Nominating and Governance Committee and that the Exchange 
may do so in the future, it is the current intention of the Exchange to 
appoint a six-person Nominating and Governance Committee at the time of 
the 2011 annual election of CBOE directors.
---------------------------------------------------------------------------

    \3\ See Article II, Section 3 of the Bylaws of the Chicago Stock 
Exchange, Inc.
---------------------------------------------------------------------------

    The Exchange will continue to provide for the fair representation 
of CBOE Trading Permit Holders in the selection of directors and the 
administration of the Exchange consistent with Section 6(b)(3) of the 
Act \4\ following this rule change. In particular, the CBOE Bylaws will 
continue to require that at least thirty percent of the directors on 
the CBOE Board of Directors must be Industry Directors and that at 
least twenty percent of CBOE's directors must be Representative 
Directors. Also, the CBOE Nominating and Governance Committee will 
continue to include both Industry and Non-Industry Directors and to 
have an Industry-Director Subcommittee that is composed of all of the 
Industry Directors serving on the Committee. Representative Directors 
will continue to be nominated (or otherwise selected through a petition 
process) by the Industry-Director Subcommittee. Additionally, CBOE 
Trading Permit Holders will continue to be able to nominate alternative 
Representative Director candidates to those nominated by the Industry 
Director Subcommittee, in which case a Run-off Election will be held in 
which CBOE's Trading Permit Holders vote to determine which candidates 
will be elected to the CBOE Board of Directors to serve as 
Representative Directors.
---------------------------------------------------------------------------

    \4\ 15 U.S.C. 78f(b)(3).
---------------------------------------------------------------------------

2. Statutory Basis
    For the reasons set forth above, CBOE believes that this filing is 
consistent with Section 6(b) of the Act,\5\ in general, and furthers 
the objectives of Section 6(b)(1) of the Act \6\ and Section 6(b)(5) of 
the Act \7\ in particular, in that (i) It enables CBOE to be so 
organized as to have the capacity to be able to carry out the purposes 
of the Act and to comply, and to enforce compliance by its Trading 
Permit Holders and persons associated with its Trading Permit Holders, 
with the provisions of the Act, the rules and regulations thereunder, 
and the rules of CBOE and (ii) 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, in general, to protect investors and the public interest.
---------------------------------------------------------------------------

    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(1).
    \7\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    Specifically, the proposed changes will streamline, make more 
efficient, and improve CBOE's governance structure by conforming the 
minimum size requirements of the CBOE Nominating and Governance 
Committee and the CBOE Holdings Nominating and Governance Committee, 
which the Exchange believes will promote consistency and efficiency and 
better enable CBOE and CBOE Holdings to have the same Nominating and 
Governance Committee compositions if desired. To the extent that the 
proposed changes enable CBOE and CBOE Holdings to have the same 
Nominating and Governance Committee compositions if desired, the 
process of scheduling and conducting Nominating and Governance 
Committee meetings is simplified, as there can be meetings held at the 
same time instead of multiple separate meetings at different times. 
This furthers CBOE's ability to be organized in a manner to have the 
capacity to be able to carry out the purposes of the Act consistent 
with Section 6(b)(1) of the Act \8\ and to carry out the purposes of 
Section 6(b)(5) of the Act.\9\
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78f(b)(1).
    \9\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The proposed rule change will not impact the current provisions of 
the CBOE Bylaws that are designed to assure the fair representation of 
CBOE Trading Permit Holders in the selection of directors and the 
administration of CBOE, and thus is consistent with Section 6(b)(3) of 
the Act.\10\ In particular, the Bylaws will continue to require that at 
least thirty percent of CBOE's directors be Industry Directors; that at 
least twenty percent of CBOE's directors be Representative Directors; 
that the CBOE Nominating and Governance Committee include both Industry 
and Non-Industry Directors and have an Industry-Director Subcommittee 
composed of all of the Industry Directors on the Committee; that 
Representative Directors be nominated (or otherwise selected through a 
petition process) by the Industry-Director Subcommittee; and that CBOE 
Trading Permit Holders are able to nominate alternative Representative 
Director candidates to those nominated by the Industry Director 
Subcommittee, in which case a Run-off Election is held in which CBOE's 
Trading Permit Holders vote to determine which candidates are elected 
as Representative Directors.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78f(b)(3).
---------------------------------------------------------------------------

    The proposed rule change was prompted by the reduction in the size 
of the CBOE Board of Directors since, as the Board size declines, it 
becomes more challenging to populate large Board committees. The 
Exchange believes that reducing the minimum size of the CBOE Nominating 
and Governance Committee will help to alleviate this issue and that, 
notwithstanding this change, the Committee will continue to be able to 
appropriately perform its functions, operate effectively, and thus 
enable the Exchange to comply with Section 6(b)(1) of the Act.\11\
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78f(b)(1).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    CBOE does not believe that the proposed rule change will impose any 
burden on competition that is not

[[Page 27127]]

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 solicited or received with respect to the 
proposed rule change.

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

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) As the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) by order approve or disapprove such proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

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-CBOE-2011-044 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-CBOE-2011-044. 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-CBOE-2011-044 and should be 
submitted on or before May 31, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
---------------------------------------------------------------------------

    \12\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-11381 Filed 5-9-11; 8:45 am]
BILLING CODE 8011-01-P


